UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Quarter Ended December 31, 2002 Commission File No. 0-12957
ENZON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2372868
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
685 Route 202/206, Bridgewater, New Jersey 08807
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 541-8600
ENZON, INC.
(Former names or former address, if changed since last report.)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b -2 of the Exchange Act). Yes |X| No |_|
As of February 12, 2003, there were 43,392,448 shares of Common Stock, par value
$.01 per share, outstanding.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, 2002 and June 30, 2002
(In thousands, except share data)
December 31, 2002 June 30, 2002
(unaudited) *
----------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 99,357 $ 113,858
Short-term investments 20,263 75,165
Accounts receivable 32,151 26,050
Inventories 12,620 2,214
Other current assets 3,848 4,175
--------- ---------
Total current assets 168,239 221,462
--------- ---------
Property and equipment 36,530 19,230
Less accumulated depreciation and amortization 9,909 9,128
--------- ---------
26,621 10,102
--------- ---------
Other assets:
Marketable securities 26,135 295,991
Cost method equity investments 21,145 48,382
Debt issue costs, net 10,032 10,946
Intangible assets, net 230,899 23,865
Goodwill 150,841 --
--------- ---------
439,052 379,184
--------- ---------
Total assets $ 633,912 $ 610,748
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,192 $ 4,526
Accrued expenses 22,026 6,175
Accrued interest 9,000 9,000
--------- ---------
Total current liabilities 45,218 19,701
--------- ---------
Accrued rent 500 552
Notes payable 400,000 400,000
--------- ---------
400,500 400,552
--------- ---------
Stockholders' equity:
Preferred stock-$.01 par value, authorized 3,000,000 shares; issued and
outstanding 7,000 shares at December 31, 2002 and June 30, 2002
(liquidation preference aggregating $354,000
at December 31, 2002 and $347,000 at June 30, 2002) -- --
Common stock-$.01 par value, authorized 90,000,000 shares,
issued and outstanding 43,364,523 shares at December 31, 2002 and
42,999,823 shares at June 30, 2002 434 429
Additional paid-in capital 267,671 262,854
Accumulated other comprehensive income (loss) (220) 1,096
Deferred compensation (4,549) (1,202)
Accumulated deficit (75,142) (72,682)
--------- ---------
Total stockholders' equity 188,194 190,495
--------- ---------
Total liabilities and stockholders' equity $ 633,912 $ 610,748
========= =========
* Condensed from audited financial statement.
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
2
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three and Six Months Ended December 31, 2002 and 2001
(In thousands, except per share data)
(unaudited)
Three months ended Six months ended
December 31, December 31,
2002 2001 2002 2001
-------- -------- -------- --------
Revenues:
Net sales $ 8,544 $ 5,872 $ 15,110 $ 10,954
Royalties 22,903 12,630 41,321 19,617
Contract revenue 50 100 134 175
-------- -------- -------- --------
Total revenues 31,497 18,602 56,565 30,746
-------- -------- -------- --------
Costs and expenses:
Cost of sales 4,265 1,456 6,779 2,846
Research and development expenses 5,692 3,988 9,754 7,486
Selling, general and administrative expenses 7,397 4,489 11,305 8,576
Amortization of acquired intangibles 1,293 36 1,328 71
Write-down of carrying value of investments 27,237 -- 27,237 --
-------- -------- -------- --------
Total costs and expenses 45,884 9,969 56,403 18,979
-------- -------- -------- --------
Operating income (loss) (14,387) 8,633 162 11,767
-------- -------- -------- --------
Other income (expense):
Investment and other income, net 4,345 4,750 7,798 10,927
Interest expense (4,957) (4,921) (9,914) (9,915)
-------- -------- -------- --------
(612) (171) (2,116) 1,012
-------- -------- -------- --------
Income (loss) before taxes (14,999) 8,462 (1,954) 12,779
Tax (benefit) expense 245 (183) 506 (97)
-------- -------- -------- --------
Net income (loss) $(15,244) $ 8,645 $ (2,460) $ 12,876
======== ======== ======== ========
Basic earnings (loss) per common share $ (0.35) $ 0.20 $ (0.06) $ 0.30
======== ======== ======== ========
Diluted earnings (loss) per common share $ (0.35) $ 0.20 $ (0.06) $ 0.29
======== ======== ======== ========
Weighted average number of common shares
outstanding-basic 43,011 42,767 42,995 42,444
======== ======== ======== ========
Weighted average number of common shares and
dilutive potential common shares outstanding 43,011 43,959 42,995 43,792
======== ======== ======== ========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
3
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
Six Months Ended December 31, 2002 and 2001
(In thousands)
(unaudited)
Six Months Ended
December 31,
2002 2001
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (2,460) $ 12,876
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,610 1,332
Non-cash expense for issuance of common stock 213 153
Amortization of bond premium/discount 1,983 (3,573)
Non-cash write-down of carrying value of investment 27,237 --
Decrease in accrued rent (52) (13)
Changes in assets and liabilities 5,961 (2,718)
--------- ---------
Net cash provided by operating activities 35,492 8,057
--------- ---------
Cash flows from investing activities:
Capital expenditures (3,594) (3,538)
Purchase of ABELCET business (369,120) --
Proceeds from sale of investments 350,318 232,249
Maturities of investments 53,000 88,429
Purchases of investments (81,859) (454,941)
--------- ---------
Net cash used in investing activities (51,255) (137,801)
--------- ---------
Cash flows from financing activities -
proceeds from exercise of common stock options 1,262 4,241
--------- ---------
Net decrease in cash and cash equivalents (14,501) (125,503)
Cash and cash equivalents at beginning of period 113,858 310,224
--------- ---------
Cash and cash equivalents at end of period $ 99,357 $ 184,721
========= =========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
4
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(unaudited)
(1) Organization and Basis of Presentation
The unaudited consolidated condensed financial statements have been
prepared from the books and records of Enzon Pharmaceuticals, Inc. (the
"Company") and its subsidiaries in accordance with accounting principles
generally accepted in the United States of America for interim financial
information. Accordingly, they do not include all of the information and
footnotes required for complete annual financial statements. In the opinion of
management, all adjustments (consisting only of normal and recurring
adjustments) considered necessary for a fair presentation have been included.
Certain prior year balances were reclassified to conform to the 2002
presentation. Interim results are not necessarily indicative of the results that
may be expected for the year.
(2) Comprehensive Income (Loss)
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", requires unrealized gains and losses on the Company's
available-for-sale securities to be included in other comprehensive income.
The following table reconciles net income to comprehensive income (loss)
(in thousands):
Three months ended Six months ended
December 31 December, 31
2002 2001 2002 2001
-------- ------- ------- --------
Net income (loss) $(15,244) $ 8,645 $(2,460) $ 12,876
Other comprehensive income (loss):
Unrealized holding gain (loss)
arising during the period (1,281) (1,331) (800) (1,267)
Less: reclassification adjustment
for net gain realized in net income (2,115) -- (2,115) 885
-------- ------- ------- --------
Total other comprehensive income (loss) (3,396) (1,331) (1,315) (382)
-------- ------- ------- --------
Total comprehensive income (loss) $(18,640) $ 7,314 $(3,775) $ 12,494
======== ======= ======= ========
(3) Earnings Per Common Share
Basic earnings per share is computed by dividing the net income available
to common shareholders adjusted for cumulative undeclared preferred stock
dividends for the relevant period, by the weighted average number of shares of
Common Stock issued and outstanding during the periods. For purposes of
calculating diluted earnings per share for the three and six months ended
December 31, 2001, the denominator includes both the weighted average number of
shares of Common Stock outstanding and the number of dilutive Common Stock
equivalents. The number of dilutive Common Stock equivalents includes the effect
of non-qualified stock options calculated using the treasury stock method and
the number of shares issuable upon conversion of the outstanding Series A
Preferred Stock. Due to the net loss recorded for the three and six months ended
December 31, 2002, the exercise or conversion of approximately 587,000 dilutive
potential common shares is not included for purposes of the diluted loss per
share calculation. The number of shares issuable upon conversion of the
Company's 4.5% Convertible Subordinated Notes due 2008 (the "Notes") have not
been included as the effect of their inclusion
5
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(unaudited)
would be anti-dilutive. As of December 31, 2002, the Company had 6,989,000
dilutive potential common shares outstanding that could potentially dilute
future earnings per share calculations.
The following table reconciles the basic and diluted earnings (loss) per
share calculations (in thousands):
Three months ended Six months ended
December 31, December 31,
2002 2001 2002 2001
-------- ------- -------- -------
Net income (loss) $(15,244) $ 8,645 $ (2,460) $12,876
Less: Preferred stock dividends 4 4 7 7
-------- ------- -------- -------
Net income (loss) available to common
Stockholders $(15,248) $ 8,641 $ (2,467) $12,869
======== ======= ======== =======
Weighted average number of common
shares outstanding-basic 43,011 42,767 42,995 42,444
Effect of dilutive securities:
Conversion of preferred stock -- 16 -- 16
Assumed exercise of non-
qualified stock options and
restricted stock -- 1,176 -- 1,332
-------- ------- -------- -------
Weighted average number of common
shares and dilutive potential common
shares outstanding 43,011 43,959 42,995 43,792
======== ======= ======== =======
(4) Inventories
The composition of inventories at December 31, 2002 and June 30, 2002 is
as follows (in thousands):
December 31, 2002 June 30, 2002
----------------- -------------
Raw materials $ 5,771 $ 827
Work in process 2,568 1,043
Finished goods 4,281 344
------- ------
$12,620 $2,214
======= ======
(5) Cash Flow Information
The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents. Cash payments for
interest were approximately $9 million for the six months ended December 31,
2002. There were no cash payments for interest for the six months ended December
31, 2001. There were no income tax payments made for the six months ended
December 31, 2002 and 2001.
6
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(unaudited)
(6) Income Taxes
The Company recognized a tax provision for the six months ended December
31, 2002 and 2001 which represents the Company's anticipated Alternative Minimum
Tax liability based on the anticipated taxable income for the full fiscal year.
The 2001 fiscal year also had a tax benefit related to the sale of certain New
Jersey state net operating loss carryforwards.
(7) Business Segments
A single management team that reports to the Chief Executive Officer
comprehensively manages the business operations. The Company does not operate
separate lines of business or separate business entities with respect to any of
its approved products or product candidates. In addition, the Company does not
conduct any operations outside of the United States. The Company does not
prepare discrete financial statements with respect to separate product areas.
Accordingly, the Company does not have separately reportable segments as defined
by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information".
(8) Business Acquisition
On November 22, 2002, the Company acquired the North American rights and
operational assets associated with the development, manufacture, sales and
marketing for ABELCET(R) (Amphotericin B Lipid Complex Injection) (the "ABELCET
Product Line") from Elan Corporation, plc, for $360 million plus certain
out-of-pocket expenses. The acquisition is being accounted for by the purchase
method of accounting in accordance with SFAS No. 141 "Business Combinations".
The total purchase price of the acquisition was (in thousands):
Cash $360,000
Out of pocket expenses, primarily legal,
investment banking and accounting fees 9,120
--------
$369,120
========
The purchase price was allocated to the tangible and identifiable
intangible assets acquired based on their estimated fair values at the
acquisition date. The excess of the purchase price over the fair value of
identifiable assets and liabilities acquired amounted to $150.8 million and was
allocated to goodwill.
The following table summarizes the estimated fair values of the assets
acquired as of the acquisition date (in thousands):
Inventories $ 8,572
Property, plant and equipment 13,707
Intangible assets 196,000
Goodwill 150,841
--------
$369,120
========
7
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(unaudited)
Property, plant and equipment and intangible assets were recorded at the
estimated fair value of the assets acquired as determined by a preliminary third
party valuation report. These values are based on preliminary results by third
party appraisals which are still being finalized. Therefore, actual results may
differ materially from preliminary results. Intangible assets include the
following components (in thousands):
Product Patented Technology (12 year estimated life) $ 64,400
Manufacturing Patent (12 year estimated life) 18,300
NDA Approval (12 year estimated life) 31,100
Marketing Intangibles (15 year estimated life) 80,000
Manufacturing Contract (3 year estimated life) 2,200
--------
$196,000
========
Amortization expense for the next five fiscal years is expected to be
approximately $15.5 million per year. Goodwill will not be amortized but will be
tested for impairment at least annually.
The acquisition was accounted for as a purchase in accordance with the
guidance in SFAS 141, Business Combinations, with the results of operations and
cash flows for the ABELCET Product Line included in the Company's consolidated
results from the date of the acquisition.
The unaudited pro forma results of operations is presented for
illustrative purposes only and is not necessarily indicative of the operating
results that would have occurred if the transaction had been consummated at the
dates indicated, nor is it necessarily indicative of future operating results of
the combined companies and should not be construed as representative of these
amounts for any future dates or periods.
The following unaudited pro forma results of operations of the Company for
the three and six-month periods ended December 31, 2002 and 2001, respectively,
assumes the acquisition of the ABELCET Product Line has been accounted for using
the purchase method of accounting as of July 1, 2002 and 2001, respectively, and
assumes the purchase price has been allocated to the assets purchased based on
fair values at the date of acquisition.
The ABELCET Product Line's results of operations included in these pro
forma financial statements are derived from its unaudited financial statements
for the three and six-month periods ended December 31, 2002 and 2001,
respectively. The ABELCET Product Line's financial statements included in the
pro forma information as of all dates and for all periods presented have been
adjusted, where appropriate, to present the ABELCET Product Line's financial
position and results of operations in accordance with generally accepted
accounting principles in the United States.
8
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(unaudited)
The following unaudited pro forma information presents a summary of the
Company's consolidated results of operations as if the ABELCET Product Line
acquisition had taken place on July 1, 2001 (in thousands, except per share
information):
Three months ended Six months ended
December 31, December 31,
------------------- --------------------
2002 2001 2002 2001
-------- ------- ---------- --------
Product sales $ 18,899 $27,273 $ 40,967 $54,128
Total revenues 41,852 40,003 82,422 73,920
Net income (loss) (24,125) 8,528 (16,629) 13,018
Pro forma earnings (loss) per share:
Basic $ (0.56) 0.20 $ (0.38) $ 0.31
Diluted $ (0.55) $ 0.19 $ (0.37) $ 0.30
(9) Write-down of Investment
------------------------
In January 2002, the Company entered into a broad strategic alliance with
Nektar Therapeutics (Nektar) (formerly Inhale Therapeutic Systems, Inc.) to
co-develop products utilizing both companies' proprietary drug delivery
platforms. As a part of this agreement, the Company purchased $40 million of
newly issued Nektar convertible preferred stock which is currently convertible
into Nektar common stock at a conversion price of $22.79 per share. Under the
cost method of accounting, investments are carried at cost and are adjusted only
for other-than-temporary declines in fair value, distributions of earnings and
additional investments.
As a result of the continued decline in the price of Nektar's common
stock, the Company determined that the decline in the value of its investment in
Nektar was other than temporary. Accordingly, during the three months ended
December 31, 2002, the Company recorded a write down of the carrying value of
its investment in Nektar, which resulted in a non-cash charge of $27.2 million.
