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Assignment And Assumption And Royalty Agreement

This is an actual contract between Incara Pharmaceuticals and Endo Pharmaceuticals Solutions.

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Sectors: Biotechnology / Pharmaceuticals
Governing Law: Delaware, View Delaware State Laws
Effective Date: May 08, 1998
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ASSIGNMENT AND ASSUMPTION AND
ROYALTY AGREEMENT


THIS AGREEMENT effective as of May 8, 1998, (the "Effective Date") between Intercardia, Inc., a corporation organized and existing under the laws of Delaware and having its principal office at 3200 East Highway 54, Cape Fear Building, Suite 300, Research Triangle Park, North Carolina 27709 ("Intercardia") and Interneuron Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware and having its principal office at 99 Hayden Avenue, Lexington MA 02173 ("Interneuron").


W I T N E S S E T H:


WHEREAS, in connection with an Agreement and Plan of Merger entered into on the Effective Date (the "Merger Agreement"), Intercardia has agreed to acquire from Interneuron all of the capital stock (the "Stock") of Transcell Technologies, Inc. ("Transcell") owned by Interneuron under the terms and conditions contained therein; and


WHEREAS, Interneuron has agreed to assign (the "Assignment") to Intercardia Interneuron's rights, benefits and interests under the agreements set forth on Appendix A hereto (the "Assigned Agreements") and to continue to guaranty certain lease obligations of Transcell under certain conditions (the "Guaranty Agreement") effective upon the closing of the merger (the "Merger") contemplated by the Merger Agreement; and


WHEREAS, as consideration for the Assignment and the Guaranty Agreement, Intercardia has agreed to pay to Interneuron royalties on Net Sales of Products (each as defined herein), upon the terms and conditions set forth herein;


NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the parties hereby agree as follows:


ARTICLE I


DEFINITIONS


Unless specifically set forth to the contrary herein, the following terms, where used in the singular or plural, shall have the respective meanings set forth below:


I.1 "Closing Date" shall mean the closing date of the Merger.


I.2 "Common Stock" shall mean the common stock, $.001 par value, of
Intercardia.


I.3 Defined Terms Appearing in Merck Agreement. The following terms shall have
the respective meanings set forth in the Merck Agreement:


(a) Affiliate;


(b) Calendar Quarter;


(c) Calendar Year;


(d) First Commercial Sale;


(e) Net Sales.


I.4 "Earned Payment" shall mean the $3,000,000 payment made by Intercardia in
Common Stock to Interneuron on the Closing Date.


I.5 "Fair Market Value" shall mean, on any applicable payment date, (a) the
average of the high and low sales price of the Common Stock on the five
(5) most recent trading days, ending two (2) business days immediately
prior to the applicable payment date, in which the trading volume of the
Common Stock was at least 1500 shares, or, if no such sales take place on
any such date, the average of the closing bid and asked prices of the
Common Stock on such date, in each case as officially reported on the
Nasdaq National Market or any other national securities exchange on which
the Common Stock is then listed, or (b) if the Common Stock is not then
listed or admitted to trading on the Nasdaq National Market or any other
national securities exchange, the average of the reported closing bid and
asked prices of the Common Stock on the five (5) trading days ending on
such date as shown by Nasdaq or (c) if the Common Stock is not then listed
on any exchange or shown by Nasdaq, the higher of (x) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of Intercardia as
at the last day of any month ending within 60 days preceding the date as
of which the determination is to be made or (y) the fair value thereof
determined in good faith by an independent valuation firm jointly selected
by the parties as of a date which is within 15 days of the date as of
which the determination is to be made.


I.6 "Merck" shall mean Merck & Co., Inc.


I.7 "Merck Agreement" shall mean the Research Collaboration and License
Agreement by and among Merck & Co., Inc., Transcell and Interneuron
effective as of June 30, 1997, a copy of which is attached hereto as
Appendix 1.2.


I.8 "Party" shall mean Intercardia or Interneuron.


-2-


I.9 "Princeton License Agreement" shall mean the License Agreement between the
Trustees of Princeton University ("Princeton") and Interneuron entered
into on April 15, 1998, effective as of June 30, 1997.


I.10 "Princeton Sponsored Research Agreements" shall mean the Research
Agreements between Princeton and Interneuron dated April 29, 1997 relating
to Research Proposals titled "Construction of a Vancomycin Library" and
"Towards a Map of the Active Site of MurG."


I.11 "Product" shall mean a product defined in the Merck Agreement as a
Licensed Product.


I.12 "Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder.


I.13 "Side Agreement" shall mean the Side Agreement effective as of June 30,
1997 by and among Merck, Princeton, Interneuron and Transcell.


