-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DNYAM3E2r7dF/KmGP4NTZ/IVopxXtGtDw6MFLj59qtF802XoLaEjGrLmiCbPeUaf b1r5dJ3MsjI3DnxmmvxENQ== 0000950144-96-001381.txt : 19960401 0000950144-96-001381.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950144-96-001381 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVEN PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000815838 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 592767632 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17254 FILM NUMBER: 96541938 BUSINESS ADDRESS: STREET 1: 11960 SW 144TH ST CITY: MIAMI STATE: FL ZIP: 33186 BUSINESS PHONE: 3052535099 MAIL ADDRESS: STREET 1: 11960 SW 144TH STREET CITY: MIAMI STATE: FL ZIP: 33185 10-K 1 NOVEN PHARMAECEUTICALS, INC. FORM 10-K 12-31-95 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from to ------------------ ----------------- Commission file number 0-17254 -------------------------------------------------------- NOVEN PHARMACEUTICALS, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 59-2767632 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 11960 S.W. 144th Street, Miami, Florida 33186 - ------------------------------------------ ---------------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (305)253-5099 ------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered Pursuant to Section 12(g) of the Act: Common Stock $.0001 Par Value - ------------------------------------------------------------------------------- (Title of class) 2 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. YES / / NO /X/ The aggregate market value of the voting stock held by non-affiliates of the registrant on March 8, 1996 was $216,447,581, (See definition of affiliate in Rule 405, 17 CFR 230.405). As of March 8, 1995, 19,766,666 shares of common stock, $.0001 par value, were outstanding. 3 DOCUMENTS INCORPORATED BY REFERENCE
Incorporated documents (to the extent indicated herein) Part of Form 10-K - -------------------------------- ----------------- Portions of the Definitive Proxy Part III Statement for the 1996 Annual Meeting of Shareholders Items 10-13
4 NOVEN PHARMACEUTICALS, INC. FORM 10-K TABLE OF CONTENTS
PART I Page Item 1. Business................................ 1 Item 2. Properties.............................. 20 Item 3. Legal Proceedings....................... 21 Item 4. Submission of Matters to a Vote of Security Holders................... 21 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 21 Item 6. Selected Financial Data................. 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 23 Item 8. Financial Statements and Supplementary Data.................................. 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................. 28 PART III (omitted) PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 28
5 PART I Item 1. Business Noven is a leader in developing and manufacturing transdermal drug delivery systems. These systems utilize an adhesive patch containing medication which is administered through the skin and into the bloodstream over an extended period of time. Noven has developed and patented thin, solid state, multi-laminate transdermal drug delivery systems that have a small surface area and the adaptability to deliver numerous drug entities. The Company is developing products for a broad range of applications, including hormone replacement therapy, dental pain management, cardiovascular disease, anti-fungal therapy, asthma, anxiety, neurological and musculoskeletal disorders. The Company received approval for its transdermal estrogen delivery system from the United States Food and Drug Administration ("FDA") as well as from regulatory authorities in twelve European countries, Canada, Australia, South Africa, Mexico and New Zealand. Presently, Rhone-Poulenc Rorer, Inc. ("RPR") is selling Noven's transdermal estrogen delivery system under the trade name Menorest in ten foreign countries, including France, Germany and the United Kingdom. In March 1996, Ciba-Geigy, Inc. ("Ciba") launched the sale of this product under the trade name Vivelle(TM) in the United States. The Company's transdermal nitroglycerin system and transoral mucosal dental anesthetic is under FDA review. The Company also has other products in various stages of development, including two products in clinical trials. (See "Products and Technology Under Development", pages 4, 5 and 6). The Company's new (40,000 + square foot) manufacturing facility has been inspected by the FDA and final approval is expected. TRANSDERMAL DRUG DELIVERY Conventional methods of drug delivery introduce drugs into the bloodstream either by absorption in the gastrointestinal ("GI") tract following oral administration or through parenteral (non-oral) administration. Conventional dosage forms such as tablets, liquids and injections may have disadvantages in certain patients, including unpredictable blood levels, difficult or uncomfortable administration, poor compliance and GI side effects. Transdermal drug delivery systems may offer significant advantages over these conventional dosage forms, including non-invasive administration, controlled delivery over an extended period of time, improved 6 patient compliance and avoidance of the problems and adverse side-effects associated with oral and parenteral drug delivery. Currently, few drugs are marketed in the form of transdermal drug delivery systems. These drugs include nitroglycerin for the treatment of angina, scopolamine for motion sickness, estrogen and estrogen/progestogen for menopausal symptoms and osteoporosis, isosorbide dinitrate for angina, clonidine for hypertension, nicotine for smoking cessation, fentanyl for pain management and testosterone for male hypogonadism. Noven believes there are numerous other drugs which may be suitable for transdermal drug delivery. The benefits of transdermal drug delivery include: Improved Dosage Delivery and Control for Maximum Therapeutic Effect Transdermal drug delivery helps provide patients with a drug's maximum therapeutic effect and decreases the risk of adverse side effects or diminished therapeutic effect due to excessive or insufficient blood concentrations. The therapeutic effect of a drug is typically achieved only when the drug is within a specific concentration range in the bloodstream. This blood concentration range is often called the drug's "therapeutic window." Below this range the drug may be ineffective, and above it the drug may cause unwanted side effects. Many conventional forms of drug delivery administer higher concentrations than are required in order to maintain effective blood levels between doses. However, blood levels often fall below effective concentrations prior to administration of the next dose. Transdermal drug delivery systems are designed to maintain a precise and continuous flow of a drug into the bloodstream. This results in more stable blood concentrations which consistently remain within a drug's therapeutic window. In addition, in contrast to oral administration, transdermal drug delivery can frequently maximize a drug's therapeutic effect by avoiding the GI tract and "first pass" liver metabolism. Oral drug delivery can often be unreliable because the achievement of therapeutic blood levels depends on several factors, including the drug's chemical composition, the patient's physical condition, chemical and physical reactions between the drug and substances in the GI tract and the timing of drug administration. Upon GI tract 2 7 absorption a drug must pass through the liver before entering the bloodstream. In many instances, the liver metabolizes a large portion of the drug. As a result, orally dosed drugs must generally be administered at levels which exceed optimal therapeutic levels, potentially resulting in adverse side effects. Improved Patient Compliance and Safety Transdermal drug delivery systems are capable of conveniently and consistently delivering drugs over a number of hours or days, thereby eliminating many of the compliance problems associated with certain conventional drug delivery regimens. In order to maintain optimal blood levels, some conventional forms of drug delivery require frequent doses which can be difficult to remember or understand, particularly for the elderly patient. Failure to comply with a recommended drug regimen can endanger a patient's health. Transdermal drug delivery may also improve the safety of drug administration. A transdermal drug delivery system can be removed quickly and easily. If a patient has an adverse reaction to a drug, removing the transdermal drug delivery system may assist in minimizing the extent of such an adverse reaction. Improved Patient Convenience and Reduced Cost Transdermal drug delivery systems can eliminate the need for the frequent doses of conventional forms of certain drugs. In addition, transdermal drug delivery, particularly when compared to invasive forms of drug delivery, may result in significant savings of cost and time, and may offer increased patient comfort and convenience. Pharmaceutical Industry Benefits In addition to patient, physician and health care provider benefits, transdermal drug delivery may provide certain economic benefits to the pharmaceutical industry. Research and development and obtaining FDA approval for new drugs can take many years and involve the expenditure of substantial funds. Transdermal drug delivery systems that utilize drugs which have been previously approved in conventional dosage forms may be commercialized faster, and with substantially less cost and risk than new chemical 3 8 entities for pharmaceutical applications. Transdermal drug delivery may also extend the patent life for those drugs which are approaching patent expiration. Additionally, transdermal drug delivery may expand the market for drugs which would benefit from the numerous advantages of this form of drug delivery. Further, transdermal drug delivery may be the only viable dosage form for certain new chemical entities. NOVEN'S TRANSDERMAL DRUG DELIVERY TECHNOLOGY Noven's patented, proprietary transdermal drug delivery systems incorporate a thin, solid state, multi-laminate construc-tion with a drug-bearing interpolymeric adhesive. The transdermal drug delivery system, or patch, has a finite area with a specific geometric shape. On one side the patch has a release liner that, when removed, exposes a pressure sensitive adhesive. This adhesive functions as both the drug platform and as the means of affixing the system to the patient's skin. The outside of the patch is comprised of a specialized backing material that is specifically tailored to the drug being delivered and the length of time the system is intended to be worn. The size of the patch is dependent upon the amount of drug needed by the patient, and its shape is designed so that the patch can be worn comfortably. The transdermal drug delivery system is packaged in a pouch designed to maintain the system's stability and protect against contamination. Noven's transdermal drug delivery system is capable of being modified so that it may be used to deliver various drugs. The techniques utilized to modify the system include those which improve the solubility and diffusibility of drugs within the transdermal system and those which improve a drug's percutaneous absorption by changing the skin's ability to retain moisture; by softening the skin and improving the skin's permeability; by adding compounds which may act as penetration assistants or hair follicle openers; or by changing the skin's boundary layer. PRODUCTS AND TECHNOLOGY UNDER DEVELOPMENT The following table sets forth information regarding products and technology under development by the Company and is qualified by reference to the more detailed descriptions elsewhere in this Form 10-K. 4 9
DRUG/ TECHNOLOGY THERAPEUTIC USES STATUS LICENSEES - ---------- ---------------- ------ --------- Hormone Replacement Estrogen Menopausal Symptoms FDA approved; Ciba-Geigy-- approved in 17 U.S. & Canada; foreign countries; RPR--Worldwide, commercial sales (excluding U.S. in the United and Canada) States (commenced March 1996) and ten foreign countries; regulatory filings in numerous other foreign countries Combination Menopausal Symptoms Phase II/III RPR-Worldwide Estrogen/Pro- Clinical Trials gestogen Second Genera- Menopausal Symptoms Development Ciba-Geigy-- tion Estrogen U.S. & Canada; RPR--Japan Other Products Nitroglycerin Angina ANDA filed -- Transoral Dental Anesthetic NDA filed -- Mucosal Anesthetic Antifungal Onychomycosis Phase I/II Clinical -- Trials Alprazolam Anxiety IND filed -- Albuterol Asthma IND filed -- Selegiline Selected Neurological Pre-Clinical -- Disorders Nicotine Smoking Cessation Pre-Clinical -- Nonsteroidal Arthritis & Soft Pre-Clinical -- Anti-Inflam- Tissue Injuries matory Drug Iontophoretic Transdermal Drug Development -- Technology Delivery
5 10 TRANSDERMAL ESTROGEN DELIVERY SYSTEM It has been estimated that during the next 50 years the overall population of the United States will increase by 40%, while the group of individuals over 65 years old will increase by 160%. Worldwide, the elderly population is increasing at a rate approximately 50% faster than overall population growth. It has also been estimated that there are approximately 35 to 40 million post-menopausal women in the U.S. and this group is one of the fastest growing demographic segments in the nation. With the aging of the population over the next several decades, conditions and diseases such as menopause and osteoporosis, which may benefit from hormone replacement therapy, will become significantly more prevalent. At the onset of menopause, women lose their ability to produce estrogen. A diminished estrogen supply in post-menopausal women can cause hot flashes, insomnia, vaginal atrophy, irritability, anxiety, moodiness and excessive sweating. Estrogen replacement therapy ("ERT") can reverse or prevent these serious physical and psychological symptoms. Another condition related to the inability to produce estrogen is osteoporosis, a progressive deterioration of the skeletal system through the loss of bone mass. According to the National Osteoporosis Foundation, osteoporosis currently affects approximately 25 million people in the U.S. It is estimated that 80% of all hip fractures in elderly patients are associated with osteoporosis and that nearly 20% of all patients with hip fractures will die from complications within six months of the event. Numerous medical studies and the National Institutes of Health recommend ERT as the most effective method of preventing osteoporosis in post-menopausal women. In addition, a ten year study of approximately 49,000 post-menopausal women, published in The New England Journal of Medicine in 1991, found that women who take estrogen after menopause can reduce their risk of heart disease by fifty percent. On October 28, 1994, Noven received full FDA approval for an advanced transdermal estrogen replacement system which delivers 17-beta estradiol continuously for 84 hours (3.5 days) in four separate dosages for the treatment of moderate to severe menopausal symptoms. To date, regulatory authorities in seventeen foreign countries also issued approval for the transdermal estrogen replacement system. This product is being sold by RPR in nine 6 11 countries in Europe (including the United Kingdom, Germany and France) and in Australia under the name Menorest. In March 1996, Ciba-Geigy launched the commercial sale of Noven's transdermal estrogen replacement system under the name Vivelle(TM) in the United States. The Company has licensed this product on a worldwide basis to Ciba-Geigy in the United States and Canada and to RPR in Europe, Japan and all other territories. This product has also been submitted for regulatory approval in numerous other foreign countries. TRANSDERMAL COMBINATION ESTROGEN/PROGESTOGEN DELIVERY SYSTEM Progestogen is a hormone that is frequently prescribed in conjunction with estrogen in order to mitigate the potential side effects of unopposed estrogen replacement therapy. Clinical studies suggest that unopposed estrogen replacement therapy may increase the risk of uterine cancer. The adminis-tration of estrogen and progestogen together more closely imitates the natural female hormonal cycle. Noven's combination estrogen/progestogen transdermal drug delivery system combines the advantages of both compounds in a single delivery system. To date, no approved progestogen or combined estrogen/progestogen transdermal drug delivery systems are available in the U.S. Phase II/III clinical trials are being conducted by RPR for the transdermal combination estrogen/progestogen delivery system. The Company has licensed these products on a worldwide basis to RPR. TRANSORAL MUCOSAL DENTAL ANESTHETIC DELIVERY SYSTEM FOR DENTAL PAIN MANAGEMENT Intraoral injection is often accompanied by significant discomfort or pain. Therefore, the use of topical anesthetics prior to intraoral injection is a widely accepted dental practice. Topical agents including gels, ointments and sprays are used to anesthetize the oral mucosa, but each of these dosage forms has distinct disadvantages. Sprays, ointments and gels make it difficult to control the amount of drug applied and to confine the drug to a desired site, and can become diluted in the oral cavity. Noven has developed a unique transoral mucosal dental anesthetic delivery system that can be applied to the oral mucosa and which will be used for pre-injection numbing. Additional studies will be required for its application to certain dental 7 12 procedures requiring minor to moderate pain relief such as periodontal curettage, periodontal scaling and dental cleaning. The transoral mucosal dental anesthetic may also be used to relieve the pain from oral sores and lesions. A transoral drug delivery system for dental anesthesia offers several potential advantages over conventional intraoral injections, including reduced patient discomfort, improved safety and reduced risk of cross-infection. In addition, the transoral mucosal dental anesthetic may offer increased convenience to the dentist and may result in increased patient visits. Noven completed Phase III clinical trials for its transoral mucosal dental anesthetic delivery system and an NDA was filed in May 1995. TRANSDERMAL NITROGLYCERIN DELIVERY SYSTEM FOR CARDIOVASCULAR DISEASE Angina pectoris is a condition caused by the temporary inability of the coronary arteries to supply a sufficient quantity of oxygenated blood to the heart muscle. An angina attack is accompanied by steady, severe pain and intense pressure in the region of the heart. Angina attacks may be relieved by the administration of nitroglycerin, a known coronary vasodilator, which increases the flow of oxygenated blood to the heart. The American Heart Association estimates that angina affects over three million people in the United States. Nitroglycerin is available in several conventional dosage forms including sublingual tablets and other oral and topical formulations. Many of these dosage forms however, have limitations. Therefore, transdermal drug delivery systems have become a widely used form of nitroglycerin delivery. First introduced commercially in 1982, transdermal nitroglycerin delivery systems are currently marketed by several companies. Worldwide sales in 1993 of this product were estimated to be in excess of $500 million. The Company has developed a transdermal nitroglycerin delivery system which has all of the attributes of the most advanced systems currently on the market, such as a small surface area, appropriate adhesive qualities and a cosmetically attractive appearance. An Abbreviated New Drug Application ("ANDA") was filed with the FDA for this product in 1992. This product is currently 8 13 under active FDA review. The Company intends to market this product either independently or with a marketing partner. TRANSDERMAL ANTIFUNGAL DELIVERY SYSTEM FOR ONYCHOMYCOSIS Onychomycosis, a nail fungal infection, is the most frequent cause of nail disease and occurs in approximately 2-5% of the population. Onychomycosis can result in splitting, thickening, roughness and discoloration of the nail. This infection can be painful as well as cosmetically unappealing. Current treatment for onychomycosis includes orally administered antifungal agents and topical creams and ointments. Many of the oral dosage forms which are absorbed systemically have been associated with undesirable side effects. Current topical treatments are limited in effectiveness by insufficient penetration of the drug into the nail bed. Noven has developed a transdermal delivery system to treat onychomycosis. Noven's transdermal antifungal patch may provide enhanced and convenient delivery, nonsystemic administration and controlled dosing. The active ingredient for the Company's system is an antifungal agent that has been approved by the FDA in other dosage forms. The Company is conducting Phase I/II clinical trials for this product. TRANSDERMAL ALPRAZOLAM DELIVERY SYSTEM FOR ANXIETY DISORDERS Anxiety is the most common mental health problem in the United States. Although some anxiety or tension associated with the stress of everyday life is normal, anxiety can become disabling when people suffer from excessive or unrealistic anxiety or worry. Symptoms of a severe anxiety disorder include trembling, restlessness, shortness of breath, palpitations, nausea and insomnia. Anxiety is often treated with antianxiety medication and/or psychotherapy. Alprazolam, which is only available in tablet form, is a mild anti-anxiety agent used primarily to relieve mild to moderate anxiety and nervous tension. Noven has developed a transdermal alprazolam delivery system for the treatment of anxiety disorders. The transdermal delivery of alprazolam may provide a more optimal delivery system with dosing intervals of once a day or longer. An Investigational New 9 14 Drug Application ("IND") was filed for this product with the FDA in December 1993. TRANSDERMAL ALBUTEROL DELIVERY SYSTEM FOR ASTHMA Asthma effects approximately 12 million Americans, including four million children under the age of eighteen. Asthma, which is a chronic affliction of the bronchial tubes, is often triggered by viral infections, allergens or pollutants. Symptoms of an asthma attack include forced breathing, coughing and loss of consciousness. Treatments for asthma include bronchodilators and anti-inflammatory drugs. Albuterol, which is available in aerosol, syrup and tablet dosage form, is a commonly prescribed drug for the treatment of asthma. Noven has developed a transdermal albuterol delivery system for the treatment of asthma. Noven believes that the transdermal delivery of albuterol could improve the overall bioavailability, dosing requirements and patient compliance when compared to other albuterol products. An IND was filed for this product with the FDA in December 1993. PRODUCT FOR SELECT NEUROLOGICAL DISORDERS Selegiline is a drug currently being marketed by Somerset Pharmaceuticals, Inc. ("Somerset") as Eldepryl(R) tablets for the treatment of late stage Parkinson's disease. U.S. sales of Eldepryl(R) in 1994 were approximately $125 million. In June, 1994 Noven entered into an agreement with Somerset to develop and manufacture a transdermal formulation of Selegiline. Although this agreement concluded in 1995, Noven is continuing to develop this product and anticipates clinical investigation commencing in 1996. PRODUCT FOR MUSCULOSKELETAL DISORDERS NonSteroidal Anti-Inflammatory Drug ("NSAID") for musculoskeletal disorders are of the most widely prescribed therapies for conditions ranging from arthritis to soft tissue injuries; some members of the NSAID class are also available over-the-counter. Although extremely effective, the major drawback of NSAID is a potential for irritation and even ulceration of the 10 15 stomach lining which can be life-threatening. Transdermal delivery of an NSAID directly to the affected joint or tissue should prove therapeutically beneficial with the added advantage of much lower potential for gastrointestinal side effects. Noven has developed transdermal systems containing NSAID. These products are in preclinical testing and an IND is anticipated in 1996. OTHER PRODUCTS AND TECHNOLOGY Several other products are in the preliminary stages of pre-clinical testing and research and development. Noven has developed a second generation estrogen transdermal delivery system which is one-third the size of the Company's current transdermal delivery system, and a transdermal nicotine system for smoking cessation, which is in pre-clinical testing. Products in the research and development stage include the transoral mucosal system which incorporate several pharmaceutical compounds (other than anesthetics) for the treatment of various oral conditions. Noven is also actively involved in the development of new technologies in the transdermal drug delivery area, such as iontophoresis. Iontophoresis is a technique whereby positively or negatively charged drug molecules are driven by an electric current from a transdermal device through the skin and into the bloodstream. Certain higher molecular weight drugs, such as those composed of peptides, may require modification of the barrier properties of the skin in order to be delivered transdermally. Noven believes its iontophoretic transdermal drug delivery system may accommodate these higher molecular weight drugs and may thereby increase the number of drugs suitable for transdermal delivery, possibly including certain genetically engineered molecules. MARKETING Noven is committed to becoming a fully integrated pharmaceutical company with capabilities for developing, manufacturing and marketing pharmaceutical products which incorporate alternate drug delivery technologies. With respect to certain products, however, Noven has entered into and anticipates that it will enter into license, development and manufacturing agreements. For the domestic market, prior to expected product 11 16 approvals from the FDA, the Company will evaluate whether to license products to a larger company with an established sales force or to develop its own marketing and sales capabilities. The Company's evaluation will be conducted on an individual product basis and will include consideration of the estimated costs associated with sales, marketing and distribution. These combined costs and the Company's financial position will be factored into the decision of whether to license or directly market the product. Noven has licensed its transdermal estrogen replacement system worldwide to two major pharmaceutical companies, Ciba-Geigy and RPR. In addition, Noven has licensed its transdermal progestogen delivery system and its transdermal combination estrogen/progestogen delivery system worldwide to RPR. The agreement with Ciba-Geigy provides it with the right to market the transdermal estrogen delivery system in the U.S. and Canada. Ciba-Geigy will market Noven's system in the U.S. and Canada as Vivelle(TM). The agreement with RPR provides it with the right to market (i) the transdermal estrogen delivery system in all territories exclusive of the United States and Canada and (ii) the transdermal combination estrogen/progestogen delivery system and transdermal progestogen delivery system worldwide. RPR will market Noven's transdermal estrogen delivery system as Menorest in its territory. The Company is currently examining the possible development of its own marketing and sales capabilities with respect to the transoral mucosal dental anesthetic product in the United States. MANUFACTURING Noven's original facility in Dade County, which consists of approximately 18,300 square feet, is fully equipped and has a manufacturing capacity of approximately 100 million transdermal units per year. This facility complied with U.S. and European regulatory requirements and has been inspected by the FDA and the Medicines Control Agency of the United Kingdom. This facility is used to commercially manufacture Vivelle(TM) and Menorest for Ciba-Geigy and RPR, respectively. This facility also received a pre-approval inspection for the manufacture of Noven's transoral 12 17 mucosal dental anesthetic product and its transdermal nitroglycerin product. Noven's newer 15 acre site in Dade County includes two adjacent buildings, each with approximately 40,000 square feet. One of the buildings has been fully renovated and equipped. This facility was inspected and approved by the Medicines Control Agency of the United Kingdom. The FDA inspected this facility in late 1995 and full approval is expected. After FDA approval of this facility, product manufactured on this site can be marketed to the public. This facility will have a capacity of approximately 400 million transdermal units per year. It is anticipated that full development of this site, including possible new construction on the property, can accommodate Noven's space requirements for its foreseeable long term growth. Noven has the capacity of designing, developing, building and maintaining its production equipment, including fabrication of replacement parts where appropriate. Additionally, Noven's engineering expertise provides valuable support to its research and development groups by rapidly fabricating or modifying equipment essential in the product development program. COMPETITION Noven's operations are conducted in highly competitive areas. All transdermal drug delivery products being developed by the Company will face competition both from conventional forms of drug delivery (i.e., oral and parenteral), other transdermal products and, possibly, alternate forms of drug delivery, such as controlled release oral delivery, liposomes and implants. Noven, therefore, faces potential competition from numerous pharmaceutical companies, many of which have greater financial resources, technical staffing and manufacturing and marketing capabilities. Competition in drug delivery systems is generally based on a company's marketing strength, product performance characteristics (i.e., reliability, safety, patient convenience) and product price. Acceptance by physicians and other health care providers including managed care groups is also critical to the success of a product. In a highly competitive marketplace and with evolving technology, there can be no assurances that additional product introductions or developments by others will not render the Company's products or 13 18 technologies noncompetitive or obsolete. Noven has attempted to minimize these risks, however, by its technological innovativeness and by developing strategic alliances. For example, Noven has aligned itself with two world wide marketing organizations, Ciba-Geigy and RPR, for marketing its estrogen delivery system as Vivelle(TM) in the U.S. and Canada and as Menorest elsewhere. In January 1995, 3M Pharmaceuticals/Drug Delivery Systems and Berlex Laboratories, Inc. announced the receipt of FDA approval to market Climara(TM), an estradiol transdermal system, in the United States in two dosage strengths. Berlex Laboratories, Inc. has U.S. marketing rights for Climara(TM). Commercial distribution of this transdermal delivery product commenced in the second quarter of 1995. To the Company's knowledge, Ciba-Geigy is the leader in marketing transdermal estrogen replacement products in the U.S. as well as in European markets. Noven believes that the quality of Vivelle(TM) and the marketing ability of Ciba-Geigy in the United States will give this product a competitive advantage in the marketplace. However, it is impossible to predict, at this time, the market share Noven's product will receive or the effect Climara(TM) (or other future competing transdermal systems) will have on sales. Ciba-Geigy and Schering-Plough Corporation dominate the world market in transdermal nitroglycerin products. Noven believes that other companies, including Alza Corporation, Cygnus Therapeutic Systems, Elan Corporation, plc, TheraTech, Inc., Ethical Holdings, plc, Cilag, a division of Johnson & Johnson, and 3M Corp. are also developing competing transdermal drug delivery products. PATENTS AND PROPRIETARY RIGHTS Noven has obtained eleven U.S. patents and has over 100 pending patent applications worldwide. The United States has changed its patent laws in fundamental respects to fulfill certain obligations under the General Agreement on Tariffs and Trade (GATT) and specifically under the accompanying Agreement on Trade-Related Aspects of Intellectual Property Law (TRIPs). These changes became law on December 8, 1994 when President Clinton signed the Uruguay Round Agreements Act, and took 14 19 effect in their entirety on January 1, 1996. All patent owners, as well as pending and future patent applications, will be affected. The immediate consequences to Noven will be that the term for some existing patents will be reset beyond their current term of 17 years from issue, thereby extending their potential commercial value. The long term consequences of these changes are, at this time, unknown. The Company is unaware of the existence of any challenges to the validity of its patents or of any claim made by a third-party of patent infringement with respect to its products. However, no assurance can be given that such challenges or claims will not be asserted in the future. Although there is a statutory presumption as to a patent's validity, the issuance of a patent is not conclusive as to such validity, or as to the enforceable scope of the claims of the patent. There is no assurance that Noven's patents or any future patents will prevent other companies from developing similar or functionally equivalent products. Furthermore, there is no assurance that any of the Company's future processes or products will be patentable, that any pending or additional patents will be issued in any or all appropriate jurisdictions or that Noven's processes or products will not infringe upon the patents of third parties. None of the drug chemical entities Noven uses for the products now in clinical trials are patented in the U.S. However, some of the drugs which may be incorporated in the Company's future products may be patented by others. Therefore, the ability of Noven to market such products prior to the expiration of such patents may depend, among other things, upon its ability to enter into arrangements with the holders of such patents. Noven also attempts to protect its proprietary information under trade secret laws. Generally, Noven's agreements with each employee, licensing partner, consultant, university, pharmaceutical company and agent contain provisions designed to protect the confidentiality of its proprietary information. There can be no assurance that these agreements will not be breached, that the Company will have adequate legal remedies as a result thereof, or that the Company's trade secrets will not otherwise become known or be independently developed by others. 15 20 GOVERNMENT REGULATION United States The marketing of pharmaceutical products requires the approval of the FDA in the U.S. The FDA has established regulations, guidelines and safety standards which apply to the pre-clinical evaluation, clinical testing, manufacturing and marketing of pharmaceutical products. The process of obtaining FDA approval for a new product may take several years and is likely to involve the expenditure of substantial resources. The steps required before a product can be produced and marketed for human use include: (i) pre-clinical studies; (ii) submission to the FDA of an IND, which must become effective before human clinical trials may commence in the U.S.; (iii) adequate and well controlled human clinical trials; (iv) submission to the FDA of an NDA or, in some cases, an ANDA; and (v) review and approval of the NDA or an ANDA by the FDA. An ANDA may be submitted for products that have the same active ingredient(s), indication, route of administration, dosage form and dosage strength as an existing FDA-approved product, if clinical studies have demonstrated bio-equivalence of the new product to the FDA-approved product. An NDA generally is required for products with new active ingredients, new indications, new routes of administration, new dosage forms or new strengths. An NDA requires that complete clinical studies of a product's safety and efficacy be submitted to the FDA, the cost of which is substantial. For products in this category, limited testing may begin on humans after submission and approval of the IND. Pre-clinical studies are conducted to obtain preliminary information on a product's efficacy and safety. The results of these studies are submitted to the FDA as part of the IND and are reviewed by the FDA before human clinical trials begin. Human clinical trials may commence 30 days after receipt of the IND by the FDA, unless the FDA objects to the commencement of clinical trials. 16 21 Human clinical trials are typically conducted in three sequential phases, but the phases may overlap. Phase I trials consist of testing the product primarily for safety in a small number of patients at one or more doses. In Phase II trials, the safety and efficacy of the product are evaluated in a patient population somewhat larger than the Phase I trials. Phase III trials typically involve additional testing for safety and clinical efficacy in an expanded population at different test sites. A clinical plan, or protocol, accompanied by the approval of the institution participating in the trials, must be reviewed by the FDA prior to commencement of each phase of the clinical trials. The FDA may order the temporary or permanent discontinuation of a clinical trial at any time. The results of product development and pre-clinical and clinical studies are submitted to the FDA as an NDA or an ANDA for approval. If an application is submitted, there can be no assurance that the FDA will review and approve the NDA or an ANDA in a timely manner. The FDA may deny an NDA or an ANDA if applicable regulatory criteria are not satisfied or it may require additional clinical testing. Even if such data is submitted, the FDA may ultimately deny approval of the product. Further, if there are any modifications to the drug, including changes in indication, manufacturing process, labeling, or a change in a manufacturing facility, an NDA or an ANDA supplement may be required to be submitted to the FDA. Product approvals may be withdrawn after the product reaches the market if compliance with regulatory standards is not maintained or if problems occur regarding the safety or efficacy of the product. The FDA may require testing and surveillance programs to monitor the effect of products which have been commercialized, and has the power to prevent or limit further marketing of these products based on the results of these post-marketing programs. The Prescription Drug User Fee Act of 1992 (the "Fee Act") authorized the FDA to collect three types of fees from prescription drug manufacturers: (1) one-time application fees imposed upon submission to the FDA for approval, (2) establishment fees, and (3) product fees which are imposed annually. Payment of application fees are required for each human drug application including an NDA, certain ANDAs, certain initial certification/approval of certain antibiotic drugs, and licensure under the Public Health Service Act of certain biological products. The Fee Act also mandates a fee on 17 22 supplements (containing clinical data) to human drug applications. The amount of the fee is dependent on whether the application is accompanied by clinical data on safety and efficacy (other than bioavailability or bioequivalence studies). For 1996, the estimated application fee for human drug applications is $204,000, while applications without clinical data and supplements with clinical data are one-half of that fee. Payment of establishment fees are required for prescription drug establishments at which at least one prescription drug product is manufactured. For 1996, the estimated establishment fee is $135,300. Payment of product fees are required for each strength and dosage form of an approved prescription drug product, and are estimated for 1996 at $12,500. The Fee Act provides for fee exceptions, waivers and reductions, including payment deferrals under certain circumstances, primarily for the benefit of small businesses. While Noven will endeavor to request such fee exceptions, waivers and reductions where it believes it can demonstrate eligibility, there is no assurance that the FDA will grant any such request. Foreign and domestic manufacturing facilities are subject to periodic inspections for compliance with the FDA's GMP regulations and each domestic drug manufacturing facility must be registered with the FDA. In complying with standards set forth in these regulations, manufacturers must continue to expend time, money and effort in the area of quality control to insure full technical compliance. Facilities handling controlled substances, such as Noven, must be licensed by the U.S. Drug Enforcement Administration ("DEA"). The Company has produced transdermal drug delivery products in accordance with the FDA's GMP regulations for clinical trials, manufacturing process validation studies and commercial manufacture. Noven's activities may also be subject to various federal, state and local laws and regulations regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and possible future local, state, federal and foreign regulations. Under certain of these laws, Noven could be liable for substantial costs and penalties in the event that waste is disposed of improperly. Noven utilizes two waste management firms to provide for proper disposal of hazardous waste. The Company believes that its hazardous waste disposal procedure prevents improper disposal. 18 23 Foreign Noven intends to have its products marketed in certain foreign countries. Therefore, approval by these countries' regulatory authorities must be obtained. The approval procedures vary from country to country, and the time required for approval may be longer or shorter than that required for FDA approval. Even after foreign approvals are obtained, further delays may be encountered before products may be marketed. For example, many countries require additional governmental approval for price reimbursement under national health insurance systems. Such approval can be critical to any extensive marketing of drug products in such countries. If practical and acceptable to the FDA, Noven intends to design its FDA protocols for the clinical studies of its products to permit acceptance of the data by foreign regulatory authorities and to thereby reduce the risk of duplication of clinical studies. However, additional studies may be required to obtain foreign regulatory approval. Further, some foreign regulatory agencies may require additional studies involving patients located in their countries. As a result of the enactment of the Drug Export Amendments Act of 1986, a drug not yet approved in the United States, but for which an IND exemption for human testing has been obtained and for which FDA approval is being actively pursued, may be exported to certain foreign markets as long as the product: (i) is approved by the importing nation; (ii) is labeled for export and (iii) is approved for export by the FDA. However, because numerous restrictions and reporting requirements are imposed under this law, the cost of exporting such products can be expected to exceed the costs of exporting products that have been approved for sale in the United States. EMPLOYMENT The Company employs two hundred and twenty-six people; approximately one hundred and twenty-eight are engaged in process development and manufacturing, thirty in research and development, fifty four in medical affairs studies, regulatory affairs, quality assurance and quality control and fourteen in administration. Most of the Company's scientific and engineering employees have had 19 24 prior experience with pharmaceutical or medical product companies. No employee is represented by a union and Noven has never experienced a work stoppage. The Company believes its employee relations are excellent. INSURANCE The Company has procured general liability insurance, in an amount of $8,000,000 per incident and $9,000,000 in the aggregate per annum. This policy provides coverage on an occurrence basis and is subject to annual renewal. The Company has also procured product liability insurance in an amount of $12 million per incident and $12 million in the aggregate per annum. This policy provides coverage on a claims made basis and is subject to annual renewal. No assurance can be given that the coverage limits will be adequate. Item 2. Properties. The Company owns a 20,000+ square foot building which is used for laboratory, engineering, office and administrative purposes on one and one-half acres. The Company also owns 9.5 acres of vacant land that could accommodate 160,000+ square feet of new buildings for a variety of manufacturing, warehousing and developmental purposes. RPR owns, on a contiguous site, two existing buildings of approximately 80,000+ square feet on four acres. One of the buildings is being used by Noven for manufacturing purposes. The other building is presently utilized for engineering. The RPR facility is leased to the Company for a term of 31.5 years on favorable terms. The lease grants Noven a purchase option. RPR may terminate the lease prior to the expiration of its term upon termination or expiration of the license agreement entered into in June 1992. These facilities, it is believed, will provide sufficient space for the Company's projected growth in the foreseeable future. The Company leases real property at 13300 Southwest 128th Street, Miami, Florida, under standard leases expiring on December 31, 1996 with various option periods. The aggregate annual rental under these leases is approximately $128,000 per year, subject to certain adjustments. Of the approximately 18,000 square feet under lease at this location, approximately 16,000 square feet is 20 25 used for manufacturing, packaging and a laboratory, and approximately 2,000 square feet is used for a warehouse. The Company believes that its existing properties are well maintained and in good operating condition and that there is no excessive obsolescence. Item 3. Legal Proceedings. The Company is not a party to any legal proceedings and to the knowledge of the Company, none are threatened. Item 4. Submission of Matters to a Vote of Security Holders. The Company did not submit any matters to a vote of stockholders during the fourth quarter of the fiscal year ended December 31, 1995. PART II Item 5. Market for Common Equity and Related Stockholder Matters. (a) Market Information The following table sets forth, for the periods indicated, the high and low sale prices for the Common Stock as reported on the Nasdaq National Market.