The adjustment was calculated based on an assessment of the fair value of the
investment.
(10) License Agreement
-----------------
Effective December 31, 2002, Enzon obtained an exclusive license for the
right to sell, market and distribute SkyePharma PLC's ("SkyePharma") DEPOCYT(R),
an injectable chemotherapeutic approved for the treatment of patients with
lymphomatous meningitis in the United States and Canada.
Enzon will pay a license fee of $12 million for the North American rights
to DEPOCYT. SkyePharma will manufacture DEPOCYT and Enzon will purchase the
finished product at a purchase price equal to 35% of net sales, which percentage
of net sales can be reduced should certain defined sales target be exceeded.
SkyePharma is also entitled to milestone payments based on the achievement of
certain sales levels and the approval of additional indications. Enzon is
required to meet certain minimum sales levels for the product which are based on
historical sales levels. Enzon's license is for an initial term of ten years and
is automatically renewable for successive two year terms thereafter. The Company
has recorded the $12 million in intangible assets (product rights) and is
amortizing it over a ten year period. The amount was paid in early January 2003.
As such, at December 31, 2002 the amount due was included in accrued expenses in
the accompanying balance sheet.
On January 2, 2003, the Company and SkyePharma also entered into a
strategic alliance based on a broad
9
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(unaudited)
technology access agreement. The two companies will draw on their combined drug
delivery technology and expertise to jointly develop up to three products for
future commercialization. These products will be based on SkyePharma's
proprietary platforms in the areas of oral, injectable and topical drug
delivery, supported by technology to enhance drug solubility and Enzon's
proprietary PEG modification technology, for which Enzon will receive a $3.5
million technology access fee. SkyePharma will receive a milestone payment for
each product based on its own proprietary technology that enters Phase II
clinical development. Research and development costs related to the technology
alliance will be shared equally, as will future revenues generated from the
commercialization of any jointly-developed products.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information contained herein contains "forward-looking statements" which can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy. We cannot assure you that the future results covered by the
forward-looking statements will be achieved. The matters set forth in the "Risk
Factors" section of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 2002, which is incorporated herein by reference, constitute
cautionary statements identifying important factors with respect to such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to vary materially from the future results indicated
in such forward-looking statements. Other factors could also cause actual
results to vary materially from the future results indicated in such
forward-looking statements.
Acquisition of ABELCET Business
On November 22, 2002, we acquired the North American rights and
operational assets associated with the development, manufacture, sales and
marketing of ABELCET(R) (Amphotericin B Lipid Complex Injection) ("the ABELCET
Product Line") from Elan Corporation, plc ("Elan") for $360 million plus
out-of-pocket expenses. This transaction is being accounted for as a business
combination.
Unless otherwise indicated, the discussions in this report of the results
of operations for the three and six months ended December 31, 2002 and financial
condition at December 31, 2002 include the results of operations of the ABELCET
Product Line commencing from November 23, 2002. Comparisons are made to the
results of operations for the three and six months ended December 31, 2001, and
financial condition as of June 30, 2002, which include only the historical
results of Enzon Pharmaceuticals, Inc.
Results of Operations
Three months ended December 31, 2002 vs. Three months ended December 31, 2001
Revenues. Revenues for the three months ended December 31, 2002 increased by 69%
to $31,497,000, as compared to $18,602,000 for the three months ended December
31, 2001. The components of revenues are net sales and royalties we earn on the
sale of our products by others and contract revenues. Net sales increased 45% to
$8,544,000 for the three months ended December 31, 2002, as compared to
$5,872,000 for the three months ended December 31, 2001. The increase in net
sales was due to the commencement of sales of ABELCET in North America and
increased sales of ADAGEN(R) and ONCASPAR(R). During November 2002, we acquired
the North American rights and operational assets associated with the
development, manufacture, sales and marketing for ABELCET from Elan. During the
three months ended December 31, 2002, we recorded $1,322,000 of sales related to
ABELCET, of which $588,000 related to sales of the product in North America and
$733,000 related to the shipment of the product to Elan for the European market,
and other contract manufacturing revenue. Sales of ONCASPAR increased by 22% to
$3,099,000 for the three months ended December 31, 2002 from $2,543,000 in the
previous year as a result of the reacquisition of our rights to market and
distribute ONCASPAR for certain territories previously licensed to Aventis.
Sales of ADAGEN increased by 24% for the three months ended December 31, 2002 to
$4,123,000, as compared to $3,329,000 for the three months ended December 31,
2001 due to an increase in patients.
Royalties for the three months ended December 31, 2002 increased to
$22,903,000, as compared to $12,630,000 for the three months ended December 31,
2001. The increase was primarily due to a full three months of sales during the
current quarter of PEG-INTRON(R) in combination with REBETOL(R) in the U.S.
Schering-Plough launched PEG-INTRON as combination therapy with REBETOL in the
U.S. in October 2001.
While we commenced the sale of ABELCET during the quarter ended December
31, 2002, sales of the product will be limited until January 2003 in order to
bring down the level of product held by our wholesalers. We expect sales to
return to normalized levels during February 2003 and for the remainder of fiscal
2003. We expect
11
ADAGEN and ONCASPAR sales to grow over the next year at similar levels as
achieved during the previous twelve months. During October 2002, Hoffmann-La
Roche's PEGASYS(R), a pegylated version of its interferon product Roferon(R)-A,
was approved in the United States as a monotherapy for hepatitis C. Based upon
Schering-Plough's historical market share of the alpha interferon market for
hepatitis C, the published clinical results of PEG-INTRON and PEGASYS, and the
fact that Schering-Plough has been marketing PEG-INTRON in the United States
since February 2001 and in Europe since June 2000, we do not expect PEGASYS to
displace PEG-INTRON as the market leader. However, we cannot assure you that the
overall market for pegylated alpha interferon products will, in fact, increase
or that Schering-Plough will be able to effectively compete with Roche in this
market. Moreover, we cannot assure you that any particular sales levels of
ABELCET, ADAGEN, ONCASPAR or PEG-INTRON will be achieved or maintained.
During the three months ended December 31, 2002, we had export sales and
royalties on export sales of $7,522,000, of which $6,803,000 were in Europe.
Export sales and royalties recognized on export sales for the prior quarter were
$6,949,000, of which $6,527,000 were in Europe.
Cost of Sales. Cost of sales, as a percentage of net sales increased to 50% for
the three months ended December 31, 2002 as compared to 25% for the three months
ended December 31, 2001. The increase was due to higher cost of goods sold for
ABELCET, due to certain purchase accounting adjustments to the acquired
inventory and as a result of unabsorbed capacity costs. The increase was also
due to our reacquisition of ONCASPAR, which resulted in increased cost of goods
sold for the product. Under the reacquisition agreement we made a $15 million
payment to Aventis in June 2002 and we will pay Aventis a 25% royalty on net
sales of ONCASPAR. The royalty and amortization of the $15 million payment are
included in cost of goods sold for the product, accounting for the increase in
cost of goods sold as a percentage of sales.
Research and Development. Research and development expenses increased by 43% to
$5,692,000 for the three months ended December 31, 2002 from $3,988,000 for the
three months ended December 31, 2001. The increase was primarily due to
increased payroll and related expenses due to increased headcount related to our
internal research and preclinical activities and increased spending related to
our Micromet collaboration to advance our SCA technology and develop the next
generation of antibody products. Research and development activities are
expected to continue to increase significantly as we continue the advancement of
the current and additional Phase II clinical trials for PROTHECAN(R) and we
conduct preclinical and clinical trials for additional compounds.
Selling, General and Administrative. Selling, general and administrative
expenses for the three months ended December 31, 2002 increased by 65% to
$7,397,000, as compared to $4,489,000 in the three months ended December 31,
2001. This increase was due to; (i) increased selling expenses related to the
ABELCET acquisition and the sales force we hired from Elan; (ii) increased sales
and marketing costs due to the reacquisition of marketing and distribution
rights for ONCASPAR; and (iii) increased general and administrative personnel
and related costs. These increases were partially offset by a reduction in legal
expense related to the prior years patent litigation with Nektar Therapeutics,
formerly Inhale Therapeutics. During January 2002, we settled our patent
infringement suit with Nektar and entered into a broad-based technology
collaboration.
Amortization. Amortization increased by $1,257,000 to $1,293,000 in the three
months ended December 31, 2002 compared to the prior year as a result of the
intangible assets acquired in connection with the ABELCET acquisition during the
quarter. Amortization of intangible assets is provided over their estimated
useful lives ranging from 3 to 15 years on a straight-line basis.
Write-down of Investment. In January 2002, the Company entered into a broad
strategic alliance with Nektar Therapeutics (Nektar) (formerly Inhale
Therapeutic Systems, Inc.) to co-develop products utilizing both companies'
proprietary drug delivery platforms. As a part of this agreement, the Company
purchased $40 million of newly issued Nektar preferred convertible stock which
is convertible into Nektar common stock at a current conversion price of $22.79
per share. Under the cost method of accounting, investments are carried at cost
and are adjusted only for other-than-temporary declines in fair value,
distributions of earnings and additional investments.
12
As a result of the continued decline in the price of Nektar's common stock, the
Company determined that the decline in the value of it's investment in Nektar
was other than temporary. Accordingly, during the three months ended December
31, 2002, the Company recorded a write down of the carrying value of its
investment in Nektar, which resulted in a non-cash charge of $27.2 million. The
adjustment was calculated based on an assessment of the fair value of the
investment.
Other Income (Expense). Investment and other income for the three months ended
December 31, 2002 decreased to $4,345,000, as compared to $4,750,000 for the
three months ended December 31, 2001. The decrease resulted from a decrease in
interest bearing investments due to our payment of $369 million in connection
with our purchase of the ABELCET Product Line from Elan in November 2002 and a
decline in interest rates on our investments. This reduction was offset by
approximately $2.1 million in realized gains resulting from the sale of short
term investments sold to fund the ABELCET acquisition. Interest expense remained
relatively unchanged as compared to the same quarter last year. The majority of
interest expense is related to $400,000,000 in 4.5% convertible subordinated
notes outstanding.
Income Taxes. During the three months ended December 31, 2002 we recognized a
tax provision that represents our anticipated Alternative Minimum Tax liability
based on our anticipated taxable income for the full fiscal year. Fiscal 2001
had the same minimum tax liability offset by the sale of certain New Jersey
state net operating loss carryforwards.
Six months ended December 31, 2002 vs. Six months ended December 31, 2001
Revenues. Revenues for the six months ended December 31, 2002 increased by 84%
to $56,565,000 as compared to $30,746,000 for the same period last year. The
components of revenues are net sales, royalties we earn on the sale of products
by others and contract revenues. Net sales increased by 38% to $15,110,000 for
the six months ended December 31, 2002, as compared to $10,954,000 for the same
period last year. The increase in net sales was due to the commencement of sales
of ABELCET in North America and increased sales of ADAGEN and ONCASPAR. During
November 2002, we acquired the North American rights and operational assets
associated with the development, manufacture, sales and marketing for ABELCET
from Elan. During the six months ended December 31, 2002, we recorded $1,322,000
of sales related to ABELCET, of which $588,000 related to sales of the product
in North America and $733,000 related to the shipment of the product to Elan for
the European market, and other contract manufacturing revenue. ONCASPAR sales
for the six months ended December 31, 2002 increased to $5,855,000, or 25%,
compared to $4,701,000 in the same period last year due to the reacquisition of
our rights to market and distribute ONCASPAR from Aventis during the six months
ended December 31, 2002. ADAGEN sales increased by 27% to $7,934,000 for the six
months ended December 31, 2002 compared to $6,252,000, in the prior year due to
an increase in patients.
Royalties for the six months ended December 31, 2002, increased to
$41,321,000 as compared to $19,617,000 in the same period last year. The
increase was primarily due to a full six months of sales in 2002 of PEG-INTRON
in combination with REBETOL in the U.S. and increased sales of PEG-INTRON in
Europe. Schering-Plough launched PEG-INTRON as combination therapy with REBETOL
in the U.S. in October 2001.
During the six months ended December 31, 2002, we had export sales and
royalties on export sales of $15,644,000, of which $13,999,000 were in Europe.
Export sales and royalties recognized on export sales for the prior year were
$11,883,000, of which $11,280,000 were in Europe.
Cost of Sales. Cost of sales as a percentage of sales increased to 45% for the
six months ended December 31, 2002, as compared to 26% for the six months ended
December 31, 2001. The increase was due to a higher cost of goods sold for
ONCASPAR due to our reacquisition of the product from Aventis. Under the
reacquisition agreement, we made a $15 million payment to Aventis in June 2002
and will pay Aventis a 25% royalty on net sales of ONCASPAR. The royalty and
amortization of the $15 million payment are included in cost of goods sold for
the product, accounting for the increase in cost of goods sold as a percentage
of sales. The increase was also due to high
13
cost of goods sold for ABELCET, due to certain purchase accounting adjustments
to the acquired inventory and as a result of unabsorbed capacity costs.
Research and Development. Research and development expenses increased by 30% to
$9,754,000, as compared to $7,486,000 for the six months ended December 31,
2001. The increase was primarily due to increased payroll and related expense
due to increased headcount related to our internal research and preclinical
activities and increased spending related to our SCA technology collaboration
with Micromet.
Selling, General and Administrative. Selling, general and administrative
expenses for the six months ended December 31, 2002 increased by 32% to
$11,305,000, as compared to $8,576,000 in the same period last year. The
increase was primarily due to; (i) increased selling expense related to the
ABELCET acquisition and the sales force we hired from Elan; (ii) increased sales
and marketing costs due to the reacquisition of marketing and distribution
rights for ONCASPAR; and (iii) increased general and administrative personnel
and related costs. These increases were partially offset by a reduction in legal
expense related to the prior year's patent litigation with Nektar Therapeutics,
formally Inhale Therapeutics. During January 2002, we settled our patent
infringement suit with Nektar and entered into a broad based technology
collaboration.
Amortization. Amortization increased by $1,257,000 to $1,328,000 in the six
months ended December 31, 2002 compared to the same period last year as a result
of the intangible assets acquired in connection with the ABELCET acquisition
during the quarter. Amortization of intangible assets is provided over their
estimated lives ranging from 3-15 years on a straight-line basis.
Write-down of Investment. In January 2002, the Company entered into a broad
strategic alliance with Nektar Therapeutics (Nektar) (formerly Inhale
Therapeutic Systems, Inc.) to co-develop products utilizing both companies'
proprietary drug delivery platforms. As a part of this agreement, the Company
purchased $40 million of newly issued Nektar preferred convertible stock which
is currentlyconvertible into Inhale common stock at a conversion price of $22.79
per share. Under the cost method of accounting, investments are carried at cost
and are adjusted only for other-than-temporary declines in fair value,
distributions of earnings and additional investments.
As a result of the continued decline in the price of Nektar's common stock, the
Company determined that the decline in the value of it's investment in Nektar
was other than temporary. Accordingly, during the three months ended December
31, 2002, the Company recorded a write down of the carrying value of its
investment in Nektar, which resulted in a non-cash charge of $27.2 million. The
adjustment was calculated based on an assessment of the fair value of the
investment.
