UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-27282
Manhattan Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3898269
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
787 Seventh Avenue, 48th Floor, New York, New York 10019
(Address of principal executive offices)
(212) 554-4525
(Issuer's telephone number)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
As of May 12, 2003, there were 77,874,653 shares of the issuer's common stock,
$.01 par value, outstanding.
F-1
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements.................3
Unaudited Condensed Consolidated Balance Sheets.......................3
Unaudited Condensed Consolidated Statements of Operations.............4
Unaudited Condensed Consolidated Statement of Stockholders' Equity....5
Unaudited Condensed Consolidated Statements of Cash Flows.............6
Notes to Unaudited Condensed Consolidated Financial Statements........7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......12
Item 3. Controls and Procedures..............................................15
PART II OTHER INFORMATION
Item 1. Legal Proceedings....................................................16
Item 2. Changes in Securities................................................16
Item 4. Submission of Matters to a Vote of Security Holders..................17
Item 6. Exhibits and Reports on Form 8-K.....................................19
Signatures...........................................................20
Certifications.......................................................21
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-QSB that
are not historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the
expectations, beliefs, intentions or strategies regarding the future. We intend
that all forward-looking statements be subject to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. In particular, the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section in Part I, Item 2 of this quarterly report include
forward-looking statements that reflect our current views with respect to future
events and financial performance. We use words such as we "expect,"
"anticipate," "believe," and "intend" and similar expressions to identify
forward-looking statements. A number of important factors could, individually or
in the aggregate, cause actual results to differ materially from those expressed
or implied in any forward-looking statements. Such factors include, but are not
limited to, the following: our lack of significant revenues and profitability;
our need for additional capital; our ability to successfully commercialize our
technologies; our ability to obtain various regulatory approvals; the
illiquidity and volatility of our common stock, and the other "Risk Factors"
identified in our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002.
F-2
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Balance Sheets
(Unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
March 31, December 31,
------------------ ------------------
Assets 2003 2002
------------------ ------------------
Current assets:
Cash and cash equivalents $ 1,146,600 $ 1,721,123
Prepaid expenses 54,745 --
------------------ ------------------
Total current assets 1,201,345 1,721,123
Property and equipment, net 12,274 --
Deposits 19,938 --
Intangible assets, net 3,140,785 --
------------------ ------------------
Total assets $ 4,374,342 $ 1,721,123
================== ==================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 473,705 $ 164,899
Accrued expenses 519,579 15,973
Note payable to bank -- 600,000
Notes payable to stockholder 70,000 206,000
Due affiliate -- 96,328
------------------ ------------------
Total liabilities 1,063,284 1,083,200
------------------ ------------------
Commitments and Contingencies:
Stockholders' equity:
Common stock, $.001 par value. Authorized 150,000,000
shares; 77,874,653 and 52,510,027 shares issued and outstanding
at March 31, 2003 and December 31, 2002, respectively 77,875 52,510
Additional paid-in capital 4,771,965 1,717,397
Unearned consulting costs (22,721) (37,868)
Deficit accumulated during development stage (1,516,061) (1,094,116)
------------------ ------------------
Total stockholders' equity 3,311,058 637,923
------------------ ------------------
Total liabilities and stockholders' equity $ 4,374,342 $ 1,721,123
================== ==================
See accompanying notes to unaudited condensed consolidated financial statements.
F-3
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Cumulative
period from
August 6, 2001
Three Months ended March 31, (inception) to
-------------------------------------------- March 31,
2003 2002 2003
--------------------- -------------------- ---------------------
Revenue $ -- $ -- $ --
--------------------- -------------------- ---------------------
Costs and expenses:
Research and development 43,355 260,576 768,752
General and administrative 378,872 50,014 728,453
--------------------- -------------------- ---------------------
Total operating expenses 422,227 310,590 1,497,205
--------------------- -------------------- ---------------------
Operating loss (422,227) (310,590) (1,497,205)
--------------------- -------------------- ---------------------
Other (income) expense:
Interest and other income (2,515) -- (2,515)
Interest expense 2,233 2,046 21,371
--------------------- -------------------- ---------------------
Total other (income) expense (282) 2,046 18,856
--------------------- -------------------- ---------------------
Net loss $ (421,945)$ (312,636)$ (1,516,061)
===================== ==================== =====================
Net loss per common share:
Basic and diluted $ (0.01)$ (0.01)
===================== ====================
Weighted average shares of common stock outstanding:
Basic and diluted 64,725,985 38,034,882
===================== ====================
See accompanying notes to unaudited condensed consolidated financial statements.
F-4
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
Deficit
accumulated Total
Common stock Additional during the Unearned stock-
------------------------ paid-in development consulting holders'
Shares Amount capital stage costs equity
------------ ---------- --------------- ------------- ------------ ------------
Balance at January 1, 2003 52,510,027 $ 52,510 $ 1,717,397 $ (1,094,116) $ (37,868) $ 637,923
Common Stock Issued, net
of expenses 4,406,021 4,406 739,285 -- -- 743,691
Effect of reverse acquisition 20,958,605 20,959 2,315,283 -- -- 2,336,242
Amortization of unearned
consulting costs -- -- -- -- 15,147 15,147
Net loss -- -- -- (421,945) -- (421,945)
------------- -------- --------------- ------------ ------------ ------------
Balance at March 31, 2003 77,874,653 $ 77,875 $ 4,771,965 $ (1,516,061) $ (22,721) $ 3,311,058
============= ======== =============== ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
F-5
MANHATTAN PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Cumulative
period from
August 1, 2001
(inception) to
Three months ended March 31, March 31,
----------------------------------- -------------------
2003 2002 2003
----------------- --------------- -------------------
Cash flows from operating activities:
Net loss $ (421,945) $ (312,636) $ (1,516,061)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Common stock issued for license rights -- -- 1,000
Amortization of unearned consulting services 15,147 -- 37,868
Amortization of intangible assets 26,393 -- 26,393
Depreciation 478 -- 478
Changes in operating assets and liabilities,
net of acquisition:
Increase in prepaid expenses (16,438) -- (16,438)
Increase (decrease) in accounts payable (14,929) -- 149,970
Increase (decrease) in accrued expenses (36,715) 55,000 (20,742)
Due affiliate (96,328) -- --
----------------- --------------- -------------------
Net cash used in operating activities (544,337) (257,636) (1,337,532)
----------------- --------------- -------------------
Cash flows from investing activities:
Purchase of furniture and equipment (5,066) -- (5,066)
Cash paid in connection with acquisition (32,811) -- (32,811)
----------------- --------------- -------------------
Net cash used in investing activities (37,877) -- (37,877)
----------------- --------------- -------------------
Cash flows from financing activities:
Proceeds from issuances of notes payable to stockholders -- -- 233,500
Repayments of notes payable to stockholders (136,000) -- (163,500)
Proceeds from issuance of note payable to bank -- 400,000 600,000
Repayment of note payable to bank (600,000) -- (600,000)
Proceeds from subscriptions receivable -- -- 4,000
Proceeds from sale of common stock, net 743,691 -- 2,448,009
----------------- --------------- -------------------
Net cash provided by financing activities 7,691 400,000 2,522,009
----------------- --------------- -------------------
Net increase (decrease) in cash and cash equivalents (574,523) 142,364 1,146,600
Cash and cash equivalents at beginning of period 1,721,123 -- --
----------------- --------------- -------------------
Cash and cash equivalents at end of period $ 1,146,600 $ 142,364 $ 1,146,600
================= =============== ===================
Supplemental disclosure of noncash financing activities:
Interest paid $ 502 $ -- $ 16,167
================= =============== ===================
Supplemental disclosure of noncash investing and financing activities:
Stock options issued for consulting services -- -- $ 60,589
Issuance of common stock for acquisition $ 2,336,242 -- $ 2,336,242
================= =============== ===================
See accompanying notes to unaudited condensed consolidated financial statements.
F-6
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information. Accordingly,
the financial statements do not include all information and footnotes required
by accounting principles generally accepted in the United States of America for
complete annual financial statements. In the opinion of management, the
accompanying condensed consolidated financial statements reflect all
adjustments, consisting of only normal recurring adjustments, considered
necessary for fair presentation. Interim operating results are not necessarily
indicative of results that may be expected for the year ending December 31, 2003
or for any subsequent period. These consolidated financial statements should be
read in conjunction with the Annual Report on Form 10-KSB of Manhattan
Pharmaceuticals, Inc. and its subsidiaries ("Manhattan" or the "Company") as of
and for the year ended December 31, 2002 and the Form 8-K/A of Manhattan
Pharmaceuticals, Inc. filed on May 9, 2003 containing the financial statements
of Manhattan Research Development, Inc.
(2) LIQUIDITY
The Company has reported a net loss of $1,037,320 for the year ended
December 31, 2002. The Company has reported a net loss of $421,945 for the three
months ended March 31, 2003. The net loss from date of inception, August 6,
2001, to March 31, 2003 amounts to $1,516,061. As discussed in Note 6, on
February 21, 2003 the Company completed a reverse acquisition of privately held
Manhattan Research Development, Inc. Based on the resources available at March
31, 2003 of the combined Company, management believes that the combined Company
will continue to incur net losses through at least March 31, 2004 and will need
additional equity or debt financing or will need to generate revenues through
licensing its products or entering into strategic alliances to be able to
sustain its operations until it can achieve profitability, if ever. These
matters raise substantial doubt about the Company's ability to continue as a
going concern.
The combined Company's continued operations will depend on its ability
to raise additional funds through various potential sources such as equity and
debt financing, collaborative agreements, strategic alliances and its ability to
realize the full potential of its technology in development. Additional funds
are currently not available on acceptable terms and may not become available,
and there can be no assurance that any additional funding that the combined
Company does obtain will be sufficient to meet the combined Company's needs in
the short and long term. Through March 31, 2003, a significant portion of the
Company's financing has been through private placements of common stock and
warrants and debt financing. Until and unless the combined Company's operations
generate significant revenues, the combined Company will attempt to continue to
fund operations from cash on hand and through the sources of capital previously
described.
The Company's common stock was delisted from the Nasdaq SmallCap Market
effective at the close of business August 23, 2001 for failing to meet the
minimum bid price requirements set forth in the NASD Marketplace Rules. Since
August 23, 2001, the Company's common stock trades on the Over-the-Counter
Bulletin Board (the "OTCBB"). The Company's ticker symbol is currently
"MHTP.OB." The de-listing of the Company's common stock from the Nasdaq SmallCap
Market could have a material adverse effect on the Company's ability to raise
additional capital.
F-7
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
(3) COMPUTATION OF NET LOSS PER COMMON SHARE
Basic net loss per common share is calculated by dividing net loss
applicable to common shares by the weighted-average number of common shares
outstanding for the period. Diluted net loss per common share equals basic net
loss per common share, since common stock equivalents from stock options, stock
warrants, stock subscriptions and convertible preferred stock would have an anti
dilutive effect because the Company incurred a net loss during each period
presented. The common stock equivalents from stock options, stock warrants,
stock subscriptions, and convertible preferred stock, which have not been
included in the diluted calculations since their effect is antidilutive, was
13,838,449 as of March 31, 2003.
(4) ISSUANCE OF STOCK, STOCK OPTIONS AND WARRANTS
On April 24, 2003, the Company effected a 2-for-3 reverse stock split.
All share and per share information has been retroactively restated to give
effect to the reverse stock split.
On February 24, 2003, the Company granted employees an aggregate of
2,920,300 options outside of the Company's 1995 Stock Option Plan. 1,946,867 of
these options vest on the first anniversary of the grant date and 973,433 of
these options vest in two equal installments on each of the first and second
anniversaries of the grant date, provided the optionee continues in service. The
options were granted at the stock price on the day of issuance and are
exercisable for a period of ten years regardless of whether the grantee
continues to be employed by the Company.
Had compensation costs been determined in accordance with the fair
value method prescribed by SFAS No. 123 for all options issued to employees, the
Company's net loss applicable to common shares and net loss per common share
(basic and diluted) for plan options would have been increased to the pro forma
amounts indicated below. There were no options granted or outstanding prior to
February 21, 2003.
Three months ended March 31,
2003
---------------------------
Net loss applicable to common shares:
As reported $ 421,945
Pro forma 479,548
Net loss per common share - basic
As reported $ 0.01
Pro forma 0.01
(5) PRIVATE PLACEMENT OF COMMON SHARES
During 2002, the Company's subsidiary, Manhattan Research Development,
Inc. (Manhattan Research) commenced a private placement and sold 798,167
shares of common stock at $2.40 per share and received proceeds of $1,704,318,
net of expenses of $211,281. These shares converted into 10,144,440 shares of
the Company's common stock when the Company completed a reverse acquisition of
Manhattan Research as described below. In addition, each investor received
warrants equal to 10% of the number of shares of common stock purchased and,
accordingly, Manhattan Research issued warrants to purchase 79,817 shares of
F-8
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
common stock in 2002 in connection with the private placement. Upon the merger,
these converted into warrants to purchase 1,014,444 shares of the Company's
common stock. Each warrant had an exercise price of $2.40 per share, which post
merger converted to approximately $0.19. These warrants expire in 2007.
During January and February 2003, Manhattan Research sold an additional
346,667 shares of common stock at $2.40 ($0.19, post merger) per share and
warrants to purchase 34,667 shares of common stock exercisable at $2.40 ($0.19
post merger) through the private placement and received net proceeds of
$743,691. These shares converted into 4,406,021 shares of the Company's common
stock when the Company completed its reverse acquisition of Manhattan Research.
The warrants to purchase 34,667 shares of common stock converted into warrants
to purchase 440,602 common shares of the combined Company.
In addition, in connection with the private placement, Manhattan
Research issued to Joseph Stevens & Co., Inc., a NASD-member broker-dealer,
warrants to purchase 435,037 shares of its common stock that are exercisable at
$2.40 ($0.19 post merger) per share and expire in 2008. Upon the merger, these
warrants converted into warrants to purchase 5,529,175 shares of common stock of
the combined Company.
(6) MERGER
On February 21, 2003, the Company (formerly known as "Atlantic
Technology Ventures, Inc.") completed a reverse acquisition of privately held
Manhattan Research Development, Inc. (formerly Manhattan Pharmaceuticals, Inc.),
a Delaware corporation. The merger was effected pursuant to an Agreement and
Plan of Merger dated December 17, 2002 (the "Merger Agreement") by and among the
Company, Manhattan Research and Manhattan Pharmaceuticals Acquisition Corp, the
Company's wholly owned subsidiary ("MPAC"). In accordance with the terms of the
Merger Agreement, MPAC merged with and into Manhattan Research, with Manhattan
Research remaining as the surviving corporation and a wholly owned subsidiary of
the Company. Pursuant to the Merger Agreement, upon the effective time of the
merger, the outstanding shares of common stock of Manhattan Research
automatically converted into an aggregate of 62,299,723 shares of the Company's
common stock, which represented 80 percent of the Company's outstanding voting
stock after giving effect to the merger. In addition, immediately prior to the
merger Manhattan Research had outstanding options and warrants to purchase an
aggregate of 576,187 shares of its common stock, which, in accordance with the
terms of the merger, automatically converted into options and warrants to
purchase an aggregate of 7,323,146 shares of the Company's common stock. Since
the stockholders of Manhattan Research received the majority of the voting
shares of the Company, the merger is being accounted for as a reverse
acquisition whereby Manhattan Research is the accounting acquirer (legal
acquiree) and the Company is the accounting acquiree (legal acquirer). Based on
the five-day average price of the Company's common stock of $0.15 per share, the
purchase price approximates $2,336,000, plus approximately $33,000 of
acquisition costs, which represents 20 percent of the market value of the
combined Company's post-merger total outstanding shares of 77,874,653. In
connection with the merger, the Company changed its name from "Atlantic
Technology Ventures, Inc." to "Manhattan Pharmaceuticals, Inc." Based on the
preliminary information currently available, Manhattan Research expects to
recognize patents and licenses for substantially all of the purchase price. Upon
completion of a formal purchase price allocation there may be a decrease in the
amount assigned to intangible assets and a corresponding increase in in-process
research and development. As a result of acquiring Manhattan Research, the
Company receives new technologies.
F-9
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
A summary of the preliminary purchase price allocation is as follows:
Common stock issued $ 2,336,242
Acquisition costs paid 32,808
----------------
Total purchase price 2,369,050
Net liabilities assumed in acquisition $ 798,128
================
Excess purchase price (preliminarily allocated to
intangible assets) $ 3,167,178
================
Assets purchased:
Prepaid expenses $ 38,307
Property and equipment 7,683
Deposits 19,938
----------------
65,928
----------------
Liabilities assumed:
Accounts payable 323,735
Accrued expenses 540,321
----------------
864,056
----------------
Net liabilities assumed (798,128)
================
The following pro forma financial information presents the combined
results of operations of Manhattan Pharmaceuticals and Manhattan Research as if
the acquisition had occurred as of January 1, 2003 and 2002, after giving effect
to certain adjustments, including the issuance of Manhattan Pharmaceuticals
common stock as part of the purchase price. For the purpose of this pro forma
presentation, both Manhattan Pharmaceuticals' and Manhattan Research's financial
information is presented for the three months ended March 31, 2003 and 2002. The
pro forma condensed consolidated financial information does not necessarily
reflect the results of operations that would have occurred had Manhattan
Pharmaceuticals and Manhattan Research been a single entity during such periods.
F-10
MANHATTAN PHARMACEUTICALS, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
Three months ended March 31,
2003 2002
------------------ ----------------
Revenues $ -- $ --
Net loss $ (463,135) $ (380,219)
Weighted-average shares of common stock outstanding
outstanding: Basic 76,835,402 73,468,632
Loss per share $ (0.01) $ (0.01)
(7) SUBSEQUENT EVENTS
On April 4, 2003, the Company entered into a license and development
agreement with NovaDel Pharma, Inc. in which the Company licensed from NovaDel
the exclusive worldwide rights to NovaDel's proprietary lingual spray technology
to deliver propofol for pre-procedural sedation. The Company will be responsible
for all costs and expenses in connection with all development and
commercialization activities including the development activities performed by
NovaDel on behalf of the Company. In consideration for this license, the Company
is required to pay an up front fee in installments contingent on the Company's
receiving certain amounts through equity financing or otherwise, including the
receipt of any milestone payments or other revenues. These amounts will be
expensed as incurred. In addition, the Company is required to pay NovaDel
milestone payments upon the occurrence of certain events specified in the
license agreement, including filing a New Drug Application or "NDA" which is
accepted for review by the FDA for a licensed product, filing a European
Marketing Application for a licensed product, having a filed NDA approved by the
FDA, having a European Marketing Application accepted for review within the
European Union, receiving commercial approval in Japan, Canada, Australia and
South Africa, and upon receiving regulatory approval in certain other countries.
