Exhibit 10.3
Execution Version
***Text Omitted and Filed Separately
with the Securities and Exchange Commission.
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4)
and 240.24b-2.
ASSET PURCHASE AGREEMENT
by and between
CYPRESS BIOSCIENCE, INC.
and
MARINA BIOTECH, INC.
dated as of August 25, 2010

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Table of Contents

              Page
ARTICLE 1 DEFINITIONS
    1  
 
       
1.1 Defined Terms
    1  
1.2 Construction of Certain Terms and Phrases
    1  
 
       
ARTICLE 2 PURCHASE AND SALE OF ASSETS
    1  
 
       
2.1 Purchase and Sale of Assets
    1  
2.2 Transition Services
    2  
2.3 Assignability and Consents
    2  
 
       
ARTICLE 3 ASSUMPTION OF ASSUMED LIABILITIES
    2  
 
       
ARTICLE 4 PURCHASE PRICE AND PAYMENT
    2  
 
       
4.1 Purchase Price
    2  
4.2 Royalties
    3  
4.3 Purchase of Product Materials
    5  
4.4 Payment of Sales, Use and Other Taxes
    5  
4.5 Allocation of Purchase Price
    5  
4.6 Withholding
    5  
 
       
ARTICLE 5 CLOSING
    6  
 
       
5.1 Time and Place
    6  
5.2 Deliveries at Closing
    6  
 
       
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER
    7  
 
       
6.1 Organization, Etc
    7  
6.2 Authority; Binding Nature
    7  
6.3 Non-Contravention; Consents
    7  
6.4 Purchased Assets
    8  
6.5 Title to Purchased Assets
    8  
6.6 Assumed Contracts
    8  
6.7 Intellectual Property Rights
    8  
6.8 Litigation
    9  
6.9 Permits; No Debarment
    9  
6.10 Product Materials.
    10  
6.11 Product Data
    10  
6.12 Brokers
    10  
6.13 Taxes.
    10  
6.14 No Other Representations
    11  
 
       
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BUYER
    11  
 
       
7.1 Organization, Etc
    11  
7.2 Authority; Binding Nature of Agreement
    11  
7.3 Non-Contravention; Consents
    11  
7.4 Litigation
    11  
7.5 Brokers
    12  
 
       
ARTICLE 8 COVENANTS OF THE PARTIES
    12  
 
       
8.1 Public Announcements
    12  

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              Page
8.2 Corporate Names
    12  
8.3 Regulatory Matters
    12  
8.4 Adverse Experience Reports
    12  
8.5 Affiliates
    13  
8.6 Access
    13  
8.7 Additional Seller Covenants
    13  
8.8 Further Assurances
    14  
8.9 Diligence
    14  
8.10 Tax Matters
    15  
 
       
ARTICLE 9 INDEMNIFICATION
    16  
 
       
9.1 Survival of Representations, Warranties, Etc
    16  
9.2 Indemnification
    16  
9.3 Limitations
    19  
9.4 Consequential Damages
    20  
 
       
ARTICLE 10 MISCELLANEOUS
    20  
 
       
10.1 Confidentiality
    20  
10.2 Notices
    21  
10.3 Entire Agreement
    22  
10.4 Waiver
    22  
10.5 Amendment
    22  
10.6 Third Party Beneficiaries
    22  
10.7 Assignment; Binding Effect
    22  
10.8 Headings
    22  
10.9 Severability
    22  
10.10 Governing Law; Dispute Resolution
    23  
10.11 Expenses
    23  
10.12 Counterparts
    23  
10.13 Schedules, Exhibits and Other Agreements
    23  

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ASSET PURCHASE AGREEMENT
     This Asset Purchase Agreement (this “Agreement”) is made and entered into
as of August 25, 2010, by and between Cypress Bioscience, Inc., a Delaware
corporation (“Buyer”), and Marina Biotech, Inc., a Delaware corporation
(“Seller”).
RECITAL
     WHEREAS, subject to the terms and conditions of this Agreement, Seller
desires to sell to Buyer, and Buyer desires to purchase from Seller, the
Purchased Assets (as defined below).
AGREEMENT
     NOW, THEREFORE, 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 hereby are acknowledged, the Parties agree
as follows:
ARTICLE 1
DEFINITIONS
     1.1 Defined Terms. Certain capitalized terms used in this Agreement are
defined in Exhibit A attached hereto.
     1.2 Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires: (a) words of any gender include each other gender;
(b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and
derivative or similar words refer to this entire Agreement; (d) the terms
“Article,” “Section” or “Exhibit” refer to the specified Article, Section or
Exhibit of this Agreement; (e) the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase, “and/or”; and
(f) the term “including” means “including without limitation.” Whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless Business Days are specified. All accounting terms used but not otherwise
defined herein shall have the meanings ascribed to such terms under U.S.
Generally Accepted Accounting Principles, consistently applied.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
     2.1 Purchase and Sale of Assets.
          (a) Subject to the terms and conditions of this Agreement, at the
Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer, free
and clear of all Encumbrances, and Buyer shall purchase, acquire and accept from
Seller, all right, title and interest, as of the Closing, in and to the
Purchased Assets.
          (b) Notwithstanding anything contained in this Agreement to the
contrary, (i) from and after the Closing, Seller shall retain all of its right,
title and interest in and to the Excluded Assets, and (ii) Seller may retain an
archival copy of all Assumed Contracts, Books and Records (excluding any
financial data relating to the Purchased Assets and the Business), and Product
Data (subject to Seller’s confidentiality obligations pursuant to Section 10.1
hereof).

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     2.2 Transition Services. For three (3) months following the Closing, Seller
shall provide to Buyer, at no additional cost to Buyer, up to an aggregate of
[...***...] of consulting services, such consulting services to be provided by
[...***...]and [...***...] following the Closing. The services shall be provided
upon the reasonable request of Buyer during normal business hours.
     2.3 Assignability and Consents. Notwithstanding anything to the contrary
contained in this Agreement, if the sale, assignment, transfer, conveyance or
delivery or attempted sale, assignment, transfer, conveyance or delivery to
Buyer of any asset that would be a Purchased Asset is (a) prohibited by any
applicable Law or (b) would require any consents, waivers, approvals,
authorizations of or notices to a third Person or Governmental or Regulatory
Authority and such consents, waivers, approvals, authorizations or notices shall
not have been obtained prior to the Closing, then in either case the Closing
shall proceed without the sale, assignment, transfer, conveyance or delivery of
such asset and this Agreement shall not constitute an agreement for the sale,
assignment, transfer, conveyance or delivery of such asset; provided that
nothing in this Section 2.3 shall be deemed to waive the rights of Buyer not to
consummate the transactions contemplated by this Agreement if the conditions to
its obligations set forth in Article 10 have not been satisfied. In the event
that the Closing proceeds without the sale, assignment, transfer, conveyance or
delivery of any such asset, then following the Closing, the Parties shall use
their commercially reasonable efforts, and cooperate with each other, to obtain
promptly such consents, waivers, approvals, authorizations or notices. Pending
such consents, waivers, approvals, authorizations or notices, the Parties shall
cooperate with each other in any mutually agreeable, reasonable and lawful
arrangements designed to provide to Buyer the benefits of use of such asset and
to Seller the benefits, including any indemnities, that, in each case, it would
have obtained had the asset been conveyed to Buyer at the Closing. Once consent,
waiver, approval, authorization or notice for the sale, assignment, transfer,
conveyance or delivery of any such asset not sold, assigned, transferred,
conveyed or delivered at the Closing is obtained or given, Seller shall assign,
transfer, convey and deliver such asset to Buyer at no additional cost to Buyer.
ARTICLE 3
ASSUMPTION OF ASSUMED LIABILITIES
     Subject to the terms and conditions of this Agreement, as of the Closing
Date, Buyer will deliver the Assignment and Assumption Agreement to Seller
pursuant to which Buyer agrees to assume, satisfy, perform, pay, discharge and
otherwise be responsible for the Assumed Liabilities subject to and in
accordance with their respective terms and conditions. Except with respect to
the Assumed Liabilities, Buyer shall not assume and shall not in any way be
responsible for any of the debts, liabilities, or obligations of Seller.
ARTICLE 4
PURCHASE PRICE AND PAYMENT
     4.1 Purchase Price. As consideration for the Purchased Assets and Seller’s
full and faithful performance of all of its obligations hereunder, Buyer shall:
          (a) pay to Seller at the Closing in cash by wire transfer of
immediately available funds a payment of Seven Hundred Fifty Thousand U.S.
Dollars (U.S.$750,000);
 

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          (b) pay to Seller on the First Milestone in cash by wire transfer of
immediately available funds a payment of [...***...];
          (c) pay to Seller on the Second Milestone in cash by wire transfer of
immediately available funds a payment of [...***...];
          (d) if and only if the payment for the Second Milestone had not been
made, pay to Seller on the Third Milestone in cash by wire transfer of
immediately available funds a payment of [...***...];
          (e) pay to Seller on the Fourth Milestone in cash by wire transfer of
immediately available funds a payment of [...***...];
          (f) if any only if the payment for the Fourth Milestone has not been
made, pay to Seller on the Fifth Milestone in cash by wire transfer of
immediately available funds a payment of [...***...];
          (g) pay to Seller any Royalties due pursuant to Section 4.2(a) (with
the payments made under Sections 4.1(a), (b), (c), (d), (e), (f) and (g) the
“Purchase Price”); and
          (h) at the Closing, assume the Assumed Liabilities pursuant to the
Assignment and Assumption Agreement.
     For purposes of this Section 4.1: (v) “First Milestone” means [...***...];
(w) “Second Milestone” means [...***...]; (x) “Third Milestone” means
[...***...]; (y) “Fourth Milestone” means [...***...]; and (z) “Fifth Milestone”
means [...***...]. For clarity, Buyer shall never have to pay both the Second
and the Third Milestones or both the Fourth and the Fifth Milestones as the
payment of the Third Milestone and the Fifth Milestone are only due if
[...***...].
     4.2 Royalties.
          (a) In addition to the payment of the Purchase Price, Buyer shall pay
to Seller a running royalty at the rate of [...***...] of Net Sales (the
“Royalties”) during the Royalty Term (as defined below).
          (b) The royalty payment obligation under Section 4.2(a) shall apply,
on a country-by-country and Product-by-Product basis in the Territory, during
the period of time beginning upon the First Commercial Sale of such Product in
such country, and ending upon the earlier of: (i) the expiration of the
last-to-expire Valid Claim of a Patent in the Intellectual Property covering the
use, import, manufacture, sale or offer for sale of such Product in such
country; and (ii) the date on which the first sale of a Generic Product takes
place in such country (such period, the “Royalty Term”).
          (c) (i) If it is necessary for Buyer or its licensee to obtain a
license to know-how or patents from any Third Party that claim or cover the
composition of matter, manufacture, use, handling, storage, sale or other
disposition of a particular Product in a particular country in the Territory in
order for Buyer or its licensee to develop, manufacture or commercialize such
Product in such country in the Territory and Buyer or its licensee pays such
Third Party any up-front fee, milestone, royalty, or other payment in
consideration of obtaining such license (each, a “Third Party Payment”), then
(subject to clause (iii) of this paragraph (c)) Buyer shall have the right to
deduct from milestone payments due Seller as part of
 