High Price Low Price ---------- --------- First Quarter, 1994 19 1/4 13 1/8 Second Quarter, 1994 17 3/4 12 3/4 Third Quarter, 1994 15 1/2 10 1/4 Fourth Quarter, 1994 16 3/4 11 1/8 First Quarter, 1995 12 3/8 6 1/2 Second Quarter, 1995 9 1/8 6 3/4 Third Quarter, 1995 11 7 Fourth Quarter, 1995 11 1/2 8 1/4
(b) Holders. As of December 31, 1995, the number of stockholders of record was 693 and the approximate number of beneficial owners was 6,000. 21 26 (c) Dividends. The Company has never paid a cash dividend on its Common Stock, intends to retain all earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the future. Any future declaration and payment of dividends will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial condition, capital requirements, as well as such other factors as the Company's Board of Directors may consider. Item 6. Selected Financial Data. SELECTED FINANCIAL DATA The selected financial data presented below are derived from the financial statements of the Company. The financial statements for the years ended December 31, 1993, 1994 and 1995 and the reports thereon, are included elsewhere in this Form 10-K. The selected financial data as of December 31, 1991 and 1992 are derived from financial statements previously filed with the Commission and not included in this Form 10-K. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Financial Statements.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues: Product Sales $ -- $ -- $ -- $ 295 $ 8,747 License revenue 139 1,927 3,125 4,155 1,703 Interest income 60 803 624 1,214 1,682 Other income -- 192 345 381 52 ------- ------- ------- ------- ------- Total 199 2,922 4,094 6,045 12,184 Expenses: Cost of products sold -- -- -- 148 4,814
22 27 Research and development 2,164 4,127 5,161 8,036 10,509 General and administrative 1,133 1,836 2,244 2,805 3,442 ----- ----- ----- ----- ----- Total 3,297 5,963 7,405 10,989 18,765 Net loss $(3,098) $(3,041) $(3,311) $(4,944) $(6,581) ======= ======== ======== ======= ======= Net loss per share $ (.02) $ (.25) $ (.21) $ (.28) (.34) ======== ======= ======== ======= ======= Weighted average shares of common stock and common stock equivalents 12,246 14,761 15,925 17,440 19,237
AT DECEMBER 31, ----------------------------------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- (IN THOUSANDS) BALANCE SHEET DATA: Working capital $ 1,946 $ 20,781 $ 14,822 $ 35,047 $ 27,560 Total assets 3,534 23,289 29,860 54,365 48,646 Long-term obligations -- -- -- ---- Accumulated deficit (4,186) (7,228) (10,539) (15,483) (22,063) Total stockholders' equity 1,562 20,740 20,693 44,546 38,030
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. General Since commencing operations in 1987, the Company has been engaged primarily in the research and development of transdermal drug delivery systems. The Company's revenues have been generated principally by license fees, milestone payments pursuant to various license agreements and interest. A significant portion of revenues in 1995, however, is attributable to the purchase by the Company's licensee partners of transdermal estrogen delivery systems for commercial sale in Europe and in anticipation of that product's commercial launch in the United States. 23 28 To date, the Company's product development efforts have been undertaken independently and pursuant to license agreements with Rhone-Poulenc Rorer, Inc. and/or its affiliates ("RPR") and Ciba-Geigy Corporation ("Ciba-Geigy"). Under these agreements a license fee was paid upon execution. All of the agreements provided for the payment of monthly development fees or cost reimbursements for product development and/or milestone payments upon achieving certain technical and regulatory goals. The Company's results of operations vary significantly from quarter to quarter and depend, among other factors, on the commercial sale of its products, execution of new product development agreements, the timing of fees and milestone payments made by its licensees, the progress of clinical trials conducted by the Company and/or its licensees and costs associated with the development of the Company's products. The timing of the Company's revenue may not match the timing of the Company's associated product development expenses for any particular period. RESULTS OF OPERATIONS 1995 Compared to 1994 Total revenues increased approximately 100% from approximately $6,045,000 in 1994 to approximately $12,184,000 in 1995. The increase in revenues during 1995 was primarily a result of the increase in product sales of the Company' transdermal estrogen delivery system to its licensee partners from $295,000 in 1994 to $8,748,000 in 1995. Royalties for product sold to one licensee will be recognized after the product is launched. License revenues decreased approximately 60% from approximately $4,155,000 in 1994 to approximately $1,703,000 in 1995. The Company believes that license revenues will fluctuate from period to period depending on contributing factors which include, but are not limited to, future success in finalizing new collaborative agreements, timely achievement of milestones and strategic decisions on self-funding certain projects. Interest income increased approximately 39% from approximately $1,214,000 in 1994 to $1,682,000 in 1995 primarily as a result of the investment of the proceeds of the 1994 public offering of common stock. Cost of product sold increased from approximately $148,000 in 1994 to approximately $4,814,000 in 1995. The gross margin 24 29 percentage was 50% in 1994 and 45% in 1995. These manufacturing costs and attendant gross margins were primarily attributable to expenses incurred in the early stages of manufacturing the transdermal estrogen delivery systems. Research and development expenses increased approximately 31% from approximately $8,036,000 in 1994 to approximately $10,509,000 in 1995. The increase in research and development expenses was attributable to new product development, manufacturing process engineering and development costs, preproduction start-up expense and the hiring of additional staff for new and existing programs. New product development included the transoral dental anesthetic systems and the transdermal estrogen/progestogen combination delivery system. Preproduction start-up includes the costs associated with staffing, obtaining regulatory approvals and preparing for product commercialization. General and administrative expenses increased approximately 23% from approximately $2,805,000 in 1994 to approximately $3,442,000 in 1995 primarily because of increases in staffing, recruiting expenses and professional fees. 1994 Compared to 1993 Total revenues increased from $4,094,000 in 1993 to $6,045,000 in 1994. The Company's license revenue increased approximately $1 million or 33% in 1994 from 1993 due to certain milestone payments. The increase in interest income of approximately $600,000 or 95% in 1994 was attributable to the investment of the proceeds of the June 1994 public offering of common stock. Research and development expenses increased approximately $2,900,000 or 56% due to research activities related to new products such as the transoral dental anesthetic system, the transdermal estrogen/progestogen combination delivery system, and the transdermal antifungal delivery system, among others. The increase in research and development expenses was also attributable to increases in the number of research, development, clinical and regulatory personnel, and preproduction expenses relating to the launch of the estradiol product including materials used in preproduction and training runs to test and validate manufacturing equipment and processes. The increase in general and 25 30 administrative expenses of approximately $560,000 or 25% was primarily due to increases in staffing. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its operations through public offerings of common stock, including the exercise of warrants issued in connection with the first such offering, private placements of its equity securities, license and contract revenues, interest income and during the 1995 calendar year, through the sale of product. From its inception through December 31, 1995, the Company received net proceeds of approximately $56,000,000 from the sale of equity securities, approximately $14,000,000 from license agreements, approximately $5,000,000 from interest income and approximately $9,000,000 from product sales. At the end of December 31, 1995 the Company had approximately $24,000,000 in cash and securities held to maturity. The decrease in cash, cash equivalents and securities held to maturity of $11,503,000 during 1995 primarily reflects the funding of a net loss of $6,581,000, an increase in inventory of $3,805,000, an increase in accounts receivable of $1,800,000 to support the worldwide launch of the transdermal estrogen replacement system and a $1,838,000 investment in property and equipment. As of December 31, 1995 the Company had no significant commitments for capital expenditures. The Company's future capital requirements depend upon numerous factors, including (i) the progress of its product development programs, (ii) the time required to obtain government regulatory approvals of products in development, (iii) the resources that the Company devotes to the development of self-funded products, proprietary manufacturing methods, advanced technologies and a marketing and sales administration infrastructure, (iv) the ability of the Company to obtain additional license agreements and to manufacture products pursuant to those agreements and (v) the demand for its products, if and when approved by regulatory authorities. The Company expects to incur additional costs related to product development activities, increased general and administrative expenses and the completion of its manufacturing facilities. Although the Company believes that existing cash, 26 31 cash equivalents and securities held to maturity, anticipated contract and manufacturing revenues, will be adequate for the foreseeable future, circumstances could arise which may result in a desire to raise additional capital. There can be no assurance that such capital will be available on acceptable terms, or at all. NEW ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS No. 121 establishes accounting standards for long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 requires that long-lived asets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of an asset may not be recoverable. SFAS No. 121 will apply to Noven for the year ended December 31, 1996. Management believes that the adoption of this statement will not have a material impact on Noven's financial statements. The FASB has also issued SFAS No. 123, "Accounting for Stock-Based Compensation". This statement defines a fair value based method of accounting for an employee stock option. This statement also permits a company to continue to measure compensation costs for their stock option plan using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS No. 123 requires disclosure of the pro forma net income and earnings per share that would be recorded if the fair value method was utilized. Noven plans to continue to utilize the provisions of APB 25 to account for such compensation costs, and will provide the pro forma disclosures required by SFAS 123 in its 1996 financial statements. 27 32 Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS
PAGE ---- REPORT OF INDEPENDENT AUDITORS' Deloitte & Touche LLP F-1 FINANCIAL STATEMENTS Balance Sheets as of December 31, 1995 and 1994 F-2 Statements of Operations for the years ended December 31, 1995, 1994 and 1993 F-3 Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993 F-4 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 F-5 Notes to Financial Statements F-6
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable PART III Omitted pursuant to General Instruction G(3) to Form 10-K PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements included in Part II of this Report. 2. Exhibits 28 33 Exhibit Number Description of Document - ------ ----------------------- 3.1 --Certificate of Incorporation of the Registrant dated April 10, 1987 and January 28, 1987, incorporated by reference to Exhibit 3(a) of Registration Statement on Form S-18 (Commission File No. 33-20331-A). 3.2 --Amendments to Certificate of Incorporation of the Registrant dated April 10, 1987 and January 28, 1988, incorporated by reference to Exhibit 3(b) of Registration Statement on Form S-18 (Commission File No. 33-20331-A). 3.3 --Amendment to Certificate of Incorporation of the Registrant dated June 21, 1991, incorporated by reference to Exhibit 3.3 of Registration Statement on Form S-2 (Commission File No. 33-45784). 3.4 --Amendment to Certificate of Incorporation of the Registrant dated August 17, 1992, incorporated by reference to Exhibit 3.4 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1994. 3.5 --By-laws of the Registrant, as amended and restated as of April 28, 1992, incorporated by reference to Exhibit 3.5 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1994. 3.6 --Amendment to Certificate of Incorporation of the Registrant dated August 2, 1994 incorporated by reference to Exhibit 3.6 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1995. 10.2 --Agreement between the Registrant and Rorer Group, Inc. (now known as Rhone-Poulenc Rorer, Inc.) dated April 27, 1989 (with certain provisions omitted pursuant to Rule 24b-2), as amended on June 22, 1990 (with certain provisions omitted pursuant to Rule 24b-2). 10.3 --Amended and Restated Stock Option Plan of the Registrant, incorporated by reference to Exhibit 10.10 of Form 10-K for the year ended December 31, 1990 filed with 29 34 the Securities and Exchange Commission on March 28, 1991, as further amended on June 23, 1992 and incorporated by reference to the 1992 Proxy Statement filed with the Securities and Exchange Commission on April 30, 1992. 10.5 --Parkside Plaza Office Lease between Maxine Chin and the Registrant dated April 1, 1991. 10.6 --Parkside Plaza Office Lease between James W. Keen and the Registrant dated July 2, 1992. 10.7 --Parkside Plaza Office Lease between Mark Rubino and the Registrant dated November 28, 1990. 10.8 --Parkside Plaza Office Lease between Bud Eiskant and the Registrant dated June 1, 1990. 10.9 --License Agreement between the Registrant and Ciba-Geigy Corporation dated November 15, 1991 (with certain provisions omitted pursuant to Rule 406) incorporated by reference to Exhibit 10.9 of Amendment No. 1 to Registration Statement on Form S-2 (Commission File No. 33-45784). 10.12 --Warrant and Warrant Agreement between the Registrant and Ciba-Geigy Corporation dated November 15, 1991, incorporated by reference to Exhibit 10.12 of Registration Statement on Form S-2 (Commission File No. 33-45784). 10.13 --License Agreement and Supply Agreement between the Registrant and Rhone-Poulenc Rorer Pharmaceuticals Inc. dated June 26, 1992 (with certain provisions omitted pursuant to Rule 24b-2), incorporated by reference to Exhibit 10.13 of Form 10-K for the year ended December 31, 1992, filed with the Securities and Exchange Commission on March 31, 1993. 10.14 --Warrant and Warrant Agreement between the Registrant and Rhone-Poulenc Rorer Pharmaceuticals Inc. dated June 26, 1992, incorporated by reference to Exhibit 10.14 of Form 10-K for the year ended December 31, 1992, filed 30 35 with the Securities and Exchange Commission on March 31, 1993. 10.15 --Parkside Plaza Office Lease between Scott E. Stuckey and Annamarie Stuckey and Registrant dated July 27, 1992, incorporated by reference to Exhibit 10.15 of Form 10-K for the year ended December 31, 1992, filed with the Securities and Exchange Commission on March 31, 1993. 10.16 --Parkside Plaza Office Lease between Lawrence T. Deddy, Trustee and the Registrant dated July 29, 1992, incorporated by reference to Exhibit 10.16 of Form 10-K for the year ended December 31, 1992, filed with the Securities and Exchange Commission on March 31, 1993. 10.17 --Agreement between the Registrant and Turnpike-McNeil Development Limited dated January 29, 1993 (re: real property), incorporated by reference to Exhibit 10.17 of Form 10-K for the year ended December 31, 1992, filed with the Securities and Exchange Commission on March 31, 1993. 10.18 --Agreement between the Registrant and Turnpike-McNeil Development Limited dated January 29, 1993 (re: real property and building), incorporated by reference to Exhibit 10.18 of Form 10-K for the year ended December 31, 1992, filed with the Securities and Exchange Commission on March 31, 1993. 10.19 --Warrant issued to Ciba-Geigy Corporation dated April 1, 1993, incorporated by reference to Exhibit 10.19 of Form 10-K for the year ended December 31, 1993, filed with the Securities and Exchange Commission on March 31, 1994. 10.20 --Industrial Lease between Rhone-Poulenc Rorer Pharmaceuticals Inc. and the Registrant dated March 23, 1993 and effective February 16, 1993 (with certain provisions omitted pursuant to Rule 24b-2), incorporated by reference to Exhibit 10.20 of Form 10-K for the year ended December 31, 1993, filed with the Securities and Exchange Commission on March 31, 1994. 31 36 10.21 --Second Amendment dated May 13, 1993 to Agreement between the Registrant and Rhone-Poulenc Rorer, Inc. (successor to Rorer Group, Inc.) dated April 27, 1989 (with certain provisions omitted pursuant to Rule 24b-2), incorporated by reference to Exhibit 10.21 of Form 10-K for the year ended December 31, 1993, filed with the Securities and Exchange Commission on March 31, 1994. 10.22 --Amendment dated May 17, 1994 to Warrant dated November 15, 1991 issued to Ciba-Geigy Corporation incorporated by reference to Exhibit 10.22 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1995. 10.23 --Warrant issued to Ciba-Geigy Corporation dated November 28, 1994 incorporated by reference to Exhibit 10.23 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1995. 10.24 --Employment Agreement between Steven Sablotsky and the Registrant dated December 31, 1994 incorporated by reference to Exhibit 10.24 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1995. 10.25 --Employment Agreement between Mitchell Goldberg and the Registrant dated December 31, 1994 incorporated by reference to Exhibit 10.25 of Form 10-K filed with the Securities and Exchange Commission on March 31, 1995. 10.26 --Employment Agreement between Colin A. Norris and the Registrant dated February 1, 1995. (b) Reports on Form 8-K - None 32 37 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 29, 1996 NOVEN PHARMACEUTICALS, INC. By:/s/ Steven Sablotsky --------------------------- STEVEN SABLOTSKY, Chairman of the Board and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- By: /s/ Steven Sablotsky Principal Executive March 29, 1996 ---------------------- Officer and Director Steven Sablotsky (Chairman of the Board and President) By: /s/ William A. Pecora Principal Financial March 29, 1996 ---------------------- and Accounting Officer William A. Pecora (Chief Financial Officer) By: Director March , 1996 ---------------------- Mitchell Goldberg (Executive Vice President)
33 38 By:/s/ Sheldon H. Becher Director March 29, 1996 ---------------------- Sheldon H. Becher By: /s/ Sidney Braginsky Director March 29, 1996 ---------------------- Sidney Braginsky By: /s/ Lawrence J. Dubow Director March 29, 1996 ---------------------- Lawrence J. Dubow
34 39 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Noven Pharmaceuticals, Inc.: We have audited the accompanying balance sheets of Noven Pharmaceuticals, Inc. ("Noven") as of December 31, 1995 and 1994, and the related statements of operations, stockholders' equity, and cash flows for each of the three years ended December 31, 1995. These financial statements are the responsibility of Noven's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Noven Pharmaceuticals, Inc. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years ended December 31, 1995, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Miami, Florida February 16, 1996 F-1 40 NOVEN PHARMACEUTICALS, INC.
