-----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, SE54LsWV5MA2ottJgNzIx7bhpV4OCLl0wg2/jf22RVfGosxHqIkQx4AcwD1dwhcj s0odc6IS9NesUwjz1y8UZg== 0000922423-97-000243.txt : 19970430 0000922423-97-000243.hdr.sgml : 19970430 ACCESSION NUMBER: 0000922423-97-000243 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 DATE AS OF CHANGE: 19970411 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENTA INCORPORATED /DE/ CENTRAL INDEX KEY: 0000880643 STANDARD INDUSTRIAL CLASSIFICATION: 2836 IRS NUMBER: 330326866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-19635 FILM NUMBER: 97572006 BUSINESS ADDRESS: STREET 1: 3550 GENERAL ATOMICS COURT CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194552700 MAIL ADDRESS: STREET 1: 3550 GENERAL ATOMICS COURT CITY: SAN DIEGO STATE: CA ZIP: 92121 10-K/A 1 AMMENDMENT NO. 1 TO ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 TO FORM 10-K FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-19635 GENTA INCORPORATED (Exact name of Registrant as specified in its certificate of incorporation) Delaware 33-0326866 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3550 General Atomics Court San Diego, California 92121 (Address of principal executive offices) (Zip Code) (619) 455-2700 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value Preferred Stock Purchase Rights, Par Value $.001 (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. [ ] The approximate aggregate market value of the voting stock held by non-affiliates of the registrant was $16.7 million as of March 1, 1997. For purposes of determining this number, 1.8 million shares of common stock held by affiliates are excluded. As of March 1, 1997, the registrant had 39,991,626 shares of Common Stock outstanding. Documents Incorporated by Reference Designated portions of Registrant's Definitive Proxy Statement to be furnished for the Annual Meeting of the Stockholders to be held on April 4, 1997 are incorporated by reference in Part III of this Form 10-K/A. Part I Item 1. Business Overview Genta Incorporated ("Genta" or the "Company"), incorporated under the laws of the State of Delaware on February 4, 1988, is an emerging biopharmaceutical company engaged in the development of a pipeline of pharmaceutical products. Genta's multi-faceted approach incorporates a product development portfolio with balanced technical risk, a novel drug delivery technology and a United States/European business base. The near to mid-term segment of the product pipeline consists of oral controlled-release drugs being developed by the Company's 50%-owned drug delivery joint venture with Jagotec AG ("Jagotec"), Genta Jago Technologies B.V. ("Genta Jago"). Using Jagotec's patented GEOMATRIX(R) drug delivery technology ("GEOMATRIX"), Genta Jago is employing a two-pronged commercialization strategy: the development of generic versions of successful brand-name controlled-release drugs and the development of controlled-release formulations of drugs currently marketed in only immediate release form. The Company's longer-term research efforts are focused on the development of proprietary Anticode(TM) oligonucleotide ("Anticode") pharmaceuticals intended to block or regulate the production of disease-related proteins at the genetic level. The Company's Anticode programs are focused primarily in the area of cancer. In late 1995, a phase I/IIa clinical trial was initiated in the United Kingdom using Genta's Anticode drug ("G3139") in non-Hodgkin's lymphoma patients for whom prior therapies have failed. The clinical trial is being conducted in collaboration with the Royal Marsden NHS Trust and the Institute for Cancer Research. In late 1996, an Investigational New Drug application ("IND") for the G3139 clinical program was filed in the United States and allowed to proceed by the United States Food and Drug Administration ("FDA"). The Company also manufactures and markets specialty biochemicals and intermediate products to the in vitro diagnostic and pharmaceutical industries through its manufacturing subsidiary, JBL Scientific, Inc. ("JBL"), a California corporation acquired by the Company in February, 1991. The statements contained in this Annual Report on Form 10-K that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. The Company intends that all forward-looking statements be subject to the safeharbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's views as of the date they are made with respect to future events and financial performance, but are subject to many risks and uncertainties, which could cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. Examples of such risks and uncertainties include, but are not limited to: the obtaining of sufficient financing to maintain the Company's planned operations; the timely development, receipt of necessary regulatory approvals and acceptance of new products; the successful application of the Company's technology to produce new products; the obtaining of proprietary protection for any such technology and products; the impact of competitive products and pricing and reimbursement policies; the changing of market conditions and the other risks detailed in the Risk Factors section of this Annual Report on Form 10-K and elsewhere herein. The Company does not undertake to update any forward-looking statements. See "Risk Factors" for a discussion of certain risks and uncertainties applicable to the Company and its stockholders, including the Company's need for additional funds to sustain its operations in 1997 and thereafter, as well as the threat of a delisting of the Company's common stock from the Nasdaq SmallCap Market. 2 Oral Controlled-Release Drugs Formulations of drugs using the GEOMATRIX technology are designed to swell and gel when exposed to gastrointestinal fluids. This swelling and gelling is designed to allow the active drug component to diffuse from the tablet into the gastrointestinal fluids, gradually over a period of up to 24 hours. The Company believes that the GEOMATRIX technology may have other benefits which, collectively, may distinguish it from competing controlled-release technologies. The Company believes GEOMATRIX formulations can control drug release and potentially modulate pharmacokinetic profiles to produce a variety of desired clinical effects. For example, the GEOMATRIX technology may be used to formulate tablets with a rapid or a delayed therapeutic effect by varying the release characteristics of the drug from the tablet. The GEOMATRIX technology may also be used to formulate tablets that release two drugs at the same or different rates, or tablets that release a drug in several pulses after administration. Genta Jago is using the GEOMATRIX drug delivery technology to develop oral controlled-release formulations for a broad range of presently marketed drugs which have lost, or will in the near to mid-term lose, patent protection and/or marketing exclusivity. Certain of these presently marketed drugs are already available in a controlled-release format, while others are only available in an immediate release format that requires dosing several times daily. In the case of drugs already available in a controlled-release format, Genta Jago is seeking to develop bioequivalent products which would be therapeutic substitutes for the branded products. In the case of currently marketed products that are only available in immediate release form requiring multiple daily dosing, Genta Jago is seeking to develop once or twice-daily controlled-release formulations. The potential benefits of Genta Jago's oral controlled-release formulations may include improved compliance, greater efficacy and reduced side effects as a result of a more constant drug plasma concentration than that associated with immediate release drugs administered several times daily. Genta Jago's strategy is to commercialize its GEOMATRIX controlled-release products worldwide primarily by forming alliances with major pharmaceutical companies. Genta Jago has established three such collaborations. See "Business -- Collaborative and Licensing Agreements" below. Genta Jago currently has eight products in various stages of development that are intended to be bioequivalent generic versions of brand-name, controlled-release drugs currently marketed by others. Four of these products, nifedipine (Procardia XL(R)), ketoprofen (Oruvail(R)), carbidopa/levodopa (Sinemet(R)CR), and naproxen (Naprelan(R)) are currently undergoing manufacturing scale-up after completion of formulations development and pilot human pharmacokinetic studies. During the manufacturing scale-up phase of development, Genta Jago and its collaborators are seeking to proceed from the production of small-scale research quantities to the production of larger-scale quantities necessary for commercial scale manufacturing. The scale-up has not yet been successfully completed for these products. Assuming successful completion of manufacturing scale-up, pivotal bioequivalency studies are scheduled to begin for these products in 1997. Genta Jago believes that if such bioequivalency studies are successfully completed, Abbreviated New Drug Applications (each an "ANDA") may be filed with the FDA for two of its products in 1997. In addition, potentially bioequivalent versions of two other products--Voltaren-XR(R) (diclofenac) and Covera-HS(R) (verapamil)--have completed formulations development and pilot pharmacokinetic studies. Genta Jago intends to proceed with manufacturing scale-up on these two products during 1997. Genta Jago has also completed initial formulations development and pilot human pharmacokinetic studies for GEOMATRIX controlled-release formulations of cefaclor (Ceclor CD(R)) and metoprolol tartrate and formulations development is ongoing for additional products including acyclovir (Zovirax(R)). Genta Jago continues to seek collaborative agreements for these products in order to finance the manufacturing scale-up and required bioequivalency or clinical studies. In addition to these products currently in development, Genta Jago maintains the rights to apply the GEOMATRIX technology to the development of up to approximately 50 additional drugs. There can be no assurance that any product will be successfully developed or receive the necessary regulatory approvals. 3 Anticode Programs Anticode oligonucleotides represent a modern approach to drug development based upon genetic control of disease. Many human diseases have a genetic origins that involve either the expression of a harmful foreign gene or the aberrant expression of a normal or mutated human gene. Anticode oligonucleotides are short strands of synthetic nucleic acids designed to bind to ("hybridize" with) specific sequences of disease-related RNA or DNA, thereby blocking or controlling production of disease-related proteins. The Company believes that, because of their selective binding properties, Anticode oligonucleotides will not interfere with the function of normal cells, and therefore, will elicit significantly fewer side effects than traditional drugs. Anticode drugs may attack a disease at one of two levels. One approach is to prevent the synthesis of essential disease-related proteins. In this approach, certain oligonucleotides are used to interrupt the processing of, or selectively to destroy, individual messenger RNA (mRNA) sequences, which leads to the down-regulation (lowering of levels) of specific proteins and thereby effectively eliminates the disease. This is referred to as the "antisense" mechanism of action. A second therapeutic opportunity is to prevent transcription of disease-causing DNA into the mRNA copy of the gene. This is referred to as the "triple-strand to DNA" mechanism of activity. Genta has focused its Anticode research on oligonucleotides with methylphosphonate and phosphorothioate backbones. The Company has exclusively licensed patents from Dr. Paul O. P. Ts'o, Dr. Paul Miller and Johns Hopkins University ("Johns Hopkins") covering methylphosphonate technology. Genta also has obtained certain rights to phosphorothioate oligonucleotide constructions. Genta's scientists have improved these technologies by introducing chirally-enriched or chirally-pure oligonucleotides. In preclinical studies, these improved oligonucleotides effectively turn off the action of targeted mRNA sequences inside cells. Intravenous administration of these oligonucleotides to certain animals demonstrates that these compounds remain stable in the circulatory system and are eventually excreted intact in the urine. New proprietary delivery systems have also been developed to increase intracellular concentration of oligonucleotides and to lower the drug dosage for potential therapeutics. Management believes that the Company has the ability to acquire or produce quantities of oligonucleotides sufficient to support its present needs for research and its projected needs for initial clinical development programs. The Company's Anticode research and development efforts are currently focused primarily on its cancer, program as described below. Extensive additional development will be required, and there can be no assurance that any product will be successfully developed or will receive the necessary regulatory approvals. BCL2 Gene Target The BCL2 gene is a proto-oncogene and a major inhibitor of apoptosis (programmed cell death) of cancerous cells. The protein produced by this gene has two known critical functions in the progression of cancer: it makes cancer cells immortal, creating a survival advantage of malignant over normal cells; and confers resistance to radiation and chemotherapy, rendering those treatments ineffective in the late stages of many types of cancer. Genta's lead anti-BCL2 molecule, G3139, is designed to inactivate the RNA that produces the BCL2 protein product, thereby preventing cellular production of the protein. High levels of BCL2 are associated with a poor clinical prognosis in many solid tumor and hematological malignancies such as lymphoma, leukemia, melanoma, multiple myeloma and prostate and breast cancers. The Company believes that its Anticode strategy against the BCL2 gene has the potential to represent a significant therapeutic opportunity in many of these cancers. In preclinical studies conducted by Dr. Finbarr Cotter, at the Institute for Child Health in London, an anti- BCL2 oligonucleotide was shown to cure lymphoma-like disease induced by the injection of human B-cell lymphoma cells in immunodeficient mice. In addition, in a variety of other animal studies, anti-BCL2 Anticode oligonucleotides were found to inhibit the growth of human melanoma, colon and human breast cancer tumors in immunodeficient mice. G3139 has demonstrated efficacy when administered as a single agent. In July 1996, the National Cancer Institute ("NCI") agreed to fund and conduct preclinical studies of G3139. Pending the outcome of these ongoing preclinical studies, NCI intends to sponsor Phase I human trials evaluating G3139 against a number of solid tumor malignancies. The Company will collaborate with NCI on the design of such clinical studies and the selection of tumor targets. The primary goal of the trials will be to determine 4 the maximum tolerated dose of G3139, although any preliminary antitumor activity will also be assessed. Tumors under consideration for clinical study include malignant melanoma, breast, prostate and colorectal cancers. NCI would cover the costs of running both preclinical and clinical studies. Genta would be responsible for supplying NCI with necessary quantities of G3139 to carry out this work. In late 1995, a Phase I/IIa clinical trial was initiated in the United Kingdom using Genta's anti-BCL2 Anticode oligonucleotides, G3139, in non-Hodgkin's lymphoma patients for whom prior therapies have failed. The clinical trial is being conducted in collaboration with the Royal Marsden NHS Trust and the Institute for Cancer Research under the direction of Dr. David Cunningham. The principal aim of this Phase I/IIa study is to define the maximum tolerated dose of G3139. Secondary objectives include measurement of clinical and biochemical disease parameters. To date, G3139 has been administered to 14 patients with relapsed and poor prognosis disease. Other than usually mild topical skin irritation in most of the patients, no serious, clearly drug-attributable or dose-limiting adverse effects have been seen, so far. The doses have been escalated six times, and escalations continue. Some of the patients have demonstrated encouraging signs of potential drug activity. The responses included one patient in whom cancer mass was reduced and one who developed a complete radiological tumor response for over 38 weeks in duration. These results have been considered very encouraging by several prominent oncologists and accepted for journal publications and presentation at peer meetings, including that of the American Society of Clinical Oncologists. Late in 1996, Genta's IND was filed in the United States and the FDA has allowed the program to proceed. Genta is working with several prominent United States and European clinical experts to devise the appropriate clinical strategy for subsequent trials. Planning includes continuation of Phase I/IIa clinical trials in non-Hodgkin's lymphoma, initiation of studies in different BCL2 positive solid tumors, including those in the prostate, reported to express BCL2 in the vast majority of patients. These studies will also examine both subcutaneous and intravenous administration. Extensive additional clinical studies are required, and there can be no assurance that the Company will secure the funding necessary to conduct this development or that any product will be successfully developed or receive the necessary regulatory approvals. In September 1996, the Company received a notice of an allowance from the United States Patent and Trademark Office for patent claims covering antisense compounds targeted against BCL2. Those claims covering compositions of matter give Genta exclusive rights to target sequences of the BCL2 gene. The patent claims cover the Company's proprietary Anticode molecules which target BCL2, including its lead clinical candidate, G3139. Other related patents and claims in the United States and Europe are still pending. Focal Adhesion Kinase (FAK) Gene Target FAK protein is involved in the regulation of adhesion-dependent growth and motility of cells. In a variety of cancers - human epithelial and mesenchymal tumors, such as those implicated in melanoma, lymphoma and multiple myeloma - the manufacture of FAK protein ("FAK expression") is highly active. Moreover, increased FAK expression correlates with increased invasiveness and increased ability of cancer to metastasize (spread of cancer through body). In collaborative preclinical experiments with Dr. William G. Cance, at the University of North Carolina, Genta's Anticode oligonucleotides against FAK were shown to inhibit the growth of a primary (the site at which the cancer is believed to have begun) tumor and to virtually eliminate metastases in human melanoma/immunocompromised mice xenograft models. Combined with the observation that anti-FAK oligonucleotides appear to show few adverse effects against normal tissues, such results indicate that the FAK target may represent a promising therapeutic opportunity for both the treatment of primary disease and the prevention of metastatic disease. In an effort to focus its research and development efforts on areas which provide the most significant commercial opportunities, the Company continually evaluates its ongoing programs in light of the latest market information and conditions, availability of third party funding, technological advances, and other factors. As a result of such evaluation, the Company's product development plans have changed from time to time, and the Company anticipates that they will continue to do so in the future. The Company recorded research and development expenses of $5.8 million, $11.3 million and $13.5 million during 1996, 1995, and 1994, respectively, of which zero, 5 approximately $1.1 million and $3.1 million, respectively, were funded pursuant to collaborative research and development agreements. In 1996, the Company terminated those employees conducting pre-clinical research on the Company's antisense projects. Topical Dermatology Products During 1996, the Company sold its rights relating to research and development activities regarding two licensed topical dermatology products for approximately $373,000. The Company does not presently intend to conduct further activities in this area. Manufacturing In 1996, Genta continued to advance its technology for large-scale production of its Anticode oligonucleotides and has also developed a high degree of self-sufficiency for large-scale production of synthon raw materials for its Anticode oligonucleotides. The Company also filed a series of key patent applications in 1996 covering the improved synthesis of dimers essential to the manufacture of its Anticode molecules. Genta obtained its manufacturing capabilities in early 1991 through the acquisition of JBL. JBL is a manufacturer of high-quality specialty biochemicals and intermediate products for the pharmaceutical and in vitro diagnostic industries. A number of Fortune 500 companies utilize JBL products as raw material in the production of a final product. The manufacturing facilities at JBL have not been formally inspected by the FDA for compliance with requirements for Good Manufacturing Practices ("GMP"). The Company is continuing to develop procedures, documentation and facilities for the production of Anticode oligonucleotides which it believes will adequately comply with the necessary GMP requirements. Failure to establish compliance with GMP to the satisfaction of the FDA can result in delays in, or prohibition from, initiating clinical trials or commercial marketing of a product. The manufacture of all of the Company's and Genta Jago's products will be subject to GMP requirements prescribed by the FDA or other standards prescribed by the appropriate regulatory agency in the country of use. There can be no assurance that the Company or Genta Jago will be able to manufacture products or have products manufactured for either of them in a timely fashion at acceptable quality and prices, that they or third party manufacturers can comply with GMP, or that they or third party manufacturers will be able to manufacture an adequate supply of product. Genta Europe Genta Europe has received $1.1 million of funding from a French governmental agency, L'Agence National de Valorisation de la Recherche ("ANVAR"), towards research and development activities. Genta Europe is currently in default under the agreement with ANVAR, and ANVAR has the right to demand repayment of such funds. However, management believes that this matter will be resolved in a mutually satisfactory manner. Sales and Marketing Genta Jago has secured collaborative agreements with three entities for the development and commercialization of selected controlled-release pharmaceuticals. Genta Jago's collaborative agreements generally provide the collaborative partner exclusive rights to market and distribute the products in exchange for royalty payments to Genta Jago on product sales. Genta Jago's goal is to form additional collaborations to develop and market a number of its GEOMATRIX controlled-release products, while potentially selecting certain products to develop and commercialize on its own. Genta Jago would consider several options for commercializing these potential products in the United States including building a small sales force or contracting for the services of an existing sales force. To market these potential products outside of the United States, Genta Jago believes it would best utilize its resources through licensing arrangements. There can be no assurance that any such potential product will be successfully developed or that any prospective collaborations or licensing arrangements will be entered into. 6 JBL manufactures and markets specialty biochemicals and intermediate products to over 100 purchasers in the pharmaceutical and diagnostic industries, with the top 10 customers representing more than 80% of JBL's total sales. Collaborative and Licensing Agreements Genta Jago In December 1992, the Company and Jagotec formed Genta Jago, a Netherlands corporation, to develop and commercialize therapeutic products on a worldwide basis. The Company and Jagotec each own 50% of Genta Jago. Under the arrangement, Jagotec granted Genta Jago an exclusive license to its GEOMATRIX oral controlledrelease technology for the development and commercialization of approximately 25 specified products (the "Initial Products"). In May 1995, the parties entered into an agreement to expand Genta Jago by adding the rights to develop and commercialize an additional 35 products (the "Additional Products"). With these Additional Products, Genta Jago now maintains the rights to develop controlled-release formulations of approximately 60 products using Jagotec's GEOMATRIX technology. Under the agreement, Genta Jago also acquired certain manufacturing rights with respect to such products. In connection with the expansion of Genta Jago, the parties elected to focus Genta Jago's activities exclusively on GEOMATRIX oral-controlled release products. As a result, Genta Jago returned to Genta, in May 1995, the right to develop six Anticode products licensed from Genta in connection with the formation of Genta Jago in 1992. In connection with the formation of Genta Jago, the Company made an initial capital contribution of $4 million to Genta Jago and issued an aggregate of 1.2 million unregistered shares of Genta's common stock to Jagotec and an affiliate. To obtain the rights to the Additional Products and the manufacturing rights in May 1995, Genta applied $5 million in option and related fees paid to Jagotec and its affiliates, of which $3.85 million was paid during 1994 (including $1.85 million of non-refundable fees charged to expense during 1994) and $1.15 million was paid in the first quarter of 1995. The Company also issued an additional 1.24 million unregistered shares of Genta's common stock to an affiliate of Jagotec in May 1995. Genta Jago is required to pay certain additional fees to Jagotec upon Genta Jago's receipt of revenues from third parties, and to pay manufacturing royalties to Jagotec. The Company is also required to provide loans to Genta Jago pursuant to a working capital agreement which expires in October 1998. The loans are advanced up to a mutually agreed upon maximum commitment amount which is established by the parties on a periodic basis. The Company anticipates contributing working capital loans of up to approximately $300,000 to Genta Jago during 1997. In connection with Genta Jago's return of the Anticode license rights to Genta in May 1995, the working capital loan payable by Genta Jago to Genta was credited with a principal reduction of approximately $4.4 million. As of December 31, 1996, the Company had advanced working capital loans of approximately $15.3 million to Genta Jago, net of principal repayments and the aforementioned credit, which amount fully satisfied the loan commitment established by the parties through December 31, 1996. Such loans bear interest and are payable in full in October 1998, or earlier in the event certain revenues are received by Genta Jago from third parties. There can be no assurance, however, that Genta Jago will obtain sufficient financial resources to repay such loans to Genta. Genta Jago repaid Genta $1 million of its working capital loans, in November 1996, from license fee revenues. Genta has the option to purchase Jagotec's interest in Genta Jago during the period beginning in December 1998 through the year 2000. The exercise price with respect to the Initial Products is the lesser of the fair market value at the time of exercise of the 50% interest in the Initial Products owned by Jagotec, or $100 million, in each case reduced by the market value at the time of exercise of the purchase option of the 1.2 million shares of Genta common stock issued to Jagotec and an affiliate in 1992. The exercise price with respect to the Additional Products is the fair market value at the time of exercise of the 50% interest in the Additional Products owned by Jagotec. The Company also has an exclusive worldwide license to use Jagotec's GEOMATRIX technology in Genta's Anticode development programs. Genta Jago has contracted with Genta and Jagotec to conduct research and development and provide certain other services. 7 Genta Jago/Gensia/Brightstone In January 1993, Genta Jago entered into a collaboration agreement with Gensia, Inc. ("Gensia") for the development and commercialization of a potentially bioequivalent nifedipine product, an oral controlled-release pharmaceutical product for treatment of cardiovascular disease. Under the agreement, Gensia was to provide funding for formulation and preclinical development to be conducted by Genta Jago and to be responsible for clinical development, regulatory submissions and marketing. Terms of the agreement provided Gensia exclusive rights to market and distribute the products in North America, Europe and certain other countries. Genta Jago received $2.2 million, $1.9 million and $4.9 million of research and development funding in 1996, 1995 and 1994, respectively, pursuant to the agreement. Collaborative revenues of $2.8 million, $3 million and $4.2 million were recognized under the agreement during the years ended December 31, 1996, 1995 and 1994, respectively. Effective October 1996, Gensia and SkyePharma PLC ("SkyePharma") reached an agreement whereby a SkyePharma subsidiary, Brightstone Pharma, Inc. ("Brightstone"), was assigned Gensia's rights to develop and copromote the potentially bioequivalent nifedipine product under the collaboration agreement with Genta Jago. The assignment was accepted by Genta Jago and has no impact on the terms of the original agreement. Genta Jago is still entitled to receive additional milestone payments from Brightstone triggered upon regulatory submissions and approvals, as well as royalties or profit sharing ranging from 10% to 21% of product sales, if any. Genta's Chairman and Chief Executive Officer is a member of Gensia's Scientific Advisory Board. Genta Jago/Apothecon In March 1996, Genta Jago entered into a collaborative licensing and development agreement with Apothecon, Inc. ("Apothecon"), the multisource subsidiary of Bristol-Myers Squibb Co. Under the terms of the agreement, Apothecon provides funding to Genta Jago up to a specified maximum amount for the formulation, development and clinical testing of a GEOMATRIX formulation of OD-CR ketoprofen, subject to certain early termination rights. The agreement also provides for Genta Jago to receive potential milestone payments and royalties on product sales, if any. Terms of the agreement provide Apothecon exclusive rights to market and distribute the products on a worldwide basis. During 1996, Genta Jago received $1.1 million in funding under the arrangement and recognized $1.3 million of collaborative revenue from the arrangement. Genta Jago/Krypton In October 1996, Genta Jago entered into five collaborative licensing and development agreements with Krypton, Ltd. ("Krypton"), a subsidiary of SkyePharma. Under the terms of the agreements, Genta Jago is to sublicense to Krypton rights to develop and commercialize potentially bioequivalent GEOMATRIX versions of five currently marketed products. Genta Jago also granted Krypton an option to sublicense rights to develop and commercialize an improved version of a sixth product. During 1996, Genta Jago received funding of $1 million under the collaborative agreements and recognized $1 million of collaborative revenue from the agreements. 8 Chugai/Gen-Probe In February 1989, the Company entered into a development, license and supply agreement with Gen-Probe Incorporated ("Gen-Probe"). Gen-Probe was subsequently acquired by Chugai Pharmaceutical Company, Ltd. ("Chugai"), a Japanese corporation. Chugai has the option to acquire an exclusive worldwide license to any product consisting of, including, derived from or based on oligonucleotides for the treatment or prevention of Epstein-Barr virus, cytomegalovirus, HIV, human T-cell leukemia virus-1 and all leukemias and lymphomas. Genta is obligated to pursue the development of a therapeutic compound for the treatment of one of these indications as its first therapeutic development program. If Chugai exercises its option to acquire rights to a product in any such indication, the Company will grant Chugai certain rights to sell such product and Chugai must fund Genta's development of any such product, subject to certain limitations and early termination rights. If Chugai fully funds the development of such product, profits on sales of such product will be shared between the parties. Through the agreement, the Company also has obtained certain rights to phosphorothioate oligonucleotide constructions and other technology. In return, the Company has agreed to pay Chugai a royalty on sales of products derived from such technology. Gen-Probe is a stockholder in the Company. Ts'o/Miller/Hopkins In February 1989, the Company entered into a license agreement with Drs. Paul Ts'o and Paul Miller (the "Ts'o/Miller Agreement") pursuant to which Drs. Ts'o and Miller granted an exclusive license to the Company to certain issued patents, patent applications and related technology regarding the use of nucleic acids and oligonucleotides, including methylphosphonates, as pharmaceutical agents. Dr. Ts'o is a Professor of Biophysics, Department of Biochemistry, and Dr. Miller a Professor of Biochemistry, both at the School of Public Health and Hygiene, Johns Hopkins University. In May 1990, the Company entered into a license agreement with Johns Hopkins (the "Johns Hopkins Agreement," and collectively with the Ts'o/Miller Agreement, referred to herein as the "Ts'o/Miller/Hopkins Agreements") pursuant to which Johns Hopkins granted Genta an exclusive license to its rights in certain issued patents, patent applications and related technology developed as a result of research conducted at Johns Hopkins by Drs. Ts'o and Miller and related to the use of nucleic acids and oligonucleotides as pharmaceutical agents. In addition, Johns Hopkins has granted Genta certain rights of first negotiation to inventions made by Drs. Ts'o and Miller in their laboratories in the area of oligonucleotides and to inventions made by investigators at Johns Hopkins in the course of research funded by Genta, which inventions are not otherwise included in the Ts'o/Miller/Hopkins Agreements. Genta has agreed to pay Dr. Ts'o, Dr. Miller and Johns Hopkins royalties on net sales of products covered by the issued patents and patent applications, but not the related technology, licensed to the Company under the Ts'o/Miller/Hopkins Agreements. The Company has also agreed to pay certain minimum royalties prior to commencement of commercial sales of such products, which royalties may be credited under certain conditions against royalties payable on subsequent sales. Subject to certain rights of early termination, the Ts'o/Miller/Hopkins Agreements remain in effect for the life of the last-to-expire patent licensed under the respective agreements or until abandonment of the last-pending patent application licensed under the respective agreements. As of December 31, 1996, the Company owed Johns Hopkins $627,271, of which $200,000 consists of royalty payments for 1995 and 1996 and the balance consisted of the Company's obligations to provide funds to support a post-doctoral research program of Johns Hopkins. In February 1997, the Company paid Johns Hopkins $100,000 toward the post-doctoral support program. The Company is in negotiations with Johns Hopkins as to payment of the remaining balance in cash and securities. On February 14, 1997, the Company received notice from Johns Hopkins that the Company was in material breach of the Johns Hopkins Agreement. The Johns Hopkins Agreement provides that, if a material payment default is not cured within 90 days of receipt of notice of such breach, Johns Hopkins may terminate the Johns Hopkins Agreement. A termination of the Johns Hopkins agreement could have a material adverse effect on the Company. 9 Other Anticode Agreements The Company entered into agreements with Baxter Healthcare Corporation and Johnson & Johnson Consumer Products, Inc. in late 1995, which provide limited funding for preliminary feasibility studies using Genta's Anticode compounds. Under the terms of these agreements, if the collaborative partner elects to pursue the commercial development of an Anticode compound upon completion of the feasibility studies, the parties would enter into mutually acceptable development, license and supply agreements. Patents and Proprietary Technology The Company's policy is to protect its technology by, among other things, filing patent applications with respect to technology considered important to the development of its business. The Company also relies upon trade secrets, unpatented know-how, continuing technological innovation and the pursuit of licensing opportunities to develop and maintain its competitive position. Genta has a portfolio of intellectual property rights to aspects of Anticode technology which includes rights in novel compositions of matter, methods of large-scale synthesis and methods of controlling gene expression. This portfolio includes issued United States and Canadian patents and patent applications, which were licensed by Genta under the Ts'o/Miller/Hopkins Agreements as described above, and patent applications filed by the Company. In addition, foreign counterparts of certain applications have been filed or will be filed at the appropriate time. These issued patents will expire, absent regulatory extension, in the years 2001 through 2005. Additional allowed patents under this agreement generally would not expire until 17 years after the date of allowance or, in other cases, 20 years from the date of application. Generally, it is the Company's strategy to apply for patent protection in the United States, Canada, Western Europe, Israel, Taiwan, Japan, Australia and New Zealand. The Company seeks to coordinate its patent protection policy with those of its licensors; however, of the six issued patents licensed by Genta under the Ts'o/Miller/Hopkins Agreements, five were filed only in the United States and one was filed in both the United States and Canada. Genta also has rights of first refusal for future antisense work performed by Drs. Ts'o and Miller. See "Collaborative and Licensing Agreements -- Ts'o/Miller/Hopkins." Since its incorporation, Genta has separately filed an aggregate of over 100 United States and foreign patent applications covering new compositions and improved methods to use, synthesize and purify Anticode oligonucleotides and linker-arm technology. Under the agreement with Gen-Probe, Genta gained non-exclusive access to all technology developed by Gen-Probe related to the use of DNA probes for therapeutic applications as of February 1989. This technology is related to nucleic acid probes for quantitation of organisms and viruses, methods for their production, including nonnucleotide linking reagents, labeling, and purification, and methods for their use including hybridization and enhanced hybridization. This includes rights to 14 issued patents and several pending United States patent applications and corresponding issued and pending applications in foreign countries. See "Collaborative and Licensing Agreements - - - -- Chugai/Gen-Probe". Genta also gained access to certain rights from the National Institutes of Health ("NIH") covering phosphorothioate oligonucleotides. This includes rights to three United States issued patents, one granted European patent and other corresponding foreign applications which are still pending. In addition, under an agreement with the University of Pennsylvania, Genta has acquired exclusive rights for the use of BCL2 as a target for antisense and gene therapy-based treatments for cancer. In September 1996, the Company received a notice of an allowance from the United States Patent and Trademark Office for patent claims covering antisense compounds targeted against BCL2 based on the technology acquired from the University of Pennsylvania. Those claims covering compositions of matter give Genta exclusive rights to target sequences of the BCL2 gene. The patent claims cover the Company's proprietary Anticode molecules which target BCL2, including its lead clinical candidate, G3139. Other related patents and claims in the United States and Europe are still pending. 10 Jagotec's GEOMATRIX technology is the subject of issued patents and pending applications. Jagotec currently holds four issued United States patents, five granted foreign patents, and other corresponding foreign patent applications still pending that cover the GEOMATRIX technology. Certain rights to GEOMATRIX technology have been licensed to Genta Jago. See "Collaborative and Licensing Agreements -- Genta Jago". The patent positions of biopharmaceutical and biotechnology firms, including Genta, can be uncertain and involve complex legal and factual questions. Consequently, even though Genta is currently prosecuting its patent applications with the United States and foreign patent offices, the Company does not know whether any of its applications will result in the issuance of any patents or, if any issued patents will provide significant proprietary protection or will be circumvented or invalidated. Since patent applications in the United States are maintained in secrecy until patents issue, and since publication of discoveries in the scientific or patent literature tend to lag behind actual discoveries by several months, Genta cannot be certain that others have not filed patent applications directed to inventions covered by its pending patent applications or that it was the first to file patent applications for such inventions. Competitors or potential competitors may have filed applications for, or have received patents and may obtain additional patents and proprietary rights relating to, compounds or processes competitive with those of the Company. See "Competition." Accordingly, there can be no assurance that the Company's patent applications will result in issued patents or that, if issued, the patents will afford protection against competitors with similar technology; nor can there be any assurance that any patents issued to Genta will not be infringed or circumvented by others; nor can there be any assurance that others will not obtain patents that the Company would need to license or design around. There can be no assurance that the Company will be able successfully to obtain a license to technology that it may require or that, if obtainable, such a license would be available on reasonable terms. There can be no assurance that the Company's patents, if issued, would be held valid by a court of competent jurisdiction. Moreover, the Company may become involved in interference proceedings declared by the United States Patent and Trademark Office in connection with one or more of its patents or patent applications to determine priority of invention, which could result in substantial cost to the Company, as well as a possible adverse decision as to priority of invention of the patent or patent application involved. The Company also relies upon unpatented trade secrets and no assurance can be given that third parties will not independently develop substantially equivalent proprietary information and techniques or gain access to the Company's trade secrets or disclose such technology to the public, or that the Company can meaningfully maintain and protect unpatented trade secrets. Genta requires its employees, consultants, outside scientific collaborators and sponsored researchers and other advisors to execute a confidentiality agreement upon the commencement of employment or consulting relationship with the Company. The agreement generally provides that all confidential information developed or made known to the individual during the course of the individual's relationship with Genta shall be kept confidential and shall not be disclosed to third parties except in specific circumstances. In the case of employees, the agreement generally provides that all inventions conceived by the individual shall be assigned to, and made the exclusive property of, the Company. There can be no assurance, however, that these agreements will provide meaningful protection for the Company's trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information, or in the event of an employee's refusal to assign any patents to the Company in spite of such contractual obligation. 11 Government Regulation Regulation by governmental authorities in the United States and foreign countries is a significant factor in the manufacture and marketing of the Company's proposed products and in its ongoing research and product development activities. All of the Company's therapeutic products will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinical and clinical testing and premarket approval procedures by the FDA and similar authorities in foreign countries. Various federal, and in some cases state, statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of such products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable federal and in some cases state, statutes and regulations, require the expenditure of substantial resources. Any failure by the Company, its collaborators or its licensees to obtain, or any delay in obtaining, regulatory approvals could adversely affect the marketing of any products developed by the Company and its ability to receive product or royalty revenue. The activities required before a new pharmaceutical agent may be marketed in the United States begin with preclinical testing. Preclinical tests include laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies must be submitted to the FDA as part of an IND, which must be reviewed and approved by the FDA before proposed clinical testing can begin. An IND becomes effective within 30 days of filing with the FDA unless the FDA imposes a clinical hold on the IND. In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence, as the case may be, without prior FDA authorization and then only under terms authorized by the FDA. Typically, clinical testing involves a three-phase process. In Phase I, clinical trials are conducted with a small number of subjects to determine the early safety profile and the pattern of drug distribution and metabolism. In Phase II, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase III, large-scale, multi-center, comparative clinical trials are conducted with patients afflicted with a target disease in order to provide enough data for the statistical proof of efficacy and safety required by the FDA and others. In the case of products for life-threatening diseases, the initial human testing is generally done in patients rather than in healthy volunteers. Since these patients are already afflicted with the target disease, it is possible that such studies may provide results traditionally obtained in Phase II trials. These trials are frequently referred to as "Phase I/II" trials. The results of the preclinical and clinical testing, together with chemistry, manufacturing and control information, are then submitted to the FDA for a pharmaceutical product in the form of a New Drug Application ("NDA"), for a biological product in the form of a Product License Application ("PLA") or for medical devices in the form of a Premarket Approval Application ("PMA") for approval to commence commercial sales. In responding to an NDA, PLA or PMA, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not satisfy its regulatory approval criteria. There can be no assurance that approvals will be granted on a timely basis, if at all, or if granted will cover all the clinical indications for which the Company is seeking approval or will not contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use. In circumstances where a company intends to develop and introduce a novel formulation of an active drug ingredient already approved by the FDA, clinical and preclinical testing requirements may not be as extensive. Limited additional data about the safety and/or effectiveness of the proposed new drug formulation, along with chemistry and manufacturing information and public information about the active ingredient, may be satisfactory for product approval. Consequently, the new product formulation may receive marketing approval more rapidly than a traditional full NDA, although no assurance can be given that a product will be granted such treatment by the FDA. For clinical investigation and marketing outside the United States, the Company is or may be subject to foreign regulatory requirements governing human clinical trials and marketing approval for drugs. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country. The Company's approach is to design its European clinical trials studies to meet FDA, European Economic Community ("EEC") and other European countries' standards. At present, the marketing authorizations 12 are applied for at a national level, although certain EEC procedures are available to companies wishing to market a product in more than one EEC member state. If the competent authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, a market authorization will be granted. The registration system proposed for medicines in the EEC after 1992 is a dual one in which products, such as biotechnology and high technology products and those containing new active substances, will have access to a central regulatory system that provides registration throughout the entire EEC. Other products will be registered by national authorities under the local laws of each EEC member state. Provided regulatory harmonization is finalized in the EEC, the Company's clinical trials will be designed to develop a regulatory package sufficient for multi-country approval in the Company's European target markets without the need to duplicate studies for individual country approvals. This approach also takes advantage of regulatory requirements in some countries, such as in the United Kingdom, which allow Phase I studies to commence after appropriate toxicology and preclinical pharmacology studies, prior to formal regulatory approval. Prior to the enactment of the Drug Price Competition and Patent Term Restoration Act of 1984 (the "Waxman/Hatch Act"), the FDA, by regulation, permitted certain pre-1962 drugs to be approved under an abbreviated procedure which waived submission of the extensive animal and human studies of safety and effectiveness normally required to be in a NDA. Instead, the manufacturer only needed to provide an ANDA containing labeling, information on chemistry and manufacturing procedures and data establishing that the original "pioneer" product and the proposed "generic" product are bioequivalent when administered to humans. Originally, the FDA's regulations permitted this abbreviated procedure only for copies of a drug that was approved by the FDA as safe before 1962 and which was subsequently determined by the FDA to be effective for its intended use. In 1984, the Waxman/Hatch Act extended permission to use the abbreviated procedure established by the FDA to copies of post-1962 drugs subject to the submission of the required data and information, including data establishing bioequivalence. However, effective approval of such ANDAs were dependent upon there being no outstanding patent or non-patent exclusivities. Additionally, the FDA allows, under section 505(b)(2) of the Food Drug and Cosmetic Act, for the submission and approval of a hybrid application for certain changes in drugs which, but for the changes, would be eligible for an effective ANDA approval. Under these procedures the applicant is required to submit the clinical efficacy and/or safety data necessary to support the changes from the ANDA eligible drug (without submitting the basic underlying safety and efficacy data for the chemical entity involved) plus manufacturing and chemistry data and information. Effective approval of a 505(b)(2) application is dependent upon the ANDA eligible drug upon which the applicant relies for the basic safety and efficacy data being subject to no outstanding patent or non-patent exclusivities. As compared to a NDA, an ANDA or a 505(b)(2) application typically involves reduced research and development costs. However, there can be no assurance that any such applications will be approved. Furthermore, the supply of raw materials must also be approved by the FDA. The Company is also subject to various foreign, federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use, manufacture, storage, handling and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with the Company's research and development work and manufacturing processes. Although the Company believes it is in compliance with these laws and regulations in all material respects (except as disclosed under "Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Liquidity and Capital Resources"), there can be no assurance that the Company will not be required to incur significant costs to comply with such regulations in the future. 13 Competition For many of their applications, the Company's, and Genta Jago's, products under development will be competing with existing therapies for market share. In addition, a number of companies are pursuing the development of antisense and triple-strand technology and controlled-release formulation technology and the development of pharmaceuticals utilizing antisense and triple-strand technology and controlled-release formulation technology. The Company competes with fully integrated pharmaceutical companies, many of which have more substantial experience, financial and other resources and superior expertise in research and development, manufacturing, testing, obtaining regulatory approvals, marketing and distribution. Smaller companies may also prove to be significant competitors, particularly through their collaborative arrangements with large pharmaceutical companies or academic institutions. Furthermore, academic institutions, governmental agencies and other public and private research organizations have conducted and will continue to conduct research, seek patent protection and establish arrangements for commercializing products. Such products may compete directly with any products which may be offered by the Company. The Company's products under development are expected to address an array of markets. The Company's competition will be determined in part by the potential indications for which the Company's products are developed and ultimately approved by regulatory authorities. For certain of the Company's potential products, an important factor in competition may be the timing of market introduction of the Company's or competitor's products. Accordingly, the relative speed with which Genta and Genta Jago can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market are expected to be important competitive factors. The Company expects that competition among products approved for sale will be based, among other things, on product efficacy, safety, reliability, availability, price, patent position and sales, marketing and distribution capabilities. The development by others of new treatment methods could render the Company's and Genta Jago's products under development non-competitive or obsolete. The Company's competitive position also depends upon its ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes and secure sufficient capital resources for the often substantial period between technological conception and commercial sales. JBL's products address several markets, including clinical chemistry, diagnostics, molecular biology and pharmaceutical development. While many customers have specified JBL products in their manufacturing protocols, competition from several international competitors could undermine JBL's competitive position, many of whom have more substantial experience, financial and other resources and superior expertise in research and development, manufacturing, testing, obtaining regulatory approvals, marketing and distribution. Competition has come primarily on price for some key JBL products for pharmaceutical development, and from competing technologies in diagnostics and molecular biology. Human Resources As of December 31, 1996, Genta, JBL and Genta Europe had 22, 41 and 2 employees, respectively, 13 of whom held doctoral degrees. Twenty employees were engaged in research and development activities, 21 were engaged in manufacturing and 24 were in administration, sales and marketing positions. A significant number of the Company's management and professional employees have had prior experience and positions with pharmaceutical and biotechnology companies. Genta believes it maintains satisfactory relations with its employees. In October 1996, the Company terminated its nine employees conducting pre-clinical research on the Company's "antisense" projects and Genta Europe terminated seven employees. The Company's overall staff was reduced by an additional net reduction of ten employees in 1996, due to attrition. Risk Factors In addition to the other information contained in this Annual Report on Form 10-K, the following factors should be considered carefully. 14 Need for Additional Funds; Risk of Insolvency. Genta's operations to date have consumed substantial amounts of cash. The Company anticipates that its existing cash funds, including $3 million in additional financing obtained in February 1997, will enable the Company to maintain its presently planned operations until July, 1997. The Company's auditors have included an emphasis paragraph in their opinion with respect to the Company's ability to continue as a going concern. Management believes that a minimum of approximately $6.4 million of additional financing will be necessary to sustain operations through the end of 1997 and to satisfy the Company's obligations under its Senior Secured Convertible Bridge Notes (the "Convertible Notes") and 4% Convertible Debentures (the "Convertible Debentures"). Substantial additional sources of financing will be required in order for the Company to continue its planned operations thereafter, as well. Furthermore, The Nasdaq Stock Market, Inc. ("Nasdaq") has informed the Company that its common stock will be delisted from the Nasdaq SmallCap Market unless the Company makes a public filing with the Securities and Exchange Commission and Nasdaq by April 7, 1997 evidencing minimum capital and surplus of at least $6 million. See "Risk Factors -- Threat of Nasdaq Delisting" below. The Company is negotiating with pharmaceutical companies regarding collaborative agreements and other financing arrangements and is actively seeking additional equity or debt financing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." However, there can be no assurance that any such collaborative agreements or other sources of funding will be available on favorable terms, if at all. If such funding is unavailable, the Company will be required to license or sell certain of its assets and technology, further scale back or eliminate some or all of its development programs, further reduce its work force and spending, and take other measures in order to continue its operations. If such measures are not successfully completed, the Company may be required to discontinue its operations. The Company will need to raise substantial additional funds to conduct the costly and time-consuming research, pre-clinical development and clinical trials necessary to bring its and Genta Jago's products to market and to establish production and marketing capabilities. The Company will also need substantial additional funds to provide working capital loans to Genta Jago. The Company intends to seek additional funding through public or private financings, including equity financings, and through collaborative arrangements. Adequate funds for these purposes, whether obtained through financial markets or collaborative or other arrangements with corporate partners or from other sources, may not be available when needed or on terms acceptable to the Company. Insufficient funds may require the Company to delay, scale back or eliminate some or all of its research and product development programs or to license third parties to commercialize products or technologies that the Company would otherwise seek to develop itself. The Company's future cash requirements will be affected by results of research and development, results of preclinical studies and bioequivalence and clinical trials, relationships with corporate collaborators, changes in the focus and direction of the Company's research and development programs, competitive and technological advances, resources devoted to Genta Jago, the FDA and foreign regulatory process, potential litigation by companies seeking to prevent or delay marketing approval of Genta Jago's products and other factors. Threat of Nasdaq Delisting. Since October 22, 1996 the Company's common stock has been trading at less than $1.00 per share. Effective February 7, 1997 the Company's common stock was removed from the Nasdaq National Market and began trading on the Nasdaq SmallCap Market under a conditional exception from the bid price and capital surplus requirements of the Nasdaq SmallCap Market. Nasdaq has indicated that, unless the Company's common stock achieves a minimum bid price of at least $1.50 per share by April 7, 1997, and maintains a minimum bid price of at least $1.50 per share for a period of ten consecutive days thereafter, the Company's common stock will be delisted from the Nasdaq SmallCap Market. The Board of Directors of the Company has approved an amendment to the Company's Restated Certificate of Incorporation effecting a one-for-ten reverse stock split of the Company's common stock (the "Reverse Split Amendment") and has recommended that stockholders approve the Reverse Split Amendment at the Annual Meeting of Stockholders to be held on April 4, 1997. The Company believes that, if the Reverse Split Amendment is approved, it can meet Nasdaq's terms; however, there can be no assurance that, even with the reverse stock split, the Company will be able to maintain its listing on the Nasdaq SmallCap Market. To maintain such listing, the Company will also be required to make a public filing with the SEC and Nasdaq evidencing minimum capital and surplus of $6 million on or before April 7, 1997. While the Company believes that it can meet this capital and surplus level by such date, there can be no assurance that the Company will succeed in timely achieving this requirement or that, even if successful, the Company's common stock would not be delisted from the Nasdaq SmallCap Market. There can be no assurances that approval of the Reverse Split Amendment will succeed in raising the bid price of the Company's common stock above $1.50 per share, that such minimum price if achieved would be maintained for the requisite period, or that even if Nasdaq's minimum bid price requirement were satisfied, the Company's common stock would not be delisted from the Nasdaq 15 SmallCap Market for other reasons. A delisting of the Company's common stock could adversely affect the ability of the Company to attract new investors. Subordination of Common Stock to Series A and Series C Preferred Stocks and Redemption of Series A Preferred Stock; Risk of Dilution. The common stock is expressly subordinate to the approximately $30 million preference of the 528,100 outstanding shares of Series A Preferred Stock and the approximately $1.5 million preference of the 1,424 shares of Series C Preferred Stock in the event of the liquidation, dissolution or winding up of the Company. Further, no dividends may be paid on the common stock unless full cumulative dividends on the Series A and Series C Preferred Stocks have been paid or funds set aside for such preferred dividends by the Company. In addition, the conversion ratio of the Series A Preferred Stock and the exercise price of warrants issued in connection with the Series A Preferred Stock (the "Series A Warrants") is subject to adjustment, among other things, upon certain issuances of common stock or securities convertible into common stock at $6.75 per share or less. Each share of Series A preferred stock is presently convertible into 21.31 shares of common stock and the exercise price of the Series A Warrants is $2.60 per share. The Series A Preferred Stock was subject to a mandatory redemption (the "Mandatory Redemption") by the Company on September 23, 1996 (the "Redemption Date"). Under the terms of the Mandatory Redemption, as set forth in the Company's Restated Certificate of Incorporation, the Redemption Price of $50 per share plus accrued dividends was to be paid, subject to certain conditions, in common stock valued at an average trading price for ten trading days before August 20, 1996. The Company elected to effect the Mandatory Redemption through the use of common stock, and then was required to use its best efforts to arrange with an investment bank acceptable to the holders of Series A preferred stock for a firm commitment underwriting relating to such shares. The Company was unable to arrange for such a firm commitment offering and is now required to use its reasonable efforts to arrange for a firm commitment underwriting as promptly as practicable and to redeem any remaining outstanding shares of Series A preferred stock upon arranging for such firm commitment underwriting. Even if the Company is successful in satisfying its Mandatory Redemption obligations with its shares of common stock, holders of common stock will experience substantial dilution at the time of such redemption. Terms of the Company's Series A preferred stock provide for the payment of dividends annually in amounts ranging from $3.00 per share per annum for the first year to $5.00 per share per annum in the third and fourth years. Dividends may be paid in cash or common stock or a combination thereof, at the Company's option. Dividends on the preferred stock accrue on a daily basis (whether or not declared) and shall accumulate to the extent not paid on the annual dividend payment date following the dividend period for which they accrue. Each share of Series C Preferred Stock is convertible, subject to certain conditions, at the option of the holder, into that number of shares of common stock determined by dividing the sum of $1,000, plus all accrued dividends on each share of Series C Preferred Stock (approximately $40 per share), by the conversion price of the Series C Preferred Stock. The conversion price of the Series C Preferred Stock is equal to 75% of the average of the closing bid prices of the Company's common stock on the Nasdaq Stock Market for a specified period. Terms of the Company's Series C convertible preferred stock also provide for dividends payable in shares of the Company's common stock. The Company has paid and, to the extent permitted by law, intends to continue paying the dividends in shares of the Company's common stock. Subordination of Common Stock to Senior Secured Convertible Bridge Notes and 4% Convertible Debentures; Risk of Dilution. In the event of a liquidation, dissolution or winding up of the Company, the common stock is also expressly subordinate to $3 million principal amount of Convertible Notes and to $350,000 principal amount of Convertible Debentures; both issues are payable in August, 1997. Further, no dividends may be paid on the common stock unless cumulative dividends on such convertible notes and debentures have been paid or funds have been set aside for such payment. The Convertible Notes are initially convertible into 600,000 shares of Series D preferred stock, which are in turn convertible into 20 million shares of common stock, subject to antidilution adjustments. The Convertible Debentures are convertible into a maximum of 122,101 shares of common stock. Early Stage of Development; Technological Uncertainty. Genta is at an early stage of development. All of the Company's potential therapeutic products are in research or development, and no revenues have been generated from therapeutic product sales. The Company is pursuing research and development, through Genta Jago, of a range of oral controlled-release formulations of currently available pharmaceuticals. Many of the products to be developed through Genta Jago have not yet been successfully formulated using GEOMATRIX technology. In 16 addition, none of the products being developed through Genta Jago has had its manufacturing process successfully scaled-up for commercial production or has started pivotal bioequivalence trials. To date, a major portion of the Company's resources have been dedicated to applying molecular biology and medicinal chemistry to the research and development of potential pharmaceutical products based upon Anticode technology. While the Company has demonstrated the activity of Anticode technology in model systems in vitro and the activity of antisense technology in animals and has identified a number of compounds which the Company believes are worthy of additional testing, only one of these potential Anticode products has begun to be tested in humans, with such testing in its early stages. There can be no assurance that the novel approach of Anticode technology to develop therapeutic products will result in products which receive necessary regulatory approvals or that will be successful commercially. Further, results obtained in preclinical studies or pilot bioequivalence trials are not necessarily indicative of results that will be obtained in human clinical testing or pivotal bioequivalence trials, respectively. The Company is also developing products for certain diseases where no animal models exist. There can be no assurance that any of the Company's or Genta Jago's potential products can be successfully developed. Furthermore, the Company's products in research or development may prove to have undesirable and unintended side effects or other characteristics that may prevent or limit their commercial use. There can be no assurance that the Company will be permitted to undertake human clinical testing of its potential Anticode products or any other of the Company's products currently in preclinical development, or, if permitted, that such products will be demonstrated to be safe and efficacious. In addition, there can be no assurance that any of the Company's or Genta Jago's products will obtain FDA or foreign regulatory approval for any indication or that an approved compound would be capable of being produced in commercial quantities at reasonable costs and successfully marketed. Products, if any, resulting from Genta's or Genta Jago's research and development programs are not expected to be commercially available for a number of years. Loss History; Uncertainty of Future Profitability. Genta has been unprofitable to date, incurring substantial operating losses associated with ongoing research and development activities, preclinical testing, clinical trials, manufacturing activities and development activities undertaken by Genta Jago. From the period since its inception to December 31, 1996, the Company has incurred a cumulative net loss of $108.4 million. The Company has experienced significant quarterly fluctuations in operating results and expects that these fluctuations in revenues, expenses and losses will continue. The Company has historically experienced significant quarterly fluctuations in its level of product sales, generally reflecting the timing and degree of customer demand for various products. Dividends. The Company has never paid cash dividends on its common stock and does not anticipate paying any such dividends in the foreseeable future. In addition, the Company is restricted from paying cash dividends on its common stock until such time as all cumulative dividends have been paid on outstanding shares of its Series A and Series C convertible preferred stock. The Company currently intends to retain its earnings, if any, after payment of dividends on outstanding shares of Series A and Series C convertible preferred stock, for the development of its business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Operations After Restructuring. As a result of the Company's restructuring to reduce operating expenses, the Company has focused its research and development programs on its near-term drug delivery (GEOMATRIX) technology and its Anticode cancer program. The Company's Anticode programs directed at other areas have largely been curtailed and any future progress with these programs is dependent upon the Company obtaining a collaborative partner to fund further research. There can be no assurance that the Company will be successful in obtaining additional funding for these programs. The Company no longer anticipates devoting any of its resources to further development of its topical dermatology product candidates. The Company's agreement with its collaborative partner, the Procter & Gamble Company ("Procter & Gamble"), for its Anticode program in infectious diseases, ended in September 1995. The Company will have to obtain additional corporate partners in order to continue its Anticode programs. There can be no assurance that the Company will be able to negotiate such collaborative arrangements on favorable terms, if at all. Genta Jago's strategy is to form alliances with major pharmaceutical companies to commercialize its GEOMATRIX oral controlled-release products worldwide. Genta Jago has established collaborations with Gensia (and, through Gensia, with Boehringer Mannheim), Apothecon and Krypton. Gensia has since entered into an Assignment and Release Agreement with SkyePharma for its United States subsidiary, Brightstone, to assume 17 Gensia's position in the collaboration with Genta Jago with no modification to the terms of the original agreement between Genta Jago and Gensia. Brightstone also replaces Gensia in its relationship with Boehringer Mannheim. No Assurance of Regulatory Approval; Government Regulation. The FDA and comparable agencies in foreign countries impose substantial premarket approval requirements upon the introduction of pharmaceutical products through lengthy and detailed preclinical and clinical testing procedures and other costly and time-consuming procedures. Satisfaction of these requirements, which includes demonstrating to the satisfaction of the FDA and foreign regulatory agencies that the product is both safe and effective, typically takes several years or more depending upon the type, complexity and novelty of the product. There can be no assurance that such testing will show any product to be safe or efficacious or, in the case of certain of Genta Jago's products, to be bioequivalent to a currently marketed pharmaceutical. Government regulation also affects the manufacture and marketing of pharmaceutical products. The effect of government regulation may be to delay marketing of any new products for a considerable or indefinite period of time, to impose costly procedures upon the Company's or Genta Jago's activities and to diminish any competitive advantage that the Company or Genta Jago may attain. It may take years before marketing approvals are obtained for the Company's or Genta Jago's products, if at all. There can be no assurance that FDA or other regulatory approval for any products developed by the Company or Genta Jago will be granted on a timely basis, if at all, or, if granted, that such approval will cover all the clinical indications for which the Company or Genta Jago is seeking approval or will not sustain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use. Further, with respect to the reformulated versions of currently available pharmaceuticals being developed through Genta Jago, there is a substantial risk that the manufacturers or marketers of such currently available pharmaceuticals will seek to delay or block regulatory approval of any reformulated versions of such pharmaceuticals through litigation or other means. Any significant delay in obtaining, or failure to obtain, such approvals would materially adversely affect the Company and Genta Jago's revenue. Moreover, additional government regulation from future legislation or administrative action may be established which could prevent or delay regulatory approval of the Company's or Genta Jago's products or further regulate the prices at which the Company's or Genta Jago's proposed products may be sold. The Company is also subject to various foreign, federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use, manufacture, storage, handling and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with the Company's research and development work and manufacturing processes. Although the Company believes it is in compliance with these laws and regulations in all material respects (except as disclosed under "Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Liquidity and Capital Resources"), there can be no assurance that the Company will not be required to incur significant costs to comply with such regulations in the future. Uncertainty Regarding Patents and Proprietary Technology. The Company's and Genta Jago's success will depend, in part, on their respective abilities to obtain patents, maintain trade secrets and operate without infringing the proprietary rights of others. No assurance can be given that patents issued to or licensed by the Company or Genta Jago will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide competitive advantages to the Company or Genta Jago. There can be no assurance that the Company's or Genta Jago's patent applications will be approved, that the Company or Genta Jago will develop additional products that are patentable, that any issued patent will provide the Company or Genta Jago with any competitive advantage or adequate protection for its inventions or will not be challenged by others, or that the patents of others will not have an adverse effect on the ability of the Company or Genta Jago to do business. Competitors may have filed applications, may have been issued patents or may obtain additional patents and proprietary rights relating to products or processes competitive with those of the Company or Genta Jago. Furthermore, there can be no assurance that others will not independently develop similar products, duplicate any of the Company's or Genta Jago's products or design around any patented products developed by the Company or Genta Jago. The Company and Genta Jago rely on secrecy to protect technology in addition to patent protection, especially where patent protection is not believed to be appropriate or obtainable. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to 18 the Company's or Genta Jago's trade secrets, or that the Company or Genta Jago can effectively protect is rights to its unpatented trade secrets. Genta and Genta Jago have obtained licenses or other rights to patents and other proprietary rights of third parties, and may be required to obtain licenses to additional patents or other proprietary rights of third parties. No assurance can be given that any existing licenses and other rights will remain in effect or that any licenses required under any such additional patents or proprietary rights would be made available on terms acceptable to the Company or Genta Jago, if at all. If Genta's or Genta Jago's licenses and other rights are terminated or if Genta or Genta Jago cannot obtain such additional licenses, Genta or Genta Jago could encounter delays in product market introductions while it attempts to design around such patents or could find that the development, manufacture or sale of products requiring such licenses could be foreclosed. In addition, the Company or Genta Jago could incur substantial costs, including costs caused by delays in obtaining regulatory approval and bringing products to market, in defending itself in any suits brought against the Company or Genta Jago claiming infringement of the patent rights of third parties or in asserting the Company's or Genta Jago's patent rights, including those granted by third parties, in a suit against another party. The Company or Genta Jago may also become involved in interference proceedings declared by the United States Patent Office in connection with one or more of its patents or patent applications, which could result in substantial cost to the Company or Genta Jago, as well as an adverse decision as to priority of invention of the patent or patent application involved. There can be no assurance that the Company or Genta Jago will have sufficient funds to obtain, maintain or enforce patents on their respective products or technology, to obtain or maintain licenses that may be required in order to develop and commercialize their respective products, to contest patents obtained by third parties, or to defend against suits brought by third parties. Dependence on Others. The Company's strategy for the research, development and commercialization of certain of its or Genta Jago's products requires negotiating, entering into and maintaining various arrangements with corporate collaborators, licensors, licensees and others, and is dependent upon the subsequent success of these outside parties in performing their responsibilities. The Company's agreement with Procter & Gamble represented the Company's primary source of collaborative revenues during 1995 and such agreement ended in September 1995. Genta Jago is seeking additional collaborative arrangements to develop and commercialize certain of their respective products. However, there can be no assurance that Genta Jago will be able to negotiate collaborative arrangements on acceptable terms, if at all. Technology Licensed From Third Parties. The Company has entered into certain agreements with, and licensed certain technology and compounds from, third parties. The Company has relied on scientific, technical, clinical, commercial and other data supplied and disclosed by others in entering into these agreements, including the Genta Jago agreements, and will rely on such data in support of development of certain products. Although the Company has no reason to believe that this information contains errors of omission or fact, there can be no assurance that there are no errors of omission or fact that would materially affect the future approvability or commercial viability of these products. Competition. The Company and Genta Jago have numerous competitors in the United States and other countries for their respective technologies and products under development, including among others, major pharmaceutical and chemical companies, specialized biotechnology firms, universities and other research institutions. There can be no assurance that the Company's or Genta Jago's competitors will not succeed in developing products or other novel technologies that are more effective than any which have been or are being developed by the Company or Genta Jago or which would render the Company's or Genta Jago's technology and products non-competitive. Many of the Company's and Genta Jago's competitors have substantially greater financial, technical, marketing and human resources than the Company or Genta Jago. In addition, many of those competitors have significantly greater experience than the Company or Genta Jago in undertaking preclinical testing and human clinical trials of new pharmaceutical products and obtaining FDA and other regulatory approvals of products for use in healthcare. Accordingly, the Company's or Genta Jago's competitors may succeed in obtaining regulatory approval for products more rapidly than the Company or Genta Jago and such competitors may succeed in delaying or blocking regulatory approvals of the Company's or Genta Jago's products. Furthermore, if the Company or Genta Jago is permitted to commence commercial sales of products, it will also be competing with respect to marketing capabilities, an area in which it has limited or no experience, and manufacturing efficiency. There are many public and private companies that are conducting research and development activities based on drug delivery 19 and antisense technologies. The Company believes that the industry-wide interest in such technologies will accelerate and competition will intensify as the techniques which permit drug design and development based on such technologies are more widely understood. Difficult Manufacturing Requirements. The manufacture of Anticode oligonucleotides is a time-consuming and complex process. Management believes that the Company has the ability to acquire or produce quantities of oligonucleotides sufficient to support its present needs for research and its projected needs for its initial clinical development programs. However, Genta believes that improvements in its manufacturing technology will be required to enable the Company to meet the volume and cost requirements needed for certain commercial applications of Anticode products. Products based on chemically modified oligonucleotides have never been manufactured on a commercial scale. The manufacture of all of the Company's and Genta Jago's products will be subject to current GMP requirements prescribed by the FDA or other standards prescribed by the appropriate regulatory agency in the country of use. There can be no assurance that the Company or Genta Jago will be able to manufacture products, or have products manufactured for it, in a timely fashion at acceptable quality and prices, that they or third party manufacturers can comply with GMP or that they or third party manufacturers will be able to manufacture an adequate supply of product. Limited Sales, Marketing and Distribution Experience. The Company and Genta Jago have very limited experience in pharmaceutical sales, marketing and distribution. In order to market and sell certain products directly, The Company or Genta Jago would have to develop or subcontract a sales force and a marketing group with technical expertise. There can be no assurance that any direct sales or marketing efforts would be successful. Uncertainty of Product Pricing, Reimbursement and Related Matters. The Company's and Genta Jago's business may be materially adversely affected by the continuing efforts of governmental and third party payers to contain or reduce the costs of healthcare through various means. For example, in certain foreign markets the pricing or profitability of healthcare products is subject to government control. In the United States, there have been, and the Company expects that there will continue to be, a number of federal and state proposals to implement similar governmental control. While the Company cannot predict whether any such legislative or regulatory proposals or reforms will be adopted, the adoption of any such proposal or reform could adversely affect the commercial viability of the Company's and Genta Jago's potential products. In addition, in both the United States and elsewhere, sales of healthcare products are dependent in part on the availability of reimbursement to the consumer from third party payers, such as government and private insurance plans. Third party payers are increasingly challenging the prices charged for medical products and services and therefore, significant uncertainty exists as to the reimbursement of existing and newly approved healthcare products. If the Company or Genta Jago succeeds in bringing one or more products to the market, there can be no assurance that these products will be considered cost effective and that reimbursement to the consumer will be available or will be sufficient to allow the Company or Genta Jago to sell its products on a competitive basis. Dependence on Qualified Personnel. The Company's success is highly dependent on the retention of principal members of its management and scientific staff and the recruitment of additional key personnel. As the Company has already fallen below critical mass, the loss of additional key personnel or the failure to recruit necessary additional personnel does and will further impede the achievement of development objectives. There is intense competition for qualified personnel in the areas of the Company's activities, and there can be no assurance that Genta will be able to continue to attract and retain the qualified personnel necessary for the development of its business. Product Liability Exposure; Limited Insurance Coverage. The Company's, JBL's and Genta Jago's businesses expose them to potential product liability risks which are inherent in the testing, manufacturing, marketing and sale of human therapeutic products. If available, product liability insurance for the pharmaceutical industry generally is expensive. The Company has obtained a level of liability insurance coverage which it deems appropriate for its current stage of development. However, there can be no assurance that the Company's present insurance coverage is adequate. Such existing coverage may not be adequate as the Company further develops products, and no assurance can be given that in the future adequate insurance coverage will be available in sufficient 20 amounts or at a reasonable cost, or that a product liability claim would not have a material adverse effect on the business or financial condition of the Company. Hazardous Materials; Environmental Matters. The Company's research and development and manufacturing processes involve the controlled storage, use and disposal of hazardous materials, biological hazardous materials and radioactive compounds. The Company is subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although the Company believes that its safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company may be held liable for any damages that result, and any such liability could exceed the resources of the Company. There can be no assurance that the Company will not be required to incur significant costs to comply with environmental laws and regulations in the future, nor that the operations, business or assets of the Company will not be materially adversely affected by current or future environmental laws of regulations. See "Management's Discussion and Analysis of Financial Condition and Results of Operation -- Liquidity and Capital Resources." Volatility of Stock Price. The market price of the Company's common stock, like that of the common stock of many other biopharmaceutical companies, has been highly volatile. Factors such as the results of preclinical studies and clinical trials by Genta, Genta Jago or their competitors, other evidence of the safety or efficacy of products of Genta, Genta Jago or their competitors, announcements of technological innovations or new therapeutic products by the Company, Genta Jago or their competitors, governmental regulation, developments in patent or other proprietary rights of the Company or its competitors, including litigation, fluctuations in the Company's operating results, and market conditions for biopharmaceutical stocks in general could have a significant impact on the future price of the common stock. On March 2, 1997, the Company had 39,991,626 shares of common stock outstanding. Future sales of shares of common stock by existing stockholders and option holders also could adversely affect the market price of the common stock. Concentration of Ownership. The Company's directors, executive officers and principal stockholders and certain of their affiliates have the ability to influence the election of the Company's directors and most other stockholder actions. Possible Nonpayment of Dividends on Series A and Series C Preferred Stock; Deficiency in Fixed Charges and Preferred Stock Dividend Coverage. Dividends will be payable on the Series A and Series C Preferred Stock only when, as and if declared by the Company's Board of Directors, out of funds legally available therefor. The Company has incurred losses and, thus, has had a deficiency in fixed charges and preferred stock dividend coverage since inception. For the fiscal years ended December 31, 1991, 1992, 1993, 1994, 1995 and 1996 the coverage deficiency was approximately $9,486,000, $16,703,000, $16,189,000, $25,998,000, $27,917,000 and $13,950,000 respectively. While the Company intends to pay dividends on the Series A and Series C Preferred Stock, it is anticipated that the Company will continue to incur losses and thus will continue to have a deficiency in fixed charges and preferred stock dividend coverage. Dividends on the Series A and Series C Preferred Stock may be paid only out of capital surplus (within the meaning of the Delaware General Corporation Law) or net profits of the Company for the fiscal year in which the dividend is declared and the preceding fiscal year. Effect of Certain Anti-Takeover Provisions. The Company's Restated Certificate of Incorporation and Bylaws include provisions that could discourage potential takeover attempts and make attempts by stockholders to change management more difficult. The approval of 66-2/3% of the Company's voting stock is required to approve certain transactions and to take certain stockholder actions, including the calling of a special meeting of stockholders and the amendment of any of the anti-takeover provisions contained in the Company's Restated Certificate of Incorporation. Further, pursuant to the terms of its stockholder rights plan adopted in December 1993, the Company has distributed a dividend of one right for each outstanding share of common stock. These rights will cause a substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board of Directors and may have the effect of deterring hostile takeover attempts. The stockholder rights plan was amended to permit the consummation of the transactions with the Aries Funds described under Item 5(d) of this Annual Report on Form 10-K. 21 Item 2. Properties Genta's principal administrative offices and research laboratories are located in San Diego, California where the Company occupies approximately 15,000 square feet. The Company's lease for these premises expired in November, 1996, and the Company is currently renting on a month-to-month basis at the same rate of $30,076 per month. The Company believes this space will be adequate for its activities through 1997. JBL, the Company's manufacturing subsidiary, leases and occupies approximately 30,000 square feet of office, laboratory and manufacturing space in San Luis Obispo, California. This lease expires in 2000. The lease calls for rent of approximately $306,000 in 1997, with amounts generally increasing annually thereafter to reflect cost of living related increases. The Company currently uses substantially all of the manufacturing capacity of this facility. The Company believes that such space will be adequate for its planned operations through 1997. The Company also has an option to purchase property adjacent to this facility, for expansion, if necessary. A director and officer and another officer of the Company, Drs. Klem and Brown, respectively, are affiliated with the owners of the leased and adjacent properties. Genta Pharmaceuticals Europe, S.A., the Company's European subsidiary, leases approximately 10,000 square feet of office, laboratory and manufacturing space in Marseilles, France. The lease is cancelable in 2003 and expires in 2005. The lease calls for rent of approximately $99,000 in 1997, with amounts generally increasing annually thereafter to reflect cost of living related increases. Item 3. Legal Proceedings (a) On February 5, 1997, Equity-Linked Investors, L.P. and Equity-Linked Investors-II (collectively, the "Plaintiffs") who, as a group, may be deemd to beneficially own more than five percent of the outstanding shares of the Common Stock of the Company as Series A preferred stockholders, filed suit (the "Suit") in the Delaware Court of Chancery (the "Court") against the Company, each of the Company's directors and the Aries Funds (as hereinafter defined in Item 5). Through the Suit, the Plaintiffs are seeking to enjoin the transactions contemplated by The Note and Warrant Purchase Agreement (the "Transactions"), rescission of the Transactions, damages, attorney fees, and such other and further relief as the Court may deem just and proper. The Suit alleges that the Board of Directors of the Company breached fiduciary duties by failing to consider financing alternatives to the Transactions and further alleges that the Transactions were not in the best interests of the stockholders. Additionally, the Suit alleges that the Aries Funds aided and abetted such breach of fiduciary duty through their participation in the Transactions. On March 4 and 5, 1997, a trial was held before the Court. The Court has established a briefing schedule and set a hearing for post-trial arguments on April 1, 1997. The Company believes that the lawsuit is without merit. (b) No material legal proceedings were terminated in the quarter ending December 31, 1996. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders in the quarter ended December 31, 1996. 22 Executive Officers of the Registrant The executive officers of the Company are as follows:
Name Age Position Thomas H. Adams, Ph.D........................... 54 Chairman of the Board, Chief Executive Officer and Director Lauren R. Brown, Ph.D........................... 54 Vice President, President of JBL Zofia E. Dziewanowska, Ph.D., M.D............... 57 Senior Vice President, Global Clinical Affairs Robert E. Klem, Ph.D............................ 52 Vice President, Director, and Chairman of the Board of JBL Guy Van de Winckel.............................. 55 Vice President, European Operations Robert Wang, Ph.D............................... 49 Vice President, Pharmaceutical Operations
Dr. Adams was the founder of Genta and has been Chairman of the Board and Chief Executive Officer of Genta since February 1989. He previously served as Chairman of the Board and Chief Executive Officer of GenProbe, which he co-founded in 1984. Prior to joining Gen-Probe, he held the positions of Senior Vice President of Research & Development and Chief Technical Officer at Hybritech Incorporated ("Hybritech"), a leading monoclonal antibody products company which was acquired by Eli Lilly and Company in 1986. He had previously held senior scientific management positions with Technicon Instruments Corp., the Hyland Laboratories Division of Baxter Travenol, and DuPont. Dr. Adams is a director of Life Technologies, Inc., and three private biotechnology firms. He received his Ph.D. in Biochemistry from the University of California at Riverside. Dr. Brown has been Vice President of the Company since October 1991. He co-founded JBL in 1973 and, since then, has been President of JBL the subsidiary that Genta acquired in February 1991. He has had significant experience in the scale-up of a wide variety of processes, including many custom syntheses for outside companies under GMP standards. In the past, he has also shared responsibilities for the research program at JBL, and he developed the syntheses for many of JBL's products. Dr. Brown received his Ph.D. in Organic Chemistry from the University of California at Riverside. Dr. Dziewanowska joined the Company as Senior Vice President, Global Clinical Affairs in May 1994. Prior to joining Genta, Dr. Dziewanowska spent 17 years at Hoffmann-La Roche Inc. in various research and development positions including, most recently, Vice President and Director of International Therapeutic Research and Medical Affairs Advisor. Dr. Dziewanowska is currently holding a faculty appointment at the Cornell University Medical School. She also has held various positions in the Pharmaceutical Research and Manufacturers Association of America, the most recent being a Vice-Chairman of the Medical Section Steering Committee, American Association of Pharmaceutical Physicians and the International Federation of Pharmaceutical Medicine. Before joining Hoffmann-La Roche, Dr. Dziewanowska worked four years as associate director of international clinical pharmacology at Merck, Sharp & Dohme Laboratories and as a visiting associate physician in the Department of Pharmacology at Rockefeller University in New York. She received an M.D. degree from the University of Warsaw Medical School and a Ph.D. in physiology from the Institute of Immunology and Experimental Therapeutics, Polish Academy of Science. Her medical degree was recertified in England and the United States She has been invited to speak on a variety of United States and International Conferences pertaining to clinical drug research and development, and she is listed in "Who's Who." Dr. Klem has been a director of the Company since February 1991 and a Vice President of the Company since October 1991. Dr. Klem co-founded JBL in 1973 and, since then, has been Chairman of the Board and Chief 23 Technical Officer of JBL with responsibility for research, development and marketing activities. Previously, Dr. Klem was the Plant Manager for E.I. DuPont in Victoria, Texas from 1970 to 1974. Dr. Klem received his Ph.D. in Organic Chemistry from the University of California at Riverside. Mr. Van de Winckel has been President of Genta Pharmaceuticals Europe, S.A. since its incorporation in November 1993 and has been Vice President, European Operations of the Company since December 1992. From 1987 until December 1992, Mr. Van de Winckel was an independent consultant for healthcare companies in Europe and the United States, specializing in marketing and financial strategies. From 1981 until 1986, Mr. Van de Winckel was Vice President International and Co-President of Hybritech Europe. He previously held various management positions with Baxter Travenol, including Vice President of Marketing with the Hyland Laboratories Division and Director of Marketing International. Mr. Van de Winckel received a degree in international business from the University of Louvain, Belgium. Dr. Wang has been Vice President, Pharmaceutical Operations of the Company since July 1995. From September 1993 through June 1995, Dr. Wang was Vice President, Corporate Operations of the Company. From the time Dr. Wang joined Genta in February 1989 to September 1993, Dr. Wang was Vice President, Process Development of the Company. From 1986 to 1988, Dr. Wang was Vice President of Development at Gen-Probe where he had technical responsibility for developing and implementing a novel nonisotopic DNA probe assay system. Prior to joining Gen-Probe, Dr. Wang was Senior Director of Process Development and Manufacturing at Hybritech, where he had overall responsibility for manufacturing, process development and clinical support for all manufacturing. Dr. Wang also held senior scientific positions at Calbiochem-Behring Diagnostics and International Diagnostic Technology. He received his Ph.D. in Biochemistry from the University of California at Riverside and was a post-doctoral fellow at Scripps Clinic and Research Foundation. 24 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters (a) Market Information Throughout 1995 and 1996, the Company's common stock was traded on the Nasdaq National Market under the symbol "GNTA". However, as of February 7, 1997 the Company's common stock trades in the over-the-counter market on the Nasdaq SmallCap Market under the symbol "GNTAC" (see "Risk Factors - Threat of Nasdaq Delisting"). The following table sets forth, for the periods indicated, the high and low sales prices for the common stock as reported by Nasdaq. High Low 1995 First Quarter................................ $ 6 1/2 3 3/4 Second Quarter............................... 3 1/2 1 3/4 Third Quarter................................ 3 1/2 1 3/8 Fourth Quarter............................... 2 7/8 1 1/2 1996 First Quarter................................ 2 15/16 1 7/8 Second Quarter............................... 2 7/8 1 7/16 Third Quarter................................ 2 7/16 Fourth Quarter............................... 1 1/2 9/32 (b) Holders There were 424 holders of record of the Company's common stock as of March 1, 1997. (c) Dividends The Company has never paid cash dividends on its common stock and does not anticipate paying any such dividends in the foreseeable future. In addition, the Company is restricted from paying cash dividends on its common stock until such time as all cumulative dividends have been paid on outstanding shares of its Series A and Series C convertible preferred stocks. The Company currently intends to retain its earnings, if any, after payment of dividends on outstanding shares of Series A and Series C convertible preferred stock, for the development of its business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". (d) Recent Sale of Unregistered Securities In February, 1997, the Company raised gross proceeds of $3 million in a private placement, to the Aries Fund and the Aries Domestic Fund, L.P. (collectively the "Aries Funds"), of Convertible Notes and warrants to purchase 20 million shares of common stock ("Bridge Warrants"). The Convertible Notes are initially convertible into 600,000 shares of Series D preferred stock, which in turn are convertible into 20 million shares of common stock. Bridge Warrants on 7.8 million shares of common stock have an exercise price of $.001 per share. Bridge Warrants on 12.2 million shares of common stock have an exercise price of $.55 per share. Further, upon the occurrence of certain events of default, if elected by the holders, up to $300,000 principal amount of the Convertible Notes is convertible into common stock at a conversion price of $.001 per share. Each Bridge Warrant is convertible, at the option of the holder, into a new 25 Warrant entitling such holder to purchase one share of common stock at an exercise price of $0.15 per share or, under certain circumstances, if lower than $0.15 per share, 50% of the market price of the common stock. Pursuant to the Note and Warrant Purchase Agreement dated as of January 28, 1997 between the Company and the Aries Funds (the "Note and Warrant Purchase Agreement"), the Aries Funds have the right to appoint a majority of the members of the Board of Directors of the Company; provided, however, that in the event the Company does not obtain Future Financings (as defined in the Note and Warrant Purchase Agreement) in excess of $3.5 million on or before the date which is six months after the Bridge Closing Date referred to in such agreement, then the Aries Funds shall have the contractual right to appoint only two directors or observers and, if at such time, more than two directors have been appointed by the Aries Funds, the additional directors shall be required to resign. As of March 14, 1997, the Aries Funds had not exercised their right to appoint any directors or observers. 26 Item 6. Selected Consolidated Financial Data The following table sets forth certain consolidated financial data with respect to the Company. The selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes thereto.
YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- CONSOLIDATED STATEMENTS OF OPERATIONS DATA: (In thousands, except per share amounts) Revenues: Product sales $4,925 $3,782 $3,574 $3,263 $2,272 Gain on sale of technology 373 - - - - Collaborative research and development - 1,125 3,141 4,733 3,546 ------------- ------------- ------------ ------------- ------------- 5,298 4,907 6,715 7,996 5,818 ------------- ------------- ------------ ------------- ------------- Costs and expenses: Cost of products sold 2,479 1,899 1,710 1,593 1,502 Research and development 5,834 11,277 13,533 12,117 10,743 Charge for acquired in-process research and development - 4,762 1,850 - 7,200 Selling, general and administrative 5,639 5,439 6,376 5,140 4,221 ------------- ------------- ------------ ------------- ------------- 13,952 23,377 23,469 18,850 23,666 ------------- ------------- ------------ ------------- ------------- Loss from operations (8,654) (18,470) (16,754) (10,854) (17,848) Equity in net loss of joint venture (2,712) (6,913) (7,425) (5,310) - Other income, net (59) 17 731 646 1,145 ------------- ------------- ------------ ------------- ------------- Net loss $(11,425) $(25,366) $(23,448) $(15,518) $(16,703) Dividends on preferred stock (2,525) (2,551) (2,550) (671) - ------------- ------------- ------------ ------------- ------------- Net loss applicable to common shares $(13,950) $(27,917) $(25,998) $(16,189) $(16,703) ============= ============= ============ ============= ============= Net loss per common share(1) $(0.47) $(1.43) $(1.90) $(1.19) $(1.34) ============= ============= ============ ============= ============= Shares used in the calculation of net loss per common share 29,834 19,519 13,710 13,621 12,450 ============= ============= ============ ============= ============= Deficiency of earnings to meet combined fixed charges and preferred stock dividends(2) $(13,950) $(27,917) $(25,998) $(16,189) $(16,703) ============= ============= ============ ============= =============
DECEMBER 31, ----------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- CONSOLIDATED BALANCE SHEETS DATA: (In thousands) Cash, cash equivalents and short-term investments $532 $272 $11,103 $34,594 $26,356 Working capital (deficit) (1,954) (1,580) 5,597 30,524 21,530 Total assets 11,169 15,631 23,908 45,486 34,618 Notes payable and capital lease obligations, less current portion 1,160 2,334 1,871 1,651 1,409 Total stockholders' equity 4,074 6,972 14,076 38,064 26,664
(1) Computed on the basis of net loss per common share described in Note 1 of Notes to Consolidated Financial Statements. (2) The Company has incurred losses and, thus, has had a deficiency in fixed charges and preferred stock dividend coverage since inception. 27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Since its inception in February 1988, Genta has devoted its principal efforts toward drug discovery, research and development. Genta has been unprofitable to date and, even if it obtains financing to continue its operations, expects to incur substantial operating losses for the next several years due to continued requirements for ongoing research and development activities, preclinical testing and clinical trials, manufacturing activities, regulatory activities, establishment of a sales and marketing organization, and development activities undertaken by Genta Jago, the Company's joint venture with Jagotec. From the period since its inception to December 31, 1996, the Company has incurred a cumulative net loss of $108.4 million. The Company has experienced significant quarterly fluctuations in operating results and it expects that these fluctuations in revenues, expenses and losses will continue. See "Risk Factors." The statements contained in this Annual Report on Form 10-K that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. The Company intends that all forward-looking statements be subject to the safeharbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's views as of the date they are made with respect to future events and financial performance, but are subject to many risks and uncertainties, which could cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. Examples of such risks and uncertainties include, but are not limited to, obtaining sufficient financing to maintain the Company's planned operations, the timely development, receipt of necessary regulatory approvals and acceptance of new products, the successful application of the Company's technology to produce new products, the obtaining of proprietary protection for any such technology and products, the impact of competitive products and pricing and reimbursement policies, changing market conditions and the other risks detailed in the Risk Factors section of this Annual Report on Form 10-K and elsewhere herein. The Company does not undertake to update any forward-looking statements. Results of Operations Operating revenues totaled $5.3 million in 1996 compared to $4.9 million in 1995 and $6.7 million in 1994. Sales of specialty chemical and pharmaceutical intermediate products increased to $4.9 million in 1996 from $3.8 million in 1995 and $3.6 million in 1994. Collaborative research and development revenues were zero, $1.1 million and $3.1 million in 1996, 1995 and 1994, respectively. Collaborative research and development revenues recorded in 1995 represented revenues earned pursuant to the Company's collaboration with The Procter & Gamble Company which ended in late 1995. Sales of specialty chemical and pharmaceutical intermediate products increased each year primarily due to increased market penetration of existing products and, to a lesser degree, the introduction of new products. One customer, a European distributor, accounted for approximately 27%, 21% and 19% of product sales during the years ended December 31, 1996, 1995 and 1994, respectively. One other customer accounted for approximately 16% and 12% of product sales during the years ended December 31, 1995 and 1994, respectively, while another customer comprised 18% of 1994 product sales. No other customer accounted for more than 8% of product sales in 1996. Management does not believe the loss of any one customer would have a material adverse affect on the Company's business as a whole. The Company has historically experienced significant quarterly fluctuations in its level of product sales, generally reflecting the timing and degree of customer demand for certain products, and the Company anticipates that these sales fluctuations will continue in future periods. Costs and expenses totaled $14 million in 1996 compared to $23.4 million in 1995 and $23.5 million in 1994. Included in costs and expenses during 1995 and 1994 were charges for acquired in-process research and development totaling $4.8 million and $1.9 million, respectively, associated with the expansion of Genta Jago to obtain rights to develop additional GEOMATRIX-based products. Exclusive of these charges, the Company's costs and expenses decreased by approximately $4.7 million in 1996 relative to 1995 primarily due to lower research and development expenses largely attributable to the Company's restructuring and related workforce reductions 28 implemented in 1995 and 1996. These savings in operating expenses were partially offset by an aggregate of approximately $850,000 in non-recurring charges recorded during 1996 primarily related to the Company's restructuring and work force reductions. As a result of the aforementioned restructuring and other cost savings measures implemented during 1995 and 1996, the Company anticipates further reductions in the level of its operating expenses during 1997 relative to 1996. However, the Company anticipates that, if sufficient collaborative revenues and other funding is available, research and development expenses may increase in future years due to requirements for preclinical studies, clinical trials and increased regulatory costs. The Company also anticipates that costs associated with Anticode marketing activities, if such products are successfully developed and approved for marketing, would be the responsibility of corporate partners. The Company's equity in net loss of joint venture totaled $2.7 million in 1996 compared to $6.9 million in 1995 and $7.4 million in 1994. The decrease in the Company's share of Genta Jago's net loss during 1996 relative to 1995 is largely attributable to the fact that development efforts are now focused exclusively on GEOMATRIX-based products and a greater portion of development activities were funded pursuant to Genta Jago's collaborative agreements with third parties. Interest income has fluctuated significantly each year and is anticipated to continue to fluctuate primarily due to changes in the levels of cash, investments and interest rates each period. Liquidity and Capital Resources Since inception, the Company has financed its operations primarily from private and public offerings of its equity securities. Cash provided from these offerings totaled approximately $95.4 million through December 31, 1996, including net proceeds of $8.4 million raised during 1996. At December 31, 1996, the Company had cash, cash equivalents and short-term investments totaling $532,000 compared to $272,000 at December 31, 1995. The increase in cash and cash equivalents during 1996 is largely attributable to proceeds from the Company's private placements, as described in footnote 8 to the Company's consolidated financial statements. The Company anticipates that its existing capital resources, including $3 million in financing obtained from the issuance of the Convertible Notes in February 1997, will enable the Company to maintain its presently planned operations until July, 1997. Management believes that a minimum of approximately $6.4 million of additional financing will be required to sustain the Company's presently-planned operations through the end of 1997 and to satisfy the Company's obligations under the Convertible Notes and the Convertible Debentures. The Company has been informed, however, that its common stock will be delisted from the Nasdaq SmallCap Market unless the Company makes a public filing with the Securities and Exchange Commission and Nasdaq by April 7, 1997 evidencing minimum capital and surplus of at least $6 million. While the Company believes that it can meet this capital and surplus level by such date, there can be no assurance that the Company will succeed in timely achieving this requirement. Such delisting may have an adverse effect on the ability of the Company to attract new investors. The Company is actively seeking additional sources of financing and is negotiating with pharmaceutical companies regarding collaborative agreements and other financial arrangements. There can be no assurance, however, that any such collaborative agreements or other sources of funding will be available on favorable terms, if at all. The Company has entered into a letter of intent with an investment banking firm pursuant to which such firm confirmed its interest in acting as placement agent, on a "best efforts" basis, of a private placement of preferred stock, convertible notes and warrants for proceeds of up to $7.5 million (plus an over-allotment option), subject to certain conditions. In the Letter of Intent, this firm agreed that, to the extent alternative financings were available at better timing, pricing and terms, the firm would waive its right to conduct the offering. If the Company is unsuccessful in raising the required funds, the Company will be required to license or sell additional assets and technology, further scale back or eliminate some or all of its development programs, further reduce its work force and spending, and take other measures in order to continue its operations. If such measures are not successfully completed, the Company may be required to discontinue its operations. See "Risk Factors -- Need for Additional Funds; Risk of Insolvency" and "Risk Factors -- Threat of Nasdaq Delisting." As described under Item 5(d) of this Annual Report on Form 10-K, the Aries Funds, who provided $3 million in financing to the Company in February, 1997, have the right to appoint a majority of the members of the 29 Board of Directors of the Company. As of March 14, 1997, the Aries Funds had not exercised this right. However, should they determine to do so, their designees may decide to alter the business strategy, operations and/or management of the Company in a manner not contemplated in this Annual Report on Form 10-K. In connection with the Genta Jago joint venture formed in late 1992 and expanded in May 1995, the Company entered into a working capital agreement with Genta Jago which expires in October 1998. Pursuant to this agreement, the Company is required to make loans to Genta Jago up to a mutually agreed upon maximum commitment amount, which amount is established by the parties on a periodic basis. The Company anticipates its working capital contribution to Genta Jago for 1997 will be $300,000, as compared to $846,784 in 1996 and $7.7 million in 1995, as a result of Genta Jago's success in entering into collaborative agreements with third parties. As of December 31, 1996, the Company had advanced working capital loans of approximately $15.3 million to Genta Jago, net of principal repayments. Such loans bear interest and are payable in full in October 1998, or earlier in the event certain revenues are received by Genta Jago from third parties. There can be no assurance, however, that Genta Jago will obtain sufficient financial resources to repay such loans to Genta. Genta Jago repaid Genta $1 million of its working capital loans in November 1996 from license fee revenues. The amount of future loans by Genta to Genta Jago will depend upon several factors including the amount of funding obtained by Genta Jago through collaborative arrangements, Genta's ability to provide loans, and the timing and cost of Genta Jago's preclinical studies, clinical trials and regulatory activities. Through December 31, 1996, the Company acquired $10.1 million in property and equipment of which $5.5 million was financed through capital leases and other equipment financing arrangements, $3.3 million was funded in cash and the remainder was acquired through the Company's acquisition of JBL. In November 1996, the Company bought out certain of its capital leases for approximately $1.2 million, primarily covering equipment used in research and development activities at Genta and JBL, using Company funds which the leasing company had on deposit. This equipment had an original cost of $4.5 million and a net book value at buyout of approximately $850,000. The Company capitalized $1.2 million as fixed assets at the time of the buyout. In 1996, the Company also sold certain of its fixed assets. This resulted in a decrease of gross fixed assets from $9.6 million in 1995 to $6 million in 1996. The Company has commitments associated with its notes payable, capital leases and operating leases as discussed further in Note 7 of the Notes to Consolidated Financial Statements. In particular, the Company's equipment financing agreement contains certain financial covenants, the most significant of which required the Company to provide certain deposits in the event that the Company's cash and investment balances fell below specified levels. As of December 31, 1996 the Company had $251,000 in security deposits with an equipment financing company pursuant to the terms of the agreement. In October 1996, JBL retained a chemical consulting firm to advise it with respect to environmental compliance regarding an incident of soil and groundwater contamination (the "Spill") by small quantities of certain chemicals. The Company believes, based upon information known to date, that the Spill is relatively minor and will not have a material adverse effect on the business of the Company, although there can be no assurance thereof. Terms of the Company's Series A Preferred Stock require the payment of dividends annually in amounts ranging from $3 per share per annum for the first year to $5 per share per annum in the third and fourth years. Dividends may be paid in cash or common stock or a combination thereof, at the Company's option. Dividends on the Series A Preferred Stock accrue on a daily basis (whether or not declared) and shall accumulate to the extent not paid on the annual dividend payment date following the dividend period for which they accrue. The Company may redeem the Series A Preferred Stock under certain circumstances, and was required to redeem the Series A Preferred Stock, subject to certain conditions, in September 1996 at a redemption price of $50 per share, plus accrued and unpaid dividends (the "Redemption Price"). The Company elected to pay the Redemption Price in common stock. In September 1996, holders of 55,900 shares of Series A Preferred Stock converted such shares and related accrued dividends into 2,423,500 shares of the Company's common stock. The Company is obligated to use its reasonable efforts to arrange for a firm commitment underwriting in order to redeem the Series A Preferred Stock. The Company is restricted from paying cash dividends on common stock until such time as all cumulative dividends on outstanding shares of Series A and Series C Preferred Stock have been paid. The Company currently intends to retain its earnings, if any, after payment of dividends on outstanding shares of Series A and Series C Preferred Stock, for the development of its business. The Company has been unsuccessful to date in its efforts to renegotiate certain terms of its agreement with the holders of the Series A Preferred Stock. 30 If the Company successfully secures sufficient levels of collaborative revenues and other sources of financing, it expects to incur substantial additional costs, including costs related to ongoing research and development activities, preclinical testing and clinical trials, manufacturing activities, costs associated with the market introduction of potential products, expansion of its administrative activities, and development activities undertaken by Genta Jago. The Company will need substantial additional funds before it can expect to realize significant product revenue. The Company anticipates that significant additional sources of financing, including equity financings, will be required in order for the Company to continue its planned principal operations. The Company's working capital and additional funding requirements will depend upon numerous factors, including: (i) the availability of funding; (ii) the progress of the Company's research and development programs; (iii) the timing and results of preclinical testing and clinical trials; (iv) the timing and costs of obtaining regulatory approvals; (v) the level of resources devoted to Genta Jago; (vi) the level of resources that the Company devotes to sales and marketing capabilities; (vii) technological advances; (viii) the activities of competitors; and (ix) the ability of the Company to establish and maintain collaborative arrangements with others to fund certain research and development, to conduct clinical trials, to obtain regulatory approvals and, if such approvals are obtained, to manufacture and market products. In the Company's Quarterly Report on Form 10-Q for the period ending September 30, 1996, the Company announced that it intended to sell, and was in negotiations with a potential buyer for, its JBL subsidiary. However, such negotiations did not produce an agreement, and the Company is no longer pursuing its discussions with the potential buyer or any other potential purchasers at this time. 31 Item 8. Financial Statements and Supplemental Data INDEX TO FINANCIAL STATEMENTS COVERED BY REPORTS OF INDEPENDENT AUDITORS
Page Genta Incorporated Report of Ernst & Young LLP, Independent Auditors............................................................33 Consolidated Balance Sheets at December 31, 1996 and 1995....................................................34 Consolidated Statements of Operations for each of the three years in the period ended December 31, 1996.....................................................................35 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1996.........................................................36 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1996...............................................................37 Notes to Consolidated Financial Statements...................................................................38 Genta Jago Technologies B.V. (A Development Stage Company) Report of Ernst & Young LLP, Independent Auditors............................................................50 Balance Sheets at December 31, 1996 and 1995.................................................................51 Statements of Operations for the years ended December 31, 1996, 1995 and 1994, and the period from inception (December 15, 1992) through December 31, 1996...................................52 Statement of Stockholders' Equity (Net Capital Deficiency) for the period from inception (December 15, 1992) through December 31, 1996..............................................53 Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994, and the period from inception (December 15, 1992) through December 31, 1996...............................54 Notes to Financial Statements................................................................................55
32 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Genta Incorporated We have audited the accompanying consolidated balance sheets of Genta Incorporated as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Genta Incorporated at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, the Company has incurred substantial and continued operating losses since inception and requires substantial additional sources of financing to fund its operations through 1997. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans as to this matter are also described in Note 1. The 1996 financial statements do not include any adjustments that might result from the outcome of this uncertainty. ERNST & YOUNG LLP San Diego, California February 28, 1997 33 GENTA INCORPORATED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------------------------- ASSETS 1996 1995 ------------------ ------------------- Current assets: Cash and cash equivalents $532,013 $271,755 Receivable from sale of preferred stock - 2,785,800 Trade accounts receivable 602,696 471,296 Notes receivable from officers and employees 62,000 362,000 Inventories 992,243 702,644 Other current assets 185,164 151,923 ------------------ ------------------- Total current assets 2,374,116 4,745,418 ------------------ ------------------- Property and equipment, net 3,634,281 4,656,955 Investment in and advances to joint venture - 258,896 Intangibles, net 4,022,242 3,577,654 Other assets, net 1,138,745 2,392,220 ------------------ ------------------- $11,169,384 $15,631,143 ================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,481,521 $2,260,495 Accrued payroll and related expenses 782,280 628,750 Other accrued expenses 1,229,845 1,407,748 Deferred revenue 193,121 148,532 Short-term notes payable 350,000 760,000 Current portion of notes payable and capital lease obligations 291,842 1,120,013 ------------------ ------------------- Total current liabilities 4,328,609 6,325,538 ------------------ ------------------- Capital lease obligations, less current portion 30,652 896,465 Notes payable, less current portion 1,129,388 1,437,481 Deficit in Joint Venture 1,606,503 - Commitments and contingencies - - Stockholders' equity: Preferred stock; 5,000,000 shares authorized, convertible preferred shares outstanding: Series A preferred stock, $.001 par value; 528,100 and 600,000 shares issued and outstanding at December 31, 1996 and 1995, respectively, liquidation value is $29,786,307 at December 31, 1996 528 600 Series B preferred stock, $.001 par value; no shares and 3,000 shares issued and outstanding at December 31, 1996 and 1995, respectively. - 3 Series C convertible preferred stock, $.001 par value; 1,424 and no shares issued and outstanding at December 31, 1996 and 1995, respectively, liquidation value is $1,468,822 at December 31, 1996. 1 - Common stock, $.001 par value; 150,000,000 shares authorized, 39,991,626 shares and 23,963,534 shares issued and outstanding at December 31, 1996 and 1995, respectively 39,992 23,964 Additional paid-in capital 108,787,562 102,374,105 Accumulated deficit (108,375,407) (96,949,625) Accrued dividends payable 3,671,532 1,572,588 Notes receivable from stockholders (49,976) (49,976) ------------------ ------------------- Total stockholders' equity 4,074,232 6,971,659 ------------------ ------------------- $11,169,384 $15,631,143 ================== ===================
See Acompanying Notes 34 GENTA INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, ------------------------------------------------------------- 1996 1995 1994 ----------------- ----------------- ------------------ Revenues: Product sales $4,924,694 $3,781,983 $3,573,701 Gain on sale of technology 373,261 - - Collaborative research and development - 1,125,000 3,141,688 ----------------- ----------------- ------------------ 5,297,955 4,906,983 6,715,389 ----------------- ----------------- ------------------ Cost and expenses: Cost of products sold 2,479,337 1,899,216 1,709,762 Research and development 5,833,697 11,277,238 13,533,600 Charge for acquired in-process research and development - 4,762,000 1,850,000 Selling, general and administrative 5,638,750 5,438,307 6,376,390 ----------------- ----------------- ------------------ 13,951,784 23,376,761 23,469,752 ----------------- ----------------- ------------------ Loss from operations (8,653,829) (18,469,778) (16,754,363) Equity in net loss of joint venture (2,712,183) (6,913,180) (7,424,828) Other income (expense): Interest income 159,165 348,470 1,014,213 Interest expense (218,935) (331,226) (283,530) ----------------- ----------------- ------------------ Net loss $(11,425,782) $(25,365,714) $(23,448,508) Dividends on preferred stock (2,524,701) (2,551,726) (2,550,000) ----------------- ----------------- ------------------ Net loss applicable to common shares $(13,950,483) $(27,917,440) $(25,998,508) ================= ================= ================== Net loss per common share $(.47) $(1.43) $(1.90) ================= ================= ================== Shares used in computing net loss per common share 29,834,491 19,518,616 13,709,611 ================= ================= ==================
See Acompanying Notes 35 GENTA INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
CONVERTIBLE PREFERRED STOCK COMMON STOCK ADDITIONAL ------------------------ ----------------------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL ------------ -------- -------------- ------------ --------------- BALANCE AT DECEMBER 31, 1993 600,000 600 13,648,972 13,649 86,525,495 Issuance of common stock on exercise of options - - 3,306 3 9,847 Issuance of common stock as dividend on preferred stock - - 222,986 223 1,799,274 Dividends accrued on preferred stock - - - - (2,550,000) Amortization of deferred compensation - - - - - Net loss - - - - - ------------ -------- -------------- ------------ --------------- BALANCE AT DECEMBER 31, 1994 600,000 600 13,875,264 13,875 85,784,616 Issuance of common stock - - 5,734,409 5,735 9,159,542 Issuance of common stock upon conversion of promissory notes - - 1,777,903 1,778 3,020,660 Issuance of common stock for acquired in-process research and development - - 1,240,000 1,240 1,610,760 Issuance of Series B convertible preferred stock 3,000 3 - - 2,774,897 Issuance of warrants to purchase common stock - - - - 173,118 Issuance of common stock on exercise of options - - 7,324 7 3,655 Issuance of common stock as dividend on preferred stock - - 1,328,634 1,329 2,398,583 Dividends accrued on preferred stock - - - - (2,551,726) Repayment of notes receivable from stockholders - - - - - Amortization of deferred compensation - - - - - Net loss - - - - - ------------ -------- -------------- ------------ --------------- BALANCE AT DECEMBER 31, 1995 603,000 603 23,963,534 23,964 102,374,105 Issuance of Series C convertible preferred stock 6,000 6 - - 5,492,633 Issuance of Series C convertible preferred stock on conversion of promissory notes 1,044 1 - - 1,044,000 Issuance of common stock upon conversion of Series A convertible preferred stock (71,900) (72) 2,554,458 2,555 324,538 Issuance of common stock upon conversion of Series B convertible preferred stock (3,000) (3) 2,269,425 2,269 31,741 Issuance of common stock upon conversion of Series C convertible preferred stock (5,620) (6) 5,247,489 5,247 59,488 Issuance of common stock upon conversion of convertible debentures - - 5,877,899 5,878 1,592,721 Issuance of warrants to purchase common stock - - - - 221,543 for patent legal services Issuance of common stock on exercise of options - - 78,821 79 171,494 Dividends accrued on preferred stock - - - - (2,524,701) Net loss - - - - - ============ ======== ============== ============ =============== BALANCE AT DECEMBER 31, 1996 529,524 $529 39,991,626 $39,992 $108,787,562 ============ ======== ============== ============ =============== GENTA INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 ACCRUED NOTES ACCUMULATED DIVIDENDS ON RECEIVABLE FROM DEFERRED DEFICIT PREFERRED STOCK STOCKHOLDERS COMPENSATION --------------- ---------------- ---------------- ---------------- BALANCE AT DECEMBER 31, 1993 (48,135,403) 670,862 (74,726) (265,730) Issuance of common stock on exercise of options - - - - Issuance of common stock as dividend - - on preferred stock - (1,800,000) - - Dividends accrued on preferred stock - 2,550,000 - - Amortization of deferred compensation - - - 200,894 Net loss (23,448,508) - - - --------------- ---------------- --------------- ------------- BALANCE AT DECEMBER 31, 1994 (71,583,911) 1,420,862 (74,726) (64,836) Issuance of common stock - - - - Issuance of common stock upon conversion of promissory notes - - - - Issuance of common stock for acquired in-process research and development - - - - Issuance of Series B convertible preferred stock - - - - Issuance of warrants to purchase common stock - - - - Issuance of common stock on exercise of options - - - - Issuance of common stock as dividend on preferred stock - (2,400,000) - - Dividends accrued on preferred stock - 2,551,726 - - Repayment of notes receivable from stockholders - - 24,750 - Amortization of deferred compensation - - - 64,836 Net loss (25,365,714) - - - --------------- ---------------- ---------------- ---------------- BALANCE AT DECEMBER 31, 1995 (96,949,625) 1,572,588 (49,976) - Issuance of Series C convertible preferred stock - - - - Issuance of Series C convertible preferred stock on conversion of promissory notes - - - - Issuance of common stock upon conversion of Series A convertible preferred stock - (327,021) - - Issuance of common stock upon conversion of Series B convertible preferred stock - (34,007) - - Issuance of common stock upon conversion of Series C convertible preferred stock - (64,729) - - Issuance of common stock upon conversion of convertible debentures - - - - Issuance of warrants to purchase common stock - - - - for patent legal services Issuance of common stock on exercise of options - - - - Dividends accrued on preferred stock - 2,524,701 - - Net loss (11,425,782) - - - =============== ================ ================ ================ BALANCE AT DECEMBER 31, 1996 $(108,375,407) $3,671,532 $(49,976) $ - =============== ================ ================ ================ GENTA INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 TOTAL STOCKHOLDERS' EQUITY --------------- BALANCE AT DECEMBER 31, 1993 38,734,747 Issuance of common stock on exercise of options 9,850 Issuance of common stock as dividend on preferred stock (503) Dividends accrued on preferred stock - Amortization of deferred compensation 200,894 Net loss (23,448,508) --------------- BALANCE AT DECEMBER 31, 1994 15,496,480 Issuance of common stock 9,165,277 Issuance of common stock upon conversion of promissory notes 3,022,438 Issuance of common stock for acquired in-process research and development 1,612,000 Issuance of Series B convertible preferred stock 2,774,900 Issuance of warrants to purchase common stock 173,118 Issuance of common stock on exercise of options 3,662 Issuance of common stock as dividend on preferred stock (88) Dividends accrued on preferred stock - Repayment of notes receivable from stockholders 24,750 Amortization of deferred compensation 64,836 Net loss (25,365,714) --------------- BALANCE AT DECEMBER 31, 1995 6,971,659 Issuance of Series C convertible preferred stock 5,492,639 Issuance of Series C convertible preferred stock on conversion of promissory notes 1,044,001 Issuance of common stock upon conversion of Series A convertible preferred stock - Issuance of common stock upon conversion of Series B convertible preferred stock - Issuance of common stock upon conversion of Series C convertible preferred stock - Issuance of common stock upon conversion of convertible debentures 1,598,599 Issuance of warrants to purchase common stock 221,543 for patent legal services Issuance of common stock on exercise of options 171,573 Dividends accrued on preferred stock - Net loss (11,425,782) =============== BALANCE AT DECEMBER 31, 1996 $4,074,232 ===============
See Accompanying Notes 36 Genta Incorporated CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ----------------------------------------------------------- 1996 1995 1994 ------------------ ------------------ ----------------- OPERATING ACTIVITIES Net loss $(11,425,782) $(25,365,714) $(23,448,508) Items reflected in net loss not requiring cash: Depreciation and amortization 1,518,142 1,761,530 1,704,281 Equity in net loss of joint venture 2,712,183 6,913,180 7,424,828 Charge for acquired in-process research and development and other - 3,807,556 - Changes in operating assets and liabilities: Accounts and notes receivable 168,600 294,012 (307,444) Inventories (289,599) 106,909 36,564 Other current assets (33,241) 366,790 (83,360) Accounts payable, accrued expenses and other (803,347) 467,738 931,835 Deferred revenue 44,589 (976,468) (141,688) ------------------ ------------------ ----------------- Net cash used in operating activities (8,108,455) (12,624,467) (13,883,492) INVESTING ACTIVITIES Purchase of short-term investments (1,497,775) - (10,935,406) Maturities of short-term investments 1,497,775 3,843,685 24,739,731 Purchase of property and equipment (115,922) (778,964) (1,264,168) Investment in and advances to joint venture (846,784) (7,722,255) (6,749,298) Deposits and other 642,654 (2,021,908) (1,291,977) ------------------ ------------------ ----------------- Net cash provided by (used in) investing activities (320,052) (6,679,442) 4,498,882 FINANCING ACTIVITIES Proceeds from notes payable 2,176,500 4,877,471 757,456 Repayments of notes payable and capital leases (1,948,438) (1,743,728) (1,069,289) Proceeds from issuance of preferred stock, net 8,267,539 - - Proceeds from issuance of common stock, net 171,573 9,168,939 9,850 Other 21,591 13,762 (503) ------------------ ------------------ ----------------- Net cash provided by (used in) financing activities 8,688,765 12,316,444 (302,486) ------------------ ------------------ ----------------- Increase (decrease) in cash and cash equivalents 260,258 (6,987,465) (9,687,096) Cash and cash equivalents at beginning of year 271,755 7,259,220 16,946,316 ------------------ ------------------ ----------------- Cash and cash equivalents at end of year $532,013 $271,755 $7,259,220 ================== ================== ================= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $225,186 $298,432 $283,530 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations entered into for equipment - 622,746 1,182,015 Preferred stock dividends accrued 2,524,701 2,551,726 2,550,000 Common stock issued in payment of dividends on preferred stock 425,757 2,399,912 1,799,497 Common stock issued upon conversion of notes payable and accrued interest 1,044,001 3,022,438 - Preferred stock issued for receivable - 2,774,900 - Common Stock issued upon conversion of convertible debentures 1,598,599 - - Exercise of buyout option for equipment under capital lease obligation in exchange for deposits 1,200,000 - -
See Accompanying Notes 37 Genta Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Organization and Business Genta Incorporated ("Genta" or the "Company") is an emerging biopharmaceutical company engaged in the development of a pipeline of pharmaceutical products. The near to mid-term segment of this product pipeline consists of oral controlled-release drugs being developed by the Company's drug delivery joint venture with Jagotec AG ("Jagotec"), Genta Jago Technologies B.V. ("Genta Jago"). The Company's longer-term research efforts are focused on the development of proprietary Anticode(TM) oligonucleotide ("Anticode") pharmaceuticals intended to block or regulate the production of disease-related proteins by acting at the genetic level. The Company also manufactures and markets specialty biochemical and pharmaceutical intermediate products through its manufacturing subsidiary, JBL Scientific, Inc. ("JBL"). Basis of Presentation The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is actively seeking collaborative agreements, additional equity financing and other financing arrangements with potential corporate partners and other sources. However, there can be no assurance that any such collaborative agreements or other sources of funding will be available on favorable terms, if at all. The Company is also considering the licensing or sale of certain of its assets and technology, delaying or curtailing of certain of its development programs, further reductions in workforce and spending or other measures in order to continue its operations. The 1996 financial statements do not include any adjustments that might result from the outcome of this uncertainty. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, JBL and Genta Pharmaceuticals Europe, S.A., the Company's European subsidiary based in Marseilles, France. All significant intercompany accounts and transactions have been eliminated in consolidation. Investment in Joint Venture The Company has a 50% ownership interest in a joint venture, Genta Jago, a Netherlands corporation. The investment in joint venture is accounted for under the equity method (Note 5). Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Actual results could differ from those estimates. Revenue Recognition and Major Customers Revenue from product sales is recognized upon shipment. One customer, a European distributor, accounted for approximately 27%, 21% and 19% of product sales during the years ended December 31, 1996, 1995 and 1994, respectively. One other customer accounted for approximately 16% and 12% of product sales during the years ended December 31, 1995 and 1994, respectively, while another customer comprised 18% of 1994 product sales. No other customer accounted for more than 8% of product sales in 1996. Collaborative research and development revenues are recorded as earned, generally ratably, as research and development activities are performed under the terms of 38 the contracts. Payments received in excess of amounts earned are deferred. See Note 9 for major collaborative research and development arrangements. Cash and Cash Equivalents Cash and cash equivalents consist of cash, money market funds, and other highly liquid investments with maturities of three months or less when purchased. The carrying value of these instruments approximates fair value. Concentration of Credit Risk The Company generally invests its excess cash in high credit quality debt instruments of corporations and financial institutions, and in United States government securities. Such investments are made in accordance with the Company's investment policy, which establishes guidelines relative to diversification and maturities designed to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. The Company has not experienced any losses on its cash equivalents or short-term investments. The Company markets its specialty biochemical and intermediate products to the pharmaceutical and diagnostic industries. Generally, collateral is not required on the Company's sales. Credit losses have been insignificant and within management's expectations. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Property and Equipment Property and equipment is stated at cost and depreciated over the estimated useful lives of the assets using the straight-line method. Leasehold improvements are stated at cost and amortized over the shorter of the estimated useful lives of the assets or the lease term. Amortization of equipment under capital leases is reported with depreciation of property and equipment. Intangible Assets Intangible assets, consisting primarily of capitalized patent costs and purchased proprietary technology, are amortized using the straight line basis over a term of 5-17 years for issued patents, 14 years for purchased proprietary technology and 5-7 years for organizational and other amortizable costs. Asset Impairment In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. There was no affect on the financial statements from the adoption of Statement No. 121. Employee Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because, the alternative fair value accounting provided for under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under SFAS No. 123, deferred compensation is recorded for 39 the excess of the fair value of the stock on the date of the option grant, over the exercise price of the option. The deferred compensation is amortized over the vesting period of the option. Net Loss Per Common Share Net loss per common share is computed using the weighted average number of common shares outstanding during each period. Shares issuable upon the exercise of outstanding stock options and warrants and upon the conversion of convertible preferred stock are not reflected as their effect is anti-dilutive. 2. Inventories
Inventories are comprised of the following: December 31, ----------------------- 1996 1995 ------ ---- Raw materials and supplies................................. $ 342,875 $ 280,621 Work-in-process............................................ 272,259 162,097 Finished goods............................................. 377,109 259,926 ----------- ----------- $ 992,243 $ 702,644 =========== =========== 3. Property and Equipment Property and equipment is comprised of the following: December 31, ----------------------- 1996 1995 ------ ---- Equipment.................................................. $ 4,093,563 $ 7,719,863 Leasehold improvements..................................... 1,128,520 1,385,041 Furniture and fixtures..................................... 105,318 116,161 Construction in progress................................... 624,167 359,273 ------------- ------------ 5,951,568 9,580,338 Less accumulated depreciation and amortization............. (2,317,287) (4,923,383) ------------- ------------ $ 3,634,281 $ 4,656,955 ============= ============
Included in property and equipment at December 31, 1996 and 1995, is equipment under capital leases aggregating $200,000 and $4.7 million, respectively, all of which is pledged as security pursuant to the Company's capital lease agreements. Accumulated amortization with respect to the equipment under capital leases totaled $80,000 and $3 million at December 31, 1996 and 1995, respectively. 4. Notes Receivable from Officers and Employees Notes receivable consist of loans made to officers and employees to facilitate their relocation. Such loans are generally secured by each individual's residence. 5. Genta Jago Joint Venture In December 1992, the Company and Jagotec, a subsidiary of Jago Holding AG which was acquired by SkyePharma in May 1996, formed Genta Jago, a 50/50 joint venture to develop and commercialize products in six major therapeutic areas. Under the arrangement, Jagotec granted Genta Jago an exclusive license to its GEOMATRIX oral controlled-release technology for the development and commercialization of approximately 25 specified products. In May 1995, the parties entered into an agreement to expand Genta Jago by adding the rights to develop and commercialize an additional 35 products. With these additional products, Genta Jago now maintains the rights to develop controlled-release formulations of approximately 60 products using Jagotec's GEOMATRIX technology. Under the agreement, Genta Jago also acquired certain manufacturing rights with respect to such products. In connection with the expansion of Genta Jago, the parties elected to focus Genta Jago's activities 40 exclusively on GEOMATRIX-based products and, as a result, Genta Jago returned to Genta in May 1995 the right to develop six Anticode products licensed from Genta in 1992. In connection with the formation of Genta Jago, the Company made an initial capital contribution of $4 million to Genta Jago and issued 1,200,000 unregistered shares of Genta's common stock to Jagotec and an affiliate. To obtain the additional product and manufacturing rights during 1995, Genta applied $5 million in option and related fees paid to Jagotec and its affiliates, of which $3.85 million was paid during 1994 (including $1.85 million of non-refundable fees charged to expense during 1994) and $1.15 million was paid during the first quarter of 1995. The Company also issued an additional 1.24 million unregistered shares of Genta's common stock to an affiliate of Jagotec in May 1995. The Company recorded a charge for acquired in-process research and development of $4.8 million during 1995 consisting of the fair value of the 1.24 million shares of common stock issued ($1.6 million), $2 million of refundable option fees paid during 1994, and the $1.15 million in fees paid during the first quarter of 1995. Genta Jago is required to pay certain additional fees to Jagotec upon Genta Jago's receipt of revenues from third parties, and pay manufacturing royalties to Jagotec. The Company is also required to provide loans to Genta Jago pursuant to a working capital agreement which expires in October 1998. The loans are advanced up to a mutually agreed upon maximum commitment amount, which amount is established by the parties on a periodic basis. In connection with Genta Jago's return of the Anticode license rights to Genta in May 1995, the working capital loan payable by Genta Jago to Genta was credited with a principal reduction of approximately $4.4 million. As of December 31, 1996, the Company had advanced working capital loans of approximately $15.3 million to Genta Jago, net of principal repayments and the aforementioned credit, which amount fully satisfied the loan commitment established by the parties through December 31, 1996. Such loans bear interest and are payable in full in October 1998, or earlier in the event certain revenues are received by Genta Jago from third parties. There can be no assurance, however, that Genta Jago will obtain the necessary financial resources to repay such loans to Genta. The Company has recorded substantially all of the net losses incurred by Genta Jago (excluding certain intercompany transactions) as a reduction of the Company's investment in joint venture. Under terms of the joint venture, Genta Jago has contracted with the Company to conduct research and development and provide certain other services. Revenues associated with providing such services, totaling $1.6 million in 1996, $2.7 million in 1995, and $2.9 million in 1994, are recorded by the Company as a reduction of the related research and development and general and administrative expenses. Terms of the arrangement also grant the Company an option to purchase Jagotec's interest in Genta Jago exercisable from December 1998 through 2000. Genta Jago entered into collaborative development agreements with Gensia, Inc., Apothecon, Inc., a subsidiary of Bristol-Myers Squibb Co., and Krypton, Ltd., a subsidiary of SkyePharma, during January 1993, March 1996 and October 1996, respectively. In October 1996, SkyePharma signed a letter of intent with Gensia, Inc. and Boehringer Mannheim Corp. whereby Brightstone, SkyePharma's United States subsidiary, will assume rights to develop Procardia XL(R) in collaboration with Boehringer Mannheim. Such agreements provide funding to Genta Jago for the development and clinical testing of selected controlled-release pharmaceuticals in addition to potential milestone payments and royalties on future product sales. 41 Condensed financial information for Genta Jago Technologies B.V. is set forth below.
December 31, ------------------- 1996 1995 ---- ---- Balance Sheets Data: Advance contract payments to related parties...................... $ - $ 1,539,000 Receivables under collaboration agreements........................ 904,000 - Other current assets.............................................. 142,000 245,000 ------------- -------------- Total current assets.............................................. 1,046,000 1,784,000 Other assets...................................................... 11,000 12,000 ------------- -------------- $ 1,057,000 $ 1,796,000 ============= ============== Current liabilities............................................... $ 3,053,000 $ 1,360,000 Notes payable to Genta Incorporated............................... 15,287,000 13,787,000 Net capital deficiency............................................ (17,283,000) (13,351,000) ------------- -------------- $ 1,057,000 $ 1,796,000 ============= ==============
Years ended December 31, ----------------------------------- 1996 1995 1994 ---- ---- ---- Statements of Operations Data: Collaborative research and development revenues................... $ 5,477,000 $ 2,968,000 $ 5,285,000 Costs and expenses................................................ 8,453,000 10,336,000 13,338,000 ------------ ------------ ------------- Loss from operations.............................................. (2,976,000) (7,368,000) (8,053,000) Gain on waiver of debt in exchange for return of license rights to related party................................ - 4,703,000 - Interest expense.................................................. (956,000) (746,000) (298,000) -------------- -------------- -------------- Net loss.......................................................... $ (3,932,000) $ (3,411,000) $ (8,351,000) ============== ============== ==============
6. Intangibles Intangibles consist of the following:
December 31, ---------------------- 1996 1995 ----- ---- Purchased proprietary technology.................................. $ 1,747,082 $ 1,747,082 Patent and patent applications.................................... 2,964,193 2,356,556 Organizational and other amortizable costs........................ 414,521 428,773 ------------- -------------- 5,125,796 4,532,411 Less accumulated amortization..................................... (1,103,554) (954,757) ------------- -------------- Net intangible assets............................................. $ 4,022,242 $ 3,577,654 ============= ==============
42 7. Notes Payable and Leases Notes payable consist of the following:
December 31, --------------------- 1996 1995 ----- ---- Note payable with interest at 12.63%, due in monthly installments of $22,407, secured by equipment with a net book value of approximately $703,000 and security deposit of $251,000.............................. $ 328,367 $ 540,955 Research financing obligation payable to a French governmental agency, non-interest bearing, maturing through 2003.................... 1,040,462 1,101,103 Other.................................................................... 7,435 16,584 ------------- ------------- 1,376,264 1,658,642 Less current portion..................................................... (246,876) (221,161) ------------- ------------- $ 1,129,388 $ 1,437,481 ============= =============
During 1995, the Company obtained $1,100,000 in financing aid from a French governmental agency to be used to fund certain of its development programs. The aggregate principal maturities of notes payable for the years 1997 through 2001 are $247,000, $185,000, $154,000, $193,000, and $385,000, respectively and $212,000 thereafter. The Company leases its facilities under operating leases that generally provide for annual cost of living related increases. The JBL facilities are leased from its prior owners, who include a director, an executive officer and other stockholders of the Company. Certain equipment is leased under operating and capital leases. The Company's equipment financing agreements contain certain financial covenants, the most significant of which required the Company to provide certain deposits in the event that the Company's cash and investment balances fell below specified levels. Included in other assets at December 31, 1996 and 1995 was $251,000 and $1.6 million in cash deposits primarily associated with the Company's equipment financing agreements. Minimum future obligations under both operating and capital leases at December 31, 1996 are as follows:
Operating leases ------------------------- Related Capital parties Others leases ---------- -------- --------- 1997............................................. $ 389,000 $ 447,000 $ 48,000 1998............................................. 408,000 99,000 31,000 1999............................................. 429,000 99,000 1,000 2000............................................. 188,000 99,000 --- 2001............................................. --- 99,000 --- Thereafter....................................... --- 198,000 --- ------------ ------------- ----------- Total future minimum lease payments.............. $ 1,414,000 $ 1,041,000 80,000 ============ ============= Less amount representing interest................ (4,000) ------------ Present value of future minimum lease payments... 76,000 Less current portion............................. (45,000) ------------ Long-term portion................................ $ 31,000 ============
Total rent expense under operating leases for the years ended December 31, 1996, 1995 and 1994 was $1,043,000, $1,117,000, and $1,090,000, respectively. 43 8. Stockholders' Equity Subsequent Event In February 1997, the company raised gross proceeds of $3 million in a private placement of Senior Secured Convertible Bridge Notes (the "Convertible Notes") that bear interest at 12% per annum and mature on the earlier of June 30, 1997 or five business days following the completion of any equity offering or series of equity offerings with gross proceeds in excess of $2.5 million. Warrants to purchase 7.8 million and 12.2 million shares of common stock at exercise prices of $.001 and $.55, respectively, are attached to the Convertible Notes. The Convertible Notes are convertible, at the option of the holder, into 600,000 shares of Series D Preferred Stock, subject to antidilution adjustments. In the event of default, the holders of the Convertible Notes have the right to convert the lesser of (i) the then outstanding principal amount of the Convertible Notes or (ii) 10% of the original principal amounts of the Convertible Notes into common shares at a conversion rate of $.001 per share, subject to antidilution adjustments. The holders of the Convertible Notes also have the right to appoint a majority of members of the Board of Directors of the Company; provided however, that in the event the Company does not obtain future financings in excess of $3.5 million on or before June 30, 1997, the holders shall have the contractual right to appoint only two directors or observers and, if additional directors have been appointed, such additional directors shall be required to resign. Preferred Stock In September 1996, the Company raised gross proceeds of $2 million (approximately $1.9 million net of offering fees and costs) through the sale of Convertible Debentures to investors in a private placement outside the United States. The Convertible Debentures bear interest at the rate of 4% per annum with principal and interest due and payable August 1, 1997. The Convertible Debentures were convertible, at the option of the holders, beginning in October 1996, into shares of common stock at a conversion price equal to 75 percent of the average Nasdaq closing bid prices of Genta common stock for a specified period prior to the date of conversion. Terms of the Convertible Debentures also provide for interest payable in shares of the Company's common stock. In November 1996, $1.65 million of the Convertible Debentures and the related accrued interest was converted into approximately 5.9 million shares of common stock. In March 1996, the Company raised gross proceeds of $6 million (approximately $5.5 million net of offering fees and costs) in a private placement of Series C Convertible preferred stock (the "Series C Preferred Stock") sold to institutional investors. In 1996, 5,620 shares of the Series C Preferred Stock and accrued dividends was converted at the option of the holders into approximately 5.2 million shares of Genta's common stock. The conversion price is based upon 75% of the average Nasdaq closing bid prices of Genta's common stock for a specified period. Terms of the Series C Preferred Stock also provide for dividends payable in shares of the Company's common stock. The Company has agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the common stock issuable upon the payment of the remaining dividends and the conversion of the Series C Preferred Stock. On December 29, 1995, the Company completed the sale of 3,000 shares of Series B Convertible preferred stock (the "Series B preferred stock") at a price of $1,000 per share to institutional investors outside of the United States. Proceeds from the offering totaling approximately $2.8 million were reflected as a receivable from sale of preferred stock at December 31, 1995 and were received by the Company on January 2, 1996. The Series B preferred stock was converted into approximately 2.3 million shares of the Company's common stock in late February 1996 pursuant to terms of the Series B stock purchase agreements. In October 1993, the Company completed the sale of 600,000 shares of Series A convertible preferred stock ("the Series A Preferred Stock") in a private placement of units consisting of one share of Series A Preferred Stock and a warrant to acquire one share of common stock, sold at an aggregate price of $50 per unit. Each share of Series A Preferred Stock is convertible, at any time prior to redemption, into 21.31 shares of the Company's common stock, subject to antidilution adjustments. Dividends on the Series A Preferred Stock are cumulative from the date of issuance, and are payable annually in amounts ranging from $3 per share per annum for the first year to $5 per share per annum in the third and fourth years. Dividends may be paid in cash or common stock or a combination thereof at the Company's option. Dividends are accrued using the straight-line method over the four year period. The 44 Company may redeem the Series A Preferred Stock under certain circumstances, and was required to redeem the Series A Preferred Stock, at the option of the holder, in September 1996 at a redemption price of $50 per share, plus accrued and unpaid dividends (the "Redemption Price"). The Company elected to pay the Redemption Price in common stock. In September 1996, 55,900 shares of Series A Preferred Stock converted such shares and related accrued dividends into approximately 2.4 million shares of the Company's common stock. The Company is obligated to use its reasonable efforts to arrange for a firm commitment underwriting in order to redeem the Series A Preferred Stock. The company is restricted from paying cash dividends on common stock until such time as all cumulative dividends on outstanding shares of Series A and Series C Preferred Stock have been paid. In December 1993, the Board of Directors of the Company adopted a Stockholder Rights Plan which provides for the distribution of a preferred stock purchase right ("Right") as a dividend for each share of the Company's common stock held of record at the close of business on January 21, 1994. Under certain circumstances involving an acquisition of 15% or more of the Company's common stock or a specified business combination, the Rights would permit the holder (other than the 15% holder) to purchase shares of the Company's common stock or, if applicable, common stock of an acquirer at a 50% discount upon payment of an exercise price of $50 per Right. The Rights expire in December 2003 and may be redeemed by the Company prior to a 15% acquisition at a price of $.01 per Right. Warrants The Company issued five-year warrants to purchase 600,000 shares of common stock at an exercise price of $2.60 per share, subject to antidilution adjustments, in connection with the Company's private placement of units in October 1993. The Company issued a five-year warrant to purchase 235,250 shares of common stock at an exercise price of $1.70 per share in connection with a private placement of common stock in May 1995. In addition, five-year warrants to purchase an aggregate of 247,312 shares of common stock at exercise prices ranging from $1.94 to $2.13 per share were issued to two equipment financing companies during 1995. In October 1996, the Company issued a five year warrant to purchase 375,123 shares of common stock at an exercise price of $1.32 per share to a patent law firm, in exchange for legal services. In October 1996, the Company also issued a five year warrant to purchase 100,000 shares of common stock at an exercise price of $1.50 per share in connection with the Convertible Debentures issued in September 1996. Warrants to purchase 7.8 million and 12.2 million shares of common stock at exercise prices of $.001 and $.55 per share, respectively, were also issued in connection with the Convertible Notes. 45 Stock Benefit Plans The Company's 1991 Stock Plan (the "Plan") provides for the sale of stock and the grant of stock options to employees, directors, consultants and advisors of the Company. Options may be designated as incentive stock options or non-statutory stock options; however, incentive stock options may be granted only to employees of the Company. Options under the Plan have a term of up to ten years and must be granted at not less than the fair market value (85% of fair market value for non-statutory options) on the date of grant. Common stock sold and options granted pursuant to the Plan generally vest over a period of four to five years. Information with respect to the Company's 1991 Stock Plan is as follows:
Shares under option Price ------------ ------- Balance at December 31, 1993............................................... 1,367,116 $ .50-15.75 Granted............................................................... 417,950 4.88-8.75 Exercised............................................................. (3,306) .50-7.25 Cancelled............................................................. (34,537) .50-12.00 ------------ ----------- Balance at December 31, 1994............................................... 1,747,223 .50-15.75 Granted............................................................... 1,988,035 1.75-6.25 Exercised............................................................. (7,324) .50 Cancelled............................................................. (1,839,092) .50-9.88 ------------ ---------- Balance at December 31, 1995............................................... 1,888,842 .50-15.75 Granted............................................................... 136,773 .41-2.63 Exercised............................................................. (78,821) .50-2.25 Cancelled............................................................. (297,492) .50-15.75 ------------ ----------- Balance at December 31, 1996............................................... 1,649,302 $ .41-7.44 ============ ===========
In April 1995, the Stock Plan Committee of the Board of Directors approved a program whereby employees (including executive officers) of the Company and certain other option holders could exchange their unexercised options ("Old Options") on a one-for-one basis for new options ("New Options") priced at the market value on April 20, 1995. The New Options have the same vesting schedule and contractual terms as the Old Options. However, the New Options held by employees (excluding executive officers) and certain other holders were not exercisable until April 20, 1996 and the New Options held by executive officers of the Company are not exercisable until April 20, 1997 unless the holder is involuntarily terminated without cause prior to such date. An aggregate of 1,581,330 options with an average exercise price of approximately $7.84 per share were exchanged for New Options with an exercise price of $2.25 per share on April 20, 1995. All of the replacement options are included in options granted and canceled in the above summary of stock option activity. At December 31, 1996, options to purchase approximately 1,248,000 shares of common stock were exercisable at a weighted average price of approximately $2.81 per share and approximately 669,000 shares of common stock were available for grant or sale under the Plan. An aggregate of approximately 18,259,930 shares of common stock were reserved for the conversion of preferred stock and the exercise of outstanding options and warrants at December 31, 1996. Adjusted pro forma information regarding net loss is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the "Black Scholes" method for option pricing with the following weighted-average assumptions for both 1995 and 1996: volatility factors of the expected market value of the Company's common stock of .7 and .8, respectively; risk-free interest rates of 6%; dividend yields of 0%; and a weighted-average expected life of the option of five years. 46 For purposes of adjusted pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's adjusted pro forma information follows: Year ended Year ended December 31, December 31, 1996 1995 ------ ----- Adjusted pro forma net loss.................. $ (14,280,253) $ (28,027,475) Adjusted pro forma loss per share .......... $ (.48) $ (1.44) The results above are not likely to be representative of the effects of applying FAS123 on reported net income or loss for future years as these amounts reflect the expense for only one or two years vesting. The weighted-average exercise price of options granted, exercised and cancelled during the year were $1.77, $2.14, and $2.23, respectively. The weighted-average grant-date fair value of the options granted during the year was $0.85. Following is a further breakdown of the options outstanding as of December 31, 1996.
Weighted Average Weighted Weighted exercise Average Average price of Range Options remaining Exercise Options options of Prices Outstanding life in years Price exercisable exercisable --------- ----------- ------------- -------- ----------- ----------- $0.41 - $1.69 54,878 6.37 $ 0.61 26,978 $ 0.50 $1.75 - $2.63 1,525,674 7.39 2.21 1,158,883 2.22 $3.00 - $7.44 68,750 6.58 7.34 62,472 7.41 --------------------------------------------------------------------------------------------------------------- 1,649,302 7.30 $ 2.33 1,248,133 $ 2.45 ===============================================================================================================
9. Research, Development and Licensing Arrangements The Company entered into collaborative research and development agreements with The Procter & Gamble Company ("P&G") and the Wyeth-Ayerst Laboratories Division of American Home Products Corporation ("WyethAyerst") during 1991 and 1992, respectively. The agreements generally provided for the Company to receive research funding for the discovery and development of specified Anticode products. The Wyeth-Ayerst collaboration ended in August 1994 and the P&G collaboration, as extended and modified, ended in September 1995. The Company received research payments of $3 million during 1994, pursuant to the P&G and Wyeth-Ayerst agreements. Collaborative revenues of $1.1 million and $3.1 million were recognized under these contracts during 1995 and 1994, respectively, which amounts approximate costs incurred on the programs. In addition to the aforementioned arrangements, the Company has entered into various license, royalty and sponsored research agreements which provide the Company with rights to develop and market products covered under the agreements. In connection with certain license agreements entered into with a director of the Company and two other stockholders, the Company incurred royalty expense of $100,000, $100,000, and $75,000 in 1996, 1995, and 1994, respectively, and is committed to pay minimum royalties of $100,000 annually until expiration of the related patents. 47 10. Income Taxes Significant components of the Company's deferred tax assets as of December 31, 1996 and 1995 are shown below. A valuation allowance of $32,508,000 has been recognized to offset the net deferred tax assets as realization of such assets is uncertain.
December 31, ------------------------- 1996 1995 ------ ---- Deferred tax assets: Capitalized research expenses........................ $ 2,663,000 $ 2,231,000 Net operating loss carryforwards..................... 22,177,000 19,490,000 Research and development credits..................... 3,248,000 2,920,000 Purchased technology and license fees................ 4,523,000 4,519,000 Other, net........................................... 1,108,000 116,000 -------------- ------------- Total deferred tax assets............................ 33,719,000 29,276,000 Valuation allowance for deferred tax assets.......... (32,508,000) (28,305,000) -------------- ------------- 1,211,000 971,000 Deferred tax liabilities: Patent expenses...................................... (1,211,000) (971,000) -------------- ------------- Net deferred tax assets.............................. $ --- $ --- ============== =============
At December 31, 1996, the Company has federal and California net operating loss carryforwards of approximately $61,731,000 and $9,525,000, respectively. The difference between the federal and California tax loss carryforwards is primarily attributable to the capitalization of research and development expenses for California tax purposes and the fifty percent limitation on California loss carryforwards. The federal tax loss carryforwards will begin expiring in 2003, unless previously utilized. The California tax loss carryforwards began expiring in 1996 and will continue to expire unless previously utilized. (Approximately $277,000 of the California tax loss expired in 1996.) The Company also has federal and California research and development tax credit carryforwards of $2,585,000 and $1,019,000, respectively, which will begin expiring in 2003 unless previously utilized. Federal and California tax laws limit the utilization of income tax net operating loss and credit carryforwards that arise prior to certain cumulative changes in a corporation's ownership resulting in change of control of the Company. The future annual use of net operating loss carryforwards and research and development tax credits will be limited due to the ownership changes that occurred during 1990, 1991, 1993 and 1996. Because of the decrease in value of the Company's stock, the ownership change which occurred in 1996 will have a material impact on the utilization of these carryforwards. 11. Employee Savings Plan The Company began a 401(k) program in 1994 which allows participating employees to contribute up to 15% of their salary, subject to annual limits. The Board of Directors may, at its sole discretion, approve Company contributions. No such contributions have been approved or made. 12. Gain on Sale of Technology In December 1996, the Company sold the rights to two development-stage dermatological products for cash of $373,261. 13. Contingencies On February 5, 1997, Equity-Linked Investors, L.P. and Equity-Linked Investors-II (collectively, the "Plaintiffs") who, as a group, beneficially own more than five percent of the outstanding shares of the Common Stock of the Company as Series A preferred stockholders, filed Suit (the "Suit") in the Delaware Court of Chancery (the "Court") against the Company, each of the Company's directors and the Aries Funds. Through the Suit, the Plaintiffs 48 are seeking to enjoin the transactions described in footnote 8 under the caption "Subsequent Event" (the "Transactions"), damages, attorney fees, and such other and further relief as the Court may deem just and proper. The Suit alleges that the Board of Directors of the Company breached fiduciary duties by failing to consider financing alternatives to the Transactions and further alleges that the Transactions were not in the best interests of the stockholders. Additionally, the Suit alleges that the Aries Funds aided and abetted such breach of fiduciary duty through their participation in the Transactions. On March 4 and 5, 1997, a trial was held before the Court. The Court has established a briefing schedule and set a hearing for post-trial arguments on April 1, 1997. In October 1996, JBL retained a chemical consulting firm to advise it with respect to environmental compliance regarding an incident of soil and groundwater contamination (the "Spill") by small quantities of certain chemicals. The Company believes, based upon information known to date, that the Spill is relatively minor and will not have a material adverse effect on the business of the Company, although there can be no assurance thereof. 49 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Genta Jago Technologies B.V. We have audited the accompanying balance sheets of Genta Jago Technologies B.V. (a development stage company) as of December 31, 1996 and 1995, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996 and for the period December 15, 1992 (inception) through December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Genta Jago Technologies B.V. (a development stage company) at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 and for the period December 15, 1992 (inception) through December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, the Company has incurred operating losses since inception and requires substantial sources of financing to fund its operations through 1997. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plan as to this matter are also described in Note 1. The 1996 financial statements do not include any adjustments that might result from the outcome of this uncertainty. ERNST & YOUNG LLP San Diego, California February 28, 1997 50 GENTA JAGO TECHNOLOGIES B.V. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS
DECEMBER 31, ----------------------------------------- ASSETS 1996 1995 ------------------- ------------------ Current assets: Cash and cash equivalents................................. $36,092 $245,172 Receivables under collaboration agreements................ 903,838 - Advance contract payments to related parties.............. - 1,538,594 Other current assets...................................... 105,934 - ------------------- ------------------ Total current assets......................................... 1,045,864 1,783,766 Property and equipment, net.................................. 4,900 7,500 Other assets................................................. 6,651 4,492 =================== ================== $1,057,415 $1,795,758 =================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) Current liabilities: Accounts payable and accrued expenses .................... $571,539 $247,354 Payable to related parties................................ 2,481,452 794,838 Deferred contract revenue................................. - 317,555 ------------------- ------------------ Total current liabilities.................................... 3,052,991 1,359,747 Notes payable to related party............................... 15,287,099 13,787,099 Stockholders' equity (net capital deficiency): Common Stock, 14,700 shares authorized, 10,000 shares issued and outstanding at stated value........................ 512,000 512,000 Additional paid-in capital................................ 3,741,950 3,741,950 Deficit accumulated during the development stage.......... (21,536,625) (17,605,038) ------------------- ------------------ Net capital deficiency....................................... (17,282,675) (13,351,088) =================== ================== $1,057,415 $1,795,758 =================== ==================
See accompanying notes 51 Genta Jago Technologies B.V. (A Development Stage Company) STATEMENTS OF OPERATIONS
Cumulative from Years ended December 31. inception ----------------------------------------------- (December 15, 1992) 1996 1995 1994 to December 31, 1996 ------------- ---------------- --------------- ---------------------- Revenues: Collaborative research and development............................ $5,477,059 $2,968,463 $5,284,602 $15,406,378 Cost and expenses: Research and development, including contractual amounts to related parties of $7,040,438, $9,318,460, and $12,456,985, and $35,629,158 in 1996, 1995, 1994 and the period from inception (December 15, 1992) to December 31, 1996, respectively............................... 8,091,465 9,866,038 13,046,365 38,263,584 General and and administrative................ 361,920 470,081 291,782 1,385,383 --------------- ---------------- --------------- --------------- 8,453,385 10,336,119 13,338,147 39,648,967 -------------- ---------------- --------------- -------------- Loss from operations............................ (2,976,326) (7,367,656) (8,053,545) (24,242,589) Other income (expense): Gain on waiver of debt in exchange for return of license rights to related party - 4,703,352 - 4,703,352 Interest income................................. 5,814 2,620 8,215 19,546 Interest expense................................ (961,075) (749,808) (306,051) (2,016,934) ---------------- ---------------- --------------- -------------- (955,261) 3,956,164 (297,836) 2,705,964 ---------------- ---------------- --------------- -------------- Net loss........................................ $(3,931,587) $(3,411,492) $(8,351,381) $(21,536,625) ================ ================ =============== ==============
See accompanying notes 52 GENTA JAGO TECHNOLOGIES B.V. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) PERIOD FROM INCEPTION (DECEMBER 15, 1992) TO DECEMBER 31, 1996
COMMON DEFICIT STOCKHOLDERS' STOCK ADDITIONAL ACCUMULATED EQUITY -------------------- PAID-IN DURING THE (NET CAPITAL SHARES AMOUNT CAPITAL DEVELOPMENT STAGE DEFICIENCY) ---------- --------- ----------- ------------------ ------------- Issuance of common stock at $51.20 per share for cash .... 2,940 $150,528 $ -- $ -- $150,528 Capital contributions in excess of stated value .............. -- -- 12,882 -- 12,882 ------- -------- ---------- ------------ ------------ Balance at December 31, 1992 .. 2,940 150,528 12,882 -- 163,410 Issuance of common stock at $51.20 per share for cash ..... 7,060 361,472 -- -- 361,472 Capital contributions in excess of stated value ............... -- -- 3,729,068 -- 3,729,068 Net loss ...................... -- -- -- (5,842,165) (5,842,165) ------ -------- ---------- ------------ ------------ Balance at December 31, 1993 .. 10,000 512,000 3,741,950 (5,842,165) (1,588,215) Net loss ...................... -- -- -- (8,351,381) (8,351,381) ------ -------- ---------- ------------ ------------ Balance at December 31, 1994 .. 10,000 512,000 3,741,950 (14,193,546) (9,939,596) Net loss ...................... -- -- -- (3,411,492) (3,411,492) ------ -------- ---------- ------------ ------------ Balance at December 31, 1995 .. 10,000 512,000 3,741,950 (17,605,038) (13,351,088) Net loss ...................... -- -- -- (3,931,587) (3,931,587) ------ -------- ---------- ------------ ------------ Balance at December 31, 1996 .. 10,000 $512,000 $3,741,950 $(21,536,625) $(17,282,675) ====== ======== ========== ============ ============
See accompanying notes. 53 GENTA JAGO TECHNOLOGIES B.V. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
CUMULATIVE FROM INCEPTION YEARS ENDED DECEMBER 31, (DECEMBER 15, 1992) ------------------------------------- -------------------- 1996 1995 1994 TO DECEMBER 31, 1996 --------------- ------------------- ----------------- ---------------------- OPERATING ACTIVITIES Net loss $(3,931,587) $(3,411,492) $(8,351,381) $(21,536,625) Items reflected in net loss not requiring cash: Depreciation and amortization 2,600 2,600 3,451 13,168 Technology license fee 192,580 - - - Gain on waiver of debt in exchange for return of license rights to related party - (4,703,352) - (4,703,352) Changes in operating assets and liabilities: Advance contract payments to related parties 1,538,594 435,276 1,016,053 - Receivables under collaboration agreements (903,838) - - (903,838) Other current assets (105,934) 68,440 (56,770) (105,934) Accounts payable and accrued expenses 324,185 112,227 20,112 571,539 Payable to related parties 1,686,614 277,479 267,085 2,481,452 Deferred contract revenue (317,555) (1,071,863) 1,065,672 --------------- ------------------- ----------------- ---------------------- Net cash used in operating activities (1,706,921) (8,290,685) (6,035,778) (23,991,010) INVESTING ACTIVITIES Purchase of property and equipment and other (2,159) (4,492) - (24,719) --------------- ------------------- ----------------- ---------------------- Net cash used in investing activities (2,159) (4,492) - (24,719) FINANCING ACTIVITIES Proceeds from issuance of common stock and capital contributions - - - Proceeds from notes payable to related 1,500,000 8,415,407 6,688,756 20,590,643 party Repayment of notes payable to related party - - (600,192) (600,192) --------------- ------------------- ----------------- ---------------------- Net cash provided by financing activities 1,500,000 8,415,407 6,088,564 24,051,821 --------------- ------------------- ----------------- ---------------------- Increase (decrease) in cash and cash equivalents (209,080) 120,230 52,786 36,092 Cash and cash equivalents at beginning of period 245,172 124,942 72,156 - --------------- ------------------- ----------------- ---------------------- Cash and cash equivalents at end of period $36,092 $245,172 $124,942 $36,092 =============== =================== ================= ====================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ - $ - $299,808 $299,808 =============== =================== ================= ======================
See accompanying notes. 54 Genta Jago Technologies B.V. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Organization and Business Genta Jago Technologies B.V. ("Genta Jago") was incorporated in December 1992 under the laws of the Netherlands. Genta Jago is a joint venture owned and controlled 50% by Genta Incorporated ("Genta") and 50% by Jagotec AG ("Jagotec"), a subsidiary of Jago Holding AG which was acquired by SkyePharma in May 1996. Genta Jago was formed to develop and commercialize pharmaceuticals in six major therapeutic areas, and commenced research and development activities in January 1993. Genta Jago is managed under the direction of a Board of Managing Directors consisting of two members appointed from each of Genta and Jagotec and one outside member. Pursuant to terms of the joint venture arrangement, Jagotec granted Genta Jago an exclusive license to its GEOMATRIX oral controlled-release technology for the development and commercialization of approximately 25 specified products. In May 1995, Genta and Jagotec entered into an agreement to expand Genta Jago by adding the rights to develop and commercialize an additional 35 products (see "Expansion of Genta Jago"). With these additional products, Genta Jago now maintains the rights to develop controlled-release formulations of approximately 60 products using Jagotec's GEOMATRIX technology. Genta Jago is dependent on future funding from Genta (see Note 2, "Capital Contributions and Working Capital Agreement") and corporate partners and is considered a Development Stage Company. Genta has incurred significant operating losses since its inception and requires substantial additional sources of financing to fund its operations through 1997, conditions which raise substantial doubt about Genta's ability to continue as a going concern. In the event funding sources prove to be unavailable or inadequate to Genta, Genta's ability to provide further funding to Genta Jago could be significantly limited. In this event, Genta Jago would be dependent on collaborative funding and may have to consider the delay or curtailment of certain of its development programs. Revenue Recognition Collaborative research and development revenues are recorded as earned as research and development activities are performed under the terms of the contracts, with such revenues generally approximating costs incurred on the programs. Payments received in excess of amounts earned are deferred. Research and Development Expenses Research and development costs are expensed as incurred. Depreciation The costs of furniture and equipment are depreciated over the estimated useful lives of the assets using the straight-line method. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 55 2. Related Party Transactions License Agreements Genta Jago entered into license agreements with Jagotec and Genta in connection with the planned development and commercialization of GEOMATRIX oral controlled-release products and Anticode products, respectively. The license with Genta was terminated in 1995 in connection with Genta Jago's return of the right to develop six Anticode products to Genta. Pursuant to such agreements, Genta Jago recorded license fee expense of $620,000, $85,000, and $170,000 during the years ended December 31, 1996, 1995 and 1994, respectively, and is obligated to make future annual license fee payments of $85,000 to Jagotec through 1997. Research and Development and Service Agreements Genta Jago has contracted with Genta and Jagotec to conduct research and development and provide certain other services. Under terms of such agreements, Genta Jago generally is required to reimburse the parties for their respective costs incurred plus a specified mark-up. Payments for research and development services are generally made in advance and are refundable if the services are not performed. For the years ended December 31, 1996, 1995 and 1994, Genta Jago incurred expenditures of $7 million, $9.2 million, and $12.3 million, respectively, pursuant to such research and development and service agreements. Capital Contributions and Working Capital Agreement In connection with the formation of the joint venture, Genta was required to make an initial capital contribution of $4 million to Genta Jago. In addition, Genta Jago entered into a working capital agreement with Genta which expires in October 1998. Pursuant to this agreement, Genta is required to make working capital loans to Genta Jago up to a mutually agreed upon maximum principal amount, which amount is established by the parties on a periodic basis. As of December 31, 1996, Genta had advanced working capital loans of approximately $15.3 million to Genta Jago, net of principal repayments and the loan credit discussed below. Such loans bear interest at rates per annum ranging from 5.81% to 7.5%, and are payable in full on October 20, 1998, or earlier in the event certain revenues are received by Genta Jago and specified cash balances are maintained by Genta Jago. Expansion of Genta Jago In May 1995, Genta and Jagotec entered into an agreement to expand Genta Jago by adding the rights to develop and commercialize an additional 35 products (the "Additional Products"). With these Additional Products, Genta Jago now maintains the rights to develop controlled-release formulations of approximately 60 products using Jagotec's GEOMATRIX technology. Under the agreement, Genta Jago also acquired certain manufacturing rights with respect to such products. In connection with the expansion of Genta Jago, the parties elected to focus Genta Jago's activities exclusively on GEOMATRIX oral-controlled release products. As a result, Genta Jago returned to Genta the right to develop six Anticode products licensed from Genta in connection with the formation of Genta Jago in 1992. In connection with the return of the Anticode license rights to Genta in May 1995, Genta Jago's note payable to Genta was credited with a principal reduction of approximately $4.4 million and accrued interest payable to Genta was reduced by approximately $300,000. Genta Jago recorded the loan credit and related accrued interest as a gain on waiver of debt in exchange for return of license rights to related party. To obtain the rights to the Additional Products and the manufacturing rights in May 1995, Genta applied $5 million in option and related fees paid to Jagotec and its affiliates, of which $3.85 million was paid during 1994 and $1.15 million was paid in the first quarter of 1995. Genta also issued an additional 1.24 million unregistered shares of Genta's common stock to an affiliate of Jagotec in May 1995. Genta Jago is required to pay certain additional fees to Jagotec upon Genta Jago's receipt of revenues from third parties, and pay manufacturing royalties to Jagotec. 56 3. Collaborative Research and Development Agreements In January 1993, Genta Jago entered into a collaboration agreement with Gensia for the development and commercialization of certain oral controlled-release pharmaceutical products for treatment of cardiovascular disease. Under the agreement, Gensia provides funding for formulation and preclinical development to be conducted by Genta Jago and is responsible for clinical development, regulatory submissions and marketing. Genta Jago received $2.2 million, $1.9 million, and $4.9 million of funding in 1996, 1995 and 1994, respectively, pursuant to the agreement. Collaborative revenues of $2.8 million, $3 million, and $4.2 million were recognized under the agreement during the years ended December 31, 1996, 1995 and 1994, respectively. Effective October 1996, Gensia and SkyePharma reached an agreement whereby Brightstone was assigned Gensia's rights (and those of Gensia's partner, Boehringer Mannheim) to develop and co-promote the potentially bioequivalent nifedipine product under the collaboration agreement with Genta Jago. The assignment was accepted by Genta Jago and has no impact on the terms of the original agreement. Genta Jago is still entitled to receive additional milestone payments from Brightstone triggered upon regulatory submissions and approvals, as well as royalties or profit sharing ranging from 10% to 21% of product sales, if any. In March 1996, Genta Jago entered into a collaborative licensing and development agreement with Apothecon. Under the terms of the agreement, Apothecon will provide funding to Genta Jago up to a specified maximum amount for the formulation, development and clinical testing of a GEOMATRIX controlled-release formulation of Q-CR ketoprofen (Oruvail(R)), subject to certain early termination rights. The agreement also provides for Genta Jago to receive potential milestone payments and royalties on product sales. Terms of the agreement provide Apothecon exclusive rights to market and distribute the products on a worldwide basis. During 1996, Genta Jago recorded revenue and received $1.1 million in funding under the arrangement and recognized $1.3 million of collaborative revenue. In October 1996, Genta Jago entered into five collaborative licensing and development agreements with Krypton, whereby Genta Jago would sublicense to Krypton, rights to develop and commercialize potentially bioequivalent GEOMATRIX(R) versions of five currently marketed products, as well as another agreement granting Krypton an option to sublicense rights to develop and commercialize an improved version of a sixth product. During 1996, Genta Jago received funding of $1 million under the collaborative agreements and recognized $1 million of collaborative revenue. 4. Income Taxes Significant components of Genta Jago's deferred tax assets as of December 31, 1996 are shown below. A valuation allowance of $2,154,000 has been recognized to offset the deferred tax assets as realization of such assets is uncertain.
December 31, ------------ Deferred tax assets: 1996 1995 ---- ---- Net operating loss carryforwards $ 2,154,000 $1,761,000 Valuation allowance for deferred tax assets (2,154,000) (1,761,000) ------------- ------------ Net deferred tax assets $ --- $ --- ============== ==============
At December 31, 1996, Genta Jago has foreign net operating loss carryforwards of approximately $21,537,000. The foreign tax loss carryforwards will begin expiring in 2000, unless previously utilized. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. 57 Part III Item 10. Directors and Executive Officers of the Registrant (a) The sections labeled "Proposal Two -- Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" appearing in the Company's Proxy Statement are incorporated herein by reference. (b) Information concerning the Company's Executive Officers is set forth in Part I of this Form 10-K. Item 11. Executive Compensation The section labeled "Compensation of Executive Officers and Directors" appearing in the Company's Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The section labeled "Stock Ownership of Management and Certain Beneficial Owners" appearing in the Company's Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The section labeled "Certain Relationships and Related Transactions" appearing in the Company's Proxy Statement is incorporated herein by reference. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1) Financial statements Reference is made to the Index to Financial Statements under Item 8 of this report on Form 10-K. (2) All schedules are omitted because they are not required, are not applicable, or the required information is included in the consolidated financial statements or notes thereto. (3) Reference is made to Paragraph (c) below for Exhibits required by Item 601 of Regulation S-K, including management contracts and compensatory plans and arrangements. (b) Reports on Form 8-K. During the fourth quarter of 1996, the Company filed the following report on Form 8-K: On October 8, 1996, the Company filed a report on Form 8-K to disclose the resignation of James C. Blair, Ph.D. as a Director and as Vice Chairman of the Board of Directors of the Company. (c) Exhibits required by Item 601 of Regulation S-K with each management contract, compensatory plan or arrangement required to be filed identified. 58 Exhibit Number Description of Document ------ ----------------------- 3(i).1(1) Restated Certificate of Incorporation as amended by the Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock as amended by the Certificate of the Powers, Designations, Preferences and Rights of the Series C Convertible Preferred Stock. 3(i).2(18) Certificate of Designations of Series D Convertible Preferred Stock of the Company. 3(ii).1(2) By-laws of the Company. 4.1(5) Specimen Common Stock Certificate. 4.2(4) Specimen Series A Convertible Preferred Stock Certificate. 4.3(4) Specimen Warrant. 4.4(4) Form of Unit Purchase Agreement dated as of September 23, 1993 by and between the Company and the Purchasers of the Series A Convertible Preferred Stock and Warrants. 4.5(11) Form of Rights Agreement dated as of December 16, 1993 between Genta Incorporated and First Interstate Bank of California, which includes as Exhibit A the form of Certificate of Designations, Rights and Preferences of Series F Participating Preferred Stock. 4.6(8) Form of Regulation S Subscription Agreement entered into between the Company and certain purchasers of the Series B Convertible Preferred Stock. 4.7(1) Form of Securities Subscription Agreement entered into between the Company and certain purchasers of the Series C Convertible Preferred Stock. 4.8(1) Common Stock Purchase Warrant dated December 14, 1995 between the Company and Lease Management Services, Inc. 4.9(17) Warrant for the Purchase of 213,415 Shares of Common Stock issued to Lyon & Lyon in October 1996. 4.10(17) Warrant for the Purchase of 100,000 Shares of Common Stock issued to Michael Arnouse in October 1996. 10.1(3)(6)(6) Amended and Restated 1991 Stock Plan of Genta Incorporated. 10.2(5) Master Lease Agreement No. 10300 dated as of May 4, 1989 between the Company and Lease Management Services, Inc. and Master Lease Agreement No. 10428 dated as of August 15, 1991 between the Company and Lease Management Services, Inc. 10.3(5) Standard Industrial Lease dated October 24, 1988, as amended, between the Company and General Atomics. 10.4(5) Revised and Restated Lease dated as of March 1, 1990 between JBL Scientific, Inc. and Granada Associates. 59 10.5(5)(6) Employment Agreement dated February 20, 1991 between the Company and Dr. Robert E. Klem. 10.6(5)(6) Employment Agreement dated February 20, 1991 between the Company and Dr. Lauren R. Brown. 10.7(5)(6) Form of Indemnification Agreement entered into between the Company and its directors and officers. 10.8(5) Preferred Stock Purchase Agreement dated September 30, 1991 and Amendment Agreement dated October 2, 1991. 10.9(5)(6) Consulting Agreement dated February 2, 1989 between the Company and Dr. Paul O.P. Ts'o. 10.10(5)(7) Development, License and Supply Agreement dated February 2, 1989 between the Company and Gen-Probe Incorporated. 10.12(5)(7) License Agreement dated February 2, 1989 among the Company, Dr. Ts'o, Dr. Miller and Mr. Finch. 10.13(5)(7) License Agreement dated May 15, 1990 between the Company and The Johns Hopkins University. 10.19(6)(1) Promissory Note dated March 7, 1996 between the Company and Dr. Donald Picker. 10.21(7)(9) Common Stock Transfer Agreement dated as of December 15, 1992, between the Company and Dr. Jacques Gonella. 10.32(9) Consulting Agreement dated as of December 15, 1992, between the Company and Dr. Jacques Gonella. 10.36(7)(9) Common Stock Transfer Agreement dated as of December 15, 1992, between the Company and Jagotec AG. 10.37(7)(9) Collaboration Agreement dated as of January 22, 1993, between Jobewol Investments B.V. (now known as Genta Jago Technologies B.V.) and Gensia, Inc. 10.46(10) Form of Purchase Agreement between the Company and certain purchasers of Common Stock. 10.47(10) Common Stock Purchase Warrant dated May 8, 1995 between the Company and Index Securities S.A. 10.48(7)(12) Restated Joint Venture and Shareholders Agreement dated as of May 12, 1995 between the Company, Jagotec AG, Jago Holding AG, Jago Pharma AG and Genta Jago Technologies B.V. 10.50(7)(12) Limited Liability Company Agreement of Genta Jago Delaware LLC dated as of May 12, 1995 between GPM Generic Pharmaceuticals Manufacturing Inc. and the Company. 10.51(7)(12) Restated Transfer Restriction Agreement dated as of May 12, 1995 between the Company and Jagotec AG. 10.52(7)(12) Transfer Restriction Agreement dated as of May 12, 1995 between the Company, GPM Generic Pharmaceuticals Manufacturing Inc. and Jago Holding AG. 60 10.53(7)(12) Common Stock Transfer Agreement dated as of May 30, 1995 between the Company and Jago Finance Limited. 10.54(7)(12) Stockholders' Agreement dated as of May 30, 1995 between the Company, Jagotec AG, Dr. Jacques Gonella and Jago Finance Limited. 10.55(7)(12) Restated Geomatrix Research and Development Agreement dated as of May 12, 1995 between Jago Pharma AG, the Company, Genta Jago Delaware, L.L.C. and Genta Jago Technologies B.V. 10.56(7)(12) Restated Services Agreement dated as of May 12, 1995 between Jago Pharma AG, the Company, Genta Jago Delaware, L.L.C. and Genta Jago Technologies B.V. 10.57(7)(12) Restated Working Capital Agreement dated as of May 12, 1995 and Amendment No. 1 to Restated Working Capital Agreement dated as of July 11, 1995 between the Company and Genta Jago Technologies B.V. 10.58(7)(12) Restated Promissory Note dated as of January 1, 1994 between Genta Jago Technologies B.V. and the Company. 10.59(7)(12) Restated License Agreement dated as of May 12, 1995 between Jagotec AG and the Company. 10.61(7)(12) Restated Geomatrix License Agreement dated as of May 12, 1995 between Jagotec AG and Genta Jago Technologies B.V. 10.62(7)(12) Geomatrix Manufacturing License Agreement dated as of May 12, 1995 between Jagotec AG and Genta Jago Technologies B.V. 10.63(7)(12) Restated Geomatrix Supply Agreement dated as of May 12, 1995 between Jago Pharma AG and Genta Jago Technologies B.V. 10.65(13) Form of Regulation S Subscription Agreement entered into between the Company and certain purchasers of the Series B Convertible Preferred Stock. 10.66(1) Promissory Note dated November 8, 1995 between the Company and Domain Partners, L.P. 10.67(1) Promissory Note dated November 8, 1995 between the Company and Domain Partners II, L.P. 10.68(1) Promissory Note dated November 8, 1995 between the Company and Institutional Venture Partners, IV. 10.69(14) Amendment to Promissory Note effective March 22, 1996 between the Company and Institutional Venture Partners, IV. 10.70(14) Amendment to Promissory Note effective March 22, 1996 between the Company and Domain Partners, L.P. 10.71(14) Amendment to Promissory Note effective March 22, 1996 between the Company and Domain Partners II, L.P. 10.72(15) Amendments to the Series C Securities Subscription Agreement dated April 23, 1996. 61 10.73(16) Form of Regulation S Securities Subscription Agreement entered into between the Company and certain purchasers of the 4% Convertible Debentures, Due August 1, 1997. 10.74(16) Form of 4% Convertible Debenture Due August 1, 1997. 10.75(19) Note and Warrant Purchase Agreement dated as of January 28, 1997, by and among the Company, The Aries Fund, A Cayman Island Trust (the "Trust") and The Aries Domestic Fund, L.P. (the "Partnership"). 10.76(19) Letter dated January 28, 1997 from Genta Incorporated. 10.77(19) Senior Secured Convertible Bridge Note of the Company dated January 28, 1997 for $1,050,000. 10.78(19) Senior Secured Convertible Bridge Note of the Company dated January 28, 1997 for $1,950,000. 10.79(19) Class A Bridge Warrant of the Company for the purchase of 2,730,000 shares of Common Stock. 10.80(19) Class A Bridge Warrant of the Company for the purchase of 5,070,000 shares of Common Stock. 10.81(19) Class B Bridge Warrant of the Company for the purchase of 4,270,000 shares of Common Stock. 10.82(19) Class B Bridge Warrant of the Company for the purchase of 7,930,000 shares of Common Stock. 10.83(19) Security Agreement dated as of January 28, 1997 between the Company and Paramount Capital, Inc. 10.84(19) Letter Agreement dated January 28, 1997 among the Company, Paramount Capital, Inc., the Partnership and the Trust. 10.85(19) Amendment No. 1 dated as of January 28, 1997 to Rights Agreement, dated as of December 16, 1997, between the Company and ChaseMellon Shareholder Services L.L.C. 10.86(20)(6) Executive Compensation Agreement dated as of January 1, 1996 between the Company and Howard Sampson. 10.87(20) Collaboration Agreement dated December 26, 1995 between the Company and Johnson & Johnson Consumer Products, Inc. 10.88(20) Assignment Agreement (of Gensia Inc.'s rights in the Collaboration Agreement between Genta Jago and Gensia, Inc., dated January 23, 1993) to Brightstone Pharma, Inc., dated October 1, 1996 among Gensia, Inc., Genta Jago Technologies B.V., Brightstone Pharma, Inc., and SkyePharma PLC. 10.89(20)(21) Development and Marketing Agreement effective February 28, 1996 between Genta Jago Technologies B.V., a Dutch company, and Apothecon, Inc., a Delaware corporation. 62 10.90(20)(21) License Agreement effective February 28, 1996 between Genta Jago Technologies B.V., a Dutch company, and Apothecon, Inc., a Delaware corporation. 10.91(20)(21) Option, Development & Sub-License Agreement/(The Company has requested confidential treatment for the name of this element) dated as of October 31, 1996 between Genta Jago Technologies B.V., a Dutch company, and Krypton Ltd., a Gibraltar limited company. 10.92(20)(21) Development and Sub-License Agreement/(The Company has requested confidential treatment for the name of this element) dated as of October 31, 1996 between Genta Jago Technologies B.V., a Dutch company, and Krypton Ltd., a Gibraltar limited company. 10.93(20)(21) Development and Sub-License Agreement/(The Company has requested confidential treatment for the name of this element) dated as of October 31, 1996 between Genta Jago Technologies B.V., a Dutch company, and Krypton Ltd., a Gibraltar limited company. 10.94(20)(21) Development and Sub-License Agreement/Diclofenac dated as of October 31, 1996 between Genta Jago Technologies B.V., a Dutch company, and Krypton Ltd., a Gibraltar limited company. 10.95(20)(21) Development and Sub-License Agreement/Naproxen dated as of October 31, 1996 between Genta Jago Technologies B.V., a Dutch company, and Krypton Ltd., a Gibraltar limited company. 10.96(20)(21) Development and Sub-License Agreement/Verapamil dated as of October 31, 1996 between Genta Jago Technologies B.V., a Dutch company, and Krypton Ltd., a Gibraltar limited company. 10.97(20)(21) License Termination Agreement dated December 2, 1996 between the Company and Wilton Licensing AG. 10.98(20) Contract for Regional Aid for Innovation, effective July 1, 1993, between L'Agence Nationale de Valorisation de la Recherche, Genta Pharmaceuticals Europe SA and the Company. 22.1(20) Subsidiaries of the Registrant. 23.1(20) Consent of Ernst & Young LLP, Independent Auditors. 24.1 Power of Attorney. (See page 66) 63 (1) Incorporated herein by reference to the exhibits of the same number to the Company's Annual Report on Form 10-K for the year ended December 31, 1995, Commission File No. 0-19635. (2) Exhibit 3(ii).1 is incorporated herein by reference to the Exhibit of the same number contained in Post- Effective Amendment No. 1 to the Company's Registration Statement on Form S-3, Registration No. 33-72130. (3) Exhibit 10.1 is incorporated herein by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-8, Registration No. 33-85887. (4) Exhibits 4.2, 4.3, and 4.4 are incorporated by reference to Exhibits of the same number to the Company's Report on Form 8-K dated as of September 24, 1993, Commission File No. 0-19635. (5) Incorporated herein by reference to the exhibit of the same number to the Company's Registration Statement on Form S-1, Registration No. 33-43642. (6) Indicates management contract, compensatory plan or arrangement. (7) The Company has been granted confidential treatment of certain portions of this exhibit. (8) Exhibit 4.6 is incorporated by reference to Exhibit 10.65 to the Company's Report on Form 8-K dated as of December 29, 1995, Commission File No. 0-19635. (9) Incorporated by reference to the exhibits of the same number to the Company's Registration Statement on Form S-3, Registration No. 33-58362. (10) Incorporated by reference to the exhibits of the same number to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, Commission File No. 0-19635. (11) Incorporated by reference to Exhibit 5.1 to the Company's Report on Form 8-K dated as of December 16, 1993, Commission File No. 0-19635. (12) Incorporated by reference to the exhibits of the same number to the Company's Quarterly Report on Form 10-Q/A for the quarter ended June 30, 1995, Commission File No. 0-19635. (13) Incorporated herein by reference to the exhibit of the same number to the Company's Report on Form 8-K dated as of December 29, 1995. (14) Incorporated herein by reference to exhibits 10.1, 10.2 and 10.3, respectively, to the Company's Registration Statement on Form S-3 (Registration No. 333-3846) (15) Incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, Commission File No. 0-19635. (16) Exhibits 10.73 and 10.74 are incorporated herein by reference to Exhibits 10.1 and 10.2 to the Company's Report on Form 8-K dated as of September 17, 1996, Commission File No. 0-19635. (17) Exhibits 4.9 and 4.10 are incorporated herein by reference to Exhibits 4.1 and 4.2 respectively to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, Commission File No. 0-19635. (18) Exhibit 3(i).2 is incorporated by reference to Exhibit 3(i) to the Company's Report on Form 8-K dated as of January 28, 1997, Commission File No. 0-19635. 64 (19) Exhibits 10.75, 10.76, 10.77, 10.78, 10.79, 10.80, 10.81, 10.82, 10.83, 10.84 and 10.85 are incorporated herein by reference to Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10 and 10.11 respectively to the Company's Report on Form 8-K dated as of January 28, 1997, Commission File No. 0-19635. (20) Filed herewith. (21) The Company has requested confidential treatment for certain portions of this Exhibit. (d) See (a)(2) above. 65 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 27th day of March, 1997. Genta Incorporated By /s/Thomas H. Adams ------------------ Thomas H. Adams, Ph.D. Chairman, Chief Executive Officer, and Acting Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas H. Adams, his true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Thomas H. Adams Chairman and Chief Executive Officer March 27, 1997 - - - ------------------------------------------ (Principal Executive Officer), Acting Chief Thomas H. Adams Financial Officer and Director /s/ Robert E. Klem Director March 27, 1997 - - - ------------------------------------------ Robert E. Klem /s/ Paul O.P. Ts'o Director March 27, 1997 - - - ------------------------------------------ Paul O.P. Ts'o /s/ Sharon B. Webster Director March 27, 1997 - - - ------------------------------------------ Sharon B. Webster