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the Purchase Price under Section 4.1 and royalty payments due Seller for Net
Sales of such Product in such country under Section 4.2(a), [...***...] of any
such Third Party Payments made by Buyer.
               (ii) If Buyer or its licensee incurs costs in connection with an
interference declared with regard to a Patent included in the Intellectual
Property, including any settlement or attorneys’ fees related thereto (“Third
Party Interference Costs”), then (subject to clause (iii) of this paragraph (c))
Buyer shall have the right to deduct from milestone payments due Seller as part
of the Purchase Price under Section 4.1 and royalty payments due Seller for Net
Sales of such Product under Section 4.2(a), [...***...] of any such Third Party
Interference Costs paid by Buyer; provided, however, that the aggregate amount
of Third Party Interference Costs which may be deducted pursuant to this clause
(ii) shall not exceed [...***...].
               (iii) Notwithstanding the provisions of clauses (i) and (ii) of
this paragraph (c), in no event shall the permitted deductions cause either
(A) any milestone payment or (B) any royalty amount payable to Seller for Net
Sales in any particular country in any particular calendar quarter to be reduced
by more than [...***...] of the milestone payment that would otherwise be
payable to Seller or the royalty amounts that would otherwise be payable for Net
Sales in such country in such period; provided, however, that (subject to the
limitations of this clause (iii)) Buyer may deduct from future milestone
payments and from royalty payments for Net Sales in such country in future
calendar quarters any amounts that it was previously unable to deduct due to
such limitations.
          (d) During the Royalty Term, within [...***...] days after the end of
each calendar quarter, Buyer shall deliver to Seller a report containing the
following information for the prior calendar quarter: (i) the gross sales
associated with each Product sold by Buyer and its Affiliates or licensees;
(ii) a calculation of Net Sales of each Products that are sold by Buyer, its
Affiliates and (if applicable) its licensees; and (iii) a calculation of
payments due to Seller with respect to the foregoing. Concurrent with these
reports, Buyer shall remit to Seller any royalty payment due for the applicable
calendar quarter. If no royalties are due to Seller for such reporting period,
the report shall so state.
          (e) Net Sales made in currencies other than dollars will be converted
into dollars using the closing exchange rates reported in The Wall Street
Journal (U.S., Western Edition) on the last business day of the applicable
calendar quarter.
          (f) All payments due hereunder shall be made by wire transfer of
immediately available funds into an account designated by Seller.
          (g) Buyer will maintain complete and accurate records in sufficient
detail to permit Seller to confirm the accuracy of the calculation of payments
under this Agreement. Upon reasonable prior notice, such records shall be
available during regular business hours for a period of three (3) years from the
end of the calendar year to which they pertain for examination at the expense of
Seller, and not more often than once each calendar year, by an independent
certified public accountant (“Independent Accountant”) selected by Seller and
reasonably acceptable to Buyer, for the sole purpose of verifying the accuracy
of the financial reports or payments furnished by Buyer pursuant to this
Agreement. Any such auditor shall not disclose to Seller Buyer’s Confidential
Information. Any amounts shown to be owed but unpaid shall be paid within thirty
(30) days from the date of delivery of the accountant’s report. Seller shall
bear the full cost of such audit unless such audit discloses an underpayment by
Buyer of more than five percent (5%) of the amount due, in which case Buyer
shall bear the full cost of such audit.
 

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     4.3 Purchase of Product Materials. On the Closing Date, Buyer shall take
title to all Product Materials.
     4.4 Payment of Sales, Use and Other Taxes. Seller shall be responsible for
all sales, use, transfer, value added, documentary and other related Taxes, if
any, arising out of the sale of the Purchased Assets to Buyer pursuant to this
Agreement (including Taxes on Seller’s income) (collectively, the “Transaction
Taxes”). Buyer and Seller agree to cooperate to determine the amount of any
Transaction Taxes payable in connection with the transfer of the Purchased
Assets under this Agreement. Buyer and Seller agree to assist each other, to the
extent reasonably necessary and appropriate, in the preparation and filing of
any and all required Tax Returns related to Transaction Taxes. Buyer hereby
waives compliance by Seller with the provisions of the bulk transfer laws of any
state.
     4.5 Allocation of Purchase Price.
          (a) The Purchase Price (plus Assumed Liabilities, to the extent
properly taken into account under the Code), shall be allocated among the
Purchased Assets in accordance with Section 1060 of the Code and the Treasury
regulations promulgated thereunder (and any similar provision of state, local or
foreign law, as appropriate) (the “Allocation”). The Allocation shall be
delivered by Purchaser to Seller within sixty (60) days after the Closing Date.
Seller and Buyer shall work in good faith to resolve any disputes relating to
the Allocation within twenty (20) days. If Seller and Buyer are unable to
amicably resolve any such dispute, such dispute shall be resolved promptly by an
Independent Accountant agreed upon by the parties, such agreement not to be
unreasonably withheld or delayed, the costs of which shall be borne equally by
Seller and Purchaser.
          (b) If the Purchase Price is adjusted pursuant to Sections 4.1, 4.2 or
8.10 or Article 9, the Allocation shall be adjusted in a manner consistent with
Section 1060 of the Code. However, if the Parties are unable to amicably agree
on such adjustment, such dispute shall be resolved promptly by an Independent
Accountant agreed upon by the parties, such agreement not to be unreasonably
withheld or delayed, the costs of which shall be borne equally by Buyer and
Seller.
          (c) Buyer and Seller agree (i) to report the sale of the Purchased
Assets for federal and state Tax purposes in accordance with the Allocation and
(ii) not to take any position inconsistent with such Allocation on any of their
respective Tax Returns.
     4.6 Withholding. Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement such amounts as Buyer
is required to deduct and withhold under the Code, or any Tax law, with respect
to the making of such payment, provided that (x) such amount is promptly paid
for and on behalf of Seller to the appropriate tax authorities and (y) Buyer
furnishes Seller with official tax receipts or other appropriate evidence of
payment issued by the appropriate tax authorities. To the extent that amounts
are so withheld and paid, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to Seller.

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ARTICLE 5
CLOSING
     5.1 Time and Place. The closing of the transactions contemplated by this
Agreement, including the purchase and sale of the Purchased Assets and the
assumption of the Assumed Liabilities (the “Closing”), shall take place on the
date hereof at the offices of Latham & Watkins LLP, 12636 High Bluff Drive,
Suite 400, San Diego, CA 92130 unless another time or place shall be agreed to
by the Parties.
     5.2 Deliveries at Closing.
          (a) Closing Deliveries by Seller.
     At the Closing, Seller shall deliver or cause to be delivered to Buyer:
          (i) a certified copy of the Certificate of Incorporation of Seller;
          (ii) a certificate, executed by an executive officer of Seller,
attaching a certified copy of the resolutions of the Board of Directors of
Seller approving the transactions contemplated hereby; and
          (iii) an intellectual property assignment, substantially in the form
of Exhibit B hereto, assigning to Buyer all right, title and interest of Seller
in the Intellectual Property (the “Intellectual Property Assignment Agreement”);
          (iv) an assignment and assumption agreement, substantially in the form
of Exhibit C hereto, pursuant to which Buyer agrees to assume, satisfy, perform,
pay, discharge and otherwise be responsible for the Assumed Liabilities (the
“Assignment and Assumption Agreement”); and
          (v) a bill of sale, substantially in the form of Exhibit D hereto,
transferring all rights of Seller in and to the Purchased Assets, including the
Assumed Contracts, to Buyer (the “Bill of Sale”);
          (vi) such instruments of assignment and other instruments or
documents, in form and substance reasonably acceptable to Seller and Buyer, as
may be reasonably necessary to effect Seller’s assignment to Buyer of all rights
of Seller in and to the Purchased Assets, including the Assumed Contracts, in
accordance with the terms of this Agreement and the Bill of Sale; and
          (vii) completed and executed copies of the documents referred to in
Section 8.10(d).
          (b) Closing Deliveries by Buyer.
     At the Closing, Buyer shall deliver or cause to be delivered to Seller:
          (i) the Intellectual Property Assignment Agreement;
          (ii) the Assignment and Assumption Agreement;
          (iii) the Bill of Sale;

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          (iv) such instruments of assumption and other instruments or
documents, in form and substance reasonably acceptable to Seller and Buyer, as
may be reasonably necessary to effect Buyer’s assumption of the Assumed
Liabilities in accordance with the terms of this Agreement and the Assignment
and Assumption Agreement; and
          (v) a certificate, executed by an executive officer of Buyer,
attaching a certified copy of the resolutions of the Board of Directors of Buyer
approving the transactions contemplated.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
     Seller represents and warrants to Buyer as of the date hereof, subject to
such exceptions as are specifically disclosed in the disclosure schedule
referencing the appropriate Section or Sections hereof as shall be supplied by
Seller to Buyer and dated as of the date hereof (the “Seller Disclosure
Schedule”), as follows:
     6.1 Organization, Etc.
     Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority (a) to conduct the Business in the manner in which
it is currently being conducted, and (b) to own and use the Purchased Assets in
the manner in which such assets are currently owned and used. Seller does not
have any subsidiaries, direct or indirect, which own or control or otherwise
have any rights with respect to the Purchased Assets.
     6.2 Authority; Binding Nature. Seller has all necessary power and authority
and has taken all actions necessary to enter into this Agreement and the other
Transaction Documents and to carry out the transactions and perform the
obligations contemplated hereby. Each of this Agreement and the other
Transaction Documents to which Buyer is a party has been duly and validly
authorized, executed and delivered by Seller and, when executed and delivered by
Buyer, will constitute a legal, valid and binding obligation of Seller
enforceable against it in accordance with its terms except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors rights generally, and
(b) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
     6.3 Non-Contravention; Consents. The execution, delivery and performance of
this Agreement and each of the other Transaction Documents and the sale of the
Purchased Assets to Buyer do not and will not contravene, conflict with or
result in a violation of any (a) Laws applicable to the Purchased Assets, any
Assumed Contract or the Business; (b) any provision of any Assumed Contract;
(c) any of the provisions of Seller’s organizational documents or any resolution
adopted by Seller’s Board of Directors (or any committee thereof) or
stockholders; or (d) any material agreement or other material instrument or
arrangement to which Seller is subject. No consent, order, authorization,
approval, declaration or filing, including with or from the stockholders of
Seller or with or from any Governmental or Regulatory Authority, is required on
the part of Seller for or in connection with the execution, delivery or
performance of this Agreement and each of the other Transaction Documents, and
the purchase by Buyer of the Purchased Assets.

