-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WWhWfge4+u5Vv8Pnx02LrwVzKhPhuwu/zK8BwjdjQa5q7Po0Lqr+Nnx/eLHfEYM2 takfGtE6pCX3276kRXNZ4Q== 0001144204-07-059362.txt : 20071108 0001144204-07-059362.hdr.sgml : 20071108 20071108165233 ACCESSION NUMBER: 0001144204-07-059362 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071108 DATE AS OF CHANGE: 20071108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Hana Biosciences Inc CENTRAL INDEX KEY: 0001140028 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 841588441 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32626 FILM NUMBER: 071226535 BUSINESS ADDRESS: STREET 1: 7000 SHORELINE COURT STREET 2: SUITE 370 CITY: SOUTH SAN FRANCISCO STATE: CA ZIP: 94080 BUSINESS PHONE: 6505886404 MAIL ADDRESS: STREET 1: 7000 SHORELINE COURT STREET 2: SUITE 370 CITY: SOUTH SAN FRANCISCO STATE: CA ZIP: 94080 FORMER COMPANY: FORMER CONFORMED NAME: EMAIL REAL ESTATE COM INC DATE OF NAME CHANGE: 20010504 10-Q 1 v092675_10q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
 
x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2007

OR

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period __________ to __________.

Commission file number 001-32626 

Hana Biosciences, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or other jurisdiction of
incorporation or organization)
32-0064979
(I.R.S. Employer Identification No.)
 
 
7000 Shoreline Ct., Suite 370, South San
Francisco , CA.
94080  
(Address of principal executive offices)
(Zip Code)
 
(650) 588-6404
(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):
 
Large accelerated filer   o      Accelerated filer   x       Non-accelerated filer   o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o  No  x
 
As of November 8, 2007, there were 32,169,553 shares of the registrant's common stock, $.001 par value, outstanding.


INDEX     
 
 
 
 
Page
PART I                   FINANCIAL INFORMATION
 
4 
 
 
 
 
Item 1.                     Unaudited Condensed Financial Statements
 
4 
 
 
 
 
                                 Unaudited Condensed Balance Sheets
 
4 
 
 
 
 
                                 Unaudited Condensed Statements of Operations and Other Comprehensive Loss 
5 
 
 
 
 
                                 Unaudited Condensed Statement of Changes in Stockholders' Equity
 
6 
 
 
 
 
                                 Unaudited Condensed Statements of Cash Flows
 
7 
 
 
 
 
                                 Notes to Unaudited Condensed Financial Statements
 
8 
 
 
 
 
 
17
 
 
 
 
 
29 
 
 
 
 
Item 4.                     Controls and Procedures
 
29 
 
 
 
 
PART II                 OTHER INFORMATION
 
31 
 
 
 
 
Item 1.                     Legal Proceedings
 
31 
 
 
 
 
Item 1A.                  Risk Factors
 
31 
 
 
 
 
 
31 
 
 
 
 
Item 3.                     Defaults Upon Senior Securities
 
31 
 
 
 
 
Item 4.                     Submission of Matters to a Vote of Security Holders
 
31 
 
 
 
 
Item 5.                     Other Information
 
31 
 
 
 
 
Item 6.                     Exhibits
 
31 
 
 
 
 
                                 Signatures
 
32 
 
 
 
 
                                 Index of Exhibits Filed with this Report
 
33 
 
- 2 -
 
Forward-Looking Statements
 
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements include, but are not limited to, statements about:

 
·
the development of our drug candidates, including when we expect to undertake, initiate and complete clinical trials of our product candidates;
 
 
·
the regulatory approval of our drug candidates;
 
 
·
our use of clinical research centers and other contractors;
 
 
·
our ability to find collaborative partners for research, development and commercialization of potential products;
 
 
·
acceptance of our products by doctors, patients or payors;
 
 
·
our ability to market any of our products;
 
 
·
our history of operating losses; our ability to compete against other companies and research institutions;
 
 
·
our ability to secure adequate protection for our intellectual property; our ability to attract and retain key personnel;
 
 
·
availability of reimbursement for our product candidates;
 
 
·
the effect of potential strategic transactions on our business; our ability to obtain adequate financing; and
 
 
·
the volatility of our stock price.
 
These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe” “intend” and similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Discussions containing these forward-looking statements may be found throughout this Form 10-Q, including Part I, the section entitled “Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements involve risks and uncertainties, including the risks discussed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (the “June 2007 Form 10-Q”), that could cause our actual results to differ materially from those in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document. The risks discussed in the June 2007 Form 10-Q and elsewhere in this report should be considered in evaluating our prospects and future financial performance.
 
- 3 -

 
 


CONDENSED BALANCE SHEETS
 
 
 
September
30,
 
December
31,
 
 
 
2007
 
2006
 
 
  
 (Unaudited)
  
  
  
ASSETS
              
Current assets:
         
Cash and cash equivalents
 
$
17,575,941
  
$
29,127,850
 
Available-for-sale securities
   
1,239,277
    
6,131,000
 
Prepaid expenses and other current assets
   
423,530
    
496,519
 
Total current assets
    
19,238,748
    
35,755,369
 
 
             
Property and equipment, net
   
381,935
    
424,452
 
Restricted cash
   
125,000
    
125,000
 
Total assets
 
$
19,745,683
  
$
36,304,821
 
 
           
LIABILITIES AND STOCKHOLDERS' EQUITY
           
Current liabilities:
           
Accounts payable 
 
$
1,876,164
  
$
2,739,956
 
Accrued expenses
   
982,297
    
1,547,459
 
Accrued personnel related expenses
   
638,595
    
1,050,657
 
Accrued research and development costs
   
540,899
    
596,927
 
Total current liabilities
   
4,037,955
    
5,934,999
 
 
           
Commitment and contingencies:
            
 
             
Stockholders' equity:
           
Common stock, $0.001 par value: 
             
100,000,000 shares authorized, 32,169,553 and 29,210,627 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively 
   
32,170
    
29,211
 
Additional paid-in capital
   
100,906,382
    
93,177,445
 
Accumulated other comprehensive income
   
—
    
20,000
 
Accumulated deficit
   
(85,230,824
)
  
(62,856,834
)
Total stockholders' equity
   
15,707,728
    
30,369,822
 
Total liabilities and stockholders' equity
 
$
19,745,683
  
$
36,304,821
 

See accompanying notes to unaudited condensed financial statements.
 
- 4 -

 
 
CONDENSED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Unaudited)

   
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
   
2007
  
2006
  
2007
  
2006
  
                   
License revenue
  
$
1,150,000
 
$
—
  
$
1,150,000
  
$
—
  
                           
Operating expenses: 
                 
Selling, general and administrative
   
481,155
   
3,440,436
   
6,553,502
   
7,000,719
 
Research and development
   
5,730,859
   
7,918,422
   
17,442,556
   
28,864,928
 
 
                 
Total operating expenses
   
6,212,014
   
11,358,858
   
23,996,058
   
35,865,647
 
 
                 
Loss from operations
   
(5,062,014
)
  
(11,358,858
)
  
(22,846,058
)
  
(35,865,647
)
Other income (expense):
                 
Interest income, net
   
264,169
   
507,347
   
969,125
   
892,099
 
Other expense, net
   
(302,418
)
  
(46,291
)
  
(497,057
)
  
(62,983
)
Total other income (expense)
    
(38,249
)
  
461,056
   
472,068
   
829,116
 
 
                 
 
                 
Net loss
 
$
(5,100,263
)
$
(10,897,802
)
$
(22,373,990
)
$
(35,036,531
)
 
                 
Net loss per share, basic and diluted
 
$
(0.16
)
$
(0.38
)
$
(0.75
)
$
(1.37
)
 
                 
Shares used in computing net loss per share, basic and diluted
   
31,197,295
   
28,787,445
   
29,958,487
   
25,656,244
 
                   
Comprehensive loss:
                          
Net loss
 
$
(5,100,263
)
$
(10,897,802
)
$
(22,373,990
)
$
(35,036,531
)
Unrealized gain (loss)
   
—
   
(16,000
)
  
(20,000
)
  
52,000
 
 
                 
Comprehensive loss
 
$
(5,100,263
)
$
(10,913,802
)
$
(22,393,990
)
$
(34,984,531
)
  
See accompanying notes to unaudited condensed financial statements.
 
- 5 -


CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)

Period from January 1, 2007 to September 30, 2007

  
 
Common stock
 
Additional
paid-in
 
Accumulated
other
comprehensive
income
 
Accumulated
  
Total
stockholders'
 
 
 
Shares
 
Amount
 
 capital
 
(loss)
 
deficit
  
equity
 
Balance at January 1, 2007
   
29,210,627
 
$
29,211
 
$
93,177,445
 
$
20,000
 
$
(62,856,834
)
$
30,369,822
 
Issuance of shares upon exercise of warrants, options and restricted stock
   
482,593
   
483
   
26,516
   
—
   
—
   
26,999
 
Stock-based compensation of employees amortized over vesting period of stock options
   
—
   
—
   
4,006,878
   
—
   
—
   
4,006,878
 
Issuance of shares under employee stock purchase plan
   
49,454
   
49
   
115,135
   
—
   
—
   
115,184
 
Share-based compensation to nonemployees for services
   
—
   
—
   
(150,165
)
  
—
   
—
   
(150,165
)
Shares returned1
    
(73,121
)
  
(73
)
  
73
                    
Repurchase of employee stock options
   
—
   
—
   
(117,000
)
  
—
   
—
   
(117,000
)
Sale of shares – Par Pharma
    
2,500,000
    
2,500
    
3,847,500
                
3,850,000
  
Net loss
   
—
   
—
   
—
   
—
   
(22,373,990
)
  
(22,373,990
)
Unrealized loss on available-for-sale securities
   
—
   
—
   
—
   
(20,000
)
  
—
   
(20,000
)
 
                                     
Balance at September 30, 2007
   
32,169,553
 
$
32,170
 
$
100,906,382
 
$
—
 
$
(85,230,824
)
$
15,707,728
 
 
See accompanying notes to unaudited condensed financial statements.
 
1 These shares were returned from NovaDel as part of an amendment to the Company’s license agreement for our product candidate Zensana. This is pursuant to a sublicense agreement signed in October 2007 with Par Pharmaceuticals for the same product candidate. See Note 8 in the “NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS” for additional information.

- 6 -

 
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
 
Nine Months Ended
September 30,
 
 
 
2007
 
2006
 
Cash flows from operating activities:
         
Net loss
 
$
(22,373,990
)
$
(35,036,531
)
Adjustments to reconcile net loss to net cash used in operating activities:
         
Depreciation
   
126,798
   
69,503
 
Stock-based compensation of employees
   
4,006,878
   
6,277,914
 
Share-based compensation to nonemployees for services
   
(150,165
)
  
235,650
 
Shares issued to nonemployees - transaction fee
   
—
   
185,841
 
Issuance of shares in partial consideration for license agreement
   
—
   
10,773,260
 
Loss on sale of capital assets
   
1,052
   
41,759
 
Realized loss on available-for-sale securities
   
436,000
   
—
 
Unrealized gain on available-for-sale securities
    
—
   
52,000
  
Changes in operating assets and liabilities:
         
(Increase) decrease in prepaid expenses and other assets
   
29,964
   
(153,114
)
Increase (decrease) in accounts payable
   
(863,791
)
  
819,434
 
Increase (decrease) in accrued and other liabilities
   
(1,033,253
)
  
1,618,422
 
Net cash used in operating activities
   
(19,820,507
)
  
(15,115,862
)
 
         
Cash flows from investing activities:
         
Purchase of property and equipment
   
(85,333
)
  
(490,916
)
Proceeds from sale of equipment
   
—
   
2,760
 
Purchase of marketable securities
   
(4,496,252
)
  
(6,075,000
)
Sale of marketable securities
   
8,975,000
   
—
 
Restricted cash deposited in escrow
   
—
   
(125,000
)
Net cash provided by (used in) investing activities
   
4,393,415
   
(6,688,156
)
 
         
Cash flows from financing activities:
         
Proceeds from registered direct and private placements of preferred and common stock, net
   
3,850,000
   
37,118,305
 
Repurchase of employee stock options
   
(117,000
)
  
—
 
Proceeds from exercise of warrants and options and employee stock purchase plan
   
142,183
   
929,260
 
Net cash provided by financing activities
   
3,875,183
    
38,047,565
 
 
         
Net increase(decrease) in cash and cash equivalents
   
(11,551,909
)
  
16,243,547
 
 
         
Cash and cash equivalents, beginning of period
   
29,127,850
   
17,082,521
 
 
         
Cash and cash equivalents, end of period
 
$
17,575,941
   
33,326,068
 
 
         
Supplemental disclosures of cash flow data:
         
Cash paid for interest
 
$
3,807
   
1,577
 
Supplemental disclosures of noncash financing activities:
         
Unrealized loss on available-for-sale securities
   
20,000
   
52,000
 
Common stock issued to as partial consideration for license agreement
   
—
   
10,279,642
 
 
See accompanying notes to unaudited condensed financial statements.  

- 7 -


NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Hana Biosciences, Inc. (“Hana”, “we” or the “Company”) is a biopharmaceutical company based in South San Francisco, California, which seeks to acquire, develop, and commercialize innovative products to strengthen the foundation of cancer care. The Company is committed to creating value by accelerating the development of its product candidates, including entering into strategic partnership agreements and expanding its product candidate pipeline by being an alliance partner of choice to universities, research centers and other companies.

Basis of Presentation

From inception to July 31, 2007, when the Company entered into a sublicense agreement with Par Pharmaceuticals, Inc., the Company was a development stage enterprise since it had not generated revenue from the sale of its products or through licensing agreements. Accordingly, the financial statements were prepared in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises.”

The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information of “publicly held companies” and, accordingly, they do not include all required disclosures for complete annual financial statements. These interim financial statements include all adjustments that the management of Hana believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results to be expected for the full fiscal year.

The accompanying condensed financial information should be read in conjunction with the audited financial statements for the year ended December 31, 2006, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006 (the “Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on April 2, 2007. The accompanying condensed balance sheet as of December 31, 2006 has been derived from the audited balance sheet as of that date included in the Form 10-K.

Use of Management's Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates based upon current assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Examples include provisions for deferred taxes and assumptions related to share-based compensation expense. Actual results may differ materially from those estimates.

Segment Reporting
 
The Company has determined that it currently operates in only one segment, which is the research and development of oncology therapeutics and supportive care for use in humans. All assets are located in the United States.
 
- 8 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
Revenue Recognition
 
The Company recognizes all revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition”, where revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery of the services, supplies or technology license has occurred; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured.

The Company recognizes revenue from the license or assignment of intellectual property and rights to third parties, including development milestone payments associated with such agreements if the funds have been received, the rights to the property have been delivered, and the Company has no further obligations under the date(s) when the payment has been received or collection is assured.

To date, the Company has only earned revenue from a non-refundable upfront payment pursuant to a sublicense agreement, as described further in Note 8.

Loss Per Share

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per common share is the same as basic net loss per common share, since potentially dilutive securities from stock options, stock warrants and restricted stock would have an antidilutive effect because the Company incurred a net loss during each period presented. The number of shares potentially issuable at September 30, 2007 and 2006 upon exercise or conversion that were not included in the computation of net loss per share totaled 6,029,602 and 6,380,137, respectively.
   
Cash and Cash Equivalents and Concentration of Risk
 
The Company considers all highly-liquid investments with a maturity of three months or less when acquired to be cash equivalents. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and available-for-sale securities. The Company maintains its cash and cash equivalents with high credit quality financial institutions and available-for-sale securities consist of U.S. government and government agency securities, corporate notes, bonds and commercial paper.

Available-for-sale Securities

Available-for-sale securities consist of investments acquired with maturities exceeding three months. All available-for-sale securities are reported at fair value, based on quoted market price, with unrealized gains or losses included in other comprehensive income (loss). For available-for-sale securities, a loss is recognized in the period an investment is considered to have an other-than-temporary impairment. The recognized loss is equal to the difference between the cost basis of the security and the fair value of the security at the balance sheet date of the reporting period for which the assessment is made. The new cost basis of the security will become the fair value of the security at this same period.

In the past, the Company has owned certain auction rate securities in its managed funds account and may do so again in the future. These are highly liquid, investment-grade securities. Auction rate securities generally have stated maturities of 20 to 30 years. However, these securities have economic characteristics of short-term investments due to a rate-setting mechanism and the ability for holders to liquidate them through a Dutch auction process that occurs on pre-determined intervals of less than 90 days. As such and because of management's intent regarding these securities, the Company classifies these securities as short-term investments. There were no material unrealized gains or losses associated with these investments as of September 30, 2007.
 
- 9 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
Income Taxes

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48), which clarifies the recognition, measurement, accounting and disclosure for uncertainty in tax positions. The Company is subject to the provisions of FIN 48 as of January 1, 2007, and has analyzed filing positions in federal and state jurisdictions where it has filed income tax returns, as well as all open tax years in these jurisdictions. The Company is subject to US and California taxes for tax jurisdictions, as defined. The only periods subject to examination for the Company’s federal return are the 2003 through 2006 tax years. The periods subject to examination for the Company’s state returns in California are the 2002 through 2006 tax years. There are currently no ongoing examinations by the relevant tax authorities.

At the adoption date and as of September 30, 2007, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. There was no interest or penalties recognized related to uncertain tax positions. The Company will account for any interest related to uncertain tax positions as interest expense, and for penalties as tax expense.
 
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
 
On September 15, 2006 FASB issued Statement No. 157, “Fair Value Measurement”s.   The Statement provides guidance for using fair value to measure assets and liabilities.  This Statement references fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The Statement applies whenever other standards require (or permit) assets or liabilities to be measured at fair value.  The Statement does not expand the use of fair value in any new circumstances.  It is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The adoption of SFAS No. 157 is not expected to have a material impact on the Company’s financial statements.
   
In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. This statement provides entities the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply the hedge accounting provisions as prescribed by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Management is currently evaluating the impact of adopting this Statement.

NOTE 3. LIQUIDITY AND CAPITAL RESOURCES

The Company reported a net loss of $22.4 million for the nine months ended September 30, 2007. The Company has financed its operations since inception primarily through equity and debt financing. During the nine months ended September 30, 2007, the Company had a net decrease of $11.6 million in cash and cash equivalents. This decrease primarily resulted from net cash used in operating activities of $19.8 million for the nine months ended September 30, 2007. Total cash and cash equivalents and available-for-sale securities as of September 30, 2007 were $18.8 million compared to $35.3 million at December 31, 2006.

The Company's continued operations will depend on whether it is able to continue the progression of the development of its product candidates, identify and acquire new and innovative oncology focused products, and whether the Company is able to successfully commercialize and sell products that have obtained FDA approval or enter into partnerships and/or license agreements regarding the commercialization of the Company’s products and product candidates. Through September 30, 2007, a significant portion of the Company's financing has been through private placements of common stock. The Company will continue to fund operations from cash on hand and through the potential sale of similar sources of capital previously described, or through debt.

With current cash, cash equivalents and available-for-sale securities, which totaled $18.8 million as of September 30, 2007, as well as the funds available to the Company pursuant to its October 2007 loan commitment, the Company expects to be able to fund anticipated operating needs into the second half of 2009 (unaudited) based upon the current and desired pace of clinical development of the Company’s current product candidates, (including milestone payments that are expected to be triggered under the license agreements relating to the Company’s product candidates, all of which can be satisfied through the issuance of new shares of the Company’s common stock), and expected general corporate and administrative expenses. However, the actual amount of funds needed to operate is subject to many factors, some of which are beyond the Company’s control. The Company expects to incur substantial expenses as it continues its drug development efforts, particularly to the extent the Company advances its lead candidate Marqibo through a pivotal clinical study. Beyond the Company’s current cash and cash equivalents on hand, and the funds available to it under its October 2007 loan commitment, the Company cannot assure that future financing will be available in amounts or on terms acceptable to it, if at all. If the Company is unable to secure sufficient additional capital or enter into strategic partnerships and/or license agreements when it needs to, it will be forced to curtail the development of its product candidates, which would delay the time by which any of our product candidates could receive regulatory approval.
 
- 10 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 4. STOCKHOLDERS' EQUITY

Stock Incentive Plans. The Company has two stockholder approved stock incentive plans under which it grants or has granted options to purchase shares of its common stock and restricted stock awards to employees: the 2003 Stock Option Plan (the “2003 Plan”) and the 2004 Stock Incentive Plan (the “2004 Plan”). The Board of Directors or the Chief Executive Officer, when designated by the Board, is responsible for administration of the Company’s employee stock incentive plans and determines the term, exercise price and vesting terms of each option. In general, stock options issued under the 2003 Plan and 2004 Plan have a vesting period of three years and expire ten years from the date of grant.
   
The 2003 Plan was adopted by the Company's Board of Directors in October 2003. The 2003 Plan authorizes a total of 1,410,068 shares of common stock for issuance. In May 2006, the Company's stockholders ratified and approved the 2003 Plan. The Company may make future stock option issuances from this plan.

In September 2004, the Company's Board of Directors approved and adopted the 2004 Plan, which initially authorized 2,500,000 shares of common stock for issuance. On March 31, 2006, the Board approved, subject to stockholder approval, an amendment to the 2004 Plan to increase the total number of shares authorized for issuance there under to 4,000,000. At the Company’s May 2006 Annual Meeting, the Company's stockholders ratified and approved the 2004 Plan, as amended. At the 2007 Annual Meeting on June 22, 2007, the Company's stockholders approved an additional increase of shares authorized for issuance from 4,000,000 to 7,000,000. The Company may make future stock option issuances from this plan.

At the May 2006 Annual Meeting, the Company's Stockholders also ratified and approved the Company's 2006 Employee Stock Purchase Plan (the “2006 Plan”), which had been approved by the Company’s Board of Directors on March 31, 2006. The 2006 Plan provides the Company's eligible employees with the opportunity to purchase shares of Company common stock through lump sum payments or payroll deductions. The 2006 Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. As adopted, the 2006 Plan authorized the issuance of up to a maximum of 750,000 shares of common stock. As of September 30, 2007, there have been 49,454 shares issued under the 2006 Plan.
 
Restricted Stock Awards The Company's Board of Directors has awarded, under the 2004 Plan, 524,264 shares of restricted stock as of September 30, 2007, at no cost to the Company's executive officers and directors.
  
A summary of the status of the Company's restricted stock awards as of September 30, 2007 and changes during the nine months ended September 30, 2007 is as follows:
 
Nonvested Restricted Stock Awards
 
Number of Shares  
 
Weighted Average
Grant-Date
Fair Value
 
Nonvested at January 1, 2007
   
460,764
 
$
10.65
 
Granted
   
—
   
—
 
Vested
   
(255,764
)
  
10.45
 
Cancelled/Forfeited
   
(205,000
)
  
10.90
  
 
             
Nonvested at September 30, 2007
   
—
 
$
—
  
 
- 11 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
Stock Options The Company currently awards stock option grants under its 2003 and 2004 Plan. Under the 2003 Plan, the Company may grant incentive and non-qualified stock options to employees, directors, consultants and service providers to purchase up to an aggregate of 1,410,068 shares of its common stock. Under the 2004 Plan, the Company may grant incentive and non-qualified stock options to employees, directors, consultants and service providers to purchase up to an aggregate of 7,000,000 shares. Historically, stock options issued under these plans primarily vest ratably on an annual basis over the vesting period, which has generally been three years.

The following table summarizes information about stock options outstanding at September 30, 2007 and changes in outstanding options in the nine months then ended, all of which are at fixed prices:

 
 
Number of
Shares Subject
to Options
Outstanding 
 
Weighted Average
Exercise Price per
Share  
 
Weighted Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value 
 
Outstanding January 1, 2007
   
5,123,917
 
$
4.42
             
Options granted
   
1,418,000
   
2.48
              
Options cancelled
   
(2,301,388
)
  
4.27
              
Options exercised
   
(226,829
)
  
0.89
              
Outstanding September 30, 2007
   
4,013,700
   
4.02
   
8.56
 
$
145,543
 
Exercisable at September 30, 2007
   
1,196,140
 
$
3.25
    
7.26
 
$
145,543
  

Total stock-based compensation expense was approximately $(0.2) million and $4.0 million related to employee stock options and restricted stock recognized in the operating results for the three and nine months ended September 30, 2007 compared to $3.6 million and $6.3 million stock-based compensation for the three and nine months ended September 30, 2006, respectively.

- 12 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
The following table summarizes information about stock options outstanding at September 30, 2007:
 
 
 
Options Outstanding
 
Options Exercisable  
 
 
 
Number of
Shares
Subject to
Options
 
Weighted Average
Exercise
 
Weighted
Average
Remaining
Contractual
Life of
Options
 
Number of Options
 
Weighted Average
Exercise
 
Exercise Price
 
Outstanding
 
Price
 
Outstanding
 
Exercisable
 
Price
 
$0.07 - $  1.74
   
1,782,539
  
$
1.44
   
8.5 yrs
   
639,539
 
$
1.15
 
$2.04 - $  4.97
   
824,328
   
4.32
   
8.2 yrs
   
384,269
   
4.46
 
$5.01 - $ 11.81
   
1,406,833
   
7.11
   
8.9 yrs
   
172,333
    
8.36
  
                                 
$0.07 - $11.81
   
4,013,700
 
$
4.02
    
8.6 yrs
   
1,196,140
 
$
3.25
  

Employee Stock Purchase Plan. The 2006 Plan allows employees to contribute a percentage of their gross salary toward the semi-annual purchase of shares of common stock of the Company. The price of each share will not be less than the lower of 85% of the fair market value of the Company’s common stock on the last trading day prior to the commencement of the offering period or 85% of the fair market value of the Company’s common stock on the last trading day of the purchase period. A total of 750,000 shares of common stock were initially reserved for issuance under the 2006 Plan.

Through September 30, 2007, the Company had issued 49,454 shares under the 2006 Plan. For the three and nine months ended September 30, 2007, the total stock-based compensation expense recognized related to the 2006 Plan under SFAS 123(R) was approximately $52,000 and $141,000, respectively, compared to approximately $47,000 stock-based compensation expense taken in both the three and nine months ended September 30, 2006.  
 
Assumptions. The following table summarizes the assumptions used in applying the Black-Scholes-Merton option pricing model to determine the fair value of awards granted during the three and nine months ended September 30, 2007 and 2006, respectively:

 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
 
2007
 
2006
 
2007
 
2006
 
Employee stock options
                  
Risk-free interest rate
   
4.5
%
  
5.01
%
  
4.5
%
  
5.01
%
Expected life (in years)
   
6.0
   
5.0 - 6.0
   
5.5 - 6.0
   
5.0 - 6.0
 
Volatility
   
0.8
   
0.7
   
0.8
   
0.7
 
Dividend Yield
   
0
%
  
0
%
  
0
%
  
0
%
Employee stock purchase plan
                  
Risk-free interest rate
   
4.82 - 4.91
%
  
5.16 – 5.24
%
  
4.82 - 5.09
%
  
5.16 – 5.24
%
Expected life (in years)
   
0.5 - 2.0
   
0.5 - 2.0
   
0.5 - 2.0
   
0.5 - 2.0
  
Volatility
   
0.73 - 0.93
   
0.67 – 1.10
   
0.55 - 1.03
   
0.67 – 1.10
  
Dividend Yield
   
0
%
  
0
%
  
0
%
  
0
%

The Company's computation of expected volatility of employee stock options is based on historical volatilities of peer companies. Peer companies' historical volatilities are used in the determination of expected volatility due to the short trading history of the Company's common stock. In selecting the peer companies, the Company considered the following factors: industry, stage of life cycle, size, and financial leverage. For the 2006 Plan, the Company used historical data of its common stock price to calculated expected volatility as the Company had sufficient historical data for the expected terms used in the Black-Scholes-Merton calculation. To determine the expected term of the Company's employee stock options granted upon adoption of SFAS 123(R), we utilized the simplified approach as defined by SEC Staff Accounting Bulletin No. 107, “Share-Based Payment” (SAB 107). This approach resulted in expected terms of 5.5 to 6 years for options granted during the nine months ended September 30, 2007. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.
 
- 13 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
Non-Employee Stock Options. The Company has also granted stock options to non-employee consultants. In accordance with Emerging Issues Task Force Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services” (EITF 96-18), compensation cost for options issued to non-employee consultants is measured at each reporting period and adjusted until the commitment date is reached, being either the date that a performance commitment is reached or the performance of the consultant is complete. The Company utilized a Black-Scholes-Merton option pricing model to determine the fair value of such awards.  For the three and nine months ended September 30, 2007, the Company recognized approximately $1,500 and ($0.2) million of stock-based compensation expense related to awards held by non-employee consultants, respectively. The reversal of approximately $0.2 million of expense for the nine months ended September 30, 2007 is mainly due to the decline in the Company’s stock price at September 30, 2007 compared to December 31, 2006. During the three and nine months ended September 30, 2006, the Company recognized $0.1 million and $0.2 million, respectively, in stock-based compensation related to awards held by non-employee consultants.
 
Warrants . The following table summarizes the warrants outstanding as of September 30, 2007 and the changes in outstanding warrants in the nine months then ended:
 
 
 
NUMBER OF
SHARES SUBJECT
TO WARRANTS
OUTSTANDING  
 
WEIGHTED-
AVERAGE
EXERCISE
PRICE
 
Warrants outstanding January 1, 2007
   
2,015,901
 
$
3.42
 
Warrants exercised
   
—
   
—
 
Warrants cancelled
   
—
   
—
 
Warrants outstanding September 30, 2007
   
2,015,901
 
$
3.42
 
 
NOTE 5. AVAILABLE-FOR-SALE SECURITIES

On September 30, 2007, the Company had $1,196,252 in total available-for-sale securities which consisted of shares of NovaDel Pharma, Inc (“NovaDel”) purchased in conjunction with the Zensana license agreement, and other short-term investments.
 
At September 30, 2007, the Company had $996,252 of available-for-sale securities invested in auction rate securities and other short-term investments and no material unrealized gains or losses were recognized as of September 30, 2007 related to these investments.
 
In October 2004, the Company acquired 400,000 shares of common stock from NovaDel for $2.50 a share. The Company paid a premium of $0.91 per share over the market value of the NovaDel shares, which was $1.59 on the purchase date. Of the $1.0 million paid for the 400,000 shares, the premium of $0.91 per share, or $364,000, was expensed upon acquisition. The remaining fair market value of $636,000 was recorded as an available-for-sale security. As a result of restrictions on its ability to sell the shares, the Company was required by SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” to account for those shares using the cost method through October 2005 and thereafter as marketable equity securities. Since October 2005, the Company has classified the shares as available-for-sale and recorded changes in their value as part of its comprehensive income. The market value of these shares on September 30, 2007 was $200,000, and the Company realized a loss of $436,000 since the original purchase in October 2004. The Company recorded realized losses as of September 30, 2007, as the decline in value, in the opinion of management, is considered other-than-temporary. On September 30, 2006, the market value of these shares was $524,000 and the Company had an unrealized loss of $112,000 since the original purchase in October 2004.
 
- 14 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 
 
NOTE 6. RESTRICTED CASH

On May 31, 2006, the Company entered into a sublease agreement relating to its South San Francisco, CA offices. The sublease required the Company to provide a security deposit in the amount of $125,000. To satisfy this obligation the Company obtained a $125,000 letter of credit with the sublessor as the beneficiary in case of default or failure to comply with the sublease requirements. In order to obtain the letter of credit, the Company was required to deposit a compensating balance of $125,000 into a restricted money market account with its financial institution. This compensating balance for the letter of credit will be restricted for the entire three-year period of the sub-lease.

NOTE 7. COMMITMENTS

Employment Agreements.   The Company entered into a written three year employment agreement with its former Chief Executive Officer dated November 1, 2003, which was subsequently amended in December 2005 to provide for a term that expires in November 2008. Effective as of August 24, 2007, the former Chief Executive Officer resigned from such office and, as of September 15, 2007, he resigned as an employee of the Company. In accordance with the terms of the employment agreement, all of the Company’s future salary commitments were terminated as of September 15, 2007, and no additional compensation is owed.