F-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
You should read the following discussion of our results of operations
and financial condition in conjunction with our Annual Report on Form 10-KSB for
the year ended December 31, 2002 and the Form 8-K/A of Manhattan
Pharmaceuticals, Inc. filed on May 9, 2003 containing the financial statements
of Manhattan Research Development, Inc. This discussion includes
"forward-looking" statements that reflect our current views with respect to
future events and financial performance. We use words such as we "expect,"
"anticipate," "believe," and "intend" and similar expressions to identify
forward-looking statements. Investors should be aware that actual results may
differ materially from our expressed expectations because of risks and
uncertainties inherent in future events, particularly those risks identified in
the "Risk Factors" section of our most recent Annual Report on Form 10-KSB, and
should not unduly rely on these forward looking statements.
RESULTS OF OPERATIONS - THREE-MONTH PERIOD ENDED MARCH 31, 2003 VS. 2002
During the quarters ended March 31, 2003 and 2002, we had no revenue.
For the quarter ended March 31, 2003, research and development expense
was $43,355 as compared to $260,576 for the first quarter of 2002. The decrease
is primarily a result of a reduction in license fees paid to Oleoyl-estrone
Developments, Inc (OED).
For the quarter ended March 31, 2003, general and administrative
expense was $378,872 as compared to $50,014 for the quarter ended March 31,
2002. The increase is due primarily to expenses associated with hiring full time
employees and consultants of approximately $61,000 and $71,000, respectively. In
addition, as a result of becoming a publicly traded company, we had increases in
legal and accounting fees of approximately $67,000. Outside services (including
transfer agent and employee finders fees) increased by approximately $27,000.
Rent, directors fees, insurance and other expenses increased by approximately
$27,000, $24,000, $12,000 and $12,000, respectively. Finally, in 2003, we had
amortization of intangible assets of approximately $26,000.
For the first quarter of 2003, interest and other income was $2,515,
compared to zero for the first quarter of 2002. The increase in interest income
is due to an increase in our cash balances.
For the first quarter of 2003, interest expense was $2,233, compared to
$2,046 for the first quarter of 2002 as a result of marginally higher average
balances of notes payable outstanding.
Net loss for the quarter ended March 31, 2003, was $421,945 as compared
to $312,636 for the quarter ended March 31, 2002. This increase in net loss is
attributable primarily to an increase in general and administrative expenses of
$328,858. This increase is partially offset by a decrease in research and
development expenses of $217,221.
LIQUIDITY AND CAPITAL RESOURCES
From inception to March 31, 2003, we incurred an accumulated deficit of
$1,516,061, and we expect to continue to incur additional losses through the
year ending March 31, 2004 and for the foreseeable future. This loss has been
incurred through a combination research and development activities related to
the various technologies under our control and expenses supporting those
activities.
F-12
During 2002, our subsidiary, Manhattan Research Development, Inc.
(Manhattan Research) commenced a private placement and sold 798,167 shares of
common stock at $2.40 per share and received proceeds of $1,704,318, net of
expenses of $211,181. These shares converted into 10,144,440 shares of our
common stock when we completed a reverse acquisition of Manhattan Research as
described below. In addition, each investor received warrants equal to 10% of
the number of shares of common stock purchased and, accordingly, Manhattan
Research issued warrants to purchase 79,817 shares of common stock in 2002 in
connection with the private placement. Upon the merger, these converted into
warrants to purchase 1,014,444 shares of our common stock. Each warrant had an
exercise price of $2.40 per share, which post merger converted to $0.19. These
warrants expire in 2007.
During January and February 2003, Manhattan Research sold an additional
346,667 shares of common stock at $2.40 ($0.19, post merger) per share and
warrants to purchase 34,667 shares of common stock exercisable at $2.40 ($0.19
post merger) through the private placement and received net proceeds of
$743,691. These shares converted into 4,406,021 shares of our common stock when
we completed our reverse acquisition of Manhattan Research. The warrants to
purchase 34,667 shares of common stock converted into warrants to purchase
440,602 common shares of the combined Company.
In addition, in connection with the private placement, Manhattan
Research issued to Joseph Stevens & Co., Inc., a NASD-member broker-dealer,
warrants to purchase 435,037 shares of its common stock that are exercisable at
$2.40 ($0.19 post merger) per share and expire in 2008. Upon the merger, these
warrants converted into warrants to purchase 5,529,175 shares of common stock of
the combined Company.
We have financed our operations since inception primarily through
equity and debt financing and our licensing of CT-3 to Indevus. During the
quarter ended March 31, 2003, we had a net decrease in cash and cash equivalents
of $574,523. This decrease primarily resulted from net cash used in investing
activities for the quarter ended March 31, 2003 of $544,337. Total cash
resources as of March 31, 2003 were $1,146,600 compared to $1,721,123 at
December 31, 2002.
Our available working capital and capital requirements will depend upon
numerous factors, including progress of our research and development programs,
our progress in and the cost of ongoing and planned pre-clinical and clinical
testing, the timing and cost of obtaining regulatory approvals, the cost of
filing, prosecuting, defending, and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in our existing collaborative and licensing relationships, the resources
that we devote to developing manufacturing and commercializing capabilities,
technological advances, the status of our competitors, our ability to establish
collaborative arrangements with other organizations and our need to purchase
additional capital equipment.
Our continued operations will depend on whether we are able to raise
additional funds through various potential sources, such as equity and debt
financing, other collaborative agreements, strategic alliances, and our ability
to realize the full potential of our technology in development. Such additional
funds may not become available as we need them or be available on acceptable
terms. Through March 31, 2003, a significant portion of our financing has been
through private placements of common stock and warrants and debt financing.
Unless our operations generate significant revenues, we will continue to fund
operations from cash on hand and through the similar sources of capital
previously described. We can give no assurances that any additional capital that
we are able to obtain will be sufficient to meet our needs.
On February 21, 2003, we completed a reverse acquisition of privately
held Manhattan Research Development, Inc., (formerly Manhattan Pharmaceuticals,
Inc.) (Manhattan Research) a Delaware corporation. The merger was effected
F-13
pursuant to an Agreement and Plan of Merger dated December 17, 2002 (the "Merger
Agreement") by and among the Company, Manhattan Research and Manhattan
Pharmaceuticals Acquisition Corp, the Company's wholly owned subsidiary
("MPAC"). In accordance with the terms of the Merger Agreement, MPAC merged with
and into Manhattan Research, with Manhattan Research remaining as the surviving
corporation and our wholly owned subsidiary. Pursuant to the Merger Agreement,
upon the effective time of the merger, the outstanding shares of common stock of
Manhattan Research automatically converted into an aggregate of 62,299,723
shares of our common stock, which represented 80 percent of our outstanding
voting stock after giving effect to the merger. In addition, immediately prior
to the merger Manhattan Research had outstanding options and warrants to
purchase an aggregate of 576,187 shares of its common stock, which, in
accordance with the terms of the merger, automatically converted into options
and warrants to purchase an aggregate of 7,323,146 shares of our common stock.
Since the stockholders of Manhattan Research received the majority of our voting
shares, the merger is being accounted for as a reverse acquisition whereby
Manhattan Research is the accounting acquirer (legal acquiree) and we are the
accounting acquiree (legal acquirer). Based on the five-day average price of our
common stock of $0.15 per share, the purchase price approximates $2,336,000,
which represents 20 percent of the market value of the combined Company's
post-merger total outstanding shares of 77,874,653. In connection with the
merger, we changed our name from "Atlantic Technology Ventures, Inc." to
"Manhattan Pharmaceuticals, Inc." Based on the preliminary information currently
available, Manhattan Research expects to recognize patents and licenses for
substantially all of the purchase price. Upon completion of a formal purchase
price allocation there may be a decrease in the amount assigned to intangible
assets and a corresponding increase in in-process research and development. As a
result of acquiring Manhattan Research, the Company receives new technologies.
Management believes that we will continue to incur net losses through
at least March 31, 2004. Based on the current resources of the resulting
company, we will need additional equity or debt financing or we will need to
generate revenues through licensing our products or entering into strategic
alliances to be able to sustain our operations until we can achieve
profitability, if ever. These matters raise substantial doubt as to our ability
to continue as a going concern.
The report of our independent auditors on our 2002 consolidated
financial statements includes an explanatory paragraph, which states that our
recurring losses, and limited liquid resources raise substantial doubt about our
ability to continue as a going concern. Our condensed consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Subsequent to an oral hearing before a Nasdaq Listing Qualifications
Panel, on August 23, 2001, our securities were delisted from the Nasdaq Stock
Market for failing to meet the minimum bid price requirements set forth in the
NASD Marketplace Rules, as our common stock had traded for less than $1.00 for
more than 30 consecutive business days. Our common stock trades now on the OTC
Bulletin Board under the symbol "MHTP.OB". Delisting our common stock from
Nasdaq could have a material adverse effect on our ability to raise additional
capital, our stockholders' liquidity and the price of our common stock.
CRITICAL ACCOUNTING POLICIES
In December 2001, the SEC requested that all registrants discuss their
most "critical accounting policies" in management's discussion and analysis of
financial condition and results of operations. The SEC indicated that a
"critical accounting policy" is one which is both important to the portrayal of
the company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. Our
significant accounting policies are described in Note 1 to our consolidated
F-14
financial statements included in this annual report; however, we believe that
none of them is considered to be critical.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." SFAS No.146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force ("EITF") issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit and Activity." SFAS No. 146 requires that liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. This statement also established that fair value is the objective for
initial measurement of the liability. The provisions of SFAS No. 146 are
effective for exit or disposal activities that initiated after December 31,
2002. The Company does not expect that the adoption of SFAS No. 146 will have a
material impact on its consolidated financial statements.
In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation- Transition and Disclosure an Amendment of SFAS No. 123." SFAS No.
148 amends SFAS No. 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock- based
employee compensation and the effect of the method used on reported results. The
Company adopted the disclosure provisions of SFAS No. 148, effective January 1,
2003.
Item 3. Controls and Procedures
Within 90 days prior to the date of this Quarterly Report, we carried
out an evaluation, under the supervision and with the participation of our chief
executive and chief financial officers, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934). Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in alerting them on a
timely basis to material information required to be disclosed in our periodic
reports to the Securities and Exchange Commission. There have been no
significant changes in our internal controls or in other factors which could
significantly affect internal controls subsequent to such evaluation.
F-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are involved with an arbitration proceeding involving Dr. Sumner
Burstein, the inventor from whom we licensed CT-3, concerning a dispute over the
payment of royalties. Under our license agreement with Dr. Burstein, he is
entitled to a royalty of 3 percent of the net sales of all licensed products
sold by us, and a royalty of 8 percent of the royalties that we receive from
sublicensees from net sales by any such sublicensee of the licensed products or
processes.
In connection with the license of our rights to CT-3 to Indevus
Pharmaceuticals, Inc. in June 2002, Indevus paid us an initial licensing fee of
$400,000 and an inventory transfer fee of $100,000. Indevus is further required
to make future payments upon achieving certain development milestones and
royalties. On July 23, 2002, we received a letter from attorneys representing
Dr. Burstein with their analysis of his rights under the Burstein license. In
the letter they concluded that the $500,000 we received from Indevus, as well as
any future milestone payments should trigger our obligation to make royalty
payments to Dr. Burstein pursuant to the terms of our agreement with him,
therefore subject to the 8 percent sublicensing royalty.
On September 16, 2002, our counsel responded by stating that we
recognize our obligation to pay an 8 percent royalty to Dr. Burstein only on
those payments that we receive from Indevus based on the "net sales" of products
and processes covered by the Burstein license. The Indevus license agreement
does not merely include a sublicense to patent rights of CT-3, but also the
transfer of our know-how, FDA regulatory filings, and inventory of CT-3 compound
and third party contracts. Presently, there have been no "net sales" on any
products covered by the Burstein license. It is our position that we have not
received any royalty payments pursuant to the Indevus license and, therefore, no
payments are due to Dr. Burstein at this time.
On November 20, 2002, we received a letter from Dr. Burstein's
attorneys purporting to terminate the Burstein license. We believe that this
purported termination is invalid under the terms of the Burstein agreement and
that Dr. Burstein's current royalty and termination claims are without merit. We
intend to vigorously defend our position that the Burstein license is not
terminated. Under the terms of the Burstein license, Dr. Burstein is not
permitted to terminate the agreement over a bona fide dispute regarding the
payment of royalties. Instead, the Burstein license states that disputes
regarding royalty payments are to be settled through binding arbitration.
In accordance with the terms of the Burstein license, we commenced an
arbitration proceeding with the American Arbitration Association in January
2003, which is currently pending. The Arbitration Hearing is scheduled for mid
October. Although we believe we will prevail in this proceeding, we believe that
even an unfavorable binding arbitration ruling that concludes a breach of the
Burstein license by us for failure to pay royalties would be capable of being
readily cured, thereby also avoiding termination of the Burstein license.
Item 2. Changes in Securities
In connection with our merger with Manhattan Research Development,
Inc., effective as of February 21, 2003, we issued an aggregate of 93,449,584
shares of our common stock to the former stockholders of Manhattan Research
Development in exchange for their shares of Manhattan Research Development
common stock. In addition, at the time of the merger, Manhattan Research
Development had outstanding warrants to purchase an aggregate of 864,280 shares
of common stock, which automatically converted into warrants to purchase an
16
aggregate of 7,323,146 shares of our common stock. The form of warrant such
warrant is attached hereto as Exhibit 4.1. We relied on the exemption from
federal registration under Section 4(2) of the Securities Act of 1933, as
amended, based on our belief that the issuance of such securities did not
involve a public offering, as there were fewer than 35 "non-accredited"
investors, all of whom, either alone or through a purchaser representative, had
such knowledge and experience in financial and business matters so that each was
capable of evaluating the risks of the investment.
Item 4. Submission of Matters to a Vote of Security Holders.
Our annual meeting of stockholders was held on February 21, 2003. The
stockholders took the following actions:
(a) The stockholders re-elected five directors, all of whom together
then comprised the entire board. The stockholders present in person or by proxy
cast the following numbers of votes in connection with the election of
directors, resulting in the election of all nominees:
Class Votes For Votes Withheld
----- --------- --------------
Steven H. Kanzer Common 6,527,329 24,600
Series A Preferred 192,479 0
Peter O. Kliem Common 6,529,195 22,733
Series A Preferred 192,478 0
A. Joseph Rudick Common 6,522,870 29,059
Series A Preferred 192,478 0
David M. Tanen Common 6,529,195 22,733
Series A Preferred 192,478 0
Frederic P. Zotos Common 6,438,854 113,075
Series A Preferred 183,473 9,006
Upon the completion of our merger with Manhattan Research Development, however,
each of the newly-elected directors, except Mr. Tanen, resigned on February 21,
2003 in accordance with the terms of the merger.
(b) The stockholders approved an amendment to our certificate of
incorporation, increasing the number of authorized shares of common stock from
50 million to 150 million. The following table sets forth a summary of the
voting on this proposal:
Class Votes For Votes Against Votes Abstained Broker Non-Votes
----- --------- ------------- --------------- ----------------
Common Stock 8,459,645 36,727 0 0
Series A Preferred 192,479 0 0 0
(c) The stockholders approved an amendment to our certificate of
incorporation, changing our name from "Atlantic Technology Ventures, Inc." to
"Manhattan Pharmaceuticals, Inc." The following table sets forth a summary of
the voting on this proposal:
Class Votes For Votes Against Votes Abstained Broker Non-Votes
----- --------- ------------- --------------- ----------------
Common Stock 8,447,791 48,500 80 0
Series A Preferred 192,479 0 0 0
17
(d) The stockholders approved an amendment to our Series A preferred
stock certificate of designations providing for the automatic conversion of all
outstanding shares of Series A preferred stock upon completion of our merger
with Manhattan Research Development, Inc. The following table sets forth a
summary of the voting on this proposal:
Class Votes For Votes Against Votes Abstained Broker Non-Votes
Common Stock 5,215,741 37,920 0 3,242,711
Series A Preferred 192,479 0 0 0
(e) The stockholders ratified our board of directors' selection of J.H.
Cohn, LLP as our independent auditors for fiscal 2002. The following table sets
forth a summary of the voting on this proposal:
Class Votes For Votes Against Votes Abstained Broker Non-Votes
Common Stock 8,410,654 81,551 4,167 0
Series A Preferred 192,479 0 0 0
18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate of incorporation, as amended through February 21,
2003 (incorporated by reference to the same exhibit number to
the Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 2002).
4.1 Form of warrant issued by Manhattan Research Development,
Inc., which automatically converted into warrants to purchase
shares of the Registrant's common stock upon the merger
transaction with such company.
10.1 Third Amendment to Employment Agreement dated February 21, 2003
between the Registrant and Frederic. P. Zotos.
10.2 Third Amendment to Employment Agreement dated February 21, 2003
between the Registrant and A. Joseph Rudick.
10.3 Second Amendment to Employment Agreement dated February 21, 2003
between the Registrant and Nicholas J. Rossettos.
10.4 Employment Agreement dated January 2, 2003, between Manhattan
Research Development, Inc. and Leonard Firestone, as
assigned to the Registrant effective as of February 21, 2003.
10.5 Employment Agreement dated February 28, 2003, between the
Registrant and Nicholas J. Rossettos.