66 EX-10.86 2 EXECUTIVE COMPENSATION AGREEMENT EXHIBIT 10.86 EXECUTIVE COMPENSATION AGREEMENT THIS AGREEMENT is entered into as of January 1, 1996, by and between Howard Sampson (the "Employee") and Genta Incorporated, a Delaware corporation (the "Company"). This Agreement supersedes any prior agreements previously entered into between Employee and Company. 1. Term of Employment. (a) Basic Rule. The Company agrees to continue the Employee's employment, and the Employee agrees to remain in employment with the Company, from the date hereof until the date when the Employee's employment terminates pursuant to Subsection (b), (c) or (d) below. (b) Early Termination. Subject to Sections 6 and 7, the Company may terminate the Employee's employment by giving the Employee 30 days' advance notice in writing. The Employee may terminate his employment by giving the Company 1 day's advance notice in writing. The Employee's employment shall terminate automatically in the event of his death. Any waiver of notice shall be valid only if it is made in writing and expressly refers to the applicable notice requirement of this Section 1. (c) Cause. The Company may at any time terminate the Employee's employment for Cause by giving the Employee notice in writing. For all purposes under this Agreement, "Cause" shall mean: (i) A willful act by the Employee which constitutes gross misconduct (as determined by an independent tribunal) or fraud and which is injurious to the Company; or (ii) Conviction of, or a plead of "guilty" or no contest" to, a felony. No act, or failure to act, by the Employee shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest. (d) Disability. The Company may terminate the Employee's active employment due to Disability by giving the Employee 30 days' advance notice in writing. For all purposes under this Agreement, "Disability" shall mean that the Employee, at the time notice is given, has become eligible to receive immediate long-term disability benefits under the Company's long-term disability insurance plan or, if there is no such plan, under the federal Social Security program. In the event that the Employee resumes the performance of substantially all of his duties hereunder before the termination of his active employment under this Subsection (d) becomes effective, the notice of termination shall automatically be deemed to have been revoked. (e) Rights Upon Termination. Except as expressly provided in Sections 6 and 7, upon the termination of the Employee's employment pursuant to this Section 1, the Employee shall only be entitled to the compensation, benefits and reimbursements described in Sections 3, 4 and 5 for the period preceding the effective date of the termination. The payments under this Agreement shall fully discharge all responsibilities of the Company to the Employee upon the termination of his employment. (f) Termination of Agreement. This Agreement shall terminate when all obligations of the parties hereunder have been satisfied. 2. Duties and Scope of Employment. (a) Position. The Company agrees to employ the Employee as its Chief Financial Officer for the term of his employment under this Agreement. The Employee shall report to the Company's President. (b) Obligations. During the term of his employment under this Agreement, the Employee shall devote his full business efforts and time to the Company and its subsidiaries. The Employee shall not render services to any other for-profit corporation or entity without the prior written consent of the Company's Board of Directors (the "Board"). This Subsection (b) shall not preclude the Employee from engaging in appropriate professional, educational, civic, charitable or religious activities or from devoting a reasonable amount of time to private investments that do not interfere or conflict with his responsibilities to the Company. 3. Base Compensation and Incentive Compensation. (a) Base Compensation. During the term of his employment under this Agreement, the Company agrees to pay the Employee as compensation for his services a base salary at the annual rate of $175,000 or at such higher rate as the Company may determine from time to time. Any difference between the Base Compensation payable on a bi-monthly basis and that actually paid between January 1, 1996, and the date this Agreement is executed shall be paid to Employee in one lump sum upon execution of this Agreement. Such salary shall be payable in accordance with the Company's standard payroll procedures. (The annual compensation specified in this Section 3, together with any increases in such compensation that the Company may grant from time to time, is referred to in this Agreement as "Base Compensation.") (b) Incentive Compensation. In addition, Employee shall be eligible for participation in an annual incentive compensation 2 program, if any, to be determined in the sole discretion of the Company. (c) Stock Compensation. In addition to such options and Company stock compensation available to Employee as of the execution of this Agreement, upon execution of this Agreement Employee shall receive 75,000 shares of Company stock at no cost to Participant. Such shares shall be fully vested when granted and shall not be subject to any right of repurchase by the Company. As a condition of this grant, Employee agrees to satisfy such requirements as Company deems necessary to satisfy its federal and state tax withholding requirements. 4. Employee Benefits. During the term of his employment under this Agreement, the Employee shall be eligible for the employee benefit plans and executive compensation programs maintained by the Company for other senior executives, subject in each case to the generally applicable terms and conditions of the plan or program in question and to the determinations of any person or committee administering such plan or program. 5. Business Expenses. During the term of his employment under this Agreement, the Employee shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. The Company shall reimburse the Employee for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Company's generally applicable policies. 6. SkyePharma Transaction. (a) General. As of September 25, 1996, the Company is contemplating a transaction with SkyePharma. If the transaction is contemplated by June 30, 1997, Employee shall be paid a lump sum cash bonus of $50,000 upon closing of the transaction. Closing means execution of a definitive agreement with shareholder approval, if necessary. Such bonus shall not be paid to Employee if he is not employed by the Company on the date of closing unless Employee is either involuntarily terminated without cause or terminates with Good Reason. (b) Good Reason. For all purposes under this Agreement, "Good Reason" shall mean that the Employee: (i) Has incurred a material reduction in his authority or responsibility except for reason of demonstrated lack of performance; (ii) Has incurred one or more reductions in his Base Compensation; or 3 (iii) Has been notified that the Company's headquarters will be relocated by a distance of 50 miles or more. 7. Termination for Any Reason Without Cause. (a) Continuation Period. Except as otherwise specifically provided for this Agreement, in the event that during the term of this Agreement, the Company terminates the Employee's employment for any reason other than Cause or Employee voluntarily terminates under circumstances where an involuntary termination for Cause is not otherwise warranted, then the Employee shall be entitled to receive all of the payments and benefit coverage described in this Section 7. Such payments and benefit coverage shall continue for the period (the "Continuation Period") commencing on the date when the employment termination is effective and ending on the date twelve months after such date. (b) Compensation. During the Continuation Period, the Company shall pay the Employee compensation at an annual rate equal to his Base Compensation at the rate in effect on the date of the employment termination. Such amount shall be paid at periodic intervals in accordance with the Company's standard payroll procedures. (c) Insurance Coverage. During the Continuation Period, the Employee (and, where applicable, his dependents) shall be entitled to continue participation in the group insurance plans maintained by the Company, including life, disability and health insurance programs, as if he were still an employee of the Company. Where applicable, the Employee's salary for purposes of such plans shall be deemed to be equal to his Base Compensation. To the extent that the Company finds it impossible to cover the Employee under its group insurance policies during the Continuation Period, the Company shall provide the Employee with individual policies which offer at least the same level of coverage and which impose not more than the same costs on him. The foregoing notwithstanding, in the event that the Employee becomes eligible for comparable group insurance coverage in connection with new employment, the coverage provided by the Company under this Subsection (c) shall terminate immediately. Any group health continuation coverage that the Company is required to offer under COBRA shall commence when coverage under this Subsection (c) terminates. (d) Incentive Programs. The Continuation Period shall be counted as employment with the Company for purposes of vesting under all stock option, stock appreciation rights, restricted stock, phantom stock or similar plans maintained by the Company (any contrary provisions of such plans notwithstanding). The preceding sentence shall not be construed to require the Company to grant any new awards to the Employee during the Continuation Period. The Continuation Period shall also be counted as employment with the Company for purposes of determining the 4 expiration date of any stock option granted by the Company and held by the Employee when his employment terminates. Any other provision of this Agreement notwithstanding, the Continuation Period for purposes of this Subsection (d) shall not exceed three months in the event that the Company terminates the Employee's employment for performance-related reasons (considering only performance after the date this Agreement is executed), as determined by the Board. (There is no Continuation Period for any purpose in the event that the termination is for Cause.) (e) No Mitigation. The Employee shall not be required to mitigate the amount of any payment contemplated by this Section 7 (whether by seeking new employment or in any other manner). Except as expressly provided in Subsection (c) above, no such payment shall be reduced by earnings that the Employee may receive from any other source. 8. Covenant Not to Compete. As a condition to Employee's rights to receive payments under Section 6 or 7 of this Agreement, the parties agree to the following: (a) Competition. Employee hereby agrees, so long as Company is not in material default (subject to notice and a 30- day cure period) of any of its material obligations under this Agreement, that Employee will not, except as specifically provided for in this Covenant, at any time during the Covenant Term (as defined in Section 8(b) below), directly or indirectly, whether or not for compensation, engage in any business activity, or have any interest in or relationship with any person, firm, corporation or business (whether as an employee, shareholder, proprietor, officer, director, agent, security holder, trustee, partner, consultant or otherwise), which is competitive with, the antisense and geomatrix drug delivery business of Company or its subsidiaries now being conducted in the Covered Area; provided, however, that Employee may own shares of companies whose securities do not constitute more than five percent (5%) of the outstanding securities of any such company. Employee further agrees that as long as the Covenant remains in effect, Employee will not, in any way which materially adversely affects the Company's business or financial position divert or attempt to divert, directly or indirectly, any business of Company or any of its subsidiaries, or any customers of their business, to any competitor in the Covered Area or induce or attempt to induce, directly or indirectly, any person to leave his or her employment with Company or any of its subsidiaries. (b) Covenant Term. The Term of this Covenant ("Covenant Term") is defined to be the period commencing on the effective date of this Agreement, and ending upon the last payment made to Employee pursuant of Section 6 or 7. (c) Covered Area. The Covered Area shall be the area in which the Company or any of its wholly-owned subsidiaries is 5 operating at the time of the alleged violation of the covenants of this paragraph. 9. Limitation on Payments. (a) Basic Rule. Any other provision of this Agreement notwithstanding, the Company shall not be required to make any payment or property transfer to, or for the benefit of, the Employee (under this Agreement or otherwise) that would be non-deductible by the Company by reason of section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or that would subject the Employee to the excise tax described in section 49999 of the Code. All calculations required by this Section 9 shall be performed by the independent auditors retained by the Company most recently prior to the Change in Control (the "Auditors"), based on information supplied by the Company and the Employee, and shall be binding on the Company and the Employee. All fees and expenses of the Auditors shall be paid by the Company. (b) Reductions. If the amount of the aggregate payments or property transfers to the Employee must be reduced under this Section 9, then the Employee shall direct in which order the payments or transfers are to be reduced, but no change in the timing of any payment or transfer shall be made without the Company's consent. As a result of uncertainty in the application of sections 280G and 4999 of the Code at the time of an initial determination by the Auditors hereunder, it is possible that a payment will have been made by the Company that should not have been made (an "Overpayment") or that an additional payment that will not have been made by the Company could have been made (an "Underpayment"). In the event that the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Employee that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Employee that he shall repay to the Company, together with interest at the applicable federal rate specified in section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Employee to the Company if and to the extent that such payment would not reduce the amount that is nondeductible under section 280G of the Code or is subject to the excise tax under section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to, or for the benefit of, the Employee, together with interest at the applicable federal rate specified in section 7872(f)(2) of the Code. 10. Successors. (a) Company's Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or 6 substantially all of the Company's business and/or assets, by an agreement in substance and form satisfactory to the Employee, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. The Company's failure to obtain such agreement prior to the effectiveness of a succession shall be a breach of this Agreement and shall entitle the Employee to all of the compensation and benefits to which he would have been entitled hereunder if the Company had involuntarily terminated his employment, without Cause immediately after such succession becomes effective. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this Subsection (a) or which becomes bound by this Agreement by operation of law. (b) Employee's Successors. This Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 11. Miscellaneous Provisions. (a) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Whole Agreement. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. (d) No Setoff; Withholding Taxes. There shall be no right of setoff or counterclaim, with respect to any claim, debt or obligation, against payments to the Employee under this 7 Agreement. All payments made under this Agreement shall be subject to reduction to reflect taxes required to be withheld by law. (e) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. (f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (g) Arbitration. Except as otherwise provided in Section 9, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in San Diego in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Discovery shall be permitted to the same extent as in a proceeding under the Federal Rules of Civil Procedure, including (without limitation) such discovery as is specifically authorized by section 1283.05 of the California Code of Civil Procedure, without need of prior leave of the arbitrator under section 1283.05(e) of such Code. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. All fees and expenses of the arbitrator and such Association shall be paid as determined by the arbitrator. Any attorney fees paid to enforce this Agreement shall be paid by the non-prevailing party. (h) No Assignment. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Subsection (h) shall be void. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. /s/ Howard Sampson ------------------------------- Howard Sampson GENTA INCORPORATED By /s/ Thomas H. Adams Title __________________________ 8 EX-10.87 3 COLLABORATION AGREEMENT EXHIBIT 10.87 [Johnson & Johnson Letterhead] AGREEMENT This Agreement, made and entered into this 26th day of December, 1995, by and between GENTA INCORPORATED, having offices at 3550 General Atomics Court, San Diego, California 92121 (hereinafter "GENTA"), and JOHNSON & JOHNSON CONSUMER PRODUCTS, INC., having offices at Grandview Avenue, Skillman, New Jersey 08550 (hereinafter "CPI"). W I T N E S S E T H WHEREAS, GENTA is a research-based company which focuses on the discovery of biopharmaceuticals; WHEREAS, CPI develops, manufactures and sells skin and hair care products; and WHEREAS, GENTA and CPI desire to cooperate in the development of new skin care agents and active ingredients. NOW THEREFORE, in consideration of the covenants and conditions set forth herein, and other good valuable consideration, the sufficiency of which is hereby acknowledged by each of the parties hereto, it is agreed as follows: 1. General Purpose It is the general purpose of this Agreement to provide for GENTA and CPI to cooperate in a feasibility study for the potential joint development of new and improved skin and hair care products and active ingredients with the objective of GENTA manufacturing and supplying such ingredients to CPI. In order to accomplish this purpose, CPI will evaluate the use of one or more of GENTA's compounds that are selective for the mRNA of the human androgen receptor (hereinafter, "the Compound") as a prophylactic and/or therapeutic agent for androgen receptor mediated conditions (such as control of hair growth, sebaceous gland activity, etc.). These will be evaluated in a study that is designed to quantify the reduction in sebum production resulting from topical application of the Compound to the forehead of selected patients (hereinafter, "the Study"). The Compound and the Formulation (as defined below) provided by GENTA to CPI under this Agreement (a) shall remain the sole property of GENTA, (b) shall be used by and under the control of CPI solely in order to carry out its obligations under this Agreement, (c) shall not be used by or delivered to or for the benefit of any third party without the prior express written consent of GENTA. GENTA and CPI each shall comply in all material respects with all laws and governmental rules, regulations and guidelines which are applicable to the Compound, the Formulation or the use thereof, including biosafety procedures, and with any safety precautions described in a writing which accompanies the Compound or the Formulation. CPI shall return to GENTA all unused quantities of the Compound and the Formulation after the completion, or earlier termination, of the Study. THE COMPOUND AND THE FORMULATION ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE COMPOUND OR THE FORMULATION WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. It is understood by the parties that "CPI", unless expressly stated otherwise, shall mean Johnson & Johnson Consumer Products, Inc., the corporation of New Jersey as above described, together with its Affiliates. "Affiliate" of, or an entity "Affiliated" with, a specified entity, means an entity that controls (in other words, owns directly or indirectly or otherwise has the power to vote more than fifty percent (50%) of the voting stock), is controlled by, or is under common control with, the entity specified. 2. Responsibility of the Parties GENTA will provide the Compound and an appropriate delivery vehicle (hereinafter, "the Formulation"). GENTA will supply the Formulation free of charge to CPI in quantities sufficient to complete CPI's evaluation. CPI will (1) provide technical resources to develop an acceptable topical formulation for use in the Study, (2) conduct appropriate toxicological tests, (3) design, conduct and evaluate the results of the Study and (4) provide GENTA with a written summary of all tests conducted in progress reports on the status of the Study and copies of all results. The Study will take place outside of the United States. CPI will be responsible for fulfilling regulatory requirements for shipping the Formulation outside the United States. The Results shall be jointly owned by GENTA and CPI, and shall constitute Confidential Information of GENTA and CPI for purposes of Section 4 below. 3. Expenses Each party will bear its own expenses in the initial preparation and evaluation of compounds under this Agreement, with the following exception: CPI shall within fifteen (15) days of signing this Agreement, pay GENTA a non-refundable commitment fee of Fifty Thousand Dollars ($50,000.00) which will not be creditable toward any further purchases or license fees. 2 4. Confidentiality In order to accomplish the objectives of this Agreement, it may be necessary for the parties to exchange materials and information which are considered to be confidential and proprietary to the disclosing party. Each party agrees to limit its disclosure of Confidential Information to the other party to that reasonably necessary to achieve the objectives of this Agreement. All information disclosed hereunder which is considered by the disclosing party to be confidential and proprietary shall be in writing and marked "Confidential", or if initially disclosed orally or visually, designated as being confidential at the time of disclosure and confirmed in writing within thirty (30) days (hereinafter "Confidential Information"). All written documents containing Confidential Information and other confidential material in tangible form received by either party under this Agreement shall remain the property of the originating party, and all and any such other materials shall be promptly returned to the originating party upon request; provided, however, that the receiving party shall have the right to retain one copy of any and all such materials solely in its Law Department files. Each party agrees that all Confidential Information received from the other party under this Agreement shall be maintained in confidence and not disclosed to a third party during the term of this Agreement and for a period of five (5) years thereafter, and the receiving party agrees not to use such Confidential Information for any purpose other than to further the objectives of this Agreement without the prior written consent of the other party. Each party shall use the same standard of care to protect the confidentiality of information received from the other party as it uses to protect its own confidential information, and shall limit disclosure of such information to those of its personnel and consultants who have an actual need to know and have a written obligation to protect the confidentiality thereof. Notwithstanding the preceding provisions, obligations regarding confidentiality and use of Confidential Information disclosed hereunder shall not include: a) information which, at the time of disclosure, was published, known publicly, or otherwise in the public domain; b) information which, after disclosure, is published, becomes known publicly, or otherwise becomes part of the public domain through no fault of the receiving party; c) information which, prior to the time of disclosure, is known to the receiving party without any obligation of confidentiality as evidenced by its written records; d) information which, after disclosure, is made available to the receiving party in good faith by a third party who is under no obligation of confidentiality or secrecy to the disclosing party; and 3 e) information which is independently developed by employees or others on behalf of the receiving party, without access to or use of the Confidential Information of the disclosing party. Notwithstanding the preceding provisions, obligations regarding confidentiality and use of Confidential Information disclosed hereunder shall not apply to the extent that the receiving party is required to disclose information by law, order or regulation of a governmental agency or a court of competent jurisdiction, provided that the receiving party shall provide written notice thereof to the disclosing party and sufficient opportunity for the disclosing party to object to any such disclosure or to request confidential treatment thereof. The disclosure of Confidential Information hereunder by either party shall not result in any right or license under any patent or know-how being granted to the other party, nor shall it be construed to impose on the other party any restriction, duty or obligation other than that of confidentiality and non-use as expressly provided herein. 5. Designated Representatives The following representatives are designated by the parties to disclose and receive Confidential Information under this Agreement: For CPI: Stanley Shapiro, Ph.D. Worldwide Director Dermatology Research and Drug Discovery For GENTA: Dr. Donald Picker Senior Vice President Research & Development 6. Competitive Activity GENTA acknowledges that CPI and its affiliates are in the business of manufacturing and selling cosmetic and pharmaceutical products for the purposes of caring for the skin and hair and has an ongoing research and development effort relating to such products. In addition, CPI may consult with, supply, and jointly develop with third parties skin and hair care compositions and products. Nothing contained herein shall be construed to prevent CPI from continuing such activities provided only that CPI does not reveal to such third parties, or use for any purpose (other than as permitted by this Agreement), the Compound, the Formulation or any Confidential Information of GENTA covered by this Agreement. 7. Inventions Any invention, discovery, or improvement made or technology developed, whether patentable or not (an "Invention") as a result of work performed pursuant to this Agreement shall be owned by the party making the Invention if such Invention is made independently of the other party. 4 Inventions made jointly by representatives of both GENTA and CPI shall be jointly owned by CPI and GENTA. GENTA and CPI shall promptly disclose to the other party all such solely or jointly owned Inventions. Both parties shall cooperate in the filing and prosecution of patent applications related to joint inventions and shall share equally the costs associated with such filings and prosecution. With respect to such joint inventions, the parties will grant each other a non-assignable, sole license to make, have made, use and sell such inventions without the right to sublicense without the mutual agreement of the parties. With respect to joint inventions and inventions made by GENTA pursuant to this Agreement, CPI shall have the right of first refusal for an exclusive license to make, have made, use and sell the inventions in the field of skin and hair care. Nothing in this Agreement shall be construed to grant to a party a license or other rights under any intellectual property rights of the other party, unless expressly provided in this Agreement. 8. Future Rights Simultaneous with the performance of the Study, CPI and GENTA will negotiate the terms of a mutually acceptable full development, supply and product license agreement (hereinafter, "the License Agreement"). Under the License Agreement, CPI shall have the exclusive worldwide rights to have made, use and sell GENTA's antisense compounds which are selective to the mRNA of the human androgen receptor for the field of skin and hair care. The License Agreement shall be complete prior to the completion of the Study. The negotiations to develop the License Agreement between CPI and GENTA shall begin no later than two (2) months after the execution of this Agreement. At the completion of the Study, CPI shall notify GENTA that the Study has been completed. Within sixty (60) days after CPI notifies GENTA that the Study has been completed, CPI shall notify GENTA whether it intends to pursue the development of the Compound commercially. Upon notification that CPI intends to pursue the development of the Compound commercially, the parties shall execute the License Agreement and CPI shall pay GENTA One Hundred and Fifty Thousand Dollars ($150,000.00). The License Agreement will include at least the following provisions: (i) GENTA will supply the Compound exclusively to CPI for use in its skin and hair care products, (ii) CPI will purchase its requirements of such compounds from GENTA, if GENTA is capable, at a negotiated fair market price which shall be at least as favorable as GENTA's price to other customers for similar compounds, and (iii) CPI will pay GENTA mutually acceptable royalties on Net Sales of products and milestone payments. 9. Exclusivity During the duration of the Study, GENTA shall not engage any third party to study the androgen receptor mediated dermatological effects of the Compound or discuss with or negotiate with any third party regarding the right to make, have made, use or sell the Compound. 5 10. Term and Termination The term of this Agreement shall be one (1) year from the date written above. This Agreement may be terminated by CPI upon thirty (30) days prior written notice to GENTA, provided, however, that the obligations of each party under Paragraph 4 hereof shall survive such termination of this Agreement. 11. Miscellaneous This Agreement may not be superseded, amended, or modified except by written agreement signed on behalf of both parties hereto. Notices given by either party hereto shall be in writing and shall be effective upon receipt and shall be sent by registered or certified mail or overnight courier to the other party at the address set forth above. Each party's rights and obligations under this Agreement shall enure to the benefit of, and shall be binding upon, its successors. This Agreement shall in no way constitute a commitment by CPI to purchase any goods from GENTA or by GENTA to produce and sell any goods to CPI. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of law principles thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their duly authorized representatives on the day and year first above written. GENTA INCORPORATED JOHNSON & JOHNSON CONSUMER PRODUCTS, INC. By: /s/Thomas H. Adams By: /s/ ------------------ --------------------- Thomas H. Adams Title: Vice President, Title:__________________ Licensing & Acquisition 6 EX-10.88 4 ASSIGNMENT AGREEMENT EXHIBIT 10.88 ASSIGNMENT AGREEMENT (OF COLLABORATION AGREEMENT BETWEEN GENTA JAGO AND GENSIA) This ASSIGNMENT AGREEMENT effective as of October 1, 1996 (this "AGREEMENT") is entered into among GENSIA, INC., a Delaware corporation having a place of business at 9360 Towne Center Drive, San Diego, California 92121, U.S.A. (hereinafter referred to as "GENSIA"), and GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, CH-6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and BRIGHTSTONE PHARMA, INC., a Delaware corporation having a place of business at 109 MacKenan Drive, Cary, North Carolina 27511, U.S.A. (hereinafter referred to as "BRIGHTSTONE") and SKYEPHARMA PLC, an English public company, having a place of business at 105 Piccadilly, London (hereinafter referred to as "SKYEPHARMA"). WITNESSTH: WHEREAS, GENSIA and GENTA JAGO have entered into a certain Collaboration Agreement dated as of January 22, 1993 (as amended as of October 7, 1994, and thereafter, hereinafter the "GJT Collaboration Agreement") regarding the development of - inter alia - a GEOMATRIX(R) formulation of Nifedipine (hereinafter the "Nifedipine Product"); and WHEREAS, GENSIA and Jagotec AG, a Swiss corporation (hereinafter "JAGOTEC") have entered into a certain License Agreement dated as of January 22, 1993 (as amended as of October 7, 1994 and thereafter; hereinafter the "License Agreement") regarding manufacturing rights for - inter alia - the Nifedipine Product; and WHEREAS, GENSIA and JAGO Pharma AG, a Swiss corporation (hereinafter "JAGO PHARMA") have entered into a certain Supply Agreement dated as of January 22, 1993 (as amended as of October 7, 1994 and thereafter; hereinafter the "Supply Agreement") regarding the manufacturing and supply of - inter alia - the Nifedipine Product; and WHEREAS, GENSIA and Boehringer Mannheim Pharmaceuticals Corporation, a Maryland corporation (hereinafter "BMPC") have entered into a certain License and Collaboration Agreement dated as of October 10, 1994 (hereinafter the "BMCT License and Collaboration Agreement") regarding the development and marketing of the Nifedipine Product; and WHEREAS, as the result of an internal corporate restructuring, Boehringer Mannheim Corporation, Therapeutics Division ("BMCT"), succeeded to the rights and obligations of BMPC under the BMCT License and Collaboration Agreement; WHEREAS, BRIGHTSTONE desires to assume, and GENSIA desires to assign to BRIGHTSTONE, all of GENSIA's rights and obligations under the GJT Collaboration Agreement as of the Effective Date (as defined below) and under the terms and subject to the conditions of this Agreement; and WHEREAS, GENTA JAGO is willing to consent to GENSIA's assignment and BRIGHTSTONE's assumption of GENSIA's rights and obligations under the GJT Collaboration Agreement, under the terms and subject to the conditions of this Agreement; and - 1 - WHEREAS, the GENTA JAGO and BRIGHTSTONE desire to amend certain provisions of the GJT Collaboration Agreement as of the Effective Date as set forth below. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereby agree as follows: ARTICLE 1 ASSIGNMENT, SUBSTITUTION AND RELEASE As of the Effective Date and subject to the terms and conditions of this Agreement, 1.1 GENSIA does assign and transfer to BRIGHTSTONE all of GENSIA's right, title and interest in and to, and all of GENSIA's liabilities, duties and obligations arising or becoming due on or after the Effective Date under the GJT Collaboration Agreement; 1.2 BRIGHTSTONE does assume such right, title, interest, liabilities, duties and obligations of GENSIA and does agree that it shall be substituted for GENSIA under the GJT Collaboration Agreement and that it will perform the obligations, liabilities and duties of GENSIA arising or becoming due on or after the Effective Date thereunder in accordance with the terms hereof and thereof; 1.3 SKYEPHARMA agrees to guarantee the performance of BRIGHTSTONE under the GJT Collaboration Agreement as it will be amended concurrently herewith; and 1.4 GENTA JAGO does consent to such assignment and substitution. ARTICLE 2 REPRESENTATIONS AND WARRANTIES 2.1 Of Each Party to the Others. Each party hereby represents and warrants to the other parties as follows: (a) Corporate Existence. Such party is a corporation duly organized, validly existing and in good standing under the laws of the state or other jurisdiction in which it is incorporated. (b) Authorization and Enforcement of Obligations. Such party has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party and constitutes a legal, valid and binding obligation, enforceable against such party in accordance with its terms. (c) Consents. All necessary consents, approvals and authorizations of all governmental authorities and other persons required to be obtained by such party in connection with this Agreement have been obtained. - 2 - (d) No Conflict. The execution and delivery of this Agreement and the performance of such party's obligations hereunder do not conflict with or violate any requirement of applicable laws or regulations and do not conflict with, or constitute a default under, any contractual obligation of such party, except such conflicts that do not, individually or in the aggregate, have a material adverse effect on such party or do not materially adversely affect such party's ability to perform its obligations under this Agreement. 2.2 Of GENSIA and GENTA JAGO to Each Other, SKYEPHARMA and BRIGHTSTONE. Each of GENSIA and GENTA JAGO hereby represents and warrants to each other, SKYEPHARMA and BRIGHTSTONE that, immediately prior to the Effective Date, (a) the GJT Collaboration Agreement is in full force and effect; (b) the GJT Collaboration Agreement has not been amended, modified or altered (by amendment, side agreement or otherwise) other than as described in the recitals to this Agreement, (c) all amounts owing as of such date by GENSIA to GJT under the GJT Collaboration Agreement have been paid in full; (d) it has not received any notice of uncured past default under the GJT Collaboration Agreement, (e) there exists no uncured default or event which (with only the passage of time, the giving of notice or both) would constitute an uncured default of a material obligation under the GJT Collaboration Agreement, other than any default under the GJT Collaboration Agreement which directly or indirectly derives from or relates to the same or a related occurrence (or series of occurrences) which BMCT alleges (or may allege) constitutes a default under the BMCT License and Collaboration Agreement or the BMCT Amended License and Collaboration Agreement and (f) to the best of its knowledge, there exists no pending litigation, arbitration or similar proceeding to which it is a party, and it has not received written notice of any threatened litigation, arbitration or similar proceeding, relating to the GJT Collaboration Agreement or the activities contemplated by the GJT Collaboration Agreement. ARTICLE 3 RELEASES 3.1 Release of GENSIA. GENTA JAGO, BRIGHTSTONE and SKYEPHARMA do hereby release, remise and forever discharge GENSIA and its officers, directors, shareholders, employees and agents from (i) liabilities of GENSIA resulting from acts of GENTA JAGO on or after the Effective Date arising from the GJT Collaboration Agreement; and (ii) those liabilities of GENSIA to GENTA JAGO, BRIGHTSTONE or SKYEPHARMA arising from the GJT Collaboration Agreement which have accrued prior to the Effective Date and are actually known by GENTA JAGO, BRIGHTSTONE or SKYEPHARMA. In no event shall the foregoing release apply to obligations and liabilities of GENSIA owing to third parties. 3.2 Release of GENTA JAGO, BRIGHTSTONE and SKYEPHARMA. GENSIA does hereby release, remise and forever discharge each of GENTA JAGO, BRIGHTSTONE and SKYEPHARMA and its officers, directors, shareholders, employees and agents from any and all liabilities and obligations arising out of or related to the GJT Collaboration Agreement which have accrued prior to the Effective Date and are actually known by GENSIA. In no event shall the foregoing release apply to obligations and liabilities of GENTA JAGO, BRIGHTSTONE or SKYEPHARMA owing to third parties. - 3 - ARTICLE 4 INDEMNIFICATION 4.1 Indemnification Provision. Each of SKYEPHARMA, BRIGHTSTONE AND GENTA JAGO severally agree to indemnify GENSIA and hold GENSIA harmless from and against all losses, liabilities, damages and expenses, including reasonable attorneys' fees and costs, incurred as a result of any claim, demand, action or other proceeding arising from the acts or omissions of SKYEPHARMA, BRIGHTSTONE AND GENTA JAGO, respectively, under the GJT Collaboration Agreement accruing on and after the Effective Date. GENTA JAGO further agrees to indemnify GENSIA and hold GENSIA harmless from and against all losses, liabilities, damages and expenses, including reasonable attorneys' fees and costs, arising from liabilities and obligations of GENSIA to GENTA JAGO arising out of or related to the GJT Collaboration Agreement which liabilities and obligations have accrued prior to the Effective Date and are actually known by GENTA JAGO; provided, however, that in no event shall SKYEPHARMA, BRIGHTSTONE OR GENTA JAGO indemnify GENSIA in respect of obligations and liabilities of GENSIA owing to third parties. GENSIA agrees to indemnify GENTA JAGO and hold GENTA JAGO harmless from and against all losses, liabilities, damages and expenses, including reasonable attorneys' fees and costs, arising from liabilities and obligations of GENTA JAGO to GENSIA arising out of or related to the GJT Collaboration Agreement which liabilities and obligations have accrued prior to the Effective Date and are actually known by GENSIA; provided, however, that in no event shall GENSIA indemnify GENTA JAGO in respect of obligations and liabilities of GENTA JAGO owing to third parties. GENSIA agrees to indemnify SKYEPHARMA, BRIGHTSTONE or GENTA JAGO and hold each of them harmless from and against all losses, liabilities, damages and expenses, including reasonable attorneys' fees and costs, arising from liabilities and obligations of GENSIA owing to third parties related to the GJT Collaboration Agreement, provided, however, that the foregoing indemnification shall not apply to losses, liabilities, damages and expenses of the indemnified parties incurred as a result of the operation of the first sentence of this Section 4.1. The foregoing notwithstanding, in no event will any party hereto be required to indemnify another party hereunder for any loss, liability, damage or expense to the extent it is caused by acts of such indemnified party constituting gross negligence or willful misconduct or constituting a breach of this Agreement. 4.2 Procedure. A party (the "Indemnitee") that intends to claim indemnification under this Section 4 shall promptly notify the indemnifying party (the "Indemnitor") of any claim, demand, action or other proceeding in respect of which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have the right to participate in, and, to the extent the Indemnitor so desires, jointly with any other Indemnitor similarly noticed, to assume the defense thereof with counsel selected by the Indemnitor, provided, however, that an Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by the Indemnitee. The indemnity obligations under this Section 4 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnitor, which consent shall not be unreasonably withheld. The failure to deliver notice to the Indemnitor within a reasonable time after the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such Indemnitor of any liability to the Indemnitee under this Section 4, but the omission so to deliver notice to the Indemnitor will not relieve it of any liability that it may have to any Indemnitee otherwise than under this Section 4. The Indemnitor may not settle the action or otherwise consent to an adverse judgment in such action that diminishes the rights or interests of the Indemnitee without the express written consent of the Indemnitee, which consent shall not be unreasonably withheld. The Indemnitee, its employees - 4 - and agents shall cooperate fully with the Indemnitor and its legal representatives in the investigation of any action, claim or liability covered by this indemnification. ARTICLE 5 AMENDMENTS TO THE GJT COLLABORATION AGREEMENT The GJT Collaboration Agreement is hereby amended as follows: 5.1 The reference to GENTA JAGO in the ingress of the GJT Collaboration Agreement: JOBEWOL INVESTMENTS BV (proposed to be renamed GENTA JAGO TECHNOLOGIES BV), a Dutch corporation ("Technologies"), having a place of business located at Vijzelstraat 32, NL-1017 Amsterdam, Netherlands, shall be deleted and replaced by the following: GENTA JAGO TECHNOLOGIES BV, A DUTCH COMPANY ("TECHNOLOGIES"), HAVING A PLACE OF BUSINESS AT GRUNDSTRASSE 12, CH-6343 ROTKREUZ, SWITZERLAND, 5.2 In Section 1.2, the qualifying threshold of voting stock or other ownership interest shall be increased from at least forty percent (40%) to MORE THAN FIFTY PERCENT (50%). 5.3 Section 1.11 shall be deleted in its entirety and replaced by the following new Section: 1.11 "GEOMATRIX(R) TECHNOLOGY" SHALL MEAN THE ORAL CONTROLLED-RELEASE DRUG DELIVERY AND RELATED TECHNOLOGY LICENSED TO TECHNOLOGIES BY JAGOTEC AG WHICH UTILIZES A HYDROPHILIC DRUG-CONTAINING MATRIX TABLET WHICH CONTROLS THE RELEASE OF THE DRUG THROUGH THE USE OF ONE OR MORE BARRIER LAYERS, TOGETHER WITH ALL IMPROVEMENTS THEREON AND THERETO. 5.4 Section 2.5 shall be deleted in its entirety and replaced by the following new Section: 2.5 RIGHTS TO GEOMATRIX(R) TECHNOLOGY. TECHNOLOGIES REPRESENTS AND WARRANTS THAT IT HAS THE EXCLUSIVE RIGHT AND LICENSE FOR SALE AND USE IN THE FIELD UNDER THE PATENT RIGHTS, THE GEOMATRIX(R) TECHNOLOGY AND THE KNOW-HOW NECESSARY AND REQUIRED TO GRANT THE LICENSES UNDER ARTICLE 6.1 BELOW, AND THAT IT HAS THE RIGHT TO GRANT THE LICENSES HEREUNDER. 5.5 Section 14.4 shall be amended by the following new sub-section 14.4 TERMINATION OF THE LICENSE AGREEMENTS. 14.4.1 IN THE EVENT THAT THE LICENSE AGREEMENT IS TERMINATED PRIOR TO THE EXPIRATION OF THE LAST TO EXPIRE OF THE PATENTS LICENSED TO TECHNOLOGIES IN THE TERRITORY, THEN JAGOTEC SHALL GRANT A DIRECT LICENSE TO BRIGHTSTONE WHEREUNDER THE SAME LICENSE RIGHTS AS ARE GRANTED UNDER THE LICENSE AGREEMENT TO TECHNOLOGIES ARE DIRECTLY GRANTED TO BRIGHTSTONE. IN THIS EVENT JAGOTEC SHALL ASSUME ALL RIGHTS AND OBLIGATIONS OF TECHNOLOGIES UNDER THIS AGREEMENT AND SHALL PROMPTLY CURE ALL DEFAULTS OF TECHNOLOGIES UNDER THIS AGREEMENT, IF ANY. - 5 - 14.4.2 NOTWITHSTANDING ANYTHING CONTAINED IN THIS SECTION 14.4, NO ACTION TAKEN BY JAGOTEC AND/OR BRIGHTSTONE TO CONTINUE OR NOT TO CONTINUE THE LICENSE SHALL RELIEVE TECHNOLOGIES FROM ANY LIABILITY FOR ANY UNCURED DEFAULTS UNDER THIS AGREEMENT OR THE LICENSE AGREEMENTS, AND SUCH ACTION BY JAGOTEC AND/OR BRIGHTSTONE SHALL BE WITHOUT PREJUDICE TO ANY OTHER RIGHTS OR REMEDIES JAGOTEC AND/OR BRIGHTSTONE MAY HAVE IN LAW OR EQUITY. 5.6 In Section 20.1, the notice addresses to BRIGHTSTONE and Technologies are amended as follows: If to BRIGHTSTONE: BRIGHTSTONE PHARMA INC. 109 MacKenan Drive Cary, NC 27511, U.S.A. att: Joseph F. Bozman, Jr. - 6 - with copies to: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England att: Company Secretary and: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland att: Dr. Thomas M. Rinderknecht If to TECHNOLOGIES: GENTA JAGO TECHNOLOGIES BV Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz att: Management Committee with copies to: remains unchanged 5.7 Section 20.6 (Non-Competition) shall be deleted in its entirety. ARTICLE 6 CONFIDENTIALITY 6.1 For a period of ten years from the Effective Date, GENSIA shall maintain in confidence and shall not use in any way information and data resulting from or related to the development of the Products under the GJT Collaboration Agreement and, to the extent not included in the foregoing, information supplied by GENTA JAGO and marked "Confidential" (collectively the "Information"). 6.2 The obligation not to disclose or use Information shall not apply to any part of such Information that (a) is or becomes patented, published or otherwise part of the public domain other than by acts of GENSIA or its Affiliates or sublicensees in contravention of this Agreement, (b) is disclosed to GENSIA or its Affiliates or sublicensees by a Third Party, provided that such Information was not obtained by such Third Party directly or indirectly on a confidential basis, (c) prior to disclosure to GENSIA was already in possession of GENSIA or its Affiliates or sublicensees, provided such Information was not obtained directly or indirectly from GENTA JAGO under the GJT Collaboration Agreement, or (d) is disclosed in a press release agreed to by all parties hereto. GENSIA agrees that it shall not, directly or indirectly, perform research and development on, promote, sell or distribute another sustained release formulation of Nifedipine in the Territory, provided, however, that the foregoing non-competition obligation shall not apply to GENSIA in the event of a change of control (as defined in Section 13.2.4 of the License and Collaboration Agreement between GENSIA and BMCT). 6.3 Furthermore, GENSIA shall not disclose to any third party any of the terms or conditions of the GJT Collaboration Agreement or this Agreement without the prior written consent of the other parties hereto, except where and to the extent required by applicable law. Notwithstanding the foregoing, prior to the Effective Date, the parties hereto shall agree on the substance of - 7 - information to describe the terms of this transaction, which information may be disclosed by GENSIA without the consent of the other parties hereto. ARTICLE 7 CLOSING, CONDITION PRECEDENT AND EFFECTIVE DATE 7.1 The closing of the transaction contemplated hereby ("Closing") shall take place at the offices of Bryan Cave LLP, counsel for BMCT, 700 Thirteenth Street, N.W., Washington, D.C., or at such other place as the parties may agree at 1:00 p.m. EST on February 24, 1997, provided that the following conditions precedent have been fulfilled: (a) GENSIA, JAGOTEC, BRIGHTSTONE and SKYE PHARMA shall have agreed upon and duly executed an assignment agreement (hereinafter the "JAGOTEC Assignment") providing for the assignment of all of GENSIA's rights and obligations under the License Agreement to, and the assumption thereof by, BRIGHTSTONE under terms and conditions reasonably acceptable to all parties thereto; and (b) GENSIA, JAGO PHARMA, BRIGHTSTONE and SKYE PHARMA shall have agreed upon and duly executed an assignment agreement (hereinafter the "JAGO PHARMA Assignment") providing for the assignment of all of GENSIA's rights and obligations under the Supply Agreement to, and the assumption thereof by, BRIGHTSTONE under terms and conditions reasonably acceptable to all parties thereto; and (c) GENSIA, BMCT, BRIGHTSTONE and SKYE PHARMA shall have agreed upon and duly executed an assignment agreement (hereinafter the "BMPC Assignment") providing for the assignment of all of GENSIA's rights and obligations under the BMPC Agreement to, and the assumption thereof by, BRIGHTSTONE under terms and conditions reasonably acceptable to all parties thereto. 7.2 Provided that the Closing shall take place as provided hereinbefore, the "Effective Date" of this transaction shall be October 1, 1996. ARTICLE 8 MISCELLANEOUS 8.1 This Agreement embodies the entire understanding among the parties hereto and supersedes any prior representations, agreements, arrangements or understandings among them regarding the subject matter hereof, including but not limited to the letter of intent dated October 17, 1996. There are no representations, agreements, arrangements or understandings, oral or written, among the parties hereto regarding the subject matter hereof which are not fully expressed herein. 8.2 No change, modification, extension, termination or waiver of this Agreement, or any provision herein contained, shall be valid unless made in writing and duly signed by authorized representatives of the parties hereto. 8.3 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. - 8 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first written above. GENSIA, INC. /s/David F. Hale - - - --------------------------------- By: David F. Hale Its: Chairman, President and CEO GENTA JAGO Technologies B.V. /s/ /s/Thomas H. Adams - - - --------------------------------- --------------------------------- By: By: Thomas H. Adams, Ph.D. Its: Managing Director Its: Managing Director BRIGHTSTONE PHARMA INC. /s/ - - - --------------------------------- By: Its: President SKYE PHARMA PLC /s/ - - - --------------------------------- By: Its: Chairman EX-10.89 5 DEVELOPMENT AND MARKETING AGREEMENT EXHIBIT 10.89 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT AND MARKETING AGREEMENT THIS AGREEMENT, is made as of the Effective Date (as defined below), by and between APOTHECON, INC., a Delaware corporation, with offices at 777 Scudders Mill Road, Plainsboro, New Jersey 08536, USA, (hereinafter referred to as "APOTHECON") and GENTA JAGO TECHNOLOGIES BV, a Dutch company, having offices at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GJT"). RECITALS WHEREAS, GJT has the expertise and skill needed to develop pharmaceutical preparations in * formulation of * (hereinafter, as more fully defined below, referred to as the "Product"); and WHEREAS, GJT (i) is the exclusive licensee of Jagotec AG, a Swiss corporation, of certain patent rights covering the GEOMATRIX formulation of the Product and (ii) is in possession of certain know-how and technology regarding the development, production and analytical methods of the Product (hereinafter, as more fully defined below, referred to as "Know-how"); and WHEREAS, APOTHECON is interested in developing, manufacturing, and marketing the Product throughout the world and receiving an exclusive license under the relevant GEOMATRIX patent rights and Know- how for such purpose, and GJT is willing to grant such exclusive license to APOTHECON; and WHEREAS, all licenses and rights to make, have made, use and sell the Product have been granted pursuant to a license agreement of even date herewith between GJT and APOTHECON (said license agreement, as the same may be extended, supplemented or changed hereafter, referred to hereinafter as the "* License Agreement"); and WHEREAS, the parties desire to provide herein for the development of the Product, all upon the terms and conditions set forth below. NOW, THEREFORE, in consideration of the above premises and the mutual promises and covenants set forth herein, the parties agree as follows: ARTICLE 1 DEFINITIONS The following terms as used in this Agreement shall have the meanings set forth in this Article 1: * that (i) where marketed within the United States, is classified by FDA as an * under the Federal Food, Drug and Cosmetic Act, as amended, and (ii) where marketed outside the United States, is classified, marketed and/or designated as a *. "Adverse Drug Reaction (ADR)" shall have the meaning ascribed to such term under applicable law, but in any event shall include any reaction, side effect or other undesirable event (such as side effects, injuries, toxicity or sensitivity reaction, or any unexpected incidence and the severity thereof) that is associated with the use of the Product in humans, whether or not the event is considered drug related, including, but not limited to, the following: an adverse event occurring in the course of the use of the Product in professional practice, including use in clinical studies; drug overdose, whether accidental or intentional; an adverse event occurring from drug abuse; an adverse event occurring from drug withdrawal; any significant failure of expected pharmacological or biological actions; - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. and any adverse event associated with the clinical use, study, investigation, testing and marketing of the Product or any other product (to the extent such adverse event pertains to the use or incorporation of the GEOMATRIX Technology in such product). In addition, when an ADR is herein referred to as "serious", it shall have the meaning ascribed to such term under applicable law, but in any event shall include one or more of the following: death; admission to a hospital or prolongation of a hospital stay; permanent or substantially disabling condition; life- threatening condition; overdose; congenital anomaly; or cancer. Also, when an ADR is herein referred to as "unexpected", it shall have the meaning ascribed to such term under applicable law, but in any event shall include (x) for a non-marketed product, an experience that is not identified in nature, severity or frequency in the current clinical investigator's confidential information brochure, and (y) for a marketed product, an experience which is not listed in the current labeling for such product, and includes an event that may be symptomatically and pathophysiologically related to an event listed in the labeling but differs from the event because of increased frequency or greater severity or specificity. "Affiliate" means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. A Person shall be regarded as in control of another Person if it/he/she owns, or directly or indirectly controls, fifty percent (50%) or more of the voting stock or other ownership interest of the other Person, or if it/he/she directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever. For example, Jagotec and Jago Pharma AG are Affiliates of GJT. "Developmental Program" shall mean a development program in which the different activities to be performed by GJT and APOTHECON shall be listed (together with a respective time schedule for the development of the Product to be carried out by GJT and/or APOTHECON), as the case may be, according to such "Project Addendum" (and as amended or supplemented by mutual written agreement from time to time hereafter), with the initial Project Addendum attached as Exhibit 1.1(i) hereto. "Effective Date" means the date when this Agreement is executed and delivered by the parties hereto, and (i) APOTHECON shall have received duly executed originals of all Waivers and Consents required under Section 3.6 hereof, (ii) all opinions of counsel contemplated by section 3.7 hereof have been received by APOTHECON, and (iii) Jagotec and Jago Pharma shall have duly executed the acknowledgment on the signature page of this Agreement. "...exclusive...." means, with respect to the grant of a license or sublicense, or to the appointment of a distributor, a license, sublicense, or appointment whereby the licensee's, sublicensee's or appointee's rights are sole and entire, and operate to exclude all others, including the licensor, sublicensor and appointor, as the case may be, and may be exercised by the licensee or sublicensee itself or through one or more of its Affiliates. An exclusive licensee (and permitted sublicensees) may sell and distribute Products through agents and distributors under exclusive or nonexclusive arrangements in any country in the Territory. ". . . semi-exclusive. . . .", with respect to the grant of a license or sublicense, or to the appointment of a distributor, shall be interpreted in the same manner as the preceding sentence, except that the licensor, sublicensor or appointor, as the case may be, may also use the licensed, sublicensed or appointed rights itself or through one or more of its Affiliates. "FDA" shall mean the United States Food and Drug Administration, or any successor agency having regulatory jurisdiction over the manufacture, distribution and sale of drugs in the United States. "First Commercial Sale" shall mean, with respect to any Product, the first sale for use or consumption by the general public of such Product in a particular country in the Territory after the required marketing approval and pricing approval, if any, has been granted by the governing health authority of such country. "GEOMATRIX Agreements" means the GEOMATRIX License Agreement, the GEOMATRIX License Agreement, the GEOMATRIX Supply Agreement, and the GEOMATRIX Research and Development Agreement (each, individually, a "GEOMATRIX Agreement"). -2- "GEOMATRIX License Agreement" shall mean the Restated GEOMATRIX License Agreement dated as of May 12, 1995 between GJT and Jagotec. "GEOMATRIX Manufacturing License Agreement" shall mean the Restated GEOMATRIX Manufacturing License Agreement dated as of May 12, 1995 between GJT and Jagotec. "GEOMATRIX Research and Development Agreement" means the Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated, a Delaware corporation, and Genta Jago Delaware, L.L.C., a Delaware limited liability company. "GEOMATRIX Supply Agreement" means the Restated GEOMATRIX Supply Agreement dated as of May 12, 1995 by and among GJT and Jago Pharma AG, as Swiss corporation. "GEOMATRIX Technology" means all oral controlled-release drug delivery and related technology which utilizes a hydrophilic drug-containing matrix * which controls the release of the drug through the use of one or more barrier layers, together with all improvements thereon and thereto, all to the extent and only to the extent that GJT now has or hereafter will have the right to grant licenses, immunities or other rights thereunder. "Gross Margin" shall have the meaning ascribed to such term in Section 7.2.2 of the * License Agreement. "Jagotec" means Jagotec AG, a Swiss corporation, having a place of business at Seestrasse 47, CH-6052 Hergiswil, Switzerland. "Jago Pharma" means Jago Pharma AG, a Swiss corporation, having a place of business at Eptingerstrasse 51, CH-4132 Muttenz, Switzerland. "* License Agreement" means the agreement referred to in the recitals above. "Know-how" means all information and data, which is not generally known, including, but not limited to, formulae, procedures, protocols, techniques, preclinical and clinical developmental and technical data, and results of experimentation and testing, which (a)(i) relate to the GEOMATRIX Technology or the Product, or the manufacture or use of same, or (ii) are necessary or useful to develop, make, use, sell or seek regulatory approval in a country in the Territory to make, use or sell the Product, and (b) are developed or acquired by or are under the control of a party to this Agreement. "Manufacturing Cost" shall mean the cost to APOTHECON and its Affiliates of * by APOTHECON or such Affiliates in the manufacture of all products produced in the facility or facilities in which the Product is manufactured. If the Product is manufactured in whole or in part by an unAffiliated Third Party, the costs to be taken into account shall be the amount paid to such Third Party plus any of the aforementioned costs that are incurred in completing the manufacture and delivery of the Product. "Net Sales" shall mean the applicable quantity of Product times "Net Sales Price." It shall be determined at the point of sale from APOTHECON (or from such of its Affiliates to whom APOTHECON may sell such Product) to a Person not Affiliated with APOTHECON. "Net Sales Price" of Product shall mean the invoiced sales price of the Product billed to independent customers of APOTHECON who are not its Affiliates, less (to the extent incurred and absorbed by APOTHECON or its Affiliates): (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- independent customers for spoiled, damaged, out-dated, rejected or returned Product; (b) actual freight and insurance costs in transporting the Product in final form to such customers; (c) cash, quantity and trade discounts, rebates, and other price adjustments or price reduction programs; (d) sales, use, value-added and other direct taxes, or any other governmental charge imposed upon the production, importation, use or sale of the Product; (e) customs duties, surcharges and other governmental charges in connection with the exportation or importation of the Product in final form; and (f) invoiced amounts with respect to the Product which are first outstanding and unpaid for * days or more during the applicable reporting period, less such invoiced amounts outstanding and unpaid for * days or more which are received or recovered during such reporting period; provided that such amounts under (f) shall not exceed * of APOTHECON during the term hereof. Notwithstanding the foregoing, if any Product is sold under * arrangements, then, prior to the First Commercial Sale of such Product and thereafter promptly following the end of each calendar year, APOTHECON and GJT shall * the "Net Sales Price" for sales of such Product under such * arrangements. Such formula shall be based on such factors as the parties * and shall appropriately and equitably allocate a sales price to Product sold under such * arrangements. "Patent Rights" shall mean(a) all patent applications heretofore or hereafter filed or having legal force in any country in the Territory owned by or licensed to GJT or its Affiliates or to which GJT or its Affiliates otherwise acquires rights, which claim the GEOMATRIX Technology or the Product, or the process of manufacture or use of the GEOMATRIX Technology or the Product, together with any and all patents that have issued or in the future issue therefrom, including utility, model and design patents and certificates of invention, including but not limited to those patent applications and patents listed on Exhibit 1.1 (ii) hereto, and (b) all divisionals, continuations, continuations-in-part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications; all to the extent and only to the extent that GJI now has or hereafter will have the right to grant licenses, immunities or other rights thereunder. "Person" shall mean an individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority, or any other form of entity not specifically listed herein. "Product" shall mean a pharmaceutical composition containing * (including all commonly used and known salts and acids thereof) which is *, and which incorporates, is based on and is derived by use of the GEOMATRIX Technology. "Region I" shall mean all countries located *, and their respective territories and possessions. "Region II' shall mean all countries *, and their respective territories and possessions. "Region III" shall mean *, and their respective territories and possessions. "Region IV" shall mean all other countries of the world other than those located in Regions I-III, and their respective territories and possessions. "Registration" shall mean any form and type of registration, application, permit, license, authorization, approval, presentation or notification being requested by any competent authorities, government or body in a given country for the manufacturing, production, marketing, advertising, distribution, sale, trade, import, export or use of the Products of such authority, government or body, and shall include all acts, steps, applications, presentations, statements or other things which are necessary or useful to obtain the foregoing. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -4- "Research and Development Costs" shall mean (a) the following costs reasonably incurred by GJT relating to its development and Registration responsibilities hereunder for the Product: raw materials, energy, direct labor (salary and benefits) and reasonable allocable direct (but not indirect) overhead charges relating to the development and Registration of the Product, plus (b) reasonable out-of-pocket or other expenses paid or accrued by GJT to any Subcontractee performing any portion of such development and Registration, provided that expenses paid to an Affiliate Subcontractee under this clause (b) shall not exceed the amounts required to be paid under the GEOMATRIX Research and Development Agreement. All such costs shall be determined and allocated in accordance with generally accepted accounting principles, consistently applied. "Royalty Term" shall mean, with respect to each Product in a given country in the Territory in which the Product is sold by or through APOTHECON, the term for which a Valid Patent Claim remains in effect, and which would be infringed by the manufacture, use or sale of the Product in such country but for the license rights granted to APOTHECON under this Agreement. "Scale-Up" shall mean, with respect to the Product and a designated Manufacturing facility, the process of developing a reliable and practical method of manufacturing the Product in such designated manufacturing facility to effectuate the orderly transition from laboratory production of the Product to routine full-scale production of the Product in such designated facility in quantities necessary for commercial sale. Without limitation, Scale-Up includes (a) installation, evaluation and validation of the necessary equipment, (b) establishment, evaluation, validation and finalization of the necessary production and process controls, (c) demonstration of the ability to produce a batch size of * of the proposed commercial production batch for the Product at such facility, (d) demonstration of compliance with all other applicable laws, regulations and good manufacturing practices, (e) production of GMP bio-batches for pivotal clinical trials, and (f) transposition to routine full scale production. "Specifications" of the Product shall have the meaning set forth in Section 4.2 hereof. "Subcontractee" shall have the meaning ascribed to such term in Article 14 hereof. "Territory" shall mean *. "Third Party" means any Person other than GJT or APOTHECON, except as otherwise specifically indicated. "Valid Patent Claim" shall mean a claim of an issued and unexpired patent included within the Patent Rights (or a claim under a patent application within the Patent Rights that is being diligently prosecuted by GJT or its Affiliates), which has not been held permanently revoked, or declared unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappeased within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise (other than as required by applicable law to initiate the reissue of a patent). "Validated Manufacturing Scale-Up" shall mean, with respect to the Product and a designated Manufacturing facility, a reliable and practical method of manufacturing the Product in such designated manufacturing facility for routine full-scale production of the Product in such designated facility in quantities necessary for commercial sale. Without limitation, Validated Manufacturing Scale-Up includes (a) installation, evaluation and validation of the necessary equipment, (b) establishment, evaluation, validation and finalization of the necessary production and process controls, (c) successful demonstration and validation of the ability to produce GMP batch sizes equal to one hundred percent (100%) of the proposed commercial production batch for the Product at such facility, (d) demonstration of compliance with all other applicable laws, regulations and good manufacturing practices, and (e) transposition to routine full scale production. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -5- ARTICLE 2 OWNERSHIP OF RIGHTS 2.1 Ownership of Rights. [Intentionally omitted.] 2.2 No Taking Subject To. Except as may be expressly set forth in this Agreement, any sublicense or other rights granted APOTHECON hereunder are not subject to the terms and conditions of the GEOMATRIX License Agreement, the GEOMATRIX Manufacturing License Agreement, the GEOMATRIX Supply Agreement or the GEOMATRIX Research and Development Agreement, and APOTHECON shall not be bound by any obligations or undertakings of GJT under any of the aforesaid agreements. 2.3 Enforcement of GEOMATRIX Agreements. GJT covenants and agrees to comply with its duties and obligations under the GEOMATRIX License Agreement, the GEOMATRIX Manufacturing License Agreement, the GEOMATRIX Supply Agreement, and the GEOMATRIX Research and Development Agreement (collectively, the "GEOMATRIX Agreements"), and to use best efforts to enforce its rights and privileges under each such GEOMATRIX Agreement so as not to diminish or adversely affect in any material respect the rights and privileges available to APOTHECON under this Agreement. GJT agrees not to terminate any such GEOMATRIX Agreement or waive in any material respect any rights or privileges available to it under any such GEOMATRIX Agreement which would have the effect of diminishing or adversely affecting in any material respect the rights and privileges available to APOTHECON hereunder or which would have the effect of diminishing or adversely affecting in any material respect GJT's agreements or obligations hereunder, without the prior written consent of APOTHECON. ARTICLE 3 GRANT OF LICENSE; BACK-UP SUPPLY; CONSENT AND WAIVER 3.1 Grant of License. [Intentionally omitted]. 3.2 Manufacture and Supply of Product. 3.2.1 Subject to the terms of this Agreement, and where referenced the * License Agreement, APOTHECON will arrange, through itself and/or its Affiliate(s) and/or a Third Party, to manufacture and supply the Product needed for GJT to conduct all testing and other activities contemplated by or through it under the Development Program (and section 4.6 hereof) or needed to register the Product in a given country. APOTHECON will also be responsible for arranging and coordinating, either through itself or its Affiliates or through a Third Party, for the supply of the Product as will be used for all other commercial purposes, and for procuring and supplying the raw material to make the Product (other than raw material previously purchased by GJT for the Development Program). 3.2.2.1 GJT shall remain solely responsible to APOTHECON (whether or not delegated by GJT) for all matters relating to GJT's responsibilities hereunder, including without limitation the following matters: bioequivalence and clinical testing; transfer and training in the use of the GEOMATRIX Technology by APOTHECON, its Affiliates, and any contract or back-up supply manufacturer selected by APOTHECON; and prompt and complete training and consulting assistance in the use of the GEOMATRIX Technology so that APOTHECON may, through itself and/or its Affiliates or a Third Party, initiate and complete Scale-Up (including Validated Manufacturing Scale-Up) on a timely basis. 3.2.2.2 As soon as reasonably practicable after the date of the Agreement, and from time to time thereafter during the term hereof as additional information becomes available, GJT shall provide, and/or shall cause its Affiliates to provide, to APOTHECON (and any contract and/or back-up supply manufacturer(s) designated by APOTHECON in accordance with this Agreement and, where referenced, the * License Agreement) with all Know-How, information regarding the Patent Rights, technical assistance and such other - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -6- cooperation as may be reasonably requested by APOTHECON and is available from GJT from time to time hereunder to enable APOTHECON (and any such contract and/or back-up supply manufacturer(s) designated by APOTHECON) to obtain all regulatory approvals required (i) to effect Scale-Up (including Validated Manufacturing Scale-Up), (ii) to qualify, file and obtain registration as a manufacturer and supplier (or back-up supplier, as the case may be) of the Product, and (iii) to make and/or have made Products in accordance with the terms of this Agreement and applicable regulatory filings therefor. Additionally, GJT shall make its and/or its Affiliates' employees and consultants available for consultation, at such time and place as APOTHECON (and any such contract and/or back-up supply manufacturer(s) designated by APOTHECON) reasonably requests, regarding the scale-up and manufacture of Products. Technical assistance supplied by GJT and/or its Affiliates for such purposes shall be without additional charge for such services to APOTHECON (and any such contract and/or back-up supply manufacturer designated by APOTHECON), except to the extent reimbursement for such charge is already included within the budgets pursuant to section 4.6 hereof, and provided that APOTHECON will reimburse GJT and/or its Affiliates for any reasonable * incurred by GJT or its Affiliates in connection therewith not covered by such budgets and for any other reasonable * (including *) needed to train an entity (other than APOTHECON and one unAffiliated Third Party selected by APOTHECON as a contract or back-up supplier) in the use of the GEOMATRIX technology. 3.3 Other Suppliers. [Intentionally omitted.] 3.4 Initiation of Back-up Supply. [Intentionally omitted.] 3.5 Sublicenses to Certain Third Parties. [Intentionally omitted]. 3.6 Consent and Waiver Agreements. As a material inducement to APOTHECON's willingness to enter into this Agreement, GJT will cause, contemporaneously with the execution and delivery of this Agreement, each of the Consent and Waiver Agreements in the form attached as Exhibits 3.6(i)-(iv) hereto to be executed and delivered to APOTHECON. 3.7 Opinions of Counsel. Contemporaneously with the execution and delivery of this Agreement, GJT will deliver opinions of counsel to itself, Jagotec and Jago Pharma AG, and an opinion of counsel to Genta Incorporated, in form and substance satisfactory to APOTHECON. ARTICLE 4 PRODUCT DEVELOPMENT 4.1 Information Exchange. Promptly following the Effective Date and thereafter as it becomes available during the term of this Agreement, each party agrees, subject to conflicting third party rights, to promptly furnish the other in writing all technical information and pre-clinical and clinical data developed or acquired relating to the Product that comes into the control or possession of a party, including all information in the nature of improvements or modifications to the aforesaid and all toxicological, analytical, chemical data, and the like, provided, that the foregoing shall not be construed as covering, or requiring APOTHECON to disclose, any manufacturing know-how or trade secrets (including but not limited to procedures, techniques, and processes) of APOTHECON, its Affiliates or its contract suppliers. All such information exchanged shall be treated as Confidential Information of the disclosing party. 4.2 Product Specifications. The parties agree to target, and acknowledge that the costs of Product development set forth in section 4.6 below contemplate, the development of the Product *. The parties may in their discretion determine hereafter to pursue different or additional strengths for the Product, in which event the parties will negotiate mutually acceptable terms - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -7- and conditions for the development and marketing of same, with such terms to be similar, where practicable, to the terms and conditions contained herein, it being further understood that APOTHECON will fund the costs to develop and register any such additional strengths. The dosage strength, formulation, quality and other specifications ("Specifications") of the furnished Product shall depend in relevant part on the following items: i) Conformity to current USP monograph(s) for all pertinent inactive and active ingredients; ii) election of dosage strength and formulation (the parties agreeing initially to target *, and to determine hereafter (based upon estimates of the cost of development thereof) whether also to pursue development of *); and iii) GMP-related specifications resulting from GJT's Product validation. The parties shall jointly agree upon and memorialize in writing the Specifications for the Product at the earliest practicable time; the initial Specifications are attached as Exhibit 4.2 hereto. Hereafter, changes or supplements to the Specifications may be made only by mutual written agreement. 4.3 APOTHECON Product Development Duties. Subject to section 6.2 of the * License Agreement, APOTHECON will, at its expense, use commercially reasonable efforts to prepare or have prepared (by itself or through an Affiliate) the necessary documentation, and shall take or have taken all necessary actions, to obtain and maintain all Registrations (e.g., the ANDA in the United States) in its name for the marketing of the Product during the term of this Agreement in those countries in the Territory in which, and for so long as, APOTHECON in its discretion considers it commercially feasible to do so. APOTHECON shall use commercially reasonable efforts to complete such Registrations in its own name (or in the name of an Affiliate, if APOTHECON believes that such Registration would be better effected by an Affiliate in such country) as quickly as commercially feasible. GJT will have the right to review and comment on all such regulatory applications and other submissions prior to filing, and APOTHECON (or such Affiliate) will give due consideration to any reasonable requests of GJT. APOTHECON shall inform GJT promptly in writing on any unforseen material problems, delays or requirements in connection with such Registrations. APOTHECON (or such Affiliate) shall maintain such Registrations for the Product in each country in the Territory in which the Product is sold during the term of this Agreement, or such portion thereof as APOTHECON (or an Affiliate) is selling the Product in such country, and thereafter for such period as required by applicable law or regulation. APOTHECON (or such Affiliate) will be responsible for all costs incurred by it in connection with filing and maintaining such Registrations. GJT shall, or shall cause its Affiliates, Subcontractees and licensors of the GEOMATRIX Technology to, provide such advice and technical assistance as APOTHECON (or its Affiliates) may reasonably request in order to prepare, obtain and maintain such Registrations. APOTHECON (and any pertinent Affiliate) will have the right to review, copy, access, cross-reference and use all development, manufacturing and testing information obtained or developed by any of them as APOTHECON (or such Affiliate) reasonably considers necessary to obtain such Registrations. All material provided by GJT toward that end will be held in confidence (subject to regulatory and filing requirements) under Article 10 hereof. APOTHECON shall be responsible for all costs incurred by it in connection with such Registrations. GJT shall be responsible for any costs incurred by it in connection with assisting APOTHECON to obtain and maintain same, to the extent not subsumed within the payments contemplated by section 4.6 hereof. 4.4 GJT Product Development Duties. Subject to Article 4.7: 4.4.1 GJT will use commercially reasonable efforts to conduct or have conducted such research, formulation, development, testing, and preclinical and human clinical trials and bioequivalence testing as are necessary or desirable to obtain all required Registrations for the Product in those countries in the Territory selected for commercialization by APOTHECON, in accordance with the terms of this Agreement - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -8- and the Development Program. GJT shall conduct or have conducted such activities in a diligent and efficient manner and in compliance in all material respects with all applicable governmental and legal requirements, all applicable good laboratory and clinical practices, and all applicable standards of practice established by applicable regulatory authorities. GJT shall allocate all necessary resources, including without limitation facilities, equipment, time and use of personnel with sufficient skills and experience, to perform and accomplish its development obligations hereunder. 4.4.2 GJT will use commercially reasonable efforts to complete all bioequivalence testing and all pivotal clinical studies, and to assist APOTHECON in completing and demonstrating Validated Manufacturing Scale-Up, for the Product by *. 4.5 Development and Registration Reports. In addition to such other informal reports and meetings as the parties may mutually agree to conduct, each party shall inform the other of all material activities and results regarding its development and Registration of the Product, as follows: 4.5.1 Within * during the term of the Agreement (or more frequently as APOTHECON may request), GJT shall prepare and deliver to APOTHECON a written summary report which shall describe, with respect to each Product, the status of such research, development, and clinical trials and such Registrations. Not less than * to the commencement of any human clinical trials of the Product, GJT shall provide APOTHECON with a reasonably detailed written report summarizing such proposed human clinical trials. 4.5.2 Not less than * to the filing or submission by APOTHECON of any regulatory filing or submission to an applicable regulatory authority regarding Registration to market the Product, APOTHECON shall provide GJT with a reasonably detailed written report summarizing such proposed regulatory filing or submission. 4.5.3 Each party shall provide the other with prompt notice of all regulatory filings and submissions to, and all responses and approvals obtained from, regulatory authorities regarding any Registration sought by a Party for the Product. Upon written request by the other party, a copy of any filing and submission made by a party to a regulatory authority, as well as the regulatory authority's written response thereto, shall be provided to the requesting party. 4.6 Development Cost Funding. Subject to section 4.7: 4.6.1 * shall be responsible for * incurred by *, after July 1, 1995, in the formulation, development and testing of the Product in the Territory, * as provided below. GJT will be responsible for all research and development costs in excess of such amounts that may be incurred by it or its Subcontractees in connection therewith, other than * associated with the conduct of pivotal clinical trials for which * shall be responsible. GJT has estimated, based upon currently available information and in recognition of incomplete regulatory guidance available at this time, that its external costs associated with the conduct of such pivotal clinical studies will be in the range of *, it being further understood that if actual costs are different (including materially different) from such estimate, GJT shall not be considered to have breached this Agreement by reason of such difference, unless GJT's estimate was made in bad faith. GJT's reasonable and actual Research and Development Costs will be reimbursed by APOTHECON subject to section 4.6.2 and pursuant to the following budget and milestones, as follows: - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -9- GJT will provide * to APOTHECON of actual Research and Development Costs expended by GJT under the budget for each milestone established below. When an advance against the full budget for a milestone has been fully expended, APOTHECON will thereafter reimburse GJT for its reasonable and actual Research and Development Costs incurred under such milestone, up to the total amount budgeted for such milestone, pursuant to such * submitted by GJT; provided, however, that any individual charges * can be submitted for reimbursement by GJT separately from the *, APOTHECON will pay same, to the extent not contested by it in good faith, within thirty (30) days thereafter. Upon conclusion of each milestone, GJT will submit a detailed reconciliation of actual Research and Development Costs incurred by it under such milestone against budget. Any * by APOTHECON will be * payments to be made under the succeeding milestone (and against outside clinical expenses * by it); any excess actual Research and Development Costs reasonably incurred by * may be * by it against any favorable budget variance arising under a succeeding milestone or will be reimbursed by APOTHECON following conclusion of the work under all milestones against an * reserved by * for same. Should the payments made by APOTHECON in the aggregate following conclusion of the work under all milestones exceed the actual direct costs reasonably incurred by GJT, the difference will be repaid to APOTHECON within 30 days following ANDA approval. The budget and payment milestones are as follows: 4.6.1.1 Contract signing/Feasibility Studies. (This includes formulation development, analytical methods development, and * product *). The budget for this milestone is * which will be paid upon contract signing. 4.6.1.2 Initiation of Scale-Up Activities. (This includes raw materials previously purchased by *, * Scale-Up activities, and analytical methods validation). The budget for this milestone is * of which will be paid upon initiation of work for scaling up the manufacturing processes and analytical methods validation for production of the bio-batch, and the balance to be paid as provided above in this section 4.6.1. 4.6.1.3 Bio-batch manufacturing. (This includes transfer of methods and GEOMATRIX technology. Actual manufacturing and raw materials purchase will be handled directly by *, other than raw materials purchase for * which have previously been purchased by * and will paid for separately by * pursuant to section 4.6.1.2). The budget for this milestone is * of which will be paid upon initiation of work for manufacture of the bio-batch, and the balance to be paid as provided above in this section 4.6.1. 4.6.1.4 Clinical studies and laboratory trials. (This includes preparation, initiation and completion of all clinical trials, compilation of data for * section, and stability testing). The budget for this milestone * exclusive of GJT's external costs to Third Parties associated with the conduct of such pivotal clinical studies. * will be paid upon initiation of work for the commencement and completion of the pivotal clinical trials, and the balance to be paid as provided above in this section 4.6.1. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -10- 4.6.1.4.1 External Clinical Development Costs. GJT will structure and present for APOTHECON's approval (not to be unreasonably withheld) the clinical program (including protocols and selection of Third Parties serving as CROs or otherwise providing clinical services) required for Product testing and approval, as well as the budget therefor (including all amounts to be paid to such Third Parties for the clinical work conducted by such Third Parties). GJT will enter into appropriate agreements with such Third Parties pursuant to Section 4.7, and APOTHECON will either reimburse GJT for (or will pay directly to such Third Party) all amounts actually paid (or owed) by GJT to such Third Parties for the performance of such services in accordance with such budget(s) and time lines therefor (and as the same may be changed, supplemented or extended by mutual written agreement thereafter), or, if not so budgeted, within 30 days after presentation of an invoice and substantiating documentation by GJT (to the extent not contested in good faith). GJT will endeavor to structure such clinical program in a reasonably cost-effective manner consistent with the time lines set forth herein. 4.6.1.5 ANDA preparation. (This includes compilation of ANDA and related assistance). The budget for this milestone * of which will be paid upon initiation of this milestone, and the balance to be paid as provided above in this section 4.6.1. 4.6.2 GJT will present the overall development budget for review, comment and approval by APOTHECON. The parties will jointly determine specific benchmarks to monitor the process of development. APOTHECON will have the right to review and comment on all significant development and testing activities prior to the start of these activities and GJT will give due consideration to all reasonable comments and requests made by APOTHECON. GJT will give APOTHECON a reasonable period in which to conduct such review, and APOTHECON will conduct its review and provide its comments within such reasonable period, so as not to cause any undue delay in the commencement of such activities. Upon conclusion of each of the milestones under 4.6.1.1, 4.6.1.2, 4.6.1.3, and 4.6.1.4 (and any other specific benchmarks/milestones to which the parties may mutually agree) and before proceeding to the next milestone, GJT must first receive APOTHECON's written approval (not to be unreasonably withheld). 4.6.3 GJT will provide APOTHECON, at its request, with a * reconciliation of actual Research and Development Costs of development hereunder incurred against budget where the duration of, or costs incurred against, a milestone is a period longer than *. 4.7 Consent and Waiver - Conforming Changes. 4.7.1 Notwithstanding any provision in this Agreement or in the GEOMATRIX Research and Development Agreement to the contrary, and subject to Article 11 hereof: 4.7.1.1 All applications filed by GJT or any other party to the GEOMATRIX Research and Development Agreement pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, APOTHECON. 4.7.1.2 All data and results pertaining to the Product generated by any party to the Research and Development Agreement shall be owned solely by APOTHECON. Concurrently with the execution and delivery of this Agreement, GJT will turn over to APOTHECON all data and results heretofore developed by or for it pertaining to the Product. GJT will thereafter report to APOTHECON in writing such data and results developed by or for it not less frequently than quarterly (monthly, if requested by APOTHECON) and will transmit all such data to APOTHECON by magnetic media or such other method as APOTHECON may request. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -11- 4.7.1.3 In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, APOTHECON shall be entitled, but shall not be obligated, to enter into an agreement with any of the parties to said GEOMATRIX Research and Development Agreement for the development and registration of the Product on terms and conditions acceptable to APOTHECON (and with APOTHECON having the rights that GJT otherwise would have had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that APOTHECON has under this Agreement). 4.7.2 GJT shall submit to APOTHECON a copy of (i) all reports, statements, invoices, Product workplans, and budgets submitted to it by any party to the GEOMATRIX Research and Development Agreement relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. If GJT should default in its obligations under the GEOMATRIX Research and Development Agreement, APOTHECON shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay each party to the GEOMATRIX Research and Development Agreement (other than GJT) directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies owed by APOTHECON to GJT under section 4.6 hereof (or, to the extent no such sums remain owing by APOTHECON under said section 4.6, then against such amounts as may be owed by APOTHECON under section 7.1 of the * License Agreement). 4.7.3 APOTHECON shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product. 4.7.4 GJT shall defend, indemnify and hold APOTHECON harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that APOTHECON suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the * *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the * or its directors, officers, general partners, employees, consultants, or agents. APOTHECON, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). ARTICLE 5 MANUFACTURE AND SUPPLY OF PRODUCT 5.1 Manufacture. APOTHECON shall manufacture or have manufactured Products for all clinical and commercial purposes in accordance with prevailing industry standards and in compliance in all material respects with all applicable laws, regulations and other governmental requirements, all applicable good manufacturing practices and all applicable standards of practice established by applicable regulatory authorities. Without limiting the generality of the foregoing, Product manufactured in the United States shall be manufactured in accordance with CGMPs promulgated by the FDA and pursuant to all necessary DMFs filed with FDA. APOTHECON shall be responsible for all costs of any nature incurred by or on behalf of it in connection with the manufacture of the Product. 5.2 Product Registrations. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -12- 5.2.1 APOTHECON shall prepare or have prepared, on behalf of itself, an Affiliate and/or a Third Party contract or back-up manufacturer, the necessary documentation, and shall take or have taken all necessary actions, to obtain and maintain Registrations for the manufacture of Products needed to meet APOTHECON's reasonably foreseeable requirements for same. APOTHECON shall use commercially reasonable efforts to complete such Registrations as quickly as commercially feasible. APOTHECON shall inform GJT promptly in writing on any unforseen material problems, delays or requirements in connection with such Registrations. APOTHECON and/or such other contractor back-up manufacturer shall maintain such Registrations for the Product in each country in which the Product is manufactured during the term of the Agreement, or such portion thereof as the Product is manufactured in such country, and thereafter for such period as required by applicable law or regulation. APOTHECON shall be responsible for all costs incurred by it or on its behalf in connection with such Registrations. Without limiting the generality of the foregoing, APOTHECON will use commercially reasonable efforts: to pursue all necessary DMF approvals required in the United States (and corresponding approvals, where applicable, in other countries in the Territory) for all pertinent bulk and/or finished material components of the Product and will cooperate with and comply with all reasonable requests of applicable governmental authorities in pursuit of same; and to secure necessary approvals from applicable governmental authorities for the manufacturing facilities from which finished dosage form Product will be supplied and shall cooperate with such applicable governmental authorities and comply with their reasonable requests for site inspections and other information and analyses in pursuit of the approved ANDA and any other Registrations. 5.3 Manufacturing and Registration Reports. APOTHECON shall inform GJT of the following activities regarding the manufacture of the Product, as follows: 5.3.1 Within * days following the end of each * until ANDA approval, APOTHECON shall prepare and deliver to GJT a written summary report which shall describe, with respect to the Product, material information pertaining to its manufacturing status; provided, that any proprietary or confidential information of APOTHECON and its Affiliates, such as manufacturing know-how or trade secrets, shall not be required to be disclosed and may be redacted. 5.3.2 APOTHECON shall provide GJT with prompt notice of all regulatory filings and submissions to, and all responses and approvals obtained from, regulatory authorities regarding such Registration to manufacture of the Product. 5.3.3 Each party shall promptly advise the other of any safety or toxicity problem of which either party becomes aware regarding the Product, intermediates or other ingredients or processes used in the manufacture of the Product. 5.3.4 APOTHECON shall be responsible for ongoing stability testing with respect to Product. 5.4 Product Purchase. 5.4.1 Subject to Article 11 hereof and to Section 3.2 hereof, the parties agree to cooperate to ensure an orderly and timely supply of Product to GJT and its clinical investigators of all Product required by GJT to conduct pivotal clinical studies and bioequivalence testing and to establish a reasonable procedure for ensuring that APOTHECON receives adequate advance notice of GJT's requirements for same. All Product supplied by APOTHECON shall be sold F.O.B. GJT's (or its clinical investigator's) facility (as the case may be), and title to, and risk of loss, of the Product shall pass upon delivery to such facility. -13- 5.4.2 No terms and conditions contained in any purchase order, acknowledgment, invoice, bill of lading, acceptance or other preprinted form issued by either party shall be effective to the extent they are inconsistent with or modify the terms and conditions contained herein. Each purchase order shall contain the requested delivery date(s), quantity purchased, routing instructions and destination. 5.5 Acceptance; Rejection of Product in Case of Non-Conformity. 5.5.1 GJT may reject the shipment to it or its investigators of Product, in whole or in part, if adulterated or otherwise not conforming in any respect with the Specifications. In order to reject a shipment, GJT must give written notice to APOTHECON within * after receipt of the shipment, together with a reasonably detailed statement of its reasons for rejection, and a report of its analysis of the allegedly nonconforming Product, together with the methods and procedures used. If no such notice is received, then GJT shall be deemed to have accepted the shipment of the Product, unless such nonconformity or grounds for rejection could not reasonably have been discovered by GJT (pursuant to the procedures set forth in the Specifications) within such * period, in which event the commencement of said * period shall be tolled until such nonconformity or grounds are discovered by GJT. APOTHECON shall notify GJT as promptly as reasonably possible, but in any event within * after receipt of such notice of rejection, whether it accepts GJT's assertions of nonconformity. 5.5.2 Whether or not APOTHECON accepts GJT's assertion of nonconformity, promptly on receipt of a notice of rejection, APOTHECON shall use its best efforts provide replacement of the same Product as in the original shipment. If the original shipment ultimately is found to be nonconforming, APOTHECON shall bear its own expenses of such replacement; if the original shipment is ultimately found to be conforming, GJT shall bear the cost of such replacement and shall reimburse APOTHECON, within * following demand for same, for all reasonable expenses and costs incurred by APOTHECON in connection with the manufacture and shipment of such replacement Product. 5.5.3 If APOTHECON disagrees with any alleged nonconformity to the Specifications, then the parties will use their best efforts to resolve the disagreement promptly as follows: an independent GMP laboratory (or other consultant), acceptable to both GJT and APOTHECON, shall analyze an aliquot sample or such other portions of the shipment, furnished by GJT from the shipment received by GJT, as may be necessary to substantiate whether the Product rejected by GJT conformed (or not) to the pertinent Specifications. The laboratory shall use such procedures and tests as the laboratory may consider necessary to reach a conclusion; however, if, by using the same tests set forth in the Specifications as were used by GJT, such laboratory confirms GJT's findings, further tests shall not be required. Both parties agree to cooperate with the independent laboratory's reasonable requests for assistance in connection with its analysis hereunder. Both parties shall be bound by the laboratory's results of analysis. The costs incurred by the laboratory shall be borne by the losing party. 5.5.4 If APOTHECON or the independent laboratory confirms the nonconformity, then, in addition to any other remedies set forth herein, at law or in equity, APOTHECON shall replace (if it has not already done so) the nonconforming Product with conforming Product as promptly as possible. Replacement shipments shall also be subject to the procedures contained in this Section 5.5. If the independent laboratory confirms (or GJT subsequently agrees) that no nonconformity existed, then, in addition to any other remedies set forth herein or available at law or in equity, GJT shall pay for the cost of the replacement shipment. 5.5.5 Unless APOTHECON requests the return to it of any nonconforming Product, GJT shall lawfully destroy such Product promptly and provide APOTHECON with written certification of such destruction. GJT shall, upon receipt of APOTHECON's request for return, promptly dispatch said Product to APOTHECON, at APOTHECON's expense. 5.6 Process Changes. [Intentionally omitted.] -14- 5.7 Warranties. 5.7.1 APOTHECON represents and warrants to GJT that Product delivered by or through APOTHECON to GJT shall, at time of delivery to GJT (or to a clinical or laboratory site, as the case may be), conform with Product Specifications and be in compliance in all material respects with applicable laws, regulations and other governmental requirements and with all applicable Regulatory requirements and approvals, including without limitation that such Product shall not be adulterated within the meaning of the Federal Food, Drug and Cosmetic Act, as amended, or within the meaning of any applicable state or municipal law in which the definition of adulteration is substantially the same as that contained in the Federal Food, Drug and Cosmetic Act, as such Act and such laws are constituted and effective at the time of delivery. 5.7.2 APOTHECON further represents and warrants that such samples and batches intended for clinical or bioequivalence testing will be manufactured in accordance with the regulations of the appropriate regulatory authority of the country (e.g., CGMP in the United States) in which the Product is manufactured. 5.7.3 APOTHECON represents and warrants that the quality control procedures and in-plant quality control checks on the manufacture of Product shall be applied in the same manner as those procedures and checks are applied to other products manufactured for sale by APOTHECON or its contract manufacturer. 5.7.4 NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OTHER THAN THOSE EXPRESSLY MADE IN THIS AGREEMENT OR THE * LICENSE AGREEMENT. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE (AND INCLUDING ANY EXPRESS OR IMPLIED WARRANTY THAT THE MANUFACTURE, USE OR SALE OF THE PRODUCT INFRINGES OR WILL INFRINGE ANY PATENT RIGHTS OR TRADEMARK RIGHTS OWNED OR CONTROLLED BY ANY PERSON OTHER THAN A PARTY OR ITS AFFILIATES) ARE HEREBY DISCLAIMED BY EACH PARTY. 5.8 Inspection. [Intentionally omitted]. 5.9 [Intentionally omitted.] 5.10 Payment Terms. APOTHECON will provide Product reasonably required by GJT for bioequivalence and clinical testing in accordance with the procedures set forth in Section 4.6 hereof without charge, and will pay for any shipping, packaging and insurance costs, as well as any customs and import charges incurred by GJT or its clinical investigators, associated with such shipments of Product. ARTICLE 6 MARKETING 6.1 Packaging and Labeling. APOTHECON shall be responsible at its expense for arranging for the labeling and packaging into bottles (or otherwise) the finished * form of the Product. GJT shall have the right to review and comment on all labels and labeling prior to any final Regulatory approval required of same. 6.2 Commercialization. Intentionally omitted]. 6.3 Covenant Not to License a Competitor. So long as APOTHECON retains the exclusive rights under section 3.1.2 of the * License Agreement to use, distribute, market and sell the Product in a country, GJT and its Affiliates may not (and GJT will cause its Affiliates not to), without the prior written consent of APOTHECON, use, distribute, develop, market, or sell, or license or permit any Third Party to use, distribute, - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -15- develop, market, or sell, any other pharmaceutical composition containing * (including all commonly used and known salts and acids thereof) as (i) an * in any country, or (ii) a * in the United States, and which incorporates, is based on and is derived by use of the GEOMATRIX Technology, irrespective of whether the dosage, formulation, strength, specifications or other qualities of such other Product are the same or different from that being developed, used, distributed, marketed or sold by APOTHECON. 6.4 Adverse Drug Reactions. The following provisions shall apply to the reporting of Adverse Drug Reactions: 6.4.1 It will be APOTHECON's responsibility to report ADRs to the FDA; however, it will be solely GJT's responsibility to report ADRs required to be reported that arise during clinical testing and which are otherwise required of GJT in accordance with applicable law. 6.4.2 Each party agrees to furnish party, as hereinafter provided, with information pertaining to any ADR known to such party from any source whatsoever (other than from the other party). For such purposes, each party shall be charged with knowledge of an ADR if (and only if) such ADR has in fact been brought to the attention of the party. Each party will exercise due diligence and exert reasonable efforts to collect ADR information from its affiliates and other related parties worldwide. In the case of a serious ADR, the party in question shall report to the other party, in English, within 48 hours of knowledge of the ADR. All other ADRs shall be reported by the party in question from time to time, but not less frequently than monthly, in the same manner. 6.4.3 Each party shall maintain, in accordance with its own customary practice, appropriate detailed records of all ADR reports which have been submitted to the other party. Further, in the event that either party shall be requested for more detailed investigation by the U.S. Food and Drug Administration or other regulatory body on any ADR, such other party shall cooperate and assist the party in question with respect to such investigation. 6.4.4 Each party further shall immediately notify the other of any information received regarding any threatened or pending action by a regulatory agency which may affect the safety and efficacy claims of the Product. Upon receipt of any such information, the parties shall consult with each other in an effort to arrive at a mutually acceptable procedure for taking appropriate action; provided, however, that nothing contained herein shall be construed as restricting either party's right to make a timely report of such matter to any regulatory agency or take other action that it deems to be appropriate or required, by applicable law or regulation. 6.4.5 The obligations under this Section 6.4 shall survive for the period of time that such reporting obligations exist under applicable law. 6.5 Product Recall 6.5.1 In the event (a) any government authority of a country in the Territory in which APOTHECON or any of its Affiliates markets or marketed the Product should issue a request, directive or order that Product be recalled, or (b) a court of competent jurisdiction orders such a recall, or (c) the parties reasonably determine after consultation with each other that Product should be recalled ("Recall"), the parties shall take all appropriate corrective action. 6.5.2 APOTHECON shall be responsible for the expense of a Recall, except to the extent that a Recall and any related expenses are attributable to a cause or event or instruction by GJT or its Affiliates, in - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -16- which case GJT shall be responsible for same. For purposes of this Agreement, Recall expenses shall include, but not be limited to, the expenses of notification and destruction or return of the recalled Product, as the case may be, and APOTHECON's and GJT's costs for the recalled Product, as the case may be; provided, however, the expense or service fee associated with representatives' time of a party hereto (or of its Affiliates) shall be borne by such party. 6.5.3 In the event a Recall resulting from any cause or event arising from a cause or event or instruction attributable to GJT, APOTHECON shall have the right at any time within of such Recall to terminate this Agreement. ARTICLE 7 MILESTONE AND ROYALTY PAYMENTS [Intentionally omitted]. ARTICLE 8 PATENT RIGHTS 8.1 Patent Prosecution and Maintenance. GJT shall be responsible for and shall control, at its sole cost, the preparation, filing, prosecution and maintenance of all patent applications and patents of the Patent Rights. In so doing, GJT shall endeavor to obtain the strongest commercially reasonable patent protection (under the circumstances) regarding the GEOMATRIX Technology with respect to the Product and shall consider in good faith the interests of APOTHECON. With respect to Patent Rights pertaining to the Product in those countries in which APOTHECON has the right hereunder to market the Product: GJT (a) shall supply APOTHECON with a copy of each such patent application as filed, together with notice of its filing date and serial number; (b) shall consult with APOTHECON regarding the prosecution and maintenance of such Patent Rights relating to the Product, and shall implement all reasonable requests of APOTHECON with respect thereto; (c) shall inform APOTHECON promptly of any substantive action or proposed action with respect to the Patent Rights relating to the Product, shall provide APOTHECON with advance copies of all proposed responses thereto, and shall implement all reasonable requests of APOTHECON with respect thereto; (d) shall not abandon or materially narrow the substantive claims of the Patent Rights without the prior express written consent of APOTHECON; (e) shall provide APOTHECON with copies of all filings, submissions, together with all correspondence, with the applicable patent authorities regarding the Patent Rights; (f) shall inform APOTHECON promptly of the allowance and issuance of each patent included in the Patent Rights, together with the date and patent number thereof, and shall provide APOTHECON with a copy of such patent as issued; and (g) shall prosecute all reexaminations and reissues as reasonably requested by APOTHECON. APOTHECON shall cooperate with GJT, execute all lawful papers and instruments and make all rightful oaths and declarations as may be necessary in the preparation, prosecution and maintenance of all such patents and patent applications. 8.2 Notification of Infringement. Each party shall notify the other party of any infringement of the Patent Rights with respect to Products that comes to the attention of the management of such party and shall provide the other party with the available evidence, if any, of such infringement. 8.3 Enforcement of Patent Rights. With respect to Patent Rights pertaining to those countries in which APOTHECON has the exclusive right hereunder to market the Product, APOTHECON, at its sole expense, shall have the right, but not the obligation, (a) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, the Patent Rights with respect to Products, (b) to take, or refrain from taking, appropriate action to enforce the Patent Rights with respect to Products, (c) to control any litigation or other enforcement action regarding Patent Rights with respect to Products, and (d) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Patent Rights with respect to Products. APOTHECON shall consult with GJT and Jagotec prior to and during the course of taking any of the foregoing actions, shall consider, in good faith, the interests of GJT and Jagotec in taking any of the foregoing actions, and, if GJT or Jagotec reasonably -17- concludes that taking any specific action(s) likely would have a material adverse effect on GJT's or Jagotec's interests in the Patent Rights (other than with respect to the Products), and timely gives APOTHECON prior express written notice thereof, then APOTHECON shall not take such specific action(s) without the prior express written consent (not to be unreasonably withheld or delayed) of GJT or Jagotec, as the case may be. If (x) within * after receipt by APOTHECON of notice by a Third Party pursuant to 21 U.S.C. ss.355(b)(3)(A) or (j)(4)(B)(iii) with respect to any Product, APOTHECON has not initiated an action for patent infringement against the Third Party that forwarded such notice, then GJT and/or Jagotec shall have the right to initiate and control such action, and (y) within * days after receipt of notice from GJT or Jagotec of such an infringement, APOTHECON has not taken action to abate the infringement or filed suit to enforce the Patent Rights with respect to Products against at least one infringing party, GJT or Jagotec shall have the right to take whatever action it deems appropriate to enforce the Patent Rights against such parties in such countries as APOTHECON may have elected not to take action to abate, or file suit to prevent, such infringement; provided, however, that GJT or Jagotec, as the case may be, shall have given prompt written notice to APOTHECON of its intent to file a suit or commence any other enforcement action in connection therewith. If GJT or Jagotec elects to file such suit or commence such action, then GJT or Jagotec (as the case may be) shall consult with APOTHECON prior to and during the course of taking any of the foregoing actions, and shall consider, in good faith, the interests of APOTHECON in taking any of the foregoing actions. Within * after receipt of such notice from GJT or Jagotec (as the case may be), APOTHECON shall have the right to jointly prosecute such suit or other action and *. The party controlling any such suit or other action shall not settle the suit or action or otherwise consent to an adverse judgment in such suit or action that diminishes the rights of the non-controlling party without the prior express written consent of the noncontrolling party. All monies recovered upon the final judgment or settlement of any such suit or other action shall be shared, after reimbursement of expenses of the controlling party(ies), as follows: i) Where APOTHECON has solely controlled the litigation, * shall be entitled to retain all monies recovered and awarded upon the final judgment or settlement of any such suit or other proceeding, and shall pay to * such amount as equals the * that * would otherwise have received under the * License Agreement on * as were taken into account in determining the monies recovered. ii) Where control of the litigation has operated other than pursuant to (i), the parties shall and awarded upon the final judgment or settlement of any such suit or other proceeding in proportion to their respective contributions to the cost thereof. Notwithstanding the foregoing, APOTHECON, Jagotec, and GJT shall reasonably cooperate with each other in the planning and execution of any suit or other action to enforce the Patent Rights with respect to Products. 8.4 Third Party Infringement Actions. 8.4.1 If GJT or APOTHECON, or their respective Affiliates or sublicensees, shall be sued by a Third Party for infringement of a patent because of the manufacture, use or sale of any pharmaceutical composition which incorporates, is based on, uses or is derived by use of the GEOMATRIX Technology, the party which (or whose Affiliate) has been sued shall promptly notify the other party in writing of the institution of such suit, and with respect to suits which are the subject of Section 8.4.2 below, shall provide the other party with copies of all pleadings, exhibits and all other relevant information available to such other party regarding such pleadings. 8.4.2 If the suit alleges the infringement of a patent because of the use or sale of the Product (or an intermediate in the manufacture thereof) and the alleged infringing process, method or composition is claimed under the Patent Rights, APOTHECON shall have the right, in its sole discretion, to control the defense of such suit with counsel of its own selection and at its own expense; provided, however, that GJT or, if GJT elects not to exercise its option, Jagotec shall have the option, within * after receipt of notice of any such suit, to co-control the defense of such suit. If GJT or Jagotec timely exercises - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -18- its option to co-control the defense of such suit, (a) APOTHECON and GJT (or Jagotec, as the case maybe) shall select mutually-acceptable counsel, if possible, and GJT or Jagotec, as the case may be, shall be solely responsible for paying the fees and costs of its own advisory counsel of its own selection and the fees and costs of any party hereto in taking any action in such suit at the request of GJT or Jagotec (as the case may be) or any action to defend the rights or interests of GJT or Jagotec, but not the interests APOTHECON, or (b) if APOTHECON and GJT (or Jagotec, as the case may be) are unable to select mutually-acceptable counsel, APOTHECON and GJT (or Jagotec, as the case may be) each shall be represented in the defense of such suit by counsel of its own selection at its own expense. If GJT (or Jagotec, as the case may be) fails to timely exercise its option to co-control the defense of such suit, GJT and Jagotec shall have the right to be represented by advisory counsel of their own selection and at their own expense, shall cooperate fully in the defense of such suit and shall furnish to APOTHECON all evidence and assistance in its control. If APOTHECON does not elect, within * after receipt of notice of any such suit, to control the defense of such suit, GJT or Jagotec may undertake such control of the defense of such suit with counsel of its own selection and at its own expense. In such case, APOTHECON shall have the right to be represented by advisory counsel of its own selection and at its own expense, shall cooperate fully in the defense of such suit and shall furnish to GJT or Jagotec (as the case may be) all evidence and assistance in its control. 8.4.3 If the suit alleges the infringement of a patent because of the use or sale of a pharmaceutical composition which incorporates, is based on, uses or is derived by use of the GEOMATRIX Technology, which is not the Product (or an intermediate in the manufacture thereof), and the alleged infringing process, method or composition is claimed under the Patent Rights, GJT or, if GJT declines to exercise same, Jagotec, shall have the right, in its sole discretion, to control the defense of such suit with counsel of its own selection and at its own expense. In such case, GJT (or Jagotec, as the case may be) shall inform APOTHECON from time to time, and upon the reasonable request of APOTHECON, of the status of the defense or settlement of any such action. 8.4.4 The party controlling such suit shall consult with the non-controlling party prior to and during the course of such suit, and shall consider, in good faith, the interests of the non-controlling party in connection therewith. The party controlling such suit shall not settle the suit or otherwise consent to an adverse judgment in such suit that diminishes the rights or interests of the non-controlling party without the express written consent of the non-controlling party ( not to be unreasonably withheld or delayed). All judgments, settlements or damages payable with respect to any suit covered by this Section 8.4 shall be paid by the party which controls the litigation, or if co-controlled, then by both parties. In the event that APOTHECON controls or co-controls any such claim, it will be entitled to offset up to of the reasonable costs and expenses (including professional fees) incurred by it in connection with any such defense against * under the * License Agreement, up to a * it would otherwise owe to GJT during any *. 8.4.5 If as a result of a settlement or other outcome under the suit or other proceedings conducted against a Third Party pursuant to this section 8.4, or if GJT and APOTHECON jointly agree to seek a license from a Third Party in order to avoid infringing such Third Party's patent rights with respect to the manufacture, use or sale of a Product in a country in the Territory, ongoing royalties or other payments must be paid by APOTHECON to such Third Party, APOTHECON shall be entitled to * by it to such Third Party * to * under the * License Agreement with respect to such country, up to a * to * during any * with respect to such country. 8.5 Prosecution and Defense of Non-Patent Actions. APOTHECON, with counsel of its own selection and at its sole expense, shall have the right, but not the obligation, (a) to control the prosecution of any litigation or other action with respect to the manufacture, use or sale of Products which is not described in Section 8.3 above, (b) subject to the provisions of Article 12 below, to control the defense of any litigation or other action with respect to the use or sale of Products which is not described in Section 8.4 above, and (c) to enter into, or permit, the settlement of any such litigation or other action described in clause (a) or (b) above. APOTHECON shall consult - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -19- with GJT and Jagotec prior to and during the course of taking any of the foregoing actions, and shall consider, in good faith, the interests of GJT and Jagotec in taking any of the foregoing actions. APOTHECON shall not settle any such litigation or other action or otherwise consent to an adverse judgment in such litigation or other action that diminishes the rights or interests of GJT and Jagotec without the prior express written consent of GJT (not to be unreasonably withheld or delayed). Notwithstanding the foregoing, GJT and Jagotec shall fully cooperate with APOTHECON at its request in the planning and prosecution or defense of any such litigation or other action. After reimbursement of any reasonable expenses of GJT and Jagotec incurred at the request of APOTHECON in the planning and prosecution or defense of any such litigation or other action, * shall be entitled to retain all monies recovered upon the final judgment or settlement of any such litigation or other action. APOTHECON shall be responsible for all judgments, settlements or damages payable with respect to any such litigation or other action covered by this Section 8.5. 8.6 Notification of Patent Term Restoration. GJT shall notify APOTHECON, and any sublicensee which APOTHECON requests in writing, promptly of each notice pertaining to any patent included within the Patent Rights which it (or Jagotec) receives as patent owner pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984 (the "Act"), including notices pursuant to 21 U.S.C. ss.355(b)(3)(A) or (j)(4)(B)(iii) from persons who have filed an Abbreviated New Drug Application. GJT shall give all such notices promptly, but in any event within five (5) calendar days of receipt of each such notice pursuant to the Act, whichever is applicable. GJT promptly shall notify APOTHECON of each filing for patent term restoration under the Act, any allegations of failure to show due diligence and all awards of patent term restoration (extensions) with respect to the Patent Rights. Likewise, GJT promptly shall inform APOTHECON of patent extensions and periods of data exclusivity in the rest of the world regarding any Product. 8.7 Indemnification. Subject to Article 8.4 hereof, GJT shall indemnify and hold harmless APOTHECON, its Affiliates and its and their directors, officers, employees and agents from and against any all liabilities, losses, damages, costs and expenses (including reasonable attorneys' fees and costs of litigation or arbitration, regardless of outcome) to the extent arising out of or in connection with any claims or causes of action: 8.7.1 * in a country in the Territory because of the manufacture, use or sale of the Product (or of an intermediate in the manufacture thereof) in such country and the alleged infringing process, method or composition is claimed under the Patent Rights, and/or 8.7.2 asserted by a Third Party to the extent based on the *, or breach of a * owed to such * or their respective Affiliates. 8.8 Condition Precedent. The exercise of any rights and benefits afforded to Jagotec under sections 8.3-8.5 hereof are conditioned on the receipt by APOTHECON and GJT of a letter (or acknowledgment in the form contained on the signature page of this Agreement) from Jagotec signed by a duly authorized official of Jagotec stating that Jagotec agrees to be bound by the duties and obligations imposed on Jagotec under such sections and by sections 6.3, 11.2.4.2 and Article 16 hereof, as well as section 11.2.4.2 of the * License Agreement, and for which an opinion, reasonably satisfactory to APOTHECON, of counsel to Jagotec is provided as to the enforceability and validity thereof. ARTICLE 9 TRADEMARKS [Intentionally omitted] - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -20- ARTICLE 10 CONFIDENTIALITY 10.1 Confidential Information. Each party shall use reasonable efforts (including not less than the same efforts it uses to protect its own confidential information) to maintain in confidence all information, records and data of the other party (including samples) disclosed by the other party in connection with the performance of this Agreement and/or the * License Agreement, and which is identified as, or acknowledged to be, confidential (the "Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except to its and its Affiliates' directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with such party's activities as expressly authorized by the Agreement or the * License Agreement. To the extent that disclosure is so authorized, prior to disclosure, each party hereto shall assure that each such Person is bound to hold such Confidential Information in confidence in a manner that is similar to that set forth herein for such party and not make use of the Confidential Information for any purpose other than those authorized by this Agreement and/or the * License Agreement. 10.2 Permitted Disclosures. The obligations of confidentiality and non-use in Section 10.1 above shall not apply to the extent that (a) the receiving party (the "Recipient") (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market the Product, provided in each case that the Recipient shall give the disclosing party written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof; or (b) the Recipient can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to the Recipient, or thereafter became public knowledge, other than as a result of actions of the Recipient, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by the Recipient (as shown by its written records) prior to the date of disclosure to the Recipient by the disclosing party hereunder; (iii) the disclosed information was disclosed to the Recipient on an unrestricted basis from a source unrelated to any party to the Agreement and not under a duty of confidentiality to the disclosing party; or (iv) the disclosed information was independently developed by the Recipient without the use of Confidential Information disclosed by the other party hereto. Notwithstanding any other provision of this Agreement or the * License Agreement, APOTHECON may disclose Confidential Information of GJT relating to information developed pursuant to either Agreement to any Third Party with whom APOTHECON has, or is proposing to enter into, a business relationship (such as a sublicense hereunder; a merger, consolidation or other reorganization; an acquisition of a business by APOTHECON or a sale of its business; or a distribution, agency or sales representative arrangement), as long as such Third Party has entered into a confidentiality agreement with APOTHECON and the nature and extent of the disclosure bears a reasonable relationship to the proposed business relationship. 10.3 Terms of the Agreement. Except as otherwise provided in Section 10.2 above, neither party shall disclose any terms or conditions of this Agreement or the * License Agreement to any Third Party without the prior consent of the other party. Notwithstanding the foregoing, prior to the execution of this Agreement and the * License Agreement, the parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the parties may disclose such information without the other party's consent. 10.4 Term of Confidentiality. The confidentiality obligations under this Article 10 shall be effective during the term of this Agreement and for a period of * after the expiration or earlier termination hereof. ARTICLE 11 TERM AND TERMINATION 11.1 Terms. This Agreement shall commence effective upon the Effective Date. The Agreement shall continue until terminated upon the earlier to occur of the following: (i) pursuant to Section 11.2 below, (ii) by - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -21- mutual written agreement, or (iii) on a country-by-country basis in the Territory upon the expiration of the Royalty Term in such country. Upon termination of this Agreement, in whole or in part, pursuant to section 11.1 (ii), the parties will determine the disposition of rights hereunder as part of such mutual termination. Upon expiration of this Agreement as to any country in the Territory under Section 11.1(iii) above, APOTHECON shall have an irrevocable, perpetual, fully paid-up and royalty-free, non-exclusive right and license to use the Knowhow in order to develop, make, have made, use and sell Products in such country. 11.2 Termination. This Agreement may be terminated in accordance with any of the following (all of which may be exercised independently of the other): 11.2.1 Termination Without Cause. APOTHECON may elect at any time, for any reason and without cause, to terminate this Agreement, in whole or in part as to one or more countries, upon sixty (60) days written notice to GJT: 11.2.1.1 If * elects to so terminate under this section 11.2.1 prior to filing of the ANDA in the United States, then: (i) such termination shall be *; (ii) all rights and licenses granted by * hereunder * with respect to such country(ies) so terminated, provided, further, that if * so elects to terminate under this section 11.2.1 in the United States, it shall be deemed a termination as to the *; (iii) * of any * that are scheduled or may be made in the future under sections 4.6 hereof and 7.1 of the * License Agreement (and the subsections thereunder), provided that such termination is exercised with respect to United States; (iv) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under this Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; (v) the * License Agreement shall * with respect to the right to sell the Product in such country(ies); and (vi) * shall thereafter be entitled exercise such rights as they may have under the GEOMATRIX Agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to *; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates. 11.2.1.2 If * elects to so terminate this Agreement under this section 11.2.1 subsequent to the * in the United States, then: (i) such termination shall be * to *; (ii) all rights and licenses granted by * hereunder shall * with respect to such country(ies) so terminated; (iii) * shall be relieved of any payments that are scheduled or may be made in the future under sections 4.6 hereof and 7.1 of the * License Agreement (and the subsections thereunder), provided that such termination is exercised with respect to United States; (iv) * shall thereafter be entitled to * as they may have under the GEOMATRIX Agreements to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates); (v) the * License Agreement shall terminate with respect to the right to sell the Product in such country(ies); (vi) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; and (vii) * shall pay to * the same *, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to *, as * would otherwise have paid (absent such termination) under the * License - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -22- Agreement to * (or on the * of such *, as the case may be) of the Product in the country(ies) to which such termination applies (with such * to be paid by * and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the * paid to * equal the aggregate amount that had been paid by * to GJT prior to such termination under the aforesaid sections 4.6 and 7.1 (and the subsections thereunder), at which time the *. 11.2.2 Termination for Default. Except as otherwise provided in Article 13 below, upon or after the breach of any material provision of the Agreement by a party (unless such failure results from, or is caused by, adherence required by a party to applicable laws or governmental regulations), if the breaching party has not cured such breach within sixty (60) days after notice thereof by the other party, the nonbreaching party may terminate this Agreement; provided, however, if any default is not capable of being cured within such 60-day period and the breaching party has diligently undertaken to cure such default within such 60- day period and continues to take diligent steps to cure same as soon as commercially feasible thereafter under the circumstances, the nonbreaching party shall have no right to terminate the Agreement. In cases where the breach involves an act or omission by a party specifically and directly relating to a country or countries, termination shall be limited to the country or countries affected by such breach, as opposed to termination of the entire Agreement, and the remedies listed in section 11.2.2.1-11.2.2.4 below shall be limited to such country or countries. For example, the termination remedy shall be limited to the country or countries affected by (i) a breach by GJT or its Affiliates of section 6.3, or (ii) APOTHECON's failure to pay royalties in accordance with the * License Agreement for such country or countries. 11.2.2.1 If GJT breaches this Agreement prior to the date that initial commercial launch occurs in the United States and in a manner that entities * to terminate this Agreement pursuant to this section 11.2.2, then, if * elects to terminate this Agreement: (i) all rights granted to * under this Agreement *; (ii) no further payments shall be due from * with respect to any of the milestones not yet paid that are set forth in Section 4.6 hereof and section 7.1 of the * License Agreement (and the subsections thereunder); (iii) the * License Agreement shall terminate with respect to the right to sell the Product in such country(ies); (iv) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under this Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product (provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates); (v) * shall pay to * the same *, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to *, as * would otherwise have paid (absent such termination) under the * License Agreement to * (or on the * of such *, as the case may be) of the Product in the country(ies) to which such termination applies (with such * to be paid by * and its Affiliates until expiration of the Royalty Term in each such country), until such time as the * paid to * equal the aggregate amount that had been paid by * to * prior to such termination under sections 4.6 and 7.1 hereof (and the subsections thereunder), at which time * of the rate then applicable from time to time thereafter; and (vi) such termination shall be without prejudice to any other rights or remedies available to * arising from such breach. 11.2.2.2 If GJT breaches this Agreement subsequent to the date that initial commercial launch occurs in the United States and in a manner that entitles APOTHECON to terminate this Agreement pursuant to this section 11.2.1, then, if APOTHECON elects to terminate this - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -23- Agreement, then the provisions of subsections 11.2.2.1(i)-(vi) apply as though fully set forth herein. 11.2.2.3 If APOTHECON breaches this Agreement prior to the date that initial commercial launch occurs in the United States and in manner that entitles GJT to terminate this Agreement pursuant to this section 11.2.2, then GJT may elect either: (A) to pursue all claims and causes of action available to it at law or in equity for such breach, or (B) to terminate this Agreement, in which event: (i) * shall be deemed to waive and release all claims and causes of action available to it at law or in equity for such breach, and such termination shall be without penalty or liability to *; (ii) all rights granted by * hereunder shall * with respect to such country(ies) so terminated; (iii) * will be relieved of any * that are scheduled or may be made in the future under section 4.6 hereof and section 7.1 of the * License Agreement (and the subsections thereunder); (iv) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under this Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; (v) the * License Agreement shall terminate with respect to the right to sell the Product in such country(ies); and (vi) * and its Affiliates shall thereafter be entitled * as they may have under the GEOMATRIX Agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to *; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, or other intellectual property rights owned or controlled by * or its Affiliates. 11.2.2.4 If APOTHECON breaches this Agreement subsequent to the date that initial commercial launch quantities occurs in the United States and in manner that entitles GJT to terminate this Agreement pursuant to this section 11.2.2, then GJT may elect either: (A) to pursue all claims and causes of action available to it at law or in equity for such breach, or (B) to terminate this Agreement, in which event: (i) * shall be deemed to waive and released all claims and causes of action available to it at law or in equity for such breach, and such termination shall be without penalty or liability to *; (ii) all rights and licenses granted by GJT hereunder shall * with respect to such country(ies) so *; (iii) * shall be relieved of any * that are scheduled or may be made in the future under sections 4.6 hereof and 7.1 of the * License Agreement (and the subsections thereunder), provided that such termination is exercised with respect to United States; (iv) * and its Affiliates shall thereafter be entitled to exercise such rights as they may have under the GEOMATRIX Agreements to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates); (v) the * License Agreement shall terminate with respect to the right to sell the Product in such country(ies); (vi) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under this Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; and (vii) * shall pay to * -24- the same *, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to *, as * would otherwise have paid (absent such termination) under the * License Agreement to * (or on the * of such *, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by * and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the * paid to * equal the aggregate amount that had been paid by * to * prior to such termination under the aforesaid sections 4.6 and 7.1 (and the subsections thereunder), at which time the royalty rate then prevailing on * (or on the * of such *, as the case may be) in the United States shall be *). 