The Company entered into a written two year employment agreement with its Vice President, Chief Business Officer on January 25, 2004. This agreement was amended in December 2005 and now provides for an employment term that expires in November 2008. The minimum aggregate amount of gross salary compensation to be provided over the remaining term of the agreement amounted to approximately $271,000 at September 30, 2007.
 
On May 6, 2007, the Company entered into a written three year employment agreement with its Executive Vice President, Development and Chief Medical Officer, whose employment commenced May 21, 2007. This agreement provides for an employment term that expires in May 2010. Effective as of August 24, 2007, the Executive Vice President, Development and Chief Medical Officer, was appointed Chief Executive Officer. There was no change to the compensation terms of the employment agreement as a result of the change in position. The minimum aggregate amount of gross salary compensation and guaranteed bonuses to be provided for over the remaining term of the agreement amounted to approximately $1,150,000 at September 30, 2007.
 
The Company entered into a written employment agreement with its Vice President and Chief Financial Officer on December 18, 2006. This agreement provides for an employment term that expires in November 2008. The minimum aggregate amount of gross salary compensation to be provided for over the remaining term of the agreement amounted to approximately $190,000 at September 30, 2007.

Lease. The Company entered into a three year sublease, which commenced on May 31, 2006, for property at 7000 Shoreline Court in South San Francisco, California, where the Company’s executive offices are located. The total cash payments due for the duration of the sublease equaled approximately $1.0 million on September 30, 2007.
 
NOTE 8. AGREEMENT WITH PAR PHARMACEUTICAL
 
On July 31, 2007, the Company entered into a sublicense agreement with Par Pharmaceutical, Inc. (“Par”) and NovaDel, pursuant to which the Company granted to Par and its affiliates, and NovaDel consented to such grant, a royalty-bearing exclusive right and license to develop and commercialize Zensana within the United States and Canada. The Company previously had acquired such exclusive, sublicensable rights from NovaDel and commenced development of Zensana™, a pharmaceutical product that contains ondansetron, pursuant to a License Agreement with NovaDel dated October 24, 2004, as amended. As agreed by the Company and NovaDel, Par assumed primary responsibility for the development, regulatory approval by the U.S. Food and Drug Administration (the “FDA”), and sales and marketing of Zensana.
 
- 15 -
 
HANA BIOSCIENCES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
In consideration for the license grant, Par purchased 2,500,000 newly-issued shares of the Company’s common stock at a price per share of $2.00 per share for aggregate consideration of $5,000,000. On July 31, 2007, the market value of the Company’s common stock was $1.54 per share. The difference between the sale price of $2.00 and the market value of the common stock on the purchase date was $0.46 per share premium. Of the total proceeds received from Par of $5.0 million, $1.2 million is related to the premium paid and represents revenues that will be recognized over the service period required by the sublicense agreement, with the remaining $3.9 million accumulated to shareholder’s equity. As of September 30, 2007, the Company has recognized the entire $1.2 million in license fee revenue related to the sublicense agreement in accordance with the requirements of Staff Accounting Bulletin No. 104, as the Company fulfilled all obligations related to the upfront payment received from Par as part of the sublicense agreement.

As additional consideration for the sublicense, following regulatory approval of Zensana, Par is required to pay the Company an additional one-time payment of $6,000,000, of which $5,000,000 is payable by the Company to NovaDel under the License Agreement. In addition, the Sublicense Agreement provides for an additional aggregate of up to $44,000,000 in commercialization milestone payments based upon actual net sales of Zensana in the United States and Canada, which amounts are not subject to any corresponding obligations to NovaDel. The Company will also be entitled to royalty payments based on net sales of Zensana by Par or any of its affiliates in such territory, however, the amount of such royalty payments is generally equal to the same amount of royalties that the Company will owe NovaDel under the License Agreement, except to the extent that aggregate net sales of Zensana exceed a specified amount in the first 5 years following FDA approval of an NDA, in which case the royalty rate payable to the Company increases beyond its royalty obligation to NovaDel.

NOTE 9. SUBSEQUENT EVENTS

On October 30, 2007, the Company entered into a loan facility agreement with certain affiliates of Deerfield Management (“Deerfield”). Deerfield has committed funds to assist with the development of the Company’s product candidates. Pursuant to the agreement, the Company may borrow from Deerfield up to an aggregate of $30 million, of which $20 million may be drawn down by the Company in as many as four installments every six months commencing October 30, 2007. Pursuant to such schedule, the Company drew down $7.5 million on November 1, 2007. The remaining $10 million of the loan is subject to disbursement in three installments upon the achievement of clinical development milestones relating to the Company’s Marqibo and Menadione product candidates. Deerfield’s obligation to disburse loan proceeds expires October 30, 2010 and the Company must repay all outstanding amounts owing under the loan no later than October 30, 2013. The Company is also required to make quarterly interest payments, at the rate of 9.85% annually. In accordance with the agreement, the Company paid a loan commitment fee of $1,050,000 to Deerfield Management.

As additional consideration for the loan, the Company also issued to Deerfield two series of 6-year warrants to purchase an aggregate of 5,225,433 shares of the Company’s common stock at an exercise price of $1.31 per share (subject to adjustment for stock splits, combinations and similar events), which represented the closing bid price of the Company’s common stock as reported on the Nasdaq Global Market on October 30, 2007. One series of such warrants represents the right to purchase 4,825,433 shares, which equals 15% of the Company’s currently issued and outstanding shares of common stock. These warrants contain an anti-dilution feature so that, as the Company issues additional shares of its common stock during the term of the warrant, the number of shares purchasable under this series is automatically increased so that they always represent 15% of the Company’s then outstanding common stock. The Company may buy out Deerfield’s rights under the anti-dilution provision of the first series after October 30, 2010 by paying $2.5 million, or after October 30, 2011 by paying $1.5 million, provided the loan has been repaid at the time. The second series of warrants, representing the right to purchase an aggregate of 400,000 shares, is identical in form except that it does not contain such anti-dilution feature. If and when the Company draws down the portion of the loan conditioned upon the achievement of clinical development milestones relating to Marqibo and Menadione, the Company is required to issue additional warrants to Deerfield which would represent the right to purchase an additional number of shares of common stock equal to 3.5% of the Company’s then outstanding shares if the Company drew down the entire $10 million subject to milestone achievement. These warrants, which will also be exercisable at $1.31 per share, will be identical in form as the first series of warrants, including the Company’s right to buy-out the anti-dilution feature of such warrants. 

- 16 -

 
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Item 1A of Part II of the June2007  Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements .

Overview

We are a biopharmaceutical company focused on acquiring, developing, and commercializing innovative products to strengthen the foundation of cancer care. The Company is committed to creating value by accelerating the development of its product candidates, including entering into strategic partnership agreements and expanding its product candidate pipeline by being an alliance partner of choice to universities, research centers and other companies.

We currently have rights to the following product candidates in various stages of development:

·
Marqibo ® (vincristine sulfate injection, OPTISOME™) - We acquired our rights to Marqibo from Tekmira Pharmaceuticals Corporation (formerly Inex Pharmaceuticals Corporation) in May 2006. To date, Marqibo has been evaluated in more than 600 patients in 13 clinical trials, including Phase 2 clinical trials in patients with non-Hodgkin’s lymphoma (NHL) and acute lymphoblastic leukemia (ALL). In August 2007, we initiated a multi-center, multi-national, Phase 2 registration-enabling clinical trial of Marqibo in adult patients with relapsed ALL, known as the rALLy study. The patient population is defined as Philadelphia chromosome-negative adult patients in second relapse or those patients who relapsed following two lines of anti-leukemia chemotherapy, including those who have previously undergone stem cell transplantation. We expect to enroll up to 56 evaluable patients in this clinical trial from approximately 30 sites. We also plan to conduct a Phase 3, supportive clinical trial in newly diagnosed, elderly adults with Philadelphia chromosome-negative ALL. This Phase 3 randomized trial will compare Marqibo to vincristine as part of a standardized multi-drug regimen in the induction, consolidation, and maintenance phases of treatment. We plan to conduct this study in collaboration with three major U.S. oncology cooperative groups with potential participation by ex-U.S. ALL oncology consortiums. Pending final review by the cooperative groups and approval by the Cancer Therapy Evaluation Program (CTEP), we anticipate this study will potentially commence in the first half of 2008. We are also planning a single-center pilot Phase 2 clinical trial of Marqibo in patients with metastatic malignant uveal melanoma. The patient population is defined as adults with uveal melanoma and confirmed metastatic disease that is untreated or that has progressed following one prior therapy. We expect to enroll up to 30 patients in this clinical trial and may add additional sites as needed to support enrollment. Additionally, the FDA granted Marqibo Orphan Drug Designation for the treatment of adult ALL and Fast Track status for the treatment of Philadelphia chromosome-negative adult patients in second relapse or those patients who relapsed following two lines of anti-leukemia chemotherapy.
 
·
Alocrest™ (vinorelbine tartrate injection, OPTISOME™) - In August 2006, we initiated a Phase 1 clinical trial to assess the safety, tolerability and preliminary efficacy of Alocrest in patients with advanced solid tumors. The trial is being conducted at the Cancer Therapy and Research Center in San Antonio, Texas,   McGill University in Montreal, Canada; and South Texas Accelerated Research Therapeutics, San Antonio. The trial is currently in its sixth dosing cohort and we expect to complete this Phase 1 trial in 2007.

·
Brakiva™ (topotecan hydrochloride injection, OPTISOME™) - We have completed essential preclinical investigational new drug application (IND) activation enabling studies for Brakiva. We submitted the IND to the FDA and the IND was opened in October 2007. We expect to initiate a Phase 1 clinical trial by the end of 2007 or in early 2008.
 
- 17 -
 
·
Talvesta™ (talotrexin) for Injection  -  In April 2004, we commenced an NCI-sponsored Phase 1 clinical trial to evaluate the safety of Talvesta when administered intravenously on days 1, 8 and 15 of a 28-day cycle to patients with solid tumors. In March 2007, this clinical trial was discontinued due to one drug-related patient death following an extended course of therapy. We commenced a Phase 1/2 clinical trial of Talvesta in non-small cell lung cancer in February 2005. In the Phase 1 portion of this clinical trial, Talvesta was administered to patients to ascertain the maximum tolerated dose of the drug. We have suspended enrollment in this clinical trial for additional safety analysis. In May 2005, we commenced a Phase 1/2 clinical trial of Talvesta in ALL. The Phase 1 portion of this clinical trial is closed for enrollment.  While we have not seen issues related to unexpected toxicity in the ALL trial, we proactively suspended enrollment in the Phase 2 portion of the ALL trial as a safety precaution.  Subsequent to our postponement of initiating new clinical trials, the FDA notified us that it had placed the Talvesta studies on clinical hold. After a thorough medical review and evaluation of the resources required to enable this compound to reenter clinical trials, we have chosen to stop further development of this drug candidate as of November 2007.
  
·
Kyrbax™ (Menadione) - We acquired the rights to Menadione in October 2006 pursuant to a license agreement with the Albert Einstein College of Medicine, (AECOM). We have finalized an initial formulation of Menadione and completed essential IND-enabling studies. We expect to submit an IND to the FDA by the end of 2007.
 
·
Zensana™ (ondansetron HCI) Oral Spray   - On July 31, 2007, we entered into a definitive agreement providing for the sublicense of all of our rights to develop and commercialize Zensana to Par Pharmaceutical, Inc. Under the terms of our agreement, Par is now responsible for all regulatory, development and commercialization activities for Zensana. Accordingly, we do not expect to incur additional expenses relating to Zensana. See “Off Balance Sheet Arrangements - License Agreements - Zensana License.”
 
To date, we have not received regulatory approval and marketing authorization for any drug candidates in any market, however we have received revenues from a license agreement entered into with Par Pharmaceuticals in July 2007 for one of our product candidates. The successful development of our product candidates is highly uncertain. Product development costs and timelines can vary significantly for each product candidate and are difficult to accurately predict. Various laws and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of each product. The lengthy process of seeking these approvals and the subsequent compliance with applicable statutes and regulations require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially, adversely affect our business. Also, if we are unable to enter into strategic partnerships, we may not be able to develop or we may be forced to slow down development and commercialization of some or all our product candidates.
 
We will not generate any product commercial sales until we receive approval from the FDA or equivalent foreign regulatory bodies to begin marketing and selling our pharmaceutical candidates. Developing pharmaceutical products, however, is a lengthy and very expensive process. In addition, as we continue the development of our remaining product pipeline, our research and development expenses will further increase. To the extent we are successful in acquiring additional product candidates for our development pipeline, our need to finance further research and development will continue increasing. Our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance the development of these product candidates or in some instances, enter into strategic partnerships. Our major sources of working capital have been proceeds from various private financings, primarily private sales of our common stock and other equity securities.

Revenues

We do not expect to generate any significant revenue from product sales or royalties in the foreseeable future. We anticipate that any revenues that we may recognize in the near future will be related to upfront, milestone development funding payments received pursuant to strategic license agreements or partnerships and that we may have large fluctuations of revenue recognized from quarter to quarter as a result of the timing and the amount of these payments. We may be unable to control the development of commercialization of these products and may be unable to estimate the timing and amount of revenue to be recognized pursuant to these agreements. Revenue from these agreements and partnerships help us fund our continuing operations. We expect our revenues to increase in the future as we are able to develop and commercialize our products, license our technology and/or enter into strategic partnerships. If we are unsuccessful, our future revenues will decrease and we may be forced to limit our development of our product candidates.
 
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Research and Development Expenses

Research and development expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for laboratory development, manufacturing, legal expenses resulting from intellectual property protection, business development and organizational affairs and other expenses relating to the acquiring, design, development, testing, and enhancement of our product candidates, including milestone payments for licensed technology. We expense our research and development costs as they are incurred.
  
General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including accounting and general legal activities. 

Critical Accounting Policies
   
The accompanying discussion and analysis of our financial condition and results of operations are based on our condensed unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We believe there are certain accounting policies that are critical to understanding our condensed unaudited financial statements, as these policies affect the reported amounts of expenses and involve management’s judgment regarding significant estimates. We have reviewed our critical accounting policies and their application in the preparation of our financial statements and related disclosures with our Audit Committee of the Board of Directors. Our critical accounting policies and estimates are described below.
 
Share Based Compensation
 
Effective January 1, 2006, we adopted the provisions of SFAS No.123R requiring that compensation cost relating to all share-based employee payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the fair value of the award using the Black-Scholes-Merton option pricing model, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity award). We adopted SFAS No.123R using the modified prospective method for share-based awards granted after we became a public entity and the prospective method for share-based awards granted prior to the time we became a public entity and, accordingly, financial statement amounts for prior periods presented in this Form 10-Q have not been restated to reflect the fair value method of recognizing compensation cost relating to stock options.
 
In applying the modified prospective transition method of SFAS No. 123R, we estimated the fair value of each option award on the date of grant using the Black-Scholes-Merton option-pricing model. As allowed by SFAS No. 123R for companies with a short period of publicly traded stock history, our estimate of expected volatility is based on the average expected volatilities of a sampling of five companies with similar attributes to us, including industry, stage of life cycle, size and financial leverage. As we have so far only awarded “plain vanilla options” as described by the SEC’s Staff Accounting Bulletin No. 107, we used the “simplified method” for determining the expected life of the options granted. This method is allowed until December 31, 2007, after which we will be required to adopt another method to determine expected life of the option awards granted after this date. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant valuation. SFAS No. 123R does not allow companies to account for option forfeitures as they occur. Instead, estimated option forfeitures must be calculated upfront to reduce the option expense to be recognized over the life of the award and updated upon the receipt of further information as to the amount of options expected to be forfeited. Based on our historical information, we currently estimate that 10% annually of our stock options awarded will be forfeited. For options granted while we were a nonpublic entity, we applied the prospective method in which the awards that were valued under the minimum value method for pro forma disclosure purposes will continue to be expensed using the intrinsic value method of APB 25.
 
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Prior to January 1, 2006, we accounted for option grants to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25, and related interpretations. The Company also followed the disclosure requirements of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” Under the guidelines of APB No. 25, we were only required to record a charge for grants of options to employees if on the date of grant they had an “intrinsic value” which was calculated based on the excess, if any, of the market value of the common stock underlying the option over the exercise price.

If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods or if we decide to use a different valuation model, the future periods may differ significantly from what we have recorded in the current period and could materially affect our operating loss, net loss and net loss per share.

The Black-Scholes-Merton option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in our option grants and employee stock purchase plan shares. Existing valuation models, including the Black-Scholes-Merton and lattice binomial models, may not provide reliable measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, expiration, early termination or forfeiture of those stock-based payments in the future. Certain stock-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, value may be realized from these instruments that are significantly higher than the fair values originally estimated on the grant date and reported in our financial statements. There currently is no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values.
  
The guidance in SFAS 123R and SAB 107 is relatively new. The application of these principles may be subject to further interpretation and refinement over time. There are significant differences among valuation models, and there is a possibility that we will adopt different valuation models in the future. This may result in a lack of consistency in future periods and materially affect the fair value estimate of stock-based payments. It may also result in a lack of comparability with other companies that use different models, methods and assumptions.

See Note 4 of our condensed unaudited financial statements included elsewhere in this Quarterly Report for further information regarding the SFAS 123R disclosures.

Licensed In-Process Research and Development
 
Licensed in-process research and development relates primarily to technology, intellectual property and know-how acquired from another entity. We evaluate the stage of development as well as additional time, resources and risks related to development and eventual commercialization of the acquired technology. As we historically have acquired non-FDA approved technologies, the nature of the remaining efforts for completion and commercialization generally include completion of clinical trials, completion of manufacturing validation, interpretation of clinical and preclinical data and obtaining marketing approval from the FDA and other regulatory bodies. The cost in resources, probability of success and length of time to commercialization are extremely difficult to determine. Numerous risks and uncertainties exist with respect to the timely completion of development projects, including clinical trial results, manufacturing process development results and ongoing feedback from regulatory authorities, including obtaining marketing approval. Additionally, there is no guarantee that the acquired technology will ever be successfully commercialized due to the uncertainties associated with the pricing of new pharmaceuticals, the cost of sales to produce these products in a commercial setting, changes in the reimbursement environment or the introduction of new competitive products. Due to the risks and uncertainties noted above, we will expense such licensed in-process research and development projects when incurred. However, the cost of acquisition of technology is capitalized if there are alternative future uses in other research and development projects or otherwise based on internal review. All milestone payments will be expensed in the period the milestone is reached.
 
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Clinical Study Activities and Other Expenses from Third-Party Contract Research Organizations
 
Much of our research and development activities related to clinical study activity are conducted by various third parties, including contract research organizations, which may also provide contractually defined administration and management services. Expense incurred for these contracted activities are based upon a variety of factors, including actual and estimated patient enrollment rates, clinical site initiation activities, labor hours and other activity-based factors. On a regular basis, our estimates of these costs are reconciled to actual invoices from the service providers, and adjustments are made accordingly.

Revenue Recognition

We recognize all revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition”, where revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery of the services, supplies or technology license has occurred; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured.

We recognize revenue from the license or assignment of intellectual property and rights to third parties, including development milestone payments associated with such agreement if the funds have been received, the rights to the property have been delivered, and we have no further obligations under the date(s) when the payment has been received or collection is assured.

To date, we have only earned revenue from a non-refundable upfront payment pursuant to a sublicense agreement, as described further in Note 8 in the “Notes to Unaudited Condensed Financial Statements” section of this Form 10-Q. .

Recent Accounting Pronouncements

On September 15, 2006, FASB issued Statement No. 157, “Fair Value Measurements”.   This Statement provides guidance for using fair value to measure assets and liabilities.  This Statement references fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The Statement applies whenever other standards require (or permit) assets or liabilities to be measured at fair value.  The Statement does not expand the use of fair value in any new circumstances.  It is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The adoption of SFAS No. 157 is not expected to have a material impact on the Company’s financial statements.

On February 15, 2007, FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, or SFAS 159. The statement provides companies with an option to report selected financial assets and liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements to facilitate comparisons between companies using different measurement attributes for similar types of assets and liabilities. The statement is effective as of the beginning of the first fiscal year that begins after November 15, 2007. Earlier adoption is permitted provided the company also elects to apply the provisions of SFAS 157. The Company is currently evaluating the impact that this standard may have on our financial statements.
 
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Results of Operations

Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
 
Revenue. For the three months ended September 30, 2007, we recognized $1.2 million in revenue compared to none for the same period in 2006. This revenue consisted entirely of the recognition of the upfront payment received from Par as part of the sublicense agreement for Zensana. As of September 30, 2007, all obligations related to the upfront payment received were satisfied. Prior to this sublicense transaction, the Company was in the developmental stage and had not yet earned any revenues. We will not recognize additional revenue from the Par sublicense agreement in future periods unless Zensana is approved by the FDA, Par can successfully commercialize the product, and our royalties earned exceed our royalty commitment to Novadel as part of our license agreement with them.

General and administrative expenses. For the three months ended September 30, 2007, general and administrative, or G&A, expense was $0.5 million, as compared to $3.4 million for the three months ended September 30, 2006. The decrease of approximately $2.9 million is due primarily to a decrease in employee related expenses of $2.6 million, which includes a decrease in salaries, other employee benefits and personnel related costs of $0.1 million along with a decrease of $2.5 million in employee related share-based compensation expense. The decrease is mainly the result of a large number of share-based awards that were forfeited by the former chief executive officer when he resigned in September 2007. Salary and other employee related expenses decreased due to the reversal of expense accrued for the 2007 executive bonus for the former chief executive officer, which will not be paid out due to his resignation. This decrease was partially offset by an increase in salaries and other employee benefits in the three months ended September 30, 2007 compared to the three months ended September 30, 2006 for G&A employees.

For the three months ended September 30, 2007, outside services and professional service fees decreased $0.1 million compared to the same period in 2006, due to decreased audit, and IT services. Our audit fees decreased partially due to switching audit firms in 2006, incurring increased fees during the three months ended September 30, 2006 due to the transition. Also, during the three months ended September 30, 2006, we incurred costs related to the audit of our internal controls for the fiscal year 2006. As of June 30, 2007, we are not required to perform such an audit for the fiscal year 2007, and therefore did not incur these costs in the three months ended September 30, 2007.

Also for the three months ended September 30, 2007, there was a decrease of $0.2 million in G&A related allocable expenses, including rent, insurance and other expenses compared to three months ended September 30, 2006, while travel costs decreased over the same periods.

Research and development expenses. For the three months ended September 30, 2007, research and development, or R&D, expense was $5.7 million, as compared to $7.9 million for the three months ended September 30, 2006. The decrease of $2.2 million is due primarily to a decrease of $1.1 million in costs related to the acquisition and development of our product candidates and a decrease of $1.1 million in employee related expenses and allocable costs.

Costs related to the development of our drug candidates decreased by $0.8 million in 2007 over the same period as 2006. These development costs included the physical manufacturing of drug compounds and payments to our contract research organizations. The decrease was mainly due to a decrease of $2.6 million in costs related to Talvesta, Zensana and IPdR, off-set partially by an increase of $1.8 million in spending on our OPTISOME drugs candidates (Marqibo, Alocrest and Brakiva) as well as Menadione. As a result of our July 2007 sublicense agreement with Par Pharmaceutical, we do not expect to incur additional costs relating to the development of Zensana. Additionally, milestones and other transactions related to our drug candidates decreased by $0.5 million as there were no milestones reached in the three months ended September 30, 2007. Outside services, consultants and professional fees related to research and development projects increased by $0.1 million in the three months ended September 30, 2007 compared to the same period in 2006. The increased expenses are mainly due to additional services required to process statistical data related to our ongoing clinical trials.

Employee related expenses decreased by $1.1 million, including a $1.3 million decrease in employee stock based compensation which is offset partially by an increase of $0.2 million in salaries and other employee related benefits as head count increased from 22 R&D employees for the three months ended September 30, 2006 to 29 R&D employees for the three months ended September 30, 2007.

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R&D related allocable operating expenses, including rent, insurance, and other expenses increased by approximately $0.1 million for the three months ended September 30, 2007 compared to the three months ended September 30, 2006. Travel expenses also increased in 2007 compared to 2006.

Interest income (expense), net. For the three months ended September 30, 2007, net interest income was $0.3 million as compared to net interest income of $0.5 million for the three months ended September 30, 2006. The decrease of $0.2 million resulted from a decreased cash balance in our interest bearing accounts.

Other income (expense), net. For the three months ended September 30, 2007, net other expense was approximately $0.3 million as compared to net other expense of approximately $0.1 million for the three months ended September 30, 2006. The increase of approximately $0.2 million resulted primarily due to a write-down on available-for-sale securities for an other-than-temporary loss.

Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
 
Revenue. For the nine months ended September 30, 2007, we recognized $1.2 million in revenue compared to none for the same period in 2006. This revenue consisted entirely of the recognition of the upfront payment received from Par as part of the sublicense agreement for Zensana. As of September 30, 2007, all obligations related to the upfront payment received were satisfied. We will not recognize additional revenue from the Par sublicense agreement in future periods unless Zensana is approved by the FDA, Par can successfully commercialize the product, and our royalties earned exceed our royalty commitment to Novadel as part of our license agreement with them.
 
General and administrative expenses. For the nine months ended September 30, 2007, G&A expense was $6.6 million, as compared to $7.0 million for the nine months ended September 30, 2006. The decrease of $0.4 million is due primarily to a decrease in employee related expenses of $1.0 million including a decrease in employee stock based compensation of $1.6 million, offset partially by an increase in salaries and other employee benefit related expenses of $0.6 million. The decrease in stock based compensation is mainly the result of a large number of share-based awards that were forfeited by the former Chief Executive Officer when he resigned in September 2007, decreased partially by additional stock options issued after the nine months ended September 30, 2006. The increase in employee expenses is due to two sales and marketing employees hired after the period ended September 30, 2006 for work on the planned commercial launch of Zensana in the second quarter of 2007, as well as increased salaries and other employee benefits in 2007 over 2006.

For the nine months ended September 30, 2007, outside services and professional service fees increased by approximately $0.4 million, mainly related to increased legal fees, audit fees, consulting fees and other outside services. The overall increase consisted of an increase of $0.7 million in accounting and consulting fees related, including complying with Section 404 of the Sarbanes-Oxley Act, increased information technology costs, increased legal costs and other professional services. We incurred certain costs related to the audit of our internal controls for the fiscal year 2006 during the nine months ended September 30, 2007. We also had increased costs due to marketing costs that were incurred in early 2007 in anticipation of the potential commercialization of Zensana. These increased expenses were partially offset by a decrease in stock based compensation to consultants of $0.3 million due to our decreased stock price on September 30, 2007 compared to September 30, 2006.

Rent, depreciation and other allocable costs were relatively unchanged, with a minimal increase of $0.1 million, mostly due to higher insurance costs.

Research and development expenses. For the nine months ended September 30, 2007, R&D expense was $17.4 million, as compared to $28.9 million for the nine months ended September 30, 2006. The decrease of $11.5 million is due primarily to a decrease in costs of $12.8 million in 2007 related to R&D outside services, milestones, transactional costs related to our product candidates and development costs. These development costs included the physical manufacturing of drug compounds, payments to our contract research organizations and other costs related to clinical and pre-clinical development of our drug candidates.

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The decrease of $12.8 million includes a decrease of $13.5 million related to milestones, license fees and transactional costs related to the in-license agreement with Inex for our optisomal platform and AECOM for Menadione. Also included is a decrease of $4.5 million in development costs for our product candidates Zensana, IPdR and Talvesta. This decrease was partially offset by an increase in spending for the following programs: Marqibo increased by $1.4 million, Alocrest increased by $1.0 million, Brakiva increased by $0.4 million and Menadione increased by $1.8 million. Outside services and other professional fees also increased by $0.6million.

Costs for Marqibo increased as the Phase 2 clinical trial in adult patients with relapsed ALL continued to initiate sites and enroll patients. Alocrest continued enrollment in the Phase 1 study in advanced solid tumors and had increased manufacturing costs in preparation for a potential Phase 2 study in 2008. Brakiva incurred significant pre-clinical and manufacturing costs as an IND was submitted to the FDA. Menadione was not added to the pipeline until October 2006, therefore, there were no costs incurred in the nine months ended September 30, 2006. Costs incurred to date have been mainly related to pre-clinical and manufacturing costs in preparation for an IND expected to be submitted by the end of 2007. Costs related to IPdR and Talvesta decreased by $1.1 million as IPdR was halted in January 2007 and Talvesta clinical trials were halted in May 2007. Costs related to the development of Zensana decreased by $3.5 million in the nine months ended September 30, 2007 compared to September 30, 2006, due mainly to a decrease in manufacturing costs and clinical costs. As a result of our July 2007 sublicense agreement with Par Pharmaceutical, we do not expect to incur additional material costs relating to the development of Zensana. Cost for professional fees and outside services increased due to increased recruiting fees as our headcount increased in R&D. We also hired additional consultants to assist in the processing of statistical data related to our ongoing clinical trials.

Employee related expenses increased by $0.5 million in 2007, including an increase in salaries, other employee benefits and personnel related costs of approximately $1.2 million and a decrease of $0.7 million in employee related share-based compensation expense. The increase in salary, bonus and benefits was due to increased wages and increased headcount from 14 employees in 2006 to 24 in 2007 as the research and development teams expanded with the acquisition of 4 additional drugs in 2006.

Other allocable operating expenses increased by approximately $0.9 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. This is mainly due to increased travel expenses, rent insurance and depreciation.

Interest income (expense), net. For the nine months ended September 30, 2007, net interest income was $1.0 million as compared to net interest income of $0.9 million for the nine months ended September 30, 2006. The increase of $0.1 million is due to mainly to higher yields on our cash and investments as we moved our money from low yield securities to higher yield securities after our financing in May 2006.

Other income (expense), net. For the nine months ended September 30, 2007, net other expense was $0.5 million as compared to net other expense of approximately $0.1 for the nine months ended September 30, 2006. The increase of approximately $0.4 million resulted primarily from a write-down on available-for-sale securities for an other-than-temporary loss.
 
Liquidity and Capital Resources
 
We have financed our operations since inception primarily through equity financing. As of September 30, 2007, we had aggregate cash and cash equivalents and available-for-sale securities of $18.8 million. We also entered into a loan facility agreement with Deerfield Mangement, which has committed $30 million to fund the development of our product candidates and other general corporate activities. Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing. Through September 30, 2007, a significant portion of our financing has been and will continue to be through private placements of common stock, preferred stock and debt financing. We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs. Given the current and desired pace of clinical development of our product candidates, we estimate that we will have sufficient cash on hand to fund clinical development into the second half of 2009. We may, however, choose to raise additional capital before then in order to fund our future development activities, likely by selling shares of our capital stock or through debt financing. If we are unable to raise additional capital or enter into strategic partnerships and/or license agreements, we will likely be forced to curtail our desired development activities, which will delay the development of our product candidates. There can be no assurance that such capital will be available to us on favorable terms or at all. We will need additional financing thereafter until we can achieve profitability, if ever.
 
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Financings. In July 2007, we entered into a sublicense agreement with Par Pharmaceuticals, upon the execution of which, we received aggregate consideration of $5.0 million in exchange for 2,500,000 shares of our common stock and the rights to our product candidate Zensana.

On October 31, 2007, we entered into a loan facility agreement with Deerfield. Pursuant to the terms of the agreement, we may borrow from Deerfield up to an aggregate of $30 million, of which $20 million may be drawn down by us in as many as four installments every six months commencing October 30, 2007. Pursuant to such schedule, we drew down $7.5 million on November 1, 2007. The remaining $10 million of the loan is subject to disbursement in three installments upon the achievement of clinical development milestones relating to our Marqibo and Menadione product candidates. Deerfield’s obligation to disburse loan proceeds expires October 30, 2010 and we must repay all outstanding amounts owing under the loan no later than October 30, 2013.