Other Income (Expense). Investment and other income for the six months ended
December 31, 2002 decreased to $7,798,000, as compared to $10,927,000 for the
same period last year. The decrease in interest income was primarily due a
decrease in interest bearing investments due to our payment of $369 million in
connection with our purchase of the ABELCET Product Line from Elan in November
2002 and a decline in interest rates on our investments. This reduction was
offset by approximately $2.1 million in realized gains resulting from the sale
of short term investments sold to fund the ABELCET acquisition. Interest expense
remained relatively unchanged as compared to the same period last year. The
majority of interest expense is related to $400,000,000 in 4.5% convertible
subordinated notes, which were outstanding for both periods.
Income Taxes. During the six months ended December 31, 2002 and 2001 we
recognized a tax provision that represents our anticipated alternative minimum
tax liability based on our anticipated taxable income for the full fiscal year.
Fiscal 2001 had the same minimum tax liability offset by the sale of certain New
Jersey state net operating loss carryforwards.
Liquidity and Capital Resources
Total cash reserves, which include cash, cash equivalents and marketable
securities, were $146,000,000 as of December 31, 2002, as compared to
$485,000,000 as of June 30, 2002. The decrease is primarily due to
14
$369,000,000 paid as a result of the closing of the ABELCET Product Line
acquisition. We invest our excess cash primarily in rated fixed income
securities.
To date, our sources of cash have been the proceeds from the sale of our
stock through public offerings and private placements, the issuance of the 4.5%
convertible subordinated notes, sales and royalties earned on sales of ADAGEN,
ONCASPAR, PEG-INTRON and ABELCET, sales of our products for research purposes,
contract research and development fees, technology transfer and license fees and
royalty advances.
As of December 31, 2002, we had $400,000,000 of 4.5% convertible
subordinated notes outstanding. The notes bear interest at an annual rate of
4.5%. Interest is payable on January 1 and July 1 of each year beginning January
2, 2002. Accrued interest on the notes was approximately $9,000,000 as of
December 31, 2002. The holders may convert all or a portion of the notes into
common stock at any time on or before July 1, 2008. The notes are convertible
into our common stock at a conversion price of $70.98 per share, subject to
adjustment in certain events. The notes are subordinated to all existing and
future senior indebtedness. On or after July 7, 2004, we may redeem any or all
of the notes at specified redemption prices, plus accrued and unpaid interest to
the day preceding the redemption date. The notes will mature on July 1, 2008
unless earlier converted, redeemed at our option or redeemed at the option of
the note holder upon a fundamental change, as described in the indenture for the
notes. Neither we nor any of our subsidiaries are subject to any financial
covenants under the indenture. In addition, neither we nor any of our
subsidiaries are restricted under the indenture from paying dividends, incurring
debt, or issuing or repurchasing our securities.
On December 31, 2002, we entered into an exclusive license agreement for
the right to sell, market and distribute SkyePharma's DEPOCYT(R), an injectable
chemotherapeutic approved for the treatment of patients with lymphomatous
meningitis in the United States and Canada in return for a $12 million license
fee. This license fee is included in accrued expenses in the Consolidated
Condensed Balance Sheet as of December 31, 2002. The payment of the $12 million
license fee will be offset against a $3.5 million technology access fee due from
Skypharma under the strategic alliance agreement we signed on January 2, 2003.
The Company has a capital expenditure commitment for the fiscal year
ending June 30, 2003 of approximately $4.0 million.
As of December 31, 2002, 1,043,000 shares of Series A preferred stock had
been converted into 3,325,000 shares of common stock. Accrued dividends on the
converted Series A preferred stock in the aggregate amount of $3,770,000 were
settled by the issuance of 235,000 shares of common stock and cash payments of
$1,947,000. The preferred shares outstanding at December 31, 2002 are
convertible into approximately 16,000 shares of common stock. Dividends accrue
on the remaining outstanding shares of Series A preferred stock at a rate of
$14,000 per year. As of December 31, 2002, there were accrued and unpaid
dividends totaling $179,000 on the 7,000 shares of Series A preferred stock
outstanding. We have the option to pay these dividends in either cash or common
stock.
Our current sources of liquidity are cash, cash equivalents, and interest
earned on such cash reserves, marketable securities, sales and royalties earned
on sales of ADAGEN, ONCASPAR, PEG-INTRON and ABELCET and sales of our products
for research purposes and license fees. Based upon our currently planned
research and development activities and related costs and our current sources of
liquidity, we anticipate our current cash reserves and expected cash flow from
operations will be sufficient to meet our capital, debt service and operational
requirements for the foreseeable future.
We may seek additional financing, through future offerings of equity or
debt securities or agreements with collaborators with respect to the development
and commercialization of products to fund future operations and potential
acquisitions. We cannot assure you, however, that we will be able to obtain
additional funds on acceptable terms, if at all.
15
Critical Accounting Policies
In December 2001, the SEC requested that all registrants discuss their
most "critical accounting policies" in management's discussion and analysis of
financial condition and results of operations. The SEC indicated that a
"critical accounting policy" is one which is both important to the portrayal of
the company's financial condition and results of operations and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. We believe based on our current business that there are no critical
accounting policies, except for our accounting related to income taxes and cost
method equity investments. Under the asset and liability method of Statement of
Financial Accounting Standards ("SFAS") No. 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance on net deferred tax assets is
provided for when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The Company has significant net
deferred tax assets, primarily related to net operating loss carryforwards, and
continues to analyze what level of the valuation allowance is needed. The
Company assesses the carrying value of its cost method investments in accordance
with SFAS No.115 and SEC Staff Accounting Bulletin No.59. An impairment
write-down is recorded when a decline in the value of an investment is
determined to be other-than-temporary. These determinations involve a
significant degree of judgment and are subject to change as facts and
circumstances change.
Recently Issued Accounting Standards
In July 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
This standard supercedes the accounting guidance provided by Emerging Issues
Task Force Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires companies to recognize
costs associated with exit activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The Company is currently evaluating the effect of this standard on our
consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements No.
5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of the
interpretation are applicable to guarantees issued or modified after December
31, 2002 and are not expected to have a material effect on the Company's
financial statements. The disclosure requirements are effective for financial
statements of interim and annual periods ending after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123, Accounting for Stock-Based Compensation. This Statement amends SFAS No. 123
to provide alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. In addition,
this statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements. Certain
of the disclosure modifications are required for fiscal years ending after
December 15, 2002 and for interim periods beginning after December 15, 2002, and
will be included in future filings.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our exposure to market risk of financial
instruments contains forward-looking statements. Actual results may differ
materially from those described.
Our holdings of financial instruments are comprised of debt securities and
time deposits. All such instruments are classified as available-for-sale
securities. We do not invest in portfolio equity securities or commodities or
use financial derivatives for trading purposes. Our debt security portfolio
represents funds held temporarily pending use in our business and operations. We
manage these funds accordingly. We seek reasonable
16
assuredness of the safety of principal and market liquidity by investing in
rated fixed income securities while at the same time seeking to achieve a
favorable rate of return. Our market risk exposure consists principally of
exposure to changes in interest rates. Our holdings are also exposed to the
risks of changes in the credit quality of issuers. We typically invest the
majority of our investments in the shorter-end of the maturity spectrum, and at
December 31, 2002, all of our holdings were in instruments maturing in four
years or less.
The table below presents the principal amounts and related weighted
average interest rates by year of matuity for our investment portfolio as of
December 31, 2002 (in thousands):
Fair
2003 2004 2005 Total Value
---------------------------------------------------
Fixed Rate $20,050 $21,198 $ 4,712 $45,960 $46,399
Average Interest Rate 2.95% 3.09% 2.30% 2.95% --
Variable Rate -- -- -- -- --
Average Interest Rate -- -- -- -- --
---------------------------------------------------
$20,050 $21,198 $ 4,712 $45,960 $46,399
===================================================
Our 4.5% convertible subordinated notes in the principal amount of
$400,000,000 due July 1, 2008 have fixed interest rates. The fair value of the
notes is affected by changes in interest rates and by changes in the price of
our common stock.
17
PART II OTHER INFORMATION
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Exchange Act) as of a date
(the "Evaluation Date") within 90 days prior to the filing date of this report.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective in timely alerting them to the material information
relating to us required to be included in our periodic SEC filings.
(b) Changes in internal controls.
There were no significant changes made in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their last evaluation.
18
Item 5. Submission of Matters to a Vote of Security Holders
(a) An annual meeting of stockholders was held on December 3, 2002.
(b) The directors elected at the annual meeting were Arthur Higgins and
Dr. Rosina Dixon. The term of office as a director for each of David
S. Barlow, Rolf A. Classon, Dr. David W. Golde, Robert LeBuhn and
Robert L. Parkinson Jr. continued after the annual meeting.
(c) The matters voted upon at the annual meeting and the results of the
voting, including broker non-votes where applicable, are set forth
below:
(i) The stockholders voted 32,153,528 shares in favor and
1,165,253 shares withheld with respect to the election of
Arthur Higgins as a Class I director of the Company,
32,118,144 shares in favor and 1,200,637 shares withheld with
respect to the election of Dr. Rosina Dixon as a Class I
director of the Company. Broker non-votes were not applicable.
(ii) The stockholders voted 33,121,997 shares in favor, 187,127
against and 9,657 abstained with respect to a proposal to
approve the amendment to the Company's Certificate of
Incorporation to change the name of the Company from "Enzon,
Inc." to "Enzon Pharmaceuticals, Inc." Broker non-votes were
not applicable.
(iii) The stockholders voted 32,513,856 shares in favor and 795,072
against and 9,853 abstained with respect to a proposal to
ratify the selection of KPMG LLP to audit the Company's
consolidated financial statements for the fiscal year ending
June 30, 2003. Broker non-votes were not applicable.
19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K).
Page Number
or
Exhibit Incorporation
Number Description By Reference
------ ----------- ------------
3(i) Certificate of Incorporation, as amended ^^^
3(i)(a) Amendment to Certificate of Incorporation ^^^^(A)
3(ii) By laws, as amended ^^(3(ii))
4.1 Indenture dated as of June 26, 2001, between the Company and
Wilmington Trust Company, as trustee, including the form of 4 1/2%
Convertible Subordinated Note due 2008 attached as Exhibit A thereto ++++(4.1)
4.2 Registration Rights Agreement dated as of June 26, 2001, between the
Company and the initial purchasers ++++(4.2)
4.3 Rights Agreement dated May 17, 2002 between the Company and
Continental Stock Transfer Trust Company, as rights agent ^(1)
10.17 Asset Purchase Agreement between the Company and Elan
Pharmaceuticals, Inc., dated as of October 1, 2002 #
10.18 License Agreement between the Company and Elan Pharmaceuticals, Inc.,
dated November 22, 2002 o
10.19 Option Agreement between the Company and Arthur J. Higgins o
10.20 Restricted Stock Agreement between the Company and Arthur J. Higgins o
10.21 Royalty Agreement between the Company and Vivo Healthcare
Corporation, dated as of October 16, 2002 o
10.22 Assignment Agreement between the Company and Vivo Healthcare
Corporation, dated as of October 16, 2002 o
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 o
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 o
o Filed herewith.
++++ Previously filed as an exhibit to the Company's Registration
Statement on Form S-3 (File No. 333-67509) filed with the Commission
and incorporated herein by reference thereto.
^ Previously filed as an exhibit to the Company's Form 8-A (File No.
000-12957) filed with the Commission on May 22, 2002 and
incorporated herein by reference thereto.
^^ Previously filed as an exhibit to the Company's Current Report on
Form 8-K filed with the Commission on May 22, 2002 and incorporated
herein by reference thereto.
^^^ Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002 and incorporated
herein by reference thereto.
^^^^ Previously filed as an exhibit to the Company's Current Report on
Form 8-K filed on December 10, 2002 and incorporated herein by
reference thereto.
# Previously filed as an exhibit to the Company's Current Report on
Form 8-K filed on October 2, 2002 and incorporated herein by
reference thereto.
20
(b) Reports on Form 8-K.
On October 2, 2002, we filed with the Commission a Current Report on Form
8-K dated October 2, 2002 reporting our agreement with Elan Corporation, plc, to
acquire the United States and Canadian rights to ABELCET(R) (Amphotericin B
Lipid Complex Injection).
On November 7, 2002, we filed with the Commission a Current Report on Form
8-K dated November 6, 2002 reporting our financial results for the first quarter
ended September 30, 2002.
On November 22, 2002, we filed with the Commission a Current Report on
Form 8-K dated November 22, 2002 reporting the acquisition of the North American
and Canadian rights to ABELCET(R) (Amphotericin B Lipid Complex Injection).
On December 9, 2002, we filed with the Commission a Current Report on Form
8-K dated November 22, 2002 reporting the completion of our acquisition of the
North American and Canadian rights to ABELCET(R) (Amphotericin B Lipid Complex
Injection).
On December 10, 2002, we filed with the Commission a Current Report on
Form 8-K dated December 10, 2002 reporting the Company's name change from
"Enzon, Inc." to "Enzon Pharmaceuticals, Inc".
On February 7, 2003, we filed with the Commission a Current Report on Form
8-K/A dated November 22, 2002 amending Form 8-K filed on December 9, 2002 to
update and file the financial statements and pro forma financial information.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 14, 2003 ENZON PHARMACEUTICALS, INC.
---------------------------
(Registrant)
By: /s/Arthur J. Higgins
------------------------
Arthur J. Higgins
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: February 14, 2003 By: /s/Kenneth J. Zuerblis
--------------------------------
Kenneth J. Zuerblis
Vice President Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
and Corporate Secretary
22
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Arthur J. Higgins, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Enzon
Pharmaceuticals, Inc. and Subsidiaries;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and financial
information included in this quarterly report fairly present, in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
23
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
February 14, 2003 By: /s/Arthur J. Higgins
-----------------------------
Arthur J. Higgins
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
24
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kenneth J. Zuerblis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Enzon
Pharmaceuticals, Inc. and Subsidiaries;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and financial
information included in this quarterly report fairly present, in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
25
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
February 14, 2003 By: /s/Kenneth J. Zuerblis
-----------------------
Kenneth J. Zuerblis
Vice President Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
and Corporate Secretary
26
Exhibit 10.18
================================================================================
LICENSE AGREEMENT
between
ELAN PHARMACEUTICALS, INC.
and
ENZON, INC.
Dated November 22, 2002
================================================================================
THIS LICENSE AGREEMENT (this "Agreement"), effective November 22,
2002 (the "Effective Date"), is between Elan Pharmaceuticals, Inc., a Delaware
corporation ("Elan"), and Enzon, Inc., a Delaware corporation ("Enzon").
