UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21022
SHAMAN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3095806
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
213 East Grand Avenue,
South San Francisco, California 94080
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 415-952-7070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of Common Stock, $.001 par value, outstanding as of
October 31, 1996: 13,789,534
SHAMAN PHARMACEUTICALS, INC.
INDEX FOR FORM 10-Q
September 30, 1996
PAGE
NUMBER
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Condensed Balance Sheets as of September 30, 1996 and 3
December 31, 1995
Condensed Statements of Operations for the 4
three and nine months ended September 30, 1996 and
September 30, 1995
Condensed Statements of Cash Flows for the three and 5
nine months ended September 30, 1996 and September 30, 1995
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults in Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
SHAMAN PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
September 30, December 31,
1996 1995
-------------------------------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ 17,853,525 $ 9,210,123
Short-term investments 2,551,486 17,454,778
Prepaid expenses and other
current assets 1,036,473 858,724
------------ ------------
Total current assets 21,441,484 27,523,625
------------ ------------
Property and equipment, net 5,083,591 6,158,056
------------ ------------
Other assets 128,080 128,080
------------ ------------
Total assets $ 26,653,155 $ 33,809,761
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other
accrued expenses $ 834,542 $ 668,078
Accrued clinical trial costs 986,275 1,016,573
Accrued professional fees 470,078 705,374
Accrued compensation 441,958 383,089
Advances - contract research 2,758,605 789,855
Current installments of long-term
obligations 2,340,801 1,111,128
------------ ------------
Total current liabilities 7,832,259 4,674,097
Long-term obligations, excluding
current installments 3,156,721 4,930,263
Stockholders' equity:
Series A preferred stock 400 --
Common stock 13,788 13,258
Additional paid-in capital 94,531,379 88,170,926
Deferred compensation and
other adjustments (82,523) (146,956)
Accumulated deficit (78,798,869) (63,831,827)
------------ ------------
Total stockholders' equity 15,664,175 24,205,401
------------ ------------
Total liabilities and stockholders'
equity $ 26,653,155 $ 33,809,761
============ ============
NOTE: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
SHAMAN PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ -----------
Revenue from
collaborative
agreement $531,251 $500,001 $1,531,252 $1,710,146
Operating expenses:
Research and
development 4,754,440 4,274,153 14,225,376 12,570,304
General and
administrative 862,477 890,762 2,634,951 2,759,917
----------- ----------- ------------ ------------
Total operating
expenses 5,616,917 5,164,915 16,860,327 15,330,221
----------- ----------- ----------- -----------
Loss from
operations (5,085,666) (4,664,914) (15,329,075) (13,620,075)
Other income (expense):
Interest income 246,159 425,390 833,917 1,303,675
Interest expense (145,876) (132,280) (471,884) (418,676)
----------- ------------ ----------- ------------
Net Loss $(4,985,383) $(4,371,804) $(14,967,042) $(12,735,076)
============ ============ ============ ============
Net loss
per share $(0.37) $(0.33) $(1.11) $(0.97)
============ ============ ============ ============
Shares used in
calculation of
net loss per
share 13,448,000 13,194,000 13,381,000 13,134,000
=========== =========== =========== ===========
See notes to condensed financial statements.
SHAMAN PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
1996 1995 1996 1995
------ ------ ------ ------
Operating activities:
Net loss $(4,985,383 $(4,371,804) $(14,967,042) $(12,735,076)
Adjustments to
reconcile net
loss to net
cash used in
operating activities:
Depreciation
and amortization 557,564 708,150 1,847,177 2,048,170
Changes in operating
assets and liabilities:
Prepaid expenses,
other current assets
and other assets (28,819) (37,512) (177,749) 339,926
Accounts payable,
accrued expenses
and contract
research advances 1,304,357 (71,798) 1,950,989 283,919
---------- ---------- ---------- ----------
Net cash used
in operating
activities (3,152,281) (3,772,964) (11,346,625) (10,063,061)
---------- ---------- ---------- ----------
Investing activities:
Purchases of
available-for-
sale investments -- (5,042,338) (10,951,386) (15,063,354)
Sales of
available-for-
sale investments 1,494,000 -- 1,494,000 --
Maturities of
available-for-
sale investments 6,467,620 6,080,500 24,300,934 24,389,000
Capital
expenditures (32,178) (228,491) (684,468) (370,986)
---------- ---------- ---------- ----------
Net cash provided
by investing
activities 7,929,442 809,671 14,159,080 8,954,660
Financing activities:
Proceeds from
issuance of
preferred stock,
net 3,060,160 -- 3,060,160 --
Proceeds from
issuance of
common stock,
net 3,024,718 16,800 3,337,156 343,586
Proceeds from
long-term
obligations -- -- 600,000 --
Principal payments
on long-term
obligations (474,673) (189,903) (1,166,369) (592,761)
---------- ---------- ---------- ----------
Net cash provided by
(used in)financing
activities 5,610,205 (173,103) 5,830,947 (249,175)
Net increase
(decrease) in
cash and cash
equivalents 10,387,366 (3,136,396) 8,643,402 (1,357,576)
Cash and cash
equivalents at
beginning of
period 7,466,159 10,555,402 9,210,123 8,776,582
---------- ---------- ---------- ----------
Cash and cash
equivalents at
end of period $17,853,525 $7,419,006 $17,853,525 $7,419,006
=========== ========== ========== ==========
See notes to condensed financial statements.
SHAMAN PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. Basis of Presentation
Shaman Pharmaceuticals, Inc. ("Shaman" or the "Company") discovers and
develops novel pharmaceutical products for major human diseases by isolating
active compounds from tropical plants. The Company has three compounds in
clinical development: Provir(TM), an oral product for the treatment of watery
diarrhea; Virend(R), a topical antiviral for the treatment of herpes; and
nikkomycin Z, an oral antifungal for the treatment of endemic mycoses. Shaman
has collaborations for the development of diabetes drugs with Lipha, Lyonnaise
Industrielle Pharmaceutique S.A. ("Lipha"), a wholly owned subsidiary of Merck
KGaA, Darmstadt, Germany and with Ono Pharmaceutical Co., Ltd. ("Ono") of Osaka,
Japan.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included. The results of operations for the interim
periods shown herein are not necessarily indicative of operating results for the
entire year.
This unaudited financial data should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, filed with the
Securities and Exchange Commission on April 1, 1996.
Operating expenses for 1995 have been reclassified to conform to
1996 presentation.
2. Collaborative Agreement
In September 1996, the Company entered into a five-year collaborative
agreement with Lipha to jointly develop antidiabetic drugs. In exchange for
development and marketing rights in all countries except Japan, South Korea, and
Taiwan (which are covered under an earlier agreement between Shaman and Ono),
Lipha will provide up to $9.5 million in research payments and up to $10 million
in equity investments priced at a 20% premium to the average market price
of the Company's common stock at the time of purchase. Complete research funding
under the collaboration is dependent upon the initiation of human clinical
trials of at least one compound by September 23, 1998. The agreement also
provides for additional preclinical and clinical milestone payments to the
Company in excess of $10 million per compound for each antidiabetic drug
developed and commercialized. Lipha will bear all pre-clinical, clinical,
regulatory and other development expenses associated with the compounds selected
under the agreement. In addition, as products are commercialized, Shaman will
receive royalties on all product sales outside the United States and up to 50%
of the profits (if the Company exercises its co-promotion rights) or royalties
on all product sales in the United States. Certain of the milestone payments
will be credited against future royalty payments, if any, due to the Company
from sales of products developed pursuant to the agreement.
Upon signing the collaboration, the Company received an annual research fee
of $1.5 million which will be amortized over twelve months. Shaman recognized
$31,250 in revenue from the Lipha collaboration at September 30, 1996. The
Company also received $3 million for 388,918 shares of common stock priced at
$7.71 per share, representing a 20% premium to the weighted average price of the
Company's stock at the time of purchase.
3. Preferred Equity Financing
In July 1996, the Company closed a private placement pursuant to Regulation
S under the Securities Act of 1933, as amended, in which it received
approximately $3.3 million for 400,000 shares of Series A Convertible Preferred
Stock ("Preferred Stock") priced at $8.147 per share and a six-year warrant to
purchase 550,000 shares of the Company's common stock at an exercise price of
$10.184 per share. The Preferred Stock does not carry a dividend obligation and
is convertible into common stock at the earlier of (a) the investor's option,
(b) immediately following any 60 trading day period in which the Company's
common stock has consistently traded higher than $8.147, or (c) July 23, 1999.
If the Preferred Stock converts prior to July 23, 1999, the conversion ratio
will be one share of common stock for each share of preferred. If the Preferred
Stock converts on July 23, 1999, the conversion rate will be the higher of $6.00
or a weighted average price of the Company's common stock at the time of
conversion. In either case, appropriate adjustments will be made for stock
dividends, splits or other adjustments.
In addition to the initial sale of Preferred Stock and warrant, the
Company has the right, from time to time during the period beginning January
1997 and ending July 2000, to sell up to 1,200,000 shares of common stock to the
investor at a premium over an average of the Company's market price at the time
of sale. As the Company exercises its rights under the agreement, the investor
has the option to increase the shares purchased by up to 577,500 shares.
4. Term Loan
The Company's unsecured term loan provided for the acceleration of
principal if the Company did not achieve certain financing or collaborative
objectives by May 15, 1996. The Company achieved the specified milestone in the
third quarter rather than by May 15, 1996, and the lender accelerated the
amortization schedule. The acceleration provisions require that principal
amortization be shortened from 30 months to 24 months, with the first monthly
payment due May 15, 1996 instead of April 30, 1997. Accordingly, to date the
Company has made six principal payments totaling $625,000 and reclassified
$1,250,000 of its term debt to current liabilities as of September 30, 1996. The
interest rate on the loan was approximately 7.1% at September 30, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Shaman Pharmaceuticals, Inc. ("Shaman" or the "Company") discovers and
develops novel pharmaceutical products for major human diseases by isolating
active compounds from tropical plants. The Company has three compounds in
clinical development: Provir(TM), an oral product for the treatment of secretory
diarrhea; Virend(R), a topical antiviral for the treatment of herpes; and
nikkomycin Z, an oral antifungal for the treatment of endemic mycoses. Shaman
has collaborations for the development of diabetes drugs with Lipha, Lyonnaise
Industrielle Pharmaceutique S.A. ("Lipha"), a wholly owned subsidiary of Merck
KGaA, Darmstadt, Germany and with Ono Pharmaceutical Co., Ltd. ("Ono") of Osaka,
Japan.
The Company began operations in March 1990. To date, Shaman has not sold
any products and does not anticipate receiving product revenue in the near
future. The Company's accumulated deficit at September 30, 1996, was
approximately $79 million. Shaman expects to continue to incur substantial
losses over the next several years, due primarily to the expense of preclinical
studies, clinical trials and its on-going research program. The Company expects
that losses will fluctuate from quarter to quarter and that such fluctuations
could be substantial. Shaman has financed its research, development and
administrative activities through various private placements of its equity
securities, an initial public offering of common stock in January 1993, a
secondary offering in December 1993, collaborative agreements with research
partners, and, to a lesser extent, through equipment and leasehold improvement
financings.
In November 1996, Shaman completed a successful Phase II trial of Provir,
an oral agent for the treatment of secretory diarrhea. The open label trial
tested Provir in 75 patients afflicted with acute diarrhea, including traveler's
diarrhea and non-specific diarrhea of unknown etiology. Overall, 89% of the 75
patients treated with Provir returned to normal bowel function after 48 hours of
treatment. Moreover, of the 71 patients available for follow up, no recurrence
was experienced during the post-treatment period. No significant adverse
reactions were reported. The Company plans to initiate a 500 patient,
randomized, multi-dose, placebo-controlled study early in 1997.
Shaman obtained an initial indication of efficacy for Virend, a topical
agent for the treatment of genital herpes, in late 1995. Focusing on a
two-pronged strategy for development and commercialization of the product, the
Company intended to conduct a Phase III trial in late 1996 in immunocompromised
patients followed by a combination trial with the standard of treatment for
genital herpes (acyclovir), in order to outlicense Virend for development and
commercialization in the immunocompetent patient population. As a result of
discussions with potential partners and consideration of the market opportunity
in the immunocompetent patient population, Shaman has decided to initiate a
combination study prior to a Phase III trial in the AIDS patient population.
Because of differing mechanisms of action, Shaman believes that Virend may have
an additive or synergistic benefit when used in combination with acyclovir.
Successful results from a combination trial could lead to more attractive
partnering opportunities with better market potential than that anticipated by
the original strategy.
Shaman plans to enter a Phase I human clinical trial of nikkomycin Z, an
oral treatment for endemic mycoses. The trial, designed to determine that
nikkomycin Z is safe, is scheduled to begin in the fourth quarter of 1996.
In September 1996, the Company entered into a five-year collaborative
agreement with Lipha to jointly develop antidiabetic drugs. In exchange for
development and marketing rights in all countries except Japan, South Korea, and
Taiwan (which are covered under an earlier agreement between Shaman and Ono),
Lipha will provide up to $9.5 million in research payments and up to $10 million
in equity investments priced at a 20% premium to the average market price of the
Company's common stock at the time of purchase. Complete research funding under
the collaboration is dependent upon the initiation of human clinical trials of
at least one compound by September 23, 1998. The agreement also provides for
additional preclinical and clinical milestone payments to the Company in excess
of $10 million per compound for each antidiabetic drug developed and
commercialized. To date, Shaman has identified ten orally active compounds which
show preclinical activity as treatments for Type II diabetes. Lipha will bear
all pre-clinical, clinical, regulatory and other development expenses associated
with the compounds selected under the agreement. In addition, as products are
commercialized, Shaman will receive royalties on all product sales outside the
United States and up to 50% of the profits (if the Company exercises its
co-promotion rights) or royalties on all product sales in the United States.
Certain of the milestone payments will be credited against future royalty
payments, if any, due to the Company from sales of products developed pursuant
to the agreement.
Upon signing the collaboration, the Company received an annual research fee
of $1.5 million which will be amortized over twelve months. The Company also
received $3 million for 388,918 shares of common stock priced at $7.71 per
share, representing a 20% premium to the weighted average price of the Company's
stock at the time of purchase.
In July 1996, the Company closed a private placement pursuant to Regulation
S under the Securities Act of 1933, as amended, in which it sold 400,000 shares
of Series A Convertible Preferred Stock ("Preferred Stock") at a price per share
of $8.147 and a six-year warrant to purchase 550,000 shares of the Company's
common stock at a price of $10.184 per share. The Preferred Stock does not carry
a dividend obligation and will convert into common stock no later than July 23,
1999 at a price per share between $6 and $8.147, depending on the market value
of the Company's common stock during the period prior to conversion. In addition
to the sale of Preferred Stock and warrant, the Company has the right, from time
to time during the period beginning January 1997 and ending July 2000, to sell
up to 1,200,000 additional shares of common stock to the investor at a premium
over an average of the Company's market price at the time of sale. The investor
has the option to increase the shares purchased by up to 577,500 shares.
Results of Operations
Three Months and Nine Months Ended September 30, 1996 and September 30, 1995
The Company recorded revenues of $0.5 million for each of the quarters
ended September 30, 1996 and 1995, and had revenues of $1.5 million and $1.7
million for the nine month periods ended September 30, 1996 and 1995,
respectively. Revenues for both the three month and nine month periods ended
September 30, 1996 resulted from collaborations for the research and development
rights of Shaman's diabetes compounds, including revenue from the recently
announced collaboration with Lipha, as well as ongoing revenues from Ono.
Collaborative revenues in 1995 resulted solely from the Company's relationship
with Ono and included a one-time access fee associated with the commencement of
that collaboration.
Research and development expenses were $4.8 million and $4.3 million for
the quarters ended September 30, 1996 and 1995, respectively. Increased spending
during the current quarter was primarily attributable to costs incurred for the
Phase II Provir trial for secretory diarrhea and start-up costs associated with
the Virend clinical trial expected to begin early in 1997. For the nine months
ended September 30, 1996, research and development expenses were $14.2 million,
representing a $1.6 million increase over the same period in 1995. The
year-to-date increase is primarily attributable to the Company's additional
pre-clinical activities with respect to nikkomycin Z and further development of
the compounds identified in its diabetes research effort. Research and
development expenses are likely to increase in upcoming quarters as the Company
continues research and development activities for various product candidates.
General and administrative expenses were $0.9 million for each of the
quarters ended September 30, 1996 and 1995, and $2.6 million and $2.8 million
for the nine month periods ended September 30, 1996 and 1995, respectively.
Current general and administrative expenses are in line with the Company's plan
and are not expected to increase substantially because the Company's expanded
research and clinical activities are not expected to require commensurate
increases in general and administrative support.
Interest income was $.25 million and $.43 million for the quarters ended
September 30, 1996 and 1995, respectively, and $.83 million and $1.3 million for
the nine months ended September 30, 1996 and 1995, respectively. Interest income
decreased for the periods ended September 30, 1996, compared with the periods
ended September 30, 1995, due to lower average cash and investment balances as
the Company continues to fund its operations. The increases in interest expense
for the three and nine-month periods ending September 30, 1996 over the same
periods in 1995 resulted from higher average debt balances in 1996, the impact
of which was partially offset by a lower average interest rate on Company debt
during 1996.
Liquidity and Capital Resources
As of September 30, 1996, the Company's cash, cash equivalents, and
investments totaled approximately $20.4 million, compared with $26.7 million at
December 31, 1995, with an average investment maturity of four and a half months
at both dates. The Company invests excess cash according to its investment
policy which provides guidelines with regard to liquidity, type of investment,
credit rating, and concentration limits.
During the quarter ended September 30, 1996, the Company received
approximately $7.75 million from its first research payment under the Lipha
collaboration, from the Lipha equity investment and from a private placement of
preferred stock. Looking forward, the two transactions closed during the quarter
provide on-going funding capability for the Company through equity financings
and research funding. Additional cash was generated during the quarter through
sales and maturities in the Company's investment portfolio.