10.6 License Agreement dated on or about February 28, 2002 between
Manhattan Research Development, Inc. (f/k/a Manhattan
Pharmaceuticals, Inc.) and Oleoyl-Estrone Developments SL
(portions of this exhibit have been ommitted pursuant to a
request for confidential treatment and have been filed separately
with the Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
99.1 Certifications of Chief Executive and Chief Financial Officer.
(b) Reports on Form 8-K
On March 5, 2003, we filed a Current Report on Form 8-K dated February
21, 2003 disclosing under Item 2 thereof our merger transaction with Manhattan
Research Development, Inc. On May 9, 2003, we amended the current report to
include financial statements and pro forma information, as required by Item 7 of
Form 8-K.
19
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MANHATTAN PHARMACEUTICALS, INC.
Date: May 15, 2003 By: /s/ Leonard Firestone
---------------------------------------------
Leonard Firestone
President and Chief Executive Officer
Date: May 15, 2003 By: /s/ Nicholas J. Rossettos
---------------------------------------------
Nicholas J. Rossettos
Chief Financial Officer
20
CERTIFICATIONS
I, Leonard Firestone, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Manhattan
Pharmaceuticals, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information zelating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003 /s/ Leonard Firestone
--------------------------------------------
Leonard Firestone
President and Chief Executive Officer
21
I, Nicholas J. Rossettos, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Manhattan
Pharmaceuticals, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003 /s/ Nicholas J. Rossettos
----------------------------------
Nicholas J. Rossettos
Chief Financial Officer
22
Exhibit Index
Exhibit No. Description
3.1 Certificate of incorporation, as amended through February 21,
2003 (incorporated by reference to the same exhibit number to
the Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 2002).
4.1 Form of warrant issued by Manhattan Research Development,
Inc., which automatically converted into warrants to purchase
shares of the Registrant's common stock upon the merger
transaction with such company.
10.1 Third Amendment to Employment Agreement dated February 21, 2003
between the Registrant and Frederic. P. Zotos.
10.2 Third Amendment to Employment Agreement dated February 21, 2003
between the Registrant and A. Joseph Rudick.
10.3 Second Amendment to Employment Agreement dated February 21, 2003
between the Registrant and Nicholas J. Rossettos.
10.4 Employment Agreement dated January 2, 2003, between Manhattan
Research Development, Inc. and Leonard Firestone, as
assigned to the Registrant effective as of February 21, 2003.
10.5 Employment Agreement dated February 28, 2003, between the
Registrant and Nicholas J. Rossettos.
10.6 License Agreement dated on or about February 28, 2002 between
Manhattan Research Development, Inc. (f/k/a Manhattan
Pharmaceuticals, Inc.) and Oleoyl-Estrone Developments SL
(portions of this exhibit have been ommitted pursuant to a
request for confidential treatment and have been filed separately
with the Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
99.1 Certifications of Chief Executive and Chief Financial Officer.
23
EXHIBIT 4.1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE WITHOUT THE
EXPRESS WRITTEN CONSENT OF MANHATTAN PHARMACEUTICALS, INC. (THE "COMPANY") AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN
EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE
SECURITIES LAWS.
MANHATTAN PHARMACEUTICALS, INC.
Warrant for the Purchase of Shares of
-------------------------------------
Common Stock
------------
CSW No. Shares
FOR VALUE RECEIVED, MANHATTAN PHARMACEUTICALS, INC., a Delaware
corporation (the "COMPANY"), hereby certifies that __________ or his registered
assigns (the "Holder") is entitled to purchase from the Company, subject to the
provisions of this Warrant, at any time commencing from the date hereof until
[DATE], 2007 (the "TERMINATION DATE"), [_________] fully paid and non-assessable
shares of the common stock, $.001 par value, of the Company ("COMMON STOCK") at
an initial per share exercise price equal to $1.60, and an initial aggregate
exercise price of $ ______. The shares of Common Stock or other securities or
property deliverable upon such exercise are hereinafter sometimes referred to as
the "WARRANT SHARES." The exercise price of a share of Common Stock in effect at
any time is hereinafter sometimes referred to as the "PER SHARE EXERCISE PRICE"
and the aggregate purchase price payable for the Warrant Shares hereunder is
hereinafter sometimes referred to as the "AGGREGATE EXERCISE PRICE." This
Warrant is one of a duly authorized issue of Warrants constituting components of
units sold by the Company on the date hereof (collectively, the "WARRANTS").
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised in whole or in part, at any time by
the Holder commencing upon the date hereof and prior to the Termination Date:
(i) by presentation and surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set forth in
Subsection 8(a) hereof, together with payment, by certified or official bank
check payable to the order of the Company, of the Aggregate Exercise Price or
the proportionate part thereof if exercised in part.
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Section 8(a) hereof. Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay the Aggregate Exercise Price, or the
proportionate part thereof if this Warrant is exercised in part. In the event of
a Cashless Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between (A) the last sale price of
the Common Stock on the trading day prior to such date or, in case no such
reported sales take place on such day, the average of the last reported bid and
asked prices of the Common Stock on such day, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
representative closing sale price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ"), or other similar organization if NASDAQ is no longer reporting such
information, or, if the Common Stock is not reported on NASDAQ, the high per
share sale price for the Common Stock in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or if not so
available, the fair market value of the Common Stock as determined in good faith
by the Board of Directors (the "Current Market Price") and (B) the Per Share
Exercise Price, and the denominator of which shall be the then Current Market
Price. For purposes of any computation under this Section 1(a), the then Current
Market Price shall be based on the trading day immediately prior to the Cashless
Exercise.
(b) If this Warrant is exercised in part only, the Company shall, upon
presentation of this Warrant upon such exercise, execute and deliver (with the
certificate for the Warrant Shares purchased) a new Warrant evidencing the
rights of the Holder hereof to purchase the balance of the Warrant Shares
purchasable hereunder upon the same terms and conditions as herein set forth.
Upon proper exercise of this Warrant, the Company promptly shall deliver
certificates for the Warrant Shares to the Holder duly legended as authorized by
the subscription form. No fractional shares shall be issued upon exercise of
this Warrant. With respect to any fraction of a share called for upon exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the Current Market Price of one (1) share of Common
Stock.
2. RESERVATION OF WARRANT SHARES; FULLY PAID SHARES; TAXES. The Company
hereby undertakes until expiration of this Warrant to reserve for issuance or
delivery upon exercise of this Warrant, such number of shares of the Common
Stock as shall be required for issuance and/or delivery upon exercise of this
Warrant in full, and agrees that all Warrant Shares so issued and/or delivered
will be validly issued, fully paid and non-assessable, and further agrees to pay
all taxes and charges that may be imposed upon such issuance and/or delivery.
3. REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Holder of
this Warrant shall have the registration rights as provided in Article V of the
Common Stock and Warrant Purchase Agreement (the "Purchase Agreement") dated as
of the date hereof between the Company and such Holder (or such Holder's
predecessor in interest). If the Holder is not a party to the Purchase
Agreement, by acceptance of this Warrant the Holder agrees to comply with
provisions of Article V of the Purchase Agreement to the same extent as if it
were a party thereto.
2
4. LIMITED TRANSFERABILITY. In addition to the limitation on
transferability set forth in Section 1(a) hereof, this Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder.
5. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
6. STATUS OF HOLDER. This Warrant does not confer upon the Holder any
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
7. NOTICES. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
If to the Holder: the Holder's address
indicated on the signature page of the
Note Purchase Agreement; or
If to the Company: c/o Manhattan Pharmaceuticals, Inc.
787 Seventh Avenue, 48th Floor,
New York, New York 10019, Attn: Secretary
8. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Notwithstanding anything to the contrary contained herein,
in no event may the effective rate of interest collected or received by the
Holder exceed that which may be charged, collected or received by the Holder
under applicable law. The parties agree to settle any disputes through binding
arbitration in the city, county and State of New York.
3
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary this ___ day of __________, 2002.
MANHATTAN PHARMACEUTICALS, INC.
By:
----------------------------
Name: David M. Tanen
Title: President
ATTEST:
- --------------------
Secretary
[Corporate Seal]
4
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing ____________________ shares of Common Stock
thereunder and hereby makes payment of $___________ by certified or official
bank check in payment of the exercise price therefor.
The undersigned hereby represents and warrants to the Company
that the undersigned is acquiring the shares of the Company's Common Stock
pursuant to exercise of the within Warrant for investment purposes only. The
undersigned hereby further acknowledges that the undersigned understands that
such shares (a) have not been registered under the Securities Act of 1933, as
amended, and are being issued to the undersigned by the Company in reliance upon
the foregoing representation and warranty and (b) may not be resold except in
accordance with the requirements of the Act, including Rule 144 thereunder, if
applicable. The undersigned further consents to the placing of a legend on the
certificates for the shares being purchased to the foregoing effect.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint _____________________,
attorney, to transfer said Warrant on the books of Manhattan Pharmaceuticals,
Inc.
Dated:_______________ Signature:____________________
Address:______________________
5
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.001 per share, of
Manhattan Pharmaceuticals, Inc. pursuant to the Cashless Exercise provisions of
the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, no par value per share, of Pain Management, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of Manhattan Pharmaceuticals, Inc.
Dated:_______________ Signature:____________________
Address:______________________
6
Exhibit 10.1
THIRD AMENDMENT
TO
EMPLOYMENT AGREEMENT
This amendment is dated February 21, 2003, and is between ATLANTIC
TECHNOLOGY VENTURES, INC., a Delaware corporation (the "COMPANY"), and FREDERIC
P. ZOTOS, an individual ("EXECUTIVE").
The Company and Executive are party to an employment agreement dated
April 3, 2000, as amended by a first amendment dated February 20, 2001, and a
second amendment dated April 1, 2002 (the "EMPLOYMENT AGREEMENT"). Under Section
7.1(h) of the merger agreement between the Company, Manhattan Pharmaceuticals
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
Company ("MPAC"), and Manhattan Pharmaceuticals, Inc., a Delaware corporation
("MANHATTAN"), the Company is required to amend the Employment Agreement. The
Company and Executive desire to amend the Employment Agreement.
The Company and Executive therefor agree as follows:
1. Section 3(a) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(a) BASE SALARY. The Company shall pay to Executive a base salary at
the annual rate of $225,000 (the "BASE SALARY"), payable in equal installments
consistent with the Company's payroll practices, except that commencing April 1,
2002, Executive shall defer and accrue a portion of the Base Salary at the
annual rate of $50,000, deferrable and accruable in equal installments
consistent with the Company's payroll practices (the aggregate amount of the
Base Salary so deferred and accrued, the "DEFERRED BASE SALARY"). As of February
21, 2003, the Deferred Base Salary equaled $44,795.
2. Section 3(c) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(c) BONUS. The Company shall pay to Executive an annual bonus in an
amount to be determined by Compensation Committee of the Company's board of
directors in its discretion but in no event less than $50,000 (the "BONUS"). In
addition, Executive shall be entitled to participate in any bonus or other
incentive programs established by the Company. The Company acknowledges that
Executive is entitled to a Bonus for 2002 in the amount of $50,000 and that that
Bonus has not yet been paid.
3. Section 4(e) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(e) TERMINATION BY COMPANY FOR ANY OTHER REASON. If Executive's
employment under this Agreement is terminated by the Company during the Term for
any reason other than as provided in Section 4(b), 4(c), or 4(d) of this
Agreement, then the Company shall pay Executive, no later than the end of
14
the month in which the date of termination occurs, the Base Salary through the
date of termination (less any Deferred Base Salary). If Executive is so
terminated the Company shall also pay Executive the following: (1) in lieu of
any further compensation and benefits for the balance of the Term, severance pay
equal to the Base Salary that Executive would have otherwise received (without
deferral of any portion of the Base Salary) during the period beginning on the
date of termination and ending six months from the date of termination, which
severance pay the Company shall pay Executive at the times and in the amounts
that the Company would have paid the Base Salary during that six-month period;
and (2) an amount equal to the Deferred Base Salary plus any Bonus due Executive
under Section 3(c), one-half of that amount payable at such time as the Company
receives $3 million of aggregate cash funds from financings and other sources on
or after the Effective Time and one-half at such time that the Company receives
$6 million of such aggregate cash funds. Time is of the essence with respect to
any payments that the Company is required to make to Executive under this
Section 4(e). For purposes of this Section 4(e), "Effective Time" means the
effective time of the merger of Manhattan Pharmaceuticals Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the Company, into
Manhattan Pharmaceuticals, Inc., a Delaware corporation. Notwithstanding
anything to the contrary contained in this Agreement, if Executive breaches any
obligation contained in Section 5 or 6 of this Agreement, then in addition to
any other remedies the Company may have in the event Executive breaches this
Agreement, the Company's obligation under this Section 4(e) to continue paying
Executive severance pay will cease and Executive's rights thereto will terminate
and be forfeited.
4. Section 8(n) of the Employment Agreement is hereby amended by
inserting between the third sentence thereof (which ends "any such Competing
Business") and the fourth sentence thereof (which begins "The rights and
remedies of the parties hereto") the following:
If the Company fails to timely pay any amount that it is required to pay
Executive under this Agreement, then all such amounts will become immediately
due. The Company shall reimburse Executive any reasonable costs, including
reasonable attorneys' fees and disbursements, incurred by Executive in enforcing
the Company's obligation to pay any amount that it is required to pay Executive
under this Agreement.
5. This agreement will immediately become ineffective if the merger of
MPAC into Manhattan has not occurred by midnight at the end of February 22,
2003.
6. This amendment is governed by the laws of the State of New York,
without regard to the principles of conflicts of laws thereof.
- 2 -
The Company and Executive are entering into this amendment on the date
stated in the introductory clause.
ATLANTIC TECHNOLOGY VENTURES, INC.
By: /s/ Nicholas J. Rossettos
--------------------------------
Name: Nicholas J. Rossettos
Title: Chief Financial Officer
/s/ Frederic P. Zotos
----------------------------------------
FREDERIC P. ZOTOS
- 3 -
Exhibit 10.2
THIRD AMENDMENT
TO
EMPLOYMENT AGREEMENT
This amendment is dated February 21, 2003, and is between ATLANTIC
TECHNOLOGY VENTURES, INC., a Delaware corporation (the "COMPANY"), and A. JOSEPH
RUDICK, an individual ("EXECUTIVE").
The Company and Executive are party to an employment agreement dated
April 10, 2000, as amended by a first amendment dated February 20, 2001, and a
second amendment dated April 1, 2002 (the "EMPLOYMENT AGREEMENT"). Under Section
7.1(h) of the merger agreement between the Company, Manhattan Pharmaceuticals
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
Company ("MPAC"), and Manhattan Pharmaceuticals, Inc., a Delaware corporation
("MANHATTAN"), the Company is required to amend the Employment Agreement. The
Company and Executive desire to amend the Employment Agreement.
The Company and Executive therefor agree as follows:
1. Section 3(a) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(a) BASE SALARY. The Company shall pay to Executive a base salary at
the annual rate of $75,000 (the "BASE SALARY"), payable in equal installments
consistent with the Company's payroll practices, except that commencing April 1,
2002, Executive shall defer and accrue a portion of the Base Salary at the
annual rate of $25,000, deferrable and accruable in equal installments
consistent with the Company's payroll practices (the aggregate amount of the
Base Salary so deferred and accrued, the "DEFERRED BASE SALARY"). As of February
21, 2003, the Deferred Base Salary equaled $22,397.
2. Section 3(c) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(c) BONUS. The Company shall pay to Executive an annual bonus in an
amount to be determined by Compensation Committee of the Company's board of
directors in its discretion but in no event less than $15,000 (the "BONUS"). In
addition, Executive shall be entitled to participate in any bonus or other
incentive programs established by the Company. The Company acknowledges that
Executive is entitled to a Bonus for 2002 in the amount of $15,000 and that that
Bonus has not yet been paid.
3. Section 4(e) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(e) TERMINATION BY COMPANY FOR ANY OTHER REASON. If Executive's
employment under this Agreement is terminated by the Company during the Term for
any reason other than as provided in Section 4(b), 4(c), or 4(d) of this
Agreement, then the Company shall pay Executive, no later than the end of the
month in which the date of termination occurs, the Base Salary through the date
of termination (less any Deferred Base Salary). If Executive is so terminated
the Company shall also pay Executive the following: (1) in lieu of any further
compensation and benefits for the balance of the Term, severance pay equal to
the Base Salary that Executive would have otherwise received (without deferral
of any portion of the Base Salary) during the period beginning on the date of
termination and ending six months from the date of termination, which severance
pay the Company shall pay Executive at the times and in the amounts that the
Company would have paid the Base Salary during that six-month period; and (2) an
amount equal to the Deferred Base Salary plus any Bonus due Executive under
Section 3(c), one-half of that amount payable at such time as the Company
receives $3 million of aggregate cash funds from financings and other sources on
or after the Effective Time and one-half at such time that the Company receives
$6 million of such aggregate cash funds. Time is of the essence with respect to
any payments that the Company is required to make to Executive under this
Section 4(e). For purposes of this Section 4(e), "Effective Time" means the
effective time of the merger of Manhattan Pharmaceuticals Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the Company, into
Manhattan Pharmaceuticals, Inc., a Delaware corporation. Notwithstanding
anything to the contrary contained in this Agreement, if Executive breaches any
obligation contained in Section 5 or 6 of this Agreement, then in addition to
any other remedies the Company may have in the event Executive breaches this
Agreement, the Company's obligation under this Section 4(e) to continue paying
Executive severance pay will cease and Executive's rights thereto will terminate
and be forfeited.
4. Section 8(n) of the Employment Agreement is hereby amended by
inserting between the third sentence thereof (which ends "any such Competing
Business") and the fourth sentence thereof (which begins "The rights and
remedies of the parties hereto") the following:
If the Company fails to timely pay any amount that it is required to pay
Executive under this Agreement, then all such amounts will become immediately
due. The Company shall reimburse Executive any reasonable costs, including
reasonable attorneys' fees and disbursements, incurred by Executive in enforcing
the Company's obligation to pay any amount that it is required to pay Executive
under this Agreement.
5. This agreement will immediately become ineffective if the merger of
MPAC into Manhattan has not occurred by midnight at the end of February 22,
2003.
6. This amendment is governed by the laws of the State of New York,
without regard to the principles of conflicts of laws thereof.