11.2.3 Termination for Failure to Meet Milestones. 11.2.3.1 If all bioequivalence testing, all pivotal clinical and bioequivalence studies shall not have been completed, and Validated Manufacturing Scale-Up capabilities (biobatches) for the Product shall not have been completed and demonstrated to APOTHECON's reasonable satisfaction, by * so as to enable manufacture and marketing of the Product in the United States and other major markets designated by APOTHECON, and irrespective of whether APOTHECON is otherwise entitled to terminate this Agreement pursuant to any other provision of this Article 11: a) APOTHECON will have the right to immediately terminate this Agreement at any time thereafter until *, or b) allow additional time for the completion and demonstration of same until *. If APOTHECON elects to terminate this Agreement with respect to one or more countries pursuant to option (a) above, then the provisions of section 11.2.1.2(i)-(vii), inclusive, shall apply. If APOTHECON elects not to terminate this Agreement in accordance with (a) above, then all payments due after * under section 7.1 of the * License Agreement shall be * and all royalty rates applicable to all * in the Territory at any time thereafter under the * License Agreement shall be * provided, * shall not apply if (A) the failure to so demonstrate and complete the foregoing was due to * failure to use all reasonable efforts to Scale-up and to manufacture adequate quantities of conforming Product on a timely basis (and * shall have given reasonable advance notice of its requirements) and/or failure to comply in all material respects with the Specifications and written instructions provided * with respect to the use of the GEOMATRIX Technology in connection with the manufacture of the Product, and (B) * shall have fulfilled its obligations hereunder in all material respects with respect to the transfer and training in the use of the GEOMATRIX Technology. 11.2.3.2 If, notwithstanding APOTHECON's election under section 11.2.3.1(b) above, all bioequivalence testing, all pivotal clinical and bioequivalence studies shall not have been completed, and Validated Manufacturing Scale-Up capabilities (bio-batches) for the Product shall not have been completed and demonstrated to APOTHECON's reasonable satisfaction, by * so as to enable manufacture and marketing of the Product in the United States and other major markets designated by APOTHECON, and APOTHECON is not otherwise entitled to terminate this Agreement pursuant to any other provision of this Article 11, then APOTHECON shall be entitled to elect, at any time within * thereafter, to terminate this Agreement, in which event the provisions of section 11.2.1.2(i)-(vii), inclusive, shall apply. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -25- If APOTHECON elects not to terminate this Agreement in accordance with this section 11.2.3.2, then all payments due after * under section 7.1 of the * License Agreement shall be eliminated and waived, and all royalty rates applicable to all * in the Territory under the * License Agreement at any time thereafter shall be * provided, that such reductions shall not apply if (A) the failure to so demonstrate and complete the foregoing was due to * failure to use all reasonable efforts to Scale-up and to manufacture adequate quantities of conforming Product on a timely basis (and * shall have given reasonable advance notice of its requirements) and/or failure to comply in all material respects with the Specifications and written instructions provided * with respect to the use of the GEOMATRIX Technology in connection with the manufacture of the Product, and (B) shall have fulfilled its obligations hereunder in all material respects with respect to the transfer and training in the use of the GEOMATRIX Technology. 11.2.4 Other Termination. 11.2.4.1 Termination for Misrepresentation. In the event that a representation or warranty of GJT hereunder is untrue in any material respect, APOTHECON shall be entitled to terminate this Agreement upon thirty (30) days' written notice to GJT. If APOTHECON elects to so terminate, the rights and actions indicated in sections 11.2.2.1 (i) - (vi), inclusive, shall apply as though set forth herein. 11.2.4.2 Termination for Failure to Repay Working Capital Agreement. If GJT fails to make a payment when due under its Restated Working Capital Agreement dated as of May 12, 1995 (as amended by a First Amendment thereto dated as of July 11, 1995, and as the same may be amended from time to time hereafter, and including any successor agreement thereto) between GJT and Genta, Incorporated, a Delaware corporation ("Genta"), GJT shall promptly inform APOTHECON of same, and APOTHECON may elect (by delivering a writing to GJT, Jagotec and Jago Pharma of APOTHECON's intent to exercise such option) at any time thereafter to terminate this Agreement and to require each of Jagotec and Jago Pharma to, and Jagotec and Jago Pharma agree that each of them will, promptly enter into a new, separate agreement with APOTHECON under which (i) Jago Pharma and Jagotec will, to the extent each has the right to do so, ensure that any licenses, sublicenses and other rights and privileges granted by GJT under this Agreement shall continue without change, (ii) Jago Pharma will assume all rights and obligations of GJT under articles 3, 4, 5, 6, 11.4.5, 12, 14, 15.1, and 15.2 hereof and will promptly cure any defaults of GJT under said articles, any payments to be made thereafter by APOTHECON under said articles shall thereafter be paid to Jago Pharma, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles, and (iii) Jagotec will assume all rights and obligations of GJT under article 8 hereof, any payments to be made thereafter by APOTHECON under said article shall thereafter be paid to Jagotec, and APOTHECON shall continue to enjoy all rights and privileges granted under said article. 11.2.5 No Effect on Remedies. Where APOTHECON elects not to terminate the Agreement pursuant to section 11.2.2.1, 11.2.2.2, or 11.2.4, such decision shall be without prejudice to any other rights or remedies available to APOTHECON arising from such breach or untrue statement. 11.2.6 Injunctive Relief. If: i) GJT or its Affiliates breach section 3.1 of the * License Agreement or section 6.3 hereof, or ii) APOTHECON or its Affiliates breach section 3.1 of the * License Agreement, then the parties acknowledge and agree that such breach will cause irreparable injury to the nonbreaching party or its Affiliates, for which monetary damages, even if available, will be inadequate and difficult, if - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -26- not impossible, to accurately ascertain. Accordingly, the parties agree that the nonbreaching party or its Affiliates may seek and obtain injunctive relief against the breach or threatened breach of the undertakings set forth in this section 11.2.6 (i) and (ii), in addition to any other rights or remedies which may be available to the nonbreaching party or to its Affiliates at law or in equity. 11.3 Effect on Continuing Business. In the event of a termination of this Agreement in which the rights to market the Product revert to GJT hereunder, GJT shall not be under any obligation, express or implied, to use the Registrations and data transferred to it or to continue to commercialize the Product, and APOTHECON shall not be under any obligation, express or implied, to continue to transfer any inventory of Product to GJT or to manufacture Product for GJT following such termination. Effect of Bankruptcy. If a party becomes insolvent or admits in writing its inability to pay its debts as they mature or applies for or consents to the appointment of a receiver or trustee for any of its properties; or a receiver or trustee is appointed for such party or a substantial portion of its properties and is not discharged within ninety (90) days; or any bankruptcy, reorganization, debt arrangement, dissolution, liquidation or other proceeding under any bankruptcy or insolvency law is instituted by or against such party and, if instituted against such party, it is consented to by such party or remains undismissed for ninety (90) days, then 11.3.1 Notwithstanding any such event, such party shall remain obligated to fulfill its obligations and covenants hereunder, and any failure to do so or other breach hereunder shall entitle the other party to terminate this Agreement in accordance with section 11.2 hereof; and 11.3.2 It is the parties desire that, if any such receiver, trustee, judge, arbitrator or other adjudicator conducting or controlling such proceedings on behalf of a party should hold that any obligations, covenants or duties of such party hereunder should be suspended or declared unenforceable, in whole or in part, then the rights and benefits granted to the other party hereunder shall remain in full force and effect, and that any such obligations, covenants or duties shall be reformed by such receiver, trustee, judge, arbitrator or other adjudicator so as to be enforceable to the maximum extent permitted by applicable law and to permit any suspension to be lifted at the earliest practicable time. 11.4 Other Effects. 11.4.1 Effect of Reversion. Where a termination of this Agreement, as provided for in this Article 11.2, results in a reversion of rights to GJT that had been granted to APOTHECON under Articles 3 and 9 of the * License Agreement, APOTHECON shall not thereafter make any use of the Patent Rights and Trademarks, and, except to the extent the same shall have entered the public domain, the Know-how, with respect to the country(ies) affected by such termination. 11.4.2 Survival. The provisions of (i) Articles 2.2 and 2.3 shall survive any expiration of this Agreement under section 1.1(iii), and (ii) Articles 5.7, 6.4, 6.5, 8.3-8.5, 8.7, 10, 11.2.4.2, 11.2.5, 11.2.7, 11.4-11.6, 12, 14, 16.2, 16.3 and 16.4 shall survive any expiration or termination of the Agreement, in whole or in part, as well as such other terms, obligations and rights which, by their intent or meaning, are intended to so survive. The expiration or termination of the Agreement shall not relieve either party of payment of any amounts that may be owed to the other based upon events occurring or rights accruing prior to the date of termination, and shall be without prejudice, except as provided in sections 11.2.2.3, and 11.2.2.4, to any rights and obligations of either party accruing prior to, or that may be based on acts or omissions of the other party occurring prior to, the effective date of termination. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -27- 11.4.3 Undeveloped Products. The Products licensed hereunder shall not be treated as "Undeveloped Products" under sections 11.2.3 of the GEOMATRIX License Agreement and GEOMATRIX Manufacturing License Agreement. 11.4.4 No Waiver. The right of either party to terminate this Agreement, as hereinabove provided, or to pursue rights and remedies available to it at law or in equity, shall not be affected in any way by its waiver of, or failure to take action with respect to, any previous defaults or breaches hereunder. 11.4.5 Use of Data Following Termination. Notwithstanding any provision of this Agreement that may state or imply to the contrary, in the event that this Agreement terminates for any reason, it is understood and agreed that all data generated pursuant to activities funded by APOTHECON pursuant to section 4.6 of this Agreement and transferred or made available to GJT or its Affiliates under this Agreement (including without limitation pursuant to 11.2.1.1(iv), 11.2.1.2(vi), 11.2.2.1(iv), 11.2.2.3(iv), or 11.2.2.4(vi) of this Agreement) may not thereafter be used by, and may not thereafter be made available to or disclosed to any Third Party by, GJT or any of its Affiliates (including any Jagotec and Genta Incorporated, a Delaware corporation, and their respective Affiliates) in the development, or registration or filing for regulatory approval, of any product other than the Product (including without limitation not using and not making such data available for developing or filing of an NDA in the United States for a * product based on, incorporating, or derived from the use of, the GEOMATRIX Technology), without the prior written consent of APOTHECON (which consent may be given or withheld in its sole and absolute discretion). 11.5 Survival of Rights and Sublicenses. 11.5.1 In the event of an event that the GEOMATRIX License Agreement and/or the GEOMATRIX Manufacturing License Agreement is or are terminated, for whatever reason and whether by action taken by Jagotec, GJT or both, this Agreement, and any licenses, sublicenses and other rights and privileges granted or extended to APOTHECON hereunder shall continue and remain in full force and effect in accordance with their terms, without further action or election on the part of APOTHECON, and notwithstanding any provision (including without limitation section 11.4) to the contrary in the GEOMATRIX License Agreement and the GEOMATRIX Manufacturing Agreement. 11.5.2 If GJT breaches this Agreement in a manner that entitles APOTHECON to terminate same pursuant to section 11.2.2.1 or 11.2.2.2, or makes an untrue statement that entitles APOTHECON to terminate same pursuant to section 11.2.4.1, or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any other remedies available to it hereunder or at law or in equity, APOTHECON may (A) elect any remedies available to it under any applicable Waiver and Consent and/or (B) elect (by delivering a writing to GJT, Jagotec and Jago Pharma of APOTHECON's intent to exercise its rights under this section 11.5.2) to terminate this Agreement with GJT, and: (i) any licenses, sublicenses and other rights and privileges granted by GJT under this Agreement shall continue without further action or election on the part of APOTHECON, with APOTHECON continuing to have the same rights and obligations as are set forth in this Agreement, notwithstanding any provision to the contrary contained in section 11.4 of the GEOMATRIX License Agreement (as the same may be thereafter amended, supplemented or extended) or in section 11.4 of the GEOMATRIX Manufacturing License Agreement (as the same may be thereafter amended, supplemented or extended), (ii) Jago Pharma and Jagotec will, to the extent each has the right to do so, ensure that all licenses, sublicenses and other rights and privileges granted by GJT under this Agreement shall continue without change, (iii) enter into an agreement with Jago Pharma under which Jago Pharma will assume all rights and obligations of GJT under articles 3, 4, 5, 6, 11.4.5, 12, 14, 15.1, and 15.2 hereof, will promptly cure any defaults of GJT under said articles, any payments to be made thereafter by APOTHECON under said articles shall thereafter be paid to Jago Pharma, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles, and (iv) enter into an agreement with Jagotec under which Jagotec will assume all rights and obligations of GJT under article 8 hereof, any payments to be made thereafter by APOTHECON under said article shall thereafter be paid to Jagotec, and APOTHECON shall continue to enjoy all rights and privileges - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -28- granted under said article. Upon request, Jagotec and Jago Pharma AG will deliver to APOTHECON satisfactory confirming written documentation of same. 11.5.3 In no event shall APOTHECON be required, as a condition to the continuance or continuing validity of any license, sublicense or other rights granted by GJT under this Agreement, to give written notice to Jagotec of any election to continue such rights, to assume all rights and obligations of GJT, and/or to promptly cure all defaults of GJT, as otherwise required under section 11.4 of each of the GEOMATRIX License Agreement and GEOMATRIX Manufacturing License Agreement. 11.6 Transfer of Registrations and Rights. In the event this Agreement terminates, and GJT is entitled hereunder (and notifies APOTHECON in writing that it desires) to continue the development and marketing of the Product in the country(ies) affected by such termination, the parties agree to reasonably cooperate to ensure an orderly transition for a reasonable period (not to exceed *) following such termination, and the parties will effectuate an orderly transfer of any Registrations owned or controlled by APOTHECON with respect to the Product in such country(ies) to GJT; provided, however, that in no event shall the foregoing create or imply any right to use or license under any patent rights, copyright rights, trademarks or trade names (including those for the Product), know-how or other intellectual property rights owned or controlled by APOTHECON or its Affiliates). Such transfer(s) in such country(ies) shall be *; provided that * shall bear all * into its name in such country(ies) and shall reimburse * for any out-of-pocket costs incurred by it in connection with the foregoing. * shall be entitled to retain, subject to the * as provided for in section 7.2 of the * License Agreement, the amount received by it on * during such transition period and shall use reasonable efforts to comply with the terms of this Agreement. For any other termination of this Agreement, such termination shall not result in any transfer of any Registrations owned or controlled by APOTHECON to GJT or Jagotec, and regardless of any provision (such as sections 11.5 of the GEOMATRIX License Agreement and of the GEOMATRIX Manufacturing License Agreement) to the contrary in any agreement between GJT and any one or more of its Affiliates. ARTICLE 12 INDEMNITY 12.1 Indemnity. 12.1.1 Indemnity by APOTHECON. APOTHECON shall defend, indemnify and hold Jagotec, GJT, their respective Affiliates and their respective directors, officers, employees, consultants, contractors, Subcontractees, and agents (each a "GJT Indemnitee") harmless from and against * (including reasonable attorneys' fees and costs of litigation, *) as a result of any claim, demand, action or other proceeding by a Third Party based upon any death, bodily injury or physical property damage arising from or relating to the manufacture (including without limitation failure to manufacture Product in accordance with the Specifications or adulteration of Product) distribution, use, handling, packaging, labeling, promotion, marketing, storage, or sale of Products by or on behalf of *, its Affiliates and its and their, licensors, licensees, sublicensees, contractors and subcontractors, except: 12.1.1.1 to the extent such damages or other amounts payable arise from or are attributable to: (i) the negligence, fault or willful misconduct of any *, or (ii) * of the terms of the * License Agreement and/or of this Agreement (or adulteration of the Product while under the control of * or any of its contractees), or - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -29- (iii) reliance upon any written instructions or written information pertaining to the manufacture and storage conditions of the Product and/or the use of the GEOMATRIX technology in connection therewith provided by *, any of its Affiliates, or its or their licensors, contractors and Subcontractees. 12.1.2 Indemnity by GJT. GJT shall defend, indemnify and hold APOTHECON, its respective Affiliates, and its and their respective directors, officers, employees, consultants, contractors, subcontractors and agents (each an "APOTHECON Indemnitee") harmless from and against * (including reasonable attorneys' fees and costs of litigation, *) as a result of any claim, demand, action or other proceeding by a Third Party based upon death, bodily injury or physical property damage arising from or relating to the development of the Product, the Specifications provided, and/or any written instructions or written information provided by GJT or its Affiliates pertaining to the use of the GEOMATRIX technology in connection with the manufacture or storage of the Product, except: 12.1.2.1 to the extent such damages or other amounts payable arise from or are attributable to: (i) *, or (ii) *. 12.2 Procedure. It is a condition precedent to a party's obligations under Section 12.1 above that: 12.2.1 A party (the "Indemnitee") that intends to claim indemnification under this Article 12 promptly shall notify the other (the "Indemnifying Party") of any claim, demand, action or other proceeding with respect to which the Indemnitee intends to claim such indemnification. The failure of an Indemnitee to deliver notice to the Indemnifying Party within a reasonable time after the commencement of any such action or other proceeding, if prejudicial to the Indemnifying Party's ability to defend such action or other proceeding, shall relieve the Indemnifying Party of any obligation or liability it may have under Section 12.1, provided that the failure to deliver such notice shall not relieve the Indemnifying Party of any liability it may have otherwise than under Article 12.1; and 12.2.2 The Indemnifying Party shall have the right to participate in and, to the extent it so desires, to assume sole control of the defense thereof (including all decisions relative to settlement, litigation and appeal) with counsel selected by the Indemnifying Party; provided, however, that the Indemnitee shall have the right to retain its own counsel with the fees and expenses to be paid by the Indemnitee if representation of the Indemnitee by the counsel retained by Indemnifying Party would be inappropriate due to actual or potential conflicting interests between the Indemnitee and any other party represented by such counsel in such proceedings. The indemnity obligations under this Article 12 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the prior written consent of the Indemnifying Party; and 12.2.3 Each lndemnitee shall cooperate fully (to the extent such cooperation would not be inappropriate due to actual or potential conflicting interests) with the Indemnifying Party and its legal representatives in the investigation and defense of any claim, demand, action or other proceeding covered by this Article 12; provided, that the failure of an Indemnitee to provide such cooperation shall not affect the Indemnifying Party's obligations under Section 12.1 to any other Indemnitee not capable of exercising control over such noncooperative Indemnitee. 12.3 Insurance. Each Indemnifying Party shall *, with respect to its indemnification obligations under this Agreement in such * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -30- * under-taking activities with products of a similar nature to the Products being manufactured and sold hereunder. After the commencement of human clinical trials or the commercial sale of the Product or other product, each party, as applicable, . ARTICLE 13 FORCE MAJEURE Neither party hereto shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached the Agreement for failure or delay in fulfilling or performing any term of the Agreement, and the time required for performance shall be extended by the period occasioned by such cause, when such failure or delay is caused by or results from causes beyond the reasonable control of the affected party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other party hereto, but not failure or delay caused by subcontractors of a party who breach their obligations hereunder. The party so affected shall give prompt notice to the other party of such cause, and shall use its best efforts to minimize the delay in performance and adverse effects occasioned by such cause. ARTICLE 14 SUBCONTRACTEES APOTHECON understands that GJT intends to contract with one or more Affiliates and other Persons ("Subcontractees") to perform certain of its duties hereunder, including without limitation, subcontracting with one or more contract research organizations to perform necessary clinical studies. All such Subcontractees must be reasonably acceptable to APOTHECON. All such arrangements shall be evidenced by written agreement(s) between GJT and such Subcontractee(s) which are consistent with the terms of this Agreement and which accord APOTHECON the same rights, benefits and options under such agreements as APOTHECON has hereunder with GJT, including without limitation, the right of APOTHECON, upon reasonable notice and at reasonable times, to examine a Subcontractee's facilities, to make copies of relevant records and monitor the work performed thereunder pertaining to the Product, and to determine the adequacy of the facilities and whether the pertinent duties are being performed in compliance with this Agreement and relevant governmental requirements. Any such subcontract shall be subject to the terms and conditions of the Agreement, and any Subcontractee shall be bound by all obligations and undertakings of GJT hereunder (as they relate to the obligations and rights so assigned or delegated). All such agreements shall be submitted by GJT to APOTHECON for review, which GJT shall use commercially reasonable efforts to effect in advance of execution to allow APOTHECON reasonable opportunity to comment thereon. A copy of each such executed Subcontractee agreement, and any amendments or supplements thereto, shall be promptly provided by GJT to APOTHECON following execution of same. All compensation, reimbursement of costs and other payments to be made for any such Subcontractee's services is solely a matter between GJT and such Subcontractee(s), and GJT shall indemnify and hold APOTHECON harmless from and against any claims of compensation, cost reimbursement or other payments claimed by any such Subcontractee(s) in connection with the performance of this Agreement. GJT will ensure (with respect to any Affiliate Subcontractee), and will use commercially reasonable efforts to ensure (in the case of any other Subcontractee), that APOTHECON is expressly designated as a third party beneficiary of a Subcontractee's obligations to GJT pertaining to this Agreement and of GJT's rights under such Subcontractee's written agreement with GJT. GJT will be responsible and liable to APOTHECON for any breach by any such Subcontractee of its obligations under such agreements and for the failure by such Subcontractee to perform any duties hereunder assigned or delegated to such Subcontractee. -31- ARTICLE 15 ASSIGNMENT; SEVERABILITY: REPRESENTATIONS AND WARRANTIES 15.1 Assignment. Except to the extent specifically set forth in this Agreement, this Agreement may not be assigned or nor may the performance of any duties hereunder be delegated or transferred, nor may any right or obligation hereunder be assigned or transferred, by either party, without the prior written consent of the other party (which consent shall not be unreasonably withheld); provided, however, that either party may, without such consent, assign the right to receive payments to an Affiliate, and may assign the Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business assets to which this Agreement relates, or in the event of merger, consolidation, or similar reorganization (or change in control or similar transaction); and provided, further, that in the case of an assignment, the assigning party shall remain liable as a continuing guarantor under any such assignment of all obligations and duties assumed by such Affiliate, and the other party shall have entered into a separate counterpart agreement with any such Affiliate. Such counterpart agreement shall be in the same form as this Agreement, except for necessary changes to reflect the extent of the assignment, the substitution of the Affiliate's name and the effective date of the assignment. 15.2 Severability. Each party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of the Agreement be or become invalid, the parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into the Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of the Agreement shall not affect the validity of the Agreement as a whole, unless the invalid provisions are of such essential importance to the Agreement that it is to be reasonably assumed that the parties would not have entered into the Agreement without the invalid provisions. 15.3 General Representations and Warranties. Each party represents and warrants to the other the following: 15.3.1 Existence and Power. It (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (b) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under the Agreement. 15.3.2 Authorization and Enforcement of Obligations. It (a) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (b) has taken all necessary action on its part to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder. The Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. 15.3.3 No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the Agreement have been obtained. 15.3.4 No Conflict. The execution and delivery of the Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations, and (b) do not conflict with, or constitute a default under, any contractual obligation of it. 15.3.5 DISCLAIMER OF WARRANTIES. NOTHING IN THE AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY GJT THAT ANY RESEARCH AND DEVELOPMENT PERFORMED BY IT UNDER THIS AGREEMENT WILL BE -32- SUCCESSFUL, IN WHOLE OR IN PART, OR THAT ANY PRODUCTS WHICH MAY BE DEVELOPED WILL BE SUCCESSFUL IN THE COMMERCIAL MARKETPLACE. APOTHECON ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE SET FORTH HEREIN OR AS MAY BE SET FORTH IN A WRITING SIGNED BY GJT, GJT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCTS WHICH MAY BE DEVELOPED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 15.4 GJT Representations and Warranties. GJT represents and warrants to APOTHECON as of the Effective Date the following: 15.4.1 The Patent Rights listed on Exhibit 1.l(ii) and the Trademarks listed on Exhibit 9.1 list all Patent Rights and GEOMATRIX Trademarks owned or controlled by GJT in the Territory or to which GJT has the right to grant the license rights, sublicense rights and other rights granted hereunder, and which may be useful to the manufacture, development, use or sale of Product, and such Exhibits specify the jurisdiction(s) by or in which such right has been issued or registered or in which an application for such issuance or registration has been filed, including respective registration or application numbers. To the best knowledge of the current officers and directors of GJT, the issued Patent Rights are valid and in full force and effect. 15.4.2 Except as disclosed on Exhibit 1. l(ii), to the best knowledge of GJT's current officers and directors, (i) the use of such Know-how and any Patent Rights in the manufacture, use and sale of the Product does not infringe upon any patent rights, copyrights or other proprietary rights of any Affiliate of GJT or any non-Affiliated Third Party in the Territory; (ii) GJT has no knowledge of any infringement by any Third Party of any of the Patent Rights in the Territory; and (iii) GJT and each its Affiliates are not subject to any outstanding order, judgment or decree of any court or administrative agency, and each has not entered into any stipulation or agreement, restricting its use of the Patent Rights in connection with the manufacture, development, use or sale of Products in the Territory. 15.4.3 There is no action, suit or proceeding pending or, to the knowledge of its current officers and directors, that has been threatened in writing by any Third Party against GJT or its Affiliates which, if adversely determined, would have a material adverse effect upon the ability of APOTHECON to use the Patent Rights or Know-how in the manufacture, use and/or sale of any Product in the Territory. 15.4.4 The Know-how and Patent Rights licensed and/or sublicensed by GJT to APOTHECON pursuant to this Agreement were not been obtained by GJT or its Affiliates in violation of any contractual or fiduciary obligation to which GJT or any of its Affiliates, any predecessor-in-interest or any of its or their employees or contractors is or was a party or by misappropriation of the trade secrets of any Third Party, and the manufacture, use or sale by or through GJT, APOTHECON and their respective Affiliates of any Product using such Know-how and Patent Rights does not and will not violate any such contractual or fiduciary obligation owed to any such Third Party or render APOTHECON liable for the payment of any royalty attributable to or arising out of any such contractual or fiduciary obligation or any such misappropriation. 15.4.5 During the term of this Agreement, GJT or its Affiliates will not disclose to APOTHECON and its Affiliates any proprietary information, such as trade secrets, which is confidential to any non-Affiliated Third Party or institution and which GJT is not entitled to disclose in accordance with the terms of this Agreement. 15.4.6 Except as otherwise provided in this Agreement, the rights under the Know-how or any Patent Rights that have been or will be licensed to APOTHECON under this Agreement are not and will not be licensed to any other party to make, have made, use or sell Products in the Territory. -33- 15.4.7 There are no licenses under any patent rights, and, to the best knowledge of the current officers and directors of GJT, under any other intellectual property or other proprietary rights owned or controlled by any GJT Affiliate or Third Party which are used by GJT in connection with the manufacture, development, use or sale of Product in the Territory, other than those listed on Exhibits 1.1 (ii) and 9. 1. ARTICLE 16 MISCELLANEOUS 16.1 Notices. Any consent, notice or report required or permitted to be given or made under the Agreement by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor and except as otherwise provided in the Agreement shall be effective upon receipt by the addressee. If to GJT: Genta Jago Technologies BV Swiss Branch Grundstrasse 12 6343 Rotkreuz, Switzerland Attention: Executive Management Committee with copies to: Genta Incorporated 3550 General Atomics Court San Diego, CA 92121, U.S.A. Attention: Thomas H. Adams, Ph.D. and: Pillsbury Madison & Sutro 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. Attention: Thomas E. Sparks, Jr., Esq. and: Jagotec AG c/o Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz, Switzerland Attention: Dr. Jacques Gonella and: Rinderknecht Glaus & Stadelhofer beethovenstrasse 7 Postfach 4451 CH-8002 Zurich, Switzerland Attention: Dr. Thomas M. Rinderknecht If to APOTHECON: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: President with a copy to: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: Corporate Legal Counsel -34- 16.2 Applicable Law. The Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. 16.3 Arbitration. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with the Agreement or any term or condition hereof, or the performance by either party of its obligations hereunder, whether before or after termination of the Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other party. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 16.3, shall be determined by binding arbitration pursuant to this Section 16.3. 16.4 Excise Taxes. If the recipient of any payment hereunder, received in consideration for providing any goods or services or granting any rights hereunder, shall have the obligation under any applicable law, regulations or governance to add, include or pay to the applicable governmental authority, any value added taxes, turnover taxes, excise taxes, sales taxes or similar taxes or levies (collectively, "Excise Taxes") on the amount of such payment received hereunder, then the recipient shall be entitled to receive the amount of any Excise Taxes on the amount of such payment hereunder as evidenced by an invoice from the recipient to the payor of such payment hereunder. The payor of such payment hereunder shall pay the amount of any such Excise Taxes thereon prior to the date on which the recipient is required to pay or account for such Excise Taxes to the applicable governmental authority. The recipient of any such payment hereunder shall use reasonable efforts to minimize any Excise Taxes on any such payments hereunder, and promptly shall take all such actions and execute all such instruments as the payor of such payment hereunder reasonably requests to enable the payor to apply for and, if possible, to receive prompt refund or credit of the amount of such Excise Taxes on such payments hereunder. 16.5 Headings. The titles and headings used in the Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of the Agreement. A reference to a an Article (or section) shall be deemed to include reference to all sections and subsections thereunder. 16.6 Independent Contractors. It is expressly agreed that the parties shall be independent contractors and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. Neither party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on the other party, without the prior consent of the other party to do so. 16.7 Waiver. The waiver by either party hereto of any right hereunder or the failure to perform or of a breach by the other party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other party whether of a similar nature or otherwise. 16.8 Amendments. The provisions of the Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the parties to the Agreement. 16.9 Entire Agreement. The terms, covenants, conditions and provisions contained in the Agreement, including the exhibits hereto and any other agreement (including the * License Agreement) to the extent herein referenced, together with all of the documents referred to herein as having been provided by one party to another and the letter agreement of even date herewith between Jagotec, GJT and APOTHECON (pertaining in part to the Territory in which APOTHECON may exercise its manufacturing rights hereunder), constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -35- 16.10 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16.11 Publicity. Neither party to this Agreement shall employ or use the name of the other party or any Affiliate of such party in any publication or promotional materials or in any form for public distribution, except as required by law, without prior written consent of said other party in each instance (which consent shall not be unreasonably withheld). -36- IN WITNESS WHEREOF, the parties hereto have duly executed the Agreement as of the date first set forth above. APOTHECON, INC. By: /s/ ----------------------- Title: VP/GM GENTA JAGO TECHNOLOGIES BV By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella -------------------- Dr. Jacques Gonella Managing Director JAGOTEC AG hereby agrees to be bound by the provisions of sections 2.2, 6.3, 8.3, 8.4, 8.5, 11.2.4.2, 11.4.3, 11.4.5, and 11.5 and article 16 of the above Agreement and sections 11.2.4.2 and 11.5 of the * License Agreement, agrees that all notices to be given to it shall be given to such address as is set forth in section 16.1 hereof unless and until it otherwise instructs APOTHECON in writing: JAGOTEC AG By: /s/ Jacques Gonella ------------------- Dr. Jacques Gonella President JAGO PHARMA AG hereby agrees to be bound by the provisions of sections 2.2, 6.3, 11.2.4.2, 11.4.3, 11.4.5, and 11.5 and article 16 of the above Agreement and sections 11.2.4.2 and 11.5 of the * License Agreement, agrees that all notices to be given to it shall be given to such address as is set forth in section 16.1 hereof unless and until it otherwise instructs APOTHECON in writing: JAGO PHARMA AG By: /s/ Jacques Gonella ------------------- Dr. Jacques Gonella President - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -37- EXHIBITS Exhibit 1.1(i) Initial Project Addendum for the Development Program Exhibit 1.1(ii) List of Patent Rights Exhibit 3.6(i)-(iv) Waiver and Consent Agreements Exhibit 4.2 Initial Product Specifications Exhibit 9.1 List of GEOMATRIX Trademarks -38- EXHIBIT 1.1(i) INITIAL PROJECT ADDENDUM FOR THE DEVELOPMENT PROGRAM - - - -------------------------------------------------------------------------------- * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. EXHIBIT 1.1(ii) PATENT RIGHTS - - - -------------------------------------------------------------------------------- PACO. 1 Subject: System for the controlled-rate release of active substances Inventors: Colombo, La Manna, Conte Assignee: JAGOTEC AG Priority: Italy, No. 23321 A/85, Dec 20th 1985 Approved: January 7th 1988, No. 1188212 Valid Until: December 19th 2005 Countries: USA Approved: June 13th 1989, No. 4.839.177 Valid Until: June 12th 2006 Europe Approved: November 22nd 1990, No. 0226884 Valid Until: December lst 2006 Australia Approved: July 10th 1990, No. 594992 Valid Until: December 18th 2006 Canada Approved: April 7th 1992, No. 1.298.479 Valid Until: April 6th 2009 New Zealand Approved: December llth 1990 No. 218.596 Valid Until: December 10th 2002 Japan Pending * PACO. 6 Subject: Tablets with controlled-rate release of active substances Inventors: Conte, La Manna, Colombo Assignee: JAGOTEC AG Priority: Italy, No. 2269489, December 14th 1989 Approved, No. 1237904, June 18th 1993 - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -1- PACO. 6 (cont.) Countries: USA Approved: June 6th 1995, No. 5,422,123 Valid Until: June 5th 2012 Europe Pending * Canada Pending * Japan Pending * PACO. 7 Subject: Process for preparing pharmaceutical compositions having an increased active substance dissolution rate, and the compositions obtained Inventors: Conte, La Manna, Giunchedi Assignee: JAGOTEC AG Priority: Italy, No. 21091, July 27th 1990 Approved: November 16th 1994, No. 1.246.188 Valid Until: July 26th 2010 Countries: USA lst Application No. 07/733457, Filed July 22nd 1991 Pending: Continuation No. 08/524.739, Filed October 11th 1994 Continuation No. 08/321,123, Filed October 11th 1994 Approved: December 19th 1995, No. 5.476.654 Valid Until: October 10th 2014 Europe Pending * Canada Pending * Japan Pending * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- PACO. 8 Subject: Pharmaceutical tablets releasing the active substance after a definite period of time Inventors: Conte, La Manna, Maggi Assignee: JAGOTEC AG Priority: Italy, MI 92 A 001174, Filed May 15th 1992 Countries: USA Approved: November 7th 1995, No. 5,464,633 Valid Until: May 23rd 2014 Canada Pending * PACO. 9 Subject: Pharmaceutical tablet capable of liberating one or more drugs at different release rates Inventors: Conte, La Manna, Maggi Assignee: JAGOTEC AG Priority: Italy, MI 92 A 002192, Filed September 24th 1992 Countries: PCT Application, No. PCT/EP93/02556, Filed September 21st 1993 Designated Territories: Australia Canada Japan USA New Zealand European Patent Territory - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- EXHIBIT 3.6(I) GENTA JAGO DELAWARE, L.L.C. SAN DIEGO, CA 92121 USA February 28, 1996 Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey USA ATTN: President Genta Jago Technologies B.V., Swiss Branch Grundstrasse 12 6343 Rotkreuz SWITZERLAND ATTN: Executive Management Committee Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz SWITZERLAND ATTN: President Genta Incorporated 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc. a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development of * , using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development Agreement"). Each of you acknowledges receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know- How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. the "* License Agreement"). Each of you acknowledges receipt of a copy of said agreement. The * License Agreement and the * Development Agreement are referred to herein as the "* Agreements."; and iii) The Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated ("Genta"), a Delaware corporation, and Genta Jago Delaware, L.L.C. ("Genta Jago LLC), a Delaware limited liability company (the "GEOMATRIX Research and Development Agreement". All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Genta Jago LLC Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG and Genta are each 50% owners of the equity and income interests of GJT. Jagotec and Jago Pharma AG are Affiliates of one another, of GJT, and of Jago Holding AG, a Swiss corporation. Genta and GPM Generic Pharmaceuticals Manufacturing, Inc. (the latter entity being an Affiliate Jagotec AG) are each a 50% owner of the equity and income interests of Genta Jago LLC. Genta Jago LLC acknowledges, and each of the parties signing below hereby acknowledges, that it expects to derive, directly or indirectly, substantial economic benefit as a result of the execution, delivery and performance of the * License Agreement, the * Development Agreement, and of the GEOMATRIX Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party signing below, Genta Jago Delaware L.L.C. hereby represents, warrants, agrees, and covenants to and with Apothecon, and each other party signing below hereby represents, warrants, agrees and concurs, as follows: 1. Notwithstanding any provision in the GEOMATRIX Research and Development Agreement to the contrary: a. All applications filed by Genta Jago LLC pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, Apothecon, and not GJT. b. All data and results pertaining to the Product generated by Genta Jago LLC under the Research and Development Agreement shall be owned solely by Apothecon. Concurrently with the execution and delivery of this Genta Jago LLC Waiver and Consent Agreement, Genta Jago LLC will turn over to Apothecon all data and results heretofore developed by or for it pertaining to the Product. Genta Jago LLC will thereafter report in writing such data and results developed by or for it not less frequently than quarterly to Apothecon and GJT (and monthly if requested by either party), and will immediately transmit all such data to Apothecon by magnetic media or such other method as Apothecon shall request. c. In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to APOTHECON under the * Development and Marketing Agreement at law or in equity, Genta Jago LLC shall, at Apothecon's request, enter into an agreement with Apothecon for the development and registration of the Product on terms and conditions that, to the maximum practicable extent, require Genta Jago LLC to perform the same obligations and observe the same terms and conditions as apply to it under the GEOMATRIX Research and Development Agreement (without regard to Genta and Jago Pharma's duties or responsibilities thereunder), and with Apothecon having the rights that GJT otherwise had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that Apothecon has under the * Development and Marketing Agreement. In such event Apothecon shall be entitled to grant to Genta Jago LLC a * under the Patent Rights and Knowhow solely to conduct the Research and Development (as such term is defined in the GEOMATRIX - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- Research and Development Agreement) that Genta Jago LLC is obligated to conduct under the GEOMATRIX Research and Development Agreement, and any payments for services performed thereafter by Genta Jago LLC with respect to the development of the Product shall be made directly by APOTHECON to Genta Jago LLC. 2. Genta Jago LLC shall submit to Apothecon, concurrently with its submission to GJT, a copy of (i) all reports, statements, invoices, Product Workplans, and budgets submitted by Genta Jago LLC to GJT or to the Steering Committee relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. Genta Jago LLC shall promptly inform Apothecon of any default by GJT under the GEOMATRIX Research and Development Agreement. Following any such default, Apothecon shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay Genta Jago LLC directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies payable thereafter by Apothecon to GJT. 3. Apothecon shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product only. 4. Genta Jago LLC shall defend, indemnify and hold Apothecon, Inc. harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that Apothecon suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the *, or their respective directors, officers, general partners, employees, consultants, or agents (other than ). Apothecon, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). 5. To the extent any provisions of the * Agreements or of any of the GEOMATRIX Agreements conflict in any way with the terms of this Genta Jago LLC Waiver and Consent Agreement, the terms of this Agreement shall control. 6. This Genta Jago LLC Waiver and Consent Agreement shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Genta Jago LLC by a duly authorized officer of Apothecon, or until the termination of the * Marketing and Development Agreement, whichever occurs first. 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor (with a copy addressed as well to the attention of its "Legal Counsel") and shall be effective upon receipt by the addressee. 8. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 9. This Genta Jago LLC Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation, or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 10. This Genta Jago LLC Waiver and Consent Agreement, together with all other documents referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof that are not set forth herein on which a party has relied. All terms and conditions of the GEOMATRIX Research and Development Agreement, to the extent not changed or supplemented by this Genta Jago LLC Waiver and Consent Agreement, remain in full force and effect. 11. This Genta Jago LLC Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 12. No provision of this Genta Jago LLC Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 13. If any term, covenant or condition of this Genta Jago LLC Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. 14. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Genta Jago LLC Waiver and Consent Agreement or any term or condition hereof, or the performance by -4- a party of its obligations hereunder, whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 14, shall be determined by binding arbitration pursuant to this Section 14. 15. It is expressly agreed that the parties are independent contractors with each other under this Agreement and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. No party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on any other party, without the prior consent of the other party to do so. 16. This Genta Jago LLC Waiver and Consent 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. It shall not be strictly construed against any party hereto. -5- IN WITNESS WHEREOF, the parties below have duly executed this Genta Jago LLC Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. GENTA JAGO DELAWARE, L.L.C. By: /s/ Thomas H. Adams -------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella -------------------- Dr. Jacques Gonella Managing Director We accept and agree to the foregoing, and acknowledge same by executing this Genta Jago LLC Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV JAGO PHARMA AG By /s/ Thomas H. Adams By: /s/ Jacques Gonella ------------------- ------------------- Thomas H. Adams, Ph.D. Dr. Jacques Gonella Managing Director President By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director GENTA INCORPORATED APOTHECON, INC. By /s/ Thomas H. Adams By: /s/ Lee Burg ------------------- ------------ Thomas H. Adams, Ph.D. Lee Burg Chairman and Chief Executive Officer President -6- EXHIBIT 3.6(II) GENTA INCORPORATED 3550 GENERAL ATOMICS COURT SAN DIEGO, CA 92121 USA February 28, 1996 Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey USA ATTN: President Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz SWITZERLAND ATTN: President Genta Jago Technologies B.V. Grundstrasse 12 6343 Rotkreuz SWITZERLAND ATTN: Executive Committee Genta Jago Delaware, L.L.C. 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc., a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development of *, using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development Agreement"). Each of you acknowledges receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT'), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know- How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -1- supplemented, changed or extended from time to time hereafter, is referred to as the "* License Agreement"). Each of you acknowledges receipt of a copy of said agreement. The * License Agreement and the * Development Agreement are referred to herein as the "* Agreements."; and iii) The Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated ("Genta"), a Delaware corporation, and Genta Jago Delaware, L.L.C. ("Genta Jago LLC"), a Delaware limited liability company (the "GEOMATRIX Research and Development Agreement". iv) The GEOMATRIX License Agreement; v) The GEOMATRIX Manufacturing License Agreement; and vi) The GEOMATRIX Supply Agreement. All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Genta Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG and Genta are each 50% owners of the equity and income interests of GJT. Jagotec and Jago Pharma AG are Affiliates of one another, of GJT, and of Jago Holding AG, a Swiss corporation. Genta and GPM Generic Pharmaceuticals Manufacturing, Inc. (the latter entity being an affiliate of Jagotec AG) are each a 50% owner of the equity and income interests of Genta Jago LLC. Genta acknowledges, and each of the parties signing below hereby acknowledges, that it expects to derive, directly or indirectly, substantial economic benefit as a result of the execution, delivery and performance of the * License Agreement, the * Development Agreement, and of the GEOMATRIX Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Genta Incorporated hereby represents, warrants, agrees, and covenants to and with Apothecon, and each other party signing below hereby represents, warrants, agrees and concurs, as follows: 1. Notwithstanding any provision in the GEOMATRIX Research and Development Agreement to the contrary: a. All applications filed by Genta pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, Apothecon, and not GJT. b. All data and results pertaining to the Product generated by Genta under the Research and Development Agreement shall be owned solely by Apothecon. Concurrently with the execution and delivery of this Genta Waiver and Consent Agreement, Genta will turn over to Apothecon all data and results developed heretofore by or for it pertaining to the Product. Genta will thereafter report in writing such data and results developed by or for it not less frequently than quarterly to Apothecon and GJT (and monthly if requested by either party), and will immediately transmit all such data to Apothecon by magnetic media or such other method as Apothecon shall request. c. In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to Apothecon under the * Development and Marketing Agreement at law or in equity, Genta shall, at Apothecon's request, enter into an agreement with Apothecon for the development and registration of the Product on terms and conditions that, to the maximum practicable extent, require Genta to perform the same obligations and observe the same terms and conditions as apply to it under the GEOMATRIX Research and Development Agreement (without regard to Jago Phanna's and Genta Jago LLC's duties or responsibilities thereunder), and with Apothecon having the - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- rights that GJT otherwise had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that Apothecon has under the * Development and Marketing Agreement. In such event Apothecon shall be entitled to grant to Genta a * under the Patent Rights and Knowhow solely to conduct the Research and Development (as such term is defined in the GEOMATRIX Research and Development Agreement) that Genta is obligated to conduct under the GEOMATRIX Research and Development Agreement, and any payments for services performed thereafter by Genta with respect to the development of the Product shall be made directly by APOTHECON to Genta. 2. Genta shall submit to Apothecon, concurrently with its submission to GJT, a copy of (i) all reports, statements, invoices, Product Workplans, and budgets submitted by Genta to GJT or to the Steering Committee relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. Genta shall promptly inform Apothecon of any default by GJT under the GEOMATRIX Research and Development Agreement. Following any such default, Apothecon shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay Genta directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies payable thereafter by Apothecon to GJT. 3. Apothecon shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product only. 4. Genta shall defend, indemnify and hold Apothecon, Inc. harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that Apothecon suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the *, or their respective directors, officers, general partners, employees, consultants, or agents (other than *). Apothecon, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). 5. To the extent any provisions of the * Agreements or of any of the GEOMATRIX Agreements conflict in any way with the terms of this Genta Waiver and Consent Agreement, the terms of this agreement shall control. 6. This Waiver and Consent shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Genta by a duly authorized officer of Apothecon, or until the termination of the * Marketing and Development Agreement, whichever occurs first. 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor (with a copy addressed as well to the attention of its "Legal Counsel") and shall be effective upon receipt by the addressee. 8. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 9. This Genta Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 10. This Genta Waiver and Consent Agreement, together with all of the documents referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof that are not set forth herein on which a party has relied. All other terms and conditions of the GEOMATRIX Research and Development Agreement, to the extent not changed or supplemented by this Genta Waiver and Consent Agreement, remain in full force and effect. 11. This Genta Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 12. No provision of this Genta Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 13. If any term, covenant or condition of this Genta Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application -4- thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. 14. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Genta Waiver and Consent Agreement or any term or condition hereof, or the performance by a party of its obligations hereunder, whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 14, shall be determined by binding arbitration pursuant to this Section 14. 15. It is expressly agreed that the parties are independent contractors with one another under this Agreement and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. No party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on any other party, without the prior consent of the other party to do so. 16. This Genta Waiver and Consent 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. It shall not be strictly construed against any party hereto. -5- IN WITNESS WHEREOF, the parties below have duly executed this Genta Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. GENTA INCORPORATED By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Chairman and Chief Executive Officer We accept and agree to the foregoing, and acknowledge same by executing this Genta Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV JAGO PHARMA AG By /s/ Thomas H. Adams By: /s/ Jacques Gonella ------------------- ------------------- Thomas H. Adams, Ph.D. Dr. Jacques Gonella Managing Director President By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director GENTA JAGO DELAWARE, L.L.C. By /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director APOTHECON, INC. By /s/ Lee Burg ------------ Lee Burg President -6- EXHIBIT 3.6(III) JAGO PHARMA AG EPTINGERSTRASSE 51 CH-4132 MUFFENZ SWITZERLAND February 28, 1996 Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey USA ATTN: President Genta Jago Technologies B.V., Swiss Branch Grundstrasse 12 6343 Rotkreuz SWITZERLAND ATTN: Executive Management Committee Genta Jago Delaware, L. L - C 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Genta Incorporated 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc., a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development of *, using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development Agreement"). Each of you acknowledges receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know- How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. supplemented, changed or extended from time to time hereafter, is referred to as the "* License Agreement"). Each of you acknowledges receipt of a copy of said agreement. The * License Agreement and the * Development Agreement are referred to herein as the "* Agreements"; and iii) The Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated ("Genta"), a Delaware corporation, and Genta Jago Delaware, L.L.C. ("Genta Jago LLC), a Delaware limited liability company (the "GEOMATRIX Research and Development Agreement". All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Jago Pharma Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG and Genta are each 50% owners of the equity and income interests of GJT. Jagotec and Jago Pharma AG are Affiliates of one another, of GJT, and of Jago Holding AG, a Swiss corporation. Genta and GPM Generic Pharmaceuticals Manufacturing Inc. (the latter entity being an Affiliate of Jagotec AG) are each a 50% owner of the equity and income interests of Genta Jago LLC. Jago Pharma AG acknowledges, and each of the parties signing below hereby acknowledges, that it expects to derive substantial economic benefit, directly or indirectly, as a result of the execution, delivery and performance of the * License Agreement, the * Development Agreement, and of the GEOMATRIX Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Jago Pharma AG hereby represents, warrants, agrees, and covenants to and with Apothecon, and each other party signing below hereby represents, warrants, agrees and concurs, as follows: 1. (a) Notwithstanding any provision in the GEOMATRIX Research and Development Agreement to the contrary: i. All applications filed by Jago Pharma AG pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, Apothecon, and not GJT. ii. All data and results pertaining to the Product generated by Jago Pharma AG under the Research and Development Agreement shall be owned solely by Apothecon. Concurrently with the execution and delivery of this Jago Pharma Waiver and Consent Agreement, Jago Pharma will turn over to Apothecon all data and results heretofore developed by or for it pertaining to the Product. Jago Pharrna AG will thereafter report in writing such data and results developed by or for it not less frequently than quarterly to Apothecon and GJT (and monthly if requested by either party), and will immediately transmit all such data to Apothecon by magnetic media or such other method as Apothecon shall request. iii. In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, then, in addition to any remedies available to APOTHECON under the * Development and Marketing Agreement at law or in equity, Jago Pharma AG shall, at Apothecon's election and request, enter into an agreement with Apothecon for the development and registration of the Product on terms and conditions that, to the maximum practicable extent, require Jago Pharma AG to perform the same obligations and observe the same terms and conditions as apply to it under the GEOMATRIX Research and Development Agreement (without regard to Genta and Genta Jago LLC's duties or responsibilities thereunder), and with Apothecon having the rights that GJT otherwise had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that Apothecon has under the * Development and Marketing Agreement. In such event Apothecon shall be entitled to grant to Jago Pharma AG a * under the Patent Rights and Knowhow solely to conduct the Research and Development (as such term is defined in the GEOMATRIX - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- Research and Development Agreement) that Jago Pharma AG is obligated to conduct under the GEOMATRIX Research and Development Agreement, and any payments for services performed thereafter by Jago Pharma AG with respect to the development of the Product shall be made directly by APOTHECON to Jago Pharma AG. (b) If GJT breaches the * Development and Marketing Agreement with respect to the development of the Product in a manner that entitles APOTHECON to terminate same pursuant to section 11.2.2.1 or 11. 2.2.2 thereof, or makes an untrue statement that entitles APOTHECON to terminate same pursuant to section 11.2.4.1 thereof, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to it under said * Development and Marketing Agreement or available to it at law or in equity, APOTHECON may elect (by delivering a writing to GJT and Jago Pharma AG of APOTHECON's intent to exercise its option), for Jago Pharma AG to, and Jago Pharma AG agrees that it will, promptly enter into an agreement with APOTHECON under which: (i) Jago Pharma will, to the extent it has the right to do so, ensure that all licenses, sublicenses and other rights and privileges granted by GJT under the * Development and Marketing Agreement shall continue without change, and (ii) Jago Pharma will assume all rights and obligations of GJT under articles 3, 4, 5, 6, 11.4.5, 12, 14, 15.1, and 15.2 of the Development and Marketing Agreement and will promptly cure any defaults of GJT under said articles, any payments to be made thereafter by APOTHECON under said articles shall thereafter be paid to Jago Phanna, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles. 2. Jago Pharma shall submit to Apothecon, concurrently with its submission to GJT, a copy of (i) all reports, statements, invoices, Product Workplans, and budgets submitted by Jago Pharma AG to GJT or to the Steering Committee relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. Jago Pharma AG shall promptly inform Apothecon of any default by GJT under the GEOMATRIX Research and Development Agreement. Following any such default, Apothecon shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay Jago Pharma AG directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies payable thereafter by Apothecon to GJT. 3. Apothecon shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product only. 4. Jago Pharma AG shall defend, indemnify and hold Apothecon, Inc. harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that Apothecon suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the *, or their respective directors, officers, general partners, employees, consultants, or agents (other than *). Apothecon, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). 5. To the extent any provisions of the * Agreements or of any of the GEOMATRIX Agreements conflict in any way with the terms of this Jago Pharma Waiver and Consent Agreement, the terms of this Agreement shall control. 6. This Waiver and Consent shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Jago Pharma by a duly authorized officer of Apothecon, or until the termination of the * Marketing and Development Agreement, whichever occurs first. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor (with a copy addressed as well to the attention of its "Legal Counsel") and shall be effective upon receipt by the addressee. 8. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 9. This Jago Pharma Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation, or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 10. This Jago Pharma Waiver and Consent Agreement, together with all other documents to the extent referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof that are not set forth herein on which a party has relied. All terms and conditions of the GEOMATRIX Research and Development Agreement, to the extent not changed or supplemented by this Jago Pharma Waiver and Consent Agreement, remain in full force and effect. 11. This Jago Pharma Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 12. No provision of this Jago Pharma Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy -4- shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 13. If any term, covenant or condition of this Jago Pharma Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. 14. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Jago Pharma Waiver and Consent Agreement or any term or condition hereof, or the performance by a party of its obligations hereunder, whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 14, shall be deter-mined by binding arbitration pursuant to this Section 14. 15. It is expressly agreed that the parties are independent contractors with each other under this Agreement and that the relationship between the parties shall not constitute a partnership, joint venture or agency. No party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on any other party, without the prior consent of the other party to do so. 16. This Jago Pharma Waiver and Consent 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. It shall not be strictly construed against any party hereto. -5- IN WITNESS WHEREOF, the parties below have duly executed this Jago Pharma Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. JAGO PHARMA AG By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella President We accept and agree to the foregoing, and acknowledge same by executing this Jago Pharma Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director GENTA INCORPORATED By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Chairman and Chief Executive Officer GENTA JAGO DELAWARE, L.L.C. By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director APOTHECON, INC. By: /s/ Lee Burg ------------ Lee Burg President -6- EXHIBIT 3.6(IV) JAGOTEC AG SEESTRASSE 47 CH-6052 HERGISWIL, SWITZERLAND February 28, 1996 Apothecon, Inc. 777 Scudder Mills Road Princeton, New Jersey 08536 USA Attn.: President Genta Jago Technologies BV Grundstrasse 12 6343 Rotkreuz SWITZERLAND Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc., a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development and marketing of *, using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development and Marketing Agreement"). You acknowledge receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know- How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* License Agreement"). You acknowledge receipt of a copy of said agreement. The * License Agreement and the * Development and Marketing Agreement are referred to herein as the "* Agreements."; All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Jagotec Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG ("Jagotec"), a Swiss corporation, is party to a Restated GEOMATRIX License Agreement between Jagotec and GJT dated May 12, 1995 (said agreement, as it may be supplemented, changed or extended from time to time, is referred to herein as the "License Agreement") and to a Restated GEOMATRIX Manufacturing License Agreement between Jagotec and GJT dated May 12, 1995 (said agreement, as it may be supplemented, changed or extended from time to time, is referred to herein as the "Manufacturing License Agreement"). - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. Jagotec is a 50% owner of the equity and income interests of GJT. Jagotec is an Affiliate of GJT and of Jago Holding AG, a Swiss corporation. Accordingly, the undersigned expects to derive, directly or indirectly, substantial economic benefit as a result of the execution, delivery and performance of the * Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, Jagotec hereby represents, warrants, agrees, and covenants to and with GJT and Apothecon as follows: 1. Jagotec agrees that any license rights, sublicense rights and other rights granted or extended by GJT to Apothecon under the * Agreements are not subject to the terms and conditions of the License Agreement and the Manufacturing License Agreement and waives any rights Jagotec may have with respect to the enforcement of same against Apothecon. Jagotec further agrees that Apothecon, to the extent it is a subcontractee or sublicensee of GJT's rights and obligations under the License Agreement and the Manufacturing Agreement, shall not be bound by any and all obligations and undertakings of GJT under either of said Agreements, and waives any rights Jagotec may have with respect to the enforcement of same against Apothecon. 2. (a) Jagotec agrees that, in the event of an event that the License Agreement and/or the Manufacturing License Agreement is or are terminated, for whatever reason and whether by action taken by Jagotec, GJT or both, and notwithstanding any provision (including without limitation section 11.4) to the contrary in the License Agreement and in the Manufacturing Agreement, all licenses, sublicenses and other rights and privileges granted or extended to Apothecon under the * Agreements shall continue and remain in full force and effect in accordance with their terms, without further action or election on the part of Apothecon, and Jagotec shall be deemed simultaneously to have assumed the rights and obligations of GJT under the * Agreements and will promptly cure all defaults of GJT thereunder. (b) If GJT breaches the * License Agreement in a manner that entitles APOTHECON to terminate same pursuant to section 11.2.2.1 or 11.2.2.2 thereof, or makes an untrue statement that entitles APOTHECON to terminate same pursuant to section 11.2.4.1 thereof, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to it under said Agreement or at law or in equity, APOTHECON may elect (by delivering a writing to GJT and Jagotec of APOTHECON's intent to exercise such option) for Jagotec to, and Jagotec agrees that it will, promptly enter into a new, separate agreement with APOTHECON under which (i) all licenses, sublicenses and other rights and privileges granted by GJT under the * License Agreement shall continue without further action or election on the part of APOTHECON, (ii) Jagotec will assume all rights and obligations of GJT and promptly cure all defaults of GJT thereunder, and (iii) all payments that would otherwise have been made thereafter by APOTHECON under the * License Agreement shall thereafter be paid to Jagotec. (c) If GJT fails to make a payment when due under its Restated Working Capital Agreement dated as of May 12, 1995 (as amended by a First Amendment thereto dated as of July 11, 1995 and as the same may be amended from time to time hereafter, and including any successor agreement thereto), between GJT and Genta, Incorporated, a Delaware corporation ("Genta"), GJT and/or Jagotec shall promptly inform APOTHECON of same, and APOTHECON may elect (by delivering a writing to GJT and Jagotec of APOTHECON's intent to exercise such option) at any time thereafter to terminate the * License Agreement and for Jagotec to, and Jagotec agrees that it will, promptly enter into a new, separate agreement with APOTHECON under which (i) all licenses, sublicenses and other rights and privileges granted by GJT under the * License Agreement shall continue without further action or election on the part of APOTHECON, and (ii) Jagotec will assume all rights and obligations of GJT and promptly cure all defaults of GJT thereunder; provided, however, that all payments that would otherwise have been made thereafter by APOTHECON under the * License Agreement and otherwise under such new, separate agreement shall thereafter continue to be paid to GJT by APOTHECON, until APOTHECON is duly instructed otherwise in writing by GJT and Jagotec AG. 3. To the extent any provisions of the * Agreements supplement or conflict with the terms of the GEOMATRIX Agreements, the terms of the * Agreements shall control. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- 4. This Jagotec Waiver and Consent Agreement shall inure to the benefit of Apothecon, its successors, assigns and legal representatives, as well as GJT, its successors, assigns and legal representatives, and shall bind the Jagotec and its successors and assigns. This Jagotec Waiver and Consent Agreement sets forth the entire understanding of the GJT, Jagotec and Apothecon with respect to the subject matter hereof, and there are no other promises, representations or understandings, written or oral, not set forth herein. 5. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 6. This Jagotec Waiver and Consent Agreement shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Jagotec by a duly authorized officer of Apothecon, or until the termination of the * Agreements, whichever occurs first. 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor and shall be effective upon receipt by the addressee. If to Jagotec: Jagotec AG c/o Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz, Switzerland Attention: Dr. Jacques Gonella with a copy to: Rinderknecht Glaus & Stadelhofer Beethovenstrasse 7 Postfach 4451 CH-8002 Zurich, Switzerland Attention: Dr. Thomas M. Rinderknecht - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- If to GJT: Genta Jago Technologies BV Swiss Branch Grundstrasse 12 6343 Rotkreuz, Switzerland Attention: Executive Management Committee with copies to: Genta Incorporated 3550 General Atomics Court San Diego, CA 92121, U.S.A. Attention: Thomas H. Adams, Ph.D. and: Pillsbury Madison & Sutro 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. Attention: Thomas E. Sparks, Jr., Esq. If to APOTHECON: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: President with a copy to: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: Corporate Legal Counsel 8. This Jagotec Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 9. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Jagotec Waiver and Consent Agreement or any term or condition hereof, or the performance by either party of its obligations hereunder, whether before or after termination of this Jagotec Waiver and Consent Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other party. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 9, shall be determined by binding arbitration pursuant to this Section 9. 10. It is expressly agreed that the parties are each independent contractors with one another under this Agreement and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. Neither party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on the other party, without the prior consent of the other party to do so. 11. The provisions of this Jagotec Waiver and Consent Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto. -4- 12. The terms, covenants, conditions and provisions contained herein, together with all other documetts to the extent referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. 13. This Jagotec Waiver and Consent 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. It shall not be strictly construed against any party hereto. 14. This Jagotec Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation, or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 15. No provision of this Jagotec Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 16. If any term, covenant or condition of this Jagotec Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. -5- IN WITNESS WHEREOF, the parties below have duly executed this Jagotec Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. JAGOTEC AG By: /s/ Jacquest Gonella -------------------- Dr. Jacques Gonella President We accept and agree to the foregoing, and acknowledge same by executing this Jagotec Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV By: /s/ Jacques Gonella ------------------- Dr.Jacques Gonella Managing Director By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. managing Director APOTHECON, INC. By: /s/ Lee Burg ------------ Title: VP/GM Date: -6- EXHIBIT 4.2 INITIAL PRODUCT SPECIFICATIONS - - - -------------------------------------------------------------------------------- * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. EXHIBIT 9.1 LIST OF GEOMATRIX TRADEMARKS - - - ------------------------------------------------------------------------------- Country TM-No. Issue Date - - - ------------------------------- ------------ -------- International 522 445 April 8, 1988 Registration (25 countries) Canada 369 959 May 29, 1990 Switzerland 360 353 November 11, 1987 United Kingdom (class 1) 1415 927 March 24, 1990 United Kingdom (class 5) 1353 226 August 2, 1995 *) Greece 90 337 August 25, 1955 Japan 2578 899 September 30, 1993 New Zealand 185 989 July 28, 1995 Portugal **) 303 292 September 12, 1994 Sweden 223 455 May 10, 1991 United States 1562 880 October 31, 1989 *) renewal date **) registration not yet granted EX-10.90 6 LICENSE AGREEMENT EXHIBIT 10.90 ------------- CONFIDENTIAL TREATMENT REQUESTED LICENSE AGREEMENT THIS AGREEMENT, is made as of the Effective Date (as defined below), by and between APOTHECON, INC., a Delaware corporation with offices at 777 Scudders Mill Road, Plainsboro, New Jersey 08536, USA (hereinafter referred to as "APOTHECON"), and GENTA JAGO TECHNOLOGIES BV, a Dutch company, having offices at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GJT"). RECITALS WHEREAS, GJT has the expertise and skill needed to develop pharmaceutical preparations in * formulation of * (hereinafter, as more fully defined below, referred to as the "Product"); and WHEREAS, GJT (i) is the exclusive licensee of Jagotec AG, a Swiss corporation, of certain patent rights covering the GEOMATRIX formulation of the Product and (ii) is in possession of certain know-how and technology regarding the development, production and analytical methods of the Product (hereinafter, as more fully defined below, referred to as "Know-how"); WHEREAS, APOTHECON is interested in developing and marketing the Product throughout the world and receiving an exclusive license under the relevant GEOMATRIX patent rights and Know-how for such purpose, and GJT is willing to grant such exclusive license to APOTHECON, all upon the terms and conditions set forth below. WHEREAS, the terms and conditions governing the research, development, manufacture, and marketing of the Product are set forth in a separate agreement of even date herewith between GJT and APOTHECON (said agreement, as the same may be extended, supplemented or changed hereafter, referred to hereinafter as the " Development and Marketing Agreement"). NOW, THEREFORE, in consideration of the above premises and the mutual promises and covenants set forth herein, the parties agree as follows: ARTICLE 1 DEFINITIONS The following terms as used in this Agreement shall have the meanings set forth in this Article 1: * that (i) where marketed within the United States, is classified by FDA as an * under the Federal Food, Drug and Cosmetic Act, as amended, and (ii) where marketed outside the United States, is classified, marketed and/or designated as a *. "Adverse Drug Reaction (ADR)" shall have the meaning ascribed to such term under applicable law, but in any event shall include any reaction, side effect or other undesirable event (such as side effects, injuries, toxicity or sensitivity reaction, or any unexpected incidence and the severity thereof) that is associated with the use of the Product in humans, whether or not the event is considered drug related, including, but not limited to, the following: an adverse event occurring in the course of the use of the Product in professional practice, including use in clinical studies; drug overdose, whether accidental or intentional; an adverse event occurring from drug abuse; an adverse event occurring from drug withdrawal; any significant failure of expected pharmacological or biological actions; and any adverse event associated with the clinical use, study, investigation, testing and marketing of the Product or any other product (to the extent such adverse event pertains to the use or incorporation of the GEOMATRIX Technology in such product). In addition, when an ADR is herein referred to as "serious", it shall have the - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. meaning ascribed to such term under applicable law, but in any event shall include one or more of the following: death; admission to a hospital or prolongation of a hospital stay; permanent or substantially disabling condition; life- threatening condition; overdose; congenital anomaly; or cancer. Also, when an ADR is herein referred to as "unexpected", it shall have the meaning ascribed to such term under applicable law, but in any event shall include (x) for a non-marketed product, an experience that is not identified in nature, severity or frequency in the current clinical investigator's confidential information brochure, and (y) for a marketed product, an experience which is not listed in the current labeling for such product, and includes an event that may be symptomatically and pathophysiologically related to an event listed in the labeling but differs from the event because of increased frequency or greater severity or specificity. "Affiliate" means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. A Person shall be regarded as in control of another Person if it/he/she owns, or directly or indirectly controls, fifty percent (50%) or more of the voting stock or other ownership interest of the other Person, or if it/he/she directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever. For example, Jagotec and Jago Pharma AG are Affiliates of GJT. "Developmental Program" shall mean a development program in which the different activities to be performed by GJT and APOTHECON shall be listed (together with a respective time schedule for the development of the Product to be carried out by GJT and/or APOTHECON), as the case may be, according to such "Project Addendum" (and as amended or supplemented by mutual written agreement from time to time hereafter), with the initial Project Addendum attached as Exhibit 1.1(i) to the * Development and Marketing Agreement. "Effective Date" means the date when this Agreement is executed and delivered by both parties hereto, and (i) APOTHECON shall have received duly executed originals of all Waivers and Consents required under Section 3.6 hereof, (ii) all opinions of counsel contemplated by section 3.7 hereof have been received by APOTHECON, and (iii) Jagotec and Jago Pharma shall have duly executed the acknowledgment on the signature page of this Agreement. "...exclusive....."means, with respect to the grant of a license or sublicense, or to the appointment of a distributor, a license, sublicense, or appointment whereby the licensee's, sublicensee's or appointee's rights are sole and entire, and operate to exclude all others, including the licensor, sublicensor and appointor, as the case may be, and may be exercised by the licensee or sublicensee itself or through one or more of its Affiliates. An exclusive licensee (and permitted sublicensees) may sell and distribute Products through agents and distributors under exclusive or nonexclusive arrangements in any country in the Territory. "...semi-exclusive....," with respect to the grant of a license or sublicense, or to the appointment of a distributor, shall be interpreted in the same manner as the preceding sentence, except that the licensor, sublicensor or appointor, as the case may be, may also use the licensed, sublicensed or appointed rights itself or through one or more of its Affiliates. "FDA" shall mean the United States Food and Drug Administration, or any successor agency having regulatory jurisdiction over the manufacture, distribution and sale of drugs in the United States. "First Commercial Sale" shall mean, with respect to any Product, the first sale for use or consumption by the general public of such Product in a particular country in the Territory after the required marketing approval and pricing approval, if any, has been granted by the governing health authority of such country. "GEOMATRIX Agreements" means the GEOMATRIX License Agreement, the GEOMATRIX Manufacturing License Agreement, the GEOMATRIX Supply Agreement, and the GEOMATRIX Research and Development Agreement (each, individually, a "GEOMATRIX Agreement"). "GEOMATRIX License Agreement" shall mean the Restated GEOMATRIX License Agreement dated as of May 12, 1995 between GJT and Jagotec. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 2 - "GEOMATRIX Manufacturing License Agreement" shall mean the Restated GEOMATRIX Manufacturing License Agreement dated as of May 12, 1995 between GJT and Jagotec. "GEOMATRIX Research and Development Agreement" means the Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, a Swiss corporation, Genta Incorporated, a Delaware corporation, and Genta Jago Delaware, L.L.C., a Delaware limited liability company. "GEOMATRIX Supply Agreement" means the Restated GEOMATRIX Supply Agreement dated as of May 12, 1995 by and among GJT and Jago Pharma AG, a Swiss corporation. "GEOMATRIX Technology" means all oral controlled-release drug delivery and related technology which utilizes a hydrophilic drug-containing matrix * which controls the release of the drug through the use of one or more barrier layers, together with all improvements thereon and thereto, all to the extent and only to the extent that GJT now has or hereafter will have the right to grant licenses, immunities or other rights thereunder. "Gross Margin" shall have the meaning ascribed to such term in Section 7.2.2 hereof. "Jagotec" means Jagotec AG, a Swiss corporation, having a place of business at Seestrasse 47, CH6052 Hergiswil, Switzerland. "Jago Pharma" means Jago Pharma AG, a Swiss corporation, having a place of business at Eptingerstrasse 51, CH-4132 Muttenz, Switzerland. "* Development and Marketing Agreement" has the meaning ascribed to such term in the recitals above. "Know-how" means all information and data, which is not generally known, including, but not limited to, formulae, procedures, protocols, techniques, preclinical and clinical developmental and technical data, and results of experimentation and testing, which (a)(i) relate to the GEOMATRIX Technology or the Product, or the manufacture or use of same, or (ii) are necessary or useful to develop, make, use, sell or seek regulatory approval in a country in the Territory to make, use or sell the Product, and (b) are developed or acquired by or are under the control of a party to this Agreement. "Manufacturing Cost" shall mean the cost to APOTHECON and its Affiliates of * by APOTHECON or such Affiliates in the manufacture of all products produced in the facility or facilities in which the Product is manufactured. If the Product is manufactured in whole or in part by an unaffiliated Third Party, the costs to be taken into account shall be the amount paid to such Third Party plus any of the aforementioned costs that are incurred in completing the manufacture and delivery of the Product. "Net Sales" shall mean the applicable quantity of Product times "Net Sales Price." It shall be determined at the point of sale from APOTHECON (or from such of its Affiliates to whom APOTHECON may sell such Product) to a Person not Affiliated with APOTHECON. "Net Sales Price" of Product shall mean the invoiced sales price of the Product billed to independent customers of APOTHECON who are not its Affiliates, less (to the extent incurred and absorbed by APOTHECON or its Affiliates): (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Product; (b) actual freight and insurance costs in transporting the Product in final form to such customers; (c) cash, quantity and trade discounts, rebates, and other price adjustments or price reduction programs; (d) sales, use, value-added and other direct taxes, - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 3 - or any other governmental charge imposed upon the production, importation, use or sale of the Product; (e) customs duties, surcharges and other governmental charges in connection with the exportation or importation of the Product in final form; and (f) invoiced amounts with respect to the Product which are first outstanding and unpaid for * or more during the applicable reporting period, less such invoiced amounts outstanding and unpaid for * or more which are received or recovered during such reporting period; provided that such amounts under (f) shall not exceed * of APOTHECON during the term hereof. Notwithstanding the foregoing, if any Product is sold under * arrangements, then, prior to the First Commercial Sale of such Product and thereafter promptly following the end of each calendar year, APOTHECON and GJT shall * the "Net Sales Price' for sales of such Product under such * arrangements. Such formula shall be based on such factors as the parties * and shall appropriately and equitably allocate a sales price to Product sold under such * arrangements. "Patent Rights" shall mean (a) all patent applications heretofore or hereafter filed or having legal force in any country in the Territory owned by or licensed to GJT or its Affiliates or to which GJT or its Affiliates otherwise acquires rights, which claim the GEOMATRIX Technology or the Product, or the process of manufacture or use of the GEOMATRIX Technology or the Product, together with any and all patents that have issued or in the future issue therefrom, including utility, model and design patents and certificates of invention, including but not limited to those patent applications and patents listed on Exhibit 1.1(ii) hereto, and (b) all divisionals, continuations, continuations-in-part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications; all to the extent and only to the extent that GJT now has or hereafter will have the right to grant licenses, immunities or other rights thereunder. " Person" shall mean an individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority, or any other form of entity not specifically listed herein. "Product" shall mean a pharmaceutical composition containing * (including all commonly used and known salts and acids thereof) which is an *, and which incorporates, is based on and is derived by use of the GEOMATRIX Technology. "Region I" shall mean all *, and their respective territories and possessions. "Region II" shall mean all countries *, and their respective territories and possessions. "Region III" shall mean *, and their respective territories and possessions. "Region IV" shall mean all other countries of the world other than those located in Regions I-III, and their respective territories and possessions. "Registration" shall mean any form and type of registration, application, permit, license, authorization, approval, presentation or notification being requested by any competent authorities, government or body in a given country for the manufacturing, production, marketing, advertising, distribution, sale, trade, import, export or use of the Products of such authority, government or body, and shall include all acts, steps, applications, presentations, statements or other things which are necessary or useful to obtain the foregoing. "Research and Development Costs" shall mean (a) the following costs reasonably incurred by GJT relating to its development and Registration responsibilities hereunder for the Product: raw materials, energy, direct labor - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 4 - (salary and benefits) and reasonable allocable direct (but not indirect) overhead charges relating to the development and Registration of the Product, plus (b) reasonable out-of-pocket or other expenses paid or accrued by GJT to any Subcontractee performing any portion of such development and Registration, provided that expenses paid to an Affiliate Subcontractee under this clause (b) shall not exceed the amounts required to be paid under the GEOMATRIX Research and Development Agreement. All such costs shall be determined and allocated in accordance with generally accepted accounting principles, consistently applied. "Royalty Term" shall mean, with respect to each Product in a given country in the Territory in which the Product is sold by or through APOTHECON, the term for which a Valid Patent Claim remains in effect, and which would be infringed by the manufacture, use or sale of the Product in such country but for the license rights granted to APOTHECON under this Agreement. "Scale-Up" shall mean, with respect to the Product and a designated Manufacturing facility, the process of developing a reliable and practical method of manufacturing the Product in such designated manufacturing facility to effectuate the orderly transition from laboratory production of the Product to routine full-scale production of the Product in such designated facility in quantities necessary for commercial sale. Without limitation, Scale-Up includes (a) installation, evaluation and validation of the necessary equipment, (b) establishment, evaluation, validation and finalization of the necessary production and process controls, (c) demonstration of the ability to produce a batch size of at least * of the proposed commercial production batch for the Product at such facility, (d) demonstration of compliance with all other applicable laws, regulations and good manufacturing practices, (e) production of GMP bio-batches for pivotal clinical trials, and (f) transposition to routine full scale production. "Specifications" of the Product shall have the meaning set forth in Section 4.2 of the * Development and Marketing Agreement. "Subcontractee" shall have the meaning ascribed to such term in Article 14 of the * Development and Marketing Agreement. "Territory" shall mean *. "Third Party" means any Person other than GJT or APOTHECON, and includes their respective Affiliates and sublicensees except as otherwise specifically indicated. "Valid Patent Claim" shall mean a claim of an issued and unexpired patent included within the Patent Rights (or a claim under a patent application within the Patent Rights that is being diligently prosecuted by GJT or its Affiliates), which has not been held permanently revoked, or declared unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, .unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise (other than as required by applicable law to initiate the reissue of a patent). "Validated Manufacturing Scale-Up" shall mean, with respect to the Product and a designated Manufacturing facility, a reliable and practical method of manufacturing the Product in such designated manufacturing facility for routine full-scale production of the Product in such designated facility in quantities necessary for commercial sale. Without limitation, Validated Manufacturing Scale-Up includes (a) installation, evaluation and validation of the necessary equipment, (b) establishment, evaluation, validation and finalization of the necessary production and process controls, (c) successful demonstration and validation of the ability to produce GMP batch sizes equal to one hundred percent (100%) of the proposed commercial production batch for the Product at such facility, (d) demonstration of compliance with all other applicable laws, regulations and good manufacturing practices, and (e) transposition to routine full scale production. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 5 - ARTICLE 2 OWNERSHIP OF RIGHTS 2.1 Ownership of Rights. GJT represents and warrants that: 2.1.1 (a) it has the exclusive license under all rights of any nature regarding the Patent Rights which are the subject of the license granted under Article 3 below, and (b) it has the right to use, and to grant the licenses hereunder to use, the Know-how which is the subject of the license granted under Article 3 below, in each case, whether protected or not by any valid registrations, approvals or by any law or contract, and 2.1.2 it has not assigned, conveyed or otherwise encumbered by any agreement, either oral or written, any right, title or interest in and to the Patent Rights or Know-how which would be inconsistent with the rights granted APOTHECON hereunder. 2.2 No Taking Subject To. Except as may be expressly set forth in this Agreement, any sublicense or other rights granted APOTHECON hereunder are not subject to the terms and conditions of the GEOMATRIX License Agreement, the GEOMATRIX Manufacturing License Agreement, the GEOMATRIX Supply Agreement or the GEOMATRIX Research and Development Agreement, and APOTHECON shall not be bound by any obligations or undertakings of GJT under any of the aforesaid Agreements. 2.3 Enforcement of GEOMATRIX Agreements. [Intentionally omitted]. ARTICLE 3 GRANT OF LICENSE; BACK-UP SUPPLY; CONSENT AND WAIVER 3.1 Grant of License. GJT hereby grants to APOTHECON and APOTHECON accepts, upon the terms hereinafter set forth: 3.1.1 a * license, with the right to grant sublicenses, under the Patent Rights and Know-how, to research and develop Products for use in the Territory in accordance with the * Development and Marketing Agreement and this Agreement; and 3.1.2 an exclusive license, with the right to grant sublicenses, under the Patent Rights and Know-how, to use, distribute, market and sell Products in the Territory; and 3.1.3 subject to section 3.5 hereof, 8 license, with the right to grant sublicenses, under the Patent Rights and Know-how to make and have made the Product in the United States (or in its possessions or Puerto Rico) for use or sale in the Territory. Such rights shall continue until terminated in accordance with the terms of this Agreement. 3.2 Supply of Product. [Intentionally omitted.] 3.3 Other Suppliers. [Intentionally omitted]. 3.4 Initiation of Back-up Supply. [Intentionally omitted.] - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 6 - 3.5 Sublicenses to Certain Third Parties. Notwithstanding anything to the contrary in this Agreement, APOTHECON shall not sublicense any right and license granted hereunder to any unaffiliated Third Party in order to make Product whose research and development programs are primarily based on controlled release-formulation technology, without the prior written consent of GJT (not to be unreasonably withheld). APOTHECON shall deliver to GJT a copy of each sublicense under the Agreement within ten (10) business days after execution thereof (except that financial and marketing provisions and information may be redacted), which GJT shall maintain in confidence pursuant to Article 10 below. Any sublicense shall be subject to the terms and conditions of the Agreement, and any sublicensee shall be bound by all obligations and undertakings of APOTHECON hereunder (as they relate to the sublicensed rights). 3.6 Consent and Waiver Agreements. As a material inducement to APOTHECON's willingness to enter into this Agreement, GJT will cause, contemporaneously with the execution and delivery of this Agreement, each of the Consent and Waiver Agreements in the form attached as Exhibits 3.6 (i)-(iv) hereto to be executed and delivered to APOTHECON. 3.7 Opinions of Counsel. Contemporaneously with the execution and delivery of this Agreement,GJT will deliver opinions of counsel to itself, Jagotec and Jago Pharma AG, and an opinion of counsel to Genta Incorporated, in form and substance satisfactory to APOTHECON. ARTICLE 4 PRODUCT DEVELOPMENT 4.1 Information Exchange. Promptly following the Effective Date, each party agrees, subject to conflicting third party rights, to promptly furnish the other in writing all technical information and preclinical and clinical data developed or acquired relating to the Product in the control or possession of a party, including all information in the nature of improvements or modifications to the aforesaid and all toxicological, analytical, chemical data, and the like. All such information exchanged shall be treated as Confidential Information of the disclosing party in accordance with the * Development and Marketing Agreement. 4.2 Product Specifications. [Intentionally omitted]. 4.3 APOTHECON Product Development Duties. [Intentionally omitted.] 4.4 GJT Product Development Duties. [Intentionally omitted.] 4.5 Development and Registration Reports. [Intentionally omitted]. 4.6 Development Cost Funding. [Intentionally omitted]. ARTICLE 5 MANUFACTURE AND SUPPLY OF PRODUCT 5.1 Manufacture. [Intentionally omitted]. 5.2 Product Registrations. [Intentionally omitted] 5.3 Manufacturing and Registration Reports. [Intentionally omitted] 5.4 Product Purchase. [Intentionally omitted]. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 7 - 5.5 Acceptance; Rejection of Initial Launch Quantity of Product in Case of Non-Conformity. [Intentionally omitted.] 5.6 Process Changes. [Intentionally omitted]. 5.7 Warranties. [Intentionally omitted. 5.8 Inspection. [Intentionally omitted]. 5.9 [Intentionally omitted] 5.10 Payment Terms. [Intentionally omitted.] ARTICLE 6 MARKETING 6.1 Packaging and Labeling. Intentionally omitted]. 6.2 Commercialization. 6.2.1 Subject to Sections 6.2.4 and 6.2.5 below, in the event that APOTHECON in the exercise of its sole discretion does not, either through itself or an Affiliate, within * of the Product *, register or file for regulatory approval to market the Product i) *, ii) *, and iii) * APOTHECON's * where APOTHECON failed to so register or file for such regulatory approval, unless APOTHECON demonstrates why such filings were not commercially feasible. 6.2.2 Subject to Sections 6.2.4 and 6.2.5, APOTHECON exclusive rights under section 3.1.2 shall, at GJT's option, be converted to * with respect to all countries located in a particular Region within Regions I, II, III or IV where, having made the filings or registrations required to be made under section 6.2.1 to maintain such exclusivity in any such Region, APOTHECON thereafter fails to diligently prosecute and pursue such regulatory approval for the marketing of the Product for the number of (or specifically designated) countries indicated in 6.2.1(i)-(iii) above (and with respect to Region I, in the United States), unless APOTHECON demonstrates why continuing such prosecution was not commercially feasible. 6.2.3 Upon obtaining all applicable Registrations to market the Product for the number of (or specifically designated) countries indicated in 6.2.1(i)-(iii) above for a given Region (and with respect to Region I, in the United States), APOTHECON shall use its commercially reasonable efforts to market, or to cause the marketing and sales of, the Product for the number of (or specifically designated) countries indicated in 6.2.1(i)-(iii) above for a given Region (and with respect to Region I, in the United States), for so long a period of time as APOTHECON considers it commercially feasible to do so for such country(ies) in such Region. APOTHECON may, but shall not be required, to consult with GJT regarding marketing and sales strategies developed and applied by APOTHECON. APOTHECON shall be responsible for all - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 8 - costs of marketing and sales of Products incurred by it. Subject to Section 6.2.4, if APOTHECON ceases to use its commercially reasonable efforts to market, or cause the marketing and sales of, the Product for the number of (or specifically designated) countries indicated in 6.2.1 (i)-(iii) above for a given Region (and with respect to Region I, in the United States), and if substantial steps are not taken by APOTHECON to reverse same (should such efforts, in fact, have ceased) within sixty (60) days following receipt by APOTHECON of written notice from GJT stating that it believes such efforts to have ceased, then, provided, that APOTHECON ceased such efforts and that it intends to pursue conversion of APOTHECON's exclusive rights under section 3.1.2 to * with respect to such Region, such rights shall, at GJT's option, be so converted. 6.2.4 Prior to any conversion of APOTHECON's rights from exclusive to *, as provided for in each of Sections 6.2.1-6.2.3, GJT shall give APOTHECON written notice of its intention Dto do so and a detailed statement of the reasons therefor. APOTHECON shall have sixty (60) days thereafter to reply in writing as to whether it will go along with or disagrees with the proposed conversion. If APOTHECON disagrees, it will provide a detailed statement of its reasons therefor. The parties will meet and confer within 30 days thereafter to determine if the difference can be resolved. If not so resolved, the matter will be referred for resolution pursuant to the arbitration procedures set forth herein. 6.2.5 An election by GJT to convert APOTHECON's exclusive rights to * under any of sections 6.2.1-6.2.3 shall be GJT's sole and exclusive remedy, and GJT shall be deemed to have released and waived any claims or other causes of action, for and with respect to any and all damages of any type or nature whatsoever arising out of or in connection with the acts or omissions of APOTHECON or its Affiliates entitling GJT to so convert. 6.3 Covenant Not to License a Competitor. [Intentionally omitted] 6.4 Adverse Drug Reactions. [Intentionally omitted] 6.5 Product Recall. [Intentionally omitted]. ARTICLE 7 MILESTONE AND ROYALTY PAYMENTS 7.1 Additional Payments. Subject to Article 11 hereof: 7.1.1 If the Product is the * with the Product), then APOTHECON shall pay to GJT an *. 7.1.2 Upon demonstration of * to GJT; provided, that * at the date of such demonstration. 7.2 Royalties. Subject to Article 11 hereof and to sections 4.7.2 and 8.4 of the * Development and Marketing Agreement, Apothecon will pay GJT royalties of * during the Royalty Term, subject to the following: 7.2.1 * on Product samples distributed by APOTHECON, it being understood that such samples will be limited to use primarily in situations involving promotional photograph - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 9 - and account demonstrations necessary to secure sales contracts, and will not, in any event, exceed *. 7.2.2 If * in such country in the Territory, less the sum of (i) packaging (in final form) and labeling costs for the dosage form of the Product (with such costs, for purposes of *, * plus (ii) actual net distribution costs for the Product in such country, with such * has been approved for marketing in such country). Actual net distribution costs are defined as * distribution costs for the Product in such country *, plus (iii) APOTHECON's actual Manufacturing Costs for the Product sold in such country, other than the costs already taken into account under subsections 7.2.2(i) and (ii) above; provided, however, that for purposes of only, APOTHECON agrees that its actual Manufacturing Costs for the Product will * following First Commercial Sale in the United States, by an amount equal to the percentage change from the immediately preceding January 1 in the Consumer Price Index for All Urban Consumers, All Items (1986 = 100) (the "Index"), as published by the U.S. Department of Labor (or successor index or department). 7.2.3 All royalties shall cease for a given country in the Territory upon the first to occur of the following: (i) the expiration of the Royalty Term in such country; (ii) when the Product is no longer being marketed by or through APOTHECON in such country; or (iii) upon termination of this Agreement with respect to such country. 7.2.4 If the royalty rate specified in the Agreement should exceed the permissible rate established in any country in the Territory, the royalty rate for Net Sales in such country shall be adjusted to the highest legally permissible or government-approved rate. 7.3 Payment: Records; Audits 7.3.1 Payment; Reports. All royalty payments due under this Agreement shall be paid in U.S. dollars within 60 days of the end of each calendar quarter, unless otherwise specifically provided herein. Each payment of royalties shall be accompanied by a report of Net Sales of Products in sufficient detail to permit confirmation of the accuracy of the royalty payment made. 7.3.1.1 Exchange Rate; Manner and Place of Payment. Royalty payments and reports due pursuant to this Agreement shall be calculated and reported for each calendar quarter. Exchange conversion of foreign payments into U.S. Dollars shall be made as necessary at the rate of exchange reported in The Wall Street Journal as of the end of the fourth banking day preceding the end of the applicable royalty period or, for payments other than royalty payments, the fourth banking day preceding the date of payment. All payments owed under this Agreement shall be made by wire transfer, unless otherwise specified by the receiving party. 7.3.1.2 Late Payments. In the event that any payment, including royalty, milestone and research payments, due hereunder is not made when due, the payment shall accrue interest from - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 10 - * ; provided that in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit any party from exercising any other rights it may have as a consequence of the lateness of any payment. 7.3.2 Records and Audit. During the term of this Agreement and for a period of two years thereafter, the parties shall each keep complete and accurate records pertaining to the development of Products and sale or other disposition of Products in sufficient detail to permit the other party to confirm the accuracy of all payments and cost reimbursements due hereunder. Each party shall have the right to have a representative (including an independent, certified public accountant if so designated by a party) to audit such books and records to confirm (i) in the case of APOTHECON, its books and records pertaining to Gross Sales, Net Sales and royalty and other payments due for the then current year and the two preceding years, and (ii) in the case of GJT, its books and records pertaining to any costs or other charges for which it seeks payment or reimbursement hereunder. Such audits may be exercised during normal business hours not more frequently than once a year upon notice to such other party. The party requesting the audit shall bear the full cost of such audit unless such audit discloses a variance of * due under this Agreement. In such case, the audited party shall bear the full cost of such audit. The terms of this Section shall survive any termination or expiration of this Agreement for a period of *. 7.3.3 Taxes. All turnover, income and other taxes levied on account of the royalties and other payments accruing to each party under this Agreement shall be paid by the party receiving such royalty or other payment for its own account, including taxes levied thereon as income to the receiving party. 7.4 Exchange Control. If at any time legal restrictions prevent the prompt remittance of part or all royalties, purchase price for Product, or other payments due hereunder, APOTHECON shall have the right, in its sole discretion, to make such payments by depositing the amount thereof in local currency to GJT's account in a bank or other depository institution in such country imposing such restrictions. 7.5 Withholding Taxes. If provision is made in law or regulation for withholding of taxes of any type, levies or other charges with respect to any royalty or other amounts payable under this Agreement to any party or other Person, the party making such payment shall be entitled to deduct such tax, levy or charge from the royalty or other payment to be made by the party making same and pay such tax, levy or charge to the proper taxing authority. A receipt of payment of the tax, levy or charge secured shall be promptly delivered to the party entitled to the royalty or other payment, together with copies of all pertinent communications from or with such governmental authorities with respect thereto. Each party agrees to assist the other party in claiming exemption from such deductions or withholdings under any double taxation or similar agreement or treaty from time to time in force and in minimizing the amount required to be so withheld or deducted. ARTICLE 8 PATENT RIGHTS [Intentionally omitted] ARTICLE 9 TRADEMARKS 9.1 GEOMATRIX Trademark. The GEOMATRIX trademark, as licensed to GJT by Jagotec as of the date hereof, shall remain the sole and exclusive property of GJT or Jagotec, as the case may be. APOTHECON shall not, directly or indirectly through its officers, directors, employees, agents, Affiliates, customers or other Persons, acquire any proprietary interest or other right to such GEOMATRIX trademark, other than as provided in the Agreement. Notwithstanding the foregoing, GJT grants to APOTHECON a non-exclusive, royalty-free - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 11 - license (including the right to grant sublicenses in the same manner as provided herein for the GEOMATRIX patent rights) to use such GEOMATRIX trademark in connection with, and for the development, use and sale of, the Products under the Agreement. GJT shall control, at its sole expense, the prosecution of any litigation or other action to abate the unauthorized use of such GEOMATRIX trademark, and the defense of any claim in any litigation or other action alleging that the use of such GEOMATRIX trademark infringes the rights of any Third Party. A list of such GEOMATRIX Trademarks for the Territory covered by this Agreement are set forth on Exhibit 9.1 hereto. 9.2 Registration of Other Trademarks. APOTHECON shall have the right, in its sole discretion and expense, to register and maintain other trademarks of its choice to be used in connection with the Products. Such other trademarks shall be held in the name of APOTHECON. 9.3 Use of GEOMATRIX Trademark. APOTHECON shall be entitled to use, as it considers appropriate in the exercise of its sole and absolute discretion and without being obligated in any way, expressly or impliedly to do so, the GEOMATRIX trademark on the label for the Product. APOTHECON agrees to use the GEOMATRIX trademark in an appropriate manner in print advertising for the Product and in the package insert for the Product, it being understood that the APOTHECON name and marks and the Bristol-Myers Squibb names and marks shall have preeminence. APOTHECON may also use such other trademarks as it deems appropriate in connection with the development, use, distribution, marketing and sale of the Products. Except as otherwise set forth in the Agreement or as otherwise agreed to in writing by GJT, APOTHECON shall not use such GEOMATRIX trademark and such other trademarks in any manner whatsoever which infringe the trademarks or other rights owned by GJT or its Affiliates. ARTICLE 10 CONFIDENTIALITY [Intentionally omitted] ARTICLE 11 TERM AND TERMINATION 11.1 Term. This Agreement shall commence effective upon the Effective Date. The Agreement shall continue until terminated upon the earlier to occur of the following: (i) pursuant to Section 11.2 below, (ii) by mutual written agreement, or (iii) on a country-by-country basis in the Territory upon the expiration of the Royalty Term in such country. Upon termination of this Agreement, in whole or in part, pursuant to section 11.1(ii), the parties will determine the disposition of rights hereunder as part of such mutual termination. Upon expiration of this Agreement as to any country in the Territory under Section 11.1(iii) above, APOTHECON shall have an irrevocable, perpetual, fully paid-up and royalty-free, non-exclusive right and license to use the Know-how in order to develop, make, have made, use and sell Products in such country. 11.2 Termination. This Agreement may be terminated in accordance with any of the following (all of which may be exercised independently of the other): 11.2.1 Termination Without Cause. APOTHECON may elect at any time, for any reason and without cause, to terminate this Agreement, in whole or in part as to one or more countries, upon sixty (60) days written notice to GJT: 11.2.1.1 If * elects to so terminate under this section 11.2.1 prior to filing of the ANDA in the United States, then: (i) such termination shall be * - 12 - to *; (ii) all rights and licenses granted by GJT hereunder shall * with respect to such country(ies) so terminated, provided, further, that if * so elects to terminate under this section 11.2.1 in the United States, it shall be deemed a termination as to the *; (iii) * of any * that are scheduled or may be made in the future under sections 4.6 of the * Development and Marketing Agreement and 7.1 hereof (and the subsections thereunder), provided that such termination is exercised with respect to the United States; (iv) all Registrations pertaining to the marketing of the Product shall be * as to the affected country(ies) and the * under the * Development and Marketing Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; (v) the * Development and Marketing Agreement shall * with respect to the development and marketing of the Product in such country(ies); and (vi) * and its Affiliates shall thereafter be entitled to exercise such rights as they may have under the GEOMATRIX Agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to *; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates. 11.2.1.2 If * elects to so terminate this Agreement under this section 11.2.1 subsequent to the * in the United States, then: (i) such termination shall be to *; (ii) all rights and licenses granted by * hereunder shall * with respect to such country(ies) so terminated; (iii) * shall be relieved of any payments that are scheduled or may be made in the future under section 7.1 hereof and section 4.6 of the * Development and Marketing Agreement (and the subsections thereunder), provided that such termination is exercised with respect to the United States; (iv) * and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates); (v) the * Development and Marketing Agreement shall terminate with respect to the development and marketing of the Product in such country(ies); (vi) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under the * Development and Marketing Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; and (vii) * shall pay to * the same *, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to *, as * would otherwise have paid (absent such termination) hereunder to * (or on the * of such *, as the case may be) of the Product in the country(ies) to which such termination applies (with such * to be paid by GJT and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the * paid to * equal the aggregate amount that had been paid by * to * prior to such termination under the aforesaid sections 4.6 and 7.1 (and the subsections thereunder), at which time the *. 11.2.2 Termination for Default. Except as otherwise provided in Article 13 below, upon or after the breach of any material provision of the Agreement by a party (unless such failure results from, or is caused by, adherence required by a party to applicable laws or governmental regulations), if the breaching party has not cured such breach within sixty (60) days after notice thereof by the other party, the nonbreaching party may terminate this Agreement; provided, however, if any default is not capable of being cured within such 60-day period and the breaching party has diligently undertaken to cure such default within such 60-day period and continues to take diligent steps to cure same as soon as commercially - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 13 - feasible thereafter under the circumstances, the nonbreaching party shall have no right to terminate the Agreement. In cases where the breach involves an act or omission by a party specifically and directly relating to a country or countries, termination shall be limited to the country or countries affected by such breach, as opposed to termination of the entire Agreement, and the remedies listed in section 11.2.2.1-11.2.2.4 below shall be limited to such country or countries. 11.2.2.1 If GJT breaches this Agreement prior to the date that initial commercial launch occurs in the United States and in a manner that entitles * to terminate this Agreement pursuant to this section 11.2.2, then, if * elects to terminate this Agreement: (i) all rights and licenses granted to * under this Agreement shall revert to GJT; (ii) no further payments shall be due from * with respect to any of the milestones not yet paid that are set forth in Section 4.6 of the * Development and Marketing Agreement and section 7.1 hereof (and the subsections thereunder); (iii) the * Development and Marketing Agreement shall terminate with respect to the development and marketing of the Product in such country(ies); (iv) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under the * Development and Marketing Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product (provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates); (v) * shall pay to * the same *, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to *, as * would otherwise have paid (absent such termination) hereunder to * (or on the * of such *, as the case may be) of the Product in the country(ies) to which such termination applies (with such * to be paid by * and its Affiliates until expiration of the Royalty Term in each such country), until such time as the * paid to * equal the aggregate amount that had been paid by * to GJT prior to such termination under said sections 4.6 and 7.1 (and the subsections thereunder), at which time the * from time to time thereafter; and (vi) such termination shall be without prejudice to any other rights or remedies available to * arising from such breach. 11.2.2.2 If GJT breaches this Agreement subsequent to the date that initial commercial launch occurs in the United States and in a manner that entitles APOTHECON to terminate this Agreement pursuant to this section 11.2.2, then, if APOTHECON elects to terminate this Agreement, then the provisions of subsections 11.2.2.1 (i)-(vi) apply as though fully set forth herein. 