RECITALS
Enzon, Elan and certain Affiliates of Elan entered into an Asset
Purchase Agreement, dated as of October 1, 2002 (the "Asset Purchase
Agreement"), pursuant to which Elan and certain of its Affiliates will sell to
Enzon, and Enzon will purchase from Elan and certain of its Affiliates, on the
Effective Date, any rights, title and interests related to the "Product" and
"Product Improvements" (each as defined in the Asset Purchase Agreement); this
license serves to convey certain of those rights to Enzon and return certain of
those rights that are assigned to Enzon pursuant to the Asset Purchase Agreement
and certain Related Agreements to Elan to the extent that they are not related
to the Product or Product Improvements.
In consideration of the premises and the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Capitalized terms not defined in this
Section 1.01 shall have their corresponding meanings as set forth in the Asset
Purchase Agreement. For purposes of this Agreement:
"Elan Improvements" shall mean Product Improvements developed by the
Elan Companies or its Affiliates for use, having used, distribution, marketing,
selling, offering to sell, having sold and promotion solely outside the
Territory.
"Excluded Technology" shall mean any proprietary Know-How or Patent
Rights owned or Controlled by Elan or its Affiliates that are unrelated to: (a)
lipid or liposomal combinations or formulations, (b) other combinations or
formulations of Amphotericin B, or any chemical derivatives thereof, with
respect to which Elan or its Affiliates are conducting or have conducted
clinical or pre-clinical research prior to the Effective Date (including any
aerosol formulations of or combination products with Amphotericin B), and/or (c)
the making, having made, using, selling, offering for sale or importing of
compositions of matter or articles of manufacture constituting any of the
foregoing. Notwithstanding the foregoing, included within this definition shall
be the NanoCrystal Technology and PROMDAS.
"Know-How" shall mean any proprietary or nonproprietary information
directly related to the manufacture, preparation, development (both research and
clinical), or commercialization of a product, including, without limitation,
product specifications, processes, product designs, plans,
trade secrets, ideas, concepts, inventions, formulae, chemical, pharmacological,
toxicological, pharmaceutical, physical, analytical, stability, safety, quality
assurance, quality control and clinical information, technical information,
research information, and all other confidential or proprietary technical and
business information, whether or not embodied in any documentation or other
tangible materials, but in no event shall the definition of "Know-How" include
information properly in the public domain as of the Effective Date.
"NanoCrystal Technology" means that certain nanoparticle milling and
stabilization technology that the Elan Companies or their Affiliates acquired
from or by reason of their acquisition of NanoSystems, Inc.
"Patent Rights" shall mean rights conferred or represented by a
granted or issued patent in force, or such like rights related to a patent
application and any divisionals, continuations, continuations-in-part,
provisionals, substitutions, patents of addition, reissues, extensions,
reexaminations or renewal applications related to, or claiming priority to, the
foregoing (including any supplemental patent certificates) or any confirmation
patent or registration patent and all patents issuing and all foreign
counterparts of any of the foregoing.
"Product Know-How" shall mean the Product Related Know-How and the
Product Specific Know-How.
"Product Patent Rights" shall mean the Product Related Patent Rights
and the Product Specific Patent Rights.
"Product Related Intellectual Property" shall mean the Product
Related Know-How and the Product Related Patent Rights.
"Product Related Know-How" shall mean that Know-How owned or
Controlled by Elan or its Affiliates that relates to the Product or Current
Product Improvement and shall exclude the Product Specific Know-How. For the
sake of clarity, Know-How claimed in an issued patent or published patent
application within the Product Related Patent Rights shall not be included in
the definition of Product Related Know-How.
"Product Related Patent Rights" shall mean those Patent Rights
listed on Exhibit A of this Agreement and any other Patents Rights that are
owned or Controlled by Elan or its Affiliates, the practice of which during the
making, having made, use, having used, marketing, sale, having sold, offering to
sell and importation of the Product or any Product Improvement in the Territory
would result in the infringement thereof, and shall exclude the Product Specific
Patent Rights.
"Product Specific Intellectual Property" shall mean the Product
Specific Know-How and the Product Specific Patent Rights.
"Product Specific Know-How" shall mean that Know-How Controlled by
Elan or its Affiliates that relates specifically and exclusively to the Product
or any Current Product improvement. For the sake of clarity, Know-How claimed in
an issued patent or published patent application within
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the Product Specific Patent Rights shall not be included in the definition of
Product Specific Know-How.
"Product Specific Patent Rights" shall mean those Patent Rights
listed on Exhibit B of this Agreement.
"PROMDAS" shall mean those solid oral dosage forms and medium chain
fatty acid enhancers as claimed and particularly described in the PCT
application WO 00/50012.
"Third Party Intellectual Property" shall mean any Know-How or
Patent Rights that are owned or controlled by any party other than a party to
this Agreement (a "Third Party").
ARTICLE 2
LICENSE GRANTS
Section 2.01. Assignments by Elan. In accordance with the Asset
Purchase Agreement and the Patent Assignment Agreement, Elan has assigned to
Enzon all right, title and interest in the Product Specific Intellectual
Property.
Section 2,02. License Grants.
(a) Elan Grant to Enzon.
Elan grants to Enzon, its Affiliates and their respective assigns,
successors, and Enzon accepts, a royalty-free, fully-paid up, irrevocable
exclusive license, or as applicable, sub-license, (exclusive even as to Elan) in
the Territory to the Product Related Intellectual Property to the extent
reasonably necessary or useful to develop, make, have made, use, have used,
market, sell, have sold, offer to sell and import the Product and any Product
Improvements. Elan shall retain and have the exclusive right and license under
the Product Related Intellectual Property, both within and without the
Territory, for all other purposes. The parties also acknowledge that Elan shall
retain the right to the Product Related Intellectual Property only to the extent
reasonably necessary or useful to make or have made the Product solely within
the Territory, or any improvements to the products developed by the Elan
Companies or its Affiliates, for use, having used, distribution, marketing,
selling, offering to sell, having sold and promotion solely outside the
Territory.
For the avoidance of doubt, and subject to the terms of the Asset
Purchase Agreement and Section 2.02(c) below, Enzon and its Affiliates and their
respective assigns and successors, shall have rights to use and have used the
Product and any Product Improvements outside the Territory in connection with
(A) clinical trials participated in or undertaken by Enzon and/or its Affiliates
in accordance with the terms of the Asset Purchase Agreement and the Related
Agreements; and (B) development and research activities undertaken or to be
undertaken by Enzon, its Affiliates and their respective assigns, successors
which are related to the Product or any Product Improvements in the Territory
(the foregoing collectively, "Enzon R&D Activities").
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(b) Enzon Grant to Elan.
Subject to Section 8.14 of the Asset Purchase Agreement, Enzon
grants to Elan and its Affiliates, their respective assigns and successors, and
Elan accepts, a royalty-free, fully-paid up, irrevocable exclusive license
(exclusive even as to Enzon) to the Product Specific Intellectual Property to
the extent reasonably necessary or useful to develop, make, have made, use, have
used, market, sell, have sold, offer to sell and import any composition of
matter or article of manufacture other than the Product or any Product
Improvements. Enzon further grants to Elan and its Affiliates, their respective
assigns, successors, and Elan accepts a royalty-free, fully-paid up co-exclusive
license in the Territory (with Enzon) to the Product Specific Intellectual
Property only to the extent reasonably necessary or useful to make or have made
the Product, or any Elan Improvement, for use, having used, distribution,
marketing, selling, offering to sell, having sold and promotion solely outside
the Territory.
For the avoidance of doubt, and subject to the terms of the Asset
Purchase Agreement and Section 2.02(c) below, Elan and its Affiliates and their
respective assigns and successors, shall have rights to use and have used the
Product and any Elan Improvements in the Territory in connection with (A)
clinical trials participated in or undertaken by Elan and/or its Affiliates in
accordance with the terms of the Asset Purchase Agreement and the Related
Agreements; and (B) development and research activities undertaken or to be
undertaken by Elan, its Affiliates and their respective assigns and successors
which are related to use, having used, distribution, marketing, selling,
offering to sell, having sold and promotion of the Product or any Elan
Improvements outside the Territory (the foregoing collectively, "Elan R&D
Activities").
(c) Trademark License and Quality Control
Each party grants to the other and its Affiliates, their respective
assigns and successors and each party accepts free of royalty, a fully-paid up
co-exclusive license to use such party's corporate name, logo or symbol on
Labeling and packaging for the Product outside the applicable territory solely
to the extent legally required to implement the rights afforded by this
Agreement and the Asset Purchase Agreement. Each party will use commercially
reasonable efforts to protect the other party's corporate name, logo and symbol.
Each party will have prior approval of each form of use of its corporate name,
logo or symbol on Labeling and packaging by the other party. Each party
acknowledges that the other party owns all right, title and interest in such
other party's corporate name, logo or symbols and the goodwill associated with
same, and that any and all use of corporate names, logos and symbols under this
Agreement, and any goodwill associated with such use, shall inure exclusively to
the benefit of the respective trademark owner.
Enzon further grants to Elan and its Affiliates a limited license to
use the ABELCET and ABCL marks (the "Marks") in the Territory only in connection
with Elan R&D Activities. Elan further grants to Enzon and its Affiliates a
limited license to use the Marks outside of the Territory only in connection
with Enzon R&D Activities. The parties agree and acknowledge that Enzon owns all
right, title and interest in the Marks in the Territory and that Elan owns all
right, title and interest in the Marks outside of the Territory. Any goodwill
associated with any and all use of the Marks in the Territory shall inure
exclusively to the benefit of Enzon, and any goodwill associated with any and
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all use of the Marks outside of the Territory shall inure exclusively to the
benefit of Elan. With respect to the activities undertaken in connection with
this limited license of the Marks, each party shall have the right, in its
discretion and prior to use or distribution in its territory, to request, review
and approve, in its reasonable discretion, samples of the other party's Products
bearing the Marks, as well as any related packaging, promotional or advertising
materials bearing the trademark(s) in any form, including (without limitation)
web site pages featuring the Marks (with a username and/or password to permit
access to restricted areas, as necessary).
In the event that actual confusion should arise, or either party
believes that a likelihood of confusion may arise, in connection with the
parties' use of the Marks, the parties will fully cooperate in an effort to
eliminate such confusion and to avoid the possibility of such a likelihood of
confusion.
(d) Copyright License.
Elan grants to Enzon a fully-paid up, irrevocable royalty-free
license in the Territory to the copyrights or equivalent statutory rights
relating specifically to the Product, including, without limitation, a right to
create derivative works or compilations thereof.
Section 2.03. Covenant Not to Enforce. During the term of this
Agreement, Elan and its Affiliates will not enforce any intellectual property
rights they own or Control, or support an action of a Third Party to enforce any
such intellectual property rights, that would block, prevent or frustrate
commercialization of the Product or any Product Improvement by Enzon, its
Affiliates or their sublicensees in the Territory. During the term of this
Agreement, Enzon and its Affiliates will not enforce any intellectual property
rights they own or Control in relation to the Product, or any Product
Improvement transferred to Enzon under the Asset Purchase Agreement, or support
an action of a Third Party to enforce any such intellectual property rights,
that would block, prevent or frustrate commercialization of the Product or any
Elan Improvements by Elan, its Affiliates or their sublicensees outside of the
Territory, or the manufacture of the Product within the Territory solely for
sale by Elan, its Affiliates or their sublicensees outside of the Territory. For
purposes of clarity, nothing in this Section 2.03 shall apply to Patent Rights
or Know-How of a Third Party that is either licensed to or purchased by, but not
issued to, a party or its Affiliates after the Effective Date or that is owned
or Controlled by a Third Party who, after the Effective Date, acquires or merges
with the ultimate parent entity of either party.
Section 2.04. Third Party Intellectual Property. Except as otherwise
provided for by the Asset Purchase Agreement or the Supply Agreement, Enzon
shall be responsible for obtaining any rights or licenses to Third Party
Intellectual Property required for the manufacture, sale, offer for sale, use,
promotion, import or export of the Product or Product Improvement thereto in the
Territory (such as, for example, any activity which may be considered by a
competent court to infringe a Patent Right owned by a Third Party), and Elan
shall be responsible for obtaining any rights or licenses to Third Party
Intellectual Property required for the manufacture, sale, offer for sale, use,
promotion, import or export of the Product or any Elan Improvement outside of
the Territory. Each of Enzon and Elan shall provide prompt written notice to the
other of the particulars of any Third Party Intellectual
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Property in the Territory that Enzon or Elan, as applicable, reasonably believes
may be asserted or that has been asserted to be Third Party Intellectual
Property.
Section 2.05. Sublicenses. All of the rights and licenses reserved
by or granted hereunder shall be freely sublicensable by the licensee, its
Affiliates and their respective licensees, sublicensees or contracting parties
without approval of the other party. All of the terms and conditions of this
Agreement shall apply to any such sublicenses. Enzon and Elan hereby guarantee
and assume responsibility for the performance of all obligations so imposed on
any sublicensee by reason of operation of the applicable sublicense.
Section 2.06. Delivery Obligations. To the extent not precluded by
confidentiality obligations owed to a Third Party, each party shall promptly,
upon the other party's reasonable request, deliver to such other party any
copies of any reasonably available tangible embodiments of the Product Patent
Rights and/or the Product Know-How licensed under this Agreement.
Section 2.07. Transfer of Product Know-How. Within ten (10) business
days following the Closing Date, the parties shall agree on a schedule for the
comprehensive disclosure by Elan to Enzon of all Product Know-How. Elan shall
for a period not to exceed one (1) year (the "Transfer Period") make available
qualified and knowledgeable personnel to promptly respond to reasonable
questions pertaining to Product Know-How. Elan will make its personnel available
for up to 100 hours without additional charge, and for up to an additional two
hundred (200) hours at an hourly rate agreed upon by the parties. Upon the
expiration of the Transfer Period, Elan shall have no further transfer
obligations.
Section 2.08. Exclusions. Notwithstanding any provision herein, none
of the obligations, covenants or license grants contained within this Agreement
shall extend to or encompass Excluded Technology.
ARTICLE 3
MAINTENANCE AND ENFORCEMENT
OF INTELLECTUAL PROPERTY RIGHTS
Section 3.01. Prosecution and Maintenance of Patent Rights.
(a) Decisions as to whether to file, prosecute and maintain, the
Product Specific Patent Rights, along with other strategic decisions relating to
patent prosecution thereof in the Territory, shall be made by Enzon, at Enzon's
sole expense and discretion. Elan shall coordinate and cooperate in the filing,
maintenance or prosecution of the Product Specific Patent Rights with the person
or persons designated in writing by Enzon. Enzon shall reasonably advise Elan of
the status and prosecution strategy of the actual and prospective patent
filings. Enzon shall not materially prejudice any foreign counterparts of the
Product Specific Patent Rights. Elan shall be permitted to comment on the
prosecution of the Patent Rights subject to this Section 3.01(a) and may, at
its own expense and
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discretion, submit such comments to Enzon. Enzon shall consider such comments in
good faith, but shall not be obligated to implement them.