BALANCE SHEETS DECEMBER 31, 1995 AND 1994 - ----------------------------------------------------------------------------------------------------------- ASSETS 1995 1994 CURRENT ASSETS: Cash and cash equivalents $ 16,131,263 $ 12,070,272 Securities held to maturity 7,881,397 23,445,070 Accounts receivable 2,512,561 712,455 Inventories 5,069,946 1,264,553 Prepaid and other current assets 258,220 825,159 ------------- ------------- Total current assets 31,853,387 38,317,509 ------------- ------------- PROPERTY AND EQUIPMENT: Property and equipment, at cost 17,506,935 16,098,902 Less: accumulated depreciation and amortization 1,974,138 1,076,379 ------------- ------------- Total net property and equipment 15,532,797 15,022,523 ------------- ------------- OTHER ASSETS: Patent development costs, net 1,218,630 979,201 Deposits and other assets 40,738 45,394 ------------- ------------- Total other assets 1,259,368 1,024,595 ------------- ------------- TOTAL $ 48,645,552 $ 54,364,627 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 4,293,185 $ 3,270,657 ------------- ------------- DEFERRED LICENSE REVENUE 6,322,011 6,548,007 ------------- ------------- COMMITMENTS AND CONTINGENCIES (Note 4) STOCKHOLDERS' EQUITY: Preferred stock - authorized 100,000 shares of $.01 par value; no shares issued or outstanding Common stock - authorized 30,000,000 shares of $.0001 par value; issued and outstanding 19,674,144 shares in 1995 and 18,839,068 in 1994 1,967 1,884 Additional paid-in capital 60,091,751 60,026,833 Accumulated deficit (22,063,362) (15,482,754) ------------- ------------- Total stockholders' equity 38,030,356 44,545,963 ------------- ------------- TOTAL $ 48,645,552 $ 54,364,627 ------------- -------------
See accompanying notes to financial statements. F-2 41 NOVEN PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - ----------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 REVENUES: Product sales $ 8,747,965 $ 294,814 License revenue 1,702,780 4,155,163 $ 3,124,447 Interest income 1,681,688 1,213,479 623,621 Other income 51,908 381,095 345,480 --------------- ------------- ------------ Total revenues 12,184,341 6,044,551 4,093,548 --------------- ------------- ------------ EXPENSES: Cost of products sold 4,814,349 147,866 Research and development 10,508,763 8,035,782 5,160,235 General and administrative 3,441,837 2,805,128 2,244,291 --------------- ------------- ------------ Total expenses 18,764,949 10,988,776 7,404,526 --------------- ------------- ------------ NET LOSS $ (6,580,608) $ (4,944,225) $ (3,310,978) --------------- ------------- ------------ NET LOSS PER SHARE $ (0.34) $ (0.28) $ (0.21) --------------- ------------- ------------ WEIGHTED AVERAGE SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS 19,236,807 17,439,955 15,924,719 --------------- ------------- ------------
See accompanying notes to financial statements. F-3 42 NOVEN PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - --------------------------------------------------------------------------------------------------- ADDITIONAL COMMON STOCK PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL BALANCE, DECEMBER 31, 1992 15,591,626 $1,559 $27,965,537 $(7,227,551) $20,739,545 ---------- ------ ----------- ------------ ----------- Issuance of 255,716 shares of stock for acquisition of property and equipment 255,716 26 3,003,974 3,004,000 Issuance of 300,658 shares of stock pursuant to stock option plan, net 300,658 30 76,005 76,035 Grant of stock purchase warrant 184,884 184,884 Net loss (3,310,978) (3,310,978) ---------- ------ ----------- ------------ ----------- BALANCE, DECEMBER 31, 1993 16,148,000 $1,615 $31,230,400 $(10,538,529) $20,693,486 ---------- ------ ----------- ------------ ----------- Issuance of 441,068 shares of stock pursuant to stock option plan, net 441,068 44 16,585 16,629 Sale of 2,250,000 shares of common stock in a public offering, net 2,250,000 225 28,317,348 28,317,573 Grant of stock purchase warrant 462,500 462,500 Net loss (4,944,225) (4,944,225) ---------- ------ ----------- ------------- ----------- BALANCE, DECEMBER 31, 1994 18,839,068 $1,884 $60,026,833 $(15,482,754) $44,545,963 ---------- ------ ----------- ------------- ----------- Issuance of 726,347 shares of stock pursuant to stock option plan, net 726,347 72 64,929 65,001 Issuance of 108,729 shares for acquisition of property and equipment 108,729 11 (11) Net loss (6,580,608) (6,580,608) ---------- ------ ----------- ------------ ----------- BALANCE, DECEMBER 31, 1995 19,674,144 $1,967 $60,091,751 $(22,063,362) $38,030,356 ---------- ------ ----------- ------------ -----------
See accompanying notes to financial statements. F-4 43 NOVEN PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - ----------------------------------------------------------------------------------------------------------------- 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (6,580,608) $ (4,944,225) $ (3,310,978) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,327,254 861,312 779,437 Amortization of patent costs 120,480 90,490 55,363 Increase in inventories (3,805,393) (563,914) (157,084) (Increase) decrease in prepaid and other current assets 566,939 (237,981) (511,185) Increase in accounts receivable (1,800,106) (712,455) Increase (decrease) in accounts payable and accrued liabilities 1,022,528 2,127,803 (156,932) Decrease in deferred license revenue (225,996) (1,475,996) (225,997) ----------- ----------- ----------- Cash flows used in operating activities (9,374,902) (4,854,966) (3,527,376) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: (Purchase) maturity of securities 15,563,673 (11,426,090) 972,679 Purchase of fixed assets, net (1,837,528) (2,772,381) (3,179,294) Payments for patent development costs (359,909) (311,205) (329,770) (Payment) refund of deposits 4,656 (19,975) (8,663) ---------- ----------- ----------- Cash flows provided (used) in investing activities 13,370,892 (14,529,651) (2,545,048) ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock 65,001 28,334,202 76,035 Grant of stock purchase warrant 462,500 184,884 ------------ ------------ ------------ Cash flows provided by financing activities 65,001 28,796,702 260,919 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,060,991 9,412,085 (5,811,505) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 12,070,272 2,658,187 8,469,692 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, END OF YEAR $ 16,131,263 $ 12,070,272 $ 2,658,187 ------------ ------------ ------------ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Property and equipment acquired in exchange of common stock and in connection with license agreement $10,004,000 -----------
See accompanying notes to financial statements. F-5 44 NOVEN PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - ------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Noven Pharmaceuticals, Inc. ("Noven") was incorporated in Delaware in January 1987 to become a fully integrated pharmaceutical company capable of developing, manufacturing and marketing pharmaceutical products which incorporate alternate drug delivery technologies. The following is a summary of significant accounting policies of Noven: PERVASIVENESS OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash and securities with a remaining maturity of three months or less. SECURITIES HELD TO MATURITY - Securities held to maturity consist mainly of U.S. Government obligations with maturities no longer than one year. The securities are recorded at cost which approximates fair value. INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The following are the major classes of inventories as of December 31:
1995 1994 Finished goods $2,226,603 $ 520,928 Work in process 1,262,657 69,133 Raw Materials 1,580,686 674,492 ---------- ---------- TOTAL $5,069,946 $1,264,553 ---------- ----------
Inventories at December 31, 1995 related primarily to the Company's transdermal estrogen delivery system. To date Noven has not experienced and does not anticipate in the future, any difficulty acquiring materials necessary to manufacture its transdermal systems. PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost. Depreciation is provided over the estimated useful lives of the assets ranging up to 31 years. Leasehold improvements are amortized over the life of the lease or the service life of the improvements, whichever is shorter. The straight-line method of depreciation is principally followed for financial purposes. Fully depreciated assets are removed from the cost and accumulated depreciation accounts. PATENT DEVELOPMENT COSTS - Costs, principally legal fees, related to the development of patents are capitalized and amortized over the lesser of their estimated economic useful lives or their remaining legal lives. F-6 45 INCOME TAXES - Noven accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS 109 provides that income taxes are accounted for using an asset and liability method which requires the recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences between tax bases and financial reporting bases of assets and liabilities. As there is no assurance that the Company will generate sufficient earnings to utilize its available tax assets for carryfowards, a valuation allowance has been established to offset the existing net deferred tax asset. At December 31, 1995 and 1994, Noven had net operating loss carryforwards of approximately $24,000,000 and $18,000,000. Additionally, at December 31, 1995 and 1994, Noven had research and development credit carryforwards of approximately $2,200,000 and $1,800,000 respectively. Carryforwards expire through 2010. REVENUE RECOGNITION - Revenue from product sales is recognized at the time of shipment. License revenue is recognized into income when earned under the terms of the agreements. Substantially all of Noven's product sales were to the principal licensees (see Note 3). COSTS OF PRODUCT SOLD - Direct and indirect costs associated with manufacturing the transdermal estrogen delivery system are included in costs of products sold. Pre-production expenses incurred during the start-up phase are charged to research and development. RESEARCH AND DEVELOPMENT COSTS - Research and development costs consist of self-funded research and development costs and the costs associated with work performed under license agreements. Research and development costs included direct and allocated expenses and are expensed as incurred. Research and development costs under license agreements partially funded by the licensees are recorded as license revenue or other income. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and cash equivalents, securities held to maturity, accounts receivable, accounts payable and accrued expenses approximate fair value due to the relatively short maturity of the respective instruments. LOSS PER SHARE - Loss per share is based on the weighted average number of shares outstanding. NEW ACCOUNTING STANDARDS - In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS No. 121 establishes accounting standards for the impairment of the long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of". SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of an asset may not recoverable. SFAS No. 121 will apply to Noven for the year ended December 31, 1996. Management believes that the adoption of this statement will not have a material impact on Noven's financial statements. The FASB has also issued SFAS No. 123, "Accounting for Stock-Based Compensation". This statement defines a fair value based method of accounting for an employee stock option. This statement also permits a company to continue to measure compensation costs for their stock option plan using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS No. 123 requires disclosure of the pro forma net income and earnings per share that would be recorded if the fair value method was utilized. Noven plans to continue to utilize the provisions of APB 25 to account for such compensation costs, and will provide the pro forma disclosures required by SFAS 123 its 1996 financial statements. RECLASSIFICATIONS - Certain amounts in the 1994 financial statements have been reclassified to conform with the 1995 presentation. F-7 46 2. PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1995 and 1994:
1995 1994 Land $ 2,540,035 $ 2,540,035 Building 2,055,714 2,011,006 Leased property and leasehold improvements 7,978,592 7,870,807 Manufacturing and testing equipment 4,481,370 3,260,086 Furniture 451,224 416,968 ----------- ----------- 17,506,935 16,098,902 Less accumulated depreciation and amortization 1,974,138 1,076,379 ----------- ----------- $15,532,797 $15,022,523 ----------- -----------
On February 16, 1993, Noven purchased a 20,000 square foot building and 9.5 acres of vacant land in two separate transactions. The $1.1 million purchase price for the building was paid with $300,000 in cash and 87,317 shares of restricted Noven common stock. The purchase price for the vacant land, $2,204,000 was paid with 168,399 shares of Noven restricted stock. The price protection provisions of the contract resulted in the issuance of 108,729 additional shares of Noven restricted stock on March 15, 1995. The land and building are adjacent to two 40,000 square foot manufacturing facilities which are leased by Noven from a licensee as part of a license agreement. 3. LICENSE AGREEMENTS In 1989 Noven entered into a license agreement which gave the licensee the right to market Noven's transdermal estrogen delivery system worldwide except for Japan. In 1990 Noven reacquired exclusive marketing rights to the United States and Canada. Licensee fees and milestone payments received in connection with this agreement were fully recognized into income by 1994. In 1991 Noven entered into a license agreement which gave the licensee the right to market Noven's transdermal estrogen delivery system in the United States and Canada. License fees and milestone payments received in connection with this agreement were fully recognized into income by 1994. This agreement also provides for receipt of royalty payments upon the commercialization of the product. Through December 31, 1995, no royalty payments have been received nor accrued. In addition, warrants to purchase 1,091,151 shares of common stock were granted under this agreement. The exercise prices of these warrants range from $2.5875 to $15.34. The term of the warrants range from five to seven years. In addition, during a 30-day period subsequent to any public or private sale of common stock by Noven, the licensee has the right to purchase shares of common stock at the same price and in an amount sufficient to maintain the same ownership percentage (inclusive of shares subject to warrants held by the licensee) in outstanding common stock held prior to any such sales. At December 31, 1995, no warrants have been exercised. In 1992 Noven entered into an additional license agreement which granted the licensee the right to market Noven's transdermal progestogen delivery system and its transdermal combination estrogen/progestogen delivery system worldwide. The agreement also expanded the licensee's marketing rights for the transdermal estrogen delivery system to include Japan. The licensee will fund all development and clinical costs for the licensed products and will provide Noven certain milestone payments. In addition, Noven granted a warrant to the licensee for the right to purchase up to 1,000,000 shares of Noven common stock at a price of $8 per share for a period of 5 years. As part of this license agreement, the licensee funded the construction of a manufacturing facility for the production of transdermal drug F-8 47 delivery systems. The facility is leased by Noven at a substantially below market rate. Noven retains the right to purchase the facility at any time in the future at the licensee's book value. Noven has recorded both the facility and deferred revenue at amounts equal to the funds advanced by the licensee which are depreciated/amortized to depreciation expense and license revenue over the life of the underlying lease (see Note 2). 4. COMMITMENTS AND CONTINGENCIES Noven has operating lease commitments, principally for research and development facilities and office space. Future minimum annual rental payments on existing noncancelable leases, at December 31, 1995, approximate the following:
1996 $227,000 1997 89,000 1998 69,000 1999 12,000 -------- Total $397,000 ========
Rent expense for the years ended December 31, 1995, 1994 and 1993 amounted to approximately $172,000, $167,000 and $193,000, respectively. Noven has long term employment agreements. The agreements provide for base salaries subject to cost of living increases each year and other increases and bonuses as determined by the Compensation Committee. These agreements provide for annual commitments of approximately $800,000 in the aggregate. 5. RELATED PARTY TRANSACTIONS Professional services have been rendered by an accounting firm of which a director of Noven is a substantial shareholder. For the years ended December 31, 1995, 1994 and 1993, Noven paid approximately $80,000, $46,000 and $79,000 for these services. 6. STOCK OPTIONS Noven has a stock option plan (the "Plan") that provides for the granting of 10,000,000 incentive and non-qualified stock options to selected individuals or entities. The terms and conditions (including price, exercise date and number of shares) are determined by the Stock Option Committee, which administers the Plan. The per share exercise price of (i) non-qualified stock options granted to directors and all other persons, may not be less than the fair market value and 50% of the fair market value, respectively, of the common stock on the date of grant and (ii) incentive stock options granted to employees and employees owning in excess of 10% of the issued and outstanding common stock, may not be less than the fair market value and 110% of the fair market value, respectively, of the common stock on the date of grant. Noven has not granted any options at less than fair market value. Each option is exercisable after the period(s) specified in the option agreement, but no option can be exercised after 10 years from the date of grant (or five years from the date of grant in the case of a grantee holding more than 10% of the issued and outstanding common stock). Options may be exercised only if the grantee has been in the continuous employment of, or affiliation with, or has continuously acted as a consultant for Noven from the date of grant to the date of exercise, except in the event of death or permanent disability. F-9 48 At December 31, 1995 and 1994, Noven had reserved 3,750,000 shares of common stock for issuance under the Plan. A summary of the stock option activity for the years ended December 31, 1995 and 1994 is as follows:
1995 1994 Outstanding at beginning of year 2,042,149 2,536,771 Granted 628,700 36,750 Exercised/canceled (1,161,486) (531,372) -------------- ---------------- Outstanding at end of year 1,509,363 2,042,149 -------------- ---------------- Exercisable at end of year 659,952 1,455,660 -------------- ---------------- Available for future grants (from 3,750,000 shares reserved at December 31, 1995 and 1994.) 297,959 725,803 -------------- ---------------- Range of prices for all options outstanding $ .20 - $17.25 $ .20 - $17.25 -------------- ---------------- Range of prices for options granted in each year $7.50 - $10.50 $11.625 - 17.25 -------------- ----------------
F-10 EX-10.2 2 AGREEMENT BETWEEN NOVEN AND RORER GROUP 1 EXHIBIT 10.2 Agreement between the Registrant and Rorer Group, Inc. (now know as Rhone-Poulenc Rorer, Inc.) dated April 27, 1989 (with certain provisions omitted pursuant to Rule 24b-2), as amended on June 22, 1990 (with certain provisions omitted pursuant to Rule 24b-2). 2 A G R E E M E N T Between RORER GROUP INC. And NOVEN PHARMACEUTICALS, INC. * CERTAIN PORTIONS HEREOF HAVE BEEN OMITTED PURSUANT TO RULE 24b-2 AND FILED SEPARATELY WITH THE COMMISSION. 3 TABLE OF CONTENTS Article Section Page RECITALS............................................. 1 I DEFINITIONS.......................................... 2 1.1 Affiliates..................................... 2 1.2 Control........................................ 2 1.3 Costs.......................................... 3 1.4 Clinical and Product Development Program....... 3 1.5 Estrogen Transdermal Drug Delivery System...... 3 1.6 Noven's Technology............................. 4 1.7 Noven's Patent Rights.......................... 4 1.8 Licensed Product............................... 5 1.9 Net Sales...................................... 5 1.10 Standard Packaging............................. 5 1.11 Sublicensee.................................... 6 1.12 The Territory.................................. 6 II OBLIGATIONS OF NOVEN................................. 6 2.1 Level of Effort................................ 6 2.2 Assignment of Invention Rights................. 6 2.3 Progress Reports............................... 7 2.4 Improvements................................... 7 2.5 Program Updates................................ 8 2.6 Term of Clinical and Product Development Program........................................ 8 2.7 Supply and Use of Information.................. 8 III OBLIGATIONS OF RORER................................. 9 3.1 Clinical Testing............................... 9 3.2 Skin Testing................................... 10 3.3 Governmental Approvals......................... 10 3.4 Supply of Information.......................... 10 3.5 Best Efforts................................... 11 3.6 Time for Reimbursement......................... 11 3.7 Estimate of Costs.............................. 11 -i- 4 TABLE OF CONTENTS (Cont'd.) Article Section Page IV GRANT................................................ 12 4.1 License........................................ 12 4.2 Sublicense..................................... 13 V PAYMENTS............................................. 13 5.1 Initial Payments............................... 13 5.2 Fee............................................ 14 5.3 Minimum Fee.................................... 17 5.4 Payments....................................... 18 5.5 Currency....................................... 18 5.6 Records........................................ 18 5.7 One Royalty.................................... 19 5.8 Compulsory License............................. 19 VI SUPPLY............................................... 19 6.1 Agreement to Supply............................ 19 VII PATENTS.............................................. 20 7.1 Noven Inventions............................... 20 7.2 Joint Inventions............................... 20 VIII CONFIDENTIALITY OBLIGATIONS.......................... 21 8.1 Confidentiality................................ 21 IX TERM AND TERMINATION................................. 22 9.1 Term........................................... 22 9.2 Termination.................................... 22 X NOVEN WARRANTIES..................................... 24 10.1 Ownership...................................... 24 10.2 Right to Enter Agreement....................... 24 10.3 Product Warranty............................... 24 10.4 Foreign Product Warranty....................... 24 10.5 Patent Infringement Warranty................... 25 10.6 Limitation On Damages.......................... 25 -ii- 5 TABLE OF CONTENTS (Cont'd) Article Section Page XI ARBITRATION.......................................... 25 11.1 Arbitration.................................... 25 11.2 Notification of Breach......................... 25 XII MISCELLANEOUS........................................ 26 12.1 Relationship of Parties........................ 26 12.2 Inspection of Facilities....................... 26 12.3 Entire Agreement............................... 26 12.4 Force Majeure.................................. 27 12.5 Severability................................... 27 12.6 Assignment..................................... 28 12.7 Governing Law.................................. 28 12.8 Notices........................................ 28 12.9 Counterparts................................... 29 EXHIBIT A - CLINICAL AND PRODUCT DEVELOPMENT PROGRAM PROTOCOL EXHIBIT B - NOVEN'S PATENT RIGHTS EXHIBIT C - TRANSDERMAL ESTROGEN SKIN PATCH PRODUCT SPECIFICATIONS EXHIBIT D - SUPPLY AGREEMENT -iii- 6 LICENSE AGREEMENT AGREEMENT ("License Agreement") made as of the 27th day of April, 1989, by and between RORER GROUP Inc., a Pennsylvania corporation having a place of business at 500 Virginia Drive, Fort Washington, Pennsylvania 19034 (herinafter "Rorer"), and NOVEN PHARMACEUTICALS, INC., a Delaware corporation having a place of business at 13300 S.W. 128th Street, Miami, Florida 33186 (hereinafter "Noven"). WITNESSETH WHEREAS, Noven represents and warrants that it has developed certain information relating to and is the owner of the entire right, title and interest in and to certain patent applications having claims covering a Transdermal Estrogen Drug Delivery System (hereinafter defined as "Licensed Product"); and WHEREAS, Noven has available as employees and independent contractors a group of scientists with the expertise and desire to implement the program described in Exhibit A (hereinafter defined as the "Clinical and Product Development Program"), said Exhibit A being a part of this License Agreement; and WHEREAS, Rorer is willing to fund said Clinical and Product Development Program with the understanding that the benefits of all such programs shall be available to Rorer and its Affiliates (as hereinafter defined) for further evaluation, 7 and for commercial exploitation solely pursuant to its sale of a Transdermal Estrogen Drug Delivery System throughout the Territory (as hereinafter defined). NOW THEREFORE, it is mutually agreed between the parties hereto as follows: ARTICLE I - DEFINITIONS 1.1 Affiliates. The term "Affiliate" or "Affiliates" means any entity that is Controlled directly or indirectly by the party referred to, or any entity that directly or indirectly Controls the party referred to, or any entity that is directly or indirectly Controlled by an entity which also directly or indirectly controls the party referred to, so that the term shall include any parent of the entity referred to or a directly or indirectly held subsidiary of the parent or of the entity referred to, and entities in common control with the entity referred to. 1.2 Control. The term "Control," "Controls" or "Controlled" means the ownership, directly or indirectly, of at least fifty percent (50%) of the voting rights attached to issued voting shares or the power to control decisions made by any person or entity other than entities having shares. In addition if any company or its Affiliate, which is one of the fifty largest in terms of pharmaceutical sales, in the United States acquires sufficient shares of Noven to exert de facto control, then such shall be considered control hereunder. -2- 8 l.3 Costs. The term "Costs" shall mean the fully allocated costs of the party referred to including but not limited to the fully allocated cost of goods and services and the manufacturing overhead related thereto and, only in the case of the Clinical and Product Development Program, an allocation of all administrative and general expenses of the entity referred to, in the same proportion that the man hours devoted to the provision of the goods and services bears to the total of man hours consumed by the entity referred to. Cost shall be determined by generally accepted accounting principles, applied on a consistent basis, as determined by the independent certified public accountant retained by the entity whose costs are being accounted for. 1.4 Clinical and Product Development Proqram. The term "Clinical and Product Development Program" shall mean research conducted as a part of Noven's pre-clinical and clinical activities, the Cost of which is to be wholly paid for by Rorer, and which is required or reasonably necessary to obtain governmental health approvals for Licensed Product during the term of this License Agreement including the program substantially as set forth in Exhibit A. l.5 Estrogen Transdermal Drug Delivery System. The term "Estrogen Transdermal Drug Delivery System" means an estrogen in a -3- 9 adapted for transdermal delivery by application to the epidermis. 1.6 Noven's Technology. The term "Noven Technology" shall mean any and all data, information, technology, know-how, process, technique, method, skill, proprietary information, trade secret, development, discovery, and inventions, owned or controlled by Noven and specifically related to an Estrogen Transdermal Drug Delivery System now existing or developed in the future under and during the course of the Clinical and Product Development Program. Noven Technology shall not include information related to the manufacture of Licensed Product and specifications and procedures related thereo, except to the extent required for health registration of Licensed Product and except to the extent of any license to manufacture granted under this License Agreement. 1.7 Noven's Patent Riqhts. The term "Noven Patent Rights" shall mean any and all patents and patent applications the claims of which cover the Licensed Product including reissues, extensions and patents of addition, which are owned by Noven or to which Noven has any right to control or to license third parties (whether in whole or in part) at any time during the term of this License Agreement. Patents on inventions made after December 31, 1994 shall be included only to the extent based on inventions which are conceived or reduced to practice by either party hereto during and under the -4- 10 Clinical and Product Development Program, The presently existing rights are set forth in Exhibit B, said Exhibit B being a part of this License Agreement. 1.8 Licensed Product. The term "Licensed Product" shall mean any Estrogen Transdermal Drug Delivery System embodying any part of Noven's Technology or covered in whole or in part by any of Noven's Patent Rights or which meet the product specifications set forth in Exhibit C, said Exhibit C being part of this License Agreement. 1.9 Net Sales. The term "Net Sales" shall mean the gross amount invoiced by Rorer, its Affiliates and Sublicensees on all sales of Licensed Products less (a) discounts actually allowed, (b) credits actually allowed for claims, allowances, retroactive price reductions or returned goods, (c) prepaid freight, and (d) sales taxes, duties and other governmental charges actually paid in connection with the sale, to the extent not reimbursed, (but excluding what is commonly known as income taxes). 1.10 Standard Packaging. The term "Standard Packaging" shall mean an Estrogen Transdermal Drug Delivery System Licensed Product meeting the specifications set forth in Exhibit C packaged in individual pouches and in individual foldings cartons consisting of eight (8) pouch units per carton and containing any labels and labelling required therefor by the United States Food and Drug Administration and provided in -5- 11 packages of twenty four (24) individual folding cartons per shipping container, and produced at a Noven facility in the United States, the grade and quality of the labels, labelling and packaging materials being as specified in the Abbreviated New Drug Application therefor. 1.11 Sublicensee. The term "Sublicensee" and "Sublicensees" shall mean any entity to whom Rorer shall grant any right or license to use Noven's Technology or to make, use or sell under all or any part of Noven's Patent Rights or to make, use or sell any product which meets the specifications set forth in Exhibit C. 1.12 The Territory. The term "Territory" shall mean all countries and territories worldwide except Japan. ARTICLE II - OBLIGATIONS OF NOVEN 2.1 Level of Effort. The officers and employees of Noven shall devote a sufficient amount of their time and efforts to the Clinical and Product Development Program and employ a sufficient number of technically qualified officers and employees to complete the Clinical and Product Development Program within the terms set forth in this Article II. 2.2 Assignment of Invention Riqhts. Immediately upon execution of this Agreement, Noven shall promptly undertake the implementation of the Clinical and Product Development Program, devoting to the Clinical and Product Development Program the services of its officers and employees. It is understood and -6- 12 agreed that all employees and, to the extent reasonably practicable, agents and consultants of Noven employed in or for the Clinical and Product Development Program shall execute written agreements acceptable to both Noven and Rorer requiring assignment to Noven of any developments, discoveries, improvements and/or inventions in Licensed Product made by such employees, agents and consultants under and during the course of the Clinical and Product Development Program. 2.3 Progress Reports. Noven shall from time to time, but not less frequently than once each month, inform Rorer in writing of the progress of the Clinical and Product Development Program and the commencement of any project within the Clinical and Product Development Program. 2.4 Improvements. During the term of this License Agreement and any extension thereof, Noven shall promptly disclose to Rorer in writing, to the extent legally permitted and in reasonable detail, any developments, discoveries, improvements or inventions in an Estrogen Transdermal Drug Delivery System relating to Licensed Product owned or controlled by Noven, its employees or agents or consultants who have the duty to assign such applications to the extent such are made prior to December 31, 1994 or at any time during the Clinical and Product Development Program. Such shall be automatically deemed Noven's Patent Rights unless Rorer notifies Noven in writing to the contrary, within sixty (60) -7- 13 days of receipt of the initial information concerning the same. No such future developments, discoveries, improvements or inventions shall be automatically included within the scope of Noven's Patent Rights unless funded under the Clinical and Product Development Program. 2.5 Program Updates. On a date which shall be approximately three (3) months after the commencement of the Clinical and Product Development Program, and at three-month intervals thereafter, representatives of Noven and of Rorer shall meet to review the progress and status of the Clinical and Product Development Program then underway. At such meetings, Rorer shall have the right to assign or reassign priorities to the various projects comprising the Clinical and Product Development Program and to suggest procedures for their implementation, except for projects for use in obtaining regulatory approval to market Licensed Product in the United States and Canada. However, Rorer's input shall be reasonably considered. 2.6 Term of Clinical and Product Development Program. Noven will use its best efforts to complete its work pursuant to the Clinical and Product Development Program needed to file an Abbreviated New Drug Application for Licensed Product in the United States, on or about December 31, 1989. 2.7 Supply and Use of Information. Noven shall promptly provide to Rorer, for Rorer's exclusive use, all -8- 14 Noven's Technology relating to Licensed Product, subject only to the concurrent right of Noven and Noven's Affiliates to use the same in the United States and Canada. The parties shall, as promptly as possible, provide to each other with any information that comes to the knowledge of a responsible officer of any party relating to any adverse reaction occasioned during research on or use of a Licensed Product. In countries where Rorer needs manufacturing information to obtain a product license, Noven shall supply the necessary information solely for use in obtaining such license and subject to the confidentiality obligations of Article VIII. ARTICLE III - DEVELOPMENT OBLIGATIONS 3.1 Clinical Testing. All pre-clinical, clinical and post-clinical testing and stability testing including but not limited to the Clinical Product Development Program required for government health care approvals in the Territory of a Licensed Product developed by Noven shall be conducted by Noven and Rorer, at Rorer's sole expense, it being understood that Noven shall perform the clinical testing for the United States and Canada at Rorer's sole expense. However, before clinical testing of a product is commenced, Noven shall complete all of Rorer's pre-clinical testing requirements set forth in Exhibit A for the Licensed Product except for the U.S. and Canada. -9- 15 3.2 Skin Testing. At the earliest possible date, but no later than December 31, 1989, Rorer may require adhesion and skin irritation studies. 3.3 Governmental Approvals. Rorer shall file requests with the appropriate government agencies within the Territory for approval of Licensed Product, except as to the United States of America and Canada. The decision regarding the timing of said filings shall be in Rorer's sole discretion, except for the United States and Canada. Rorer shall have full and complete ownership of all governmental approvals, except for the United States and Canada, relating to Licensed Products. The parties shall provide each other with full copies of and a right of reference to any application for registrations and any registration in the United States and Canada. 3.4 Supply of Information. Rorer shall promptly and on a continuing basis provide Noven, for use by Noven, with all information regarding Rorer's technology related to Licensed Product, on a royalty-free basis. -10- 16 3.5 Best Efforts. Rorer shall use its best efforts to file and obtain approval of appropriate governmental agencies for the sale of Licensed Product in Rorer shall use its best efforts to sell Licensed Product in Rorer shall use efforts to file and obtain approval of appropriate governmental agencies, and sell Licensed Product as it would for its own products. 3.6 Time for Reimbursement. Payment shall be made for Noven's Costs pursuant to this Article III by Rorer in Miami, Florida within thirty (30) days of receipt of a Noven invoice itemizing the nature of charges incurred hereunder. 3.7 Estimate of Costs. The parties acknowledge that the Costs of clinical testing and obtaining any necessary governmental regulatory approvals cannot be estimated. Without intending to be bound hereby or by the estimates for the same set forth in Exhibit A, Noven estimates that its Costs of clinical testing and obtaining an Abbreviated New Drug Application for Licensed Product in the United States will be approximately One Million (U.S. $ 1,000,000.00) United States Dollars and the Costs of additional clinical testing for regulatory filings in -11- 17 will be approximately an additional One Million (U.S. $ 1,000,000.00) United States Dollars. Any costs exceeding the program of Exhibit A must be agreed to in writing by Rorer. ARTICLE IV - GRANT 4.1 License. (a) Noven hereby grants to Rorer, with the right to sublicense Rorer's Affiliates and Sublicensees subject to the provisions of Article 4.2 hereof, the exclusive right and license in the territory to use, sell, or otherwise dispose of Licensed Products under Noven's Patent Rights and Noven's Technology; provided, however, Noven ond its Affiliates shall retain the non-exclusive right to use and sell licensed product in the United States and Canada. Said retained right to use and sell cannot be licensed by Noven to any third party, other than Noven or its Affillates. Noven's and its Affiliates retained right to use and sell in the United States and Canada shall cease, at Rorer's option, if there is a change of Control of Noven. (b) No right or license to make, use or sell under Noven's Technology or Noven's Patent Rights is granted herein except as provided herein and with reference to Licensed Product. No right of Rorer, its Affiliates or sublicensees to manufacture Licensed Product is granted except to the extent stated herein. -12- 18 (c) The term "exclusive" used here means that Noven shall not voluntarily grant a right to any third parties under Noven's Technology or Noven's Patent Rights and Rorer shall have the benefit of Article 5.8 hereof with respect to such grant. 4.2 Sublicense. As part of the rights granted in Article 4.1, Rorer shall have the right throughout the Territory to grant sublicenses to Sublicensees, only with the prior written approval of Noven, which approval shall not be unreasonably withheld. Such written approval by Noven shall not be required for sublicenses to Rorer Affiliates. Any such Sublicensee shall agree to assume the duties of Rorer hereunder with respect to the Territory involved, provided, however, that such sublicense shall not release Rorer from any liability for performance under this License Agreement. Noven shall have no duty to approve any such sublicense until it receives a copy of the proposed sublicense agreement, from which Rorer shall have the right to delete the financial terms. ARTICLE V - PAYMENTS 5.1 Initial Payments. As consideration for the rights herein granted, Rorer shall pay to Noven the sum of payable as follows: upon execution of this License Agreement; -13- 19 when Noven files an Abbreviated New Drug Application in the United States for a licensed Product; when Rorer files for health registration for a Licensed Product in one of the following countries: upon first health registration and any required price or insurance reimbursement approval for Licensed Product in one of the following countries: and upon approval for sale by the United States Food and Drug Administration of Licensed Product. 