11.2.2.3 If APOTHECON breaches this Agreement prior to the date that initial commercial launch occurs in the United States and in manner that entitles GJT to terminate this Agreement pursuant to this section 11.2.2, then GJT may elect either: (A) to pursue all claims and causes of action available to it at law or in equity for such breach, or (B) to terminate this Agreement, in which event: (i) * shall be deemed to waive and release all claims and causes of action available to it at law or in equity for such breach, and such termination shall be without penalty or liability to *; (ii) all rights granted by * hereunder (including without limitation under Articles 3 and 9 hereof) shall * with respect to such country(ies) so terminated; (iii) * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 14 - will be relieved of any * that are scheduled or may be made in the future under section 4.6 of the * Development and Marketing Agreement and section 7.1 hereof (and the subsections thereunder); (iv) all Registrations pertaining to the marketing of the Product shall be as to the affected country(ies) and the * under the * Development and Marketing Agreement shall be provided to and thereafter may be * * to develop, manufacture and market the Product; (v) the * Development and Marketing Agreement shall terminate with respect to the development and marketing of the Product in such country(ies); and (vi) * and its Affiliates shall thereafter be entitled to * as they may have under the GEOMATRIX Agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to *; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, or other intellectual property rights owned or controlled by * or its Affiliates. 11.2.2.4 If APOTHECON breaches this Agreement subsequent to the date that initial commercial launch occurs in the United States and in manner that entitles GJT to terminate this Agreement pursuant to this section 11.2.2, then GJT may elect either: (A) to pursue all claims and causes of action available to it at law or in equity for such breach, or (B) to terminate this Agreement, in which event: (i) * shall be deemed to waive and release all claims and causes of action available to it at law or in equity for such breach, and such termination shall be without penalty or liability to *; (ii) all rights and licenses granted by GJT hereunder shall * with respect to such country(ies) so terminated; (iii) * shall be relieved of any * that are scheduled or may be made in the future under section 7.1 hereof and section 4.6 of the * Development and Marketing Agreement (and the subsections thereunder), provided that such termination is exercised with respect to the United States; (iv) * and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by * or its Affiliates); (v) the * Development and Marketing Agreement shall terminate with respect to the development and marketing of the Product in such country(ies); (vi) all Registrations pertaining to the Product shall be * as to the affected country(ies) and the * under the * Development and Marketing Agreement shall be provided to and thereafter may be * to develop, manufacture and market the Product; and (vii) * shall pay to * the same *, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to *, as * would otherwise have paid (absent such termination) hereunder to * (or on the * of such *, as the case may be) of the Product in the country(ies) to which such termination applies (with such * to be paid by * and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the * paid to - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 15 - * equal the aggregate amount that had been paid by * to * prior to such termination under the aforesaid sections 4.6 and 7.1 (and the subsections thereunder), at which time the *. 11.2.3 Termination for Failure to Meet Milestones. 11.2.3.1 If all bioequivalence testing, all pivotal clinical and bioequivalence studies shall not have been completed, and Validated Manufacturing Scale-Up capabilities (bio-batches) for the Product shall not have been completed and demonstrated to APOTHECON's reasonable satisfaction, * so as to enable manufacture and marketing of the Product in the United States and other major markets designated by APOTHECON, and APOTHECON is not otherwise entitled to terminate this Agreement pursuant to any other provision of this Article 11: a) APOTHECON will have the right to immediately terminate this Agreement at any time thereafter until *, or b) allow additional time for the completion and demonstration of same until *. If APOTHECON elects to terminate this Agreement with respect to one or more countries pursuant to option (a) above, then the provisions of section 11.2.1.2(i)-(vii), inclusive, shall apply. If APOTHECON elects not to terminate this Agreement in accordance with (a) above, then all payments due after under section 7.1 hereof shall be * shall not apply if (A) the failure to so demonstrate and complete the foregoing was due to * failure to use all reasonable efforts to Scale-up and to manufacture adequate quantities of conforming Product on a timely basis (and * shall have given reasonable advance notice of its requirements) and/or failure to comply in all material respects with the Specifications and written instructions provided * with respect to the use of the GEOMATRIX Technology in connection with the manufacture of the Product, and (B) * shall have fulfilled its obligations hereunder in all material respects with respect to the transfer and training in the use of the GEOMATRIX Technology. 11.2.3.2 If, notwithstanding APOTHECON's election under section 11.2.3.1(b) above, all bioequivalence testing, all pivotal clinical and bioequivalence studies shall not have been completed, and Validated Manufacturing Scale-Up capabilities (bio-batches) for the Product shall not have been completed and demonstrated to APOTHECON's reasonable satisfaction, by * so as to enable manufacture and marketing of the Product in the United States and other major markets designated by APOTHECON, and APOTHECON is not otherwise entitled to terminate this Agreement pursuant to any other provision of this Article 11, then APOTHECON shall be entitled to elect, at any time within thereafter, to terminate this Agreement, in which event the provisions of section 11.2.1.2(i)-(vii), inclusive, shall apply. If APOTHECON elects not to terminate this Agreement in accordance with this section 11.2.3.2, then * shall not apply if (A) the failure to so demonstrate and complete the foregoing was due to * failure to use all reasonable efforts to Scale-up and to manufacture adequate quantities of conforming Product on a timely basis (and * shall have given reasonable advance notice of its requirements) and/or - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 16 - failure to comply in all material respects with the Specifications and written instructions provided * with respect to the use of the GEOMATRIX Technology in connection with the manufacture of the Product, and (B) * shall have fulfilled its obligations hereunder in all material respects with respect to the transfer and training in the use of the GEOMATRIX Technology. 11.2.4 Other Termination. 11.2.4.1 Termination for Misrepresentation. In the event that a representation or warranty of GJT hereunder is untrue in any material respect, APOTHECON shall be entitled to terminate this Agreement upon thirty (30) days' written notice to GJT. If APOTHECON elects to so terminate, the rights and actions indicated in sections 11.2.2.1 (i)-(vi), inclusive, shall apply as though set forth herein. 11.2.4.2 Termination for Failure to Repay Working Capital Agreement. If GJT fails to make a payment when due under its Restated Working Capital Agreement dated as of May 12, 1995 (as amended by a First Amendment thereto dated as of July 11, 1995, and as the same may be amended from time to time hereafter, and including any successor agreement thereto) between GJT and Genta, Incorporated, a Delaware corporation ("Genta"), GJT shall promptly inform APOTHECON of same, and APOTHECON may elect (by delivering a writing to GJT, Jagotec and Jago Pharma of APOTHECON's intent to exercise such option) at any time thereafter to terminate this Agreement and to require each of Jagotec and Jago Pharma to, and Jagotec and Jago Pharma agree that each of them will, promptly enter into a new, separate agreement with APOTHECON under which (i) Jago Pharma and Jagotec will, to the extent each has the right to do so, ensure that all licenses, sublicenses and other rights and privileges granted by GJT under this Agreement shall continue without change, (ii) Jago Pharma will assume all rights and obligations of GJT under articles 3, 4, 5, 6, 11.4.5, 12, 14, 15. 1, and 15.2 of the * Development and Marketing Agreement and will promptly cure any defaults of GJT under said articles, any payments to be made thereafter by APOTHECON under said articles shall thereafter be paid to Jago Pharma, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles, and (iii) Jagotec will assume all rights and obligations of GJT under article 8 of the * Development and Marketing Agreement and under articles 3.1, 6, 7 and 9 hereof, any payments to be made thereafter by APOTHECON under said articles shall thereafter be paid to Jagotec, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles; provided, however, that such new agreement with Jagotec shall provide that all payments that would otherwise have been made thereafter by APOTHECON under article 7 hereof shall continue thereafter to be paid to GJT by APOTHECON, until APOTHECON is duly instructed otherwise in writing by GJT and Jagotec. 11.2.5 No Effect on Remedies. Where APOTHECON elects not to terminate the Agreement pursuant to section 11.2.2.1, 11.2.2.2, or 11.2.4, such decision shall be without prejudice to any other rights or remedies available to APOTHECON arising from such breach or untrue statement. 11.2.6 Injunctive Relief. If: i) GJT or its Affiliates breach section 3.1 hereof or section 6.3 of the * Development and Marketing Agreement, or ii) APOTHECON or its Affiliates breach section 3.1 hereof, then the parties acknowledge and agree that such breach will cause irreparable injury to the nonbreaching party or its Affiliates, for which monetary damages, even if available, will be inadequate and difficult, if not impossible, to accurately ascertain. Accordingly, the parties agree that the nonbreaching party or its Affiliates may seek and obtain injunctive relief against the breach or threatened breach of the undertakings - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 17 - set forth in this section 11.2.6(i) and (ii), in addition to any other rights or remedies which may be available to the nonbreaching party or to its Affiliates at law or in equity. 11.2.7 Effect on Continuing Business. In the event of a termination of this Agreement in which the rights to market the Product revert to GJT hereunder, GJT shall not be under any obligation, express or implied, to use the Registrations and data transferred to it or to continue to commercialize the Product, and APOTHECON shall not be under any obligation, express or implied, to continue to transfer any inventory of Product to GJT or to manufacture Product for GJT following such termination. 11.3 Effect of Bankruptcy. If a party becomes insolvent or admits in writing its inability to pay its debts as they mature or applies for or consents to the appointment of a receiver or trustee for any of its properties; or a receiver or trustee is appointed for such party or a substantial portion of its properties and is not discharged within ninety (90) days; or any bankruptcy, reorganization, debt arrangement, dissolution, liquidation or other proceeding under any bankruptcy or insolvency law is instituted by or against such party and, if instituted against such party, it is consented to by such party or remains undismissed for ninety (90) days, then 11.3.1 Notwithstanding any such event, such party shall remain obligated to fulfill its obligations and covenants hereunder, and any failure to do so or other breach hereunder shall entitle the other party to terminate this Agreement in accordance with section 11.2 hereof; and 11.3.2 It is the parties' desire that, if any such receiver, trustee, judge, arbitrator or other adjudicator conducting or controlling such proceedings on behalf of a party should hold that any obligations, covenants or duties of such party hereunder should be suspended or declared unenforceable, in whole or in part, then the rights and benefits granted to the other party hereunder shall remain in full force and effect, and that any such obligations, covenants or duties shall be reformed by such receiver, trustee, judge, arbitrator or other adjudicator so as to be enforceable to the maximum extent permitted by applicable law and to permit any suspension to be lifted at the earliest practicable time. 11.4 Other Effects. 11.4.1 Effect of Reversion. Where a termination of this Agreement, as provided for in this Article 11.2, results in a reversion of rights to GJT that had been granted to APOTHECON under Articles 3 and 9 hereof, APOTHECON shall not thereafter make any use of the Patent Rights and Trademarks, and, except to the extent the same shall have entered the public domain, the Know-how, with respect to the country(ies) affected by such termination. 11.4.2 Survival. The provisions of (i) Articles 2.2 and 9 shall survive any expiration of this Agreement under section 11.1 (iii), and (ii) Articles 7.3-7.5, 11.2.4.1, 11.2.5, 11.2.7, 11.4-11.6, 16.2, 16.3 and 16.4 shall survive any expiration or termination of the Agreement, in whole or in part, as well as such other terms, obligations and rights which, by their intent or meaning, are intended to so survive. The expiration or termination of the Agreement shall not relieve either party of payment of any amounts that may be owed to the other based upon events occurring or rights accruing prior to the date of termination, and shall be without prejudice, except as provided in sections 11.2.2.3, and 11.2.2.4, to any rights and obligations of either party accruing prior to, or that may be based on acts or omissions of the other party occurring prior to, the effective date of termination. 11.4.3 Undeveloped Products. The Products licensed hereunder shall not be treated as "Undeveloped Products" under sections 11.2.3 of the GEOMATRIX License Agreement and GEOMATRIX Manufacturing License Agreement. - 18 - 11.4.4 No Waiver. The right of either party to terminate this Agreement, as hereinabove provided, or to pursue rights and remedies available to it at law or in equity, shall not be affected in any way by its waiver of, or failure to take action with respect to, any previous defaults or breaches hereunder. 11.4.5 Use of Data Following Termination. Notwithstanding any provision of this Agreement that may state or imply to the contrary, in the event that this Agreement terminates for any reason, it is understood and agreed that all data generated pursuant to activities funded by APOTHECON pursuant to section 4.6 of the * Development and Marketing Agreement and transferred or made available to GJT or its Affiliates under this Agreement (including without limitation pursuant to 11.2.1.1(iv), 11.2.1.2(vi), 11.2.2.1(iv), 11.2.2.3(iv), or 11.2.2.4(vi) of this Agreement) may not thereafter be used by, and may not thereafter be made available to or disclosed to any Third Party by, GJT or any of its Affiliates (including any Jagotec and Genta Incorporated, a Delaware corporation, and their respective Affiliates) in the development, or registration or filing for regulatory approval, of any product other than the Product (including without limitation not using and not making such data available for developing or filing of an NDA in the United States for a * product based on, incorporating, or derived from the use of, the GEOMATRIX Technology), without the prior written consent of APOTHECON (which consent may be given or withheld in its sole and absolute discretion). 11.5 Survival of Rights and Sublicenses. 11.5.1 In the event of an event that the GEOMATRIX License Agreement and/or the GEOMATRIX Manufacturing License Agreement is or are terminated, for whatever reason and whether by action taken by Jagotec, GJT or both, this Agreement, and all licenses, sublicenses and other rights and privileges granted or extended to APOTHECON hereunder, shall continue and remain in full force and effect in accordance with their terms, without further action or election on the part of APOTHECON, and notwithstanding any provision (including without limitation section 11.4) to the contrary in the GEOMATRIX License Agreement and the GEOMATRIX Manufacturing Agreement. 11.5.2 If GJT breaches this Agreement in a manner that entitles APOTHECON to terminate same pursuant to section 11.2.2.1 or 11.2.2.2, or makes an untrue statement that entitles APOTHECON to terminate same pursuant to section 11. 2.4.1, or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any other remedies available to it hereunder or at law or in equity, APOTHECON may (A) elect any remedies available to it under any applicable Waiver and Consent and/or (B) elect (by delivering a writing to GJT, Jagotec and Jago Pharma of APOTHECON's intent to exercise its rights under this section 11.5.2) to terminate this Agreement with GJT, and: (i) any licenses, sublicenses and other rights and privileges granted by GJT under this Agreement shall continue without further action or election on the part of APOTHECON, with APOTHECON continuing to have the same rights and obligations as are set forth in this Agreement, notwithstanding any provision to the contrary contained in section 11.4 of the GEOMATRIX License Agreement (as the same may be thereafter amended, supplemented or extended) or in section 11.4 of the GEOMATRIX Manufacturing License Agreement (as the same may be thereafter amended, supplemented or extended), (ii) Jago Pharma and Jagotec will, to the extent each has the right to do so, ensure that all licenses, sublicenses and other rights and privileges granted by GJT under this Agreement shall continue without change, (iii) Jago Pharma will enter into an agreement with APOTHECON under which Jago Pharina will assume all rights and obligations of GJT under articles 3, 4, 5, 6, 11.4.5, 12, 14, 15.1, and 15.2 of the * Development and Marketing Agreement, will promptly cure any defaults of GJT under said articles, any payments to be made thereafter by APOT'HECON under said articles shall thereafter be paid to Jago Pharma, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles, and (iv) Jagotec will enter into an agreement with APOTHECON under which Jagotec will assume all rights and obligations of GIT under article 8 of the * Development and Marketing Agreement and under articles 3.1, 6, 7 and 9 hereof, any payments to be made thereafter by APOTHECON under shall thereafter be paid to Jagotec, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles. Upon request, Jagotec and Jago Pharma AG will deliver to APOTHECON satisfactory confirming written documentation of same. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 19 - 11.5.3 In no event shall APOTHECON be required, as a condition to the continuance or continuing validity of any license, sublicense or other rights granted by GJT under this Agreement, to give written notice to Jagotec of any election to continue such rights, to assume all rights and obligations of GJT, and/or to promptly cure all defaults of GJT, as otherwise required under section 11.4 of each of the GEOMATRIX License Agreement and GEOMATRIX Manufacturing License Agreement. 11.6 Transfer of Registrations and Rights. In the event this Agreement terminates, and GJT is entitled hereunder (and notifies APOTHECON in writing that it desires) to continue the development and marketing of the Product in the country(ies) affected by such termination, the parties agree to reasonably cooperate to ensure an orderly transition for a reasonable period (not to exceed *) following such termination, and the parties will effectuate an orderly transfer of any Registrations owned or controlled by APOTHECON with respect to the Product in such country(ies) to GJT; provided, however, that in no event shall the foregoing create or imply any right to use or license under any patent rights, copyright rights, trademarks or trade names (including those for the Product), know-how, or other intellectual property rights owned or controlled by APOTHECON or its Affiliates. Such transfer(s) in such country(ies) shall be *; provided that * shall bear all * into its name in such country(ies) and shall reimburse for any out-of-pocket costs incurred by it in connection with the foregoing. * shall be entitled to retain, subject to the * as provided for in section 7.2, the amount received by it on * during such transition period and shall use reasonable efforts to comply with the terms of this Agreement. For any other termination of this Agreement, such termination shall not result in any transfer of any Registrations owned or controlled by APOTHECON to GJT or Jagotec, and regardless of any provision (such as sections 11.5 of the GEOMATRIX License Agreement and of the GEOMATRIX Manufacturing License Agreement) to the contrary in any agreement between GJT and any one or more of its Affiliates. ARTICLE 12 INDEMNITY [Intentionally omitted] ARTICLE 13 FORCE MAJEURE Neither party hereto shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached the Agreement for failure or delay in fulfilling or performing any term of the Agreement, and the time required for performance shall be extended by the period occasioned by such cause, when such failure or delay is caused by or results from causes beyond the reasonable control of the affected party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other party hereto, but not failure or delay caused by subcontractors of a party who breach their obligations hereunder. The party so affected shall give prompt notice to the other party of such cause, and shall use its best efforts to minimize the delay in performance and adverse effects occasioned by such cause. ARTICLE 14 SUBCONTRACTEES [Intentionally omitted] - 20 - ARTICLE 15 ASSIGNMENT; SEVERABILITY; REPRESENTATIONS AND WARRANTIES 15.1 Assignment. Except to the extent specifically set forth in this Agreement, this Agreement may not be assigned or nor may the performance of any duties hereunder be delegated or transferred, nor may any right or obligation hereunder be assigned or transferred, by either party, without the prior written consent of the other party (which consent shall not be unreasonably withheld); provided, however, that either party may, without such consent, assign the right to receive payments to an Affiliate, and may assign the Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business assets to which this Agreement relates, or in the event of merger, consolidation, or similar reorganization (or change in control or similar transaction); and provided, further, that in the case of an assignment, the assigning party shall remain liable as a continuing guarantor under any such assignment of all obligations and duties assumed by such Affiliate, and the other party shall have entered into a separate counterpart agreement with any such Affiliate. Such counterpart agreement shall be in the same form as this Agreement, except for necessary changes to reflect the extent of the assignment, the substitution of the Affiliate's name and the effective date of the assignment. 15.2 Severability. Each party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of the Agreement be or become invalid, the parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into the Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of the Agreement shall not affect the validity of the Agreement as a whole, unless the invalid provisions are of such essential importance to the Agreement that it is to be reasonably assumed that the parties would not have entered into the Agreement without the invalid provisions. 15.3 General Representations and Warranties. Each party represents and warrants to the other the following: 15.3.1 Existence and Power. It (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (b) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under the Agreement. 15.3.2 Authorization and Enforcement of Obligations. It (a) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (b) has taken all necessary action on its part to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder. The Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. 15.3.3 No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the Agreement have been obtained. 15.3.4 No Conflict. The execution and delivery of the Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations, and (b) do not conflict with, or constitute a default under, any contractual obligation of it. - 21 - 15.3.5 DISCLAIMER OF WARRANTIES. NOTHING IN THE AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY GJT THAT ANY RESEARCH AND DEVELOPMENT PERFORMED BY IT UNDER THIS AGREEMENT WILL BE SUCCESSFUL, IN WHOLE OR IN PART, OR THAT ANY PRODUCTS WHICH MAY BE DEVELOPED WILL BE SUCCESSFUL IN THE COMMERCIAL MARKETPLACE. APOTHECON ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE SET FORTH HEREIN OR AS MAY BE SET FORTH IN A WRITING SIGNED BY GJT, GJT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCTS WHICH MAY BE DEVELOPED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 15.4 GJT Representations and Warranties. GJT represents and warrants to APOTHECON as of the Effective Date the following: 15.4.1 The Patent Rights listed on Exhibit 1.1(ii) and the Trademarks listed on Exhibit 9.1 list all Patent Rights and GEOMATRIX Trademarks owned or controlled by GJT in the Territory or to which GJT has the right to grant the license rights, sublicense rights and other rights granted hereunder, and which may be useful to the manufacture, development, use or sale of Product, and such Exhibits specify the jurisdiction(s) by or in which such right has been issued or registered or in which an application for such issuance or registration has been filed, including respective registration or application numbers. To the best knowledge of the current officers and directors of GJT, the issued Patent Rights are valid and in full force and effect. 15.4.2 Except as disclosed on Exhibit 1.1(ii), to the best knowledge of GJT's current officers and directors, (i) the use of such Know-how and any Patent Rights in the manufacture, use and sale of the Product does not infringe upon any patent rights, copyrights or other proprietary rights of any Affiliate of GJT or any non-Affiliated,Third Party in the Territory; (ii) GJT has no knowledge of any infringement by any Third Party of any of the Patent Rights in the Territory; and (iii) GJT and each its Affiliates are not subject to any outstanding order, judgment or decree of any court or administrative agency, and each has not entered into any stipulation or agreement, restricting its use of the Patent Rights in connection with the manufacture, development, use or sale of Products in the Territory. 15.4.3 There is no action, suit or proceeding pending or, to the knowledge of its current officers and directors, that has been threatened in writing by any Third Party against GJT or its Affiliates which, if adversely determined, would have a material adverse effect upon the ability of APOTHECON to use the Patent Rights or Know-how in the manufacture, use and/or sale of any Product in the Territory. 15.4.4 The Know-how and Patent Rights licensed and/or sublicensed by GJT to APOTHECON pursuant to this Agreement were not been obtained by GJT or its Affiliates in violation of any contractual or fiduciary obligation to which GJT or any of its Affiliates, any predecessor-in-interest or any of its or their employees or contractors is or was a party or by misappropriation of the trade secrets of any Third Party, and the manufacture, use or sale by or through GJT, APOTHECON and their respective Affiliates of any Product using such Know-how and Patent Rights does not and will not violate any such contractual or fiduciary obligation owed to any such Third Party or render APOTHECON liable for the payment of any royalty attributable to or arising out of any such contractual or fiduciary obligation or any such misappropriation. 15.4.5 During the term of this Agreement, GJT or its Affiliates will not disclose to APOTHECON and its Affiliates any proprietary information, such as trade secrets, which is confidential to any non-Affiliated Third Party or institution and which GJT is not entitled to disclose in accordance with the terms of this Agreement. - 22 - 15.4.6 Except as otherwise provided in this Agreement, the rights under the Know-how or any Patent Rights that have been or will be licensed to APOTHECON under this Agreement are not and will not be licensed to any other party to make, have made, use or sell Products in the Territory. 15.4.7 There are no licenses under any patent rights, and, to the best knowledge of the current officers and directors of GJT, under any other intellectual property or other proprietary rights owned or controlled by any GJT Affiliate or Third Party which are used by GJT in connection with the manufacture, development, use or sale of Product in the Territory, other than those listed on Exhibits 1.1(ii) and 9.1. ARTICLE 16 MISCELLANEOUS 16.1 Notices. Any consent, notice or report required or permitted to be given or made under the Agreement by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor and except as otherwise provided in the Agreement shall be effective upon receipt by the addressee. If to GJT: Genta Jago Technologies BV Swiss Branch Grundstrasse 12 6343 Rotkreuz, Switzerland Attention: Executive Management Committee with copies to: Genta Incorporated 3550 General Atomics Court San Diego, CA 92121, U.S.A. Attention: Thomas H. Adams, Ph.D. and: Pillsbury Madison & Sutro 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. Attention: Thomas E. Sparks, Jr., Esq. and: Jagotec AG c/o Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz, Switzerland Attention: Dr. Jacques Gonella and: Rinderknecht Glaus & Stadelhofer Beethovenstrasse 7 Postfach 4451 CH-8002 Zurich, Switzerland Attention: Dr. Thomas M. Rinderknecht If to APOTHECON: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: President - 23 - with a copy to: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: Corporate Legal Counsel 16.2 Applicable Law. The Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. 16.3 Arbitration. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with the Agreement or any term or condition hereof, or the performance by either party of its obligations hereunder, whether before or after termination of the Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other party. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 16.3, shall be determined by binding arbitration pursuant to this Section 16.3. 16.4 Excise Taxes. If the recipient of any payment hereunder, received in consideration for providing any goods or services or granting any rights hereunder, shall have the obligation under any applicable law, regulations or governance to add, include or pay to the applicable governmental authority, any value added taxes, turn-over taxes, excise taxes, sales taxes or similar taxes or levies (collectively, "Excise Taxes') on the amount of such payment received hereunder, then the recipient shall be entitled to receive the amount of any Excise Taxes on the amount of such payment hereunder as evidenced by an invoice from the recipient to the payor of such payment hereunder. The payor of such payment hereunder shall pay the amount of any such Excise Taxes thereon prior to the date on which the recipient is required to pay or account for such Excise Taxes to the applicable governmental authority. The recipient of any such payment hereunder shall use reasonable efforts to minimize any Excise Taxes on any such payments hereunder, and promptly shall take all such actions and execute all such instruments as the payor of such payment hereunder reasonably requests to enable the payor to apply for and, if possible, to receive prompt refund or credit of the amount of such Excise Taxes on such payments hereunder. 16.5 Headings. The titles and headings used in the Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of the Agreement. A reference to an Article (or section) shall be deemed to include reference to all sections and subsections thereunder. No terms and conditions contained in any purchase order, acknowledgment, invoice, bill of lading, acceptance or other preprinted form issued by either party shall be effective to the extent they are inconsistent with or modify the terms and conditions contained herein. Each purchase order shall contain the requested delivery date(s), quantity purchased, routing instructions and destination. 16.6 Independent Contractors. It is expressly agreed that the parties shall be independent contractors and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. Neither party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on the other party, without the prior consent of the other party to do so. 16.7 Waiver. The waiver by either party hereto of any right hereunder or the failure to perform or of a breach by the other party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other party whether of a similar nature or otherwise. - 24 - 16.8 Amendments. The provisions of the Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the parties to the Agreement. 16.9 Entire Agreement. The terms, covenants, conditions and provisions contained in the Agreement, including the exhibits hereto and any other agreement (including the * Development and Marketing Agreement) to the extent herein referenced, together with all of the documents referred to herein as having been provided by one party to another (pertaining in part to the Territory in which APOTHECON may exercise its manufacturing rights hereunder), constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. 16.10 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16.11 Publicity. Neither party to this Agreement shall employ or use the name of the other party or any Affiliate of such party in any publication or promotional materials or in any form for public distribution, except as required by law, without prior written consent of said other party in each instance (which consent shall not be unreasonably withheld). IN WITNESS WHEREOF, the parties hereto have duly executed the Agreement as of the date first set forth above. APOTHECON, INC. By: /s/Lee Burg ---------------------------------- Title: Vice President/General Manager GENTA JAGO TECHNOLOGIES BV By: /s/ Thomas H. Adams ---------------------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella ---------------------------------- Dr. Jacques Gonella Managing Director JAGOTEC AG hereby agrees to be bound by the provisions of sections 2.2, 6.3, 8.3, 8.4, 8.5, 11.2.4.2, 11.4.3, 11.4.5, and 11.5 and article 16 of the * Development and Marketing Agreement and sections 11.2.4.2 and 11.5 of the above Agreement, that all notices to be given to it shall be given to such address as is set forth in section 16.1 hereof unless and until it otherwise instructs APOTHECON in writing. JAGOTEC AG By: /s/ Jacques Gonella --------------------- Dr. Jacques Gonella President - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 25 - JAGO PHARMA AG hereby agrees to be bound by the provisions of sections 2.2, 6.3, 11.2.4.2, 11.4.3, 11.4.5, and 11.5 and article 16 of the * Development and Marketing Agreement and sections 11.2.4.2 and 11.5 of the above Agreement, agrees that all notices to be given to it shall be given to such address as is set forth in section 16.1 hereof unless and until it otherwise instructs APOTHECON in writing: JAGO PHARMA AG By: /s/ Jacques Gonella --------------------- Dr. Jacques Gonella President - 26 - EXHIBITS Exhibit 1. l(ii) - List of Patent Rights Exhibit 3.6(i)-(iv) - Waiver and Consent Agreements Exhibit 9.1 - List of GEOMATRIX Trademarks - 27 - EXHIBIT 1.1(ii) PATENT RIGHTS - - - -------------------------------------------------------------------------------- PACO. 1 Subject: System for the controlled-rate release of active substances Inventors: Colombo, La Manna, Conte Assignee: JAGOTEC AG Priority: Italy, No. 23321 A/85, Dec 20th 1985 Approved: January 7th 1988, No. 1188212 Valid Until: December 19th 2005 Countries: USA Approved: June 13th 1989, No. 4.839.177 Valid Until: June 12th 2006 Europe Approved: November 22nd 1990, No. 0226884 Valid Until: December lst 2006 Australia Approved: July 10th 1990, No. 594992 Valid Until: December 18th 2006 Canada Approved: April 7th 1992, No. 1.298.479 Valid Until: April 6th 2009 New Zealand Approved: December llth 1990 No. 218.596 Valid Until: December 10th 2002 Japan Pending * PACO. 6 Subject: Tablets with controlled-rate release of active substances Inventors: Conte, La Manna, Colombo Assignee: JAGOTEC AG Priority: Italy, No. 2269489, December 14th 1989 Approved, No. 1237904, June 18th 1993 - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -1- PACO. 6 (cont.) Countries: USA Approved: June 6th 1995, No. 5,422,123 Valid Until: June 5th 2012 Europe Pending * Canada Pending * Japan Pending * PACO. 7 Subject: Process for preparing pharmaceutical compositions having an increased active substance dissolution rate, and the compositions obtained Inventors: Conte, La Manna, Giunchedi Assignee: JAGOTEC AG Priority: Italy, No. 21091, July 27th 1990 Approved: November 16th 1994, No. 1.246.188 Valid Until: July 26th 2010 Countries: USA lst Application No. 07/733457, Filed July 22nd 1991 Pending: Continuation No. 08/524.739, Filed October 11th 1994 Continuation No. 08/321,123, Filed October 11th 1994 Approved: December 19th 1995, No. 5.476.654 Valid Until: October 10th 2014 Europe Pending * Canada Pending * Japan Pending * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- PACO. 8 Subject: Pharmaceutical tablets releasing the active substance after a definite period of time Inventors: Conte, La Manna, Maggi Assignee: JAGOTEC AG Priority: Italy, MI 92 A 001174, Filed May 15th 1992 Countries: USA Approved: November 7th 1995, No. 5,464,633 Valid Until: May 23rd 2014 Canada Pending * PACO. 9 Subject: Pharmaceutical tablet capable of liberating one or more drugs at different release rates Inventors: Conte, La Manna, Maggi Assignee: JAGOTEC AG Priority: Italy, MI 92 A 002192, Filed September 24th 1992 Countries: PCT Application, No. PCT/EP93/02556, Filed September 21st 1993 Designated Territories: Australia Canada Japan USA New Zealand European Patent Territory - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- EXHIBIT 3.6(I) GENTA JAGO DELAWARE, L.L.C. SAN DIEGO, CA 92121 USA February 28, 1996 Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey USA ATTN: President Genta Jago Technologies B.V., Swiss Branch Grundstrasse 12 6343 Rotkreuz SWITZERLAND ATTN: Executive Management Committee Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz SWITZERLAND ATTN: President Genta Incorporated 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc. a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development of * , using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development Agreement"). Each of you acknowledges receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know- How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. the "* License Agreement"). Each of you acknowledges receipt of a copy of said agreement. The * License Agreement and the * Development Agreement are referred to herein as the "* Agreements."; and iii) The Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated ("Genta"), a Delaware corporation, and Genta Jago Delaware, L.L.C. ("Genta Jago LLC), a Delaware limited liability company (the "GEOMATRIX Research and Development Agreement". All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Genta Jago LLC Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG and Genta are each 50% owners of the equity and income interests of GJT. Jagotec and Jago Pharma AG are Affiliates of one another, of GJT, and of Jago Holding AG, a Swiss corporation. Genta and GPM Generic Pharmaceuticals Manufacturing, Inc. (the latter entity being an Affiliate Jagotec AG) are each a 50% owner of the equity and income interests of Genta Jago LLC. Genta Jago LLC acknowledges, and each of the parties signing below hereby acknowledges, that it expects to derive, directly or indirectly, substantial economic benefit as a result of the execution, delivery and performance of the * License Agreement, the * Development Agreement, and of the GEOMATRIX Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party signing below, Genta Jago Delaware L.L.C. hereby represents, warrants, agrees, and covenants to and with Apothecon, and each other party signing below hereby represents, warrants, agrees and concurs, as follows: 1. Notwithstanding any provision in the GEOMATRIX Research and Development Agreement to the contrary: a. All applications filed by Genta Jago LLC pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, Apothecon, and not GJT. b. All data and results pertaining to the Product generated by Genta Jago LLC under the Research and Development Agreement shall be owned solely by Apothecon. Concurrently with the execution and delivery of this Genta Jago LLC Waiver and Consent Agreement, Genta Jago LLC will turn over to Apothecon all data and results heretofore developed by or for it pertaining to the Product. Genta Jago LLC will thereafter report in writing such data and results developed by or for it not less frequently than quarterly to Apothecon and GJT (and monthly if requested by either party), and will immediately transmit all such data to Apothecon by magnetic media or such other method as Apothecon shall request. c. In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to APOTHECON under the * Development and Marketing Agreement at law or in equity, Genta Jago LLC shall, at Apothecon's request, enter into an agreement with Apothecon for the development and registration of the Product on terms and conditions that, to the maximum practicable extent, require Genta Jago LLC to perform the same obligations and observe the same terms and conditions as apply to it under the GEOMATRIX Research and Development Agreement (without regard to Genta and Jago Pharma's duties or responsibilities thereunder), and with Apothecon having the rights that GJT otherwise had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that Apothecon has under the * Development and Marketing Agreement. In such event Apothecon shall be entitled to grant to Genta Jago LLC a under the Patent Rights and Knowhow solely to conduct the Research and Development (as such term is defined in the GEOMATRIX - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- Research and Development Agreement) that Genta Jago LLC is obligated to conduct under the GEOMATRIX Research and Development Agreement, and any payments for services performed thereafter by Genta Jago LLC with respect to the development of the Product shall be made directly by APOTHECON to Genta Jago LLC. 2. Genta Jago LLC shall submit to Apothecon, concurrently with its submission to GJT, a copy of (i) all reports, statements, invoices, Product Workplans, and budgets submitted by Genta Jago LLC to GJT or to the Steering Committee relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. Genta Jago LLC shall promptly inform Apothecon of any default by GJT under the GEOMATRIX Research and Development Agreement. Following any such default, Apothecon shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay Genta Jago LLC directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies payable thereafter by Apothecon to GJT. 3. Apothecon shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product only. 4. Genta Jago LLC shall defend, indemnify and hold Apothecon, Inc. harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that Apothecon suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the * *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the * or their respective directors, officers, general partners, employees, consultants, or agents (other than *). Apothecon, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). 5. To the extent any provisions of the * Agreements or of any of the GEOMATRIX Agreements conflict in any way with the terms of this Genta Jago LLC Waiver and Consent Agreement, the terms of this Agreement shall control. 6. This Genta Jago LLC Waiver and Consent Agreement shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Genta Jago LLC by a duly authorized officer of Apothecon, or until the termination of the * Marketing and Development Agreement, whichever occurs first. 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor (with a copy addressed as well to the attention of its "Legal Counsel") and shall be effective upon receipt by the addressee. 8. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 9. This Genta Jago LLC Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation, or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 10. This Genta Jago LLC Waiver and Consent Agreement, together with all other documents referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof that are not set forth herein on which a party has relied. All terms and conditions of the GEOMATRIX Research and Development Agreement, to the extent not changed or supplemented by this Genta Jago LLC Waiver and Consent Agreement, remain in full force and effect. 11. This Genta Jago LLC Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 12. No provision of this Genta Jago LLC Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 13. If any term, covenant or condition of this Genta Jago LLC Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. 14. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Genta Jago LLC Waiver and Consent Agreement or any term or condition hereof, or the performance by -4- a party of its obligations hereunder, whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 14, shall be determined by binding arbitration pursuant to this Section 14. 15. It is expressly agreed that the parties are independent contractors with each other under this Agreement and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. No party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on any other party, without the prior consent of the other party to do so. 16. This Genta Jago LLC Waiver and Consent 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. It shall not be strictly construed against any party hereto. -5- IN WITNESS WHEREOF, the parties below have duly executed this Genta Jago LLC Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. GENTA JAGO DELAWARE, L.L.C. By: /s/ Thomas H. Adams -------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella -------------------- Dr. Jacques Gonella Managing Director We accept and agree to the foregoing, and acknowledge same by executing this Genta Jago LLC Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV JAGO PHARMA AG By /s/ Thomas H. Adams By: /s/ Jacques Gonella ------------------- ------------------- Thomas H. Adams, Ph.D. Dr. Jacques Gonella Managing Director President By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director GENTA INCORPORATED APOTHECON, INC. By /s/ Thomas H. Adams By: /s/ Lee Burg ------------------- ------------ Thomas H. Adams, Ph.D. Lee Burg Chairman and Chief Executive Officer President -6- EXHIBIT 3.6(II) GENTA INCORPORATED 3550 GENERAL ATOMICS COURT SAN DIEGO, CA 92121 USA February 28, 1996 Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey USA ATTN: President Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz SWITZERLAND ATTN: President Genta Jago Technologies B.V. Grundstrasse 12 6343 Rotkreuz SWITZERLAND ATTN: Executive Committee Genta Jago Delaware, L.L.C. 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc., a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development of *, using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development Agreement"). Each of you acknowledges receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT'), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know-How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -1- supplemented, changed or extended from time to time hereafter, is referred to as the "* License Agreement"). Each of you acknowledges receipt of a copy of said agreement. The * License Agreement and the * Development Agreement are referred to herein as the "* Agreements."; and iii) The Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated ("Genta"), a Delaware corporation, and Genta Jago Delaware, L.L.C. ("Genta Jago LLC"), a Delaware limited liability company (the "GEOMATRIX Research and Development Agreement". iv) The GEOMATRIX License Agreement; v) The GEOMATRIX Manufacturing License Agreement; and vi) The GEOMATRIX Supply Agreement. All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Genta Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG and Genta are each 50% owners of the equity and income interests of GJT. Jagotec and Jago Pharma AG are Affiliates of one another, of GJT, and of Jago Holding AG, a Swiss corporation. Genta and GPM Generic Pharmaceuticals Manufacturing, Inc. (the latter entity being an affiliate of Jagotec AG) are each a 50% owner of the equity and income interests of Genta Jago LLC. Genta acknowledges, and each of the parties signing below hereby acknowledges, that it expects to derive, directly or indirectly, substantial economic benefit as a result of the execution, delivery and performance of the * License Agreement, the * Development Agreement, and of the GEOMATRIX Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Genta Incorporated hereby represents, warrants, agrees, and covenants to and with Apothecon, and each other party signing below hereby represents, warrants, agrees and concurs, as follows: 1. Notwithstanding any provision in the GEOMATRIX Research and Development Agreement to the contrary: a. All applications filed by Genta pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, Apothecon, and not GJT. b. All data and results pertaining to the Product generated by Genta under the Research and Development Agreement shall be owned solely by Apothecon. Concurrently with the execution and delivery of this Genta Waiver and Consent Agreement, Genta will turn over to Apothecon all data and results developed heretofore by or for it pertaining to the Product. Genta will thereafter report in writing such data and results developed by or for it not less frequently than quarterly to Apothecon and GJT (and monthly if requested by either party), and will immediately transmit all such data to Apothecon by magnetic media or such other method as Apothecon shall request. c. In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to Apothecon under the * Development and Marketing Agreement at law or in equity, Genta shall, at Apothecon's request, enter into an agreement with Apothecon for the development and registration of the Product on terms and conditions that, to the maximum practicable extent, require Genta to perform the same obligations and observe the same terms and conditions as apply to it under the GEOMATRIX Research and Development Agreement (without regard to Jago Phanna's and Genta Jago LLC's duties or responsibilities thereunder), and with Apothecon having the - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- rights that GJT otherwise had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that Apothecon has under the * Development and Marketing Agreement. In such event Apothecon shall be entitled to grant to Genta a * under the Patent Rights and Knowhow solely to conduct the Research and Development (as such term is defined in the GEOMATRIX Research and Development Agreement) that Genta is obligated to conduct under the GEOMATRIX Research and Development Agreement, and any payments for services performed thereafter by Genta with respect to the development of the Product shall be made directly by APOTHECON to Genta. 2. Genta shall submit to Apothecon, concurrently with its submission to GJT, a copy of (i) all reports, statements, invoices, Product Workplans, and budgets submitted by Genta to GJT or to the Steering Committee relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. Genta shall promptly inform Apothecon of any default by GJT under the GEOMATRIX Research and Development Agreement. Following any such default, Apothecon shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay Genta directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies payable thereafter by Apothecon to GJT. 3. Apothecon shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product only. 4. Genta shall defend, indemnify and hold Apothecon, Inc. harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that Apothecon suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the *, or their respective directors, officers, general partners, employees, consultants, or agents (other than *). Apothecon, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). 5. To the extent any provisions of the * Agreements or of any of the GEOMATRIX Agreements conflict in any way with the terms of this Genta Waiver and Consent Agreement, the terms of this agreement shall control. 6. This Waiver and Consent shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Genta by a duly authorized officer of Apothecon, or until the termination of the * Marketing and Development Agreement, whichever occurs first. 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor (with a copy addressed as well to the attention of its "Legal Counsel") and shall be effective upon receipt by the addressee. 8. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 9. This Genta Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 10. This Genta Waiver and Consent Agreement, together with all of the documents referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof that are not set forth herein on which a party has relied. All other terms and conditions of the GEOMATRIX Research and Development Agreement, to the extent not changed or supplemented by this Genta Waiver and Consent Agreement, remain in full force and effect. 11. This Genta Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 12. No provision of this Genta Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 13. If any term, covenant or condition of this Genta Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application -4- thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. 14. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Genta Waiver and Consent Agreement or any term or condition hereof, or the performance by a party of its obligations hereunder, whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 14, shall be determined by binding arbitration pursuant to this Section 14. 15. It is expressly agreed that the parties are independent contractors with one another under this Agreement and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. No party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on any other party, without the prior consent of the other party to do so. 16. This Genta Waiver and Consent 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. It shall not be strictly construed against any party hereto. -5- IN WITNESS WHEREOF, the parties below have duly executed this Genta Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. GENTA INCORPORATED By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Chairman and Chief Executive Officer We accept and agree to the foregoing, and acknowledge same by executing this Genta Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV JAGO PHARMA AG By /s/ Thomas H. Adams By: /s/ Jacques Gonella ------------------- ------------------- Thomas H. Adams, Ph.D. Dr. Jacques Gonella Managing Director President By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director GENTA JAGO DELAWARE, L.L.C. By /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director APOTHECON, INC. By /s/ Lee Burg ------------ Lee Burg President -6- EXHIBIT 3.6(III) JAGO PHARMA AG EPTINGERSTRASSE 51 CH-4132 MUFFENZ SWITZERLAND February 28, 1996 Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey USA ATTN: President Genta Jago Technologies B.V., Swiss Branch Grundstrasse 12 6343 Rotkreuz SWITZERLAND ATTN: Executive Management Committee Genta Jago Delaware, L. L - C 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Genta Incorporated 3550 General Atomics Court San Diego, CA 92121 USA ATTN: President Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc., a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development of *, using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development Agreement"). Each of you acknowledges receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know-How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. supplemented, changed or extended from time to time hereafter, is referred to as the "* License Agreement"). Each of you acknowledges receipt of a copy of said agreement. The * License Agreement and the * Development Agreement are referred to herein as the "* Agreements"; and iii) The Restated GEOMATRIX Research and Development Agreement dated as of May 12, 1995 by and among GJT, Jago Pharma AG, as Swiss corporation, Genta Incorporated ("Genta"), a Delaware corporation, and Genta Jago Delaware, L.L.C. ("Genta Jago LLC), a Delaware limited liability company (the "GEOMATRIX Research and Development Agreement". All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Jago Pharma Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG and Genta are each 50% owners of the equity and income interests of GJT. Jagotec and Jago Pharma AG are Affiliates of one another, of GJT, and of Jago Holding AG, a Swiss corporation. Genta and GPM Generic Pharmaceuticals Manufacturing Inc. (the latter entity being an Affiliate of Jagotec AG) are each a 50% owner of the equity and income interests of Genta Jago LLC. Jago Pharma AG acknowledges, and each of the parties signing below hereby acknowledges, that it expects to derive substantial economic benefit, directly or indirectly, as a result of the execution, delivery and performance of the * License Agreement, the * Development Agreement, and of the GEOMATRIX Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Jago Pharma AG hereby represents, warrants, agrees, and covenants to and with Apothecon, and each other party signing below hereby represents, warrants, agrees and concurs, as follows: 1. (a) Notwithstanding any provision in the GEOMATRIX Research and Development Agreement to the contrary: i. All applications filed by Jago Pharma AG pursuant to its obligations under the GEOMATRIX Research and Development Agreement as are necessary or useful for the Registration of the Product shall be filed in the name of, and be owned by, Apothecon, and not GJT. ii. All data and results pertaining to the Product generated by Jago Pharma AG under the Research and Development Agreement shall be owned solely by Apothecon. Concurrently with the execution and delivery of this Jago Pharma Waiver and Consent Agreement, Jago Pharma will turn over to Apothecon all data and results heretofore developed by or for it pertaining to the Product. Jago Pharrna AG will thereafter report in writing such data and results developed by or for it not less frequently than quarterly to Apothecon and GJT (and monthly if requested by either party), and will immediately transmit all such data to Apothecon by magnetic media or such other method as Apothecon shall request. iii. In the event that the GEOMATRIX Research and Development Agreement should terminate, for whatever reason and however effected, then, in addition to any remedies available to APOTHECON under the * Development and Marketing Agreement at law or in equity, Jago Pharma AG shall, at Apothecon's election and request, enter into an agreement with Apothecon for the development and registration of the Product on terms and conditions that, to the maximum practicable extent, require Jago Pharma AG to perform the same obligations and observe the same terms and conditions as apply to it under the GEOMATRIX Research and Development Agreement (without regard to Genta and Genta Jago LLC's duties or responsibilities thereunder), and with Apothecon having the rights that GJT otherwise had under such GEOMATRIX Research and Development Agreement and with APOTHECON assuming GJT's obligations under such GEOMATRIX Research and Development Agreement to the extent such obligations do not conflict with or are in addition to the obligations that Apothecon has under the * Development and Marketing Agreement. In such event Apothecon shall be entitled to grant to Jago Pharma AG a * under the Patent Rights and Knowhow solely to conduct the Research and Development (as such term is defined in the GEOMATRIX - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- Research and Development Agreement) that Jago Pharma AG is obligated to conduct under the GEOMATRIX Research and Development Agreement, and any payments for services performed thereafter by Jago Pharma AG with respect to the development of the Product shall be made directly by APOTHECON to Jago Pharma AG. (b) If GJT breaches the * Development and Marketing Agreement with respect to the development of the Product in a manner that entitles APOTHECON to terminate same pursuant to section 11.2.2.1 or 11. 2.2.2 thereof, or makes an untrue statement that entitles APOTHECON to terminate same pursuant to section 11.2.4.1 thereof, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to it under said * Development and Marketing Agreement or available to it at law or in equity, APOTHECON may elect (by delivering a writing to GJT and Jago Pharma AG of APOTHECON's intent to exercise its option), for Jago Pharma AG to, and Jago Pharma AG agrees that it will, promptly enter into an agreement with APOTHECON under which: (i) Jago Pharma will, to the extent it has the right to do so, ensure that all licenses, sublicenses and other rights and privileges granted by GJT under the * Development and Marketing Agreement shall continue without change, and (ii) Jago Pharma will assume all rights and obligations of GJT under articles 3, 4, 5, 6, 11.4.5, 12, 14, 15.1, and 15.2 of the Development and Marketing Agreement and will promptly cure any defaults of GJT under said articles, any payments to be made thereafter by APOTHECON under said articles shall thereafter be paid to Jago Phanna, and APOTHECON shall continue to enjoy all rights and privileges granted under said articles. 2. Jago Pharma shall submit to Apothecon, concurrently with its submission to GJT, a copy of (i) all reports, statements, invoices, Product Workplans, and budgets submitted by Jago Pharma AG to GJT or to the Steering Committee relating to the Product, (ii) a copy of all reports relating to the Product submitted to GJT under section 5.4 of the GEOMATRIX Research and Development Agreement, and (iii) a copy of all submissions to, and all responses and approvals obtained from, a regulatory authority relating to the Product. Jago Pharma AG shall promptly inform Apothecon of any default by GJT under the GEOMATRIX Research and Development Agreement. Following any such default, Apothecon shall have the right, but shall not be under any obligation of any nature whatsoever, expressly or impliedly, to (i) cure any such default, and/or (ii) pay Jago Pharma AG directly thereafter for all services performed by it under the GEOMATRIX Research and Development Agreement that pertain to the Product and deduct and offset same from any monies payable thereafter by Apothecon to GJT. 3. Apothecon shall have the right to exercise the same audit rights as GJT may exercise under section 4.6 of the GEOMATRIX Research and Development Agreement, to the extent relating to the Product only. 4. Jago Pharma AG shall defend, indemnify and hold Apothecon, Inc. harmless from and against any and all losses, liabilities, damages and expenses (including reasonable attorneys' fees and costs) that Apothecon suffers as a result of any claim, demand, action or other proceeding by any Third Party arising from or relating to the *, its directors, officers, employees, consultants or agents in performing its obligations under the GEOMATRIX Research and Development Agreement, except to the extent such losses, liabilities, damages and expenses arise from the *, or their respective directors, officers, general partners, employees, consultants, or agents (other than *). Apothecon, as an Indemnitee, agrees to adhere to and be bound by the terms of section 9.5 of the GEOMATRIX Research and Development Agreement, as though such terms were fully set forth herein (and with "Article 9" replaced by "Article 4 hereof"). 5. To the extent any provisions of the * Agreements or of any of the GEOMATRIX Agreements conflict in any way with the terms of this Jago Pharma Waiver and Consent Agreement, the terms of this Agreement shall control. 6. This Waiver and Consent shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Jago Pharma by a duly authorized officer of Apothecon, or until the termination of the * Marketing and Development Agreement, whichever occurs first. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor (with a copy addressed as well to the attention of its "Legal Counsel") and shall be effective upon receipt by the addressee. 8. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 9. This Jago Pharma Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation, or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 10. This Jago Pharma Waiver and Consent Agreement, together with all other documents to the extent referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof that are not set forth herein on which a party has relied. All terms and conditions of the GEOMATRIX Research and Development Agreement, to the extent not changed or supplemented by this Jago Pharma Waiver and Consent Agreement, remain in full force and effect. 11. This Jago Pharma Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 12. No provision of this Jago Pharma Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy -4- shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 13. If any term, covenant or condition of this Jago Pharma Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. 14. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Jago Pharma Waiver and Consent Agreement or any term or condition hereof, or the performance by a party of its obligations hereunder, whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 14, shall be deter-mined by binding arbitration pursuant to this Section 14. 15. It is expressly agreed that the parties are independent contractors with each other under this Agreement and that the relationship between the parties shall not constitute a partnership, joint venture or agency. No party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on any other party, without the prior consent of the other party to do so. 16. This Jago Pharma Waiver and Consent 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. It shall not be strictly construed against any party hereto. -5- IN WITNESS WHEREOF, the parties below have duly executed this Jago Pharma Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. JAGO PHARMA AG By /s/ Jacques Gonella ------------------- Dr. Jacques Gonella President We accept and agree to the foregoing, and acknowledge same by executing this Jago Pharma Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director GENTA INCORPORATED By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Chairman and Chief Executive Officer GENTA JAGO DELAWARE, L.L.C. By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. Managing Director By: /s/ Jacques Gonella ------------------- Dr. Jacques Gonella Managing Director APOTHECON, INC. By: /s/ Lee Burg ------------ Lee Burg President -6- EXHIBIT 3.6(IV) JAGOTEC AG SEESTRASSE 47 CH-6052 HERGISWIL, SWITZERLAND February 28, 1996 Apothecon, Inc. 777 Scudder Mills Road Princeton, New Jersey 08536 USA Attn.: President Genta Jago Technologies BV Grundstrasse 12 6343 Rotkreuz SWITZERLAND Re: WAIVER AND CONSENT Gentlemen: Reference is hereby made to: i) An Agreement dated the date hereof by and between Apothecon, Inc., a Delaware corporation, and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the development and marketing of *, using certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* Development and Marketing Agreement"). You acknowledge receipt of a copy of said agreement; and ii) An Agreement dated the date hereof by and between Apothecon and Genta Jago Technologies BV ("GJT"), a Dutch company, regarding the grant of certain license rights to Apothecon to make, have made, use and sell * under certain Patent Rights and Know-How licensed to GJT pertaining to certain proprietary sustained release technology licensed to GJT by Jagotec AG (said agreement, as it may be supplemented, changed or extended from time to time hereafter, is referred to as the "* License Agreement"). You acknowledge receipt of a copy of said agreement. The * License Agreement and the * Development and Marketing Agreement are referred to herein as the "* Agreements."; All capitalized terms not expressly defined in this Waiver and Consent agreement ("the "Jagotec Waiver and Consent Agreement") have the meaning ascribed to such term in the * License Agreement. Jagotec AG ("Jagotec"), a Swiss corporation, is party to a Restated GEOMATRIX License Agreement between Jagotec and GJT dated May 12, 1995 (said agreement, as it may be supplemented, changed or extended from time to time, is referred to herein as the "License Agreement") and to a Restated GEOMATRIX Manufacturing License Agreement between Jagotec and GJT dated May 12, 1995 (said agreement, as it may be supplemented, changed or extended from time to time, is referred to herein as the "Manufacturing License Agreement"). - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. Jagotec is a 50% owner of the equity and income interests of GJT. Jagotec is an Affiliate of GJT and of Jago Holding AG, a Swiss corporation. Accordingly, the undersigned expects to derive, directly or indirectly, substantial economic benefit as a result of the execution, delivery and performance of the * Agreements. Therefore, in order to induce Apothecon to execute, deliver and perform the * Agreements, to make the payments required of Apothecon thereunder, and to accept GJT's promises to discharge its obligations thereunder and otherwise, Jagotec hereby represents, warrants, agrees, and covenants to and with GJT and Apothecon as follows: 1. Jagotec agrees that any license rights, sublicense rights and other rights granted or extended by GJT to Apothecon under the * Agreements are not subject to the terms and conditions of the License Agreement and the Manufacturing License Agreement and waives any rights Jagotec may have with respect to the enforcement of same against Apothecon. Jagotec further agrees that Apothecon, to the extent it is a subcontractee or sublicensee of GJT's rights and obligations under the License Agreement and the Manufacturing Agreement, shall not be bound by any and all obligations and undertakings of GJT under either of said Agreements, and waives any rights Jagotec may have with respect to the enforcement of same against Apothecon. 2. (a) Jagotec agrees that, in the event of an event that the License Agreement and/or the Manufacturing License Agreement is or are terminated, for whatever reason and whether by action taken by Jagotec, GJT or both, and notwithstanding any provision (including without limitation section 11.4) to the contrary in the License Agreement and in the Manufacturing Agreement, all licenses, sublicenses and other rights and privileges granted or extended to Apothecon under the * Agreements shall continue and remain in full force and effect in accordance with their terms, without further action or election on the part of Apothecon, and Jagotec shall be deemed simultaneously to have assumed the rights and obligations of GJT under the * Agreements and will promptly cure all defaults of GJT thereunder. (b) If GJT breaches the * License Agreement in a manner that entitles APOTHECON to terminate same pursuant to section 11.2.2.1 or 11.2.2.2 thereof, or makes an untrue statement that entitles APOTHECON to terminate same pursuant to section 11.2.4.1 thereof, and/or in the event that GJT commences proceedings to dissolve, liquidate or wind up its affairs, then, in addition to any remedies available to it under said Agreement or at law or in equity, APOTHECON may elect (by delivering a writing to GJT and Jagotec of APOTHECON's intent to exercise such option) for Jagotec to, and Jagotec agrees that it will, promptly enter into a new, separate agreement with APOTHECON under which (i) all licenses, sublicenses and other rights and privileges granted by GJT under the * License Agreement shall continue without further action or election on the part of APOTHECON, (ii) Jagotec will assume all rights and obligations of GJT and promptly cure all defaults of GJT thereunder, and (iii) all payments that would otherwise have been made thereafter by APOTHECON under the * License Agreement shall thereafter be paid to Jagotec. (c) If GJT fails to make a payment when due under its Restated Working Capital Agreement dated as of May 12, 1995 (as amended by a First Amendment thereto dated as of July 11, 1995 and as the same may be amended from time to time hereafter, and including any successor agreement thereto), between GJT and Genta, Incorporated, a Delaware corporation ("Genta"), GJT and/or Jagotec shall promptly inform APOTHECON of same, and APOTHECON may elect (by delivering a writing to GJT and Jagotec of APOTHECON's intent to exercise such option) at any time thereafter to terminate the * License Agreement and for Jagotec to, and Jagotec agrees that it will, promptly enter into a new, separate agreement with APOTHECON under which (i) all licenses, sublicenses and other rights and privileges granted by GJT under the * License Agreement shall continue without further action or election on the part of APOTHECON, and (ii) Jagotec will assume all rights and obligations of GJT and promptly cure all defaults of GJT thereunder; provided, however, that all payments that would otherwise have been made thereafter by APOTHECON under the * License Agreement and otherwise under such new, separate agreement shall thereafter continue to be paid to GJT by APOTHECON, until APOTHECON is duly instructed otherwise in writing by GJT and Jagotec AG. 3. To the extent any provisions of the * Agreements supplement or conflict with the terms of the GEOMATRIX Agreements, the terms of the * Agreements shall control. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- 4. This Jagotec Waiver and Consent Agreement shall inure to the benefit of Apothecon, its successors, assigns and legal representatives, as well as GJT, its successors, assigns and legal representatives, and shall bind the Jagotec and its successors and assigns. This Jagotec Waiver and Consent Agreement sets forth the entire understanding of the GJT, Jagotec and Apothecon with respect to the subject matter hereof, and there are no other promises, representations or understandings, written or oral, not set forth herein. 5. Each party represents and warrants to the other parties hereto the following: a) Existence and Power. It (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the requisite power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted; and (iii) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of it and would not materially adversely affect its ability to perform its obligations under this Agreement. b) Authorization and Enforcement of Obligations. It (i) has the requisite power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder; and (ii) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on its behalf, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with its terms. c) No Consents. All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it in connection with the execution and performance of this Agreement have been obtained. d) No Conflict. The execution and delivery of this Agreement on its behalf and the performance of its obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations applicable to it, and (b) do not conflict or are inconsistent with, or constitute a default under, any contractual or fiduciary obligation or covenant of it. 6. This Jagotec Waiver and Consent Agreement shall be effective immediately and shall continue in full force and effect until such time as Apothecon may elect to terminate it by a writing delivered to GJT and to Jagotec by a duly authorized officer of Apothecon, or until the termination of the * Agreements, whichever occurs first. 7. Any consent, notice or report required or permitted to be given or made hereunder by one party to the other party shall be in English and in writing, delivered personally or by registered mail, return receipt requested, addressed to the other party at its address indicated below or to such other address as the addressee shall have last furnished in writing to the addressor and shall be effective upon receipt by the addressee. If to Jagotec: Jagotec AG c/o Jago Pharma AG Eptingerstrasse 51 CH-4132 Muttenz, Switzerland Attention: Dr. Jacques Gonella with a copy to: Rinderknecht Glaus & Stadelhofer Beethovenstrasse 7 Postfach 4451 CH-8002 Zurich, Switzerland Attention: Dr. Thomas M. Rinderknecht - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- If to GJT: Genta Jago Technologies BV Swiss Branch Grundstrasse 12 6343 Rotkreuz, Switzerland Attention: Executive Management Committee with copies to: Genta Incorporated 3550 General Atomics Court San Diego, CA 92121, U.S.A. Attention: Thomas H. Adams, Ph.D. and: Pillsbury Madison & Sutro 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. Attention: Thomas E. Sparks, Jr., Esq. If to APOTHECON: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: President with a copy to: Apothecon, Inc. 777 Scudders Mill Road Plainsboro, New Jersey 08536 USA Attention: Corporate Legal Counsel 8. This Jagotec Waiver and Consent Agreement shall be governed by and construed in accordance with the laws of Switzerland, without reference to the conflicts of law principles thereof. 9. Any dispute, claim or controversy between the parties relating to, arising out of or in any way connected with this Jagotec Waiver and Consent Agreement or any term or condition hereof, or the performance by either party of its obligations hereunder, whether before or after termination of this Jagotec Waiver and Consent Agreement, shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other party. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in Paris, France. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the cost of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this Section 9, shall be determined by binding arbitration pursuant to this Section 9. 10. It is expressly agreed that the parties are each independent contractors with one another under this Agreement and that the relationship between the two parties shall not constitute a partnership, joint venture or agency. Neither party shall have the authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on the other party, without the prior consent of the other party to do so. 11. The provisions of this Jagotec Waiver and Consent Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto. -4- 12. The terms, covenants, conditions and provisions contained herein, together with all other documetts to the extent referred to herein, constitute the total and complete agreement of the parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. 13. This Jagotec Waiver and Consent 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. It shall not be strictly construed against any party hereto. 14. This Jagotec Waiver and Consent Agreement shall inure to the benefit of, and be binding upon each party hereto, and its respective successors, permitted assigns and legal representatives. Any party may also assign its rights and obligations under this Agreement without the consent of the other parties in connection with a merger, consolidation, or the sale of all or substantially all of its assets to an Affiliate agreeing to be bound by same, or may otherwise assign its rights or obligations under this Agreement only with the prior written consent of the other parties hereto. This Agreement shall survive any merger, consolidation or similar reorganization of either party with or into another party and no consent for a merger, consolidation or similar reorganization shall be required hereunder. Any assignment not in accordance with this Agreement shall be void. 15. No provision of this Jagotec Waiver and Consent Agreement, or the benefit thereof may be waived, altered, amended or repealed in whole or in part except by the written consent of all of the parties hereto, and no such waiver or changed shall extend beyond the circumstances for which it is granted. Except as specifically provided for herein, the waiver from time to time by a party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such party's rights or remedies hereunder. 16. If any term, covenant or condition of this Jagotec Waiver and Consent Agreement or the application thereof to any party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (1) the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (2) the parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the parties that the basic purposes of this Agreement are to be effectuated. -5- IN WITNESS WHEREOF, the parties below have duly executed this Jagotec Waiver and Consent Agreement through their respective duly authorized representatives as of the date first set forth above. JAGOTEC AG By: /s/ Jacquest Gonella -------------------- Dr. Jacques Gonella President We accept and agree to the foregoing, and acknowledge same by executing this Jagotec Waiver and Consent Agreement through our duly authorized representatives: GENTA JAGO TECHNOLOGIES BV By: /s/ Jacques Gonella ------------------- Dr.Jacques Gonella Managing Director By: /s/ Thomas H. Adams ------------------- Thomas H. Adams, Ph.D. managing Director APOTHECON, INC. By: /s/ Lee Burg ------------ Title: VP/GM Date: -6- EXHIBIT 9.1 LIST OF GEOMATRIX TRADEMARKS - - - -------------------------------------------------------------------------------- Country TM-No. Issue Date - - - ------------------------------- ------------ -------- International 522 445 April 8, 1988 Registration (25 countries) Canada 369 959 May 29, 1990 Switzerland 360 353 November 11, 1987 United Kingdom (class 1) 1415 927 March 24, 1990 United Kingdom (class 5) 1353 226 August 2, 1995 *) Greece 90 337 August 25, 1955 Japan 2578 899 September 30, 1993 New Zealand 185 989 July 28, 1995 Portugal **) 303 292 September 12, 1994 Sweden 223 455 May 10, 1991 United States 1562 880 October 31, 1989 *) renewal date **) registration not yet granted EX-10.91 7 OPTION, DEVELOPMENT & SUB-LICENSE AGREEMENT EXHIBIT 10.91 CONFIDENTIAL TREATMENT REQUESTED OPTION , DEVELOPMENT & SUB-LICENSE AGREEMENT * This OPTION, DEVELOPMENT AND SUB-LICENSE AGREEMENT (this "AGREEMENT"), effective from the date last written hereunder, is entered into between GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and KRYPTON LTD., a Gibraltar limited company, having a place of business at East Wing, Second Level, Hadfield House, Library Street, Gibraltar (hereinafter referred to as "KRYPTON") WITNESSTH: WHEREAS, GENTA JAGO has expertise in the development of controlled-release formulations for pharmaceutical agents and in particular has exclusive rights to proprietary know-how and technology generally known and commercialized under the registered trademark GEOMATRIX(R) and as described and embodied in the Patents (as defined below) with respect to product(s) containing * as the sole active ingredient; and WHEREAS, KRYPTON is a company which markets pharmaceutical products and is interested in developing Prototype Formulations (as defined below) for the Final Products (as defined below) and in seeking the approval of Regulatory Authorities (as defined below) to manufacture, or have manufactured and market the Final Products in the Territory (as defined below); and WHEREAS, GENTA JAGO is prepared to conduct or have conducted certain studies and the development of the Prototype Formulations and Final Products; and WHEREAS, GENTA JAGO is prepared to grant to KRYPTON under the terms and conditions set forth hereafter an option to sub-license under the Patents, GEOMATRIX(R) Technology and Know-How (as defined below) to conduct studies relating to the Prototype Formulations and, upon receipt of approval by the Regulatory Authority (as defined below), to manufacture or have manufactured, market and sell the Final Products in the Territory. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the Parties hereby agree as follows: - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. ARTICLE 1 DEFINITIONS For purposes of this Agreement, the terms defined in this Article 1 shall have the following meanings: 1.1 "Active Ingredient" shall mean *. 1.2 "Affiliate" shall mean, with respect to either Party hereto, any corporation, partnership or other entity controlled by, controlling or under common control with, such Party, with "control" meaning direct or indirect beneficial ownership of more than 50% of the voting power of, or more than 50% of ownership interest in, such corporation, partnership or other entity. 1.3 "FDA" shall mean the U.S. Federal Food and Drug Administration and any successor agency thereof. 1.4 "Final Products" shall mean the pharmaceutical orally-administered controlled-release formulation containing the Active Ingredient, presented as a compressed tablet developed pursuant to this Agreement, based on the GEOMATRIX(R) Technology and meeting the Specifications. 1.5 "GEOMATRIX(R) Technology" shall mean the oral controlled-release drug delivery and related technology licensed to GENTA JAGO by the Licensor which utilizes a hydrophilic drug-containing matrix tablet which controls the release of the drug through the use of one or more barrier layers. 1.6 "Know-How" shall mean all information and data, which are not generally known -------- including, but not limited to, patent claims and related information not yet disclosed to the public, formulae, procedures, protocols, techniques and results of experimentation and testing, which (a) relate to the GEOMATRIX(R)Technology, any Prototype Formulation or any Final Product, or (b) are necessary or useful to develop, make or use any Prototype Formulation, or (c) are necessary or useful to develop, seek regulatory approval, make, use or sell any Final Product, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.7 "Leading Dose Strength" shall mean the dose strength of Active Ingredient to be used in the first to be developed Prototype Formulations, as mutually agreed upon by the Parties, together with the respective Specifications. 1.8 "License Agreements" shall mean the license agreements entered into by and between GENTA JAGO and the Licensor, under which the Licensor granted GENTA JAGO the rights in the Patents, the Know-How and the GEOMATRIX(R) Technology, which are the subject matter of the sub-license referred to in Article 11. below. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- 1.9 "Licensor" shall mean Jagotec AG, a Swiss corporation, having its place of business at Seestrasse 91, CH-6052 Hergiswil, Switzerland. 1.10 "NDA" shall mean any New Drug Application filed with the FDA, by or for KRYPTON requesting authorization to manufacture, have manufactured or sell any Final Product in the United States of America, or any equivalent application to a Regulatory Authority in any other country of the Territory. 1.11 "Net Sales" shall mean, with respect to any Final Product(s), the invoiced sales price of --------- such Final Product(s) in finished package form invoiced by KRYPTON and/or its Affiliates to any independent customer other than KRYPTON's Affiliates, less (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Final Product(s); (b) actual freight and insurance costs incurred and paid by KRYPTON and/or its Affiliates in transporting such Final Product(s) in final form to such customers; (c) customary cash, quantity and trade discounts and other price reduction programs; (d) sales, use, value-added and other direct taxes (but excluding any income tax) actually incurred and paid by KRYPTON and/or its Affiliates; and (e) customs duties, surcharges and other governmental charges incurred by KRYPTON and/or its Affiliates in connection with the exportation or importation of such Final Product(s) in final form. 1.12 "Patents" shall mean all patents and patent applications heretofore or hereafter filed or ------- having presently or in the future legal force in any country of the Territory, licensed by the Licensor to GENTA JAGO which claim the GEOMATRIX(R)Technology or the process to manufacture Prototype Formulations and/or Final Products by use of, or the use of, the GEOMATRIX(R)Technology, including but not limited to the patents and patent applications listed in APPENDIX A hereto, together with all patents that in the future issue therefrom in any country of the Territory, including utility, model and design patents and certificates of invention, and all divisionals, continuations, continuations-in-part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.13 "Prototype Formulations" shall mean the oral delivery system for both, the Leading Dose Strength and the Subsequent Dose Strength, of Active Ingredient based on the GEOMATRIX(R) Technology that reasonably meet the Specifications. 1.14 "Reference Products" shall mean the products containing Active Ingredient listed in APPENDIX B. 1.15 "Regulatory Authority" shall mean the FDA and any equivalent competent regulatory authority in the other countries of the Territory. 1.16 "Specifications" shall mean the Product specifications to be mutually decided and agreed upon by the Parties for the Leading Dose Strength and the Subsequent Dose Strength and as set forth from time to time in Appendixes to this Agreement. -3- 1.17 "Subsequent Dose Strength" shall mean the dose strength of Active Ingredient to be used in Prototype Formulations to be developed hereunder subsequent to the Prototype Formulations for the Leading Dose Strength, as mutually agreed upon by the Parties, together with the respective Specifications, at the appropriate time. 1.18 "Territory" shall mean *. ARTICLE 2 GRANT OF OPTION AND DEVELOPMENT PREAMBLE 2.1 GENTA JAGO hereby grants to KRYPTON an exclusive option to develop and to acquire a sub-licensese (hereinafter referred to as the "License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, GEOMATRIX(R) Technology and Know How as further set forth hereinafter. This option may be exercised by KRYPTON in writing at any time on or before the earlier of (i)* or (ii) within *. Upon timely exercise of this option the terms and provisions set forth hereinafter for the development, registration and sub-license for the Final Products shall come into full force and effect. Should KRYPTON not timely exercise its option granted hereunder or inform GENTA JAGO in writing that KRYPTON does not wish to exercise the option, then GENTA JAGO shall be free to develop, sub-license and market the Final Products for its own purposes or for and to any other third party. 2.2 The Parties agree that upon KRYPTON's exercise of the option granted in Section 2.1. above GENTA JAGO shall commence the development of Prototype Formulations for the Leading Dose Strength pursuant to this Agreement. During the term of this Agreement, KRYPTON shall have a further option of whether or not and when to commence development of Prototype Formulations for the Subsequent Dose Strength by giving written notice to that effect to GENTA JAGO. If and when KRYPTON so elects and GENTA JAGO so agrees, than the terms and conditions for the development as set forth hereinafter shall apply accordingly to the Prototype Formulations for the Subsequent Dose Strength, except where explicitly stated otherwise below. 2.3 At the date of execution of this Agreement, GENTA JAGO has performed certain preliminary development efforts for the Prototype Formulations. This development is hereby incorporated in this Agreement. 2.4 GENTA JAGO undertakes to conduct the development of the Prototype Formulation(s) -4- and the Final Product(s) in an efficient and professional manner. KRYPTON shall actively support GENTA JAGO regarding the development and studies to be executed by GENTA JAGO as may be reasonably required by GENTA JAGO from time to time. In particular, KRYPTON shall provide information reasonably requested by GENTA JAGO relating to the Active Ingredient for the purposes of carrying out this development, including, but not limited to, physico-chemical characteristics, safe-handling instructions, in-vitro analytical methods, degradation products and standards and analytical methods therefore. Additionally, KRYPTON shall provide to GENTA JAGO requested data and adequate quantities of samples of Reference Products for the purposes of conducting the Feasibility Study. KRYPTON, however, shall not be required to provide information regarding the Reference Products which is not in the public domain, unless KRYPTON is duly authorized to possess and disclose such non-public information. Any costs and expenses incurred by KRYPTON in connection with such support shall be borne by KRYPTON. 2.5 Due to the nature and complexity of the development and the respective studies as set forth in this Agreement, the Parties recognize and acknowledge that problems and delays may occur which render the time limits set in this Agreement and/or the time-frame of the development mutually agreed upon difficult or impossible to accomplish. The Parties agree that they shall immediately inform each other in writing in the event that significant problems or delays are encountered or envisaged during the course of the development and shall discuss such problems and delays in order to agree on a mutually acceptable revision of the time limits set in this Agreement and/or the time-frames mutually agreed upon. 2.6 Together with the notice from KRYPTON to GENTA JAGO referred to in Section 3.1 below, KRYPTON, or its designated supplier, shall supply GENTA JAGO on a free-of- charge basis with sufficient quantities of Active Ingredient to perform the development program intended hereunder. Such supplies shall be accompanied with respective certificates of analysis and conformity. GENTA JAGO shall use all Active Ingredient supplied to it by KRYPTON hereunder solely and exclusively in connection with the development program mutually agreed upon. Alternatively, KRYPTON may request that GENTA JAGO obtain a supply of Active Ingredient from a reputable source having the necessary regulatory clearances in place to allow future marketing of the Final Product in the Territory. Should KRYPTON so require and GENTA JAGO so agree, the chosen supplier's facilities, processes and procedures shall be audited by GENTA JAGO, or a third party mutually acceptable to KRYPTON and GENTA JAGO, in order to ensure compliance with the appropriate regulatory requirements. KRYPTON shall reimburse all direct costs of GENTA JAGO incurred in carrying out, or having carried out such audit. GENTA JAGO shall provide KRYPTON with a copy of the audit report within thirty (30) days as of the completion of the audit. 2.7 In the event that GENTA JAGO becomes responsible for the supply of Active Ingredient, KRYPTON shall * related thereto and shall further reimburse GENTA JAGO any and all shipping and transportation costs, import duties, taxes or other - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -5- costs incurred by GENTA JAGO in connection with such supply of Active Ingredient promptly upon receipt of GENTA JAGO's respective invoices. ARTICLE 3 FEASIBILITY STUDY 3.1 By the notice of exercise of the option granted in Section 2.1 above from KRYPTON the development program contemplated hereunder shall be initiated. Not later than two (2) months as of the receipt of (i) such notice, (ii) a * and (iii) the Active Ingredient, GENTA JAGO shall commence the feasibility study under this Article 3. and shall use its commercially reasonable efforts to develop the Prototype Formulations. Up to three (3) of the developed Prototype Formulations shall be chosen by mutual agreement by the Parties for further study and development. The Parties recognize that the Specifications mutually agreed upon eventually will need to be updated with more detailed specifications for the Final Product in the course of the development, and in such case the Parties agree to mutually agree on any reasonable amendment of the Specifications. 3.2 The development of the Prototype Formulations shall include, but not necessarily be limited to, the following elements: (a) Development and establishment of analytical methodology specific to the characterization of such Prototype Formulations; (b) Qualitative and quantitative characterization of such Prototype Formulation; (c) In-vitro release profile characterization of such Prototype Formulations and the Originator by using appropriate methodology mutually agreed to by the Parties; (d) Elaboration of pre-scale up procedures and the production of samples (2000 units +/- 10%) of the chosen Prototype Formulations for evaluation by KRYPTON, and for use in the Pilot Pharmacokinetic Study under Article 4. below; and (e) Accelerated stability testing of Prototype Formulations to provide *. 3.3 GENTA JAGO will ensure the use of generally accepted standards of Good Laboratory and Manufacturing Practices during the performance of the feasibility study. 3.4 Within thirty (30) days of the completion of the feasibility study, GENTA JAGO shall supply KRYPTON with a report (the "Feasibility Study Report") reasonably detailing the development of the Prototype Formulation(s) and containing one (1) month accelerated stability data only. A supplement to the Feasibility Study Report containing the * accelerated stability data will be forwarded sixty (60) days later. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -6- 3.5 Prior to the commencement of the Feasibility Study GENTA JAGO shall submit to KRYPTON a * for the entire Feasibility Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Feasibility Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 3.6 In the event that the results of the feasibility study conclusively demonstrate that no Prototype Formulation has been developed which reasonably meets the Specifications to the good faith mutual satisfaction of KRYPTON and GENTA JAGO, the Parties agree to enter into good faith negotiations in order to determine an appropriate course of action, including, but not limited to, that the Parties may mutually agree to abandon the development program under this Agreement, and terminate this Agreement with immediate effect. ARTICLE 4 PILOT PHARMACOKINETIC STUDY 4.1 Included as part of the feasibility study described in Article 3. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable in all material respects to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified clinical research organization (hereinafter "CRO") to perform a pilot pharmacokinetic study pursuant to this Article 4. 4.2 The Pilot Pharmacokinetic Study shall consist of commercially reasonable and appropriately designed * of the Prototype Formulations and the Originator. KRYPTON shall reasonably consult with GENTA JAGO in the design of the Pilot Pharmacokinetic Study and shall review the final protocol with GENTA JAGO prior to initiating work with the selected sub-contractor. The Pilot Pharmacokinetic Study shall be conducted in accordance with generally accepted standards of Good Clinical Practice and in compliance with Ethical Committee requirements or equivalent requirements, where applicable. 4.3 Prior to the commencement of the Pilot Pharmacokinetic Study GENTA JAGO shall submit to KRYPTON a * for the entire Pilot Pharmacokinetic Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pilot Pharmacokinetic Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -7- upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 4.4 KRYPTON shall provide GENTA JAGO with a copy of the report (hereinafter referred to as the "Pilot Pharmacokinetic Study Report") reasonably detailing the results of the Pilot Pharmacokinetic Study within six (6) weeks as of the study's completion and presentation of the preliminary data for GENTA JAGO's file. 4.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pilot Pharmacokinetic Study, including without limitation the availability or quality of the results and data from such Pilot Pharmacokinetic Study to be carried out by KRYPTON and the CRO. 4.6 In the event that the results of the Pilot Pharmacokinetic Study conclusively demonstrate that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that at least one of the Prototype Formulations reasonably meet the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such Prototype Formulation. ARTICLE 5 PRE-SCALE-UP ACTIVITIES 5.1 Upon completion of the Pilot Pharmacokinetic Study, KRYPTON may, at its option, request and charge GENTA JAGO to carry out the pre-scale-up activities as described in this Article 5. (hereinafter referred to as the "Pre-Scale-Up Activities"). KRYPTON shall, within thirty (30) days as from the date of the Pilot Pharmacokinetic Study Report notify in writing GENTA JAGO of its decision whether to proceed with and to have GENTA JAGO perform the Pre-Scale-Up Activities. 5.2 Prior to the commencement of the Pre-Scale-Up Activities GENTA JAGO shall submit to KRYPTON a * for the entire Pre-Scale-Up Activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pre-Scale Up activity, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such pre scale up costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 5.3 The Pre-Scale-Up Activities to be performed by GENTA JAGO shall comprise all reasonable activities necessary to allow the technology transfer to, and subsequent scale-up at, the mutually established manufacturing site, including, but not limited to, final optimization of the Prototype Formulation (where necessary), development and validation of the scale-up manufacturing procedure and analytical validation. Such Pre-Scale-Up Activities shall be completed within the time period mutually agreed upon by the Parties - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -8- in Appendix D hereto, calculated as from the date of receipt of the KRYPTON's notice by GENTA JAGO pursuant to Section 5.1 above. 5.4 In the event that additional clinical testing, including without limitation, confirming pharmacokinetic studies, is reasonably required or deemed necessary beyond the program envisaged in this Agreement in order to satisfy the FDA requirements for an NDA or ANDA approval of the Product, KRYPTON and GENTA JAGO shall meet to discuss in good faith the appropriate course of action to be followed and agree upon any such additional testing to be performed, provided that any such additional testing shall in any event be funded solely by KRYPTON. 5.5 Not later than upon the initiation of the Pre-Scale-Up Activities, the Parties shall establish and mutually agree upon a manufacturing site, where the Bio-Batches referred to in Section 7.2 below required for the pivotal clinical studies will be produced and where the Final Product shall be manufactured for commercial use after FDA approval(s) for the Final Product have been granted. ARTICLE 6 PRE-PIVOTAL PHARMACOKINETIC STUDY 6.1 Included as part of the Pre-Scale-Up Activities, KRYPTON shall at its own responsibility and its own cost, perform or have performed with a CRO selected by KRYPTON, a pre- pivotal pharmacokinetic study pursuant to this Article 6. (hereinafter referred to as "Pre- Pivotal Study"). Such Pre-Pivotal Study shall consist of *, to select the best of the Prototype Formulations for each dose strength to be used in the further development under this Agreement. 6.2 The Pre-Pivotal Study shall be performed in the United States of America. KRYPTON shall consult, review and mutually agree with GENTA JAGO on the design and final protocol of such Pre-Pivotal Study prior to initiating work with the selected CRO. 6.3 KRYPTON shall reimburse to GENTA JAGO the * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Pre-Pivotal Study. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 6.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailling the results of the Pre-Pivotal Study within ten (10) days of its completion for GENTA JAGO's file. GENTA JAGO shall have no liability or responsibility whatsoever with resupect to such Pre-Pivotal Study, including without limitation, the performance or conduct of such Pre- Pivotal Study or the availability or quality of the results and data from such Pre-Pivotal Study to be carried out by KRYPTON and the CRO. 6.5 Upon completion of the Pre-Pivotal Study and availability of the results of such Pre- Pivotal Study, the Parties shall consult with each other on such results and mutually agree - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -9- in writing upon the Prototype Formulation to be selected for further development under this Agreement. In the event that the results of the Pre-Pivotal Study are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of the Parties that at least one of the Prototype Formulations meet the respective Specifications, KRYPTON may elect to abandon the development program and terminate this Agreement with respect to such Prototype Formulation by giving written notice to that effect to GENTA JAGO. ARTICLE 7 FURTHER ACTIVITIES 7.1 Technology Transfer Upon mutual agreement of the Prototype Formulation to be used for development as referred to in Section 6.5 above, GENTA JAGO shall be responsible for and initiate the technology transfer to, and perform the scale-up at, the manufacturing site mutually established and agreed upon by the Parties. GENTA JAGO agrees that such technology transfer, and in particular the aspects of scale-up and validation of the manufacturing process shall be carried out by GENTA JAGO on such equipment as shall eventually be used by KRYPTON or a third party to manufacture the Final Product. Upon completion of such scale-up, GENTA JAGO shall notify KRYPTON thereof in writing. 7.2 Production of Industrial Scale Batches Upon receipt by KRYPTON of GENTA JAGO's notice referred to in Section 7.1 above, the Parties shall initiate the production of three (3) industrial scale batches (hereinafter "Bio-Batches") on such equipment as shall eventually be used KRYPTON or a third party to commercially manufacture the Final Product, based on the Prototype Formulation (the size of each Bio-Batch to be not less than the greater of (i) 10% (ten percent) of the anticipated initial commercial batch size, or (ii) 100,000 tablets), according to Current Good Manufacturing Practices, such Bio-Batches to be subsequently used for stability testing and pivotal clinical studies; provided however, that GENTA JAGO shall have the ultimate responsibility with respect of any and all technical aspects of such production of batches related to the technology transfer and the implementation of such technology in the manufacturing site. 7.3 Funding of Further Activities (a) Prior to the commencement of any activities under Sections 7.1 and 7.2 above GENTA JAGO shall submit to KRYPTON a * for such further activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall refund GENTA JAGO's * reasonably incurred by GENTA JAGO under Sections 7.1 and 7.2 above, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such further development costs shall be refunded by KRYPTON * - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -10- upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. (b) Furthermore, KRYPTON shall be responsible, at its own cost, for the supply of all raw material including, but not limited to, the Active Ingredients required or necessary for, and all additional costs and expenses whatsoever arising out of or in connection with, the production of the Bio-Batches described in Section 7.2 above and all other costs associated with the use of facilities, technology transfer, equipment and analytical services. 7.4 Stability Testing (a) KRYPTON shall be responsible for and perform or have performed at its own cost, the stability testing of the Final Product according to the then current requirements of the FDA in bulk packaging and in the final packaging materials. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such stability testing, including without limitation, the performance or conduct of such stability testing or the availability or quality of the results and data from such stability testing to be carried out or requested by KRYPTON. (b) KRYPTON shall provide to GENTA JAGO with a copy of all stability testing data within thirty (30) days after the completion of each stability testing period (hereinafter referred to as the "Final Stability Testing Report") for GENTA JAGO's file. (c) GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON in connection with the stability testing of the Final Product. KRYPTON shall pay to GENTA JAGO for such services provided by GENTA JAGO's or Jago Pharma's personnel an amount of USD * or part thereof spent, and furthermore, KRYPTON shall reimburse GENTA JAGO for all reasonable and documented travel related expenses of GENTA JAGO personnel who travel at KRYPTON's request to locations remote from such personnel's usual working location. 7.5 Further Provisions In the event that KRYPTON and GENTA JAGO shall reasonably deem the results or data from any of the activities to be performed by either Party under this Article 7. with respect to any dose strength be unsatisfactory for any reason, the Parties may mutually agree to abandon the development program and terminate this Agreement with immediate effect. ARTICLE 8 PIVOTAL CLINICAL STUDY 8.1 Promptly upon completion of the further activities referred to in Article 7. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -11- confidentiality commitments comparable to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified CRO of its choice, reasonably acceptable to GENTA JAGO, to perform and manage a series of pivotal clinical studies (hereinafter "Clinical Studies") in man required and/or necessary for any subsequent NDA or ANDA for the Final Product in accordance with the then current requirements of the FDA. 8.2 KRYPTON shall consult, review and agree with GENTA JAGO on the design and the final protocol of such Clinical Studies prior to initiating work with the selected subcontractor. 8.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Clinical Studies. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 8.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Clinical Studies within ten (10) days of its completion for GENTA JAGO's file. 8.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Clinical Studies, including without limitation, the performance or conduct of such Clinical Studies or the availability or quality of the results and data from such Clinical Studies to be carried out or requested by KRYPTON. 8.6 In the event that the results of the Pivotal Clinical Studies are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that the Prototype Formulation reasonably meets the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such dose strength. ARTICLE 9 THE REGULATORY (NDA OR ANDA) SUBMISSION 9.1 Upon completion of the Clinical Studies, KRYPTON may, at its option, elect to prepare and submit to the FDA an NDA or ANDA. KRYPTON shall notify GENTA JAGO of its election to exercise or not to exercise this option by giving written notice thereof to GENTA JAGO within thirty (30) days as of the availability of the results of the Clinical Studies. 9.2 In the event that KRYPTON elects pursuant to Section 9.1 above to make NDA or ANDA submission(s) to any Regulatory Authority with respect to a Final Product, KRYPTON shall have sole liability and responsibility for the prosecution, conduct and results of such NDA or ANDA and shall bear all costs in connection therewith. KRYPTON, at KRYPTON's option, may elect by written notice to GENTA JAGO prior to - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -12- commencement of the technology transfer referred to in Section 7.1 above to have the NDA or ANDA dossier prepared on its behalf by a qualified third party acceptable to GENTA JAGO. KRYPTON shall be liable and responsible for any and all costs associated with such sub-contracting. 9.3 KRYPTON or its chosen sub-contractor shall consult with GENTA JAGO, and GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON or the chosen sub-contractor, in connection with the preparation and prosecution of any NDA or ANDA or with the preparation of the dossier to be submitted to the FDA. KRYPTON shall pay to GENTA JAGO for such services and consultation provided by GENTA JAGO's personnel an amount of USD * or any part thereof spent. Furthermore, KRYPTON shall reimburse GENTA JAGO for reasonable and documented travel-related expenses of GENTA JAGO personnel who travel at KRYPTON's request to the elected manufacturing facility(ies) or other locations remote from such personnel's usual working location. ARTICLE 10 PROPRIETARY RIGHTS AND PATENTS 10.1 Patents and Proprietary Rights of GENTA JAGO (a) The Licensor and GENTA JAGO, respectively, shall retain title to and ownership of Patents, Know-How and GEOMATRIX(R) Technology licensed to GENTA JAGO, including, but not limited to, any and all developments and inventions relating to Patents, Know-How and GEOMATRIX(R) Technology (hereinafter collectively referred to as "GENTA JAGO IPR"). (b) KRYPTON shall not, directly or indirectly through its officers, directors, employees, agents, customers or other controlled or associated third parties, acquire any proprietary interest in or other right to GENTA JAGO IPR, other than provided in this Agreement. (c) GENTA JAGO shall use all commercially reasonable efforts, at its own cost, to cause the Licensor to prepare, prosecute and maintain all patent applications and patents constituting Patents, and shall keep KRYPTON fully and promptly informed on any developments or changes relating thereto. If the Licensor decides not to further prosecute any patent application constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. During the term of this Agreement, GENTA JAGO shall, at its sole cost, use all commercially reasonable efforts to cause the Licensor to take all steps necessary to maintain Patents to the extent GENTA JAGO deems commercially reasonable. If the Licensor decides not to maintain any patent constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -13- request, meet with the Licensor to discuss any reasonable appropriate action. Notwithstanding the foregoing, KRYPTON acknowledges to GENTA JAGO that Licensor has the final authority regarding such preparation, prosecution and maintenance of all patent applications and patents. 10.2 Patents and Proprietary Rights for Final Products (a) KRYPTON shall retain title to and ownership of all developments, whether patentable or not, relating specifically and exclusively to the Final Products, provided that such developments are entirely independent of any and all GENTA JAGO IPR (hereinafter collectively referred to "Final Product IPR"). (b) KRYPTON shall be responsible for and shall control, at its own cost, the preparation, prosecution and maintenance of all Final Product IPR and shall keep GENTA JAGO fully and promptly informed on any developments or changes relating thereto. During the term of this Agreement, KRYPTON shall, at its sole cost, take all steps necessary to prosecute and/or maintain all Final Product IPR to the extent KRYPTON deems commercially reasonable. If KRYPTON intends not to further prosecute and/or maintain any of the Final Product IPR, KRYPTON shall promptly inform GENTA JAGO of such intention in writing, and GENTA JAGO shall have the right and option, but not the obligation, to have transferred to it sole title to and ownership in such Final Product IPR free of any charge by giving respective written notice thereof to KRYPTON within thirty (30) days after GENTA JAGO's receipt of KRYPTON's notice referred to above. (c) In the event GENTA JAGO has and exercises its right and option referred to Section 10.2 (b) above to have transferred to it any such Final Product IPR, KRYPTON shall promptly undertake any and all steps required and/or necessary to transfer title to and ownership of such Final Product IPR to GENTA JAGO. In the event that GENTA JAGO exercises its option to have transferred such Final Product IPR from KRYPTON to GENTA JAGO, GENTA JAGO shall maintain such Final Product IPR during the term of this Agreement to the extent GENTA JAGO deems commercially reasonable and shall bear all cost associated therewith incurred after the date of GENTA JAGO's notice to KRYPTON exercising its option referred to in Section 10.2 (b) above. In such case, the Parties shall negotiate in good faith the terms and condition, under which such Final Product IPR transferred to GENTA JAGO shall be included in the License pursuant to Article 11. below. 10.3 Notification of Infringement (a) If KRYPTON becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR or Final Product IPR or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR or Final Product IPR, then KRYPTON shall promptly notify GENTA JAGO in writing of any such infringement, violation, -14- action, claim or dispute. (b) If GENTA JAGO becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR with respect to Final Products or of Final Product IPR; or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR with respect to Final Products or of Final Product IPR, then GENTA JAGO shall promptly notify KRYPTON in writing of any such infringement, violation, action, claim or dispute. 10.4 Enforcement of GENTA JAGO IPR (a) GENTA JAGO, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, GENTA JAGO IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, GENTA JAGO IPR, (iii) to control any litigation or other enforcement action regarding GENTA JAGO IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding GENTA JAGO IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions, to the extent that any such action or such infringement may have an adverse effect on Final Product. KRYPTON shall, at its own cost, fully cooperate with GENTA JAGO in the planing and execution of any suit or other action to enforce, or defend third-party actions regar- ding, GENTA JAGO IPR as reasonably required or requested by GENTA JAGO. (b) If GENTA JAGO does not within one-hundred-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of GENTA JAGO IPR which may adversely affect Final Products, or of any third-party action, claim or dispute based upon or arising out of GENTA JAGO IPR which may adversely affect Final Products, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then the Parties shall, upon KRYPTON's written request, promptly meet to discuss any reasonable appropriate action with regard to such enforcement of GENTA JAGO IPR which may adversely affect Final Products, provided however, that KRYPTON is aware and acknowledges that in such case the Licensor will have the right to enforce any and all GENTA JAGO IPR pursuant to the License Agreements. (c) Subject to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in the preceding section, KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action where necessary to obtain complete relief regarding -15- the subject infringement or violation. 10.5 Enforcement of Final Product IPR (a) KRYPTON, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, Final Product IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, Final Product IPR, (iii) to control any litigation or other enforcement action regarding Final Product IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Final Product IPR. Notwithstanding anything contained in the preceding sentence, KRYPTON shall not settle any suit or action or otherwise consent to an adverse judgment in such suit or action without the prior written consent of GENTA JAGO, which consent shall not be withheld unreasonably. KRYPTON shall keep GENTA JAGO informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of GENTA JAGO under this Agreement and in GENTA JAGO IPR, when taking any of the foregoing actions. (b) If KRYPTON does not, within one-hundred-and-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of Final Product IPR, or of any third-party action, claim or dispute based upon or arising out of Final Product IPR, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then GENTA JAGO shall have the right, but not the obligation, at its sole expense, to take and control such action as it deems appropriate to enforce, or abate the infringement of, or defend against such third-party action, regarding Final Product IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis of any such action and consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions. KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action controlled by GENTA JAGO where necessary to obtain complete relief regarding the subject infringement or violation. 10.6 Application of Monies Recovered Subject always to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in Section 10.4(c) and any right to receive any monies recovered therefrom as provided for in the License Agreements, all monies recovered upon the final judgment or settlement of any suit or other action under this Sections 10.4 or 10.5 shall be applied as follows: (i) to cover any and all costs and expenses (including attorney's fees) incurred by the -16- Party controlling such suit or other action; (ii) to cover any and all costs and expenses (including attorney's fees) reasonably, or upon request of the controlling Party, incurred by the other Party in connection with such suit or other action, if any; (iii) the remainder, if any, to the Party controlling any such suit or other action. ARTICLE 11 SUB-LICENSE AGREEMENT 11.1 GENTA JAGO hereby grants to KRYPTON the exclusive and sublicenseable right and sub-license (hereinafter referred to as the "License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, GEOMATRIX(R) Technology and Know How exclusively for that purpose subject to the payment of the * and the Royalties pursuant to Articles 13. and 14. below. 11.2 The rights of KRYPTON to grant any sub-license in any part of the Territory shall be subject to the requirement that KRYPTON shall obtain the written approval of GENTA JAGO prior to executing any such sub-license agreement, which approval shall not unreasonably be withheld, provided however, that no such approval by GENTA JAGO shall be required for any sub-license to an Affiliate of KRYPTON . 11.3 In any event KRYPTON shall be responsible for any and all acts, deeds and undertakings of its permitted sub-licensee(s) and KRYPTON and its permitted sub-licensee(s) shall continue to be bound by all terms and provisions under this Agreement throughout its term. In case that KRYPTON sub-licenses rights and/or the License to any sub-licensee(s) approved by GENTA JAGO, such sub-licensee(s) shall agree in writing to any and all of KRYPTON's obligations and undertakings under this Agreement, including but not limited to its confidentiality obligations set forth hereinafter. Furthermore, KRYPTON undertakes that any and all sub-license agreements shall provide for inspection and audit provisions identical to the provisions set forth below in order to enable GENTA JAGO to control and audit and receive any and all fees and Royalties due as provided in this Agreement. KRYPTON shall provide GENTA JAGO promptly with reasonable appropriate information on its sub-licensee(s) and copies of all agreements with such sub-licensee(s) (with only the commercial terms may be redacted). ARTICLE 12 MANUFACTURING AND PRODUCT LIABILITY 12.1 In the event that KRYPTON, subject to Section 5.5 above, elects GENTA JAGO, and GENTA JAGO expressly agrees to such manufacture, or any of its Affiliates shall manufacture Final Products, then the Parties agree to enter into good faith negotiations on and to use commercially reasonable efforts to execute in due time a respective - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -17- Manufacturing and Supply Agreement, according to which GENTA JAGO or its Affiliates shall undertake to manufacture and supply Final Products in sufficient quantities to meet KRYPTON's requirements, at a sale price for such Final Products manufactured equal to GENTA JAGO's * In the event and for such period of time, that GENTA JAGO or its Affiliate manufactures and supplies Final Product under such Manufacturing and Supply Agreement, the Royalty Rate referred to in Section 14.1 below shall be * 12.2 In the event that KRYPTON or any of its Affiliates or any third party is elected pursuant to Section 5.5 above to manufacture Final Product, then KRYPTON undertakes and agrees that at all times the Specifications and to any and all laws, rules and regulations imposed by any competent authority on the manufacturing, marketing, distribution and sale of Final Products are strictly adhered to by the manufacturer, and KRYPTON shall during the entire term of this Agreement be solely and fully liable and responsible for the compliance with all such laws, rules and regulations when manufacturing, having manufactured, marketing, distributing and selling Final Products itself and/or through Affiliates or sub- licensee(s). 