Lipha has committed an additional $15.0 million to the Company in the form
of periodic research funding and annual purchases of premium-priced common
stock. Complete funding under the collaboration is dependent upon the initiation
of human clinical trials of at least one compound within two years. The Lipha
agreement also provides for additional preclinical and clinical milestone
payments in excess of $10 million per compound for each antidiabetic drug
developed and commercialized, part of which may be offset against future
royalties, if any. Further, Lipha will bear the preclinical, clinical trial and
other development expenses associated with any antidiabetic compound which it
selects. Shaman will receive royalties on antidiabetic product sales outside the
United States and up to 50% of the profits (if the Company exercises its
co-promotion rights) or royalties on all product sales in the United States.
In July 1996, the Company received gross proceeds of $3.3 million for
400,000 shares of Series A Convertible Preferred Stock and a six-year warrant to
purchase 550,000 shares of the Company's common stock at a price of $10.84 per
share. In addition to the initial sale of the Preferred Stock and warrant, the
Company has the right, from time to time during the period beginning January
1997 and ending July 2000, to sell up to 1,200,000 additional shares of common
stock the investor at a premium over an average of the Company's market price at
the time of sale. As the Company exercises its rights under the agreement, the
investor has the option to increase the shares purchased by up to 577,500
shares.
The Company expects to incur substantial additional costs relating to the
continued clinical development of its products, its research and development
programs, preclinical and clinical testing, and regulatory activities. At its
current burn rate, the Company anticipates that its cash, cash equivalents and
investment balances of approximately $20.4 million at September 30, 1996, the
collaborative revenue committed by Lipha and Ono, Lipha's commitment to purchase
additional equity and Shaman's additional rights to sell common stock through
its private placement will be adequate to fund operations through 1997.
Recognizing the need for additional financing, the Company continues to
actively consider a variety of financing alternatives, including public and
private equity financings, licensing arrangements for its other products,
capital equipment financing, and term debt. To the extent the Company is
successful in closing such transactions and creating such partnerships, cash
balances would be enhanced through equity investments and fees. There can be no
assurance that any of these sources of funds will be available to the Company on
acceptable terms, if at all.
Future Outlook
In addition to historical information, this report contains predictions,
estimates and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from any future performance
suggested in this report as a result of the risk factors set forth below under
the caption "Risk Factors" and elsewhere in this report and in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
April 1, 1996.
Risk Factors
History of Operating Losses; Products Still in Development; Future
Profitability Uncertain. Shaman's potential products are in research and
development. In order to generate revenues or profits, the Company, alone or
with others, must successfully develop, test, obtain regulatory approval and
market its potential products. No assurance can be given that these product
development efforts will be successful, that required regulatory approvals will
be obtained, or that the products, if developed and introduced, will be
successfully marketed or achieve market acceptance.
Additional Financing Requirements and Uncertain Access to Capital Markets.
The Company has significant long-term capital requirements and, in the event
Shaman receives regulatory approval for any of its products, it will incur
substantial expenditures to develop manufacturing, sales and marketing
capabilities. The Company will need to raise additional funds for these purposes
through additional equity or debt financings, collaborative arrangements with
corporate partners or from other sources. No assurance can be given that such
additional funds will be available to the Company to finance its development on
acceptable terms, if at all.
No Assurance of FDA Approval for Marketing; Government Regulation. The
Company's activities with respect to research, preclinical development, clinical
trials, manufacturing and marketing in the United States and other countries are
subject to extensive regulation by numerous governmental authorities including,
but not limited to, the Food and Drug Administration ("FDA"). The process of
obtaining FDA and other required regulatory approvals is lengthy and requires
the expenditure of substantial resources. Success cannot be assured. In order to
obtain FDA approval, the Company must perform clinical tests to demonstrate to
the FDA's satisfaction that a product is safe and effective for its intended
uses. The Company may encounter problems in clinical trials which could cause
the FDA or the Company to delay or suspend clinical trials. Further, the Company
must demonstrate that it is capable of manufacturing bulk product to the
relevant standards. There can be no assurance that any of the Company's future
studies will demonstrate their intended result, that the Company's products will
not have undesirable side effects that may prevent or limit their commercial
use, or that the FDA will otherwise approve any of the Company's products.
Dependence on Sources of Supply. The Company currently imports all of the
plant materials from which its products are derived from countries in South and
Latin America, Africa and Southeast Asia. To the extent that its products cannot
be economically synthesized or otherwise produced, the Company will continue to
be dependent upon a supply of raw plant material. While Shaman believes it has
good relationships with the local governments and suppliers of these plant
materials, the Company does not have formal agreements in place with all of its
suppliers.
Limited Manufacturing and Marketing Experience and Capacity. The Company
currently produces products only in quantities necessary for clinical trials and
partner requirements, and does not currently have the staff or facilities
necessary to manufacture products in commercial quantities. As a result, the
Company may rely on collaborative partners or third-party manufacturing
facilities, which may not be available on commercially acceptable terms adequate
for Shaman's long-term needs. The Company currently has no marketing or sales
staff. To the extent that the Company does not or is unable to enter into
co-promotion agreements or to arrange for third party distribution of its
products, significant additional resources will be required to develop a
marketing and sales force.
Rapid Technological Change and Substantial Competition. The pharmaceutical
industry is subject to rapid and substantial technological change. Technological
competition from pharmaceutical companies, biotechnology companies and
universities is intense. Many of these entities have significantly greater
research and development capabilities, as well as substantial marketing,
manufacturing, financial and managerial resources, and represent significant
competition for the Company. There can be no assurance that developments by
others will not render the Company's products or technologies noncompetitive or
that the Company will be able to keep pace with technological developments.
Uncertainty Regarding Patents and Proprietary Rights. The Company's success
depends in part on its ability to obtain patent protection for its products and
to preserve its trade secrets. No assurance can be given that the Company's
patent applications will be approved, that any patents will provide the Company
with competitive advantages for its products or that they will not be
successfully challenged or circumvented by the Company's competitors. In
addition, patents do not necessarily prevent others from developing competitive
products. The Company has not conducted an exhaustive patent search and no
assurance can be given that patents do not exist or could not be filed which
would have an adverse effect on the Company's ability to market its products.
Uncertainty of Health Care Reimbursement and Reform. Shaman's ability to
successfully commercialize its products may depend in part on the extent to
which reimbursement for the cost of such products and related treatments will be
available from government health administration authorities, private health
insurers and other organizations. Significant uncertainty exists as to the
pricing, availability of distribution channels and reimbursement status of newly
approved healthcare products.
Possible Volatility of Stock Price. The market price of the Company's
common stock, like the stock prices of many publicly traded biotechnology and
smaller pharmaceutical companies, has been and may continue to be highly
volatile.
Environmental Regulation. In connection with its research and development
activities and its periodic manufacturing of clinical trial materials, the
Company is subject to federal, state and local laws, rules, regulations and
policies governing the use, generation, manufacture, storage, air emission,
effluent discharge, handling and disposal of certain materials and wastes.
Although the Company believes that it has complied with these laws and
regulations in all material respects and has not been required to take any
action to correct any noncompliance, there can be no assurance that the Company
will not be required to incur significant costs to comply with environmental and
health and safety regulations in the future.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults in Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
10.50+ Joint Research and Product Development and
Commercialization Agreement Between Lipha, Lyonnaise
Industrielle Pharmaceutique s.a. and Shaman
Pharmaceuticals, Inc. dated September 23, 1996.
10.51+ Stock Purchase Agreement between Lipha, Lyonnaise
Industrielle Pharmaceutique s.a. and Shaman
Pharmaceuticals, Inc. dated September 23, 1996.
27 Financial Data Schedule.
(b) Reports on Form 8-K
A Current Report on Form 8-K dated July 26, 1996 was filed in the
quarter ended September 30, 1996, with disclosure in Items 5 and 7 thereto. No
financial statements were filed in conjunction therewith.
- --------------------------------------
+ Confidential treatment pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended, has been requested for certain portions of this
agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 13, 1996
Shaman Pharmaceuticals, Inc.
(Registrant)
/s/ Lisa A. Conte
-----------------------------------
Lisa A. Conte
President and Chief Executive Officer
(principal executive officer)
/s/ Barbara J. Goodrich
-----------------------------------
Barbara J. Goodrich
Vice President and Chief Financial Officer
(principal financial and accounting officer)
EXHIBIT 10.50
JOINT RESEARCH AND PRODUCT DEVELOPMENT
AND COMMERCIALIZATION AGREEMENT
BETWEEN
LIPHA, LYONNAISE INDUSTRIELLE PHARMACEUTIQUE s.a.
AND
SHAMAN PHARMACEUTICALS, INC.
TABLE OF CONTENTS
Page
1. DEFINITIONS............................................... 1
2. RESEARCH PROGRAM AND COLLABORATION; RESEARCH PERIOD....... 6
3. DEVELOPMENT PHASE; MANAGEMENT; DEVELOPMENT PLAN;
REGULATORY MATTERS....................................... 11
4. PAYMENT................................................... 13
5. COMMERCIALIZATION......................................... 16
6. MANUFACTURE AND SUPPLY OF PRODUCTS........................ 18
7. POST-LAUNCH TESTING AND REPORTING; PRODUCT RECALLS........ 20
8. LICENSES OF TECHNOLOGY; ROYALTIES......................... 20
9. GLOBAL RELATIONSHIP....................................... 24
10. DISPUTE RESOLUTION AND ARBITRATION........................ 24
11. CONFIDENTIALITY, DISCLOSURE AND PUBLICATION............... 25
12. INDEMNIFICATION........................................... 27
13. INDEPENDENT CONTRACTORS................................... 28
14. NO SOLICITATION OF EMPLOYEES.............................. 28
15. TERM...................................................... 28
16. TERMINATION OF AGREEMENT.................................. 28
17. PUBLIC ANNOUNCEMENT OF AGREEMENT.......................... 29
18. PATENT MATTERS............................................ 30
19. RESEARCH EXPENSES......................................... 33
20. REPRESENTATIONS AND WARRANTIES............................ 33
21. SURVIVAL OF RIGHTS, DUTIES AND OBLIGATIONS................ 35
22. ASSIGNMENT................................................ 35
23. FURTHER ASSURANCES........................................ 35
24. LANGUAGE.................................................. 35
25. GOVERNING LAW............................................. 35
26. NOTICES................................................... 36
27. ENTIRE AGREEMENT.......................................... 37
28. NONWAIVER OF RIGHTS....................................... 37
29. SEVERABILITY.............................................. 37
30. FORCE MAJEURE............................................. 37
31. COUNTERPARTS.............................................. 37
JOINT RESEARCH AND PRODUCT DEVELOPMENT AGREEMENT
This Agreement is made effective as of the 23rd day of September,
1996 (the "Effective Date") by and between Shaman Pharmaceuticals, Inc., a
corporation organized and existing pursuant to the laws of the State of Delaware
with its principal office at 213 East Grand Avenue, South San Francisco,
California, U.S.A. ("Shaman") and Lipha, Lyonnaise Industrielle Pharmaceutique
s.a., a corporation organized and existing pursuant to the laws of France with
its principal office at 34, rue Saint-Romain, F-69379 Lyon, cedex-08, France
("LIPHA").
RECITALS
WHEREAS, Shaman has identified compounds from plants having potential
for the treatment of diabetes mellitus and its complications and other
pathologies related to the Insulin Resistance Metabolic Syndrome; and
WHEREAS, LIPHA possesses expertise with respect to the development of
therapeutic products for the treatment of diabetes mellitus and its
complications and other pathologies related to the Insulin Resistance Metabolic
Syndrome and is interested in the development of additional therapeutic products
for the treatment of diabetes mellitus and its complications and other
pathologies related to the Insulin Resistance Metabolic Syndrome based upon the
Shaman compounds; and
WHEREAS, the parties desire to collaborate in the
development and commercialization of such therapeutic products.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Affiliates" means, with respect to any specified Person, a
Person that is controlled by, controlling or under common control with, the
Person specified; provided, that in the case of each Party, "Affiliate" shall
not include the other Party. For the purposes of this definition, control of a
corporation or other business entity means (i) direct or indirect beneficial
ownership of greater than fifty percent (50%) of the voting stock or a greater
than fifty percent (50%) interest in the income of such corporation or other
business entity or (ii) the power to direct or cause the direction of the
management of policies of such corporation or other business entity.
1.2 "Agreement" means this Agreement and all
amendments and modifications thereto.
1.3 "Chemical Class" means a set or family of compounds linked by a
common structure based on the scientific nomenclature of the International Union
of Pure and Applied Chemistry ("IUPAC") and/or a family of naturally occurring
related metabolites and their synthetic analogs built around a natural nucleus.
A chemical class will include each Compound covered by the same patent and all
continuations-in-part or divisions of such patent but excluding any Compound
described by a separate patent which does not infringe or require reference to
the original patent.
1.4 "Chemical Modification" means a process or activity of deriving
alternative chemical structures (such as analogs) belonging to the same Chemical
Class as a Compound presented by Shaman, e.g. chemical synthesis.
1.5 "Collaboration" means the joint collaboration of the Parties
under the terms of this Agreement.
1.6 "Commercialization Costs" means, with respect to any Product,
the sum of (i) all product launch costs (i.e. market research reports, training
of sales force and development of promotional materials), (ii) direct selling,
marketing and other costs (including associated overhead), specifically
identifiable to sales of the Product and (iii) Product registration costs.
1.7 "Compound" means a molecule that is (a) patentable or patented
or the use of which is patentable or patented and (b) derived, isolated or
synthesized at any time from a plant source or extract identified by Shaman to
LIPHA prior to the termination of this Agreement as an orally active compound
for the treatment of diabetes mellitus and its complications and other
pathologies related to the Insulin Resistance Metabolic Syndrome.
1.8 "Development Plan" means the plan set forth in
Section 3.2.1.
1.9 "Dollars" means United States dollars.
1.10 "Evaluation Period" has the meaning set forth in
Section 2.3.3.
1.11 "FDA" means the United States Food and Drug
Administration.
1.12 "FD&C Act" means the United States Federal Food, Drug and
Cosmetic Act and applicable regulations promulgated thereunder, as amended from
time to time.
1.13 "First Commercial Sale" means the first sale of the Product for
use, consumption or resale to any third party customer in the Territory after
all required Regulatory Approvals have been obtained.
1.14 "Field" means the diagnosis and treatment of diabetes mellitus
and its complications and other pathologies related to the Insulin Resistance
Metabolic Syndrome.
1.15 "Improvements" means all inventions or discoveries or other
technology conceived or reduced to practice during the term of this Agreement by
employees or others acting on behalf of either of the Parties or their
respective Affiliates, licensees or sublicensees, or to which either of the
Parties or their respective Affiliates, licensees or sublicensees acquire
rights, which constitute an improvement to the Shaman Technical Information, the
LIPHA Technical Information, the Shaman Patents, the LIPHA Patents, the Joint
Patents or to a Product or Compound.
1.16 "Initial Chemical Classes" means those Chemical Classes,
containing at least one Compound, which are listed in Exhibit A hereto and are
presented by Shaman at the initial meeting of the Joint Research and Development
Steering Committee.
1.17 "Joint Inventions" has the meaning set forth in
Section 18.1.
1.18 "Joint Clinical Development Committee" means the Committee
established pursuant to Section 2.5 among Shaman and LIPHA and, as applicable,
Ono to manage the clinical development of Products.
1.19 "Joint Patent" means (i) all issued patents, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof and (ii) all pending patent applications, including any continuation,
division or continuation-in-part, which patent(s) contain claims covering any
Joint Invention.
1.20 "Joint Research and Development Steering Committee" means that
committee established pursuant to Section 2.5.
1.21 "Lead Compound" has the meaning set forth in
Section 2.3.1.
1.22 "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect to such
asset. For the purposes of this Agreement, Shaman or any of its Subsidiaries
shall be deemed to own subject to a Lien any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
1.23 "LIPHA Patents" means (i) all issued patents, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof and (ii) all pending patent applications, including any continuation,
division or continuation-in-part, which patent is owned or controlled by LIPHA
or its Affiliates and which patent covers an invention made as a result of the
Collaboration, including LIPHA's interest in any patents owned jointly by the
Parties.
1.24 "LIPHA Technical Information" means all products, Compounds,
uses of Compounds, modifications of Compounds, inventions (including LIPHA
Patents resulting therefrom), discoveries, know-how, trade secrets,
improvements, information, technical data, formulas, procedures or results
(including, without limitation, physical, chemical, biological, toxicological,
pharmacological, pre-clinical and clinical data, product forms and formulations,
and know-how relating to methods, processes or techniques for the manufacture or
use of Products including, without limitation, preparation, recovery, packaging,
and sterilization processes and techniques, dosage regimens, control assays and
specifications), that are rightfully held by LIPHA or its Affiliates with right
to license or sublicense as of the Effective Date or are acquired by LIPHA as a
result of the Collaboration during the period beginning on the Effective Date
and ending upon the termination of this Agreement pursuant to Section 16, and
which Technical Information is useful or necessary for the registration,
manufacture, use or sale of a Product, including the in vitro and in vivo assays
and physiology models provided by LIPHA to identify Compounds.
1.25 "Major Market Country" means any of Belgium,
France, Germany, Italy, Sweden or the United Kingdom.
1.26 "Net Sales" means with respect to any Product, the aggregate
amount invoiced by a Party (including by its Affiliates, licensees and
sublicensees) for or on account of any sale to a non-affiliated purchaser of
such Product, less (i) normal and customary trade discounts (i.e. consistent
with customary practice for a situation in which the Product is the only product
being transferred between seller and purchaser) allowed and taken, (ii) rebates
to wholesalers, (iii) returns, (iv) amounts for transportation and shipping
charges to purchasers if invoiced separately, and (v) taxes (not including any
taxes on income) and duties levied on such sale. Any commercial use or sale of a
Product at a reduced or promotional price by a Party (including its Affiliates,
licensees and sublicensees) shall be consistent with customary trade practices.