Current and Future Capital Requirements. Our plan of operation for the remainder of the year ending December 31, 2007 is to continue implementing our business strategy, including the continued development of our product candidates that are currently in clinical and preclinical phases. We also intend to possibly expand our drug candidate portfolio by acquiring additional drug technologies for development. We expect our principal expenditures during the next 12 months to include:

 
·
operating expenses, including on-going research and development and general and administrative expenses; and
 
 
·
product development expenses, including the costs incurred with respect to applications to conduct clinical trials in the United States, as well as outside of the United States, for our product candidates, including manufacturing, intellectual property prosecution and regulatory compliance.

As part of our planned research and development, we intend to use clinical research organizations and third parties to help perform our clinical studies and manufacturing. As indicated above, at our current and desired pace of clinical development of our product candidates, over the next 12 months we expect to spend approximately between $16.0 million and $20 million on clinical development (including milestone payments of $2.5 million that we expect to be triggered under the license agreements relating to our product candidates, all of which can be satisfied through the issuance of new shares of our common stock at our discretion), $4.0 million on general corporate and administrative expenses, including $0.6 million on facilities and rent.

We believe that our cash, cash equivalents and available-for-sale securities, which totaled $18.8 million as of September 30, 2007, as well as the funds committed by Deerfield as part of the debt agreement will be sufficient to meet our anticipated operating needs into the second half of 2009 based upon our current and desired pace of clinical development. However, we expect to incur substantial expenses as we continue our drug discovery and development efforts, particularly to the extent we advance our lead candidate Marqibo through a pivotal clinical study. We cannot guarantee that future financing will be available in amounts or on terms acceptable to us, if at all.

However, the actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:
 
 
·
costs associated with conducting preclinical and clinical testing;

 
·
costs of establishing arrangements for manufacturing our product candidates;
 
 
·
costs of acquiring new drug candidates;
 
 
·
payments required under our current and any future license agreements and collaborations;
 
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·
costs, timing and outcome of regulatory reviews;
 
 
·
costs of obtaining, maintaining and defending patents on our product candidates; and
 
 
·
costs of increased general and administrative expenses.
 
We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our stock or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed. 

Research and Development Projects

The discussion below describes for each of our development projects the research and development expenses we have incurred to date and, to the extent we are able to reasonably ascertain, the amounts we estimate we will have to expend in order to complete development of each project and the time we estimate it will take to complete development of each project. In addition to those risks identified in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, our assumptions relating the expected costs of development and timeframe for completion are dependent on numerous risks and other factors, including the availability of capital, unforeseen safety issues, lack of effectiveness, and significant unforeseen delays in the clinical trial and regulatory approval process, any of which could be extremely costly. In addition, our estimates assume that we will be able to enroll a sufficient number of patients in clinical trials.

Since our business does not currently generate positive cash flow, we will likely need to raise additional capital in the future to continue development of our product candidates. If we are to raise such capital, we expect to raise it primarily by selling shares of our capital stock. To the extent additional capital is not available when we need it, we may be forced to discontinue or scale-back our development efforts relating to one or more of our product candidates or out-license our rights to our product candidates to a third party, any of which would have a material adverse effect on the prospects of our business.

Marqibo.   Since acquiring the exclusive world-wide rights to develop and commercialize Marqibo in May 2006, we have incurred $3.5 million in project costs related to our development of Marqibo through September 30, 2007, of which $2.2 million and $1.3 million was incurred in 2007 and 2006, respectively. In 2007, we have initiated a Phase 2, registration-enabling, open-label trial in relapsed adult ALL and plan to initiate a pilot Phase 2 trial in metastic uveal melanoma. Pending finalization of the protocol with cooperative groups and approval by the Cancer Therapy Evaluation Program (CTEP), we also anticipate conducting a Phase 3 supportive trial in front-line ALL potentially commencing in the first half of 2008. We estimate that we will need to expend at least an aggregate of approximately $47 million in order for us to obtain FDA approval for Marqibo, if ever, which includes a milestone payment that would be owed to our licensor upon FDA approval.  We expect that it will take approximately three to four years until we will have completed development and obtained FDA approval of Marqibo, if ever.

Alocrest.   Since acquiring the exclusive world-wide rights to develop and commercialize Alocrest in May 2006, we have incurred $2.5 million in project costs related to our development of Alocrest through September 30, 2007, of which $1.7 million and $0.8 million was incurred in 2007 and 2006, respectively. We initiated a Phase 1 clinical trial in August 2006. This Phase 1 trial is designed to assess safety, tolerability and preliminary efficacy in patients with advanced solid tumors. The trial is currently in its sixth dosing cohort and we expect to complete this Phase 1 trial in 2007. We estimate that we will need to expend at least an aggregate of approximately $47 million, in order for us to obtain FDA approval for Alocrest, if ever, which amount includes milestone payments that would be owed to our licensor upon FDA approval.  We expect that it will take approximately five to six years until we will have completed development and obtained FDA approval of Alocrest, if ever.
 
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Brakiva. Since acquiring the exclusive world-wide rights to develop and commercialize Brakiva in May 2006, we have incurred $1.8 million in project costs related to our development of this drug through September 30, 2007, of which $0.8 million and $1.0 million was incurred in 2007 and 2006, respectively. We have submitted an IND to the FDA which has been activated. We expect to initiate a Phase 1 clinical trial in 2007 or in early 2008. As this drug is early in its clinical development, both the registrational strategy and total expenditures to obtain FDA approval are still being evaluated.

Talvesta. Through September 30, 2007, we have incurred $4.5 million of costs related to our development of Talvesta, of which $0.5 million and $4.0 million was incurred in 2007 and 2006, respectively. As we have chosen to stop further clinical development of this drug, we do not expect to incur additional material costs related to Talvesta in the future.

Menadione. We licensed our rights to menadione from the Albert Einstein College of Medicine in October 2006 and have incurred approximately $2.1 million in project costs related to our development of this drug through September 30, 2007, of which $1.8 million and $0.3 million was incurred in 2007 and 2006, respectively. We have finalized the formulation of Menadione and completed essential IND activation enabling studies. We expect to submit an IND to the FDA by the end of 2007. As this drug is early in its clinical development, both the registrational strategy and total expenditures to obtain FDA approval are still being evaluated.
     
Zensana (ondansetron HCl) Oral Spray.   On July 31, 2007, we entered into a definitive agreement providing for the sublicense of all our rights to develop and commercialize Zensana to Par Pharmaceutical, Inc. Accordingly, we do not expect to incur additional costs relating to the development of Zensana. See “ - Off- Balance Sheet Arrangements - License Agreements - Zensana. ”
 
Off-Balance Sheet Arrangements

We do not have any “off-balance sheet agreements,” as that term is defined by SEC regulation. We do, however, have various commitments under certain agreements, as follows:

License Agreements.  

In the event we achieve certain milestones in connection with the development of our product candidates, we will be obligated to make milestone payments to our licensors in accordance with the terms of our license agreements, as discussed below. The development of pharmaceutical product candidates is subject to numerous risks and uncertainties, including, without limitation, the following: (1) risk of delays in or discontinuation of development from lack of financing, (2) our inability to obtain necessary regulatory approvals to market the products, (3) unforeseen safety issues relating to the products, (4) our ability to enroll a sufficient number of patients in our clinical trials, and (5) dependence on third party collaborators to conduct research and development of the products. Additionally, on a historical basis, only approximately 11 percent of all product candidates that enter human clinical trials are eventually approved for sale. Accordingly, we cannot state that it is reasonably likely that we will be obligated to make any milestone payments under our license agreements. Summarized below are our future commitments under our license agreements, as well as the amounts we have paid to date under such agreements.
 
Talvesta License . Our rights to Talvesta are governed by the terms of a December 2002 license agreement with Dana-Farber Cancer Institute and Ash Stevens, Inc. The agreement provides us with an exclusive worldwide royalty bearing license, including the right to grant sublicenses, to the intellectual property rights and know-how relating to Talvesta and all of its uses. Upon execution of the license agreement, we paid a $100,000 license fee and reimbursed our licensors for approximately $11,000 of patent-related expenses. The license agreement also requires us to make future payments totaling up to $6 million upon the achievement of certain milestones, including a $5 million payment upon approval by the FDA of a New Drug Application for Talvesta. To date, we have made two of these milestone payments totaling $200,000 following commencement of the Phase 1 clinical trial and upon reaching 50% enrollment of a Phase 1 clinical trial. Additionally, we are obligated to pay royalties in the amount of 3.5 percent of “net sales” (as defined in the license agreement) of Talvesta. We are also required to pay to the licensors 20 percent of fees or non-royalty consideration (e.g., milestone payments, license fees) received by us in connection with any sublicense of Talvesta granted prior to the start of a Phase 2 trial, and 15 percent of such fees after initiation of a Phase 2 clinical trial.
 
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Zensana License. Our rights to Zensana are subject to the terms of an October 2004 license agreement with NovaDel Pharma, Inc. The license agreement grants us a royalty-bearing, exclusive right and license to develop and commercialize Zensana within the United States and Canada. The technology licensed to us under the license agreement currently covers one United States issued patent, which expires in March 2022. In consideration for the license, we issued 73,121 shares of our common stock to NovaDel and have agreed to make double-digit royalty payments to NovaDel based on a percentage of “net sales” (as defined in the agreement). In addition, we purchased from NovaDel 400,000 shares of its common stock at a price of $2.50 per share for an aggregate payment of $1 million.  
 
On July 31, 2007, we entered into a sublicense agreement with Par Pharmaceutical, Inc. and NovaDel , pursuant to which we granted to Par and its affiliates, and NovaDel consented to such grant, a royalty-bearing exclusive right and license to develop and commercialize Zensana within the United States and Canada. We previously had acquired such exclusive, sublicensable rights from NovaDel and commenced development of Zensana™, a pharmaceutical product that contains ondansetron, pursuant to a License Agreement with NovaDel dated October 24, 2004, as amended. As agreed by us and NovaDel, Par assumed primary responsibility for the development, regulatory approval by the FDA, and sales and marketing of Zensana.
 
In consideration for the license grant to Par, and upon execution of the Sublicense Agreement, Par purchased 2,500,000 newly-issued shares of our common stock at a price per share of $2.00 per share for aggregate consideration of $5,000,000.
 
As additional consideration for the sublicense, following regulatory approval of Zensana, the Sublicense Agreement, Par is required to pay us an additional one-time payment of $6,000,000, of which $5,000,000 is payable by us to NovaDel under the License Agreement. In addition, the Sublicense Agreement provides for an additional aggregate of $44,000,000 in commercialization milestone payments based upon actual net sales of Zensana in the United States and Canada, which amounts are not subject to any corresponding obligations to NovaDel. We will also be entitled to royalty payments based on net sales of Zensana by Par or any of its affiliates in such territory, however, the amount of such royalty payments is generally equal to the same amount of royalties that we will owe NovaDel under the License Agreement, except to the extent that aggregate net sales of Zensana exceed a specified amount in the first 5 years following FDA approval of an NDA, in which case the royalty rate payable to us increases beyond its royalty obligation to NovaDel.

In order to give effect to and accommodate the terms of the Sublicense Agreement, on July 31, 2007, we also entered into an Amended and Restated License Agreement with NovaDel. The primary modifications to the Amended and Restated License Agreement are as follows:
 
·
we relinquished our right under the original License Agreement to reduced royalty rates to NovaDel until such time as we have recovered one-half of our costs and expenses incurred in developing Zensana from sales of Zensana or payments or other fees from a sublicensee;
 
·
NovaDel surrendered for cancellation all 73,121 shares of our common stock that it acquired upon the execution of the original License Agreement;
 
·
We will have the right, but not the obligation, to exploit the licensed product in Canada;
 
·
We or our sublicensee must consummate the first commercial sale of the licensed product within 9 months of regulatory approval by the FDA of such product; and
 
·
If the Sublicense Agreement is terminated, we may elect to undertake further development of Zensana.
 
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Inex License Agreement.   In May 2006, we entered into a series of related agreements with Inex Pharmaceuticals Corporation. Pursuant to a license agreement with Inex, we received an exclusive, worldwide license to patents, technology and other intellectual property relating to our Marqibo, Alocrest and Brakiva product candidates. Under the license agreement, we also received an exclusive, worldwide sublicense to other patents and intellectual property relating to these product candidates held by the M.D. Anderson Cancer Center. In addition, we entered into a sublicense agreement with Inex and the University of British Columbia, or UBC, which licenses to Inex other patents and intellectual property relating to the technology used in Marqibo, sphingosome encapsulated vinorelbine and Brakiva. Further, Inex assigned to us its rights under a license agreement with Elan Pharmaceuticals, Inc., from which Inex had licensed additional patents and intellectual property relating to the three sphingosomal product candidates.

In consideration for the rights and assets acquired from Inex, we paid to Inex aggregate consideration of $11.8 million, which payment consisted of $1.5 million in cash and 1,118,568 shares of our common stock. We also agreed to pay to Inex royalties on sales of the licensed products, as well as upon the achievement of specified development and regulatory milestones and up to a maximum aggregate amount of $30.5 million for all product candidates. The milestones and other payments may include annual license maintenance fees and milestones. To date, we have made one milestone payment of $1.0 million to Inex upon initiation of a Phase 1 clinical trial in Alocrest.

Menadione License Agreement. In October 2006, we entered into a license agreement with the Albert Einstein College of Medicine of Yeshiva University, a division of Yeshiva University, or the College. Pursuant to the Agreement, we acquired an exclusive, worldwide, royalty-bearing license to certain patent applications, and other intellectual property relating to topical menadione. In consideration for the license, we agreed to issue the College $150,000 of our common stock, valued at $7.36 per share (representing the closing sale price on October 11, 2006). We also agreed to make an additional cash payment within 30 days of signing the agreement, and pay annual maintenance fees. Further, we agreed to make milestone payments in the aggregate amount of $2,750,000 upon the achievement of various clinical and regulatory milestones, as described in the agreement. We may also make annual maintenance fees as part of the agreement. We also agreed to make royalty payments to the College on net sales of any products covered by a claim in any licensed patent. We may also grant sublicenses to the licensed patents and the proceeds resulting from such sublicenses will be shared with the College.
 
Lease Agreements. We entered into a three year sublease, which commenced on May 31, 2006, for property at 7000 Shoreline Court in South San Francisco, California, where the Company has relocated its executive offices. The total cash payments due for the duration of the sublease equaled approximately $1.0 million on September 30, 2007. 
 
 
Our exposure to market risk is confined to our cash, cash equivalents, auction rate securities and our investment in NovaDel Pharma, Inc. We have attempted to minimize risk by investing in high-quality financial instruments, primarily money market funds with no security having an effective duration longer than 90 days. We are subject to risk due to general market conditions, which may adversely impact the carrying value of our auction rate securities and our investment in NovaDel. If the market interest rate decreases by 100 basis points or 1%, the fair value of our cash and cash equivalents portfolio would have minimal to no impact on the carrying value of our portfolio. We did not hold any derivative instruments as of September 30, 2007, and we have never held such instruments in the past. 

 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
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Based on their evaluation as of September 30, 2007, our Chief Executive Officer and Chief Financial Officer, with the participation of management, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
 
During the quarter ended September 30, 2007, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
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We are not involved in any legal proceeding.
 

We have not had any material changes to our risk factors disclosed in response to Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.


None
 

Not applicable
 

None


None
 
 
  Exhibit No.
 
Description
10.1
  
Product Development and Commercialization Sublicense Agreement dated July 31, 2007 Among Hana Biosciences, Inc., Par Pharmaceuticals, Inc., and NovaDel Pharma, Inc.**
     
10.2
  
Amended and Restated License Agreement dated July 31, 2007 between Hana Biosciences, Inc. and NovaDel Pharma, Inc. **
     
31.1
 
Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).
 
 
 
31.2
 
Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).
 
 
 
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer, as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
 
 
**
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment. The entire exhibit has been separately filed with the Commission.
 
- 31 -

 
In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
HANA BIOSCIENCES, INC.
 
 
 
 
 
 
Dated: November 8, 2007
By:  
/s/ Steven R. Deitcher, MD
 
Steven R. Deitcher
 
President and Chief Executive Officer

 
 
 
Dated: November 8, 2007
By:  
/s/ John P. Iparraguirre  
 
John P. Iparraguirre
Vice President, Chief Financial Officer
 
 
 
- 32 -

 
  Exhibit No.
 
Description
     
10.1
  
Product Development and Commercialization Sublicense Agreement dated July 31, 2007 Among Hana Biosciences, Inc., Par Pharmaceuticals, Inc., and NovaDel Pharma, Inc.**
     
10.2
  
Amended and Restated License Agreement dated July 31, 2007 between Hana Biosciences, Inc. and NovaDel Pharma, Inc. **
     
31.1
 
Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).
 
 
 
31.2
 
Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).
 
 
 
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer, as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
 
 
**
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment. The entire exhibit has been separately filed with the Commission.
 
- 33 -
 
 EX-10.1 2 v092675_ex10-1.htm Unassociated Document
Exhibit 10.1

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.

PRODUCT DEVELOPMENT AND
COMMERCIALIZATION SUBLICENSE AGREEMENT
 
This Development and Commercialization Sublicense Agreement (this “Agreement”) is made and entered into this 31st day of July, 2007 (the “Effective Date”), by and among HANA Biosciences, Inc., a Delaware corporation (“HANA”), PAR Pharmaceutical, Inc., a Delaware corporation (“PAR”), and NovaDel Pharma, Inc., a Delaware corporation (“NovaDel”).
 
WHEREAS, HANA has exclusive, restricted sublicensable rights under a license from NovaDel , the owner of certain patents, intellectual property and know-how relating to lingual sprays for the metered delivery of pharmaceutical products to humans;
 
WHEREAS, HANA has commenced the development of a pharmaceutical product containing ondansetron as an active ingredient that will be administered to humans using the Licensed Technology (as defined below) on terms and conditions set forth herein;
 
WHEREAS, HANA desires to sublicense to PAR the Licensed Technology, and PAR desires to accept such sublicense on the terms and conditions set forth herein; and
 
WHEREAS, simultaneously with the execution of this Agreement, the Parties are entering into that certain Subscription Agreement that provides, on the terms and subject to the conditions set forth therein, for a purchase by PAR of the common stock of HANA in an amount up to $5,000,000.
 
NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HANA, PAR and NovaDel agree as follows:
 
ARTICLE 1
DEFINITIONS
 
For purposes of this Agreement, the following words and phrases shall have the following meanings, unless otherwise specifically provided herein:
 
1.1 AAA has the meaning set forth in Section 15.2.1.
 
1.2 Affiliate shall mean, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. For purposes of this Section 1.1 only, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” shall mean (a) the possession, directly or indirectly, of the power to direct the management or policies of an Person, whether through the ownership of voting securities, by contract or otherwise, or (b) the ownership, directly or indirectly, of at least fifty percent (50%) of the voting securities or other ownership interest of a Person
 

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1.3 Agreement has the meaning set forth in the preamble.
 
1.4 Agreement Related Assets has the meaning set forth in Section 11.3.2.
 
1.5 Anticipated Filing Date has the meaning set forth in Section 4.2.2.
 
1.6 Applicable Law shall mean the applicable laws, rules, regulations, guidelines and requirements of the Regulatory Authorities in the Territory.
 
1.7 CGMP means the regulatory requirements for current good manufacturing practices promulgated by the FDA under the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder, particularly 21 C.F.R. Section 210 et seq., and 21 C.F.R. Sections 600-610, as the same may be amended from time to time.
 
1.8 Commercialization means the marketing, promotion, advertising, selling and/or distribution of the Licensed Product in the Territory after Regulatory Approval therefor has been obtained; and the term “Commercialize” has a corresponding meaning.
 
1.9 Commercially Reasonable Efforts shall mean, with respect to the development or commercialization of the Licensed Product, efforts and resources commonly used in the research-based pharmaceutical industry for a product of similar commercial potential at a similar stage in its lifecycle, taking into consideration its safety and efficacy, its cost to develop, the competitiveness of alternative products, its proprietary position, the likelihood of regulatory approval, its profitability, and all other relevant factors. Commercially Reasonable Efforts shall be determined on a market-by-market basis for each Licensed Product without regard to the particular circumstances of a Party, including any other product opportunities of such Party.
 
1.10 Common Technical Document shall have the meaning set forth in the International Conference on Harmonization of the Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) Guideline M4, Organization of the Common Technical Document, as revised on January 13, 2004.
 
1.11 Confidential Information has the meaning set forth in Section 9.1.
 
1.12 Control shall mean, with respect to any item of Information and Inventions, Patent Rights or other intellectual property right, possession of the ability, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such item, Patent or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.
 
1.13 Development Committee has the meaning set forth in Section 4.1.2.
 
1.14 Designated Compound means ondansetron.
 
1.15 Development Plan has the meaning set forth in Section 4.1.1.

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1.16 Effective Date has the meaning set forth in the preamble.
 
1.17 Exploit shall mean to make, have made, import, use, sell, or offer for sale, including to research, develop, register, modify, improve, manufacture, have manufactured, store, have used, export, transport, distribute, promote, market or have sold or otherwise dispose of a Licensed Product or Licensed Process.
 
1.18 Exploitation shall mean the making, having made, importation, use, sale, offering for sale of a licensed product or process, including the research, development, registration, modification, improvement, manufacture, storage, optimization, import, export, transport, distribution, promotion, marketing, sale or other disposition of a Licensed Product or Licensed Process.
 
1.19 FDA means The Food and Drug Administration of the United States Department of Health and Human Services, or any successor agency(ies) thereof performing similar functions.
 
1.20 GAAP shall have the meaning set forth in Section 6.8.
 
1.21 HANA has the meaning set forth in the preamble.
 
1.22 HANA Indemnified Parties has meaning set forth in Section 12.1.
 
1.23 HANA Know-How shall mean all Information and Inventions Controlled by HANA or an Affiliate of HANA at any time during the Term that (a) are necessary for the use of the Licensed Process to Exploit the Licensed Product, and (b) are not generally known.
 
1.24 Improvement shall mean any modification, variation or revision to an apparatus, method, product or technology, or any discovery, technology, device, process or formulation related to an apparatus, method, product or technology, whether or not patented or patentable, including any enhancement in the manufacture or steps or processes thereof, ingredients, preparation, presentation, formulation, means of delivery, packaging or dosage of an apparatus, method, product or technology, any discovery or development of any new or expanded indications for an apparatus, method, product or technology, or any discovery or development that improves the stability, safety or efficacy of an apparatus, method, product or technology), in each case, to the extent related to the Licensed Process, Licensed Product or Licensed Technology.
 
1.25 IND shall mean an investigational new drug application filed with the FDA for approval to commence human clinical trials, and its equivalent in other countries or regulatory jurisdictions in the Territory.
 
1.26 Indemnification Claim Notice shall have the meaning set forth in Section 12.4.1.
 
1.27 Indemnified Party has meaning set forth in Section 12.4.1.

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1.28 Information And Invention shall mean all technical, scientific and other know-how and information, trade secrets, knowledge, technology, means, methods, processes, practices, formulas, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and other material, including pre-clinical and clinical trial results, manufacturing procedures and test procedures and techniques, (whether or not confidential, proprietary, patented or patentable) in written, electronic or any other form now known or hereafter developed, and all Improvements, whether to the foregoing or otherwise, and other discoveries, developments, inventions, and other intellectual property (whether or not confidential, proprietary, patented or patentable), in each case, to the extent related to the Licensed Process, Licensed Product or Licensed Technology.
 
1.29 Infringement Suit has meaning set forth in Section 10.3.
 
1.30 Initial Commercial Sale means the first sale for use or consumption by the general public of the Licensed Product by PAR or its Affiliates in the Territory following Regulatory Approval of the Licensed Product. Sales for clinical studies, compassionate use, named patient programs, sales under a treatment IND, test marketing, any nonregistrational studies, or any similar instance where the Licensed Product is supplied without charge shall not constitute an Initial Commercial Sale.
 
1.31 Licensed Process shall mean the proprietary lingual spray technology for the delivery of pharmaceutical compounds through the mucosal membrane of the mouth in humans using an aerosol or pump spray device that is under the Control of NovaDel as of the effective date of the NovaDel-Hana License and any Improvements thereto that are conceived and reduced to practice by NovaDel in the course of performing its obligations under the NovaDel-Hana License.
 
1.32 Licensed Product shall mean any dosage of pharmaceutical composition or preparation in finished form labeled and packaged for sale by prescription, over-the-counter or any other method only for human application that contains, as the sole active ingredient, the Designated Compound delivered by means of the Licensed Process.
 
1.33 Licensed Technology shall mean the NovaDel Patent Rights, the NovaDel Know-How and Improvements thereof, and the Drug Master File, collectively, but only with respect to the Exploitation of the Licensed Product.
 
1.34 Licensed Trademark shall mean “ZENSANA” owned by HANA as evidenced by U.S. Trademark Application Serial No. 78,710,181.
 
1.35 Lock-Up Period has meaning set forth in Section 6.1.
 
1.36 Losses has the meaning set forth in Section 12.1.
 
1.37 NDA means a New Drug Application as defined in the United States Federal Food, Drug and Cosmetic Act and applicable regulations promulgated thereunder as amended from time to time and any equivalent application required by any Regulatory Authority for the marketing, sale or use of the Licensed Product in the Territory for human application.

4

1.38 Net Sales means [***]
 
1.39 NovaDel has the meaning set forth in the preamble.
 
1.40 NovaDel-Hana License means that certain License and Development Agreement originally dated October 26, 2004, by and between NovaDel and HANA, as amended and restated effective as of July 31, 2007.

5

1.41 NovaDel Indemnified Parties has meaning set forth in Section 12.1.
 
1.42 NovaDel Know-How shall mean all Information and Inventions Controlled by NovaDel or an Affiliate of NovaDel as of the effective date of the NovaDel-Hana License or, from time to time, during the Term that (a) (i) are necessary for the use of the Licensed Process to Exploit the Licensed Product or (ii) relate to Improvements to the Licensed Product or Licensed Process that are conceived and/or reduced to practice in the course of Exploiting the Licensed Product or License Process, and (b) are not generally known, but excluding any Information and Inventions to the extent claimed by any NovaDel Patents.
 
1.43 NovaDel Patents shall mean the Patent Rights that NovaDel Controls (a) as of the effective date of the NovaDel-Hana License that are listed on Exhibit A hereto and (b) from time to time during the Term that claim (i) the Licensed Process, (ii) the Licensed Product, (iii) NovaDel Know-How, or (iv) any Improvements that are conceived and/or reduced to practice in the course of Exploiting the Licensed Product or License Process.
 
1.44 Par has the meaning set forth in the preamble.
 
1.45 PAR Indemnified Parties has meaning set forth in Section 12.2.
 
1.46 Party or Parties means HANA, NovaDel and/or PAR, as applicable.
 
1.47 Patent Rights means any of the following: (a) United States patents; (b) United States patent applications (both provisional and non-provisional), PCT patent applications, and divisionals, continuations and claims of continuation-in-part applications which shall be directed to subject matter specifically described in such United States and/or PCT patent applications, and the resulting patents (whether such divisionals, continuations or continuation-in-part applications are based upon a United States patent, United States patent application or PCT application); (c) any patents resulting from reissues or reexaminations of the United States patents described in (a) and (b) above; (d) foreign patents; (e) foreign patent applications and, to the extent applicable, divisionals, continuations and claims of continuation-in-part applications which shall be directed to subject matter specifically described in such foreign patent applications, and the resulting patents (whether such divisionals, continuations or continuation-in-part applications are based upon a foreign patent application or a foreign patent); and (f) any foreign patents, resulting from foreign procedures similar to United States reissues and reexaminations, of the foreign patents and applications described in (d) and (e) above.
 
1.48 Person means an individual, partnership, joint venture, association, corporation, limited liability company and any other form of business organization, government, regulatory or governmental agency, commission, department or instrumentality.
 
1.49 Product Liability Claim means a Third Party’s assertion of a strict liability claim of actual personal injury or death as a result of the use of the Licensed Product during the Term.
 
1.50 Product Trademarks has meaning set forth in Section 5.4.

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1.51 Regulatory Approval means approval by the FDA to market the Licensed Product in the United States, or equivalent Regulatory Authority in Canada to market the Licensed Product in Canada, including the issuance by the FDA or such other Regulatory Authority of an action letter indicating the approval of the NDA and the manufacturing processes and facilities for commercial supplies of the Licensed Product.
 
1.52 Regulatory Authority shall mean any applicable supra-national, federal, national, regional, state, provincial or local regulatory agencies, departments, bureaus, commissions, councils or other government entities regulating or otherwise exercising authority with respect to the Licensed Technology or the Licensed Product in the Territory.
 
1.53 Regulatory Documentation shall mean all applications, registrations, licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), all supporting documents and all clinical studies and tests, relating to the Licensed Product, and all data contained in any of the foregoing, including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.
 
1.54 Subscription Agreement has the meaning set forth in Section 6.1.
 
1.55 Term has the meaning set forth in Section 11.1.
 
1.56 Territory means the United States of America and Canada.
 
1.57 Third Party means any Person other than PAR, NovaDel, HANA and their respective Affiliates.
 
1.58 Third Party Claim shall have the meaning set forth in Section 12.5.2.
 
1.59 Trademark shall include any word, name, symbol, color, designation or device or any combination thereof, including any trademark, trade dress, brand mark, trade name, brand name, logo or business symbol.
 
1.60 Valid Claim shall mean, with respect to a particular country, a claim of a Patent Right in such country that (a) has not been revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which no appeal can be taken or has been taken within the time allowed for appeal, and (b) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise in such country, except if a claim, or the subject matter thereof, of a pending patent application shall not have issued within four (4) years after the filing date from which such claim, or subject matter thereof, takes priority, such claim shall not constitute a valid claim for purposes of this Agreement unless and until such claims shall issue.
 
ARTICLE 2
SCOPE OF THE COLLABORATION
 
2.1 Objectives. The Parties agree, pursuant and subject to the terms of this Agreement, that HANA intends to assign to PAR, and PAR intends to assume, all of HANA’s rights and obligations to develop and obtain Regulatory Approval for the Licensed Product in the Territory and to commercialize the Licensed Product in the Territory.
 
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2.2 Diligence Obligations. PAR shall use Commercially Reasonable Efforts in accordance with the terms and conditions of this Agreement, including the Development Plan, to (a) develop and commercialize the Licensed Product in the entire Territory; (b) file the NDA with the FDA in PAR’s name and obtain Regulatory Approval(s) with respect to the Licensed Product in the Territory; and (c) Exploit the Licensed Product in the Territory.
 
2.3 Outsourcing of MARQIBO Development. HANA holds the exclusive license and patent rights for the commercialization of Sphingosomal Vincristine sulfate liposome for the therapeutic treatment of patients with leukemia, lymphoma and solid tumors currently being developed under the trade name “MARQIBO.” In the event that HANA in its sole discretion, elects to grant a Third Party a right to manufacture and sell such product, HANA will inform PAR and, if PAR so requests, HANA will allow PAR to submit a proposal for HANA’s consideration prior to entering into negotiations with any other Third Party to manufacture and sell the product.
 
2.4 Co-Promotion of ZENSANA. Within ninety (90) days following PAR’s submission of an NDA for the Licensed Product, HANA may submit a proposal for PAR’s consideration with respect to the Parties’ joint promotion and commercialization of such Licensed Product; provided, however, that any determination whether to jointly promote and commercialize the Licensed Product with HANA will be in PAR’s sole discretion and if PAR determines to jointly promote with HANA, then PAR and HANA will negotiate in good faith an agreement that provides for the rights and obligations in respect thereof.
 