5.2 Fee. (a) Rorer shall pay to Noven a fee of of Rorer's, its Affiliates and Sublicensees Net Sales, which fee shall include the compensation for supplying Licensed Product in Standard Packaging, subject to the provisions set forth in Article 5.2. Costs above the Standard Packaging Cost shall be allocated to Rorer and to Noven. (b) The fee to be paid hereunder shall be no less than bulk bandage in Standard Packaging and no more than -14- 20 per such unit ex Noven's factory (c) After 1989, this minimum and maximum shall be adjusted annually pursuant to the "Consumer Price Index" published by the U.S. Department of Labor, Bureau of Labor Statistics, as the U.S. City Average, all items 1982-1984 = 100 (hereinafter referred to as the "Index"). The minimum and the maximum applicable during years subseguent to 1989 shall be determined by multiplying the minimums and maximums for 1989, by the fraction, the numerator of which shall be the Index for January of the year for which the computation is made, and the denominator of which shall be the Index for January 1989. Should the publication of said Index be discontinued by said Bureau of Labor Statistics, then such other indexes may be published by said Bureau most nearly approaching said discontinued Index shall be used in determining the adjustment hereunder. Should said Bureau discontinue the publication of any such index, then such indexes may be published by another United States governmental agency, as most nearly approximating the Index, shall govern and be substituted as the Index hereunder. (d) Notwithstanding the foregoing, if Noven's Cost of Licensed Product increases at a rate greater than the rate of increase of said Index, or if Rorer's weighted average gross margin computed excluding samples and sales at or below -15- 21 cost for the product is reduced below with respect to any country in the Territory, then Rorer and Noven shall negotiate in good faith for a revised royalty with respect to the countries involved. In the absence of the parties being able to reach a mutually satisfactory agreement, Noven shall grant to Rorer a non-exclusive license to manufacture Licensed Product under Noven's Technology and Noven's Patent Rights in return for royalty of of Net Sales, in addition to other terms and conditions as reasonably agreed between the parties. Such license shall only be for sales of Licensed Product in the countries which occasioned the negotiation. (e) The foregoing minimums and the maximums are based on an Estrogen Transdermal Drug Delivery System containing a weighted average of of . To the extent a greater weighted average of containing bandages is purchased in any calendar quarter, then the minimums and maximums for such purchases for said calendar quarter shall be established by multiplying the price as set forth under Paragraph 5.2(b) and 5.2(c) above times a number, the numerator of which is the weighted average milligrams of in the units purchased and the denominator of which is -16- 22 5.3 Minimum Fee. (a) Rorer shall pay Noven a minimum fee per year beginning with the first calendar year after product registration in the following countries as follows: MINIMUM FEE PER CALENDAR YEAR FROM PRODUCT REGISTRATION (YEAR 1 - YEAR OF PRODUCT REGISTRATION) (U.S $ in thousands) Year 1 Year 2 Year 3 Year 4 Year 5 (b) For year 6 and subsequent years the minimum royalty shall be the same as for Year 5 multiplied by a number, the numerator of which is the total transdermal estrogen market in the country in question for which the calculation is made and the denominator of which is the total transdermal estrogen market in the country in question in Year 5. (c) To the extent there is a difference in any country at the end of each calendar year between any amount set -17- 23 forth in Article 5.3(a) in the amounts set forth in Article 5.2(a) above, Rorer shall pay the difference between the minimums and the amount actually pald within sixty (60) days of year end or this License Agreement will become non-exclusive in that country. 5.4 Payments. The fee due hereunder shall be payable as follows: The miniumum price of Paragraph 5.2(a) and subject to the adjustments set forth in Paragraph 5.2(b) shall be due and payable within thirty (3O) days of Noven's invoice for such Licensed Product. The remainder of any payment due under Article V hereof shall be due and payable within sixty (60) days of the end of each calendar quarter in which Rorer, Rorer's Affiliates or Rorer's Sublicensees received payment for such Licensed Product. 5.5 Currency. Fees and royalties based on sales in a currency other than United States dollars shall be converted to U.S. dollars at the closing spot rate for the purchase of U.S. dollars on the last business date of the calendar quarter for which payments are being accounted as published by the Chase Manhattan Bank, New York. 5.6 Records. Rorer, its Affiliates and Sublicensees shall keep accurate records in any way related to Licensed Product in accordance with generally accepted accounting practices uniformly applied. At Noven's request, such records shall be made available for examination by independent -18- 24 certified public accountants or auditors designated by Noven and approved by Rorer which approval shall not be unreasonably withheld. 5.7 One Royalty. Only one royalty shall be paid on any Sale of Licensed Product, namely the sale by Rorer, its Affiliate or Sublicensee to an unrelated third party. 5.8 Compulsory License. As an alternative, but not in addition to this License Agreement, Rorer shall have the benefit of the royalty provided for in any compulsory license but to the exclusion of the benefits or rights under this License Agreement for such country. ARTICLE VI - SUPPLY 6.1 Agreement to Supply. Noven shall use its best efforts to supply and Rorer shall purchase all of Rorer's, its Affiliates' and Sublicensees' requirements of Licensed Product from Noven according to the terms and conditions set forth in the Supply Agreement set forth in Exhibit D, which forms a part of this License Agreement; however, should Noven be unable to meet Rorer's requirements of Licensed Product of Rorer or by reason of force majeure is unable to import Licensed Product into a country and if the parties, after having consulted in good faith to resolve the matter, are unable to do so, Rorer's sole remedy for Noven's failure to supply shall be the right to a non-exclusive license to make or have made Licensed Product under Noven's Technology and Noven's Patent Rights under all -19- 25 other terms and conditions of this Agreement in return for a royalty for a royalty of of Net Sales. ARTICLE VII - PATENTS 7.1 Noven Inventions. On all inventions conceived or made under and during the scope of the Clinical and Product Development Program for which Noven (through its employees and consultants) is the sole inventor, Noven shall obtain at its own expense and own any patents in the countries requested by Rorer and these inventions shall become a part of Noven's Patent Rights. Rorer shall decide unilaterally in which countries Rorer wishes patent protection and Noven shall, at Noven's expense, file patent applications in such countries in the name of Noven, and Noven shall have all right, title and interest subject to the other provisions of this Agreement. Except for the United States and Canada, Rorer shall have the duty to pay all costs and fees for such filings in any and all said countries for so long as Rorer is not selling Licensed Product in such country or is not paying the minimum royalties with respect to such countries. 7.2 Joint Inventions. On all inventions conceived or made under and during the scope of the Clinical and Product Development Program which are joint inventions of an employee(s) or consultants of Noven and an employee(s) or consultants of Rorer, or an Affiliate of Rorer, the parties to this Agreement shall have joint ownership of any patent -20- 26 applications and patents obtained thereon, and Rorer shall pay all costs and expenses of obtaining and maintaining such patent rights, provided, however, that one-half (1/2) of all such expenses in a country payable by Rorer shall be a credit against one-half (l/2) of any royalties otherwise due Noven in such country. Rorer shall have the sole right to decide in which countries Rorer wishes patent protection on an invention developed hereunder. Rorer shall keep Noven fully and promptly informed with respect to the countries in which Rorer elects to obtain patent protection, and Noven may, at its own espense, apply for and obtain patent protection in any country in which Rorer does not elect to obtain such patent protection. ARTICLE VIII - CONFIDENTIALITY OBLIGATIONS 8.1 Confidentiality. Except to the extent that any of the data, information or know-how developed by either party, including but not limited to Noven's Technology, is in the public domain at the time of disclosure or subsequently enters the public domain without fault on the part of a party hereto, each party shall hold all such data, information, or know-how received from the other prior to or during the term of this License Agreement in confidence and shall not disclose it to any other entities during the term of this License Agreement or thereafter without the other party's permission in writing. Such permission shall not be withheld (a) to the extent disclosure is required by legal process to which process the -21- 27 generating party is permitted to object or (b) to information required to be submitted to governmental authorities in order to obtain any necessary health registration or price reimbursement. Such permission shall not be unreasonably withheld as to other information reasonably required for obtaining health registration or insurance reimbursement approval or in marketing Licensed Product. Notwithstanding the foregoing, Rorer shall have the riqht to use and disclose after the year 2010 Noven's Technology existing on the date of signing of this License Agreement or twenty (20) years after its disclosure as to data generated after the execution of this Agreement, if this Agreement expires by its normal terms, as set forth under paragraph 9.1 below. ARTICLE IX - TERM AND TERMINATION 9.1 Term. The term of this License Agreement shall be for the last to expire of Noven's Patent Rights on a country-by-country basis. In countries where Noven has no Patent Rights, the term of this License Agreement shall be for ten (10) years and shall automatically be renewed for a five (5) year term. 9.2 Termination (a) If either Rorer or Noven should fail to discharge fully and promptly any of its obligations under this License Agreement, including but not limited to the Supply Agreement, attached as Exhibit D, including the obligation to -22- 28 make payments, and should such party failing to discharge any of its obligations fail to rectify such failure within ten (10) to make payments or within sixty (60) days for other failures after notice in writing thereof by the other party, this Agreement can thereupon be terminated at the other party's option upon receipt of notice to that effect. (b) Any one party hereto shall have the right to terminate this License Agreement with immediate effect in the event of any proceeding under a Bankruptcy Act or any insolvency, receivership or dissolution proceeding directed against the other party. (c) Noven shall have the right to terminate this Agreement at any time upon thirty (30) days' notice in the event that Rorer or any Rorer Affiliate or Sublicensee or any entity to whom Rorer sells its ethical pharmaceutical business markets, sells or distributes any Estrogen Transdermal Drug Delivery System other than Licensed Product. (d) Upon termination, all information and data, relating to Licensed Product including but not limited to Noven's Technology, and information obtained from, incorporating or based on Noven's Technology shall be returned to Noven. Rorer, its Affiliates and Sublicensees shall make no further use of the same. The foregoing shall not apply to information solely generated by Rorer, if termination is by -23- 29 Rorer for cause of Noven or by expiration of the term specified in Article 9.1 ARTICLE X - NOVEN WARRANTIES 10.1 Ownership. Noven represents and warrants that it has developed Noven's Technology and it owns the entire right, title and interest in the patent and patent applications now set forth in Exhibit B. 10.2 Riqht to Enter Aqreement. Noven warrants that it has the right to enter into this License Agreement, and that there are no outstanding assignments, grants, licenses, encumbrances, obligations or agreements, either written, oral or implied, inconsistent with this License Agreement. 10.3 Product Warranty. Noven represents and warrants that Licensed Product in the form delivered to Rorer shall conform to specifications for any such product and approved in any United States Abbreviated New Drug Application pertaining thereto including composition, purity, appearance and stability and shall be capable of maintaining such until any expiration date for such Licensed Product; and shall not be misbranded in violation of Sections 501, 502 and 505 of the Federal Food, Drug and Cosmetic Act, as amended from time to time. 10.4 Foreiqn Product Warranty. Noven will use its best efforts to comply with manufacturing specifications of foreign countries of which Rorer has given Noven notice, provided that Rorer pays all Cost of such compliance. -24- 30 10.5 Patent Infringement Warranty. Noven represents and warrants that it has no present knowledge of any patent, the claims of which cover Licensed Product. 10.6 Limitation On Damages. In the event of any breach of any representation and warranty of Noven under this Article X damages shall be limited to actual damages and shall not exceed the royalty payable to Noven hereunder in any calendar year or, in the case of the warranty against patent infringement, shall not exceed fifty (50%) percent of the royalties paid to Noven in any such calendar year for the country in question. ARTICLE XI - ARBITRATION 11.1 Arbitration. Any claim or controversy arising between the parties hereto in connection with this License Agreement or the breach thereof which cannot be settled satisfactorily by correspondence or by mutual conference shall be determined by arbitration in New York, New York, by three arbitrators in accordance with the then prevailing rules of the American Arbitration Association upon the request by either party. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. 11.2 Notification of Breach. In the event one party notifies the other party of a breach of this License Agreement, and such breach is not cured within the applicable notice -25- 31 period, such other party shall have the right within said sixty (60) day period to bring such dispute to arbitration. ARTICLE XII - MISCELLANEOUS 12.1 Relationship of Parties. The parties hereto have the relationship of independent contractors, and neither party shall enter into any agreements, understandings or commitments on behalf of the other party without the other party's express permission in writing. 12.2 Inspection of Facilities. At any time during the term of this License Agreement and any extension thereof, Rorer may from time to time during normal working hours have employees of its choosing visit and inspect the facilities of Noven, and may discuss with Noven employees the progress of projects under development by Noven. 12.3 Entire Agreement. This License Agreement represents the entire understanding between the parties and supersedes any and all previous understandings, both oral and written, with respect to the subject matter hereof. The terms, conditions and provisions of this License Agreement shall prevail over any inconsistent statements, terms, conditions or provisions contained in any document passing between the parties hereto including, but not limited to, any acknowledgment, confirmation or notice. This License Agreement may not be amended, supplemented, or otherwise modified except by an instrument in writing designated as an amendment, -26- 32 supplement or modification which is signed by both parties hereto. 12.4 Force Majeure. If the performance of this License Agreement or any obligation reasonably related thereto is prevented or hindered, by reason of any cause beyond the control of the affected party, including but not limited to, fire, flood, riot, strikes or any governmental action, then the party so affected, upon notice to the other party, shall be excused from such performance, provided that the party so affected shall use its best efforts to avoid or remove such cause or causes of non-performance and shall continue to perform thereunder with the utmost dispatch whenever such cause or causes are removed. If, as a result of any such action, the performance of this Agreement is prevented for a continuous period of one hundred eighty (180) days, either party shall have the right to terminate this agreement as to the country or countries involved by providing the other party with written notice of termination. 12.5 Severability. If any provision of this License Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner effect or render invalid or unenforceable any other severable provision of this License Agreement, and this License Agreement shall be carried out as -27- 33 if any such invalid or unenforceable provision were not contained herein. 12.6 Assignment. This License Agreement shall inure to the benefit of the parties and to the successors and assigns of that part of the business of Rorer to which the subject matter of this License Agreement is related. This License Agreement, or any rights thereunder, shall not otherwise be sold, assigned, transferred or encumbered by either party without first obtaining the consent of the other party in writing. 12.7 Governing Law. This License Agreement shall be interpreted in accordance with and governed by the laws of the State of New York, without references to the conflict of law rules. Both parties forever waive any New York law cannot be validly applied to this Agreement and that an agreement to use "best efforts" is unenforceable under New York law. 12.8 Notices. Any notice or report required or permitted hereunder shall be given in writing, hand delivered or by registered or certified mail, to the following addresses: (1) Noven Pharmaceuticals, Inc. 13300 S.W. 128th Street Miami, Florida 33186 Attention: President With a copy to: Sybil Meloy, Esq. Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A. 701 Brickell Avenue Miami, Florida 33131 -28- 34 (2) Rorer Group Inc. 500 Virginia Drive Fort Washington, Pennsylvania 19034 Attention: President With a copy to: Ernest Lipscomb, III, Esq. Patent Counsel Rorer Group Inc. 500 Virginia Drive Fort Washington, Pennsylvania 19034 or to such other address or in care of such other person as hereafter shall be designated in writing by either party to the other, and shall be deemed to have been given as of the date of mailing. 12.9 Counterparts. This License Agreement and any amendments may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed in duplicate and their seals to be hereunto affixed as of the day and year first written above. RORER GROUP INC. By: -------------------------------- Title: ----------------------------- Date: ----------------------------- NOVEN PHARMACEUTICALS, INC. By: /s/ Steven Sablotsky ------------------------------- Title: President ----------------------------- Date: 4-27-89 ----------------------------- -29- 35 (2) Rorer Group Inc 500 Virginia Drive Fort Washington, Pennsylvania 19034 Attention: President With a copy to: Ernest Lipscomb III, Esq. Patent Counsel Rorer Group Inc 500 Virginia Drive Fort Washington, Pennsylvania 19034 or to such other address or in care of such other person as hereafter shall be designated in writing by either party to the other, and shall be deemed to have been given as of the date of mailing. 12.9 Counterparts. This License Agreement and any amendments may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed in duplicate and their seals to be hereunto affixed as of the day and year first written above. RORER GROUP INC. By: /s/ ------------------------------ Title: Senior V.P.-Finance and CFO ---------------------------- Date: April 27, 1989 ----------------------------- NOVEN PHARMACEUTICALS, INC. By: ------------------------------- Title: ---------------------------- Date: ----------------------------- -29- 36 EXHIBIT A CLINICAL AND PRODUCT DEVELOPMENT PROGRAM ================================================================================ ESTRADIOL TRANSDERMAL COST EST. $ ACTIVITY 1 MILLION 37 EXHIBIT B NOVEN'S PATENT RIGHTS 38 EXHIBIT C TRANSDERMAL ESTROGEN SKIN PATCH PRODUCT SPECIFICATIONS An estrogen in a in a form suitable for application to and delivery through the skin meeting the specifications now employed by Noven and any such amended or revised specifications, as set forth in the approved new drug application for such product by Federal Food and Drug application. 39 EXHIBIT D SUPPLY AGREEMENT This Agreement, made this 27th day of April, 1989, by and between RORER GROUP INC , a Pennsylvania corporation, having a place of business at 500 Virginia Drive, Fort Washington, Pennsylvania 19034 (hereinafter "Rorer"), and NOVEN PHARMACEUTICALS, INC , a Delaware corporation, having a place of business at 13300 S.W. 128th Street, Miami, Florida 33186 (hereinafter "Noven"). W I T N E S S E T H WHEREAS, Noven has licensed Rorer the right to market an estrogen drug delivery system, specifications of which are attached to said License Agreement as Exhibit C (herein "Licensed Product"); WHEREAS, RORER desires to purchase all of its requirements of the Licensed Product from Noven; and WHEREAS, Noven desires to supply Rorer with all of its requirements of the Licensed Product. NOW, THEREFORE, it is mutualIy agreed between the parties hereto as follows: 40 ARTICLE I - DEFINITIONS 1.01 In General. All terms used in this Supply Agreement shall have the same definition as in the License Agreement entered into by the parties hereto concurrently with the execution of this Supply Agreement. ARTICLE II - SUPPLY 2.01 Agreement to Supply. (a) Noven shall use its best efforts to supply and Rorer shall purchase, in Standard Packaging, all of Rorer's, its Affiliates' and its Sublicensees' requirements for the Licensed Product subject to the terms and limitations herein contained. (b) Licensed Product shall meet the following specifications: A laminate with a colorless plastic backing juxtaposed to a where the in a form suitable for delivery through the skin. The adhesive has a contained in a heat sealed. The units will be available in the following dosages: -2- 41 2.02 Price. The price to be paid by Rorer to Noven for the Licensed Product which Rorer purchases from Noven pursuant to this Supply Agreement, is set forth in Article 5.2 of the License Agreement. 2.03 Payment. Payment for each delivery of Licensed Product shall be made in accordance with the provisions of Article 5.2 of the License Agreement. 2.04 Price Increases. The minimum and maximum initial payment for Licensed Product shall be increased as set forth in Article 5.2 of the License Agreement. 2.05 Records of Costs. Noven shall keep accurate accounting records for the calculation of Noven's Cost of Licensed Product supplied Rorer Licensed Product. 2.06 Manufacturing Standards. (a) The Licensed Product supplied by Noven hereunder shall be manufactured, assayed, and packaged in accordance with Good Manufacturing Practices ("GMP") as such -3- 42 term is defined under the United States Federal Food, Drug and Cosmetic Act of 1938, as amended from time to time, and regulations and guidelines promulgated pursuant thereto and in an establishment licensed for such purpose by the United States Food & Drug Administration or any successor agency of the United States government, and shall fully conform with the specifications attached to the License Agreement as Exhibit C and with all United States governmental requirements in effect at the time of shipment. Furthermore, the Licensed Product supplied by Noven for sale in countries other than the United States shall conform with the standards of that country and shall be manufactured in a facility approved for that purpose by the proper authorities of each country to the extent Rorer specifically notifies Noven of the same and pays the cost of any changes in specifications or manufacturing practices required. (b) Rorer shall provide a rolling forecast of needs on a calendar quarter year in advance of such forecasted need, which forecast shall be updated on a calendar quarter basis. Rorer shall be required to purchase ninety (90%) percent of such forecast made six (6) months in advance of the specified delivery date and Noven shall have no duty to deliver units in excess of one hundred ten (110%) percent of such forecast, in addition to and independent of the limits based on Rorer's Moving Average. -4- 43 (c) Noven shall deliver to Rorer with each shipment of the Licensed Product a certificate of analysis for each lot of Licensed Product. 2.07 Forecasts and Orders. Rorer orders for the Licensed Product shall indicate the quantity to be delivered and specific delivery dates on a monthly basis and shall be sent to Noven at least 120 days prior to the earliest specified delivery date. Rorer shall attempt to minimize fluctuations in the amounts of such orders to the extent feasible Rorer's orders shall not call for delivery of more than ten thousand (10,000) units in any calendar month during the first year of marketing in any country under this agreement. Thereafter, any order for delivery in any month of more than one hundred twenty (120%) percent of Rorer's Moving Average (as hereinafter defined) shall be sent to Noven at least six (6) months prior to the earliest specified delivery date, but no such order shall call for delivery of more than one hundred fifty (150%) percent of said Rorer's Moving Average. If Rorer's requirements exceed the limitations set forth above, the parties shall consult in good faith regarding the best way in which to fulfill them. 2.08 Movinq Average. "Rorer's Moving Average" as used herein shall mean the average monthly number of patches ordered by Rorer during the six (6) month period immediately preceding the date of the order being considered. -5- 44 ARTICLE III - REPRESENTATIONS, WARRANTIES AND INDEMNITY 3.01 Ownership. Noven represents and warrants that it has developed Noven's Technology and it owns the entire right, title and interest in the patent applications now set forth in Exhibit B. 3.02 Right to Enter Agreement. Noven warrants that it has the right to enter into this Supply Agreement, and that there are no outstanding assignments, grants, licenses, encumbrances, obligations or agreements, either written, oral or implied, inconsistent with this Supply Agreement. 3.03 Product Indemnity. Noven represents and warrants that Licensed Product in the form delivered to Rorer shall conform to specifications for any such product and proved in any United States abbreviated New Drug Application pertaining thereto including composition, purity, appearance and stability and shall be capable of maintaining such until any expiration date for such Licensed Product; and Noven represents and warrants that it will use its best efforts comply with all rules and regulations, including all current Good Manufacturing Practices, as that term is defined by the United States Food and Drug Administration, applicable to the manufacture, filling, labeling, packaging, storage and shipment of Licensed Product which are in force or hereafter adopted by the United States Food and Drug Administration or any successor agency thereto or any agency Oe the state within the Territory and -6- 45 shall not be misbranded in violation of Sections 501, 502 and 505 of the Federal Food, Drug and Cosmetic Act, as amended from time to time. 3.04 Foreign Product Warranty. Noven will use its best efforts to comply with manufacturing specifications of foreign countries of which Rorer has given Noven specific notice, provided that Rorer pays all Cost of such compliance. 3.05 No Other Warranties. Except as stated above, Noven makes no other warranties or indemnities, express or implied, with respect to Noven's Technology, Noven's Patent Rights or Licensed Product. 3.06 Limitation On Damages. In the event of any breach of any representation and warranty of Noven under this Article III damages shall be limited to actual damages and shall not exceed the royalty payable to Noven under the License Agreement in any calendar year except in the case of the warranty against patent infringement, which shall not exceed fifty (50%) percent of the royalties paid to Noven in any such calendar year for such country. ARTICLE IV - CONFIDENTIALITY 4.01 Confidentiality. Except to the extent that any of the data, information or know-how developed by either party, including but not limited to Noven's Technology, is in the public domain at the time of disclosure or subsequently enters the public domain without fault on the part of a party hereto, -7- 46 each party shall hold all such data, information, or know-how received from the other prior to or during the term of this License Agreement in confidence and shall not disclose it to any other entities during the term of this License Agreement or thereafter without the other party's permission in writing. Such permission shall not be withheld (a) to the extent disclosure is required by legal process to which process the generating party is permitted to object or (b) to information required to be submitted to governmental authorities in order to obtain any necessary health registration or price reimbursement. Such permission shall not be unreasonably withheld as to other information reasonably required for obtaining health registration or insurance reimbursement approval or in marketing Licensed Product. Notwithstanding the foregoing, Rorer shall have the right to use and disclose after the year 2010 Noven's Technology existing on the date of signing of this License Agreement or twenty (20) years after its disclosure as to data generated after the execution of this Agreement, if this Agreement expires by its normal forms, as set forth under paragraph 9.1 below. ARTICLE V - PRODUCT RECALL 5.01 Recall. If an authorized government agency of the United or any country or territory based on requirements specifically notified to Noven by Rorer thereof shall seize any Licensed Product or if Rorer deems it necessary - 8 - 47 to initiate a voiuntary recall of any Licensed Product for any reason, Rorer shall immediately notify Noven of such seizure or recall and shall consult with Noven regarding the timely compliance with all pertinent state or federal regulations pertaining thereto. Furthermore, Rorer shall make a permanent record of all costs incurred thereby, a copy of which shall be delivered to Noven as soon after the completion of such recall or seizure as practically may be done. When the reason of said recall or seizure resides in the negligent failure of Noven to manufacture Licensed Product in accordance with its specifications, compendium requirements, or government rules and regulations, or in the failure of Licensed Product to maintain stability for the period described in the product labeling, Noven shall reimburse Rorer for all reasonable costs incurred by Rorer in effecting such recall or seizure, including all reasonable credits extended to Rorer's customers as a result thereof. When the cause or reason of said recall or seizure directly resides in the failure of Rorer to properly store, transport or care for Licensed Product while Licensed Product was in Rorer's possession, Rorer shall bear all costs of such recall or seizure and indemnity Noven therefrom. ARTICLE VI - TERM AND TERMINATION 6.01 Term. The term of this Supply Agreement shall be the same as the term set forth in Paragraph 9.1 of the License Agreement, unless earlier terminated in accordance with Paragraph 6.02 of this Supply Agreement. - 9 - 48 6.02 Termination. Each party shall have the right to terminate this Supply Agreement at any time on ninety (90) days' written notice that the other party is in default and the reasons therefore, and if such other party fails to cure such default within such period, this Supply Agreement shall terminate upon the date set in such notice; provided, however, that if this Supply Agreement is terminated (i) Rorer shall have the right to sell all Licensed Product then in its inventory, and (ii) in the event such termination is through no fault of Rorer, if Rorer so elects; it shall have the right to receive from Noven, and to se11, all of Rorer's orders for Licensed Product accepted by Noven prior to such notice of default. The provisions of this Supply Agreement shall apply to all such orders notwithstanding its termination. 6.03 Force Majeure. If the performance of this Supply Agreement or any obligation hereunder is prevented or hindered, by reason of any cause beyond control of the affected party, including, but not limited to, fire, flood, riot, strikes or any governmental action, the party so affected, upon immediate notice to the other party, shall be excused from such performance, provided that the party so affected shall use its best efforts to avoid or remove such cause or causes of non-performance and shall continue to perform hereunder with the utmost dispatch whenever such cause or causes are removed. If as a result of any governmental action, the performance of -10- 49 this Supply Agreement or any obligation hereunder is prevented for a continuous period of one hundred eighty (180) days, either party shall have the right to terminate this Agreement by providing the other party with written notice of termination. ARTICLE VII - NOTICE 7.01 Notices. Any notice or report required or permitted hereunder shall be given in writing, by registered or certified mail, to the following addresses: (1) Noven Pharmaceuticals, Inc. 13000 S.W. 128th Street Miami, Florida 33186 Attention: President With a copy to: Sybil Meloy, Esq. Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A. 701 Brickell Avenue Miami , Florida 33131 (2) Rorer Group Inc. 500 Virginia Drive Fort Washington, Pennsylvania 19034 Attention: President With a copy to: Ernest Lipscomb, Esq. Patent Counsel Rorer Group Inc. 500 Virginia Drive Fort Washington, Pennsylvania 19034 or to such other address or in care of such other person as hereafter shall be designated in writing by either party to the other, and shall be deemed to have been given as of the date of mailing. -11- 50 ARTICLE VIII - MISCELLANEOUS 8.01 Relationship of Parties. The parties hereto have the relationship of independent contractors, and neither party shall enter into any agreements, understandings or commitments on behalf of the other party without the other party's express permission in writing. 8.02 Entire Agreement. This Supply Agreement and the License Agreement and Exhibits attached thereto which this Supply Agreement forms a part thereof, represent the entire understanding between the parties and supersedes any and all previous understandings, both oral and written, with respect to the subject matter hereof. This Supply Agreement may not be amended, supplemented, or otherwise modified except by an instrument in writing designated as an amendment, supplement or modification which is signed by both parties hereto. 8.03 Severability. If any provision of this Supply Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner effect or render invalid or unenforceable any other severable provision of this Supply Agreement, and this Supply Agreement shall be carried out as if any such invalid or unenforceable provision were not contained herein. 8.04 Arbitration. Any dispute arising from or relating to this Supply Agreement shall be finally and -12- 51 bindingly settled by arbitration in accordance with the then obtaining rules of the American Arbitration Association by one or more arbitrators designated in conformity with those rules at a site mutually agreed upon by the parties, or, if there is no such agreement, then in New York, New York, and judgment upon any award thereunder may be entered in any court having jurisdiction thereof. 8.05 Assiqnment. This Supply Agreement shall inure to the benefit of the parties and to the successors and assigns of that part of the business of Rorer to which the subject matter of this Supply Agreement is related. This Supply Agreement, or any rights thereunder, shall not otherwise be sold, assigned, transferred or encumbered by either party without first obtaining the consent of other other party in writing. 8.06 Governinq Law. This Supply Agreement shall be construed, and the respective rights of the parties hereto determined, according to the substantive laws of the State of New York, without reference to the conflict of law rules. lN WITNESS WHEREOF, the parties hereto have caused this Supply Agreement to be executed by their duly authorized officers upon the date above written. ATTEST: NOVEN PHARMACEUTICALS, INC. /s/ Graciela Lopez - --------------------------------- By: /s/ Steven Sablotsky ------------------------------- Title: President ----------------------------- Date: 4-27-89 ----------------------------- (SIGNATURES CONTINUED ON NEXT PAGE) -13- 52 (SIGNATURES CONTINUED) ATTEST: RORER GROUP INC. /s/ Ernest B. Lipscomb - ----------------------------- Ernest B. Lipscomb By: /s/ ----------------------------- Title: Senior V.P.-Finance and CFO --------------------------- Date: April 27, 1989 --------------------------- -14- 53 AMENDMENT TO LICENSE AGREEMENT This amends the License Agreement of April 27, 1989 between Noven Pharmaceuticals, Inc. (Noven) and Rorer Group Inc. (Rorer). WHEREAS, Noven and Rorer entered into a license agreement covering the development, marketing, supply and sale of Licensed Product, as that term is defined in the License Agreement of April 27, 1989 (the License Agreeement); WHEREAS, the License Agreement covered all countries and territories worldwide, except Japan; WHEREAS, Rorer is willing to surrender its U.S. and Canadian rights to the Licensed Products under the circumstances described below; and WHEREAS, Rorer and Noven intend to continue their collaboration on the Licensed Products outside the United States and Canada; NOW, THEREFORE, intending to be legally bound, Noven and Rorer hereby amend the License Agreement as follows: I. Surrender of U.S. and Canadian License Rights Rorer hereby surrenders and grants back to Noven all license rights covered by Article IV of the License Agreement with respect to the United States and Canada. The foregoing grant back and surrender of license rights applies only to the U.S. and Canada, and not to any other area of the Territory, as that term is defined in the License Agreement. II. Rorer Relieved of Obligation to Fund the U.S. Clinical and Product Development Program Rorer shall be excused and released from funding any work conducted after March 31, 1990 on the U.S. and Canadian Clinical and Product Development Program, as that term is defined in the License Agreement. III. Contingent Reimbursement of Rorer of its Prior U.S. and Canadian Clinical and Product Development Program Costs Noven shall reimburse Rorer the approximately in costs paid to third-parties in connection with clinical trials 1001, 1002 and 1005 for the U.S. and Canadian Clinical and Product Development Program, if that program's studies are used by Noven for any purpose and are not used by Rorer to secure regulatory approval outside the U.S. or Canada and provided that Noven either commercializes the Licensed Product in the U.S. or Canada or receives payments from a third party in return for the U.S. or Canadian rights to the Licensed 54 Product. In the latter event, if Noven receives a lump sum payment from a third party in return for such rights, Noven shall immediately reimburse Rorer the entire amount required under this section, up to the amount of the lump sum payment(s). Any remaining balance -- or in the event no lump sum payment is received from a third party, the entire amount to be reimbursed -- shall be paid by Noven commencing on commercialization of the Licensed Product. In such event, percent of the operating profit Noven makes on the Licensed Product in each calendar quarter -- whether such profit is derived from sales, royalties, manufacturing or any other source -- shall be paid over to Rorer within thirty days of the end of that calendar quarter, until Rorer has been fully reimbursed as required by this section. IV. Contingent Reimbursement Of Rorer Of One Half Of The Payment Made To Noven On Execution Of License Agreement If Noven commercializes the Licensed Product in the United States or Canada, or enters into an agreement with a third party covering the U.S. or Canadian rights to the Licensed Product, Noven shall reimburse Rorer dollars, an amount that represents the payment Rorer made to Noven on execution of the License Agreement. Such reimbursement will be made immediately, to the extent of any lump sum payments Noven receives from a third-party for the U.S. or Canadian rights to the Licensed Product. If such lump sum payments from third-parties in the aggregate are less than , then Noven shall pay Rorer within thirty days of the close of each calendar quarter following U.S. or Canadian commercialization, percent of the operating profit Noven makes in that quarter from the Licensed Product -- whether such profit is derived from sales, royalties, manufacturing or any other source -- until Rorer has been reimbursed the full payment. V. Previous U.S. ANDA Milestone Payment To Be Applied Against Future International Milestone Payments The previously paid by Rorer to Noven as an advance payment in anticipation that Noven would shortly file a completed U.S. ANDA will be applied and credited against the remaining International milestone payments specified in Article 5.1 of the License Agreement. VI. Notices, Records and Audit Rights Noven shall immediately notify Rorer, if Noven either commercializes the Licensed Product in the U.S. or Canada or enters into an agreement with a third-party covering the rights thereto in those countries. All reimbursement payments -2- 55 required by Sections III and IV hereof shall be accompanied by a statement in reasonable detail, permitting Rorer to ascertain whether the amount of the payment is correct. On reasonable notice and at reasonable times, Rorer, not more than twice a year, shall have the right to audit relevant books and records of Noven to ensure that Noven is not in breach of its obligations to make the aforesaid reimbursement payments. VII. Release Of Rorer From Further U.S. and Canadian Obligations Relating To The Licensed Product Noven hereby releases Rorer from any and all further obligations, whether contractual or otherwise, relating to the development, sale, distribution, manufacture or any other aspect of the Licensed Products in the U.S. or Canada. VIII. Reciprocal Rights To Exploit Data Rorer shall have the unrestricted right to use any data derived from any existing or future study on the Licensed Product, whether conducted by Rorer, Noven or a third party, in any country or area of the Territory other than the United States and Canada. Noven shall similarly have the unrestricted right to use any such data, but only in the United States, Canada and Japan. IX. Ceiling On International Clinical And Product Development Program Notwithstanding any provision or term of the License Agreement, Noven shall charge Rorer no more than the following monthly sums for all work performed, and all Licensed Product furnished, by Noven in 1990 in connection with the International Product Development Program for the Licensed Products (the "Ceiling Sums").