In the case of sales of a Product containing a combination of a Compound and one
or more other therapeutically active ingredients (a "Combination Product"), "Net
Sales" shall be calculated retrospectively as follows: (i) if either of the
active ingredients is already on the market, then the ratio of the net sales
price of the commercialized ingredient during the measurement period as
determined in Section 8.4.2 to the total net sales price of the Combination
Product shall be used to establish the relative contribution of each ingredient,
and Net Sales shall be multiplied by a fraction which represents the proportion
of total net sales price which the Compound bears to the Combination Product, or
(ii) if neither ingredient is then being marketed, then the proportion of Net
Sales represented by such Compound shall be determined in good faith by the
Joint Research and Development Steering Committee on the basis of the
therapeutic value to the patient of the Compound to the therapeutic value of the
Combination Product.
1.27 "Party" shall mean either Shaman or LIPHA and "Parties" means
both Shaman and LIPHA.
1.28 "Patent Matters" means all matters related to evaluating,
drafting, filing, prosecuting (which shall include, without limitation, actions
concerning interference proceedings in the United States and the abandonment of
patents and patent applications), defending, maintaining and enforcing of patent
applications and patents related to the Shaman Patents, LIPHA Patents and Joint
Patents.
1.29 "Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, or any other
entity.
1.30 "Product" means any finished human therapeutic composition
(whether in bulk or final product form), intended for use in the Field, that
contains a Compound as an active ingredient or which is derived from an
Improvement to a Compound for which LIPHA has made the payments specified in
Section 4.
1.31 "Regulatory Approval" means the granting of all governmental or
regulatory approvals required, if any, for the sale of a Product in a given
country or jurisdiction within the Territory, including, if any, the approval by
any national authority for inclusion of such Product in the National Health
Insurance Scheme.
1.32 "Research Period" has the meaning set forth in
Section 2.1.
1.33 "Ono" means Ono Pharmaceutical Co., Ltd., a corporation
organized and existing under the laws of Japan.
1.34 "Ono Territory" means the nations of Japan, South
Korea and Taiwan.
1.35 "Selection Criteria" means, with respect to any Compound, that
the Compound (i) can be administered by the oral route and that it is capable of
resulting in a statistically significant fall in blood glucose levels by at
least * * * of the initial glycemia value (as observed prior to treatment) in
mouse models of NIDDM and at least * * * in rat models of NIDDM (high
fructose-low STZ model or other predictive NIDDM rat models), without any
increase in plasma triglyceride levels, with doses equal to or less than * * *
of oral administration; (ii) is covered by the claims of a patent application;
and (iii) is produced by synthesis or extraction according to synthesis or
extraction processes fully and properly described. [* INDICATES THAT MATERIAL
HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO
RULE 24b-2.]
1.36 "Shaman Patents" means (i) all issued patents, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof and (ii) all pending patent applications, including any continuation,
division or continuation-in-part, which covers a method, material, manufacture,
use, treatment, process, compound, composition or product-by-process necessary
to make, use or sell a Compound or a Product, which patent is owned or
controlled by Shaman, including Shaman's interest in any patents owned jointly
by the Parties.
1.37 "Shaman Technical Information" means all Products, Compounds,
uses of Compounds, modifications of Compounds, inventions (including Shaman
Patents resulting therefrom), discoveries, know-how, trade secrets,
improvements, information, experience, technical data, formulas, procedures or
results (including, without limitation, physical, chemical, biological,
toxicological, pharmacological, pre-clinical and clinical data, product forms
and formulations, and know-how relating to methods, processes or techniques for
the manufacture or use of Products including, without limitation, preparation,
recovery, packaging, and sterilization processes and techniques, dosage
regimens, control assays and specifications), that are rightfully held by Shaman
or its Affiliates (including information received from Ono) with right to
license or sublicense as of the Effective Date or are acquired by Shaman as a
result of the Collaboration during the period beginning on the Effective Date
and ending upon the termination of this Agreement pursuant to Section 16, and
which Technical Information is useful or necessary for the registration,
manufacture, use or sale of a Product, including the in vivo and in vitro assays
and physiology models provided by Shaman.
1.38 "Stage II(a)" means the completion of those activities set forth
on Exhibit A.
1.39 "Subsidiary" means, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
1.40 "Technical Information" means, as the context requires, either
the Shaman Technical Information, the LIPHA Technical Information or both.
1.41 "Territory" means all of the nations of the world, other than
those nations included in the Ono Territory.
2 RESEARCH PROGRAM AND COLLABORATION; RESEARCH PERIOD.
2.1 Research Period. During a period beginning on the Effective Date
through and including the fifth anniversary thereof (the "Research Period"), the
Parties will collaborate in identifying potential Products for use within the
Field.
2.2 Obligations of Shaman.
2.2.1 Collection and Screening of Plants. Unless otherwise
decided by the Joint Research and Development Steering Committee, during each
year of the Research Period, (the annual accounting period for this activity
will begin on May 24, 1996 to coordinate with the Ono accounting cycle) Shaman
shall (i) collect and screen in vivo for oral administration a minimum of one
hundred (100) plants; (ii) provide the resources to move each Compound through
the completion of Stage II(a) Development; (iii) use such assays as a tool in
the purification and identification of the active Compounds to generate Lead
Compounds; (iv) allocate at least twenty (20) full time equivalent ("FTE")
scientists in the first three years under this Agreement and at least thirty
(30) FTE scientists in the fourth and fifth years to carry out the obligations
of Shaman under this Agreement; and (v) operate and expend resources in
accordance with achieving Stage II(a) activities.
2.2.2 Presentation of Compounds. When Shaman discovers during the
Research Period a Chemical Class containing a Compound or Compounds that have
completed Stage II(a) activities, Shaman shall present such Chemical Class to
LIPHA at the succeeding meeting of the Joint Research and Development Steering
Committee, and provide LIPHA with the following concerning such Compound or
Compounds from such Chemical Class: (i) structure, including structure
elucidation data, (ii) patent filing documents, (iii) biological data, (iv)
synthesization process, if any, (v) the complete ethnobotany and conservation
dossier developed by Shaman through the date of presentation including all
clinical assessment information collected by Shaman on the traditional use of
such Compound in the Field, and (vi) any relevant information provided to Shaman
by Ono. At the first meeting of the Joint Research and Development Steering
Committee, to be scheduled within thirty (30) days following the Effective Date,
Shaman shall deliver to LIPHA its Technical Information on the Initial Chemical
Classes. Shaman will, upon LIPHA's request deliver to LIPHA information
regarding any Compound sooner than the completion of Stage II(a) activities (but
not earlier than Shaman's ability to determine the patentability of such
Compound).
2.3 Obligations of LIPHA.
2.3.1 Acceptance of Compounds. LIPHA will determine which
presented Compound or Compounds merit selection as a "Lead Compound" and shall
do so not later than sixty (60) days following the meeting of the Joint Research
and Development Steering Committee at which a Compound having completed Stage
II(a) activities and meeting the Selection Criteria was presented by Shaman.
Such selection shall be communicated to Shaman in writing within such sixty (60)
day period and the selected Compound(s) shall thereafter be referred to as Lead
Compounds. LIPHA may, however, select a Compound as a Lead Compound at an
earlier time if it so chooses. Notwithstanding the foregoing, if Shaman has
presented more than one Compound at a given time, LIPHA shall be given an
additional sixty (60) days for each additional Compound, i.e. LIPHA would need
to select a first Compound within sixty (60) days but could wait one-hundred and
twenty (120) days before selecting the second Compound and one-hundred and
eighty (180) days for the third Compound, etc.
2.3.2 Prioritization of Efforts. During the Research Period,
LIPHA shall use its commercially reasonable efforts to perform its product
development obligations under this Agreement in a fashion which is consistent
with the commercial potential of the Products in the Field and in the Territory,
and shall cooperate with Shaman in doing so.
2.3.3 Development and Selection Obligations; Lead Compounds.
LIPHA shall have a period of * * * from the date on which it first selects a
Compound as a Lead Compound (the "Evaluation Period") during which it must make
further Compound selection determinations. Such determinations shall be made
together with the appropriate milestone payments as set forth in Section 4.2.1.
During the Evaluation Period LIPHA may conduct such other preclinical studies as
LIPHA reasonably considers necessary to determine whether to pursue such Lead
Compound(s) or Chemical Class for development under this Agreement. By selection
of a Lead Compound LIPHA shall be deemed to have selected all other Compounds or
analogs contained in the same Chemical Class as such Lead Compound.
Consequently, LIPHA may conduct studies with respect to the Lead Compound, or
analog or derivative within the same Chemical Class as such Lead Compound, but
only so long as all payments prescribed in Section 4.2.1 have been made in a
timely manner. If LIPHA develops an analog or derivative within the selected
Chemical Class which it chooses to develop further and which derivative or
analog meets the Selection Criteria, then LIPHA shall promptly so notify Shaman
and such notification shall reset the starting point for the * * * Evaluation
Period and for further milestone payments which may be due as set forth in
Section 4.2 hereinafter. Any milestone payment previously made during the
Evaluation Period for that Chemical Class will be credited against any such
payment due with respect to the substituted Lead Compound. All rights to any
Chemical Class that is not selected by LIPHA for development or which is
abandoned by virtue of LIPHA's failing to make the appropriate milestone
payments as set forth in Section 4.2.1, within the relevant Evaluation Period
shall revert to Shaman, subject to Sections 2.3.4, 2.3.5 and 2.3.6. [* INDICATES
THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24b-2.]
2.3.4 First Right to Reverted Chemical Classes. If, during the
term of this Agreement, a Compound contained within a Chemical Class that has
reverted to Shaman pursuant to Section 2.3.3 is the subject of an IND filing or
equivalent for the initiation of human clinical trials, Shaman shall promptly
inform LIPHA in writing and deliver to LIPHA a summary of the preclinical data
generated for such Compound. LIPHA shall thereafter have the option, exercisable
for a period of * * * days following the delivery of such information, to
designate such Compound as a Lead Compound subject to the terms and conditions
of this Agreement, in exchange for the payment to Shaman of a lump sum in cash
equal to (i) Two Million Seven Hundred Thousand dollars ($2,700,000) (the
aggregate pre-clinical milestones payments that would have otherwise become due
and payable under Section 4.2.1 below), plus (ii) any clinical milestones due
pursuant to Section 4.2.3; reduced in each case by any milestone payments
already made by LIPHA with respect to the same Chemical Class pursuant to
Section 4.2. In the event LIPHA fails to exercise its option within the * * *
day period prescribed above, Shaman shall thereafter be free to itself develop
Compound(s) within such Chemical Class or license to a third party the rights to
commercialize Compound(s) within such Chemical Class in the Territory, subject
only to Sections 2.3.5 and 2.3.6 below. [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.]
2.3.5 Second Right to Reverted Chemical Classes . If, during the
term of this Agreement, a Compound contained within a Chemical Class that has
reverted to Shaman pursuant to Section 2.3.3 has received clearance for the
initiation of human clinical trials, Shaman shall promptly inform LIPHA in
writing and deliver to LIPHA a summary of the preclinical data generated for
such Compound. LIPHA, in turn, shall have the right to conduct limited human
clinical testing of such Compound pursuant to a protocol approved in writing by
both Parties. If LIPHA notifies Shaman in writing of LIPHA's interest in
incorporating such Compound and its Chemical Class in the Collaboration within
one year of the notification by Shaman to LIPHA of the clearance to initiate
clinical trials of such Compound, then LIPHA shall be entitled to incorporate
such Compound and its Chemical Class in this Collaboration by making a lump sum
cash payment to Shaman equal to (i) Three Million Nine Hundred Thousand dollars
($3,900,000) plus (ii) any clinical milestones that may have become due pursuant
to Section 4.2.3; reduced in each case by any milestone payments already made by
LIPHA with respect to the same Chemical Class pursuant to Section 4.2.
Notwithstanding the foregoing, this second right to reverted Compounds shall
only be available to LIPHA if LIPHA has purchased (or committed in connection
with its receipt of the option set forth in this Section 2.3.5 to purchase) at
least $3,500,000 in equity value (or 350,000 shares, as adjusted for stock
splits and recapitalizations, whichever is less) in the next public offering, if
any, conducted by Shaman after the date of this Agreement.
2.3.6 Final Right to Reverted Chemical Classes . With respect to
any reverted Chemical Class, if following the expiration of the rights granted
in subsections 2.3.4 and 2.3.5 above, Shaman desires to enter into a corporate
licensing arrangement and outlicense any Compound, Shaman shall so notify LIPHA
in writing and then Shaman will allow LIPHA * * * ( * ) days after receipt of
such written notice to negotiate in good faith a license to such Compound with
Shaman. If during such * * * ( * ) day period, the Parties have failed to reach
full agreement on the license terms for such agreement, Shaman shall be free to
conclude an agreement with a third party for such Compound on terms not
materially more favorable, as a whole, to such third party, than those refused
by LIPHA. [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO RULE 24b-2.]
2.4 Joint Obligations. During the Research Period and thereafter
during the term of this Agreement, LIPHA and Shaman shall inform each other, to
the extent they have not already done so, of their respective Technical
Information that is necessary or useful for the other Party to carry out its
obligations under this Agreement, to achieve the goals of the Collaboration or
to develop, manufacture, register, market and sell Products. During the term of
this Agreement, each Party will permit access at reasonable times and with
reasonable frequency to the relevant scientific, manufacturing, preclinical,
clinical, regulatory and other appropriate personnel of the other Party. Each
Party will, not less frequently than at each meeting of the Joint Research and
Development Steering Committee, (i) provide the other party with a progress
report on its efforts and results on the Collaboration, and (ii) inform the
other Party of any Technical Information (including all pre-clinical and
clinical results relating to the Products) obtained by them to the extent such
results are necessary or useful for the other Party to carry out its obligations
under this Agreement, to achieve the goals of the Collaboration or to develop,
manufacture, register, market and sell Products.
2.5 Joint Research and Development Steering Committee and Joint
Clinical Development Committee. Promptly following the Effective Date, Shaman
and LIPHA shall each appoint two (2) representatives to a Joint Research and
Development Steering Committee. Upon the commencement of human clinical trials
with respect to any Product, the Party initiating such trials shall be
responsible for creating a two (2) party or a three (3) party (depending on
whether Ono is also developing the same Compound in clinical trials) Joint
Clinical Development Committee and Shaman, LIPHA and Ono, as applicable, shall
each appoint two (2) representatives to such Joint Clinical Development
Committee. Together, the Joint Research and Development Steering Committee and
the Joint Clinical Development Committee shall be referred to as the
"Committees." All members of the Committees shall be senior executive officers
of the relevant Party, vested with final decision making authority with respect
to the Collaboration. Subject to the foregoing, each Party may change any of its
representatives at any time and from time to time by written notice to the other
Party prior to appointing a new representative to the applicable Committee. The
memberships of the Committees may include individuals serving on both
Committees.
2.6 Meetings of the Committees. The Committees shall meet every
three (3) months, unless otherwise mutually agreed. The Chief Executive Officer
of each of the Parties shall attend together one (1) meeting each of the
Committees each year. Such meetings shall take place at sites which shall be
designated by each of the Parties in alternating sequence. Each Party shall pay
its own costs in attending Committee meetings. Executive officers from Shaman or
LIPHA may attend such meetings with the consent of the relevant Committee. A
hosting Party shall designate a member to act as Chairman of the Committee
meetings. Each such Chairman shall be responsible for developing an agenda and
supporting materials for the meeting, and shall distribute such agenda no later
than fourteen (14) days prior to the scheduled meeting. The Chairman shall
promptly, after each meeting, prepare and distribute to the members minutes
reflecting the discussions of the Committee, which minutes shall be subject to
the review and approval of such Committee at the next meeting thereof. All
meetings shall be conducted and records kept in English. In the event that
either Committee is unable to resolve any disagreement, either Party shall use
commercially reasonable and diligent efforts to resolve the dispute amicably.
Any dispute that the Parties are unable to resolve by good faith negotiation
shall be subject to the dispute resolution mechanism prescribed in Section 10.
3 DEVELOPMENT PHASE; MANAGEMENT; DEVELOPMENT PLAN; REGULATORY MATTERS.
3.1 Development Collaboration. Each Product will be developed for
use in the Field pursuant to this Section 3. The role of each Party in the
development program for each Product shall be determined by this Section 3, with
each Party having the authority described in Section 3.2 and providing advisory
services with respect to each phase of the process in which such Party does not
have primary responsibility.
3.2 Development Plan.
3.2.1 Within * * * months from the date a Lead Compound is first
selected, LIPHA shall establish and present to Shaman for its review and comment
a development plan including budgeting information for each Lead Compound with
respect to the preclinical and clinical development and regulatory approval of
such Lead Compound for use in the Field (the "Development Plan"). Depending on
the state of development of the Lead Compound, the Development Plan shall
describe fully the proposed program of development for each Lead Compound,
including pre-clinical testing, formulation, process development, manufacture of
pilot and clinical trial lots, clinical studies and regulatory plans and other
key elements of obtaining Regulatory Approval in the Territory. LIPHA shall
update the Development Plan annually, and oversee its implementation.
[* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO RULE 24b-2.]