ARTICLE 3
GRANT OF RIGHTS
 
3.1 License Grant. Subject to Section 3.3 and the other terms and conditions of this Agreement, HANA hereby grants to PAR and its Affiliates and PAR accepts:
 
3.1.1 A non-transferable (except as provided in Section 11.3.2), nonsublicenseable (except as set forth in this Section 3.1 and Section 3.2), royalty-bearing, exclusive sublicense under the Licensed Technology to Exploit the Licensed Product in the Territory, to the full end of the Term for which the Licensed Technology is licensed, unless sooner terminated as herein after provided; provided, however, that PAR shall have the right to (i) utilize Third Parties to manufacture the Licensed Product in the Territory, and (ii) use, have used, manufacture or have manufactured the Licensed Product outside of the Territory solely for purposes of the distribution and sale of the Licensed Product inside the Territory. PAR shall be entitled to use a Third Party contract sales organization to market the Licensed Product in the Territory; provided, that the employees of such Third Party contract sales organization that are utilized to market the Licensed Product are trained and managed by PAR and carry only PAR’s products.

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3.1.2 In the event that PAR elects to use the Licensed Trademark in connection with the Exploitation of the Licensed Product in the Territory pursuant to Section 0, then a non-transferable (except as provided in Article 12), nonsublicenseable, royalty-bearing, non-exclusive right and license under the Licensed Trademark will be granted for the sole purpose of using the Licensed Trademark to market, distribute and sell the Licensed Product in the Territory, to the full end of the Term for which the Licensed Product is licensed, unless sooner terminated as herein after provided.
 
3.1.3 PAR shall not sell, distribute or transfer the Licensed Product to any Person that, to PAR’s knowledge or should reasonably know, is using or intends to use the Licensed Product outside of the Territory or is selling or transferring, or intends to sell or transfer, the Licensed Product to a Person who is using or intends to use such Licensed Product outside of the Territory.
 
3.1.4 PAR agrees that during the Term it will use the Licensed Technology only as explicitly provided and in accordance with the term and conditions of this Agreement. PAR expressly acknowledges and agrees that the only licenses granted under this Agreement are the licenses expressly granted under this Agreement and that there shall be no implied license or license by estoppel.
 
3.2 License Grant to NovaDel. In the event that NovaDel and PAR agree pursuant to Section 0 that NovaDel is to perform certain development activities under the Development Plan, PAR hereby grants to NovaDel a limited, royalty-free, co-exclusive right and license in the Territory in and to the Licensed Technology to the extent necessary to perform such development activities.
 
3.3 Retained Rights. PAR acknowledges that NovaDel retains all right, title and interest, including the right to grant licenses to Third Parties, in and to the Licensed Technology. PAR shall have no rights, express or implied, with respect to the Licensed Technology except as expressly set forth in Section 3.1, and PAR covenants to HANA and NovaDel that none of PAR or its Affiliates shall use the Licensed Technology, directly or indirectly, for any purpose other than for administration of the Designated Compound in connection with the Exploitation of Licensed Product hereunder. Notwithstanding anything in this Agreement to the contrary, PAR acknowledges that NovaDel retains, without any duty of accounting or otherwise to PAR:
 
3.3.1 The right to enter into collaborations or other agreements with, and to grant licenses and other rights under the NovaDel Patents and NovaDel Know-How to Third Parties to Exploit products containing compounds other than the Designated Compound and to use the Licensed Process in connection therewith; and
 
3.3.2 The right to independently Exploit products containing compounds other than the Designated Compound and to use the Licensed Process in connection therewith; and
 
3.3.3 An irrevocable, non-exclusive, royalty-free right to use the Licensed Technology (including the Licensed Process) with respect to the Designated Compound, for its internal, non-commercial research and development activities; and
 
3.3.4 The rights for all other territories other than the Territory and non-human uses of the Designated Compound.

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3.4 Additional Covenants and Agreements.
 
3.4.1 HANA covenants and agrees that, from and after the Effective Date until the termination of this Agreement, neither it nor any of its Affiliates shall seek to develop (directly or indirectly) any lingual spray technology for the delivery of anti-emetic pharmaceutical compounds.
 
3.4.2 Promptly after the Effective Date, each of NovaDel and HANA shall at its cost and expense, use good faith reasonable efforts to disclose to PAR in writing, or via mutually acceptable electronic media, copies or reproductions of all HANA Know-How and NovaDel Know-How, not previously disclosed to PAR, reasonably necessary in order to enable PAR to exploit its rights granted under this Article 3. In addition, during the Term, each of HANA and NovaDel shall promptly disclose to PAR in writing, or via mutually acceptable electronic media, on an ongoing basis, copies or reproductions of all new HANA Know-How and NovaDel Know-How that is reasonably necessary to market, sell or have sold the Licensed Product. Such HANA Know-How and NovaDel Know-How and other information shall be automatically deemed to be within the scope of the licenses granted herein without payment of any additional compensation.
 
3.5 Manufacturing.
 
3.5.1 Subject to the other provisions of this Section 3.5.1, PAR shall be solely responsible for the manufacture of the Licensed Product, both for clinical development and following receipt of Regulatory Approval of the Licensed Product; provided that PAR may contract with a Third Party to perform such manufacturing services. PAR shall share all data and other information relating to the manufacturing process and shall consult with NovaDel with respect thereto. Without limiting the generality of the foregoing, NovaDel shall have the opportunity to review, prior to execution, all agreements with Third Parties relating to the manufacture of the Licensed Product; provided, however, that PAR shall have the ultimate decision making authority in the event of any dispute between NovaDel and PAR relating to the terms of any such manufacturing agreement (or the choice of such Third Party manufacturer). NovaDel and its Extraterritorial Licensees (as defined in the NovaDel-Hana License) retain the right to purchase product from said Third Party, if applicable, at the same costs as PAR with the exception of an increase of cost due to a modification to the packaging/labeling by NovaDel or any Extraterritorial Licensee.
 
3.5.2 PAR agrees that, at all times during the performance of the development activities, it, or its designee, will act in accordance with all Applicable Laws.
 
3.5.3 To the extent PAR contracts with a Third Party to manufacture the Licensed Product, such Third Party shall agree in writing to be bound by the obligations of confidentiality and non-use at least equivalent in scope to those set forth in Article 9 of this Agreement.
    
3.5.4 PAR shall not object to permitting any Third Party manufacturer from selling NovaDel and its Extraterritorial Licensees Licensed Product under Section 3.5.1 in the identical packaging and labeling as PAR purchases such Licensed Product for sale in the United States, subject to the requirement by NovaDel and Sublicensees to have such Licensed Product uniquely identified by a separate batch record identification or other indicia sufficient to distinguish sales by NovaDel, or its Extraterritorial Licensees, from those of PAR.

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3.5.5 PAR shall use Commercially Reasonable Efforts to obtain any required licenses, permissions needed and documentation (e.g., Certificate of Pharmaceutical Product) in order for NovaDel and its Extraterritorial Licensees to buy and export Licensed Product from the United States. NovaDel shall reimburse all reasonable expenses incurred by PAR for obtaining such licenses or permissions within thirty (30) days of an Extraterritorial Licensee’s receipt of an invoice from PAR itemizing such expenses
 
3.5.6 NovaDel warrants, covenants and agrees that any license agreement that NovaDel enters into with an Extraterritorial Licensee regarding Licensed Product that are subject to this Agreement shall contain an indemnity clause requiring the Extraterritorial Licensee to indemnify PAR and its Affiliates against any and all claims, proceedings, demands, liability and expenses of any kind, including legal expenses and attorneys’ fees (collectively, “Claims”), arising out of or in connection with the manufacture, sale, use, consumption, advertisement or other disposition of Licensed Product by the Extraterritorial Licensee, its Affiliates or any end user, or arising from any violation of law, negligence, willful or reckless misconduct, or from any breach of any material obligation of such Extraterritorial Licensee under its agreement with NovaDel, other than Claims resulting from the gross negligence or willful misconduct of PAR; provided, however, that in no event shall the scope of the indemnification to PAR be any less than the scope of the Extraterritorial Licensee’s indemnification obligations to NovaDel.
 
ARTICLE 4
DEVELOPMENT PROGRAM
 
4.1 Development Plan; Responsibility and Control.
 
4.1.1 Within sixty (60) days after the Effective Date, PAR will adopt a development plan, and provide such development plan to NovaDel, describing its strategy and principal activities in seeking Regulatory Approval for the Licensed Product and commercializing the Licensed Product in accordance with the terms of this Agreement (the “Development Plan”), which may be amended by PAR in its commercially reasonable discretion. PAR will use its Commercially Reasonable Efforts to execute the Development Plan. Subject to the Development Plan and the other terms and conditions contained in this Agreement, PAR shall have control over and responsibility for executing all aspects of the Development Plan, including planning, strategy, administrative management, and fiscal control; provided, however, that PAR shall include the Development Committee in such efforts in a consultative capacity. In the event that PAR desires, PAR may request NovaDel to conduct certain development activities, and, if NovaDel agrees, NovaDel and PAR shall negotiate in good faith the scope of such development activities to be undertaken by NovaDel, appropriate amendments to the Development Plan and the amounts to be paid to NovaDel for the provision of such development activities; provided that it is understood that PAR shall not be entitled to amend the Development Plan to include the performance of any activities by NovaDel without the prior written consent of NovaDel.
 

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4.1.2 PAR and NovaDel shall establish a development committee (the “Development Committee”), which shall confer at least on an annual basis to coordinate PAR’s and NovaDel’s performance of their respective responsibilities under this Agreement. PAR and NovaDel each shall appoint an equal number of representatives with the requisite experience and seniority to enable them to make decisions on behalf of the Parties. From time to time, PAR and NovaDel each may substitute its representatives on written notice to the other. The Development Committee shall not have the power to amend or modify the Development Plan, which may only be amended or modified as provided in Section 4.1.1.
 
4.1.3 By no later than November 1 of each calendar year during the Term, PAR shall prepare and deliver to NovaDel an updated Development Plan for the following calendar year. NovaDel shall have the right to comment on the Development Plan (including the initial Development Plan delivered pursuant to Section 4.1.1), and PAR shall consider such comments in good faith; provided that nothing contained herein is intended to limit PAR’s sole discretion with respect to the development of the Licensed Product in the Territory.
 
4.2 Clinical and Regulatory Approval.
 
4.2.1 Subject to the terms of the Development Plan, in the Territory, PAR shall (a) use its Commercially Reasonable Efforts to conduct required clinical trials of the Licensed Product and obtain Regulatory Approval, and (b) be responsible for all activities related to the toxicology, formulation, process development, quality assurance/quality control, and regulatory affairs for the Licensed Product and (c) include HANA and NovaDel in such efforts in a consultative capacity; provided, however, that, as and to the extent requested by PAR and agreed to by NovaDel pursuant to Section 4.1.1, NovaDel may collaborate with PAR in executing the Development Plan; provided further, however, for purposes of clarity, neither HANA nor NovaDel shall have the right to direct or control PAR’s conduct of such activities.
 
4.2.2 Subject to the terms of the Development Plan, PAR shall use its Commercially Reasonable Efforts to prepare any required application(s) for Regulatory Approval, including the filing of the NDA with the FDA in PAR’s name, and shall have responsibility for: (a) all clinical data and reports related to Licensed Product studies, including clinical trials for the Licensed Product; and (b) all NDAs and other Regulatory Approvals for the Licensed Product in the Territory. PAR shall inform HANA and NovaDel of all communications with the FDA, and shall provide copies of all FDA submissions and other written communication with the FDA as soon as reasonably practicable. The Parties shall cooperate in good faith with respect to all such submissions and meetings with the FDA relating to regulatory approval of the Licensed Product. In addition, and without limiting PAR’s obligations under Section 0 or this Section 0, PAR shall file the NDA with the FDA on or before the last day of the thirty-second (32nd) month after the Effective Date (the “Anticipated Filing Date”); provided, however, that PAR may extend the Anticipated Filing Date by four (4) months by delivering, at any time after the second (2nd) anniversary of the Effective Date, written notice of such extension to NovaDel. The Anticipated Filing Date, as extended, may thereafter be extended only upon the mutual agreement of PAR and NovaDel.
 

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4.2.3 PAR shall, and shall cause its Affiliates to, promptly disclose to NovaDel all Regulatory Documentation and all other Information and Inventions in the possession or Control of PAR or its Affiliates that relate to the Exploitation of the Licensed Product. NovaDel and NovaDel’s Extraterritorial Licensees shall have a perpetual, royalty-free, irrevocable, worldwide right to use and reference the Regulatory Documentation and any data included or referenced therein for all purposes. PAR agrees to utilize the Common Technical Document format for its marketing applications in order to facilitate any subsequent submissions filed by NovaDel or its Extraterritorial Licensees outside of the Territory.
 
4.2.4 PAR will be the primary contact for Chemistry, Manufacturing and Control matters in all relevant regulatory applications except to regulatory bodies outside the     United States and Canada. PAR will keep NovaDel reasonably informed of all such communications, if any, between PAR and the Regulatory Authorities in the United States and Canada.
 
4.2.5 PAR agrees to keep the Common Technical Document, except for those sections in the Summary Basis of Approval and available through the Freedom of Information Act, strictly confidential in accordance with Article 9.
 
4.3 Development Program Reporting. PAR shall provide HANA and NovaDel at least quarterly with updates regarding the progress of the Development Program and Regulatory Approval process, including all planned and ongoing clinical trials for the Licensed Product, planned and ongoing formulation and stability studies, interaction with Regulatory Authorities, planned and ongoing promotional advertising and other marketing efforts, rolling forecasts of projected sales of each Licensed Product for the upcoming twelve (12) months, and also shall advise HANA and NovaDel of any unforeseen material problems or delays encountered since the date of its last such report and any other information reasonably requested by HANA or NovaDel with respect to the development activities related to the Licensed Product undertaken by PAR in such calendar quarter.
 
4.4 Development Costs. PAR shall be solely responsible for all costs and expenses incurred by it after the Effective Date relating to the development of the Licensed Products for Exploitation in the Territory, including costs and expenses, if any, incurred by NovaDel at in accordance with Section 4.1.1.
 
4.5 Regulatory Records. PAR shall maintain records of its development activities in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of its development activities, and which shall be retained by PAR for at least five (5) years after the termination of this Agreement, or for such longer period as may be required by Applicable Law. NovaDel shall have the right, during normal business hours and upon reasonable notice, to inspect and copy any such records; provided, however, that NovaDel shall not have the right to conduct more than one such inspection in any twelve (12)-month period.

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ARTICLE 5
COMMERCIALIZATION OBLIGATIONS
 
5.1 Regulatory Compliance. All Commercialization activities in respect of the Licensed Product in the Territory shall be conducted by PAR in compliance with Applicable Laws and the Regulatory Approval in the country of sale.
 
5.2 Labeling and Patent Marking. The Licensed Product shall be packaged by PAR and labeled in a manner consistent with the requirements of the Regulatory Authorities and all Applicable Laws in the country in which it will be sold, and where legally permissible, shall identify any applicable Patent Rights consistent with any patent marking requirements.
 
5.3 Commercialization Efforts. Following receipt of Regulatory Approval of the Licensed Product by the FDA, PAR shall use Commercially Reasonable Efforts to Exploit the Licensed Product in the United States. PAR shall have the right to Exploit the Licensed Product in Canada; provided, however, that if PAR does not use Commercially Reasonable Efforts to Commercialize the Licensed Product in Canada within one hundred eighty (180) days following Regulatory Approval by Health Canada, then HANA may Commercialize the Licensed Product in Canada, provided further, that, in such case, PAR shall be entitled to a royalty of [***] percent ([***]%) of the Net Sales in Canada. In addition, and without limiting PAR’s obligations under Section 0 or this Section 0, PAR shall consummate the Initial Commercial Sale in the United States within nine (9) months after receipt of Regulatory Approval from the FDA for the Licensed Product. PAR shall have responsibility for all advertising, marketing, promotion, distribution, selling and other commercialization activities, including developing strategies and tactics related to such activities for the Licensed Product. PAR shall, at all times during the Term after receipt of Regulatory Approval, use efforts, including but not limited to appropriate promotional campaigns and materials, and qualified commercial personnel, consistent with those typically used in the pharmaceutical industry and equal to those committed to products of similar size and expected value to seek to commercialize the Licensed Product in the Territory for those formulations and indications for which PAR is commercializing the Licensed Product. Should PAR fail to meet the above 'standard', the NovaDel and PAR will discuss PAR’s continued commitment to commercialize the Licensed Product and the termination of this Agreement.
 
5.4 Trademarks. PAR shall have the right and obligation to determine the trademark and any other related logos, trade names, and similar source identifiers that are created or selected for use to be used on and with the Licensed Product, including the whether to use the Licensed Trademark (collectively, the “Product Trademarks”). With the exception of the Licensed Trademark, the Product Trademarks shall not include any trademarks, logos, trade names or similar source identifiers that are owned or licensed by HANA or NovaDel as of the Effective Date.

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ARTICLE 6
ROYALTIES AND OTHER CONSIDERATIONS
 
6.1 License Fee and Equity. Simultaneously with the execution of this Agreement, PAR shall purchase Five Million Dollars ($5,000,000) worth of shares of newly issued HANA common stock at a price per share that reflects a twenty-five percent premium to the then current market price of HANA’s common stock pursuant to the terms and conditions of that certain Stock Purchase Agreement between the Parties of even date herewith (the “Subscription Agreement”). The number of shares of HANA’s common stock issued to PAR will be determined by dividing the sum of Five Million Dollars ($5,000,000) by one hundred twenty-five percent (125%) of the weighted average closing price per share of HANA’s common stock on the NASDAQ Global Market during the ten (10) business days prior to the Effective Date. PAR represents that it is acquiring the shares of common stock of HANA for investment purposes only and covenants that it will not sell, transfer or otherwise dispose of any such shares until the earliest of: (a) the one (1) year anniversary of the Effective Date, (b) the filing of an NDA for the Licensed Product, and (c) the termination of this Agreement. PAR shall pay HANA for such shares by wire transfer of immediately available funds upon execution and delivery of this Agreement (the “Lock-Up Period”). Following the expiration of the Lock-Up Period, the Investor further agrees that, without the prior written consent of the Company, it will not sell more than fifty percent (50%) of the aggregate number of Shares purchased hereunder in any ninety (90) day period until the first anniversary of the end of the Lock-Up Period, at which time this further restriction shall no longer be applicable.
 
6.2 Milestone Payments. In addition to the preceding amounts, PAR shall also pay milestone payments to HANA as follows:
 
6.2.1 [***] Dollars ($[***]) within ten (10) days following PAR’s receipt of Regulatory Approval from the FDA of the NDA for the Licensed Product; plus
 
6.2.2 If Net Sales during a specified fiscal year equal at least $[***] in the Territory, then PAR will pay to HANA [***] Dollars ($[***]) within 60 days following the end of such year; plus
 
6.2.3 If Net Sales during a specified fiscal year equal at least $[***] in the Territory, then PAR will pay to HANA [***] Dollars ($[***]) within 60 days following the end of such year; plus
 
6.2.4 If cumulative Net Sales of the Licensed Product reaches [***] Dollars ($[***]) within five (5) years following Regulatory Approval by the FDA of the NDA, then PAR will pay to HANA [***] Dollars ($[***]) within 60 days after obtaining such Net Sales threshold; plus
 
6.2.5 If cumulative Net Sales of the Licensed Product reaches [***] Dollars ($[***]) within five (5) years following Regulatory Approval by the FDA of the NDA, then PAR will pay to HANA [***] Dollars ($[***]) within 60 days after obtaining such Net Sales threshold.
 
6.3 Royalty Payments. In addition to the milestone payments described above, PAR shall pay to HANA royalty payments based on Net Sales of the Licensed Product as follows:
 
6.3.1 PAR shall pay to HANA amounts due to NovaDel as royalties under the NovaDel-Hana License as follows:

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6.3.1.1 [***] percent ([***]%) of up to the first $[***] of Net Sales by PAR or any Affiliate during each fiscal year in the Territory; plus
 
6.3.1.2 [***] percent ([***]%) of Net Sales greater than $[***] and up to $[***] by PAR or any Affiliate during each fiscal year in the Territory; plus
 
6.3.1.3 [***] percent ([***]%) of Net Sales greater than $[***] by PAR or any Affiliate during each fiscal year in the Territory.
 
6.3.2 After cumulative Net Sales exceed [***] Dollars ($[***]) within five (5) years following Regulatory Approval by the FDA of the NDA, PAR shall pay to HANA royalty payments based on Net Sales equal to [***] percent ([***]%) of Net Sales in excess of [***] Dollars ($[***]) per Contract Year (in addition to the [***] percent ([***]%) royalty provided in Section 6.3.1.3).
 
6.3.3 All royalties shall be payable to HANA on a calendar quarterly basis, within forty-five (45) days after the end of each calendar quarter. The conversion rate for payments under this section, as it pertains to sales in Canada, shall be calculated by using the conversion rate on the last day of the calendar quarter for which the sales apply. The conversion rate to be used will be taken from the currency converter at www.oanda.com. Canadian dollar sales will be converted into U.S. dollars and then the royalty rates outlined in this section will apply.
 
6.3.4 Notwithstanding anything to the contrary contained herein, any and all amounts to be received by HANA from PAR pursuant to Section 6.3.1 shall be paid to a lock-box account. Accordingly, the Parties agree that, within thirty (30) days after the Effective Date, the Parties will take such actions reasonably requested by NovaDel, and enter into documentation in form and substance reasonably satisfactory to NovaDel (including, without limitation, a security agreement, lockbox agreement and irrevocable payment instructions), in order to (i) grant to NovaDel a first priority, perfected security interest in all of HANA’s right, title and interest under this Agreement (including without limitation its right to receive payments of the sublicense fees and other amounts payable by PAR hereunder) and in and to any lockbox account(s) to which payments thereunder may be made, (ii) perfect NovaDel’s security interest in such lockbox account(s) and provide for remittances therefrom in accordance with the terms in the NovaDel-Hana License and (iii) irrevocably instruct PAR to make all payments under this Agreement directly to such lockbox account(s); provided, however, that any payment obligation owed by PAR to HANA pursuant to Section 6.3.1 shall be deemed paid immediately upon delivery of such amount to the agreed-to lock box account.
 
6.4 Royalty Term. PAR’s royalty obligations under Section 6.3 shall terminate, on a country-by-country basis, with respect to the Licensed Product upon the later of (a) the expiration or invalidation in such country of the last NovaDel Patent that includes at least one Valid Claim covering the Licensed Product in such country and (b) the twentieth (20th) anniversary of the Effective Date; provided, however, if (i) the last NovaDel Patent that includes at least one Valid Claim covering the Licensed Product in such country expires or is invalidated prior to the twentieth (20th) anniversary of the Effective Date and (ii) no regulatory exclusivity with respect to such Licensed Product exists in such country (whether as a result of expiration of the exclusivity period or otherwise), then the royalty obligations under Section 6.3 in such country shall be reduced in accordance with the terms of Section 6.7.

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6.5 Mode of Payment. All payments to HANA under this Agreement shall be paid in United States Dollars by wire transfer of immediately available funds to a bank account in the United States as HANA may reasonably designate.
 
6.6 Non-Refundable, Non-Creditable. Subject to Sections 6.8 and 8.2, the amounts paid or payable under this Article 6 shall be non-refundable and non-creditable against any other amounts due NovaDel or HANA under this Agreement.
 
6.7 Reduction of Royalty. In the event that, or from and after the date on which, (a) no Valid Claim of a NovaDel Patent covering the Licensed Product exists in a country in the Territory and (b) no regulatory exclusivity with respect to such Licensed Product exists in such country (whether as a result of expiration of the exclusivity period or otherwise), the royalty payment set forth in Section 6.3 with respect to the Licensed Product in such country shall be reduced by [***] percent ([***]%). In addition, if at any time during the Term the royalties owed by HANA to NovaDel pursuant to the NovaDel-Hana License are reduced, then (i) HANA shall promptly provide PAR with written notice of such reduction and (ii) HANA and PAR shall amend this Article 6 to reduce the royalties owed by PAR to HANA in the identical manner.
 
6.8 Accounting. The Parties acknowledge that any expenses or costs deducted from Net Sales under this Agreement may be based upon accruals, which accruals will be compliant with Generally Accepted Accounting Principles (“GAAP”), consistently applied; provided that when the actual results become known relative to any accrued amount, any difference between the actual results and the accrual is reported and accounted for in the next payment due hereunder. To the extent that the difference between such accruals and the actual results has led to an underpayment, PAR shall pay HANA the amount of such underpayment on the next date payment is due to HANA hereunder. To the extent that the difference between such accruals and the actual results has led to an overpayment to HANA, PAR may set-off such overpayments against subsequent payments to be made to HANA; additionally, if any overpayments remain upon the expiration or termination of this Agreement, HANA shall refund such overpayments to PAR within thirty (30) days of receiving an invoice for such overpayment together with applicable supporting documentation.
 
ARTICLE 7
INTELLECTUAL PROPERTY RIGHTS AND LICENSES
 
7.1 Ownership of Intellectual Property. Subject to Sections 3.1 and 7.2, PAR hereby acknowledges and agrees that NovaDel owns and shall continue at all times to own all right, title and interest in and to: (a) the NovaDel Patent Rights and NovaDel Know-How, including all intellectual property rights appurtenant thereto; (b) the Licensed Technology and Improvements; and (c) other Information and Inventions that are conceived, discovered, developed or otherwise made by or on behalf of any Party (or its Affiliates or its sublicensees), whether or not patented or patentable, and any and all Patent Rights and other intellectual property rights with respect thereto.
 
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7.2 Ownership of the Licensed Process. Subject to the license grants to PAR under Article 3, NovaDel shall own and retain all right, title and interest in and to the Licensed Process, including any and all Information and Inventions with respect to the Licensed Process (including any Improvements thereto) that are conceived, discovered, developed or otherwise made, by or on behalf of PAR or its Affiliates, whether or not patented or patentable, and any and all Patent Rights and other intellectual property rights with respect thereto. PAR acknowledges and agrees that (a) the licenses granted to it pursuant to Section 3.1 permit PAR to use the Licensed Process solely for the Exploitation of Licensed Product as provided in this Agreement, (b) PAR has no right to use the Licensed Process or to discover, develop or otherwise make Improvements with respect to the Licensed Process under such grants outside the scope of this Agreement, and (c) neither it, nor any of its Affiliates will engage, directly or indirectly, in activities designed to, or otherwise undertake or attempt, either on behalf of itself or another, to discover, develop or make any Information and Inventions that relate to the Licensed Process.
 
7.3 Disclosure and Assignment. PAR shall promptly disclose to NovaDel in writing, the conception or reduction to practice, or the discovery, development or making of all intellectual property rights identified in Sections 7.1 and 7.2, and shall, and does hereby, assign, and shall cause its Affiliates to so assign, to NovaDel, without additional compensation, all of their respective rights, titles and interests in and to any such intellectual property rights. To the extent necessary to assign any such intellectual property rights, PAR shall enter into and execute all reasonable and appropriate assignments, transfers and other agreements, and enter into all agreements with its employees, contractors, and Affiliates, that are necessary or appropriate to ensure the assignment of such intellectual property rights to NovaDel. For the avoidance of doubt, all such intellectual property rights shall be included in the Licensed Technology, and PAR shall be entitled to use such intellectual property rights in accordance with the licenses granted pursuant to Article 3.
 
7.4 Non-Use of Trademarks. Except as set forth explicitly in this Agreement, no Party shall have the right to use the trademarks, trade names or logos of any other Parties, nor any adaptation thereof, nor the names of any employees or consultants of any other Party, without the prior written consent of such other Party in each instance, except that any Party may use any other Party’s name in its general list of collaborators and any Party may use any other Party’s name to the extent required by Applicable Law, including pursuant to the Securities Act of 1933, as amended, and the rules and regulations thereunder.
 
7.5 United States Law. The determination of whether Information and Inventions are conceived, discovered, developed or otherwise made by a Party for the purpose of allocating proprietary rights (including Patent Right, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in accordance with applicable United States law.
 
ARTICLE 8
REPORTS AND RECORDS
 
8.1 Record Retention. PAR shall maintain (and shall ensure that its Affiliates shall maintain) complete and accurate books, records and accounts that fairly reflect their respective Net Sales, other income and any milestones payable with respect to Licensed Product in sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with GAAP, which books, records and accounts shall be retained by PAR until the later of (a) three (3) years after the end of the period to which such books, records and accounts pertain, and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law.

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8.2 Audit. HANA shall have the right, on behalf of itself and NovaDel, to have an independent certified public accounting firm of nationally recognized standing, reasonably acceptable to PAR, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of PAR (and its Affiliates) as may be reasonably necessary to verify the accuracy of all sales and payments due to HANA for any calendar quarter ending not more than thirty-six (36) months prior to the date of such request; provided, however, that neither HANA shall not have the right to conduct more than one such audit in any twelve (12)-month period. The accounting firm shall disclose to each Party only whether such sales or payments are correct or incorrect and the specific details concerning any discrepancies. HANA shall bear the cost of such audit unless the audit reveals an under-reporting or underpayment in excess of the greater of one hundred thousand dollars ($100,000) or two percent (2%) of royalties or milestone payments payable for such period, in which case PAR shall bear the cost of the audit, rectify such underpayment and pay HANA applicable interest as required by Section 8.5. Any overpayment shall be promptly repaid by HANA. All payments required under this Section 8.2 shall be due within thirty (30) days of the date that notice of the payment due. The results of such accounting firm shall be final, absent manifest error. PAR acknowledges that the results of any such audit may be shared by HANA with NovaDel and such results shall be treated as “Confidential Information” subject to the terms of Article 9.
 
8.3 Reports. Within forty-five (45) days of the end of each quarter of each calendar year, PAR shall deliver to HANA and NovaDel complete and accurate reports, giving such particulars of the business conducted by PAR during the preceding quarter under this Agreement as shall be pertinent to an accounting for royalties, milestone payments and other amounts due hereunder. These shall include at least the following:
 
8.3.1 All Licensed Product used, leased or sold, by or for PAR or its Affiliates.
 
8.3.2 Total amounts invoiced for Licensed Product used, leased or sold, by or for PAR or its Affiliates.
 
8.3.3 Total milestone payments due based on achievement of milestones.
 
8.3.4 Total Net Sales and the royalties due by or for PAR and its Affiliates.
 
8.3.5 Names and addresses of all Affiliates of PAR.
 
8.4 Interest. Amounts which are not paid when due and which are not the subject of a bona fide dispute shall accrue interest from the due date until paid, at an annual rate equal to the then prevailing prime rate of Citibank, N.A., plus six percent (6%), but in no event exceeding the amount permitted by applicable law.
 
8.5 Confidentiality. Each report received by HANA and NovaDel shall be treated by HANA and NovaDel as if it were “Confidential Information” subject to the terms of Article 9.

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ARTICLE 9
CONFIDENTIALITY
 
9.1 Definition. “Confidential Information” of a Party shall mean all information and know-how and any tangible embodiments thereof provided by or on behalf of such Party to another Party either in connection with the discussions and negotiations pertaining to, or in the course of performing, this Agreement, including the terms of this Agreement; the Designated Compound; data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, marketing and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business. For purposes of this Agreement, notwithstanding the Party that disclosed such information or know-how, all NovaDel Know-How and all Information and Inventions with respect to the Licensed Process shall be Confidential Information of NovaDel.
 
9.2 Exclusions. Notwithstanding the foregoing, information or know-how of a Party shall not be deemed Confidential Information with respect to a receiving Party for purposes of this Agreement if such receiving Party can affirmatively demonstrate through the production of written documentation that such information or know-how:
 
9.2.1 was already known to the receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, at the time of disclosure to such receiving Party;
 
9.2.2 was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to such receiving Party;
 
9.2.3 became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such receiving Party through no fault of a Party other than the Party that Controls such information and know-how;
 
9.2.4 was disclosed to such receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, by a Third Party who had no obligation to the Party that Controls such information and know-how not to disclose such information or know-how to others; or
 
9.2.5 was independently discovered or developed by such receiving Party or its Affiliates, as evidenced by their written records, without the use of Confidential Information belonging to the Party that Controls such information and know-how, except with respect to the NovaDel Know-How with respect to the Licensed Process, which shall be and remain Confidential Information of NovaDel.
 