- 2 -
The Company and Executive are entering into this amendment on the date
stated in the introductory clause.
ATLANTIC TECHNOLOGY VENTURES, INC.
By: /s/ Frederic P. Zotos
----------------------------------
Name: Frederic P. Zotos
Title: Chief Executive Officer
/s/ A. Joseph Rudick
------------------------------------------
A. JOSEPH RUDICK
- 3 -
Exhibit 10.3
SECOND AMENDMENT
TO
EMPLOYMENT AGREEMENT
This amendment is dated February 21, 2003, and is between ATLANTIC
TECHNOLOGY VENTURES, INC., a Delaware corporation (the "COMPANY"), and NICHOLAS
ROSSETTOS, an individual ("EMPLOYEE").
The Company and Employee are party to an employment agreement dated
April 10, 2000, as amended by a first amendment dated April 1, 2002 (the
"EMPLOYMENT AGREEMENT"). Under Section 7.1(h) of the merger agreement between
the Company, Manhattan Pharmaceuticals Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of the Company ("MPAC"), and Manhattan
Pharmaceuticals, Inc., a Delaware corporation ("MANHATTAN"), the Company is
required to amend the Employment Agreement. The Company and Employee desire to
amend the Employment Agreement.
The Company and Employee therefor agree as follows:
1. Section 3(a) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(a) BASE SALARY. The Company shall pay to Employee a base salary at
the annual rate of $125,000 (the "BASE SALARY"), payable in equal installments
consistent with the Company's payroll practices, except that commencing April 1,
2002, Employee shall defer and accrue a portion of the Base Salary at the annual
rate of $25,000, deferrable and accruable in equal installments consistent with
the Company's payroll practices (the aggregate amount of the Base Salary so
deferred and accrued, the "DEFERRED BASE SALARY"). As of February 21, 2003, the
Deferred Base Salary equaled $22,397.
2. Section 3(c) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(c) BONUS. The Company shall pay to Employee an annual bonus in an
amount to be determined by Compensation Committee of the Company's board of
directors in its discretion but in no event less than $25,000 (the "BONUS"). In
addition, Employee shall be entitled to participate in any bonus or other
incentive programs established by the Company. The Company acknowledges that
Employee is entitled to a Bonus for 2002 in the amount of $25,000 and that that
Bonus has not yet been paid.
3. Section 4(e) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(e) TERMINATION BY COMPANY FOR ANY OTHER REASON. If Employee's
employment under this Agreement is terminated by the Company during the Term for
any reason other than as provided in Section 4(b), 4(c), or 4(d) of this
Agreement, then the Company shall pay Employee, no later than the end of the
month in which the date of termination occurs, the Base Salary through the date
of termination (less any Deferred Base Salary). If Employee is so terminated the
Company shall also pay Employee the following: (1) in lieu of any further
compensation and benefits for the balance of the Term, severance pay equal to
the Base Salary that Employee would have otherwise received (without deferral of
any portion of the Base Salary) during the period beginning on the date of
termination and ending three months from the date of termination, which
severance pay the Company shall pay Employee at the times and in the amounts
that the Company would have paid the Base Salary during that three-month period;
and (2) an amount equal to the Deferred Base Salary plus any Bonus due Employee
under Section 3(c), one-half of that amount payable at such time as the Company
receives $3 million of aggregate cash funds from financings and other sources on
or after the Effective Time and one-half at such time that the Company receives
$6 million of such aggregate cash funds. Time is of the essence with respect to
any payments that the Company is required to make to Employee under this Section
4(e). For purposes of this Section 4(e), "Effective Time" means the effective
time of the merger of Manhattan Pharmaceuticals Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company, into Manhattan
Pharmaceuticals, Inc., a Delaware corporation. Notwithstanding anything to the
contrary contained in this Agreement, if Employee breaches any obligation
contained in Section 5 or 6 of this Agreement, then in addition to any other
remedies the Company may have in the event Employee breaches this Agreement, the
Company's obligation under this Section 4(e) to continue paying Employee
severance pay will cease and Employee's rights thereto will terminate and be
forfeited.
4. Section 8(n) of the Employment Agreement is hereby amended by
inserting between the third sentence thereof (which ends "any such Competing
Business") and the fourth sentence thereof (which begins "The rights and
remedies of the parties hereto") the following:
If the Company fails to timely pay any amount that it is required to pay
Employee under this Agreement, then all such amounts will become immediately
due. The Company shall reimburse Employee any reasonable costs, including
reasonable attorneys' fees and disbursements, incurred by Employee in enforcing
the Company's obligation to pay any amount that it is required to pay Employee
under this Agreement.
5. This agreement will immediately become ineffective if the merger of
MPAC into Manhattan has not occurred by midnight at the end of February 22,
2003.
6. This amendment is governed by the laws of the State of New York,
without regard to the principles of conflicts of laws thereof.
- 2 -
The Company and Employee are entering into this amendment on the date
stated in the introductory clause.
ATLANTIC TECHNOLOGY VENTURES, INC.
By: /s/ Frederic P. Zotos
-----------------------------------
Name: Frederic P. Zotos
Title: Chief Executive Officer
/s/ Nicholas Rossettos
---------------------------------------------
NICHOLAS ROSSETTOS
- 3 -
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
AGREEMENT (the "AGREEMENT"), dated as of January 2, 2003, by
and between MANHATTAN PHARMACEUTICALS, INC., a Delaware corporation with
principal executive offices at 787 Seventh Avenue, 48th Floor, New York, NY
10019 (the "COMPANY"), and DR. LEONARD FIRESTONE, residing at Backbone Road,
Sewickley Heights, PA 15143-0408 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive as
President and Chief Executive Officer of the Company, and the Executive desires
to serve the Company in those capacities, upon the terms and subject to the
conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Employment.
(a) Services. The Executive will be employed by the Company
as its President and Chief Executive Officer. You will report to the Board of
Directors of the Company (the "Board") and shall perform such duties as are
consistent with your position as President and Chief Executive Officer (the
"Services"). The Executive agree to perform such duties faithfully, to devote
all your working time, attention and energies to the business of the Company,
and while you remain employed, not to engage in any other business activity that
is in conflict with your duties and obligations to the Company. Upon approving
this Agreement, the Board of Directors shall elect you to serve as a Director on
the Board of Directors. The principal place of performance of your services
hereunder shall be at the principal offices of the Company or such other place
as the Board may reasonably designate.
(b) Acceptance. Executive hereby accepts such employment
and agrees to render the Services.
2. Term.
The Executive's employment under this Agreement (the "Term")
shall commence as of the Effective Date (as hereinafter defined) and shall
continue for a term of one (1) year, unless sooner terminated pursuant to
Section 9 of this Agreement. Notwithstanding anything to the contrary contained
herein, the provisions of this Agreement governing protection of Confidential
Information shall continue in effect as specified in Section 6 hereof and
survive the expiration or termination hereof. The Term may be extended for
additional one (1) year periods upon mutual written consent of the Executive and
the Board.
3. Best Efforts; Place of Performance.
(a) The Executive shall devote substantially all of
his business time, attention and energies to the business and affairs of the
Company and shall use his best efforts to advance the best interests of the
Company and shall not during the Term be actively engaged in any other business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage, that will interfere with the performance by the
Executive of his duties hereunder or the Executive's availability to perform
such duties or that will adversely affect, or negatively reflect upon, the
Company.
(b) The duties to be performed by the Executive
hereunder shall be performed primarily at the office of the Company in New York,
New York, subject to reasonable travel requirements on behalf of the Company.
4. Directorship. The Company shall use its best efforts to
cause the Executive to be elected as a member of its Board of Directors
throughout the Term and shall include him in the management slate for election
as a director at every stockholders meeting during the Term at which his term as
a director would otherwise expire. The Executive agrees to accept election, and
to serve during the Term, as director of the Company, without any compensation
therefor other than as specified in this Agreement.
5. Compensation. As full compensation for the performance by
the Executive of his duties under this Agreement, the Company shall pay the
Executive as follows:
(a) Base Salary. The Company shall pay Executive a salary
(the "Base Salary") equal to Two Hundred Fifty Thousand Dollars ($250,000.00)
per year. Payment shall be made semi-monthly, on the last day of each calendar
month.
(b) Discretionary Bonus. At the sole discretion of the
Board of Directors of the Company, the Executive shall receive an additional
annual bonus (the "DISCRETIONARY BONUS") in an amount equal to up to 100% of his
Base Salary, based upon his performance on behalf of the Company during the
prior year. The Discretionary Bonus shall be payable either as a lump-sum
payment or in installments as determined by the Board of Directors of the
Company in its sole discretion. In addition, the Board of Directors of the
Company shall annually review the Bonus to determine whether an increase in the
amount thereof is warranted.
(c) Incentive Bonus. The Company shall pay the Executive a
periodic milestone based incentive bonuses (each an "INCENTIVE BONUS") as
follows:
(i) $50,000 upon the filing of an Investigational New
Drug Application (IND) with the United States Food and Drug Administration;
(ii) $25,000 within 10 days of the date on which the
Company has received an aggregate of $5,000,000 through financing or otherwise;
(iii) $25,000 within 10 days of the date on which the
Company has received an aggregate of $10,000,000 through financing or otherwise;
and
(iv) $50,000 upon the successful completion of a Phase I
clinical trial of oleoyl-estrone.
(d) Withholding. The Company shall withhold all applicable
federal, state and local taxes and social security and such other amounts as may
be required by law from all amounts payable to the Executive under this Section
5.
(e) Stock Options. The Company has executed an Agreement and
Plan of Merger with Atlantic Technology Ventures, Inc. ("Atlantic"), a publicly
traded company (the "Merger"), following which Merger Manhattan stockholders
will own 80% of the outstanding common stock of Atlantic. Promptly after the
date of the Merger, and as additional compensation for the services to be
rendered by the Executive pursuant to this Agreement, the Company shall grant
the Executive stock options ("STOCK OPTIONS") to purchase a number of shares of
Common Stock of the Company representing 2.5% of the outstanding Common Stock of
the Company immediately following the Merger. The stock options shall vest
following the first anniversary of this Agreement, subject, in each case, to the
provisions of Section 10 below. In connection with such grant, the Executive
shall enter into the Company's standard stock option agreement which will
incorporate the foregoing vesting schedule and the Stock Option related
provisions contained in Section 10 below. The Board of Directors of the Company
shall annually review the number of Stock Options granted to the Executive to
determine whether an increase in the number thereof is warranted. In the event
that the Merger is terminated, then you shall be issued Stock Options to
purchase 2.5% of the Company following the date of termination.
(f) Expenses. The Company shall reimburse the Executive for
all normal, usual and necessary expenses incurred by the Executive in
furtherance of the business and affairs of the Company, including reasonable
travel and entertainment, upon timely receipt by the Company of appropriate
vouchers or other proof of the Executive's expenditures and otherwise in
accordance with any expense reimbursement policy as may from time to time be
adopted by the Company.
(g) Other Benefits. The Executive shall be entitled to all
rights and benefits for which he shall be eligible under any benefit or other
plans (including, without limitation, dental, medical, medical reimbursement and
hospital plans, pension plans, employee stock purchase plans, profit sharing
plans, bonus plans and other so-called "fringe" benefits) as the Company shall
make available to its senior executives from time to time. In addition, the
Company shall reimburse the Executives for his reasonable medical licensing fees
and other professional dues.
(h) Vacation. The Executive shall, during the Term, be
entitled to a vacation of four (4) weeks per annum, in addition to holidays
observed by the Company. The Executive shall not be entitled to carry any
vacation forward to the next year of employment and shall not receive any
compensation for unused vacation days.
6. Confidential Information and Inventions.
(a) The Executive recognizes and acknowledges that in the
course of his duties he is likely to receive confidential or proprietary
information owned by the Company, its affiliates or third parties with whom the
Company or any such affiliates has an obligation of confidentiality.
Accordingly, during and after the Term, the Executive agrees to keep
confidential and not disclose or make accessible to any other person or use for
any other purpose other than in connection with the fulfillment of his duties
under this Agreement, any Confidential and Proprietary Information (as defined
below) owned by, or received by or on behalf of, the Company or any of its
affiliates. "Confidential and Proprietary Information" shall include, but shall
not be limited to, confidential or proprietary scientific or technical
information, data, formulas and related concepts, business plans (both current
and under development), client lists, promotion and marketing programs, trade
secrets, or any other confidential or proprietary business information relating
to development programs, costs, revenues, marketing, investments, sales
activities, promotions, credit and financial data, manufacturing processes,
financing methods, plans or the business and affairs of the Company or of any
affiliate or client of the Company. The Executive expressly acknowledges the
trade secret status of the Confidential and Proprietary Information and that the
Confidential and Proprietary Information constitutes a protectable business
interest of the Company. The Executive agrees: (i) not to use any such
Confidential and Proprietary Information for himself or others; and (ii) not to
take any Company material or reproductions (including but not limited to
writings, correspondence, notes, drafts, records, invoices, technical and
business policies, computer programs or disks) thereof from the Company's
offices at any time during his employment by the Company, except as required in
the execution of the Executive's duties to the Company. The Executive agrees to
return immediately all Company material and reproductions (including but not
limited, to writings, correspondence, notes, drafts, records, invoices,
technical and business policies, computer programs or disks) thereof in his
possession to the Company upon request and in any event immediately upon
termination of employment.
(b) Except with prior written authorization by the Company,
the Executive agrees not to disclose or publish any of the Confidential and
Proprietary Information, or any confidential, scientific, technical or business
information of any other party to whom the Company or any of its affiliates owes
an obligation of confidence, at any time during or after his employment with the
Company.
(c) The Executive agrees that all inventions, discoveries,
improvements and patentable or copyrightable works ("INVENTIONS") initiated,
conceived or made by him, either alone or in conjunction with others, during the
Term shall be the sole property of the Company to the maximum extent permitted
by applicable law and, to the extent permitted by law, shall be "works made for
hire" as that term is defined in the United States Copyright Act (17 U.S.C.A.,
Section 101). The Company shall be the sole owner of all patents, copyrights,
trade secret rights, and other intellectual property or other rights in
connection therewith. The Executive hereby assigns to the Company all right,
title and interest he may have or acquire in all such Inventions; provided,
however, that the Board of Directors of the Company may in its sole discretion
agree to waive the Company's rights pursuant to this Section 6(c) with respect
to any Invention that is not directly or indirectly related to the Company's
business. The Executive further agrees to assist the Company in every proper way
(but at the Company's expense) to obtain and from time to time enforce patents,
copyrights or other rights on such Inventions in any and all countries, and to
that end the Executive will execute all documents necessary:
(i) to apply for, obtain and vest in the name of the
Company alone (unless the Company otherwise directs) letters patent, copyrights
or other analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of
such applications and any opposition proceedings or petitions or applications
for revocation of such letters patent, copyright or other analogous protection.
(d) The Executive acknowledges that while performing the
services under this Agreement the Executive may locate, identify and/or evaluate
patented or patentable inventions having commercial potential in the fields of
pharmacy, pharmaceutical, biotechnology, healthcare, technology and other fields
which may be of potential interest to the Company or one of its affiliates (the
"THIRD PARTY INVENTIONS"). The Executive understands, acknowledges and agrees
that all rights to, interests in or opportunities regarding, all Third-Party
Inventions identified by the Company, any of its affiliates or either of the
foregoing persons' officers, directors, employees (including the Executive),
agents or consultants during the Employment Term shall be and remain the sole
and exclusive property of the Company or such affiliate and the Executive shall
have no rights whatsoever to such Third-Party Inventions and will not pursue for
himself or for others any transaction relating to the Third-Party Inventions
which is not on behalf of the Company.
(e) The provisions of this Section 6 shall survive any
termination of this Agreement.
7. Non-Competition, Non-Solicitation and Non-Disparagement.
(a) The Executive understands and recognizes that his services
to the Company are special and unique and that in the course of performing such
services the Executive will have access to and knowledge of Confidential and
Proprietary Information (as defined in Section 6) and the Executive agrees that,
during the Term and for a period of eighteen (18) months thereafter, he shall
not in any manner, directly or indirectly, on behalf of himself or any person,
firm, partnership, joint venture, corporation or other business entity
("PERSON"), enter into or engage in any business which is engaged in any
business directly or indirectly competitive with the business of the Company,
either as an individual for his own account, or as a partner, joint venturer,
owner, executive, employee, independent contractor, principal, agent,
consultant, salesperson, officer, director or shareholder of a Person in a
business competitive with the Company within the geographic area of the
Company's business, which is deemed by the parties hereto to be worldwide. The
Executive acknowledges that, due to the unique nature of the Company's business,
the loss of any of its clients or business flow or the improper use of its
Confidential and Proprietary Information could create significant instability
and cause substantial damage to the Company and its affiliates and therefore the
Company has a strong legitimate business interest in protecting the continuity
of its business interests and the restriction herein agreed to by the Executive
narrowly and fairly serves such an important and critical business interest of
the Company. For purposes of this Agreement, the Company shall be deemed to be
actively engaged on the date hereof in the development of novel application drug
delivery systems for presently marketed prescription and over-the-counter drugs
and providing consulting services in connection therewith, and in the future in
any other business in which it actually devotes substantive resources to study,
develop or pursue. Notwithstanding the foregoing, nothing contained in this
Section 7(a) shall be deemed to prohibit the Executive from (i) acquiring or
holding, solely for investment, publicly traded securities of any corporation,
some or all of the activities of which are competitive with the business of the
Company so long as such securities do not, in the aggregate, constitute more
than three percent (3%) of any class or series of outstanding securities of such
corporation.
(b) During the Term and for a period of 18 months thereafter,
the Executive shall not, directly or indirectly, without the prior written
consent of the Company:
(i) solicit or induce any employee of the Company or any
of its affiliates to leave the employ of the Company or any such affiliate; or
hire for any purpose any employee of the Company or any affiliate or any
employee who has left the employment of the Company or any affiliate within one
year of the termination of such employee's employment with the Company or any
such affiliate or at any time in violation of such employee's non-competition
agreement with the Company or any such affiliate; or
(ii) solicit or accept employment or be retained by any
Person who, at any time during the term of this Agreement, was an agent, client
or customer of the Company or any of its affiliates where his position will be
related to the business of the Company or any such affiliate; or (iii) solicit
or accept the business of any agent, client or customer of the Company or any of
its affiliates with respect to products, services or investments similar to
those provided or supplied by the Company or any of its affiliates.