(b) Decisions as to whether to file, prosecute and maintain, the
Product Related Patent Rights or the foreign counterparts of the Product Patent
Rights, along with other strategic decisions relating to patent prosecution
thereof, shall be made by Elan, at Elan's sole expense and discretion. Enzon
shall coordinate and cooperate in the filing, maintenance or prosecution of the
Product Related Patent Rights with the person or persons designated in writing
by Elan; provided, however, that to the extent such activities are unrelated to
the Product or any Product Improvement, Enzon shall be reimbursed for its
reasonable out-of-pocket costs relating thereto. Elan shall reasonably advise
Enzon of the status and prosecution strategy of the actual and prospective
patent filings in the Territory. Elan shall not materially prejudice the Product
Patent Rights. Enzon shall be permitted to comment on the prosecution of the
Patent Rights subject to this Section 3.01(b) and may, at its own expense and
discretion, submit such comments to Elan. Elan shall consider such comments in
good faith, but shall not be obligated to implement them.
(c) Immediately upon the decision of either party not to file,
maintain or continue the prosecution of any Product Patent Rights or foreign
counterparts thereof, and at least sixty (60) days before ceasing prosecution
and/or maintenance of any such Patent Rights, if a party elects not to file a
patent application or ceases the diligent prosecution and/or maintenance of any
such Patent Right, the other party at its sole discretion, may elect to file
and/or continue prosecution and/or maintenance or assume control of the
prosecution of such Patent Rights at its own cost and expense.
(d) The parties shall cooperate, if necessary and appropriate, with
each other in gaining patent term extensions that are now available or become
available in the future wherever applicable to the Product, a Product
Improvement or an Elan Improvement. The parties shall, if necessary and
appropriate, use reasonable efforts to agree upon a joint strategy relating to
patent term extensions, but, in the absence of mutual agreement with respect to
any extension issue, a patent shall be extended if either party elects to extend
such patent. All filings for such extension shall be made by the party to whom
the patent is assigned; provided, however, such party shall (i) inform the other
party of its intention not to file and (ii) grant the other party the right to
file for such extension.
(e) Except as otherwise provided for by the Asset Purchase Agreement
or the Supply Agreement, the parties shall bear their own costs and expenses of
filing, prosecuting, maintaining and extending any Patent Rights subject to this
Agreement.
Section 3.02. Infringement of Licensed Property.
(a) Enzon shall, with respect to infringement claims maturing after
the Effective Date, within the Territory, have the sole and exclusive right to
enforce, even as to acts or products unrelated to the Product or any Product
Improvement (a "Non-Product Claim"), the Patent Specific Product Rights. Elan
shall, within and without the Territory, have and retain the sole and exclusive
right to enforce, even as to acts or products related to the Product or any
Product Improvement (a "Product Related Claim") of the Patent Related Product
Rights and the foreign counterparts of the Product Patent Rights. In
prosecuting, as applicable, the enforcement rights retained or granted under
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this Section 3.02(a), neither party may materially prejudice the other party's
rights, as applicable, in the Product Patent Rights or their foreign
counterparts. The parties agree to cooperate in the enforcement of the Product
Patent Rights. If one party brings any action or proceeding to enforce the
Product Patent Rights, the second party may be joined as a party plaintiff if
necessary for the action or proceeding to proceed and, in case of joining, the
second party agrees to give the first party reasonable assistance and authority
to file and to prosecute such suit. Each party agrees to provide the party that
is seeking to prevent or enjoin any such infringement with all reasonable
assistance, information and authority to perform the foregoing. The
non-prosecuting party shall have the right, but not the obligation at its own
expense, to be represented in such action by its own counsel. Each party shall
keep the other party reasonably informed as to the status and conduct of the
litigation and shall, at the other party's sole cost and expense, accept and
reasonably consider the other party's comments relating thereto. A party having
knowledge that any of the Product Patent Rights are subject to infringement, or
having knowledge of a reasonable probability of such infringement, shall
promptly notify the other in writing, but in any event within thirty (30) days
of receipt of written notice of such infringement. The notice shall set forth
the facts of such infringement in reasonable detail.
(b) Upon receiving notice of infringement or suspected infringement
of the Product Specific Patent Rights, including, without limitation, a
Non-Product Claim, Enzon shall have the sole right and discretion, but not the
obligation, to institute, prosecute, and control with its own counsel at its own
expense any action or proceeding with respect to infringement of the Product
Specific Patents and Elan shall have the right, but not the obligation at its
own expense, to be represented in such action by its own counsel. Enzon shall be
entitled to retain all awards, damages and settlement amounts arising out of any
action initiated pursuant to this Section 3.02(b); provided, however, Elan shall
be entitled to receive fifty percent (50%) of any amount directly attributable
to any Non-Product Claim less Enzon's reasonable attorneys' fees and expenses
relating to prosecuting such Non-Product Claim. Elan shall have no right to
institute or prosecute such an infringement action if Enzon declines to do so.
(c) Upon receiving notice of infringement or suspected infringement
of the Product Related Patent Rights or the foreign counterparts of the Product
Patent Rights, including, without limitation, a Product Related Claim, Elan
shall have the sole right and discretion, but not the obligation, to institute,
prosecute, and control with its own counsel at its own expense any action or
proceeding with respect to infringement of the Product Related Patent Rights or
the foreign counterparts of the Product Patent Rights and Enzon shall have the
right, but not the obligation at its own expense, to be represented in such
action by its own counsel. Elan shall be entitled to retain all awards, damages
and settlement amounts arising out of any action initiated pursuant to this
Section 3.02(b); provided, however, Enzon shall be entitled to receive fifty
percent (50%) of any amount directly attributable to any Product Related Claim
arising out of the Product Related Patent Rights less Elan's reasonable
attorneys' fees and expenses relating to prosecuting such Product Related Claim.
Enzon shall have no right to institute such an infringement action if Elan to do
so.
Section 3.03. Challenge of Patents. Neither party or its Affiliates,
nor their respective sublicensees, will challenge (other than in defense of an
action for infringement of a Product Patent Right or in an action for breach of
contract) any of the Patent Rights owned or Controlled by the other party or its
Affiliates that are related to the Product, or to any Product Improvement in the
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case of Enzon and any Elan Improvement in the case of Elan, or support an action
of its Affiliate or a Third Party challenging the validity of any such Patent
Rights.
ARTICLE 4
TERM AND TERMINATION
Section 4.01. Term and Expiration. This Agreement shall become
effective as of the Effective Date and shall continue in perpetuity unless and
until all licenses under Section 2 have terminated by mutual written agreement
of the parties.
Section 4.02. Accrued Rights; Surviving Obligations. Termination of
this Agreement shall be without prejudice to any rights that shall have accrued
to the benefit of any party prior to such termination. Such termination shall
not relieve any party from obligations that are expressly indicated to survive
termination of this Agreement.
ARTICLE 5
MISCELLANEOUS
Section 5.01. Assignment, Binding Effect. Neither Elan nor Enzon may
assign this agreement, or any of their respective right or obligations
hereunder, without the prior written consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that (i) either party may
assign this Agreement to an Affiliate without the prior written consent of the
other party, and (ii) either party may assign or transfer this Agreement without
consent to any entity into or with which such party merges or consolidates, or
to whom such party transfers all or substantially all of its business or assets
to which this Agreement relates, subject in either case to the assignee or
transferee agreeing in advance and in writing to assume all of the assignor's or
transferor's obligations under this Agreement. Notwithstanding the foregoing,
the Product Patent Rights may not be assigned to an Affiliate or a Third Party
without the concomitant assignment of this Agreement or all of the obligations
hereunder to the assignee and any attempt to do so will be null and void. This
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and each of their respective successors and permitted assigns.
The covenants, licenses and obligations contained herein are appurtenant to and
shall run with transfer, assignment, sale or other disposition of the Patent
Rights subject to this Agreement. Each party, at the request of the other party,
shall take such reasonable steps, including, without limitation, filings with
the applicable patent office, as are necessary to perfect the other party's
rights with respect to such Patent Rights under this Agreement.
Section 5.02. Insolvency. All rights and licenses granted under or
pursuant to this Agreement by either party are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the U.S. Bankruptcy Code and other similar
foreign laws, licenses of rights to "intellectual property" as defined under
Section 101 of the U.S. Bankruptcy Code or such foreign laws. Each party
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agrees that the other party, as a licensee of such rights under this Agreement,
shall retain and may fully exercise all of its rights and elections under
Section 365(n) of the U.S. Bankruptcy Code and other similar foreign laws, and
neither party shall claim that this Agreement does not fall within the scope
thereof. Each party further agrees that, upon the commencement of a bankruptcy
proceeding by or against such party under the U.S. Bankruptcy Code, the other
party shall be immediately entitled to a complete duplicate of (or complete
access to, as appropriate) any such intellectual property and all embodiments of
such intellectual property, and the same, if not already in such other party's
possession, shall be promptly delivered to the other party if such party rejects
this Agreement, fails to promptly elect in writing to continue to perform all of
its obligations under this Agreement, and/or fails to take all steps necessary
to protect such intellectual property.
Section 5.03. Tax Matters. Elan agrees that it will deliver to Enzon
two (2) duly completed, appropriate and valid Withholding Certificates (as
defined under ss. 1.1441-1(c)(16) of the U.S. Income Tax Regulations)
certifying its status (i.e., U.S. or foreign person).
Section 5.04. Affiliates. Each party guarantees that its Affiliates
shall comply with the terms and conditions of this Agreement relating thereto,
including, without limitation, the terms and conditions of this Agreement
applicable to the license of any rights hereunder.
Section 5.05. Miscellaneous Terms. For the sake of brevity, this
Agreement incorporates by reference the provisions of the Asset Purchase
Agreement where this Agreement is silent. By way of example, such incorporation
includes but is not limited to Choice of Law, Indemnification, Confidentiality,
Public Announcements, Descriptive Headings, Injunctive Relief, Non-Waiver,
Relationship of the Parties, Severability, and Counterparts, as they appear in
the Asset Purchase Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
ELAN PHARMACEUTICALS, INC.
By: /s/ Lisabeth F. Murphy
-------------------------------------
Name: Lisabeth F. murphy
Title: Vice President & Secretary
ENZON, INC.
By:
-------------------------------------
Name:
Title:
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
ELAN PHARMACEUTICALS, INC.
By:
-------------------------------------
Name:
Title:
ENZON, INC.
By: [SIGNATURE ILLEGIBLE]
-------------------------------------
Name: [NAME ILLEGIBLE]
Title:VP & GC
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EXHIBIT 10.19
ENZON PHARMACEUTICALS, INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
This Non-Incentive Stock Option Agreement (the "Agreement") is made this
3rd day of December, 2002, by and between Enzon Pharmaceuticals, Inc., a
Delaware corporation (the "Company") and Arthur J. Higgins an individual
resident of Illinois ("Employee").
WITNESSETH, THAT:
WHEREAS, the Company has adopted the Enzon Pharmaceuticals, Inc. 2001
Incentive Stock Plan (the "Plan") which permits issuance of stock options for
the purchase of shares of common stock of the Company, and the Company has taken
all necessary actions to grant the following option pursuant and subject to the
terms of the Plan.
NOW THEREFORE, in accordance with the terms and conditions of the Plan and
the mutual covenants herein contained, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Employee the right and
option (the "Option") to purchase all or any part of an aggregate of two hundred
thousand (200,000) shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), at the price of $17.80 per share (the "Option
Price") on the terms and conditions set forth in this Agreement and in the Plan.
It is understood and agreed that the Option Price is the per share Fair Market
Value (as defined in the Plan) of the Common Stock as of December 3, 2002, the
date that the Compensation Committee (the "Compensation Committee") of the Board
of Directors (the "Board") of the Company granted the Option to the Employee
(the "Grant Date"). The Option is not intended to be an Incentive Stock Option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Option is issued pursuant to the Plan and is subject
to its terms. A copy of the Plan will be furnished upon request of Employee.
Except as otherwise provided in Section 3 hereof, once the Option becomes
exercisable it shall remain exercisable until 5:00 pm New York City time on the
tenth (10th) anniversary of the Grant Date (the "Expiration Date"). Employee
shall not have any of the rights of a shareholder with respect to the shares
subject to the Option until such shares shall be issued to Employee upon the
proper exercise of the Option.
2. Vesting of Option Rights.
(a) Except as otherwise provided in Sections 3 or 4 of this
Agreement, the Option may be exercised by Employee in accordance with the
following schedule:
Number of shares
---------------------------
with respect to which
On or after each of ---------------------------
the following dates: the Option is exercisable:
- ------------------------ ---------------------------
December 3, 2003 200,000
3. Exercise of Option upon Termination of Employment or Upon Change in
Control. The Option shall terminate and may no longer be exercised if Employee
ceases to be employed by the Company or its subsidiaries, except that:
(a) In the event the Company terminates Employee's employment as the
Company's President and Chief Executive Officer without Cause pursuant to
Section 9(a)(iv) of the Employment Agreement between the Company and
Employee, dated as of May 9, 2001, as amended as of May 23, 2001 (the
"Employment Agreement"), or Employee terminates such employment for Good
Reason pursuant to Section 9(c) of the Employment Agreement:
(i) prior to December 3, 2003 and the Option has not otherwise
vested pursuant to Section 3 hereof, the Option granted to
Employee pursuant to Section 1 hereof will be of no further
force or effect; provided however that the Option shall vest
and become exercisable as to a pro rated portion (based on the
portion of the year between the Grant Date and December 3,
2003 during which Employee is employed by the Company) of the
shares subject to the Option and such Option shall remain
exercisable as to such shares until the expiration date; or
(ii) on or subsequent to December 3, 2003 or such earlier date
on which the Option has vested pursuant to this Section 3, the
Option granted to Employee pursuant to Section 1 hereof will
remain exercisable until its expiration date.
(b) In the event the Company terminates Employee's employment as the
Company's President and Chief Executive Officer for Cause pursuant to
Section 9(a)(iii) of the Employment Agreement:
(i) prior to December 3, 2003, the Option granted to Employee
pursuant to Section 1 hereof will terminate as of the date of
such termination and will be of no further force and effect;
or
(ii) on or subsequent to December 3, 2003, the Option granted
to Employee pursuant to Section 1 hereof shall remain
exercisable for a period of six months following such
termination of employment.
(c) In the event Employee's employment as the Company's President
and Chief Executive Officer is terminated as a result of Employee's death
or on account of Employee's disability pursuant to Section 9(a)(ii) of the
Employment Agreement, the Option granted to Employee pursuant to Section 1
hereof shall vest on December 3, 2003, and shall remain exercisable, until
the earlier of (A) three years from the date of such termination of
employment and (B) the Expiration Date.
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(d) In the event Employee voluntarily terminates his employment as
the Company's President and Chief Executive Officer, other than for Good
Reason:
(i) prior to December 3, 2003 and the Option has not otherwise
vested pursuant to Section 3 hereof, the Option granted to
Employee pursuant to Section 1 hereof will terminate as of the
date of such termination and will be of no further force and
effect; or
(ii) on or subsequent to December 3, 2003 or such earlier date
on which the Option has vested pursuant to this Section 3, the
Option granted to Employee pursuant to Section 1 hereof shall
remain exercisable for a period of six months following such
termination.