ARTICLE II


ASSIGNMENT AND ASSUMPTION; GUARANTY AGREEMENT


II.1 Assignment and Assumption. Interneuron hereby assigns to Intercardia all
of its rights, benefits and interests under each of the Assigned
Agreements. Intercardia hereby assumes and agrees to pay, perform,
discharge and carry out all of the obligations and liabilities of
Interneuron under each of the Assigned Agreements.


II.2 Guaranty Agreement. Interneuron hereby agrees to continue its respective
guaranties set forth on Appendix 2.2 hereof (the "Guaranties") until such
time as the respective guaranty can be terminated or transferred to
Intercardia. Intercardia hereby agrees to (i) use its best efforts to
terminate or remove Interneuron from each of the Guaranties and (ii) pay,
perform, discharge and carry out all the obligations and liabilities under
the leases subject to the Guaranties; provided, however, that promptly
after the Closing Date, Intercardia shall submit a written request to
terminate or remove Interneuron from such Guaranties and shall negotiate
in good faith to do so; further provided that, in the event that
Intercardia shall be unsuccessful in terminating or removing Interneuron
from such Guaranties at such time, Intercardia hereby covenants to submit
a similar request on an annual basis, or promptly following the closing of
any capital raising transaction of Intercardia, whichever is sooner, until
such Guaranties are terminated. Interneuron may participate in or initiate
any discussions relating to the termination of, or removal of Interneuron
from, such Guaranties.


-3-


II.3 Consents or Approvals. To the extent that any consent or approval is
required to permit the assignment to Intercardia of any Assigned Agreement
or any agreement, commitment or other contractual right thereof,
contemplated hereunder to be assigned to Intercardia and such consent or
approval is not obtained, this Agreement shall not constitute an
assignment thereof. However, Interneuron and Intercardia shall cooperate
in any reasonable arrangements designed to provide for Intercardia all of
the benefits (and to assure that Interneuron will be effectively relieved
from related liabilities) under such agreement or commitment; provided,
however, that neither Interneuron nor Intercardia shall be required to
enter into any arrangement which, in the reasonable opinion of its
counsel, violates the provisions of any contract, law or regulation to
which such Party is a party or by which such Party is bound. Intercardia
agrees that, so long as it is a party to any such agreement or commitment
Intercardia will fully perform all of Interneuron `s obligations
thereunder which arise following the Effective Date.


ARTICLE III


EARNED PAYMENT; ROYALTIES AND REPORTS


III.1 Earned Payment and Royalties. In consideration for Interneuron's
agreements hereunder, Intercardia shall make the following payments to
Interneuron:


III.1.1 Earned Payment. Intercardia shall pay the Earned Payment to
Interneuron on the Closing Date. The Earned Payment shall be
non-refundable and shall be paid in shares of Intercardia Common
Stock calculated by dividing $3,000,000 by the Per Share Price.
The Per Share Price shall equal the Fair Market Value of
Intercardia Common Stock determined as of the Closing Date;
provided, however, that if the Fair Market Value of Intercardia
Common Stock determined as of the Closing Date is (i) less than
$15.00 then the Per Share Price shall equal $15.00 and (ii) more
than $29.00, the Per Share Price shall equal $29.00.


III.1.2 Royalties


(a) Subject to the terms and conditions of this Agreement,
Intercardia shall pay to Interneuron royalties based on
cumulative annual Net Sales of Products by Merck,
Intercardia, their Affiliates or sublicensees in the
percentages set forth below:


Cumulative Annual Net Sales Royalty
--------------------------- -------
Less than or equal to $500,000,000 1%
Greater than $500,000,000 1.5%


-4-


(b) Royalties at the rates set forth above shall be
effective as of the date of First Commercial Sale of a
Product and shall continue until Merck, or its successor
in interest to the Merck Agreement, no longer has an
obligation to pay royalties pursuant to the Merck
Agreement, on any Product; provided, however, that
payment of royalties shall not be due until cumulative
net sales of Products equal $300,000,000 (the "Initial
Payment Event").


III.2 Reports; Payment of Royalty; Adjustments.


(a) Following the First Commercial Sale of a Product and during the
term of the Agreement, Intercardia shall furnish to Interneuron
a copy of the written report received by Intercardia under
Section 5.5 of the Merck Agreement for each Calendar Quarter of
a Calendar Year showing the sales of all Products subject to
royalties sold by Merck, Intercardia, their Affiliates and
sublicensees during the reporting period (and a reconciliation
to Net Sales) together with a report showing the royalties
accrued under this Agreement (collectively, the "Accrual
Reports"). Accrual Reports shall be due on the thirty-fifth
(35th) day following the close of each Calendar Quarter.
Royalties shown to have accrued as of the Initial Payme
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