(c) The Company and the Executive each agree that both during
the Term and at all times thereafter, neither party shall directly or indirectly
disparage, whether or not true, the name or reputation of the other party or any
of its affiliates, including but not limited to, any officer, director, employee
or shareholder of the Company or any of its affiliates.
(d) In the event that the Executive breaches any provisions of
Section 6 or this Section 7 or there is a threatened breach, then, in addition
to any other rights which the Company may have, the Company shall (i) be
entitled, without the posting of a bond or other security, to injunctive relief
to enforce the restrictions contained in such Sections and (ii) have the right
to require the Executive to account for and pay over to the Company all
compensation, profits, monies, accruals, increments and other benefits
(collectively "BENEFITS") derived or received by the Executive as a result of
any transaction constituting a breach of any of the provisions of Sections 6 or
7 and the Executive hereby agrees to account for and pay over such Benefits to
the Company.
(e) Each of the rights and remedies enumerated in Section 7(d)
shall be independent of the others and shall be in addition to and not in lieu
of any other rights and remedies available to the Company at law or in equity.
If any of the covenants contained in this Section 7, or any part of any of them,
is hereafter construed or adjudicated to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants or rights or
remedies which shall be given full effect without regard to the invalid
portions. If any of the covenants contained in this Section 7 is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form such provision shall then be enforceable. No such holding of
invalidity or unenforceability in one jurisdiction shall bar or in any way
affect the Company's right to the relief provided in this Section 7 or otherwise
in the courts of any other state or jurisdiction within the geographical scope
of such covenants as to breaches of such covenants in such other respective
states or jurisdictions, such covenants being, for this purpose, severable into
diverse and independent covenants.
(f) In the event that an actual proceeding is brought in
equity to enforce the provisions of Section 6 or this Section 7, the Executive
shall not urge as a defense that there is an adequate remedy at law nor shall
the Company be prevented from seeking any other remedies which may be available.
The Executive agrees that he shall not raise in any proceeding brought to
enforce the provisions of Section 6 or this Section 7 that the covenants
contained in such Sections limit his ability to earn a living.
(g) The provisions of this Section 7 shall survive any
termination of this Agreement.
8. Representations and Warranties by the Executive.
The Executive hereby represents and warrants to the Company as
follows:
(i) Neither the execution or delivery of this Agreement nor the performance by
the Executive of his duties and other obligations hereunder violate or will
violate any statute, law, determination or award, or conflict with or constitute
a default or breach of any covenant or obligation under (whether immediately,
upon the giving of notice or lapse of time or both) any prior employment
agreement, contract, or other instrument to which the Executive is a party or by
which he is bound.
(ii) The Executive has the full right, power and
legal capacity to enter and deliver this Agreement and to perform his duties and
other obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of the Executive enforceable against him in accordance with
its terms. No approvals or consents of any persons or entities are required for
the Executive to execute and deliver this Agreement or perform his duties and
other obligations hereunder.
9. Termination. The Executive's employment hereunder shall be
terminated upon the Executive's death and may be terminated as follows:
(a) The Executive's employment hereunder may be terminated by
the Board of Directors of the Company for Cause. Any of the following actions by
the Executive shall constitute "CAUSE":
(i) The willful failure, disregard or refusal by the
Executive to perform his duties hereunder;
(ii) Any willful, intentional or grossly negligent act by
the Executive having the effect of injuring, in a material way (whether
financial or otherwise and as determined in good-faith by a majority of the
Board of Directors of the Company), the business or reputation of the Company or
any of its affiliates, including but not limited to, any officer, director,
executive or shareholder of the Company or any of its affiliates;
(iii) Willful misconduct by the Executive in respect of
the duties or obligations of the Executive under this Agreement, including,
without limitation, insubordination with respect to directions received by the
Executive from the Board of Directors of the Company;
(iv) The Executive's indictment of any felony or a
misdemeanor involving moral turpitude (including entry of a nolo contendere
plea);
(v) The determination by the Company, after a reasonable
and good-faith investigation by the Company following a written allegation by
another employee of the Company, that the Executive engaged in some form of
harassment prohibited by law (including, without limitation, age, sex or race
discrimination), unless the Executive's actions were specifically directed by
the Board of Directors of the Company;
(vi) Any misappropriation or embezzlement of the property
of the Company or its affiliates (whether or not a misdemeanor or felony);
(vii) Breach by the Executive of any of the provisions
of Sections 6, 7 or 8 of this Agreement; and (viii) Breach by the Executive of
any provision of this Agreement other than those contained in Sections 6, 7 or 8
which is not cured by the Executive within thirty (30) days after notice thereof
is given to the Executive by the Company.
(b) The Executive's employment hereunder may be terminated by
the Board of Directors of the Company due to the Executive's Disability. For
purposes of this Agreement, a termination for "DISABILITY" shall occur (i) when
the Board of Directors of the Company has provided a written termination notice
to the Executive supported by a written statement from a reputable independent
physician to the effect that the Executive shall have become so physically or
mentally incapacitated as to be unable to resume, within the ensuing twelve (12)
months, his employment hereunder by reason of physical or mental illness or
injury, or (ii) upon rendering of a written termination notice by the Board of
Directors of the Company after the Executive has been unable to substantially
perform his duties hereunder for 90 or more consecutive days, or more than 120
days in any consecutive twelve month period, by reason of any physical or mental
illness or injury. For purposes of this Section 9(b), the Executive agrees to
make himself available and to cooperate in any reasonable examination by a
reputable independent physician retained by the Company.
(c) The Executive's employment hereunder may be terminated by
the Board of Directors of the Company (or its successor) upon the occurrence of
a Change of Control. For purposes of this Agreement, "CHANGE OF CONTROL" means
(i) the acquisition, directly or indirectly, following the date hereof by any
person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), in one transaction or a series of related
transactions, of securities of the Company representing in excess of fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding securities if such person or his or its affiliate(s) do not own in
excess of 50% of such voting power on the date of this Agreement, or (ii) the
future disposition by the Company (whether direct or indirect, by sale of assets
or stock, merger, consolidation or otherwise) of all or substantially all of its
business and/or assets in one transaction or series of related transactions
(other than a merger effected exclusively for the purpose of changing the
domicile of the Company).
(d) The Executive's employment hereunder may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean any of the following: (i) the assignment to the Executive of duties
inconsistent with the Executive's position, duties, responsibilities, titles or
offices as described herein; (ii) any material reduction by the Corporation of
the Executive's duties and responsibilities; or (iii) any reduction by the
Corporation of the Executive's compensation or benefits payable hereunder (it
being understood that a reduction of benefits applicable to all employees of the
Corporation, including the Executive, shall not be deemed a reduction of the
Executive's compensation package for purposes of this definition).
10. Compensation upon Termination.
(a) If the Executive's employment is terminated as a result of
his death or Disability, the Company shall pay to the Executive or to the
Executive's estate, as applicable, (x) his Base Salary and any accrued and any
unpaid Bonus and expense reimbursement amounts through the date of his Death or
Disability. All Stock Options that are scheduled to vest by the end of the
calendar year in which such termination occurs shall be accelerated and deemed
to have vested as of the termination date. All Stock Options that have not
vested (or been deemed pursuant to the immediately preceding sentence to have
vested) as of the date of termination shall be deemed to have expired as of such
date. Any Stock Options that have vested as of the date of the Executive's death
or Disability (including the Options described in the immediately preceding
sentence).
(b) If the Executive's employment is terminated by the Board
of Directors of the Company for Cause, then the Company shall pay to the
Executive his Base Salary through the date of his termination and the Executive
shall have no further entitlement to any other compensation or benefits from the
Company. All Stock Options that are scheduled to vest by the end of the calendar
year in which such Change of Control occurs shall be accelerated and deemed to
have vested as of the termination date. All Stock Options that have not vested
(or been deemed pursuant to the immediately preceding sentence to have vested)
as of the date of termination shall be deemed to have expired as of such date.
(c) If the Executive's employment is terminated by the Company
(or its successor) upon the occurrence of a Change of Control, the Company (or
its successor, as applicable) shall continue to pay to the Executive his Base
Salary and benefits for a period of one year following such termination. All
Stock Options that have not vested as of the date of such termination shall be
accelerated and deemed to have vested as of such date.
(d) If the Executive's employment is terminated by the Company
other than as a result of the Executive's death or Disability and other than for
reasons specified in Sections 10(b) or (c), then the Company shall continue to
pay to the Executive his Base Salary for a period of one year following such
termination, and (ii) pay the Executive any expense reimbursement amounts owed
through the date of termination. The Company's obligation under clauses (i) and
(ii) in the preceding sentence shall be subject to offset by any amounts
otherwise received by the Executive from any employment during the one year
period following the termination of his employment. All Stock Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. All Stock Options that have not vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as of the date of termination
shall be deemed to have expired as of such date.
(e) This Section 10 sets forth the only obligations of the
Company with respect to the termination of the Executive's employment with the
Company, and the Executive acknowledges that, upon the termination of his
employment, he shall not be entitled to any payments or benefits which are not
explicitly provided in Section 10.
(f) Upon termination of the Executive's employment hereunder
for any reason, the Executive shall be deemed to have resigned as director of
the Company, effective as of the date of such termination.
(g) The provisions of this Section 10 shall survive any
termination of this Agreement.
11. Miscellaneous.
(a) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
giving effect to its principles of conflicts of laws.
(b) Any dispute arising out of, or relating to, this Agreement
or the breach thereof (other than Sections 6 or 7 hereof), or regarding the
interpretation thereof, shall be finally settled by arbitration conducted in New
York City in accordance with the rules of the American Arbitration Association
then in effect before a single arbitrator appointed in accordance with such
rules. Judgment upon any award rendered therein may be entered and enforcement
obtained thereon in any court having jurisdiction. The arbitrator shall have
authority to grant any form of appropriate relief, whether legal or equitable in
nature, including specific performance. For the purpose of any judicial
proceeding to enforce such award or incidental to such arbitration or to compel
arbitration and for purposes of Sections 6 and 7 hereof, the parties hereby
submit to the non-exclusive jurisdiction of the Supreme Court of the State of
New York, New York County, or the United States District Court for the Southern
District of New York, and agree that service of process in such arbitration or
court proceedings shall be satisfactorily made upon it if sent by registered
mail addressed to it at the address referred to in paragraph (g) below. The
costs of such arbitration shall be borne proportionate to the finding of fault
as determined by the arbitrator. Judgment on the arbitration award may be
entered by any court of competent jurisdiction.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns.
(d) This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder in connection with any sale,
transfer or other disposition of all or substantially all of its business or
assets.
(e) This Agreement cannot be amended orally, or by any course
of conduct or dealing, but only by a written agreement signed by the parties
hereto.
(f) The failure of either party to insist upon the strict
performance of any of the terms, conditions and provisions of this Agreement
shall not be construed as a waiver or relinquishment of future compliance
therewith, and such terms, conditions and provisions shall remain in full force
and effect. No waiver of any term or condition of this Agreement on the part of
either party shall be effective for any purpose whatsoever unless such waiver is
in writing and signed by such party.
(g) All notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing and shall be
delivered personally or by an overnight courier service or sent by registered or
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses set forth on the first page of this Agreement, and shall be deemed
given when so delivered personally or by overnight courier, or, if mailed, five
days after the date of deposit in the United States mails. Either party may
designate another address, for receipt of notices hereunder by giving notice to
the other party in accordance with this paragraph (g).
(h) This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or liable for any alleged representation,
promise or inducement not so set forth.
(i) As used in this Agreement, "affiliate" of a specified
Person shall mean and include any Person controlling, controlled by or under
common control with the specified Person.
(j) The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
(k) This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MANHATTAN PHARMACEUTICALS, INC.
By: /s/ David M. Tanen
------------------------------
Name: David M. Tanen
Title: President
EXECUTIVE
By: /s/ Dr. Leonard Firestone
-------------------------
Name: Dr. Leonard Firestone
Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT (the "AGREEMENT"), dated as of February 28, 2003, by
and between MANHATTAN PHARMACEUTICALS, INC., a Delaware corporation with
principal executive offices at 787 Seventh Avenue, 48th Floor, New York, NY
10019 (the "COMPANY"), and Nicholas J. Rossettos, residing at 449 West 56th
Street, Apt. 7D, New York, New York (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive as Chief
Financial Officer and Chief Operating Officer of the Company, and the Executive
desires to serve the Company in those capacities, upon the terms and subject to
the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. (a) SERVICES. The Executive will be employed by
the Company as its Chief Financial Officer and Chief Operating Officer. You will
report to the Board of Directors of the Company (the "Board") with primary
direction being given by the Company's Chief Executive Officer. You agree to
perform such services as are consistent with your position as Chief Financial
Officer and Chief Operating Officer (the "Services"). The Executive agree to
perform such Services faithfully, to devote all his working time, attention and
energies to the business of the Company, and while he remains employed, not to
engage in any other business activity that is in conflict with his duties and
obligations to the Company. The Executive also agrees that during the term of
this Agreement, the Board, at his sole discretion, may appoint another
individual to the role of Chief Operations Officer, at which time the Executive
will continue being employed by the Company solely as its Chief Financial
Officer, without change in compensation or term of the Agreement.
(b) ACCEPTANCE. Executive hereby accepts such employment and
agrees to render the Services.
2. TERM. (a) The Executive's employment under this Agreement
(the "Term") shall commence as of the Effective Date (as hereinafter defined)
and shall continue for a term of two (2) years, unless sooner terminated
pursuant to Section 9 of this Agreement. Notwithstanding anything to the
contrary contained herein, the provisions of this Agreement governing protection
of Confidential Information shall continue in effect as specified in Section 5
hereof and survive the expiration or termination hereof. The Term may be
extended for additional one (1) year periods upon mutual written consent of the
Executive and the Board.
(b) This Agreement shall be conditioned in its entirety upon
the successful completion of the merger transaction (the "Merger") contemplated
by and among the Company and Atlantic Technology Ventures, Inc. The Effective
Date for the purposes of Section 2. (a) shall be February 21, 2003, the date of
the Merger.
3. BEST EFFORTS; PLACE OF PERFORMANCE. The Executive shall
devote substantially all of his business time, attention and energies to the
business and affairs of the Company and shall use his best efforts to advance
the best interests of the Company and shall not during the Term be actively
engaged in any other business activity, whether or not such business activity is
pursued for gain, profit or other pecuniary advantage, that will interfere with
the performance by the Executive of his duties hereunder or the Executive's
availability to perform such duties or that will adversely affect, or negatively
reflect upon, the Company. The duties to be performed by the Executive hereunder
shall be performed primarily at the office of the Company in New York, New York,
subject to reasonable travel requirements on behalf of the Company.
4. COMPENSATION. As full compensation for the performance by
the Executive of his duties under this Agreement, the Company shall pay the
Executive as follows:
(a) BASE SALARY. The Company shall pay Executive a salary (the
"Base Salary") equal to One Hundred Fifty Thousand Dollars ($150,000.00) per
year. Payment shall be made semi-monthly, on the middle and last day of each
calendar month.
(b) DISCRETIONARY BONUS. At the sole discretion of the Board
of Directors of the Company, the Executive shall be eligible to receive an
additional annual bonus (the "DISCRETIONARY BONUS") based upon his performance
on behalf of the Company during the prior year. The Discretionary Bonus shall be
payable either as a lump-sum payment or in installments as determined by the
Board of Directors of the Company in its sole discretion.
(c) WITHHOLDING. The Company shall withhold all applicable
federal, state and local taxes and social security and such other amounts as may
be required by law from all amounts payable to the Executive under this Section
4.
(d) STOCK OPTIONS. As additional compensation for the services
to be rendered by the Executive pursuant to this Agreement, the Company shall
grant the Executive stock options ("STOCK OPTIONS") to purchase a number of
shares to be determined approximating 1.25 percent of the shares of the
outstanding Common Stock of the Company immediately following the Merger. The
stock options shall vest equally on the first and second anniversary of this
Agreement, subject, in each case, to the provisions of Section 9 below. In
connection with such grant, the Executive shall enter into the Company's
standard stock option agreement which will incorporate the foregoing vesting
schedule and the Stock Option related provisions contained in Section 9 below.
The Board of Directors of the Company shall annually review the number of Stock
Options granted to the Executive to determine whether an increase in the number
thereof is warranted.
(e) EXPENSES. The Company shall reimburse the Executive for
all normal, usual and necessary expenses incurred by the Executive in
furtherance of the business and affairs of the Company, including reasonable
travel and entertainment, upon timely receipt by the Company of appropriate
vouchers or other proof of the Executive's expenditures and otherwise in
accordance with any expense reimbursement policy as may from time to time be
adopted by the Company.
(f) OTHER BENEFITS. The Executive shall be entitled to all
rights and benefits for which he shall be eligible under any benefit or other
plan (including, without limitation, dental, medical, medical reimbursement and
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hospital plans, pension plans, employee stock purchase plans, profit sharing
plans, bonus plans and other so-called "fringe" benefits) as the Company shall
make available to its senior executives from time to time
(g) VACATION. The Executive shall, during the Term, be
entitled to a vacation of four (4) weeks per annum, in addition to holidays
observed by the Company. The Executive shall not be entitled to carry any
vacation forward to the next year of employment and shall not receive any
compensation for unused vacation days.
5. CONFIDENTIAL INFORMATION AND INVENTIONS.
(a) The Executive recognizes and acknowledges that in the
course of his duties he is likely to receive confidential or proprietary
information owned by the Company, its affiliates or third parties with whom the
Company or any such affiliates has an obligation of confidentiality.