12.3 KRYPTON shall indemnify, defend and hold GENTA JAGO, its Affiliates and the Licensor harmless from and against any losses, claims, liabilities, costs and expenses (including reasonable attorney's fees) that may be imposed upon or asserted against GENTA JAGO and/or its Affiliates and/or the Licensor as a result of the marketing, distributing, manufacture, use or sale of Final Products by or on behalf of KRYPTON, its Affiliates, agents or sub-licensee(s), except for those claims, liabilities, costs and expenses arising from gross negligence or intentional misconduct on the part of GENTA JAGO, its Affiliates or the Licensor. ARTICLE 13 * PAYMENTS AND OTHER CONSIDERATION 13.1 As consideration for GENTA JAGO granting the option hereinbefore set forth KRYPTON undertakes to pay to GENTA JAGO an *, payable upon execution of this Agreement. 13.2 Provided that KRYPTON shall exercise the option granted hereunder, as consideration for the License granted by GENTA JAGO to KRYPTON under this Agreement and in consideration of certain major development steps achieved hereunder, KRYPTON undertakes to pay to GENTA JAGO a * 13.3 The * shall be payable *: (a) * KRYPTON's receipt of - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -18- GENTA JAGO's notice referred to in Section 7.1 above; and (b) *; and (c) * for the Final Product; and (d) * for Final Product. 13.4 The Parties agree that * as set forth in Section 14.4 below. 13.5 Unless otherwise agreed by the Parties in writing, all payments under this Article 13. shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. ARTICLE 14 ROYALTIES 14.1 During a period commencing upon the first commercial sale of Final Product in each country of the Territory and ending upon the earlier of (i) the fifteenth (15th) anniversary of the first commercial sale of Final Product in such country of the Territory, and (ii) the expiration of the last of the Patents covering Final Product in such country of the Territory (hereinafter referred to as the"Royalty Term"), and in further consideration of the License granted to KRYPTON by GENTA JAGO, KRYPTON shall pay to GENTA JAGO a royalty (hereinafter referred to as the"Royalty") of an amount equal to * of the Final Products in the Territory. 14.2 Royalties shall be payable on a quarterly basis. KRYPTON shall remit to GENTA JAGO within six (6) weeks after the end of each calendar quarter the amount of Royalty due with respect to Net Sales achieved in the preceding quarter, beginning with the calendar quarter in which the first commercial sale of the Final Product is made in any country of the Territory. KRYPTON shall deliver to GENTA JAGO, along with such remittance of Royalty payments, * of the Final Product on a country-by-country and product-by-product basis to which the Royalty payment relates. 14.3 All Royalty Reports shall be prepared in accordance with generally accepted accounting principles consistently applied from applicable period to period and shall be certified by an officer of KRYPTON as being so prepared, true, accurate and correct. 14.4 In recognition of the * payable by KRYPTON to GENTA JAGO prior to the - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -19- commercial sale of the Final Products, the amount of Royalty payments due to GENTA JAGO under Article 14.2 above with respect to each calendar quarter shall be * until such time as the aggregate amount of all * 14.5 Unless otherwise agreed by the Parties in writing, payments of Royalties shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. Any conversions into United States Dollars from the currency in which the corresponding Net Sales for such Royalties were made, are to be calculated as using the average closing buying rate for such currency quoted in the continental terms method of quoting exchange rates (local currency per USD 1) published in the Wall Street Journal on the last business day of the applicable reporting period covered by such Royalty Report. ARTICLE 15 INSPECTION AND AUDIT 15.1 During the term of this Agreement and during a period of twelve (12) months after its expiration or termination for any reason, upon the written request of GENTA JAGO and not more than once each calendar year, KRYPTON shall permit an independent certified public accountant of internationally recognized standing selected by GENTA JAGO, at GENTA JAGO's expense, to have access during regular business hours to such of the records of KRYPTON and its Affiliates as may be reasonably necessary to verify the accuracy of the Royalty Reports for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to GENTA JAGO only whether the Royalty Reports and records of KRYPTON and its Affiliates and the amount of Royalties actually paid are correct or not and the specific details concerning any discrepancies; no other information shall be shared. The Parties agree to accept such written audit report as final and binding upon them. 15.2 If such independent accounting firm correctly concludes that additional Royalties were owed during any such period audited, KRYPTON shall pay such additional Royalties within ten (10) days of the date GENTA JAGO delivers to KRYPTON such accounting firm's written report so concluding. The fees and expenses charged by such accounting firm with respect to such audit shall be paid by GENTA JAGO; provided however, if any such audit correctly discloses that Royalties payable by KRYPTON for the audited period are more *, then KRYPTON shall pay all reasonable fees and expenses charged by such accounting firm with respect to such audit. 15.3 GENTA JAGO shall treat all financial information subject to review under this Article 15. as confidential and subject to the confidentiality obligations in Article 16. below. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -20- ARTICLE 16 CONFIDENTIALITY 16.1 Confidential Information KRYPTON shall maintain in confidence all Know-How and other information of GENTA JAGO (including samples) disclosed by GENTA JAGO and identified as, or acknowledged to be, confidential (the "Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except on a need-to-know basis to its directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with KRYPTON's activities as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, KRYPTON hereto shall obtain agreement in writing of any such person to hold in confidence and not make use of the Confidential Information for any purpose other than those authorized by this Agreement. KRYPTON shall notify GENTA JAGO promptly upon the discovery of the unauthorized use or disclosure of the Confidential Information. 16.2 Permitted Disclosures The obligations of confidentiality and non-use contained in Section 16.1 above shall not apply to the extent that (a) KRYPTON (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market Final Products, provided in each case that KRYPTON shall give GENTA JAGO written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof, or (b) KRYPTON can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to it, or thereafter became public knowledge, other than as a result of actions of KRYPTON, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by KRYPTON (as shown by its written records) prior to the date of disclosure to it by GENTA JAGO hereunder; (iii) the disclosed information was disclosed to KRYPTON on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to GENTA JAGO or the Licensor; or (iv) the disclosed information was independently developed by KRYPTON without the use of Confidential Information disclosed by GENTA JAGO. 16.3 Terms of this Agreement Except as otherwise provided in Section 16.2 above, neither Party shall disclose any terms or conditions of this Agreement to any third party (other than the Licensor) without the prior consent of the other Party. The Parties further agree that no public announcements or press releases shall be made prior to the exercise of the option granted hereinbefore. 16.4 Term of Confidentiality -21- The confidentiality obligations under this Article 16 shall be effective during the term of this Agreement and for a period of ten (10) years after the expiration or earlier termination hereof. 16.5 Injunctive Remedies GENTA JAGO shall be entitled to injunctive remedies and relief against KRYPTON and any third parties for any breach or threatened breach of the confidentiality obligations under this Article 16. 16.6 Damages In the event of a breach of the confidentiality provisions under this Article 16 by KRYPTON or its directors, officers, employees or any other person who were given access to the Confidential Information by KRYPTON, GENTA JAGO shall be entitled to receive from KRYPTON any and all actual costs and damages caused by such breach. ARTICLE 17 TERM AND TERMINATION 17.1 Term and Expiration (a) This Agreement shall expire on a country-by-country and product-by-product basis upon the expiration of the Royalty Term. (b) Upon the expiration of this Agreement in each country of the Territory pursuant to Section 17.1 (a) above and payment of all fees, including but not limited to the *, and all Royalties and other payments by KRYPTON due GENTA JAGO under this Agreement, the License shall be deemed to be a perpetual, fully paid-up and royalty-free license for such Final Product and each such country of the Territory. 17.2 Termination Prior to Registration During the development, test, study and registration phases as specified in Articles 3. through 8. above, and until the first successful registration approval of any Final Product by any Regulatory Authority, this Agreement may be terminated by KRYPTON for any reason and without cause, in accordance with the provisions set forth in Sections 3.6, 4.6, 6.5, 7.5 and 8.6 above. 17.3 Termination for Cause During the entire term of this Agreement either Party may terminate this Agreement by giving to the other Party written notice to that effect, if any of the following events occur: - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -22- (a) the other Party is in default or in breach of a term or provision hereof and such default or breach continues and is not remedied within thirty (30) days upon the other Party's written request to remedy such default or breach; or (b) the other Party shall commit a breach of any of the confidentiality provisions of Article 16. above; or (c) the other Party goes into liquidation, voluntarily or otherwise, other than for the sole purpose of reorganization, or goes into bankruptcy or makes an assignment for the benefit of creditors, or in the event of a receiver being appointed of the other Party's property or parts thereof. 17.4 Effect of Termination (a) If KRYPTON elects to so terminate the Agreement under Section 17.2 above prior to filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated, (iii) KRYPTON be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) all Registrations pertaining to the marketing of the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vi) GENTA JAGO and its Affiliates shall thereafter be entitled to exercise such rights as they may have under their own license agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to KRYPTON; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates. If KRYPTON elects to so terminate this Agreement subsequent to the filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated; (iii) KRYPTON shall be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) GENTA JAGO and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or -23- imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates); (vi) all Registrations pertaining to the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated hereunder shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vii) GENTA JAGO shall pay to KRYPTON the same royalty, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to KRYPTON, as KRYPTON would otherwise have paid (absent such termination) hereunder to GENTA JAGO on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by GENTA JAGO and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the royalties paid to KRYPTON equal the aggregate amount that had been paid by KRYPTON to GENTA JAGO prior to such termination under the Sections 3.5, 4.3, 5.2, 6.3, 7.3,8.3, 9.2 and 13., at which time the royalty rate then prevailing on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) in the United States shall be reduced by two percent (2 %) (but shall not be reduced for sales outside the United States). (c) Otherwise the termination of this Agreement shall be without prejudice to any rights and obligations of either Party accrued prior to the effective date of termination. KRYPTON shall forthwith make all payments due and outstanding to GENTA JAGO at the date of termination. Except as explicitly otherwise stated in this Agreement, GENTA JAGO shall not be obligated to refund upon termination of this Agreement to KRYPTON any payments, including without limitation the *, made by KRYPTON to GENTA JAGO prior to such termination pursuant to the provisions of this Agreement. (d) The termination of this Agreement pursuant to Section 17.3 above by either Party shall not limit remedies which may be otherwise available in law or equity to either Party. 17.5 Early Termination of the License Agreements (a) In the event that the License Agreements are terminated prior to the expiration of the last to expire of the Patents licensed to GENTA JAGO in the Territory, then the License granted hereunder to KRYPTON shall also terminate upon KRYPTON's receipt of the respective termination notice from the Licensor. KRYPTON may give written notice to the Licensor of KRYPTON's desire to continue the License granted under this Agreement within sixty (60) days as of KRYPTON's receipt of the Licensor's notice referred to above. (b) In the event that KRYPTON timely notifies the Licensor of its desire to continue the License granted under this Agreement, the Licensor shall have the right, at its sole - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -24- discretion, to elect to assume in writing within sixty (60) days upon the Licensor's receipt of KRYPTON's notice any and all rights of GENTA JAGO under this Agreement and to promptly cure all defaults of GENTA JAGO under this Agreement, if any. (c) In the event that the Licensor does not timely gives notice to KRYPTON and cures all of GENTA JAGO's defaults hereunder pursuant to Section 17.5(b) above, then KRYPTON shall promptly assume in writing any and all rights and obligations of GENTA JAGO under the License Agreements with the Licensor, but with regard to the rights encompassed by the License granted hereunder only, and promptly cure all defaults of GENTA JAGO under the License Agreements with regard to the rights encompassed by the License granted hereunder only, if any. (d) Notwithstanding anything contained in this Section 17.5, no action taken by the Licensor and/or KRYPTON to continue or not to continue the License shall relieve GENTA JAGO from any liability for any uncured defaults under this Agreement or the License Agreements, and such action by the Licensor and/or KRYPTON shall be without prejudice to any other rights or remedies the Licensor and/or KRYPTON may have in law or equity. ARTICLE 18 WARRANTIES 18.1 GENTA JAGO shall carry out and undertake the studies and tests specified in this Agreement in a careful and diligent manner. GENTA JAGO agrees to carefully choose, instruct and supervise any employees, officers, Affiliates or third parties to be chosen by GENTA JAGO pursuant to this Agreement, who are involved with the tests and studies. Nothing in this Agreement shall be construed as a representation made, or warranty given, by GENTA JAGO that any development performed by or for GENTA JAGO under this Agreement will be successful in whole or in part, or that any product, including Final Product, which may be developed, will be successful in the commercial marketplace. Furthermore, GENTA JAGO makes no representation or warranty, express or implied, with respect to GEOMATRIX(R)Technology and/or Know-How, including without limitation, any warranty of completeness, accuracy, merchantability or fitness for a particular purpose thereof. 18.2 GENTA JAGO represents and warrants that it has all rights regarding Patents, GEOMATRIX(R)Technology and Know-How necessary to grant the License hereunder. Notwithstanding the preceding sentence, GENTA JAGO does not assume any responsibility and makes no warranty that the performance of this Agreement and any product developed hereunder, including Prototype Formulation(s) and Final Products, do not infringe any third party's patents, patent applications or other intellectual property rights. Notwithstanding the preceding sentence, GENTA JAGO represents and warrants that, as of the effective date of this Agreement, it is not aware and has not knowledge of any such infringement of any third party rights. If, however, during the course of this -25- Agreement either Party discovers that the Prototype Formulation(s) and/or the Final Products infringe or may infringe any third party's intellectual property rights, it shall promptly inform the other Party thereof and the Parties shall meet to discuss the course of action to be taken with regard thereto. 18.3 Nothing in this Agreement shall be construed as a representation made, or warranty given by GENTA JAGO that any patent will issue based upon any pending patent application encompassed by the term Patents, and that any patent encompassed by the term Patents which issues will be valid or enforceable. 18.4 GENTA JAGO assumes no liability or responsibility for any damages caused to KRYPTON, third parties, animals and/or the environment by the manufacturing, marketing or use of the Prototype Formulations or Final Products or the active ingredient contained therein, except to the extent that any of the above are attributable to the gross negligence or willful misconduct of GENTA JAGO in performing its obligations hereunder. 18.5 Subject to the specific representations and warranties given and specific disclaimers of representations and warranties included in this Article 18, and further subject to anything to the contrary contained in this Agreement, either Party shall, as to third parties, be indemnified and held harmless by the other Party from and against any and all losses, liabilities and damages arising from any claim, action or other proceeding by any third party relating to any acts or omissions of the other Party, its directors, officers, employees or agents, or the gross negligence or willful misconduct of such other Party, its directors, officers, employees or agents in performing any of its obligations under this Agreement. 18.6 Any liability, warranty and undertaking contained herein shall be limited to the payment by either Party for direct damages to the other Party and in any event, neither Party shall be liable to the other Party for any special, indirect, punitive or consequential damages and/or loss of profits or anticipated profits, respectively. 18.7 KRYPTON shall, at its own expense, purchase from an insurance company of its choice and shall maintain during the entire term of this Agreement an appropriate and customary policy of general liability and product liability insurance covering its responsibilities regarding Prototype Formulation(s) and Final Products developed, manufactured, marketed and sold under this Agreement and the Active Ingredient contained therein and the use thereof. Upon request, KRYPTON shall provide GENTA JAGO with evidence that such insurances are existing and are maintained. ARTICLE 19 MISCELLANEOUS PROVISIONS 19.1 Entire Agreement: The terms, covenants, conditions and provisions contained in this Agreement, including its Appendices referred to herein, constitute the total and complete agreement of the Parties and supersede all prior understandings and agreements hereto -26- made, and there are no other representations, understandings or agreements relating to the subject matter hereof. The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the Parties to this Agreement. 19.2 Assignment: This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party, other than to an Affiliate of such Party, without the consent of the other Party; provided however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction; and provided further that GENTA JAGO may without the consent of KRYPTON assign any and all of its rights and obligations hereunder to the Licensor and/or any of the Licensor's Affiliates. Any permitted assignee shall assume all obligations of its assignor under this Agreement or under the respective rights or obligations actually assigned. 19.3 Successors: This Agreement and all rights hereunder shall ensure to the benefit of all successors and assigns of both Parties. 19.4 Notices: Any consent, notice or report required or permitted to be given or made under this Agreement by one Party to the other shall be in English and in writing, delivered personally or by courier service or by facsimile (promptly confirmed by personal delivery or courier service) addressed to the other Party at its address indicated below, or to such other address as shall have been notified in writing to the sending Party by the receiving party from time to time, and shall take effect upon receipt by the addressee. IF TO KRYPTON: KRYPTON Ltd. East Wing, Second Level Hadfield House Library Street Gibraltar attn.: PRESIDENT WITH COPIES TO: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England attn.: COMPANY SECRETARY AND: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT -27- IF TO GENTA JAGO: GENTA JAGO Technologies B.V. Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz, Switzerland attn.: MANAGEMENT COMMITTEE WITH COPIES TO: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 8002 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT AND: PILLSBURY MADISON & SUTRO LLP 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. attn.: THOMAS E. SPARKS, JR., ESQ. 19.5 Independent Contractors: It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party to do so. 19.6 Severability: Each Party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. 19.7 Force Majeure: Neither Party hereto shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party hereto. -28- 19.8 Interest: In the event any amount due and payable under this Agreement is not paid by the due date, then the Party owing such amount shall pay to the creditor, without being requested by the other Party, interest on the total outstanding amount at the rate equal to the London Interbank Offered Rate ("LIBOR"), as published in the Wall Street Journal (Europe) on the date that such payment falls due, increased by three percent (3%), in United States Dollars and adjusted on the first day of every calendar quarter. 19.9 Headings: The titles and headings used in this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 19.10 Waiver: The waiver by either Party hereto of any right hereunder or the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. 19.11 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. ARTICLE 20 DISPUTE RESOLUTION AND ARBITRATION 20.1 In the event of any dispute arising between the Parties concerning this Agreement, GENTA JAGO and KRYPTON agree that in the first place they shall meet for good faith discussions in an attempt to negotiate an amicable solution. 20.2 Any dispute arising between the Parties out of or in connection with this Agreement, or the interpretation, breach or enforcement thereof, which cannot be amicably resolved pursuant to Section 20.1 above within two (2) months as from the first appearance of such dispute, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to all of the other Parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in PARIS, FRANCE. The arbitrators shall have the authority to grant specific performance, and to allocate among the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this section, shall be determined by binding arbitration pursuant to this section. 20.3 Notwithstanding anything contained in this Article 20, either Party may seek preliminary -29- or injunctive measures or relief in any competent court having jurisdiction. ARTICLE 21 APPLICABLE LAW The Parties hereto agree that this Agreement, all transactions executed hereunder and all relationships between the Parties in connection therewith shall be construed under and be governed by the laws of Switzerland without reference to the conflict of law principals thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 31st day of October 1996. GENTA JAGO TECHNOLOGIES B.V. /s/ Thomas H. Adams /s/ Jacques Gonella - - - ------------------- ------------------- by: Dr. Thomas H. Adams by: Dr. Jacques Gonella its: Managing Director its: Managing Director KRYPTON LTD. /s/ - - - ------------------- by: its: The Licensor, Jagotec AG, hereby agrees to be bound by the obligations contained in Section 17.5 of this Agreement. JAGOTEC AG /s/ Jacques Gonella - - - ------------------- by: by: its: its: -30- EX-10.92 8 DEVELOPMENT & SUB-LICENSE AGREEMENT EXHIBIT 10.92 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT & SUB-LICENSE AGREEMENT * This DEVELOPMENT AND SUB-LICENSE AGREEMENT (this "Agreement"), effective from the date last written hereunder, is entered into between GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and KRYPTON LTD., a Gibraltar limited company, having a place of business at East Wing, Second Level, Hadfield House, Library Street, Gibraltar (hereinafter referred to as "KRYPTON") WITNESSETH: WHEREAS, GENTA JAGO has expertise in the development of controlled-release formulations for pharmaceutical agents and in particular has exclusive rights to proprietary know-how and technology generally known and commercialized under the registered trademark GEOMATRIX(R) and as described and embodied in the Patents (as defined below) with respect to a Bioequivalent Product (as defined below) to * _; and WHEREAS, KRYPTON is a company which markets pharmaceutical products and is interested in developing Prototype Formulations (as defined below) for the Final Product (as defined below) and in seeking the approval of Regulatory Authorities (as defined below) to manufacture, or have manufactured and market the Final Product in the Territory (as defined below); and WHEREAS, GENTA JAGO is prepared to conduct or have conducted certain studies and the development of the Prototype Formulations and Final Product; and WHEREAS, GENTA JAGO is prepared to grant to KRYPTON under the terms and conditions set forth hereafter a sub-license under the Patents, GEOMATRIX(R) Technology and Know-How (as defined below) to conduct studies relating to the Prototype Formulations and, upon receipt of approval by the Regulatory Authority (as defined below), to manufacture or have manufactured, market and sell the Final Product in the Territory. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the Parties hereby agree as follows: - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. ARTICLE 1 DEFINITIONS For purposes of this Agreement, the terms defined in this Article 1 shall have the following meanings: 1.1 "Active Ingredient" shall mean *. 1.2 "Affiliate" shall mean, with respect to either Party hereto, any corporation, partnership or other entity controlled by, controlling or under common control with, such Party, with "control" meaning direct or indirect beneficial ownership of more than 50% of the voting power of, or more than 50% of ownership interest in, such corporation, partnership or other entity. 1.3 "ANDA" shall mean any Abbreviated New Drug Application filed with the FDA, by or for KRYPTON requesting authorization to manufacture, have manufactured or sell the Final Product in the United States of America, or any equivalent application to a Regulatory Authority in any other country of the Territory. 1.4 "Bioequivalent Product" shall mean a drug product meeting the bioequivalence requirements imposed by the FDA for in vitro and/or in vivo testing as set forth in the regulations of the FDA at 21 C.F.R. ss.320 ("AB Equivalent Rating"), as they may be amended from time to time. 1.5 "Competitive Product" shall mean any product other than the Final Product or the Originator which is a Bioequivalent Product of the Originator and is marketed and sold in the Territory on a country-to-country basis. 1.6 "FDA" shall mean the U.S. Federal Food and Drug Administration and any successor agency thereof. 1.7 "Final Product" shall mean the pharmaceutical orally-administered controlled-release formulation(s) containing the Active Ingredient, presented as a compressed tablet developed pursuant to this Agreement, based on the GEOMATRIX(R) Technology and being a Bioequivalent Product of the Originator, of a Competitive Product or of any other product containing the Active Ingredient. 1.8 "GEOMATRIX(R) Technology" shall mean the oral controlled-release drug delivery and related technology licensed to GENTA JAGO by the Licensor which utilizes a hydrophilic drug-containing matrix tablet which controls the release of the drug through the use of one or more barrier layers. 1.9 "Gross Margin" shall mean, with respect to any Final Product, Net Sales less only the direct cost of such Final Product sold, i.e. (a) raw material cost, (b) direct labor cost, (c) reasonably directly allocatable overhead cost (e.g. energy cost), (d) packaging and labeling - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 2 - cost, and (e) other costs directly associated with the manufacturing of such Final Product (e.g. quality control). No other deductions from Net Sales are permissible for the calculation of Gross Margin, including without limitation, sales, marketing and distribution costs. Alternatively, in the event that KRYPTON sub-contracts the manufacturing of any Final Product to a third party, then "Gross Margin" with respect to such Final Product shall mean Net Sales less only the manufacturing costs as invoiced by such manufacturing third party sub-contractor and actually paid by KRYPTON. 1.10 "Know-How" shall mean all information and data, which are not generally known including, but not limited to, patent claims and related information not yet disclosed to the public, formulae, procedures, protocols, techniques and results of experimentation and testing, which (a) relate to the GEOMATRIX(R)Technology, any Prototype Formulation or any Final Product, or (b) are necessary or useful to develop, make or use any Prototype Formulation, or (c) are necessary or useful to develop, seek regulatory approval, make, use or sell any Final Product, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.11 "License Agreements" shall mean the license agreements entered into by and between GENTA JAGO and the Licensor, under which the Licensor granted GENTA JAGO the rights in the Patents, the Know-How and the GEOMATRIX(R) Technology, which are the subject matter of the sub-license referred to in Article 11. below. 1.12 "Licensor" shall mean Jagotec AG, a Swiss corporation, having its place of business at Seestrasse 91, CH-6052 Hergiswil, Switzerland. 1.13 "Net Sales" shall mean, with respect to any Final Product, the invoiced sales price of such Final Product in finished package form invoiced by KRYPTON and/or its Affiliates to any independent customer other than KRYPTON's Affiliates, less (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Final Product; (b) actual freight and insurance costs incurred and paid by KRYPTON and/or its Affiliates in transporting such Final Product in final form to such customers; (c) customary cash, quantity and trade discounts and other price reduction programs; (d) sales, use, value- added and other direct taxes (but excluding any income tax) actually incurred and paid by KRYPTON and/or its Affiliates; and (e) customs duties, surcharges and other governmental charges incurred by KRYPTON and/or its Affiliates in connection with the exportation or importation of such Final Product in final form. 1.14 "Originator" shall mean * actually marketed in the United States by * or any other pharmaceutical products containing the Active Ingredient and being marketed in the Territory 1.15 "Patents" shall mean all patents and patent applications heretofore or hereafter filed or having presently or in the future legal force in any country of the Territory, licensed by the Licensor to GENTA JAGO which claim the GEOMATRIX(R) Technology or the - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 3 - process to manufacture Prototype Formulations and/or Final Product by use of, or the use of, the GEOMATRIX(R) Technology, including but not limited to the patents and patent applications listed in APPENDIX A hereto, together with all patents that in the future issue therefrom in any country of the Territory, including utility, model and design patents and certificates of invention, and all divisionals, continuations, continuations-in-part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.16 "Prototype Formulations" shall mean the oral delivery system for the Active Ingredient based on the GEOMATRIX(R) Technology that reasonably meet the Specifications. 1.17 "Regulatory Authority" shall mean the FDA or any equivalent competent regulatory authority in any other countries of the Territory. 1.18 "Specifications" shall mean the Products specifications set forth in Appendix B attached hereto. 1.19 "Territory" shall mean *. ARTICLE 2 DEVELOPMENT PREAMBLE 2.1 At the date of execution of this Agreement, GENTA JAGO has performed certain preliminary development efforts for the Prototype Formulation. This development is hereby incorporated in this Agreement. 2.2 GENTA JAGO undertakes to conduct the development of the Prototype Formulation(s) and the Final Product in an efficient and professional manner. KRYPTON shall actively support GENTA JAGO regarding the development and studies to be executed by GENTA JAGO as may be reasonably required by GENTA JAGO from time to time. In particular, KRYPTON shall provide information reasonably requested by GENTA JAGO relating to the Originator and to the Active Ingredient for the purposes of carrying out this development, including, but not limited to, physico-chemical characteristics, safe-handling instructions, in-vitro analytical methods, degradation products and standards and analytical methods therefore. Additionally, KRYPTON shall provide to GENTA JAGO requested data and adequate quantities of samples of the Originator for the purposes of conducting the Feasibility Study. KRYPTON, however, shall not be required to provide information regarding the Originator which is not in the public domain, unless KRYPTON is duly authorized to possess and disclose such non-public information. Any costs and expenses incurred by KRYPTON in connection with such support shall be borne by KRYPTON. 2.3 Due to the nature and complexity of the development and the respective studies as set forth in this Agreement, the Parties recognize and acknowledge that problems and delays - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 4 - may occur which render the time limits set forth in this Agreement and/or the time-frame of the development as mutually agreed upon difficult or impossible to accomplish. The Parties agree that they shall immediately inform each other in writing in the event that significant problems or delays are encountered or envisaged during the course of the development and shall discuss such problems and delays in order to agree on a mutually acceptable revision of the time limits set in this Agreement and/or the time-frame as previously mutually agreed upon. 2.4 Together with the notice from KRYPTON referred to in Section 3.1 below, KRYPTON, or its designated supplier, shall supply GENTA JAGO on a free-of-charge basis with sufficient quantities of Active Ingredient to perform the development program intended hereunder. Such supplies shall be accompanied with respective certificates of analysis and conformity. GENTA JAGO shall use all Active Ingredient supplied to it by KRYPTON hereunder solely and exclusively in connection with the development program as mutually agreed upon. Alternatively, KRYPTON may request that GENTA JAGO obtain a supply of Active Ingredient from a reputable source having the necessary regulatory clearances in place to allow future marketing of the Final Product in the Territory. Should KRYPTON so require and GENTA JAGO so agree, the chosen supplier's facilities, processes and procedures shall be audited by GENTA JAGO, or a third party mutually acceptable to KRYPTON and GENTA JAGO, in order to ensure compliance with the appropriate regulatory requirements. KRYPTON shall * of GENTA JAGO incurred in carrying out, or having carried out such audit. GENTA JAGO shall provide KRYPTON with a copy of the audit report within thirty (30) days as of the completion of the audit. 2.5 In the event that the Parties mutually agree that GENTA JAGO becomes responsible for the supply of Active Ingredient, KRYPTON shall * GENTA JAGO for any and all shipping and transportation costs, import duties, taxes or other costs incurred by GENTA JAGO in connection with such supply of Active Ingredient upon receipt of GENTA JAGO's respective invoices. ARTICLE 3 FEASIBILITY STUDY 3.1 KRYPTON shall initiate the development program contemplated hereunder as soon as technically feasible and within the time limits set forth in the mutually accepted development program by giving written notice to that effect to GENTA JAGO. Not later than two (2) months after receipt of (i) such notice, (ii) a * and (iii) the Active Ingredient, GENTA JAGO shall commence the feasibility study under this Article 3. and shall use its commercially reasonable efforts to develop the Prototype Formulations. Up to three (3) of the developed Prototype Formulations shall be chosen by mutual agreement by the Parties for further study and development. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 5 - The Parties recognize that the Specifications mutually agreed upon eventually will need to be updated with more detailed specifications for the Final Product in the course of the development, and in such case the Parties agree to mutually agree on any reasonable amendment of the Specifications. 3.2 The development of the Prototype Formulations shall include, but not necessarily be limited to, the following elements: (a) Development and establishment of analytical methodology specific to the characterization of such Prototype Formulations; (b) Qualitative and quantitative characterization of such Prototype Formulation; (c) In-vitro release profile characterization of such Prototype Formulations and the Originator by using appropriate methodology mutually agreed to by the Parties; (d) Elaboration of pre-scale up procedures and the production of samples (2000 units +/- 10%) of the chosen Prototype Formulations for evaluation by KRYPTON, and for use in the Pilot Pharmacokinetic Study under Article 4. below; and (e) Accelerated stability testing of Prototype Formulations to provide *. 3.3 GENTA JAGO will ensure the use of generally accepted standards of Good Laboratory and Manufacturing Practices during the performance of the feasibility study. 3.4 Within thirty (30) days of the completion of the feasibility study, GENTA JAGO shall supply KRYPTON with a report (the "Feasibility Study Report") reasonably detailing the development of the Prototype Formulation(s) and containing one (1) month accelerated stability data only. A supplement to the Feasibility Study Report containing the * accelerated stability data will be forwarded sixty (60) days later. 3.5 Prior to the commencement of the Feasibility Study GENTA JAGO shall submit to KRYPTON * for the entire Feasibility Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Feasibility Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 3.6 In the event that the results of the feasibility study conclusively demonstrate that no Prototype Formulation has been developed which reasonably meets the Specifications to - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 6 - the good faith mutual satisfaction of KRYPTON and GENTA JAGO, the Parties agree to enter into good faith negotiations in order to determine an appropriate course of action, including, but not limited to, that the Parties may mutually agree to abandon the development program under this Agreement, and terminate this Agreement with immediate effect. ARTICLE 4 PILOT PHARMACOKINETIC STUDY 4.1 Included as part of the feasibility study described in Article 3. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable in all material respects to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified clinical research organization (hereinafter "CRO") to perform a pilot pharmacokinetic study pursuant to this Article 4. 4.2 The Pilot Pharmacokinetic Study shall consist of commercially reasonable and appropriately designed * of the Prototype Formulations and the Originator. KRYPTON shall reasonably consult with GENTA JAGO in the design of the Pilot Pharmacokinetic Study and shall review the final protocol with GENTA JAGO prior to initiating work with the selected sub-contractor. The Pilot Pharmacokinetic Study shall be conducted in accordance with generally accepted standards of Good Clinical Practice and in compliance with Ethical Committee requirements or equivalent requirements, where applicable. 4.3 Prior to the commencement of the Pilot Pharmacokinetic Study GENTA JAGO shall submit to KRYPTON * for the entire Pilot Pharmacokinetic Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pilot Pharmacokinetic Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 4.4 KRYPTON shall provide GENTA JAGO with a copy of the report (hereinafter referred to as the "Pilot Pharmacokinetic Study Report") reasonably detailing the results of the Pilot Pharmacokinetic Study within six (6) weeks as of the study's completion and presentation of the preliminary data for GENTA JAGO's file. 4.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pilot Pharmacokinetic Study, including without limitation the availability or quality of the results and data from such Pilot Pharmacokinetic Study to be carried out by KRYPTON and the CRO. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 7 - 4.6 In the event that the results of the Pilot Pharmacokinetic Study conclusively demonstrate that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that at least one of the Prototype Formulations reasonably meet the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such Prototype Formulation. ARTICLE 5 PRE-SCALE-UP ACTIVITIES 5.1 Upon completion of the Pilot Pharmacokinetic Study, KRYPTON may, at its option, request and charge GENTA JAGO to carry out the pre-scale-up activities as described in this Article 5. (hereinafter referred to as the "Pre-Scale-Up Activities"). KRYPTON shall, within thirty (30) days as from the date of the Pilot Pharmacokinetic Study Report notify in writing GENTA JAGO of its decision whether to proceed with and to have GENTA JAGO perform the Pre-Scale-Up Activities. 5.2 Prior to the commencement of the Pre-Scale-Up Activities GENTA JAGO shall submit to KRYPTON * for the entire Pre-Scale-Up Activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pre-Scale Up activity, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such pre scale up costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 5.3 The Pre-Scale-Up Activities to be performed by GENTA JAGO shall comprise all reasonable activities necessary to allow the technology transfer to, and subsequent scale-up at, the mutually established manufacturing site, including, but not limited to, final optimization of the Prototype Formulation (where necessary), development and validation of the scale-up manufacturing procedure and analytical validation. Such Pre-Scale-Up Activities shall be completed within the time period mutually agreed upon by the Parties in Appendix D hereto, calculated as from the date of receipt of the KRYPTON's notice by GENTA JAGO pursuant to Section 5.1 above. 5.4 In the event that additional clinical testing, including without limitation, confirming pharmacokinetic studies, is reasonably required or deemed necessary beyond the program envisaged in this Agreement in order to satisfy the FDA requirements for an NDA or ANDA approval of the Product, KRYPTON and GENTA JAGO shall meet to discuss in good faith the appropriate course of action to be followed and agree upon any such additional testing to be performed, provided that any such additional testing shall in any event be funded solely by KRYPTON. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 8 - 5.5 Not later than upon the initiation of the Pre-Scale-Up Activities, the Parties shall establish and mutually agree upon a manufacturing site, where the Bio-Batches referred to in Section 7.2 below required for the pivotal clinical studies will be produced and where the Final Product shall be manufactured for commercial use after FDA approval(s) for the Final Product have been granted. ARTICLE 6 PRE-PIVOTAL PHARMACOKINETIC STUDY 6.1 Included as part of the Pre-Scale-Up Activities, KRYPTON shall at its own responsibility and its own cost, perform or have performed with a CRO selected by KRYPTON, a pre- pivotal pharmacokinetic study pursuant to this Article 6. (hereinafter referred to as "Pre- Pivotal Study"). Such Pre-Pivotal Study shall consist of *, to select the best of the Prototype Formulations for each dose strength to be used in the further development under this Agreement. 6.2 The Pre-Pivotal Study shall be performed in the United States of America. KRYPTON shall consult, review and mutually agree with GENTA JAGO on the design and final protocol of such Pre-Pivotal Study prior to initiating work with the selected CRO. 6.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Pre-Pivotal Study. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 6.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Pre-Pivotal Study within ten (10) days of its completion for GENTA JAGO's file. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pre-Pivotal Study, including without limitation, the performance or conduct of such Pre- Pivotal Study or the availability or quality of the results and data from such Pre-Pivotal Study to be carried out by KRYPTON and the CRO. 6.5 Upon completion of the Pre-Pivotal Study and availability of the results of such Pre- Pivotal Study, the Parties shall consult with each other on such results and mutually agree in writing upon the Prototype Formulation to be selected for further development under this Agreement. In the event that the results of the Pre-Pivotal Study are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of the Parties that at least one of the Prototype Formulations meet the respective Specifications, KRYPTON may elect to abandon the development program and terminate this Agreement with respect to such Prototype Formulation by giving written notice to that effect to GENTA JAGO. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 9 - ARTICLE 7 FURTHER ACTIVITIES 7.1 Technology Transfer Upon mutual agreement of the Prototype Formulation to be used for development as referred to in Section 6.5 above, GENTA JAGO shall be responsible for and initiate the technology transfer to, and perform the scale-up at, the manufacturing site mutually established and agreed upon by the Parties. GENTA JAGO agrees that such technology transfer, and in particular the aspects of scale-up and validation of the manufacturing process shall be carried out by GENTA JAGO on such equipment as shall eventually be used by KRYPTON or a third party to manufacture the Final Product. Upon completion of such scale-up, GENTA JAGO shall notify KRYPTON thereof in writing. 7.2 Production of Industrial Scale Batches Upon receipt by KRYPTON of GENTA JAGO's notice referred to in Section 7.1 above, the Parties shall initiate the production of three (3) industrial scale batches (hereinafter "Bio-Batches") on such equipment as shall eventually be used KRYPTON or a third party to commercially manufacture the Final Product, based on the Prototype Formulation (the size of each Bio-Batch to be not less than the greater of (i) 10% (ten percent) of the anticipated initial commercial batch size, or (ii) 100,000 tablets), according to Current Good Manufacturing Practices, such Bio-Batches to be subsequently used for stability testing and pivotal clinical studies; provided however, that GENTA JAGO shall have the ultimate responsibility with respect of any and all technical aspects of such production of batches related to the technology transfer and the implementation of such technology in the manufacturing site. 7.3 Funding of Further Activities (a) Prior to the commencement of any activities under Sections 7.1 and 7.2 above GENTA JAGO shall submit to KRYPTON * for such further activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall refund GENTA JAGO's * reasonably incurred by GENTA JAGO under Sections 7.1 and 7.2 above, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such further development costs shall be refunded by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. (b) Furthermore, KRYPTON shall be responsible, at its own cost, for the supply of all raw material including, but not limited to, the Active Ingredients required or necessary for, and all additional costs and expenses whatsoever arising out of or in connection with, the production of the Bio-Batches described in Section 7.2 above and all other costs associated with the use of facilities, technology transfer, equipment and analytical services. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 10 - 7.4 Stability Testing (a) KRYPTON shall be responsible for and perform or have performed at its own cost, the stability testing of the Final Product according to the then current requirements of the FDA in bulk packaging and in the final packaging materials. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such stability testing, including without limitation, the performance or conduct of such stability testing or the availability or quality of the results and data from such stability testing to be carried out or requested by KRYPTON. (b) KRYPTON shall provide to GENTA JAGO with a copy of all stability testing data within thirty (30) days after the completion of each stability testing period (hereinafter referred to as the "Final Stability Testing Report") for GENTA JAGO's file. (c) GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON in connection with the stability testing of the Final Product. KRYPTON shall pay to GENTA JAGO for such services provided by GENTA JAGO's or Jago Pharma's personnel an amount of USD * or part thereof spent, and furthermore, KRYPTON shall reimburse GENTA JAGO for all reasonable and documented travel related expenses of GENTA JAGO personnel who travel at KRYPTON's request to locations remote from such personnel's usual working location. 7.5 Further Provisions In the event that KRYPTON and GENTA JAGO shall reasonably deem the results or data from any of the activities to be performed by either Party under this Article 7. with respect to any dose strength be unsatisfactory for any reason, the Parties may mutually agree to abandon the development program and terminate this Agreement with immediate effect. ARTICLE 8 PIVOTAL CLINICAL STUDY 8.1 Promptly upon completion of the further activities referred to in Article 7. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified CRO of its choice, reasonably acceptable to GENTA JAGO, to perform and manage a series of pivotal clinical studies (hereinafter "Clinical Studies") in man required and/or necessary for any subsequent NDA or ANDA for the Final Product in accordance with the then current requirements of the FDA. 8.2 KRYPTON shall consult, review and agree with GENTA JAGO on the design and the final protocol of such Clinical Studies prior to initiating work with the selected sub-contractor. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 11 - 8.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Clinical Studies. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 8.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Clinical Studies within ten (10) days of its completion for GENTA JAGO's file. 8.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Clinical Studies, including without limitation, the performance or conduct of such Clinical Studies or the availability or quality of the results and data from such Clinical Studies to be carried out or requested by KRYPTON. 8.6 In the event that the results of the Pivotal Clinical Studies are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that the Prototype Formulation reasonably meets the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such dose strength. ARTICLE 9 THE REGULATORY (NDA OR ANDA) SUBMISSION 9.1 Upon completion of the Clinical Studies, KRYPTON may, at its option, elect to prepare and submit to the FDA an NDA or ANDA. KRYPTON shall notify GENTA JAGO of its election to exercise or not to exercise this option by giving written notice thereof to GENTA JAGO within thirty (30) days as of the availability of the results of the Clinical Studies. 9.2 In the event that KRYPTON elects pursuant to Section 9.1 above to make NDA or ANDA submission(s) to any Regulatory Authority with respect to a Final Product, KRYPTON shall have sole liability and responsibility for the prosecution, conduct and results of such NDA or ANDA and shall bear all costs in connection therewith. KRYPTON, at KRYPTON's option, may elect by written notice to GENTA JAGO prior to commencement of the technology transfer referred to in Section 7.1 above to have the NDA or ANDA dossier prepared on its behalf by a qualified third party acceptable to GENTA JAGO. KRYPTON shall be liable and responsible for any and all costs associated with such sub-contracting. 9.3 KRYPTON or its chosen sub-contractor shall consult with GENTA JAGO, and GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON or the chosen sub-contractor, in connection with the preparation and prosecution of any NDA or ANDA or with the preparation of the dossier - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 12 - to be submitted to the FDA. KRYPTON shall pay to GENTA JAGO for such services and consultation provided by GENTA JAGO's personnel an amount of USD * or any part thereof spent. Furthermore, KRYPTON shall reimburse GENTA JAGO for reasonable and documented travel-related expenses of GENTA JAGO personnel who travel at KRYPTON's request to the elected manufacturing facility(ies) or other locations remote from such personnel's usual working location. ARTICLE 10 PROPRIETARY RIGHTS AND PATENTS 10.1 Patents and Proprietary Rights of GENTA JAGO (a) The Licensor and GENTA JAGO, respectively, shall retain title to and ownership of Patents, Know-How and GEOMATRIX(R) Technology licensed to GENTA JAGO, including, but not limited to, any and all developments and inventions relating to Patents, Know-How and GEOMATRIX(R) Technology (hereinafter collectively referred to as "GENTA JAGO IPR"). (b) KRYPTON shall not, directly or indirectly through its officers, directors, employees, agents, customers or other controlled or associated third parties, acquire any proprietary interest in or other right to GENTA JAGO IPR, other than provided in this Agreement. (c) GENTA JAGO shall use all commercially reasonable efforts, at its own cost, to cause the Licensor to prepare, prosecute and maintain all patent applications and patents constituting Patents, and shall keep KRYPTON fully and promptly informed on any developments or changes relating thereto. If the Licensor decides not to further prosecute any patent application constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. During the term of this Agreement, GENTA JAGO shall, at its sole cost, use all commercially reasonable efforts to cause the Licensor to take all steps necessary to maintain Patents to the extent GENTA JAGO deems commercially reasonable. If the Licensor decides not to maintain any patent constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. Notwithstanding the foregoing, KRYPTON acknowledges to GENTA JAGO that Licensor has the final authority regarding such preparation, prosecution and maintenance of all patent applications and patents. 10.2 Patents and Proprietary Rights for Final Products (a) KRYPTON shall retain title to and ownership of all developments, whether patentable or not, relating specifically and exclusively to the Final Products, provided - 13 - that such developments are entirely independent of any and all GENTA JAGO IPR (hereinafter collectively referred to "Final Product IPR"). (b) KRYPTON shall be responsible for and shall control, at its own cost, the preparation, prosecution and maintenance of all Final Product IPR and shall keep GENTA JAGO fully and promptly informed on any developments or changes relating thereto. During the term of this Agreement, KRYPTON shall, at its sole cost, take all steps necessary to prosecute and/or maintain all Final Product IPR to the extent KRYPTON deems commercially reasonable. If KRYPTON intends not to further prosecute and/or maintain any of the Final Product IPR, KRYPTON shall promptly inform GENTA JAGO of such intention in writing, and GENTA JAGO shall have the right and option, but not the obligation, to have transferred to it sole title to and ownership in such Final Product IPR free of any charge by giving respective written notice thereof to KRYPTON within thirty (30) days after GENTA JAGO's receipt of KRYPTON's notice referred to above. (c) In the event GENTA JAGO has and exercises its right and option referred to Section 10.2 (b) above to have transferred to it any such Final Product IPR, KRYPTON shall promptly undertake any and all steps required and/or necessary to transfer title to and ownership of such Final Product IPR to GENTA JAGO. In the event that GENTA JAGO exercises its option to have transferred such Final Product IPR from KRYPTON to GENTA JAGO, GENTA JAGO shall maintain such Final Product IPR during the term of this Agreement to the extent GENTA JAGO deems commercially reasonable and shall bear all cost associated therewith incurred after the date of GENTA JAGO's notice to KRYPTON exercising its option referred to in Section 10.2 (b) above. In such case, the Parties shall negotiate in good faith the terms and condition, under which such Final Product IPR transferred to GENTA JAGO shall be included in the License pursuant to Article 11. below. 10.3 Notification of Infringement (a) If KRYPTON becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR or Final Product IPR or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR or Final Product IPR, then KRYPTON shall promptly notify GENTA JAGO in writing of any such infringement, violation, action, claim or dispute. (b) If GENTA JAGO becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR with respect to Final Products or of Final Product IPR; or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR with respect to Final Products or of Final Product IPR, then GENTA JAGO shall promptly notify KRYPTON in writing of any such infringement, violation, action, claim or dispute. - 14 - 10.4 Enforcement of GENTA JAGO IPR (a) GENTA JAGO, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, GENTA JAGO IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, GENTA JAGO IPR, (iii) to control any litigation or other enforcement action regarding GENTA JAGO IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding GENTA JAGO IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions, to the extent that any such action or such infringement may have an adverse effect on Final Product. KRYPTON shall, at its own cost, fully cooperate with GENTA JAGO in the planing and execution of any suit or other action to enforce, or defend third-party actions regar- ding, GENTA JAGO IPR as reasonably required or requested by GENTA JAGO. (b) If GENTA JAGO does not within one-hundred-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of GENTA JAGO IPR which may adversely affect Final Products, or of any third-party action, claim or dispute based upon or arising out of GENTA JAGO IPR which may adversely affect Final Products, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then the Parties shall, upon KRYPTON's written request, promptly meet to discuss any reasonable appropriate action with regard to such enforcement of GENTA JAGO IPR which may adversely affect Final Products, provided however, that KRYPTON is aware and acknowledges that in such case the Licensor will have the right to enforce any and all GENTA JAGO IPR pursuant to the License Agreements. (c) Subject to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in the preceding section, KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action where necessary to obtain complete relief regarding the subject infringement or violation. 10.5 Enforcement of Final Product IPR (a) KRYPTON, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, Final Product IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, Final Product IPR, (iii) to control any litigation or other - 15 - enforcement action regarding Final Product IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Final Product IPR. Notwithstanding anything contained in the preceding sentence, KRYPTON shall not settle any suit or action or otherwise consent to an adverse judgment in such suit or action without the prior written consent of GENTA JAGO, which consent shall not be withheld unreasonably. KRYPTON shall keep GENTA JAGO informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of GENTA JAGO under this Agreement and in GENTA JAGO IPR, when taking any of the foregoing actions. (b) If KRYPTON does not, within one-hundred-and-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of Final Product IPR, or of any third-party action, claim or dispute based upon or arising out of Final Product IPR, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then GENTA JAGO shall have the right, but not the obligation, at its sole expense, to take and control such action as it deems appropriate to enforce, or abate the infringement of, or defend against such third-party action, regarding Final Product IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis of any such action and consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions. KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action controlled by GENTA JAGO where necessary to obtain complete relief regarding the subject infringement or violation. 10.6 Application of Monies Recovered Subject always to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in Section 10.4(c) and any right to receive any monies recovered therefrom as provided for in the License Agreements, all monies recovered upon the final judgment or settlement of any suit or other action under this Sections 10.4 or 10.5 shall be applied as follows: (i) to cover any and all costs and expenses (including attorney's fees) incurred by the Party controlling such suit or other action; (ii) to cover any and all costs and expenses (including attorney's fees) reasonably, or upon request of the controlling Party, incurred by the other Party in connection with such suit or other action, if any; (iii) the remainder, if any, to the Party controlling any such suit or other action. - 16 - ARTICLE 11 SUB-LICENSE AGREEMENT 11.1 GENTA JAGO hereby grants to KRYPTON the exclusive and sublicenseable right and sub-license (hereinafter referred to as the "License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, GEOMATRIX(R) Technology and Know How exclusively for that purpose subject to the payment of the * and the Royalties pursuant to Articles 13. and 14. below. 11.2 The rights of KRYPTON to grant any sub-license in any part of the Territory shall be subject to the requirement that KRYPTON shall obtain the written approval of GENTA JAGO prior to executing any such sub-license agreement, which approval shall not unreasonably be withheld, provided however, that no such approval by GENTA JAGO shall be required for any sub-license to an Affiliate of KRYPTON . 11.3 In any event KRYPTON shall be responsible for any and all acts, deeds and undertakings of its permitted sub-licensee(s) and KRYPTON and its permitted sub-licensee(s) shall continue to be bound by all terms and provisions under this Agreement throughout its term. In case that KRYPTON sub-licenses rights and/or the License to any sub-licensee(s) approved by GENTA JAGO, such sub-licensee(s) shall agree in writing to any and all of KRYPTON's obligations and undertakings under this Agreement, including but not limited to its confidentiality obligations set forth hereinafter. Furthermore, KRYPTON undertakes that any and all sub-license agreements shall provide for inspection and audit provisions identical to the provisions set forth below in order to enable GENTA JAGO to control and audit and receive any and all fees and Royalties due as provided in this Agreement. KRYPTON shall provide GENTA JAGO promptly with reasonable appropriate information on its sub-licensee(s) and copies of all agreements with such sub-licensee(s) (with only the commercial terms may be redacted). ARTICLE 12 MANUFACTURING AND PRODUCT LIABILITY 12.1 In the event that KRYPTON, subject to Section 5.5 above, elects GENTA JAGO, and GENTA JAGO expressly agrees to such manufacture, or any of its Affiliates shall manufacture Final Products, then the Parties agree to enter into good faith negotiations on and to use commercially reasonable efforts to execute in due time a respective Manufacturing and Supply Agreement, according to which GENTA JAGO or its Affiliates shall undertake to manufacture and supply Final Products in sufficient quantities to meet KRYPTON's requirements, at a sale price for such Final Products manufactured equal to GENTA JAGO's * In the event and for such period of time, that GENTA JAGO or its Affiliate manufactures and supplies Final Product under such Manufacturing and Supply Agreement, the Royalty Rate referred to in Section 14.1 below shall be * 12.2 In the event that KRYPTON or any of its Affiliates or any third party is elected pursuant - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 17 - to Section 5.5 above to manufacture Final Product, then KRYPTON undertakes and agrees that at all times the Specifications and to any and all laws, rules and regulations imposed by any competent authority on the manufacturing, marketing, distribution and sale of Final Products are strictly adhered to by the manufacturer, and KRYPTON shall during the entire term of this Agreement be solely and fully liable and responsible for the compliance with all such laws, rules and regulations when manufacturing, having manufactured, marketing, distributing and selling Final Products itself and/or through Affiliates or sub- licensee(s). 12.3 KRYPTON shall indemnify, defend and hold GENTA JAGO, its Affiliates and the Licensor harmless from and against any losses, claims, liabilities, costs and expenses (including reasonable attorney's fees) that may be imposed upon or asserted against GENTA JAGO and/or its Affiliates and/or the Licensor as a result of the marketing, distributing, manufacture, use or sale of Final Products by or on behalf of KRYPTON, its Affiliates, agents or sub-licensee(s), except for those claims, liabilities, costs and expenses arising from gross negligence or intentional misconduct on the part of GENTA JAGO, its Affiliates or the Licensor. ARTICLE 13 * PAYMENTS AND OTHER CONSIDERATION 13.1 As consideration for GENTA JAGO's preliminary development efforts for the Prototype Formulation performed prior to the execution of this Agreement as referred to in Section 2.1 above, KRYPTON undertakes to pay to GENTA JAGO an initial *, payable upon execution of this Agreement. 13.2 As consideration for the License granted by GENTA JAGO to KRYPTON under this Agreement and in consideration of certain major development steps achieved hereunder, KRYPTON undertakes to pay to GENTA JAGO *: (a) * KRYPTON's receipt of GENTA JAGO's notice referred to in Section 7.1 above; and (b) *; and (c) * for the Final Product; and (d) * for the Final Product. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 18 - 13.3 The Parties agree that an * as set forth in Section 14.4 below. 13.4 Unless otherwise agreed by the Parties in writing, all payments under this Article 13. shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. ARTICLE 14 ROYALTIES 14.1 During a period commencing upon the first commercial sale of Final Product in each country of the Territory and ending upon the earlier of (i) the fifteenth (15th) anniversary of the first commercial sale of Final Product in such country of the Territory, and (ii) the expiration of the last of the Patents covering Final Product in such country of the Territory (hereinafter referred to as the "Royalty Term"), and in further consideration of the License granted to KRYPTON by GENTA JAGO, KRYPTON shall pay to GENTA JAGO a royalty (hereinafter referred to as the "Royalty") of an amount equal to * of the Final Product in the Territory. 14.2 The Parties agree that * shall be applicable for the first time on sales of such Final Product in such country of the Territory after the beginning of the calendar quarter immediately following the first commercial sale of such Competitive Product. 14.3 Royalties shall be payable on a quarterly basis. KRYPTON shall remit to GENTA JAGO within six (6) weeks after the end of each calendar quarter the amount of Royalty due with respect to Net Sales and/or Gross Margin, as the case may be, achieved in the preceding quarter, beginning with the calendar quarter in which the first commercial sale of the Final Product is made in any country of the Territory. KRYPTON shall deliver to GENTA JAGO, along with such remittance of Royalty payments, a detailed statement (hereinafter referred to as the "Royalty Report") of the Net Sales and/or Gross Margin, as the case may be, of the Final Product on a country-by-country basis to which the Royalty payment relates. 14.4 All Royalty Reports shall be prepared in accordance with generally accepted accounting principles consistently applied from applicable period to period and shall be certified by an officer of KRYPTON as being so prepared, true, accurate and correct. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 19 - 14.5 In recognition of the * by KRYPTON to GENTA JAGO prior to the commercial sale of the Final Products, the amount of Royalty payments due to GENTA JAGO under Article 14.2 above with respect to each calendar quarter shall be * until such time as the aggregate amount of all * 14.6 Unless otherwise agreed by the Parties in writing, payments of Royalties shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. Any conversions into United States Dollars from the currency in which the corresponding Net Sales and/or Gross Margin for such Royalties were made, are to be calculated as using the average closing buying rate for such currency quoted in the continental terms method of quoting exchange rates (local currency per USD 1) published in the Wall Street Journal on the last business day of the applicable reporting period covered by such Royalty Report. ARTICLE 15 INSPECTION AND AUDIT 15.1 During the term of this Agreement and during a period of twelve (12) months after its expiration or termination for any reason, upon the written request of GENTA JAGO and not more than once each calendar year, KRYPTON shall permit an independent certified public accountant of internationally recognized standing selected by GENTA JAGO, at GENTA JAGO's expense, to have access during regular business hours to such of the records of KRYPTON and its Affiliates as may be reasonably necessary to verify the accuracy of the Royalty Reports for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to GENTA JAGO only whether the Royalty Reports and records of KRYPTON and its Affiliates and the amount of Royalties actually paid are correct or not and the specific details concerning any discrepancies; no other information shall be shared. The Parties agree to accept such written audit report as final and binding upon them. 15.2 If such independent accounting firm correctly concludes that additional Royalties were owed during any such period audited, KRYPTON shall pay such additional Royalties within ten (10) days of the date GENTA JAGO delivers to KRYPTON such accounting firm's written report so concluding. The fees and expenses charged by such accounting firm with respect to such audit shall be paid by GENTA JAGO; provided however, if any such audit correctly discloses that Royalties payable by KRYPTON for the audited period are more *, then KRYPTON shall pay all reasonable fees and expenses charged by such accounting firm with respect to such audit. 15.3 GENTA JAGO shall treat all financial information subject to review under this Article 15. as confidential and subject to the confidentiality obligations in Article 16. below. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 20 - ARTICLE 16 CONFIDENTIALITY 16.1 Confidential Information. KRYPTON shall maintain in confidence all Know-How and other information of GENTA JAGO (including samples) disclosed by GENTA JAGO and identified as, or acknowledged to be, confidential (the "Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except on a need- to-know basis to its directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with KRYPTON's activities as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, KRYPTON hereto shall obtain agreement in writing of any such person to hold in confidence and not make use of the Confidential Information for any purpose other than those authorized by this Agreement. KRYPTON shall notify GENTA JAGO promptly upon the discovery of the unauthorized use or disclosure of the Confidential Information. 16.2 Permitted Disclosures. The obligations of confidentiality and non-use contained in Section 16.1 above shall not apply to the extent that (a) KRYPTON (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market Final Product, provided in each case that KRYPTON shall give GENTA JAGO written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof, or (b) KRYPTON can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to it, or thereafter became public knowledge, other than as a result of actions of KRYPTON, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by KRYPTON (as shown by its written records) prior to the date of disclosure to it by GENTA JAGO hereunder; (iii) the disclosed information was disclosed to KRYPTON on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to GENTA JAGO or the Licensor; or (iv) the disclosed information was independently developed by KRYPTON without the use of Confidential Information disclosed by GENTA JAGO. 16.3 Terms of this Agreement. Except as otherwise provided in Section 16.2 above, neither Party shall disclose any terms or conditions of this Agreement to any third party (other than the Licensor) without the prior consent of the other Party. Notwithstanding the foregoing, prior to the execution of this Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information only without the other Party's consent. Notwithstanding the foregoing, prior to the execution of the Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this - 21 - transaction, and the Parties may disclose such information without the other Party's consent. 16.4 Term of Confidentiality. The confidentiality obligations under this Article 16 shall be effective during the term of this Agreement and for a period of ten (10) years after the expiration or earlier termination hereof. 16.5 Injunctive Remedies. GENTA JAGO shall be entitled to injunctive remedies and relief against KRYPTON and its Affiliates and any third parties for any breach or threatened breach of the confidentiality obligations under this Article 16. 16.6 Damages. In the event of a breach of the confidentiality provisions under this Article 16 by KRYPTON, its Affiliates or its directors, officers, employees or any other person who were given access to the Confidential Information by KRYPTON, GENTA JAGO shall be entitled to receive from KRYPTON any and all actual costs and damages caused by such breach. 16.7 Public Announcements. Neither Party shall make any press releases or other public announcements or disclosures regarding the execution and the existence of this Agreement or any activities conducted hereunder, including development results, filings and registrations, without the prior written consent of the other Party, except for such public disclosure as may be necessary in the opinion of any party's legal advisor in order not to be in violation of or default under any applicable law, regulation or governmental order, in such later event the party having an obligation to disclose shall submit to the other party a draft of the required announcement and shall give the other party the opportunity to request reasonable amendments and modifications of such required announcement. ARTICLE 17 TERM AND TERMINATION 17.1 Term and Expiration (a) This Agreement shall expire on a country-by-country basis upon the expiration of the Royalty Term. (b) Upon the expiration of this Agreement in each country of the Territory pursuant to Section 17.1 (a) above and payment of all fees, including but not limited to the *, and all Royalties and other payments by KRYPTON due GENTA JAGO under this Agreement, the License shall be deemed to be a perpetual, fully paid-up and royalty-free license for such Final Product and each such country of the Territory. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 22 - 17.2 Termination Prior to Registration During the development, test, study and registration phases as specified in Articles 3. through 8. above, and until the first successful registration approval of any Final Product by any Regulatory Authority, this Agreement may be terminated in accordance with the provisions set forth in Sections 3.6, 4.6, 6.5, 7.5 and 8.6 above. 17.3 Termination for Cause During the entire term of this Agreement either Party may terminate this Agreement by giving to the other Party written notice to that effect, if any of the following events occur: (a) the other Party is in default or in breach of a term or provision hereof and such default or breach continues and is not remedied within thirty (30) days upon the other Party's written request to remedy such default or breach; or (b) the other Party shall commit a breach of any of the confidentiality provisions of Article 16. above; or (c) the other Party goes into liquidation, voluntarily or otherwise, other than for the sole purpose of reorganization, or goes into bankruptcy or makes an assignment for the benefit of creditors, or in the event of a receiver being appointed of the other Party's property or parts thereof. 17.4 Effect of Termination (a) If KRYPTON elects to so terminate the Agreement under Section 17.2 above prior to filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated, (iii) KRYPTON be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) all Registrations pertaining to the marketing of the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vi) GENTA JAGO and its Affiliates shall thereafter be entitled to exercise such rights as they may have under their own license agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to KRYPTON; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates. - 23 - (b) If KRYPTON elects to so terminate this Agreement subsequent to the filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated; (iii) KRYPTON shall be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) GENTA JAGO and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates); (vi) all Registrations pertaining to the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated hereunder shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vii) GENTA JAGO shall pay to KRYPTON the same royalty, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to KRYPTON, as KRYPTON would otherwise have paid (absent such termination) hereunder to GENTA JAGO on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by GENTA JAGO and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the royalties paid to KRYPTON equal the aggregate amount that had been paid by KRYPTON to GENTA JAGO prior to such termination under the Sections 3.5, 4.3, 5.2, 6.3, 7.3,8.3, 9.2 and 13., at which time the royalty rate then prevailing on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) in the United States shall be reduced by two percent (2 %) (but shall not be reduced for sales outside the United States). (c) Otherwise the termination of this Agreement shall be without prejudice to any rights and obligations of either Party accrued prior to the effective date of termination. KRYPTON shall forthwith make all payments due and outstanding to GENTA JAGO at the date of termination. Except as explicitly otherwise stated in this Agreement, GENTA JAGO shall not be obligated to refund upon termination of this Agreement to KRYPTON any payments, including without limitation the *, made by KRYPTON to GENTA JAGO prior to such termination pursuant to the provisions of this Agreement. (d) The termination of this Agreement pursuant to Section 17.3 above by either Party shall not limit remedies which may be otherwise available in law or equity to either Party. - - - ----------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 24 - 17.5 Early Termination of the License Agreements (a) In the event that the License Agreements are terminated prior to the expiration of the last to expire of the Patents licensed to GENTA JAGO in the Territory, then the License granted hereunder to KRYPTON shall also terminate upon KRYPTON's receipt of the respective termination notice from the Licensor. KRYPTON may give written notice to the Licensor of KRYPTON's desire to continue the License granted under this Agreement within sixty (60) days as of KRYPTON's receipt of the Licensor's notice referred to above. (b) In the event that KRYPTON timely notifies the Licensor of its desire to continue the License granted under this Agreement, the Licensor shall have the right, at its sole discretion, to elect to assume in writing within sixty (60) days upon the Licensor's receipt of KRYPTON's notice any and all rights of GENTA JAGO under this Agreement and to promptly cure all defaults of GENTA JAGO under this Agreement, if any. (c) In the event that the Licensor does not timely gives notice to KRYPTON and cures all of GENTA JAGO's defaults hereunder pursuant to Section 17.5(b) above, then KRYPTON shall promptly assume in writing any and all rights and obligations of GENTA JAGO under the License Agreements with the Licensor, but with regard to the rights encompassed by the License granted hereunder only, and promptly cure all defaults of GENTA JAGO under the License Agreements with regard to the rights encompassed by the License granted hereunder only, if any. (d) Notwithstanding anything contained in this Section 17.5, no action taken by the Licensor and/or KRYPTON to continue or not to continue the License shall relieve GENTA JAGO from any liability for any uncured defaults under this Agreement or the License Agreements, and such action by the Licensor and/or KRYPTON shall be without prejudice to any other rights or remedies the Licensor and/or KRYPTON may have in law or equity. ARTICLE 18 WARRANTIES 18.1 GENTA JAGO shall carry out and undertake the studies and tests specified in this Agreement in a careful and diligent manner. GENTA JAGO agrees to carefully choose, instruct and supervise any employees, officers, Affiliates or third parties to be chosen by GENTA JAGO pursuant to this Agreement, who are involved with the tests and studies. Nothing in this Agreement shall be construed as a representation made, or warranty given, by GENTA JAGO that any development performed by or for GENTA JAGO under this Agreement will be successful in whole or in part, or that any product, including Final Product, which may be developed, will be successful in the commercial marketplace. Furthermore, GENTA JAGO makes no representation or warranty, express or implied, with respect to GEOMATRIX(R)Technology and/or Know-How, including without limitation, any warranty of completeness, accuracy, merchantability or fitness for a particular purpose thereof. - 25 - 18.2 GENTA JAGO represents and warrants that it has all rights regarding Patents, GEOMATRIX(R)Technology and Know-How necessary to grant the License hereunder. Notwithstanding the preceding sentence, GENTA JAGO does not assume any responsibility and makes no warranty that the performance of this Agreement and any product developed hereunder, including Prototype Formulation(s) and Final Products, do not infringe any third party's patents, patent applications or other intellectual property rights. Notwithstanding the preceding sentence, GENTA JAGO represents and warrants that, as of the effective date of this Agreement, it is not aware and has not knowledge of any such infringement of any third party rights. If, however, during the course of this Agreement either Party discovers that the Prototype Formulation(s) and/or the Final Products infringe or may infringe any third party's intellectual property rights, it shall promptly inform the other Party thereof and the Parties shall meet to discuss the course of action to be taken with regard thereto. 18.3 Nothing in this Agreement shall be construed as a representation made, or warranty given by GENTA JAGO that any patent will issue based upon any pending patent application encompassed by the term Patents, and that any patent encompassed by the term Patents which issues will be valid or enforceable. 18.4 GENTA JAGO assumes no liability or responsibility for any damages caused to KRYPTON, third parties, animals and/or the environment by the manufacturing, marketing or use of the Prototype Formulations or Final Products or the active ingredient contained therein, except to the extent that any of the above are attributable to the gross negligence or willful misconduct of GENTA JAGO in performing its obligations hereunder. 18.5 Subject to the specific representations and warranties given and specific disclaimers of representations and warranties included in this Article 18, and further subject to anything to the contrary contained in this Agreement, either Party shall, as to third parties, be indemnified and held harmless by the other Party from and against any and all losses, liabilities and damages arising from any claim, action or other proceeding by any third party relating to any acts or omissions of the other Party, its directors, officers, employees or agents, or the gross negligence or willful misconduct of such other Party, its directors, officers, employees or agents in performing any of its obligations under this Agreement. 18.6 Any liability, warranty and undertaking contained herein shall be limited to the payment by either Party for direct damages to the other Party and in any event, neither Party shall be liable to the other Party for any special, indirect, punitive or consequential damages and/or loss of profits or anticipated profits, respectively. 18.7 KRYPTON shall, at its own expense, purchase from an insurance company of its choice and shall maintain during the entire term of this Agreement an appropriate and customary policy of general liability and product liability insurance covering its responsibilities regarding Prototype Formulation(s) and Final Products developed, manufactured, marketed - 26 - and sold under this Agreement and the Active Ingredient contained therein and the use thereof. Upon request, KRYPTON shall provide GENTA JAGO with evidence that such insurances are existing and are maintained. ARTICLE 19 MISCELLANEOUS PROVISIONS 19.1 Entire Agreement: The terms, covenants, conditions and provisions contained in this Agreement, including its Appendices referred to herein, constitute the total and complete agreement of the Parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the Parties to this Agreement. 19.2 Assignment: This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party, other than to an Affiliate of such Party, without the consent of the other Party; provided however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction; and provided further that GENTA JAGO may without the consent of KRYPTON assign any and all of its rights and obligations hereunder to the Licensor and/or any of the Licensor's Affiliates. Any permitted assignee shall assume all obligations of its assignor under this Agreement or under the respective rights or obligations actually assigned. 19.3 Successors: This Agreement and all rights hereunder shall ensure to the benefit of all successors and assigns of both Parties. 19.4 Notices: Any consent, notice or report required or permitted to be given or made under this Agreement by one Party to the other shall be in English and in writing, delivered personally or by courier service or by facsimile (promptly confirmed by personal delivery or courier service) addressed to the other Party at its address indicated below, or to such other address as shall have been notified in writing to the sending Party by the receiving party from time to time, and shall take effect upon receipt by the addressee. IF TO KRYPTON: KRYPTON LTD. East Wing, Second Level Hadfield House Library Street Gibraltar attn.: PRESIDENT - 27 - WITH COPIES TO: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England attn.: COMPANY SECRETARY AND: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT IF TO GENTA JAGO: GENTA JAGO Technologies B.V. Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz, Switzerland attn.: MANAGEMENT COMMITTEE WITH COPIES TO: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 8002 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT AND: PILLSBURY MADISON & SUTRO LLP 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. attn.: THOMAS E. SPARKS, JR., ESQ. 19.5 Independent Contractors: It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party to do so. 19.6 Severability: Each Party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as - 28 - a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. 19.7 Force Majeure: Neither Party hereto shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party hereto. 19.8 Interest: In the event any amount due and payable under this Agreement is not paid by the due date, then the Party owing such amount shall pay to the creditor, without being requested by the other Party, interest on the total outstanding amount at the rate equal to the London Interbank Offered Rate ("LIBOR"), as published in the Wall Street Journal (Europe) on the date that such payment falls due, increased by three percent (3%), in United States Dollars and adjusted on the first day of every calendar quarter. 19.9 Headings: The titles and headings used in this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 19.10 Waiver: The waiver by either Party hereto of any right hereunder or the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. - 29 - 19.11 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. ARTICLE 20 DISPUTE RESOLUTION AND ARBITRATION 20.1 In the event of any dispute arising between the Parties concerning this Agreement, GENTA JAGO and KRYPTON agree that in the first place they shall meet for good faith discussions in an attempt to negotiate an amicable solution. 20.2 Any dispute arising between the Parties out of or in connection with this Agreement, or the interpretation, breach or enforcement thereof, which cannot be amicably resolved pursuant to Section 20.1 above within two (2) months as from the first appearance of such dispute, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to all of the other Parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in PARIS, FRANCE. The arbitrators shall have the authority to grant specific performance, and to allocate among the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this section, shall be determined by binding arbitration pursuant to this section. 20.3 Notwithstanding anything contained in this Article 20, either Party may seek preliminary or injunctive measures or relief in any competent court having jurisdiction. ARTICLE 21 APPLICABLE LAW The Parties hereto agree that this Agreement, all transactions executed hereunder and all relationships between the Parties in connection therewith shall be construed under and be governed by the laws of Switzerland without reference to the conflict of law principals thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 31st day of October 1996. GENTA JAGO TECHNOLOGIES B.V. /s/ Thomas H. Adams /s/ Jacques Gonella - - - ------------------- ------------------- by: Dr. Thomas H. Adams by: Dr. Jacques Gonella its: Managing Director its: Managing Director KRYPTON LTD. /s/ - - - ------------------- by: its: The Licensor, Jagotec AG, hereby agrees to be bound by the obligations contained in Section 17.5 of this Agreement. JAGOTEC AG /s/ Jacques Gonella - - - ------------------- by: by: its: its: -30- EX-10.93 9 DEVELOPMENT & SUB-LICENSE AGREEMENT EXHIBIT 10.93 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT & SUB-LICENSE AGREEMENT * This DEVELOPMENT AND SUB-LICENSE AGREEMENT (this "AGREEMENT"), effective from the date last written hereunder, is entered into between GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and KRYPTON LTD., a Gibraltar limited company, having a place of business at East Wing, Second Level, Hadfield House, Library Street, Gibraltar (hereinafter referred to as "KRYPTON") WITNESSTH: WHEREAS, GENTA JAGO has expertise in the development of controlled-release formulations for pharmaceutical agents and in particular has exclusive rights to proprietary know-how and technology generally known and commercialized under the registered trademark GEOMATRIX(R) and as described and embodied in the Patents (as defined below) with respect to a Bioequivalent Product (as defined below) to *; and WHEREAS, KRYPTON is a company which markets pharmaceutical products and is interested in developing Prototype Formulations (as defined below) for the Final Product (as defined below) and in seeking the approval of Regulatory Authorities (as defined below) to manufacture, or have manufactured and market the Final Product in the Territory (as defined below); and WHEREAS, GENTA JAGO is prepared to conduct or have conducted certain studies and the development of the Prototype Formulations and Final Product; and WHEREAS, GENTA JAGO is prepared to grant to KRYPTON under the terms and conditions set forth hereafter a sub-license under the Patents, GEOMATRIX(R) Technology and Know-How (as defined below) to conduct studies relating to the Prototype Formulations and, upon receipt of approval by the Regulatory Authority (as defined below), to manufacture or have manufactured, market and sell the Final Product in the Territory. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the Parties hereby agree as follows: - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. ARTICLE 1 DEFINITIONS For purposes of this Agreement, the terms defined in this Article 1 shall have the following meanings: 1.1 "Active Ingredient" shall mean *. 1.2 "Affiliate" shall mean, with respect to either Party hereto, any corporation, partnership or other entity controlled by, controlling or under common control with, such Party, with "control" meaning direct or indirect beneficial ownership of more than 50% of the voting power of, or more than 50% of ownership interest in, such corporation, partnership or other entity. 1.3 "ANDA" shall mean any Abbreviated New Drug Application filed with the FDA, by or for KRYPTON requesting authorization to manufacture, have manufactured or sell the Final Product in the United States of America, or any equivalent application to a Regulatory Authority in any other country of the Territory. 1.4 "Bioequivalent Product" shall mean a drug product meeting the bioequivalence requirements imposed by the FDA for in vitro and/or in vivo testing as set forth in the regulations of the FDA at 21 C.F.R. ss.320 ("AB Equivalent Rating"), as they may be amended from time to time. 1.5 "Competitive Product" shall mean any product other than the Final Product or the Originator which is a Bioequivalent Product of the Originator and is marketed and sold in the Territory on a country-to-country basis. 1.6 "FDA" shall mean the U.S. Federal Food and Drug Administration and any successor agency thereof. 1.7 "Final Product" shall mean the pharmaceutical orally-administered controlled-release formulation(s) containing the Active Ingredient, presented as a compressed tablet developed pursuant to this Agreement, based on the GEOMATRIX(R) Technology and being a Bioequivalent Product of the Originator, of a Competitive Product or of any other product containing the Active Ingredient. 1.8 "GEOMATRIX(R) Technology" shall mean the oral controlled-release drug delivery and related technology licensed to GENTA JAGO by the Licensor which utilizes a hydrophilic drug-containing matrix tablet which controls the release of the drug through the use of one or more barrier layers. 1.9 "Gross Margin" shall mean, with respect to any Final Product, Net Sales less only the direct cost of such Final Product sold, i.e. (a) raw material cost, (b) direct labor cost, (c) reasonably directly allocatable overhead cost (e.g. energy cost), (d) packaging and labeling cost, and (e) other costs directly associated with the manufacturing of such Final Product (e.g. quality control). No other deductions from Net Sales are permissible for the calculation of Gross Margin, including without limitation, sales, marketing and distribution - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -2- costs. Alternatively, in the event that KRYPTON sub-contracts the manufacturing of any Final Product to a third party, then "Gross Margin" with respect to such Final Product shall mean Net Sales less only the manufacturing costs as invoiced by such manufacturing third party sub-contractor and actually paid by KRYPTON. 1.10 "Know-How" shall mean all information and data, which are not generally known including, but not limited to, patent claims and related information not yet disclosed to the public, formulae, procedures, protocols, techniques and results of experimentation and testing, which (a) relate to the GEOMATRIX(R)Technology, any Prototype Formulation or any Final Product, or (b) are necessary or useful to develop, make or use any Prototype Formulation, or (c) are necessary or useful to develop, seek regulatory approval, make, use or sell any Final Product, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.11 "License Agreements" shall mean the license agreements entered into by and between GENTA JAGO and the Licensor, under which the Licensor granted GENTA JAGO the rights in the Patents, the Know-How and the GEOMATRIX(R) Technology, which are the subject matter of the sub-license referred to in Article 11. below. 1.12 "Licensor" shall mean Jagotec AG, a Swiss corporation, having its place of business at Seestrasse 91, CH-6052 Hergiswil, Switzerland. 1.13 "Net Sales" shall mean, with respect to any Final Product, the invoiced sales price of such Final Product in finished package form invoiced by KRYPTON and/or its Affiliates to any independent customer other than KRYPTON's Affiliates, less (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Final Product; (b) actual freight and insurance costs incurred and paid by KRYPTON and/or its Affiliates in transporting such Final Product in final form to such customers; (c) customary cash, quantity and trade discounts and other price reduction programs; (d) sales, use, value- added and other direct taxes (but excluding any income tax) actually incurred and paid by KRYPTON and/or its Affiliates; and (e) customs duties, surcharges and other governmental charges incurred by KRYPTON and/or its Affiliates in connection with the exportation or importation of such Final Product in final form. 1.14 "Originator" shall mean * actually marketed in the United States by * or any other pharmaceutical products containing the Active Ingredient and being marketed in the Territory 1.15 "Patents" shall mean all patents and patent applications heretofore or hereafter filed or having presently or in the future legal force in any country of the Territory, licensed by the Licensor to GENTA JAGO which claim the GEOMATRIX(R)Technology or the process to manufacture Prototype Formulations and/or Final Product by use of, or the use of, the GEOMATRIX(R)Technology, including but not limited to the patents and patent applications listed in APPENDIX A hereto, together with all patents that in the future issue therefrom in any country of the Territory, including utility, model and design patents and certificates of invention, and all divisionals, continuations, continuations-in-part, reissues, - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.16 "Prototype Formulations" shall mean the oral delivery system for the Active Ingredient based on the GEOMATRIX(R) Technology that reasonably meet the Specifications. 1.17 "Regulatory Authority" shall mean the FDA or any equivalent competent regulatory authority in any other countries of the Territory. 1.18 "Specifications" shall mean the Products specifications set forth in APPENDIX B attached hereto. 1.19 "Territory" shall mean *. ARTICLE 2 DEVELOPMENT PREAMBLE 2.1 At the date of execution of this Agreement, GENTA JAGO has performed certain preliminary development efforts for the Prototype Formulation. This development is hereby incorporated in this Agreement. 2.2 GENTA JAGO undertakes to conduct the development of the Prototype Formulation(s) and the Final Product in an efficient and professional manner. KRYPTON shall actively support GENTA JAGO regarding the development and studies to be executed by GENTA JAGO as may be reasonably required by GENTA JAGO from time to time. In particular, KRYPTON shall provide information reasonably requested by GENTA JAGO relating to the Originator and to the Active Ingredient for the purposes of carrying out this development, including, but not limited to, physico-chemical characteristics, safe-handling instructions, in-vitro analytical methods, degradation products and standards and analytical methods therefore. Additionally, KRYPTON shall provide to GENTA JAGO requested data and adequate quantities of samples of the Originator for the purposes of conducting the Feasibility Study. KRYPTON, however, shall not be required to provide information regarding the Originator which is not in the public domain, unless KRYPTON is duly authorized to possess and disclose such non-public information. Any costs and expenses incurred by KRYPTON in connection with such support shall be borne by KRYPTON. 2.3 Due to the nature and complexity of the development and the respective studies as set forth in this Agreement, the Parties recognize and acknowledge that problems and delays may occur which render the time limits set forth in this Agreement and/or the time-frame of the development as mutually agreed upon difficult or impossible to accomplish. The Parties agree that they shall immediately inform each other in writing in the event that significant problems or delays are encountered or envisaged during the course of the development and shall discuss such problems and delays in order to agree on a mutually acceptable revision of the time limits set in this Agreement and/or the time-frame as previously mutually agreed upon. - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -4- 2.4 Together with the notice from KRYPTON referred to in Section 3.1 below, KRYPTON, or its designated supplier, shall supply GENTA JAGO on a free-of-charge basis with sufficient quantities of Active Ingredient to perform the development program intended hereunder. Such supplies shall be accompanied with respective certificates of analysis and conformity. GENTA JAGO shall use all Active Ingredient supplied to it by KRYPTON hereunder solely and exclusively in connection with the development program as mutually agreed upon. Alternatively, KRYPTON may request that GENTA JAGO obtain a supply of Active Ingredient from a reputable source having the necessary regulatory clearances in place to allow future marketing of the Final Product in the Territory. Should KRYPTON so require and GENTA JAGO so agree, the chosen supplier's facilities, processes and procedures shall be audited by GENTA JAGO, or a third party mutually acceptable to KRYPTON and GENTA JAGO, in order to ensure compliance with the appropriate regulatory requirements. KRYPTON shall * of GENTA JAGO incurred in carrying out, or having carried out such audit. GENTA JAGO shall provide KRYPTON with a copy of the audit report within thirty (30) days as of the completion of the audit. 2.5 In the event that the Parties mutually agree that GENTA JAGO becomes responsible for the supply of Active Ingredient, KRYPTON shall * GENTA JAGO for any and all shipping and transportation costs, import duties, taxes or other costs incurred by GENTA JAGO in connection with such supply of Active Ingredient upon receipt of GENTA JAGO's respective invoices. ARTICLE 3 FEASIBILITY STUDY 3.1 KRYPTON shall initiate the development program contemplated hereunder as soon as technically feasible and within the time limits set forth in the mutually accepted development program by giving written notice to that effect to GENTA JAGO. Not later than two (2) months after receipt of (i) such notice, (ii) a * and (iii) the Active Ingredient, GENTA JAGO shall commence the feasibility study under this Article 3. and shall use its commercially reasonable efforts to develop the Prototype Formulations. Up to three (3) of the developed Prototype Formulations shall be chosen by mutual agreement by the Parties for further study and development. The Parties recognize that the Specifications mutually agreed uopn eventually will need to be updated with more detailed specifications for the Final Product in the course of the development, and in such case the Parties agree to mutually agree on any reasonable amendment of the Specifications. 3.2 The development of the Prototype Formulations shall include, but not necessarily be limited to, the following elements: (a) Development and establishment of analytical methodology specific to the - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -5- characterization of such Prototype Formulations; (b) Qualitative and quantitative characterization of such Prototype Formulation; (c) In-vitro release profile characterization of such Prototype Formulations and the Originator by using appropriate methodology mutually agreed to by the Parties; (d) Elaboration of pre-scale up procedures and the production of samples (2000 units +/- 10%) of the chosen Prototype Formulations for evaluation by KRYPTON, and for use in the Pilot Pharmacokinetic Study under Article 4. below; and (e) Accelerated stability testing of Prototype Formulations to provide *. 3.3 GENTA JAGO will ensure the use of generally accepted standards of Good Laboratory and Manufacturing Practices during the performance of the feasibility study. 3.4 Within thirty (30) days of the completion of the feasibility study, GENTA JAGO shall supply KRYPTON with a report (the "Feasibility Study Report") reasonably detailing the development of the Prototype Formulation(s) and containing one (1) month accelerated stability data only. A supplement to the Feasibility Study Report containing the * accelerated stability data will be forwarded sixty (60) days later. 3.5 Prior to the commencement of the Feasibility Study GENTA JAGO shall submit to KRYPTON * for the entire Feasibility Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Feasibility Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 3.6 In the event that the results of the feasibility study conclusively demonstrate that no Prototype Formulation has been developed which reasonably meets the Specifications to the good faith mutual satisfaction of KRYPTON and GENTA JAGO, the Parties agree to enter into good faith negotiations in order to determine an appropriate course of action, including, but not limited to, that the Parties may mutually agree to abandon the development program under this Agreement, and terminate this Agreement with immediate effect. ARTICLE 4 PILOT PHARMACOKINETIC STUDY 4.1 Included as part of the feasibility study described in Article 3. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable in all material respects to the provisions set forth herein between GENTA - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -6- JAGO and KRYPTON to an external qualified clinical research organization (hereinafter "CRO") to perform a pilot pharmacokinetic study pursuant to this Article 4. 4.2 The Pilot Pharmacokinetic Study shall consist of commercially reasonable and appropriately designed * of the Prototype Formulations and the Originator. KRYPTON shall reasonably consult with GENTA JAGO in the design of the Pilot Pharmacokinetic Study and shall review the final protocol with GENTA JAGO prior to initiating work with the selected sub-contractor. The Pilot Pharmacokinetic Study shall be conducted in accordance with generally accepted standards of Good Clinical Practice and in compliance with Ethical Committee requirements or equivalent requirements, where applicable. 4.3 Prior to the commencement of the Pilot Pharmacokinetic Study GENTA JAGO shall submit to KRYPTON * for the entire Pilot Pharmacokinetic Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pilot Pharmacokinetic Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 4.4 KRYPTON shall provide GENTA JAGO with a copy of the report (hereinafter referred to as the "Pilot Pharmacokinetic Study Report") reasonably detailing the results of the Pilot Pharmacokinetic Study within six (6) weeks as of the study's completion and presentation of the preliminary data for GENTA JAGO's file. 4.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pilot Pharmacokinetic Study, including without limitation the availability or quality of the results and data from such Pilot Pharmacokinetic Study to be carried out by KRYPTON and the CRO. 4.6 In the event that the results of the Pilot Pharmacokinetic Study conclusively demonstrate that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that at least one of the Prototype Formulations reasonably meet the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such Prototype Formulation. ARTICLE 5 PRE-SCALE-UP ACTIVITIES 5.1 Upon completion of the Pilot Pharmacokinetic Study, KRYPTON may, at its option, request and charge GENTA JAGO to carry out the pre-scale-up activities as described in this Article 5. (hereinafter referred to as the ,,Pre-Scale-Up Activities"). KRYPTON shall, within thirty (30) days as from the date of the Pilot Pharmacokinetic Study Report notify in writing GENTA JAGO of its decision whether to proceed with and to have GENTA - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -6- JAGO perform the Pre-Scale-Up Activities. 5.2 Prior to the commencement of the Pre-Scale-Up Activities GENTA JAGO shall submit to KRYPTON * for the entire Pre-Scale-Up Activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pre-Scale Up activity, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such pre scale up costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 5.3 The Pre-Scale-Up Activities to be performed by GENTA JAGO shall comprise all reasonable activities necessary to allow the technology transfer to, and subsequent scale-up at, the mutually established manufacturing site, including, but not limited to, final optimization of the Prototype Formulation (where necessary), development and validation of the scale-up manufacturing procedure and analytical validation. Such Pre-Scale-Up Activities shall be completed within the time period mutually agreed upon by the Parties in Appendix D hereto, calculated as from the date of receipt of the KRYPTON's notice by GENTA JAGO pursuant to Section 5.1 above. 5.4 In the event that additional clinical testing, including without limitation, confirming pharmacokinetic studies, is reasonably required or deemed necessary beyond the program envisaged in this Agreement in order to satisfy the FDA requirements for an NDA or ANDA approval of the Product, KRYPTON and GENTA JAGO shall meet to discuss in good faith the appropriate course of action to be followed and agree upon any such additional testing to be performed, provided that any such additional testing shall in any event be funded solely by KRYPTON. 5.5 Not later than upon the initiation of the Pre-Scale-Up Activities, the Parties shall establish and mutually agree upon a manufacturing site, where the Bio-Batches referred to in Section 7.2 below required for the pivotal clinical studies will be produced and where the Final Product shall be manufactured for commercial use after FDA approval(s) for the Final Product have been granted. - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -7- ARTICLE 6 PRE-PIVOTAL PHARMACOKINETIC STUDY 6.1 Included as part of the Pre-Scale-Up Activities, KRYPTON shall at its own responsibility and its own cost, perform or have performed with a CRO selected by KRYPTON, a pre-pivotal pharmacokinetic study pursuant to this Article 6. (hereinafter referred to as "Pre-Pivotal Study"). Such Pre-Pivotal Study shall consist of *, to select the best of the Prototype Formulations for each dose strength to be used in the further development under this Agreement. 6.2 The Pre-Pivotal Study shall be performed in the United States of America. KRYPTON shall consult, review and mutually agree with GENTA JAGO on the design and final protocol of such Pre-Pivotal Study prior to initiating work with the selected CRO. 6.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Pre-Pivotal Study. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 6.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailling the results of the Pre-Pivotal Study within ten (10) days of its completion for GENTA JAGO's file. GENTA JAGO shall have no liability or responsibility whatsoever with resupect to such Pre-Pivotal Study, including without limitation, the performance or conduct of such Pre- Pivotal Study or the availability or quality of the results and data from such Pre-Pivotal Study to be carried out by KRYPTON and the CRO. 6.5 Upon completion of the Pre-Pivotal Study and availability of the results of such Pre- Pivotal Study, the Parties shall consult with each other on such results and mutually agree in writing upon the Prototype Formulation to be selected for further development under this Agreement. In the event that the results of the Pre-Pivotal Study are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of the Parties that at least one of the Prototype Formulations meet the respective Specifications, KRYPTON may elect to abandon the development program and terminate this Agreement with respect to such Prototype Formulation by giving written notice to that effect to GENTA JAGO. ARTICLE 7 FURTHER ACTIVITIES 7.1 Technology Transfer Upon mutual agreement of the Prototype Formulation to be used for development as referred to in Section 6.5 above, GENTA JAGO shall be responsible for and initiate the technology transfer to, and perform the scale-up at, the manufacturing site mutually established and agreed upon by the Parties. GENTA JAGO agrees that such technology transfer, and in particular the aspects of scale-up and validation of the manufacturing process shall be carried out by GENTA JAGO on such equipment as shall eventually be used by KRYPTON or a third party to manufacture the Final Product. Upon completion - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -8- of such scale-up, GENTA JAGO shall notify KRYPTON thereof in writing. 7.2 Production of Industrial Scale Batches Upon receipt by KRYPTON of GENTA JAGO's notice referred to in Section 7.1 above, the Parties shall initiate the production of three (3) industrial scale batches (hereinafter "Bio-Batches") on such equipment as shall eventually be used KRYPTON or a third party to commercially manufacture the Final Product, based on the Prototype Formulation (the size of each Bio-Batch to be not less than the greater of (i) 10% (ten percent) of the anticipated initial commercial batch size, or (ii) 100'000 tablets), according to Current Good Manufacturing Practices, such Bio-Batches to be subsequently used for stability testing and pivotal clinical studies; provided however, that GENTA JAGO shall have the ultimate responsibility with respect of any and all technical aspects of such production of batches related to the technology transfer and the implementation of such technology in the manufacturing site. 7.3 Funding of Further Activities (a) Prior to the commencement of any activities under Sections 7.1 and 7.2 above GENTA JAGO shall submit to KRYPTON * for such further activities which budget and forecast shall be reasonably acceptable to KRYPTON. KRYPTON shall refund GENTA JAGO's * reasonably incurred by GENTA JAGO under Sections 7.1 and 7.2 above, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such further development costs shall be refunded by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. (b) Furthermore, KRYPTON shall be responsible, at its own cost, for the supply of all raw material including, but not limited to, the Active Ingredients required or necessary for, and all additional costs and expenses whatsoever arising out of or in connection with, the production of the Bio-Batches described in Section 7.2 above and all other costs associated with the use of facilities, technology transfer, equipment and analytical services. 7.4 Stability Testing (a) KRYPTON shall be responsible for and perform or have performed at its own cost, the stability testing of the Final Product according to the then current requirements of the FDA in bulk packaging and in the final packaging materials. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such stability testing, including without limitation, the performance or conduct of such stability testing or the availability or quality of the results and data from such stability testing to be carried out or requested by KRYPTON. (b) KRYPTON shall provide to GENTA JAGO with a copy of all stability testing data within thirty (30) days after the completion of each stability testing period (hereinafter - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -9- referred to as the Final Stability Testing Report") for GENTA JAGO's file. (c) GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON in connection with the stability testing of the Final Product. KRYPTON shall pay to GENTA JAGO for such services provided by GENTA JAGO's or Jago Pharma's personnel an amount of USD * or part thereof spent, and furthermore, KRYPTON shall reimburse GENTA JAGO for all reasonable and documented travel related expenses of GENTA JAGO personnel who travel at KRYPTON's request to locations remote from such personnel's usual working location. 7.5 Further Provisions In the event that KRYPTON and GENTA JAGO shall reasonably deem the results or data from any of the activities to be performed by either Party under this Article 7. with respect to any dose strength be unsatisfactory for any reason, the Parties may mutually agree to abandon the development program and terminate this Agreement with immediate effect. ARTICLE 8 PIVOTAL CLINICAL STUDY 8.1 Promptly upon completion of the further activities referred to in Article 7. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified CRO of its choice, reasonably acceptable to GENTA JAGO, to perform and manage a series of pivotal clinical studies (hereinafter "Clinical Studies") in man required and/or necessary for any subsequent NDA or ANDA for the Final Product in accordance with the then current requirements of the FDA. 8.2 KRYPTON shall consult, review and agree with GENTA JAGO on the design and the final protocol of such Clinical Studies prior to initiating work with the selected subcontractor. 8.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Clinical Studies. Such development costs shall be paid by * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 8.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Clinical Studies within ten (10) days of its completion for GENTA JAGO's file. 8.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -10- Clinical Studies, including without limitation, the performance or conduct of such Clinical Studies or the availability or quality of the results and data from such Clinical Studies to be carried out or requested by KRYPTON. 8.6 In the event that the results of the Pivotal Clinical Studies are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that the Prototype Formulation reasonably meets the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such dose strength. ARTICLE 9 THE REGULATORY (NDA OR ANDA) SUBMISSION 9.1 Upon completion of the Clinical Studies, KRYPTON may, at its option, elect to prepare and submit to the FDA an NDA or ANDA. KRYPTON shall notify GENTA JAGO of its election to exercise or not to exercise this option by giving written notice thereof to GENTA JAGO within thirty (30) days as of the availability of the results of the Clinical Studies. 9.2 In the event that KRYPTON elects pursuant to Section 9.1 above to make NDA or ANDA submission(s) to any Regulatory Authority with respect to a Final Product, KRYPTON shall have sole liability and responsibility for the prosecution, conduct and results of such NDA or ANDA and shall bear all costs in connection therewith. KRYPTON, at KRYPTON's option, may elect by written notice to GENTA JAGO prior to commencement of the technology transfer referred to in Section 7.1 above to have the NDA or ANDA dossier prepared on its behalf by a qualified third party acceptable to GENTA JAGO. KRYPTON shall be liable and responsible for any and all costs associated with such sub-contracting. 9.3 KRYPTON or its chosen sub-contractor shall consult with GENTA JAGO, and GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON or the chosen sub-contractor, in connection with the preparation and prosecution of any NDA or ANDA or with the preparation of the dossier to be submitted to the FDA. KRYPTON shall pay to GENTA JAGO for such services and consultation provided by GENTA JAGO's personnel an amount of USD * or any part thereof spent. Furthermore, KRYPTON shall reimburse GENTA JAGO for reasonable and documented travel-related expenses of GENTA JAGO personnel who travel at KRYPTON's request to the elected manufacturing facility(ies) or other locations remote from such personnel's usual working location. ARTICLE 10 PROPRIETARY RIGHTS AND PATENTS 10.1 Patents and Proprietary Rights of GENTA JAGO (a) The Licensor and GENTA JAGO, respectively, shall retain title to and ownership of - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -11- Patents, Know-How and GEOMATRIX(R) Technology licensed to GENTA JAGO, including, but not limited to, any and all developments and inventions relating to Patents, Know-How and GEOMATRIX(R) Technology (hereinafter collectively referred to as ,,GENTA JAGO IPR"). (b) KRYPTON shall not, directly or indirectly through its officers, directors, employees, agents, customers or other controlled or associated third parties, acquire any proprietary interest in or other right to GENTA JAGO IPR, other than provided in this Agreement. (c) GENTA JAGO shall use all commercially reasonable efforts, at its own cost, to cause the Licensor to prepare, prosecute and maintain all patent applications and patents constituting Patents, and shall keep KRYPTON fully and promptly informed on any developments or changes relating thereto. If the Licensor decides not to further prosecute any patent application constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. During the term of this Agreement, GENTA JAGO shall, at its sole cost, use all commercially reasonable efforts to cause the Licensor to take all steps necessary to maintain Patents to the extent GENTA JAGO deems commercially reasonable. If the Licensor decides not to maintain any patent constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. Notwithstanding the foregoing, KRYPTON acknowledges to GENTA JAGO that Licensor has the final authority regarding such preparation, prosecution and maintenance of all patent applications and patents. 10.2 Patents and Proprietary Rights for Final Products (a) KRYPTON shall retain title to and ownership of all developments, whether patentable or not, relating specifically and exclusively to the Final Products, provided that such developments are entirely independent of any and all GENTA JAGO IPR (hereinafter collectively referred to ,,Final Product IPR"). (b) KRYPTON shall be responsible for and shall control, at its own cost, the preparation, prosecution and maintenance of all Final Product IPR and shall keep GENTA JAGO fully and promptly informed on any developments or changes relating thereto. During the term of this Agreement, KRYPTON shall, at its sole cost, take all steps necessary to prosecute and/or maintain all Final Product IPR to the extent KRYPTON deems commercially reasonable. If KRYPTON intends not to further prosecute and/or maintain any of the Final Product IPR, KRYPTON shall promptly inform GENTA JAGO of such intention in writing, and GENTA JAGO shall have the right and option, but not the obligation, to have transferred to it sole title to and ownership in such Final Product IPR free of any charge by giving respective written notice thereof to KRYPTON within thirty (30) days after GENTA JAGO's receipt of KRYPTON's notice referred to above. -12- (c) In the event GENTA JAGO has and exercises its right and option referred to Section 10.2 (b) above to have transferred to it any such Final Product IPR, KRYPTON shall promptly undertake any and all steps required and/or necessary to transfer title to and ownership of such Final Product IPR to GENTA JAGO. In the event that GENTA JAGO exercises its option to have transferred such Final Product IPR from KRYPTON to GENTA JAGO, GENTA JAGO shall maintain such Final Product IPR during the term of this Agreement to the extent GENTA JAGO deems commercially reasonable and shall bear all cost associated therewith incurred after the date of GENTA JAGO's notice to KRYPTON exercising its option referred to in Section 10.2 (b) above. In such case, the Parties shall negotiate in good faith the terms and condition, under which such Final Product IPR transferred to GENTA JAGO shall be included in the License pursuant to Article 11. below. 