Month Ceiling Sum in $000s April May June July August September October November December Total
The foregoing Ceiling Sums, which shall cover all direct and indirect costs including overhead and legal fees, may not be exceeded without the express written consent of Rorer. Noven shall provide all services specified in a letter from R. Haslan -3- 56 to R. Lucking dated 3/21/90, a copy of which is attached as Exhibit A. Noven will forward to Keith Salenger and Robin Norris invoices covering actual monthly expenses up to the Ceiling Sums. X. Effect Of Amendment On License Agreement Except as provided in this amendment, all other terms and provisions of the License Agreement shall remain in full force and effect. NOVEN PHARMACEUTICALS INC. RORER GROUP INC. BY: /s/ Steven Sablotsky BY: /s/ --------------------------- ----------------------------- DATE: 5-10-90 DATE: 6/22/90 ------------------------- ---------------------------- -4- EX-10.5 3 OFFICE LEASE AGREEMENT - CHIN 1 EXHIBIT 10.5 Parkside Plaza Office Lease between Maxine Chin and the Registrant dated April 1, 1991. 2 LEASE This Lease is made this 1st day of April, 1991, by and between Maxine Chin ("Landlord"), an individual whose mailing address is 12300 S.W. 121st Avenue, Miami, Florida 33186 and Noven Pharmaceuticals, Inc. ("Tenant") whose mailing address is 13300 S.W. 128th Street, Miami, Florida 33186, as follows: Premises: Landlord, in consideration of the rents and covenants hereinafter contained does hereby lease to Tenant, on a month to month basis, the building space ("Leased Premises") having a street address at 13388 S.W. 128th Street, Miami, Florida 33186. Term: Commencing on the "Commencement Date" April 1, 1991 and ending 21 months thereafter; except that in the event the Commencement Date is a date other than the first day of calendar month, said term shall extend for said number of months in addition to the remainder of the calendar month following the Commencement Date. The term of this Lease shall be 21 months from April 1, 1991 to December 31, 1992 with an additional three (3) two-year options to run consecutively with an annual increase in rent proportionate to such increase in the CPI Miami with April 1, 1991 as the basis with maximum increase of _____________________________. Rent: Tenant shall pay rent to the Landlord starting with the commencement date of Lease or the date of occupancy, whichever first 3 occurs for the use and occupancy of the Leased Premises at a rate of Six Hundred and Twenty-Four Dollars ($624.00) per month plus applicable sales tax, each installment being due on or before the first date of each month during the leased period, without notice or demand. Use and Care of Premises: Tenant shall use the Leased Premises as a warehouse and for no other purpose without the prior written consent of Landlord. Tenant will not use or occupy the Leased Premises for any unlawful purpose and will comply with all present and future laws, ordinances, regulations and orders of all state and governmental units or agencies having jurisdiction over the Leased Premises. Tenant hereby agrees to abide by all of the rules and regulations as set forth by the Landlord attached hereto as Exhibit "A" and as may be from time to time modified in the sole discretion of the Landlord. Tenant hereby accepts the Premises in "as is" condition and shall return the Premises upon termination of this Lease in a like manner, normal wear and tear excepted and broom clean. Any and all equipment or fixtures remaining at termination shall be considered the property of the Landlord. Security Deposit: Tenant, upon executing this Lease has deposited with Landlord Six Hundred Dollars ($600.00) as security for Tenant's performance of this Lease. Such sum shall be held by Landlord without 2 4 interest. Should Tenant comply with all of the terms, covenants and conditions of this lease and promptly pay all of the rental and all other sums payable by Tenant herein as they fall due, the Security Deposit (less any sums incurred or expended by Landlord in cleaning and restoring the Demised Premises) shall be returned to Tenant at the end of the term. Utilities and Services: Tenant shall pay for all electricity, gas, telephone, sewer, water and other utility services separately metered or chargeable to the Leased Premises. All utility services which are not separately metered or chargeable to the Leased Premises shall be paid by Landlord. Insurance: Landlord shall maintain fire and extended coverage insurance on the building and the Premises in such amounts as Landlord deems appropriate. Such insurance shall be maintained at the expense of Landlord. Tenant shall maintain, at its expense, in an amount equal to full replacement cost, fire and extended coverage insurance on all of its personal property, including removable trade fixtures, located in the Premises and in such additional amounts as are required to meet Tenant's obligations. Tenant shall, at its own expense, maintain a policy or policies of comprehensive general liability insurance with respect to the Premises, with the premium thereon fully paid on or before due date, issued by and 3 5 binding upon an insurance company approved by Landlord. Such insurance shall afford minimum protection of not less than $300,000.00 combined single limit coverage for bodily injury, property damage or any combination thereof. Landlord shall not be required to maintain insurance against theft within the Premises or the building. Tenant shall, at Landlord's request provide Landlord with current certificates of insurance, which shall name as additional insureds Maxine Chin, an individual. All insurance purchased by Tenant shall contain a Waiver of Subrogation against Maxine Chin, an individual. Default: Tenant's non-compliance with any of the provisions set forth in this Lease shall be considered a default. Landlord may pursue any and all legal remedies available to it to cure any default. Tenant agrees that should Landlord employ an attorney to present, enforce or defend Landlord's rights or remedies hereunder, the undersigned shall pay any and all attorney's fees and expenses incurred by Landlord in connection therewith. Notices: All notices or demands to be given by either party hereunder shall be in writing and addressed to the addressees first set forth above. Governing Law: This Lease shall be governed by the Laws of Florida. 4 6 IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the day and year first above written. Signed, Sealed and Delivered "LANDLORD" in the presence of: /s/ By: /s/ - ---------------------------- --------------------------- Operations Manager As Its Landlord - ---------------------------- Witness "TENANT" /s/ By: /s/ Steven Sablotsky - ---------------------------- --------------------------- Accountant As Its President 4-3-91 5 EX-10.6 4 OFFICE LEASE AGREEMENT - KEEN 1 EXHIBIT 10.6 Parkside Plaza Office Lease Between James W. Keen and the Registrant dated July 2, 1992. 2 STANDARD OFFICE LEASE THIS LEASE AGREEMENT made and entered into this 2nd day of July, 1992 by and between James W. Keen (hereinafter referred to as "Lessor") and Noven Pharmaceuticals, Inc. (hereinafter referred to as "Tenant" or "Lessee"). WITNESSETH: 1. DESCRIPTION. Lessor hereby leases unto Tenant and Tenant hereby leases form Lessor, Suite No. 104,203 & 204 ("Demised Premises") containing approximately 3,328 square feet in that certain building ("Building") located at 13316, 13332, 13334 SW. 128th Street, Miami, Florida, also known as "Parkside Plaza." 2. TERM. [Fill in and Initial A or B] A. The term ("Term") of this Lease shall be from the 1st day of January, 1993 ("Commencement Date") through the 31st day of December, 1994 ("Expiration Date") with three (3) additional two-year options. B. The term ("Term") of this lease shall commence on 3 the earlier of the following dates ("Commencement Date"): (i) the date on which Tenant opens for business in the Demises Premises, or (ii) ______________ days after Lessor has tendered possession (as hereafter provided) of the Demised Premises to Tenant, or (iii) the date _________ days after Lessor notifies Tenant that the Demises Premises are or should be ready for occupancy. Tenant shall pay all rent and additional rent relating to the Demised Premises which accrue after Lessor's tender of possession. Tender of possession shall be deemed to have occurred when Lessor has completed Lessor's work, if any. If Lessor is unable to give possession of the Demised Premises to Tenant on the date for the commencement of the term hereof by reason of the fact that Lessor has not substantially completed any space preparation work in the Demised Premises pursuant to Lessor's Work Letter signed on behalf of Lessor and Tenant (which Work Letter, if any, is made a part hereof by reference) and if the delay in completion of such work has not been caused by Tenant's failure to submit its plans and specifications to Lessor on or before the time called for in the Work Letter, or caused by other act or failure to act by Tenant, then the term of this Lease shall commence on the day following the day of notification by Lessor 4 that such work has been substantially completed. If such date shall be other than the first day of a calendar month, the rent or such months shall be prorated on a per diem basis. No failure to deliver possession on the scheduled date for the commencement of the term shall extend, or be deemed to extend, the term of this Lease. 3. RENTAL PAYMENT. Subject to increase as provided in this Lease. Tenant agrees to pay to Lessor as and for rent for the Demised Premises for the Term hereof the sum of Fifty-one thousand nine hundred sixteen dollars and eighty cents ($51,916.80) plus all applicable sales and use taxes which sum for the convenience of the Tenant shall be paid as follows: $2,163.20 + 6.5% sales tax = $2,303.81 ("Base Monthly Rental") plus all applicable sales and use taxes upon the first day of each calendar month for the Term hereof commencing with the first calendar month following the calendar month of the Commencement Date. The rental payments shall be made to Lessor of the address hereinafter set forth to which notices to Lessor shall be sent or at such other place as Lessor may, from time to time, hereafter designate by notice to Tenant. Tenant's obligation to pay rent 5 and keep and perform any and all covenants and agreements herein contained shall not be abated, released or discharged because of any reason whatsoever except as is otherwise specifically provided for in this Lease. Rent and each installment thereof shall be paid in lawful money of the United States, legal tender at the time of payment. All rents shall be payable in advance and paid without deduction, setoff, discount or abatement. Under no circumstances shall any holding over by Tenant be authorized and no occupancy beyond the term limited hereby shall ever constitute anything except an unlawful holding over by Tenant after the expiration of the Term. By Tenant's execution hereof, Tenant acknowledges that Tenant has inspected the Demised Premises and the Building and that as of the date hereof the Demised Premises and the Building are in all respects in satisfactory condition and acceptable to Tenant and Tenant is accepting same as is. A. This Lease shall replace all previous existing leases regarding the aforementioned units between Noven Pharmaceuticals and James W. Keen. This new lease shall take effect January 1, 1993. All previously existing leases shall be in force until this lease is in effect. 6 4. INCREASE OF BASE RENT: The annual rental for each year of this lease ("lease year"), after the base year shall be increased or decreased, but never less than the base rent, by an amount equal to the proportion hereafter set forth, times the amount of the increase or decrease based on the cost of living escalation published by the Bureau of Labor Statistics U.S. Department of Labor. (a) COST OF LIVING ESCALATION: If two months prior to commencement of any lease year, the Consumer Price Index (C.P.I.) for "all items" (United States City Average Index) as compiled and published by the Bureau of Labor Statistics, United States Department of Labor not to exceed 5.5% maximum should be higher than the Base Consumer Price Index of January 1, 1993, the Minimum Monthly Rent installments shall be increased by an amount proportionate to the amount of such increase in the said price index, not to exceed 5.5% maximum. If such price index should in the future be compiled upon a different basis, a proper adjustment will be made therein, for the purposes of this Paragraph, to reflect any increase the cost of living that has occurred over the Base Consumer Price Index. If at the time of any such computation the United States Department of Labor should no longer compile and publish such prices indexes, the index for "All Items" compiled and published by any other branch or department of the Federal 7 government shall be used for the purpose of this paragraph and if no such index is compiled and published by any branch or department of the Federal government, the statistics reflecting cost of living increases as compiled by any institution or organization or individual generally recognized as an authority by financial and insurance institutions shall be used as a basis for such adjustment. This provision is independent of the other provisions which provide for a pass through of certain increases. (See attached addendum for cost of option renewal). For example: If the base C.P.I. is 230.5 and two months prior to the first lease year the C.P.I. is 235.8 and the minimum monthly rent is $1,400.00. The new minimum monthly rent for the next lease year would be $1,432.19 or $1,432.00 per month. [235.8 divided by 230.5 = 1.023 X $1,400.00 = $1,432.19 per month]. Lessor shall have the right to treat any sums due pursuant to this Paragraph as additional rent due hereunder and if the same be not promptly paid when due. Lessor shall have all the rights and remedies to which Lessor is entitled for the nonpayment of rent. 5. USE AND POSSESSION. It is understood and agreed that the demised space and premises shall be continually used and 8 occupied by the Lessee during the term of this Lease only for the research, development, clinical manufacturing and packaging of pharmaceutical products and for no other purposes or uses whatsoever. Tenant will not make or permit any use of the space or premises which, directly or indirectly, is forbidden by public law, ordinance or government regulation or which may be dangerous to life, limb or property. In the event the Tenant uses the space or premises for any purposes not expressly permitted herein then the Lessor may terminate the lease or without notice to tenant, restrain such improper use by injunction or other legal action. As a material consideration hereto the Tenant covenants that Tenant will not without the written consent of the Lessor permit the premises to be occupied by any person, firm or corporation other than the Tenant whose name appears on this lease. 6. SERVICES: Lessor agrees to furnish the following services to Tenant: (1) Automatically operated fire suppressant sprinkler system throughout and central smoke detector in office areas only. (2) Water. (3) Furnishing, supplying and maintaining the building's common areas and restroom facilities, all at Lessor's expense, unless otherwise agreed to in this Lease. Tenant agrees to and shall pay when due all charges for 9 utility services, which are billed to Tenant with respect to the Demised Premises or which are charged with respect to the Demised Premises as opposed to the Building as a whole. If the Tenant fails to pay same promptly when due. Lessor shall have the right, but not the obligation, to pay said charges and Tenant agrees to reimburse Lessor promptly therefor. Any sum to which Lessor shall be entitled pursuant to this Paragraph shall be deemed to be additional rent hereunder and, if the same be not promptly paid to Lessor, Lessor shall have all the rights and remedies to which it is entitled for the nonpayment of rent. Tenant shall pay for all utility charges, for electricity, in connection with the Demised Premises. If the Tenant requires additional current or other than 110 volt service, request for same must be obtained from the Lessor and all work required will be paid for by the Tenant. The Lessor shall not be liable for any delay or failure to supply any of such services due to unusual conditions beyond its control and Lessor shall not be liable for damage nor shall the Tenant ever be entitled to any abatement of rent for failure to supply same. 7. NO ASSIGNMENTS, SUBLEASES OR ENCUMBRANCES: Tenant shall neither sublet the Demised Premises or any part thereof nor assign this lease or any of the rights herein granted to Tenant without 10 the prior written consent of Lessor in each instance. Tenant shall have no right or power to, and shall not, hypothecate, transfer, pledge or other encumber this Lease or Tenant's rights hereunder nor shall Tenant permit any such encumbrance. Tenant has no right or power to cause, permit or do anything which would cause the Demised Premises, the Building, the Land or Tenant's interest in this Lease to become the subject of any lien, including, but not limited to, any mechanic's liens under the laws of the State of Florida and nothing done by, through, under or against Tenant shall ever create any such liens. If any such lien is filed, Tenant shall cause the land and the Tenant's interest in this Lease to be released from the lien thereof by posting a bond or otherwise within ten (10) days of the date such lien is filed. 8. ALTERATIONS AND IMPROVEMENTS, ETC.: (a) Tenant shall make no alterations, decorations, installations, additions or improvements in or to the demised premises without Lessor's prior written consent. Tenant shall not cut, drill into, disfigure, deface or injure any part of the premises; nor obstruct or permit any obstruction, alteration, addition, improvement, decoration or installation in the premises. All alterations, additions, improvements, decorations or installations (except movable furniture and fixtures put in at the expense of the Tenant and removable without defacing or injuring the Building or the 11 premises) shall become the property of Lessor at the termination of the term; Lessor, however, reserves the option to require Tenant upon demand in writing to remove all fixtures and additions, improvements, decorations or installations (including those not removable without defacing or injuring the leased premises) and to restore the premises to the same condition as when originally leased to Tenant, reasonable wear and tear excepted. Tenant agrees to restore the premises immediately upon the receipt of the said demand in writing at his own cost and expense and agrees in case of his failure to do so, that Lessor may do so and collect the cost thereof from Tenant. Any such alterations or restorations shall be made at such times and in such manner as Lessor may designate and so as not to interfere with the occupation, use and enjoyment of the remainder of the Building by the other tenants thereof. (b) In making any alterations, decorations, additions, installations or improvements to or in the premises. Tenant shall employ and use only such labor, contractors or mechanics as approved by Lessor and all such work done by Tenant shall be performed and installed in such a manner that the same shall comply with all provisions of law, ordinances and all rules and regulations of any and all agencies and authorities having jurisdiction over the premises and at such time and in such manner 12 as not to interfere with the progress of any work being performed by or on account of Lessor. Notwithstanding the foregoing, it is understood that Tenant is not obliged by Lessor to make any improvement or improvements and in no event shall Tenant have the right to create or permit there to be established any lien or encumbrance of any nature against the premises or the Building for said improvement or improvements by Tenant shall fully pay the cost of any improvement or improvements made or contracted by Tenant. Any mechanics's lien filed against the premises of the Building for work claimed to have been, done or materials claims to have been furnished to Tenant shall be duly discharged by Tenant within ten (10) days after the filing of the lien. 9. INSPECTION, EXAMINATION AND ENTRY: Lessor and Lessor's agents shall have the right to enter the premises at all reasonable hours to examine the same and workmen may enter at any time when authorized by Lessor or Lessor's agents to make such repairs, alternations or improvements in the Building as Lessor may deem necessary or desirable. If during the last month of the term, Tenant shall have removed all of Tenant's property. Lessor may immediately enter the premises and prepare them for any future Tenant. Furthermore, the Lessor may allow such future Tenant to occupy the premises. These acts shall have no effect upon Tenant's 13 obligations under this Lease and Tenant shall be entitled to no abatement on diminution of rent as a result thereof, except that in the event such future Tenant makes any payment for the period up until the expirations of this Lease, Tenant shall be entitled to a credit to the extent of such payment. If Tenant shall not be personally present to open and permit entry into the premises, when entry therein to shall be permissible or necessary hereunder, Lessor may forcibly enter same without rendering Lessor liable to any claim for damages and without affecting the obligations and covenants of this Lease. Employees of Lessor and Lessor's agents shall be permitted to enter the demised premises by pass-key at all reasonable times. The Lessor shall also have the right to enter the leased premises at all reasonable hours for the purpose of displaying said premises to prospective tenants within ninety days prior to the termination of this Lease. 10. RIGHT OF LESSOR TO USE ENTRANCES, ETC. AND TO CHANGE SAME: For the purpose of making repairs or alterations in any portion of the Building of which the premises form a part, Lessor may use one or more of the street entrances, halls, passageways and elevators of the said building, provided, however, that there be no unnecessary obstruction of the right of entry to the premises while the same are occupied. Lessor may at any time change the name or 14 number of the Building, remodel or alter the same, or the locations of any entrance thereto, or any other portion thereof not occupied by Tenant and the same shall not constitute a constructive or actual, total or partial eviction. 11. TENANT TO TAKE GOOD CARE OF PREMISES: Tenant shall keep the premises in a clean, safe and sanitary condition and shall permit no waste or injury to occur to the premises and fixtures therein, or to any additions, alterations and improvements thereto. All damage caused by Tenant's negligence, or that of his agents, servants, employees or visitors, shall be repaired promptly by Tenant at his sole cost and expense. In the event that the Tenant fails to comply with the foregoing provisions, the Lessor shall have the option to enter the premises and make all necessary repairs at Tenant's cost and expense, the same to be added to and be payable with the next monthly installment of rent. 12. COMPLIANCE WITH ORDINANCES AND DIRECTIVES OF AUTHORITIES: Lessee shall, at its own cost and expense, comply with all present or future rules, regulations, directives, laws, ordinances and orders of all public authorities and Fire Underwriters which are or may become applicable to the leased premises and space, except as said rules pertain to any structural work or outside repairs. 15 Lessee waives any claim against Lessor for any expenses or damages resulting from compliance with any of the said rules, regulations, directives, laws, ordinances or orders. 13. RULES AND REGULATIONS: That in addition to the several covenants in this Lease, it is mutually covenanted and agreed that the rules and regulations appertaining to the said building and which are annexed hereto, as part hereof in Exhibit C, are agreed to in all of their terms and said Tenant agrees to be bound by the same, and also covenants to be bound by such further rules and regulations as may be made by said Lessor from time to time, during this Lease, deemed by it to be necessary, for the safety, care, cleanliness and the economical management of the premises, and for the preservations of good order therein. Any failure on the part of the Tenant to comply with the terms of this Lease, or with any of said rules and regulations now in existence, as aforesaid, shall, at Lessor's option, work a forfeiture of this Lease and of all rights of Lessee hereunder, and hereupon the Lessor, its agents or attorneys, shall have the right to re-enter said premises and remove Lessee therefrom and to take all necessary steps to collect any rents due hereunder up to the time of said forfeiture or cancellation. 16 14. PARKING: Lessor shall provide and maintain for the use of Tenant and Tenant's invitees and guests, in common with other tenants of the Building and their invitees and guests, an off-street parking area. Lessor reserves the right, however, to enlarge or rearrange such parking facility and Tenant agrees that Tenant and Tenant's employees, if requested by Lessor will park their automobiles only in such areas as Lessor designates from time to time. 15. EQUIPMENT: In the event Tenant desires to place any equipment in the Demised Premises other than normal and customary business equipment, Tenant shall be allowed to install all equipment necessary to carry out said use per paragraph "5". In connection with the installation, maintenance and use by Tenant in equipment using or producing electricity, x-rays, ultra violet rays, infrared rays, sound waves or other rays, waves or forces emitted by scientific or technological equipment. Tenant covenants that Tenant will maintain adequate and proper safeguards, procedures and equipment necessary or desirable for the use of such equipment and that Tenant will indemnify Lessor and hold Lessor harmless from any liability to which Lessor might or could become subjected by reason of inconvenience, injury or damage to person or property resulting from the use of any Tenant's equipment. In 17 addition, should the installation or use of or any equipment, whether properly or improperly installed or protected, result in any increase in the fire insurance rate payable by Lessor or by any other tenant (nothing herein contained being construed to permit Tenant to do anything or to install or use any equipment which would result in any increase in any fire insurance rate), then Tenant shall be liable for such increased rate and shall pay to Lessor forthwith upon demand all increased costs resulting therefrom. Any equipment, including medical and dental equipment, installed by Tenant shall be and remain at all times the property of Tenant and shall be removed by Tenant at the termination of the tenancy, at Tenant's own cost and expense; and upon such removal Tenant shall restore the Demised Premises to their original condition, usual wear and tear excepted. 16. SIGNS: The Tenant will not place any signs or other advertising matter or material on the exterior or on the interior, where possible to be seen from the exterior, of the leased premises or of the building in which the leased premises are located, without the prior written consent of the Lessor. Any lettering or signs placed on the interior of said building shall be for 18 directional purposes only and such signs and lettering shall be of a type, kind, character and description to be approved by the Lessor. 17. DAMAGE TO PROPERTY: It is covenanted and agreed by and between the parties hereto that the Lessor shall not in any event, whether caused by the Lessor's negligence or otherwise, be liable for any loss, damage or injury to the Tenant, Tenant's agents, servants, employees or visitors, or to the Tenant's property, for any damage or injury caused by or from the bursting or leaking of boilers of water, sewer or steam pipes, or air conditioning equipment, or from heating or plumbing fixtures, or from electric wires, equipment or fixtures, or from gas odors or from the elements, or from any cause whatsoever, except in the case of the willful neglect of the Lessor. 18. SUBORDINATION AND ATTORNMENT: This Lease is subject and subordinate to the lien of any mortgage or ground lease or deeds of trust or other encumbrances, now or hereafter placed upon the land or Building, in any amounts whatsoever. Tenant covenants and agrees to execute and deliver such instruments evidencing such subordination of this Lease to such liens of any such mortgages, deeds of trust or other encumbrances, as may be requested by Lessor 19 from time to time. As aforedescribed, this Lease is subordinate to the lien of any existing and/or future mortgage and any further advances, renewals, extensions or modifications thereof, so long as Tenant is not in default under the Lease at that time, this Lease shall continue in full force and effect as a direct and valid Lease between the Tenant and then owner of the fee provided that the then new owner shall not be liable for any previous act or omission of Lessor or any other party, or be subject to any offsets against Lessor, or bound by prepayment of more than one (1) month's rent. 19. DAMAGE BY FIRE OR OTHER CASUALTY: In the event that the Demised Premises are rendered untenantable by reason of fire, explosion or any other casualty, Lessor, at its option, may either repair the said premises to make the same tenable within one hundred eighty (180) days thereafter, or may, at its option, terminate this Lease. In either event, Lessor shall give Tenant a thirty (30) day notice in writing. Furthermore, in the event that the Demised Premises are untenantable and further if Tenant is not liable for the damage in question, Tenant's rent for that period of time shall be abated or apportioned under this Lease or otherwise. 20 20. CONDEMNATION: If during the term of this Lease, the whole of the leased premises or Building, or such portion(s) thereof as will render the leased premised unusable for the purpose leased, be condemned or otherwise leased or taken under the right of eminent domain by any competent authority for public or quasi-public use or purpose or is taken by private purchase in lieu of condemnation, then in such event this Lease shall, at the option of the Lessor, cease and come to an end as of the date of the vesting of title in such public authority or by private purchase, or when possession is given to such public authority, whichever event last occurs. Upon such occurrence the rent shall be proportioned as of such date and any prepaid rent shall be returned to the Tenant. The Lessor shall be entitled to the entire award or purchase price and the Tenant shall have no right or claim to any part thereof. 21. ABANDONMENT: In case Tenant shall fail to take possession at the commencement of the term, or in case the premises or any part thereof shall be vacated during the term prior to the expiration of the term of this Lease. Lessor shall have the right to enter the premises without instituting any proceeding either by force or otherwise without being liable for damages therefor, and to relet the same, or any part thereof, for the unexpired portion of the term or longer and to collect the rent therefor and to apply 21 the rents so collected to the payment of rent and all other sums payable to Lessor. Tenant shall in such case remain responsible to Lessor for any and all deficiency, loss and damage suffered by Lessor. 22. RE-ENTRY, DEFAULT: The Tenant covenants that if the rent reserved by this Lease or any part thereof shall be unpaid when due, or, if the premises shall become vacant or actually unoccupied during the term, or if the Tenant shall fail to perform any of the conditions, covenants, provisions and agreements contained herein, or if a petition in bankruptcy shall be filed by the Tenant, or if the Tenant shall be adjudged bankrupt or insolvent by any court, or if a receiver or trustee in bankruptcy or receiver of the property of the Tenant shall be appointed in any suit, action or proceeding, or if the Tenant shall make an assignment for the benefit of creditors, of if an execution shall be issued against the Tenant, or if the Tenant's leasehold interest herein shall be levied upon, or if the Tenant's leasehold interest herein shall by operation of law pass to any person other than the Tenant, then in each and every case, the Lessor may, at its option, without notice to the Tenant or to any assignee, transferee, trustee, receiver or other person or persons with force or otherwise, retake and recover possession of said premises and 22 terminate this Lease and the term herein and hereby granted and demised; or, in each and such case, the Lessor may, at its option, without notice to the Tenant or to any assignee, transferee, trustee, receiver or other person or persons, with force or otherwise enter said premises and relet the same as it may see fit, without avoiding or terminating this Lease, and for the purpose of such reletting the Lessor may make such repairs, alterations and addition in or to said premises as the Lessor may deem necessary for the purpose and charges of such reletting, alterations and additions in and to said premises to equal the rent hereinabove covenanted to be paid by the Tenant, then the Tenant shall pay any deficiency arising upon demand therefor and such deficiency shall be considered, construed and taken to be a debt provable in bankruptcy or receivership. 23. ATTORNEY'S FEES: If the Tenant defaults in the performance of any of the covenants of this Lease and by reason thereof the Lessor employs the services of an attorney to enforce performance of the covenants by the Tenant, to evict the Tenant, to collect monies due by the Tenant, or to perform any service based upon said default, then in any of said events, the Tenant does not agree to pay a reasonable attorney's fee, including all appellate fees and all expenses and costs incurred by the Lessor pertaining 23 thereto and in enforcement of any remedy available to the Lessor. 24. HOLDING OVER: In the event the Tenant shall withhold from the Lessor the possession of the premises demised herein after the termination of this Lease and the term hereby demised, whether by expiration of said term or by election or act of either party hereto, the damages for which the Tenant shall be liable to the Lessor for a period equal to the period of such detention. In the event the Tenant shall remain in possession of said premises after the expiration and termination of this Lease for any cause whatsoever, the Tenant shall then be considered a tenant at will and by sufferance and no such holding over or retention of possession or occupancy shall operate as an extension or renewal of this Lease in any manner whatsoever. 25. CERTIFICATE BY TENANT: Tenant shall deliver to Lessor or to its mortgagee, auditors or prospective purchaser, or the owner of the fee, when requested by Lessor, a certificate to the effect that this Lease is in full force and effect and that Lessor is not in default therein, or stating specifically any exceptions thereto. Failure to give such a certificate within two (2) weeks after written request shall be conclusive evidence that the lease is in full force and effect and Lessor is not in default and Tenant 24 shall be estopped from asserting any defaults known to him at that time. 26. INDEMNIFICATION: The Lessor shall not be liable for any damage or injury to any person or property whether it be the person or property of the Tenant, the Tenant's employees, agents, guests, invitees or otherwise by reason of Tenant's occupancy and use of the leased premises or because of the fire, flood, windstorm, Acts of God or for any other reason. Tenant shall indemnify and save Lessor harmless and does agree to indemnify and save Lessor harmless, of and from all fines, claims demands and causes of action of every nature whatsoever arising or growing out of or in any manner connected with the occupation or use of the premises and Building and every part thereof, by Tenant and the employees, agents, servants, guests and invitees of Tenant including without limiting the generality of the foregoing, any claims, demands and causes of action for personal injury and/or property damage and said indemnification shall extend to any fines, claims, demands and causes of action of every nature whatsoever which may be made upon, sustained or incurred by Lessor or reason of any breach, violation or non-performance of any term, covenant or condition hereof on the part of Tenant or by reason of 25 any act or omission on the part of Tenant and the employees, agents, servants, guests and invitees of Tenant. In any such event, contributory negligence on the part of the Lessor shall not any wise affect Tenant's obligations under this indemnification. Tenant agrees that this indemnification shall further extend to all costs incurred by Lessor, including reasonable attorney's fees. 27. NOTICES: All notices required hereunder shall be in writing and any notice by Lessor to Tenant shall be deemed to be duly given if either delivered personally to Tenant or sent by registered or certified mail, addressed to Tenant at the premises leased hereunder. Any notice by Tenant to Lessor shall be deemed duly given if sent by registered or certified mail to Lessor at Aaron-Thomas, Inc., 11010 N. Kendall Drive, Suite 200, Miami, Florida 33176 (or at such other address as may be hereafter designated by Lessor) and also to the agent of Lessor charged with the renting and management of the Building, if any. 28. SURRENDER AT EXPIRATION OF TERM: Tenant agrees at the expiration of the term by lapse of time or otherwise to quit and surrender the premises hereby demised and everything belonging to or connected therewith in as good a state and condition as reasonable wear and use thereof will permit and to remove all 26 signs, advertisements and rubbish from the said premises; and Tenant hereby expressly authorizes Lessor, as the agent of Tenant, to remove such rubbish and make such changes and repairs as may be necessary to restore the premises to such condition at the expense of Tenant. 