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     6.4 Purchased Assets. The Purchased Assets collectively constitute all of
the properties, rights, interests and other tangible and intangible assets owned
by Seller and used by Seller exclusively to conduct the Business.
     6.5 Title to Purchased Assets. Seller has good and marketable title to all
of the Purchased Assets, including the Product Materials, free and clear of all
Encumbrances, and Seller has not received any written notice of any adverse
claim asserting ownership of any Purchased Asset. The execution, delivery and
performance by Seller of this Agreement and the sale of the Purchased Assets to
Buyer will not result in the imposition of any Encumbrance on the Purchased
Assets.
     6.6 Assumed Contracts.
          (a) Section 6.6 of the Seller Disclosure Schedule sets forth a
complete and correct list of each Contract to which Seller is a party that
relates exclusively to Purchased Assets.
          (b) (i) Seller is not presently in violation or breach of, and has not
declared or committed any default under and, to the Knowledge of Seller, no
Person is presently in violation or breach of, or has declared or committed any
default under, any Assumed Contract, (ii) Seller has not received any written
notice regarding any breach of, or default under, any Assumed Contract, (iii) no
event has occurred, and no circumstance or condition exists (including the
Closing of the transactions contemplated by this Agreement), that would give any
Person the right to cancel, terminate or modify any Assumed Contract, and
(iv) each Assumed Contract sets forth the entire agreement and understanding
between Seller and the other parties thereto and is valid, binding and in full
force and effect. Seller has made available to Buyer complete and correct copies
of all Assumed Contracts.
     6.7 Intellectual Property Rights.
          (a) Section 6.7(a) of the Seller Disclosure Schedule sets forth a
complete and correct list of all Registered Intellectual Property.
          (b) Seller owns good and marketable title in and to all of the
Intellectual Property (including the Registered Intellectual Property and other
Intellectual Property set forth on Section 6.7(a) of the Seller Disclosure
Schedule), free and clear of all Encumbrances other than Permitted Encumbrances.
          (c) All documents and instruments necessary to perfect the rights of
Seller in the Patents included in the Intellectual Property have been validly
executed, delivered or filed in a timely manner with the appropriate
Governmental or Regulatory Authorities.
          (d) Except as set forth on Section 6.7(d) of the Seller Disclosure
Schedule, Seller has disclosed trade secrets of Seller included in the
Intellectual Property only to Persons that have executed written confidentiality
agreements governing the use and disclosure of such trade secrets, except to the
extent Seller was required to disclose such information in connection with
making filings related to any Purchased Assets with Governmental or Regulatory
Authorities.
          (e) The Intellectual Property constitutes all patents, patent
applications and technology, know-how, information and other intellectual
property rights owned or licensed to Seller relating exclusively to the
Business, the manufacture of the Compound or the Product or the use or sale of
the Product.
          (f) No interest in any of the Intellectual Property has been assigned,
transferred, licensed or sublicensed by Seller to any Person, nor has Seller
agreed not to assert, or to permit the

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assertion of, any Intellectual Property against any Person. Seller has not
executed or granted to any third party, directly or indirectly, or entered into
any agreement for, any license or other right to make, use, offer to sell, sell
or import the Compound or a Product or otherwise to conduct the Business.
          (g) None of the Intellectual Property is (nor to Seller’s Knowledge is
any of the Intellectual Property likely to become) subject to any outstanding
and final order, judgment, decree or stipulation from a Government or Regulatory
Authority having jurisdiction over Seller restricting the use thereof by Seller
with respect to the Business or restricting the licensing thereof by Seller to
any Person.
          (h) No interference, opposition, reissue, reexamination or other
Action or Proceeding of any nature is pending or, to Seller’s knowledge,
threatened in writing in which the scope, validity or enforceability of any of
the Patents within the Intellectual Property is being, has been or could
reasonably be expected to be contested or challenged.
          (i) Seller has not made any claim of any violation or infringement by
others of its rights in the Intellectual Property, and, to Seller’s knowledge,
no grounds for any such claims exist. Seller has not received any notice nor
does it believe that it is in conflict with or infringing upon the asserted
rights of others in connection with the Intellectual Property and, to Seller’s
Knowledge, the use of the Intellectual Property by Seller is not infringing and
has not infringed upon any rights of any other Person.
          (j) To the extent any Intellectual Property or any component thereof
was created in whole or in part by or on behalf of Seller, each Person who
contributed to the creation of such Intellectual Property has irrevocably
assigned to Seller in writing all intellectual property or other ownership
rights in such Person’s contribution to such Intellectual Property or component
thereof, and such Person has waived all moral rights in such Person’s
contribution to such Intellectual Property or component thereof. Seller has
provided to Buyer true, correct and complete copies of all such assignments.
     6.8 Litigation. There are no pending Actions or Proceedings and no Person
has threatened in writing to commence any Action or Proceeding, (a) that
involves the Purchased Assets; or (b) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
the transactions contemplated by this Agreement. There are, and there have been,
no claims made in writing against Seller alleging any material defects in the
Product, the Compound or the Product Materials or alleging any failure of the
Product, the Compound or the Product Materials to meet specifications.
     6.9 Permits; No Debarment.
          (a) No license, franchise, permit or other similar authorization
(each, a “Permit”) is necessary for the conduct of research using the Purchased
Assets. No event has occurred, and Seller has not received any notice in writing
from any Governmental or Regulatory Authority or otherwise of that any such
Permit is required.
          (b) Seller has not made any Regulatory Filings with respect to the
Compound or any Product.
          (c) Seller represents and warrants that Seller is not debarred and has
not used in any capacity relating to the Purchased Assets the services of any
Person debarred under subsections 306(a) or (b) of the Generic Drug Enforcement
Act of 1992.

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     6.10 Product Materials.
          (a) Section 6.10 of the Seller Disclosure Schedule lists (i) the lot
numbers associated with the Compound included in the Product Materials and
(ii) the locations where all Product Materials are located. Seller will deliver
all Product Materials to Buyer within seven (7) Business Days after the Closing.
Seller represents and warrants that the Product Materials manufactured by or for
Seller that will be provided to Buyer hereunder were at the time of creation
collected or manufactured, packaged and stored in compliance with all relevant,
applicable Laws, including those governing clinical biopharmaceutical supplies.
          (b) The Product Materials represent all raw materials, Compound and
finished goods directly related to the Product that are currently owned and on
hand or in the control of Seller at any of its warehouses, blenders, toll
manufacturers, suppliers, or other third parties.
     6.11 Product Data. Seller represents and warrants that the Product Data
constitutes all of the information, including all manufacturing information in
Seller’s tangible possession as of the Closing that was generated and/or used by
Seller or any of Seller’s Affiliates exclusively in connection with the
development and/or manufacture of the Compound or the Product by Seller or any
such Affiliate.
     6.12 Brokers. Seller has not retained any broker in connection with the
transactions contemplated hereunder. Buyer has no, and will have no, obligation
to pay any brokers, finders, investment bankers, financial advisors or similar
fees in connection with this Agreement or the transactions contemplated hereby
by reason of any action taken by or on behalf of Seller.
     6.13 Taxes.
          (a) Seller has duly and timely filed with the appropriate Tax
authorities all Tax Returns required to be filed with respect to the Purchased
Assets. All such Tax Returns are complete and accurate in all material respects.
All Taxes due and owing with respect to the Purchased Assets (whether or not
shown on any Tax Returns) have been paid or reserved for.
          (b) No deficiencies for Taxes with respect to the Purchased Assets
have been claimed, proposed or assessed by any Tax authority or other
Governmental Authority. There are no pending or, to the Knowledge of Seller,
threatened audits, assessments or other actions for or relating to any Liability
in respect of Taxes with respect to the Purchased Assets. There are no matters
under discussion with any Tax authority, or known to Seller, with respect to
Taxes that could result in an additional Liability for Taxes with respect to the
Purchased Assets.
          (c) There are no Encumbrances for Taxes on the Purchased Assets (other
than for current Taxes not yet due and payable).
          (d) There are no Tax sharing agreements or similar arrangements
(including indemnity arrangements) with respect to or involving the Purchased
Assets.
          (e) No Purchased Assets (i) is property required to be treated as
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt use
property” within the meaning of Section 168(h) of the Code, (iii) is “tax-exempt
bond financed property” within the meaning of Section 168(g) of the Code,
(iv) secures any debt the interest of which is tax-exempt under Section 103(a)
of the Code or (v) is subject to a 467 rental agreement as defined in
Section 467 of the Code.

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          (f) No part of the Purchase Price payable hereunder will be considered
an amount received from the sale or exchange of a United States real property
interest subject to Section 897(a) of the Code.
     6.14 No Other Representations.
     SELLER MAKES NO REPRESENTATION OR WARRANTY OTHER THAN AS SET FORTH IN THIS
AGREEMENT AS TO THE COMPOUND, THE PRODUCT, THE PURCHASED ASSETS (INCLUDING, BUT
NOT LIMITED TO, THE PRODUCT MATERIALS) OR THE BUSINESS, WHETHER EXPRESS OR
IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR INFRINGEMENT OF THIRD PARTY RIGHTS, AND ALL SUCH WARRANTIES ARE
EXPRESSLY DISCLAIMED.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
     Buyer represents and warrants to Seller as of the date hereof as follows,
subject to such exceptions as either (a) are specifically disclosed in the
disclosure schedule referencing the appropriate Sections hereof supplied by
Buyer to Seller and dated as of the date hereof (the “Buyer Disclosure
Schedule”) or (b) as to Sections 7.1, 7.2, 7.4 and 7.5 only, are disclosed in
the SEC Reports:
     7.1 Organization, Etc.Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority (a) to conduct its business in the
manner in which it is currently being conducted, and (b) to own and use its
assets in the manner in which its assets are currently owned and used.
     7.2 Authority; Binding Nature of Agreement. Buyer has all necessary power
and authority and has taken all actions necessary to enter into this Agreement
and the other Transaction Documents and to carry out the transactions and
perform the obligations contemplated hereby. Each of this Agreement and the
other Transaction Documents has been duly and validly authorized, executed and
delivered by Buyer and, when executed and delivered by Seller, will constitute a
legal, valid and binding obligation of Buyer enforceable against it in
accordance with its respective terms except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors rights generally, and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
     7.3 Non-Contravention; Consents. The execution, delivery and performance of
this Agreement and each of the other Transaction Documents and the purchase of
the Purchased Assets by Buyer do not and will not contravene, conflict with or
result in a violation of any (a) Laws to which Buyer or any of the assets owned
or used by Buyer is subject, (b) any of the provisions of Buyer’s organizational
documents or any resolution adopted by Buyer’s Board of Directors (or any
committee thereof) or stockholders or (c) any material agreement or other
instrument or arrangement to which Buyer is subject. No consent, order,
authorization, approval, declaration or filing, including with or to any
Governmental or Regulatory Authority, is required on the part of Buyer for or in
connection with the execution, delivery or performance of this Agreement and
each of the other Transaction Documents, and the purchase by Buyer of the
Purchased Assets.
     7.4 Litigation. There are no pending Actions or Proceedings, and to the
Knowledge of Buyer, no Person has threatened to commence any Action or
Proceeding, (a) that involves Buyer and that has an