9.3 Disclosure and Use Restriction. Except as expressly provided herein, the Parties agree that during the Term of this Agreement, and for five (5) years thereafter, each Party and its Affiliates shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose except for the purposes contemplated by this Agreement any Confidential Information of another Party or its Affiliates.
 
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9.4 Authorized Disclosure. Each Party may disclose Confidential Information of another Party to the extent that such disclosure is:
 
9.4.1 Required by Governmental Order. Made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial or local governmental or regulatory body of competent jurisdiction; provided, however, that such Party shall first have given notice to the owning Party and given the owning Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;
 
9.4.2 Required by Law. Otherwise required by law; provided, however, that the disclosing Party shall (a) provide the owning Party with reasonable advance notice of and an opportunity to comment on any such required disclosure, (b) if requested by the owning Party, seek confidential treatment with respect to any such disclosure to the extent available, and (c) use good faith efforts to incorporate the comments of the owning Party in any such disclosure or request for confidential treatment;
 
9.4.3 Required by Regulatory Authority. Made by such Party to the Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information; or
 
9.4.4 Required by Agreement. Made by such Party, in connection with the performance of this Agreement, to Affiliates, research parties, employees, consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 9.
 
9.5 Injunctive Relief. The Parties acknowledge that any breach of this Article 9 will constitute irreparable harm, and that the non-breaching Party shall be entitled to specific performance or injunctive relief to enforce this Article 9 in addition to whatever remedies such Party may otherwise be entitled to at law or in equity.
 
ARTICLE 10
PATENT PROSECUTION AND INFRINGEMENT
 
10.1 Prosecution of NovaDel Patent Rights.
 
10.1.1 NovaDel shall have the sole right, at its cost and expense, to obtain, prosecute and maintain throughout the world the NovaDel Patent Rights. PAR shall, and shall cause its Affiliates to, cooperate fully with NovaDel in the preparation, filing, prosecution, enforcement and maintenance of the NovaDel Patents. Such cooperation includes (a) promptly executing all papers and instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable NovaDel to file, prosecute, enforce and maintain the NovaDel Patents in any country; (b) promptly informing NovaDel in reasonable detail of any Improvements by PAR or any of its Affiliates or agents; and (c) promptly informing NovaDel of any matters of which PAR may be aware that may affect the preparation, filing, prosecution or maintenance of any such NovaDel Patent.
 
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10.1.2 NovaDel shall provide PAR with drafts of all patent applications and other material submissions to and correspondence with any patent authorities in the Territory to the extent such applications or submissions relate to the Licensed Technology (other than the Licensed Process), in sufficient time, but in any event not less than thirty (30) days prior to the date a reply is required by the relevant patent authorities in the Territory, to allow for review and comment by PAR. In addition, NovaDel shall provide PAR with an opportunity to consult with NovaDel regarding the filing and contents of any such application, submission or correspondence in the Territory. If PAR provides to NovaDel comments with respect to any such application, submission or correspondence, to the extent such comments relate to any Licensed Technology (other than the Licensed Process) in the Territory, NovaDel agrees to reasonably consider such comments, it being understood that NovaDel retains the right to determine whether to comply with or incorporate such comments, if at all. If (x) NovaDel elects not to pursue the filing, prosecution or maintenance of a NovaDel Patent in a particular country, in the Territory or to take any other action with respect to a NovaDel Patent in a particular country in the Territory that is necessary or useful to establish or preserve rights with respect to the Licensed Product, and (y) such NovaDel Patent does not claim or cover the Licensed Process, then NovaDel shall so notify PAR promptly in writing and in good time to enable PAR to meet any deadlines by which an action must be taken to establish or preserve any such rights in such NovaDel Patent in such country in the Territory. Upon receipt of any such notice by NovaDel or if, at any time, NovaDel fails to initiate any such action within thirty (30) days after a request by PAR that it do so (and thereafter diligently pursue such action), PAR shall have the right, but not the obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such NovaDel Patent at its expense in such country in the Territory. If PAR elects to pursue such filing or registration, as the case may be, or continue such support, then PAR shall notify NovaDel of such election and NovaDel shall, and shall cause its Affiliates to, (x) reasonably cooperate with PAR in this regard, and (y) promptly grant to PAR, without additional consideration, an exclusive, perpetual, irrevocable, royalty-free license in such country in the Territory under such NovaDel Patent in order to Exploit the Licensed Product in accordance with the terms of this Agreement.
 
10.2 Infringement of NovaDel Patent Rights.
 
10.2.1 PAR and HANA shall inform each other and NovaDel promptly in writing of any alleged or suspected infringement by a Third Party of any Licensed Technology, and of any available evidence thereof. Each Party shall provide reasonable assistance to other Parties, including providing access to relevant records, papers, information, samples, specimens and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to maintain the action.
 
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10.2.2 In respect of any alleged or suspected actual or constructive infringement by a Third Party of any NovaDel Patent, NovaDel Know-How or Improvements, in each case related solely to the Licensed Process and Licensed Product, most particularly where a Third Party files an ANDA or a 505(b)(2) application containing a Paragraph IV certification with the FDA targeting or referencing the Licensed Product, as the NDA holder, PAR shall have the right to institute a suit and control the prosecution, settlement negotiation, settlement or compromise thereof or defend against any suit alleging the invalidity or noninfringement or unenforceability of the Patent Rights of a Party or its Affiliates to the extent related solely to the Licensed Product; provided that PAR shall not enter into any settlement or compromise with respect to any NovaDel Patent, NovaDel Know-How or Improvement without NovaDel’s prior written consent, such consent not to be unreasonably withheld, unless such settlement or compromise does not include any statements as to or otherwise affect the validity or enforceability of the NovaDel Patents, NovaDel Know-How or Improvements and the only form of consideration paid by the Third Party is monetary that has not been reduced or offset by any consideration by PAR.  PAR shall bear all the costs of such a suit.  At PAR’s request, NovaDel shall be named as a party in such litigation, and NovaDel shall execute all papers and perform such acts as may be reasonably required, in respect thereof; provided, however, that NovaDel’s joining of such action shall not affect PAR’s control thereof.  NovaDel and HANA shall, at the request and sole expense of PAR, provide reasonable cooperation and, to the extent possible, each of NovaDel and HANA shall have its employees testify when requested and make available relevant records, papers, information, samples, specimens and the like regardless of whether NovaDel has joined such suit.  NovaDel shall have the right to select, at NovaDel’s expense, separate counsel to participate in such suits on NovaDel’s behalf.  In the event that PAR fails within ninety (90) days following notice of such infringement, or earlier notifies NovaDel in writing of its intent not to take commercially appropriate steps to remove any infringement of any NovaDel Patent, NovaDel Know-How or Improvement, NovaDel shall have the right, but not the obligation, to do so at its own expense; provided, however, that if PAR has commenced negotiations with an alleged infringer for discontinuance of such infringement within such ninety (90) day period, PAR shall have an additional ninety (90) days to conclude its negotiations before NovaDel may bring suit for such infringement.  Each of PAR, HANA, and NovaDel shall provide reasonable assistance to the Person controlling such litigation, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action, with all reasonable expenses incurred by HANA in providing such assistance to such Person to be paid in full by PAR.  Any amounts, royalties, payments, damages, expenses, fees or other awards received by or recovered by NovaDel or PAR, as applicable, pursuant to this Section 10.2.2, whether by settlement or by judgment, shall be used to reimburse such Person for their reasonable costs and expenses in making such recovery, with any remainder to be shared [***] percent ([***]%) to NovaDel and [***] percent ([***]%) to PAR.  For all other NovaDel Patents, NovaDel Know-How or Improvements, NovaDel shall have the sole right to institute a suit and control prosecution, settlement negotiation, settlement or compromise thereof and defend against; provided that NovaDel shall consult with PAR and NovaDel shall use reasonable business judgment to determine whether to consent to instituting a suit, such reasonable business judgment to include consideration of any other existing or contemplated products covered by the NovaDel Patents, NovaDel Know-How or Improvements.
 
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10.3 Third Party Litigation. In the event that a Third Party institutes a patent or other infringement suit against any of NovaDel, PAR or HANA or any of its respective Affiliates during the Term, alleging manufacture, use or sale of a Licensed Product in the Territory, infringes one or more patent or other intellectual property rights held by such Third Party (an “Infringement Suit”), the Parties shall cooperate with one another in defending such suit.  PAR, as the NDA holder, shall have the first right to direct and control, at its expense, any Infringement Suit (including settlement negotiations, settlement or compromise thereof) to the extent that it relates to the manufacture, use or sale of a Licensed Product but does not implicate the Licensed Technology or Licensed Process.  In the event that the Infringement Suit relates to the use of the Licensed Technology or Licensed Process, NovaDel shall have the first right to direct and control, at its expense, any such Infringement Suit (including settlement negotiations, settlement or compromise thereof).  To the extent that any amounts become payable to any Third Party as a result of such action, whether through judgment or settlement, then PAR shall, unless HANA is jointly promoting and commercializing the Licensed Product pursuant to Section 2.4 and subject to Section 12.2, bear [***] percent ([***]%) of such amounts with respect to the Exploitation of the Licensed Product; provided, however, that PAR shall have the right to credit [***] percent ([***]%) of any amounts paid by PAR through judgment or settlement with respect to such country against the royalty payments to be paid by PAR to HANA with respect to the sale of the Licensed Product under Section 6.3; provided further, however, that no royalty payment when due, regardless of the amount or number of credits available to PAR shall be reduced by more than [***] percent ([***]%) of the amounts otherwise owed pursuant to Section 6.3 in any calendar quarter.  Credits not exhausted in any calendar quarter may be carried into future calendar quarters. Notwithstanding the foregoing, in the event that no payments are due or owing, or contemplated to be due or owing, by PAR to HANA under Article 6 with respect to the sale of the Licensed Product, then NovaDel shall pay to PAR such amount owed to a Third Party up to a cap of [***]% of such amount owed to such Third Party, less any amount already credited to PAR under this Section 10.3. Notwithstanding the foregoing, NovaDel shall have no obligation under this Section 10.3 for any costs, expenses or damages that are paid or payable to a Third Party as a result of an actual or alleged infringement by PAR or HANA to the extent such costs, expenses or damages result from the use of a Product Trademark.
 
10.4 Retained Rights. Nothing in this Section 10 shall prevent PAR, at its own expense, from obtaining any license or other rights from Third Parties it deems appropriate in order to permit the full and unhindered exercise of its rights under this Agreement.
 
ARTICLE 11
TERMINATION
 
11.1 Term. Unless otherwise terminated pursuant to this Article 11, this Agreement shall enter into effect on the Effective Date and shall remain in full force and effect on a country-by-country basis until the later of (a) expiration date of the last to expire of any issued NovaDel patent that includes at least one Valid Claim and (b) the twentieth (20th) anniversary of the Effective Date (the “Term”).
 
11.2 Termination Events. This Agreement may be terminated prior to expiration of the Term as follows:
 
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11.2.1 Termination Upon Insolvency.
 
11.2.1.1 If HANA shall become bankrupt, or shall file a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee or of its assets, or if an involuntary petition for any of the foregoing shall be filed with respect to HANA and not dismissed within sixty (60) days, or if the business of HANA shall be placed in the hands of a receiver, assignee or trustee for the benefit of creditors, whether by the voluntary act of HANA or otherwise, PAR or NovaDel (subject to Section 11.6.3) shall have the right to terminate this Agreement.
 
11.2.1.2 If PAR shall become bankrupt, or shall file a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee or of its assets, or if an involuntary petition for any of the foregoing shall be filed with respect to PAR and not dismissed within sixty (60) days, or if the business of PAR shall be placed in the hands of a receiver, assignee or trustee for the benefit of creditors, whether by the voluntary act of PAR or otherwise, HANA or NovaDel shall have the right to terminate this Agreement.
 
11.2.2 Termination for Payment Default. Should PAR fail to make payment to HANA of royalties or other amounts due in accordance with the terms of this Agreement, HANA or NovaDel shall have the right to terminate this Agreement within ten (10) days after giving said notice of termination unless PAR shall pay to HANA, within the 10-day period, all such amounts due and payable. Upon the expiration of the 10-day period, if PAR shall not have paid all such amounts due and payable, the rights, privileges and licenses granted hereunder shall, at the option of HANA or NovaDel, immediately terminate. In the event a payment is the subject of a bona fide dispute between HANA and PAR that is being pursued by a Party pursuant to the dispute resolution mechanism in Article 15, then PAR shall make such payment, but shall provide HANA with written notice that such payment is being made subject to the outcome of such pending dispute resolution procedure and in the event such dispute is finally and conclusively resolved in favor of PAR, HANA shall refund such payment to PAR with interest calculated pursuant to Section 8.5 from the date of such payment.
 
11.2.3 Termination for Material Breach.
 
11.2.3.1 Upon any material breach or default of this Agreement by either HANA or PAR, other than as set forth in Section 11.2.2, NovaDel shall, subject to Section 11.6.3, have the right to terminate this Agreement and the rights, privileges and licenses granted hereunder upon giving thirty (30) days notice to HANA and PAR. Such termination shall become effective upon the expiration of such thirty (30)-day period unless the breaching Party shall have cured any such breach or default prior to the expiration of such thirty (30) day period.
 
11.2.3.2 Upon any material breach or default of this Agreement by HANA, other than as set forth in Section 11.2.2, PAR shall have the right to terminate this Agreement and the rights, privileges and licenses granted hereunder upon giving thirty (30) days notice to the HANA and NovaDel. Such termination shall become effective upon the expiration of such thirty (30)-day period unless HANA shall have cured any such breach or default prior to the expiration of such thirty (30) day period.
 
11.2.3.3 Upon any material breach or default of this Agreement by PAR, other than as set forth in Section 11.2.2, HANA shall have the right to terminate this Agreement and the rights, privileges and licenses granted hereunder upon giving thirty (30) days notice to the PAR and NovaDel. Such termination shall become effective upon the expiration of such thirty (30)-day period unless PAR shall have cured any such breach or default prior to the expiration of such thirty (30) day period.
 
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11.2.4 Termination By PAR. PAR shall have the right at any time to terminate this Agreement in whole or as to any Licensed Product by giving ninety (90) days notice thereof in writing to HANA and NovaDel.
 
11.3 Return of Information; Assignment and License.
 
11.3.1 Upon termination of this Agreement as a result of PAR’s material breach hereof pursuant to Section 11.2.2, 11.2.3.1 or 11.2.3.3, or as a result of PAR’s insolvency pursuant to Section 11.2.1.2 or by PAR pursuant to Section 11.2.4, PAR shall, and shall cause its Affiliates to return to HANA and NovaDel any and all data, files, records and other materials in its possession or control that relate to the Licensed Technology or contain or comprise Information and Inventions or other Confidential Information (except one copy of each that may be retained for archival purposes).
 
11.3.2 Upon termination of this Agreement as a result of PAR’s material breach hereof pursuant to Section 11.2.2, 11.2.3.1 or 11.2.3.3, or as a result of PAR’s insolvency pursuant to Section 11.2.1.2, or by PAR pursuant to Section 11.2.4, PAR: (a) shall, and shall cause its Affiliates to, promptly disclose to HANA and NovaDel, in whatever form HANA may request, all Regulatory Documentation and all other Information and Inventions in the possession or Control of PAR or its Affiliates that relate to the Exploitation of such Licensed Product, (b) shall, and does hereby, assign, and shall cause its Affiliates to assign, to HANA, without additional compensation, all of their respective rights, titles and interests in and to any and all (i) patent, trademark, copyright or other intellectual property rights and (ii) Regulatory Documentation and all data included or referenced therein (the “Agreement-Related Assets”) and are permitted to be assigned, (c) to the extent that the Agreement-Related Assets may not be assigned, shall, and does hereby, grant, and shall cause its Affiliates to grant, to HANA, without additional compensation, a perpetual, irrevocable, royalty-free, exclusive, sublicenseable through multiple tiers of sublicenses, right and license to Exploit such Licensed Product in the Territory and (d) shall, and does hereby, assign, and shall cause its Affiliates to assign, to NovaDel, without additional compensation, all of their respective rights, titles and interests in and to any and all other Information and Inventions in the possession or Control of PAR or its Affiliates in each case that relate to the Exploitation of such Licensed Product to the extent not already assigned to NovaDel pursuant to Section 7.1 or Section 7.2.
 
11.4 Cumulative Remedies. The rights and remedies set forth in this Article 11 are cumulative and in addition to any other rights that may be available to the Parties.
 
11.5 Non-Refundability of Payments. Any and all license fees, royalties and milestone payments made to HANA by PAR under Article 6 of this Agreement shall be non-refundable, notwithstanding the termination of this Agreement under any provision of this Agreement.
 
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11.6 Effect of Termination.
 
11.6.1 The termination or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of any Party prior to such termination or expiration. Such termination or expiration shall not relieve any Party from obligations which are expressly indicated to survive termination or expiration of this Agreement.
 
11.6.2 Upon the termination of the Agreement pursuant to Section 11.2.1.2 or by HANA in accordance with Section 11.2.2 or 11.2.3.3 or by NovaDel pursuant to Section 11.2.2 or 11.2.3.1, all rights and licenses granted to PAR pursuant to this Agreement shall automatically and immediately terminate and PAR immediately shall discontinue Commercialization of the Licensed Product.
 
11.6.3 Upon the termination of the Agreement pursuant to Section 11.2.1.1 or by PAR or NovaDel as a result of HANA’s material breach pursuant to Section 11.2.2 or 11.2.3.2, then, in such event, HANA shall, contemporaneously with the termination of this Agreement and in exchange for the good and valuable consideration set forth herein (the sufficiency of which is hereby acknowledged by HANA), assign all of its rights and interests in, under and to, the NovaDel-Hana License (without regard to any termination thereunder) and PAR shall assume the obligations of HANA thereunder (and NovaDel hereby consents to such assignment and assumption); provided, however, that NovaDel acknowledges that in no event shall PAR have any greater obligations (economically or otherwise) to NovaDel than it has to HANA under the terms of this Agreement; provided further, that if there are any operational obligations of HANA that are not covered by the terms of this Agreement, then NovaDel and PAR shall, at the time of such assignment, in good faith negotiate commercially reasonable terms in respect of such operational obligations.
 
11.7 Disposition of Product. Upon any termination of this Agreement pursuant to other than for which Section 11.6.2 would be applicable, PAR shall within thirty (30) days after the effective date of such termination notify HANA in writing of the amount of each Licensed Product which PAR and its Affiliates then have completed on hand, the sale of which would, but for the termination, be subject to royalty. At HANA’s sole election, evidenced by written consent, HANA may grant PAR and/or its Affiliates written permission during the one (1) year following such termination to sell that amount of Licensed Product, provided that PAR shall pay royalties owing thereon in accordance with the provisions of this Agreement.
 
11.8 Survival. In addition to all rights that have accrued as of the date of termination, the following provisions shall survive the termination of this Agreement for whatever reason: Articles 7, 8, 9, 12, 14 and 15, and Sections 4.5, 10.3, 11.3, 11.4, 11.5, 11.6. 11.7, 11.8, 13.6, 16.4, 16.7, 16.9, 16.10, 16.11, 16.12, 16.13, 16.14 and 16.15. In addition, any other provision required to interpret and enforce the Parties’ rights and obligations under this Agreement shall also survive, but only to the extent required for the observation and performance of the aforementioned surviving rights or portions of this Agreement.
 
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ARTICLE 12
INDEMNIFICATION
 
12.1 Indemnification By PAR. PAR shall at all times during the term of this Agreement and thereafter, indemnify, defend and hold HANA and its Affiliates and their respective officers, directors, employees and agents, and the successors and assigns of the foregoing (“Hana Indemnified Parties”) and NovaDel and its Affiliates and their respective officers, directors, employees and agents, and the successors and assigns of the foregoing (“NovaDel Indemnified Parties”), harmless from and against all liability, demands, damages, including expenses or loses including death, personal injury, illness or property damage of any kind whatsoever, including legal expenses and reasonable attorneys’ fees (collectively, “Losses”) arising directly or indirectly out of (a) any breach of this Agreement by PAR or its Affiliates or permitted Third Party manufacturers, including the failure of PAR or its Affiliates or permitted Third Party manufacturers to manufacture, test or release Licensed Product in accordance with Applicable Law, agreed-to specifications or CGMP, (b) the negligence or willful misconduct or willful omissions by PAR or its Affiliates or permitted Third Party manufacturers, (c) actual or asserted violations of Applicable Law by PAR or its Affiliates or permitted Third Party manufacturers, (d) the Exploitation of the Licensed Product in the Territory (subject to Section 12.4 and intellectual property infringement claims, which shall be governed by Article 10), and (e) the use of the Product Trademark, except to the extent of those Losses for which, as applicable, HANA has an obligation to indemnify the PAR Indemnified Parties pursuant to Section 12.2 or to the extent caused by a breach of this Agreement by NovaDel or the negligence or willful misconduct or willful omissions of NovaDel.
 
12.2 Indemnification By HANA. HANA shall defend, indemnify and hold PAR and its Affiliates and their respective officers, directors, employees and agents (“PAR Indemnified Parties”) and the NovaDel Indemnified Parties harmless from and against all Losses arising directly or indirectly out of (a) any breach of this Agreement or the NovaDel-Hana License by HANA or Affiliates, (b) the negligence or willful misconduct or willful omissions by HANA or its Affiliates, and (c) actual or asserted violations of Applicable Law by HANA or its Affiliates, except to the extent of those Losses for which PAR has an obligation to indemnify the HANA Indemnified Parties pursuant to Section 12.1.
 
12.3 Indemnification By NovaDel. NovaDel shall defend, indemnify and hold the Indemnified Parties harmless from and against all Losses arising directly or indirectly out of (a) any breach of this Agreement or the NovaDel-Hana License by NovaDel or Affiliates, (b) the negligence or willful misconduct or willful omissions by NovaDel or its Affiliates and (c) actual or asserted violations of Applicable Law by NovaDel or its Affiliates, except to the extent of those Losses for which PAR has an obligation to indemnify the NovaDel Indemnified Parties pursuant to Section 12.1.
 
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12.4 Product Liability Claims. If any Party becomes aware of a Product Liability Claim solely with respect to Licensed Product sold by PAR or its Affiliates during the Term that is not otherwise subject to indemnification by a Party under Section 12.1, 12.2 or 12.3, it shall promptly notify the other Parties in writing of any such Product Liability Claim. PAR shall have the first option to control the defense of such Product Liability Claim with counsel of its choice and PAR will fund the litigation expenses with respect to such Product Liability Claim; provided that NovaDel shall reimburse PAR for [***]% of such expenses within forty-five (45) days of receiving an invoice setting forth such expenses and NovaDel’s share of the same. NovaDel will have the option of joining in any action related to such Product Liability Claim, and upon so joining, if NovaDel shall be represented in such action by its own counsel, such representation shall be at its own expense. In the event that PAR does not so elect to defend against such Product Liability Claim within ninety (90) days of becoming aware of the same, NovaDel shall be free to proceed and solely control such defense and NovaDel shall fund the litigation expenses with respect to such Product Liability Claim; provided that PAR shall reimburse NovaDel for [***]% of such expenses within forty-five (45) days of receiving an invoice setting forth such expenses and PAR’s share of the same. Each Party, and its employees and agents, shall provide to the other Party and its legal representatives reasonable assistance and cooperation with respect to such Product Liability Claim, including entering into any joint defense and/or joint privilege agreement that may be reasonably requested by such Party, to the extent possible, having its employees testify when requested and making available relevant records, papers, information, samples, specimens and the like. To the extent either Party incurs any Losses arising from or in connection with any such Product Liability Claim with respect to the Licensed Product that is not otherwise subject to indemnification by a Party under Section 12.1, 12.2 or 12.3 of this Agreement, such Losses shall be shared [***]% by NovaDel and [***]% by PAR.
 
12.5 Indemnification Procedure.
 
12.5.1 Notice of Claim. The indemnified Party shall give the indemnifying Party prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such indemnified Party intends to base a request for indemnification, but in no event shall the indemnifying Party be liable for any Losses that result from any delay in providing such notice. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss is known at such time). The indemnified Party shall furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any Losses. All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents shall be made solely by such Party to this Agreement (the “Indemnified Party”).
 
12.5.2 Third Party Claims. The obligations of an indemnifying Party under this Article 12 with respect to Losses arising from claims of any Third Party that are subject to indemnification as provided for in Section 12.1, 12.2 or 12.3 (a “Third Party Claim”) shall be governed by and be contingent upon the following additional terms and conditions:
 

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12.5.2.1 Control of Defense. At its option, the indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying Party is liable to indemnify any indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any defenses it may assert against any indemnified Party’s claim for indemnification. Upon assuming the defense of a Third Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the indemnifying Party. In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the indemnifying Party all original notices and documents (including court papers) received by any indemnified Party in connection with the Third Party Claim. Should the indemnifying Party assume the defense of a Third Party Claim, the indemnifying Party shall not be liable to the Indemnified Party or any other indemnified Party for any legal expenses subsequently incurred by such indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless an Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of the Third Party Claim with respect to such Indemnified Party.
 
12.5.2.2 Right to Participate in Defense. Without limiting Section 12.5.2.1, any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof has been specifically authorized by the indemnifying Party in writing or (ii) the indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 12.5.2.1 (in which case the Indemnified Party shall control the defense).
 
12.5.2.3 Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnified Party in any manner, and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 12.5.2.1, the indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an indemnified Party that is reached without the written consent of the indemnifying Party. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, no indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the indemnifying Party.
 
12.5.2.4 Cooperation. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other indemnified Party to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.
 
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12.5.2.5 Expenses. Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a calendar quarter basis by the indemnifying Party, without prejudice to the indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.
 
12.6 Insurance.
 
12.6.1 At all times from and after the Effective Date, PAR shall have and maintain such type and amounts of liability insurance covering the manufacture, supply, use and sale of the Licensed Product as is normal and customary in the pharmaceutical industry generally for parties similarly situated, and shall upon request provide NovaDel and HANA with a copy of its policies of insurance in that regard, along with any amendments and revisions thereto.
 
12.6.2 PAR shall, starting 6 months prior to anticipated receipt of NDA approval of the Licensed Product and extending through the remaining term of this Agreement and for a period of not less than 36 months following the termination of this Agreement, carry liability insurance (including blanket contractual liability) in an amount of not less than $[***] combined single limit, which insurance will be written on a “claims-made” policy basis with an insurance carrier reasonably acceptable to NovaDel and HANA. PAR shall provide NovaDel and HANA with evidence of coverage contemplated hereby, in the form of certificates of insurance, as reasonably requested. Such certificates shall be provided by written notice to each of NovaDel and HANA thirty (30) days prior to any material change, cancellation or non-renewal of the policy. The said amount can vary if mutually agreed by both parties.
 
12.7 Indemnification for Infringement Claims. The provisions of this Article 12 shall supplement the terms of Section 10.3 with respect to Third Party patent infringement claims. In the event of a conflict between this Article 12 and Section 10.3, the terms of Section 10.3 shall control (except as expressly made subject to Section 12.2 therein).
 
ARTICLE 13
REPRESENTATIONS AND WARRANTIES
 
13.1 Legal Authority. Each of HANA and PAR represents and warrants as follows: (a) such Party is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as is contemplated to be conducted by this Agreement; (b) such Party has the legal power, authority and right to enter into this Agreement and to perform its respective obligations set forth herein; and (c) this Agreement has been duly executed and delivered by such Party and constitutes the valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles.
 
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13.2 No Conflicts. Each of HANA and PAR represents or warrants that as of the date of this Agreement it is not a party to any agreement or arrangement with any Third Party or under any obligation or restriction, including pursuant to its corporate charter, bylaws or comparable governing documents, which in any way limits or conflicts with its entering into this Agreement or its ability to fulfill any of its obligations under this Agreement.
 
13.3 Litigation. Each of HANA and PAR represents or warrants that it is not aware of any pending or threatened litigation (and has not received any communication) that alleges that such Party’s activities related to this Agreement have violated, or that by conducting the activities as contemplated herein such Party would violate, any of the intellectual property rights of any other Person.
 
13.4 Additional Covenants of PAR. PAR on behalf of itself and its Affiliates, agrees and covenants to the extent permitted by Applicable Law, never, in any country, region or jurisdiction in the Territory, to institute or prosecute any claim, action or suit at law or in equity seeking to have any claim in a NovaDel Patent Right declared invalid or unenforceable; provided, however, that nothing contained herein shall prohibit PAR and its Affiliates from either (a) asserting any and all defenses available to it, including assertions relating to the validity or enforceability of the NovaDel Patent Rights, in any suit or proceeding brought against them alleging the infringement of any of the NovaDel Patent Rights, or (b) asserting any and all defenses, evidence and arguments, including lack of patentability of the subject matter of a count or claim and lack of support for a count or claim, in any interference involving a patent or patent application owned by PAR or its Affiliates and a patent or patent application included within the definition of the NovaDel Patent Rights. PAR and its Affiliates will take all reasonable action (including signing required documents) and offer full cooperation to allow NovaDel to exercise the march-in rights provided herein, to the extent permitted by law; provided, however, that such rights shall be subject to PAR’s right to notice and cure and shall be subject to the dispute resolutions provided herein.
 
13.5 Additional Representations and Warranties of HANA. HANA hereby represents, warrants and covenants to PAR as follows:
 
(i) Neither HANA nor any of its Affiliates has received any written notice from any Person, or has knowledge, of any actual or threatened claim or assertion that the development of the Licensed Product infringes (or would infringe) or misappropriates any intellectual property rights of any Third Party;
 
(ii) There is no action or proceeding pending or, to HANA’s knowledge, threatened that questions the validity of this Agreement or any action taken by HANA in connection with the effectiveness of this Agreement;
 

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(iii) HANA has no knowledge of any pending patent application, which if issued, would similarly be infringed by the use of the Licensed Technology as contemplated by this Agreement;
 
(iv) HANA has not violated the trade secrets or misappropriated the confidential information or intellectual property of any Third Party in connection with the development of the Licensed Technology;
 
(v) HANA has the right to grant the sublicense granted to PAR herein;
 
(vi) To HANA’s knowledge, as of the Effective Date, there is no unauthorized use, infringement or misappropriation of any of the Licensed Technology by any Third Party, including any current or former employee or consultant of HANA and its Affiliates; and
 
(vii) HANA has made available to or provided PAR with copies of all information in HANA’s Control regarding the Licensed Technology, which could reasonably be expected to be material to assessing the commercial potential for the Licensed Product, or the ability to timely gain Regulatory Approval of the Licensed Product.
 
13.6 DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 13.1, 13.2, 13.3 AND 13.5, NEITHER HANA, PAR NOR NOVADEL MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, UNDER THIS AGREEMENT, AND HANA AND NOVADEL EACH SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENT RIGHTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES UNDER THIS AGREEMENT.
 
ARTICLE 14
LIMITATION OF LIABILITY
 
14.1 LIMITATION OF LIABILITY. EXCEPT FOR EACH PARTY’S INDEMNIFICATION OBLIGATIONS IN RESPECT OF THIRD PARTY CLAIMS UNDER THIS AGREEMENT, NONE OF HANA, PAR, NOVADEL OR ANY OF THEIR RESPECTIVE AFFILIATES SHALL BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING FOR LOST PROFITS), WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (A) THE USE OF THE LICENSED TECHNOLOGY OR LICENSED TRADEMARKS OR (B) ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT.
 