(e) Upon a Change in Control (as defined in Section 9(d) of the
Employment Agreement) which occurs while Employee is employed by the
Company this Option, to the extent it has not already vested, shall vest
in its entirety immediately prior to the effective date of such Change in
Control and the Option shall remain exercisable in accordance with the
terms herein.
(f) Each time that all or a portion of this Option is exercised, 50%
of the shares (after deducting any shares used or sold by Employee to pay
any applicable taxes in connection with such exercise) of Common Stock
received by Employee from such exercise on the date of such exercise (the
"Exercise Date") shall be held by Employee for three years from the
Exercise Date and the stock certificates representing such shares shall
bear appropriate legends reflecting such restriction on sale; provided,
however, the Compensation Committee, in its sole discretion, may waive
such restriction on transfer and all or a portion of such shares may be
sold or transferred prior to the expiration of such three year period.
Nothing in this Section 3(f) shall prevent Employee from accepting a
payment of cash, other property or securities in consideration for the
shares of Common Stock issued upon exercise of this Option in connection
with a Change in Control or other event described in Section 5(e),
provided that the restrictions on transfer set forth in this Section 3(f)
shall continue to apply to any securities received by Employee in
connection with any such Change in Control unless Employee terminates
employment and these restrictions cease to apply as provided in Section
3(g).
(g) Notwithstanding Section 3(f) above, if Employee is terminated
pursuant to Sections 3(a), 3(c) or 3(e) above, the Section 3(f)
restriction on transfer will automatically cease and so long as all
federal and state securities laws are adhered to, any shares which
Employee receives or has received pursuant to the exercise of the Option
granted pursuant to Section 1 hereof may be immediately sold or
transferred.
(h) Notwithstanding anything to the contrary in this Agreement or
the Employment Agreement, the Compensation Committee or the Board, in its
sole discretion, may waive any of the restrictions on vesting of the
Option set forth in this Section 3 in order to accelerate the
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vesting of all or a portion of the Option as the Compensation Committee or
the Board so determines in its sole discretion.
(i) Notwithstanding the above, in no case may the Option be
exercised to any extent by anyone after the Expiration Date.
(j) The Option may only be transferred or assigned in accordance
with subsection 6(d) of this Agreement.
(k) if upon a Change in Control or any of the events described in
Section 5(e) (each a "Section 5(e) Event") the shares of Common Stock
issuable upon exercise of this Option are replaced with other equity
securities, such other securities must be registered under the Securities
Act of 1933 and be freely transferable under all applicable federal and
state securities laws and regulations. In such event, the number of shares
issuable upon exercise of this Option shall be determined by using the
exchange ratio used for other outstanding shares of the Company's Common
Stock in connection with the Change in Control or Section 5(e) Event, or
if there is no such ratio, an exchange ratio to be determined by the
Compensation Committee or the Board, and the exercise price per share
shall be adjusted accordingly so as to preserve the same economic value in
this Option as existed prior to the Change in Control or Section 5(e)
Event. Also in the event of any such Change in Control or Section 5(e)
Event, all references herein to the Common Stock shall thereafter be
deemed to refer to the replacement equity securities issuable upon
exercise of this Option, references to the Company shall thereafter be
deemed to refer to the issuer of such replacement securities, and all
other terms of this Option shall continue in effect except as and to the
extent modified by this Section 3.
4. Method of Exercise of Option. Subject to the foregoing, the Option may
be exercised in whole or in part from time to time by Employee or other proper
party serving written notice of exercise on the Company at its principal office
within the period during which the Option is exercisable as provided in this
Agreement. The notice shall state the number of shares as to which the Option is
being exercised and shall be accompanied by payment in full of the Option Price
for all shares designated in the notice. Payment of the Option Price shall be
made in cash (including bank check, personal check or money order payable to the
Company), or, with the approval of the Company (which may be given in its sole
discretion), by delivering to the Company for cancellation shares of the
Company's Common Stock already owned by Employee having a Fair Market Value
equal to the full purchase price of the shares being acquired or a combination
of cash and such shares.
5. Miscellaneous.
(a) In the event that any provision of this Agreement conflicts with
or is inconsistent in any respect with the terms of the Plan, the terms of
the Plan shall control.
(b) Neither the Plan nor this Agreement shall (i) be deemed to give
any individual a right to remain an employee of the Company, (ii) restrict
the right of the Company to discharge any employee, with or without cause,
or (iii) be deemed to be a written contract of employment.
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(c) The exercise of all or any parts of the Option shall only be
effective at such time that the sale of shares of Common Stock pursuant to
such exercise will not violate any state or federal securities or other
laws.
(d) The Option shall not be transferred, except by will or the laws
of descent and distribution to the extent provided in subsection 3(c),
and, except for as provided in the Plan or this Agreement, during the
Employee's lifetime the Option is exercisable only by the Employee.
Notwithstanding the foregoing, Employee may transfer the Option to any
Family Member, provided, however, that (i) Employee may not receive any
consideration for such transfer, (ii) the Family Member must agree in
writing not to make any subsequent transfers of the Option other than by
will or the laws of the descent and distribution and (iii) the Company
receives prior written notice of such transfer. For purposes of this
subsection 7(d) the definition of Family Member shall be the definition
adopted by the Committee administering the Plan as of the date of the
attempted transfer of the Option.
(e) If there shall be any change in the Common Stock subject to the
Option through merger, consolidation, reorganization, recapitalization,
dividend or other distribution, stock split or other similar corporate
transaction or event of the Company, appropriate adjustments shall be made
by the Company in the number of shares and the price per share of the
shares subject to the Option in order to prevent dilution or enlargement
of the Option rights granted hereunder; provided, however, that the number
of shares subject to the Option shall always be a whole number.
(f) The Company shall at all times during the term of the Option
reserve and keep available such number of shares of the Company's Common
Stock as will be sufficient to satisfy the requirements of this agreement.
(g) In order to provide the Company with the opportunity to claim
the benefit of any income tax deduction which may be available to it upon
the exercise of the Option and in order to comply with all applicable
federal or state income tax laws or regulations, the Company may take such
action as it deems appropriate to insure that, if necessary, all
applicable federal or state payroll, withholding, income or other taxes
are withheld or collected from Employee.
(h) The Company, in its sole and absolute discretion, may allow
Employee to satisfy Employee's federal and state income tax withholding
obligations upon exercise of the Option by (i) having the Company withhold
a portion of the shares of Common Stock otherwise to be delivered upon
exercise of the Option having a Fair Market Value equal to the amount of
federal and state income tax required to be withheld upon such exercise,
in accordance with such rules as the Company may from time to time
establish, or (ii) delivering to the Company shares of its Common Stock
other than the shares issuable upon exercise of the Option with a Fair
Market Value equal to such taxes, in accordance with such rules.
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(i) This Agreement shall inure to the benefit of, and be binding
upon, the Company, its successors and assigns, and upon Employee, his
administrator, executor, personal representative, successors and heirs.
(j) Except as provided in Section 3(h), no change to or modification
of this Agreement shall be valid unless it is in writing and signed by the
Company and Employee.
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
on the date set forth in the first paragraph.
ENZON PHARMACEUTICALS, INC.
-----------------------------------
By:
--------------------------------
Its:
--------------------------------
EMPLOYEE:
-----------------------------------
Name:
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EXHIBIT 10.20
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT, made as of this ___ day of December 2002, by and
between Enzon Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and
Arthur J. Higgins ("Executive").
WITNESSETH, THAT:
WHEREAS, The Company wishes to grant a restricted stock award to
Executive;
NOW, THEREFORE, In consideration of the premises and mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Award
The Company, effective as of the date of this Agreement, hereby
grants to Executive a restricted stock award of 200,000 shares (the "Shares") of
common stock of the Company (the "Common Stock") (against Executive's payment of
$2000 representing the par value thereof), subject to the terms and conditions
set forth herein and to the terms of the Employment Agreement between the
Company and Executive, dated as of May 9, 2001, as amended as of May 23, 2001
(the "Employment Agreement") which are specifically referenced herein.
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Employment Agreement.
2. Vesting
Subject to the terms and conditions of this Agreement, the
Executive's Shares shall vest according to the following schedule:
Date Number of Shares that Vest on such Date
---- ---------------------------------------
December 3, 2005 60,000
December 3, 2006 60,000
December 3, 2007 80,000
3. Restriction on Transfer
Until any group of Shares vests pursuant to Sections 2 or 4 hereof,
none of such Shares may be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of or encumbered, and no attempt to transfer such Shares,
whether voluntary or involuntary, by operation of law or otherwise, shall vest
the transferee with any interest or right in or with respect to such Shares.
4. Early Vesting; Forfeiture
(a) In the event the Company terminates Executive's employment as
the Company's President and Chief Executive Officer without Cause pursuant to
Section 9(a)(iv) of the Employment Agreement or Executive terminates such
employment for Good Reason pursuant to Section 9(c) of the Employment Agreement,
all of the Shares granted to Executive pursuant to Section 1 hereof shall vest
immediately upon termination;
(b) In the event the Company terminates Executive's employment as
the Company's President and Chief Executive Officer for Cause pursuant to
Section 9(a)(iii) of the Employment Agreement, Executive will forfeit all
unvested Shares granted to Executive pursuant to Section 1 hereof.
(c) In the event Executive's employment as the Company's President
and Chief Executive Officer is terminated as a result of Executive's death, all
unvested Shares granted to Executive pursuant to Section 1 hereof shall vest
immediately upon Executive's death.
(d) Upon termination of Executive's employment as the Company's
President and Chief Executive Officer on account of Executive's disability
pursuant to Section 9(a)(ii) of the Employment Agreement, all unvested Shares
granted to Executive pursuant to Section 1 hereof shall vest immediately upon
such termination.
(e) In the event Executive voluntarily terminates his employment as
the Company's President and Chief Executive Officer, other than for Good Reason
pursuant to Section 9(c) of the Employment Agreement, Executive will forfeit all
unvested Shares granted to Executive pursuant to Section 1 hereof.
(f) Notwithstanding anything to the contrary in this Agreement or
the Employment Agreement, the Compensation Committee of the Board of Directors
of the Company (the "Committee") or the Board of Directors of the Company (the
"Board"), in its sole discretion, may waive any of the forfeiture requirements
in this Section 4 or may accelerate the vesting of all or a portion of the
Shares as the Committee or the Board so determines.
5. Issuance and Custody of Certificate
(a) The Company shall cause to be issued one or more stock
certificates, registered in the name of Executive, evidencing the Shares. Each
such certificate shall bear the following legends:
"The shares of common stock represented by this certificate are
subject to forfeiture, and the transferability of this certificate and the
shares of stock represented hereby are subject to the restrictions, terms and
conditions (including restrictions against transfer) contained in a Restricted
Stock Award Agreement entered into between Enzon Pharmaceuticals, Inc. (formerly
known as Enzon, Inc.) and the registered owner of such shares dated December __,
2002. A Copy of the Restricted Stock Award Agreement is on file in the office of
Enzon Pharmaceuticals, Inc."
(b) Executive shall cause stock powers relating to the Shares
executed by Executive to be delivered to the Company.
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(c) Each certificate issued pursuant to Section 5(a) hereof,
together with the stock powers relating to the Shares, shall be deposited by the
Company with the Secretary of the Company or a custodian designated by the
Secretary. The Secretary or such custodian shall issue a receipt to Executive
evidencing the certificate or certificates held which are registered in the name
of Executive.
(d) After any Shares subject to this Agreement vest pursuant to
Sections 2 or 4(b) hereof, the Company shall promptly cause a certificate or
certificates evidencing such vested Shares, (together with the stock powers
relating to the Shares) to be released and delivered to Executive or Executive's
legal representatives, beneficiaries or heirs.
(e) Prior to issuance of the Shares, the Company shall have caused
such issuance to be registered under the Securities Act of 1933, as amended.
6. Distributions and Adjustments
(a) In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend or other event, including a Change in Control
as defined in the Employment Agreement, the number and character of the Shares
shall be adjusted at the same time and to the same extent as other shares of
Common Stock are adjusted as a result of any such event. If all or any portion
of the Shares vest in Executive subsequent to any such change in the number or
character of the shares of Common Stock, Executive shall then receive upon such
vesting the number and type of securities or other consideration which
Participant would have received if the Shares had vested prior to the event
changing the number or character of outstanding shares of Common Stock.
(b) Any additional shares of Common Stock, any other securities of
the Company and any other property (except for cash dividends) distributed with
respect to the Shares prior to the date the Shares vest shall be subject to the
same restrictions, terms and conditions as the Shares. Any cash dividends
payable with respect to the Shares shall be distributed to Executive at the same
time cash dividends are distributed to shareholders of the Company generally.
(c) Any additional shares of Common Stock, any securities and any
other property (except for cash dividends) distributed with respect to the
Shares prior to the date such Shares vest shall be promptly deposited with the
Secretary or the custodian designated by the Secretary to be held in custody in
accordance with Section 5(c) hereof for Executive's benefit and shall be
distributed to Executive as provided in Section 6(b) when the Shares vest.
7. Taxes
(a) The issuance of the Shares to Executive pursuant to this
Agreement involves complex and substantial tax considerations, including,
without limitation, consideration of the advisability of Executive making an
election under Section 83(b) of the Internal Revenue Code. The Executive is
urged to consult his own tax advisor with respect to the transactions described
in this Agreement. The Company makes no warranties or representations whatsoever
to the Executive regarding the tax consequences of the grant to the Executive of
the Shares or
3
this Agreement. Executive acknowledges that the making of any Section 83(b)
election shall be his personal responsibility.
(b) In order to provide the Company with the opportunity to claim
the benefit of any income tax deduction which may be available to it in
connection with this restricted stock award, and in order to comply with all
applicable federal or state tax laws or regulations, the Company may take such
action as it deems appropriate to insure that, if necessary, all applicable
federal or state income and social security taxes, which are the sole and
absolute responsibility of Executive, are withheld or collected from Executive.
(c) Executive may elect to satisfy his federal and state income tax
withholding obligations arising from the receipt of, or the lapse of
restrictions relating to, the Shares by (i) delivering cash, check (bank check,
certified check or personal check) or money order payable to the order of the
Company, (ii) having the Company withhold a portion of the Shares otherwise to
be delivered having a fair market value based on the last reported sale price of
a share of Common Stock on the Nasdaq Stock Market (or if the Shares no longer
trade on the Nasdaq Stock Market, the closing or last reported price on the
principal exchange or system on which they trade) (the "Fair Market Value")
equal to the amount of such taxes, or (iii) delivering to the Company Common
Stock having a Fair Market Value equal to the amount of such taxes. The Company
will not deliver any fractional Share but will pay, in lieu thereof, the Fair
Market Value of such fractional Share. The Participant's election must be made
on or before the date that the amount of tax to be withheld is determined.
Otherwise, the Company shall be entitled to withhold taxes due in such manner as
the Company determines in its discretion.
8. Miscellaneous
(a) Executive shall be entitled at all times to all of the rights of
a shareholder with respect to the Shares, including without limitation the right
to vote and tender such Shares and to receive dividends and other distributions
as provided in and subject to the provisions of Section 6.