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Adverse Effect; or (b) that challenges, or has the effect of preventing,
delaying, making illegal or otherwise interfering with, the transactions
contemplated by this Agreement.
     7.5 Brokers. Buyer has not retained any broker in connection with the
transactions contemplated hereunder. Seller has no, and will have no, obligation
to pay any brokers, finders, investment bankers, financial advisors or similar
fees in connection with this Agreement or the transactions contemplated hereby
by reason of any action taken by or on behalf of Buyer.
ARTICLE 8
COVENANTS OF THE PARTIES
     8.1 Public Announcements. Neither Seller, Buyer nor any of their respective
Affiliates shall issue any press release or make any public announcement with
respect to this Agreement and the transactions contemplated hereby without
obtaining the prior written consent of the other Party, which consent shall not
be unreasonably withheld, except as may be required by applicable Law upon the
advice of counsel and only if the disclosing Party provides the non-disclosing
Party with an opportunity to first review the release or other public
announcement. Following the Closing, Buyer shall be entitled to make such public
announcements as it deems appropriate related to the Product and the Compound;
provided, that, without Seller’s prior written consent, no such announcement
shall contain any reference to Seller or actions taken with respect to the
Product or Compound prior to the Closing Date other than as previously approved
by Seller. For clarity, in addition to the provisions of Section 10.1, the
foregoing shall not restrict in any way the making of any filing or disclosure
by either Party with respect to this Agreement or the transactions contemplated
hereby if required by any federal or state securities law or other law upon
advice of counsel.
     8.2 Corporate Names.
          (a) Following the Closing, Buyer shall not have any rights by virtue
of this Agreement or any of the transactions or agreements contemplated hereby
to any names, trademarks, trade names, trade dress or logos relating to Seller
or any of the Affiliates of Seller or any of their products other than those
included in the Purchased Assets.
          (b) Following the Closing, Seller shall not have any right to use any
names, trademarks, trade names, trade dress or logos included within the
Purchased Assets.
     8.3 Regulatory Matters. From and after the Closing, Buyer, at its sole cost
and expense, shall be solely responsible and liable for taking all actions,
paying all fees and conducting all communication with the appropriate
Governmental or Regulatory Authority required by Law in respect of any
Regulatory Filing, including preparing and filing all reports (including adverse
drug experience reports) with the appropriate Governmental or Regulatory
Authority.
     8.4 Adverse Experience Reports. Seller shall promptly submit to Buyer all
adverse drug experience information brought to the attention of Seller in
respect of the Compound or the Product, as well as any material events and
matters concerning or affecting the safety or efficacy of the Compound or the
Product, each as they relate to activities of Seller prior to the Closing but
which are received or as to which Seller becomes aware following the Closing.
After the Closing, Buyer shall have all responsibility for required reporting of
adverse experiences for the Compound and the Product, but such reporting shall
not limit Seller’s obligation for any actions necessary with respect to Products
distributed prior to the Closing based upon the facts and circumstances
contained in such adverse drug experience information.

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     8.5 Affiliates. Each Party hereto shall cause its respective Affiliates to
comply with the terms of this Agreement.
     8.6 Access. Following the Closing and for a period of not less than five
(5) years, Seller will maintain and grant Buyer and its legal, accounting and
other advisors access, upon reasonable notice and during normal business hours,
to any corporate records, Tax records, contracts and other documents of Seller
that are related to the Business as are reasonably required for Buyer to
complete any required Tax filings with any Governmental or Regulatory Authority.
     8.7 Additional Seller Covenants.
     (a) Section 8.7(a) of the Seller Disclosure Schedule lists all of the
patents and patent applications developed in Seller’s nasal delivery technology
program which claim formulations consisting of a particular active
pharmaceutical ingredient (“API”) or class of APIs together with excipients (the
“Nasal Formulation Patents”). In furtherance of its undertaking to amend as
promptly as practicable any patent or patent application included in the
Non-Assert IP in order to remove all Carbetocin Claims (as such terms are
defined below), Seller hereby perpetually covenants, warrants and agrees that it
will not (and will cause its Affiliates, successors, and assigns not to)
commence or pursue any action or proceeding claiming infringement of a Nasal
Formulation Patent based on the manufacture, use, development, sale, offer for
sale, import or other commercialization by Purchaser or any of its Affiliates or
licensees, successors or assigns of either (A) the Compound or (B) a Product
which is a formulation consisting solely of the Compound as the API together
with excipients.
          (b) Subject to paragraph (c) of this Section 8.7, Seller hereby
covenants, warrants and agrees that, for a period of ten (10) years following
the Closing Date:
               (i) it will not (and will cause its Affiliates, successors and
assigns not to) pursue the prosecution of any claims in the Non-Assert IP which
are specifically directed to the composition of matter of the Compound or the
development, manufacture or commercialization of the Compound or the Product
(the “Carbetocin Claims”) and will amend as promptly as practicable any patent
or patent application included in the Non-Assert IP in order to remove all
Carbetocin Claims;
               (ii) it will not (and will cause its Affiliates not to) include,
or pursue the prosecution of, any claim in any patent or patent application
filed after the date hereof which is a Carbetocin Claim;
               (iii) it will not (and will cause its Affiliates not to) directly
or indirectly, individually or as a partner or other owner or participant in any
business entity or joint venture, for itself or for the benefit of any unrelated
third party, engage in the manufacture, use, development, sale, offer for sale,
import or other commercialization of the Compound or the Product; and
     For purposes of this Agreement, “Non-Assert IP” means all patents or
applications owned or Controlled by Seller or any of its Affiliates as of the
date hereof (other than Patents and Know-How included in the Purchased Assets).
          (c) (i) The prohibitions set forth in paragraph (b) shall not apply to
any Affiliate of or successor to Seller which becomes such an Affiliate or
successor after the Closing Date as a result of a change of control, merger,
acquisition or other similar transaction (such Affiliates or successors,
hereinafter collectively, an “Acquiror”) to the extent that (A) the prohibited
patent or patent application does not derive from the Non-Assert IP or (B) the
prohibited activity by the Acquiror constitutes (1) a continuation of activities
that such Acquiror was engaged in prior to the closing of the Acquiror’s

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acquisition of Seller, (2) an activity engaged in by another Person which is
acquired by the Acquiror after the Acquiror’s acquisition of Seller or (3) an
activity engaged in by Acquiror without use of or reference to the Non-Assert
IP, as evidenced by contemporaneous documentation.
               (ii) If Seller identifies or otherwise becomes aware of a
potential business opportunity related to the Compound or the Product, Seller
may notify Buyer of such opportunity and, if so notified, Buyer may pursue such
opportunity or not, in its sole discretion. For clarity, Seller shall not be
permitted to pursue such business opportunity until the prohibitions set forth
in paragraph (b) of this Section 8.7 have lapsed; provided, however, that it
shall not be a violation of the prohibitions set forth in said paragraph (b) if
Seller grants rights to any unrelated third party (on such terms as Seller in
its sole discretion may determine) for use of any Seller patent, technology or
know how which is not included in the Purchased Assets and which is not
specifically directed to the composition of matter of the Compound or the
development, manufacture or commercialization of the Compound or the Product.
     8.8 Further Assurances.
          (a) Following the Closing, Seller and Buyer each agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this Agreement and
to vest in Buyer good and marketable title to the Purchased Assets. In
furtherance of the foregoing, Seller agrees that if, after the Closing, Buyer
reasonably believes that Seller holds any patents or patent applications which
relate exclusively to the Business, Buyer shall provide Seller with notice
thereof, together with a written description in reasonable detail of the basis
for such belief (the “Follow-On Request”). If Seller has no objection to the
Follow-On Request, Seller shall, at its sole expense, as promptly as practicable
assign and transfer or cause to be assigned or transferred such patents or
patent applications to Buyer. If Seller objects to the Follow-On request, Seller
shall promptly provide Buyer with notice thereof, together with a written
description in reasonable detail of the reasons why Seller rejects the Follow-On
Request, including, if applicable, Seller’s position that Buyer’s belief is not
reasonable (the “Rejection Notice”). If the parties cannot resolve their dispute
within thirty (30) days from the date of the Rejection Notice, either party may
submit the dispute to arbitration in accordance with Section 10.10(b). If the
Rejection Notice does not specifically assert that Buyer’s belief is not
reasonable, Seller agrees that it will not (and will cause its Affiliates not
to) commence any action or proceeding alleging infringement by Buyer of the
subject matter of any Follow-On Request unless and until any dispute regarding
the Follow-On Request has been resolved by such arbitration.
          (b) Seller hereby constitutes and appoints, effective as of the
Closing Date, Buyer and its successors and assigns as the true and lawful
attorney of Seller with full power of substitution in the name of Buyer or in
the name of Seller, but for the benefit of Buyer (i) to collect for the account
of Buyer any items of Purchased Assets and (ii) to institute and prosecute all
proceedings that Buyer may in its sole discretion deem proper in order to assert
or enforce any right, title or interest in, to or under the Purchased Assets,
and to defend or compromise any and all actions, suits or proceedings arising
after the Closing in respect of the Purchased Assets. Buyer shall be entitled to
retain for its account any amounts collected pursuant to the foregoing powers,
including any amounts payable as interest in respect thereof.
     8.9 Diligence.
          (a) After the Closing Date, Buyer shall devote commercially reasonable
efforts to develop and market at least one (1) Product in the United States;
provided that Buyer may determine in its sole discretion to cease the
development or commercialization of the Compound or the Product at any time in
which case upon request of Seller, the Parties shall use good faith diligent
efforts to agree upon reasonable terms pursuant to which Seller can reacquire
the Purchased Assets. Buyer shall provide to