3.2.2 In the event that the Parties are unable to agree on a
specific protocol or the need to conduct specific clinical or pre-clinical
studies, LIPHA's decisions shall control clinical and pre-clinical studies
(including their protocols) for filing in the Territory (provided, however, that
in the U.S. LIPHA shall consult with Shaman as to preclinical and clinical
studies), and, as between the Parties, Shaman's decisions shall control clinical
and pre-clinical studies (including their protocols) for filing in the Ono
Territory; provided, that in no event will either Party take any action that
will impair the other Party's efforts to have a Lead Compound achieve the
relevant Regulatory Approvals. The Parties shall use their diligent efforts,
through the two Committees, to coordinate their respective development plans and
to create and maintain a single worldwide safety and adverse events database and
shall share the results of the Parties' respective preclinical and clinical
trials in order to facilitate such development by both Parties, including, when
feasible, elimination of duplicate development efforts. Each Party shall
immediately inform the other at such time as it receives notice of any
Regulatory Approvals.
3.3 Development Efforts. Once a Compound has been selected as a Lead
Compound, LIPHA shall use its commercially reasonable efforts to (i) develop,
test and, where applicable, manufacture a Product based on such Lead Compound,
including without limitation, pre-clinical and clinical development, (ii) obtain
Regulatory Approvals in the Territory (it being understood that LIPHA would
intend to first prepare a registration dossier for and initially seek Regulatory
Approvals in the United States or one or more of the Major Market Countries) and
(iii) subject to Section 5.2 below, market and sell the Product in the
Territory. LIPHA shall provide Shaman with reports of its progress at each
meeting of either Committee, or more frequently as Shaman may reasonably
request.
3.4 Pre-Clinical and Clinical Matters. LIPHA shall take all
reasonable action and bear all costs to conduct the pre-clinical and clinical
testing, regulatory applications and the development of all Lead Compounds
within the Territory. As reasonably requested by Shaman, certain studies
containing pre-clinical data suitable for publication or use in countries
outside the Territory shall be prepared and delivered to Shaman in the English
language; provided, Shaman shall bear the sole responsibility to formulate such
data and as may be necessary to submit such data for publication or use in the
countries outside the Territory. However, prior to any such submission of data
for publication, Shaman shall submit to LIPHA for LIPHA's prior written approval
(which approval will not be unreasonably withheld) the complete text of such
planned publication and its translation into English. Likewise, any pre-clinical
studies performed by or on behalf of Shaman or information with regard to such
studies provided to Shaman by Ono on all Lead Compounds shall also be provided
to LIPHA together with its translation in the English language free of charge.
Each Party shall provide one (1) copy to the other of all regulatory submissions
as soon as such submissions are prepared and LIPHA shall provide the original
dossier and the text of any addendum or variation of such original dossier to
Shaman in English as soon as possible.
3.5 Availability of Employees. Each Party shall make its employees
engaged in activities relating to this Agreement available, upon reasonable
notice during normal business hours, at their respective places of employment to
consult with the other party on issues arising during the term hereof and in
connection with any request from any regulatory agency, including regulatory,
scientific, technical and clinical testing issues.
3.6 Visits of Facilities. Representatives of each Party may, at such
party's own expense and upon reasonable notice and at times reasonably
acceptable to the other Party, (i) visit the facilities where the development
program with respect to any Compound or Lead Compound is being conducted and
(ii) consult informally, during such visits and by telephone, with personnel of
the other Party performing work on such development program and (iii) with the
other Party's prior approval, which approval shall not be unreasonably withheld,
visit the sites of any clinical trials or other experiments being conducted by
such other Party in connection with such development program, but only to the
extent in each case as such trials or other experiments relate to such
development program. Shaman shall use its reasonable efforts to facilitate
visits by LIPHA to Ono's facilities as requested from time to time.
4 PAYMENT.
4.1 Research Funding.
4.1.1 Stock Purchases. On the Effective Date, LIPHA will make an
up-front Research payment to Shaman of $1,500,000 in shares of Shaman's Common
Stock (at a 20% premium to the volume weighted * * * trading day average closing
price of such shares prior to the purchase date, the "* * * Average Price"). In
addition, for years one through five of this Agreement, LIPHA shall pay to
Shaman each year one-half of that year's total research payment in the form of
an equity purchase. Consequently, on the Effective Date, LIPHA shall pay to
Shaman a second $1,500,000 in the form of a purchase by LIPHA from Shaman of
shares of Shaman's Common Stock (at a 20% premium to the * * * Average Price
prior to the purchase date). On the first and second anniversary of the
Effective Date, LIPHA shall make further stock purchases of $1,500,000 each at a
20% premium to the * * * Average Price preceding such first and second
anniversary dates. On the third and fourth anniversary dates LIPHA shall make
further stock purchases of $2,250,000 each at a 20% premium to the * * * Average
Price preceding such third and fourth anniversary dates. All such stock
purchases shall be made on the terms and subject to the conditions of a Stock
Purchase Agreement of even date herewith between Shaman and LIPHA, in the form
attached hereto as Exhibit B (the "Stock Purchase Agreement"). [* INDICATES THAT
MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24b-2.]
4.1.2 Periodic Research Payments. On the Effective Date, LIPHA
will also make an initial cash payment in the amount of $1,500,000 to Shaman as
the second half of its initial research funding payment. Thereafter, LIPHA shall
make quarterly payments to Shaman as follows: (i) on or before the first
anniversary of the Effective Date a payment of $375,000 and (ii) on or before
the expiration of each successive three month period thereafter, a further
payment of $375,000. In years four and five of this Agreement, starting on the
third anniversary of the Effective Date, such quarterly payments shall be
increased to an amount of $562,500. In sum, the cash payments to be made by
LIPHA under this Section 4.1.2 will equal $1,500,000 in years one, two and three
and $2,250,000 in years four and five.
4.2 Milestone Payments. LIPHA shall pay to Shaman each of the
amounts set forth below, payable in the manner set forth in this Section 4.2, at
or before the end of each period set forth below.
4.2.1 Pre-clinical Milestones. For each Chemical Class containing
a Compound or Compounds:
PRE-CLINICAL MILESTONE PAYMENT
.1 *months after selection of such Chemical Class* $0.8 million
.2 *months after selection of such Chemical Class* $0.9 million
.3 *months after selection of such Chemical Class* $1.0 million
[* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH
THE COMMISSION PURSUANT TO RULE 24b-2.]
In the event that LIPHA shall, pursuant to applicable law and
regulation, administer any Lead Compound to a human in the course of its
preclinical studies, then all Pre-clinical Milestones shall be paid in full
immediately.
4.2.2 Supply of Compound during Pre-clinical Period. Shaman shall
supply LIPHA with the following quantities of a Compound or Compounds within a
Chemical Class during the Evaluation Period with respect to such Chemical Class:
(i) 2.5 grams upon selection of a Lead Compound; (ii) at least 30 grams within
the first twelve months (which shall be supplied (A) as rapidly as possible and
(B) at a rate which at least equals 10 grams for each four month period and if
not supplied at such rate, the 12 month period shall be correspondingly extended
as described below in this Section and (iii) at least another 250 grams provided
ratably over months 13-30. In the case of (ii) and (iii) in the foregoing
sentence, Shaman shall use its commercially reasonable efforts to provide such
additional quantities of each Compound as requested by LIPHA as soon as Shaman
is able and all quantities of material supplied after the initial 32.5 grams
shall be supplied at Shaman's direct cost for such materials, the initial 32.5
grams being supplied as part of the research payments made by LIPHA, and without
further charge to LIPHA. For synthetic Compounds, Shaman will supply only the
first 32.5 grams. In the event that LIPHA requests and Shaman is unable to
supply sufficient quantities of such Compound or raw plant material for
extraction thereof during such periods or LIPHA is unable despite good faith
efforts to synthesize the specified quantities of Compound, then the applicable
milestone time lines under paragraph 4.2.1 above shall be extended on a
month-by-month basis during any period such supply requirements cannot be met,
----------
* Payment will be due in each case only if LIPHA is then still pursiuing the
development of a Compound within the same Chemical Class a that first
presented. Failure to make such payment shall be deemed a decision by
LIPHA not to pursue such Chemical Class further and all rights therein shall
revert to Shaman subject only to the reversion rights set forth in Sections
2.3.4, 2.3.5 and 2.3.6.
thereby extending the Evaluation Period. LIPHA shall provide Shaman with
reasonable lead time, considering Shaman's plant collection effort, with respect
to any request hereunder for the delivery of any Compound, or raw plant material
for extraction thereof, during the respective periods.
4.2.3 Clinical Milestones. For each Lead Compound being
developed for an indication within the Field:
CLINICAL MILESTONE PAYMENT
.1 Upon commencement of Phase II Clinical Studies $1.5 million
.2 Upon commencement of Phase III Clinical Studies $1.8 million
.3 Upon the first filing of an NDA in the United States
or equivalent filing in any Major Market Country $2.0 million
.4 Upon the first Regulatory Approval in the United States
or equivalent approval in any Major Market Country $2.5 million
4.2.4 Additionally, with respect to the milestones set forth in
this Section 4.2, the following shall apply:
.1 The milestones set forth in subsections 4.2.1.1, 4.2.1.2 and 4.2.1.3
and 4.2.3.1 shall be nonrefundable and nonrecoverable.
.2 The milestones set forth in subsections 4.2.3.2, 4.2.3.3, and 4.2.3.4
shall be creditable against royalties owing to Shaman from LIPHA on
account of sales of any Product in all countries in the Territory in
years 2, 3 and 4 after initial commercialization, with one-third
(1/3rd) of the aggregate creditable milestone amount being credited
in each such year (in the event the amount of a credit exceeds the
amount of royalties payable over such three year period, then such
excess shall be carried forward into future years until it is fully
recovered out of royalties).
.3 With respect to any Chemical Class as to which LIPHA pays Shaman at
least one milestone pursuant to this section 4.2, if the development
of such Chemical Class is subsequently discontinued prior to
commercialization solely as a result of the inability of Shaman or
LIPHA to obtain patent protection in the U.S. or in any of the Major
Market Countries for such Chemical Class for its use as a
therapeutic, then LIPHA shall be entitled to credit such milestone(s)
against the milestones owing to Shaman on the next Chemical Class
chosen for development by LIPHA.
.4 Each milestone payment may only be credited once against future
liabilities owing from LIPHA to Shaman.
.5 In addition, there shall be cap of $7.8 Million, on the crediting of
milestones against any individual Product royalty amount.
4.3 Payment Terms. All payments under this Agreement shall be by wire
transfer of immediately available funds to a bank account designated by Shaman
at the time payment is due, or within forty-five days after receipt by LIPHA of
the corresponding invoices for such payment from Shaman. Any tax paid or
required to be withheld by LIPHA for the benefit of Shaman on account of
royalties payable to Shaman under this Agreement shall be deductible and
deducted from the amount otherwise due. LIPHA shall secure and deliver to Shaman
proof of any such taxes required to be withheld and actually paid by LIPHA for
the benefit of Shaman and shall, at Shaman's request provide all reasonable
assistance to Shaman in recovering or obtaining credit for such taxes, if
possible.
5. COMMERCIALIZATION.
5.1 Product Launch. Subject to Section 5.2 below, LIPHA shall
initiate distribution or sales of Product in each country in the Territory as
soon as reasonably possible following Regulatory Approval, but in no event later
than one hundred and eighty (180) days following Regulatory Approval. Within one
(1) year following the submission of the definitive application for Regulatory
Approval for each Product in the Territory, LIPHA shall submit to Shaman a
global marketing plan for such Product for the Territory. This plan shall be
updated annually by LIPHA.
5.2 Co-Promotion.
5.2.1 Shaman shall have the right to share in up to fifty
percent (50%) of the profits of each Product in the United States (the
"Co-Promotion Territory"). Upon Shaman's decision to co-promote, Shaman and
LIPHA shall jointly establish a Marketing Committee and a Management Committee.
The Marketing Committee shall be responsible for the development of the sales,
marketing, manufacturing, and distribution strategy, as well as the pricing of
and the tactics and forecasts for each Product to be co-promoted in the U.S.,
including the coordination of Shaman's sales and marketing activities with those
of LIPHA. The Management Committee determines the financial aspects of the
co-promotion according to the strategy determined by the Marketing Committee,
including, without limitation, required reimbursement by Shaman to LIPHA of
Pre-Approval Costs and determination of Operating Profit (as defined in Section
5.2.4 below). Each Committee will have equal representation from each Party and
will meet every two (2) months. Any unresolved disputes shall be handled in good
faith, first between the chief executive officers of the Parties and then
through arbitration. All issues regarding Product sales, marketing,
manufacturing, distribution and pricing shall be reviewed by the Marketing
Committee, however LIPHA shall have the right to make the final determination on
any decision before the Marketing Committee.
5.2.2 Subject to subsections 5.2.3 and 5.2.4 below, Shaman shall
have the right, but not the obligation, to field up to fifty percent (50%) of
the combined field sales force deployed for each Product only in the
Co-Promotion Territory and to pay to LIPHA a co-promotion payment equal to a
matching percentage of LIPHA "Pre-Approval Costs" as defined below, as such
costs are approved by the Management Committee. Shaman must notify LIPHA in
writing of its decision to co-promote a Product and must at such time also
notify LIPHA of the percentage of participation it is choosing to make (the
"Co-Promotion Involvement Percentage," which percentage shall apply for the life
of this Agreement once selected), all not later than one (1) year following the
submission of the definitive application (i.e. an NDA) for Regulatory Approval
of a Product in the Co-Promotion Territory. Shaman's contribution to any
co-promotion efforts in the United States may consist of either sales and
marketing personnel, cash contributions to such expenses, or both.
5.2.3 Upon Shaman's decision to co-promote, LIPHA shall submit
to the Management Committee an overall summary of the (i) marketing and launch
costs previously incurred with respect to such Product in the U.S. (including
costs associated with market analyses and the hiring and training of a field
sales force) ("Pre-Approval Costs") and (ii) Commercialization Costs expected to
be incurred prior to Regulatory Approval and forecasted Operating Profits in the
U.S. in the three (3) year period immediately following the First Commercial
Sale of the Product in the U.S.
5.2.4 Not later than ninety (90) days after the decision to
co-promote a Product, Shaman shall pay to LIPHA the Co-Promotion Involvement
Percentage of the Pre-Approval Costs in the U.S. for the Product. Thereafter,
LIPHA shall credit Shaman for the amount actually funded by Shaman for the
Co-Promotion according to the Co-Promotion Involvement Percentage selected by
Shaman in accordance with Section 5.2.2 above and LIPHA shall then credit Shaman
with that same Co-Promotion Involvement Percentage of any Operating Profits
resulting from the marketing of any Product in the Co-Promotion Territory, or
charge Shaman the same Co-Promotion Involvement Percentage of any Operating Loss
resulting from the marketing of any Product in the Co-Promotion Territory (as
used herein, Operating Profit or Loss means the Net Sales of the Product in the
relevant country less (i) the cost of goods sold and (ii) the U.S.
Commercialization Costs associated therewith). All payments to be made on
account of such charges or credits shall be made in accordance with Section
5.2.5 below. If LIPHA determines to license its rights and responsibilities to a
third party, the co-promotion rights of Shaman must also be licensed.
5.2.5 Within thirty (30) days following the conclusion of each
calendar quarter following Shaman's decision to Co-Promote, the Parties shall
deliver to the Management Committee for the Co-Promotion Territory all
information reasonably necessary to permit such Management Committee to
determine the Operating Profits (Losses) realized by the Parties during such
quarter in such Co-Promotion Territory. On or before the 45th day following the
conclusion of each calendar quarter, the Management Committee shall deliver to
each Party a statement of accounting in reasonable detail for the Operating
Profits (Losses) realized by the Parties during such quarter in the U.S. and
prescribing the amount of any payment owed by one Party to the other Party with
respect thereto consistent with the Co-Promotion Involvement Percentage. Within
five (5) business days following the date of the Management Committee's
statement, the Party that is deemed therein to owe payment to the other Party
shall make such payment in full, by wire transfer of funds to the bank account
specified in writing by the receiving Party.
5.3 Promotion and Marketing Obligations.
5.3.1 Marketing Efforts. In addition to the undertakings set
forth in Section 5.1, LIPHA agrees to use its commercially reasonable efforts to
promote the sale, marketing and distribution of Product for use in the Field in
the Territory, consistent with applicable legal requirements and with accepted
business practices, devoting the same level of efforts as it devotes to its own
high-priority products.
5.3.2 General Conduct. LIPHA hereby covenants that it will not,
without the prior written authorization of Shaman, solicit sale of any Products
or advertise, or keep a stock of any Product, outside of the Territory. LIPHA
shall not, directly or indirectly, without prior written notification to Shaman,
contact any federal, state or local regulatory agency or entity outside the
Territory about any Product, except as required to do so by law or regulation.
5.3.3 Trademarks. LIPHA will select and own one or more
trademarks for use in connection with the promotion, marketing and sale of the
Product for use in the Field in the Territory; and LIPHA shall have the right to
designate and will be responsible for the filing, prosecution and defense of
such trademark in all countries in the Territory. The Product will be promoted,
marketed and sold for use in the Field in the Territory only under such
trademark(s) until the expiration of the last patent covering such Product.
5.3.4 Packaging. All packaging for the Product shall comply with
applicable government rules and regulations. In addition, and as permitted by
law, packaging for the Product shall indicate (i) LIPHA as the owner of the
Product's trademark(s), (ii) the holder of the patent(s) under which the Product
is licensed, and (iii) the name of any third-party manufacturer of the Product.
Notwithstanding the foregoing, Shaman shall be entitled to add its name to
product labels in the U.S. in a manner jointly agreed to by the Parties and
approved by the appropriate regulatory authorities.
6. MANUFACTURE AND SUPPLY OF PRODUCTS.
6.1 Supply of Product. Subject to the terms of this Agreement, if the
Product is synthesized or synthesizable, LIPHA shall supply, or cause to be
supplied, the Parties' requirements of finished Product for pre-clinical and
clinical trials and commercial sale. If the Product is not synthesized or
synthesizable, Shaman shall supply or cause to be supplied all raw plant
material and bulk drug necessary for the manufacture of the Parties'
requirements of finished Product for pre-clinical and clinical trials and
commercial sale. All Product supplied hereunder shall be supplied at cost,
including shipping, handling and insurance costs; provided, that LIPHA shall
provide research quantities of synthesized Product free of charge to Shaman for
studies agreed to by the Joint Research and Development Steering Committee.