29. QUIET POSSESSION AND OTHER COVENANTS: Lessors covenants that if and so long as Tenant pays the rent and additional rent reserved by this Lease and performs and observes all of the covenants, conditions and rules and regulations hereof, Tenant shall quietly enjoy the demised premises subject, however, to all of their terms of this Lease. Tenant expressly agrees for himself, his executors, administrators, personal representatives, successors and assigns that the covenant of quiet enjoyment (express or implied) and all other covenants in this Lease on the part of Lessor to be performed shall be binding upon Lessor only so long as Lessor remains the owner of the Building which the demised premises form a part. 30. REMEDIES CUMULATIVE: The various rights, remedies, powers and elections of Lessor reserved, expressed or contained in this Lease, are cumulative and none of them shall be deemed to be exclusive of the others or of such other rights, remedies, powers, 27 options or elections as are now or may hereafter be conferred upon Lessor by law. The failure on the part of the Lessor to exercise promptly any rights given hereunder shall not operate to forfeit or waive any of the said rights. 31. NO WAIVER OF PERFORMANCE: No waiver by Lessor of any provision hereof shall be deemed to have been made unless such waiver be in writing signed by Lessor. The failure of Lessor to insist upon the strict performance of any of the covenants or conditions of this Lease, or to exercise any option herein conferred, shall not be construed as waiving or relinquishing for the future of any such covenants, conditions or options but the same shall continue and remain in full force and effect. No act of Lessor or its agent during the term hereof shall be deemed an acceptance of a surrender of the said premises unless made in writing and personally subscribed by Lessor, neither shall the delivery of the keys to the premises by Tenant to Lessor or its agent be deemed a surrender and acceptance thereof. No payment by Tenant of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the stipulated rent. 32. SECURITY: The Tenant concurrently with the execution of this Lease has deposited with Lessor the sum of $4,240.00 28 ($2,120.00, security and $2,120.00 last month's rent)(1) as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this Lease; it is agreed that, in the event Tenant defaults in respect of any of the terms, provisions and conditions of this Lease, including, but not limited to, the payment of rent and additional rent Lessor may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which tenant is in default or for any sum which Lessor may expend or may be required to expend by reason of Tenant's default in respect to any of the terms, covenants and conditions of this Lease, including, but not limited to, any damages or deficiency in the re-letting of the premises whether such damage or deficiency accrued before or after summary proceedings on other re-entry by Lessor. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this Lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the premises to the Lessor. In the event of a sale of the land and Building of - --------------------------- (1)Lessor acknowledges that Lessee has paid these amounts in full upon execution of previous leases regarding these units with Lessor. 29 which the premises form a part, Lessor shall have the right to transfer the security to the vendee and Lessor shall thereupon be released by Tenant from all liability for the return of such security and Tenant agrees to look to the new Lessor solely for the return of such security. It is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Lessor. Tenant further covenants that he will not assign or encumber the monies deposited herein as security and that neither Lessor nor its assigns shall be bound by and any such assignment or encumbrances. Lessor shall not be required to keep the security in a segregated account and the security may be commingled with other funds of Lessor and in ono event shall Tenant be entitled to any interest on the security. 33. LIEN: The said Tenant hereby pledges and assigns to the Lessor all the furniture, fixtures, goods and chattels of said Tenant, which shall or may be brought or put on said premises as security for the payment of the rent herein reserved and the Tenant agrees that the said lien may be enforced by distress, foreclosure or otherwise at the election of the said Lessor and does hereby agree to pay attorney's fees together with all costs and charges therefor incurred or paid by the Lessor. 30 34. SUCCESSORS: This Lease shall inure to and be binding upon the heirs, administrators, executors, successors and assigns of the Lessor and the heirs, administrators, executors, successors and assigns of the Tenant. 35. AMENDMENT: It is mutually agreed that this Lease cannot be changed, altered, modified or extended, except in writing signed by the Lessor's duly authorized agent. 36. RELOCATION: Lessor reserves the right to relocate the Tenant in another similar area of the Building during the term of this Lease, provided Tenant is given 90 days written notice as to relocation and all attendant costs of moving, telephones, stationery, etc. are paid by Lessor. 37. INSURANCE, INDEMNIFICATION: Tenant agrees that Tenant will, at its own cost and expense, maintain public liability insurance naming Lessor and Tenant as insureds, protecting each of them against any and all claims for injury or damage to persons or property or for the loss of life or property occurring in, or about the Demised premises and arising out of the act, negligence, omission, nonfeasance or malfeasance of Tenant, its employees, agents, contractors, customers licensees, invitees or guests. Such 31 insurance shall be carried in an amount not less than Three Hundred Thousand Dollars ($300,000.00) for bodily injury or death to any one person and Three Hundred Thousand Dollars ($300,000.00) for bodily injury or death of a number of persons in the same accident or occurrence and One Hundred Thousand Dollars ($100,000.00) for property damage. All such insurance shall be effective under valid and enforceable policies and shall be issued by insurers of recognized responsibility authorized to do business in the State of Florida and acceptable to Lessor (though Lessor's acceptance of any such insurer shall not constitute a representation or warranty by Lessor as to the financial stability of such insurer or otherwise and no such acceptance of any insurer by Lessor shall be deemed a release or waiver of any responsibility, obligation or liability of Tenant under this Lease). All such insurance policies shall contain a provision whereby the insurer agrees not to cancel such insurance without ten (10) days prior written notice to Lessor. Tenant shall furnish Lessor with a certificate evidencing the aforesaid insurance coverage on or before the Commencement Date and upon each renewal thereof but in all events at least ten (10) days prior to the expiration of any such policy. Tenant shall indemnify and save harmless Lessor and its agents against and from (i) any and all claims arising from : (a) the management by Tenant of the Demised Premises or any business therein, any work whatsoever done 32 therein or thereon, or any condition created therein or thereon, during the Term of this Lease or during any other period of time that Tenant has access to the Demised Premises (though nothing herein contained shall be construed to grant Tenant access to the Demised Premises except as provided in this Lease); or (b) any negligent or otherwise wrongful act or omission of Tenant or any subtenant (though nothing contained in this Lease shall be construed to permit a sublease), licensee, employee, agent or contractor of Tenant or any other party acting by, through or under Tenant; and (ii) all costs, expenses and liabilities incurred in or in connection with or as a result of each such claim, action or proceeding brought hereunder, whether or not suit be instituted, including but not limited to reasonable attorney's fees incurred by Lessor in defending any such action through and including all appeals. In case any action or proceeding be brought against Lessor by reason of any such claim, Tenant, upon notice from Lessor, shall resist and defend such action or proceeding at the cost of Tenant. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. WITNESSES: TENANT: 33 /s/ Graciela Lopez /s/ Steven Sablotsky, President [SEAL] ______________________________ ______________________________ 8-10-92 ______________________________ ______________________________ Date signed by Tenant WITNESSES: LESSOR: /s/ /s/ James Keen __________________________ ______________________________ 8-10-92 __________________________ _______________________________ Date signed by Lessor Commission At the time of signing, a commission of 6% of the total rent due under the Lease is due and payable to Aaron-Thoms, Inc. The same rate is due upon the exercise of each option as it occurs. Commission is Lessor's responsibility. Lessee is not responsible in any manner for payment of commission. 34 ADDENDUM OPTION TO RENEW: Lessor hereby grants to Lessee the exclusive right and option to renew this lease for an additional three consecutive two year periods. The increase in rental price during the option renewal will follow the schedule as stated in section 4a of this Lease Agreement. In addition, as agreed with all increases, the monthly rent installments during option renewals will not exceed 5.5% maximum. /s/ Steven Sablotsky 8-10-92 EX-10.7 5 OFFICE LEASE AGREEMENT - RUBINO 1 EXHIBIT 10.7 Parkside Plaza Office Lease between Mark Rubino and the Registrant dated November 28, 1990. 2 STANDARD OFFICE LEASE THIS LEASE AGREEMENT made and entered into this 28th day of November, 1990, by and between Mark Rubino, an individual (hereinafter referred to as "Lessor") and Noven Pharmaceuticals, Inc. (hereinafter referred to as "Tenant" or "Lessee"). WITNESSETH: 1. DESCRIPTION. Lessor hereby leases unto Tenant and Tenant hereby leases form Lessor, Suite No. 208 ("Demised Premises") containing approximately 1,091 square feet in that certain building ("Building") located at 13342 S.W. 128th Street, Miami, FL, also known as "Parkside Plaza." 2. TERM. [Fill in and Initial A or B] A. The term ("Term") of this Lease shall be two years from the 1st day of January, 1991 ("Commencement Date") through the 31st day of December, 1992 ("Expiration Date") with an additional three (3) two-year options to run consecutively. B. The term ("Term") of this lease shall commence on 3 the earlier of the following dates ("Commencement Date"): (i) the date on which Tenant opens for business in the Demises Premises, or (ii) ______________ days after Lessor has tendered possession (as hereafter provided) of the Demised Premises to Tenant, or (iii) the date _________ days after Lessor notifies Tenant that the Demises Premises are or should be ready for occupancy. Tenant shall pay all rent and additional rent relating to the Demised Premises which accrue after Lessor's tender of possession. Tender of possession shall be deemed to have occurred when Lessor has completed Lessor's work, if any. If Lessor is unable to give possession of the Demised Premises to Tenant on the date for the commencement of the term hereof by reason of the fact that Lessor has not substantially completed any space preparation work in the Demised Premises pursuant to Lessor's Work Letter signed on behalf of Lessor and Tenant (which Work Letter, if any, is made a part hereof by reference) and if the delay in completion of such work has not been caused by Tenant's failure to submit its plans and specifications to Lessor on or before the time called for in the Work Letter, or caused by other act or failure to act by Tenant, then the term of this Lease shall commence on the day following the day of notification by Lessor 4 that such work has been substantially completed. If such date shall be other than the first day of a calendar month, the rent or such months shall be prorated on a per diem basis. No failure to deliver possession on the scheduled date for the commencement of the term shall extend, or be deemed to extend, the term of this Lease. 3. RENTAL PAYMENT. Subject to increase as provided in this Lease. Tenant agrees to pay to Lessor as and for rent for the Demised Premises for the Term hereof the sum of Fifteen thousand six hundred dollars ($15,600.00) plus all applicable sales and use taxes which sum for the convenience of the Tenant shall be paid as follows: $650.00 ("Base Monthly Rental") plus all applicable sales and use taxes upon the first day of each calendar month for the Term hereof commencing with the first calendar month following the calendar month of the Commencement Date. The rental payments shall be made to Lessor of the address hereinafter set forth to which notices to Lessor shall be sent or at such other place as Lessor may, from time to time, hereafter designate by notice to Tenant. Tenant's obligation to pay rent and keep and perform any and all covenants and agreements herein 5 contained shall not be abated, released or discharged because of any reason whatsoever except as is otherwise specifically provided for in this Lease. Rent and each installment thereof shall be paid in lawful money of the United States, legal tender at the time of payment. All rents shall be payable in advance and paid without deduction, setoff, discount or abatement. Under no circumstances shall any holding over by Tenant be authorized and no occupancy beyond the term limited hereby shall ever constitute anything except an unlawful holding over by Tenant after the expiration of the Term. By Tenant's execution hereof, Tenant acknowledges that Tenant has inspected the Demised Premises and the Building and that as of the date hereof the Demised Premises and the Building are in all respects in satisfactory condition and acceptable to Tenant and Tenant is accepting same as is. 4. INCREASE OF BASE RENT: The annual rental for each year of this lease ("lease year"), after the base year shall be increased or decreased, but never less than the base rent, by an amount equal to the proportion hereafter set forth, times the amount of the increase or decrease based on the cost of living escalation published by the Bureau of Labor Statistics U.S. 6 Department of Labor. (a) Base year shall be the first full calendar year after the building has been completed or the first full calendar year of the terms of this lease, whichever is later. (b) Direct operating costs shall include: taxes, insurance, and water & sewer. All expenditures scheduled less often than annually shall be prorated over the period to which such expenditures are applicable. (c) For purposes of determining increases or decreases in taxes: (i) "Base year tax" shall mean the real estate tax bill of the land and building, of which the demised premises are a part, made in the first tax year that the building is assessed as completed, rather than under construction, or the base tax year of 1991 and the real estate tax for that year is to be ascertained. (ii) "Taxes" shall mean real estate taxes, special and extraordinary assessments, and governmental levies imposed upon or with respect to the land and building of which is the demised premises are a part and any similar tax imposed in addition to, in substitution for, or in lieu of such leases. (d) Lessee's pro rata share of any increase in direct operating costs shall be determined by the ratio that the gross 7 rental area of the demised premises bears to the total gross rental of the building which Lessor and Tenant hereby agree is 3.855 percent. (e) COST OF LIVING ESCALATION: If two months prior to commencement of any lease year, the Consumer Price Index (C.P.I.) for "all items" (Miami, FL C.P.I. Index) as compiled and published by the Bureau of Labor Statistics, United States Department of Labor not to exceed 5% maximum should be higher than the Base Consumer Price Index of January 1, 1991, the Minimum Monthly Rent installments shall be increased by an amount proportionate to the amount of such increase in the said price index, not to exceed 5% maximum. If such price index should in the future be compiled upon a different basis, a proper adjustment will be made therein, for the purposes of this Paragraph, to reflect any increase the cost of living that has occurred over the Base Consumer Price Index. If at the time of any such computation the United States Department of Labor should no longer compile and publish such prices indexes, the index for "All Items" compiled and published by any other branch or department of the Federal government shall be used for the purpose of this paragraph and if no such index is compiled and published by any branch or department of the Federal government, the statistics reflecting cost of living increases as compiled by any institution or organization or individual generally recognized as an authority 8 by financial and insurance institutions shall be used as a basis for such adjustment. This provision is independent of the other provisions which provide for a pass through of certain increases. (See attached addendum for cost of option renewal). For example: If the base C.P.I. is 230.5 and two months prior to the first lease year the C.P.I. is 235.8 and the minimum monthly rent is $1,400.00. The new minimum monthly rent for the next lease year would be $1,432.19 or $1,432.00 per month. [235.8 divided by 230.5 = 1.023 X $1,400.00 = $1,432.19 per month]. Lessor shall have the right to treat any sums due pursuant to this Paragraph as additional rent due hereunder and if the same be not promptly paid when due. Lessor shall have all the rights and remedies to which Lessor is entitled for the nonpayment of rent. 5. USE AND POSSESSION. It is understood and agreed that the demised space and premises shall be continually used and occupied by the Lessee during the term of this Lease only for the research, development, clinical manufacturing and packaging of pharmaceutical products and for no other purposes or uses whatsoever. Tenant will not make or permit any use of the space or premises which, directly or indirectly, is forbidden by public law, 9 ordinance or government regulation or which may be dangerous to life, limb or property. In the event the Tenant uses the space or premises for any purposes not expressly permitted herein then the Lessor may terminate the lease or without notice to tenant, restrain such improper use by injunction or other legal action. As a material consideration hereto the Tenant covenants that Tenant will not without the written consent of the Lessor permit the premises to be occupied by any person, firm or corporation other than the Tenant whose name appears on this lease. 6. SERVICES: Lessor agrees to furnish the following services to Tenant: (1) Automatically operated fire suppressant sprinkler system throughout and central smoke detector in office areas only. (2) Water. (3) Furnishing, supplying and maintaining the building's common areas and restroom facilities, all at Lessor's expense, unless otherwise agreed to in this Lease. Tenant agrees to and shall pay when due all charges for utility services, which are billed to Tenant with respect to the Demised Premises or which are charged with respect to the Demised Premises as opposed to the Building as a whole. If the Tenant fails to pay same promptly when due. Lessor shall have the right, but not the obligation, to pay said charges and Tenant agrees to 10 reimburse Lessor promptly therefor. Any sum to which Lessor shall be entitled pursuant to this Paragraph shall be deemed to be additional rent hereunder and, if the same be not promptly paid to Lessor, Lessor shall have all the rights and remedies to which it is entitled for the nonpayment of rent. Tenant shall pay for all utility charges, for electricity, in connection with the Demised Premises. If the Tenant requires additional current or other than 110 volt service, request for same must be obtained from the Lessor and all work required will be paid for by the Tenant. The Lessor shall not be liable for any delay or failure to supply any of such services due to unusual conditions beyond its control and Lessor shall not be liable for damage nor shall the Tenant ever be entitled to any abatement of rent for failure to supply same. 7. NO ASSIGNMENTS, SUBLEASES OR ENCUMBRANCES: Tenant shall neither sublet the Demised Premises or any part thereof nor assign this lease or any of the rights herein granted to Tenant without the prior written consent of Lessor in each instance. Tenant shall have no right or power to, and shall not, hypothecate, transfer, pledge or other encumber this Lease or Tenant's rights hereunder nor shall Tenant permit any such encumbrance. Tenant has no right or power to cause, permit or do anything which would cause the 11 Demised Premises, the Building, the Land or Tenant's interest in this Lease to become the subject of any lien, including, but not limited to, any mechanic's liens under the laws of the State of Florida and nothing done by, through, under or against Tenant shall ever create any such liens. If any such lien is filed, Tenant shall cause the land and the Tenant's interest in this Lease to be released from the lien thereof by posting a bond or otherwise within ten (10) days of the date such lien is filed. 8. ALTERATIONS AND IMPROVEMENTS, ETC.: (a) Tenant shall make no alterations, decorations, installations, additions or improvements in or to the demised premises without Lessor's prior written consent. Tenant shall not cut, drill into, disfigure, deface or injure any part of the premises; nor obstruct or permit any obstruction, alteration, addition, improvement, decoration or installation in the premises. All alterations, additions, improvements, decorations or installations (except movable furniture and fixtures put in at the expense of the Tenant and removable without defacing or injuring the Building or the premises) shall become the property of Lessor at the termination of the term; Lessor, however, reserves the option to require Tenant upon demand in writing to remove all fixtures and additions, improvements, decorations or installations (including those not removable without defacing or injuring the leased premises) and to 12 restore the premises to the same condition as when originally leased to Tenant, reasonable wear and tear excepted. Tenant agrees to restore the premises immediately upon the receipt of the said demand in writing at his own cost and expense and agrees in case of his failure to do so, that Lessor may do so and collect the cost thereof from Tenant. Any such alterations or restorations shall be made at such times and in such manner as Lessor may designate and so as not to interfere with the occupation, use and enjoyment of the remainder of the Building by the other tenants thereof. (b) In making any alterations, decorations, additions, installations or improvements to or in the premises. Tenant shall employ and use only such labor, contractors or mechanics as approved by Lessor and all such work done by Tenant shall be performed and installed in such a manner that the same shall comply with all provisions of law, ordinances and all rules and regulations of any and all agencies and authorities having jurisdiction over the premises and at such time and in such manner as not to interfere with the progress of any work being performed by or on account of Lessor. Notwithstanding the foregoing, it is understood that Tenant is not obliged by Lessor to make any improvement or improvements and in no event shall Tenant have the right to create or permit there to be established any lien or 13 encumbrance of any nature against the premises or the Building for said improvement or improvements by Tenant shall fully pay the cost of any improvement or improvements made or contracted by Tenant. Any mechanics's lien filed against the premises of the Building for work claimed to have been, done or materials claims to have been furnished to Tenant shall be duly discharged by Tenant within ten (10) days after the filing of the lien. (c) Lessor agrees to additional roof penetrations required by Leases for ventilation of labs and clinical manufacturing areas. (d) Any improvements made by Tenant will become part of the real estate and are to remain. 9. INSPECTION, EXAMINATION AND ENTRY: Lessor and Lessor's agents shall have the right to enter the premises at all reasonable hours to examine the same and workmen may enter at any time when authorized by Lessor or Lessor's agents to make such repairs, alternations or improvements in the Building as Lessor may deem necessary or desirable. If during the last month of the term, Tenant shall have removed all of Tenant's property. Lessor may immediately enter the premises and prepare them for any future Tenant. Furthermore, the Lessor may allow such future Tenant to 14 occupy the premises. These acts shall have no effect upon Tenant's obligations under this Lease and Tenant shall be entitled to no abatement on diminution of rent as a result thereof, except that in the event such future Tenant makes any payment for the period up until the expirations of this Lease, Tenant shall be entitled to a credit to the extent of such payment. If Tenant shall not be personally present to open and permit entry into the premises, when entry therein to shall be permissible or necessary hereunder, Lessor may forcibly enter same without rendering Lessor liable to any claim for damages and without affecting the obligations and covenants of this Lease. Employees of Lessor and Lessor's agents shall be permitted to enter the demised premises by pass-key at all reasonable times. The Lessor shall also have the right to enter the leased premises at all reasonable hours for the purpose of displaying said premises to prospective tenants within ninety days prior to the termination of this Lease. 10. RIGHT OF LESSOR TO USE ENTRANCES, ETC. AND TO CHANGE SAME: For the purpose of making repairs or alterations in any portion of the Building of which the premises form a part, Lessor may use one or more of the street entrances, halls, passage ways and elevators of the said building, provided, however, that there be no unnecessary obstruction of the right of entry to the premises while 15 the same are occupied. Lessor may at any time change the name or number of the Building, remodel or alter the same, or the locations of any entrance thereto, or any other portion thereof not occupied by Tenant and the same shall not constitute a constructive or actual, total or partial eviction. 11. TENANT TO TAKE GOOD CARE OF PREMISES: Tenant shall keep the premises in a clean, safe and sanitary condition and shall permit no waste or injury to occur to the premises and fixtures therein, or to any additions, alterations and improvements thereto. All damage caused by Tenant's negligence, or that of his agents, servants, employees or visitors, shall be repaired promptly by Tenant at his sole cost and expense. In the event that the Tenant fails to comply with the foregoing provisions, the Lessor shall have the option to enter the premises and make all necessary repairs at Tenant's cost and expense, the same to be added to and be payable with the next monthly installment of rent. 12. COMPLIANCE WITH ORDINANCES AND DIRECTIVES OF AUTHORITIES: Lessee shall, at its own cost and expense, comply with all present or future rules, regulations, directives, laws, ordinances and orders of all public authorities and Fire Underwriters which are or may become applicable to the leased premises and space, except as 16 said rules pertain to any structural work or outside repairs. Lessee waives any claim against Lessor for any expenses or damages resulting from compliance with any of the said rules, regulations, directives, laws, ordinances or orders. 13. RULES AND REGULATIONS: That in addition to the several covenants in this Lease, it is mutually covenanted and agreed that the rules and regulations appertaining to the said building and which are annexed hereto, as part hereof in Exhibit C, are agreed to in all of their terms and said Tenant agrees to be bound by the same, and also covenants to be bound by such further rules and regulations as may be made by said Lessor from time to time, during this Lease, deemed by it to be necessary, for the safety, care, cleanliness and the economical management of the premises, and for the preservations of good order therein. Any failure on the part of the Tenant to comply with the terms of this Lease, or with any of said rules and regulations now in existence, as aforesaid, shall, at Lessor's option, work a forfeiture of this Lease and of all rights of Lessee hereunder, and hereupon the Lessor, its agents or attorneys, shall have the right to re-enter said premises and remove Lessee therefrom and to take all necessary steps to collect any rents due hereunder up to the time of said forfeiture or cancellation. 17 14. PARKING: Lessor shall provide and maintain for the use of Tenant and Tenant's invitees and guests, in common with other tenants of the Building and their invitees and guests, an off-street parking area. Lessor reserves the right, however, to enlarge or rearrange such parking facility and Tenant agrees that Tenant and Tenant's employees, if requested by Lessor will park their automobiles only in such areas as Lessor designates from time to time. 15. EQUIPMENT: In the event Tenant desires to place any equipment in the Demised Premises other than normal and customary business equipment, Tenant shall be allowed to install all equipment necessary to carry out said use per paragraph "5". In connection with the installation, maintenance and use by Tenant in equipment using or producing electricity, x-rays, ultra violet rays, infrared rays, sound waves or other rays, waves or forces emitted by scientific or technological equipment. Tenant covenants that Tenant will maintain adequate and proper safeguards, procedures and equipment necessary or desirable for the use of such equipment and that Tenant will indemnify Lessor and hold Lessor harmless from any liability to which Lessor might or could become subjected by reason of inconvenience, injury or damage to person or property resulting from the use of any Tenant's equipment. In 18 addition, should the installation or use of or any equipment, whether properly or improperly installed or protected, result in any increase in the fire insurance rate payable by Lessor or by any other tenant (nothing herein contained being construed to permit Tenant to do anything or to install or use any equipment which would result in any increase in any fire insurance rate), then Tenant shall be liable for such increased rate and shall pay to Lessor forthwith upon demand all increased costs resulting therefrom. Any equipment, including medical and dental equipment, installed by Tenant shall be and remain at all times the property of Tenant and shall be removed by Tenant at the termination of the tenancy, at Tenant's own cost and expense; and upon such removal Tenant shall restore the Demised Premises to their original condition, usual wear and tear excepted. 16. SIGNS: The Tenant will not place any signs or other advertising matter or material on the exterior or on the interior, where possible to be seen from the exterior, of the leased premises or of the building in which the leased premises are located, without the prior written consent of the Lessor. Any lettering or signs placed on the interior of said building shall be for 19 directional purposes only and such signs and lettering shall be of a type, kind, character and description to be approved by the Lessor. 17. DAMAGE TO PROPERTY: It is covenanted and agreed by and between the parties hereto that the Lessor shall not in any event, whether caused by the Lessor's negligence or otherwise, be liable for any loss, damage or injury to the Tenant, Tenant's agents, servants, employees or visitors, or to the Tenant's property, for any damage or injury caused by or from the bursting or leaking of boilers of water, sewer or steam pipes, or air conditioning equipment, or from heating or plumbing fixtures, or from electric wires, equipment or fixtures, or from gas odors or from the elements, or from any cause whatsoever, except in the case of the willful neglect of the Lessor. 18. SUBORDINATION AND ATTORNMENT: This Lease is subject and subordinate to the lien of any mortgage or ground lease or deeds of trust or other encumbrances, now or hereafter placed upon the land or Building, in any amounts whatsoever. Tenant covenants and agrees to execute and deliver such instruments evidencing such subordination of this Lease to such liens of any such mortgages, deeds of trust or other encumbrances, as may be requested by Lessor 20 from time to time. As aforedescribed, this Lease is subordinate to the lien of any existing and/or future mortgage and any further advances, renewals, extensions or modifications thereof, so long as Tenant is not in default under the Lease at that time, this Lease shall continue in full force and effect as a direct and valid Lease between the Tenant and then owner of the fee provided that the then new owner shall not be liable for any previous act or omission of Lessor or any other party, or be subject to any offsets against Lessor, or bound by prepayment of more than one (1) month's rent. 19. DAMAGE BY FIRE OR OTHER CASUALTY: In the event that the Demised Premises are rendered untenantable by reason of fire, explosion or any other casualty, Lessor, at its option, may either repair the said premises to make the same tenable within one hundred eighty (180) days thereafter, or may, at its option, terminate this Lease. In either event, Lessor shall give Tenant a thirty (30) day notice in writing. Furthermore, in the event that the Demised Premises are untenantable and further if Tenant is not liable for the damage in question, Tenant's rent for that period of time shall be abated or apportioned under this Lease or otherwise. 21 20. CONDEMNATION: If during the term of this Lease, the whole of the leased premises or Building, or such portion(s) thereof as will render the leased premised unusable for the purpose leased, be condemned or otherwise leased or taken under the right of eminent domain by any competent authority for public or quasi-public use or purpose or is taken by private purchase in lieu of condemnation, then in such event this Lease shall, at the option of the Lessor, cease and come to an end as of the date of the vesting of title in such public authority or by private purchase, or when possession is given to such public authority, whichever event last occurs. Upon such occurrence the rent shall be proportioned as of such date and any prepaid rent shall be returned to the Tenant. The Lessor shall be entitled to the entire award or purchase price and the Tenant shall have no right or claim to any part thereof. 