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ARTICLE 15
DISPUTE RESOLUTION
 
15.1 Good Faith Negotiations. In the event of any dispute or disagreement among the Parties as to the interpretation of any provision of this Agreement or the performance of obligations hereunder, the matter, upon written request of any Party, shall first be referred to the chief executive officers of the Parties for decision. Such chief executive officers shall promptly meet in a good faith effort to resolve the dispute.
 
15.2 Arbitration.
 
15.2.1 Procedures. Any dispute arising from or relating to this Agreement that is not resolved by the Parties chief executive officers pursuant to Section 0 shall be determined before a tribunal of three arbitrators in New York, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “AAA”). One arbitrator shall be selected by NovaDel, one arbitrator shall be selected by PAR and the third arbitrator shall be selected by mutual agreement of the first two arbitrators or by the AAA, if the arbitrators appointed by the Parties are unable to select a third arbitrator within thirty (30) days.
 
15.2.2 Patent Disputes. Any claim, dispute, or controversy concerning the validity, enforceability, or infringement of any patent contained in the NovaDel Patents licensed hereunder shall be resolved in any court having jurisdiction thereof. In the event that, in any arbitration proceeding, any issue shall arise concerning the validity, enforceability, or infringement of any patent contained in the NovaDel Patents licensed hereunder, the arbitrators shall, to the extent possible, resolve all issues other than validity, enforceability, and infringement; in any event, the arbitrators shall not delay the arbitration proceeding for the purpose of obtaining or permitting ether Party to obtain judicial resolution of such issues, unless an order staying the arbitration proceeding shall be entered by a court of competent jurisdiction. No Party hereto shall raise any issue concerning the validity, enforceability, or infringement of any patent contained in the NovaDel Patents licensed hereunder, in any proceeding to enforce any arbitration award hereunder, or in any proceeding otherwise arising out of any such arbitration award.
 
15.2.3 Costs. The costs of such arbitration shall be borne proportionate to the finding of fault as determined by the arbitration panel. Judgment on the arbitration award may be entered by any court of competent jurisdiction.
 
ARTICLE 16
MISCELLANEOUS
 
16.1 Publicity. No Party hereto shall originate any publicity, news release or other public announcement, written or oral, relating to this Agreement or the existence of a collaboration among the Parties, without the prior written approval of the other Parties except as otherwise permitted by this Agreement or required, in the reasonable judgment of the disclosing Party’s attorneys, by Applicable Law, including the Securities Act of 1933, as amended, and the rules and regulations thereunder or as promulgated by an applicable securities exchange governing body.
 
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16.2 Publications. In the event that any Party desires to publish or disclose, by written, oral or other presentation, Licensed Technology or any material information relating thereto, then such Party shall notify the other in writing of its intention at least sixty (60) days prior to any speech, lecture or other oral presentation and at least sixty (60) days before any written or other publication or disclosure, and shall include with such notice a description of any proposed oral presentation or, with respect to any proposed written or other disclosure, a current draft of such proposed disclosure or abstract. NovaDel may request that PAR, no later than thirty (30) days following the receipt of such notice, delay such presentation, publication or disclosure in order to enable NovaDel to file, or have filed on its behalf or jointly, as applicable, a patent application, copyright or other appropriate form of intellectual property protection related to the information to be disclosed or request that PAR do so. Upon receipt of such request to delay such presentation, publication or disclosure, PAR shall arrange for a delay of such presentation, publication or disclosure until such time as PAR or NovaDel has filed, or had filed on its behalf, such patent application, copyright or other appropriate form of intellectual property protection in form and in substance reasonably satisfactory to NovaDel. If PAR does not receive any such request from NovaDel to delay such presentation, publication or disclosure, PAR may submit such material for presentation, publication or other form of disclosure. Notwithstanding the foregoing, in no event shall PAR have any right to publish or disclose the Licensed Process or any information or data related thereto without the prior written consent of NovaDel, which consent NovaDel may withhold in its sole discretion.
 
16.3 Assignment. During the Term, neither this Agreement nor any of the rights or obligations hereunder may be assigned by without the prior written consent of the other Parties hereto, which consent shall not be unreasonably withheld.
 
16.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
 
16.5 Registration. If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, PAR shall assume all legal obligations to do so and the costs in connection therewith.
 
16.6 Trade Regulations. PAR shall observe all applicable United States and foreign laws with respect to the transfer of Licensed Product and related technical data to foreign countries, including the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.
 
16.7 Equitable Relief. Each Party acknowledges and agrees that the restrictions set forth in Article 9 of this Agreement are reasonable and necessary to protect the legitimate interest of the other Parties and that such other Parties would not have entered into this Agreement in the absence of such restrictions, and that any violations or threatened violation of any provision of Article 9 may result in irreparable injury to such other Parties. Each Party also acknowledges and agrees that in the event of a violation or threatened violation of any provision of Article 9, the affected Party shall be entitled to seek preliminary and permanent injunctive relief, without the necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits and other benefits arising from any such violation. The rights provided in the immediately preceding sentence shall be cumulative and in addition to any other rights or remedies that may be available to such other Party. Nothing in this Section 16.7 is intended, or should be construed, to limit such other Party’s right to preliminary and permanent injunctive relief or any other remedy for breach of any other provision of this Agreement.
 
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16.8 Force Majeure. In the event that any Party fails to perform any of its obligations under this Agreement (other than an obligation to pay money) due to any act of God, fire, casualty, flood, war, strike, lockout, failure of public utilities, injunction, act of a governmental authority (including enactment of any governmental law, order or regulation permanently or temporarily prohibiting or reducing the level of research, development or production work hereunder or the manufacture, use or sale of the Licensed Product), epidemic, destruction of production facilities, riot, insurrection, inability to procure or use materials, labor, equipment, transportation or energy in quantities sufficient to meet experimentation or manufacturing needs, or any other cause beyond the reasonable control of the Party invoking this Section 16.8; provided, in each case, that such Party shall have used Commercially Reasonable Efforts to avoid such failure, then such Party shall promptly give written notice of such occurrence to the other Party, and thereupon the affected Party’s performance shall be excused and the time for performance shall be extended for the period of delay or inability to perform due to such occurrence.
 
16.9 Waiver. The waiver by any Party of a breach or a default of any provision of this Agreement by another Party shall not be construed as a waiver of any succeeding breach of the same or any other provision, nor shall any delay or omission on the part of any Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder operate as a waiver of any right, power or privilege by such Party.
 
16.10 Notices. Any and all notices or other communications made or given pursuant to this Agreement shall be in writing and shall be delivered (i) by express overnight or two-day international courier service, (ii) by certified or registered mail, return receipt requested, or (iii) by confirmed facsimile or other electronic transmission (with confirming copy to follow by express overnight courier service):
 
 
If to HANA to:
 
Hana Biosciences, Inc.
7000 Shoreline Court, Suite 370
South San Francisco, California 94080
Attention: President
Fax: (650) 588-2787
 
 
With a copy (not constituting notice) to:
 
Maslon Edelman Borman & Brand, LLP
Attention: Christopher J. Melsha Esq.
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
 
 
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In the case of PAR:
 
Par Pharmaceutical, Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07677
Attn: John MacPhee, President, Branded Division and
General Counsel’s Office
Fax: (201) 802-4223
 
 
with a copy (not constituting notice) to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103-0001
Attn: R. King Milling, Jr., Esq.
Fax: (212) 506-5151
 
 
In the case of NovaDel
NovaDel Pharma, Inc.
25 Minneakoning Road
Flemington, NJ 08822
Attn: President
Fax: (908) 806-2445
 
 
with a copy (not constituting notice) to:
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ 08540
Attn: Randall B. Sunberg, Esq.
Fax: (609) 919-6701
 
or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such communication shall be deemed to have been given (a) when delivered, if personally delivered or sent by telecopier on a business day, (b) on the business day after dispatch, if sent by nationally-recognized overnight courier, and (c) on the third business day following the date of mailing, if sent by mail. It is understood and agreed that this Section 16.10 is not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement. Notices provided in accordance with this Section 16.10 shall be deemed delivered upon receipt of the notice by the Party being sent the notice.
 
16.11 No Agency. Nothing herein shall be deemed to constitute any Party as the agent or representative of any other Party, or the Parties hereto as joint venturers or partners for any purpose. HANA shall be an independent contractor, not an employee or partner of PAR or NovaDel, and the manner in which HANA performs its obligations under this Agreement shall be within HANA’s sole discretion. PAR shall be an independent contractor, not an employee or partner of HANA or NovaDel, and the manner in which PAR performs its obligations under this Agreement shall be within PAR’s sole discretion (subject to PAR’s compliance with its obligations under this Agreement). No Party hereto shall be responsible for the acts or omissions of any other Party, and no Party shall have authority to speak for, represent or bind any other Party in any way without prior written authority from such other Party.
 
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16.12 Entire Agreement. This Agreement and the Exhibits and Schedules attached hereto (which Exhibits and Schedules are deemed to be a part of this Agreement for all purposes) contain the full understanding of the Parties with respect to the subject matter hereof and supersede all prior understandings and writings relating thereto. No waiver, alteration or modification of any of the provisions hereof shall be binding unless made in writing and signed on behalf of the Parties by their respective officers thereunto duly authorized.
 
16.13 Headings; Interpretation. The section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “but not limited to.” All references herein to Articles, Sections and Exhibits shall be deemed references to Articles and Sections of, and Exhibits to, this Agreement unless the context shall otherwise require. All Exhibits and Schedules attached to this Agreement shall be deemed incorporated herein by reference as if fully set forth herein. Words such as “herein,” “hereof,” “hereto,” “hereby” and “hereunder” refer to this Agreement and to the Exhibits, taken as a whole. Except as otherwise expressly provided herein: (a) any reference in this Agreement to any agreement shall mean such agreement as amended, restated, supplemented or otherwise modified from time to time; and (b) any reference in this Agreement to any law shall include corresponding provisions of any successor law and any regulations and rules promulgated pursuant to such law or such successor law.
 
16.14 Severability. In the event that any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable because it is invalid or in conflict with any law of any relevant jurisdiction, the validity of the remaining provisions shall not be affected, and the rights and obligations of the Parties shall be construed and enforced as if the Agreement did not contain the particular provisions held to be unenforceable.
 
16.15 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their permitted successors and assigns.
 
16.16 Counterparts. This Agreement may be executed in any number of counterparts (including signature by facsimile), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
 
16.17 Export Controls. Each Party acknowledges that it is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended and the United States Department of Commerce Export Administrations Regulations). The transfer of such items may require a license from the cognizant agency of the United States Government and/or written assurances by PAR or HANA that it shall not export data or commodities to certain foreign countries without prior approval of such agency. No Party makes any representation as to whether any such license will be required or, if required, whether it will be issued.
 
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16.18 Further Assurances. Each Party hereby agrees, without further consideration, to execute and deliver such documents and take such other actions as the other Party may reasonably request to carry out the provisions hereof and further the intent of this Agreement.

16.19 Consent to Sublicense. NovaDel hereby consents to the terms of this Agreement and the sublicense granted hereunder.
 
[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties hereto have caused this Development and Commercialization Sublicense Agreement to be executed as a sealed instrument in their names by their properly and duly authorized officers or representatives as of the date first above written.
 
 HANA BIOSCIENCES, INC.   PAR PHARMACEUTICAL, INC. 
     
By:
   /s/ Mark J. Ahn
  
By:
   /s/ John MacPhee
 
Name:  Mark J. Ahn
    
Name:  John MacPhee
 
Title:  President and CEO
    
Title:  President, Branded Division
 
 
NOVADEL PHARMA, INC.
 
 
   /s/ Steven Ratoff
  
   
 
Title: Chairman, President and CEO
  
 
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EXHIBIT A
 
NOVADEL PATENTS
 
1.   United States Patent No. 6,676,931 B2
 
41
 EX-10.2 3 v092675_ex10-2.htm Unassociated Document
Exhibit 10.2

INFORMATION MARKED BY [***] HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTION HAS BEEN SEPARATELY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.

AMENDED AND RESTATED
LICENSE AND DEVELOPMENT AGREEMENT
 
THIS AMENDED AND RESTATED LICENSE AND DEVELOPMENT AGREEMENT (this “Agreement”), dated as of July 31, 2007 (the “Execution Date”), is entered into by and between NovaDel Pharma, Inc., a Delaware corporation (“NovaDel”), and Hana Biosciences, Inc., a Delaware corporation (the “Licensee”). NovaDel and Licensee each may be referred to herein individually as a “Party,” or collectively as the “Parties.”

WHEREAS, NovaDel has certain proprietary rights and intellectual property (including to certain patents) with respect to lingual sprays for the metered delivery of pharmaceutical products to humans (the “Technology”); and
 
WHEREAS, pursuant to that certain License and Development Agreement by and between NovaDel and Licensee, effective as of October 26, 2004 (the “Effective Date”), as amended by that certain Amendment No. 1 To License and Development Agreement dated August 3, 2005, as amended by that certain Amendment No. 2 To License and Development Agreement dated May 15, 2006, and as amended by that certain Amendment No. 3 To License and Development Agreement dated December 22, 2006, (collectively, the “Initial Agreement”), Licensee obtained from NovaDel, and NovaDel granted to Licensee, an exclusive, restricted, sublicensable license to develop and commercialize a pharmaceutical product containing ondansetron as an active ingredient that will be administered only to humans using the Technology; and
 
WHEREAS, the Parties desire to amend and restate the Initial Agreement in its entirety upon the terms and conditions as set forth herein in connection with the PAR Sublicense Agreement.
 
NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants of the Parties contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:
 
ARTICLE 1
DEFINITIONS
 
For the purposes of this Agreement, the following words and phrases shall have the following meanings, unless otherwise specifically provided herein:
 
1.1 “AAA” shall have the meaning set forth in Section 9.1.
 
1.2 “Affiliate” shall mean, with respect to any Entity, any other Entity that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Entity. For purposes of this Section 1.2 only, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” shall mean (a) the possession, directly or indirectly, of the power to direct the management or policies of an Entity, whether through the ownership of voting securities, by contract or otherwise, or (b) the ownership, directly or indirectly, of at least fifty percent (50%) of the voting securities or other ownership interest of an Entity.
 
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1.3 “Agreement” shall have the meaning set forth in the preamble.
 
1.4 “Agreement-Related Assets” shall have the meaning set forth in Section 8.7.2.
 
1.5 “Anticipated Filing Date” shall have the meaning set forth in Section 3.2.2.
 
1.6 “Applicable Law” shall mean the applicable laws, rules, regulations, guidelines and requirements of the Regulatory Authorities, in the Territory.
 
1.7 “Claims” shall have the meaning set forth in Section 3.10.6.
 
1.8 “CMC” shall have the meaning set forth in Section 3.4.1.
 
1.9 “Commercially Reasonable Efforts” shall mean, with respect to the development or commercialization of a Licensed Product, efforts and resources commonly used in the research-based pharmaceutical industry for a product of similar commercial potential at a similar stage in its lifecycle, taking into consideration its safety and efficacy, its cost to develop, the competitiveness of alternative products, its proprietary position, the likelihood of regulatory approval, its profitability, and all other relevant factors. Commercially Reasonable Efforts shall be determined on a market-by-market basis for each Licensed Product without regard to the particular circumstances of a Party, including any other product opportunities of such Party.
 
1.10 “Confidential Information” shall have the meaning set forth in Article 15.
 
1.11 “Common Technical Document” shall have the meaning set forth in the International Conference on Harmonization of the Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) Guideline M4, Organization of the Common Technical Document, as revised on January 13, 2004.
 
1.12 “Control” shall mean, with respect to any item of Information and Inventions, Patents or other intellectual property right, possession of the ability, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such item, Patent or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.
 
1.13 “Designated Compound” shall mean ondansetron.
 
1.14 “Development Activities” shall mean the activities performed by the Parties under the Development Plan pursuant to Article 3.
 
1.15 “Development Budget” shall have the meaning set forth in Section 3.2.2.
 
1.16 “Development Committee” shall have the meaning set forth in Section 3.3.1.
 
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1.17 “Development Plan” shall have the meaning set forth in Section 3.2.1.
 
1.18 “Effective Date” shall have the meaning set forth in the preamble.
 
1.19 “Execution Date” shall have the meaning set forth in the preamble.
 
1.20 “Entity” shall mean any individual, sole proprietorship, corporation, limited liability company, association, joint venture, partnership, limited partnership, limited liability partnership, trust, university, business, government or political subdivision thereof, including an agency, or any other organization that possesses independent legal standing.
 
1.21 “Exploit” shall mean to make, have made, import, use, sell, or offer for sale, including to research, develop, register, modify, improve, manufacture, have manufactured, store, have used, export, transport, distribute, promote, market or have sold or otherwise dispose of a Licensed Product or Licensed Process.
 
1.22 “Exploitation” shall mean the making, having made, importation, use, sale, offering for sale of a licensed product or process, including the research, development, registration, modification, improvement, manufacture, storage, optimization, import, export, transport, distribution, promotion, marketing, sale or other disposition of a Licensed Product or Licensed Process.
 
1.23 “Extraterritorial Licensees” shall mean NovaDel’s Affiliates and licensees outside of the Territory.
 
1.24 “FDA” shall mean the United States Food and Drug Administration, or any successor agency responsible for the evaluation and approval of pharmaceutical products.
 
1.25 “GAAP” shall mean Generally Accepted Accounting Principles as consistently applied.
 
1.26 “Improvement” shall mean any modification, variation or revision to an apparatus, method, product or technology, or any discovery, technology, device, process or formulation related to an apparatus, method, product or technology, whether or not patented or patentable, including any enhancement in the manufacture or steps or processes thereof, ingredients, preparation, presentation, formulation, means of delivery, packaging or dosage of an apparatus, method, product or technology, any discovery or development of any new or expanded indications for an apparatus, method, product or technology, or any discovery or development that improves the stability, safety or efficacy of an apparatus, method, product or technology, in each case, to the extent related to the Licensed Process, Licensed Product or Licensed Technology.
 
1.27 “IND” shall mean an investigational new drug application filed with the FDA for approval to commence human clinical trials, and its equivalent in other countries or regulatory jurisdictions in the Territory.
 
1.28 “Indemnification Claim Notice” shall have the meaning set forth in Section 10.3.1.
 
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1.29 “Indemnified Party” shall have the meaning set forth in Section 10.3.1.
 
1.30 “Initial Commercial Sale” shall mean the first sale for use or consumption by the general public of the Licensed Product by Licensee or its Affiliates or Sublicensee in the Territory following Regulatory Approval of the Licensed Product. Sales for clinical studies, compassionate use, named patient programs, sales under a treatment IND, test marketing, any nonregistrational studies, or any similar instance where the Licensed Product is supplied without charge shall not constitute an Initial Commercial Sale.
 
1.31 “Initial Agreement” shall have the meaning set forth in the preamble.
 
1.32 “Infringement Suit” shall have the meaning set forth in Section 6.8.2.
 
1.33 “Information and Inventions” shall mean all technical, scientific and other know-how and information, trade secrets, knowledge, technology, means, methods, processes, practices, formulas, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and other material, including pre-clinical and clinical trial results, manufacturing procedures and test procedures and techniques, (whether or not confidential, proprietary, patented or patentable) in written, electronic or any other form now known or hereafter developed, and all Improvements, whether to the foregoing or otherwise, and other discoveries, developments, inventions, and other intellectual property (whether or not confidential, proprietary, patented or patentable), in each case, to the extent related to the Licensed Process, Licensed Product or Licensed Technology.
 
1.34 “Knowledge” shall mean the good faith understanding of the vice presidents, senior vice presidents, executive vice presidents, president or chief executive officer of the respective Party of the facts and information then in their possession without any duty to conduct any investigation with respect to such facts and information.
 
1.35 “Licensed Process” shall mean the proprietary lingual spray technology for the delivery of pharmaceutical compounds through the mucosal membrane of the mouth in humans using an aerosol or pump spray device that is under the Control of NovaDel as of the Effective Date and any Improvements thereto that are conceived and reduced to practice by NovaDel in the course of performing the Development Activities.
 
1.36 “Licensed Product” shall mean any dosage of pharmaceutical composition or preparation in finished form labeled and packaged for sale by prescription, over-the-counter or any other method only for human application that contains, as the sole ingredient, the Designated Compound delivered by means of the Licensed Process.
 
1.37 “Licensed Technology” shall mean the NovaDel Patents, the NovaDel Know-How and the Drug Master File, collectively, but only with respect to the Exploitation of the Licensed Product.
 
1.38 “Licensee” shall have the meaning set forth in the preamble.
 
1.39 “Licensee Shares” shall have the meaning set forth in Section 4.4.
 
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1.40 “Losses” shall have the meaning set forth in Section 10.1.
 
1.41 “NDA” shall mean a New Drug Application filed pursuant to the requirements of the FDA, as more fully defined in 21 C.F.R. § 314.5 et seq., and any equivalent application required by any Regulatory Authority for the marketing, sale or use of the Licensed Product in the Territory for human application.
 
1.42 “Net Sales” shall mean [***]
 
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1.43 “NovaDel” shall have the meaning set forth in the preamble.
 
1.44 “NovaDel Know-How” shall mean all Information and Inventions Controlled by NovaDel or an Affiliate of NovaDel as of the Effective Date or, from time to time, during the Term that (a) (i) are necessary for the use of the Licensed Process to Exploit the Licensed Product or (ii) relate to Improvements to the Licensed Product or Licensed Process that are conceived and/or reduced to practice in the course of Exploiting the Licensed Product or Licensed Process, and (b) are not generally known, but excluding any Information and Inventions to the extent claimed by any NovaDel Patents.
 
1.45 “NovaDel Patents” shall mean the Patents that NovaDel Controls (a) as of the Effective Date that are listed on Exhibit A hereto and (b) from time to time during the Term that claim (i) the Licensed Process, (b) the Licensed Product, (c) NovaDel Know-How, or (d) any Improvements that are conceived and/or reduced to practice in the course of Exploiting the Licensed Product or Licensed Process.
 
1.46 “PAR” shall have the meaning set forth in Section 3.2.1.
 
1.47 “PAR Sublicense Agreement” shall have the meaning set forth in Section 3.2.1.
 
1.48 “Parties” shall have the meaning set forth in the preamble.
 
1.49 “Party” shall have the meaning set forth in the preamble.
 
1.50 “Patents” shall mean any of the following: (a) United States patents; (b) United States patent applications (both provisional and non-provisional), PCT patent applications, and divisionals, continuations and claims of continuation-in-part applications which shall be directed to subject matter specifically described in such United States and/or PCT patent applications, and the resulting patents (whether such divisionals, continuations or continuation-in-part applications are based upon a United States patent, United States patent application or PCT application); (c) any patents resulting from reissues or reexaminations of the United States patents described in (a) and (b) above; (d) foreign patents; (e) foreign patent applications and, to the extent applicable, divisionals, continuations and claims of continuation-in-part applications which shall be directed to subject matter specifically described in such foreign patent applications, and the resulting patents (whether such divisionals, continuations or continuation-in-part applications are based upon a foreign patent application or a foreign patent); and (f) any foreign patents, resulting from foreign procedures similar to United States reissues and reexaminations, of the foreign patents and applications described in (d) and (e) above.
 
1.51 “Regulatory Approval” shall mean approval by the FDA to market the Licensed Product in the United States, or equivalent Regulatory Authority in Canada to market the Licensed Product in Canada, including the issuance by the FDA or such other Regulatory Authority of an action letter indicating the approval of the NDA and the manufacturing processes and facilities for commercial supplies of the Licensed Product.
 
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1.52 “Regulatory Authority” shall mean any applicable supra-national, federal, national, regional, state, provincial or local regulatory agencies, departments, bureaus, commissions, councils or other government entities regulating or otherwise exercising authority with respect to the Licensed Technology or the Licensed Product in the Territory.
 
1.53 “Regulatory Documentation” shall mean all applications, registrations, licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), all supporting documents and all clinical studies and tests, relating to any Licensed Product, and all data contained in any of the foregoing, including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.
 
1.54 “Sublicensee” shall mean any Third Party to which Licensee grants a sublicense pursuant to Section 2.4 under the licenses granted to Licensee by NovaDel under Section 2.1.
 
1.55 “Technology” shall have the meaning set forth in the preamble.
 
1.56 “Term” shall have the meaning set forth in Section 7.1.
 
1.57 “Territory” shall mean the United States of America and Canada.
 
1.58 “Third Party” shall mean any Entity other than NovaDel, Licensee and their respective Affiliates.
 
1.59 “Third Party Claim” shall have the meaning set forth in Section 10.3.2.
 
1.60 “Trademark” shall include any word, name, symbol, color, designation or device or any combination thereof, including any trademark, trade dress, brand mark, trade name, brand name, logo or business symbol.
 
1.61 “Valid Claim” shall mean, with respect to a particular country, a claim of a Patent in such country that (a) has not been revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which no appeal can be taken or has been taken within the time allowed for appeal, and (b) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise in such country, except if a claim, or the subject matter thereof, of a pending patent application shall not have issued within four (4) years after the filing date from which such claim, or subject matter thereof, takes priority, such claim shall not constitute a valid claim for purposes of this agreement unless and until such claims shall issue.
 
ARTICLE 2
GRANT OF RIGHTS
 
2.1 License Grants to Licensee. Subject to Section 2.3 and the other terms and conditions of this Agreement, NovaDel hereby grants to Licensee and Licensee accepts, a non-transferable (except as provided in Article 12), sublicenseable (only as provided in Section 2.4), royalty-bearing, exclusive right and license under the Licensed Technology to Exploit the Licensed Product in the Territory, to the full end of the Term for which the Licensed Technology is licensed, unless sooner terminated as herein after provided.
 
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2.2 License Grant to NovaDel. Licensee hereby grants to NovaDel a limited, royalty-free, non-exclusive right and license in the Territory in and to the Licensed Technology to the extent necessary to perform its Development Activities under Article 3.
 
2.3 Retained Rights. NovaDel retains all right, title and interest, including the right to grant licenses to Third Parties, in and to the Licensed Technology. Licensee shall have no rights, express or implied, with respect to the Licensed Technology, except as expressly set forth in Section 2.1, and Licensee covenants to NovaDel that none of Licensee, its Affiliates or Sublicensees shall use the Licensed Technology, directly or indirectly, for any purpose other than for administration of the Designated Compound in connection with the Exploitation of Licensed Product hereunder. Notwithstanding anything in this Agreement to the contrary, NovaDel does hereby retain, without any duty of accounting or otherwise to Licensee or a Sublicensee, as applicable,:
 
2.3.1 The right to enter into collaborations or other agreements with, and to grant licenses and other rights under the NovaDel Patents and NovaDel Know-How to Third Parties to Exploit products containing compounds other than the Designated Compound and to use the Licensed Process in connection therewith; and
 
2.3.2 The right to independently Exploit products containing compounds other than the Designated Compound and to use the Licensed Process in connection therewith; and
 
2.3.3 An irrevocable, non-exclusive, royalty-free right to use the Licensed Technology (including the Licensed Process) with respect to the Designated Compound, for its internal, non-commercial research and development activities; and
 
2.3.4 The rights for all other territories other than the Territory and non-human uses of the Designated Compound.
 
2.4 Sublicenses. Licensee shall have the right to grant sublicenses under the grants in Section 2.1 to Third Parties pursuant to a separate written agreement, subject to the following requirements and conditions:
 
2.4.1 Licensee must obtain NovaDel’s prior written consent in respect of each such sublicense, such consent not to be unreasonably withheld but in no case will exceed thirty (30) days. Except to the extent the Parties otherwise agree pursuant to the terms of a particular sublicense granted under this Section 2.4, any sublicense agreement must be fully consistent with the terms and conditions of this Agreement, and provide that Sublicensee will indemnify NovaDel and its Affiliates to the extent provided in Article 10.
 
2.4.2 Within five (5) days after execution or receipt thereof, as applicable, Licensee shall provide NovaDel with a full and complete copy of each sublicense agreement granted hereunder and shall deliver copies of all reports (including relating to royalties and other payments) received by Licensee from such Sublicensees.
 
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2.4.3 Termination of this Agreement by NovaDel pursuant to Section 8.3 with respect to Licensee shall not terminate any sublicense granted by Licensee pursuant to this Section 2.4 with respect to a Sublicensee, provided that (a) such Sublicensee is not in breach of any provision of this Agreement or the applicable sublicense agreement, (b) such Sublicensee shall perform all obligations of Licensee under this Agreement, (c) NovaDel shall have all rights with respect to any and all Sublicensees as it had hereunder with respect to Licensee prior to termination of this Agreement with respect to Licensee, and (d) Licensee shall include in any sublicense a provision in which said Sublicensee acknowledges its obligations to NovaDel hereunder and the rights of NovaDel to terminate such sublicense agreement for a breach of such sublicense agreement by such Sublicensee. The failure of Licensee to include in a sublicense the provisions referenced in clause (d) shall render the affected sublicense void.
 
ARTICLE 3
DEVELOPMENT AND COMMERCIALIZATION ACTIVITIES
 
3.1 Development and Commercialization. Licensee or its Sublicensee shall have the sole right and obligation to develop and commercialize the Licensed Product in the Territory. NovaDel shall perform or cause to be performed, on behalf of Licensee, certain Development Activities in accordance with this Article 3. Except as set forth herein or in an applicable sublicense, Licensee shall be solely responsible for all costs and expenses in connection with all development and commercialization activities, including the Development Activities performed by NovaDel on behalf of Licensee.
 
3.2 Development Activities. Except as the Parties otherwise agree pursuant to the terms of a sublicense agreement:  
 
3.2.1 Election Upon Termination of Par Sublicense. If that certain Product Development and Commercialization Sublicense Agreement by and between Licensee, NovaDel and PAR Pharmaceutical, Inc. (“PAR”), dated as of the Execution Date (the “PAR Sublicense Agreement”) is terminated, Licensee shall notify NovaDel within sixty (60) days following such termination of Licensee’s election to undertake further development of Licensed Product. Within sixty (60) days following delivery of such notice to NovaDel, Licensee will adopt and provide to NovaDel a development plan describing its strategy and principal activities in seeking Regulatory Approval and commercializing the Licensed Product in accordance with the terms of this Agreement (the “Development Plan”). If Licensee fails to notify NovaDel within the sixty (60) day period of its election to undertake further development, fails to provide NovaDel within the sixty (60) day period a Development Plan, or elects not to continue development of Licensed Product, this Agreement shall terminate in accordance with the provisions of Section 8.4
 
3.2.2 General. Under the direction and supervision of the Development Committee, NovaDel and Licensee each shall perform, or cause to be performed, its respective Development Activities in accordance with the Development Plan and corresponding development budget (the “Development Budget”). Notwithstanding the foregoing, the Parties acknowledge and agree that there can be no assurances that the objectives of the Development Activities can be achieved, or that they can be achieved in the manner or in the time set forth in the Development Plan. Although outcomes cannot be guaranteed, each Party shall use Commercially Reasonable Efforts to perform or cause to be performed its respective Development Activities in good scientific manner, and in material compliance with Applicable Law. In addition, and without limiting Licensee’s obligations under this Section 3.2.2, Licensee or its Sublicensee shall file the NDA with the FDA on or before the last day of the thirty-second (32nd) month after the Execution Date (the “Anticipated Filing Date”); provided, however, that Licensee or its Sublicensee may extend the Anticipated Filing Date by four (4) months by delivering, at any time after the second (2nd) anniversary of the Execution Date, written notice of such extension to NovaDel. The Anticipated Filing Date, as extended, may thereafter be extended only upon the mutual agreement of Licensee or its Sublicensee and NovaDel.
 
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3.2.3 Reports. Within thirty (30) days after the end of each calendar quarter in which Development Activities are performed, each Party shall provide to the Development Committee a written progress report, which shall describe the Development Activities it has performed, or cause to be performed, during such calendar quarter, evaluate the work performed in relation to the goals of the Development Plan and in relation to the Development Budget, and provide such other information as may be required by the Development Plan or reasonably requested by the Development Committee with respect to the Development Activities. Minutes from periodic project team meetings or other meetings between the Parties can serve as a substitute for the required progress reports outlined in this Section 3.2.3.
 