Accordingly, during and after the Term, the Executive agrees to keep
confidential and not disclose or make accessible to any other person or use for
any other purpose other than in connection with the fulfillment of his duties
under this Agreement, any Confidential and Proprietary Information (as defined
below) owned by, or received by or on behalf of, the Company or any of its
affiliates. "Confidential and Proprietary Information" shall include, but shall
not be limited to, confidential or proprietary scientific or technical
information, data, formulas and related concepts, business plans (both current
and under development), client lists, promotion and marketing programs, trade
secrets, or any other confidential or proprietary business information relating
to development programs, costs, revenues, marketing, investments, sales
activities, promotions, credit and financial data, manufacturing processes,
financing methods, plans or the business and affairs of the Company or of any
affiliate or client of the Company. The Executive expressly acknowledges the
trade secret status of the Confidential and Proprietary Information and that the
Confidential and Proprietary Information constitutes a protectable business
interest of the Company. The Executive agrees: (i) not to use any such
Confidential and Proprietary Information for himself or others; and (ii) not to
take any Company material or reproductions (including but not limited to
writings, correspondence, notes, drafts, records, invoices, technical and
business policies, computer programs or disks) thereof from the Company's
offices at any time during his employment by the Company, except as required in
the execution of the Executive's duties to the Company. The Executive agrees to
return immediately all Company material and reproductions (including but not
limited, to writings, correspondence, notes, drafts, records, invoices,
technical and business policies, computer programs or disks) thereof in his
possession to the Company upon request and in any event immediately upon
termination of employment.
(b) Except with prior written authorization by the Company,
the Executive agrees not to disclose or publish any of the Confidential and
Proprietary Information, or any confidential, scientific, technical or business
information of any other party to whom the Company or any of its affiliates owes
an obligation of confidence, at any time during or after his employment with the
Company.
(c) The Executive agrees that all inventions, discoveries,
improvements and patentable or copyrightable works ("INVENTIONS") initiated,
conceived or made by him, either alone or in conjunction with others, during the
Term shall be the sole property of the Company to the maximum extent permitted
by applicable law and, to the extent permitted by law, shall be "works made for
hire" as that term is defined in the United States Copyright Act (17 U.S.C.A.,
Section 101). The Company shall be the sole owner of all patents, copyrights,
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trade secret rights, and other intellectual property or other rights in
connection therewith. The Executive hereby assigns to the Company all right,
title and interest he may have or acquire in all such Inventions; provided,
however, that the Board of Directors of the Company may in its sole discretion
agree to waive the Company's rights pursuant to this Section 5(c) with respect
to any Invention that is not directly or indirectly related to the Company's
business. The Executive further agrees to assist the Company in every proper way
(but at the Company's expense) to obtain and from time to time enforce patents,
copyrights or other rights on such Inventions in any and all countries, and to
that end the Executive will execute all documents necessary:
(i) to apply for, obtain and vest in the name of the
Company alone (unless the Company otherwise directs) letters patent, copyrights
or other analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of
such applications and any opposition proceedings or petitions or applications
for revocation of such letters patent, copyright or other analogous protection.
(d) The Executive acknowledges that while performing the
services under this Agreement the Executive may locate, identify and/or evaluate
patented or patentable inventions having commercial potential in the fields of
pharmacy, pharmaceutical, biotechnology, healthcare, technology and other fields
which may be of potential interest to the Company or one of its affiliates (the
"THIRD PARTY INVENTIONS"). The Executive understands, acknowledges and agrees
that all rights to, interests in or opportunities regarding, all Third-Party
Inventions identified by the Company, any of its affiliates or either of the
foregoing persons' officers, directors, employees (including the Executive),
agents or consultants during the Employment Term shall be and remain the sole
and exclusive property of the Company or such affiliate and the Executive shall
have no rights whatsoever to such Third-Party Inventions and will not pursue for
himself or for others any transaction relating to the Third-Party Inventions
which is not on behalf of the Company.
(e) The provisions of this Section 5 shall survive any
termination of this Agreement.
6. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.
(a) The Executive understands and recognizes that his services
to the Company are special and unique and that in the course of performing such
services the Executive will have access to and knowledge of Confidential and
Proprietary Information (as defined in Section 6) and the Executive agrees that,
during the Term and for a period of eighteen (18) months thereafter, he shall
not in any manner, directly or indirectly, on behalf of himself or any person,
firm, partnership, joint venture, corporation or other business entity
("PERSON"), enter into or engage in any business which is engaged in any
business directly or indirectly competitive with the business of the Company,
either as an individual for his own account, or as a partner, joint venturer,
owner, executive, employee, independent contractor, principal, agent,
consultant, salesperson, officer, director or shareholder of a Person in a
business competitive with the Company within the geographic area of the
Company's business, which is deemed by the parties hereto to be worldwide. The
Company acknowledges the need for the Executive to be EMPLOYED IN HIS PROFESSION
AND WILL CONSIDER WHETHER THERE IS A SPECIFIC CONFLICT. The Executive
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acknowledges that, due to the unique nature of the Company's business, the loss
of any of its clients or business flow or the improper use of its Confidential
and Proprietary Information could create significant instability and cause
substantial damage to the Company and its affiliates and therefore the Company
has a strong legitimate business interest in protecting the continuity of its
business interests and the restriction herein agreed to by the Executive
narrowly and fairly serves such an important and critical business interest of
the Company. For purposes of this Agreement, the Company shall be deemed to be
actively engaged on the date hereof in the development of novel application drug
delivery systems for presently marketed prescription and over-the-counter drugs
and providing consulting services in connection therewith, and in the future in
any other business in which it actually devotes substantive resources to study,
develop or pursue. Notwithstanding the foregoing, nothing contained in this
Section 6(a) shall be deemed to prohibit the Executive from (i) acquiring or
holding, solely for investment, publicly traded securities of any corporation,
some or all of the activities of which are competitive with the business of the
Company so long as such securities do not, in the aggregate, constitute more
than three percent (3%) of any class or series of outstanding securities of such
corporation.
(b) During the Term and for a period of 18 months thereafter,
the Executive shall not, directly or indirectly, without the prior written
consent of the Company, which will not be unreasonably withheld:
(i) solicit or induce any employee of the Company or any
of its affiliates to leave the employ of the Company or any such affiliate; or
hire for any purpose any employee of the Company or any affiliate or any
employee who has left the employment of the Company or any affiliate within one
year of the termination of such employee's employment with the Company or any
such affiliate or at any time in violation of such employee's non-competition
agreement with the Company or any such affiliate; or
(ii) solicit or accept employment or be retained by any
Person who, at any time during the term of this Agreement, was an agent, client
or customer of the Company or any of its affiliates where his position will be
related to the business of the Company or any such affiliate; or (iii) solicit
or accept the business of any agent, client or customer of the Company or any of
its affiliates with respect to products, services or investments similar to
those provided or supplied by the Company or any of its affiliates. (c) The
Company and the Executive each agree that both during the Term and at all times
thereafter, neither party shall directly or indirectly disparage, whether or not
true, the name or reputation of the other party or any of its affiliates,
including but not limited to, any officer, director, employee or shareholder of
the Company or any of its affiliates.
(d) In the event that the Executive breaches any provisions of
Section 5 or this Section 6 or there is a threatened breach, then, in addition
to any other rights which the Company may have, the Company shall (i) be
entitled, without the posting of a bond or other security, to injunctive relief
to enforce the restrictions contained in such Sections and (ii) have the right
to require the Executive to account for and pay over to the Company all
compensation, profits, monies, accruals, increments and other benefits
(collectively "BENEFITS") derived or received by the Executive as a result of
any transaction constituting a breach of any of the
- 5 -
provisions of Sections 5 or 6 and the Executive hereby agrees to account for and
pay over such Benefits to the Company.
(e) Each of the rights and remedies enumerated in Section 6(d)
shall be independent of the others and shall be in addition to and not in lieu
of any other rights and remedies available to the Company at law or in equity.
If any of the covenants contained in this Section 6, or any part of any of them,
is hereafter construed or adjudicated to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants or rights or
remedies which shall be given full effect without regard to the invalid
portions. If any of the covenants contained in this Section 6 is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form such provision shall then be enforceable. No such holding of
invalidity or unenforceability in one jurisdiction shall bar or in any way
affect the Company's right to the relief provided in this Section 6 or otherwise
in the courts of any other state or jurisdiction within the geographical scope
of such covenants as to breaches of such covenants in such other respective
states or jurisdictions, such covenants being, for this purpose, severable into
diverse and independent covenants.
(f) In the event that an actual proceeding is brought in
equity to enforce the provisions of Section 5 or this Section 6, the Executive
shall not urge as a defense that there is an adequate remedy at law nor shall
the Company be prevented from seeking any other remedies which may be available.
The Executive agrees that he shall not raise in any proceeding brought to
enforce the provisions of Section 5 or this Section 6 that the covenants
contained in such Sections limit his ability to earn a living.
(g) The provisions of this Section 6 shall survive any
termination of this Agreement.
7. REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE.
The Executive hereby represents and warrants to the best of
his knowledge and belief to the Company as follows:
(i) Neither the execution or delivery of this Agreement
nor the performance by the Executive of his duties and other obligations
hereunder violate or will violate any statute, law, determination or award, or
conflict with or constitute a default or breach of any covenant or obligation
under (whether immediately, upon the giving of notice or lapse of time or both)
any prior employment agreement, contract, or other instrument to which the
Executive is a party or by which he is bound.
(ii) The Executive has the full right, power and
legal capacity to enter and deliver this Agreement and to perform his duties and
other obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of the Executive enforceable against him in accordance with
its terms. No approvals or consents of any persons or entities are required for
the Executive to execute and deliver this Agreement or perform his duties and
other obligations hereunder.
8. Termination. The Executive's employment hereunder shall be
- 6 -
terminated upon the Executive's death and may be terminated as follows:
(a) The Executive's employment hereunder may be terminated by
the Board of Directors of the Company for Cause. Any of the following actions by
the Executive shall constitute "CAUSE":
(i) The willful failure, disregard or refusal by the
Executive to perform his duties hereunder;
(ii) Any willful, intentional or grossly negligent act by
the Executive having the effect of injuring, in a material way (whether
financial or otherwise and as determined in good-faith by a majority of the
Board of Directors of the Company), the business or reputation of the Company or
any of its affiliates, including but not limited to, any officer, director,
executive or shareholder of the Company or any of its affiliates;
(iii) Willful misconduct by the Executive in respect of
the duties or obligations of the Executive under this Agreement, including,
without limitation, insubordination with respect to directions received by the
Executive from the Board of Directors of the Company;
(iv) The Executive's indictment of any felony or a
misdemeanor involving moral turpitude (including entry of a nolo contendere
plea);
(v) The determination by the Company, after a reasonable
and good-faith investigation by the Company following a written allegation by
another employee of the Company, that the Executive engaged in some form of
harassment prohibited by law (including, without limitation, age, sex or race
discrimination), unless the Executive's actions were specifically directed by
the Board of Directors of the Company;
(vi) Any misappropriation or embezzlement of the property
of the Company or its affiliates (whether or not a misdemeanor or felony);
(vii) Breach by the Executive of any of the provisions
of Sections 5, 6 or 7 of this Agreement; and
(viii) Breach by the Executive of any provision of
this Agreement other than those contained in Sections 5, 6 or 7 which is not
cured by the Executive within thirty (30) days after notice thereof is given to
the Executive by the Company.
(b) The Executive's employment hereunder may be terminated by
the Board of Directors of the Company due to the Executive's Disability. For
purposes of this Agreement, a termination for "DISABILITY" shall occur (i) when
the Board of Directors of the Company has provided a written termination notice
to the Executive supported by a written statement from a reputable independent
physician to the effect that the Executive shall have become so physically or
mentally incapacitated as to be unable to resume, within the ensuing twelve (12)
months, his employment hereunder by reason of physical or mental illness or
injury, or (ii) upon rendering of a written termination notice by the Board of
Directors of the Company after the Executive has been unable to substantially
perform his duties hereunder for 90 or more consecutive days, or more than 120
days in any consecutive twelve month period, by reason of any physical or mental
- 7 -
illness or injury. For purposes of this Section 9(b), the Executive agrees to
make himself available and to cooperate in any reasonable examination by a
reputable independent physician retained by the Company.
(c) The Executive's employment hereunder may be terminated by
the Board of Directors of the Company (or its successor) upon the occurrence of
a Change of Control. For purposes of this Agreement, "CHANGE OF CONTROL" means
(i) the acquisition, directly or indirectly, following the date hereof by any
person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), in one transaction or a series of related
transactions, of securities of the Company representing in excess of fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding securities if such person or his or its affiliate(s) do not own in
excess of 50% of such voting power on the date of this Agreement, or (ii) the
future disposition by the Company (whether direct or indirect, by sale of assets
or stock, merger, consolidation or otherwise) of all or substantially all of its
business and/or assets in one transaction or series of related transactions
(other than a merger effected exclusively for the purpose of changing the
domicile of the Company).
(d) The Executive's employment hereunder may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean any of the following: (i) the assignment to the Executive of duties
inconsistent with the Executive's position, duties, responsibilities, titles or
offices as described herein; (ii) any material reduction by the Corporation of
the Executive's duties and responsibilities; or (iii) any reduction by the
Corporation of the Executive's compensation or benefits payable hereunder (it
being understood that a reduction of benefits applicable to all employees of the
Corporation, including the Executive, shall not be deemed a reduction of the
Executive's compensation package for purposes of this definition).
9. COMPENSATION UPON TERMINATION.
(a) If the Executive's employment is terminated as a result of
his death or Disability, the Company shall pay to the Executive or to the
Executive's estate, as applicable, (x) his Base Salary and any accrued but
unpaid Bonus and expense reimbursement amounts through the date of his Death or
Disability. All Stock Options that are scheduled to vest by the end of the
calendar year in which such termination occurs shall be accelerated and deemed
to have vested as of the termination date. All Stock Options that have not
vested (or been deemed pursuant to the immediately preceding sentence to have
vested) as of the date of termination shall be deemed to have expired as of such
date.
(b) If the Executive's employment is terminated by the Board
of Directors of the Company for Cause, then the Company shall pay to the
Executive his Base Salary through the date of his termination and the Executive
shall have no further entitlement to any other compensation or benefits from the
Company. All Stock Options that are scheduled to vest by the end of the calendar
year in which such Change of Control occurs shall be accelerated and deemed to
have vested as of the termination date. All Stock Options that have not vested
(or been deemed pursuant to the immediately preceding sentence to have vested)
as of the date of termination shall be deemed to have expired as of such date.
(c) If the Executive's employment is terminated by the Company
(or its successor) upon the occurrence of a Change of Control, the Company (or
its successor, as applicable) shall continue to pay to the Executive his Base
- 8 -
Salary and benefits for a period of 6 months following such termination. All
Stock Options that have not vested as of the date of such termination shall be
accelerated and deemed to have vested as of such date.
(d) If the Executive's employment is terminated by the Company
other than as a result of the Executive's death or Disability and other than for
reasons specified in Sections 9(b) or (c), then the Company shall continue to
pay to the Executive his Base Salary and Benefits until the earlier to occur of
(1) the end of the Term and (2) the date that is one year following such
termination, and (ii) pay the Executive any expense reimbursement amounts owed
through the date of termination. The Company's obligation under clauses (i) and
(ii) in the preceding sentence shall be subject to offset by any amounts
otherwise received by the Executive from any employment during the one year
period following the termination of his employment. All Stock Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. All Stock Options that have not vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as of the date of termination
shall be deemed to have expired as of such date.
(e) This Section 9 sets forth the only obligations of the
Company with respect to the termination of the Executive's employment with the
Company, and the Executive acknowledges that, upon the termination of his
employment, he shall not be entitled to any payments or benefits which are not
explicitly provided in Section 9.
(f) The provisions of this Section 9 shall survive any
termination of this Agreement.
10. Miscellaneous.
(a) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
giving effect to its principles of conflicts of laws.
(b) Any dispute arising out of, or relating to, this Agreement
or the breach thereof (other than Sections 5 or 6 hereof), or regarding the
interpretation thereof, shall be finally settled by arbitration conducted in New
York City in accordance with the rules of the American Arbitration Association
then in effect before a single arbitrator appointed in accordance with such
rules. Judgment upon any award rendered therein may be entered and enforcement
obtained thereon in any court having jurisdiction. The arbitrator shall have
authority to grant any form of appropriate relief, whether legal or equitable in
nature, including specific performance. For the purpose of any judicial
proceeding to enforce such award or incidental to such arbitration or to compel
arbitration and for purposes of Sections 5 and 6 hereof, the parties hereby
submit to the non-exclusive jurisdiction of the Supreme Court of the State of
New York, New York County, or the United States District Court for the Southern
District of New York, and agree that service of process in such arbitration or
court proceedings shall be satisfactorily made upon it if sent by registered
mail addressed to it at the address referred to in paragraph (g) below. The
costs of such arbitration shall be borne proportionate to the finding of fault
as determined by the arbitrator. Judgment on the arbitration award may be
entered by any court of competent jurisdiction.
- 9 -
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns.
(d) This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder in connection with any sale,
transfer or other disposition of all or substantially all of its business or
assets.
(e) This Agreement cannot be amended orally, or by any course
of conduct or dealing, but only by a written agreement signed by the parties
hereto.
(f) The failure of either party to insist upon the strict
performance of any of the terms, conditions and provisions of this Agreement
shall not be construed as a waiver or relinquishment of future compliance
therewith, and such terms, conditions and provisions shall remain in full force
and effect. No waiver of any term or condition of this Agreement on the part of
either party shall be effective for any purpose whatsoever unless such waiver is
in writing and signed by such party.
(g) All notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing and shall be
delivered personally or by an overnight courier service or sent by registered or
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses set forth on the first page of this Agreement, and shall be deemed
given when so delivered personally or by overnight courier, or, if mailed, five
days after the date of deposit in the United States mails. Either party may
designate another address, for receipt of notices hereunder by giving notice to
the other party in accordance with this paragraph (g).
(h) This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or liable for any alleged representation,
promise or inducement not so set forth.
(i) As used in this Agreement, "affiliate" of a specified
Person shall mean and include any Person controlling, controlled by or under
common control with the specified Person.
(j) The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
(k) This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same instrument.
- 10 -
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MANHATTAN PHARMACEUTICALS, INC.