(b) Executive hereby acknowledges receipt of a copy of the
Employment Agreement. The Employment Agreement is also available for inspection
during business hours at the principal office of the Company.
(c) This Agreement shall not confer on Executive any right with
respect to continuance of employment by the Company.
(d) This Agreement shall inure to the benefit of, and be binding
upon, the Company, its successors and assigns, and upon Executive, his
administrator, executor, personal representative, successors and heirs.
(e) Except as provided in Section 4(f), no change to or modification
of this Agreement shall be valid unless it is in writing and signed by the
Company and Executive. .
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to
be executed on the day and year first above written.
4
ENZON PHARMACEUTICALS, INC.
By:________________________________________
Kenneth J. Zuerblis
Vice President, Chief Financial Officer
and Secretary
---------------------------
Arthur J. Higgins
5
EXHIBIT 10.21
EXECUTION COPY
ROYALTY AGREEMENT
THIS ROYALTY AGREEMENT is made and entered into as of October 16, 2002
(the "Effective Date"), by and between ENZON, INC., a Delaware corporation
("Enzon"), and VIVO HEALTHCARE CORPORATION, a Delaware corporation ("Vivo").
Capitalized terms used herein and not otherwise defined shall have the meaning
assigned to them in the Assignment Agreement, dated as of October 16, 2002, by
and among Enzon, Vivo, and the Vivo shareholders listed on Schedule A thereto
(the "Assignment Agreement").
WHEREAS, pursuant to the terms of the Assignment Agreement, Vivo has
agreed to sell and assign, and Enzon has agreed to purchase and assume, the
Assigned Assets; and
WHEREAS, pursuant to Paragraph 2(b) of the Assignment Agreement, Vivo and
Enzon have agreed to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Enzon and Vivo agree as follows:
ARTICLE I.
DEFINITIONS
For purposes of this Royalty Agreement, the following terms and variations
thereof have the meanings specified or referred to in this Article I:
"Affiliates" - any person or entity which directly or indirectly controls,
is controlled by, or is under common control with a party hereto. For purposes
of this Royalty Agreement, "control" means the legal, beneficial or equitable
ownership directly or indirectly of more than 50% of the aggregate of all voting
equity interests rights in such entity.
"Net Sales Amount" - shall mean the invoiced amount of sales of Products
by Enzon or any of its Affiliates or licensees to customers less (1) actual
allowances for returns, damages or otherwise, and discounts, rebates and
allowances to customers, including cash, credit or free goods allowances; and
(2) freight or other transportation charges, including insurance, actually
allowed or paid on account of the delivery of Products to purchasers thereof;
and (3) taxes (except income taxes) or duties paid, absorbed or otherwise
imposed on the sale, including, without limitation, value added taxes.
"Patents" - any and all domestic or foreign patents subsequently issued to
Enzon relating to the p-MPA Technology being transferred from Vivo to Enzon
pursuant to the Assignment Agreement, including any continuations-in-part,
continuations, divisions, substitutes, reissues, reexaminations or extensions
thereof.
"Products" - any products which embody any of the p-MPA Technology, any
Patents or are covered by any claim of the Patents.
EXECUTION COPY
ARTICLE II.
ROYALTY OBLIGATIONS
Section 2.1 Amount of Payment. Enzon shall pay a royalty (the
"Royalty") to Vivo during the Term as set forth below:
(a) Enzon shall pay a Royalty to Vivo based upon the following
percentages (the "Royalty Percentage") of:
(i) the aggregate Net Sales Amount of any Products sold by
Enzon or any of its Affiliates on a country by country
basis, for the longer of (A) ten years from the date
hereof or (B) such time as any of the Patents with
respect to such country remain valid, enforceable, and
in effect:
(A) three percent (3%) up to the first $25 million of
aggregate Net Sales Amount;
(B) two percent (2%) for the next $25 million of
aggregate Net Sales Amount;
(C) one percent (1%) for the next $50 million of
aggregate Net Sales; and
(D) one-half of one percent (0.5%) thereafter; and
(ii) the aggregate royalties received by Enzon or any of its
Affiliates on Net Sales Amount of any Products sold by
licensees of Enzon or any of its Affiliates on a country
by country basis, for the longer of (A) ten years from
the date hereof or (B) such time as any of the Patents
with respect to such country remain valid, enforceable,
and in effect:
(A) three percent (3%) of the aggregate royalties
received by Enzon or any of its Affiliates on such
Net Sales Amount up to the first $25 million of
aggregate Net Sales Amount;
(B) two percent (2%) of the aggregate royalties
received by Enzon or any of its Affiliates on such
Net Sales Amount for the next $25 million of
aggregate Net Sales Amount;
(C) one percent (1%) of the aggregate royalties
received by Enzon or any of its Affiliates on such
Net Sales Amount for the next $50 million of
aggregate Net Sales;
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EXECUTION COPY
(D) and one-half of one percent (0.5%) of the
aggregate royalties received by Enzon or any of
its Affiliates on such Net Sales Amount
thereafter.
(b) Upon expiration of the longer of (i) ten years from the
date hereof or (ii) such time as any of the Patents with respect to
such applicable country remain valid, enforceable and in effect,
Enzon shall have no further obligation to pay the Royalty in any
applicable country.
Section 2.2 Payment of Royalty. Enzon shall pay the Royalty
quarterly. Within forty-five (45) days after the end of each calendar quarter,
Enzon shall (i) pay Vivo the amount of the Royalty owed by Enzon for such
calendar quarter, and (ii) provide Vivo with a written report setting forth the
Net Sales Amount with respect to the Products sold by Enzon or its Affiliates or
royalties received by Enzon or its Affiliates on the Net Sales Amount sold by
licensees for the applicable quarter, and the computation of the Royalty with
respect thereto for the applicable quarter. The Royalty shall be payable in
currency of the United States of America regardless of the country where earned
and shall be paid or deposited as designated in writing by Vivo. The exchange
rate used to calculate the Royalty shall be the same rate specified under
Financial Accounting Standards Board Statement 52, or its successor, used to
translate the financial results of Enzon or its Affiliates for public reporting.
Section 2.3 Records and Reports; Audits. Enzon shall keep true and
accurate records and books of account containing information necessary for the
determination of the Royalty payable hereunder. Vivo shall be entitled to
conduct an audit, once quarterly upon thirty (30) days' prior written notice to
Enzon, of such books and records. Vivo may engage an independent third party
auditor to conduct such audits. Enzon shall be entitled to receive a copy of any
audit reports produced by or on behalf of Vivo hereunder. In the event any such
audit reveals a greater than ten percent (10%) discrepancy between the correct
amount of the Royalty which should have been paid by Enzon pursuant to the terms
herein during the period covered by such audit and the actual amount of the
Royalty paid by Enzon during such period, Enzon shall reimburse Vivo for the
costs of such audit.
Section 2.4 No Obligation to Exploit. Notwithstanding anything to
the contrary contained in this Royalty Agreement and subject to Paragraph 4 of
the Assignment Agreement, Enzon shall have no obligation to develop,
commercialize or otherwise exploit the p-MPA Technology or any Product. Without
limiting the foregoing, Enzon shall have no obligation to file any Patent
applications or to maintain any Patents, if and when issued.
ARTICLE III.
TERM; TERMINATION
Section 3.1 Term. This Royalty Agreement commences upon the
Effective Date and terminates at such time when Enzon has no further obligation
to pay any Royalties pursuant to Section 2.1 or at such earlier date as provided
in this Article III (the "Term").
Section 3.2 Termination Upon Breach. Upon thirty (30) days' prior
written notice to Vivo, Enzon may terminate this Royalty Agreement if Vivo
breaches any of its material obligations hereunder or in the Assignment
Agreement and fails to cure such breach by the end
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EXECUTION COPY
of such thirty (30) day period, or, if the parties agree that the breach is not
capable of being cured or remedied within thirty (30) days, then within a time
frame mutually agreed upon by the parties.
Section 3.3 Termination For Non-Development. Notwithstanding any
other provision hereof, this Royalty Agreement shall terminate in the event Vivo
causes a reassignment of the Assigned Assets pursuant to Section 4 of the
Assignment Agreement.
Section 3.4 Remedies upon Termination. Termination of this Royalty
Agreement shall not limit either party from pursuing any other remedies
otherwise available to it, including, without limitation, injunctive relief.
Section 3.5 Effect of Termination. In the event of notice of
termination, each party shall continue to perform its obligations hereunder up
to the date of termination. Upon termination, except as otherwise provided
herein, the obligations of the parties hereunder shall cease and Enzon shall pay
Vivo any amounts then owing hereunder; provided, however, that in the event of
termination due to a breach by Vivo, Enzon shall have the right to offset any
payment due to Vivo under Section 2.1.
ARTICLE IV.
CONFIDENTIALITY
Vivo acknowledges that any information concerning Enzon received in
connection with this Royalty Agreement shall be deemed "Confidential and
Proprietary Information." Vivo agrees that it shall not permit the duplication,
use or disclosure of any such Confidential and Proprietary Information to any
person or entity. Confidential and Proprietary Information does not include any
information which, at the time of disclosure, is generally known by the public
through no breach of the disclosing party. The provisions of this Article IV
shall survive the expiration or termination of this Royalty Agreement.
ARTICLE V.
INTELLECTUAL PROPERTY
Section 5.1 Right to Defend. At the election and expense of Enzon,
Enzon shall have the sole right (but not the obligation), to protect all
intellectual property rights related to the p-MPA Technology or the Products, by
obtaining and maintaining appropriate patent, trademark, trade secret or other
rights. Vivo agrees to cooperate, at the expense of Enzon, in the filing and
prosecution of patent applications in the United States and in foreign countries
in connection with all such intellectual property rights, and to promptly notify
Enzon of any conflicting uses of, or any applications or registrations to use,
any mark, name, symbol, device or word that becomes known to Vivo that Enzon
believes may constitute an act of infringement with respect to the intellectual
property rights related to p-MPA Technology or the Products.
Section 5.2 Ownership of Intellectual Property. Vivo acknowledges
that neither this Royalty Agreement nor the performance of its obligations
hereunder shall affect the ownership by Enzon of any of the goodwill or
intellectual property rights related to p-MPA Technology or the Products, and
such goodwill or other rights shall be and remain in the name of Enzon. Vivo
warrants that it shall not at any time (a) do or cause to be done any act or
thing
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contesting or in any way impairing or tending to impair any part of such
ownership and/or rights, or (b) represent that it has any ownership in p-MPA
Technology or the Products or any intellectual property rights in connection
therewith.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 No Joint Venture. Nothing herein shall create any
association, partnership, joint venture or agency relationship between the
parties hereto or any third party.
Section 6.2 Further Assurances. The parties shall cooperate
reasonably with each other in connection with any steps required to be taken as
part of their respective obligations under this Royalty Agreement, and the
parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Royalty Agreement.
Section 6.3 Notices. All notices, consents, waivers, and other
communications under this Royalty Agreement must be in writing and are deemed to
have been duly given when (a) delivered by hand with written confirmation of
receipt, (b) sent by facsimile with confirmation of transmission by the
transmitting equipment, (c) five (5) days after delivery, if sent by certified
mail, return receipt requested, or (d) one (1) day after delivery, if sent by a
nationally recognized overnight delivery service, return receipt requested, in
each case to the appropriate addresses, or facsimile numbers set forth below (or
to such other addresses, facsimile numbers or as a party may designate by notice
to the other parties):
Enzon: Enzon, Inc.
685 Route 202/206
Bridgewater, New Jersey 08807
Attention: Chief Executive Officer
Fax: (908) 575-3296
with a copy to: Enzon, Inc.
685 Route 202/206
Bridgewater, New Jersey 08807
Attention: Vice President General Counsel
Fax: (908) 575-3296
Vivo: Vivo Healthcare Corporation
299 Pavonia Avenue, Loft 3-8
Jersey City, New Jersey 07302
Attention: Clark Atwell
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with a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Robert H. Friedman, Esq.
Fax: (212) 935-1787
Section 6.4 Waiver . The rights and remedies of the parties to this
Royalty Agreement are cumulative and not alternative. Neither the failure nor
any delay by any party in exercising any right under this Royalty Agreement
operates as a waiver of such right, and no single or partial exercise of any
such right precludes any other or further exercise of such right or the exercise
of any other right. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Royalty Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party is applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party is deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Royalty Agreement.
Section 6.5 Entire Agreement and Modification. This Royalty
Agreement and the Assignment Agreement constitute the entire agreement between
the parties with respect to the subject matter of this Royalty Agreement and
supersede all prior written and oral agreements and understandings between the
parties with respect to the subject matter of this Royalty Agreement. This
Royalty Agreement may not be amended except by a written agreement signed on
behalf of each of the parties hereto.
Section 6.6 Assignment. Except as set forth below, no party to this
Royalty Agreement may assign, transfer, or otherwise dispose of any of its
rights, duties, or obligations hereunder without the prior written consent of
the other party hereto; provided, however (i) upon prior written notice to Vivo,
Enzon may assign, transfer, or otherwise dispose of any of its rights, duties or
obligations hereunder to any of its Affiliates or in connection with the sale or
other transfer of all or a portion of the business, assets, or properties or
stock of Enzon or any of its Affiliates without the consent of Vivo (in which
case Enzon shall continue to be liable for its obligations hereunder) and (ii)
upon prior written notice to Enzon, Vivo may assign all of its rights, duties
and obligations under the Agreement to the Shareholders without the prior
written consent of Enzon, provided the assignee Shareholders agree to be bound
by the terms and conditions of this Royalty Agreement and no such assignment
shall relieve Vivo from any of its obligations hereunder. Subject to the
foregoing, this Royalty Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their permitted successors and assigns.
Section 6.7 Severability. If any provision of this Royalty Agreement
is held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Royalty Agreement remain in full force and effect. The
parties further agree that if any provision contained herein is, to any extent,
held invalid or unenforceable in any respect under the laws governing this
Royalty Agreement, they shall take any actions necessary to render the remaining
provisions of this Royalty Agreement valid and enforceable to the fullest extent
permitted by law and, to the extent necessary, shall amend or otherwise modify
this Royalty
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Agreement to replace any provision contained herein that is held invalid or
unenforceable with a valid and enforceable provision giving effect to the intent
of the parties.
Section 6.8 No Third Party Beneficiary. No provision of this Royalty
Agreement shall create, or be deemed to create, any legal or equitable right in
any person not a party to this Royalty Agreement or give any such person any
claim against any party to this Royalty Agreement that such party would not have
but for this Royalty Agreement.
Section 6.9 Section Headings; Construction. The headings of Articles
and Sections in this Royalty Agreement are provided for convenience only and
will not affect its construction or interpretation. All words used in this
Royalty Agreement will be construed to be of such gender or number as the
context requires. The language used in the Royalty Agreement shall be construed,
in all cases, according to its fair meaning, and not for or against any party
hereto. The parties acknowledge that each party has reviewed this Royalty
Agreement and that rules of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be available in the
interpretation of this Royalty Agreement.
