Exhibit 10.2
Research and Development Agreement
This RESEARCH AND DEVELOMENT AGREEMENT (the "Agreement") is made and
entered into this 26th day of October, 2001 by and among HealthSpan Sciences,
Inc. (soon to be Arogen, Inc.), a California corporation with its principal
executive offices located at 0000 Xxxxx Xxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000
("Arogen"), and Disease Sciences, Inc., a Delaware corporation with its
principal executive offices located at 00000 Xxxxx Xxxx 0, Xxxxx 000, Xxxx
Xxxxx, Xxxxxxx 00000 ("DISE").
RECITALS
WHEREAS, DISE wishes to purchase a 51% controlling interest in Arogen,
upon the terms and conditions stated in the Stock Purchase Agreement, DISE and
Arogen also wish to enter into a two-year Research and Development Agreement in
which DISE agrees to fund a N-propyl gallate drug development program during the
two years that Disease Sciences controls Arogen. The major purpose of this joint
HealthSpan-DISE drug R & D effort is to develop antioxidant drugs for multiple
degenerative diseases. Following the completion of the N-propyl gallate
research, DISE will retain the drug rights for the prion- caused diseases, while
Arogen will retain all drug rights for other degenerative disease indications,
including AIDS, Alzheimer's, cancer, and cardiovascular disease.
NOW THEREFORE, Arogen and DISE hereby agree as follows:
1. Upon approval of research expenses, DISE will provide Arogen with
initial operating funds (estimated at $50,000) to start the drug
discovery effort.
2. DISE will provide Arogen with the administrative and legal funds needed
for the drug development effort after approval of expenses by DISE.
Legal costs (mostly patent work on continuing and new applications)
will vary greatly over time, as patents are filed, supported, or
modified. The administrative payments include a salary of $3,000 per
month for Xxxxxx Xxxx for a minimum of 50% effort. Other administrative
costs (office supplies, bills, and travel) are estimated to be in the
range of $2,000 per month, and are subject to the prior approval of
DISE. During the 24 month period following the execution of this
Agreement, Xxxxxx Xxxxxxxxxxxx will not take any of the DISE payments
as salary, but instead will rely on his scheduled DISE salary pursuant
to the terms and conditions of the Employment Agreement between Xx.
Xxxxxxxxxxxx and XXXX, which such agreement will be extended until the
end of this 24 months period. After the first six months, Mr. Ridz and
Xx. Xxxxxxxxxxxx may be permitted to supplement their salary with a
reasonable portion of any Arogen funds that may exist from possible
corporate partnership revenues (e. g. IAMS or Antiox). In this case,
DISE will have to right to cap any excess salary payments during the 24
month period following the date of this Agreement.
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3. In the preclinical phase of the R & D effort, DISE will fund Arogen's
preclinical Drug Discovery Program and IND Filing, which is estimated
to cost about $225,000 for preclinical contract costs for 10 N-propyl
gallate analogs, upon approval of individual expenses by DISE. These R
& D funds are contingent on the continued viability of the N-propyl
gallate drug discovery program and may be delayed or halted if, at some
future point, all drug analogs fail some crucial preliminary test. In
this case, DISE and Arogen may mutually agree to go back to develop new
drug analogs for testing. Alternatively, all drug development and DISE
funds could be stopped if Arogen and DISE mutually agree that favorable
progress is unlikely or if a mutually- agreed-on group of scientific
experts reviews the R & D program and comes to the conclusion that none
of at least ten potential N-propyl gallate analogs is likely to be
approved for clinical testing by the FDA. However, if the scientific
experts decide that some version of the N-propyl gallate drug
development program has a reasonable chance of succeeding, then the
funding will continue. DISE has the right to review all such contracts,
but pledges not to unduly delay the overall project by rejecting
essential contracts.