3.2.4 Development Plan and Budget. The Development Committee shall review the Development Plans and the Development Budgets at least quarterly and shall have the right to make such modifications or updates to the Development Plans or Development Budgets that it deems appropriate. The Parties acknowledge and agree that the amounts set forth in the Development Budgets are estimates and, given the unpredictability of the Development Activities, there can be no assurances that the Development Activities can be completed within the Development Budgets, provided, however, that the Parties agree to use their Commercially Reasonable Efforts to adhere to the Development Budgets not to exceed the amounts set forth in such Development Budgets without written approval of the Development Committee.
 
3.3 Development Committee. Except as the Parties otherwise agree pursuant to the terms of a sublicense agreement:
 
3.3.1 Formation and Authority of Development Committee. NovaDel and Licensee shall establish a development committee (the “Development Committee”), which shall oversee the Development Activities performed by the Parties, review and approve the Development Budget and approve any changes to the Development Plan and Development Budget. Each Party shall appoint an equal number of representatives with the requisite experience and seniority to enable them to make decisions on behalf of the Parties with respect to the Development Activities. From time to time, each Party may substitute its representatives on written notice to the other Party.
 
3.3.2 Procedural Rules of Development Committee. The Development Committee shall meet monthly, or as otherwise agreed to by the Parties. The Development Committee shall adopt such standing rules as shall be necessary for its work. A quorum of the Development Committee shall exist whenever there is present at a meeting at least one representative appointed by each Party. Members of the Development Committee may attend a meeting either in person or by telephone, video conference or similar means in which each participant can hear what is said by the other participants. Representation by proxy shall not be allowed. The Development Committee shall take action by unanimous consent of NovaDel and Licensee, with each such Party having a single vote, irrespective of the number of representatives actually in attendance at a meeting, or by a written resolution signed by the designated representatives of each of NovaDel and Licensee.
 
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3.3.3 Dispute Resolution. If the Development Committee cannot, or does not, reach agreement on an issue, then either Party shall have the right to refer such issue to the Chief Executive Officers of the Parties who shall confer on the resolution of the issue. Any final decision mutually agreed to by the Chief Executive Officers of the Parties shall be in writing and shall be conclusive and binding on the Parties. If such officers are not able to agree on the resolution of an issue within twenty (20) days after such issue was first referred to them, either Party shall have the right to refer such dispute to arbitration pursuant to Article 9.
 
3.3.4 Limitations on Authority of Development Committee. Each Party to this Agreement shall retain the rights, powers, and discretion granted to it under this Agreement, and no such rights, powers, or discretion shall be delegated to or vested in the Development Committee unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. The Development Committee shall not have the power to amend or modify this Agreement, which may only be amended or modified as provided in Section 16.4.
 
3.4 Regulatory Approvals. Except as the Parties otherwise agree pursuant to the terms of a sublicense, all INDs, NDAs and other filings, applications or requests pursuant to or in connection with the Regulatory Approvals required under the Development Plan shall be made in the name of Licensee; provided, however, that Licensee shall consult with NovaDel with respect to the preparation and submission of any such filings, applications or requests in connection with Regulatory Approvals.
 
3.4.1 Licensee will be the primary contact for Chemistry, Manufacturing and Control (“CMC”) matters in all relevant regulatory applications except to regulatory bodies outside the United States and Canada. Licensee will keep NovaDel reasonably informed of all such communications, if any, between Licensee and the Regulatory Authorities in the United States and Canada.
 
3.4.2 NovaDel and NovaDel’s Extraterritorial Licensees shall have a perpetual, royalty-free, irrevocable, worldwide right to use and reference the Regulatory Documentation with respect to the Licensed Product and any data included or referenced therein for all purposes. Licensee agrees to utilize the Common Technical Document format for its marketing applications in order to facilitate any subsequent submissions filed by NovaDel or its Extraterritorial Licensee’s outside of the Territory. Licensee shall keep NovaDel reasonably informed as to the communications, if any, between Licensee and the Regulatory Authorities.
 
3.4.3 Licensee agrees to keep the Common Technical Document, except for those sections in the Summary Basis of Approval and available through the Freedom of Information Act, strictly confidential in accordance with Article 15.
 
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3.5 Regulatory Records. NovaDel and Licensee each shall maintain, or cause to be maintained, records of its respective Development Activities in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of its respective Development Activities, and which shall be retained by such Party for at least five (5) years after the termination of this Agreement, or for such longer period as may be required by Applicable Law. Each Party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy any such records; provided, however, that neither Party shall have the right to conduct more than one such inspection in any twelve (12)-month period.
 
3.6 Development Expenses. Except as the Parties otherwise agree pursuant to the terms of a sublicense:
 
3.6.1 Licensee’s Obligation. In consideration of NovaDel’s performance of its Development Activities, Licensee shall reimburse NovaDel for the reasonable and documented costs and expenses incurred by NovaDel in performing such activities in accordance with the Development Budget (as may be amended in accordance with Section 3.2.4). Licensee shall bear all costs and expenses incurred by or on behalf of Licensee in connection with the performance of its Development Activities.
 
3.6.2 Invoices and Payments. Within thirty (30) days after the end of each month in which Development Activities are performed, NovaDel shall invoice Licensee for any costs and expenses incurred by NovaDel or its Affiliates in such month. Each invoice shall be payable to NovaDel within thirty (30) days after invoice date.
 
3.6.3 Books and Records. Each Party shall maintain complete and accurate books, records and accounts that, in reasonable detail, fairly reflect any reimbursable costs and expenses incurred by it or its Affiliates in performance of the Development Activities in conformity with GAAP. Each Party shall retain such books, records and accounts until the later of (a) three (3) years after the end of the period to which such books, records and accounts pertain, and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law. Each Party shall have the right to have its certified public accountant, who shall be reasonably acceptable to NovaDel and Licensee, as applicable, audit the books and financial records of the other Party and their respective Affiliates relating to its Development Activities during one or more calendar quarters; provided, however, that Licensee shall not have the right to audit a calendar quarter more than two (2) years after the end of such quarter, to conduct more than one such audit in any twelve-month period, or to audit any calendar quarter more than once; and provided further that each Party shall bear the cost of such audit unless the audit reveals a variance of more than five percent (5%) from the reported results, in which case audited Party shall bear the cost of the audit. The results of such accounting firm shall be final, absent manifest error.
 
3.7 Cooperation. Each Party shall cooperate with any and all reasonable requests for assistance from the other Party with respect to the Development Activities, including by making its employees, consultants and other scientific staff available upon reasonable notice during normal business hours at their respective places of employment to consult with such other Party on issues arising in connection with the performance of such Development Activities.
 
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3.8 Development and Use of Trademarks. Licensee shall have the sole right to determine the Trademarks to be used with respect to the Exploitation of the Licensed Product in the Territory, provided that the product labeling and promotional materials disclose that the Licensed Product are delivered using the Licensed Process.
 
3.9 Diligence Obligations. Following receipt of Regulatory Approval of the Licensed Product by the FDA, Licensee (or its Sublicensees) shall use Commercially Reasonable Efforts to Exploit the Licensed Product in the United States. Licensee shall have the right, but not the obligation, to Exploit the Licensed Product in Canada. In addition, Licensee directly or through a Sublicensee will consummate the Initial Commercial Sale in the United States within nine (9) months after receipt of Regulatory Approval from the FDA for the Licensed Product. Licensee (or its Sublicensee if there is a sublicense agreement) shall have responsibility for all advertising, marketing, promotion, distribution, selling and other commercialization activities, including developing strategies and tactics related to such activities for the Licensed Product. Licensee (or its Sublicensee if a there is a sublicense agreement) shall, at all times during the Term of this Agreement, use efforts, including but not limited to appropriate promotional campaigns and materials, and qualified commercial personnel, consistent with those typically used in the pharmaceutical industry and equal to those committed to products of similar size and expected value to seek to commercialize the Licensed Product in the Territory after receipt of Regulatory Approval for those formulations and indications for which Licensee (or its Sublicensee if a there is a sublicense agreement) is commercializing the Licensed Product. Should Licensee (or its Sublicensee if a there is a sublicense agreement) fail to meet the above 'standard', the Parties will discuss Licensee’s (or its Sublicensee’s if a there is a sublicense agreement) continued commitment to commercialize the Licensed Product and the termination of this Agreement or sublicense agreement, if applicable.
 
3.10 Manufacturing. Except as the Parties otherwise agree pursuant to the terms of an applicable sublicense: 
 
3.10.1 Subject to the other provisions of this Section 3.10.1, Licensee shall be solely responsible for the manufacture of the Licensed Product, both for clinical development and following receipt of Regulatory Approval of the Licensed Product; provided that Licensee may contract with a Third Party to perform such manufacturing services. Licensee shall share all data and other information relating to the manufacturing process and shall consult with NovaDel with respect thereto. Without limiting the generality of the foregoing, NovaDel shall have the opportunity to review, prior to execution, all agreements with Third Parties relating to the manufacture of the Licensed Product. Any disputes between NovaDel and Licensee relating to the manufacture of the Licensed Product shall be resolved in the manner set forth in Section 3.3.3 hereof. NovaDel and its Extraterritorial Licensees retain the right to purchase product from said Third Party, if applicable, at the same costs as Licensee with the exception of an increase of cost due to a modification to the packaging/labeling by NovaDel or any Extraterritorial Licensee.
 
3.10.2 Licensee agrees that, at all times during the performance of the Development Activities, it, or its designee, will act in accordance with all Applicable Laws.
 
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3.10.3 To the extent Licensee contracts with a Third Party to manufacture the Licensed Product, such Third Party shall agree in writing to be bound by the obligations of confidentiality and non-use at least equivalent in scope to those set forth in Article 15 of this Agreement.
 
3.10.4 NovaDel and its Extraterritorial Licensees may purchase Licensed Product under Section 3.10.1 in the identical packaging and labeling as Licensee purchases such Licensed Product for sale in the United States, subject to the requirement by NovaDel and Sublicensees to have such Licensed Product uniquely identified by a separate batch record identification or other indicia sufficient to distinguish sales by NovaDel, or its Extraterritorial Licensees, from those of Licensee.
 
3.10.5 Licensee shall use Commercially Reasonable Efforts to obtain any required licenses, permissions needed and documentation (e.g., Certificate of Pharmaceutical Product) in order for NovaDel and its Extraterritorial Licensees to buy and export Licensed Product from the United States. NovaDel shall reimburse all reasonable expenses incurred by Licensee for obtaining such licenses or permissions within thirty (30) days of an Extraterritorial Licensee’s receipt of an invoice from Licensee itemizing such expenses.
 
3.10.6 NovaDel warrants, covenants and agrees that any license agreement that NovaDel enters into with an Extraterritorial Licensee regarding Licensed Product that are subject to this Agreement shall contain an indemnity clause requiring the Extraterritorial Licensee to indemnify Licensee and its Affiliates against any and all claims, proceedings, demands, liability and expenses of any kind, including legal expenses and attorneys’ fees (collectively, “Claims”), arising out of or in connection with the manufacture, sale, use, consumption, advertisement or other disposition of Licensed Product by the Extraterritorial Licensee, its Affiliates or any end user, or arising from any violation of law, negligence, willful or reckless misconduct, or from any breach of any material obligation of such Extraterritorial Licensee under its agreement with NovaDel, other than Claims resulting from the gross negligence or willful misconduct of Licensee; provided, however, that in no event shall the scope of the indemnification to Licensee be any less than the scope of the Extraterritorial Licensee’s indemnification obligations to NovaDel.
 
ARTICLE 4
ROYALTIES AND OTHER CONSIDERATION
 
4.1 Royalties. As consideration for the rights, privileges and licenses granted hereunder and the Development Activities performed by NovaDel pursuant to Article 3, Licensee shall make the following payments to NovaDel:
 
4.1.1 Licensee shall pay to NovaDel royalties as follows: (i) [***] percent ([***]%) of up to the first $[***] of Net Sales by Licensee or any Affiliate or Sublicensee of Licensee of the Licensed Product during each calendar year in the Territory plus (ii) [***] percent ([***]%) of Net Sales greater than $[***] and up to $[***] by Licensee or any Affiliate or Sublicensee of Licensee of the Licensed Product during each calendar year in the Territory plus (iii) [***] percent ([***]%) of Net Sales greater than $[***] by Licensee or any Affiliate or Sublicensee of Licensee of the Licensed Product during each calendar year in the Territory (see Exhibit B for schedule of royalty calculation).
 
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4.1.2 The conversion rate for payments under Section 4.1.1, as it pertains to sales in Canada, shall be calculated by using the conversion rate on the last day of the calendar quarter for which the sales apply. The conversion rate to be used will be taken from the currency converter at www.oanda.com. Canadian dollar sales will be converted into U.S. dollars and then the royalty rates outlined in Section 4.1.1 will apply.
 
4.1.3 Notwithstanding anything to the contrary contained herein, any and all royalties to be received by Licensee pursuant to the PAR Sublicense Agreement shall be paid to a lock-box account. Accordingly, the Parties agree that, within thirty (30) days after the Execution Date, the Parties and the Sublicensee will take such actions reasonably requested by NovaDel, and enter into documentation in form and substance reasonably satisfactory to NovaDel (including, without limitation, a security agreement, lockbox agreement and irrevocable payment instructions), in order to (i) grant to NovaDel a first priority, perfected security interest in all of Licensee’s right, title and interest under the Par Sublicense Agreement (including without limitation its right to receive payments of the sublicense fees and other amounts payable by Par thereunder) and in and to any lockbox account(s) to which royalty payments thereunder may be made, (ii) perfect NovaDel’s security interest in such lockbox account(s) and provide for remittances therefrom in accordance with the terms in this Agreement and (iii) irrevocably instruct PAR to make all royalty payments under the PAR Sublicense Agreement directly to such lockbox account(s).
 
4.2 Royalty Term. Except as the Parties otherwise agree pursuant to the terms of an applicable sublicense, Licensee’s royalty obligations under Section 4.1.1 shall terminate, on a country-by-country basis, with respect to the Licensed Product upon the later of (a) the expiration or invalidation in such country of the last NovaDel Patent that includes at least one Valid Claim covering the Licensed Product in such country and (b) the twentieth (20th) anniversary of the Execution Date; provided, however, if (i) the last NovaDel Patent that includes at least one Valid Claim covering the Licensed Product in such country expires or is invalidated prior to the twentieth (20th) anniversary of the Execution Date and (ii) and no regulatory exclusivity with respect to such Licensed Product exists in such country (whether as a result of expiration of the exclusivity period or otherwise), then the royalty obligations under Section 4.1.1 in such country shall be reduced in accordance with the terms of Section 4.6.
 
4.3 Royalty Payments. Royalties under Section 4.1.1 shall be payable to NovaDel on a calendar quarterly basis, within forty-five (45) days after the end of each calendar quarter. Licensee will submit to NovaDel documentation to support the total amount of funds spent by the Licensee on pharmaceutical development and clinical studies for the Licensed Product. Licensee will submit along with payment to NovaDel, a quarterly royalty statement in a format mutually agreed by both Parties. Along with the statement will be all supporting documentation comprising of a statement of net sales for the period and copies of actual paid invoices covering clinical supplies, consultants, clinical studies, investigator fees, document preparation, regulatory fees and other direct fees related to development of the Licensed Product,
 
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4.4 Licensee Fee & Equity. Simultaneously with the execution of the Initial Agreement, Licensee issued and sold to NovaDel 73,121 shares of its common stock (the “Licensee Shares”) totaling a value of $500,000. Upon execution of this Agreement, NovaDel will transfer and assign to Licensee all of its right, title and interest in and to the Licensee Shares and Licensee will redeem the Licensee Shares. Such transfer and assignment by NovaDel will be evidenced by a duly executed stock power or other form of assignment and shall be accompanied by the original certificate representing the Licensee Shares.
 
4.5 Milestone Payments.
 
4.5.1 Licensee has paid, and NovaDel hereby acknowledges receipt of, the Milestone Payments in the total sum of $[***], as described in Sections 4.5.1, 4.5.2 and 4.5.3 of the Initial Agreement.
 
4.5.2 Licensee shall pay to NovaDel the additional sum of $[***] within ten (10) Business Days from the date on which the NDA for the Licensed Product is approved by the FDA.
 
4.6 Reduction of Payments. In the event that, or from and after the date on which, (a) no Valid Claim of a NovaDel Patent covering the Licensed Product exists in a country and (b) no regulatory exclusivity with respect to such Licensed Product exists in such country (whether as a result of expiration of the exclusivity period or otherwise), the royalty payments set forth in Section 4.1.1 with respect to the Licensed Product in such country shall be reduced by [***] percent ([***]%).
 
4.7 Mode of Payment. All payments to NovaDel under this Agreement shall be paid in United States Dollars to a bank account in the United States as NovaDel may reasonably designate.
 
4.8 Non-Refundable, Non-Creditable. Subject to Sections 4.9 and 5.2, the amounts paid or payable under this Article 4 shall be non-refundable and non-creditable against any other amounts due NovaDel under this Agreement.
 
4.9 Accounting. The Parties acknowledge that any expenses or costs deducted from Net Sales under this Agreement may be based upon accruals, which accruals will be compliant with GAAP, consistently applied; provided that when the actual results become known relative to any accrued amount, any difference between the actual results and the accrual is reported and accounted for in the next payment due hereunder. To the extent that the difference between such accruals and the actual results has led to an underpayment, Licensee shall pay NovaDel the amount of such underpayment on the next date payment is due to NovaDel hereunder. To the extent that the difference between such accruals and the actual results has led to an overpayment to NovaDel, Licensee may set-off such overpayments against subsequent payments to be made to NovaDel; additionally, if any overpayments remain upon the expiration or termination of this Agreement, NovaDel shall refund such overpayments to Licensee within thirty (30) days of receiving an invoice for such overpayment together with applicable supporting documentation.
 
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ARTICLE 5
REPORTS AND RECORDS
 
5.1 Record Retention. Licensee shall maintain (and shall ensure that its Affiliates and any Sublicensee and its Affiliates shall maintain) complete and accurate books, records and accounts that fairly reflect their respective Net Sales, other income and any milestones payable with respect to Licensed Product in sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with GAAP, which books, records and accounts shall be retained by Licensee until the later of (a) three (3) years after the end of the period to which such books, records and accounts pertain, and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law.
 
5.2 Audit. NovaDel shall have the right to have an independent certified public accounting firm of nationally recognized standing, reasonably acceptable to Licensee, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of Licensee and its Affiliates as may be reasonably necessary to verify the accuracy of such Net Sales, Milestone Payments for any calendar quarter ending not more than thirty-six (36) months prior to the date of such request, and NovaDel may, at its expense, request Licensee to have such an audit conducted of its Sublicensee and its Affiliates, as applicable; provided, however, that in each case NovaDel shall not have the right to conduct more than one such audit in any twelve (12)-month period. The accounting firm shall disclose to each Party whether such Net Sales, Other Income or milestone payments are correct or incorrect and the specific details concerning any discrepancies. NovaDel shall bear the cost of such audit unless the audit reveals an under-reporting or underpayment in excess of the greater of [***] dollars ($[***]) or [***] percent ([***]%) of royalties, Milestone Payments or Sublicense Income payable for such period, in which case Licensee shall bear the cost of the audit, rectify such underpayment and pay NovaDel applicable interest as required by Section 5.5. All payments required under this Section 5.2 shall be due within thirty (30) days of the date NovaDel provides Licensee notice of the payment due. The results of such accounting firm shall be final, absent manifest error.
 
5.3 Reports. Within forty-five (45) days of the end of each quarter of each calendar year, Licensee shall deliver to NovaDel complete and accurate reports, giving such particulars of the business conducted by Licensee during the preceding quarter under this Agreement as shall be pertinent to an accounting for royalties, milestone payments and Other Income hereunder. These shall include at least the following:
 
5.3.1 All Licensed Product used, leased or sold, by or for Licensee or its Affiliates.
 
5.3.2 Total amounts invoiced for Licensed Product used, leased or sold, by or for Licensee or its Affiliates.
 
5.3.3 Deductions applicable in computed “Net Sales” as defined in Section 1.42.
 
5.3.4 Total milestone payments due based on achievement of milestones.
 
5.3.5 Total Net Sales and the royalties due by or for Licensee or its Affiliates or its Sublicensees, including any adjustments pursuant to Section 4.1.
 
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5.3.6 Names and addresses of all Sublicensees and their respective Affiliates and Affiliates of Licensee.
 
5.4 Financial Statements. Within one hundred twenty (120) days of the end of each fiscal year of Licensee, Licensee shall provide NovaDel with a copy of Licensee’s audited financial statements for such year to NovaDel.
 
5.5 Interest. Amounts which are not paid when due and which are not the subject of a bona fide dispute shall accrue interest from the due date until paid, at a rate equal to the then prevailing prime rate of Citibank, N.A., plus [***] percent ([***]%), but in no event exceeding the amount permitted by Applicable Law.
 
5.6 Confidentiality. Each report received by NovaDel shall be treated by NovaDel as if it were “Confidential Information” subject to the terms of Article 15.
 
ARTICLE 6
PATENT PROSECUTION AND MAINTENANCE
 
6.1 Ownership of Information and Inventions. Subject to Section 6.2 and the license grants under Article 2, as between the Parties, NovaDel shall own and retain all right, title and interest in and to any and all: (a) Information and Inventions that are conceived, discovered, developed or otherwise made by or on behalf of either Party (or its Affiliates or its Sublicensees), whether or not patented or patentable, and any and all Patent and other intellectual property rights with respect thereto; and (b) other Information and Inventions, and Patent and other intellectual property rights with respect thereto that are Controlled (other than pursuant to the license grants set forth in Article 2) by either Party, its Affiliates or Sublicensees. Subject to the license grants to Licensee under Article 2, as between the Parties, NovaDel shall own and retain all right, title and interest in and to all Licensed Technology.
 
6.2 Ownership of the Licensed Process. Subject to the license grants to Licensee under Article 2, as between the Parties, NovaDel shall own and retain all right, title and interest in and to the Licensed Process, including any and all Information and Inventions with respect to the Licensed Process (including any Improvements thereto) that are conceived, discovered, developed or otherwise made, by or on behalf of Licensee, its Affiliates or Sublicensees (other than NovaDel and its Affiliates), whether or not patented or patentable, and any and all Patent and other intellectual property rights with respect thereto. Licensee acknowledges and agrees that (a) the licenses granted to it pursuant to Section 2.1 permit Licensee to use the Licensed Process solely for the Exploitation of Licensed Product as provided in this Agreement, (b) Licensee has no right to use the Licensed Process or to discover, develop or otherwise make Improvements with respect to the Licensed Process under such grants, and (c) neither it, nor any of its Affiliates or Sublicensees, will engage, directly or indirectly, in activities designed to, or otherwise undertake or attempt, either on behalf of itself or another, to discover, develop or make any Information and Inventions that relate to the Licensed Process. Accordingly, Licensee shall promptly disclose to NovaDel in writing, the conception or reduction to practice, or the discovery, development or making of any such Information and Inventions that relate to the Licensed Process and shall, and does hereby, assign, and shall cause its Affiliates and Sublicensees to so assign, to NovaDel, without additional compensation, all of their respective rights, titles and interests in and to any such Information and Inventions.
 
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6.3 Disclosure and Assignment. Licensee or its Sublicensee, as applicable, shall promptly disclose to NovaDel in writing, the conception or reduction to practice, or the discovery, development or making of all intellectual property rights identified in Sections 6.1 and 6.2, and shall, and does hereby, assign, and shall cause its respective Affiliates to so assign, to NovaDel, without additional compensation, all of their respective rights, titles and interests in and to any such intellectual property rights. To the extent necessary to assign any such intellectual property rights, Licensee or its Sublicensee, as applicable, shall enter into and execute all reasonable and appropriate assignments, transfers and other agreements, and enter into all agreements with its employees, contractors, and Affiliates, that are necessary or appropriate to ensure the assignment of such intellectual property rights to NovaDel. For the avoidance of doubt, all such intellectual property rights shall be included in the Licensed Technology, and Licensee or its Sublicensee, as applicable, shall be entitled to use such intellectual property rights in accordance with the licenses granted pursuant to Article 2.
 
6.4 Non-Use of Trademarks. Except as set forth explicitly in this Agreement, neither Licensee or any of its Sublicensees or Affiliates nor NovaDel shall have the right to use the trademarks, trade names or logos of the other parties, nor any adaptation thereof, nor the names of any employees or consultants of any of the other parties, without the prior written consent of such other party in each instance, except that any party may use any other party’s name in its general list of collaborators and any party may use any other party’s name to the extent required by Applicable Law, including pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended, and the rules and regulations thereunder.
 
6.5 United States Law. The determination of whether Information and Inventions are conceived, discovered, developed or otherwise made by a Party for the purpose of allocating proprietary rights (including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in accordance with applicable United States law.
 
6.6 Prosecution of Patents. Except as the Parties otherwise agree pursuant to the terms of an applicable sublicense:
 
6.6.1 Prosecution of NovaDel Patents. As between the Parties, NovaDel shall have the sole right, at its cost and expense, to obtain, prosecute and maintain throughout the world the NovaDel Patents; provided, however, that Licensee shall reimburse NovaDel for [***] percent ([***]%) of the reasonable out-of-pocket costs incurred by NovaDel, as of the Effective Date, for filing, prosecuting and maintaining such NovaDel Patents to the extent that they claim or cover solely the Exploitation of the Licensed Product in the Territory. Licensee shall, and shall cause its Affiliates and Sublicensees, as applicable, to, cooperate fully with NovaDel in the preparation, filing, prosecution, and maintenance of NovaDel’s Patents. Such cooperation includes (a) promptly executing all papers and instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable NovaDel to file, prosecute, and maintain its Patents in any country; and (b) promptly informing NovaDel of matters that may affect the preparation, filing, prosecution, or maintenance of any such Patents. NovaDel shall provide Licensee with drafts of all patent applications and other material submissions to and correspondence with any patent authorities to the extent such applications or submissions relate to the Licensed Technology (other than the Licensed Process), in sufficient time, but in any event not less than thirty (30) days prior to the date a reply is required by the relevant patent authorities, to allow for review and comment by Licensee. In addition, NovaDel shall provide Licensee with an opportunity to consult with NovaDel regarding the filing and contents of any such application, submission or correspondence. If Licensee provides to NovaDel comments with respect to any such application, submission or correspondence, to the extent such comments relate to any Licensed Technology (other than the Licensed Process), NovaDel agrees to reasonably consider such comments, it being understood that NovaDel retains the right to determine whether to comply with or incorporate such comments, if at all. If (x) NovaDel elects not to pursue the filing, prosecution or maintenance of a NovaDel Patent in a particular country, or to take any other action with respect to a NovaDel Patent in a particular country that is necessary or useful to establish or preserve rights with respect to the Licensed Product, and (y) such Patent does not claim or cover the Licensed Process, then NovaDel shall so notify Licensee promptly in writing and in good time to enable Licensee to meet any deadlines by which an action must be taken to establish or preserve any such rights in such NovaDel Patent in such country. Upon receipt of any such notice by NovaDel or if, at any time, NovaDel fails to initiate any such action within thirty (30) days after a request by Licensee that it do so (and thereafter diligently pursue such action), Licensee shall have the right, but not the obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such NovaDel Patent at its expense in such country. If Licensee elects to pursue such filing or registration, as the case may be, or continue such support, then Licensee shall notify NovaDel of such election and NovaDel shall, and shall cause its Affiliates to, (x) reasonably cooperate with Licensee in this regard, and (y) promptly grant to Licensee, without additional consideration, an exclusive, perpetual, irrevocable, royalty-free license in such country under such NovaDel Patent.
 
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6.7 Enforcement of NovaDel Patents. Except as the Parties otherwise agree pursuant to the terms of an applicable sublicense: 
 
6.7.1 Technology of NovaDel. If either Party determines that any Technology or NovaDel or any joint Technology is being infringed by a Third Party’s activities and that such infringement could affect the exercise by the Parties of their respective rights and obligations under this Agreement, it shall promptly notify such other Party in writing and provide such other Party with any evidence of such infringement that is reasonably available. Promptly after the receipt of such written notice, the Parties shall meet and discuss in good faith the removal of such infringement. NovaDel shall consider in good faith any comments from Licensee and shall keep Licensee reasonably informed of any steps taken to remove such infringement. NovaDel shall have the first right, but not the obligation, to remove such infringement at its sole cost and expense; provided, however, that Licensee shall reimburse NovaDel for one hundred percent (100%) of the reasonable out-of-pocket costs incurred by NovaDel with respect to the removal of any such infringement to the extent that such infringement adversely affects the Exploitation of the Licensed Product in the Territory. In the event that NovaDel fails within ninety (90) days following notice of such infringement, or earlier notifies Licensee in writing of its intent not, to take commercially appropriate steps to remove any infringement of any NovaDel Patent that is likely to have a material adverse effect on the sale of a Licensed Product, Licensee shall have the right to do so at Licensee’s expense; provided, however, that if NovaDel has commenced negotiations with an alleged infringer for discontinuance of such infringement within such ninety (90) day period, NovaDel shall have an additional ninety (90) days to conclude its negotiations before Licensee may bring suit for such infringement, and provided further that Licensee shall not enter into any settlement or compromise with respect to any NovaDel Patent without NovaDel’s prior consent, which consent shall not be unreasonably withheld. Each Party shall provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action. Any amounts recovered by a Party pursuant to this Section, whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being retained by the Party that brought the enforcement action; provided, however, that to the extent that any award is attributable to the loss of sales of Licensed Product, such amount shall be paid to Licensee and shall be treated as Net Sales on which royalties shall be due under Article 4. 
 
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6.8 Potential Third Party Rights. Except as the Parties otherwise agree pursuant to the terms of an applicable sublicense:
 
6.8.1 Third-Party Licenses. If (a) in the opinion of outside patent counsel to Licensee, Licensee, or any of its Affiliates or Sublicensees, cannot Exploit a Licensed Product in a country in the Territory without infringing one or more Patents that have issued to a Third Party in such country, or (b) as a result of any claim made against a Party, or any of its Affiliates or Sublicensees, alleging that the Exploitation of a Licensed Product infringes or misappropriates any Patent or any other intellectual property right of a Third Party in a country in the Territory, a judgment is entered by a court of competent jurisdiction from which no appeal is taken within the time permitted for appeal, such that Licensee cannot Exploit such Licensed Product in such country without infringing the Patent or other proprietary rights of such Third Party, then, in either case, Licensee shall have the first right, but not the obligation to negotiate and to obtain a license from such Third Party as necessary for the Exploitation of any Licensed Product hereunder in such country; provided, however, that NovaDel shall have the sole right to seek any such license with respect to the Licensed Process and shall use commercially reasonable efforts to obtain such a license in its own name from such Third Party in such country, under which NovaDel shall, to the extent permissible under such license, grant a sublicense to Licensee as necessary for Licensee, and any of its Affiliates and Sublicensees, to Exploit the Licensed Product as provided hereunder in such country. Licensee shall be solely responsible for [***] percent ([***]%) of all royalty and other obligations with respect to the Exploitation of the Licensed Product; provided, however, that Licensee shall have the right to credit [***] percent ([***]%) any royalties paid by Licensee, its Affiliates or Sublicensees under such license with respect to such country against the royalty payments to be paid by Licensee to NovaDel with respect to the sale of the Licensed Product under Section 4.1; provided, however, that no royalty payment when due, regardless of the amount or number of credits available to Licensee in accordance with this Agreement, shall be reduced by more than [***] percent ([***]%) of the amounts otherwise owed pursuant to Section 4.1 in any calendar quarter. Credits not exhausted in any calendar quarter may be carried into future calendar quarters. 
 