Subject to the foregoing, Product for commercial sale may be supplied by a third
party supplier, identified by the Party responsible for supply and agreed upon
by the Marketing or Joint Clinical Development Committee, pursuant to a supply
agreement to be negotiated and entered into between the Party responsible for
supply and such third party supplier (the "Commercial Supply Agreement"). The
material terms of the Commercial Supply Agreement, and any amendments or
subsequent agreements relating thereto, shall be promptly reviewed and approved
by the Joint Clinical Development Committee, such approval not to be
unreasonably withheld. The terms of the Commercial Supply Agreement shall
provide for the qualification of such supplier and the filing of a Drug Master
File for such Product by such supplier. The Party responsible for supply will
have primary responsibility for working with the third party supplier with
respect to qualification and the filing of the Drug Master File.
6.2 Risk of Non-Supply. If either Party or its third party supplier
under the Commercial Supply Agreement is unable, for any reason, to supply
sufficient quantities of Product to the other Party or Parties, the Parties will
work together to promptly identify and qualify a new third party supplier.
6.3 Supply Forecasts. LIPHA and Shaman shall work together, through
the Joint Clinical Development Committee and Marketing Committee, to develop, in
a timely manner, any and all short- and long-term supply forecasts which may be
required pursuant to the Commercial Supply Agreement.
6.4 Orders. Product for commercial supply shall be ordered pursuant
to written purchase orders which shall be received in such time as to reasonably
allow the Party responsible for supply to meet the lead time requirements set
forth in the Commercial Supply Agreement.
6.5 Product Specifications; Regulatory Compliance. All Product
manufactured and supplied under this Agreement (i) will conform to product
specifications to be established by LIPHA and set forth in the Commercial Supply
Agreement; (ii) will be manufactured in accordance with applicable current Good
Manufacturing Practices ("GMP") standards promulgated by the FDA and the
national health administration having jurisdiction in any country where such
Product is to be sold; (iii) will be manufactured in a facility registered with
and approved for such purpose by the relevant national health administration;
(iv) for Products sold in the U.S. will not be adulterated or misbranded within
the meaning of the FD&C Act; and (v) for Products sold in the U.S. will not be
an article that may not be introduced into interstate commerce under the
provisions of Sections 404 or 505 of the FD&C Act.
6.6 Packaging Specifications. Subject to Section 5.3.4 above,
packaging and labeling of all Product manufactured and supplied under this
Agreement for commercial supply shall conform to packaging specifications to be
established by LIPHA and set forth in the Commercial Supply Agreement.
7. POST-LAUNCH TESTING AND REPORTING; PRODUCT RECALLS.
7.1 Post-Launch Testing and Reporting. If, after the date of First
Commercial Sale, adverse events or other issues arise with respect to any safety
or efficacy of any Product which jeopardize the Product's performance or are
deemed by the parties to potentially limit its approved indications, the Parties
shall consult with each other with respect to such events or other issues. If
the Parties determine that the situation requires post-launch clinical testing,
modifications to the NDA or other communication with the FDA, LIPHA shall be
responsible for the design and implementation of any such testing, modifications
or communication, in consultation with Shaman. Each Party shall maintain a
record of all complaints, adverse reaction reports and similar notices
("Complaints") which it receives with respect to any Product. If either Party
receives a Complaint involving a serious life-threatening or unanticipated
event, such Party shall notify the other Party of such Complaint immediately.
All other complaints shall be communicated to the other party in a manner to be
agreed to by the Parties. In any event, either Party shall promptly notify the
other of any complaint received by such Party in sufficient detail and in
sufficient time to allow the responsible party to comply with any and all
regulatory requirements imposed upon it with regard to such complaint.
7.2 Product Recall. LIPHA and Shaman each shall notify the other
promptly if any unit of Product is the subject of a recall, market withdrawal or
correction, and the Parties shall cooperate in the handling and disposition of
such recall, market withdrawal or correction. LIPHA shall bear the cost of all
recalls, market withdrawal or corrections of any Product in all countries in the
Territory other than the Co-Promotion Territory, in which Shaman shall bear its
Co-Promotion Involvement Percentage share of such expenses, subject to any
rights of recovery against the third party supplier under the Commercial Supply
Agreement. LIPHA and Shaman shall maintain records of all sales of Product and
customers sufficient to adequately administer a recall, market withdrawal or
correction for such period as may be required by applicable rules and
regulations.
7.3 Reports. Each Party shall keep the other fully informed of all
governmental activities and plans which potentially or actually affect the sale
of Product for use in the Field in the Territory.
8. LICENSES OF TECHNOLOGY; ROYALTIES.
8.1 License to LIPHA.
8.1.1 Shaman hereby grants to LIPHA a perpetual license under the
Shaman Patents, the Joint Patents and the Shaman Technical Information to make,
have made, use and sell Products in the Territory. This license shall be
exclusive with respect to all Products for the Territory. Such license shall be
subject to the royalty contained in Section 8.4 herein. For purposes of this
Section 8.1.1, the term "exclusive" shall mean that the license grant under this
Section 8.1.1 is granted to LIPHA within the Territory, to the exclusion of all
other parties, subject only to Shaman's right to co-promote any Product in the
Co-Promotion Territory pursuant to Section 5.2 above.
8.1.2 LIPHA shall have the right to grant licenses or sublicenses
to develop, market and sell Product in the Territory consistent with this
Agreement; provided, (i) that the grant of any such license or sublicense in the
Co-Promotion Territory shall be consistent with the provisions of Section 5.2
hereof and subject to the approval of Shaman, which shall not be withheld
unreasonably, and (ii) that such licensees or sublicensees agree in writing to
be bound by the terms of this Agreement. LIPHA shall be responsible for the
operations and activities of its licensees and sublicensees as if such
operations and activities were carried out by LIPHA, and LIPHA shall hold Shaman
harmless from and against any and all damages, costs and expenses arising from
or related to the operations or activities of such Affiliates, licensees or
sublicensees. LIPHA further agrees to deliver to Shaman notification of each
sublicense granted by LIPHA and termination thereof, within fifteen (15) days
after execution or termination, setting forth the name of the sublicensee and
the territory as to which the sublicense is effective.
8.2 License to Shaman.
8.2.1 LIPHA hereby grants to Shaman a perpetual, royalty-free
exclusive license under the Joint Patents and the LIPHA Technical Information to
make, have made, use and sell Products but no other products, with the right to
sublicense, with respect to all Products for the Ono Territory. For purposes of
this Section 8.2.1, the term "exclusive" shall mean that the license grant under
this Section are granted to Shaman in the Ono Territory, to the exclusion of all
other parties, including LIPHA.
8.2.2 Subject to Section 8.3 hereof, Shaman shall have the right
to grant licenses or sublicenses to develop, market and sell all Products in the
Ono Territory consistent with this Agreement. Shaman shall be responsible for
the operations and activities of its licensees and sublicensees as if such
operations and activities were carried out by Shaman, and Shaman shall hold
LIPHA harmless from and against any and all damages, costs and expenses arising
from or related to the operations or activities of such Affiliates, licensees or
sublicensees.
8.3 Improvements. Any modification or Improvement to the Compounds
and/or Products or to the LIPHA Technical Information or Shaman Technical
Information licensed under this Agreement made by Ono or Shaman before the
termination of this Agreement shall be included in each of the license(s)
granted under this Section 8 without additional charge to the licensed Party.
The Parties agree to promptly disclose in writing all modifications and
Improvements.
8.4 Royalty Payments; Reports. LIPHA shall, with respect to each
Product in each country of the Territory until the later of (i) ten (10) years
after the date such Product is first commercialized; or (ii) the date of
expiration of the last valid patent covering the manufacture, sale or use of
such Product in such country, pay to Shaman a royalty in U.S. dollars at the
rate of: (i) with respect to annual Net Sales in all countries of the Territory
of less than * * * U.S.; * * * percent ( * %) of Net Sales of the Product; and
(ii) with respect to annual Net Sales in all countries of the Territory of * * *
U.S. or more; * * * percent ( * %) of Net Sales of the Product exceeding * * *
and * % on the amounts below * * *, such royalties to be calculated and paid on
aggregate sales but accounted for on a country-by-country basis. LIPHA shall
remain liable for all royalties payable by its Affiliates, licensees or
sublicensees. In the case that Shaman elects to co-promote such Products in the
Co-Promotion Territory, sales in such country will be excluded from the royalty
calculation. In the event that LIPHA grants any third party or parties licenses
to market, sell or distribute such Product, the royalty payable by LIPHA on Net
Sales of such Product pursuant to this Section 8.4 in the country in which such
third party license was granted, shall not be greater in any year than * * *
percent ( * %) of the net profit for LIPHA (and its Affiliates) in such country
in such year, including only royalty payments on such Product and gross margin
on supply of Product to such licensees received by LIPHA (and its Affiliates).
In no event shall Shaman receive an amount less than that which would equal a *
* * percent ( * %) royalty on Net Sales of such Product. Notwithstanding the
foregoing, if LIPHA receives material non-cash consideration from any such
licensee, the twenty percent limitation shall not apply. [* INDICATES THAT
MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24b-2.]
8.4.1 In the event that during the applicable royalty term for a
Product, such Product on a country by country basis is (i) no longer covered by
a valid Shaman Patent, LIPHA Patent or Joint Patent or in any other case
contemplated by Section 18.4.3 hereinafter and (ii) there exists generic
competition to such Product from a product or products which contains the same
active ingredient, then the otherwise applicable royalty shall be adjusted as
follows: (A) if the number of prescriptions represented by the competitive
products in such country is less than or equal to 20% of the combined
prescriptions for the generic products and the Product, then no royalty
adjustment shall be made; (B) if the number of prescriptions represented by the
competitive products in such country is greater than 20% but less than or equal
to 50% of the combined prescriptions for the generic products and the Product,
then the applicable royalty in such country for such Product shall be reduced to
75% of the amounts set forth in Section 8.4; and (C) if the number of
prescriptions represented by the competitive products in such country is greater
than 50% of the combined prescriptions for the generic products and the Product,
then the applicable royalty in such country for such Product shall be reduced to
50% of the amounts set forth in Section 8.4.
8.4.2 LIPHA shall provide a royalty report and, if applicable, a
royalty payment to Shaman every three (3) months. The report and payment
relating to Net Sales shall be provided within forty-five (45) days after the
end of March, June, September and December of each calendar year, and shall
include all sales of Products by LIPHA and its Affiliates, licensees and
sublicensees. To the extent that the applicable currency control laws and
regulations in any country in the Territory prohibit or limit LIPHA's ability to
export funds from such country to discharge its royalty obligation hereunder,
LIPHA shall pay to Shaman in U.S. dollars to an account designated by Shaman at
the time payment is due, all royalties that would otherwise have been due with
respect to Net Sales in such country.
8.4.3 LIPHA shall keep, and require any Affiliate, licensee and
sublicensee to keep, for a period of not less than seven (7) years, complete and
accurate records of all Net Sales of each Product. Shaman shall have the right,
at Shaman's sole expense, through a certified public accountant reasonably
acceptable to LIPHA, and following reasonable notice, to examine such records
during regular business hours during the life of the LIPHA obligation to pay
royalties on Product, provided however, that such examination shall not (i) be
of records for more than the prior three (3) years, (ii) take place more often
than once a year, and (iii) shall not cover any records which date prior to the
date of the last examination, and provided further that, such accountants shall
report to Shaman only as to the accuracy of the royalty statements and payments.
Copies of such reports shall be supplied to LIPHA. In the event the report
demonstrates that LIPHA has underpaid royalties, LIPHA shall pay such royalties
immediately upon request of Shaman. If LIPHA has overpaid royalties, LIPHA may
deduct such overpayments from future royalties owed to Shaman.
8.4.4 Any tax paid or required to be withheld by LIPHA for the
benefit of Shaman on account of royalties payable to Shaman under this Agreement
shall be deductible and deducted from the amount of royalties otherwise due.
LIPHA shall secure and send to Shaman proof of any such taxes withheld and paid
by LIPHA for the benefit of Shaman and shall, at Shaman's request, provide
reasonable assistance to Shaman in recovering or obtaining credit for said
taxes, if possible.
8.4.5 For the purpose of computing royalty-bearing Net Sales for
Products sold in a currency other than United States Dollars, such currency
shall be converted into United States Dollars in accordance with the applicable
exchange rate as quoted in The Wall Street Journal on the date the royalty
report and payment is required pursuant to Section 8.4.2 above.
8.4.6 In the event LIPHA grants licenses or sublicenses to others
to make or sell Products in the Territory, such licenses or sublicenses shall
include an obligation for the licensee or sublicensee to account for and report
its Net Sales of such Products on the same basis as if such sales were Net Sales
by LIPHA, and LIPHA shall pay royalties to Shaman as if the Net Sales of the
licensee or sublicensee were Net Sales of LIPHA.
9. GLOBAL RELATIONSHIP.
9.1 Overall Relationship. Shaman has previously entered into a
relationship with Ono to develop therapeutic products for the Field in the Ono
Territory. LIPHA hereby agrees that it shall, together with Shaman and Ono enter
into a global collaboration on the terms set forth below.
9.2 Transfer of Information; License Obligations. During the term of
this Agreement, subject to reciprocity by Ono, Shaman and LIPHA shall make
available, without charge, to Ono all of the LIPHA Technical Information and the
Shaman Technical Information which is useful or necessary for registration,
manufacture, use or sale of a Mutual Product, in whatever form is best suited to
fully deliver such information, including, but not limited to, the transfer of
copies of all issued patents, patent applications, technical information and
data relating to Mutual Products (defined in Section 9.3 below). Each of the
parties shall also provide the other parties with reports of its progress.
9.3 Global Development Plan; Coordination. In the event that Ono and
LIPHA have each chosen to develop a therapeutic product for the Field derived
from the same Compound in development and having substantially the same identity
for marketing, sales or regulatory purposes (a "Mutual Product"), LIPHA, Shaman
and Ono shall use their commercially reasonable and diligent efforts in mutual
cooperation with one another to establish a Joint Clinical Development Committee
pursuant to Section 2.5 and a development plan for such Mutual Product with
respect to the pre-clinical and clinical studies of such Mutual Product (the
"Global Development Plan"). Each party may use such study data for regulatory
filing and approval purposes in their respective territory. In the event that
the three parties are unable to agree on a specific protocol or the need to
conduct specific clinical or pre-clinical studies, LIPHA's decisions shall
control clinical and pre-clinical studies (including their protocols) for filing
in the Territory, and Ono's decisions shall control clinical and pre-clinical
studies (including their protocols) for filing in the Ono Territory; provided,
that to the extent possible neither party will take an action that will impair
the others' efforts to have a Mutual Product achieve the relevant Regulatory
Approvals. In addition, the three parties shall create and maintain a single
worldwide database regarding safety and adverse clinical events and any other
clinical data as may be required by the appropriate regulatory agencies, and
shall promptly share with each other the results of the parties' respective
pre-clinical and clinical studies.
10. DISPUTE RESOLUTION AND ARBITRATION.
10.1 Initial Resolution Mechanisms. The Parties recognize that
disputes as to certain matters may from time to time arise during the term of
this Agreement which relate to either Party's rights and/or obligations
hereunder. It is the objective of the Parties to establish procedures to
facilitate the resolution of disputes arising under this Agreement in an
expedient manner by mutual cooperation and without resort to litigation. To
accomplish this objective, the Parties agree to follow the procedures set forth
in this Section 10, if and when a dispute arises under this Agreement, which
dispute cannot be resolved as set forth in Section 2.6 above. If the Parties are
unable to resolve such a dispute within thirty (30) days, either Party may, by
written notice to the other, have such dispute referred to their respective
chief executive officers, for attempted resolution by good faith negotiations
within fourteen (14) days after such notice is received. In the event the
designated executive officers are not able to resolve such dispute, either Party
may at anytime after the fourteen (14) day period invoke the provisions of
Section 10.2.
10.2 Arbitration. The parties agree that any dispute, controversy or
claim (except as to any issue relating to intellectual property owned in whole
or in part by Shaman or LIPHA) arising out of or relating to this Agreement, or
the breach, termination or invalidity thereof, shall be resolved through
negotiation and/or binding arbitration. If a dispute arises between the parties,
and if said dispute cannot be resolved pursuant to Section 10.1, the Parties
agree to resolve by binding arbitration in accordance with the rules of the
International Chamber of Commerce ("I.C.C."), except as modified herein. Shaman
and LIPHA shall each select one arbitrator and the two arbitrators so selected
shall choose a third arbitrator to resolve the dispute. The arbitration shall be
held in New York City, New York, and the decision shall be rendered within three
(3) months of conclusion of arbitration and shall be binding and not be
appealable to any court in any jurisdiction. The arbitration shall determine the
share of the cost of the arbitration filing and hearing fees and the cost of the
arbitrators. Each party must bear its own attorney's fees and associated costs
and expenses.
10.3 Jurisdiction. For the purposes of this Section 10, the Parties
agree to accept the jurisdiction of the federal courts located in the Southern
District (New York City) of New York for the purposes of entering the decision
rendered by any arbitration panel and enforcing awards entered pursuant to, and
for enforcing the agreements reflected in, this Article.
10.4 Determination of Patents and Other Intellectual Property. Any
dispute relating to the determination of validity of a Party's Patents or other
issues relating solely to a Party's intellectual property shall be submitted
exclusively to the federal or national court located in the location of the
defendant, and the Parties hereby consent to the jurisdiction and venue of such
court.