4. DISE will provide extra funds to open a small office and laboratory in
the San Diego area near the University of California in the early part
of 2002 at its discretion after review of Drug development progress. By
mutual consent, said office and laboratory could be for Arogen alone or
be jointly run as facilities of both Arogen and DISE. If an Arogen only
office and laboratory is opened, DISE will provide a minimum of $3,000
per month of extra support for the facility during the remainder of the
guaranteed period. If a jointly run Arogen and DISE office is opened,
then extra monthly funding will be negotiated at the time of the
opening.
5. If an IND (FDA approval) is obtained within the 24 month period for
testing an Arogen's drug analog in a Phase I clinical trial for a
particular disease indication, then DISE will provide all additional
funds necessary to start Arogen's FDA- approved Phase 1 Clinical Trial
within 30 days of the IND issuance and will fully fund the completion
of the Phase I Clinical Trial (estimated at $250,000 to $300,000).
6. The above DISE funding for the Arogen R & D program is a joint research
project of Arogen and DISE. The main DISE role is to provide timely
funding of the project and to advertise the developmental progress as a
means to enhance public awareness. Arogen's role in the joint project
is to use its intellectual property and drug development skills to
create value for both companies. In view of its intellectual property
and management contribution, Arogen will not provide any stock, warrant
or payback for any of the research funding provided by DISE as
described above in sections 1 though 5. Following the completion of the
DISE funded R & D program, DISE will retain the available drug
intellectual property rights for the prion-caused diseases, while
Arogen will retain all drug intellectual property rights for other
degenerative disease indications, including AIDS, Alzheimer's,
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cancer, and cardiovascular disease. At the option and request of DISE,
Arogen will promptly execute, acknowledge and deliver such
applications, assignments and other instruments which DISE shall deem
necessary in order to (i) apply for and obtain letters patent of the
United States and any foreign countries for any and all of the
available drug intellectual property rights for the prion-caused
diseases, and (ii) assign and convey to DISE the sole and exclusive
right, title and interest therein, and Arogen will assist DISE or its
nominee in every proper way, at DISE's cost and expense, in
accomplishing any and all of the foregoing.
7. GOVERNING LAW; MISCELLANEOUS.
a. Construction and Enforcement. This Agreement shall be construed in
accordance with the laws of the State of Delaware, without and application of
the principles of conflicts of laws. If it becomes necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
and such legal action results in a final judgment in favor of such party
("Prevailing Party"), then the party or parties against whom said final judgment
is obtained shall reimburse the Prevailing Party for all direct, indirect or
incidental expenses incurred including, but not limited to, all attorney's fees,
court costs and other expenses incurred throughout all negotiations, trials or
appeals undertaken in order to enforce the Prevailing Party's rights hereunder.
Any suit, action or proceeding with respect to this Agreement shall be brought
in the state or federal courts located in Palm Beach County in the State of
Florida, if brought by DISE, or located in San Diego County, in the State of
California, if brought by Arogen. The parties hereto hereby accept the exclusive
jurisdiction and venue of those courts for the purpose of any such suit, action
or proceeding.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between DISE, Arogen, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect
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to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither Arogen nor DISE makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by Arogen
and DISE, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to Arogen: 0000 Xxxxx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
With a copy to:
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If to DISE: 00000 Xxxxx Xxxx 0
Xxxxx 000
Xxxx Xxxxx, XX 00000
With a copy to: Atlas Xxxxxxxx P.A.
000 X. Xxx Xxxx Xxxx., Xxxxx 0000
Xx. Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
or at such other address of such other person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change.
g. Successors and Assigns; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. Arogen shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of DISE. DISE may assign some or all
of its rights hereunder without the consent of Arogen, provided, however, that
any such assignment shall not release DISE from its obligations hereunder unless
such obligations are assumed by such assignee and Arogen has consented to such
assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of
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the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
i. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. Termination by DISE For Cause. This Agreement may be terminated with
cause by DISE upon thirty (30) days prior written notice to Arogen if: (i)
Arogen and DISE both mutually agree that favorable progress in the R & D drug
program on N-propyl Gallate is unlikely and jointly agree to stop funding the
project; or (ii) a mutually-agreed-on group of scientific experts reviews the R
& D program and comes to the conclusion that none of at least ten potential
N-propyl gallate analogs is likely to be approved for clinical testing by the
FDA. In the latter case, if the scientific experts decide that one or more
analogs of the N-propyl gallate drug development program have a reasonable
chance of getting IND status, then the funding will continue. If termination
occurs with cause, Arogen will return all 3.8 million shares of DISE stock and
the parties will have no further obligation to each other except pursuant to the
provisions of Paragraph 6 hereof.