10.3 Notification of Infringement (a) kind that involves or may involve an infringement or violation of GENTA JAGO IPR or Final Product IPR or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR or Final Product IPR, then KRYPTON shall promptly notify GENTA JAGO in writing of any such infringement, violation, action, claim or dispute. (b) If GENTA JAGO becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR with respect to Final Products or of Final Product IPR; or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR with respect to Final Products or of Final Product IPR, then GENTA JAGO shall promptly notify KRYPTON in writing of any such infringement, violation, action, claim or dispute. 10.4 Enforcement of GENTA JAGO IPR (a) GENTA JAGO, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, GENTA JAGO IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, GENTA JAGO IPR, (iii) to control any litigation or other enforcement action regarding GENTA JAGO IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding GENTA JAGO IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions, to the extent that any such action or such infringement may have an adverse effect on Final Product. KRYPTON shall, at its own cost, fully cooperate with GENTA JAGO in the planing and execution of any suit or other action to enforce, or defend third-party actions regar- -13- ding, GENTA JAGO IPR as reasonably required or requested by GENTA JAGO. (b) If GENTA JAGO does not within one-hundred-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of GENTA JAGO IPR which may adversely affect Final Products, or of any third-party action, claim or dispute based upon or arising out of GENTA JAGO IPR which may adversely affect Final Products, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then the Parties shall, upon KRYPTON's written request, promptly meet to discuss any reasonable appropriate action with regard to such enforcement of GENTA JAGO IPR which may adversely affect Final Products, provided however, that KRYPTON is aware and acknowledges that in such case the Licensor will have the right to enforce any and all GENTA JAGO IPR pursuant to the License Agreements. (c) Subject to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in the preceding section, KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action where necessary to obtain complete relief regarding the subject infringement or violation. 10.5 Enforcement of Final Product IPR (a) KRYPTON, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, Final Product IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, Final Product IPR, (iii) to control any litigation or other enforcement action regarding Final Product IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Final Product IPR. Notwithstanding anything contained in the preceding sentence, KRYPTON shall not settle any suit or action or otherwise consent to an adverse judgment in such suit or action without the prior written consent of GENTA JAGO, which consent shall not be withheld unreasonably. KRYPTON shall keep GENTA JAGO informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of GENTA JAGO under this Agreement and in GENTA JAGO IPR, when taking any of the foregoing actions. (b) If KRYPTON does not, within one-hundred-and-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of Final Product IPR, or of any third-party action, claim or dispute based upon or arising out of Final Product IPR, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then GENTA JAGO shall have the right, but not the obligation, at its sole expense, to take and control such action as it deems appropriate to enforce, or abate the infringement of, or defend against such third-party action, regarding Final Product IPR. GENTA JAGO shall -13- keep KRYPTON informed on a regular basis of any such action and consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions. KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action controlled by GENTA JAGO where necessary to obtain complete relief regarding the subject infringement or violation. 10.6 Application of Monies Recovered Subject always to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in Section 10.4(c) and any right to receive any monies recovered therefrom as provided for in the License Agreements, all monies recovered upon the final judgment or settlement of any suit or other action under this Sections 10.4 or 10.5 shall be applied as follows: (i) to cover any and all costs and expenses (including attorney's fees) incurred by the Party controlling such suit or other action; (ii) to cover any and all costs and expenses (including attorney's fees) reasonably, or upon request of the controlling Party, incurred by the other Party in connection with such suit or other action, if any; (iii) the remainder, if any, to the Party controlling any such suit or other action. ARTICLE 11 SUB-LICENSE AGREEMENT 11.1 GENTA JAGO hereby grants to KRYPTON the exclusive and sublicenseable right and sub-license (hereinafter referred to as the "License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, GEOMATRIX(R) Technology and Know How exclusively for that purpose subject to the payment of the * and the Royalties pursuant to Articles 13. and 14. below. 11.2 The rights of KRYPTON to grant any sub-license in any part of the Territory shall be subject to the requirement that KRYPTON shall obtain the written approval of GENTA JAGO prior to executing any such sub-license agreement, which approval shall not unreasonably be withheld, provided however, that no such approval by GENTA JAGO shall be required for any sub-license to an Affiliate of KRYPTON . 11.3 In any event KRYPTON shall be responsible for any and all acts, deeds and undertakings of its permitted sub-licensee(s) and KRYPTON and its permitted sub-licensee(s) shall continue to be bound by all terms and provisions under this Agreement throughout its term. In case that KRYPTON sub-licenses rights and/or the License to any sub-licensee(s) approved by GENTA JAGO, such sub-licensee(s) shall agree in writing to any and all of KRYPTON's obligations and undertakings under this Agreement, including but not limited to its confidentiality obligations set forth hereinafter. Furthermore, KRYPTON undertakes that any and all sub-license agreements shall provide for inspection and audit provisions - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -14- identical to the provisions set forth below in order to enable GENTA JAGO to control and audit and receive any and all fees and Royalties due as provided in this Agreement. KRYPTON shall provide GENTA JAGO promptly with reasonable appropriate information on its sub-licensee(s) and copies of all agreements with such sub-licensee(s) (with only the commercial terms may be redacted). ARTICLE 12 MANUFACTURING AND PRODUCT LIABILITY 12.1 In the event that KRYPTON, subject to Section 5.5 above, elects GENTA JAGO, and GENTA JAGO expressly agrees to such manufacture, or any of its Affiliates shall manufacture Final Products, then the Parties agree to enter into good faith negotiations on and to use commercially reasonable efforts to execute in due time a respective Manufacturing and Supply Agreement, according to which GENTA JAGO or its Affiliates shall undertake to manufacture and supply Final Products in sufficient quantities to meet KRYPTON's requirements, at a sale price for such Final Products manufactured equal to GENTA JAGO's *. In the event and for such period of time, that GENTA JAGO or its Affiliate manufactures and supplies Final Product under such Manufacturing and Supply Agreement, the Royalty Rate referred to in Section 14.1 below shall be *. 12.2 In the event that KRYPTON or any of its Affiliates or any third party is elected pursuant to Section 5.5 above to manufacture Final Product, then KRYPTON undertakes and agrees that at all times the Specifications and to any and all laws, rules and regulations imposed by any competent authority on the manufacturing, marketing, distribution and sale of Final Products are strictly adhered to by the manufacturer, and KRYPTON shall during the entire term of this Agreement be solely and fully liable and responsible for the compliance with all such laws, rules and regulations when manufacturing, having manufactured, marketing, distributing and selling Final Products itself and/or through Affiliates or sub- licensee(s). 12.3 KRYPTON shall indemnify, defend and hold GENTA JAGO, its Affiliates and the Licensor harmless from and against any losses, claims, liabilities, costs and expenses (including reasonable attorney's fees) that may be imposed upon or asserted against GENTA JAGO and/or its Affiliates and/or the Licensor as a result of the marketing, distributing, manufacture, use or sale of Final Products by or on behalf of KRYPTON, its Affiliates, agents or sub-licensee(s), except for those claims, liabilities, costs and expenses arising from gross negligence or intentional misconduct on the part of GENTA JAGO, its Affiliates or the Licensor. ARTICLE 13 * PAYMENTS AND OTHER CONSIDERATION 13.1 As consideration for GENTA JAGO's preliminary development efforts for the Prototype Formulation performed prior to the execution of this Agreement as referred to in Section 2.1 above, KRYPTON undertakes to pay to GENTA JAGO an initial *, payable upon execution of this Agreement. - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -15- 13.2 As consideration for the License granted by GENTA JAGO to KRYPTON under this Agreement and in consideration of certain major development steps achieved hereunder, KRYPTON undertakes to pay to GENTA JAGO *. (a) * upon KRYPTON's receipt of GENTA JAGO's notice referred to in Section 7.1 above; and (b) *; and (c) * for the Final Product; and (d) * for the Final Product. 13.3 The Parties agree that an * as set forth in Section 14.4 below. 13.4 Unless otherwise agreed by the Parties in writing, all payments under this Article 13. shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. ARTICLE 14 ROYALTIES 14.1 During a period commencing upon the first commercial sale of Final Product in each country of the Territory and ending upon the earlier of (i) the fifteenth (15th) anniversary of the first commercial sale of Final Product in such country of the Territory, and (ii) the expiration of the last of the Patents covering Final Product in such country of the Territory (hereinafter referred to as the "Royalty Term"), and in further consideration of the License granted to KRYPTON by GENTA JAGO, KRYPTON shall pay to GENTA JAGO a royalty (hereinafter referred to as the "Royalty") of an amount equal to * of the Final Product in the Territory. 14.2 The Parties agree that * shall be applicable for the first time on sales of such - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -16- Final Product in such country of the Territory after the beginning of the calendar quarter immediately following the first commercial sale of such Competitive Product. 14.3 Royalties shall be payable on a quarterly basis. KRYPTON shall remit to GENTA JAGO within six (6) weeks after the end of each calendar quarter the amount of Royalty due with respect to Net Sales and/or Gross Margin, as the case may be, achieved in the preceding quarter, beginning with the calendar quarter in which the first commercial sale of the Final Product is made in any country of the Territory. KRYPTON shall deliver to GENTA JAGO, along with such remittance of Royalty payments, a detailed statement (hereinafter referred to as the "Royalty Report") of the Net Sales and/or Gross Margin, as the case may be, of the Final Product on a country-by-country basis to which the Royalty payment relates. 14.4 All Royalty Reports shall be prepared in accordance with generally accepted accounting principles consistently applied from applicable period to period and shall be certified by an officer of KRYPTON as being so prepared, true, accurate and correct. 14.5 In recognition of the * by KRYPTON to GENTA JAGO prior to the commercial sale of the Final Products, the amount of Royalty payments due to GENTA JAGO under Article 14.2 above with respect to each calendar quarter shall be * until such time as the aggregate amount of all *. 14.6 Unless otherwise agreed by the Parties in writing, payments of Royalties shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. Any conversions into United States Dollars from the currency in which the corresponding Net Sales and/or Gross Margin for such Royalties were made, are to be calculated as using the average closing buying rate for such currency quoted in the continental terms method of quoting exchange rates (local currency per USD 1) published in the Wall Street Journal on the last business day of the applicable reporting period covered by such Royalty Report. ARTICLE 15 INSPECTION AND AUDIT 15.1 During the term of this Agreement and during a period of twelve (12) months after its expiration or termination for any reason, upon the written request of GENTA JAGO and not more than once each calendar year, KRYPTON shall permit an independent certified public accountant of internationally recognized standing selected by GENTA JAGO, at GENTA JAGO's expense, to have access during regular business hours to such of the records of KRYPTON and its Affiliates as may be reasonably necessary to verify the accuracy of the Royalty Reports for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to GENTA JAGO only whether the Royalty Reports and records of KRYPTON and its Affiliates and the amount of Royalties actually paid are correct or not and the specific details concerning - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -17- any discrepancies; no other information shall be shared. The Parties agree to accept such written audit report as final and binding upon them. 15.2 If such independent accounting firm correctly concludes that additional Royalties were owed during any such period audited, KRYPTON shall pay such additional Royalties within ten (10) days of the date GENTA JAGO delivers to KRYPTON such accounting firm's written report so concluding. The fees and expenses charged by such accounting firm with respect to such audit shall be paid by GENTA JAGO; provided however, if any such audit correctly discloses that Royalties payable by KRYPTON for the audited period are more *, then KRYPTON shall pay all reasonable fees and expenses charged by such accounting firm with respect to such audit. 15.3 GENTA JAGO shall treat all financial information subject to review under this Article 15. as confidential and subject to the confidentiality obligations in Article 16. below. ARTICLE 16 CONFIDENTIALITY 16.1 Confidential Information. KRYPTON shall maintain in confidence all Know-How and other information of GENTA JAGO (including samples) disclosed by GENTA JAGO and identified as, or acknowledged to be, confidential (the,,Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except on a need- to-know basis to its directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with KRYPTON's activities as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, KRYPTON hereto shall obtain agreement in writing of any such person to hold in confidence and not make use of the Confidential Information for any purpose other than those authorized by this Agreement. KRYPTON shall notify GENTA JAGO promptly upon the discovery of the unauthorized use or disclosure of the Confidential Information. 16.2 Permitted Disclosures. The obligations of confidentiality and non-use contained in Section 16.1 above shall not apply to the extent that (a) KRYPTON (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market Final Product, provided in each case that KRYPTON shall give GENTA JAGO written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof, or (b) KRYPTON can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to it, or thereafter became public knowledge, other than as a result of actions of KRYPTON, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by KRYPTON (as shown by its written records) prior to the date of disclosure to it by GENTA JAGO hereunder; (iii) the disclosed information was disclosed to KRYPTON on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to GENTA JAGO or the - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -18- Licensor; or (iv) the disclosed information was independently developed by KRYPTON without the use of Confidential Information disclosed by GENTA JAGO. 16.3 Terms of this Agreement. Except as otherwise provided in Section 16.2 above, neither Party shall disclose any terms or conditions of this Agreement to any third party (other than the Licensor) without the prior consent of the other Party. Notwithstanding the foregoing, prior to the execution of this Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information only without the other Party's consent. Notwithstanding the foregoing, prior to the execution of the Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information without the other Party's consent. 16.4 Term of Confidentiality. The confidentiality obligations under this Article 16 shall be effective during the term of this Agreement and for a period of ten (10) years after the expiration or earlier termination hereof. 16.5 Injunctive Remedies. GENTA JAGO shall be entitled to injunctive remedies and relief against KRYPTON and its Affiliates and any third parties for any breach or threatened breach of the confidentiality obligations under this Article 16. 16.6 Damages. In the event of a breach of the confidentiality provisions under this Article 16 by KRYPTON, its Affiliates or its directors, officers, employees or any other person who were given access to the Confidential Information by KRYPTON, GENTA JAGO shall be entitled to receive from KRYPTON any and all actual costs and damages caused by such breach. 16.7 other public announcements or disclosures regarding the execution and the existence of this Agreement or any activities conducted hereunder, including development results, filings and registrations, without the prior written consent of the other Party, except for such public disclosure as may be necessary in the opinion of any party's legal advisor in order not to be in violation of or default under any applicable law, regulation or governmental order, in such later event the party having an obligation to disclose shall submit to the other party a draft of the required announcement and shall give the other party the opportunity to request reasonable amendments and modifications of such required announcement. ARTICLE 17 TERM AND TERMINATION 17.1 Term and Expiration (a) This Agreement shall expire on a country-by-country basis upon the expiration of the Royalty Term. (b) Upon the expiration of this Agreement in each country of the Territory pursuant to -18- Section 17.1 (a) above and payment of all fees, including but not limited to the *, and all Royalties and other payments by KRYPTON due GENTA JAGO under this Agreement, the License shall be deemed to be a perpetual, fully paid-up and royalty-free license for such Final Product and each such country of the Territory. 17.2 Termination Prior to Registration During the development, test, study and registration phases as specified in Articles 3. through 8. above, and until the first successful registration approval of any Final Product by any Regulatory Authority, this Agreement may be terminated in accordance with the provisions set forth in Sections 3.6, 4.6, 6.5, 7.5 and 8.6 above. 17.3 Termination for Cause During the entire term of this Agreement either Party may terminate this Agreement by giving to the other Party written notice to that effect, if any of the following events occur: (a) the other Party is in default or in breach of a term or provision hereof and such default or breach continues and is not remedied within thirty (30) days upon the other Party's written request to remedy such default or breach; or (b) the other Party shall commit a breach of any of the confidentiality provisions of Article 16. above; or (c) the other Party goes into liquidation, voluntarily or otherwise, other than for the sole purpose of reorganization, or goes into bankruptcy or makes an assignment for the benefit of creditors, or in the event of a receiver being appointed of the other Party's property or parts thereof. 17.4 Effect of Termination (a) If KRYPTON elects to so terminate the Agreement under Section 17.2 above prior to filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated, (iii) KRYPTON be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) all Registrations pertaining to the marketing of the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vi) GENTA JAGO and its Affiliates shall thereafter be entitled to exercise such rights as they may have under their own license agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to KRYPTON; provided, that the foregoing rights under -19- (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates. (b) If KRYPTON elects to so terminate this Agreement subsequent to the filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated; (iii) KRYPTON shall be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) GENTA JAGO and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates); (vi) all Registrations pertaining to the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated hereunder shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vii) GENTA JAGO shall pay to KRYPTON the same royalty, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to KRYPTON, as KRYPTON would otherwise have paid (absent such termination) hereunder to GENTA JAGO on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by GENTA JAGO and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the royalties paid to KRYPTON equal the aggregate amount that had been paid by KRYPTON to GENTA JAGO prior to such termination under the Sections 3.5, 4.3, 5.2, 6.3, 7.3,8.3, 9.2 and 13., at which time the royalty rate then prevailing on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) in the United States shall be reduced by two percent (2 %) (but shall not be reduced for sales outside the United States). (c) Otherwise the termination of this Agreement shall be without prejudice to any rights and obligations of either Party accrued prior to the effective date of termination. KRYPTON shall forthwith make all payments due and outstanding to GENTA JAGO at the date of termination. Except as explicitly otherwise stated in this Agreement, GENTA JAGO shall not be obligated to refund upon termination of this Agreement to KRYPTON any payments, including without limitation the *, made by KRYPTON to GENTA JAGO prior to such termination pursuant to the provisions of this Agreement. (d) The termination of this Agreement pursuant to Section 17.3 above by either Party shall not limit remedies which may be otherwise available in law or equity to either Party. - - - --------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -20- 17.5 Early Termination of the License Agreements (a) In the event that the License Agreements are terminated prior to the expiration of the last to expire of the Patents licensed to GENTA JAGO in the Territory, then the License granted hereunder to KRYPTON shall also terminate upon KRYPTON's receipt of the respective termination notice from the Licensor. KRYPTON may give written notice to the Licensor of KRYPTON's desire to continue the License granted under this Agreement within sixty (60) days as of KRYPTON's receipt of the Licensor's notice referred to above. (b) In the event that KRYPTON timely notifies the Licensor of its desire to continue the License granted under this Agreement, the Licensor shall have the right, at its sole discretion, to elect to assume in writing within sixty (60) days upon the Licensor's receipt of KRYPTON's notice any and all rights of GENTA JAGO under this Agreement and to promptly cure all defaults of GENTA JAGO under this Agreement, if any. (c) In the event that the Licensor does not timely gives notice to KRYPTON and cures all of GENTA JAGO's defaults hereunder pursuant to Section 17.5(b) above, then KRYPTON shall promptly assume in writing any and all rights and obligations of GENTA JAGO under the License Agreements with the Licensor, but with regard to the rights encompassed by the License granted hereunder only, and promptly cure all defaults of GENTA JAGO under the License Agreements with regard to the rights encompassed by the License granted hereunder only, if any. (d) Notwithstanding anything contained in this Section 17.5, no action taken by the Licensor and/or KRYPTON to continue or not to continue the License shall relieve GENTA JAGO from any liability for any uncured defaults under this Agreement or the License Agreements, and such action by the Licensor and/or KRYPTON shall be without prejudice to any other rights or remedies the Licensor and/or KRYPTON may have in law or equity. ARTICLE 18 WARRANTIES 18.1 GENTA JAGO shall carry out and undertake the studies and tests specified in this Agreement in a careful and diligent manner. GENTA JAGO agrees to carefully choose, instruct and supervise any employees, officers, Affiliates or third parties to be chosen by GENTA JAGO pursuant to this Agreement, who are involved with the tests and studies. Nothing in this Agreement shall be construed as a representation made, or warranty given, by GENTA JAGO that any development performed by or for GENTA JAGO under this Agreement will be successful in whole or in part, or that any product, including Final Product, which may be developed, will be successful in the commercial marketplace. Furthermore, GENTA JAGO makes no representation or warranty, express or implied, with respect to GEOMATRIX(R)Technology and/or Know-How, including without limitation, any warranty of completeness, accuracy, merchantability or fitness for a -21- particular purpose thereof. 18.2 GENTA JAGO represents and warrants that it has all rights regarding Patents, GEOMATRIX(R)Technology and Know-How necessary to grant the License hereunder. Notwithstanding the preceding sentence, GENTA JAGO does not assume any responsibility and makes no warranty that the performance of this Agreement and any product developed hereunder, including Prototype Formulation(s) and Final Products, do not infringe any third party's patents, patent applications or other intellectual property rights. Notwithstanding the preceding sentence, GENTA JAGO represents and warrants that, as of the effective date of this Agreement, it is not aware and has not knowledge of any such infringement of any third party rights. If, however, during the course of this Agreement either Party discovers that the Prototype Formulation(s) and/or the Final Products infringe or may infringe any third party's intellectual property rights, it shall promptly inform the other Party thereof and the Parties shall meet to discuss the course of action to be taken with regard thereto. 18.3 Nothing in this Agreement shall be construed as a representation made, or warranty given by GENTA JAGO that any patent will issue based upon any pending patent application encompassed by the term Patents, and that any patent encompassed by the term Patents which issues will be valid or enforceable. 18.4 GENTA JAGO assumes no liability or responsibility for any damages caused to KRYPTON, third parties, animals and/or the environment by the manufacturing, marketing or use of the Prototype Formulations or Final Products or the active ingredient contained therein, except to the extent that any of the above are attributable to the gross negligence or willful misconduct of GENTA JAGO in performing its obligations hereunder. 18.5 Subject to the specific representations and warranties given and specific disclaimers of representations and warranties included in this Article 18, and further subject to anything to the contrary contained in this Agreement, either Party shall, as to third parties, be indemnified and held harmless by the other Party from and against any and all losses, liabilities and damages arising from any claim, action or other proceeding by any third party relating to any acts or omissions of the other Party, its directors, officers, employees or agents, or the gross negligence or willful misconduct of such other Party, its directors, officers, employees or agents in performing any of its obligations under this Agreement. 18.6 Any liability, warranty and undertaking contained herein shall be limited to the payment by either Party for direct damages to the other Party and in any event, neither Party shall be liable to the other Party for any special, indirect, punitive or consequential damages and/or loss of profits or anticipated profits, respectively. 18.7 KRYPTON shall, at its own expense, purchase from an insurance company of its choice and shall maintain during the entire term of this Agreement an appropriate and customary policy of general liability and product liability insurance covering its responsibilities regarding Prototype Formulation(s) and Final Products developed, manufactured, marketed and sold under this Agreement and the Active Ingredient contained therein and the use thereof. Upon request, KRYPTON shall provide GENTA JAGO with evidence that such -22- insurances are existing and are maintained. ARTICLE 19 MISCELLANEOUS PROVISIONS 19.1 Entire Agreement: The terms, covenants, conditions and provisions contained in this Agreement, including its Appendices referred to herein, constitute the total and complete agreement of the Parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the Parties to this Agreement. 19.2 Assignment: This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party, other than to an Affiliate of such Party, without the consent of the other Party; provided however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction; and provided further that GENTA JAGO may without the consent of KRYPTON assign any and all of its rights and obligations hereunder to the Licensor and/or any of the Licensor's Affiliates. Any permitted assignee shall assume all obligations of its assignor under this Agreement or under the respective rights or obligations actually assigned. 19.3 Successors: This Agreement and all rights hereunder shall ensure to the benefit of all successors and assigns of both Parties. 19.4 Notices: Any consent, notice or report required or permitted to be given or made under this Agreement by one Party to the other shall be in English and in writing, delivered personally or by courier service or by facsimile (promptly confirmed by personal delivery or courier service) addressed to the other Party at its address indicated below, or to such other address as shall have been notified in writing to the sending Party by the receiving party from time to time, and shall take effect upon receipt by the addressee. IF TO KRYPTON: KRYPTON LTD. East Wing, Second Level Hadfield House Library Street Gibraltar attn.: PRESIDENT WITH COPIES TO: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England attn.: COMPANY SECRETARY -23- AND: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT IF TO GENTA JAGO: GENTA JAGO Technologies B.V. Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz, Switzerland attn.: MANAGEMENT COMMITTEE WITH COPIES TO: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 8002 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT AND: PILLSBURY MADISON & SUTRO LLP 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. attn.: THOMAS E. SPARKS, JR., ESQ. 19.5 Independent Contractors: It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party to do so. 19.6 Severability: Each Party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. 19.7 Force Majeure: Neither Party hereto shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fire, floods, embargoes, war, acts of war (whether war be -24- declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party hereto. 19.8 Interest: In the event any amount due and payable under this Agreement is not paid by the due date, then the Party owing such amount shall pay to the creditor, without being requested by the other Party, interest on the total outstanding amount at the rate equal to the London Interbank Offered Rate (,,LIBOR"), as published in the Wall Street Journal (Europe) on the date that such payment falls due, increased by three percent (3%), in United States Dollars and adjusted on the first day of every calendar quarter. 19.9 Headings: The titles and headings used in this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 19.10 Waiver: The waiver by either Party hereto of any right hereunder or the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. 19.11 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. ARTICLE 20 DISPUTE RESOLUTION AND ARBITRATION 20.1 In the event of any dispute arising between the Parties concerning this Agreement, GENTA JAGO and KRYPTON agree that in the first place they shall meet for good faith discussions in an attempt to negotiate an amicable solution. 20.2 Any dispute arising between the Parties out of or in connection with this Agreement, or the interpretation, breach or enforcement thereof, which cannot be amicably resolved pursuant to Section 20.1 above within two (2) months as from the first appearance of such dispute, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to all of the other Parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in PARIS, FRANCE. The arbitrators shall have the authority to grant specific performance, and to allocate among the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this section, shall be determined by binding arbitration pursuant to this section. -25- 20.3 Notwithstanding anything contained in this Article 20, either Party may seek preliminary or injunctive measures or relief in any competent court having jurisdiction. ARTICLE 21 APPLICABLE LAW The Parties hereto agree that this Agreement, all transactions executed hereunder and all relationships between the Parties in connection therewith shall be construed under and be governed by the laws of Switzerland without reference to the conflict of law principals thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 31st day of October 1996. GENTA JAGO TECHNOLOGIES B.V. /s/ Thomas M. Adams /s/ Jacques Gonella - - - ------------------- ------------------- by: Dr. Thomas H. Adams by: Dr. Jacques Gonella its: Managing Director its: Managing Director KRYPTON LTD. /s/ - - - ------------------ by: its: The Licensor, Jagotec AG, hereby agrees to be bound by the obligations contained in Section 17.5 of this Agreement. JAGOTEC AG /s/ Jacques Gonella /s/ - - - ------------------- ------------------- by: by: its: its: -26- EX-10.94 10 DEVELOPMENT & SUB-LICENSE AGREEMENT/DICLOFENAC Exhibit 10.94 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT & SUB-LICENSE AGREEMENT DICLOFENAC This DEVELOPMENT AND SUB-LICENSE AGREEMENT (this "AGREEMENT"), effective from the date last written hereunder, is entered into between GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and KRYPTON LTD., a Gibraltar limited company, having a place of business at East Wing, Second Level, Hadfield House, Library Street, Gibraltar (hereinafter referred to as "KRYPTON") WITNESSTH: WHEREAS, GENTA JAGO has expertise in the development of controlled-release formulations for pharmaceutical agents and in particular has exclusive rights to proprietary know-how and technology generally known and commercialized under the registered trademark GEOMATRIX(R) and as described and embodied in the Patents (as defined below) with respect to a Bioequivalent Product (as defined below) to * and WHEREAS, KRYPTON is a company which markets pharmaceutical products and is interested in developing Prototype Formulations (as defined below) for the Final Product (as defined below) and in seeking the approval of Regulatory Authorities (as defined below) to manufacture, or have manufactured and market the Final Product in the Territory (as defined below); and WHEREAS, GENTA JAGO is prepared to conduct or have conducted certain studies and the development of the Prototype Formulations and Final Product; and WHEREAS, GENTA JAGO is prepared to grant to KRYPTON under the terms and conditions set forth hereafter a sub-license under the Patents, GEOMATRIX(R) Technology and Know-How (as defined below) to conduct studies relating to the Prototype Formulations and, upon receipt of approval by the Regulatory Authority (as defined below), to manufacture or have manufactured, market and sell the Final Product in the Territory. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the Parties hereby agree as follows: - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. ARTICLE 1 DEFINITIONS For purposes of this Agreement, the terms defined in this Article 1 shall have the following meanings: 1.1 "Active Ingredient" shall mean Diclofenac. 1.2 "Affiliate" shall mean, with respect to either Party hereto, any corporation, partnership or other entity controlled by, controlling or under common control with, such Party, with "control" meaning direct or indirect beneficial ownership of more than 50% of the voting power of, or more than 50% of ownership interest in, such corporation, partnership or other entity. 1.3 "ANDA" shall mean any Abbreviated New Drug Application filed with the FDA, by or for KRYPTON requesting authorization to manufacture, have manufactured or sell the Final Product in the United States of America, or any equivalent application to a Regulatory Authority in any other country of the Territory. 1.4 "Bioequivalent Product" shall mean a drug product meeting the bioequivalence requirements imposed by the FDA for in vitro and/or in vivo testing as set forth in the regulations of the FDA at 21 C.F.R. ss.320 (,,AB Equivalent Rating"), as they may be amended from time to time. 1.5 "Competitive Product" shall mean any product other than the Final Product or the Originator which is a Bioequivalent Product of the Originator and is marketed and sold in the Territory on a country-to-country basis. 1.6 "FDA" shall mean the U.S. Federal Food and Drug Administration and any successor agency thereof. 1.7 "Final Product" shall mean the pharmaceutical orally-administered controlled-release formulation(s) containing the Active Ingredient, presented as a compressed tablet developed pursuant to this Agreement, based on the GEOMATRIX(R) Technology and being a Bioequivalent Product of the Originator, of a Competitive Product or of any other product containing the Active Ingredient. 1.8 "GEOMATRIX(R) Technology" shall mean the oral controlled-release drug delivery and related technology licensed to GENTA JAGO by the Licensor which utilizes a hydrophilic drug-containing matrix tablet which controls the release of the drug through the use of one or more barrier layers. 1.9 "Gross Margin" shall mean, with respect to any Final Product, Net Sales less only the direct cost of such Final Product sold, i.e. (a) raw material cost, (b) direct labor cost, (c) reasonably directly allocatable overhead cost (e.g. energy cost), (d) packaging and labeling cost, and (e) other costs directly associated with the manufacturing of such Final -2- Product (e.g. quality control). No other deductions from Net Sales are permissible for the calculation of Gross Margin, including without limitation, sales, marketing and distribution costs. Alternatively, in the event that KRYPTON sub-contracts the manufacturing of any Final Product to a third party, then ,,Gross Margin" with respect to such Final Product shall mean Net Sales less only the manufacturing costs as invoiced by such manufacturing third party sub-contractor and actually paid by KRYPTON. 1.10 "Know-How" shall mean all information and data, which are not generally known including, but not limited to, patent claims and related information not yet disclosed to the public, formulae, procedures, protocols, techniques and results of experimentation and testing, which (a) relate to the GEOMATRIX(R)Technology, any Prototype Formulation or any Final Product, or (b) are necessary or useful to develop, make or use any Prototype Formulation, or (c) are necessary or useful to develop, seek regulatory approval, make, use or sell any Final Product, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.11 "License Agreements" shall mean the license agreements entered into by and between GENTA JAGO and the Licensor, under which the Licensor granted GENTA JAGO the rights in the Patents, the Know-How and the GEOMATRIX(R) Technology, which are the subject matter of the sub-license referred to in Article 11. below. 1.12 "Licensor" shall mean Jagotec AG, a Swiss corporation, having its place of business at Seestrasse 91, CH-6052 Hergiswil, Switzerland. 1.13 "Net Sales" shall mean, with respect to any Final Product, the invoiced sales price of such Final Product in finished package form invoiced by KRYPTON and/or its Affiliates to any independent customer other than KRYPTON's Affiliates, less (a) credits, allowances, discounts and rebates to, and charge-backs from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Final Product; (b) actual freight and insurance costs incurred and paid by KRYPTON and/or its Affiliates in transporting such Final Product in final form to such customers; (c) customary cash, quantity and trade discounts and other price reduction programs; (d) sales, use, value-added and other direct taxes (but excluding any income tax) actually incurred and paid by KRYPTON and/or its Affiliates; and (e) customs duties, surcharges and other governmentl charges incurred by KRYPTON and/or its Affiliates in connection with the exportation or importation of such Final Product in final form. 1.14 "Originator" shall mean * actually marketed in the United States by * or any other pharmaceutical products containing the Active Ingredient and being marketed in the Territory. 1.15 "Patents" shall mean all patents and patent applications heretofore or hereafter filed or having presently or in the future legal force in any country of the Territory, licensed by the Licensor to GENTA JAGO which claim the GEOMATRIX(R) Technology or the process to manufacture Prototype Formulations and/or Final Product by use of, or the - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- use of, the GEOMATRIX(R) Technology, including but not limited to the patents and patent applications listed in APPENDIX A hereto, together with all patents that in the future issue therefrom in any country of the Territory, including utility, model and design patents and certificates of invention, and all divisionals, continuations, continuations-in- part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.16 "Prototype Formulations" shall mean the oral delivery system for the Active Ingredient based on the GEOMATRIX(R) Technology that reasonably meet the Specifications. 1.17 "Regulatory Authority" shall mean the FDA or any equivalent competent regulatory authority in any other countries of the Territory. 1.18 "Specifications" shall mean the Products specifications to be mutually agreed upon. 1.19 "Territory" shall mean *. ARTICLE 2 DEVELOPMENT PREAMBLE 2.1 At the date of execution of this Agreement, GENTA JAGO has performed certain preliminary development efforts for the Prototype Formulation. This development is hereby incorporated in this Agreement. 2.2 GENTA JAGO undertakes to conduct the development of the Prototype Formulation(s) and the Final Product in an efficient and professional manner. KRYPTON shall actively support GENTA JAGO regarding the development and studies to be executed by GENTA JAGO as may be reasonably required by GENTA JAGO from time to time. In particular, KRYPTON shall provide information reasonably requested by GENTA JAGO relating to the Originator and to the Active Ingredient for the purposes of carrying out this development, including, but not limited to, physico-chemical characteristics, safe- handling instructions, in-vitro analytical methods, degradation products and standards and analytical methods therefore. Additionally, KRYPTON shall provide to GENTA JAGO requested data and adequate quantities of samples of the Originator for the purposes of conducting the Feasibility Study. KRYPTON, however, shall not be required to provide information regarding the Originator which is not in the public domain, unless KRYPTON is duly authorized to possess and disclose such non-public information. Any costs and expenses incurred by KRYPTON in connection with such support shall be borne by KRYPTON. 2.3 Due to the nature and complexity of the development and the respective studies as set forth in this Agreement, the Parties recognize and acknowledge that problems and delays may occur which render the time limits set forth in this Agreement and/or the time-frame of the development as mutually agreed upon difficult or impossible to accomplish. The Parties agree that they shall immediately inform each other in writing in the event that - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -4- significant problems or delays are encountered or envisaged during the course of the development and shall discuss such problems and delays in order to agree on a mutually acceptable revision of the time limits set in this Agreement and/or the time-frame as previously mutually agreed upon. 2.4 Together with the notice from KRYPTON referred to in Section 3.1 below, KRYPTON, or its designated supplier, shall supply GENTA JAGO on a free-of-charge basis with sufficient quantities of Active Ingredient to perform the development program intended hereunder. Such supplies shall be accompanied with respective certificates of analysis and conformity. GENTA JAGO shall use all Active Ingredient supplied to it by KRYPTON hereunder solely and exclusively in connection with the development program as mutually agreed upon. Alternatively, KRYPTON may request that GENTA JAGO obtain a supply of Active Ingredient from a reputable source having the necessary regulatory clearances in place to allow future marketing of the Final Product in the Territory. Should KRYPTON so require and GENTA JAGO so agree, the chosen supplier's facilities, processes and procedures shall be audited by GENTA JAGO, or a third party mutually acceptable to KRYPTON and GENTA JAGO, in order to ensure compliance with the appropriate regulatory requirements. KRYPTON shall * of GENTA JAGO incurred in carrying out, or having carried out such audit. GENTA JAGO shall provide KRYPTON with a copy of the audit report within thirty (30) days as of the completion of the audit. 2.5 In the event that the Parties mutually agree that GENTA JAGO becomes responsible for the supply of Active Ingredient, KRYPTON shall * GENTA JAGO for any and all shipping and transportation costs, import duties, taxes or other costs incurred by GENTA JAGO in connection with such supply of Active Ingredient upon receipt of GENTA JAGO's respective invoices. ARTICLE 3 FEASIBILITY STUDY 3.1 KRYPTON shall initiate the development program contemplated hereunder as soon as technically feasible and within the time limits set forth in the mutually accepted development program by giving written notice to that effect to GENTA JAGO. Not later than two (2) months after receipt of (i) such notice, (ii) * and (iii) the Active Ingredient, GENTA JAGO shall commence the feasibility study under this Article 3. and shall use its commercially reasonable efforts to develop the Prototype Formulations. Up to three (3) of the developed Prototype Formulations shall be chosen by mutual agreement by the Parties for further study and development. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -5- The Parties recognize that the Specifications mutually agreed upon eventually will need to be updated with more detailed specifications for the Final Product in the course of the development, and in such case the Parties agree to mutually agree on any reasonable amendment of the Specifications. 3.2 The development of the Prototype Formulations shall include, but not necessarily be limited to, the following elements: (a) Development and establishment of analytical methodology specific to the characterization of such Prototype Formulations; (b) Qualitative and quantitative characterization of such Prototype Formulation; (c) In-vitro release profile characterization of such Prototype Formulations and the Originator by using appropriate methodology mutually agreed to by the Parties; (d) Elaboration of pre-scale up procedures and the production of samples (2000 units +/- 10%) of the chosen Prototype Formulations for evaluation by KRYPTON, and for use in the Pilot Pharmacokinetic Study under Article 4. below; and (e) Accelerated stability testing of Prototype Formulations to provide *. 3.3 GENTA JAGO will ensure the use of generally accepted standards of Good Laboratory and Manufacturing Practices during the performance of the feasibility study. 3.4 Within thirty (30) days of the completion of the feasibility study, GENTA JAGO shall supply KRYPTON with a report (the ,,Feasibility Study Report") reasonably detailing the development of the Prototype Formulation(s) and containing one (1) month accelerated stability data only. A supplement to the Feasibility Study Report containing the * accelerated stability data will be forwarded sixty (60) days later. 3.5 Prior to the commencement of the Feasibility Study GENTA JAGO shall submit to KRYPTON * for the entire Feasibility Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Feasibility Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 3.6 In the event that the results of the feasibility study conclusively demonstrate that no Prototype Formulation has been developed which reasonably meets the Specifications to the good faith mutual satisfaction of KRYPTON and GENTA JAGO, the Parties agree to enter into good faith negotiations in order to determine an appropriate course of action, including, but not limited to, that the Parties may mutually agree to abandon the - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -6- development program under this Agreement, and terminate this Agreement with immediate effect. ARTICLE 4 PILOT PHARMACOKINETIC STUDY 4.1 Included as part of the feasibility study described in Article 3. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable in all material respects to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified clinical research organization (hereinafter ,,CRO") to perform a pilot pharmacokinetic study pursuant to this Article 4. 4.2 The Pilot Pharmacokinetic Study shall consist of commercially reasonable and appropriately designed * of the Prototype Formulations and the Originator. KRYPTON shall reasonably consult with GENTA JAGO in the design of the Pilot Pharmacokinetic Study and shall review the final protocol with GENTA JAGO prior to initiating work with the selected sub- contractor. The Pilot Pharmacokinetic Study shall be conducted in accordance with generally accepted standards of Good Clinical Practice and in compliance with Ethical Committee requirements or equivalent requirements, where applicable. 4.3 Prior to the commencement of the Pilot Pharmacokinetic Study GENTA JAGO shall submit to KRYPTON * for the entire Pilot Pharmacokinetic Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pilot Pharmacokinetic Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 4.4 KRYPTON shall provide GENTA JAGO with a copy of the report (hereinafter referred to as the ,,Pilot Pharmacokinetic Study Report") reasonably detailing the results of the Pilot Pharmacokinetic Study within six (6) weeks as of the study's completion and presentation of the preliminary data for GENTA JAGO's file. 4.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pilot Pharmacokinetic Study, including without limitation the availability or quality of the results and data from such Pilot Pharmacokinetic Study to be carried out by KRYPTON and the CRO. 4.6 In the event that the results of the Pilot Pharmacokinetic Study conclusively demonstrate that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that at least one of the Prototype Formulations reasonably meet the - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -7- respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such Prototype Formulation. ARTICLE 5 PRE-SCALE-UP ACTIVITIES 5.1 Upon completion of the Pilot Pharmacokinetic Study, KRYPTON may, at its option, request and charge GENTA JAGO to carry out the pre-scale-up activities as described in this Article 5. (hereinafter referred to as the "Pre-Scale-Up Activities"). KRYPTON shall, within thirty (30) days as from the date of the Pilot Pharmacokinetic Study Report notify in writing GENTA JAGO of its decision whether to proceed with and to have GENTA JAGO perform the Pre-Scale-Up Activities. 5.2 Prior to the commencement of the Pre-Scale-Up Activities GENTA JAGO shall submit to KRYPTON * for the entire Pre-Scale-Up Activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pre-Scale Up activity, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such pre scale up costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 5.3 The Pre-Scale-Up Activities to be performed by GENTA JAGO shall comprise all reasonable activities necessary to allow the technology transfer to, and subsequent scale- up at, the mutually established manufacturing site, including, but not limited to, final optimization of the Prototype Formulation (where necessary), development and validation of the scale-up manufacturing procedure and analytical validation. Such Pre-Scale-Up Activities shall be completed within the time period mutually agreed upon by the Parties in Appendix D hereto, calculated as from the date of receipt of the KRYPTON's notice by GENTA JAGO pursuant to Section 5.1 above. 5.4 In the event that additional clinical testing, including without limitation, confirming pharmacokinetic studies, is reasonably required or deemed necessary beyond the program envisaged in this Agreement in order to satisfy the FDA requirements for an NDA or ANDA approval of the Product, KRYPTON and GENTA JAGO shall meet to discuss in good faith the appropriate course of action to be followed and agree upon any such additional testing to be performed, provided that any such additional testing shall in any event be funded solely by KRYPTON. 5.5 Not later than upon the initiation of the Pre-Scale-Up Activities, the Parties shall establish and mutually agree upon a manufacturing site, where the Bio-Batches referred to in Section 7.2 below required for the pivotal clinical studies will be produced and where the Final Product shall be manufactured for commercial use after FDA approval(s) for the Final Product have been granted. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -8- ARTICLE 6 PRE-PIVOTAL PHARMACOKINETIC STUDY 6.1 Included as part of the Pre-Scale-Up Activities, KRYPTON shall at its own responsibility and its own cost, perform or have performed with a CRO selected by KRYPTON, a pre- pivotal pharmacokinetic study pursuant to this Article 6. (hereinafter referred to as "Pre- Pivotal Study"). Such Pre-Pivotal Study shall consist of *, to select the best of the Prototype Formulations for each dose strength to be used in the further development under this Agreement. 6.2 The Pre-Pivotal Study shall be performed in the United States of America. KRYPTON shall consult, review and mutually agree with GENTA JAGO on the design and final protocol of such Pre-Pivotal Study prior to initiating work with the selected CRO. 6.3 KRYPTON shall reimburse to GENTA JAGO the * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Pre-Pivotal Study. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 6.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailling the results of the Pre-Pivotal Study within ten (10) days of its completion for GENTA JAGO's file. GENTA JAGO shall have no liability or responsibility whatsoever with resupect to such Pre-Pivotal Study, including without limitation, the performance or conduct of such Pre- Pivotal Study or the availability or quality of the results and data from such Pre-Pivotal Study to be carried out by KRYPTON and the CRO. 6.5 Upon completion of the Pre-Pivotal Study and availability of the results of such Pre- Pivotal Study, the Parties shall consult with each other on such results and mutually agree in writing upon the Prototype Formulation to be selected for further development under this Agreement. In the event that the results of the Pre-Pivotal Study are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of the Parties that at least one of the Prototype Formulations meet the respective Specifications, KRYPTON may elect to abandon the development program and terminate this Agreement with respect to such Prototype Formulation by giving written notice to that effect to GENTA JAGO. ARTICLE 7 FURTHER ACTIVITIES 7.1 Technology Transfer Upon mutual agreement of the Prototype Formulation to be used for development as referred to in Section 6.5 above, GENTA JAGO shall be responsible for and initiate the technology transfer to, and perform the scale-up at, the manufacturing site mutually established and agreed upon by the Parties. GENTA JAGO agrees that such technology transfer, and in particular the aspects of scale-up and validation of the manufacturing - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -9- process shall be carried out by GENTA JAGO on such equipment as shall eventually be used by KRYPTON or a third party to manufacture the Final Product. Upon completion of such scale-up, GENTA JAGO shall notify KRYPTON thereof in writing. 7.2 Production of Industrial Scale Batches Upon receipt by KRYPTON of GENTA JAGO's notice referred to in Section 7.1 above, the Parties shall initiate the production of three (3) industrial scale batches (hereinafter "Bio-Batches") on such equipment as shall eventually be used KRYPTON or a third party to commercially manufacture the Final Product, based on the Prototype Formulation (the size of each Bio-Batch to be not less than the greater of (i) 10% (ten percent) of the anticipated initial commercial batch size, or (ii) 100,000 tablets), according to Current Good Manufacturing Practices, such Bio-Batches to be subsequently used for stability testing and pivotal clinical studies; provided however, that GENTA JAGO shall have the ultimate responsibility with respect of any and all technical aspects of such production of batches related to the technology transfer and the implementation of such technology in the manufacturing site. 7.3 Funding of Further Activities (a) Prior to the commencement of any activities under Sections 7.1 and 7.2 above GENTA JAGO shall submit to KRYPTON * for such further activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall refund GENTA JAGO's * reasonably incurred by GENTA JAGO under Sections 7.1 and 7.2 above, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such further development costs shall be refunded by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. (b) Furthermore, KRYPTON shall be responsible, at its own cost, for the supply of all raw material including, but not limited to, the Active Ingredients required or necessary for, and all additional costs and expenses whatsoever arising out of or in connection with, the production of the Bio-Batches described in Section 7.2 above and all other costs associated with the use of facilities, technology transfer, equipment and analytical services. 7.4 Stability Testing (a) KRYPTON shall be responsible for and perform or have performed at its own cost, the stability testing of the Final Product according to the then current requirements of the FDA in bulk packaging and in the final packaging materials. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such stability testing, including without limitation, the performance or conduct of such stability testing or the availability or quality of the results and data from such - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -10- stability testing to be carried out or requested by KRYPTON. (b) KRYPTON shall provide to GENTA JAGO with a copy of all stability testing data within thirty (30) days after the completion of each stability testing period (hereinafter referred to as the "Final Stability Testing Report") for GENTA JAGO's file. (c) GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON in connection with the stability testing of the Final Product. KRYPTON shall pay to GENTA JAGO for such services provided by GENTA JAGO's or Jago Pharma's personnel an amount of USD * or part thereof spent, and furthermore, KRYPTON shall reimburse GENTA JAGO for all reasonable and documented travel related expenses of GENTA JAGO personnel who travel at KRYPTON's request to locations remote from such personnel's usual working location. 7.5 Further Provisions In the event that KRYPTON and GENTA JAGO shall reasonably deem the results or data from any of the activities to be performed by either Party under this Article 7. with respect to any dose strength be unsatisfactory for any reason, the Parties may mutually agree to abandon the development program and terminate this Agreement with immediate effect. ARTICLE 8 PIVOTAL CLINICAL STUDY 8.1 Promptly upon completion of the further activities referred to in Article 7. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified CRO of its choice, reasonably acceptable to GENTA JAGO, to perform and manage a series of pivotal clinical studies (hereinafter,,Clinical Studies") in man required and/or necessary for any subsequent NDA or ANDA for the Final Product in accordance with the then current requirements of the FDA. 8.2 KRYPTON shall consult, review and agree with GENTA JAGO on the design and the final protocol of such Clinical Studies prior to initiating work with the selected subcontractor. 8.3 KRYPTON shall reimburse to GENTA JAGO the * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Clinical Studies. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -11- 8.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Clinical Studies within ten (10) days of its completion for GENTA JAGO's file. 8.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Clinical Studies, including without limitation, the performance or conduct of such Clinical Studies or the availability or quality of the results and data from such Clinical Studies to be carried out or requested by KRYPTON. 8.6 In the event that the results of the Pivotal Clinical Studies are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that the Prototype Formulation reasonably meets the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such dose strength. ARTICLE 9 THE REGULATORY (NDA OR ANDA) SUBMISSION 9.1 Upon completion of the Clinical Studies, KRYPTON may, at its option, elect to prepare and submit to the FDA an NDA or ANDA. KRYPTON shall notify GENTA JAGO of its election to exercise or not to exercise this option by giving written notice thereof to GENTA JAGO within thirty (30) days as of the availability of the results of the Clinical Studies. 9.2 In the event that KRYPTON elects pursuant to Section 9.1 above to make NDA or ANDA submission(s) to any Regulatory Authority with respect to a Final Product, KRYPTON shall have sole liability and responsibility for the prosecution, conduct and results of such NDA or ANDA and shall bear all costs in connection therewith. KRYPTON, at KRYPTON's option, may elect by written notice to GENTA JAGO prior to commencement of the technology transfer referred to in Section 7.1 above to have the NDA or ANDA dossier prepared on its behalf by a qualified third party acceptable to GENTA JAGO. KRYPTON shall be liable and responsible for any and all costs associated with such sub-contracting. 9.3 KRYPTON or its chosen sub-contractor shall consult with GENTA JAGO, and GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON or the chosen sub-contractor, in connection with the preparation and prosecution of any NDA or ANDA or with the preparation of the dossier to be submitted to the FDA. KRYPTON shall pay to GENTA JAGO for such services and consultation provided by GENTA JAGO's personnel an amount of USD * or any part thereof spent. Furthermore, KRYPTON shall reimburse GENTA JAGO for reasonable and documented travel-related expenses of GENTA JAGO personnel who travel at KRYPTON's request to the elected manufacturing facility(ies) or other locations remote from such personnel's usual working location. -12- ARTICLE 10 PROPRIETARY RIGHTS AND PATENTS 10.1 Patents and Proprietary Rights of GENTA JAGO (a) The Licensor and GENTA JAGO, respectively, shall retain title to and ownership of Patents, Know-How and GEOMATRIX(R) Technology licensed to GENTA JAGO, including, but not limited to, any and all developments and inventions relating to Patents, Know-How and GEOMATRIX(R) Technology (hereinafter collectively referred to as "GENTA JAGO IPR"). (b) KRYPTON shall not, directly or indirectly through its officers, directors, employees, agents, customers or other controlled or associated third parties, acquire any proprietary interest in or other right to GENTA JAGO IPR, other than provided in this Agreement. (c) GENTA JAGO shall use all commercially reasonable efforts, at its own cost, to cause the Licensor to prepare, prosecute and maintain all patent applications and patents constituting Patents, and shall keep KRYPTON fully and promptly informed on any developments or changes relating thereto. If the Licensor decides not to further prosecute any patent application constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. During the term of this Agreement, GENTA JAGO shall, at its sole cost, use all commercially reasonable efforts to cause the Licensor to take all steps necessary to maintain Patents to the extent GENTA JAGO deems commercially reasonable. If the Licensor decides not to maintain any patent constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. Notwithstanding the foregoing, KRYPTON acknowledges to GENTA JAGO that Licensor has the final authority regarding such preparation, prosecution and maintenance of all patent applications and patents. 10.2 Patents and Proprietary Rights for Final Products (a) KRYPTON shall retain title to and ownership of all developments, whether patentable or not, relating specifically and exclusively to the Final Products, provided that such developments are entirely independent of any and all GENTA JAGO IPR (hereinafter collectively referred to "Final Product IPR"). (b) KRYPTON shall be responsible for and shall control, at its own cost, the preparation, prosecution and maintenance of all Final Product IPR and shall keep GENTA JAGO fully and promptly informed on any developments or changes relating thereto. During the term of this Agreement, KRYPTON shall, at its sole cost, take all steps necessary to prosecute and/or maintain all Final Product IPR -13- to the extent KRYPTON deems commercially reasonable. If KRYPTON intends not to further prosecute and/or maintain any of the Final Product IPR, KRYPTON shall promptly inform GENTA JAGO of such intention in writing, and GENTA JAGO shall have the right and option, but not the obligation, to have transferred to it sole title to and ownership in such Final Product IPR free of any charge by giving respective written notice thereof to KRYPTON within thirty (30) days after GENTA JAGO's receipt of KRYPTON's notice referred to above. (c) In the event GENTA JAGO has and exercises its right and option referred to Section 10.2 (b) above to have transferred to it any such Final Product IPR, KRYPTON shall promptly undertake any and all steps required and/or necessary to transfer title to and ownership of such Final Product IPR to GENTA JAGO. In the event that GENTA JAGO exercises its option to have transferred such Final Product IPR from KRYPTON to GENTA JAGO, GENTA JAGO shall maintain such Final Product IPR during the term of this Agreement to the extent GENTA JAGO deems commercially reasonable and shall bear all cost associated therewith incurred after the date of GENTA JAGO's notice to KRYPTON exercising its option referred to in Section 10.2 (b) above. In such case, the Parties shall negotiate in good faith the terms and condition, under which such Final Product IPR transferred to GENTA JAGO shall be included in the License pursuant to Article 11. below. 10.3 Notification of Infringement (a) If KRYPTON becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR or Final Product IPR or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non- infringement) based upon or arising out of GENTA JAGO IPR or Final Product IPR, then KRYPTON shall promptly notify GENTA JAGO in writing of any such infringement, violation, action, claim or dispute. (b) If GENTA JAGO becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR with respect to Final Products or of Final Product IPR; or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR with respect to Final Products or of Final Product IPR, then GENTA JAGO shall promptly notify KRYPTON in writing of any such infringement, violation, action, claim or dispute. 10.4 Enforcement of GENTA JAGO IPR (a) GENTA JAGO, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, GENTA JAGO IPR, (ii) -14- to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, GENTA JAGO IPR, (iii) to control any litigation or other enforcement action regarding GENTA JAGO IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding GENTA JAGO IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions, to the extent that any such action or such infringement may have an adverse effect on Final Product. KRYPTON shall, at its own cost, fully cooperate with GENTA JAGO in the planing and execution of any suit or other action to enforce, or defend third-party actions regarding, GENTA JAGO IPR as reasonably required or requested by GENTA JAGO. (b) If GENTA JAGO does not within one-hundred-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of GENTA JAGO IPR which may adversely affect Final Products, or of any third-party action, claim or dispute based upon or arising out of GENTA JAGO IPR which may adversely affect Final Products, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then the Parties shall, upon KRYPTON's written request, promptly meet to discuss any reasonable appropriate action with regard to such enforcement of GENTA JAGO IPR which may adversely affect Final Products, provided however, that KRYPTON is aware and acknowledges that in such case the Licensor will have the right to enforce any and all GENTA JAGO IPR pursuant to the License Agreements. (c) Subject to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in the preceding section, KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action where necessary to obtain complete relief regarding the subject infringement or violation. 10.5 Enforcement of Final Product IPR (a) KRYPTON, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, Final Product IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third- party actions regarding, Final Product IPR, (iii) to control any litigation or other enforcement action regarding Final Product IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Final Product IPR. Notwithstanding anything contained in the preceding sentence, KRYPTON shall not settle any suit or action or otherwise consent to an adverse judgment in such suit or action without the prior written consent of GENTA -15- JAGO, which consent shall not be withheld unreasonably. KRYPTON shall keep GENTA JAGO informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of GENTA JAGO under this Agreement and in GENTA JAGO IPR, when taking any of the foregoing actions. (b) If KRYPTON does not, within one-hundred-and-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of Final Product IPR, or of any third-party action, claim or dispute based upon or arising out of Final Product IPR, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then GENTA JAGO shall have the right, but not the obligation, at its sole expense, to take and control such action as it deems appropriate to enforce, or abate the infringement of, or defend against such third-party action, regarding Final Product IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis of any such action and consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions. KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action controlled by GENTA JAGO where necessary to obtain complete relief regarding the subject infringement or violation. 10.6 Application of Monies Recovered Subject always to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in Section 10.4(c) and any right to receive any monies recovered therefrom as provided for in the License Agreements, all monies recovered upon the final judgment or settlement of any suit or other action under this Sections 10.4 or 10.5 shall be applied as follows: (i) to cover any and all costs and expenses (including attorney's fees) incurred by the Party controlling such suit or other action; (ii) to cover any and all costs and expenses (including attorney's fees) reasonably, or upon request of the controlling Party, incurred by the other Party in connection with such suit or other action, if any; (iii) the remainder, if any, to the Party controlling any such suit or other action. ARTICLE 11 SUB-LICENSE AGREEMENT 11.1 GENTA JAGO hereby grants to KRYPTON the exclusive and sublicenseable right and sub-license (hereinafter referred to as the ,,License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, -16- GEOMATRIX(R) Technology and Know How exclusively for that purpose subject to the payment of the * and the Royalties pursuant to Articles 13. and 14. below. 11.2 The rights of KRYPTON to grant any sub-license in any part of the Territory shall be subject to the requirement that KRYPTON shall obtain the written approval of GENTA JAGO prior to executing any such sub-license agreement, which approval shall not unreasonably be withheld, provided however, that no such approval by GENTA JAGO shall be required for any sub-license to an Affiliate of KRYPTON . 11.3 In any event KRYPTON shall be responsible for any and all acts, deeds and undertakings of its permitted sub-licensee(s) and KRYPTON and its permitted sub-licensee(s) shall continue to be bound by all terms and provisions under this Agreement throughout its term. In case that KRYPTON sub-licenses rights and/or the License to any sub- licensee(s) approved by GENTA JAGO, such sub-licensee(s) shall agree in writing to any and all of KRYPTON's obligations and undertakings under this Agreement, including but not limited to its confidentiality obligations set forth hereinafter. Furthermore, KRYPTON undertakes that any and all sub-license agreements shall provide for inspection and audit provisions identical to the provisions set forth below in order to enable GENTA JAGO to control and audit and receive any and all fees and Royalties due as provided in this Agreement. KRYPTON shall provide GENTA JAGO promptly with reasonable appropriate information on its sub-licensee(s) and copies of all agreements with such sub-licensee(s) (with only the commercial terms may be redacted). ARTICLE 12 MANUFACTURING AND PRODUCT LIABILITY 12.1 In the event that KRYPTON, subject to Section 5.5 above, elects GENTA JAGO, and GENTA JAGO expressly agrees to such manufacture, or any of its Affiliates shall manufacture Final Products, then the Parties agree to enter into good faith negotiations on and to use commercially reasonable efforts to execute in due time a respective Manufacturing and Supply Agreement, according to which GENTA JAGO or its Affiliates shall undertake to manufacture and supply Final Products in sufficient quantities to meet KRYPTON's requirements, at a sale price for such Final Products manufactured equal to GENTA JAGO's *. In the event and for such period of time, that GENTA JAGO or its Affiliate manufactures and supplies Final Product under such Manufacturing and Supply Agreement, the Royalty Rate referred to in Section 14.1 below shall be * 12.2 In the event that KRYPTON or any of its Affiliates or any third party is elected pursuant to Section 5.5 above to manufacture Final Product, then KRYPTON undertakes and agrees that at all times the Specifications and to any and all laws, rules and regulations imposed by any competent authority on the manufacturing, marketing, distribution and sale of Final Products are strictly adhered to by the manufacturer, and KRYPTON shall during the entire term of this Agreement be solely and fully liable and responsible for the compliance with all such laws, rules and regulations when manufacturing, having manufactured, - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -17- marketing, distributing and selling Final Products itself and/or through Affiliates or sub-licensee(s). 12.3 KRYPTON shall indemnify, defend and hold GENTA JAGO, its Affiliates and the Licensor harmless from and against any losses, claims, liabilities, costs and expenses (including reasonable attorney's fees) that may be imposed upon or asserted against GENTA JAGO and/or its Affiliates and/or the Licensor as a result of the marketing, distributing, manufacture, use or sale of Final Products by or on behalf of KRYPTON, its Affiliates, agents or sub-licensee(s), except for those claims, liabilities, costs and expenses arising from gross negligence or intentional misconduct on the part of GENTA JAGO, its Affiliates or the Licensor. ARTICLE 13 * PAYMENTS AND OTHER CONSIDERATION 13.1 As consideration for GENTA JAGO's preliminary development efforts for the Prototype Formulation performed prior to the execution of this Agreement as referred to in Section 2.1 above, KRYPTON undertakes to pay to GENTA JAGO an initial *, payable upon execution of this Agreement. 13.2 As consideration for the License granted by GENTA JAGO to KRYPTON under this Agreement and in consideration of certain major development steps achieved hereunder, KRYPTON undertakes to pay to GENTA JAGO *: (a) * KRYPTON's receipt of GENTA JAGO's notice referred to in Section 7.1 above; and (b) *; and (c) * for the Final Product; and (d) * for the Final Product. 13.3 Unless otherwise agreed by the Parties in writing, all payments under this Article 13. shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -18- ARTICLE 14 ROYALTIES 14.1 During a period commencing upon the first commercial sale of Final Product in each country of the Territory and ending upon the earlier of (i) the fifteenth (15th) anniversary of the first commercial sale of Final Product in such country of the Territory, and (ii) the expiration of the last of the Patents covering Final Product in such country of the Territory (hereinafter referred to as the,,Royalty Term"), and in further consideration of the License granted to KRYPTON by GENTA JAGO, KRYPTON shall pay to GENTA JAGO a royalty (hereinafter referred to as the,,Royalty") of an amount equal to * of the Final Product in the Territory. 14.2 The Parties agree that * shall be applicable for the first time on sales of such Final Product in such country of the Territory after the beginning of the calendar quarter immediately following the first commercial sale of such Competitive Product. 14.3 Royalties shall be payable on a quarterly basis. KRYPTON shall remit to GENTA JAGO within six (6) weeks after the end of each calendar quarter the amount of Royalty due with respect to Net Sales and/or Gross Margin, as the case may be, achieved in the preceding quarter, beginning with the calendar quarter in which the first commercial sale of the Final Product is made in any country of the Territory. KRYPTON shall deliver to GENTA JAGO, along with such remittance of Royalty payments, a detailed statement (hereinafter referred to as the "Royalty Report") of the Net Sales and/or Gross Margin, as the case may be, of the Final Product on a country-by-country basis to which the Royalty payment relates. 14.4 All Royalty Reports shall be prepared in accordance with generally accepted accounting principles consistently applied from applicable period to period and shall be certified by an officer of KRYPTON as being so prepared, true, accurate and correct. 14.5 Unless otherwise agreed by the Parties in writing, payments of Royalties shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. Any conversions into United States Dollars from the currency in which the corresponding Net Sales and/or Gross Margin for such Royalties were made, are to be calculated as using the average closing buying rate for such currency quoted in the continental terms method of quoting exchange rates (local currency per USD 1) published in the Wall Street Journal on the last business day of the applicable reporting period covered by such Royalty Report. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -19- ARTICLE 15 INSPECTION AND AUDIT 15.1 During the term of this Agreement and during a period of twelve (12) months after its expiration or termination for any reason, upon the written request of GENTA JAGO and not more than once each calendar year, KRYPTON shall permit an independent certified public accountant of internationally recognized standing selected by GENTA JAGO, at GENTA JAGO's expense, to have access during regular business hours to such of the records of KRYPTON and its Affiliates as may be reasonably necessary to verify the accuracy of the Royalty Reports for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to GENTA JAGO only whether the Royalty Reports and records of KRYPTON and its Affiliates and the amount of Royalties actually paid are correct or not and the specific details concerning any discrepancies; no other information shall be shared. The Parties agree to accept such written audit report as final and binding upon them. 15.2 If such independent accounting firm correctly concludes that additional Royalties were owed during any such period audited, KRYPTON shall pay such additional Royalties within ten (10) days of the date GENTA JAGO delivers to KRYPTON such accounting firm's written report so concluding. The fees and expenses charged by such accounting firm with respect to such audit shall be paid by GENTA JAGO; provided however, if any such audit correctly discloses that Royalties payable by KRYPTON for the audited period are more *, then KRYPTON shall pay all reasonable fees and expenses charged by such accounting firm with respect to such audit. 15.3 GENTA JAGO shall treat all financial information subject to review under this Article 15. as confidential and subject to the confidentiality obligations in Article 16. below. ARTICLE 16 CONFIDENTIALITY 16.1 Confidential Information. KRYPTON shall maintain in confidence all Know-How and other information of GENTA JAGO (including samples) disclosed by GENTA JAGO and identified as, or acknowledged to be, confidential (the ,,Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except on a need- to-know basis to its directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with KRYPTON's activities as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, KRYPTON hereto shall obtain agreement in writing of any such person to hold in confidence and not make use of the Confidential Information for any purpose other than those authorized by this Agreement. KRYPTON shall notify GENTA JAGO promptly upon the discovery of the unauthorized use or disclosure of the Confidential Information. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -20- 16.2 Permitted Disclosures. The obligations of confidentiality and non-use contained in Section 16.1 above shall not apply to the extent that (a) KRYPTON (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market Final Product, provided in each case that KRYPTON shall give GENTA JAGO written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof, or (b) KRYPTON can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to it, or thereafter became public knowledge, other than as a result of actions of KRYPTON, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by KRYPTON (as shown by its written records) prior to the date of disclosure to it by GENTA JAGO hereunder; (iii) the disclosed information was disclosed to KRYPTON on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to GENTA JAGO or the Licensor; or (iv) the disclosed information was independently developed by KRYPTON without the use of Confidential Information disclosed by GENTA JAGO. 16.3 Terms of this Agreement. Except as otherwise provided in Section 16.2 above, neither Party shall disclose any terms or conditions of this Agreement to any third party (other than the Licensor) without the prior consent of the other Party. Notwithstanding the foregoing, prior to the execution of this Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information only without the other Party's consent. Notwithstanding the foregoing, prior to the execution of the Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information without the other Party's consent. 16.4 Term of Confidentiality. The confidentiality obligations under this Article 16 shall be effective during the term of this Agreement and for a period of ten (10) years after the expiration or earlier termination hereof. 16.5 Injunctive Remedies. GENTA JAGO shall be entitled to injunctive remedies and relief against KRYPTON and its Affiliates and any third parties for any breach or threatened breach of the confidentiality obligations under this Article 16. 16.6 Damages. In the event of a breach of the confidentiality provisions under this Article 16 by KRYPTON, its Affiliates or its directors, officers, employees or any other person who were given access to the Confidential Information by KRYPTON, GENTA JAGO shall be entitled to receive from KRYPTON any and all actual costs and damages caused by such breach. 16.7 Public Announcements. Neither Party shall make any press releases or other public announcements or disclosures regarding the execution and the existence of this Agreement or any activities conducted hereunder, including development results, filings and registrations, without the prior written consent of the other Party, except for such public -21- disclosure as may be necessary in the opinion of any party's legal advisor in order not to be in violation of or default under any applicable law, regulation or governmental order, in such later event the party having an obligation to disclose shall submit to the other party a draft of the required announcement and shall give the other party the opportunity to request reasonable amendments and modifications of such required announcement. ARTICLE 17 TERM AND TERMINATION 17.1 Term and Expiration (a) This Agreement shall expire on a country-by-country basis upon the expiration of the Royalty Term. (b) Upon the expiration of this Agreement in each country of the Territory pursuant to Section 17.1 (a) above and payment of all fees, including but not limited to the *, and all Royalties and other payments by KRYPTON due GENTA JAGO under this Agreement, the License shall be deemed to be a perpetual, fully paid-up and royalty-free license for such Final Product and each such country of the Territory. 17.2 Termination Prior to Registration During the development, test, study and registration phases as specified in Articles 3. through 8. above, and until the first successful registration approval of any Final Product by any Regulatory Authority, this Agreement may be terminated in accordance with the provisions set forth in Sections 3.6, 4.6, 6.5, 7.5 and 8.6 above. 17.3 Termination for Cause During the entire term of this Agreement either Party may terminate this Agreement by giving to the other Party written notice to that effect, if any of the following events occur: (a) the other Party is in default or in breach of a term or provision hereof and such default or breach continues and is not remedied within thirty (30) days upon the other Party's written request to remedy such default or breach; or (b) the other Party shall commit a breach of any of the confidentiality provisions of Article 16. above; or (c) the other Party goes into liquidation, voluntarily or otherwise, other than for the sole purpose of reorganization, or goes into bankruptcy or makes an assignment for the benefit of creditors, or in the event of a receiver being appointed of the other Party's property or parts thereof. -22- 17.4 Effect of Termination (a) If KRYPTON elects to so terminate the Agreement under Section 17.2 above prior to filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated, (iii) KRYPTON be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) all Registrations pertaining to the marketing of the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vi) GENTA JAGO and its Affiliates shall thereafter be entitled to exercise such rights as they may have under their own license agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to KRYPTON; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates. (b) If KRYPTON elects to so terminate this Agreement subsequent to the filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated; (iii) KRYPTON shall be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) GENTA JAGO and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates); (vi) all Registrations pertaining to the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated hereunder shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vii) GENTA JAGO shall pay to KRYPTON the same royalty, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to KRYPTON, as KRYPTON would otherwise have paid (absent such termination) hereunder to GENTA JAGO on Net Sales (or on -23- the Gross Margin of such Net Sales, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by GENTA JAGO and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the royalties paid to KRYPTON equal the aggregate amount that had been paid by KRYPTON to GENTA JAGO prior to such termination under the Sections 3.5, 4.3, 5.2, 6.3, 7.3,8.3, 9.2 and 13., at which time the royalty rate then prevailing on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) in the United States shall be reduced by two percent (2 %) (but shall not be reduced for sales outside the United States). (c) Otherwise the termination of this Agreement shall be without prejudice to any rights and obligations of either Party accrued prior to the effective date of termination. KRYPTON shall forthwith make all payments due and outstanding to GENTA JAGO at the date of termination. Except as explicitly otherwise stated in this Agreement, GENTA JAGO shall not be obligated to refund upon termination of this Agreement to KRYPTON any payments, including without limitation the *, made by KRYPTON to GENTA JAGO prior to such termination pursuant to the provisions of this Agreement. (d) The termination of this Agreement pursuant to Section 17.3 above by either Party shall not limit remedies which may be otherwise available in law or equity to either Party. 17.5 Early Termination of the License Agreements (a) In the event that the License Agreements are terminated prior to the expiration of the last to expire of the Patents licensed to GENTA JAGO in the Territory, then the License granted hereunder to KRYPTON shall also terminate upon KRYPTON's receipt of the respective termination notice from the Licensor. KRYPTON may give written notice to the Licensor of KRYPTON's desire to continue the License granted under this Agreement within sixty (60) days as of KRYPTON's receipt of the Licensor's notice referred to above. (b) In the event that KRYPTON timely notifies the Licensor of its desire to continue the License granted under this Agreement, the Licensor shall have the right, at its sole discretion, to elect to assume in writing within sixty (60) days upon the Licensor's receipt of KRYPTON's notice any and all rights of GENTA JAGO under this Agreement and to promptly cure all defaults of GENTA JAGO under this Agreement, if any. (c) In the event that the Licensor does not timely gives notice to KRYPTON and cures all of GENTA JAGO's defaults hereunder pursuant to Section 17.5(b) above, then KRYPTON shall promptly assume in writing any and all rights and obligations of GENTA JAGO under the License Agreements with the Licensor, but with regard to the rights encompassed by the License granted hereunder only, and promptly - - - ------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. -24- cure all defaults of GENTA JAGO under the License Agreements with regard to the rights encompassed by the License granted hereunder only, if any. (d) Notwithstanding anything contained in this Section 17.5, no action taken by the Licensor and/or KRYPTON to continue or not to continue the License shall relieve GENTA JAGO from any liability for any uncured defaults under this Agreement or the License Agreements, and such action by the Licensor and/or KRYPTON shall be without prejudice to any other rights or remedies the Licensor and/or KRYPTON may have in law or equity. ARTICLE 18 WARRANTIES 18.1 GENTA JAGO shall carry out and undertake the studies and tests specified in this Agreement in a careful and diligent manner. GENTA JAGO agrees to carefully choose, instruct and supervise any employees, officers, Affiliates or third parties to be chosen by GENTA JAGO pursuant to this Agreement, who are involved with the tests and studies. Nothing in this Agreement shall be construed as a representation made, or warranty given, by GENTA JAGO that any development performed by or for GENTA JAGO under this Agreement will be successful in whole or in part, or that any product, including Final Product, which may be developed, will be successful in the commercial marketplace. Furthermore, GENTA JAGO makes no representation or warranty, express or implied, with respect to GEOMATRIX(R)Technology and/or Know-How, including without limitation, any warranty of completeness, accuracy, merchantability or fitness for a particular purpose thereof. 18.2 GENTA JAGO represents and warrants that it has all rights regarding Patents, GEOMATRIX(R)Technology and Know-How necessary to grant the License hereunder. Notwithstanding the preceding sentence, GENTA JAGO does not assume any responsibility and makes no warranty that the performance of this Agreement and any product developed hereunder, including Prototype Formulation(s) and Final Products, do not infringe any third party's patents, patent applications or other intellectual property rights. Notwithstanding the preceding sentence, GENTA JAGO represents and warrants that, as of the effective date of this Agreement, it is not aware and has not knowledge of any such infringement of any third party rights. If, however, during the course of this Agreement either Party discovers that the Prototype Formulation(s) and/or the Final Products infringe or may infringe any third party's intellectual property rights, it shall promptly inform the other Party thereof and the Parties shall meet to discuss the course of action to be taken with regard thereto. 18.3 Nothing in this Agreement shall be construed as a representation made, or warranty given by GENTA JAGO that any patent will issue based upon any pending patent application encompassed by the term Patents, and that any patent encompassed by the term Patents which issues will be valid or enforceable. -25- 18.4 GENTA JAGO assumes no liability or responsibility for any damages caused to KRYPTON, third parties, animals and/or the environment by the manufacturing, marketing or use of the Prototype Formulations or Final Products or the active ingredient contained therein, except to the extent that any of the above are attributable to the gross negligence or willful misconduct of GENTA JAGO in performing its obligations hereunder. 18.5 Subject to the specific representations and warranties given and specific disclaimers of representations and warranties included in this Article 18, and further subject to anything to the contrary contained in this Agreement, either Party shall, as to third parties, be indemnified and held harmless by the other Party from and against any and all losses, liabilities and damages arising from any claim, action or other proceeding by any third party relating to any acts or omissions of the other Party, its directors, officers, employees or agents, or the gross negligence or willful misconduct of such other Party, its directors, officers, employees or agents in performing any of its obligations under this Agreement. 18.6 Any liability, warranty and undertaking contained herein shall be limited to the payment by either Party for direct damages to the other Party and in any event, neither Party shall be liable to the other Party for any special, indirect, punitive or consequential damages and/or loss of profits or anticipated profits, respectively. 18.7 KRYPTON shall, at its own expense, purchase from an insurance company of its choice and shall maintain during the entire term of this Agreement an appropriate and customary policy of general liability and product liability insurance covering its responsibilities regarding Prototype Formulation(s) and Final Products developed, manufactured, marketed and sold under this Agreement and the Active Ingredient contained therein and the use thereof. Upon request, KRYPTON shall provide GENTA JAGO with evidence that such insurances are existing and are maintained. ARTICLE 19 MISCELLANEOUS PROVISIONS 19.1 Entire Agreement: The terms, covenants, conditions and provisions contained in this Agreement, including its Appendices referred to herein, constitute the total and complete agreement of the Parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the Parties to this Agreement. 19.2 Assignment: This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party, other than to an Affiliate of such Party, without the consent of the other Party; provided however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or -26- sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction; and provided further that GENTA JAGO may without the consent of KRYPTON assign any and all of its rights and obligations hereunder to the Licensor and/or any of the Licensor's Affiliates. Any permitted assignee shall assume all obligations of its assignor under this Agreement or under the respective rights or obligations actually assigned. 19.3 Successors: This Agreement and all rights hereunder shall ensure to the benefit of all successors and assigns of both Parties. 19.4 Notices: Any consent, notice or report required or permitted to be given or made under this Agreement by one Party to the other shall be in English and in writing, delivered personally or by courier service or by facsimile (promptly confirmed by personal delivery or courier service) addressed to the other Party at its address indicated below, or to such other address as shall have been notified in writing to the sending Party by the receiving party from time to time, and shall take effect upon receipt by the addressee. IF TO KRYPTON: KRYPTON LTD. East Wing, Second Level Hadfield House Library Street Gibraltar attn.: PRESIDENT WITH COPIES TO: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England attn.: COMPANY SECRETARY AND: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT IF TO GENTA JAGO: GENTA JAGO Technologies B.V. Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz, Switzerland attn..: MANAGEMENT COMMITTEE WITH COPIES TO: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 8002 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT -27- AND: PILLSBURY MADISON & SUTRO LLP 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. attn.: THOMAS E. SPARKS, JR., ESQ. 19.5 Independent Contractors: It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party to do so. 19.6 Severability: Each Party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. 19.7 Force Majeure: Neither Party hereto shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party hereto. 19.8 Interest: In the event any amount due and payable under this Agreement is not paid by the due date, then the Party owing such amount shall pay to the creditor, without being requested by the other Party, interest on the total outstanding amount at the rate equal to the London Interbank Offered Rate (,,LIBOR"), as published in the Wall Street Journal (Europe) on the date that such payment falls due, increased by three percent (3%), in United States Dollars and adjusted on the first day of every calendar quarter. 19.9 Headings: The titles and headings used in this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. -28- 19.10 Waiver: The waiver by either Party hereto of any right hereunder or the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. 19.11 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. ARTICLE 20 DISPUTE RESOLUTION AND ARBITRATION 20.1 In the event of any dispute arising between the Parties concerning this Agreement, GENTA JAGO and KRYPTON agree that in the first place they shall meet for good faith discussions in an attempt to negotiate an amicable solution. 20.2 Any dispute arising between the Parties out of or in connection with this Agreement, or the interpretation, breach or enforcement thereof, which cannot be amicably resolved pursuant to Section 20.1 above within two (2) months as from the first appearance of such dispute, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to all of the other Parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in PARIS, FRANCE. The arbitrators shall have the authority to grant specific performance, and to allocate among the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this section, shall be determined by binding arbitration pursuant to this section. 20.3 Notwithstanding anything contained in this Article 20, either Party may seek preliminary or injunctive measures or relief in any competent court having jurisdiction. -29- ARTICLE 21 APPLICABLE LAW The Parties hereto agree that this Agreement, all transactions executed hereunder and all relationships between the Parties in connection therewith shall be construed under and be governed by the laws of Switzerland without reference to the conflict of law principals thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 31st day of October 1996. GENTA JAGO TECHNOLOGIES B.V. /s/ Thomas H. Adams /s/ Jacques Gonella - - - ------------------- ------------------- by Dr. Thomas H. Adams by: Dr. Jacques Gonella its: Managing Director its: Managing Director KRYPTON LTD. /s/ - - - ------------------- by: its: The Licensor, Jagotec AG, hereby agrees to be bound by the obligations contained in Section 17.5 of this Agreement. JAGOTEC AG /s/ Jacques Gonella /s/ - - - ------------------- ------------------------ by: by: its: its -30- EX-10.95 11 DEVELOPMENT & SUB-LICENSE AGREEMENT EXHIBIT 10.95 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT & SUB-LICENSE AGREEMENT NAPROXEN This DEVELOPMENT AND SUB-LICENSE AGREEMENT (this "AGREEMENT"), effective from the date last written hereunder, is entered into between GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and KRYPTON LTD., a Gibraltar limited company, having a place of business at East Wing, Second Level, Hadfield House, Library Street, Gibraltar (hereinafter referred to as "KRYPTON") WITNESSETH: WHEREAS, GENTA JAGO has expertise in the development of controlled-release formulations for pharmaceutical agents and in particular has exclusive rights to proprietary know-how and technology generally known and commercialized under the registered trademark GEOMATRIX(R) and as described and embodied in the Patents (as defined below) with respect to a Bioequivalent Product (as defined below) to * and WHEREAS, KRYPTON is a company which markets pharmaceutical products and is interested in developing Prototype Formulations (as defined below) for the Final Product (as defined below) and in seeking the approval of Regulatory Authorities (as defined below) to manufacture, or have manufactured and market the Final Product in the Territory (as defined below); and WHEREAS, GENTA JAGO is prepared to conduct or have conducted certain studies and the development of the Prototype Formulations and Final Product; and WHEREAS, GENTA JAGO is prepared to grant to KRYPTON under the terms and conditions set forth hereafter a sub-license under the Patents, GEOMATRIX(R) Technology and Know-How (as defined below) to conduct studies relating to the Prototype Formulations and, upon receipt of approval by the Regulatory Authority (as defined below), to manufacture or have manufactured, market and sell the Final Product in the Territory. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the Parties hereby agree as follows: - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. ARTICLE 1 DEFINITIONS For purposes of this Agreement, the terms defined in this Article 1 shall have the following meanings: 1.1 "Active Ingredient" shall mean Naproxen. 1.2 "Affiliate" shall mean, with respect to either Party hereto, any corporation, partnership or other entity controlled by, controlling or under common control with, such Party, with "control" meaning direct or indirect beneficial ownership of more than 50% of the voting power of, or more than 50% of ownership interest in, such corporation, partnership or other entity. 1.3 "ANDA" shall mean any Abbreviated New Drug Application filed with the FDA, by or for KRYPTON requesting authorization to manufacture, have manufactured or sell the Final Product in the United States of America, or any equivalent application to a Regulatory Authority in any other country of the Territory. 1.4 "Bioequivalent Product" shall mean a drug product meeting the bioequivalence requirements imposed by the FDA for in vitro and/or in vivo testing as set forth in the regulations of the FDA at 21 C.F.R. ss.320 ("AB Equivalent Rating"), as they may be amended from time to time. 1.5 "Competitive Product" shall mean any product other than the Final Product or the Originator which is a Bioequivalent Product of the Originator and is marketed and sold in the Territory on a country-to-country basis. 1.6 "FDA" shall mean the U.S. Federal Food and Drug Administration and any successor agency thereof. 1.7 "Final Product" shall mean the pharmaceutical orally-administered controlled-release formulation(s) containing the Active Ingredient, presented as a compressed tablet developed pursuant to this Agreement, based on the GEOMATRIX(R) Technology and being a Bioequivalent Product of the Originator, of a Competitive Product or of any other product containing the Active Ingredient. 1.8 "GEOMATRIX(R) Technology" shall mean the oral controlled-release drug delivery and related technology licensed to GENTA JAGO by the Licensor which utilizes a hydrophilic drug-containing matrix tablet which controls the release of the drug through the use of one or more barrier layers. 1.9 "Gross Margin" shall mean, with respect to any Final Product, Net Sales less only the direct cost of such Final Product sold, i.e. (a) raw material cost, (b) direct labor cost, (c) reasonably directly allocable overhead cost (e.g. energy cost), (d) packaging and labeling - 2 - cost, and (e) other costs directly associated with the manufacturing of such Final Product (e.g. quality control). No other deductions from Net Sales are permissible for the calculation of Gross Margin, including without limitation, sales, marketing and distribution costs. Alternatively, in the event that KRYPTON sub-contracts the manufacturing of any Final Product to a third party, then "Gross Margin" with respect to such Final Product shall mean Net Sales less only the manufacturing costs as invoiced by such manufacturing third party sub-contractor and actually paid by KRYPTON. 1.10 "Know-How" shall mean all information and data, which are not generally known including, but not limited to, patent claims and related information not yet disclosed to the public, formulae, procedures, protocols, techniques and results of experimentation and testing, which (a) relate to the GEOMATRIX(R)Technology, any Prototype Formulation or any Final Product, or (b) are necessary or useful to develop, make or use any Prototype Formulation, or (c) are necessary or useful to develop, seek regulatory approval, make, use or sell any Final Product, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.11 "License Agreements" shall mean the license agreements entered into by and between GENTA JAGO and the Licensor, under which the Licensor granted GENTA JAGO the rights in the Patents, the Know-How and the GEOMATRIX(R) Technology, which are the subject matter of the sub-license referred to in Article 11. below. 1.12 "Licensor" shall mean Jagotec AG, a Swiss corporation, having its place of business at Seestrasse 91, CH-6052 Hergiswil, Switzerland. 1.13 "Net Sales" shall mean, with respect to any Final Product, the invoiced sales price of such Final Product in finished package form invoiced by KRYPTON and/or its Affiliates to any independent customer other than KRYPTON's Affiliates, less (a) credits, allowances, discounts and rebates to, and charge-backs from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Final Product; (b) actual freight and insurance costs incurred and paid by KRYPTON and/or its Affiliates in transporting such Final Product in final form to such customers; (c) customary cash, quantity and trade discounts and other price reduction programs; (d) sales, use, value- added and other direct taxes (but excluding any income tax) actually incurred and paid by KRYPTON and/or its Affiliates; and (e) customs duties, surcharges and other governmental charges incurred by KRYPTON and/or its Affiliates in connection with the exportation or importation of such Final Product in final form. 1.14 "Originator" shall mean * actually marketed in the United States by * or any other pharmaceutical products containing the Active Ingredient and being marketed in the Territory. 1.15 "Patents" shall mean all patents and patent applications heretofore or hereafter filed or having presently or in the future legal force in any country of the Territory, licensed by the Licensor to GENTA JAGO which claim the GEOMATRIX(R) Technology or the - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 3 - process to manufacture Prototype Formulations and/or Final Product by use of, or the use of, the GEOMATRIX(R) Technology, including but not limited to the patents and patent applications listed in APPENDIX A hereto, together with all patents that in the future issue therefrom in any country of the Territory, including utility, model and design patents and certificates of invention, and all divisionals, continuations, continuations-in-part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.16 "Prototype Formulations" shall mean the oral delivery system for the Active Ingredient based on the GEOMATRIX(R) Technology that reasonably meet the Specifications. 1.17 "Regulatory Authority" shall mean the FDA or any equivalent competent regulatory authority in any other countries of the Territory. 1.18 "Specifications" shall mean the Products specifications to be mutually agreed upon. 1.19 "Territory" shall mean *. ARTICLE 2 DEVELOPMENT PREAMBLE 2.1 At the date of execution of this Agreement, GENTA JAGO has performed certain preliminary development efforts for the Prototype Formulation. This development is hereby incorporated in this Agreement. 2.2 GENTA JAGO undertakes to conduct the development of the Prototype Formulation(s) and the Final Product in an efficient and professional manner. KRYPTON shall actively support GENTA JAGO regarding the development and studies to be executed by GENTA JAGO as may be reasonably required by GENTA JAGO from time to time. In particular, KRYPTON shall provide information reasonably requested by GENTA JAGO relating to the Originator and to the Active Ingredient for the purposes of carrying out this development, including, but not limited to, physico-chemical characteristics, safe-handling instructions, in-vitro analytical methods, degradation products and standards and analytical methods therefore. Additionally, KRYPTON shall provide to GENTA JAGO requested data and adequate quantities of samples of the Originator for the purposes of conducting the Feasibility Study. KRYPTON, however, shall not be required to provide information regarding the Originator which is not in the public domain, unless KRYPTON is duly authorized to possess and disclose such non-public information. Any costs and expenses incurred by KRYPTON in connection with such support shall be borne by KRYPTON. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 4 - 2.3 Due to the nature and complexity of the development and the respective studies as set forth in this Agreement, the Parties recognize and acknowledge that problems and delays may occur which render the time limits set forth in this Agreement and/or the time-frame of the development as mutually agreed upon difficult or impossible to accomplish. The Parties agree that they shall immediately inform each other in writing in the event that significant problems or delays are encountered or envisaged during the course of the development and shall discuss such problems and delays in order to agree on a mutually acceptable revision of the time limits set in this Agreement and/or the time-frame as previously mutually agreed upon. 2.4 Together with the notice from KRYPTON referred to in Section 3.1 below, KRYPTON, or its designated supplier, shall supply GENTA JAGO on a free-of-charge basis with sufficient quantities of Active Ingredient to perform the development program intended hereunder. Such supplies shall be accompanied with respective certificates of analysis and conformity. GENTA JAGO shall use all Active Ingredient supplied to it by KRYPTON hereunder solely and exclusively in connection with the development program as mutually agreed upon. Alternatively, KRYPTON may request that GENTA JAGO obtain a supply of Active Ingredient from a reputable source having the necessary regulatory clearances in place to allow future marketing of the Final Product in the Territory. Should KRYPTON so require and GENTA JAGO so agree, the chosen supplier's facilities, processes and procedures shall be audited by GENTA JAGO, or a third party mutually acceptable to KRYPTON and GENTA JAGO, in order to ensure compliance with the appropriate regulatory requirements. KRYPTON shall * of GENTA JAGO incurred in carrying out, or having carried out such audit. GENTA JAGO shall provide KRYPTON with a copy of the audit report within thirty (30) days as of the completion of the audit. 2.5 In the event that the Parties mutually agree that GENTA JAGO becomes responsible for the supply of Active Ingredient, KRYPTON shall * GENTA JAGO for any and all shipping and transportation costs, import duties, taxes or other costs incurred by GENTA JAGO in connection with such supply of Active Ingredient upon receipt of GENTA JAGO's respective invoices. ARTICLE 3 FEASIBILITY STUDY 3.1 KRYPTON shall initiate the development program contemplated hereunder as soon as technically feasible and within the time limits set forth in the mutually accepted development program by giving written notice to that effect to GENTA JAGO. Not later than two (2) months after receipt of (i) such notice, (ii) a * and (iii) the Active Ingredient, GENTA JAGO shall commence the feasibility study under - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 5 - this Article 3. and shall use its commercially reasonable efforts to develop the Prototype Formulations. Up to three (3) of the developed Prototype Formulations shall be chosen by mutual agreement by the Parties for further study and development. The Parties recognize that the Specifications mutually agreed upon eventually will need to be updated with more detailed specifications for the Final Product in the course of the development, and in such case the Parties agree to mutually agree on any reasonable amendment of the Specifications. 3.2 The development of the Prototype Formulations shall include, but not necessarily be limited to, the following elements: (a) Development and establishment of analytical methodology specific to the characterization of such Prototype Formulations; (b) Qualitative and quantitative characterization of such Prototype Formulation; (c) In-vitro release profile characterization of such Prototype Formulations and the Originator by using appropriate methodology mutually agreed to by the Parties; (d) Elaboration of pre-scale up procedures and the production of samples (2000 units +/- 10%) of the chosen Prototype Formulations for evaluation by KRYPTON, and for use in the Pilot Pharmacokinetic Study under Article 4. below; and (e) Accelerated stability testing of Prototype Formulations to provide *. 3.3 GENTA JAGO will ensure the use of generally accepted standards of Good Laboratory and Manufacturing Practices during the performance of the feasibility study. 3.4 Within thirty (30) days of the completion of the feasibility study, GENTA JAGO shall supply KRYPTON with a report (the "Feasibility Study Report") reasonably detailing the development of the Prototype Formulation(s) and containing one (1) month accelerated stability data only. A supplement to the Feasibility Study Report containing the * accelerated stability data will be forwarded sixty (60) days later. 3.5 Prior to the commencement of the Feasibility Study GENTA JAGO shall submit to KRYPTON * for the entire Feasibility Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Feasibility Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 6 - 3.6 In the event that the results of the feasibility study conclusively demonstrate that no Prototype Formulation has been developed which reasonably meets the Specifications to the good faith mutual satisfaction of KRYPTON and GENTA JAGO, the Parties agree to enter into good faith negotiations in order to determine an appropriate course of action, including, but not limited to, that the Parties may mutually agree to abandon the development program under this Agreement, and terminate this Agreement with immediate effect. ARTICLE 4 PILOT PHARMACOKINETIC STUDY 4.1 Included as part of the feasibility study described in Article 3. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable in all material respects to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified clinical research organization (hereinafter "CRO") to perform a pilot pharmacokinetic study pursuant to this Article 4. 4.2 The Pilot Pharmacokinetic Study shall consist of commercially reasonable and appropriately designed * of the Prototype Formulations and the Originator. KRYPTON shall reasonably consult with GENTA JAGO in the design of the Pilot Pharmacokinetic Study and shall review the final protocol with GENTA JAGO prior to initiating work with the selected sub-contractor. The Pilot Pharmacokinetic Study shall be conducted in accordance with generally accepted standards of Good Clinical Practice and in compliance with Ethical Committee requirements or equivalent requirements, where applicable. 4.3 Prior to the commencement of the Pilot Pharmacokinetic Study GENTA JAGO shall submit to KRYPTON * for the entire Pilot Pharmacokinetic Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pilot Pharmacokinetic Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 4.4 KRYPTON shall provide GENTA JAGO with a copy of the report (hereinafter referred to as the "Pilot Pharmacokinetic Study Report") reasonably detailing the results of the Pilot Pharmacokinetic Study within six (6) weeks as of the study's completion and presentation of the preliminary data for GENTA JAGO's file. 4.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pilot Pharmacokinetic Study, including without limitation the availability or quality of the - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 7 - results and data from such Pilot Pharmacokinetic Study to be carried out by KRYPTON and the CRO. 4.6 In the event that the results of the Pilot Pharmacokinetic Study conclusively demonstrate that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that at least one of the Prototype Formulations reasonably meet the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such Prototype Formulation. ARTICLE 5 PRE-SCALE-UP ACTIVITIES 5.1 Upon completion of the Pilot Pharmacokinetic Study, KRYPTON may, at its option, request and charge GENTA JAGO to carry out the pre-scale-up activities as described in this Article 5. (hereinafter referred to as the "Pre-Scale-Up Activities"). KRYPTON shall, within thirty (30) days as from the date of the Pilot Pharmacokinetic Study Report notify in writing GENTA JAGO of its decision whether to proceed with and to have GENTA JAGO perform the Pre-Scale-Up Activities. 5.2 Prior to the commencement of the Pre-Scale-Up Activities GENTA JAGO shall submit to KRYPTON * for the entire Pre-Scale-Up Activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pre-Scale Up activity, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such pre scale up costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 5.3 The Pre-Scale-Up Activities to be performed by GENTA JAGO shall comprise all reasonable activities necessary to allow the technology transfer to, and subsequent scale-up at, the mutually established manufacturing site, including, but not limited to, final optimization of the Prototype Formulation (where necessary), development and validation of the scale-up manufacturing procedure and analytical validation. Such Pre-Scale-Up Activities shall be completed within the time period mutually agreed upon by the Parties in Appendix D hereto, calculated as from the date of receipt of the KRYPTON's notice by GENTA JAGO pursuant to Section 5.1 above. 5.4 In the event that additional clinical testing, including without limitation, confirming pharmacokinetic studies, is reasonably required or deemed necessary beyond the program envisaged in this Agreement in order to satisfy the FDA requirements for an NDA or ANDA approval of the Product, KRYPTON and GENTA JAGO shall meet to discuss in good faith the appropriate course of action to be followed and agree upon any such additional testing to be performed, provided that any such additional testing shall in any - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 8 - event be funded solely by KRYPTON. 5.5 Not later than upon the initiation of the Pre-Scale-Up Activities, the Parties shall establish and mutually agree upon a manufacturing site, where the Bio-Batches referred to in Section 7.2 below required for the pivotal clinical studies will be produced and where the Final Product shall be manufactured for commercial use after FDA approval(s) for the Final Product have been granted. ARTICLE 6 PRE-PIVOTAL PHARMACOKINETIC STUDY 6.1 Included as part of the Pre-Scale-Up Activities, KRYPTON shall at its own responsibility and its own cost, perform or have performed with a CRO selected by KRYPTON, a pre- pivotal pharmacokinetic study pursuant to this Article 6. (hereinafter referred to as "Pre- Pivotal Study"). Such Pre-Pivotal Study shall consist of *, to select the best of the Prototype Formulations for each dose strength to be used in the further development under this Agreement. 6.2 The Pre-Pivotal Study shall be performed in the United States of America. KRYPTON shall consult, review and mutually agree with GENTA JAGO on the design and final protocol of such Pre-Pivotal Study prior to initiating work with the selected CRO. 6.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Pre-Pivotal Study. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 6.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Pre-Pivotal Study within ten (10) days of its completion for GENTA JAGO's file. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pre-Pivotal Study, including without limitation, the performance or conduct of such Pre- Pivotal Study or the availability or quality of the results and data from such Pre-Pivotal Study to be carried out by KRYPTON and the CRO. 6.5 Upon completion of the Pre-Pivotal Study and availability of the results of such Pre- Pivotal Study, the Parties shall consult with each other on such results and mutually agree in writing upon the Prototype Formulation to be selected for further development under this Agreement. In the event that the results of the Pre-Pivotal Study are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of the Parties that at least one of the Prototype Formulations meet the respective Specifications, KRYPTON may elect to abandon the development program and terminate this Agreement with respect to such Prototype Formulation by giving written notice to that effect to GENTA JAGO. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 9 - ARTICLE 7 FURTHER ACTIVITIES 7.1 Technology Transfer Upon mutual agreement of the Prototype Formulation to be used for development as referred to in Section 6.5 above, GENTA JAGO shall be responsible for and initiate the technology transfer to, and perform the scale-up at, the manufacturing site mutually established and agreed upon by the Parties. GENTA JAGO agrees that such technology transfer, and in particular the aspects of scale-up and validation of the manufacturing process shall be carried out by GENTA JAGO on such equipment as shall eventually be used by KRYPTON or a third party to manufacture the Final Product. Upon completion of such scale-up, GENTA JAGO shall notify KRYPTON thereof in writing. 