11. CONFIDENTIALITY, DISCLOSURE AND PUBLICATION.
11.1 Prior Agreements. This Agreement supersedes any
and all previous agreements and understandings, whether oral or
written, between the Parties regarding the treatment of
confidential information.
11.2 Confidentiality. During the term of this Agreement and
thereafter, each Party shall maintain in confidence all information and
materials disclosed by the other Party and marked as confidential or which such
Party knows or has reason to know are or contain trade secrets or other
proprietary information of the other, including without limitation, information
relating to the Technical Information of the other Party, Joint Inventions and
inventions of the other Party, and the business plans of the other Party,
including information provided by either Party to the other Party prior to or
after the Effective Date, and shall not use such trade secrets, information or
materials for any purpose except as permitted by this Agreement or disclose the
same to anyone other than those of its Affiliates, sublicensees, employees,
consultants, agents or subcontractors as are necessary in connection with such
Party's activities as contemplated in this Agreement. Each Party shall obtain a
written agreement from any sublicensees, employees, consultants, agents and
subcontractors, prior to disclosure, to hold in confidence and not make use of
such trade secrets or proprietary information for any purpose other than those
permitted by this Agreement.
11.3 Exceptions.
11.3.1 The obligation of confidentiality contained in this
Agreement shall not apply to the extent that (a) either Party (the "Recipient")
is required to disclose information by order or regulation of a governmental
agency or a court of competent jurisdiction, provided that the Recipient shall
not make any such disclosure (other than a filing of information or materials
with (i) the U.S. Securities and Exchange Commission; (ii) a similar filing of
information or materials with the National Association of Securities Dealers; or
(iii) state securities regulations or a filing of information or materials
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
and the rules and regulations thereunder, as amended; or (iv) a filing with the
Commission des Operations de Bourse and other corresponding French or German or
other European agencies) without first notifying the other Party and allowing
the other Party a reasonable opportunity to seek injunctive relief from (or
protective order with respect to) the obligation to make such disclosure or (b)
the Recipient can demonstrate that (i) the disclosed information was at the time
of such disclosure to the Recipient already in (or thereafter enters) the public
domain other than as a result of actions of the Recipient, its Affiliates,
employees, sublicensees, agents or subcontractors in violation hereof; (ii) the
disclosed information was rightfully known by the Recipient or its Affiliates
(as shown by its written records) prior to the date of disclosure to the
Recipient in connection with the negotiation, execution or performance of this
Agreement; or (iii) the disclosed information was received by the Recipient or
its Affiliates on an unrestricted basis from a source unrelated to any Party to
this Agreement and not under a duty of confidentiality to the other Party or (c)
disclosure is made to a government regulatory agency as Part of such agency's
product license approval process.
11.3.2 In the event that Ono chooses to develop a product for
the treatment of Diabetes based on a Compound that has been selected by LIPHA as
a Lead Compound, the obligation of confidentiality shall be waived by LIPHA with
respect to all pre-clinical and clinical data with respect to such Compound
generated by LIPHA in the course of its product development efforts. As a
condition to such disclosure, Shaman has required Ono to enter into
confidentiality provisions equivalent to those set forth in this Section 11.
Shaman's agreement with Ono contains a provision equivalent in substance
requiring Ono to disclose to LIPHA pre-clinical and clinical data generated by
Ono.
11.4 Publications. Prior to public disclosure or submission for
publication of a manuscript describing the results of any aspect of the
Collaboration or other scientific or clinical activity or collaboration between
LIPHA and Shaman or their Affiliates, the Party disclosing or submitting such a
manuscript ("Disclosing Party") shall send the other Party ("Responding Party")
a copy of the manuscript to be submitted and shall allow the Responding Party
not less than sixty (60) days in which to determine whether the manuscript
contains subject matter for which patent protection should be sought prior to
publication of such manuscript for the purpose of protecting an invention of
commercial value to the Responding Party, or whether the manuscript contains
confidential information belonging to the Responding Party. After the expiration
of such sixty (60) day period, if the Responding Party has not objected, the
Disclosing Party may submit such manuscript for publication and publish or
otherwise disclose to the public such research results. If the Responding Party
believes the subject matter of the manuscript contains confidential information
or a patentable invention of commercial value to the Responding Party, then
prior to the expiration of such sixty (60) day period, the Responding Party
shall notify the Disclosing Party in writing of its determination. Upon receipt
of such written notice from the Responding Party, the Disclosing Party shall
delay public disclosure of such information or submission of the manuscript for
an additional period of thirty (30) days to permit preparation and filing of a
patent application on the disclosed subject matter. The Disclosing Party shall
thereafter be free to publish or disclose such information, except that the
Disclosing Party may not disclose any confidential information of the Responding
Party in violation of this Section 11 without the prior written consent of the
Responding Party. Determination of authorship for any paper or patent shall be
in accordance with accepted scientific practice. Should any questions on
authorship arise, this will be determined by good faith consultation between the
members of the Joint Research and Development Steering Committee as appropriate.
12. INDEMNIFICATION. Each Party shall defend, indemnify and hold the other
Party, any officer, director or employee of such other Party or any of its
Affiliates (individually, an "Exculpated Party") harmless from and against any
damage, loss, liability or expense (including, without limitation, reasonable
attorneys' fees, settlement costs, litigation costs and costs on appeal
regardless of outcome) incurred or suffered by any Exculpated Party arising out
of (i) any misrepresentation or breach of warranty made by such Party pursuant
to this Agreement or (ii) any claim arising from the negligence or intentional
misconduct of any of such Party's employees or agents and specifically for any
claim of any kind whatsoever arising from the testing, manufacture, use, sale,
consumption, distribution or advertising of any of the Products which may be
developed as a result of this Agreement.
12.1 Each Party shall advise the other in writing promptly upon
becoming aware of any adverse event(s) arising out of any use of the Compound or
the Products, whether for commercial or noncommercial use.
12.2 Either Party (the "Notifying Party") shall promptly notify the
other Party (the "Indemnifying Party") of the existence of any third party
claim, demand or other action giving rise to a claim for indemnification under
this Agreement (a "Third Party Claim") and shall give the Indemnifying Party a
reasonable opportunity to defend the same at its own expense and with its own
counsel, provided that the Notifying Party shall at all times have the right to
participate in such defense at its own expense. If, within a reasonable time
after receipt of notice of a Third Party Claim, the Indemnifying Party shall
fail to undertake to so defend, the Notifying Party shall have the right, but
not the obligation, to defend and to compromise or settle (exercising reasonable
business judgment) the Third Party Claim for the account and at the risk and
expense of the Indemnifying Party. Each Party shall make available to the other
at the other's expense such information and assistance as the other shall
reasonably request in connection with the defense of a Third Party Claim.
13. INDEPENDENT CONTRACTORS. Both Parties shall act solely as independent
contractors and nothing in this Agreement shall be construed to give either
Party the power or authority to act on behalf of the other and each party shall
hold the other party harmless against any claim based on a representation of
authority in excess of that provided herein, provided that the indemnitor is
given prompt notice of any such claim, loss or liability and has the right to
participate in, and at its own option control, any proceeding arising therefrom.
14. NO SOLICITATION OF EMPLOYEES. During the term of this Agreement and
for two (2) years thereafter, neither Party shall solicit the other's employees
without the prior written approval of the other Party. This provision will not
preclude any Party from hiring any such employees if they independently apply
for a job without solicitation or pursuant to a general solicitation not
specifically directed at such employee.
15. TERM. This Agreement shall become effective as of the Effective Date
first written above and, unless sooner terminated pursuant to the provisions of
Section 16 below, shall remain in full force and effect for so long as LIPHA
shall be obligated to make royalty payments to Shaman pursuant to Section 8.4.
LIPHA shall after the expiration of this Agreement (other than any termination
by Shaman under Section 16) have the right to manufacture and sell any Products
as to which royalty obligations have expired in accordance with Section 8.4,
i.e. later of ten years after commercialization or expiration of patents,
without any further obligation of paying royalties.
16. TERMINATION OF AGREEMENT.
16.1 This Agreement shall be terminable in its entirety by
mutual written agreement of both Parties.
16.2 This Agreement shall be terminable at the option of either
Party upon written notice to the other, if such other Party is in material
breach or default with respect to any material term or provision hereof and
fails to cure the same within sixty (60) days after written notice of said
breach or default. Such termination rights shall be in addition to and not in
substitution of any other remedies that may be available to the Party serving
such notice against the Party in default. Termination pursuant to this Section
16.2 shall not relieve the Party in default from liability and damages to the
other Party for breach of this Agreement.
16.3 This Agreement shall be terminable at the option of either
Party upon written notice to the other, if such other Party is adjudged
bankrupt, files or has filed against it any petition under any bankruptcy,
insolvency or similar law, which petition is not dismissed within sixty (60)
days, has a receiver appointed for its business or property, or makes a general
assignment for the benefit of its creditors.
16.4 LIPHA shall have the right, at its sole discretion, to
terminate this Agreement if within two (2) years following the Effective Date,
no human clinical studies have been commenced for any Compound for an indication
in the Field. Such right of termination shall be exercised within a period of
ninety (90) days following the second anniversary of the Effective Date, and by
LIPHA giving to Shaman sixty (60) days advance written notice of such
termination. In the event of such termination, LIPHA shall have no obligation to
make any further payments to Shaman under this Agreement (or to purchase
additional shares under the Stock Purchase Agreement, it being nevertheless
understood that the Registration Rights Agreement shall continue to apply to any
and all shares of Common Stock already purchased, at that date, by LIPHA
pursuant to the Stock Purchase Agreement), nor shall Shaman be entitled to any
indemnity, damages or other payment, it being understood that LIPHA shall then
have no further rights hereunder, whether to Compounds already selected, in
development, or otherwise.
16.5 In the event of any acquisition or merger of Shaman by or
with a third party in which Shaman is not the surviving entity, if such third
party is a direct competitor of LIPHA in the Field, LIPHA shall be entitled to
terminate this Agreement as a result of such merger or acquisition, provided
that LIPHA shall have the right to retain all Product and technology rights
licensed to LIPHA at the time of such termination subject to all applicable
milestone and royalty payments and other LIPHA obligations relating to such
licensed rights.
17. PUBLIC ANNOUNCEMENT OF AGREEMENT. Except as required to comply with
U.S. and other foreign securities laws, any order of a court or government
agency of any country of the Territory, and except as provided below, neither
Party shall release information concerning this Agreement or the subject matter
hereof to the news media, or other media, without first sending the other Party
by express mail or facsimile, a copy of the information to be disclosed and
allowing the other Party a reasonable time (not to exceed three (3) business
days from the date of receipt) in which to comment on the information. If the
other Party objects to the information to be disclosed and prior to the
expiration of the three (3) business day period, the other Party shall so notify
the disclosing Party who shall then delay public disclosure of the information
and make reasonable efforts to accommodate any request for revisions by the
other Party. If no notification is received during the three (3) business day
period, the Party proposing disclosure shall be free to disclose the
information. The Parties designate the following individuals to receive and
approve announcements under this provision: Shaman, its Chief Executive Officer;
LIPHA, its Chairman and Chief Executive Officer. The Parties agree that Shaman
may discuss the general terms of the Agreement with Ono without disclosing any
Confidential Information of LIPHA or LIPHA Technical Information without LIPHA's
prior written consent; and that the parties will cooperate in good faith with
one another to formulate a form of announcement that Shaman and LIPHA may
release as soon as practicable after the Effective Date.
18. PATENT MATTERS. The ownership rights and other matters regarding
patents developed pursuant to the Collaboration pursuant to this Agreement shall
be as follows:
18.1 Inventions; Joint Inventions and Patents.
18.1.1 Ownership of all inventions arising during the term of
the Research Period and for a period of five (5) years thereafter that are
either (i) related to Compounds or any modification or improvement of such
Compounds, or (ii) substantially similar in structure or site of activity to
Compounds or any modification or improvement of such Compounds (except those
that LIPHA can clearly demonstrate are independently developed by LIPHA as
evidenced by written records), whether patented or not, which are invented by
LIPHA or its Affiliates or a person contractually required to assign or license
patent rights covering such inventions to LIPHA, shall be vested jointly in
Shaman and LIPHA or their respective Affiliates consistent with the United
States laws pertaining to joint ownership of patents and inventions ("Joint
Inventions").
18.1.2 In the event that during the term of the Research Period
and the period of five (5) years thereafter, Shaman becomes aware of an
invention that it believes should be treated as a Joint Invention pursuant to
Section 18.1.1 and is not being treated as such by LIPHA, Shaman shall have the
opportunity to receive a reasonably detailed scientific presentation by LIPHA on
such invention to determine in good faith whether such invention should be
treated as a Joint Invention. Shaman and LIPHA shall retain full ownership to
all Joint Inventions and any Patents resulting therefrom, with full ownership
rights in any field and subject only to the licenses granted in Section 8, with
the full right by either party to transfer joint ownership in or to sublicense
any such Joint Invention or Patent without the consent of the other party and
without accounting to the other party for any consideration received from such
transfer of joint ownership or sublicense. The laws of the United States with
respect to joint ownership of inventions shall, to the extent not inconsistent
with the foregoing sentence, apply in all jurisdictions giving force and effect
to this Agreement. All information provided by either party in the course of
such a presentation shall be subject to the confidentiality provisions of
Section 11 hereof.
18.1.3 Except as otherwise expressly set forth in this
Agreement, ownership of all sole inventions of either Party hereto shall be
vested solely in that Party.
18.2 General Provisions Relating to Prosecution and Maintenance. Both
Parties shall jointly file patent applications for Joint Inventions made by the
Parties. Joint applications shall be filed initially in the United States,
unless the Joint Research and Development Steering Committee determines for a
compelling business reason that the application should first be filed in another
jurisdiction.
18.3 Payments; Disputes. With respect to Shaman Patents, Shaman shall
bear all costs and expenses for fees or other payments required to submit and
maintain their own applications and patents in the whole world. With respect to
LIPHA Patents, LIPHA shall bear all costs and expenses for fees or other
payments required to submit and maintain their own applications and patents in
the whole world. With respect to Joint Patent application filings, Shaman and
LIPHA shall share all costs and expenses for fees or other payments required to
submit and maintain joint applications and patents in the Territory. In the
event there is a dispute as to whether a particular invention was developed by a
Party individually or by the Parties jointly, the issue shall be resolved by the
Joint Research and Development Steering Committee.
18.4 Infringement by a Third Party. If at any time either Party
hereto shall become aware of any infringement or threatened infringement by a
third party in the Territory of any or all of the Shaman Patents, LIPHA Patents
or Joint Patents to which the Party having the knowledge thereof claims an
interest pursuant to this Agreement, the Party having the knowledge thereof
shall forthwith give notice thereof to the other Party. Upon notice of any such
infringement, the Parties shall promptly consult with one another with a view
toward reaching agreement on a course of action to be pursued.
18.4.1 Shaman shall have the first right but not the obligation
to bring an enforcement action or to take any other reasonable steps to defend
Shaman Patents and Joint Patents against infringement and LIPHA shall in such
event give all reasonable assistance to Shaman with respect to patent and legal
questions. The costs of such patent enforcement shall be borne by Shaman. If
Shaman does not commence a particular infringement action within ninety (90)
days after it has received notice of such infringement, LIPHA, after notifying
Shaman in writing, shall be entitled to bring such infringement action or other
appropriate action or claim at its own expense but shall request in writing that
Shaman fund 50% of such expenses. The party conducting such action shall
consider in good faith the comments of the other party with regard to the
conduct of such action. If Shaman declines to pursue such action or fails to
respond to LIPHA within 60 days after receipt of LIPHA's notice that it will do
so and LIPHA undertakes such action, then LIPHA shall be entitled to 100% of all
recoveries and LIPHA shall no longer be required to pay royalties to Shaman for
any Product covered by such patent(s) in the country in which such action was
prosecuted. Recovery from any settlement or judgement from any such action in
the Territory either pursued by Shaman or co-funded by Shaman shall go first to
reimburse the expenses of the parties and the remainder shall be shared by the
parties on a 50%/50% basis. Notwithstanding the foregoing, if the monetary
recovery is less than the out-of-pocket expenses of Shaman and LIPHA,
reimbursement shall be on a pro rata basis, based upon cost incurred. In any
event, Shaman and LIPHA shall assist one another and reasonably cooperate in any
such litigation at the other's request without expense to the requesting party.
18.4.2 LIPHA shall have the first right but not the obligation
to bring an enforcement action or to take any other reasonable steps to defend
LIPHA Patents against infringement and Shaman shall in such event give all
reasonable assistance to LIPHA with respect to patent and legal questions. The
costs of such patent enforcement shall be borne by LIPHA but Shaman shall have
the right to co-fund 50% of the expenses. If LIPHA does not commence a
particular infringement action within ninety (90) days after it has received
notice of such infringement, Shaman, after notifying LIPHA in writing, shall be
entitled to bring such infringement action or other appropriate action or claim
at its own expense but shall request in writing that LIPHA fund 50% of such
expenses. The party conducting such action shall consider in good faith the
comments of the other party with regard to the conduct of such action. If LIPHA
declines to pursue such action or fails to respond to Shaman within 60 days
after receipt of Shaman's notice that it will do so, Shaman undertakes such
action and LIPHA fails to fund 50% of Shaman's expenses in pursuing such action,
then Shaman shall be entitled to 100% of all recoveries. If LIPHA notifies
Shaman that it will pursue and does pursue such action and Shaman declines to
co-fund the same or fails to notify to LIPHA within 60 days after receipt of
LIPHA's notice that it will pursue the action, then LIPHA shall be entitled to
100% of all recoveries and LIPHA shall no longer be required to pay royalties to
Shaman for any Product covered by such patent(s) in the country in which such
action was prosecuted. Recovery from any settlement or judgement from any such
action in the Territory co-funded by the parties shall go first to reimburse the
expenses of the parties and the remainder shall be shared by the parties on a
50%/50% basis. Notwithstanding the foregoing, if the monetary recovery is less
than the out-of-pocket expenses of Shaman and LIPHA, reimbursement shall be on a
pro rata basis, based upon cost incurred. In any event, Shaman and LIPHA shall
assist one another and reasonably cooperate in any such litigation at the
other's request without expense to the requesting party.