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Seller written updates as to its progress in such efforts within each calendar
year following the Closing Date no later than January 31 of the following
calendar year.
          (b) After the Closing Date, Buyer shall devote commercially reasonable
efforts to the prosecution and maintenance of the Registered Intellectual
Property and to enforce and defend such Registered Intellectual Property.
          (c) If Seller believes that Buyer is not devoting commercially
reasonable efforts as set forth in this Section 8.9,, Seller shall so notify
Buyer in writing, such notice to include Seller’s specific concerns and
recommendations. Within [...***...] days after receipt of such notice from
Seller, appropriate individuals from Buyer and Seller shall meet to discuss
Seller’s concerns and recommendations in good faith.
     8.10 Tax Matters.
          (a) Buyer and Seller agree to furnish or cause to be furnished to the
other, upon request, as promptly as practicable, such information and assistance
relating to the Purchased Assets, including access to books and records, as is
reasonably necessary for the filing of all Tax Returns by Buyer or Seller, the
making of any election relating to Taxes, the preparation for any audit by any
taxing authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax. Buyer and Seller shall cooperate fully with each
other in the conduct of any audit, litigation or other proceeding relating to
Taxes involving the Purchased Assets. Buyer and Seller further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including with
respect to the transactions contemplated hereby).
          (b) Seller shall be responsible for and shall promptly pay when due
all Property Taxes levied with respect to the Purchased Assets attributable to
the Pre-Closing Tax Period, and Buyer shall be responsible for and shall
promptly pay when due all Property Taxes levied with respect to the Purchased
Assets attributable to the Post-Closing Tax Period. All Property Taxes levied
with respect to the Purchased Assets for the Straddle Period shall be
apportioned between the Pre-Closing Tax Period and the Post-Closing Tax Period,
as follows: the portion allocable to the Pre-Closing Tax Period shall be deemed
to be the amount of such Tax for the entire Straddle Period multiplied by a
fraction the numerator of which is the number of days from the beginning of the
Straddle Period through the Closing Date and the denominator of which is the
number of days in the entire Straddle Period. Upon receipt of any bill for such
Taxes relating to the Purchased Assets, Buyer, on one hand, and Seller, on the
other hand, shall present a statement to the other setting forth the amount of
reimbursement to which each is entitled under this Section 8.10(b) together with
such supporting evidence as is reasonably necessary to calculate the proration
amount. The proration amount shall be paid by the party owing it to the other
within ten (10) days after delivery of such statement. In the event that Buyer
or Seller shall make any payment for which it is entitled to reimbursement under
this Section 8.10(b), the applicable party shall make such reimbursement
promptly but in no event later than ten (10) days after the presentation of a
statement setting forth the amount of reimbursement to which the presenting
party is entitled along with such supporting evidence as is reasonably necessary
to calculate the amount of reimbursement.
          (c) Seller shall promptly notify Buyer in writing upon receipt by
Seller of notice of any pending or threatened federal, state, local or foreign
Tax audits or assessments relating to the income, properties or operations of
Seller that reasonably may be expected to relate to the Purchased Assets.
 

***   Confidential Treatment Requested

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          (d) At the Closing, Seller shall deliver to the Buyer such forms and
certificates, duly executed and acknowledged, in form and substance reasonably
satisfactory to Buyer, certifying that the transactions contemplated under this
Agreement are exempt from withholding under Section 1445 of the Code.
          (e) Any payments made pursuant to Sections 4.1, 4.2 or 8.10 or
Article 9 shall constitute an adjustment to the Purchase Price for Tax purposes
and shall be treated as such by the parties on their Tax Returns to the extent
permitted by law.
ARTICLE 9
INDEMNIFICATION
     9.1 Survival of Representations, Warranties, Etc.
     The representations and warranties made by either Party in this Agreement
shall survive the Closing and shall expire twenty four (24) months after the
Closing Date, provided that the representations and warranties contained in
Section 6.13 hereof shall expire sixty (60) days following the expiration of any
applicable Tax statute of limitation, and any Liability of either Party with
respect to such representations and warranties (other than for Damages
attributable to fraud) shall thereupon cease; provided, however, that if, at any
time prior to such expiration date, notice of any claim for indemnification
pursuant to Section 9.2(a)(i) or Section 9.2(b)(i), as the case may be, shall
have been given prior to the applicable expiration date and such notice
describes the circumstances with respect to which such indemnification claim
relates, such indemnification claim shall survive until such time as such claim
is finally resolved.
     9.2 Indemnification.
          (a) By Seller. Subject to Sections 9.3 and 9.4, from and after the
Closing, Seller shall indemnify, reimburse, defend and hold harmless Buyer, its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns (collectively, the “Buyer Indemnified Parties”) from and
against any and all costs, losses, Liabilities, damages, lawsuits, deficiencies,
claims and expenses (including interest, penalties and reasonable fees and
disbursements of attorneys paid in connection with the investigation, defense or
settlement of any of the foregoing) (collectively, the “Damages”) to the extent
arising or resulting from:
          (i) any inaccuracy or breach of any representation or warranty of
Seller herein;
          (ii) any breach of any covenant or other agreement of Seller or any of
its Affiliates herein;
          (iii) the conduct of the Business by Seller or any of its Affiliates
prior to the Closing;
          (iv) the failure of Seller or any of its Affiliates to pay, perform or
discharge any Excluded Liabilities;
          (v) any and all Liabilities and obligations arising out of or
resulting from product liability claims caused by a Product administered,
provided or sold by or on behalf of Seller before the Closing; or

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          (vi) except as otherwise provided herein, any and all other
Liabilities and obligations that arise out of or are related to the Purchased
Assets, the Business, the Compound or the Product, attributable to occurrences
and circumstances arising before the Closing.
          (b) By Buyer. Subject to Sections 9.3 and 9.4, from and after the
Closing, Buyer shall indemnify, reimburse, defend and hold harmless Seller, its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns (collectively, the “Seller Indemnified Parties”) from and
against any and all Damages to the extent arising or resulting from:
          (i) any inaccuracy or breach of any representation or warranty of
Buyer herein;
          (ii) any breach of any covenant or other agreement of Buyer herein;
          (iii) the conduct of the Business by Buyer or any of its Affiliates
from and after the Closing;
          (iv) any and all Liabilities and obligations arising out of or
resulting from product liability claims caused by a Product administered,
provided or sold by or on behalf of Buyer after the Closing; or
          (v) except as otherwise provided herein, any and all other Liabilities
and obligations that arise out of or are related to the Purchased Assets, the
Business, the Compound or the Product, attributable to occurrences and
circumstances arising after the Closing.
          (c) Procedures. The indemnified party (the “Indemnified Party”) shall
give the indemnifying party (the “Indemnifying Party”) prompt written notice (an
“Indemnification Claim Notice”) (but in no event more than thirty (30) days
after discovery) of any Damages or discovery of fact upon which such Indemnified
Party intends to base a request for indemnification under Section 9.2(a) or
Section 9.2(b); provided, however, in no event shall the Indemnifying Party be
liable for any Damages that result from any delay in providing such notice
except to the extent that the rights of the Indemnifying Party are not
materially prejudiced by the failure to give notice. Each Indemnification Claim
Notice must contain a reasonable description of the claim and the nature and
amount of such Damages (to the extent that the nature and amount of such Damages
are known at such time). The Indemnified Party shall furnish promptly to the
Indemnifying Party (but in no event more than thirty (30) days after discovery)
copies of all papers and official documents received in respect of any Damages.
All indemnification claims in respect of a Party, its Affiliates or their
respective directors, officers, employees and agents (collectively, the
“Indemnitees” and each an “Indemnitee”) shall be made solely by such Party to
this Agreement.
          (d) Third Party Claims. The obligations of an Indemnifying Party under
this Section 9.2 with respect to Damages arising from claims of any third party
that are subject to indemnification as provided for in Section 9.2(a) or
Section 9.2(b) (a “Third Party Claim”) shall be governed by and be contingent
upon the following additional terms and conditions:
          (i) At its option, the Indemnifying Party may assume the defense of
any Third Party Claim by giving written notice to the Indemnified Party within
thirty (30) days after the Indemnifying Party’s receipt of an Indemnification
Claim Notice. The assumption of the defense of a Third Party Claim by the
Indemnifying Party shall not be construed as an acknowledgment that the
Indemnifying Party is liable to indemnify any Indemnitee in respect of the Third
Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any
defenses it may assert against any Indemnitee’s claim for indemnification.
Failure by the Indemnifying Party to notify the Indemnified Party of its
election to defend any such action within thirty (30) days after notice thereof
shall have

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been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to defend such action. Upon assuming the defense
of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in
the defense of the Third Party Claim any legal counsel selected by the
Indemnifying Party that is reasonably acceptable to the Indemnified Party. In
the event the Indemnifying Party assumes the defense of a Third Party Claim, the
Indemnified Party shall promptly deliver to the Indemnifying Party all original
notices and documents (including court papers) received by any Indemnitee in
connection with the Third Party Claim. Should the Indemnifying Party assume the
defense of and continue to defend a Third Party Claim with counsel reasonably
acceptable to the Indemnified Party, except as provided in subsection
(ii) below, the Indemnifying Party shall not be liable to the Indemnified Party
or any other Indemnitee for any legal expenses subsequently incurred by such
Indemnified Party or other Indemnitee in connection with the analysis, defense
or settlement of the Third Party Claim. In the event that it is ultimately
determined that the Indemnifying Party is not obligated to indemnify, defend or
hold harmless an Indemnitee from and against the Third Party Claim, the
Indemnified Party shall reimburse the Indemnifying Party for any and all costs
and expenses (including attorneys’ fees and costs of suit) and any Damages
incurred by the Indemnifying Party in its defense of the Third Party Claim with
respect to such Indemnitee.
          (ii) Without limiting Section 9.2(d)(i), any Indemnitee shall be
entitled to participate in, but not control, the defense of such Third Party
Claim and to employ counsel of its choice for such purpose; provided, however,
that such employment of separate legal counsel shall be at the Indemnitee’s own
expense unless (A) the employment thereof has been specifically authorized by
the Indemnifying Party in writing, (B) the Indemnifying Party has failed to
assume the defense and employ counsel in accordance with Section 9.2(d)(i) (in
which case the Indemnified Party shall control the defense) or (C) if the
Indemnified Party and the Indemnifying Party are both named parties to the
proceeding and the Indemnified Party has reasonably concluded that there may be
one or more legal defenses that are different from or in addition to those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to assume the defense of such action on behalf of the
Indemnified Party and the Indemnifying Party shall be liable for all legal
expenses incurred by the Indemnified Party in furtherance thereof).
          (iii) With respect to any Damages relating solely to the payment of
money damages in connection with a Third Party Claim and that will not result in
the Indemnitee’s becoming subject to injunctive or other relief or otherwise
adversely affect the business of the Indemnitee in any manner, and as to which
the Indemnifying Party shall have acknowledged in writing the obligation to
indemnify the Indemnitee hereunder, the Indemnifying Party shall have the sole
right to consent to the entry of any judgment, enter into any settlement or
otherwise dispose of such Damages, on such terms as the Indemnifying Party, in
its sole discretion, shall deem appropriate. With respect to all other Damages
in connection with Third Party Claims, where the Indemnifying Party has assumed
the defense of the Third Party Claim in accordance with Section 9.2(d)(i), the
Indemnifying Party shall not have authority to consent to the entry of any
judgment, enter into any settlement or otherwise dispose of such Damages unless
it obtains the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld, conditioned or delayed). The Indemnifying
Party shall not be liable for any settlement or other disposition of Damages by
an Indemnitee that is reached without the written consent of the Indemnifying
Party (which consent shall not be unreasonably withheld or delayed). Regardless
of whether the Indemnifying Party chooses to defend or prosecute any Third Party
Claim, if an Indemnitee shall admit any liability with respect to, or settle,
compromise or discharge, any Third Party Claim without the prior written consent
of the Indemnifying Party (which consent shall not be unreasonably withheld,
conditioned or delayed), the Indemnitee shall have deemed to have waived all
rights to indemnification hereunder by the Indemnifying Party with the respect
to such Third Party Claim.