21. ABANDONMENT: In case Tenant shall fail to take possession at the commencement of the term, or in case the premises or any part thereof shall be vacated during the term prior to the expiration of the term of this Lease. Lessor shall have the right to enter the premises without instituting any proceeding either by force or otherwise without being liable for damages therefor, and to relet the same, or any part thereof, for the unexpired portion of the term or longer and to collect the rent therefor and to apply 22 the rents so collected to the payment of rent and all other sums payable to Lessor. Tenant shall in such case remain responsible to Lessor for any and all deficiency, loss and damage suffered by Lessor. 22. RE-ENTRY, DEFAULT: The Tenant covenants that if the rent reserved by this Lease or any part thereof shall be unpaid when due, or, if the premises shall become vacant or actually unoccupied during the term, or if the Tenant shall fail to perform any of the conditions, covenants, provisions and agreements contained herein, or if a petition in bankruptcy shall be filed by the Tenant, or if the Tenant shall be adjudged bankrupt or insolvent by any court, or if a receiver or trustee in bankruptcy or receiver of the property of the Tenant shall be appointed in any suit, action or proceeding, or if the Tenant shall make an assignment for the benefit of creditors, of if an execution shall be issued against the Tenant, or if the Tenant's leasehold interest herein shall be levied upon, or if the Tenant's leasehold interest herein shall by operation of law pass to any person other than the Tenant, then in each and every case, the Lessor may, at its option, without notice to the Tenant or to any assignee, transferee, trustee, receiver or other person or persons with force or otherwise, retake and recover possession of said premises and 23 terminate this Lease and the term herein and hereby granted and demised; or, in each and such case, the Lessor may, at its option, without notice to the Tenant or to any assignee, transferee, trustee, receiver or other person or persons, with force or otherwise enter said premises and relet the same as it may see fit, without avoiding or terminating this Lease, and for the purpose of such reletting the Lessor may make such repairs, alterations and addition in or to said premises as the Lessor may deem necessary for the purpose and charges of such reletting, alterations and additions in and to said premises to equal the rent hereinabove covenanted to be paid by the Tenant, then the Tenant shall pay any deficiency arising upon demand therefor and such deficiency shall be considered, construed and taken to be a debt provable in bankruptcy or receivership. 23. ATTORNEY'S FEES: If the Tenant defaults in the performance of any of the covenants of this Lease and by reason thereof the Lessor employs the services of an attorney to enforce performance of the covenants by the Tenant, to evict the Tenant, to collect monies due by the Tenant, or to perform any service based upon said default, then in any of said events, the Tenant does not agree to pay a reasonable attorney's fee, including all appellate fees and all expenses and costs incurred by the Lessor pertaining 24 thereto and in enforcement of any remedy available to the Lessor. 24. HOLDING OVER: In the event the Tenant shall withhold from the Lessor the possession of the premises demised herein after the termination of this Lease and the term hereby demised, whether by expiration of said term or by election or act of either party hereto, the damages for which the Tenant shall be liable to the Lessor for a period equal to the period of such detention. In the event the Tenant shall remain in possession of said premises after the expiration and termination of this Lease for any cause whatsoever, the Tenant shall then be considered a tenant at will and by sufferance and no such holding over or retention of possession or occupancy shall operate as an extension or renewal of this Lease in any manner whatsoever. 25. CERTIFICATE BY TENANT: Tenant shall deliver to Lessor or to its mortgagee, auditors or prospective purchaser, or the owner of the fee, when requested by Lessor, a certificate to the effect that this Lease is in full force and effect and that Lessor is not in default therein, or stating specifically any exceptions thereto. Failure to give such a certificate within two (2) weeks after written request shall be conclusive evidence that the lease is in full force and effect and Lessor is not in default and Tenant 25 shall be estopped from asserting any defaults known to him at that time. 26. INDEMNIFICATION: The Lessor shall not be liable for any damage or injury to any person or property whether it be the person or property of the Tenant, the Tenant's employees, agents, guests, invitees or otherwise by reason of Tenant's occupancy and use of the leased premises or because of the fire, flood, windstorm, Acts of God or for any other reason. Tenant shall indemnify and save Lessor harmless and does agree to indemnify and save Lessor harmless, of and from all fines, claims demands and causes of action of every nature whatsoever arising or growing out of or in any manner connected with the occupation or use of the premises and Building and every part thereof, by Tenant and the employees, agents, servants, guests and invitees of Tenant including without limiting the generality of the foregoing, any claims, demands and causes of action for personal injury and/or property damage and said indemnification shall extend to any fines, claims, demands and causes of action of every nature whatsoever which may be made upon, sustained or incurred by Lessor or reason of any breach, violation or non-performance of any term, covenant or condition hereof on the part of Tenant or by reason of 26 any act or omission on the part of Tenant and the employees, agents, servants, guests and invitees of Tenant. In any such event, contributory negligence, except willful neglect, on the part of the Lessor shall not any wise affect Tenant's obligations under this indemnification. Tenant agrees that this indemnification shall further extend to all costs incurred by Lessor, including reasonable attorney's fees. 27. NOTICES: All notices required hereunder shall be in writing and any notice by Lessor to Tenant shall be deemed to be duly given if either delivered personally to Tenant or sent by registered or certified mail, addressed to Tenant at the premises leased hereunder. Any notice by Tenant to Lessor shall be deemed duly given if sent by registered or certified mail to Lessor at Mark Rubino, 27221 S.W. 145th Avenue, Naranja, Florida 33032 (or at such other address as may be hereafter designated by Lessor) and also to the agent of Lessor charged with the renting and management of the Building, if any. 28. SURRENDER AT EXPIRATION OF TERM: Tenant agrees at the expiration of the term by lapse of time or otherwise to quit and surrender the premises hereby demised and everything belonging to or connected therewith in as good a state and condition as 27 reasonable wear and use thereof will permit and to remove all signs, advertisements and rubbish from the said premises; and Tenant hereby expressly authorizes Lessor, as the agent of Tenant, to remove such rubbish and make such changes and repairs as may be necessary to restore the premises to such condition at the expense of Tenant. 29. QUIET POSSESSION AND OTHER COVENANTS: Lessors covenants that if and so long as Tenant pays the rent and additional rent reserved by this Lease and performs and observes all of the covenants, conditions and rules and regulations hereof, Tenant shall quietly enjoy the demised premises subject, however, to all of their terms of this Lease. Tenant expressly agrees for himself, his executors, administrators, personal representatives, successors and assigns that the covenant of quiet enjoyment (express or implied) and all other covenants in this Lease on the part of Lessor to be performed shall be binding upon Lessor only so long as Lessor remains the owner of the Building which the demised premises form a part. 30. REMEDIES CUMULATIVE: The various rights, remedies, powers and elections of Lessor reserved, expressed or contained in this Lease, are cumulative and noone of them shall be deemed to be 28 exclusive of the others or of such other rights, remedies, powers, options or elections as are now or may hereafter be conferred upon Lessor by law. The failure on the part of the Lessor to exercise promptly any rights given hereunder shall not operate to forfeit or waive any of the said rights. 31. NO WAIVER OF PERFORMANCE: No waiver by Lessor of any provision hereof shall be deemed to have been made unless such waiver be in writing signed by Lessor. The failure of Lesor to insist upon the strict performance of any of the covenants or conditions of this Lease, or to exercise any option herein conferred, shall not be construed as waiving or relinquishing for the future of any such covenants, conditions or options but the same shall continue and remain in full force and effect. No act of Lessor or its agent during the term hereof shall be deemed an acceptance of a surrender of the said premises unless made in writing and personally subscribed by Lessor, neither shall the delivery of the keys to the premises by Tenant to Lessor or its agent be deemed a surrender and acceptance thereof. No payment by Tenant of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the stipulated rent. 32. SECURITY: The Tenant concurrently with the execution of this Lease has deposited with Lessor the sum of Twelve hundered 29 dollars ($600.00, security and $600.00 last month's rent)(1) as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this Lease; it is agreed that, in the event Tenant defaults in respect of any of the terms, provisions and conditions of this Lease, including, but not limited to, the payment of rent and additional rent Lessor may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which tenant is in default or for any sum which Lessor may expend or may be required to expend by reason of Tenant's default in respect to any of the terms, covenants and conditions of this Lease, including, but not limited to, any damages or deficiency in the re-letting of the premises whether such damage or deficiency accrued before or after summary proceedings on other re-entry by Lessor. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this Lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the premises to the Lessor. In the event of a sale of the land and Building of - ------------------------ (1)Lessor acknowledges that Lessee has paid these amounts in full upon execution of previous leases regarding these units with Lessor. 30 which the premises form a part, Lessor shall have the right to transfer the security to the vendee and Lessor shall thereupon be released by Tenant from all liability for the return of such security and Tenant agrees to look to the new Lessor solely for the return of such security. It is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Lessor. Tenant further covenants that he will not assign or encumber the monies deposited herein as security and that neither Lessor nor its assigns shall be bound by and any such assignment or encumbrances. Lessor shall not be required to keep the security in a segregated account and the security may be commingled with other funds of Lessor and in ono event shall Tenant be entitled to any interest on the security. 33. LIEN: The said Tenant hereby pledges and assigns to the Lessor all the furniture, fixtures, goods and chattels of said Tenant, which shall or may be brought or put on said premises as security for the payment of the rent herein reserved and the Tenant agrees that the said lien may be enforced by distress, foreclosure or otherwise at the election of the said Lessor and does hereby agree to pay attorney's fees together with all costs and charges therefor incurred or paid by the Lessor. 31 34. SUCCESSORS: This Lease shall inure to and be binding upon the heirs, administrators, executors, successors and assigns of the Lessor and the heirs, administrators, executors, successors and assigns of the Tenant. 35. AMENDMENT: It is mutually agreed that this Lease cannot be changed, altered, modified or extended, except in writing signed by the Lessor's duly authorized agent. 36. RELOCATION: Lessor reserves the right to relocate the Tenant in another similar area of the Building during the term of this Lease, provided Tenant is given 90 days written notice as to relocation and all attendant costs of moving, telephones, stationery, etc. are paid by Lessor. 37. INSURANCE, INDEMNIFICATION: Tenant agrees that Tenant will, at its own cost and expense, maintain public liability insurance naming Lessor and Tenant as insureds, protecting each of them against any and all claims for injury or damage to persons or property or for the loss of life or property occurring in, or about the Demised premises and arising out of the act, negligence, omission, nonfeasance or malfeasance of Tenant, its employees, agents, contractors, customers licensees, invitees or guests. Such 32 insurance shall be carried in an amount not less than Three Hundred Thousand Dollars ($300,000.00) for bodily injury or death to any one person and Three Hundred Thousand Dollars ($300,000.00) for bodily injury or death of a number of persons in the same accident or occurrence and One Hundred Thousand Dollars ($100,000.00) for property damage. All such insurance shall be effective under valid and enforceable policies and shall be issued by insurers of recognized responsibility authorized to do business in the State of Florida and acceptable to Lessor (though Lessor's acceptance of any such insurer shall not constitute a representation or warranty by Lessor as to the financial stability of such insurer or otherwise and no such acceptance of any insurer by Lessor shall be deemed a release or waiver of any responsibility, obligation or liability of Tenant under this Lease). All such insurance policies shall contain a provision whereby the insurer agrees not to cancel such insurance without ten (10) days prior written notice to Lessor. Tenant shall furnish Lessor with a certificate evidencing the aforesaid insurance coverage on or before the Commencement Date and upon each renewal thereof but in all events at least ten (10) days prior to the expiration of any such policy. Tenant shall indemnify and save harmless Lessor and its agents against and from (i) any and all claims arising from: (a) the management by Tenant of the Demised Premises or any business therein, any work whatsoever done 33 therein or thereon, or any condition created therein or thereon, during the Term of this Lease or during any other period of time that Tenant has access to the Demised Premises (though nothing herein contained shall be construed to grant Tenant access to the Demised Premises except as provided in this Lease); or (b) any negligent or otherwise wrongful act or omission of Tenant or any subtenant (though nothing contained in this Lease shall be construed to permit a sublease), licensee, employee, agent or contractor of Tenant or any other party acting by, through or under Tenant; and (ii) all costs, expenses and liabilities incurred in or in connection with or as a result of each such claim, action or proceeding brought hereunder, whether or not suit be instituted, including but not limited to reasonable attorney's fees incurred by Lessor in defending any such action through and including all appeals. In case any action or proceeding be brought against Lessor by reason of any such claim, Tenant, upon notice from Lessor, shall resist and defend such action or proceeding at the cost of Tenant. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. WITNESSES: TENANT: 34 /s/ Graciela Lopez /s/ Steven Sablotsky 12-6-90 -------------------------- ------------------------------ President -------------------------- ------------------------------ WITNESSES: LESSOR: /s/ Mark Rubino -------------------------- ------------------------------ -------------------------- ------------------------------ EX-10.8 6 OFFICE LEASE AGREEMENT - EISKANT 1 EXHIBIT 10.8 Parkside Plaza Office Lease between Bud Eiskant and the Registrant dated June 1, 1990. 2 STANDARD OFFICE LEASE THIS LEASE AGREEMENT made and entered into this 1st day of June, 1990, by and between Bud Eiskant, an individual (hereinafter referred to as "Lessor") and Noven Pharmaceuticals, Inc. (hereinafter referred to as "Tenant" or "Lessee"). WITNESSETH: 1. DESCRIPTION. Lessor hereby leases unto Tenant and Tenant hereby leases form Lessor, Suite No. 209 ("Demised Premises") containing approximately 1,091 square feet in that certain building ("Building") located at 13344 S.W. 128th Street, Miami, FL, also known as "Parkside Plaza." 2. TERM. [Fill in and Initial A or B] A. The term ("Term") of this Lease shall be 2 years and 7 months from the 1st day of June, 1990 ("Commencement Date") through the 31st day of December, 1992 ("Expiration Date") with an additional three (3) two-year options to run consecutively with an option to purchase any time during this period at fair market 3 value.(1) B. The term ("Term") of this lease shall commence on the earlier of the following dates ("Commencement Date"): (i) the date on which Tenant opens for business in the Demised Premises, or (ii) 7 days after Lessor has tendered possession (as hereafter provided) of the Demised Premises to Tenant, or (iii) the date 7 days after Lessor notifies Tenant that the Demises Premises are or should be ready for occupancy. Tenant shall pay all rent and additional rent relating to the Demised Premises which accrue after Lessor's tender of possession. Tender of possession shall be deemed to have occurred when Lessor has completed Lessor's work, if any. If Lessor is unable to give possession of the Demised Premises to Tenant on the date for the commencement of the term hereof by reason of the fact that Lessor has not substantially completed any space preparation work in the Demised Premises pursuant to Lessor's Work Letter signed on behalf of Lessor and Tenant (which Work - ------------------------ (1)The purchase price shall be established by the average of three (3) MAI appraisers; one to be chosen by the Tenant, one by the Landlord, and the third will be chosen through mutual agreement of the other two appraisers. 4 Letter, if any, is made a part hereof by reference) and if the delay in completion of such work has not been caused by Tenant's failure to submit its plans and specifications to Lessor on or before the time called for in the Work Letter, or caused by other act or failure to act by Tenant, then the term of this Lease shall commence on the day following the day of notification by Lessor that such work has been substantially completed. If such date shall be other than the first day of a calendar month, the rent or such months shall be prorated on a per diem basis. No failure to deliver possession on the scheduled date for the commencement of the term shall extend, or be deemed to extend, the term of this Lease. 3. RENTAL PAYMENT. Subject to increase as provided in this Lease. Tenant agrees to pay to Lessor as and for rent for the Demised Premises for the Term hereof the sum of Twenty-one thousand seven hundred dollars ($21,700.00) plus all applicable sales and use taxes which sum for the convenience of the Tenant shall be paid as follows: $700.00 ("Base Monthly Rental") plus all applicable sales and use taxes upon the first day of each calendar month for the Term hereof commencing with the first calendar month following the calendar month of the Commencement Date. 5 The rental payments shall be made to Lessor of the address hereinafter set forth to which notices to Lessor shall be sent or at such other place as Lessor may, from time to time, hereafter designate by notice to Tenant. Tenant's obligation to pay rent and keep and perform any and all covenants and agreements herein contained shall not be abated, released or discharged because of any reason whatsoever except as is otherwise specifically provided for in this Lease. Rent and each installment thereof shall be paid in lawful money of the United States, legal tender at the time of payment. All rents shall be payable in advance and paid without deduction, setoff, discount or abatement. Under no circumstances shall any holding over by Tenant be authorized and no occupancy beyond the term limited hereby shall ever constitute anything except an unlawful holding over by Tenant after the expiration of the Term. By Tenant's execution hereof, Tenant acknowledges that Tenant has inspected the Demised Premises and the Building and that as of the date hereof the Demised Premises and the Building are in all respects in satisfactory condition and acceptable to Tenant and Tenant is accepting same as is. 6 4. INCREASE OF BASE RENT: The annual rental for each year of this lease ("lease year"), after the base year shall be increased or decreased, but never less than the base rent, by an amount equal to the proportion hereafter set forth, times the amount of the increase or decrease based on the cost of living escalation published by the Bureau of Labor Statistics U.S. Department of Labor. (a) Base year shall be the first full calendar year after the building has been completed or the first full calendar year of the terms of this lease, whichever is later. (b) Direct operating costs shall include: taxes, insurance, and water & sewer. All expenditures scheduled less often than annually shall be prorated over the period to which such expenditures are applicable. (c) For purposes of determining increases or decreases in taxes: (i) "Base year tax" shall mean the real estate tax bill of the land and building, of which the demised premises are a part, made in the first tax year that the building is assessed as completed, rather than under construction, or the base tax year of 1990 and the real estate tax for that year is to be ascertained. (ii) "Taxes" shall mean real estate taxes, special 7 and extraordinary assessments, and governmental levies imposed upon or with respect to the land and building of which is the demised premises are a part and any similar tax imposed in addition to, in substitution for, or in lieu of such leases. (d) Lessee's pro rata share of any increase in direct operating costs shall be determined by the ratio that the gross rental area of the demised premises bears to the total gross rental of the building which Lessor and Tenant hereby agree is 3.0 percent. (e) COST OF LIVING ESCALATION: If two months prior to commencement of any lease year, the Consumer Price Index (C.P.I.) for "all items" (Miami, FL C.P.I. Index) as compiled and published by the Bureau of Labor Statistics, United States Department of Labor not to exceed 5% maximum should be higher than the Base Consumer Price Index of June 1, 1990, the Minimum Monthly Rent installments shall be increased by an amount proportionate to the amount of such increase in the said price index, not to exceed 5% maximum. If such price index should in the future be compiled upon a different basis, a proper adjustment will be made therein, for the purposes of this Paragraph, to reflect any increase the cost of living that has occurred over the Base Consumer Price Index. If at the time of any such computation the United States Department of Labor should no longer compile and publish such prices indexes, the 8 index for "All Items" compiled and published by any other branch or department of the Federal government shall be used for the purpose of this paragraph and if no such index is compiled and published by any branch or department of the Federal government, the statistics reflecting cost of living increases as compiled by any institution or organization or individual generally recognized as an authority by financial and insurance institutions shall be used as a basis for such adjustment. This provision is independent of the other provisions which provide for a pass through of certain increases. (See attached addendum for cost of option renewal). For example: If the base C.P.I. is 230.5 and two months prior to the first lease year the C.P.I. is 235.8 and the minimum monthly rent is $1,400.00. The new minimum monthly rent for the next lease year would be $1,432.19 or $1,432.00 per month. [235.8 divided by 230.5 = 1.023 X $1,400.00 = $1,432.19 per month]. Lessor shall have the right to treat any sums due pursuant to this Paragraph as additional rent due hereunder and if the same be not promptly paid when due. Lessor shall have all the rights and remedies to which Lessor is entitled for the nonpayment of rent. 5. USE AND POSSESSION. It is understood and agreed that 9 the demised space and premises shall be continually used and occupied by the Lessee during the term of this Lease only for the research, development, clinical manufacturing and packaging of pharmaceutical products and for no other purposes or uses whatsoever. Tenant will not make or permit any use of the space or premises which, directly or indirectly, is forbidden by public law, ordinance or government regulation or which may be dangerous to life, limb or property. In the event the Tenant uses the space or premises for any purposes not expressly permitted herein then the Lessor may terminate the lease or without notice to tenant, restrain such improper use by injunction or other legal action. As a material consideration hereto the Tenant covenants that Tenant will not without the written consent of the Lessor permit the premises to be occupied by any person, firm or corporation other than the Tenant whose name appears on this lease. 6. SERVICES: Lessor agrees to furnish the following services to Tenant: (1) Automatically operated fire suppressant sprinkler system throughout and central smoke detector in office areas only. (2) Water. (3) Furnishing, supplying and maintaining the building's common areas and restroom facilities, all at Lessor's expense, unless otherwise agreed to in this Lease. 10 Tenant agrees to and shall pay when due all charges for utility services, which are billed to Tenant with respect to the Demised Premises or which are charged with respect to the Demised Premises as opposed to the Building as a whole. If the Tenant fails to pay same promptly when due. Lessor shall have the right, but not the obligation, to pay said charges and Tenant agrees to reimburse Lessor promptly therefor. Any sum to which Lessor shall be entitled pursuant to this Paragraph shall be deemed to be additional rent hereunder and, if the same be not promptly paid to Lessor, Lessor shall have all the rights and remedies to which it is entitled for the nonpayment of rent. Tenant shall pay for all utility charges, for electricity, in connection with the Demised Premises. Lessor will provide 220V Service. If the Tenant requires additional current or other than 110 volt service, request for same must be obtained from the Lessor and all work required will be paid for by the Tenant. The Lessor shall not be liable for any delay or failure to supply any of such services due to unusual conditions beyond its control and Lessor shall not be liable for damage nor shall the Tenant ever be entitled to any abatement of rent for failure to supply same. 7. NO ASSIGNMENTS, SUBLEASES OR ENCUMBRANCES: Tenant shall neither sublet the Demised Premises or any part thereof nor assign 11 this lease or any of the rights herein granted to Tenant without the prior written consent of Lessor in each instance. Tenant shall have no right or power to, and shall not, hypothecate, transfer, pledge or other encumber this Lease or Tenant's rights hereunder nor shall Tenant permit any such encumbrance. Tenant has no right ow power to cause, permit or do anything which would cause the Demised Premises, the Building, the Land or Tenant's interest in this Lease to become the subject of any lien, including, but not limited to, any mechanic's liens under the laws of the State of Florida and nothing done by, through, under or against Tenant shall ever create any such liens. If any such lien is filed, Tenant shall cause the land and the Tenant's interest in this Lease to be released from the lien thereof by posting a bond or otherwise within ten (10) days of the date such lien is filed. 8. ALTERATIONS AND IMPROVEMENTS, ETC.: (a) Tenant shall make no alterations, decorations, installations, additions or improvements in or to the demised premises without Lessor's prior written consent. Tenant shall not cut, drill into, disfigure, deface or injure any part of the premises; nor obstruct or permit any obstruction, alteration, addition, improvement, decoration or installation in the premises. All alterations, additions, improvements, decorations or installations (except movable furniture and fixtures put in at the 12 expense of the Tenant and removable without defacing or injuring the Building or the premises) shall become the property of Lessor at the termination of the term; Lessor, however, reserves the option to require Tenant upon demand in writing to remove all fixtures and additions, improvements, decorations or installations (including those not removable without defacing or injuring the leased premises) and to restore the premises to the same condition as when originally leased to Tenant, reasonable wear and tear excepted. Tenant agrees to restore the premises immediately upon the receipt of the said demand in writing at his own cost and expense and agrees in case of his failure to do so, that Lessor may do so and collect the cost thereof from Tenant. Any such alterations or restorations shall be made at such times and in such manner as Lessor may designate and so as not to interfere with the occupation, use and enjoyment of the remainder of the Building by the other tenants thereof. (b) In making any alterations, decorations, additions, installations or improvements to or in the premises. Tenant shall employ and use only such labor, contractors or mechanics as approved by Lessor and all such work done by Tenant shall be performed and installed in such a manner that the same shall comply with all provisions of law, ordinances and all rules and regulations of any and all agencies and authorities having 13 jurisdiction over the premises and at such time and in such manner as not to interfere with the progress of any work being performed by or on account of Lessor. Notwithstanding the foregoing, it is understood that Tenant is not obliged by Lessor to make any improvement or improvements and in no event shall Tenant have the right to create or permit there to be established any lien or encumbrance of any nature against the premises or the Building for said improvement or improvements by Tenant shall fully pay the cost of any improvement or improvements made or contracted by Tenant. Any mechanics's lien filed against the premises of the Building for work claimed to have been, done or materials claims to have been furnished to Tenant shall be duly discharged by Tenant within ten (10) days after the filing of the lien. (c) Lessor agrees to additional roof penetrations required by Leases for ventilation of labs and clinical manufacturing areas. (d) Any improvements made by Tenant will become part of the real estate and are to remain. 9. INSPECTION, EXAMINATION AND ENTRY: Lessor and Lessor's agents shall have the right to enter the premises at all reasonable hours to examine the same and workmen may enter at any time when authorized by Lessor or Lessor's agents to make such repairs, alternations or improvements in the Building as Lessor may deem 14 necessary or desirable. If during the last month of the term, Tenant shall have removed all of Tenant's property. Lessor may immediately enter the premises and prepare them for any future Tenant. Furthermore, the Lessor may allow such future Tenant to occupy the premises. These acts shall have no effect upon Tenant's obligations under this Lease and Tenant shall be entitled to no abatement on diminution of rent as a result thereof, except that in the event such future Tenant makes any payment for the period up until the expirations of this Lease, Tenant shall be entitled to a credit to the extent of such payment. If Tenant shall not be personally present to open and permit entry into the premises, when entry therein to shall be permissible or necessary hereunder, Lessor may forcibly enter same without rendering Lessor liable to any claim for damages and without affecting the obligations and covenants of this Lease. Employees of Lessor and Lessor's agents shall be permitted to enter the demised premises by pass-key at all reasonable times. The Lessor shall also have the right to enter the leased premises at all reasonable hours for the purpose of displaying said premises to prospective tenants within ninety days prior to the termination of this Lease. 10. RIGHT OF LESSOR TO USE ENTRANCES, ETC. AND TO CHANGE SAME: For the purpose of making repairs or alterations in any 15 portion of the Building of which the premises form a part, Lessor may use one or more of the street entrances, halls, passageways and elevators of the said building, provided, however, that there be no unnecessary obstruction of the right of entry to the premises while the same are occupied. Lessor may at any time change the name or number of the Building, remodel or alter the same, or the locations of any entrance thereto, or any other portion thereof not occupied by Tenant and the same shall not constitute a constructive or actual, total or partial eviction. 11. TENANT TO TAKE GOOD CARE OF PREMISES: Tenant shall keep the premises in a clean, safe and sanitary condition and shall permit no waste or injury to occur to the premises and fixtures therein, or to any additions, alterations and improvements thereto. All damage caused by Tenant's negligence, or that of his agents, servants, employees or visitors, shall be repaired promptly by Tenant at his sole cost and expense. In the event that the Tenant fails to comply with the foregoing provisions, the Lessor shall have the option to enter the premises and make all necessary repairs at Tenant's cost and expense, the same to be added to and be payable with the next monthly installment of rent. 12. COMPLIANCE WITH ORDINANCES AND DIRECTIVES OF AUTHORITIES: 16 Lessee shall, at its own cost and expense, comply with all present or future rules, regulations, directives, laws, ordinances and orders of all public authorities and Fire Underwriters which are or may become applicable to the leased premises and space, except as said rules pertain to any structural work or outside repairs. Lessee waives any claim against Lessor for any expenses or damages resulting from compliance with any of the said rules, regulations, directives, laws, ordinances or orders. 13. RULES AND REGULATIONS: That in addition to the several covenants in this Lease, it is mutually covenanted and agreed that the rules and regulations appertaining to the said building and which are annexed hereto, as part hereof in Exhibit C, are agreed to in all of their terms and said Tenant agrees to be bound by the same, and also covenants to be bound by such further rules and regulations as may be made by said Lessor from time to time, during this Lease, deemed by it to be necessary, for the safety, care, cleanliness and the economical management of the premises, and for the preservations of good order therein. Any failure on the part of the Tenant to comply with the terms of this Lease, or with any of said rules and regulations now in existence, as aforesaid, shall, at Lessor's option, work a forfeiture of this Lease and of all rights of Lessee hereunder, and hereupon the Lessor, its agents 17 or attorneys, shall have the right to re-enter said premises and remove Lessee therefrom and to take all necessary steps to collect any rents due hereunder up to the time of said forfeiture or cancellation. 