18.4.3 If Shaman and LIPHA, after consultation with each other,
elect not to bring suit, individually or jointly, or if Shaman and/or LIPHA, as
the case may be, are/is not able to stop such infringing activities, the
applicable royalty shall be adjusted as set forth in Section 8.4.1, if at all.
18.5 Alleged Infringement by Products. In the event of
dispute concerning a third party's patent rights in the
Territory, Shaman and LIPHA will proceed as follows:
18.5.1 While a dispute concerning infringement of a third
party's patent rights is in progress, the Party which had a claim brought
against it by a third party (the "Defendant Party") will use its best efforts to
defend against the infringement claim and resolve the dispute; and both parties
shall share all costs, fees and expenses associated with the resolution of this
dispute. Additionally, the other Party will assist and use its best efforts to
help the Defendant Party resolve the dispute on favorable terms, also sharing
all such costs and expenses.
18.5.2 In the event the dispute is resolved against Shaman
and/or LIPHA, with a finding of an infringement, then the Parties shall share
all damages; and provided further that if any royalties are required to be paid
to a third party as a result of such infringement or any negotiated settlement
approved jointly by the Parties, then LIPHA shall make such payment and shall be
entitled to deduct fifty percent (50%) of such payment against any royalties
owing to Shaman under this Agreement.
19. RESEARCH EXPENSES. Except as otherwise expressly
provided by this Agreement, each Party shall bear its own
internal research, development and regulatory costs.
20. REPRESENTATIONS AND WARRANTIES. Shaman and LIPHA each
represent and warrant to the other as set forth below:
20.1 Representations and Warranties of Shaman. Shaman
represents and warrants that:
20.1.1 The execution, delivery and performance of this Agreement
by Shaman will not, with or without notice, the passage of time or both, result
in any violation of, be in conflict with, or constitute a default under any
material contract, obligation or commitment to which Shaman is a party or by
which it is bound, or to Shaman's knowledge, any statute, rule or governmental
regulation applicable to Shaman.
20.1.2 Shaman has all requisite legal and corporate power and
authority to enter into this Agreement, to grant the licenses to be granted by
Shaman hereunder and to carry out and perform its obligations under the terms of
this Agreement. All corporate action on the part of Shaman, its officers and
directors necessary for the grants of licenses pursuant hereto and the
performance of Shaman's obligations hereunder has been taken. This Agreement
constitutes a valid and binding obligation of Shaman, enforceable in accordance
with its terms, except (i) the enforceability hereof may be limited by
bankruptcy, insolvency, moratorium or other similar law as affecting the
enforcement of creditors' rights generally, (ii) the availability of equitable
remedies (e.g., specific performance, injunctive relief, and other equitable
remedies) may be limited by equitable principles or general applicability, (iii)
to the extent the indemnification provisions contained in this Agreement may be
limited by applicable federal or state securities law; and (iv) that no
representation is made regarding the effect of laws relating to competition,
antitrust or patent misuse or the effect of LIPHA's or third parties'
intellectual property rights.
20.1.3 All employees of Shaman who are expected to participate
in the Collaboration have signed agreements regarding proprietary information
and inventions with Shaman in a form reasonably considered by Shaman and its
counsel to assure Shaman's title to any Joint Inventions, Shaman Technical
Information or Shaman Patents that may arise or be developed by such employees
hereunder. Such agreements are legal, valid and binding obligations of Shaman
and its employees and are enforceable in accordance with their terms, except as
limited by applicable bankruptcy laws and other similar laws affecting the
creditors' rights and remedies generally and except insofar as the availability
of equitable remedies may be limited.
20.2 Representations and Warranties of LIPHA. LIPHA
represents and warrants that:
20.2.1 The execution, delivery and performance of this Agreement
by LIPHA will not, with or without notice, the passage of time or both, result
in any violation of, be in conflict with, or constitute a default under any
material contract, obligation or commitment to which LIPHA is a party or by
which it is bound, or to LIPHA's knowledge, any statute, rule or governmental
regulation applicable to LIPHA.
20.2.2 LIPHA has all requisite legal and corporate power and
authority to enter into this Agreement to grant the licenses to be granted by
LIPHA hereunder and to carry out and perform its obligations under the terms of
this Agreement. All corporate action on the part of LIPHA and its officers and
directors necessary for the grants of licenses pursuant hereto and the
performance of LIPHA's obligations hereunder has been taken. This Agreement
constitutes a valid and binding obligation of LIPHA, enforceable in accordance
with its terms, except as (i) the enforceability hereof may be limited by
bankruptcy, insolvency, moratorium or other similar law as affecting the
enforcement of creditors' rights generally, (ii) the availability of equitable
remedies (e.g., specific performance, injunctive relief, and other equitable
remedies) may be limited by equitable principles or general applicability, (iii)
to the extent the indemnification provisions contained in this Agreement may be
limited by applicable law and (iv) and that no representation is made regarding
the effect of laws relating to competition, antitrust or patent misuse or the
effect of Shaman's or third parties' intellectual property rights.
20.2.3 All employees of LIPHA who are expected to participate in
the Collaboration have signed agreements regarding proprietary information and
inventions with LIPHA in a form reasonably considered by LIPHA and its counsel
to assure LIPHA's title to any Joint Inventions or LIPHA Technical Information
that may arise or be developed by such employees hereunder. Such agreements are
legal, valid and binding obligations of LIPHA and its employees and are
enforceable in accordance with their terms, except as limited by applicable
bankruptcy laws and other similar laws affecting the creditors' rights and
remedies generally and except insofar as the availability of equitable remedies
may be limited.
20.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
SHAMAN AND LIPHA MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
21. SURVIVAL OF RIGHTS, DUTIES AND OBLIGATIONS. Termination of this
Agreement for any cause shall not release a Party from any liability, which at
the time of termination has already accrued to another Party, or which
thereafter may accrue in respect of any act or omission prior to such
termination. The obligations and rights established in Sections 8, 10, 11, 12,
14, 17, 18, 22 and 23 shall survive the termination of this Agreement for any
reason.
22. ASSIGNMENT. This Agreement shall be binding on the Parties hereto and
their respective successors and assigns. Neither of the Parties hereto shall be
entitled to assign this Agreement or any of its rights or obligations hereunder
without the consent of the other. Notwithstanding the foregoing, each Party
shall be entitled to assign this Agreement to an Affiliate of such Party unless
the other Party reasonably objects to such assignment for valid business
purposes. If either Party is acquired or merged with another entity, that entity
shall succeed to all of the rights and obligations of the disappearing Party;
provided in the event either Party is acquired or merged with another entity,
such acquiring or successor entity shall expressly assume in writing the due and
punctual performance and observance of all obligations under this Agreement of
the Party it has acquired or with which it has merged, with the same effect as
if such entity had originally been such Party hereunder; and further provided if
such acquiring or successor entity does not so assume the obligations of the
Party it has acquired or with which it has merged, the other Party may terminate
this Agreement pursuant to Section 16 hereof. Notwithstanding the foregoing,
nothing contained in this Section 22 shall be construed as preventing either
Party from sublicensing its rights to any Products granted hereunder.
23. FURTHER ASSURANCES. Shaman and LIPHA shall cooperate with each other
and execute and deliver to each other such other instruments and documents and
take such other actions as may be reasonably requested from time to time in
order to carry out, evidence and confirm the rights and intended purposes of
this Agreement.
24. LANGUAGE. This Agreement is entered into in the
English language. All meetings and correspondence between the
Parties are to be in English. In the event of any dispute
concerning the construction or meaning of this Agreement,
reference shall be made only to this Agreement as written in
English and not to any translation into any other language.
25. GOVERNING LAW. Disputes arising out of or based upon this Agreement
shall be governed by and construed in accordance with the laws of the State of
California, United States of America, as applied to agreements among California
residents entered into and to be performed entirely within California. LIPHA
hereby submits to the non-exclusive personal jurisdiction and to service and
venue in any U.S. state or federal court located in the State of California in
connection with any claim arising hereunder or in connection herewith. Shaman,
in turn hereby submits to the non-exclusive personal jurisdiction and to service
and venue in any French court in connection with any claim arising hereunder or
in connection herewith.
26. NOTICES. Notices, demands or other communications required or
permitted to be given or made hereunder shall be in writing and delivered
personally or sent by private overnight mail delivery, with recorded delivery or
by legible telefax addressed to the intended recipient at its address set forth
below in this Section or to such other address or telefax number as any Party
may from time to time duly notify to the other. Any such notice, demand or
communication shall, unless the contrary is proved, be deemed to have been duly
served (if given or made by telefax) on the next following business day at the
place of receipt or (if given or made by overnight private mail) forty-eight
(48) hours after posting and in proving the same, it shall be sufficient to
show, in the case of a letter, that the envelope contained the same as duly
addressed, correctly stamped and posted and in the case of a telefax, that such
telefax was duly dispatched to a current telefax number of the addressee.
Correspondence to Shaman shall be addressed to:
President and Chief Executive Officer
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, California 94080 U.S.A.
Telefax number: (415) 873-8367
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303 U.S.A.
Attn: J. Stephan Dolezalek
Telefax number: (415) 496-2736
Correspondence to LIPHA shall be addressed to:
Chairman and Chief Executive Officer
LIPHA, Lyonnaise Industrielle Pharmaceutique s.a.
34 rue Saint-Romain
F-69379 Lyon, cedex 08
France
Telefax number: 33/78 75 39 05 or
after 10/18/96: 33/04 78 75 39 05
27. ENTIRE AGREEMENT. This Agreement, together with the schedules and
appendices hereto, constitutes the entire agreement between the Parties with
respect to the subject matter hereof and save as otherwise expressly provided no
modification, amendment or waiver of any of the provisions of this Agreement
shall be effective unless made in writing specifically referring to this
Agreement and duly signed and delivered by the Parties hereto. Whenever in this
Agreement a Party's approval or signature is required, such approval or
signature may not be unreasonably withheld.
28. NONWAIVER OF RIGHTS. No failure or delay on the part of Shaman or
LIPHA in exercising any right under this Agreement, irrespective of the length
of time for which such failure or delay shall continue, will operate as a waiver
of, or impair, any such right. No single or partial exercise of any such right
will preclude any other or further exercise thereof or the exercise of any other
right. No waiver of any such right will be effective unless given in a signed
writing. No waiver of any such right will be deemed a waiver of any other right
hereunder or thereunder.
29. SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the Parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
30. FORCE MAJEURE. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any terms of this Agreement
when such failure or delay is caused by or results from fires, floods,
embargoes, government regulations or administrative guidance, prohibitions or
interventions, war, acts of war (whether war be declared or not), insurrections,
riots, civil commotions, strikes, lockouts, acts of God, or any other cause
beyond their respective reasonable control, but they shall make every reasonable
effort to remove any such cause of their failure or delay as soon as possible.
31. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall be
deemed for all purposes to be executed and effective upon receipt of an executed
signature page, either an original or telefax copy thereof, from the duly
authorized officer of each of LIPHA and Shaman.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the Effective Date written above.
SHAMAN PHARMACEUTICALS, INC. LIPHA, LYONNAISE INDUSTRIELLE
PHARMACEUTIQUE s.a.
By: /s/ Lisa A. Conte By: /s/ Jean-Noel Treilles
Lisa A. Conte Jean-Noel Treilles
President and Chief Executive Chairman and Chief Executive
Officer Officer
EXHIBIT A
DEVELOPMENT PLAN
Primary In-depth
Evaluation Evaluation Development
Active --> Lead --> Development --> IND
Compds. Compds. Candidates
Stage IIa Stage IIb Stage III
o Establish plant sourcing plan
o Plant collections
o Establish rat model & test compounds
o Address bioavailability issues
o General pharmacology
STAGE II a UPDATE
================================================================================
Data Pharmacology Med. Chem.
Compound Mouse Rat Human Screen Patent Synthesis
================================================================================
SP-134101 * * * * * *
================================================================================
SP-49701 * * * * * *
================================================================================
SP-910255 * * * * * *
================================================================================
SP-910235 * * * * * *
================================================================================
SP-4003 * * * * * *
================================================================================
SP-18904 * * * * * *
================================================================================
SP-67004 * * * * * *
================================================================================
SP-66904 * * * * * *
================================================================================
SP-82001 * * * * * *
================================================================================
SP-18908 * * * * * *
================================================================================
[* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH
THE COMMISSION PURSUANT TO RULE 24b-2.]
EXHIBIT 10.51
EXHIBIT B
STOCK PURCHASE AGREEMENT
BETWEEN
LIPHA, LYONNAISE INDUSTRIELLE PHARMACEUTIQUE s.a.
AND
SHAMAN PHARMACEUTICALS, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into as of this 23rd
day of September, 1996 (the "Effective Date"), between Shaman Pharmaceuticals
Inc., a Delaware corporation (the "Company"), and LIPHA, Lyonnaise Industrielle
Pharmaceutique s.a., a French corporation ("Buyer").
WHEREAS, the Company and Buyer have entered into that certain Joint
Research and Product Development and Commercialization Agreement of even date
herewith (the "Development Agreement"), pursuant to which the Company and Buyer
have agreed to develop jointly products for the treatment of diabetes mellitus
and its complications; and
WHEREAS, in connection with the execution and delivery of the
Development Agreement and the completion of the collaboration contemplated
therein, the Company intends to sell, and Buyer intends to purchase, shares of
the Company's Common Stock, par value $.001 per share (the "Common Stock"), on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
a. Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, on each Closing Date (as defined herein), the Company
agrees to sell to Buyer, and Buyer agrees to purchase from the Company, that
number of shares of the Company's Common Stock as is determined by dividing (i)
$3,000,000 with respect to the Initial Closing, $1,500,000 with respect to each
Subsequent Closing and $2,250,000 with respect to each Extension Closing (as
defined herein) by (ii) a price per share of Common Stock which is a twenty
percent (20%) premium to the volume weighted average of the closing prices per
share for the Common Stock as quoted on the Nasdaq National Market (or any other
national securities exchange on which the Common Stock is then traded) for the
* * * ( * ) consecutive trading days ending on the second trading day
immediately preceding such Closing Date. [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO
RULE 24b-2.]
b. Closings. Subject to the terms and conditions of this
Agreement, the consummation of (i) the initial closing of the purchase and sale
of shares of Common Stock under this Agreement (the "Initial Closing") shall be
held on the date of this Agreement, (ii) subsequent closings (each a "Subsequent
Closing") shall be held on first and second anniversary of the date of the
Initial Closing and (iii) extension closings (each an "Extension Closing") shall
be held on the third and fourth anniversaries of the Initial Closing. The
Initial Closing, the Subsequent Closings and the Extension Closings are referred
to herein collectively as the "Closings."
c. Location. All Closings shall be held at 8:30 a.m. (California
time) at the offices of Brobeck, Phleger & Harrison at Two Embarcadero Place,
2200 Geng Road, Palo Alto, California or at such other place as the Company and
Buyer may agree in writing and such closings may occur via facsimile, mail
delivery or other delivery service without the need for the parties to be
physically present.
d. Trading Day; Fractional Shares. For purposes of this Agreement,
the term "trading day" does not include any day on which no closing price per
share of Common Stock is reported. As prescribed in Section 1(a) above, the
number of shares of Common Stock to be purchased by Buyer on any Closing Date
shall equal the aggregate purchase price to be paid for such shares divided by
the applicable per share price; provided, however, that the Company will not
issue any fractional shares of Common Stock. Any such fractional shares will be
rounded to the nearest whole share.
2. Delivery. Subject to the terms and conditions of this
Agreement, at all Closings the Company will deliver to Buyer, stock certificates
representing the number of shares subject to purchase hereunder against payment
of the purchase price therefor by wire transfer in immediately available United
States dollars to such account of the Company as the Company may specify to
Buyer not less than three (3) business days prior to the applicable Closing.