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          (iv) If the Indemnifying Party chooses to defend or prosecute any
Third Party Claim, the Indemnified Party shall, and shall cause each other
Indemnitee to, cooperate in the defense or prosecution thereof and shall furnish
such records, information and testimony, provide such witnesses and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith. Such cooperation shall include
access during normal business hours afforded to the Indemnifying Party to, and
reasonable retention by the Indemnified Party of, records and information that
are reasonably relevant to such Third Party Claim, and making Indemnitees and
other employees and agents available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Indemnifying Party shall reimburse the Indemnified Party for all its reasonable
costs and expenses in connection with any of the foregoing.
          (e) Expenses. Except as provided above, the costs and expenses,
including fees and disbursements of counsel, incurred by the Indemnified Party
in connection with any claim shall be reimbursed on a quarterly basis by the
Indemnifying Party, without prejudice to the Indemnifying Party’s right to
contest the Indemnified Party’s right to indemnification and subject to refund
in the event the Indemnifying Party is ultimately held not to be obligated to
indemnify the Indemnified Party.
     9.3 Limitations. Notwithstanding anything to the contrary contained in this
Agreement, each of the following limitations shall apply:
          (a) Seller will not be required to indemnify Buyer under
Section 9.2(a)(i) except to the extent that the cumulative amount of the Damages
under Section 9.2(a)(i) actually incurred by the Buyer Indemnified Parties
exceeds [...***...] at which point Seller will be required to pay, and will have
Liability for, the cumulative amount of the Damages under Section 9.2(a)(i)
actually incurred by the Buyer Indemnified Parties (including the first
[...***...]).
          (b) Buyer will not be required to indemnify Seller under
Section 9.2(b)(i) except to the extent that the cumulative amount of the Damages
under Section 9.2(b)(i) actually incurred by the Seller Indemnified Parties
exceeds [...***...] at which point Buyer will be required to pay, and will have
Liability for, the cumulative amount of the Damages under Section 9.2(b)(i)
actually incurred by the Seller Indemnified Parties (including the first
[...***...]).
          (c) In no event shall the aggregate out-of-pocket Liability of Seller
for any Damages pursuant to Section 9.2(a)(i) exceed the aggregate Purchase
Price received by Seller as of the date such Damages are finally determined. For
clarity, Seller shall not be permitted to offset any such amounts due hereunder
against the Milestone Payments.
          (d) In no event shall Seller or Buyer have any Liability under
Section 9.2(a)(i) or 9.2(b)(i), as the case may be, with respect to claims that
are not properly asserted in writing prior to the date that is (i) twenty four
(24) months after the Closing Date in the case of claims related to breaches of
representations and warranties other than those contained in Section 6.13
hereof, and (ii) sixty (60) days following the expiration of any applicable Tax
statute of limitation in the case of claims related to breaches of the
representations and warranties contained in Section 6.13 hereof. In addition,
there shall be no limitation on Liability with respect to breaches of the
representations and warranties contained in Section 6.13 hereof.
          (e) The amount of any Damages under Section 9.2 shall be reduced by
the amount of any insurance proceeds actually received by the Indemnified Party
relating to such claim.
 

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          (f) No Party shall be entitled to indemnification under this Article 9
to the extent Damages result from the gross negligence or intentional misconduct
of the Party seeking indemnification.
          (g) Except with respect to claims based on fraud or willful
misconduct, after the Closing:
          (i) the right of the Buyer Indemnified Parties to indemnification
under this Article 9 shall be the exclusive remedy of the Buyer Indemnified
Parties with respect to claims arising or resulting from (A) any inaccuracy or
breach of any representation or warranty of Seller or any of its Affiliates in
this Agreement; (B) any breach of any covenant or other agreement of Seller or
any of its Affiliates in this Agreement; (C) Seller’s or any of its Affiliates’
conduct of the Business prior to the Closing except to the extent the same
constitutes Assumed Liabilities which were assigned to Buyer pursuant to this
Agreement and the Assignment and Assumption Agreement; or (D) the failure of
Seller or any of its Affiliates to pay, perform or discharge any Excluded
Liabilities; and
          (ii) the right of the Seller Indemnified Parties to indemnification
under this Article 9 shall be the exclusive remedy of the Seller Indemnified
Parties with respect to claims arising or resulting from (A) any inaccuracy or
breach of any representation or warranty of Buyer in this Agreement; (B) any
breach of any covenant or other agreement of Buyer in this Agreement;
(C) Buyer’s conduct of the Business from and after the Closing; or (D) the
failure of Buyer to pay, perform or disclose any Assumed Liabilities.
     9.4 Consequential Damages.
     NO PARTY TO THIS AGREEMENT SHALL BE LIABLE FOR ANY PUNITIVE OR EXEMPLARY
DAMAGES OR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR
RELATING TO THIS AGREEMENT, PROVIDED THAT THE FOREGOING SHALL NOT LIMIT THE
INDEMNIFICATION OBLIGATION OF EITHER PARTY HEREUNDER WITH RESPECT TO DAMAGES
RESULTING FROM A THIRD PARTY CLAIM.
ARTICLE 10
MISCELLANEOUS
     10.1 Confidentiality.
          (a) In addition to the restrictions set forth in Section 8.1, each
Party agrees that at and after the Closing, it shall not, without the prior
written consent of the other Party, (i) disclose to any Person such other
Party’s Confidential Information (as defined below), except to those of its
employees or representatives who need to know such information for the purpose
of exploiting its rights or fulfilling its obligations under this Agreement (and
then only to the extent that such persons are under an obligation to maintain
the confidentiality of the Confidential Information), or (ii) use any of such
other Party’s Confidential Information for any reason other than as contemplated
by this Agreement. If a Party has been advised by legal counsel that in the
opinion of such counsel disclosure of Confidential Information of the other
Party is required to be made under applicable Law (including the requirements of
a national securities exchange or another similar regulatory body) or pursuant
to documents subpoena, civil investigative demand, interrogatories, requests for
information, or other similar process, the Party required to disclose the
Confidential Information shall (to the extent legally permitted) provide the
other Party with prompt written notice of such request or demands or other
similar process so that such other Party may seek an appropriate protective
order or waive the disclosing Party’s compliance with the provisions of this
Section 10.1(a). In the absence of a protective order or waiver or other remedy,
the Party required to disclose the other Party’s

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Confidential Information may disclose only that portion of the Confidential
Information which its legal counsel advises that it is legally required to
disclose, provided that it exercises good faith, diligent efforts to preserve
the confidentiality of such other party’s Confidential Information, including by
cooperating with such other Party to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Confidential Information.
          (b) The term “Confidential Information” as used in this Section 10.1
means (i) as to Buyer, all confidential information relating to Buyer’s
business, the Business, and the Purchased Assets and the Assumed Liabilities,
and (ii) as to Seller, all confidential information relating to the business and
operations of Seller, including the Excluded Assets and the Excluded Liabilities
or other obligations, or other than the Assumed Liabilities, but not including
the Business or Purchased Assets, in each of (i) and (ii) whether disclosed
prior to or after the date hereof. The term “Confidential Information” does not
include information which (A) becomes generally available to the public other
than as a result of disclosure by the disclosing Party, (B) becomes available to
the non-disclosing Party on a non-confidential basis from a source other than
the disclosing Party provided that such source is not bound by a confidentiality
agreement with the non-disclosing Party, or (C) was previously known by the
non-disclosing Party as evidenced by the non-disclosing Party’s written records.
     10.2 Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or by nationally recognized overnight courier that maintains
records of delivery to the Parties at the following addresses or facsimile
numbers:

         
 
  If to Buyer to:   Cypress Biosciences, Inc.
4350 Executive Drive, Suite 325
San Diego, California 92121
Attention: Dr. Jay D. Kranzler
With a copy to: Legal Department
Facsimile: +1 (858) 452-1222
 
            With a copy to (which shall not constitute notice):
 
       
 
      Latham & Watkins LLP
12636 High Bluff Drive, Suite 400
San Diego, CA 92130
Attention: Faye H. Russell, Esq.
Facsimile: +1 (858) 523-5450
 
       
 
  If to Seller to:   Marina Biotech, Inc.
3830 Monte Villa Parkway
Bothell, WA 98021
Attention: Chief Financial Officer
Facsimile: +1(425) 908-3653
 
            With a copy to (which shall not constitute notice):
 
       
 
      Pryor Cashman LLP
7 Times Square
New York, NY 10036
Attention: Lawrence Remmel, Esq.
Facsimile: +1(212) 798-6365

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     All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 10.2, be deemed given upon
receipt, (b) if delivered by facsimile to the facsimile number as provided in
this Section 10.2, be deemed given upon receipt by the sender of the answer back
confirmation and (c) if delivered by overnight courier to the address as
provided in this Section 10.2, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice, request or other communication
is to be delivered pursuant to this Section 10.2). Any Party from time to time
may change its address, facsimile number or other information for the purpose of
notices to that Party by giving notice specifying such change to the other
Parties hereto in accordance with the terms of this Section 10.2.
     10.3 Entire Agreement. This Agreement (and all Exhibits and Schedules
attached hereto and all other documents delivered in connection herewith)
supersedes all prior discussions and agreements among the Parties with respect
to the subject matter hereof and contains the sole and entire agreement among
the Parties hereto with respect to the subject matter hereof.
     10.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the Party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the Party waiving such term or condition. No waiver by any Party
hereto of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion.
     10.5 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by each Party hereto.
     10.6 Third Party Beneficiaries. Except as provided in Article 9, the terms
and provisions of this Agreement are intended solely for the benefit of each
Party hereto and their respective successors or permitted assigns and it is not
the intention of the Parties to confer third-party beneficiary rights upon any
other Person.
     10.7 Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any Party hereto without the
prior written consent of the other Party hereto (which consent shall not be
unreasonably withheld) and any attempt to do so will be void; provided however,
such prior written consent will not be required with respect to an assignment by
either Party (a) to an Affiliate of such Party so long as such Party remains
bound by the terms hereof, or (b) in connection with a merger, sale or transfer
involving all or substantially all of the assets of such Party; provided
further¸ such prior written consent will not be required with respect to an
assignment by Cypress in connection with a merger, sale or transfer involving
all or substantially all of the assets related to the Business. This Agreement
is binding upon, inures to the benefit of and is enforceable by the Parties
hereto and their respective successors and permitted assigns.
     10.8 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
     10.9 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any Party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom, and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added