By: /s/ Leonard Firestone MD
------------------------
Name: Leonard Firestone MD
Title: Chief Executive Officer
Date:
EXECUTIVE
By: /s/ Nicholas J. Rossettos
-------------------------
Name: Nicholas J. Rossettos
Date
- 11 -
[Portions herein identified by ** have been ommitted pursuant to a request for
confidential treatment and have been filed separately with the Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.]
Exhibit 10.6
LICENSE AGREEMENT
-----------------
This License Agreement (hereinafter referred to as this "Agreement"),
effective as of February 15, 2002 (the "Effective Date"), is entered into by and
between Oleoyl-Estrone Developments SL (the "Licensor") and Manhattan
Pharmaceuticals, Inc., a corporation duly organized and existing under the laws
of the State of Delaware (the "Company").
WHEREAS, the Licensor is the owner of the intellectual property set
forth in Appendix I hereto which is based on inventions and confidential
information discovered at the University of Barcelona (the "University")
relating to the use of fatty acid monoesters of estrone for the treatment of
obesity and/or overweight (the "Invention"); and
WHEREAS, the Licensor may discover or develop, or acquire ownership of
pursuant to a Contract Research Agreement dated December 15, 2001, between
Licensor, Dr. Maria Alemany and the University (the "University Contract"),
additional intellectual property, technical information or proprietary rights
which may be subject to the terms of this Agreement; and
WHEREAS, the Licensor desires to grant to the Company and the Company
desires to obtain a license to the Invention and to further developments thereto
upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
ARTICLE 1 - DEFINITIONS
-----------------------
For the purposes of this License Agreement, the following words and
phrases shall have the following meanings:
1.1 The "Company" shall mean Manhattan Pharmaceuticals, Inc., a
Delaware corporation.
1.2 "Affiliate" shall mean, with respect to any Entity (as hereinafter
defined), any Entity that directly or indirectly controls, is controlled by, or
is under common control with such Entity.
1.2.1 "Control" shall mean, for this purpose, the direct or indirect
control of more than fifty percent (50%) of the voting securities of an Entity
or, if such Entity does not have outstanding voting securities, more than 50% of
the directorships or similar positions with respect to such Entity.
1.2.2 "Entity" shall mean any corporation, association, joint
venture, partnership, limited liability company, trust, university, business,
individual, government or political subdivision thereof, including an agency, or
any other organization that can exercise independent legal standing.
1.3 "Patent Rights" shall mean:
1.3.1 all U.S. and foreign patents and patent applications set forth
in Appendix I;
1.3.2 Any other United States and/or foreign patent applications
and/or patents together with any and all patents issuing thereon, including
parent patents, continuation, divisionals and re-issue applications,
re-examinations and continuation-in-part applications and any United States or
foreign patents
- 2 -
granted upon such applications, based upon any Improvements, any and all of
which shall be deemed added to Appendix I;
1.3.3 Any later-filed United States and/or foreign patent
applications based on the patent applications and/or patents listed in Appendix
I, or corresponding thereto, including any continuations, continuations-in-part,
divisional, reissues, reexaminations, or extensions thereof;
1.3.4 Any United States and/or foreign patents issuing from any of
the foregoing; and 1.3.5 Any United States and/or foreign trademark applications
filed by or on behalf of the Licensor related to the Invention.
1.4 "Know-how" shall mean all tangible information (other than that
contained in the Patent Rights) whether patentable or not (but which has not
been patented) and physical objects related to the Invention or to the Licensed
Product, including but not limited to formulations, materials, data, drawings
and sketches, designs, testing and test results, regulatory information of a
like nature, owned by any of the Licensor as of the Effective Date or
subsequently generated or acquired by the Licensor during the term of this
Agreement, which the Licensor has the right to disclose and license to the
Company, and which arose in Dr. Alemany's, Dr. Xavier Remesar's and Dr. Jose A.
Fernandez' respective laboratory under one or all of their direction.
1.5 "Licensed Product(s)" shall mean:
1.5.1 Any product that is covered in whole or in part by a valid and
unexpired claim contained in the Patent Rights in the country in which the
product is made, used, leased or sold;
- 3 -
1.5.2 Any product which is used according to a method, which is
covered in whole or in part by a valid and unexpired claim, contained in the
Patent Rights in the country in which the method is used.
1.6 "Improvements" means any inventions or improvements to the
Invention, in each case, within the scope of one or more claims of any of the
Patent Rights, acquired, created or made by the Licensor during the term of this
Agreement and which arose in Dr. Alemany's, Dr. Xavier Remesar's and Dr. Jose A.
Fernandez' respective laboratory under one or all of their direction.
ARTICLE 2 - GRANT
-----------------
2.1 The Licensor hereby grants to the Company, and the Company accepts,
subject to the terms and conditions of this Agreement, a worldwide license in
all fields of use to practice under the Patent Rights and to utilize the
Know-how, to make, have made, use, lease and/or sell the Licensed Products, to
the full end of the term for which the Patent Rights are granted, unless sooner
terminated as hereinafter provided.
2.2 Notwithstanding any other provision contained in this Agreement,
the Licensor retains an irrevocable, non-exclusive, royalty-free right to use
the technology, ideas and enhancements reflected in the Patent Rights and the
Know-how solely for its internal, non-commercial use.
2.3 The Licensor owns the Patent Rights, free and clear of all liens,
charges, encumbrances or other restrictions or limitations of any kind
whatsoever and, to the Licensor's knowledge and belief, there are no licenses,
options, restrictions, liens, rights of third parties, disputes, royalty
obligations, proceedings or claims relating to, affecting, or limiting its
rights or the rights of the Company under this Agreement with respect to, or
which may lead to a claim of infringement or invalidity regarding, any part or
- 4 -
all of the Patent Rights and their use as contemplated in the underlying patent
applications as presently drafted.
2.4 Prior to execution of this Agreement, the Licensor has made
available to the Company a fully executed copy of the Declaration of Assignment
between the Licensor and the University (a copy of which is attached hereto as
Exhibit 2.4) granting the Licensor exclusive, absolute, irrevocable right, title
and interest to practice the rights granted thereunder together with the right
to grant the license granted to the Company hereunder. The Licensor further
represents to the Company that it requires no consent from any third party
(including without limitations, the University, the Licensor's stockholders to
any governmental agency) to grant to the Company the rights granted hereunder
and that it has made all regulatory filings required in order to secure the
rights granted under the Declaration of Assignment, including filing with the
Commercial Registry..
2.5 To the Licensor's knowledge and belief there is no claim, pending
or threatened, of infringement, interference or invalidity regarding, any part
or all of the Patent Rights and their use as contemplated in the underlying
patent applications as presently drafted.
2.6 The Licensor has disclosed certain information to the Company or
its Affiliates subject to the terms of the Confidentiality Agreement entered
into prior to the execution of this Agreement, which, to Licensor's knowledge,
constitutes all material information in Licensor" possession relating to the
Invention.
2.7 The Licensor grants to the Company the right to grant sublicenses
to third-parties under the license granted hereunder, subject, solely in the
case of a sublicense to an Affiliate of the Company, to the prior written
consent of the Licensor which will not be unreasonably withheld. In order to
enable the Licensor to make a determination regarding any such proposed
- 5 -
sublicense that is subject to Licensor's consent pursuant to the immediately
preceding sentence, the Company shall give the Licensor prior written notice
thereof, such notice to be accompanied by the proposed sublicense agreement, if
available, or, if such agreement is not then available, by a description setting
forth in reasonable detail, the identity of the proposed sublicensee and the
terms and conditions of such sublicense. The Licensor shall respond to any
request for consent by the Company within fourteen (14) days following the
Licensor's receipt of the Company's notice and accompanying information. The
failure by Licensor timely to respond to any such request for consent shall be
deemed to constitute Licensor's consent to the sublicense described in the
Company's notice. The Company shall remain responsible for the performance
hereunder by its sublicensees.
2.7.1 Within 30 days after execution or receipt thereof, as
applicable, the Company shall provide the Licensor with a copy of each
sublicense issued hereunder.
2.7.2 Upon termination of this Agreement other than by expiration in
accordance with paragraph 7.7 or as a result of a breach of Section 3 hereof,
any and all sublicenses shall survive such termination provided that (a) the
sublicensee is not in default as of the date of termination and (b) the Licensor
shall be entitled to receive all royalties and other payments payable by the
sublicensee to the Company in respect of such sublicense for all periods from
and after the date on which this Agreement terminates and shall be entitled to
enforce the provisions of such sublicense against the sublicensee and to
exercise the remedies of the Company thereunder fully and to the same extent as
if the Licensor were the original sublicensor thereunder. The Company shall
cause each sublicense it enters into hereunder to contain a provision to the
effect set forth in this Section 2.7.2
- 6 -
2.7.3 The Company's right to sublicense hereunder shall be subject
to the Company obtaining the sublicensee's agreement to be bound by the terms of
this Agreement directly or indirectly applicable to sublicensees, including
without limitation, confidentiality and indemnitifcation of the Licensor
(provided that such agreement shall not relieve the Company of its own
obligations under this Agreement).
2.8 Licensor agrees that it will promptly disclose to the Company, or
any persons designated by the Company, all Improvements and Know-how acquired by
it during the term of this Agreement, which Improvements and Know-how shall be
owned by Licensor and licensed to the Company pursuant to this Agreement. The
Licensor further agrees to assist the Company in every proper way (but at the
Company's expense) to obtain and from time to time enforce patents, copyrights
or other rights on any such Improvements in any and all countries, and to that
end the Licensor will execute all documents necessary:
2.8.1 to apply for, obtain and vest in the name of the Licensor
letters patent, copyrights or other analogous protection in any country
throughout the world and when so obtained or vested to renew and restore the
same, all of which shall be subject to the license granted hereby; and
2.8.2 to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications for
revocation of such letters patent, copyright or other analogous protection.
ARTICLE 3 - DUE DILIGENCE
-------------------------
The Company shall use its commercially reasonable efforts to bring Licensed
Products to market through a thorough, vigorous and diligent program for
exploitation of the Patent Rights and Know-how and continue active, diligent
marketing efforts for Licensed Products throughout the life of this Agreement.
Schedule B hereto contains the Company's good faith estimates of the timing of
- 7 -
the initial phases of the exploitation of the Patent Rights and Know-how,
although the parties acknowledge and agree that such estimates are based on the
Company's current plans and will be subject to change based upon actual
pre-clinical and clinical testing results and other factors outside of the
Company's control. The Company will deliver to the Licensor written status and
progress reports, or hold meetings with the Licensor, concerning the status of
such exploitation and marketing efforts, upon the written request of the
Licensor, which reports or meetings may be requested no more than quarterly. The
Licensor may also request oral or informal information from the Company with
respect to such matters from time to time.
ARTICLE 4 - EQUITY AND MILESTONE PAYMENTS
-----------------------------------------
4.1 On the Effective Date, (i) upon execution and delivery of the
Stockholders Agreement (as hereinafter defined) by the parties thereto, the
Company shall issue to the Licensor a number of shares of common stock of the
Company, par value $.001 per share ("Common Stock") representing twenty percent
(20%) of the outstanding shares of Common Stock of the Company as of the
Effective Date; (ii) the Company, the Licensor and the principal stockholder of
the Company shall execute and deliver a Stockholders' Agreement containing,
among other things, certain rights and obligations relating to the ownership of
the Common Stock by the Licensor (the "Stockholders Agreement"); and (iii) the
Company and the Licensor shall execute and deliver a Consulting Agreement
pursuant to which the Licensor will provide the services of the Inventors to
consult with the Company, upon the terms and conditions set forth therein.
4.2 The Company shall pay to the Licensor the following cash payments:
4.2.1 $** upon execution of this Agreement;
- 8 -
4.2.2 $** upon the treatment of the first patient in a phase I
clinical trial under a Company sponsored Investigational New Drug Application
("IND");
4.2.3 $** upon the treatment of the first patient in a phase II
clinical trial under a Company sponsored IND;
4.2.4 $** upon the first successful completion of a Company
sponsored phase II clinical trial under a Company sponsored IND;
4.2.5 $** upon the first successful completion of a Company
sponsored phase III clinical trial under a Company-sponsored IND;
4.2.6 $** upon the first final approval of the first New Drug
Application ("NDA") for the first Licensed Product by the United States Food and
Drug Administration (the "FDA");
4.3 All payments pursuant to paragraph 4.2 above shall become due and
payable within 30 days after achievement of the indicated milestone. The Company
shall give the Licensor prompt notice of the achievement, if any, of each such
milestone.
4.4 All payments shall be made in U.S. dollars. Payments shall be made
by wire transfer of funds to an account designated in writing by the Licensor.
ARTICLE 5 - REPORTS AND RECORDS
-------------------------------
5.1 Within sixty (60) days from the end of each calendar quarter, the
Company shall deliver to the Licensor complete and accurate reports, giving such
particulars of the business conducted by the Company during the preceding
quarter under this License Agreement as shall be pertinent to the Licensor.
These shall include at least the following:
5.1.1 Names and addresses of all sublicensees and Affiliates of the
Company.
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5.1.2 A copy of any report, which is in substance similar to the
report required by this Article 5, received from any sublicensee and other
documents received from any sublicensee as the Licensor may reasonably request.
5.2 The Licensor agrees to hold in confidence each report delivered by
the Company pursuant to this Article 5 until the termination of this Agreement.
Notwithstanding the foregoing, the Licensor may disclose any such information
required to be disclosed pursuant to any judicial, administrative or
governmental request, subpoena, requirement or order, provided that the Licensor
takes reasonable steps to provide the Company with the opportunity to contest
such request, subpoena, requirement or order.
ARTICLE 6 - PATENT PROSECUTION AND MAINTENANCE
6.1 The Company, at its sole cost and expense, shall diligently
prosecute and maintain the Patent Rights as set forth in Appendix I hereto (as
the same may be amended or supplemented from time to time after the date
hereof), including, but not limited to, the filing of patent applications for
Improvements, utilizing such patent counsel as may be mutually agreed upon by
the parties hereto. The Company agrees to keep the Licensor reasonably well
informed with respect to the status and progress of any such applications,
prosecutions and maintenance activities including and to consult in good faith
with the Licensor and take into account the Licensor's comments and requests
with respect thereto. Both parties agree to provide reasonable cooperation to
each other to facilitate the application and prosecution of patents pursuant to
this Agreement.
6.2 The Company may, in its discretion, elect to abandon any patent
application or issued patent comprising the Patent Rights, in which case the
Company shall make no further use of such Patent Rights and such rights shall
revert to the Licensor. Prior to any such abandonment, the Company shall give
- 10 -
the Licensor at least 60 days notice and a reasonable opportunity to take over
prosecution of such Patent Rights. In such event, the Licensor shall have the
right, but not the obligation, to commence or continue such prosecution and to
maintain any such Patent Rights under its own control and at its expense and the
Company shall then make no further use of any such Patent Rights and shall have
no royalty or other obligation to the Licensor in respect of any Licensed
Products, the manufacture, use or sale of which is covered by a valid and
unexpired claim of such Patent Rights. The Company agrees to cooperate in such
activities, including execution of any assignments or other documents necessary
to enable the Licensor to obtain and retain sole ownership and control of such
Patent Rights.
ARTICLE 7 - TERMINATION
-----------------------
7.1 If the Company shall become bankrupt, or shall file a petition in
bankruptcy, or if the business of the Company shall be placed in the hands of a
receiver, assignee or trustee for the benefit of creditors, whether by the
voluntary act of the Company or otherwise, this License Agreement shall
automatically terminate.
7.2 In the event that the Company fails to make payment to the Licensor
of amounts due in accordance with the terms of this Agreement or any other
agreement between the Licensor and the Company, provided such failure to make
payment is not as a result of a bona fide dispute between the Licensor and the
Company, the Licensor shall have the right to terminate this License Agreement
within thirty (30) days after giving said notice of termination unless the
Company shall pay to the Licensor, within the 30-day period, all such amounts
due and payable (together with interest thereon until receipt of payment in full
at a rate equal to 10% per annum). Subject to Article 8, upon the expiration of
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the 30-day period, if the Company shall not have paid all such amounts due and
payable, the rights, privileges and license granted hereunder shall, at the
option of the Licensor, immediately terminate.
7.3 Upon any material breach or default of this License Agreement by
the Company, other than as set forth in Paragraphs 7.1 and 7.2 hereinabove, the
Licensor shall have the right to terminate this Agreement and the rights,
privileges and license granted hereunder upon giving sixty (60) days notice to
the Company. Such termination shall become effective immediately unless the
Company shall have cured any such breach or default prior to the expiration of
the sixty (60) day period referred to above.
7.4 The Company shall have the right at any time to terminate this
Agreement in whole or as to any portion of the Patent Rights by giving sixty
(60) days notice thereof in writing to the Licensor.
7.5 If the University Contract shall cease to be in full force and
effect or the Licensor and the University enter into any amendment or
modification of the University Contract that adversely affects the rights of the
Company hereunder (each, an "Adverse Condition"), the Company shall have the
right to terminate this Agreement upon thirty (30) days notice to the Licensor.
Such termination shall become effective immediately unless such Adverse
Condition shall have been cured prior to the expiration of such thirty (30) day
period.
7.6 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination or obligations under Articles 5,
8, 9, 10, 15 and 16. The Company and/or any sublicensee thereof may, however, at
any time after the effective date of such termination and continuing for a
period not to exceed six (6) months thereafter, sell all completed Licensed
Products, and any Licensed Products in the process of manufacture at the time of
such termination, and sell the same, provided that the Company shall pay or
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cause to be paid to the Licensor the royalties thereon as required by Article 4
of this License Agreement and shall submit the reports required by Article 5
hereof on the sales of Licensed Products.
7.7 If not terminated sooner, this Agreement shall terminate on the
date of the last to expire claim contained in the Patent Rights.
7.8 Upon termination of this Agreement, except pursuant to 7.7 hereof,
the Company shall have no further rights to the Patent Rights and Know-how
granted hereunder, and shall make no further use thereof, including the
manufacture, use or sale of Licensed Products, except as otherwise set forth
herein.