k. Termination by DISE Without Cause. This Agreement may be terminated
without cause by DISE upon thirty (30) days prior written notice to Arogen. Upon
termination without cause, DISE will return to Arogen a proportion of the
9,050,883 Common Shares of Arogen's stock equal to the fraction of months
remaining in the 24 month R & D program divided by 24. Likewise, Arogen will
return to DISE a similar fraction of the 3,800,000 Common shares of DISE's
Common Stock equal to the fraction of months remaining in the 24 month R & D
contract divided by 24. For example, if DISE terminates the Agreement without
cause at the end of 12 months, then DISE will trade back 4,525,441 shares of
Arogen's Common Shares for 1,900,000 shares of DISE Common Shares. Moreover, in
the case of DISE termination without cause, DISE agrees that the remaining DISE
shares owned by Arogen will become free trading after one year from closing
subject to standard 144 rules. Both DISE and Arogen agree that said changes on
termination of the R & D agreement supersede any instructions contained in the
Stock Purchase agreement. Also, said termination voids the provisions in the
Stock Purchase Agreement providing for the DISE right to maintain a 51% Common
Stock position during the 2-year Guaranteed Period and a 35% position following
the Guaranteed Period. Except for the obligation to carry out said changes and
the provisions of Paragraph 6, the parties will have no further obligation to
each other.
x. XXXX Contract Breach and Termination by Arogen. If DISE defaults on
its salary, administrative, or approved contract payments or unreasonably delays
progress on the project (e. g. by failing to approve critical R & D contracts or
find alternative contracts of similar quality) for a period exceeding 45 days,
then Arogen has the right to terminate this Agreement upon thirty (30) days
prior written notice to DISE. Upon termination
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following a DISE contract breach, DISE will return to Arogen a proportion of the
9,050,883 Common Shares of Arogen's stock equal to the fraction of months
remaining in the 24 month R & D program divided by 24. Likewise, Arogen will
return to DISE a similar fraction of the 3,800,000 Common shares of DISE's
Common Stock equal to the fraction of months remaining in the 24 month R & D
contract divided by 24. For example, if Arogen terminates the Agreement for
breach at the end of 12 months, then DISE will trade back 4,525,441 shares of
Arogen's Common Shares for 1,900,000 shares of DISE Common Shares. Moreover, in
the case of Arogen termination, DISE agrees that the remaining DISE shares owned
by Arogen will become free trading after one year from closing subject to
standard 144 rules. Both DISE and Arogen agree that said changes on termination
of the R & D agreement supersede any instructions contained in the Stock
Purchase agreement. Also, said termination voids the provisions in the Stock
Purchase Agreement providing for the DISE right to maintain a 51% Common Stock
position during the 2-year Guaranteed Period and a 35% position following the
Guaranteed Period. Except for the obligation to carry out said changes and the
provisions of Paragraph 6, the parties will have no further obligation to each
other.
m. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
n. Remedies. DISE and Arogen shall have all rights and remedies set
forth in the Transactional Documents and all rights and remedies which such
holder has been granted at any time under any other agreement or contract and
all of the rights which such holder has under any law. Any party having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
IN WITNESS WHEREOF, DISE and Arogen have caused this Research
Collaboration and Funding Agreement to be duly executed as of the date first
written above.
HEALTHSPAN SCIENCES, INC. (AROGEN, INC).
By:
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Xxxxxx Xxxxxxxxxxxx, Ph.D.,
President
DISEASE SCIENCES, INC.
By:
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Xxxxx Xxxxxxxxx, M.D.,
President
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