3. Conditions to Obligations.
a. Buyer's Conditions to Initial Closing. The obligation of
Buyer to purchase and pay for the shares of Common Stock at the Initial Closing
shall be subject to the satisfaction of each of the following conditions
precedent, any one or more of which may be waived by Buyer:
i. Representations and Warranties. Each of the
representations and warranties of the Company set forth in Section 4 shall be
true and correct as if made at the Initial Closing.
ii. Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Initial Closing.
iii. Compliance Certificate. The Chief Executive Officer of
the Company shall deliver to Buyer at the Initial Closing a certificate
certifying that the conditions set forth in this Section 3(a) have been
fulfilled.
iv. Opinion of Counsel to the Company. Buyer shall have
received from Brobeck, Phleger & Harrison, counsel for the Company, an opinion
dated as of the Initial Closing, in form and substance reasonably acceptable to
the Buyer and its counsel.
v. Consents. The Company and Buyer shall have obtained all
consents (including all governmental and regulatory consents, approvals or
authorizations required in connection with the valid execution and delivery of
this Agreement), permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Initial Purchase under this Agreement.
vi. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Initial
Closing and all documents incident thereto shall be reasonably satisfactory in
form and substance to Buyer and Buyer's counsel, and they shall have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.
b. Buyer's Conditions to Subsequent Closings and Extension
Closings. The obligation of Buyer to purchase and pay for the shares of Common
Stock at each Subsequent Closing and each Extension Closing, as the case may be,
is subject to the satisfaction or Buyer's waiver, on or prior to such Closing,
of each of the following conditions:
i. Representations and Warranties. The representations and
warranties made by the Company in Sections 4(a), (b), (c), (d), (e), (f), (g)
and (h) shall be true and correct on the date of such Closing, with the same
force and effect as if they had been made on and as of each of such dates,
provided, however, that with respect to Section 4(f) the Company shall only be
required to notify Buyer as to the existence of any subsidiaries, the existence
of which at the time of such future closing shall not constitute a breach of
representation or warranty.
ii. Performance. The Company shall have performed all
covenants, obligations and conditions required to be performed or observed by it
on or prior to such Closing.
iii. Compliance Certificate. The Chief Executive Officer of
the Company shall deliver to Buyer at such Closing a certificate certifying that
the conditions set forth in this Section 3(b) have been fulfilled.
iv. Opinion of Counsel to the Company. Buyer shall have
received from Brobeck, Phleger & Harrison, counsel for the Company, an opinion
dated as of such Closing, in form and substance reasonably acceptable to the
Buyer and its counsel.
v. Consents. The Company and Buyer shall have obtained all
consents (including all governmental or regulatory consents, approvals or
authorizations required in connection with the valid execution and delivery of
this Agreement), permits and waivers necessary or appropriate for consummation
of the transactions at such Closing, as the case may be, under this Agreement.
vi. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at each Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer and Buyer's counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
c. Company's Conditions to Initial Closing. The obligations of
the Company to Buyer under this Agreement are subject to the fulfillment on or
before the Initial Closing of each of the following conditions precedent, any
one or more of which may be waived by the Company:
i. Representations and Warranties. Each of the
representations and warranties of Buyer set forth in Section 5 shall be true and
correct as if made at the Initial Closing.
ii. Payment of Purchase Price. Buyer shall have delivered
payment in the amount of $3,000,000 in accordance with Section 2 above.
iii. Performance. Buyer shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with on or before such Initial Closing.
iv. Consents. The Company and Buyer shall have obtained all
consents (including all governmental and regulatory consents, approvals or
authorizations required in connection with the valid execution and delivery of
this Agreement), permits and waivers necessary or appropriate for consummation
of the transactions at the Initial Closing under this Agreement.
v. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Initial
Closing and all documents incident thereto shall be satisfactory in form and
substance to the Company and the Company's counsel, and they shall have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.
d. Company's Conditions to Subsequent Closings and Extension
Closings. The obligation of the Company to sell and issue the shares at each
Subsequent Closing and each Extension Closing, as the case may be, is subject to
the satisfaction or the Company's waiver, on or prior to such Closing, of each
of the following conditions:
i. Representations and Warranties. The representations and
warranties made by Buyer in Section 5 shall be true and correct on the date of
such Closing, with the same force and effect as if they had been made on and as
of each of such dates.
ii. Payment. Buyer shall have delivered payment in the
amount prescribed in Section 1 above with respect to such Closing, in accordance
with Section 2 above.
iii. Performance. Buyer shall have performed all covenants,
obligations and conditions required to be performed or observed by it on or
prior to such Closing.
iv. Consents. The Company and Buyer shall have obtained all
consents (including all governmental or regulatory consents, approvals or
authorizations required in connection with the valid execution and delivery of
this Agreement), permits and waivers necessary or appropriate for consummation
of the transactions at such Closing, under this Agreement.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to Buyer as follows:
a. Corporate Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business as a foreign corporation in each jurisdiction
where failure to qualify would have a material adverse effect on the business or
properties of the Company. The Company has full power and authority to own its
property, to carry on its business as presently conducted and to carry out the
transactions contemplated hereby.
b. Authorization. The Company has full power to execute, deliver
and perform this Agreement, and this Agreement has been duly executed and
delivered by the Company and is the legal, valid and, assuming due execution by
Buyer, binding obligation of the Company, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting creditors' rights generally, and to general equitable
principles. The execution, delivery and performance of this Agreement, including
the sale, issuance and delivery of the Common Stock, has been duly authorized by
all necessary corporate action of the Company.
c. Valid Issuance of Common Stock. The shares of Common Stock
being purchased by Buyer hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, and, based in part upon the representations of Buyer in
this Agreement, will be issued in compliance with all applicable federal and
state securities laws and such shares of Common Stock will be fully paid and
non-assessable.
d. Governmental Approvals. Based in part on the representations
made by Buyer in Section 5, 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, under any applicable laws, rules or regulations presently in effect, is
or will be necessary for, or in connection with, the offer, issuance, sale,
execution and delivery by the Company of the Common Stock or for the performance
by the Company of its obligations under this Agreement, except for filings under
applicable securities laws which will be made by the Company within the
prescribed periods.
e. Litigation. There is no litigation or governmental
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company which would materially and adversely affect the
execution and delivery of this Agreement or the performance by the Company of
its obligations hereunder.
f. Subsidiaries; Charter Documents. The Company has no active
subsidiaries and does not otherwise directly or indirectly control any other
business entity. The Company has furnished Buyer with certified copies of its
Restated Certificate of Incorporation and Bylaws, together with any amendments
thereto as of the date hereof.
g. Filings. The Company has timely filed all reports, registration
statements and other documents required to be filed by it with the Securities
and Exchange Commissioner under the Securities Act of 1933, as amended (the
"1933 Act"), or the Securities Exchange Act of 1934, as amended (the "1934
Act"), including, without limitation, the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 (the "10-Q"), Annual Report on Form
10-K for the year ended December 31, 1995 (the "10-K"), and Annual Report to
Stockholders for the fiscal year ended December 31, 1995 (the "Annual Report").
As of its filing date, no such report or statement contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
h. Non-Contravention. The execution, delivery and performance by
the Company of this Agreement does not and will not (i) contravene or conflict
with the Restated Certificate of Incorporation or Bylaws of the Company, or (ii)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company in any manner which would materially and adversely
affect Buyer's rights or their ability to realize the intended benefits under
this Agreement.
5. Representations and Warranties of BuyerRepresentations and
Warranties of Buyer. Buyer hereby represents and warrants to the Company as
follows:
a. Investment Experience. Buyer Investment Experience. Buyer
is an "accredited investor" within the meaning of Rule 501 under the 1933 Act,
and was not organized for the specific purpose of acquiring the Common Stock.
Buyer has sufficient knowledge and experience in investing in companies similar
to the Company in terms of the Company's stage of development so as to be able
to evaluate the risks and merits of its investment in the Company and it is able
financially to bear the risks thereof.
b. Purchase for Own Account. Buyer is acquiring the Common Stock
for investment for its own account and not with the view to, or for resale in
connection with, any distribution thereof. Buyer has no present intention of
selling, granting any participation in, or otherwise distributing the same.
Buyer does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer, or grant participations to such person or to any third
person, with respect to any of the Common Stock. Buyer understands that the
shares of Common Stock have not been registered under the 1933 Act by reason of
an exemption from the registration provisions of the 1933 Act which depends
upon, among other things, the bona fide nature of its investment intent as
expressed herein.
c. Restricted Securities. Buyer understands that the Common Stock
may not be sold, transferred, or otherwise disposed of without registration
under the 1933 Act, or an exemption therefrom, and that in the absence of an
effective registration statement covering the Common Stock, or an available
exemption from registration under the 1933 Act, the Common Stock must be held
indefinitely. In the absence of an effective registration statement or an
exemption from registration covering the Common Stock, Buyer will sell,
transfer, or otherwise dispose of the Common Stock only in a manner consistent
with its representations and agreements set forth herein.
d. Information. Buyer acknowledges that it has received all the
information it has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the Common Stock. Buyer represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the Company and the terms and conditions of the Common Stock,
and to obtain any additional information necessary to verify the accuracy of the
information given Buyer.
e. Legend. It is understood that the certificates evidencing
the Common Stock may bear substantially the following legend:
i. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT; OR
ii. Any legend required by the laws of the State of
California or any other applicable jurisdiction.
6. Registration of Shares. Buyer shall have the right to request
registration of all or a portion of the shares acquired by Buyer under this
Agreement as provided in the Registration Rights Agreement attached hereto as
Exhibit A.
7. Miscellaneous.
a. No Waiver; Cumulative Remedies. No failure or delay on the part
of Buyer or the Company 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.
b. Amendments, Waivers and Consents. Except as otherwise expressly
provided in this Agreement, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein or therein set forth
may be omitted or waived, so long as all of the parties to this Agreement so
agree in writing. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only to
the extent expressly set forth therein.
c. Addresses for Notices. All notices, requests, demands and other
communications provided for hereunder to be sent to Buyer shall be in writing
(including telegraphic communication) and mailed or telegraphed or telecopied or
delivered at the address indicated on the signature page hereto. Any such
notices, requests, demands or other communications to the Company shall be sent
to:
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, California 94080 U.S.A.
Attn: Lisa A. Conte
President and Chief Executive Officer
Telefax: (415) 873-8367
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303 U.S.A.
Attn: J. Stephan Dolezalek, Esq.
Telefax: (415) 496-2736
Either party to this Agreement may change its address by written notice to the
other party complying as to delivery with the terms of this Section. Unless
otherwise provided, any notice, request, demand or other communication required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or delivery
to such party by either international courier service or through the federal
postal system of the country of the sender by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party above or on the signature page hereto or at such other
address as such party may designate by ten (10) days advance written notice to
the other parties.
d. Fees, Costs and Expenses. Each party hereto shall bear its own
legal costs and expenses incurred in connection with the preparation, execution
and delivery of this Agreement and the other instruments and documents to be
delivered hereunder. The Company shall pay any and all stamp and other similar
taxes payable or determined to be payable in connection with the execution and
delivery of this Agreement, the Common Stock and the other instruments and
documents to be delivered hereunder or thereunder and agrees to save Buyer
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and filing fees.
e. Binding Effect; Assignment. Except as otherwise specifically
provided for herein, the terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any of the shares sold hereunder). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
f. Prior Agreements. This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof.
g. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
h. Public Disclosure. Neither party shall make any public
disclosure concerning the transactions contemplated hereby without prior
consultation with the other party; provided, however, that nothing herein shall
preclude either party from making such disclosure as is required by applicable
laws binding on it as long as the disclosing party has exercised good faith
efforts under the circumstances to consult with the other party as provided in
this Section 7(h).
i. Governing Law. This Agreement shall be governed by and
construed in accordance with, the laws of the State of California, without
giving effect to principles of conflict of laws.
j. Headings. 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.
k. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
l. Attorney's Fees. If any action at law or in equity is brought
for a breach of representation or warranty made herein or necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
IN WITNESS WHEREOF, the Company and Buyer have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
Lisa A. Conte, President and Chief
Executive Officer
LIPHA, LYONNAISE INDUSTRIELLE
PHARMACEUTIQUE s.a.
Address: 34 rue Saint-Romain
F-69379 Lyon, cedex 08
France
Telefax: 33/78 75 39 05 or
after 10/18/96: 33/04 78 75 39 05
By: /s/ Jean-Noel Treilles
Jean-Noel Treilles, Chairman and Chief
Executive Officer
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
the 23rd day of September, 1996 by and among Shaman Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and LIPHA, Lyonnaise Industrielle
Pharmaceutique s.a. ("LIPHA").
RECITALS
A. WHEREAS, the Company proposes to sell shares of its Common Stock to
LIPHA pursuant to a Stock Purchase Agreement of even date (the "Purchase
Agreement").
B. WHEREAS, by this Agreement, the Company and LIPHA desire to provide for
certain registration rights as set forth herein.
AGREEMENT
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Registration Rights.
1.1. Definitions. For purposes of this Section 1:
1.1.1. The term "register", "registered", and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933 (the "Act"), and the declaration or
ordering of effectiveness of such registration statement;
1.1.2. The term "Registrable Securities" means the Common Stock
purchased by LIPHA pursuant to the Purchase Agreement and any Common Stock of
the Company issued as a dividend or other distribution with respect to, or in
exchange for, such Common Stock;
1.1.3. The term "Form S-3" means such form under the Act or any
successor thereto adopted by the Securities and Exchange Commission ("SEC")
which permits incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
1.2. Requested Registration of Defined Sale
1.2.1. If the Company, at any time after September 23, 1998 (the
"Lockup Expiration Date") receives a written request from LIPHA that the Company
file a registration statement under the Act covering the registration of at
least twenty-five percent (25%) of the Registrable Securities then outstanding,
then the Company shall, subject to the limitations of subsection 1.2.2 and
Section 1.6, effect as soon as practicable, and in any event shall use its best
efforts to effect within 90 days of the receipt of such request, the
registration under the Act of all Registrable Securities which LIPHA requests to
be registered.
1.2.2. The Company is obligated to effect only one (1) such
registration pursuant to this Section 1.2, and shall not be obligated to effect
such registration during the period starting thirty (30) days prior to the
Company's estimated filing of, and ending four (4) months following the
effective date of, any other registration statement of the Company.
1.2.3. All expenses other than underwriting discounts and
commissions incurred in connection with the single registration, filing or
qualification permitted pursuant to this Section 1.2, including (without
limitation) all registration, filing and qualification fees, printer's and
accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for LIPHA shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to this Section 1.2
if the registration request is subsequently withdrawn at the request of LIPHA
(in which case LIPHA shall bear such expenses).
1.3. Shelf Registration on Form S-3. If the Company, at any time after
the Lockup Expiration Date, receives from LIPHA, a written request that the
Company effect a shelf registration on Form S-3 with respect to all or a
part of the Registrable Securities owned by LIPHA, the Company will:
1.3.1. As soon as practicable, effect such registration as would
permit or facilitate the sale and distribution of all or such portion of LIPHA's
Registrable Securities as are specified in such request; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.3: (i) if Form S-3 is
not available for such offering by LIPHA; (ii) if LIPHA proposes to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public of less than $500,000; (iii) if the Company has, within the twelve
(12) month period preceding the date of such request, already effected one
registration on Form S-3 for LIPHA pursuant to this Section 1.3; or (iv) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.
1.3.2. Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request of LIPHA. All expenses incurred in connection with any registration
requested pursuant to Section 1.3, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for LIPHA and counsel for the
Company, but excluding any underwriters' discounts or commissions associated
with Registrable Securities, shall be borne by Company. Registrations effected
pursuant to this Section 1.3 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2.
1.4. Participation in Company Registrations. If the Company proposes to
register any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than (i) a
registration pursuant to a demand registration right held by any other
stockholder of the Company; (ii) a registration relating solely to the sale of
securities to participants in a Company stock plan; or (iii) a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give LIPHA
written notice of such registration. Upon the written request of LIPHA given
within twenty (20) days after mailing of such notice by the Company, the Company
shall, subject to the provisions of Section 1.5, cause to be registered under
the Act all of the Registrable Securities that LIPHA has requested to be
registered.
1.5. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.4 to include any of LIPHA's securities in
such underwriting unless LIPHA accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by shareholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders).
1.6. Right to Defer. Notwithstanding Sections 1.2 and 1.3 above, if the
Company shall furnish to LIPHA a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for either form of such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer taking action with respect to such filing for a period
of not more than 90 days after receipt of LIPHA's request; provided, however,
that the Company may not utilize this right more than once in any twelve month
period.
1.7. Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
1.7.1. Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of LIPHA, keep
such registration statement effective for up to one hundred twenty (120) days.
1.7.2. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
1.7.3. Furnish to LIPHA such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as it may reasonably request in order to
facilitate the disposition of Registrable Securities owned by it.
1.7.4. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities laws of such
jurisdictions as shall be reasonably requested by LIPHA, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
1.8. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of LIPHA that LIPHA shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of LIPHA's Registrable Securities.
1.9. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
1.9.1. To the extent permitted by law, the Company will indemnify
and hold harmless LIPHA and each person, if any, who controls LIPHA within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto; (ii) 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 (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, or any state
securities law. The Company will pay to LIPHA or controlling person any legal or
other expenses reasonably incurred by them (such payment to be made as incurred
by such persons) in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.9.1 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by LIPHA or controlling person.
1.9.2. To the extent permitted by law, LIPHA will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by LIPHA expressly for use in connection with such
registration; and LIPHA will pay any legal or other expenses reasonably incurred
by any person intended to be indemnified pursuant to this subsection 1.9.2 (such
payment to be made as incurred by such persons), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.9.2 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of LIPHA, which consent shall not be unreasonably withheld; provided that in no
event shall any indemnity under this subsection 1.9.2 exceed the gross proceeds
from the offering received by LIPHA, unless such Violation by LIPHA is wilful.
1.9.3. Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
1.10. Reports Under Securities Exchange Act of 1934. With a view to making
available to LIPHA the benefits of Rule 144 promulgated under the Act and any
other rule or regulation of the SEC that may at any time permit LIPHA to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
1.10.1. Make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
1.10.2. Take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable
LIPHA to utilize Form S-3 for the sale of its Registrable Securities; and
1.10.3. File with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act.
1.11. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and LIPHA.
1.12. Limitation of Registration Rights. LIPHA shall not be entitled to
exercise any right provided for in Sections 1.2, 1.3 or 1.4 if, at such time,
LIPHA is entitled to sell all of the shares of Company Common Stock then held by
it without restriction or further registration.
2. Miscellaneous.
2.1. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of California as applied to transactions taking place
between California residents and wholly within the State of California.
2.2. Successors and Assigns. Except as otherwise provided herein, the
Provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
2.3. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth
herein.
2.4. Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or delivery to such
party by either international courier service or through the federal postal
system of the country of the sender by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days advance written notice to the other parties.
2.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
2.6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
Lisa A. Conte, President and
Chief Executive Officer
Address: 213 East Grand Avenue
South San Francisco, CA 94080
U.S.A.
Telefax: (415) 873-8367
LIPHA, LYONNAISE INDUSTRIELLE
PHARMACEUTIQUE s.a.
By: /s/ Jean-Noel Treilles
Jean-Noel Treilles, Chairman and Chief
Executive Officer
Address: 34 rue Saint-Romain
F-69379 Lyon, cedex 08
France
Telefax: 33/78 75 39 05 or
after 10/18/96: 33/04 78 75 39 05