7.2 Production of Industrial Scale Batches Upon receipt by KRYPTON of GENTA JAGO's notice referred to in Section 7.1 above, the Parties shall initiate the production of three (3) industrial scale batches (hereinafter "Bio-Batches") on such equipment as shall eventually be used KRYPTON or a third party to commercially manufacture the Final Product, based on the Prototype Formulation (the size of each Bio-Batch to be not less than the greater of (i) 10% (ten percent) of the anticipated initial commercial batch size, or (ii) 100,000 tablets), according to Current Good Manufacturing Practices, such Bio-Batches to be subsequently used for stability testing and pivotal clinical studies; provided however, that GENTA JAGO shall have the ultimate responsibility with respect of any and all technical aspects of such production of batches related to the technology transfer and the implementation of such technology in the manufacturing site. 7.3 Funding of Further Activities (a) Prior to the commencement of any activities under Sections 7.1 and 7.2 above GENTA JAGO shall submit to KRYPTON * for such further activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall refund GENTA JAGO's * reasonably incurred by GENTA JAGO under Sections 7.1 and 7.2 above, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such further development costs shall be refunded by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. (b) Furthermore, KRYPTON shall be responsible, at its own cost, for the supply of all raw material including, but not limited to, the Active Ingredients required or necessary for, and all additional costs and expenses whatsoever arising out of or in connection with, the production of the Bio-Batches described in Section 7.2 - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 10 - above and all other costs associated with the use of facilities, technology transfer, equipment and analytical services. 7.4 Stability Testing (a) KRYPTON shall be responsible for and perform or have performed at its own cost, the stability testing of the Final Product according to the then current requirements of the FDA in bulk packaging and in the final packaging materials. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such stability testing, including without limitation, the performance or conduct of such stability testing or the availability or quality of the results and data from such stability testing to be carried out or requested by KRYPTON. (b) KRYPTON shall provide to GENTA JAGO with a copy of all stability testing data within thirty (30) days after the completion of each stability testing period (hereinafter referred to as the "Final Stability Testing Report") for GENTA JAGO's file. (c) GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON in connection with the stability testing of the Final Product. KRYPTON shall pay to GENTA JAGO for such services provided by GENTA JAGO's or Jago Pharma's personnel an amount of USD * or part thereof spent, and furthermore, KRYPTON shall reimburse GENTA JAGO for all reasonable and documented travel related expenses of GENTA JAGO personnel who travel at KRYPTON's request to locations remote from such personnel's usual working location. 7.5 Further Provisions In the event that KRYPTON and GENTA JAGO shall reasonably deem the results or data from any of the activities to be performed by either Party under this Article 7. with respect to any dose strength be unsatisfactory for any reason, the Parties may mutually agree to abandon the development program and terminate this Agreement with immediate effect. ARTICLE 8 PIVOTAL CLINICAL STUDY 8.1 Promptly upon completion of the further activities referred to in Article 7. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified CRO of its choice, reasonably acceptable to GENTA JAGO, to perform and manage a series of pivotal clinical studies (hereinafter"Clinical Studies") in man required and/or necessary for any subsequent NDA or ANDA for the Final Product in accordance with the then current requirements of the FDA. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 11 - 8.2 KRYPTON shall consult, review and agree with GENTA JAGO on the design and the final protocol of such Clinical Studies prior to initiating work with the selected subcontractor. 8.3 KRYPTON shall reimburse to GENTA JAGO the * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Clinical Studies. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 8.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Clinical Studies within ten (10) days of its completion for GENTA JAGO's file. 8.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Clinical Studies, including without limitation, the performance or conduct of such Clinical Studies or the availability or quality of the results and data from such Clinical Studies to be carried out or requested by KRYPTON. 8.6 In the event that the results of the Pivotal Clinical Studies are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that the Prototype Formulation reasonably meets the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such dose strength. ARTICLE 9 THE REGULATORY (NDA OR ANDA) SUBMISSION 9.1 Upon completion of the Clinical Studies, KRYPTON may, at its option, elect to prepare and submit to the FDA an NDA or ANDA. KRYPTON shall notify GENTA JAGO of its election to exercise or not to exercise this option by giving written notice thereof to GENTA JAGO within thirty (30) days as of the availability of the results of the Clinical Studies. 9.2 In the event that KRYPTON elects pursuant to Section 9.1 above to make NDA or ANDA submission(s) to any Regulatory Authority with respect to a Final Product, KRYPTON shall have sole liability and responsibility for the prosecution, conduct and results of such NDA or ANDA and shall bear all costs in connection therewith. KRYPTON, at KRYPTON's option, may elect by written notice to GENTA JAGO prior to commencement of the technology transfer referred to in Section 7.1 above to have the NDA or ANDA dossier prepared on its behalf by a qualified third party acceptable to GENTA JAGO. KRYPTON shall be liable and responsible for any and all costs associated with such sub-contracting. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 12 - 9.3 KRYPTON or its chosen sub-contractor shall consult with GENTA JAGO, and GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON or the chosen sub-contractor, in connection with the preparation and prosecution of any NDA or ANDA or with the preparation of the dossier to be submitted to the FDA. KRYPTON shall pay to GENTA JAGO for such services and consultation provided by GENTA JAGO's personnel an amount of USD * or any part thereof spent. Furthermore, KRYPTON shall reimburse GENTA JAGO for reasonable and documented travel-related expenses of GENTA JAGO personnel who travel at KRYPTON's request to the elected manufacturing facility(ies) or other locations remote from such personnel's usual working location. ARTICLE 10 PROPRIETARY RIGHTS AND PATENTS 10.1 Patents and Proprietary Rights of GENTA JAGO (a) The Licensor and GENTA JAGO, respectively, shall retain title to and ownership of Patents, Know-How and GEOMATRIX(R) Technology licensed to GENTA JAGO, including, but not limited to, any and all developments and inventions relating to Patents, Know-How and GEOMATRIX(R) Technology (hereinafter collectively referred to as "GENTA JAGO IPR"). (b) KRYPTON shall not, directly or indirectly through its officers, directors, employees, agents, customers or other controlled or associated third parties, acquire any proprietary interest in or other right to GENTA JAGO IPR, other than provided in this Agreement. (c) GENTA JAGO shall use all commercially reasonable efforts, at its own cost, to cause the Licensor to prepare, prosecute and maintain all patent applications and patents constituting Patents, and shall keep KRYPTON fully and promptly informed on any developments or changes relating thereto. If the Licensor decides not to further prosecute any patent application constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. During the term of this Agreement, GENTA JAGO shall, at its sole cost, use all commercially reasonable efforts to cause the Licensor to take all steps necessary to maintain Patents to the extent GENTA JAGO deems commercially reasonable. If the Licensor decides not to maintain any patent constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. Notwithstanding the foregoing, KRYPTON acknowledges to GENTA JAGO that Licensor has the final authority regarding such preparation, prosecution and maintenance of all patent applications and patents. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 13 - 10.2 Patents and Proprietary Rights for Final Products (a) KRYPTON shall retain title to and ownership of all developments, whether patentable or not, relating specifically and exclusively to the Final Products, provided that such developments are entirely independent of any and all GENTA JAGO IPR (hereinafter collectively referred to "Final Product IPR"). (b) KRYPTON shall be responsible for and shall control, at its own cost, the preparation, prosecution and maintenance of all Final Product IPR and shall keep GENTA JAGO fully and promptly informed on any developments or changes relating thereto. During the term of this Agreement, KRYPTON shall, at its sole cost, take all steps necessary to prosecute and/or maintain all Final Product IPR to the extent KRYPTON deems commercially reasonable. If KRYPTON intends not to further prosecute and/or maintain any of the Final Product IPR, KRYPTON shall promptly inform GENTA JAGO of such intention in writing, and GENTA JAGO shall have the right and option, but not the obligation, to have transferred to it sole title to and ownership in such Final Product IPR free of any charge by giving respective written notice thereof to KRYPTON within thirty (30) days after GENTA JAGO's receipt of KRYPTON's notice referred to above. (c) In the event GENTA JAGO has and exercises its right and option referred to Section 10.2 (b) above to have transferred to it any such Final Product IPR, KRYPTON shall promptly undertake any and all steps required and/or necessary to transfer title to and ownership of such Final Product IPR to GENTA JAGO. In the event that GENTA JAGO exercises its option to have transferred such Final Product IPR from KRYPTON to GENTA JAGO, GENTA JAGO shall maintain such Final Product IPR during the term of this Agreement to the extent GENTA JAGO deems commercially reasonable and shall bear all cost associated therewith incurred after the date of GENTA JAGO's notice to KRYPTON exercising its option referred to in Section 10.2 (b) above. In such case, the Parties shall negotiate in good faith the terms and condition, under which such Final Product IPR transferred to GENTA JAGO shall be included in the License pursuant to Article 11. below. 10.3 Notification of Infringement (a) If KRYPTON becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR or Final Product IPR or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non- infringement) based upon or arising out of GENTA JAGO IPR or Final Product IPR, then KRYPTON shall promptly notify GENTA JAGO in writing of any such infringement, violation, action, claim or dispute. (b) If GENTA JAGO becomes aware of (i) any product or activity of any kind that - 14 - involves or may involve an infringement or violation of GENTA JAGO IPR with respect to Final Products or of Final Product IPR; or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR with respect to Final Products or of Final Product IPR, then GENTA JAGO shall promptly notify KRYPTON in writing of any such infringement, violation, action, claim or dispute. 10.4 Enforcement of GENTA JAGO IPR (a) GENTA JAGO, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, GENTA JAGO IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, GENTA JAGO IPR, (iii) to control any litigation or other enforcement action regarding GENTA JAGO IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding GENTA JAGO IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions, to the extent that any such action or such infringement may have an adverse effect on Final Product. KRYPTON shall, at its own cost, fully cooperate with GENTA JAGO in the planing and execution of any suit or other action to enforce, or defend third-party actions regarding, GENTA JAGO IPR as reasonably required or requested by GENTA JAGO. (b) If GENTA JAGO does not within one-hundred-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of GENTA JAGO IPR which may adversely affect Final Products, or of any third-party action, claim or dispute based upon or arising out of GENTA JAGO IPR which may adversely affect Final Products, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then the Parties shall, upon KRYPTON's written request, promptly meet to discuss any reasonable appropriate action with regard to such enforcement of GENTA JAGO IPR which may adversely affect Final Products, provided however, that KRYPTON is aware and acknowledges that in such case the Licensor will have the right to enforce any and all GENTA JAGO IPR pursuant to the License Agreements. (c) Subject to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in the preceding section, KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action where necessary to obtain complete relief regarding the subject infringement or violation. - 15 - 10.5 Enforcement of Final Product IPR (a) KRYPTON, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, Final Product IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, Final Product IPR, (iii) to control any litigation or other enforcement action regarding Final Product IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Final Product IPR. Notwithstanding anything contained in the preceding sentence, KRYPTON shall not settle any suit or action or otherwise consent to an adverse judgment in such suit or action without the prior written consent of GENTA JAGO, which consent shall not be withheld unreasonably. KRYPTON shall keep GENTA JAGO informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of GENTA JAGO under this Agreement and in GENTA JAGO IPR, when taking any of the foregoing actions. (b) If KRYPTON does not, within one-hundred-and-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of Final Product IPR, or of any third-party action, claim or dispute based upon or arising out of Final Product IPR, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then GENTA JAGO shall have the right, but not the obligation, at its sole expense, to take and control such action as it deems appropriate to enforce, or abate the infringement of, or defend against such third-party action, regarding Final Product IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis of any such action and consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions. KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action controlled by GENTA JAGO where necessary to obtain complete relief regarding the subject infringement or violation. 10.6 Application of Monies Recovered Subject always to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in Section 10.4(c) and any right to receive any monies recovered therefrom as provided for in the License Agreements, all monies recovered upon the final judgment or settlement of any suit or other action under this Sections 10.4 or 10.5 shall be applied as follows: - 16 - (i) to cover any and all costs and expenses (including attorney's fees) incurred by the Party controlling such suit or other action; (ii) to cover any and all costs and expenses (including attorney's fees) reasonably, or upon request of the controlling Party, incurred by the other Party in connection with such suit or other action, if any; (iii) the remainder, if any, to the Party controlling any such suit or other action. ARTICLE 11 SUB-LICENSE AGREEMENT 11.1 GENTA JAGO hereby grants to KRYPTON the exclusive and sublicenseable right and sub-license (hereinafter referred to as the "License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, GEOMATRIX(R) Technology and Know How exclusively for that purpose subject to the payment of the * and the Royalties pursuant to Articles 13. and 14. below. 11.2 The rights of KRYPTON to grant any sub-license in any part of the Territory shall be subject to the requirement that KRYPTON shall obtain the written approval of GENTA JAGO prior to executing any such sub-license agreement, which approval shall not unreasonably be withheld, provided however, that no such approval by GENTA JAGO shall be required for any sub-license to an Affiliate of KRYPTON . 11.3 In any event KRYPTON shall be responsible for any and all acts, deeds and undertakings of its permitted sub-licensee(s) and KRYPTON and its permitted sub-licensee(s) shall continue to be bound by all terms and provisions under this Agreement throughout its term. In case that KRYPTON sub-licenses rights and/or the License to any sub-licensee(s) approved by GENTA JAGO, such sub-licensee(s) shall agree in writing to any and all of KRYPTON's obligations and undertakings under this Agreement, including but not limited to its confidentiality obligations set forth hereinafter. Furthermore, KRYPTON undertakes that any and all sub-license agreements shall provide for inspection and audit provisions identical to the provisions set forth below in order to enable GENTA JAGO to control and audit and receive any and all fees and Royalties due as provided in this Agreement. KRYPTON shall provide GENTA JAGO promptly with reasonable appropriate information on its sub-licensee(s) and copies of all agreements with such sub-licensee(s) (with only the commercial terms may be redacted). ARTICLE 12 MANUFACTURING AND PRODUCT LIABILITY 12.1 In the event that KRYPTON, subject to Section 5.5 above, elects GENTA JAGO, and GENTA JAGO expressly agrees to such manufacture, or any of its Affiliates shall - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 17 - manufacture Final Products, then the Parties agree to enter into good faith negotiations on and to use commercially reasonable efforts to execute in due time a respective Manufacturing and Supply Agreement, according to which GENTA JAGO or its Affiliates shall undertake to manufacture and supply Final Products in sufficient quantities to meet KRYPTON's requirements, at a sale price for such Final Products manufactured equal to GENTA JAGO's * In the event and for such period of time, that GENTA JAGO or its Affiliate manufactures and supplies Final Product under such Manufacturing and Supply Agreement, the Royalty Rate referred to in Section 14.1 below shall be *. 12.2 In the event that KRYPTON or any of its Affiliates or any third party is elected pursuant to Section 5.5 above to manufacture Final Product, then KRYPTON undertakes and agrees that at all times the Specifications and to any and all laws, rules and regulations imposed by any competent authority on the manufacturing, marketing, distribution and sale of Final Products are strictly adhered to by the manufacturer, and KRYPTON shall during the entire term of this Agreement be solely and fully liable and responsible for the compliance with all such laws, rules and regulations when manufacturing, having manufactured, marketing, distributing and selling Final Products itself and/or through Affiliates or sub- licensee(s). 12.3 KRYPTON shall indemnify, defend and hold GENTA JAGO, its Affiliates and the Licensor harmless from and against any losses, claims, liabilities, costs and expenses (including reasonable attorney's fees) that may be imposed upon or asserted against GENTA JAGO and/or its Affiliates and/or the Licensor as a result of the marketing, distributing, manufacture, use or sale of Final Products by or on behalf of KRYPTON, its Affiliates, agents or sub-licensee(s), except for those claims, liabilities, costs and expenses arising from gross negligence or intentional misconduct on the part of GENTA JAGO, its Affiliates or the Licensor. ARTICLE 13 * PAYMENTS AND OTHER CONSIDERATION 13.1 As consideration for GENTA JAGO's preliminary development efforts for the Prototype Formulation performed prior to the execution of this Agreement as referred to in Section 2.1 above, KRYPTON undertakes to pay to GENTA JAGO an initial *, payable upon execution of this Agreement. 13.2 As consideration for the License granted by GENTA JAGO to KRYPTON under this Agreement and in consideration of certain major development steps achieved hereunder, KRYPTON undertakes to pay to GENTA JAGO a *: - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 18 - (a) * KRYPTON's receipt of GENTA JAGO's notice referred to in Section 7.1 above; and (b) *; and (c) * for the Final Product; and (d) * for the Final Product. 13.3 Unless otherwise agreed by the Parties in writing, all payments under this Article 13. shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. ARTICLE 14 ROYALTIES 14.1 During a period commencing upon the first commercial sale of Final Product in each country of the Territory and ending upon the earlier of (i) the fifteenth (15th) anniversary of the first commercial sale of Final Product in such country of the Territory, and (ii) the expiration of the last of the Patents covering Final Product in such country of the Territory (hereinafter referred to as the"Royalty Term"), and in further consideration of the License granted to KRYPTON by GENTA JAGO, KRYPTON shall pay to GENTA JAGO a royalty (hereinafter referred to as the"Royalty") of an amount equal to * of the Final Product in the Territory. 14.2 The Parties agree that * shall be applicable for the first time on sales of such Final Product in such country of the Territory after the beginning of the calendar quarter immediately following the first commercial sale of such Competitive Product. 14.3 Royalties shall be payable on a quarterly basis. KRYPTON shall remit to GENTA JAGO within six (6) weeks after the end of each calendar quarter the amount of Royalty due with respect to Net Sales and/or Gross Margin, as the case may be, achieved in the preceding quarter, beginning with the calendar quarter in which the first commercial sale of the Final Product is made in any country of the Territory. KRYPTON shall deliver to GENTA JAGO, along with such remittance of Royalty payments, a detailed statement - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 19 - (hereinafter referred to as the "Royalty Report") of the Net Sales and/or Gross Margin, as the case may be, of the Final Product on a country-by-country basis to which the Royalty payment relates. 14.4 All Royalty Reports shall be prepared in accordance with generally accepted accounting principles consistently applied from applicable period to period and shall be certified by an officer of KRYPTON as being so prepared, true, accurate and correct. 14.5 Unless otherwise agreed by the Parties in writing, payments of Royalties shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. Any conversions into United States Dollars from the currency in which the corresponding Net Sales and/or Gross Margin for such Royalties were made, are to be calculated as using the average closing buying rate for such currency quoted in the continental terms method of quoting exchange rates (local currency per USD 1) published in the Wall Street Journal on the last business day of the applicable reporting period covered by such Royalty Report. ARTICLE 15 INSPECTION AND AUDIT 15.1 During the term of this Agreement and during a period of twelve (12) months after its expiration or termination for any reason, upon the written request of GENTA JAGO and not more than once each calendar year, KRYPTON shall permit an independent certified public accountant of internationally recognized standing selected by GENTA JAGO, at GENTA JAGO's expense, to have access during regular business hours to such of the records of KRYPTON and its Affiliates as may be reasonably necessary to verify the accuracy of the Royalty Reports for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to GENTA JAGO only whether the Royalty Reports and records of KRYPTON and its Affiliates and the amount of Royalties actually paid are correct or not and the specific details concerning any discrepancies; no other information shall be shared. The Parties agree to accept such written audit report as final and binding upon them. 15.2 If such independent accounting firm correctly concludes that additional Royalties were owed during any such period audited, KRYPTON shall pay such additional Royalties within ten (10) days of the date GENTA JAGO delivers to KRYPTON such accounting firm's written report so concluding. The fees and expenses charged by such accounting firm with respect to such audit shall be paid by GENTA JAGO; provided however, if any such audit correctly discloses that Royalties payable by KRYPTON for the audited period are more *, then KRYPTON shall pay all reasonable fees and expenses charged by such accounting firm with respect to such audit. - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 20 - 15.3 GENTA JAGO shall treat all financial information subject to review under this Article 15. as confidential and subject to the confidentiality obligations in Article 16. below. ARTICLE 16 CONFIDENTIALITY 16.1 Confidential Information. KRYPTON shall maintain in confidence all Know-How and other information of GENTA JAGO (including samples) disclosed by GENTA JAGO and identified as, or acknowledged to be, confidential (the"Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except on a need- to-know basis to its directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with KRYPTON's activities as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, KRYPTON hereto shall obtain agreement in writing of any such person to hold in confidence and not make use of the Confidential Information for any purpose other than those authorized by this Agreement. KRYPTON shall notify GENTA JAGO promptly upon the discovery of the unauthorized use or disclosure of the Confidential Information. 16.2 Permitted Disclosures. The obligations of confidentiality and non-use contained in Section 16.1 above shall not apply to the extent that (a) KRYPTON (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market Final Product, provided in each case that KRYPTON shall give GENTA JAGO written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof, or (b) KRYPTON can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to it, or thereafter became public knowledge, other than as a result of actions of KRYPTON, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by KRYPTON (as shown by its written records) prior to the date of disclosure to it by GENTA JAGO hereunder; (iii) the disclosed information was disclosed to KRYPTON on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to GENTA JAGO or the Licensor; or (iv) the disclosed information was independently developed by KRYPTON without the use of Confidential Information disclosed by GENTA JAGO. 16.3 Terms of this Agreement. Except as otherwise provided in Section 16.2 above, neither Party shall disclose any terms or conditions of this Agreement to any third party (other than the Licensor) without the prior consent of the other Party. Notwithstanding the foregoing, prior to the execution of this Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information only without the other Party's consent. Notwithstanding the foregoing, prior to the execution of the Agreement, the Parties shall - 21 - agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information without the other Party's consent. 16.4 Term of Confidentiality. The confidentiality obligations under this Article 16 shall be effective during the term of this Agreement and for a period of ten (10) years after the expiration or earlier termination hereof. 16.5 Injunctive Remedies. GENTA JAGO shall be entitled to injunctive remedies and relief against KRYPTON and its Affiliates and any third parties for any breach or threatened breach of the confidentiality obligations under this Article 16. 16.6 Damages. In the event of a breach of the confidentiality provisions under this Article 16 by KRYPTON, its Affiliates or its directors, officers, employees or any other person who were given access to the Confidential Information by KRYPTON, GENTA JAGO shall be entitled to receive from KRYPTON any and all actual costs and damages caused by such breach. 16.7 Public Announcements. Neither Party shall make any press releases or other public announcements or disclosures regarding the execution and the existence of this Agreement or any activities conducted hereunder, including development results, filings and registrations, without the prior written consent of the other Party, except for such public disclosure as may be necessary in the opinion of any party's legal advisor in order not to be in violation of or default under any applicable law, regulation or governmental order, in such later event the party having an obligation to disclose shall submit to the other party a draft of the required announcement and shall give the other party the opportunity to request reasonable amendments and modifications of such required announcement.. ARTICLE 17 TERM AND TERMINATION 17.1 Term and Expiration (a) This Agreement shall expire on a country-by-country basis upon the expiration of the Royalty Term. (b) Upon the expiration of this Agreement in each country of the Territory pursuant to Section 17.1 (a) above and payment of all fees, including but not limited to the *, and all Royalties and other payments by KRYPTON due GENTA JAGO under this Agreement, the License shall be deemed to be a perpetual, fully paid-up and royalty-free license for such Final Product and each such country of the Territory. 17.2 Termination Prior to Registration - - - ------------- * Confidential treatment requested. The redacted material has been separately filed wit the Commission. - 22 - During the development, test, study and registration phases as specified in Articles 3. through 8. above, and until the first successful registration approval of any Final Product by any Regulatory Authority, this Agreement may be terminated in accordance with the provisions set forth in Sections 3.6, 4.6, 6.5, 7.5 and 8.6 above. 17.3 Termination for Cause During the entire term of this Agreement either Party may terminate this Agreement by giving to the other Party written notice to that effect, if any of the following events occur: (a) the other Party is in default or in breach of a term or provision hereof and such default or breach continues and is not remedied within thirty (30) days upon the other Party's written request to remedy such default or breach; or (b) the other Party shall commit a breach of any of the confidentiality provisions of Article 16. above; or (c) the other Party goes into liquidation, voluntarily or otherwise, other than for the sole purpose of reorganization, or goes into bankruptcy or makes an assignment for the benefit of creditors, or in the event of a receiver being appointed of the other Party's property or parts thereof. 17.4 Effect of Termination (a) If KRYPTON elects to so terminate the Agreement under Section 17.2 above prior to filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated, (iii) KRYPTON be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) all Registrations pertaining to the marketing of the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vi) GENTA JAGO and its Affiliates shall thereafter be entitled to exercise such rights as they may have under their own license agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to KRYPTON; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates. - 23 - (b) If KRYPTON elects to so terminate this Agreement subsequent to the filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated; (iii) KRYPTON shall be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) GENTA JAGO and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates); (vi) all Registrations pertaining to the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated hereunder shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vii) GENTA JAGO shall pay to KRYPTON the same royalty, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to KRYPTON, as KRYPTON would otherwise have paid (absent such termination) hereunder to GENTA JAGO on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by GENTA JAGO and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the royalties paid to KRYPTON equal the aggregate amount that had been paid by KRYPTON to GENTA JAGO prior to such termination under the Sections 3.5, 4.3, 5.2, 6.3, 7.3,8.3, 9.2 and 13., at which time the royalty rate then prevailing on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) in the United States shall be reduced by two percent (2 %) (but shall not be reduced for sales outside the United States). (c) Otherwise the termination of this Agreement shall be without prejudice to any rights and obligations of either Party accrued prior to the effective date of termination. KRYPTON shall forthwith make all payments due and outstanding to GENTA JAGO at the date of termination. Except as explicitly otherwise stated in this Agreement, GENTA JAGO shall not be obligated to refund upon termination of this Agreement to KRYPTON any payments, including without limitation the *, made by KRYPTON to GENTA JAGO prior to such termination pursuant to the provisions of this Agreement. (d) The termination of this Agreement pursuant to Section 17.3 above by either Party shall not limit remedies which may be otherwise available in law or equity to either Party. - 24 - 17.5 Early Termination of the License Agreements (a) In the event that the License Agreements are terminated prior to the expiration of the last to expire of the Patents licensed to GENTA JAGO in the Territory, then the License granted hereunder to KRYPTON shall also terminate upon KRYPTON's receipt of the respective termination notice from the Licensor. KRYPTON may give written notice to the Licensor of KRYPTON's desire to continue the License granted under this Agreement within sixty (60) days as of KRYPTON's receipt of the Licensor's notice referred to above. (b) In the event that KRYPTON timely notifies the Licensor of its desire to continue the License granted under this Agreement, the Licensor shall have the right, at its sole discretion, to elect to assume in writing within sixty (60) days upon the Licensor's receipt of KRYPTON's notice any and all rights of GENTA JAGO under this Agreement and to promptly cure all defaults of GENTA JAGO under this Agreement, if any. (c) In the event that the Licensor does not timely gives notice to KRYPTON and cures all of GENTA JAGO's defaults hereunder pursuant to Section 17.5(b) above, then KRYPTON shall promptly assume in writing any and all rights and obligations of GENTA JAGO under the License Agreements with the Licensor, but with regard to the rights encompassed by the License granted hereunder only, and promptly cure all defaults of GENTA JAGO under the License Agreements with regard to the rights encompassed by the License granted hereunder only, if any. (d) Notwithstanding anything contained in this Section 17.5, no action taken by the Licensor and/or KRYPTON to continue or not to continue the License shall relieve GENTA JAGO from any liability for any uncured defaults under this Agreement or the License Agreements, and such action by the Licensor and/or KRYPTON shall be without prejudice to any other rights or remedies the Licensor and/or KRYPTON may have in law or equity. ARTICLE 18 WARRANTIES 18.1 GENTA JAGO shall carry out and undertake the studies and tests specified in this Agreement in a careful and diligent manner. GENTA JAGO agrees to carefully choose, instruct and supervise any employees, officers, Affiliates or third parties to be chosen by GENTA JAGO pursuant to this Agreement, who are involved with the tests and studies. Nothing in this Agreement shall be construed as a representation made, or warranty given, by GENTA JAGO that any development performed by or for GENTA JAGO under this Agreement will be successful in whole or in part, or that any product, including Final Product, which may be developed, will be successful in the commercial marketplace. Furthermore, GENTA JAGO makes no representation or warranty, express or implied, - 25 - with respect to GEOMATRIX(R) Technology and/or Know-How, including without limitation, any warranty of completeness, accuracy, merchantability or fitness for a particular purpose thereof. 18.2 GENTA JAGO represents and warrants that it has all rights regarding Patents, GEOMATRIX(R)Technology and Know-How necessary to grant the License hereunder. Notwithstanding the preceding sentence, GENTA JAGO does not assume any responsibility and makes no warranty that the performance of this Agreement and any product developed hereunder, including Prototype Formulation(s) and Final Products, do not infringe any third party's patents, patent applications or other intellectual property rights. Notwithstanding the preceding sentence, GENTA JAGO represents and warrants that, as of the effective date of this Agreement, it is not aware and has not knowledge of any such infringement of any third party rights. If, however, during the course of this Agreement either Party discovers that the Prototype Formulation(s) and/or the Final Products infringe or may infringe any third party's intellectual property rights, it shall promptly inform the other Party thereof and the Parties shall meet to discuss the course of action to be taken with regard thereto. 18.3 Nothing in this Agreement shall be construed as a representation made, or warranty given by GENTA JAGO that any patent will issue based upon any pending patent application encompassed by the term Patents, and that any patent encompassed by the term Patents which issues will be valid or enforceable. 18.4 GENTA JAGO assumes no liability or responsibility for any damages caused to KRYPTON, third parties, animals and/or the environment by the manufacturing, marketing or use of the Prototype Formulations or Final Products or the active ingredient contained therein, except to the extent that any of the above are attributable to the gross negligence or willful misconduct of GENTA JAGO in performing its obligations hereunder. 18.5 Subject to the specific representations and warranties given and specific disclaimers of representations and warranties included in this Article 18, and further subject to anything to the contrary contained in this Agreement, either Party shall, as to third parties, be indemnified and held harmless by the other Party from and against any and all losses, liabilities and damages arising from any claim, action or other proceeding by any third party relating to any acts or omissions of the other Party, its directors, officers, employees or agents, or the gross negligence or willful misconduct of such other Party, its directors, officers, employees or agents in performing any of its obligations under this Agreement. - 26 - 18.6 Any liability, warranty and undertaking contained herein shall be limited to the payment by either Party for direct damages to the other Party and in any event, neither Party shall be liable to the other Party for any special, indirect, punitive or consequential damages and/or loss of profits or anticipated profits, respectively. 18.7 KRYPTON shall, at its own expense, purchase from an insurance company of its choice and shall maintain during the entire term of this Agreement an appropriate and customary policy of general liability and product liability insurance covering its responsibilities regarding Prototype Formulation(s) and Final Products developed, manufactured, marketed and sold under this Agreement and the Active Ingredient contained therein and the use thereof. Upon request, KRYPTON shall provide GENTA JAGO with evidence that such insurances are existing and are maintained. ARTICLE 19 MISCELLANEOUS PROVISIONS 19.1 Entire Agreement: The terms, covenants, conditions and provisions contained in this Agreement, including its Appendices referred to herein, constitute the total and complete agreement of the Parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the Parties to this Agreement. 19.2 Assignment: This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party, other than to an Affiliate of such Party, without the consent of the other Party; provided however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction; and provided further that GENTA JAGO may without the consent of KRYPTON assign any and all of its rights and obligations hereunder to the Licensor and/or any of the Licensor's Affiliates. Any permitted assignee shall assume all obligations of its assignor under this Agreement or under the respective rights or obligations actually assigned. 19.3 Successors : This Agreement and all rights hereunder shall ensure to the benefit of all successors and assigns of both Parties. 19.4 Notices: Any consent, notice or report required or permitted to be given or made under this Agreement by one Party to the other shall be in English and in writing, delivered personally or by courier service or by facsimile (promptly confirmed by personal delivery or courier service) addressed to the other Party at its address indicated below, or to such - 27 - other address as shall have been notified in writing to the sending Party by the receiving party from time to time, and shall take effect upon receipt by the addressee. IF TO KRYPTON: KRYPTON LTD. East Wing, Second Level Hadfield House Library Street Gibraltar attn.: PRESIDENT WITH COPIES TO: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England attn.: COMPANY SECRETARY AND: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT IF TO GENTA JAGO: GENTA JAGO Technologies B.V. Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz, Switzerland attn..: MANAGEMENT COMMITTEE WITH COPIES TO: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 8002 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT AND: PILLSBURY MADISON & SUTRO LLP 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. attn.: THOMAS E. SPARKS, JR., ESQ. 19.5 Independent Contractors: It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party to do so. - 28 - 19.6 Severability: Each Party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. 19.7 Force Majeure: Neither Party hereto shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party hereto. 19.8 Interest: In the event any amount due and payable under this Agreement is not paid by the due date, then the Party owing such amount shall pay to the creditor, without being requested by the other Party, interest on the total outstanding amount at the rate equal to the London Interbank Offered Rate ("LIBOR"), as published in the Wall Street Journal (Europe) on the date that such payment falls due, increased by three percent (3%), in United States Dollars and adjusted on the first day of every calendar quarter. 19.9 Headings: The titles and headings used in this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 19.10 Waiver: The waiver by either Party hereto of any right hereunder or the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. 19.11 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. - 29 - ARTICLE 20 DISPUTE RESOLUTION AND ARBITRATION 20.1 In the event of any dispute arising between the Parties concerning this Agreement, GENTA JAGO and KRYPTON agree that in the first place they shall meet for good faith discussions in an attempt to negotiate an amicable solution. 20.2 Any dispute arising between the Parties out of or in connection with this Agreement, or the interpretation, breach or enforcement thereof, which cannot be amicably resolved pursuant to Section 20.1 above within two (2) months as from the first appearance of such dispute, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to all of the other Parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in PARIS, FRANCE. The arbitrators shall have the authority to grant specific performance, and to allocate among the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this section, shall be determined by binding arbitration pursuant to this section. 20.3 Notwithstanding anything contained in this Article 20, either Party may seek preliminary or injunctive measures or relief in any competent court having jurisdiction. ARTICLE 21 APPLICABLE LAW The Parties hereto agree that this Agreement, all transactions executed hereunder and all relationships between the Parties in connection therewith shall be construed under and be governed by the laws of Switzerland without reference to the conflict of law principals thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. - 30 - IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 31st day of October 1996. GENTA JAGO TECHNOLOGIES B.V. /s/ Thomas H. Adams /s/ Jacques Gonella - - - ------------------------ -------------------------- By Dr. Thomas H. Adams By: Dr. Jacques Gonella Its: Managing Director Its: Managing Director KRYPTON LTD. /s/ - - - ----------------------- By: Its: The Licensor, Jagotec AG, hereby agrees to be bound by the obligations contained in Section 17.5 of this Agreement. JAGOTEC AG /s/ Jacques Gonella /s/ - - - -------------------------- -------------------------- By: By: Its: Its: - 31 - EX-10.96 12 DEVELOPMENT & SUB-LICENSE AGREEMENT EXHIBIT 10.96 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT & SUB-LICENSE AGREEMENT VERAPAMIL This DEVELOPMENT AND SUB-LICENSE AGREEMENT (this "Agreement"), effective from the date last written hereunder, is entered into between GENTA JAGO TECHNOLOGIES B.V., a Dutch company, having a place of business at Grundstrasse 12, 6343 Rotkreuz, Switzerland (hereinafter referred to as "GENTA JAGO"), and KRYPTON LTD., a Gibraltar limited company, having a place of business at East Wing, Second Level, Hadfield House, Library Street, Gibraltar (hereinafter referred to as "KRYPTON") WITNESSTH: WHEREAS, GENTA JAGO has expertise in the development of controlled-release formulations for pharmaceutical agents and in particular has exclusive rights to proprietary know-how and technology generally known and commercialized under the registered trademark GEOMATRIX(R) and as described and embodied in the Patents (as defined below) with respect to a * and WHEREAS, KRYPTON is a company which markets pharmaceutical products and is interested in developing Prototype Formulations (as defined below) for the Final Product (as defined below) and in seeking the approval of Regulatory Authorities (as defined below) to manufacture, or have manufactured and market the Final Product in the Territory (as defined below); and WHEREAS, GENTA JAGO is prepared to conduct or have conducted certain studies and the development of the Prototype Formulations and Final Product; and WHEREAS, GENTA JAGO is prepared to grant to KRYPTON under the terms and conditions set forth hereafter a sub-license under the Patents, GEOMATRIX(R) Technology and Know-How (as defined below) to conduct studies relating to the Prototype Formulations and, upon receipt of approval by the Regulatory Authority (as defined below), to manufacture or have manufactured, market and sell the Final Product in the Territory. NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein and intending to be legally bound hereby, the Parties hereby agree as follows: - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. ARTICLE 1 DEFINITIONS For purposes of this Agreement, the terms defined in this Article 1 shall have the following meanings: 1.1 "Active Ingredient" shall mean Verapamil. 1.2 "Affiliate" shall mean, with respect to either Party hereto, any corporation, partnership or other entity controlled by, controlling or under common control with, such Party, with "control" meaning direct or indirect beneficial ownership of more than 50% of the voting power of, or more than 50% of ownership interest in, such corporation, partnership or other entity. 1.3 "ANDA" shall mean any Abbreviated New Drug Application filed with the FDA, by or for KRYPTON requesting authorization to manufacture, have manufactured or sell the Final Product in the United States of America, or any equivalent application to a Regulatory Authority in any other country of the Territory. 1.4 "Bioequivalent Product" shall mean a drug product meeting the bioequivalence requirements imposed by the FDA for in vitro and/or in vivo testing as set forth in the regulations of the FDA at 21 C.F.R. ss.320 ("AB Equivalent Rating"), as they may be amended from time to time. 1.5 "Competitive Product" shall mean any product other than the Final Product or the Originator which is a Bioequivalent Product of the Originator and is marketed and sold in the Territory on a country-to-country basis. 1.6 "FDA" shall mean the U.S. Federal Food and Drug Administration and any successor agency thereof. 1.7 "Final Product" shall mean the pharmaceutical orally-administered controlled-release formulation(s) containing the Active Ingredient, presented as a compressed tablet developed pursuant to this Agreement, based on the GEOMATRIX(R) Technology and being a Bioequivalent Product of the Originator, of a Competitive Product or of any other product containing the Active Ingredient. 1.8 "GEOMATRIX(R) Technology" shall mean the oral controlled-release drug delivery and related technology licensed to GENTA JAGO by the Licensor which utilizes a hydrophilic drug-containing matrix tablet which controls the release of the drug through the use of one or more barrier layers. 1.9 "Gross Margin" shall mean, with respect to any Final Product, Net Sales less only the direct cost of such Final Product sold, i.e. (a) raw material cost, (b) direct labor cost, (c) reasonably directly allocatable overhead cost (e.g. energy cost), (d) packaging and labeling cost, and (e) other costs directly associated with the manufacturing of such Final Product -2- (e.g. quality control). No other deductions from Net Sales are permissible for the calculation of Gross Margin, including without limitation, sales, marketing and distribution costs. Alternatively, in the event that KRYPTON sub-contracts the manufacturing of any Final Product to a third party, then "Gross Margin" with respect to such Final Product shall mean Net Sales less only the manufacturing costs as invoiced by such manufacturing third party sub-contractor and actually paid by KRYPTON. 1.10 "Know-How" shall mean all information and data, which are not generally known including, but not limited to, patent claims and related information not yet disclosed to the public, formulae, procedures, protocols, techniques and results of experimentation and testing, which (a) relate to the GEOMATRIX(R)Technology, any Prototype Formulation or any Final Product, or (b) are necessary or useful to develop, make or use any Prototype Formulation, or (c) are necessary or useful to develop, seek regulatory approval, make, use or sell any Final Product, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.11 "License Agreements" shall mean the license agreements entered into by and between GENTA JAGO and the Licensor, under which the Licensor granted GENTA JAGO the rights in the Patents, the Know-How and the GEOMATRIX(R) Technology, which are the subject matter of the sub-license referred to in Article 11. below. 1.12 "Licensor" shall mean Jagotec AG, a Swiss corporation, having its place of business at Seestrasse 91, CH-6052 Hergiswil, Switzerland. 1.13 "Net Sales" shall mean, with respect to any Final Product, the invoiced sales price of such Final Product in finished package form invoiced by KRYPTON and/or its Affiliates to any independent customer other than KRYPTON's Affiliates, less (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Final Product; (b) actual freight and insurance costs incurred and paid by KRYPTON and/or its Affiliates in transporting such Final Product in final form to such customers; (c) customary cash, quantity and trade discounts and other price reduction programs; (d) sales, use, value- added and other direct taxes (but excluding any income tax) actually incurred and paid by KRYPTON and/or its Affiliates; and (e) customs duties, surcharges and other governmental charges incurred by KRYPTON and/or its Affiliates in connection with the exportation or importation of such Final Product in final form. 1.14 "Originator" shall mean * actually marketed in the United States by * or any other pharmaceutical products containing the Active Ingredient and being marketed in the Territory 1.15 "Patents" shall mean all patents and patent applications heretofore or hereafter filed or having presently or in the future legal force in any country of the Territory, licensed by the Licensor to GENTA JAGO which claim the GEOMATRIX(R) Technology or the process to manufacture Prototype Formulations and/or Final Product by use of, or the use - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -3- of, the GEOMATRIX(R) Technology, including but not limited to the patents and patent applications listed in APPENDIX A hereto, together with all patents that in the future issue therefrom in any country of the Territory, including utility, model and design patents and certificates of invention, and all divisionals, continuations, continuations-in-part, reissues, renewals, extensions, substitutions, confirmations or additions to any such patents and patent applications, all to the extent presently or during the term of this Agreement licensed or otherwise available to and at the free disposition of GENTA JAGO. 1.16 "Prototype Formulations" shall mean the oral delivery system for the Active Ingredient based on the GEOMATRIX(R) Technology that reasonably meet the Specifications. 1.17 "Regulatory Authority" shall mean the FDA or any equivalent competent regulatory authority in any other countries of the Territory. 1.18 "Specifications" shall mean the Products specifications set forth in Appendix B attached hereto. 1.19 "Territory" shall mean *. ARTICLE 2 DEVELOPMENT PREAMBLE 2.1 At the date of execution of this Agreement, GENTA JAGO has performed certain preliminary development efforts for the Prototype Formulation. This development is hereby incorporated in this Agreement. 2.2 GENTA JAGO undertakes to conduct the development of the Prototype Formulation(s) and the Final Product in an efficient and professional manner. KRYPTON shall actively support GENTA JAGO regarding the development and studies to be executed by GENTA JAGO as may be reasonably required by GENTA JAGO from time to time. In particular, KRYPTON shall provide information reasonably requested by GENTA JAGO relating to the Originator and to the Active Ingredient for the purposes of carrying out this development, including, but not limited to, physico-chemical characteristics, safe-handling instructions, in-vitro analytical methods, degradation products and standards and analytical methods therefore. Additionally, KRYPTON shall provide to GENTA JAGO requested data and adequate quantities of samples of the Originator for the purposes of conducting the Feasibility Study. KRYPTON, however, shall not be required to provide information regarding the Originator which is not in the public domain, unless KRYPTON is duly authorized to possess and disclose such non-public information. Any costs and expenses incurred by KRYPTON in connection with such support shall be borne by KRYPTON. 2.3 Due to the nature and complexity of the development and the respective studies as set forth in this Agreement, the Parties recognize and acknowledge that problems and delays may occur which render the time limits set forth in this Agreement and/or the time-frame of the development as mutually agreed upon difficult or impossible to accomplish. The - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -4- Parties agree that they shall immediately inform each other in writing in the event that significant problems or delays are encountered or envisaged during the course of the development and shall discuss such problems and delays in order to agree on a mutually acceptable revision of the time limits set in this Agreement and/or the time-frame as previously mutually agreed upon. 2.4 Together with the notice from KRYPTON referred to in Section 3.1 below, KRYPTON, or its designated supplier, shall supply GENTA JAGO on a free-of-charge basis with sufficient quantities of Active Ingredient to perform the development program intended hereunder. Such supplies shall be accompanied with respective certificates of analysis and conformity. GENTA JAGO shall use all Active Ingredient supplied to it by KRYPTON hereunder solely and exclusively in connection with the development program as mutually agreed upon. Alternatively, KRYPTON may request that GENTA JAGO obtain a supply of Active Ingredient from a reputable source having the necessary regulatory clearances in place to allow future marketing of the Final Product in the Territory. Should KRYPTON so require and GENTA JAGO so agree, the chosen supplier's facilities, processes and procedures shall be audited by GENTA JAGO, or a third party mutually acceptable to KRYPTON and GENTA JAGO, in order to ensure compliance with the appropriate regulatory requirements. KRYPTON shall * of GENTA JAGO incurred in carrying out, or having carried out such audit. GENTA JAGO shall provide KRYPTON with a copy of the audit report within thirty (30) days as of the completion of the audit. 2.5 In the event that the Parties mutually agree that GENTA JAGO becomes responsible for the supply of Active Ingredient, KRYPTON shall * GENTA JAGO for any and all shipping and transportation costs, import duties, taxes or other costs incurred by GENTA JAGO in connection with such supply of Active Ingredient upon receipt of GENTA JAGO's respective invoices. ARTICLE 3 FEASIBILITY STUDY 3.1 KRYPTON shall initiate the development program contemplated hereunder as soon as technically feasible and within the time limits set forth in the mutually accepted development program by giving written notice to that effect to GENTA JAGO. Not later than two (2) months after receipt of (i) such notice, (ii) a * and (iii) the Active Ingredient, GENTA JAGO shall commence the feasibility study under this Article 3. and shall use its commercially reasonable efforts to develop the Prototype Formulations. Up to three (3) of the developed Prototype Formulations shall be chosen by mutual agreement by the Parties for further study and development. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -5- The Parties recognize that the Specifications mutually agreed uopn eventually will need to be updated with more detailed specifications for the Final Product in the course of the development, and in such case the Parties agree to mutually agree on any reasonable amendment of the Specifications. 3.2 The development of the Prototype Formulations shall include, but not necessarily be limited to, the following elements: (a) Development and establishment of analytical methodology specific to the characterization of such Prototype Formulations; (b) Qualitative and quantitative characterization of such Prototype Formulation; (c) In-vitro release profile characterization of such Prototype Formulations and the Originator by using appropriate methodology mutually agreed to by the Parties; (d) Elaboration of pre-scale up procedures and the production of samples (2000 units +/- 10%) of the chosen Prototype Formulations for evaluation by KRYPTON, and for use in the Pilot Pharmacokinetic Study under Article 4. below; and (e) Accelerated stability testing of Prototype Formulations to provide *. 3.3 GENTA JAGO will ensure the use of generally accepted standards of Good Laboratory and Manufacturing Practices during the performance of the feasibility study. 3.4 Within thirty (30) days of the completion of the feasibility study, GENTA JAGO shall supply KRYPTON with a report (the "Feasibility Study Report") reasonably detailing the development of the Prototype Formulation(s) and containing one (1) month accelerated stability data only. A supplement to the Feasibility Study Report containing the * accelerated stability data will be forwarded sixty (60) days later. 3.5 Prior to the commencement of the Feasibility Study GENTA JAGO shall submit to KRYPTON * for the entire Feasibility Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Feasibility Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO at the end of each quarter upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 3.6 In the event that the results of the feasibility study conclusively demonstrate that no Prototype Formulation has been developed which reasonably meets the Specifications to the good faith mutual satisfaction of KRYPTON and GENTA JAGO, the Parties agree to enter into good faith negotiations in order to determine an appropriate course of action, - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -6- including, but not limited to, that the Parties may mutually agree to abandon the development program under this Agreement, and terminate this Agreement with immediate effect. ARTICLE 4 PILOT PHARMACOKINETIC STUDY 4.1 Included as part of the feasibility study described in Article 3. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable in all material respects to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified clinical research organization (hereinafter "CRO") to perform a pilot pharmacokinetic study pursuant to this Article 4. 4.2 The Pilot Pharmacokinetic Study shall consist of commercially reasonable and appropriately designed * of the Prototype Formulations and the Originator. KRYPTON shall reasonably consult with GENTA JAGO in the design of the Pilot Pharmacokinetic Study and shall review the final protocol with GENTA JAGO prior to initiating work with the selected sub-contractor. The Pilot Pharmacokinetic Study shall be conducted in accordance with generally accepted standards of Good Clinical Practice and in compliance with Ethical Committee requirements or equivalent requirements, where applicable. 4.3 Prior to the commencement of the Pilot Pharmacokinetic Study GENTA JAGO shall submit to KRYPTON * for the entire Pilot Pharmacokinetic Study which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pilot Pharmacokinetic Study, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such development costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 4.4 KRYPTON shall provide GENTA JAGO with a copy of the report (hereinafter referred to as the "Pilot Pharmacokinetic Study Report") reasonably detailing the results of the Pilot Pharmacokinetic Study within six (6) weeks as of the study's completion and presentation of the preliminary data for GENTA JAGO's file. 4.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Pilot Pharmacokinetic Study, including without limitation the availability or quality of the results and data from such Pilot Pharmacokinetic Study to be carried out by KRYPTON and the CRO. 4.6 In the event that the results of the Pilot Pharmacokinetic Study conclusively demonstrate that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that at least one of the Prototype Formulations reasonably meet the - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -7- respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such Prototype Formulation. ARTICLE 5 PRE-SCALE-UP ACTIVITIES 5.1 Upon completion of the Pilot Pharmacokinetic Study, KRYPTON may, at its option, request and charge GENTA JAGO to carry out the pre-scale-up activities as described in this Article 5. (hereinafter referred to as the "Pre-Scale-Up Activities"). KRYPTON shall, within thirty (30) days as from the date of the Pilot Pharmacokinetic Study Report notify in writing GENTA JAGO of its decision whether to proceed with and to have GENTA JAGO perform the Pre-Scale-Up Activities. 5.2 Prior to the commencement of the Pre-Scale-Up Activities GENTA JAGO shall submit to KRYPTON * for the entire Pre-Scale-Up Activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall reimburse GENTA JAGO's *, reasonably incurred by GENTA JAGO during the Pre-Scale Up activity, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such pre scale up costs shall be refunded by KRYPTON to GENTA JAGO * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 5.3 The Pre-Scale-Up Activities to be performed by GENTA JAGO shall comprise all reasonable activities necessary to allow the technology transfer to, and subsequent scale-up at, the mutually established manufacturing site, including, but not limited to, final optimization of the Prototype Formulation (where necessary), development and validation of the scale-up manufacturing procedure and analytical validation. Such Pre-Scale-Up Activities shall be completed within the time period mutually agreed upon by the Parties in Appendix D hereto, calculated as from the date of receipt of the KRYPTON's notice by GENTA JAGO pursuant to Section 5.1 above. 5.4 In the event that additional clinical testing, including without limitation, confirming pharmacokinetic studies, is reasonably required or deemed necessary beyond the program envisaged in this Agreement in order to satisfy the FDA requirements for an NDA or ANDA approval of the Product, KRYPTON and GENTA JAGO shall meet to discuss in good faith the appropriate course of action to be followed and agree upon any such additional testing to be performed, provided that any such additional testing shall in any event be funded solely by KRYPTON. 5.5 Not later than upon the initiation of the Pre-Scale-Up Activities, the Parties shall establish and mutually agree upon a manufacturing site, where the Bio-Batches referred to in Section 7.2 below required for the pivotal clinical studies will be produced and where the Final Product shall be manufactured for commercial use after FDA approval(s) for the Final Product have been granted. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -8- ARTICLE 6 PRE-PIVOTAL PHARMACOKINETIC STUDY 6.1 Included as part of the Pre-Scale-Up Activities, KRYPTON shall at its own responsibility and its own cost, perform or have performed with a CRO selected by KRYPTON, a pre- pivotal pharmacokinetic study pursuant to this Article 6. (hereinafter referred to as "Pre- Pivotal Study"). Such Pre-Pivotal Study shall consist of *, to select the best of the Prototype Formulations for each dose strength to be used in the further development under this Agreement. 6.2 The Pre-Pivotal Study shall be performed in the United States of America. KRYPTON shall consult, review and mutually agree with GENTA JAGO on the design and final protocol of such Pre-Pivotal Study prior to initiating work with the selected CRO. 6.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Pre-Pivotal Study. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. 6.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailling the results of the Pre-Pivotal Study within ten (10) days of its completion for GENTA JAGO's file. GENTA JAGO shall have no liability or responsibility whatsoever with resupect to such Pre-Pivotal Study, including without limitation, the performance or conduct of such Pre- Pivotal Study or the availability or quality of the results and data from such Pre-Pivotal Study to be carried out by KRYPTON and the CRO. 6.5 Upon completion of the Pre-Pivotal Study and availability of the results of such Pre- Pivotal Study, the Parties shall consult with each other on such results and mutually agree in writing upon the Prototype Formulation to be selected for further development under this Agreement. In the event that the results of the Pre-Pivotal Study are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of the Parties that at least one of the Prototype Formulations meet the respective Specifications, KRYPTON may elect to abandon the development program and terminate this Agreement with respect to such Prototype Formulation by giving written notice to that effect to GENTA JAGO. ARTICLE 7 FURTHER ACTIVITIES 7.1 Technology Transfer Upon mutual agreement of the Prototype Formulation to be used for development as referred to in Section 6.5 above, GENTA JAGO shall be responsible for and initiate the technology transfer to, and perform the scale-up at, the manufacturing site mutually established and agreed upon by the Parties. GENTA JAGO agrees that such technology - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -9- transfer, and in particular the aspects of scale-up and validation of the manufacturing process shall be carried out by GENTA JAGO on such equipment as shall eventually be used by KRYPTON or a third party to manufacture the Final Product. Upon completion of such scale-up, GENTA JAGO shall notify KRYPTON thereof in writing. 7.2 Production of Industrial Scale Batches Upon receipt by KRYPTON of GENTA JAGO's notice referred to in Section 7.1 above, the Parties shall initiate the production of three (3) industrial scale batches (hereinafter "Bio-Batches") on such equipment as shall eventually be used KRYPTON or a third party to commercially manufacture the Final Product, based on the Prototype Formulation (the size of each Bio-Batch to be not less than the greater of (i) 10% (ten percent) of the anticipated initial commercial batch size, or (ii) 100,000 tablets), according to Current Good Manufacturing Practices, such Bio-Batches to be subsequently used for stability testing and pivotal clinical studies; provided however, that GENTA JAGO shall have the ultimate responsibility with respect of any and all technical aspects of such production of batches related to the technology transfer and the implementation of such technology in the manufacturing site. 7.3 Funding of Further Activities (a) Prior to the commencement of any activities under Sections 7.1 and 7.2 above GENTA JAGO shall submit to KRYPTON * for such further activities which * shall be reasonably acceptable to KRYPTON. KRYPTON shall refund GENTA JAGO's * reasonably incurred by GENTA JAGO under Sections 7.1 and 7.2 above, including but not limited to costs, expenses and fees paid to Jago Pharma and third party contractors, by the payment of non-refundable development fees. Such further development costs shall be refunded by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. (b) Furthermore, KRYPTON shall be responsible, at its own cost, for the supply of all raw material including, but not limited to, the Active Ingredients required or necessary for, and all additional costs and expenses whatsoever arising out of or in connection with, the production of the Bio-Batches described in Section 7.2 above and all other costs associated with the use of facilities, technology transfer, equipment and analytical services. 7.4 Stability Testing (a) KRYPTON shall be responsible for and perform or have performed at its own cost, the stability testing of the Final Product according to the then current requirements of the FDA in bulk packaging and in the final packaging materials. GENTA JAGO shall have no liability or responsibility whatsoever with respect to such stability testing, including without limitation, the performance or conduct of such - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -10- stability testing or the availability or quality of the results and data from such stability testing to be carried out or requested by KRYPTON. (b) KRYPTON shall provide to GENTA JAGO with a copy of all stability testing data within thirty (30) days after the completion of each stability testing period (hereinafter referred to as the "Final Stability Testing Report") for GENTA JAGO's file. (c) GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON in connection with the stability testing of the Final Product. KRYPTON shall pay to GENTA JAGO for such services provided by GENTA JAGO's or Jago Pharma's personnel an amount of USD * or part thereof spent, and furthermore, KRYPTON shall reimburse GENTA JAGO for all reasonable and documented travel related expenses of GENTA JAGO personnel who travel at KRYPTON's request to locations remote from such personnel's usual working location. 7.5 Further Provisions In the event that KRYPTON and GENTA JAGO shall reasonably deem the results or data from any of the activities to be performed by either Party under this Article 7. with respect to any dose strength be unsatisfactory for any reason, the Parties may mutually agree to abandon the development program and terminate this Agreement with immediate effect. ARTICLE 8 PIVOTAL CLINICAL STUDY 8.1 Promptly upon completion of the further activities referred to in Article 7. above, KRYPTON shall, at its own responsibility and its own cost, sub-contract under confidentiality commitments comparable to the provisions set forth herein between GENTA JAGO and KRYPTON to an external qualified CRO of its choice, reasonably acceptable to GENTA JAGO, to perform and manage a series of pivotal clinical studies (hereinafter "Clinical Studies") in man required and/or necessary for any subsequent NDA or ANDA for the Final Product in accordance with the then current requirements of the FDA. 8.2 KRYPTON shall consult, review and agree with GENTA JAGO on the design and the final protocol of such Clinical Studies prior to initiating work with the selected subcontractor. 8.3 KRYPTON shall reimburse to GENTA JAGO * incurred by GENTA JAGO to cover its workload for preparation and consulting of such Clinical Studies. Such development costs shall be paid by KRYPTON * upon receipt by KRYPTON of an invoice from GENTA JAGO or Jago Pharma AG. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -11- 8.4 KRYPTON shall provide GENTA JAGO with a copy of the report detailing the results of the Clinical Studies within ten (10) days of its completion for GENTA JAGO's file. 8.5 GENTA JAGO shall have no liability or responsibility whatsoever with respect to such Clinical Studies, including without limitation, the performance or conduct of such Clinical Studies or the availability or quality of the results and data from such Clinical Studies to be carried out or requested by KRYPTON. 8.6 In the event that the results of the Pivotal Clinical Studies are unsatisfactory in that it is not fully demonstrated to the good faith mutual satisfaction of KRYPTON and GENTA JAGO that the Prototype Formulation reasonably meets the respective Specifications, the Parties may mutually agree to abandon the development program and terminate this Agreement with respect to such dose strength. ARTICLE 9 THE REGULATORY (NDA OR ANDA) SUBMISSION 9.1 Upon completion of the Clinical Studies, KRYPTON may, at its option, elect to prepare and submit to the FDA an NDA or ANDA. KRYPTON shall notify GENTA JAGO of its election to exercise or not to exercise this option by giving written notice thereof to GENTA JAGO within thirty (30) days as of the availability of the results of the Clinical Studies. 9.2 In the event that KRYPTON elects pursuant to Section 9.1 above to make NDA or ANDA submission(s) to any Regulatory Authority with respect to a Final Product, KRYPTON shall have sole liability and responsibility for the prosecution, conduct and results of such NDA or ANDA and shall bear all costs in connection therewith. KRYPTON, at KRYPTON's option, may elect by written notice to GENTA JAGO prior to commencement of the technology transfer referred to in Section 7.1 above to have the NDA or ANDA dossier prepared on its behalf by a qualified third party acceptable to GENTA JAGO. KRYPTON shall be liable and responsible for any and all costs associated with such sub-contracting. 9.3 KRYPTON or its chosen sub-contractor shall consult with GENTA JAGO, and GENTA JAGO agrees to provide additional technical assistance and consultation as may be reasonably requested by KRYPTON or the chosen sub-contractor, in connection with the preparation and prosecution of any NDA or ANDA or with the preparation of the dossier to be submitted to the FDA. KRYPTON shall pay to GENTA JAGO for such services and consultation provided by GENTA JAGO's personnel an amount of USD * or any part thereof spent. Furthermore, KRYPTON shall reimburse GENTA JAGO for reasonable and documented travel-related expenses of GENTA JAGO personnel who travel at KRYPTON's request to the elected manufacturing facility(ies) or other locations remote from such personnel's usual working location. -12- ARTICLE 10 PROPRIETARY RIGHTS AND PATENTS 10.1 Patents and Proprietary Rights of GENTA JAGO (a) The Licensor and GENTA JAGO, respectively, shall retain title to and ownership of Patents, Know-How and GEOMATRIX(R) Technology licensed to GENTA JAGO, including, but not limited to, any and all developments and inventions relating to Patents, Know-How and GEOMATRIX(R) Technology (hereinafter collectively referred to as "GENTA JAGO IPR"). (b) KRYPTON shall not, directly or indirectly through its officers, directors, employees, agents, customers or other controlled or associated third parties, acquire any proprietary interest in or other right to GENTA JAGO IPR, other than provided in this Agreement. (c) GENTA JAGO shall use all commercially reasonable efforts, at its own cost, to cause the Licensor to prepare, prosecute and maintain all patent applications and patents constituting Patents, and shall keep KRYPTON fully and promptly informed on any developments or changes relating thereto. If the Licensor decides not to further prosecute any patent application constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. During the term of this Agreement, GENTA JAGO shall, at its sole cost, use all commercially reasonable efforts to cause the Licensor to take all steps necessary to maintain Patents to the extent GENTA JAGO deems commercially reasonable. If the Licensor decides not to maintain any patent constituting Patents, GENTA JAGO shall promptly inform KRYPTON of such decision in writing, and the Parties shall, upon KRYPTON's reasonable written request, meet with the Licensor to discuss any reasonable appropriate action. Notwithstanding the foregoing, KRYPTON acknowledges to GENTA JAGO that Licensor has the final authority regarding such preparation, prosecution and maintenance of all patent applications and patents. 10.2 Patents and Proprietary Rights for Final Products (a) KRYPTON shall retain title to and ownership of all developments, whether patentable or not, relating specifically and exclusively to the Final Products, provided that such developments are entirely independent of any and all GENTA JAGO IPR (hereinafter collectively referred to "Final Product IPR"). (b) KRYPTON shall be responsible for and shall control, at its own cost, the preparation, prosecution and maintenance of all Final Product IPR and shall keep GENTA JAGO fully and promptly informed on any developments or changes relating thereto. During the term of this Agreement, KRYPTON shall, at its sole cost, take all steps necessary to prosecute and/or maintain all Final Product IPR -13- to the extent KRYPTON deems commercially reasonable. If KRYPTON intends not to further prosecute and/or maintain any of the Final Product IPR, KRYPTON shall promptly inform GENTA JAGO of such intention in writing, and GENTA JAGO shall have the right and option, but not the obligation, to have transferred to it sole title to and ownership in such Final Product IPR free of any charge by giving respective written notice thereof to KRYPTON within thirty (30) days after GENTA JAGO's receipt of KRYPTON's notice referred to above. (c) In the event GENTA JAGO has and exercises its right and option referred to Section 10.2 (b) above to have transferred to it any such Final Product IPR, KRYPTON shall promptly undertake any and all steps required and/or necessary to transfer title to and ownership of such Final Product IPR to GENTA JAGO. In the event that GENTA JAGO exercises its option to have transferred such Final Product IPR from KRYPTON to GENTA JAGO, GENTA JAGO shall maintain such Final Product IPR during the term of this Agreement to the extent GENTA JAGO deems commercially reasonable and shall bear all cost associated therewith incurred after the date of GENTA JAGO's notice to KRYPTON exercising its option referred to in Section 10.2 (b) above. In such case, the Parties shall negotiate in good faith the terms and condition, under which such Final Product IPR transferred to GENTA JAGO shall be included in the License pursuant to Article 11. below. 10.3 Notification of Infringement (a) If KRYPTON becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR or Final Product IPR or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non- infringement) based upon or arising out of GENTA JAGO IPR or Final Product IPR, then KRYPTON shall promptly notify GENTA JAGO in writing of any such infringement, violation, action, claim or dispute. (b) If GENTA JAGO becomes aware of (i) any product or activity of any kind that involves or may involve an infringement or violation of GENTA JAGO IPR with respect to Final Products or of Final Product IPR; or (ii) any third-party action, claim or dispute (including, but not limited to, actions for declaratory judgment alleging the invalidity or non-infringement) based upon or arising out of GENTA JAGO IPR with respect to Final Products or of Final Product IPR, then GENTA JAGO shall promptly notify KRYPTON in writing of any such infringement, violation, action, claim or dispute. 10.4 Enforcement of GENTA JAGO IPR (a) GENTA JAGO, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, GENTA JAGO IPR, (ii) -14- to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, GENTA JAGO IPR, (iii) to control any litigation or other enforcement action regarding GENTA JAGO IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding GENTA JAGO IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions, to the extent that any such action or such infringement may have an adverse effect on Final Product. KRYPTON shall, at its own cost, fully cooperate with GENTA JAGO in the planing and execution of any suit or other action to enforce, or defend third-party actions regarding, GENTA JAGO IPR as reasonably required or requested by GENTA JAGO. (b) If GENTA JAGO does not within one-hundred-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of GENTA JAGO IPR which may adversely affect Final Products, or of any third-party action, claim or dispute based upon or arising out of GENTA JAGO IPR which may adversely affect Final Products, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then the Parties shall, upon KRYPTON's written request, promptly meet to discuss any reasonable appropriate action with regard to such enforcement of GENTA JAGO IPR which may adversely affect Final Products, provided however, that KRYPTON is aware and acknowledges that in such case the Licensor will have the right to enforce any and all GENTA JAGO IPR pursuant to the License Agreements. (c) Subject to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in the preceding section, KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action where necessary to obtain complete relief regarding the subject infringement or violation. 10.5 Enforcement of Final Product IPR (a) KRYPTON, at its sole expense, shall have the right, but not the obligation, (i) to determine the appropriate course of action to enforce, or otherwise abate the infringement of, or defend third-party actions regarding, Final Product IPR, (ii) to take, or refrain from taking, appropriate action to enforce, or defend third-party actions regarding, Final Product IPR, (iii) to control any litigation or other enforcement action regarding Final Product IPR, and (iv) to enter into, or permit, the settlement of any such litigation or other enforcement action regarding Final Product IPR. Notwithstanding anything contained in the preceding sentence, KRYPTON shall not settle any suit or action or otherwise consent to an adverse judgment in such suit or action without the prior written consent of GENTA -15- JAGO, which consent shall not be withheld unreasonably. KRYPTON shall keep GENTA JAGO informed on a regular basis on its taking or refraining from taking, and the development of, any of the foregoing actions, and shall consider, in good faith, the interests of GENTA JAGO under this Agreement and in GENTA JAGO IPR, when taking any of the foregoing actions. (b) If KRYPTON does not, within one-hundred-and-twenty (120) days, or any shorter delay imposed by any applicable law or regulation or court or authority having jurisdiction, after receiving notice of any infringement or violation of Final Product IPR, or of any third-party action, claim or dispute based upon or arising out of Final Product IPR, commence or take an action to enforce, or otherwise abate such infringement, or defend against such third-party action, then GENTA JAGO shall have the right, but not the obligation, at its sole expense, to take and control such action as it deems appropriate to enforce, or abate the infringement of, or defend against such third-party action, regarding Final Product IPR. GENTA JAGO shall keep KRYPTON informed on a regular basis of any such action and consider, in good faith, the interests of KRYPTON under this Agreement when taking any of the foregoing actions. KRYPTON, upon its written request and at its sole expense, shall be made an additional, but not controlling party, in any such suit or other action controlled by GENTA JAGO where necessary to obtain complete relief regarding the subject infringement or violation. 10.6 Application of Monies Recovered Subject always to the right of the Licensor to control any suit or other action with regard to GENTA JAGO IPR as outlined in Section 10.4(c) and any right to receive any monies recovered therefrom as provided for in the License Agreements, all monies recovered upon the final judgment or settlement of any suit or other action under this Sections 10.4 or 10.5 shall be applied as follows: (i) to cover any and all costs and expenses (including attorney's fees) incurred by the Party controlling such suit or other action; (ii) to cover any and all costs and expenses (including attorney's fees) reasonably, or upon request of the controlling Party, incurred by the other Party in connection with such suit or other action, if any; (iii) the remainder, if any, to the Party controlling any such suit or other action. ARTICLE 11 SUB-LICENSE AGREEMENT 11.1 GENTA JAGO hereby grants to KRYPTON the exclusive and sublicenseable right and sub-license (hereinafter referred to as the "License") to use, manufacture, have manufactured, sell and market the Final Products in the Territory and to use the Patents, -16- GEOMATRIX(R) Technology and Know How exclusively for that purpose subject to the payment of the * and the Royalties pursuant to Articles 13. and 14. below. 11.2 The rights of KRYPTON to grant any sub-license in any part of the Territory shall be subject to the requirement that KRYPTON shall obtain the written approval of GENTA JAGO prior to executing any such sub-license agreement, which approval shall not unreasonably be withheld, provided however, that no such approval by GENTA JAGO shall be required for any sub-license to an Affiliate of KRYPTON . 11.3 In any event KRYPTON shall be responsible for any and all acts, deeds and undertakings of its permitted sub-licensee(s) and KRYPTON and its permitted sub-licensee(s) shall continue to be bound by all terms and provisions under this Agreement throughout its term. In case that KRYPTON sub-licenses rights and/or the License to any sub-licensee(s) approved by GENTA JAGO, such sub-licensee(s) shall agree in writing to any and all of KRYPTON's obligations and undertakings under this Agreement, including but not limited to its confidentiality obligations set forth hereinafter. Furthermore, KRYPTON undertakes that any and all sub-license agreements shall provide for inspection and audit provisions identical to the provisions set forth below in order to enable GENTA JAGO to control and audit and receive any and all fees and Royalties due as provided in this Agreement. KRYPTON shall provide GENTA JAGO promptly with reasonable appropriate information on its sub-licensee(s) and copies of all agreements with such sub- licensee(s) (with only the commercial terms may be redacted). ARTICLE 12 MANUFACTURING AND PRODUCT LIABILITY 12.1 In the event that KRYPTON, subject to Section 5.5 above, elects GENTA JAGO, and GENTA JAGO expressly agrees to such manufacture, or any of its Affiliates shall manufacture Final Products, then the Parties agree to enter into good faith negotiations on and to use commercially reasonable efforts to execute in due time a respective Manufacturing and Supply Agreement, according to which GENTA JAGO or its Affiliates shall undertake to manufacture and supply Final Products in sufficient quantities to meet KRYPTON's requirements, at a sale price for such Final Products manufactured equal to GENTA JAGO's * In the event and for such period of time, that GENTA JAGO or its Affiliate manufactures and supplies Final Product under such Manufacturing and Supply Agreement, the Royalty Rate referred to in Section 14.1 below shall be * 12.2 In the event that KRYPTON or any of its Affiliates or any third party is elected pursuant to Section 5.5 above to manufacture Final Product, then KRYPTON undertakes and agrees that at all times the Specifications and to any and all laws, rules and regulations imposed by any competent authority on the manufacturing, marketing, distribution and sale of Final Products are strictly adhered to by the manufacturer, and KRYPTON shall during the entire term of this Agreement be solely and fully liable and responsible for the compliance with all such laws, rules and regulations when manufacturing, having manufactured, - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -17- marketing, distributing and selling Final Products itself and/or through Affiliates or sub- licensee(s). 12.3 KRYPTON shall indemnify, defend and hold GENTA JAGO, its Affiliates and the Licensor harmless from and against any losses, claims, liabilities, costs and expenses (including reasonable attorney's fees) that may be imposed upon or asserted against GENTA JAGO and/or its Affiliates and/or the Licensor as a result of the marketing, distributing, manufacture, use or sale of Final Products by or on behalf of KRYPTON, its Affiliates, agents or sub-licensee(s), except for those claims, liabilities, costs and expenses arising from gross negligence or intentional misconduct on the part of GENTA JAGO, its Affiliates or the Licensor. ARTICLE 13 PAYMENTS AND OTHER CONSIDERATION 13.1 As consideration for GENTA JAGO's preliminary development efforts for the Prototype Formulation performed prior to the execution of this Agreement as referred to in Section 2.1 above, KRYPTON undertakes to pay to GENTA JAGO an initial *, payable upon execution of this Agreement. 13.2 As consideration for the License granted by GENTA JAGO to KRYPTON under this Agreement and in consideration of certain major development steps achieved hereunder, KRYPTON undertakes to pay to GENTA JAGO *: (a) * KRYPTON's receipt of GENTA JAGO's notice referred to in Section 7.1 above; and (b) *; and (c) * for the Final Product; and (d) * a for the Final Product. 13.3 The Parties agree that * as set forth in Section 14.4 below. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -18- 13.4 Unless otherwise agreed by the Parties in writing, all payments under this Article 13. shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. ARTICLE 14 ROYALTIES 14.1 During a period commencing upon the first commercial sale of Final Product in each country of the Territory and ending upon the earlier of (i) the fifteenth (15th) anniversary of the first commercial sale of Final Product in such country of the Territory, and (ii) the expiration of the last of the Patents covering Final Product in such country of the Territory (hereinafter referred to as the "Royalty Term"), and in further consideration of the License granted to KRYPTON by GENTA JAGO, KRYPTON shall pay to GENTA JAGO a royalty (hereinafter referred to as the "Royalty") of * of the Final Product in the Territory. 14.2 The Parties agree that * shall be applicable for the first time on sales of such Final Product in such country of the Territory after the beginning of the calendar quarter immediately following the first commercial sale of such Competitive Product. 14.3 Royalties shall be payable on a quarterly basis. KRYPTON shall remit to GENTA JAGO within six (6) weeks after the end of each calendar quarter the amount of Royalty due with respect to Net Sales and/or Gross Margin, as the case may be, achieved in the preceding quarter, beginning with the calendar quarter in which the first commercial sale of the Final Product is made in any country of the Territory. KRYPTON shall deliver to GENTA JAGO, along with such remittance of Royalty payments, a detailed statement (hereinafter referred to as the "Royalty Report") of the Net Sales and/or Gross Margin, as the case may be, of the Final Product on a country-by-country basis to which the Royalty payment relates. 14.4 All Royalty Reports shall be prepared in accordance with generally accepted accounting principles consistently applied from applicable period to period and shall be certified by an officer of KRYPTON as being so prepared, true, accurate and correct. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -19- 14.5 In recognition of the * by KRYPTON to GENTA JAGO prior to the commercial sale of the Final Products, the amount of Royalty payments due to GENTA JAGO under Article 14.2 above with respect to each calendar quarter shall be * until such time as the aggregate amount of * 14.6 Unless otherwise agreed by the Parties in writing, payments of Royalties shall be made in United States Dollars and to such place or account as GENTA JAGO reasonably requests from time to time in writing. Any conversions into United States Dollars from the currency in which the corresponding Net Sales and/or Gross Margin for such Royalties were made, are to be calculated as using the average closing buying rate for such currency quoted in the continental terms method of quoting exchange rates (local currency per USD 1) published in the Wall Street Journal on the last business day of the applicable reporting period covered by such Royalty Report. ARTICLE 15 INSPECTION AND AUDIT 15.1 During the term of this Agreement and during a period of twelve (12) months after its expiration or termination for any reason, upon the written request of GENTA JAGO and not more than once each calendar year, KRYPTON shall permit an independent certified public accountant of internationally recognized standing selected by GENTA JAGO, at GENTA JAGO's expense, to have access during regular business hours to such of the records of KRYPTON and its Affiliates as may be reasonably necessary to verify the accuracy of the Royalty Reports for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to GENTA JAGO only whether the Royalty Reports and records of KRYPTON and its Affiliates and the amount of Royalties actually paid are correct or not and the specific details concerning any discrepancies; no other information shall be shared. The Parties agree to accept such written audit report as final and binding upon them. 15.2 If such independent accounting firm correctly concludes that additional Royalties were owed during any such period audited, KRYPTON shall pay such additional Royalties within ten (10) days of the date GENTA JAGO delivers to KRYPTON such accounting firm's written report so concluding. The fees and expenses charged by such accounting firm with respect to such audit shall be paid by GENTA JAGO; provided however, if any such audit correctly discloses that Royalties payable by KRYPTON for the audited period are *, then KRYPTON shall pay all reasonable fees and expenses charged by such accounting firm with respect to such audit. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -20- 15.3 GENTA JAGO shall treat all financial information subject to review under this Article 15. as confidential and subject to the confidentiality obligations in Article 16. below. ARTICLE 16 CONFIDENTIALITY 16.1 Confidential Information. KRYPTON shall maintain in confidence all Know-How and other information of GENTA JAGO (including samples) disclosed by GENTA JAGO and identified as, or acknowledged to be, confidential (the "Confidential Information"), and shall not use, disclose or grant the use of the Confidential Information except on a need- to-know basis to its directors, officers, employees, agents, consultants, clinical investigators or other permitted contractors, to the extent such disclosure is reasonably necessary in connection with KRYPTON's activities as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, KRYPTON hereto shall obtain agreement in writing of any such person to hold in confidence and not make use of the Confidential Information for any purpose other than those authorized by this Agreement. KRYPTON shall notify GENTA JAGO promptly upon the discovery of the unauthorized use or disclosure of the Confidential Information. 16.2 Permitted Disclosures. The obligations of confidentiality and non-use contained in Section 16.1 above shall not apply to the extent that (a) KRYPTON (i) is required to disclose information by law, regulation or order of a governmental agency or a court of competent jurisdiction, or (ii) is required to disclose information to any governmental agency for purposes of obtaining approval to test or market Final Product, provided in each case that KRYPTON shall give GENTA JAGO written notice thereof and sufficient opportunity to object to any disclosure or to request confidential treatment thereof, or (b) KRYPTON can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to it, or thereafter became public knowledge, other than as a result of actions of KRYPTON, its directors, officers and employees in violation hereof; (ii) the disclosed information was rightfully known by KRYPTON (as shown by its written records) prior to the date of disclosure to it by GENTA JAGO hereunder; (iii) the disclosed information was disclosed to KRYPTON on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to GENTA JAGO or the Licensor; or (iv) the disclosed information was independently developed by KRYPTON without the use of Confidential Information disclosed by GENTA JAGO. 16.3 Terms of this Agreement. Except as otherwise provided in Section 16.2 above, neither Party shall disclose any terms or conditions of this Agreement to any third party (other than the Licensor) without the prior consent of the other Party. Notwithstanding the foregoing, prior to the execution of this Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this transaction, and the Parties may disclose such information only without the other Party's consent. Notwithstanding the foregoing, prior to the execution of the Agreement, the Parties shall agree upon the substance of information that can be used to describe the terms of this -21- transaction, and the Parties may disclose such information without the other Party's consent. 16.4 Term of Confidentiality. The confidentiality obligations under this Article 16 shall be effective during the term of this Agreement and for a period of ten (10) years after the expiration or earlier termination hereof. 16.5 Injunctive Remedies. GENTA JAGO shall be entitled to injunctive remedies and relief against KRYPTON and its Affiliates and any third parties for any breach or threatened breach of the confidentiality obligations under this Article 16. 16.6 Damages. In the event of a breach of the confidentiality provisions under this Article 16 by KRYPTON, its Affiliates or its directors, officers, employees or any other person who were given access to the Confidential Information by KRYPTON, GENTA JAGO shall be entitled to receive from KRYPTON any and all actual costs and damages caused by such breach. 16.7 Public Announcements. Neither Party shall make any press releases or other public announcements or disclosures regarding the execution and the existence of this Agreement or any activities conducted hereunder, including development results, filings and registrations, without the prior written consent of the other Party, except for such public disclosure as may be necessary in the opinion of any party's legal advisor in order not to be in violation of or default under any applicable law, regulation or governmental order, in such later event the party having an obligation to disclose shall submit to the other party a draft of the required announcement and shall give the other party the opportunity to request reasonable amendments and modifications of such required announcement.. ARTICLE 17 TERM AND TERMINATION 17.1 Term and Expiration (a) This Agreement shall expire on a country-by-country basis upon the expiration of the Royalty Term. (b) Upon the expiration of this Agreement in each country of the Territory pursuant to Section 17.1 (a) above and payment of all fees, including but not limited to the *, and all Royalties and other payments by KRYPTON due GENTA JAGO under this Agreement, the License shall be deemed to be a perpetual, fully paid-up and royalty-free license for such Final Product and each such country of the Territory. 17.2 Termination Prior to Registration - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -22- During the development, test, study and registration phases as specified in Articles 3. through 8. above, and until the first successful registration approval of any Final Product by any Regulatory Authority, this Agreement may be terminated in accordance with the provisions set forth in Sections 3.6, 4.6, 6.5, 7.5 and 8.6 above. 17.3 Termination for Cause During the entire term of this Agreement either Party may terminate this Agreement by giving to the other Party written notice to that effect, if any of the following events occur: (a) the other Party is in default or in breach of a term or provision hereof and such default or breach continues and is not remedied within thirty (30) days upon the other Party's written request to remedy such default or breach; or (b) the other Party shall commit a breach of any of the confidentiality provisions of Article 16. above; or (c) the other Party goes into liquidation, voluntarily or otherwise, other than for the sole purpose of reorganization, or goes into bankruptcy or makes an assignment for the benefit of creditors, or in the event of a receiver being appointed of the other Party's property or parts thereof. 17.4 Effect of Termination (a) If KRYPTON elects to so terminate the Agreement under Section 17.2 above prior to filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated, (iii) KRYPTON be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) all Registrations pertaining to the marketing of the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated under this Agreement shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vi) GENTA JAGO and its Affiliates shall thereafter be entitled to exercise such rights as they may have under their own license agreements to make, have made, use or sell the Product in the country(ies) so terminated without compensation or obligation to KRYPTON; provided, that the foregoing rights under (iv) and (vi) shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates. -23- (b) If KRYPTON elects to so terminate this Agreement subsequent to the filing of the ANDA in the United States, then: (i) such termination shall be without penalty or liability to KRYPTON; (ii) all rights and licenses granted by GENTA JAGO hereunder shall revert to GENTA JAGO with respect to such country(ies) so terminated; (iii) KRYPTON shall be relieved of any payments that are scheduled or may be made in the future under this Agreement, (iv) KRYPTON shall return to GENTA JAGO all materials, documentation, information, data and other things furnished by GENTA JAGO in connection with this Agreement, including without limitation any and all Confidential Information, together with all copies thereof in KRYPTON's possession or under its control, (v) GENTA JAGO and its Affiliates shall thereafter be entitled to make, have made, use or sell the Product in the country(ies) so terminated (and, provided, that the foregoing shall not create or imply any right or license under any patent rights, copyright rights, trademarks or trade names, know-how, or other intellectual property rights owned or controlled by KRYPTON or its Affiliates); (vi) all Registrations pertaining to the Product shall be transferred to and be owned by GENTA JAGO as to the affected country(ies) and the data generated hereunder shall be provided to and thereafter may be freely used by GENTA JAGO to develop, manufacture and market the Product; and (vii) GENTA JAGO shall pay to KRYPTON the same royalty, which shall be paid in the same manner and subject to the same terms and conditions as would otherwise have applied to KRYPTON, as KRYPTON would otherwise have paid (absent such termination) hereunder to GENTA JAGO on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) of the Product in the country(ies) to which such termination applies (with such royalty to be paid by GENTA JAGO and its Affiliates in each such country until expiration of the Royalty Term in each such country), until such time as the royalties paid to KRYPTON equal the aggregate amount that had been paid by KRYPTON to GENTA JAGO prior to such termination under the Sections 3.5, 4.3, 5.2, 6.3, 7.3,8.3, 9.2 and 13., at which time the royalty rate then prevailing on Net Sales (or on the Gross Margin of such Net Sales, as the case may be) in the United States shall be reduced by two percent (2 %) (but shall not be reduced for sales outside the United States). (c) Otherwise the termination of this Agreement shall be without prejudice to any rights and obligations of either Party accrued prior to the effective date of termination. KRYPTON shall forthwith make all payments due and outstanding to GENTA JAGO at the date of termination. Except as explicitly otherwise stated in this Agreement, GENTA JAGO shall not be obligated to refund upon termination of this Agreement to KRYPTON any payments, including without limitation the *, made by KRYPTON to GENTA JAGO prior to such termination pursuant to the provisions of this Agreement. (d) The termination of this Agreement pursuant to Section 17.3 above by either Party shall not limit remedies which may be otherwise available in law or equity to either Party. - - - ------------------ * Confidential treatment requested. The redacted material has been separately filed with the Commission. -24- 17.5 Early Termination of the License Agreements (a) In the event that the License Agreements are terminated prior to the expiration of the last to expire of the Patents licensed to GENTA JAGO in the Territory, then the License granted hereunder to KRYPTON shall also terminate upon KRYPTON's receipt of the respective termination notice from the Licensor. KRYPTON may give written notice to the Licensor of KRYPTON's desire to continue the License granted under this Agreement within sixty (60) days as of KRYPTON's receipt of the Licensor's notice referred to above. (b) In the event that KRYPTON timely notifies the Licensor of its desire to continue the License granted under this Agreement, the Licensor shall have the right, at its sole discretion, to elect to assume in writing within sixty (60) days upon the Licensor's receipt of KRYPTON's notice any and all rights of GENTA JAGO under this Agreement and to promptly cure all defaults of GENTA JAGO under this Agreement, if any. (c) In the event that the Licensor does not timely gives notice to KRYPTON and cures all of GENTA JAGO's defaults hereunder pursuant to Section 17.5(b) above, then KRYPTON shall promptly assume in writing any and all rights and obligations of GENTA JAGO under the License Agreements with the Licensor, but with regard to the rights encompassed by the License granted hereunder only, and promptly cure all defaults of GENTA JAGO under the License Agreements with regard to the rights encompassed by the License granted hereunder only, if any. (d) Notwithstanding anything contained in this Section 17.5, no action taken by the Licensor and/or KRYPTON to continue or not to continue the License shall relieve GENTA JAGO from any liability for any uncured defaults under this Agreement or the License Agreements, and such action by the Licensor and/or KRYPTON shall be without prejudice to any other rights or remedies the Licensor and/or KRYPTON may have in law or equity. ARTICLE 18 WARRANTIES 18.1 GENTA JAGO shall carry out and undertake the studies and tests specified in this Agreement in a careful and diligent manner. GENTA JAGO agrees to carefully choose, instruct and supervise any employees, officers, Affiliates or third parties to be chosen by GENTA JAGO pursuant to this Agreement, who are involved with the tests and studies. Nothing in this Agreement shall be construed as a representation made, or warranty given, by GENTA JAGO that any development performed by or for GENTA JAGO under this Agreement will be successful in whole or in part, or that any product, including Final Product, which may be developed, will be successful in the commercial marketplace. Furthermore, GENTA JAGO makes no representation or warranty, express or implied, -25- with respect to GEOMATRIX(R) Technology and/or Know-How, including without limitation, any warranty of completeness, accuracy, merchantability or fitness for a particular purpose thereof. 18.2 GENTA JAGO represents and warrants that it has all rights regarding Patents, GEOMATRIX(R)Technology and Know-How necessary to grant the License hereunder. Notwithstanding the preceding sentence, GENTA JAGO does not assume any responsibility and makes no warranty that the performance of this Agreement and any product developed hereunder, including Prototype Formulation(s) and Final Products, do not infringe any third party's patents, patent applications or other intellectual property rights. Notwithstanding the preceding sentence, GENTA JAGO represents and warrants that, as of the effective date of this Agreement, it is not aware and has not knowledge of any such infringement of any third party rights. If, however, during the course of this Agreement either Party discovers that the Prototype Formulation(s) and/or the Final Products infringe or may infringe any third party's intellectual property rights, it shall promptly inform the other Party thereof and the Parties shall meet to discuss the course of action to be taken with regard thereto. 18.3 Nothing in this Agreement shall be construed as a representation made, or warranty given by GENTA JAGO that any patent will issue based upon any pending patent application encompassed by the term Patents, and that any patent encompassed by the term Patents which issues will be valid or enforceable. 18.4 GENTA JAGO assumes no liability or responsibility for any damages caused to KRYPTON, third parties, animals and/or the environment by the manufacturing, marketing or use of the Prototype Formulations or Final Products or the active ingredient contained therein, except to the extent that any of the above are attributable to the gross negligence or willful misconduct of GENTA JAGO in performing its obligations hereunder. 18.5 Subject to the specific representations and warranties given and specific disclaimers of representations and warranties included in this Article 18, and further subject to anything to the contrary contained in this Agreement, either Party shall, as to third parties, be indemnified and held harmless by the other Party from and against any and all losses, liabilities and damages arising from any claim, action or other proceeding by any third party relating to any acts or omissions of the other Party, its directors, officers, employees or agents, or the gross negligence or willful misconduct of such other Party, its directors, officers, employees or agents in performing any of its obligations under this Agreement. 18.6 Any liability, warranty and undertaking contained herein shall be limited to the payment by either Party for direct damages to the other Party and in any event, neither Party shall be liable to the other Party for any special, indirect, punitive or consequential damages and/or loss of profits or anticipated profits, respectively. 18.7 KRYPTON shall, at its own expense, purchase from an insurance company of its choice and shall maintain during the entire term of this Agreement an appropriate and customary -26- policy of general liability and product liability insurance covering its responsibilities regarding Prototype Formulation(s) and Final Products developed, manufactured, marketed and sold under this Agreement and the Active Ingredient contained therein and the use thereof. Upon request, KRYPTON shall provide GENTA JAGO with evidence that such insurances are existing and are maintained. ARTICLE 19 MISCELLANEOUS PROVISIONS 19.1 Entire Agreement: The terms, covenants, conditions and provisions contained in this Agreement, including its Appendices referred to herein, constitute the total and complete agreement of the Parties and supersede all prior understandings and agreements hereto made, and there are no other representations, understandings or agreements relating to the subject matter hereof. The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except by the written consent of both of the Parties to this Agreement. 19.2 Assignment: This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party, other than to an Affiliate of such Party, without the consent of the other Party; provided however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction; and provided further that GENTA JAGO may without the consent of KRYPTON assign any and all of its rights and obligations hereunder to the Licensor and/or any of the Licensor's Affiliates. Any permitted assignee shall assume all obligations of its assignor under this Agreement or under the respective rights or obligations actually assigned. 19.3 Successors: This Agreement and all rights hereunder shall ensure to the benefit of all successors and assigns of both Parties. 19.4 Notices: Any consent, notice or report required or permitted to be given or made under this Agreement by one Party to the other shall be in English and in writing, delivered personally or by courier service or by facsimile (promptly confirmed by personal delivery or courier service) addressed to the other Party at its address indicated below, or to such other address as shall have been notified in writing to the sending Party by the receiving party from time to time, and shall take effect upon receipt by the addressee. IF TO KRYPTON: KRYPTON LTD. East Wing, Second Level Hadfield House Library Street Gibraltar attn.: PRESIDENT -27- WITH COPIES TO: SKYEPHARMA PLC 105 Piccadilly London W1V 9FN, England attn.: COMPANY SECRETARY AND: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 P.O. Box 4451 CH-8022 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT IF TO GENTA JAGO: GENTA JAGO Technologies B.V. Swiss Branch Grundstrasse 12 CH-6343 Rotkreuz, Switzerland attn.: MANAGEMENT COMMITTEE WITH COPIES TO: RINDERKNECHT GLAUS & STADELHOFER Beethovenstrasse 7 8002 Zurich, Switzerland attn.: DR. THOMAS M. RINDERKNECHT -28- AND: PILLSBURY MADISON & SUTRO LLP 235 Montgomery Street, 15th Floor San Francisco, CA 94104, U.S.A. attn.: THOMAS E. SPARKS, JR., ESQ. 19.5 Independent Contractors: It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party to do so. 19.6 Severability: Each Party hereby acknowledges that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the parties would have entered into this Agreement with such provisions. In case such provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. 19.7 Force Majeure: Neither Party hereto shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party hereto. 19.8 Interest: In the event any amount due and payable under this Agreement is not paid by the due date, then the Party owing such amount shall pay to the creditor, without being requested by the other Party, interest on the total outstanding amount at the rate equal to the London Interbank Offered Rate ("LIBOR"), as published in the Wall Street Journal (Europe) on the date that such payment falls due, increased by three percent (3%), in United States Dollars and adjusted on the first day of every calendar quarter. 19.9 Headings: The titles and headings used in this Agreement are intended for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. -29- 19.10 Waiver: The waiver by either Party hereto of any right hereunder or the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. 19.11 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. ARTICLE 20 DISPUTE RESOLUTION AND ARBITRATION 20.1 In the event of any dispute arising between the Parties concerning this Agreement, GENTA JAGO and KRYPTON agree that in the first place they shall meet for good faith discussions in an attempt to negotiate an amicable solution. 20.2 Any dispute arising between the Parties out of or in connection with this Agreement, or the interpretation, breach or enforcement thereof, which cannot be amicably resolved pursuant to Section 20.1 above within two (2) months as from the first appearance of such dispute, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to all of the other Parties. Any arbitration hereunder shall be conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Any such arbitration shall be conducted in the English language by a panel of three (3) arbitrators appointed in accordance with such rules, and shall be held in PARIS, FRANCE. The arbitrators shall have the authority to grant specific performance, and to allocate among the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award so rendered and an order of enforcement, as the case may be. Whether a claim, dispute or other matter in question would be barred by the applicable statute of limitations, which also shall apply to any arbitration under this section, shall be determined by binding arbitration pursuant to this section. 20.3 Notwithstanding anything contained in this Article 20, either Party may seek preliminary or injunctive measures or relief in any competent court having jurisdiction. ARTICLE 21 APPLICABLE LAW The Parties hereto agree that this Agreement, all transactions executed hereunder and all relationships between the Parties in connection therewith shall be construed under and be governed by the laws of Switzerland without reference to the conflict of law principals thereof, and shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 31st day of October 1996. GENTA JAGO TECHNOLOGIES B.V. /s/ Thomas H. Adams /s/ Jacques Gonella - - - ------------------- ------------------- by: Dr. Thomas H. Adams by: Dr. Jacques Gonella its: Managing Director its: Managing Director KRYPTON LTD. /s/ - - - ------------------- by: its: The Licensor, Jagotec AG, hereby agrees to be bound by the obligations contained in Section 17.5 of this Agreement. -30- JAGOTEC AG /s/ Jacques Gonella /s/ - - - ------------------- ------------------- by: by: its: its -31- EX-10.97 13 LICENSE TERMINATION AGREEMENT EXHIBIT 10.97 CONFIDENTIAL TREATMENT REQUESTED LICENSE TERMINATION AGREEMENT BETWEEN THE UNDERSIGNED: Wilton Licensing AG, Postfach, Ch - 6052 Hergiswil ("Wilton") AND Genta, Inc., 3350 General Atomics Court, San Diego, CA 92121, and Genta Pharmaceuticals Europe SA, 146 Rue Paradis, F - 13006 Marseille. WHEREAS: On 28th October 1991, Genta and Wilton signed a contract for a duration of * or for the life of the PATENT in each country of the TERRITORY, whichever is longer under the terms and conditions of which Wilton granted to Genta a right and license to make, have made, use and sell the PRODUCT as regards to the new chemical entity (SCY ER). On 28th October 1991, Genta and Wilson also signed a contract for a duration of * or for the life of the PATENT in each country of the TERRITORY, whichever is longer under the terms and conditions of which Wilton granted to Genta a right and license to make, have made, use and sell the PRODUCT as regards to the new chemical entity (SCY). These agreements (hereafter referred to as the CONTRACTS enclosed in appendix are governed by the laws of the State of California). Due to various circumstances Genta has agreed to terminate the CONTRACTS. Wilson has agreed to such termination. THEREFORE GENTA, WILSON AND PERMATEC HAVE AGREED TO FIND AN AMICABLE SOLUTION ON THE FOLLOWING TERMS: - - - ---------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 1 - Article 1 Upon payment by Permatec of the lump sum as described in article 2, hereafter, Wilton and Genta acknowledge that the CONTRACTS shall be terminated and be transferred back to Wilton effective on 25th November 1996. Genta agrees that with such termination all development results, studies, dossiers, files and documents in connection with the CONTRACTS or which have been acquired by Genta in connection with its activities under the CONTRACTS ("Development Results") shall be transferred and assigned to Wilton and that Wilton shall be solely entitled to utilize the Development Results. Article 2 So as to avoid any dispute of whatsoever nature arising out of the above, Permatec undertakes to pay to Genta upon execution of the Agreement the sum of * and on 5th December 1996 a further amount of * in full and final settlement of all mutual claims under the CONTRACTS and for the transfer of the Development Results. Article 3 Genta will acknowledge receipt of the sum described in Article 2 above, and acknowledges that all its rights arising out of the performance of the CONTRACTS with Wilton have been fulfilled and transferred back to Wilton and Genta shall not continue any activity in respect of the subject matter of the CONTRACTS or shall not use anymore the Development Results. Genta agrees to execute any such other documents which may be necessary for the transfer and assignment of the Development Results. Wilton also acknowledges that all its rights arising out of the performance and termination of the CONTRACTS between Genta and Wilton have been fulfilled and that Genta shall be fully released from any obligation to Wilton in connection with the CONTRACTS, except for the transfer and assignment of the Development Results. Wilton acknowledges that Genta does not give any guarantee or warranty in respect of the Development Results. Wilton and Genta also declare that all their rights arising out of the legal relations and/or out of the CONTRACTS which existed between them have been fulfilled. Article 4 The existence and contents of this agreement are strictly confidential and shall not be disclosed to any third party, unless and only to the extent that such disclosure is required by laws or regulations, are legally required by a competent authority. Any such disclosure shall not relieve either party of its obligation of confidentiality thereunder in respect of any other legal or physical person other than those to whom disclosure is required by law regulations or competent authorities. - - - ---------------- * Confidential treatment requested. The redacted material has been separately filed with the Commission. - 2 - Article 5 Any and all rights and interpretation arising out of this settlement are governed by reference to the CONTRACTS and the provision contained herein. Article 6 This agreement shall not constitute an admission of liability by either of the parties, except as expressly set forth herein. The above provisions, which have been fully discussed and agreed upon between the parties represent the entirety of their agreement and constitute a settlement. Made in Muttenz, on Monday, 2nd December 1996, in three (3) originals. /s/ /s/ - - - ---------------------- ------------------------- Genta, Inc. Wilton Licensing AG Enclosures: *Appendix *Power of Attorney - 3 - EX-10.98 14 ACCURATE TRANSLATION CERTIFICATION LEGAL LANGUAGE SERVICES - - - ------------------------------------------------------------------------------- [LOGO] A Division of ALS International Telephone (212) 766-4111 18 John Street Toll Free (800) 788-0450 Suite 300 Telefax (212) 349-0964 New York, NY 10038-4011 March 25, 1997 To Whom It May Concern: This is to certify that the attached translation from French into English is an accurate representation of the document received by this office. This document is designated as: CONTRACT NO. A 93 08 222 U 00, BETWEEN AGENCE NATIONALE DE VALORISATION DE LA RECHERCHE (ANVAR) AND GENTA PHARMACEUTICALS EUROPE ET. AL. Richard Grose, who performed this translation, is certified by this agency as fluent in French and standard North American English and is qualified to translate. He attests to the following: "To the best of my knowledge, the accompanying text is a true, full and accurate translation of the specified document." /s/ Richard Grose - - - ------------------------------------ Signature of Richard Grose Subscribed and sworn to before me this 3-25, 1997 /s/ Sherry Riedel - - - ------------------------------------ Sherry Riedel Notary Public, State of New York No. 43-5041034 Qualified in Richmond County Certificate Filed in New York County Commissin Expires March 27, 1999 Sincerely, Victor J. Hertz President EX-22.1 15 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 22.1 GENTA INCORPORATED SUBSIDIARIES OF THE REGISTRANT JBL Scientific, Inc., a California corporation, is a wholly owned subsidiary of Genta Incorporated. Genta Pharmaceuticals Europe S.A., a French corporation, is a wholly owned subsidiary of Genta Incorporated. EX-23.1 16 CONSENT OF AUDITORS EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements on Forms S-3 and S-8 of our reports dated February 28, 1997, with respect to the consolidated financial statements of Genta Incorporated and the financial statements of Genta Jago Technologies B.V., included in the Genta Incorporated Annual Report (Form 10-K) for the year ended December 31, 1996. /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP San Diego, California March 13, 1997 EX-27 17 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 532,013 0 664,696 0 992,243 2,374,116 5,951,568 2,317,287 11,169,384 4,328,609 2,766,543 0 529 39,992 4,033,711 11,169,384 4,924,694 5,297,955 2,479,337 13,951,784 0 0 (59,770) 0 0 0 0 0 0 (11,425,782) (.47) 0
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