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6.8.2 Third Party Litigation. In the event that a Third Party institutes a patent or other infringement suit (including any suit alleging the invalidity or unenforceability of the Patents of a Party or its Affiliates) against either Party or its respective Affiliates, licensees or Sublicensees during the Term, alleging use of the Licensed Technology or any other activities hereunder, infringes one or more patent or other intellectual property rights held by such Third Party (an “Infringement Suit”), the Parties shall cooperate with one another in defending such suit. NovaDel shall have the first right to direct and control any Infringement Suit to the extent that it relates to the use of the Licensed Technology or the Licensed Process; provided that Licensee shall bear [***] percent ([***]%) of the costs and expenses associated with any such Infringement Suit to the extent that it relates to the Exploitation of the Licensed Product.
 
6.8.3 Retained Rights. Nothing in this Section 6.8 shall prevent Licensee or its Sublicensee, as applicable, at its own expense, from obtaining any license or other rights from Third Parties it deems appropriate in order to permit the full and unhindered exercise of its rights under this Agreement.
 
ARTICLE 7
TERM OF THE AGREEMENT
 
7.1 Term. Unless otherwise terminated pursuant to Article 8, this Agreement shall enter into effect on the Effective Date and shall remain in full force and effect on a country-by-country basis until the later of (a) the expiration or invalidation in such country of the last NovaDel Patent that includes at least one Valid Claim covering the Licensed Product in such country and (b) the twentieth (20th) anniversary of the Execution Date (the “Term”).
 
ARTICLE 8
TERMINATION
 
8.1 Termination Upon Insolvency. If Licensee shall become bankrupt, or shall file a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee or of its assets, or if an involuntary petition for any of the foregoing shall be filed with respect to Licensee and not dismissed within sixty (60) days, or if the business of Licensee shall be placed in the hands of a receiver, assignee or trustee for the benefit of creditors, whether by the voluntary act of Licensee or otherwise, this Agreement shall automatically terminate.
 
8.2 Termination for Payment Default. Should Licensee fail to make payment to NovaDel of royalties or other amounts due in accordance with the terms of this Agreement, NovaDel shall have the right to terminate this Agreement within ten (10) days after giving said notice of termination unless Licensee shall pay to NovaDel, within the 10-day period, all such amounts due and payable. Upon the expiration of the 10-day period, if Licensee shall not have paid all such amounts due and payable, the rights, privileges and licenses granted hereunder shall, at the option of NovaDel, immediately terminate. In the event a payment is the subject of a bona fide dispute between NovaDel and Licensee that is being pursued by a Party pursuant to the dispute resolution mechanism in Article 9, then Licensee shall make such payment, but shall provide NovaDel with written notice that such payment is being made subject to the outcome of such pending dispute resolution procedure and in the event such dispute is finally and conclusively resolved in favor of Licensee, NovaDel shall refund such payment to Licensee with interest calculated pursuant to Section 5.5 from the date of such payment.
 
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8.3 Termination for Material Breach. Upon any material breach or default of this Agreement by either Party, other than as set forth in Section 8.2, and subject to Section 2.4.3, the other Party shall have the right to terminate this Agreement and the rights, privileges and licenses granted hereunder upon giving thirty (30) days notice to the breaching Party. Such termination shall become effective upon the expiration of such thirty (30) day period unless the breaching Party shall have cured any such breach or default prior to the expiration of such thirty (30) day period.
 
8.4 Termination By The Licensee. Licensee shall have the right at any time to terminate this Agreement in whole or as to any Licensed Product (i) by giving 90 days notice thereof in writing to NovaDel or (ii) if Licensee elects not to effect the Milestone Payment which is due and payable as provided in Section 4.5.2.
 
8.5 Survival. Any expiration or termination of this Agreement shall not affect the rights and obligations of the Parties accrued prior to such expiration or termination. Without limiting the foregoing, Articles 4, 5, 6, 9, 10, 11, 14, 15 and 16 and Sections 8.6, 8.7, 16.1, 16.7 and this Section 8.5 shall survive the termination or expiration of this Agreement for any reason.
 
8.6 Work-in-Progress. Licensee and/or any Sublicensee thereof may, however, after the effective date of such termination and continuing for a period not to exceed six (6) months thereafter, sell all completed Licensed Product, and any Licensed Product in the process of manufacture at the time of such termination, and sell the same, provided that Licensee shall pay or cause to be paid to NovaDel the royalties thereon as required by Article 4 of this Agreement and shall submit the reports required by Article 5 hereof on the sales of Licensed Product.
 
8.7 Return of Information; Assignment and License.
 
8.7.1 Upon termination of this Agreement, Licensee shall, and shall cause its Affiliates and Sublicensees, as applicable, to return to NovaDel any and all data, files, records and other materials in its possession or control that relate to the Licensed Technology or contain or comprise NovaDel’s Information and Inventions or other Confidential Information (except one copy of each that may be retained for archival purposes).
 
8.7.2 Upon the termination of this Agreement, Licensee (a) shall, and shall cause its Affiliates and, subject to Section 8.7.3, Sublicensees to, promptly disclose to NovaDel, in whatever form NovaDel may request, all Regulatory Documentation and all other Information and Inventions in the possession or Control of Licensee, its Affiliates or Sublicensees that relate to the Exploitation of such Licensed Product, (b) shall, and does hereby, assign, and shall cause its Affiliates and, subject to Section 8.7.3, Sublicensees to assign, to NovaDel, without additional compensation, all of their respective rights, titles and interests in and to any and all (i) patent, trademark, copyright or other intellectual property rights, and (ii) Regulatory Documentation and all data included or referenced therein (the “Agreement-Related Assets”) and are permitted to be assigned, (c) to the extent that the Agreement-Related Assets may not be assigned, shall, and does hereby, grant, and shall cause its Affiliates and, subject to Section 8.7.3, Sublicensees to grant, to NovaDel, without additional compensation, a perpetual, irrevocable, royalty-free, exclusive, sublicenseable through multiple tiers of sublicensees, right and license to Exploit such Licensed Product in the Territory, and (d) shall, and does hereby, and shall cause its Affiliates and, subject to Section 8.7.3, Sublicensees to, assign to NovaDel, without additional compensation, all of their respective rights, titles and interests in and to any and all other Information and Inventions in the possession or control of Licensee and its Affiliates or any Sublicensee and its Affiliates in each case that relate to the Exploitation of such Licensed Product to the extent not already assigned to NovaDel pursuant to Sections 6.1 or 6.2.
 
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8.7.3 Notwithstanding anything contained in Sections 8.7.1 and 8.7.2, in the event that any sublicense granted by Licensee survives pursuant to Section 2.4.3, the Sublicensee may retain (a) the information and materials identified in Section 8.7.1 that are rightfully in its possession and (b) Agreement-Related Assets, in each case until the termination of such sublicense, whereupon such Sublicensee shall return such materials to NovaDel.
 
8.8 Cumulative Remedies. The rights and remedies set forth in this Article 8 are cumulative and in addition to any other rights that may be available to the Parties.
 
8.9 Non-Refundability of Milestones and Development Costs. Any and all Milestone Payments made to NovaDel by Licensee under Article 4 of this Agreement shall be non-refundable in the event of termination of this Agreement by either Party under any of the provisions of Article 8.
 
ARTICLE 9
ARBITRATION
 
9.1 Procedures. Any dispute arising from or relating to this Agreement shall be determined before a tribunal of three arbitrators in New York, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “AAA”). One arbitrator shall be selected by NovaDel, one arbitrator shall be selected by Licensee and the third arbitrator shall be selected by mutual agreement of the first two arbitrators or by the AAA, if the arbitrators appointed by the Parties are unable to select a third arbitrator within thirty (30) days.
 
9.2 Patent Disputes. Any claim, dispute, or controversy concerning the validity, enforceability, or infringement of any patent contained in the NovaDel Patents licensed hereunder shall be resolved in any court having jurisdiction thereof. In the event that, in any arbitration proceeding, any issue shall arise concerning the validity, enforceability, or infringement of any patent contained in the NovaDel Patents licensed hereunder, the arbitrators shall, to the extent possible, resolve all issues other than validity, enforceability, and infringement; in any event, the arbitrators shall not delay the arbitration proceeding for the purpose of obtaining or permitting either Party to obtain judicial resolution of such issues, unless an order staying the arbitration proceeding shall be entered by a court of competent jurisdiction. Neither Party shall raise any issue concerning the validity, enforceability, or infringement of any patent contained in the NovaDel Patents licensed hereunder, in any proceeding to enforce any arbitration award hereunder, or in any proceeding otherwise arising out of any such arbitration award.
 
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9.3 Costs. The costs of such arbitration shall be borne proportionate to the finding of fault as determined by the arbitration panel. Judgment on the arbitration award may be entered by any court of competent jurisdiction.
 
ARTICLE 10
INDEMNIFICATION AND INSURANCE
 
10.1 Indemnification of NovaDel. Subject to any Sublicensee’s first obligations to directly indemnify, defend and hold NovaDel harmless under an applicable sublicense agreement, Licensee shall defend, indemnify and hold NovaDel, its Affiliates, and their respective directors, officers, employees and agents harmless from and against all liability, demands, damages, including expenses or losses including death, personal injury, illness or property damage (collectively, “Losses”) arising directly or indirectly out of any: (a) breach of this Agreement by Licensee, its Affiliates, Sublicensees or permitted assigns or transferees; (b) actual or asserted violations of Applicable Law by Licensee, its Affiliates, Sublicensees or permitted assignees or transferees; (c) use by Licensee, its Affiliates, Sublicensees or permitted assignees or transferees of the Licensed Technology or (d) Exploitation of the Licensed Product by Licensee, its Affiliates, Sublicensees or permitted assignees or transferees, except for those Losses for which NovaDel has an obligation to indemnify Licensee and its Affiliates pursuant to Section 10.2, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses and other than as a result of NovaDel’s gross negligence, recklessness or willful misconduct.
 
10.2 Indemnification of Licensee. Subject to any Sublicensee’s first obligations to directly indemnify, defend and hold Licensee harmless under an applicable sublicense agreement, NovaDel shall defend, indemnify and hold Licensee, its Affiliates, and their respective directors, officers, employees and agents harmless from and against all Losses arising directly or indirectly out of any: (a) breach of this Agreement by NovaDel or its Affiliates; or (b) actual or asserted violations of Applicable Law by NovaDel or its Affiliates, except for those Losses for which Licensee has an obligation to indemnify NovaDel and its Affiliates pursuant to Section 10.1, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses.
 
10.3 Indemnification Procedure.
 
10.3.1 Notice of Claim. The indemnified party shall give the indemnifying Party prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such indemnified party intends to base a request for indemnification under Section 10.1 or Section 10.2, but in no event shall the indemnifying Party be liable for any Losses that result from any delay in providing such notice. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss is known at such time). The indemnified party shall furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any Losses. All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents shall be made solely by such party (the “Indemnified Party”).
 
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10.3.2 Third Party Claims. The obligations of an indemnifying Party under this Article 10 with respect to Losses arising from claims of any Third Party that are subject to indemnification as provided for in Sections 10.1 or 10.2 (a “Third Party Claim”) shall be governed by and be contingent upon the following additional terms and conditions:
 
(a) Control of Defense. At its option, the indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying Party is liable to indemnify any Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any defenses it may assert against any Indemnified Party’s claim for indemnification. Upon assuming the defense of a Third Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the indemnifying Party. In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the indemnifying Party all original notices and documents (including court papers) received by any Indemnified Party in connection with the Third Party Claim. Should the indemnifying Party assume the defense of a Third Party Claim, the indemnifying Party shall not be liable to the Indemnified Party or any other Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless an Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of the Third Party Claim with respect to such Indemnified Party.
 
(b) Right to Participate in Defense. Without limiting Section 10.3.2(a), any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof has been specifically authorized by the indemnifying Party in writing or (ii) the indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 10.3.2(a) (in which case the Indemnified Party shall control the defense).
 
(c) Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnified Party in any manner, and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 10.3.2(a), the indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an Indemnified Party that is reached without the written consent of the indemnifying Party. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the indemnifying Party.
 
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(d) Cooperation. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other Indemnified Party to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.
 
(e) Expenses. Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a calendar quarter basis by the indemnifying Party, without prejudice to the indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.
 
10.4 Insurance. 
 
10.4.1 At all times from and after the Effective Date, Licensee or its Sublicensee shall have and maintain such type and amounts of liability insurance covering the manufacture, supply, use and sale of the Licensed Product as is normal and customary in the pharmaceutical industry generally for parties similarly situated, and shall upon request provide NovaDel with a copy of its policies of insurance in that regard, along with any amendments and revisions thereto.
 
10.4.2 At all times from and after the Effective Date, NovaDel shall have and maintain such type and amounts of liability insurance covering the manufacture, supply, use and sale of the Licensed Product as is normal and customary in the pharmaceutical industry generally for parties similarly situated, and shall upon request provide the Licensee with a copy of its policies of insurance in that regard, along with any amendments and revisions thereto.
 
10.4.3  Each of Licensee and NovaDel shall, starting 6 months prior to anticipated receipt of NDA approval of Licensed Product and extending through the remaining term of this Agreement and for a period of not less than 36 months following the termination of this Agreement, carry liability insurance (including blanket contractual liability) in an amount of not less than $[***] combined single limit, which insurance will be written on a “claims-made” policy basis with an insurance carrier reasonably acceptable to the other Party. Each Party shall provide the other Party with evidence of coverage contemplated hereby, in the form of certificates of insurance, as reasonably requested. Such certificates shall be provided by written notice to the other Party 15 days prior to any material change, cancellation or non-renewal of the policy. The said amount can vary if mutually agreed by both Parties.
 
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ARTICLE 11
REPRESENTATIONS AND WARRANTIES;
LIMITATION OF LIABILITY
 
11.1 Representations, Warranties and Covenants. Each Party hereby represents and warrants to the other Party as of the Effective Date as follows:
 
11.1.1  Duly Organized. Such Party is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as is contemplated to be conducted by this Agreement.
 
11.1.2 Corporate Authority. Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, and (b) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. The Agreement has been duly executed and delivered on behalf of such Party and is enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered in a proceeding at law or in equity.
 
11.1.3 Litigation. Such Party is not aware of any pending or threatened litigation (and has not received any communication) that alleges that such Party’s activities related to this Agreement have violated, or that by conducting the activities as contemplated herein such Party would violate, any of the intellectual property rights of any other Entity.
 
11.1.4 Consents, Approvals, etc. All necessary consents, approvals and authorizations of all regulatory and governmental authorities and other Entities required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.
 
11.1.5 Conflicts. The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of Applicable Law or regulation or any provision of the articles of incorporation, bylaws, or any similar constitutive document of such Party, as applicable, in any material way, and (b) do not conflict with, violate, or breach or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.
 
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11.2 Additional Representations, Warranties and Covenants of NovaDel. NovaDel hereby represents and warrants and, on behalf of its Affiliates, agrees and covenants as follows:
 
11.2.1 NovaDel represents and warrants to Licensee that, to its Knowledge, as of the Effective Date, NovaDel is the owner or (sub)licensee (with the right to grant sublicenses to Licensee as contemplated under this Agreement) of the NovaDel Patents, and has all right, title, and interest in and to the NovaDel Patents, including exclusive, absolute, irrevocable right, title and interest thereto, free and clear of all liens, charges, encumbrances or other restrictions or limitations of any kind whatsoever and to the NovaDel’s knowledge and belief there are no licenses, options, restrictions, liens, rights of Third Parties, disputes, royalty obligations, proceedings or claims relating to, affecting, or limiting its rights or the rights of the Licensee under this Agreement with respect to, or which may lead to a claim of infringement or invalidity regarding, any part or all of the Licensed Technology and their use as contemplated in the underlying patent applications as presently drafted. The NovaDel Patents have not, as of the Effective Date, been held by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part; 
 
11.2.2 To NovaDel’s knowledge and belief there is no claim, pending or threatened, of infringement, interference or invalidity regarding, any part or all of the Licensed Technology and their use as contemplated in the underlying patent applications as presently drafted;
 
11.3 Additional Representations, Warranties and Covenants of Licensee. Licensee hereby represents and warrants and, on behalf of itself and its Affiliates, agrees and covenants as follows:
 
11.3.1 To the extent permitted by Applicable Law, in any country, region or jurisdiction in the Territory, Licensee, on behalf of its Affiliates, agrees and covenants never to institute or prosecute any claim, action or suit at law or in equity seeking to have any claim in a NovaDel Patent declared invalid or unenforceable; provided, however, that nothing contained herein shall prohibit Licensee and its Affiliates and Sublicensees from either (a) asserting any and all defenses available to it, including assertions relating to the validity or enforceability of the NovaDel Patents, in any suit or proceeding brought against them alleging the infringement of any of the NovaDel Patents, or (b) asserting any and all defenses, evidence and arguments, including lack of patentability of the subject matter of a count or claim and lack of support for a count or claim, in any interference involving a patent or patent application owned by Licensee or its Affiliates or Sublicensees and a patent or patent application included within the definition of the NovaDel Patents.
 
11.3.2 Except as the Parties otherwise agree pursuant to the terms of an applicable sublicense, Licensee shall include covenants in its agreements with each of its Sublicensees materially identical to those Licensee is making in Sections 11.3.1 and 11.3.2 on the part of the Sublicensee, and shall provide that NovaDel shall have march-in right to seek termination of such agreement in the event the Sublicensee breaches the covenant. NovaDel’s right to seek termination of such agreement with the Sublicensee shall be subject to notice, cure and dispute resolutions provisions materially identical to the provisions set forth in Article 9. Licensee and its Affiliates will take all reasonable action (including signing required documents) and offer full cooperation to allow NovaDel to exercise the march-in rights provided herein, to the extent permitted by law.
 
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11.4 DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 11.1, 11.2 AND 11.3, NEITHER NOVADEL NOR LICENSEE MAKE ANY REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, UNDER THIS AGREEMENT, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES UNDER THIS AGREEMENT.
 
11.5 LIMITATION OF LIABILITY. EXCEPT FOR EACH PARTY’S INDEMNIFICATION OBLIGATIONS IN RESPECT OF THIRD PARTY CLAIMS UNDER THIS AGREEMENT, NONE OF NOVADEL OR ANY OF ITS AFFILIATES OR LICENSEE OR ANY OF ITS AFFILIATES OR ANY SUBLICENSEE OR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING FOR LOST PROFITS), WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (A) THE USE OF THE LICENSED TECHNOLOGY OR (B) ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT.
 
ARTICLE 12
ASSIGNMENT
 
This Agreement and the rights and duties appertaining hereto may not be assigned by either Party without first obtaining the written consent of the other which consent shall not be unreasonably withheld. Any such purported assignment, without the written consent of the other Party, shall be null and of no effect. Notwithstanding the foregoing, Licensee may assign this Agreement (i) to a purchaser, merging or consolidating corporation, or acquiror of substantially all of Licensee’s assets or business and/or pursuant to any reorganization qualifying under section 368 of the Internal Revenue Code of 1986, as amended, and as may be in effect at such time, or (ii) to an Affiliate of Licensee subject to the consent of NovaDel which consent shall not be reasonably withheld.

ARTICLE 13
USE OF NAMES AND PUBLICATION
 
13.1 Publicity. No Party hereto shall originate any publicity, news release or other public announcement, written or oral, relating to this Agreement or the existence of a collaboration among the Parties, without the prior written approval of the other Parties except as otherwise permitted by this Agreement or required, in the reasonable judgment of the disclosing Party’s attorneys, by Applicable Law, including the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended, and the rules and regulations thereunder or as promulgated by an applicable securities exchange governing body.
 
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13.2 Relationship of the Parties. Nothing herein shall be deemed to establish a relationship of principal and agent between NovaDel and Licensee, nor any of their agents or employees for any purpose whatsoever. This Agreement shall not be construed as creating a partnership between NovaDel and Licensee, or as creating any other form of legal association or arrangement which would impose liability upon one Party for the act or failure to act of the other Party.
 
13.3 Publications. In the event that either Party desires to publish or disclose, by written, oral or other presentation, Licensed Technology or any material information related thereto, then such Party shall notify the other in writing of its intention at least sixty (60) days prior to any speech, lecture or other oral presentation and at least sixty (60) days before any written or other publication or disclosure, and shall include with such notice a description of any proposed oral presentation or, with respect to any proposed written or other disclosure, a current draft of such proposed disclosure or abstract. NovaDel may request that Licensee or its Sublicensee, no later than thirty (30) days following the receipt of such notice, delay such presentation, publication or disclosure in order to enable NovaDel to file, or have filed on its behalf or jointly, as applicable, a patent application, copyright or other appropriate form of intellectual property protection related to the information to be disclosed or request that Licensee or its Sublicensee do so. Upon receipt of such request to delay such presentation, publication or disclosure, Licensee or its Sublicensee shall arrange for a delay of such presentation, publication or disclosure until such time as Licensee or its Sublicensee or NovaDel has filed, or had filed on its behalf, such patent application, copyright or other appropriate form of intellectual property protection in form and in substance reasonably satisfactory to NovaDel. If Licensee or its Sublicensee does not receive any such request from NovaDel to delay such presentation, publication or disclosure, Licensee or its Sublicensee may submit such material for presentation, publication or other form of disclosure. Notwithstanding the foregoing, in no event shall Licensee or its Sublicensee have any right to publish or disclose the Licensed Process or any information or data related thereto without the prior written consent of NovaDel, which consent NovaDel may withhold in its sole discretion.
 
ARTICLE 14
PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
 
All notices or other communications that are required or permitted hereunder shall be in writing and delivered personally, sent by telecopier (and promptly confirmed by personal delivery, registered or certified mail or overnight courier as provided herein), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
 
If to NovaDel to:
 
NovaDel Pharma Inc.
25 Minneakoning Road
 
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Flemington, NJ 08822
Attention: President
908.806.2445 (fax)
 
with a copy (not constituting notice) to:
 
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ 08540
Attention: Randall B. Sunberg, Esq.
Fax: (609) 919-6701

If to Licensee to:
 
Hana Biosciences, Inc.
7000 Shoreline Court, Suite 370
South San Francisco, California 94080
Attention: President
Fax: (650) 588-2787
 
with a copy (not constituting notice) to:
 
Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Christopher J. Melsha, Esq.
Fax: (612) 642-8343

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such communication shall be deemed to have been given (a) when delivered, if personally delivered or sent by telecopier on a business day, (b) on the business day after dispatch, if sent by nationally-recognized overnight courier, and (c) on the third business day following the date of mailing, if sent by mail. It is understood and agreed that this Article 14 is not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement.
 
ARTICLE 15
CONFIDENTIALITY
 
15.1 Definition. “Confidential Information” of a Party shall mean all information and know-how and any tangible embodiments thereof provided by or on behalf of such Party to the other Party either in connection with the discussions and negotiations pertaining to, or in the course of performing, this Agreement, including the terms of this Agreement; the Designated Compound; data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, marketing and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business. For purposes of this Agreement, notwithstanding the Party that disclosed such information or know-how, all NovaDel Know-How and all Information and Inventions with respect to the Licensed Process shall be Confidential Information of NovaDel.
 
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15.2 Exclusions. Notwithstanding the foregoing, information or know-how of a Party shall not be deemed Confidential Information with respect to a receiving Party for purposes of this Agreement if such receiving Party can affirmatively demonstrate through the production of written documentation that such information or know-how:
 
15.2.1 was already known to the receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, at the time of disclosure to such receiving Party;
 
15.2.2 was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to such receiving Party;
 
15.2.3 became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such receiving Party through no fault of a Party other than the Party that Controls such information and know-how;
 
15.2.4 was disclosed to such receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, by a Third Party who had no obligation to the Party that Controls such information and know-how not to disclose such information or know-how to others; or
 
15.2.5 was independently discovered or developed by such receiving Party or its Affiliates, as evidenced by their written records, without the use of Confidential Information belonging to the Party that Controls such information and know-how, except with respect to the NovaDel Know-How with respect to the Licensed Process, which shall be and remain Confidential Information of NovaDel.
 
Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of a Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of such Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of a Party merely because individual elements of such Confidential Information are in the public domain or in the possession of such Party unless the combination and its principles are in the public domain or in the possession of such Party.

15.3 Disclosure and Use Restriction.  Except as expressly provided herein, the Parties agree that during the Term of this Agreement, and for five (5) years thereafter, each Party and its Affiliates and sublicensees shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose except for the purposes contemplated by this Agreement any Confidential Information of the other Party, its Affiliates or Sublicensees.
 
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15.4 Authorized Disclosure. Each Party may disclose Confidential Information of the other Party to the extent that such disclosure is:
 
15.4.1 Required by Governmental Order. Made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial or local governmental or regulatory body of competent jurisdiction; provided, however, that such Party shall first have given notice to such other Party and given such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;
 
15.4.2 Required by Law. Otherwise required by law; provided, however, that the disclosing Party shall (a) provide the other Party with reasonable advance notice of and an opportunity to comment on any such required disclosure, (b) if requested by such other Party, seek confidential treatment with respect to any such disclosure to the extent available, and (c) use good faith efforts to incorporate the comments of such other Party in any such disclosure or request for confidential treatment;
 
15.4.3 Required by Regulatory Authority. Made by such Party to the Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information; or
 
15.4.4 Required by Agreement. Made by such Party, in connection with the performance of this Agreement, to Affiliates, Sublicensees, research parties, employees, consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 15.
 
15.5 Press Releases. Press releases or other similar public communication by either Party relating to this Agreement, shall be approved in advance by the other Party, which approval shall not be unreasonably withheld or delayed, except for those communications required by Applicable Law (which shall be provided to the other Party as soon as practicable after the release or communication thereof), disclosures of information for which consent has previously been obtained, and information of a similar nature to that which has been previously disclosed publicly with respect to this Agreement, each of which shall not require advance approval.
 
ARTICLE 16
MISCELLANEOUS PROVISIONS
 
16.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
 
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16.2 Registration. If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, Licensee or its Sublicensee, as applicable, shall assume all legal obligations to do so and the costs in connection therewith.
 
16.3 Trade Regulations. Licensee or its Sublicensee and its Affiliates shall observe all applicable United States and foreign laws with respect to the transfer of Licensed Product and related technical data to foreign countries, including the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.
 
16.4 Entire Agreement. The Parties hereto acknowledge that this Agreement, including the Appendices and documents incorporated by reference, sets forth the entire agreement and understanding of the Parties hereto as to the subject matter hereof, and shall not be subject to any change of modification except by the execution of a written instrument subscribed to by the Parties hereto. This Agreement shall supersede all previous communications, representations or understandings, either oral or written, between the Parties relating to the subject matter hereof, including the Initial Agreement.
 
16.5 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties herein. To the fullest extent permitted by Applicable Law, each Party hereby waives any provision of law that would render any provision prohibited or unenforceable in any respect.
 
16.6 Waiver. The waiver by a Party of a breach or a default of any provision of this Agreement by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provision, nor shall any delay or omission on the part of a Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder operate as a waiver of any right, power or privilege by such Party.
 
16.7 Equitable Relief. Each Party acknowledges and agrees that the restrictions set forth in Articles 6 and 16 of this Agreement are reasonable and necessary to protect the legitimate interests of the other Party and that such other Party would not have entered into this Agreement in the absence of such restrictions, and that any violation or threatened violation of any provision of Article 6 and 16 may result in irreparable injury to such other Party. Each Party also acknowledges and agrees that in the event of a violation or threatened violation of any provision of Article 6 and 16, the other Party shall be entitled to seek preliminary and permanent injunctive relief, without the necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits and other benefits arising from any such violation. The rights provided in the immediately preceding sentence shall be cumulative and in addition to any other rights or remedies that may be available to such other Party. Nothing in this Section 16.7 is intended, or should be construed, to limit such other Party’s right to preliminary and permanent injunctive relief or any other remedy for breach of any other provision of this Agreement.
 
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16.8 Force Majeure. In the event that a Party fails to perform any of its obligations under this Agreement (other than an obligation to pay money) due to any act of God, fire, casualty, flood, war, strike, lockout, failure of public utilities, injunction, act of a governmental authority (including enactment of any governmental law, order or regulation permanently or temporarily prohibiting or reducing the level of research, development or production work hereunder or the manufacture, use or sale of the Licensed Product), epidemic, destruction of production facilities, riot, insurrection, inability to procure or use materials, labor, equipment, transportation or energy in quantities sufficient to meet experimentation or manufacturing needs, or any other cause beyond the reasonable control of the Party invoking this Section 16.8, provided, in each case, that such Party shall have used Commercially Reasonable Efforts to avoid such failure, then such Party shall promptly give written notice of such occurrence to the other Party, and thereupon the affected Party’s performance shall be excused and the time for performance shall be extended for the period of delay or inability to perform due to such occurrence.
 
16.9 Construction. Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or). The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including” as used herein shall mean including, without limiting the generality of any description preceding such term. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto.
 
16.10 Further Assurance. Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes, or to better assure and confirm unto such other Party its rights and remedies under this Agreement.
 
16.11 Expenses. Each of Licensee and NovaDel shall be responsible for their own expenses relating to the negotiation, execution and performance of this Agreement.
 
16.12 Export Controls. Each Party acknowledges that it is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended and the United States Department of Commerce Export Administrations Regulations). The transfer of such items may require a license from the cognizant agency of the United States Government and/or written assurances by NovaDel or Licensee or any Sublicensee and its Affiliates that it shall not export data or commodities to certain foreign countries without prior approval of such agency. No Party makes any representation as to whether any such license will be required or, if required, whether it will be issued.
 
Page 36 of 40
 
16.13 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.
 
16.14 Binding. This Agreement shall not be binding upon the Parties until it has been signed below on behalf of each Party.
 
[Signature Page Follows]
 
Page 37 of 40
 
IN WITNESS WHEREOF, the duly authorized officers of the Parties have executed this Agreement as of the dates set forth below their respective signatures.
 
NOVADEL PHARMA INC.   HANA BIOSCIENCES, INC.
         
By:
 /s/ Steven Ratoff  
By:
 /s/ Mark J. Ahn
 
Name:
 Steven Ratoff  
Name:
 Mark J. Ahn
         
Title:
 Chairman, President and CEO  
Title:
 President & CEO
 
Date:
 July 31, 2007  
Date:
 July 31, 2007
 
Page 38 of 40

EXHIBIT A
 
PATENTS
 
1. United States Patent No. 6,676,931 B2
 
Page 39 of 40

EXHIBIT B
 
Royalty Rate Structure

Net Sales (U.S. Sales and Canadian Sales Converted to U.S. Dollars)
Royalty Rate
     
$[***] to $[***]
  
[***]%
     
Plus
   
     
$[***] to $[***]
  
[***]%
     
Plus
    
     
$[***] and above
  
[***]%
 
Page 40 of 40
 
 EX-31.1 4 v092675_ex31-1.htm
 

I, Steven R. Deticher, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Hana Biosciences, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
 
 
(d)
Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: November 8, 2007
/s/ Steven R. Deitcher, MD
 
Steven R. Deitcher
 
 
- 1 -
 
 EX-31.2 5 v092675_ex31-2.htm
Exhibit 31.2
 

I, John P. Iparraguirre, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Hana Biosciences, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
 
 
(d)
Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2007
/s/ John P. Iparraguirre
 
John P. Iparraguirre
 
 
- 1 -
 
 EX-32.1 6 v092675_ex32-1.htm
Exhibit 32.1

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO  
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Hana Biosciences, Inc. does hereby certify that to the best of his knowledge:

(a) the Quarterly Report on Form 10-Q of Hana Biosciences, Inc. for the three months ended September 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Hana Biosciences, Inc.

Dated: November 8, 2007
/s/ Steven R. Deitcher, MD
 
Steven R. Deitcher
 
President and Chief Executive Officer
   
   
Dated: November 8, 2007
/s/ John P. Iparraguirre
 
John P. Iparraguirre
 
Vice President, Chief Financial Officer
 
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