Section 6.10 Governing Law; Jurisdiction. This Royalty Agreement is
to be governed by and construed under the laws of the State of New York without
regard to conflicts of laws principles that would require the application of any
other law. The parties agree that the state and federal courts located in New
York County, New York shall be the sole venue and shall have sole jurisdiction
for the resolution of all disputes arising hereunder.
Section 6.11 Execution of Agreement, Counterparts. This Royalty
Agreement may be executed in one or more counterparts, each of which is deemed
to be an original copy of this Royalty Agreement and all of which, when taken
together, are deemed to constitute one and the same agreement. The exchange of
copies of this Royalty Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Royalty
Agreement as to the parties and may be used in lieu of the original Royalty
Agreement for all purposes. Signatures of the parties transmitted by facsimile
are deemed to be their original signatures for any purpose whatsoever.
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[signature page to Royalty Agreement]
IN WITNESS WHEREOF, the parties have executed this Royalty Agreement as
of the date first written above.
ENZON, INC.
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
VIVO HEALTHCARE CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
Exhibit 10.22
EXECUTION COPY
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of October 16, 2002,
by and among VIVO HEALTHCARE CORPORATION, a Delaware corporation ("Assignor"),
Assignor's shareholders listed on Schedule A attached hereto and made a part
hereof (collectively, the "Shareholders"), and ENZON, INC., a Delaware
corporation ("Assignee").
WHEREAS, Assignor is the owner of the entire right, title and interest in,
to and under all of the assets of Assignor used or useful in connection with the
p-MPA Technology (as hereinafter defined), including those identified on
Schedule B attached hereto and made a part hereof (the "Assigned Assets"); and
WHEREAS, Assignor desires to assign to Assignee, and Assignee desires to
receive from Assignor, all of Assignor's right, title and interest in, to and
under the Assigned Assets.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee agree as
follows:
1. Assignor hereby sells, assigns, transfers and conveys to Assignee, and
Assignee hereby purchases and acquires from Assignor, Assignor's entire right,
title and interest in the Assigned Assets on a worldwide basis for the
consideration set forth in Paragraph 2 below. It is understood and agreed by the
parties hereto that no representations or warranties, direct or implied, are
made with respect to the Assigned Assets and as such they are taken hereunder by
Assignee on an "as is" basis.
2. As a material inducement to and in consideration of the Assignor's
agreement to enter into this Assignment Agreement, Assignee shall pay Assignor
the following consideration:
(a) Seven Hundred Fifty Thousand Dollars ($750,000) to be paid to
Assignor upon Assignee's receipt of evidence that the United States Food
and Drug Administration has approved Assignor's investigational new drug
application to commence human clinical trials on any product incorporating
the p-MPA Technology (the "Milestone Payment").
(b) Royalties on Assignee's use and exploitation of the p-MPA
Technology pursuant to the terms of a royalty agreement substantially in
the form attached hereto as Exhibit 1 (the "Royalty Agreement").
3. Covenant not to Compete.
(a) Assignor and each Shareholder acknowledges that the agreements
and covenants contained in this Paragraph 3 are essential to protect the
Assigned Assets being purchased by Assignee, and Assignee would not
purchase the Assigned Assets but for the agreements and covenants of
Assignor and each Shareholder contained in this Paragraph 3.
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(b) Until the earlier to occur of (i) five (5) years following the
date of this Assignment Agreement, or (ii) two (2) years following the
date of this Assignment Agreement but only in the event that Assignee does
not expend at least One Million Dollars ($1,000,000) (including direct
research and development expenditures plus a portion of Assignee's general
administrative expenses attributable to such project, each to be allocated
in a manner consistent with generally accepted accounting principles and
Assignee's past practices) (the "Minimum Requirement") on the development
or commercialization of the p-MPA Technology or the Assigned Assets during
such two-year period, neither Assignor nor any Shareholder nor any of
their Related Persons shall engage in a business that markets the p-MPA
Technology or products which include the p-MPA Technology, either directly
or indirectly, or enter the employ of, or render any services to, any
Person (other than the Assignee) engaged, directly or indirectly, in such
activities; or become interested in any Person (other than the Assignee)
that is engaged in such activities, directly or indirectly, as a partner,
lender, member, shareholder, agent, trustee, consultant or in any other
relationship or capacity; provided that each such party may own, directly
or indirectly, solely as an investment, securities of any Person which are
traded on any national securities exchange if such party is not a
controlling person of, or a member of a group which controls, such Person
or does not, directly or indirectly, own 1% or more of any class of
securities of such Person.
4. Notwithstanding anything to the contrary contained in this Assignment
Agreement, Assignee shall have no obligation to develop, commercialize or
otherwise exploit the p-MPA Technology. Without limiting the foregoing, Assignee
shall have no obligation to file any patent applications or to maintain any
patents, if and when issued. The parties further agree that in the event that
Assignee does not expend at least the Minimum Requirement on the development or
commercialization of the p-MPA Technology or the Assigned Assets during the
first two (2) years following the date of this Agreement, Assignor shall have
the right to cause Assignee to reassign the Assigned Assets to Assignor.
Assignor shall have ninety (90) days following the end of such two (2) year
period to exercise such right to cause the reassignment of the Assigned Assets.
5. Jerrold Hirschberg and George Naimark hereby acknowledge that (a)
Assignee has hired Uli Grau, Eddy Anglade and A. Clarke Atwell as its employees,
(b) Messrs. Grau's, Anglade's and Atwell's compensation may include options to
purchase shares of Assignee's capital stock (or such other securities as
Assignee may choose), and (c) the terms pursuant to which such options will vest
may be subject to Assignee meeting certain thresholds based on the sale of
products that exploit or otherwise incorporate the p-MPA Technology.
Notwithstanding the foregoing, Messrs. Hirschberg and Naimark jointly and
severally on behalf of themselves and their respective Related Persons (as
defined herein) hereby acknowledge that they shall have no right to such
compensation, and they each hereby fully and forever release and discharge
Assignee and its Related Persons (collectively, the "Assignee Releasees"), from
and against all actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
extents, executions, obligations, claims and demands whatsoever, in law or
equity, which against the Assignee Releasees Messrs. Hirschberg and Naimark or
their respective heirs, executors, administrators, successors and assigns ever
had, now have or hereafter can, shall or may, have for, upon, or by reason of
any matter, cause or thing whatsoever
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from the beginning of the world to the date of this Assignment Agreement of
every nature arising from or otherwise directly or indirectly relating to
Assignee's employment of Messrs. Grau, Anglade and Atwell.
6. Subject to Paragraph 4, no party may assign any of its rights or
delegate any of its obligations under this Assignment Agreement without the
prior written consent of the other parties, except as follows:
(a) Assignee may assign any of its rights and delegate any of its
obligations under this Assignment Agreement to any subsidiary or affiliate
of Assignee or in connection with the sale or other transfer of all or a
portion of the business, assets, properties or stock of Assignee or any of
its subsidiaries or affiliates; provided that until Assignee expends at
least the Minimum Requirement on the development or commercialization of
the p-MPA Technology or the Assigned Assets, any such assignment or
delegation by Assignee shall be subject to the approval of Assignor, which
approval may not be unreasonably withheld; and
(b) upon prior written notice to Assignee, Assignor may assign its
rights to receive the Milestone Payment to the Shareholders; provided that
no such assignment or delegation shall relieve Assignee or Assignor, as
the case may be, from any of its obligations hereunder.
7. Subject to Paragraph 6, this Assignment Agreement applies to, is
binding in all respects upon, and inures to the benefit of the successors and
permitted assigns of the parties hereto. Nothing in this Assignment Agreement is
to be construed to give any Person other than the parties to this Assignment
Agreement any legal or equitable right under or with respect to this Assignment
Agreement or any provision of this Assignment Agreement, except such rights as
shall inure to a successor or permitted assignee pursuant to this Paragraph 7.
8. The parties hereto shall cooperate reasonably with each other and with
their respective representatives in connection with any steps required to be
taken as part of their respective obligations under this Assignment Agreement,
and the parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Assignment Agreement
and the transactions contemplated hereby.
9. This Assignment Agreement is to be governed by and construed under the
laws of the State of New York without regard to conflicts of laws principles
that would require the application of any other law. The parties agree that the
state and federal courts located in New York County, New York shall be the sole
venue and shall have sole jurisdiction for the resolution of all disputes
arising hereunder.
10. Certain Definitions.
"Person" - an individual, partnership, corporation, business trust,
limited liability company or partnership, joint stock company, trust,
unincorporated association, joint venture or other entity, or a governmental
body.
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"p-MPA Technology" - all rights in all data, technology, know how,
patents, copyrights, marks, trade secrets and other intellectual property owned,
used or licensed (as licensor or licensee) by Assignor or its
predecessors-in-interest (including but not limited to, all improvements,
changes and modifications thereto that at any time in the past were, or
currently are, in the process of being made, tested or developed) in connection
with (a) a polymerized version of mycophenolate ("p-MPA") with expected
resorption of orally administered p-MPA in a suitable dosage form in the
gastrointestinal tract to provide steady and prolonged levels of the active
principle mycophenolate ("MPA") in the bloodstream; (b) plans to design p-MPA,
by varying certain parameters such as degree of polymerization, chemical nature
of the linker molecule, or controlling the particle size of the drug product, so
that it exhibits pharmacokinetic properties suitable for once-a-day, or less
frequent dosing, providing certain convenience advantages over mycophenolate
(dosed twice or thrice-a-day), including, but not limited to, all experimental
plans, development plans, regulatory strategies, marketing plans and competitive
analyses therefor, (c) any business plans for such technology, (d) any
developmental strategy designed in the indication pemphigus vulgaris, a rare,
dermal autoimmune disease for which there is no causual treatment, and (e) any
marketing plans.
"Related Person" - is: (a) any Person that, directly or indirectly,
controls, is controlled by, or is under common control with a specified Person;
(b) any Person that holds a Material Interest in a specified Person; (c) each
Person that serves as a director, officer, partner, executor, or trustee of a
specified Person (or in a similar capacity); and (d) any Person in which a
specified Person holds a Material Interest. For purposes of this definition, (a)
"control" (including "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and (b) "Material
Interest" means direct or indirect beneficial ownership (defined as the power to
vote or to direct the voting of, or the power to dispose of, an equity security)
of voting securities or other voting interests representing at least three
percent (3%) of the outstanding voting power of a Person or equity securities or
other equity interests representing at least three percent (3%) of the
outstanding equity securities or equity interests in a Person.
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[Signature Page to Assignment Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement as of the date first written above.
VIVO HEALTHCARE CORPORATION
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ENZON, INC.
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SHAREHOLDERS:
---------------------------------
ULI GRAU
---------------------------------
EDDY ANGLADE
---------------------------------
A. CLARK ATWELL
---------------------------------
JERROLD HIRSCHBERG
---------------------------------
GEORGE NAIMARK
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SCHEDULE A
List of Shareholders
Uli Grau
Eddy Anglade
A. Clarke Atwell
Jerrold Hirschberg
George Naimark
Schedule A-1
EXECUTION COPY
SCHEDULE B
Assigned Assets
All of the Assignor's right, title and interest in and to the p-MPA
Technology on a worldwide basis, and all of the following property and assets,
personal or mixed, tangible and intangible, owned or leased, of every kind and
description, wherever located (but excluding the Excluded Assets (as defined
below)):
1. all other intangible rights and property of Assignor relating to the
p-MPA Technology, including, but not limited to, going concern value, goodwill,
and all rights to the names "Vivo Healthcare" and "p-MPA";
2. all of Assignor's rights in, to and under all agreements entered into
by Assignor or any predecessor-in-interest thereof with any Person (a) under
which Assignor has or may acquire any rights or benefits, or that assigns or
licenses to Assignor rights to any inventions, improvements, discoveries or
information, relating in whole or in part to the p-MPA Technology or any other
Assigned Asset, (b) relating to nondisclosure and non-use of confidential or
proprietary information, or assigning or transferring, as works made for hire,
any inventions, improvements, discoveries or information made or other rights
created by such personnel, in any other way relating to p-MPA Technology, or (c)
obligating such Person not to engage in any activities competitive with any
business of Assignor or any predecessor-in-interest thereof. For purposes of
this Agreement, the term "predecessor-in-interest" shall include, but not be
limited to, each Shareholder.
3. all data and records relating to the p-MPA Technology, including, but
not limited to, customer lists, all raw data, all data on use and experience
with the p-MPA Technology, research and development reports and records,
production reports and records, equipment logs, operating guides and manuals,
financial and accounting records, creative materials, advertising materials,
promotional materials, reports, correspondence and other similar documents and
records;
4. all equipment of every kind owned or leased by Assignor in connection
with the p-MPA Technology (wherever located and whether or not carried on
Assignor's books), including, but not limited to, all CPUs and storage devices
on which any of the p-MPA Technology is stored in electronic form, but shall not
include any furniture, photocopiers or other ordinary office equipment;
5. all governmental authorizations (including, but not limited to all
consents, licenses, or permits issued, granted, given, or otherwise made
available by or under the authority of any governmental body or pursuant to any
legal requirement, but specifically excluding any general business license)
relating to the p-MPA Technology and all pending applications therefor or
renewals thereof, in each case to the extent transferable to Assignee; and
6. all insurance benefits, including rights and proceeds, arising from or
relating to the Assigned Assets prior to the date of the Assignment Agreement,
including all benefits paid
Schedule B-1
EXECUTION COPY
after the date of the Assignment Agreement for occurrences prior to the date of
the Assignment Agreement.
All of the property and assets to be transferred to Assignor pursuant to
the terms of the Assignment Agreement (including this and the other schedules
thereto), including, but not limited to, the items referred to in paragraphs 1
through 6 above, but excluding the Excluded Assets, are herein referred to
collectively as the "Assigned Assets".
Notwithstanding anything to the contrary contained in the Assignment
Agreement (including this and the other schedules thereto), (a) all cash, cash
equivalents and accounts receivable, and (b) all agreements, contracts, leases,
consensual obligations, promises, or undertakings (whether written or oral and
whether express or implied) other than those agreements included within the
Assigned Assets are not part of the sale and purchase contemplated hereunder,
are excluded from the Assigned Assets, and shall remain the property of Assignor
after the date of the Assignment Agreement (collectively, the "Excluded
Assets").
Schedule B-2
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enzon Pharmaceuticals, Inc. and
Subsidiaries (the "Company") on Form 10-Q for the period ended December 31, 2002
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Arthur J. Higgins, Chairman, President and Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
By: /s/Arthur J. Higgins
---------------------------------------
Arthur J. Higgins
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
February 14, 2003
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enzon Pharmaceuticals, Inc. and
Subsidiaries (the "Company") on Form 10-Q for the period ended December 31, 2002
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Kenneth J. Zuerblis, Vice President Finance, Chief Financial
Officer and Corporate Secretary of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
By: /s/Kenneth J. Zuerblis
-----------------------
Kenneth J. Zuerblis
Vice President Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
and Corporate Secretary
February 14, 2003