7.9 Upon termination of this Agreement, the Company agrees to cooperate
fully with the Licensor or its respective nominees: (i) to take whatever steps
are reasonably necessary and appropriate to effect reversion to the Licensor of
all rights to the Patent Rights and Know How in all relevant countries; and (ii)
to transfer, or to hand over, to the Licensor or such nominees, all information
obtained by the Licensor in connection with the exploitation of the Licensed
Patents and Know How and/or marketing of Licensed Products during the term of
this Agreement, including information derived in any pre-clinical and clinical
trials, and all regulatory filings, health registrations and sales permissions
regarding Licensed Products in all countries in which such regulatory filings,
health registrations or sales permissions have been obtained with respect
thereto.
ARTICLE 8 - ARBITRATION
-----------------------
8.1 Any dispute arising from or relating to this Agreement shall be
determined before a tribunal of three (3) arbitrators in New York, New York in
accordance with the rules of the American Arbitration Association. The Licensor
shall select one arbitrator; the Company shall select one arbitrator and the
- 13 -
third arbitrator shall be selected by mutual agreement of the first two
arbitrators.
8.2 Any claim, dispute, or controversy concerning the validity,
enforceability, or infringement of any patent contained in the Patent Rights
licensed hereunder shall be resolved in court having jurisdiction thereof.
8.3 In the event that, in any arbitration proceeding, any issue shall
arise concerning the validity, enforceability, or infringement of any patent
contained in the Patent Rights licensed hereunder, the arbitrators shall, to the
extent possible, resolve all issues other than validity, enforceability, and
infringement; in any event, the arbitrators shall not delay the arbitration
proceeding for the purpose of obtaining or permitting either party to obtain
judicial resolution of such issues, unless an order staying the arbitration
proceeding shall be entered by a court of competent jurisdiction. Neither party
shall raise any issue concerning the validity, enforceability, or infringement
of any patent contained in the Patent Rights licensed hereunder, in any
proceeding to enforce any arbitration award hereunder, or in any proceeding
otherwise arising out of any such arbitration award.
8.4 The costs of such arbitration shall be borne proportionate to the
finding of fault as determined by the Arbitrator. Judgment on the arbitration
award may be entered by any court of competent jurisdiction.
- 14 -
ARTICLE 9 - INFRINGEMENT AND OTHER ACTIONS
------------------------------------------
9.1 The Company and the Licensor shall promptly provide written notice,
to the other party, of any alleged infringement by a third party of the Patent
Rights and provide such other party with any available evidence of such
infringement.
9.2 During the term of this Agreement, the Company shall have the
right, but not the obligation, to prosecute and/or defend, at its own expense
and utilizing counsel of its choice, any infringement of, and/or challenge to,
the Patent Rights. In furtherance of such right, the Licensor hereby agrees that
the Company may join the Licensor as a party in any such suit, without expense
to the Licensor. No settlement, consent judgment or other voluntary final
disposition of any such suit which would adversely affect the rights of the
Licensor may be entered into without the consent of the Licensor, which consent
shall not be unreasonably withheld. The Company shall indemnify and hold the
Licensor harmless against any costs, expenses or liability that may be found or
assessed against the Licensor in any such suit other than resulting from the
Licensor's gross negligence, recklessness or willful misconduct.
9.3 In the event that a claim or suit is asserted or brought against
the Company alleging that the manufacture or sale of any Licensed Product by the
Company, an Affiliate of the Company, or any sublicensee, or the use of such
Licensed Product by any customer of any of the foregoing, infringes proprietary
rights of a third party, the Company shall give written notice thereof to the
Licensor. The Company may, in its sole discretion, modify such Licensed Product
to avoid such infringement and/or may settle on terms that it deems advisable in
its sole discretion, subject to paragraph 9.2. Otherwise, the Company shall have
the right, but not the obligation, to defend any such claim or suit. In the
event the Company elects not to defend such suit, the Licensor shall have the
right, but not the obligation to do so at its sole expense.
- 15 -
9.4 Any recovery of damages by the Company, in any such suit brought by
the Company, shall be applied first in satisfaction of any unreimbursed expenses
and legal fees of the Company relating to the suit. The balance remaining from
any such recovery shall be shared 80% to the Company and 20% to the Licensor.
Any recovery of damages by the Licensor, in any such suit brought by the
Licensor, shall be applied first in satisfaction of any unreimbursed expense and
legal fees of the Licensor relating to such suit. The balance remaining from any
such recovery shall be shared 80% to the Licensor and 20% to the Company.
9.5 If within six (6) months after receiving notice of any alleged
infringement, the Company shall have been unsuccessful in persuading the alleged
infringer to desist, or shall not have brought and shall not be diligently
prosecuting an infringement action, or if the Company shall notify the Licensor,
at any time prior thereto, of its intention not to bring suit against the
alleged infringer, then, and in those events only, the Licensor shall have the
right, but not the obligation, to prosecute, at its own expense and utilizing
counsel of its choice, any infringement of the Patent Rights, and the Licensor
may, for such purposes, join the Company as a party plaintiff. The total cost of
any such infringement action commenced solely by the Licensor shall be borne by
the Licensor and the Licensor shall keep any recovery or damages for
infringement or otherwise derived therefrom and such shall not be applicable to
any payment obligation of the Company.
9.6 In any suit to enforce and/or defend the Patent Rights pursuant to
this License Agreement, the party not in control of such suit shall, at the
request and expense of the controlling party, cooperate in all respects and, to
the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like.
- 16 -
ARTICLE 10 - LIMITATION OF LIABILITY, INDEMNITY
-----------------------------------------------
10.1 The Licensor, by this License Agreement, makes no representations
or warranties as to the validity and/or breadth of the inventions contained in
the Patent Rights and the Company so acknowledges. The Licensor, by this License
Agreement, makes no representations or warranties as to patents now held or
which will be held by others in the field of the Licensed Products for a
particular purpose.
10.2 EXCEPT AS MAY BE EXPRESSLY PROVIDED HEREIN, THE LICENSORS DO NOT
MAKE, AND EXPRESSLY DISCLAIM ANY WARRANTIES, EITHER EXPRESS OR IMPLIED, ORAL OR
WRITTEN, AS TO ANY MATTER WHATSOEVER, INCLUDING MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
10.3 The Company agrees to defend, indemnify and hold harmless the
Licensor, its affiliates, directors, employees and officers from and against all
liability, demands, damages, including without limitation, reasonable legal fees
and expenses and losses including death, personal injury, illness or property
damage arising directly or indirectly: (a) out of the use by the Company or its
transferees of inventions licensed or information furnished under this License
Agreement or (b) out of any testing, use, manufacture, import, sale or other
disposition by the Company or its transferees of Patent Rights, Know-how or
Licensed Products, in each case which are not the result of the Licensor's gross
negligence or willful misconduct.
10.4 Subject to the Stockholders Agreement, prior to entering into
human clinical trials for a proposed Licensed Product, the Company shall
purchase and maintain, at its own expense, during the term of this Agreement,
and for a minimum of two (2) years following the expiration, termination or
cancellation of this Agreement, a product liability policy from an insurance
company or companies reasonably satisfactory to the Licensor. During any
- 17 -
clinical development of Licensed Product, such coverage shall be for at least
$2,000,000 per occurrence. Promptly upon commercial introduction of Licensed
Product, the parties shall negotiate in good faith an increase in such coverage.
The insurance policy relating to such coverage shall name the Licensor as an
additional insured by way of endorsement or otherwise as its interests may
appear. Within thirty (30) days following the Effective Date, the Company shall
cause to be delivered to the Licensor an insurance certificate evidencing the
insurance coverage required by this Section 10.4. Such insurance certificate
shall name the Licensor as an additional insured as its interests may appear.
ARTICLE 11 - ASSIGNMENT
-----------------------
This Agreement and the rights and duties appertaining hereto may not be
assigned by either party without first obtaining the written consent of the
other, which consent shall not be unreasonably withheld; or by the Company to an
Affiliate Any such purported assignment, without the written consent of the
other party, shall be null and of no effect. Notwithstanding the foregoing, the
Company may assign this Agreement (i) subject to clause (ii) below, to a
purchaser, merging or consolidating corporation, or acquiror of substantially
all of the Company's assets or business and/or pursuant to any reorganization
qualifying under section 368 of the Internal Revenue Code of 1986 as amended, as
may be in effect at such time, or (ii) to an Affiliate of the Company subject to
the consent of the Licensor which consent shall not be unreasonably withheld. In
order to enable the Licensor or the Company, as the case may be, to make a
determination regarding any such proposed assignment that is subject to the
other party's consent pursuant to this paragraph, the party seeking such consent
shall give the other party prior written notice thereof, such notice to be
accompanied by the proposed assignment agreement, if available, or, if such
- 18 -
agreement is not then available, by a description setting forth in reasonable
detail, the identity of the proposed assignee and the terms and conditions of
such assignment. The party entitled to consent to such assignment shall respond
to any request for consent by the other party within fourteen (14) days
following such party's receipt of the applicable notice and accompanying
information. The failure of such party timely to respond to any such request for
consent shall be deemed a consent to the assignment described in the other
party's request.
ARTICLE 12 - PAYMENT OF FEES AND EXPENSES
-----------------------------------------
Each of the Company and the Licensor shall be responsible for their own
expenses relating to the preparation and consummation of this Agreement and the
agreements and transactions contemplated hereby.
ARTICLE 13 - USE OF NAMES AND PUBLICATION
-----------------------------------------
13.1 Nothing contained in this Agreement shall be construed as granting
any right to the Company or its Affiliates to use in advertising, publicity, or
other promotional activities any name, trade name, trademark, or other
designation of the Licensor or any of its units (including contraction,
abbreviation or simulation of any of the foregoing) without the prior, written
consent of the Licensor; provided, however, that the Licensor acknowledges and
agrees that the Company may use the name of the Licensor in various documents
used by the Company for capital raising and financing without such prior written
consent where the use of such names may be required by law. The Company agrees
to promptly provide the Licensor with a copy of any documents used by the
Company, which contain the name of the Licensor.
13.2 Nothing herein shall be deemed to establish a relationship of
principal and agent between the Licensor and the Company, nor any of their
agents or employees for any purpose whatsoever. This Agreement shall not be
construed as creating a partnership between the Licensor and the Company, or as
- 19 -
creating any other form of legal association or arrangement, which would impose
liability upon one party for the act or failure to act of the other party.
13.3 Notwithstanding the provisions of Article 15 hereof, in the event
that the Licensor desires to publish or disclose, by written, oral or other
presentation, Know-how, Patent Rights, or any material information related
thereto then the Licensor shall notify the Company in writing by facsimile where
confirmed by the receiving party, and/or by certified or registered mail (return
receipt requested) of its intention at least sixty (60) days prior to any
speech, lecture or other oral presentation and at least sixty (60) days before
any written or other publication or disclosure. The Licensor shall include with
such notice a description of any proposed oral presentation or, in any proposed
written or other disclosure, a current draft of such proposed disclosure or
abstract. The Company may request that the Licensor, no later than sixty (60)
days following the receipt of such notice, delay such presentation, publication
or disclosure in order to enable the Company to file, or have filed on their
behalf, a patent application, copyright or other appropriate form of
intellectual property protection related to the information to be disclosed or
request that the Licensor does so. Upon receipt of such request to delay such
presentation, publication or disclosure, the Licensor shall arrange for a delay
of such presentation, publication or disclosure until such time as the Company
or the Licensor has filed, or has had filed on its behalf, such patent
application, copyright or other appropriate form of intellectual property
protection in form and in substance reasonably satisfactory to the Company and
the Licensor. This delay will not exceed thirty (30) days. If the Licensor does
not timely receive any such request from the Company to delay such presentation,
publication or disclosure, the Licensor may submit such material for
presentation, publication or other form of disclosure.
- 20 -
ARTICLE 14 - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
-------------------------------------------------------
14.1 Any payment, notice or other communication required or permitted
to be given pursuant to this Agreement shall be in writing and sent by certified
first class mail, postage prepaid, by hand delivery or by facsimile if confirmed
in writing, in each case effective upon receipt, at the addresses below or as
otherwise designated by written notice given to the other party:
In the case of the Licensor:
Chief Executive Officer
Oleoyl-Estrone Developments SL
Josep Samitier 1-5
Barcelona Science Park
08028 Barcelona, Spain
Facsimile: 011 34 93 403 7098
with a copy to:
Ezra G. Levin
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Fax: 212-715-8000
In the case of the Company:
Manhattan Pharmaceuticals, Inc.
c/o Horizon Biomedical Ventures, LLC
787 Seventh Avenue
New York, New York 10019
Tel: 212-554-4350
Fax: 212-554-4355
Attn: David M. Tanen
15 - CONFIDENTIALITY
--------------------
15.1 Any proprietary or confidential information relating to the
Invention (including but not limited to Know-how and patent prosecution
documents relating to Patent Rights) collectively constitute the "Confidential
- 21 -
Information." The Company and the Licensor agree that they will not use the
Confidential Information for any purpose unrelated to this Agreement or the
University Contract, and will hold it in confidence during the term of this
Agreement and for a period of five (5) years after the termination or expiration
date of this Agreement. The Company and the Licensor shall exercise with respect
to such the Confidential Information the same degree of care as the Company and
the Licensor exercise with respect to their own confidential or proprietary
information of a similar nature, and shall not disclose it or permit its
disclosure to any third party (except to those of its employees, consultants, or
agents who are bound by the same obligation of confidentiality as the Company of
the Licensor is bound by pursuant to this Agreement). However, such undertaking
of confidentiality by the Company or the Licensor shall not apply to any
information or data which:
15.1.1 The receiving party receives at any time from a third party
lawfully in possession of same and having the right to disclose same.
15.1.2 Is, as of the date of this Agreement, in the public domain,
or subsequently enters the public domain through no fault of the receiving
party.
15.1.3 Is independently developed by the receiving party as
demonstrated by written evidence without reference to information disclosed to
the receiving party.
15.1.4 Is disclosed pursuant to the prior written approval of the
disclosing party.
15.1.5 Is required to be disclosed pursuant to law or legal process
(including, without limitation, to a governmental authority) provided, in the
case of disclosure pursuant to legal process, reasonable notice of the impending
disclosure is provided to the disclosing party and disclosing party has agreed
- 22 -
to such disclosure in writing or has exhausted its right to contest such
disclosure.
ARTICLE 16 - MISCELLANEOUS PROVISIONS
-------------------------------------
16.1 This License Agreement shall be construed, governed, interpreted
and applied in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws
16.2 If this Agreement or any associated transaction is required by the
law of any nation to be either approved or registered with any governmental
agency, the Company shall assume all legal obligations to do so and the costs in
connection therewith.
16.3 The Company shall observe all applicable United States and foreign
laws with respect to the use, sale manufacture and transfer of Licensed Products
and related technical data to foreign countries, including, without limitation,
the regulations of the Food and Drug Administration and its foreign equivalents,
the International Traffic in Arms Regulations (ITAR), the Export Administration
Regulations.
16.4 The parties hereto acknowledge that this Agreement, including the
Appendices and documents incorporated by reference, sets forth the entire
agreement and understanding of the parties hereto as to the subject matter
hereof, and shall not be subject to any change of modification except by the
execution of a written instrument subscribed to by the parties hereto.
16.5 The provisions of this License Agreement are severable, and in the
event that any provision of this License Agreement shall be determined to be
invalid or unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
- 23 -
16.6 The failure of either party to assert a right hereunder or to
insist upon compliance with any term or condition of this License Agreement
shall not constitute a waiver of that right or excuse a similar subsequent
failure to perform any such term or condition by the other party.
16.7 The headings of the several articles are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
16.8 This Agreement will not be binding upon the parties until it has
been signed below on behalf of each party, in which event, it shall be effective
as of the date recited on page one.
16.9 This Agreement embodies the entire understanding of the parties
and shall supersede all previous communications, representations or
understandings, either oral or written, between the parties relating to the
subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement. This
Agreement may be delivered by facsimile transmission with the same legal effect
as if delivery of an original were made in person.
16.10 Each party hereto shall be excused from any breach of this
Agreement, which is proximately caused by governmental regulation, act of war,
strike, act of God or other similar circumstance normally deemed outside the
control of the parties.
- 24 -
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement, in triplicate by proper persons thereunto duly authorized.
MANHATTAN PHARMACEUTICALS
INC.
By:
---------------------------------
Name:
Title:
---------------------------------
Date:
OLEOYL-ESTRONE DEVELOPMENTS SL
By:
---------------------------------
Name:
Title:
---------------------------------
Date:
[Signature Page of License Agreement, effective as of January __, 2002, between
Oleoyl-Estrone Developments SL, as Licensor, and Manhattan Pharmaceuticals,
Inc., as Licensee]
- 25 -
APPENDIX I
----------
1. United States Patent No. 5,798,348 entitled "Fatty-acid monoesters of
estrogens for the treatment of obesity and/or overweight (October 30,
1996) (M. Alemany, Inventor)
2. European Patent Application No. 771,817 entitled "Fatty-acid monoesters
of estrogens for the treatment of obesity and/or overweight" (October
28, 1996) (M. Alemany, Inventor)
3. Spanish Patent Application No. ES 200100785 entitled "Fatty-acid
monoesters of estrogens acting as anti-diabetic and "hipolipemiante"
agents" (March 28, 2001) (M. Alemany Lamana, Francisco Javier Remesar
Betiloch and Jose Antonio Fernandez Lopez, Inventors)
4. Canadian Patent Application No. 2,316,330 entitled "Estrone and estrone
esters and fat deposition promoting compounds in humans" (August 9,
2000) (M. Alemany Lamana, Francisco Javier Remesar Betiloch and Jose
Antonio Fernandez Lopez, Inventors)
- 26 -
Exhibit 99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Manhattan Pharmaceuticals, Inc. do hereby certify that: (a) the Quarterly Report on Form 10-QSB of Manhattan Pharmaceuticals, Inc. for the quarter ended March 31, 2003 (the "Report:) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Manhattan Pharmaceuticals, Inc. Dated: May 15, 2003 /s/ Leonard Firestone ------------------------------------- Leonard Firestone President and Chief Executive Officer Dated: May 15, 2003 /s/ Nicholas J. Rossettos ------------------------------------- Nicholas J. Rossettos Chief Financial Officer