14. PARKING: Lessor shall provide and maintain for the use of Tenant and Tenant's invitees and guests, in common with other tenants of the Building and their invitees and guests, an off-street parking area. Lessor reserves the right, however, to enlarge or rearrange such parking facility and Tenant agrees that Tenant and Tenant's employees, if requested by Lessor will park their automobiles only in such areas as Lessor designates from time to time. 15. EQUIPMENT: In the event Tenant desires to place any equipment in the Demised Premises other than normal and customary business equipment, Tenant shall be allowed to install all equipment necessary to carry out said use per paragraph "5". In connection with the installation, maintenance and use by Tenant in equipment using or producing electricity, x-rays, ultra violet rays, infrared rays, sound waves or other rays, waves or forces emitted by scientific or technological equipment. Tenant covenants that Tenant will maintain adequate and proper safeguards, 18 procedures and equipment necessary or desirable for the use of such equipment and that Tenant will indemnify Lessor and hold Lessor harmless from any liability to which Lessor might or could become subjected by reason of inconvenience, injury or damage to person or property resulting from the use of any Tenant's equipment. In addition, should the installation or use of or any equipment, whether properly or improperly installed or protected, result in any increase in the fire insurance rate payable by Lessor or by any other tenant (nothing herein contained being construed to permit Tenant to do anything or to install or use any equipment which would result in any increase in any fire insurance rate), then Tenant shall be liable for such increased rate and shall pay to Lessor forthwith upon demand all increased costs resulting therefrom. Any equipment, including medical and dental equipment, installed by Tenant shall be and remain at all times the property of Tenant and shall be removed by Tenant at the termination of the tenancy, at Tenant's own cost and expense; and upon such removal Tenant shall restore the Demised Premises to their original condition, usual wear and tear excepted. 16. SIGNS: The Tenant will not place any signs or other 19 advertising matter or material on the exterior or on the interior, where possible to be seen from the exterior, of the leased premises or of the building in which the leased premises are located, without the prior written consent of the Lessor. Any lettering or signs placed on the interior of said building shall be for directional purposes only and such signs and lettering shall be of a type, kind, character and description to be approved by the Lessor. 17. DAMAGE TO PROPERTY: It is covenanted and agreed by and between the parties hereto that the Lessor shall not in any event, whether caused by the Lessor's negligence or otherwise, be liable for any loss, damage or injury to the Tenant, Tenant's agents, servants, employees or visitors, or to the Tenant's property, for any damage or injury caused by or from the bursting or leaking of boilers of water, sewer or steam pipes, or air conditioning equipment, or from heating or plumbing fixtures, or from electric wires, equipment or fixtures, or from gas odors or from the elements, or from any cause whatsoever, except in the case of the willful neglect of the Lessor. 18. SUBORDINATION AND ATTORNMENT: This Lease is subject and subordinate to the lien of any mortgage or ground lease or deeds of 20 trust or other encumbrances, now or hereafter placed upon the land or Building, in any amounts whatsoever. Tenant covenants and agrees to execute and deliver such instruments evidencing such subordination of this Lease to such liens of any such mortgages, deeds of trust or other encumbrances, as may be requested by Lessor from time to time. As aforedescribed, this Lease is subordinate to the lien of any existing and/or future mortgage and any further advances, renewals, extensions or modifications thereof, so long as Tenant is not in default under the Lease at that time, this Lease shall continue in full force and effect as a direct and valid Lease between the Tenant and then owner of the fee provided that the then new owner shall not be liable for any previous act or omission of Lessor or any other party, or be subject to any offsets against Lessor, or bound by prepayment of more than one (1) month's rent. 19. DAMAGE BY FIRE OR OTHER CASUALTY: In the event that the Demised Premises are rendered untenantable by reason of fire, explosion or any other casualty, Lessor, at its option, may either repair the said premises to make the same tenable within one hundred eighty (180) days thereafter, or may, at its option, terminate this Lease. In either event, Lessor shall give Tenant a 21 thirty (30) day notice in writing. Furthermore, in the event that the Demised Premises are untenantable and further if Tenant is not liable for the damage in question, Tenant's rent for that period of time shall be abated or apportioned under this Lease or otherwise. 20. CONDEMNATION: If during the term of this Lease, the whole of the leased premises or Building, or such portion(s) thereof as will render the leased premised unusable for the purpose leased, be condemned or otherwise leased or taken under the right of eminent domain by any competent authority for public or quasi-public use or purpose or is taken by private purchase in lieu of condemnation, then in such event this Lease shall, at the option of the Lessor, cease and come to an end as of the date of the vesting of title in such public authority or by private purchase, or when possession is given to such public authority, whichever event last occurs. Upon such occurrence the rent shall be proportioned as of such date and any prepaid rent shall be returned to the Tenant. The Lessor shall be entitled to the entire award or purchase price and the Tenant shall have no right or claim to any part thereof. 21. ABANDONMENT: In case Tenant shall fail to take possession at the commencement of the term, or in case the premises or any part thereof shall be vacated during the term prior to the 22 expiration of the term of this Lease. Lessor shall have the right to enter the premises without instituting any proceeding either by force or otherwise without being liable for damages therefor, and to relet the same, or any part thereof, for the unexpired portion of the term or longer and to collect the rent therefor and to apply the rents so collected to the payment of rent and all other sums payable to Lessor. Tenant shall in such case remain responsible to Lessor for any and all deficiency, loss and damage suffered by Lessor. 22. RE-ENTRY, DEFAULT: The Tenant covenants that if the rent reserved by this Lease or any part thereof shall be unpaid when due, or, if the premises shall become vacant or actually unoccupied during the term, or if the Tenant shall fail to perform any of the conditions, covenants, provisions and agreements contained herein, or if a petition in bankruptcy shall be filed by the Tenant, or if the Tenant shall be adjudged bankrupt or insolvent by any court, or if a receiver or trustee in bankruptcy or receiver of the property of the Tenant shall be appointed in any suit, action or proceeding, or if the Tenant shall make an assignment for the benefit of creditors, of if an execution shall be issued against the Tenant, or if the Tenant's leasehold interest herein shall be levied upon, or if the Tenant's leasehold interest 23 herein shall by operation of law pass to any person other than the Tenant, then in each and every case, the Lessor may, at its option, without notice to the Tenant or to any assignee, transferee, trustee, receiver or other person or persons with force or otherwise, retake and recover possession of said premises and terminate this Lease and the term herein and hereby granted and demised; or, in each and such case, the Lessor may, at its option, without notice to the Tenant or to any assignee, transferee, trustee, receiver or other person or persons, with force or otherwise enter said premises and relet the same as it may see fit, without avoiding or terminating this Lease, and for the purpose of such reletting the Lessor may make such repairs, alterations and addition in or to said premises as the Lessor may deem necessary for the purpose and charges of such reletting, alterations and additions in and to said premises to equal the rent hereinabove covenanted to be paid by the Tenant, then the Tenant shall pay any deficiency arising upon demand therefor and such deficiency shall be considered, construed and taken to be a debt provable in bankruptcy or receivership. 23. ATTORNEY'S FEES: If the Tenant defaults in the performance of any of the covenants of this Lease and by reason thereof the Lessor employs the services of an attorney to enforce 24 performance of the covenants by the Tenant, to evict the Tenant, to collect monies due by the Tenant, or to perform any service based upon said default, then in any of said events, the Tenant does not agree to pay a reasonable attorney's fee, including all appellate fees and all expenses and costs incurred by the Lessor pertaining thereto and in enforcement of any remedy available to the Lessor. 24. HOLDING OVER: In the event the Tenant shall withhold from the Lessor the possession of the premises demised herein after the termination of this Lease and the term hereby demised, whether by expiration of said term or by election or act of either party hereto, the damages for which the Tenant shall be liable to the Lessor for a period equal to the period of such detention. In the event the Tenant shall remain in possession of said premises after the expiration and termination of this Lease for any cause whatsoever, the Tenant shall then be considered a tenant at will and by sufferance and no such holding over or retention of possession or occupancy shall operate as an extension or renewal of this Lease in any manner whatsoever. 25. CERTIFICATE BY TENANT: Tenant shall deliver to Lessor or to its mortgagee, auditors or prospective purchaser, or the owner of the fee, when requested by Lessor, a certificate to the 25 effect that this Lease is in full force and effect and that Lessor is not in default therein, or stating specifically any exceptions thereto. Failure to give such a certificate within two (2) weeks after written request shall be conclusive evidence that the lease is in full force and effect and Lessor is not in default and Tenant shall be estopped from asserting any defaults known to him at that time. 26. INDEMNIFICATION: The Lessor shall not be liable for any damage or injury to any person or property whether it be the person or property of the Tenant, the Tenant's employees, agents, guests, invitees or otherwise by reason of Tenant's occupancy and use of the leased premises or because of the fire, flood, windstorm, Acts of God or for any other reason. Tenant shall indemnify and save Lessor harmless and does agree to indemnify and save Lessor harmless, of and from all fines, claims demands and causes of action of every nature whatsoever arising or growing out of or in any manner connected with the occupation or use of the premises and Building and every part thereof, by Tenant and the employees, agents, servants, guests and invitees of Tenant including without limiting the generality of the foregoing, any claims, demands and causes of action for personal 26 injury and/or property damage and said indemnification shall extend to any fines, claims, demands and causes of action of every nature whatsoever which may be made upon, sustained or incurred by Lessor or reason of any breach, violation or non-performance of any term, covenant or condition hereof on the part of Tenant or by reason of any act or omission on the part of Tenant and the employees, agents, servants, guests and invitees of Tenant. In any such event, contributory negligence, except willful neglect, on the part of the Lessor shall not any wise affect Tenant's obligations under this indemnification. Tenant agrees that this indemnification shall further extend to all costs incurred by Lessor, including reasonable attorney's fees. 27. NOTICES: All notices required hereunder shall be in writing and any notice by Lessor to Tenant shall be deemed to be duly given if either delivered personally to Tenant or sent by registered or certified mail, addressed to Tenant at the premises leased hereunder. Any notice by Tenant to Lessor shall be deemed duly given if sent by registered or certified mail to Lessor at 8864 S.W. 176th Terrace, Miami, Florida 33157 (or at such other address as may be hereafter designated by Lessor) and also to the agent of Lessor charged with the renting and management of the Building, if any. 27 28. SURRENDER AT EXPIRATION OF TERM: Tenant agrees at the expiration of the term by lapse of time or otherwise to quit and surrender the premises hereby demised and everything belonging to or connected therewith in as good a state and condition as reasonable wear and use thereof will permit and to remove all signs, advertisements and rubbish from the said premises; and Tenant hereby expressly authorizes Lessor, as the agent of Tenant, to remove such rubbish and make such changes and repairs as may be necessary to restore the premises to such condition at the expense of Tenant. 29. QUIET POSSESSION AND OTHER COVENANTS: Lessors covenants that if and so long as Tenant pays the rent and additional rent reserved by this Lease and performs and observes all of the covenants, conditions and rules and regulations hereof, Tenant shall quietly enjoy the demised premises subject, however, to all of their terms of this Lease. Tenant expressly agrees for himself, his executors, administrators, personal representatives, successors and assigns that the covenant of quiet enjoyment (express or implied) and all other covenants in this Lease on the part of Lessor to be performed shall be binding upon Lessor only so long as Lessor remains the owner of the Building which the demised premises form a part. 28 30. REMEDIES CUMULATIVE: The various rights, remedies, powers and elections of Lessor reserved, expressed or contained in this Lease, are cumulative and noone of them shall be deemed to be exclusive of the others or of such other rights, remedies, powers, options or elections as are now or may hereafter be conferred upon Lessor by law. The failure on the part of the Lessor to exercise promptly any rights given hereunder shall not operate to forfeit or waive any of the said rights. 31. NO WAIVER OF PERFORMANCE: No waiver by Lessor of any provision hereof shall be deemed to have been made unless such waiver be in writing signed by Lessor. The failure of Lesor to insist upon the strict performance of any of the covenants or conditions of this Lease, or to exercise any option herein conferred, shall not be construed as waiving or relinquishing for the future of any such covenants, conditions or options but the same shall continue and remain in full force and effect. No act of Lessor or its agent during the term hereof shall be deemed an acceptance of a surrender of the said premises unless made in writing and personally subscribed by Lessor, neither shall the delivery of the keys to the premises by Tenant to Lessor or its agent be deemed a surrender and acceptance thereof. No payment by 29 Tenant of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the stipulated rent. 32. SECURITY: The Tenant concurrently with the execution of this Lease has deposited with Lessor the sum of $450.00 first month's rent, $450.00 last month's rent and $450 security(2) as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this Lease; it is agreed that, in the event Tenant defaults in respect of any of the terms, provisions and conditions of this Lease, including, but not limited to, the payment of rent and additional rent Lessor may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which tenant is in default or for any sum which Lessor may expend or may be required to expend by reason of Tenant's default in respect to any of the terms, covenants and conditions of this Lease, including, but not limited to, any damages or deficiency in the re-letting of the premises whether such damage or deficiency accrued before or after summary proceedings on other re-entry by Lessor. In the event that Tenant shall fully and faithfully comply with all of the terms, - ---------------------- (2)Lessor acknowledges that Lessee has paid these amounts in full upon execution of previous leases regarding these units with Lessor. 30 provisions, covenants and conditions of this Lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the premises to the Lessor. In the event of a sale of the land and Building of which the premises form a part, Lessor shall have the right to transfer the security to the vendee and Lessor shall thereupon be released by Tenant from all liability for the return of such security and Tenant agrees to look to the new Lessor solely for the return of such security. It is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Lessor. Tenant further covenants that he will not assign or encumber the monies deposited herein as security and that neither Lessor nor its assigns shall be bound by and any such assignment or encumbrances. Lessor shall not be required to keep the security in a segregated account and the security may be commingled with other funds of Lessor and in ono event shall Tenant be entitled to any interest on the security. 33. LIEN: The said Tenant hereby pledges and assigns to the Lessor all the furniture, fixtures, goods and chattels of said Tenant, which shall or may be brought or put on said premises as security for the payment of the rent herein reserved and the Tenant agrees that the said lien may be enforced by distress, foreclosure 31 or otherwise at the election of the said Lessor and does hereby agree to pay attorney's fees together with all costs and charges therefor incurred or paid by the Lessor. 34. SUCCESSORS: This Lease shall inure to and be binding upon the heirs, administrators, executors, successors and assigns of the Lessor and the heirs, administrators, executors, successors and assigns of the Tenant. 35. AMENDMENT: It is mutually agreed that this Lease cannot be changed, altered, modified or extended, except in writing signed by the Lessor's duly authorized agent. 36. RELOCATION: Lessor reserves the right to relocate the Tenant in another similar area of the Building during the term of this Lease, provided Tenant is given 90 days written notice as to relocation and all attendant costs of moving, telephones, stationery, etc. are paid by Lessor. 37. INSURANCE, INDEMNIFICATION: Tenant agrees that Tenant will, at its own cost and expense, maintain public liability insurance naming Lessor and Tenant as insureds, protecting each of them against any and all claims for injury or damage to persons or 32 property or for the loss of life or property occurring in, or about the Demised premises and arising out of the act, negligence, omission, nonfeasance or malfeasance of Tenant, its employees, agents, contractors, customers licensees, invitees or guests. Such insurance shall be carried in an amount not less than Three Hundred Thousand Dollars ($300,000.00) for bodily injury or death to any one person and Three Hundred Thousand Dollars ($300,000.00) for bodily injury or death of a number of persons in the same accident or occurrence and One Hundred Thousand Dollars ($100,000.00) for property damage. All such insurance shall be effective under valid and enforceable policies and shall be issued by insurers of recognized responsibility authorized to do business in the State of Florida and acceptable to Lessor (though Lessor's acceptance of any such insurer shall not constitute a representation or warranty by Lessor as to the financial stability of such insurer or otherwise and no such acceptance of any insurer by Lessor shall be deemed a release or waiver of any responsibility, obligation or liability of Tenant under this Lease). All such insurance policies shall contain a provision whereby the insurer agrees not to cancel such insurance without ten (10) days prior written notice to Lessor. Tenant shall furnish Lessor with a certificate evidencing the aforesaid insurance coverage on or before the Commencement Date and upon each renewal thereof but in all events at least ten (10) days 33 prior to the expiration of any such policy. Tenant shall indemnify and save harmless Lessor and its agents against and from (i) any and all claims arising from : (a) the management by Tenant of the Demised Premises or any business therein, any work whatsoever done therein or thereon, or any condition created therein or thereon, during the Term of this Lease or during any other period of time that Tenant has access to the Demised Premises (though nothing herein contained shall be construed to grant Tenant access to the Demised Premises except as provided in this Lease); or (b) any negligent or otherwise wrongful act or omission of Tenant or any subtenant (though nothing contained in this Lease shall be construed to permit a sublease), licensee, employee, agent or contractor of Tenant or any other party acting by, through or under Tenant; and (ii) all costs, expenses and liabilities incurred in or in connection with or as a result of each such claim, action or proceeding brought hereunder, whether or not suit be instituted, including but not limited to reasonable attorney's fees incurred by Lessor in defending any such action through and including all appeals. In case any action or proceeding be brought against Lessor by reason of any such claim, Tenant, upon notice from Lessor, shall resist and defend such action or proceeding at the cost of Tenant. 34 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. WITNESSES: TENANT: /s/ /s/ Steven Sablotsky (SEAL) __________________________ ______________________________ 5-30-90 __________________________ ______________________________ WITNESSES: LESSOR: /s/ /s/ Anthony C. Eiskant __________________________ ______________________________ 5-30-90 5-30-90 __________________________ ______________________________ EX-10.26 7 EMPLOYMENT AGREEMENT - NORRIS 1 EXHIBIT 10.26 Employment Agreement between Colin A. Morris and the Registrant dated February 1, 1995. 2 EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into this 1st day of February, 1995 by and between COLIN A. MORRIS (hereinafter referred to "EMPLOYEE") and Noven Pharmaceuticals, Inc., a Delaware Corporation having its principal office at 11960 S.W. 144th Street, Miami, Florida 33186 (hereinafter referred to as the "COMPANY"). WITNESSETH: WHEREAS, EMPLOYEE is currently employed as Vice President of Operations of the COMPANY and has been so employed since April, 1993; WHEREAS, a principal inducement of the COMPANY for entering into this Agreement is the continued employment of EMPLOYEE to provide his unique qualifications, knowledge, skill and ability in conducting and developing the business of the COMPANY and its subsidiaries, in accordance with the terms of this Agreement; WHEREAS, EMPLOYEE desires to perform such duties and functions for the COMPANY and its subsidiaries as described herein, subject to the terms and conditions of this Agreement; and WHEREAS, the Compensation Committee of the Board of Directors of the COMPANY has approved the terms and conditions of the employment of EMPLOYEE as set forth herein and has authorized the execution and delivery of this Agreement. 3 NOW, THEREFORE, for and in consideration of the mutual covenants herein and such other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the parties agree as follows: Page 2 of 14 4 1. EMPLOYMENT The COMPANY hereby employs EMPLOYEE as a full-time EMPLOYEE of the COMPANY to perform the duties and functions set forth in Section 3, and EMPLOYEE hereby accepts such employment and agrees to perform such duties and functions upon the terms and conditions contained herein. 2. TERM (a) The term of this Agreement shall be for a period of two (2) years commencing January 1, 1995, unless sooner terminated in accordance with the terms, provisions and conditions set forth herein. (b) Upon the mutual agreement of the COMPANY and EMPLOYEE, the term of this Agreement may be extended for additional periods, on the terms, provisions and conditions set forth herein. Any such extension shall be made no later than sixty (60) days prior to the termination of the original two (2) year term. 3. DUTIES EMPLOYEE shall, and does hereby agree to, perform the following duties and functions, and any additional duties and functions as may be from time to time assigned to EMPLOYEE by the President of the COMPANY, in connection with his employment: Page 3 of 14 5 (a) To perform such duties customarily incident to the office of Vice President of Operations of the COMPANY, and such other duties and functions assigned by the President of the COMPANY from time to time. (b) To promote the interests of the COMPANY and assist in its business and scientific dealings with other companies, academic institutions and medical/business groups. (c) To devote such effort, time and skill to the affairs of the COMPANY as is reasonable necessary to competently perform his duties and functions, and not participate in any outside business or academic activities which would prevent such performance of duties and functions. EMPLOYEE agrees to accept no outside employment of any kind, whether as a consultant, guest lecturer or otherwise, without the prior written approval of the President of the COMPANY. 4. COMPENSATION (a) Salary and Bonus: (i) THE COMPANY shall pay EMPLOYEE an annual base salary of One Hundred Sixty Thousand Dollars (U.S. $160,000). For each subsequent year, the Compensation Committee of the Board of Directors shall have the authority to increase the annual base salary at any time during the remainder of the term of this Page 4 of 14 6 Agreement or any extension thereof. (ii) EMPLOYEE shall be entitled to receive a bonus beginning December 1995 and each December thereafter; provided however, that the determination of (i) whether EMPLOYEE shall receive any bonus and (ii) the amount and form of payment of any such bonus, shall be solely in the discretion of the Compensation Committee of the Board of Directors. (iii) Compensation pursuant to 3(a) and (b) shall be paid to EMPLOYEE with the same frequency as other executives of the COMPANY are compensated. (iv) EMPLOYEE'S annual base salary shall be automatically increased minimally each year during the term of this Agreement, or any extension thereof, beginning with the year 1996 without action by the COMPANY or EMPLOYEE, by an amount which shall be necessary to adjust such annual base salary to keep pace with the increases in the cost of living. The COMPANY shall compute the increase, if any, as promptly as practicable at the end of each year during the term of this Agreement, or any extension thereof, using the "Revised Consumers Price Index - Cities" (hereinafter the "Index") published by the United States Bureau of Labor Statistics, as the basis of such compensation, with October 1994 as the base year and the corresponding Index number for the month of October Page 5 of 14 7 each anniversary thereafter as the current Index number. Appropriate adjustments shall be promptly made in case there is a published amendment of the Index figures upon which the computation is based. If publication of the Index is discontinued, the parties hereto shall accept comparable statistics on the cost of living in Miami, Florida as computed and published by an agency of the United States or by a responsible financial periodical of recognized authority then to be mutually agreed upon by the parties. (b) Stock: (i) EMPLOYEE shall be entitled to receive options for stock of the COMPANY in accordance with the prevailing policies and practices of the COMPANY then in effect, based upon performance by EMPLOYEE of his duties and functions; provided, however, that the determination to grant any such stock options shall be solely in the opinion and discretion of the COMPANY's executive management with the approval of the Chairman of the Executive Compensation/Stock Option Committee of the Board of Directors. (ii) As additional consideration for entering into this Agreement, EMPLOYEE hereby agrees to the cancellation of options for 100,000 shares of common stock granted on April 12, 1993 at $10.50 per share. COMPANY shall issue new seven (7) year options in the amount of 100,000 shares at $7.75 per share, the closing price Page 6 of 14 8 on February 1, 1995. Such options shall be dated February 1, 1995. (c) Employee Benefits: (i) Nothing contained in this Agreement shall be construed to limit EMPLOYEE'S participation in or entitlement to any medical, health and insurance plan or coverage, or any other EMPLOYEE benefit to which EMPLOYEE would otherwise be entitled, in accordance with the prevailing policies and practices of the COMPANY then in effect, in the absence of this Agreement. 5. NON-COMPETITION (a) During the term of this Agreement, and for a period of two (2) years following termination of the services of EMPLOYEE with the COMPANY unless waived in writing by a majority vote of the Board of Directors of the COMPANY, EMPLOYEE shall not, directly or indirectly, whether as principal, agent, shareholder (except as set forth below) or in any other capacity, whether or not compensation is received, engage or participate in any activity for, be employed by, assist or have an equity interest in (other than as a passive investor of no more than ten percent (10%) with no involvement in the management or conduct of the affairs of business of such entity) any business or other entity which is or plans to develop, manufacture, market or sell any pharmaceutical product designed to compete directly with the transdermal/transoral or topical products Page 7 of 14 9 of the COMPANY and its subsidiaries which are under active development or are manufactured, marketed or sold during the term of this Agreement. (b) EMPLOYEE acknowledges that the provisions of Section 5(a) are reasonably necessary for the purposes of protecting the COMPANY'S legitimate business interests and goodwill. It is accordingly the intention of the parties that this Section 5(a) be enforceable to the fullest extent permissible under applicable law. EMPLOYEE agrees, however, that in the event any restriction or limitation of Section 5(a), or any portion thereof, shall be declared or held to be invalid or unenforceable by a court of competent jurisdiction, then such restriction or limitation shall be deemed amended to substitute or modify it, as either or both may be necessary, to render it valid and enforceable. (c) EMPLOYEE acknowledges and agrees that a breach or threatened breach of Section 5 of this Agreement will cause irreparable injury to COMPANY'S legitimate business interests and goodwill. The COMPANY shall accordingly be entitled to injunctive relief from a court of competent jurisdiction without the posting of bond or security, in addition to any other rights, remedies or damages available to the COMPANY. Page 8 of 14 10 6. TERMINATION (a) This agreement may be terminated upon mutual agreement in writing of the COMPANY and EMPLOYEE. (b) This Agreement may be terminated by the COMPANY for cause, for breach of Section 5(a), or for any intentional breach of any material term, provision or condition of this Agreement. For purposes of this Agreement, the term "cause" when used with reference to the termination of the services of EMPLOYEE, shall mean the termination by vote of a majority of the Board of Directors of the COMPANY, after giving EMPLOYEE (i) not less than ten (10) days prior written notice stating the specific action proposed to be taken and the grounds therefor and (ii) a reasonable opportunity to respond to such notice at a meeting of the Board of Directors of the COMPANY, that one of the following events has occurred and such event and/or condition is the reason for termination: (i) Willful, substantial or continuing neglect or inattention by EMPLOYEE of or to the duties in Section 3; (ii) Willful misconduct or gross negligence of EMPLOYEE in connection with the performance of such duties; or (iii) The refusal of EMPLOYEE to perform any of the duties described in Section 3 or elsewhere in the Agreement, or the Page 9 of 14 11 reasonable instructions of the President of the Company. (c) This Agreement shall terminate upon the death or permanent disability of EMPLOYEE. For purposes of this Agreement, the term "permanent disability" when used with reference to the termination of the services of EMPLOYEE shall mean a mental or physical illness or condition which renders EMPLOYEE incapable of performing EMPLOYEE'S duties and functions with the COMPANY for a period of one hundred eighty (180) consecutive days during the term of this Agreement or any extension thereof, as determined by the Board of Directors of the COMPANY, who shall also determine the date of onset of permanent disability. In such event, the COMPANY shall pay EMPLOYEE, or his designated beneficiaries, estate or legal representatives the death and disability payments as set forth in Section 7. (d) In the event that the COMPANY shall cease operations without the transfer of its business, in whole or in part, to a successor, this Agreement shall terminate as of the last day of the month on which the COMPANY ceases operation with the same force and effect as if such last day of the month were originally set as the termination date thereof. 7. DISABILITY. DEATH AND SEVERANCE PAYMENTS In the event of termination of this Agreement under any Page 10 of 14 12 of the following conditions, the COMPANY shall provide the payments and/or benefits to EMPLOYEE as follows: (a) Disability: In the event that EMPLOYEE shall become disabled and terminated for such disability pursuant to Section 6(c), then EMPLOYEE shall continue to receive his annual salary at the date of onset of such disability for the remaining term of this Agreement or any extension thereof; provided, however that payment of such salary shall be reduced by the amount of any disability payments received by EMPLOYEE from any insurance policy or policies paid for by the COMPANY. (b) Death: EMPLOYEE'S designated beneficiaries, legal representatives or estate shall receive for a period of one year or the remaining term of this Agreement or any extension thereof, whichever is less, the compensation EMPLOYEE would have otherwise received as an active EMPLOYEE pursuant to Sections 4(a). (c) Severance: If EMPLOYEE is terminated pursuant to Section 6(b) or resigns or leaves the COMPANY, through no act of the COMPANY, then EMPLOYEE shall receive no payments and/or benefits after the date of termination. If EMPLOYEE is terminated pursuant to Section 6(a), then EMPLOYEE shall receive all compensation to which EMPLOYEE would be entitled under this Agreement. Page 11 of 14 13 (d) Stock Options: Any unvested options shall terminate in accordance with the Stock Option Plan in the event that EMPLOYEE does not, for any reason, remain in the employ of the COMPANY or in the event that EMPLOYEE is terminated pursuant to Section 6(b) herein. 8. NOTICES Any notice required or permitted to be given under this Agreement shall be in writing and made by certified mail, return-receipt requested, postage prepaid or by hand delivery, telex or facsimile, and shall be deemed to have been given upon receipt or actual notice. 9. WAIVER Any failure on the part of the COMPANY to insist upon the performance of this Agreement, or any part thereof, at any time or from time to time, shall not constitute a waiver of any right, or future performance of any term, provision or covenant, under this Agreement. 10. ASSIGNMENT This Agreement shall inure to the benefit of and be binding on (a) the COMPANY's successors and assigns, including without limitation, any person or entity which may acquire substantially all of the COMPANY'S assets or business, or with or Page 12 of 14 14 into which the COMPANY may be merged, consolidated, liquidated or otherwise combined and (b) so far as legally possible, on EMPLOYEE'S heirs, administrators, executors and legal representatives. 11. SEVERABILITY The invalidity or unenforceability of any term, provision or condition of this Agreement shall not impair or affect the validity or enforceability of any other term, provision or condition. In the event of such invalidity or enforceability, the term, provision or condition shall, in so far as possible, be substituted or modified to implement the purpose thereof in a valid or enforceable way. 12. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, both substantive and procedural, without regard to choice-of-law principles. Venue for any legal proceeding relating to or arising from this Agreement shall be exclusively in Dade County, Florida. 13. ENTIRE AGREEMENT This Agreement, together with the Confidential Disclosure and Invention Agreement attached hereto and executed contemporaneously herewith and all prior stock agreements and/or Page 13 of 14 15 grants, contains the entire understanding and agreement of parties with respect to the subject matter hereof, and supersedes all prior understandings and agreements directed thereto. No modification, amendment, alteration or waiver shall be valid or binding except as may be specifically authorized herein or by a written document duly executed by the parties or their representatives. IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first written above. NOVEN PHARMACEUTICALS, INC. COLIN A. MORRIS By: /s/ Sheldon H. Becher /s/ Colin A. Morris - ---------------------------- ---------------------- SHELDON H. BECHER, DIRECTOR, CHAIRMAN OF EXECUTIVE COMPENSATION/STOCK OPTION COMMITTEE Page 14 of 14 -----END PRIVACY-ENHANCED MESSAGE-----