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automatically as a part of this Agreement a legal, valid and enforceable
provision as similar to terms to such illegal, invalid or unenforceable
provision as may be possible and reasonably acceptable to the Parties herein.
     10.10 Governing Law; Dispute Resolution.
          (a) This Agreement shall be construed in accordance with, and governed
in all respects by, the laws of the State of Delaware (without giving effect to
principles of conflicts of laws that would require the application of any other
law).
          (b) Except with respect to any claim seeking injunctive relief
hereunder, in the event of any controversy or claim arising out of, relating to
or in connection with any provision of this Agreement or the rights or
obligations of the parties hereunder, the parties will try to settle their
differences amicably between themselves as contemplated herein. To the extent
not provided for herein, any party may initiate such informal dispute resolution
by sending written notice of the dispute to the other party, and within
[...***...] after such notice, the Chief Executive Officer (or his or her
designee) of Buyer will meet with the Chief Executive Officer (or his or her
designee) of Seller, for attempted resolution by good faith negotiations. If
such Persons are unable to resolve promptly such disputed matter, such dispute
shall be finally settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association (“AAA”), then in
force, by one (1) arbitrator appointed in accordance with said rules, provided
that the appointed arbitrator shall have appropriate experience in the
biopharmaceutical industry. The place of arbitration shall be [...***...]. The
award rendered shall be final and binding upon all parties participating in such
arbitration. The judgment rendered by the arbitrator may, at the arbitrator’s
discretion, include costs of arbitration, reasonable attorneys’ fees and
reasonable costs for any expert and other witnesses. Judgment upon the award may
be entered in any court having jurisdiction, or application may be made to such
court for judicial acceptance of the award and/or an order of enforcement as the
case may be. The parties agree to use their good faith efforts to resolve the
dispute within [...***...] of receipt of the original notice of dispute.
Notwithstanding the foregoing, any disputes regarding the scope, validity,
enforceability or inventorship of any patents or patent applications shall be
submitted for final resolution by a court of competent jurisdiction.
     10.11 Expenses. Except as otherwise provided in this Agreement, each Party
hereto shall pay its own expenses and costs incidental to the preparation of
this Agreement and to the consummation of the transactions contemplated hereby.
     10.12 Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile or pdf file contained in an email, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
     10.13 Schedules, Exhibits and Other Agreements. The Exhibits, Schedules,
other agreements, certificates and notices specifically referred to herein, and
delivered pursuant hereto, are an integral part of this Agreement. Any
disclosure that is made in any of the Schedules or certificates delivered
pursuant to this Agreement shall be deemed responsive to any other applicable
disclosure obligation hereunder where it is reasonably apparent that such
disclosure is responsive to such other applicable disclosure obligation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
 

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          IN WITNESS WHEREOF, this Agreement has been executed by the Parties
hereto as of the date first written above.

                  CYPRESS BIOSCIENCE, INC.    
 
           
 
  By:   /s/ Jay Kranzler    
 
  Name:  
 
Jay D. Kranzler, M.D., Ph.D.    
 
  Title:   Chief Executive Officer    
 
                MARINA BIOTECH, INC.    
 
           
 
  By:   /s/ J. Michael French    
 
  Name:  
 
J. Michael French    
 
  Title:   President & CEO    

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

 

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Exhibit A
DEFINITIONS
     “AAA” has the meaning set forth in Section 10.10(b).
     “Acquiror” has the meaning set forth in Section 8.7(c)(i).
     “Action or Proceeding” means any action, suit, proceeding, arbitration,
Order, hearing, assessment with respect to fines or penalties or litigation
(whether civil, criminal, administrative, investigative or informal) commenced,
brought, conducted or heard by or before any Governmental or Regulatory
Authority.
     “Adverse Effect” means an effect or condition that individually or in the
aggregate is materially adverse to the ability to take possession of, own or use
the Purchased Assets.
     “Affiliate” means, with respect to any Person, any other Person which
controls, is controlled by or is under common control with such Person. A Person
shall be regarded as in control of another Person if it owns or controls,
directly or indirectly, (i) in the case of corporate entities at least fifty
percent (50%) (or the maximum ownership interest permitted by law) of the equity
securities in the subject entity entitled to vote in the election of directors
and, (ii) in the case of an entity that is not a corporation, at least fifty
percent (50%) (or the maximum ownership interest permitted by law) of the equity
securities or other ownership interests with the power to direct the management
and policies of such subject entity or entitled to elect the corresponding
management authority, or such other relationship as, in fact, constitutes actual
control.
     “Agreement” has the meaning set forth in the Preamble hereto.
     “Allocation” has the meaning set forth in Section 4.5(a).
     “API” has the meaning set forth in Section 8.7(a).
     “Assets and Properties” of any Person means all assets and properties of
any kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person, including cash, cash equivalents,
accounts and notes receivable, chattel paper, documents, instruments, general
intangibles, regulatory approvals, equipment, inventory, goods and intellectual
property.
     “Assignment and Assumption Agreement” has the meaning set forth in
Section 5.2(a)(iv).
     “Assumed Contract” means the Contracts or portions of the Contracts
identified in Section 6.6 of the Seller Disclosure Schedule.
     “Assumed Liabilities” means any and all Liabilities and obligations of
Seller or any of its Affiliates under the Assumed Contracts to be incurred after
the Closing or arising from the Buyer’s performance under the Assumed Contracts
after the Closing but not including such Liabilities incurred, paid, performed
or otherwise arose on or prior to the Closing or Liabilities arising out of any
breach or default by Seller or any of its Affiliates under the Assumed Contracts
on or prior to the Closing.
     “Bill of Sale” has the meaning set forth in Section 5.2(a)(v).

A-1

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     “Books and Records” means all files, documents, instruments, papers, books
and records (other than Marketing Materials) owned by Seller or any of its
Affiliates relating exclusively to the Business or to the research, clinical
development, use or manufacture of the Compound or the Product, including any
vendor lists, financial data, written and pending orders and all documentation
relating to the Intellectual Property.
     “Business” means the activities of research, development and manufacturing
conducted by or on behalf of Seller related exclusively to the Compound or the
Product in the Territory.
     “Business Day” means a day other than Saturday, Sunday or any day on which
banks located in the State of California are authorized or obligated to close.
     “Buyer” has the meaning set forth in the Preamble to this Agreement.
     “Buyer Disclosure Schedule” has the meaning set forth in Article 7 hereof.
     “Buyer Indemnified Parties” has the meaning set forth in Section 9.2(a).
     “Carbetocin Claims” has the meaning set forth in Section 8.7(b)(i).
     “Closing” has the meaning set forth in Section 5.1.
     “Closing Date” means the date that the Closing actually occurs as provided
in Section 5.1.
     “Code” means the Internal Revenue Code of 1986, as amended.
     “Compound” means carbetocin, including any salts, esters, solvates,
polymorphs or other non-covalent derivatives thereto.
     “Confidential Information” has the meaning set forth in Section 10.1(b).
     “Contract” means any and all commitments, contracts, purchase orders,
leases, or other agreements, whether written or oral related to the Compound or
the Product.
     “Damages” has the meaning set forth in Section 9.2(a).
     “Encumbrance” means any mortgage, pledge, assessment, security interest,
deed of trust, lease, lien, adverse claim, levy, charge or other encumbrance,
restriction, limitation or third party right of any kind, or any conditional
sale or title retention agreement or other agreement to give any of the
foregoing in the future.
     “Excluded Assets” means all Assets and Properties of Seller and its
Affiliates (including Seller’s rights under this Agreement) except the Purchased
Assets.
     “Excluded Liabilities” means (i) any and all Liabilities in respect of any
Excluded Assets, including (a) the outstanding amount of all principal,
interest, fees and expenses in respect of borrowed money, capital leases,
installment purchases and other indebtedness of Seller, (b) any Liability of
Seller, or otherwise imposed on the Purchased Assets, in respect of any Tax,
including (i) any Liability of Seller for the Taxes of any other Person under
Reg. 1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, and (ii) any Transaction
Taxes, but excluding any Transaction Taxes or Property Taxes to the extent that
they are specifically allocated to Buyer pursuant to Section 4.4 or 8.10(b), (c)
any environmental Liabilities of Seller, (d) any Liabilities to

A-2

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directors, officers or employees of Seller or in respect of Seller employee
benefit, profit sharing or health care plans, (e) any Liabilities of Seller with
respect to any Action or Proceeding pending or threatened against Seller,
(f) any Liabilities of any Person other than Seller and (g) any Liabilities of
Seller (including expenses to be borne by Seller) under this Agreement or any of
the other agreements, instruments and certificates executed in connection
herewith, (ii) any Liabilities of Seller or any of its Affiliates which arise
out of or are related to the Purchased Assets, the Business or the Product
attributable to occurrences and circumstances arising on or prior to the
Closing, and (iii) any Liabilities of Seller arising from or relating to any
action taken by Seller, or any failure on the part of Seller to take any action,
at any time after the Closing Date.
     “FDA” means the U.S. Food and Drug Administration.
     “First Commercial Sale” means the first sale of a Product by Buyer, its
Affiliates, or its licensees to a Third Party in a given regulatory jurisdiction
within the Territory after receipt of regulatory approval (including pricing and
reimbursement approvals, if necessary to begin marketing) for such Product has
been obtained in such jurisdiction.
     “Fifth Milestone” has the meaning set forth in Section 4.1.
     “First Milestone” has the meaning set forth in Section 4.1.
     “Follow-On Request” has the meaning set forth in Section 8.8(a).
     “Fourth Milestone” has the meaning set forth in Section 4.1.
     “Generic Product” means , with respect to a Product in the Territory,
another pharmaceutical product that is: (a) a Product; (b) is bioequivalent to
such Product with respect to pharmacokinetic properties; and (c) is either
(i) approved for use in the Territory by the Governmental or Regulatory
Authority, or (ii) launched by a Third Party in the Territory pursuant to
Paragraph IV of the Drug Price Competition and Patent Term Restoration Act of
1984, as amended, or any successor regulations (or its comparable regulation in
a jurisdiction within the Territory).
     “Governmental or Regulatory Authority” means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or other country, or any supra-national organization, state,
county, city or other political subdivision thereof.
     “Indemnification Claim Notice” has the meaning set forth in Section 9.2(c).
     “Indemnified Party” has the meaning set forth in Section 9.2(c).
     “Indemnifying Party” has the meaning set forth in Section 9.2(c).
     “Indemnitee” and “Indemnitees” have the respective meanings set forth in
Section 9.2(c).
     “Independent Accountant” has the meaning set forth in Section 4.2(g).
     “Intellectual Property” means any and all of the following intellectual
property rights owned by or licensed to Seller and used by Seller exclusively in
connection with the conduct of the Business or the research, development,
manufacture or commercialization of the Compound or a Product: all (i) Patents;
(ii) Know-how; (iii) copyrights, copyright registrations, applications therefor
and renewal rights therefor; and (iv) software, data, covenants not to assert
and trade secrets, and in each case all documentation

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associated therewith; including those items identified in Section 6.7(a) of the
Seller Disclosure Schedule. For clarity, Intellectual Property shall not include
any patents, applications, discoveries, know-how or technical information owned
or controlled by Seller which relate to RNA interference.
     “Intellectual Property Assignment Agreement” has the meaning set forth in
Section 5.2(a)(iii).
     “Know-How” means the following information owned by or licensed to Seller:
all tangible and intangible know-how, trade secrets and inventions (whether or
not patentable), and all engineering, production and other designs, drawing,
specifications, formulas, technology, software, data, analytic reference
materials and methods and all confidential or proprietary chemical substances,
assays and information, in all cases that is identifiable and used exclusively
in connection with the use or manufacture of a Product.
     “Knowledge” means such knowledge which a reasonable person should have
obtained after reasonable inquiry.
     “Law” means any federal, state or local law, statute or ordinance, or any
rule, regulation, or published guidelines promulgated by any Governmental or
Regulatory Authority.
     “Liability” means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due).
     “Nasal Formulation Patents” has the meaning set forth in Section 8.7(a).
     “Net Sales” means, with respect to a particular time period, the total
amounts invoiced during such time period by Buyer and its Affiliates or
licensees for sales of Products to unrelated Third Parties in the Territory,
less the following deductions to the extent actually allowed or incurred with
respect to such sales:
     (a) trade discounts, credits or allowances including cash and quantity
discounts provided by means of chargebacks, rebates and administrative fees
charged by customers or health care organizations determined based upon sales;
     (b) credits or allowances (other than those specified in clause (a)),
granted for damaged, outdated, spoiled, returned or rejected Products, including
in connection with recalls;
     (c) freight, shipping and insurance charges, to the extent included in the
invoiced amount and identified in the applicable invoice;
     (d) taxes, tariffs, duties or other governmental charges (other than income
taxes) levied on, absorbed or otherwise imposed on sales of the Products in the
Territory, as adjusted by any refunds, provided that such Taxes, tariffs, duties
and other governmental charges are included in the applicable invoiced amount
and identified in the applicable invoice; and
     (e) rebates, discounts or other payments to Third Parties on sales of
Products to such Third Parties that are mandated by a Governmental or Regulatory
Authority.
     Notwithstanding the foregoing, amounts invoiced by Buyer and its Affiliates
or licensees for the sale of Products between Buyer and its Affiliates or
licensees for resale to Third Parties shall not be included in the computation
of Net Sales hereunder. For purposes of determining Net Sales, a “sale” shall

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not include reasonable transfers or dispositions, at no cost, as samples or for
charitable purposes, or transfers or dispositions at no cost for preclinical,
clinical or regulatory purposes.
     Each of the deductions set forth above shall be in accordance with United
States Generally Accepted Accounting Principles.
     For the purpose of determining royalties due to Seller, Buyer shall
calculate Net Sales of Combination Products (as defined below) by multiplying
Net Sales of such Combination Product by a fraction A/A+B, where A is the sale
price of the Product portion of such Combination Product when sold separately
and B is the sale price of the other active ingredient(s) in such Combination
Product when sold separately; provided, however, that if the Product portion of
such Combination Product or any of the other active ingredients in such
Combination Product is not then sold separately, then Buyer shall calculate Net
Sales of such Combination Products by the fraction C/C+D, where C is a
reasonable estimate of the fair market value of the Product portion of such
Combination Product, D is a reasonable estimate of the fair market value of the
other active ingredients in such Combination Product, and the estimates of C and
D are determined by mutual agreement of the Parties. As used in this Agreement,
“Combination Product” means a product in which one or more active ingredients
that are not Products are sold in a single formulation with a Product.
     “NDA” means a New Drug Application filed with the FDA pursuant to 21 U.S.C.
Section 357 and 21 C.F.R. Section 314.
     “NDA Filing” means the receipt of a written acceptance for filing of an NDA
for a Product by the FDA.
     “Non-Assert IP” has the meaning set forth in Section 8.7(b).
     “Order” means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
     “Parties” means Buyer and Seller.
     “Party” means each of Buyer and Seller.
     “Patents” means (a) any patents, patent applications, provisional patent
applications and similar instruments identified in Section 6.7(a) of the Seller
Disclosure Schedule; and (b) to the extent related thereto or derived therefrom,
any and all substitutions, reissues, renewals, extensions, utility models,
reexaminations, patents of addition, supplementary protection certificates,
inventors’ certificates, pediatric data package exclusivity extensions, requests
for continued examinations, designs, divisions, re-filings, continuations and
continuations-in-part thereof, or the like and any foreign equivalents thereof
(including certificates of invention and any applications therefor) and all
documentation associated therewith.
     “Permits” has the meaning set forth in Section 6.9(a).
     “Permitted Encumbrance” means (a) Encumbrances for Taxes or assessments
which are not delinquent or which are being contested in good faith by
appropriate proceedings or (b) statutory mechanics’, carriers’, workmen’s,
landlords’ or other similar liens arising or incurred in the ordinary course of
business which are not yet delinquent or the validity of which are being
contested in good faith by appropriate proceedings.

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     “Person” means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
     “Post-Closing Tax Period” means (a) any Tax period beginning after the
Closing Date and (b) with respect to any Straddle Period, the portion of such
period beginning after the Closing Date.
     “Pre-Closing Tax Period” means (a) any Tax period ending on or before the
Closing Date and (b) with respect to any Straddle Period, the portion of such
period ending on the Closing Date.
     [...***...]
     “Product” means any pharmaceutical composition or preparation, in any
dosage strength or size, containing Compound as an active pharmaceutical
ingredient.
     “Product Data” means all toxicology, pre-clinical, clinical, regulatory and
manufacturing information and data and technology, and all submissions and
correspondence with or to any Governmental or Regulatory Authority in the
Territory related exclusively to the Compound or a Product, including the
manufacturing, packaging and release of a Product, e.g., all validation data and
documentation supporting the process of manufacturing the Compound or a Product,
in any form whatsoever including notebooks, but only to the extent the foregoing
may be in Seller’s possession or control.
     “Product Materials” means (a) all inventory of expired Compound owned or
controlled by Seller as of the Closing and (b) all blood samples owned or
controlled by Seller as of the Closing derived from research studies of the
Compound or the Product.
     “Property Taxes” means all real property Taxes, personal property Taxes and
similar ad valorem Taxes.
     “Purchase Price” has the meaning set forth in Section 4.1(g).
     “Purchased Assets” means, subject to Section 2.3: (i) the Intellectual
Property (including the Registered Intellectual Property); (ii) the Assumed
Contracts; (iii) the Books and Records; (iv) the Product Data; (v) the Product
Materials; (vi) all other assets used by Seller exclusively in the research or
clinical development of the Compound or the Product (other than Excluded
Assets); and (vii) all other assets owned or controlled by Seller and used
exclusively for the research, development, manufacture or commercialization of
the Compound or the Product.
     “Registered Intellectual Property” means all of the Patents identified in
Section 6.7(a) of the Seller Disclosure Schedule.
     “Regulatory Filings” means the investigational and new drug applications,
and drug submissions, licenses and marketing authorizations (and the equivalent
foreign registrations and approvals) for the Compound or the Product in the
Territory (including marketing approvals, pricing or reimbursement approvals,
manufacturing approvals, technical, medical, and scientific licenses, and
clinical and non-clinical study authorization applications or notifications),
and all, amendments, supplements, supporting files, data, studies, and reports
relating thereto (in hard and electronic form) and all technical and other
information contained therein.
 

***   Confidential Treatment Requested

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     “Rejection Notice” has the meaning set forth in Section 8.8(a).
     “Royalties” has the meaning set forth in Section 4.2(a).
     “Royalty Term” has the meaning set forth in Section 4.2(b).
     “SEC Reports” means (i) Buyers’ Annual Report on Form 10-K for the year
ended December 31, 2009 (the “10-K”); (ii) Buyer’s Quarterly Reports on Form
10-Q for the periods ended March 31, 2010 and June 30, 2010; (iii) Buyer’s
Current Reports on Form 8-K filed subsequent to the filing of the 10-K;
(iv) Buyer’s definitive proxy statement for the 2010 annual meeting of
stockholders, as amended; and (v) such other reports, schedules and documents
filed subsequent to the filing of the 10-K by Buyer or its stockholders and
available on the web site of the Securities and Exchange Commission
(www.sec.gov).
     “Second Milestone” has the meaning set forth in Section 4.1.
     “Seller” has the meaning set forth in the Preamble to this Agreement.
     “Seller Disclosure Schedule” has the meaning set forth in the preamble to
Article 6 of this Agreement.
     “Seller Indemnified Parties” has the meaning set forth in Section 9.2(b).
     “Straddle Period” means any Tax period beginning before the Closing Date
and ending after the Closing Date.
     “Tax” means all of the following tax in connection with the operations of
the Business or the transactions contemplated hereby: (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment imposed by a
governmental, regulatory or administrative entity or agency responsible for the
imposition of any such tax (domestic or foreign); (ii) any Liability for the
payment of any amounts of the type described in (i) as a result of being a
member of any affiliated, consolidated, combined, unitary or other group for any
taxable period; and (iii) any Liability for the payment of any amounts of the
type described in (i) or (ii) as a result of any express or implied obligation
to indemnify any other Person.
     “Tax Return” shall mean any return, declaration, report, claim for refund,
or information returned or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
     “Territory” means the entire world.
     “Third Milestone” has the meaning set forth in Section 4.1.
     “Third Party” means any Person other than a Party or its Affiliates.
     “Third Party Claim” has the meaning set forth in Section 9.2(d).
     “Third Party Interference Costs” has the meaning set forth in
Section 4.2(c)(ii).
     “Third Party Payment” has the meaning set forth in Section 4.2(c)(i).

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     “Transaction Documents” means this Agreement, the Assignment and Assumption
Agreement, the Bill of Sale and the Intellectual Property Assignment Agreement.
     “Transaction Taxes” has the meaning set forth in Section 4.3.
     “Valid Claim” means, with respect to any country, a claim of an issued and
unexpired Patent (as may be extended through supplementary protection
certificate or patent term extension or the like) included within the
Intellectual Property to the extent such claim has not been (i) held invalid or
unenforceable by a non-appealed or un-appealable decision of a court or
government agency or other appropriate body of competent jurisdiction and has
not been admitted invalid through disclaimer or dedication to the public, and
(ii) has not expired, been determined to be unenforceable, been cancelled,
withdrawn, abandoned.

A-8

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Exhibit B
FORM OF INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
[OMITTED]

 

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Exhibit C
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
[OMITTED]

 

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Exhibit D
FORM OF BILL OF SALE
[OMITTED]