e10vq

-----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, TyAu549vE7UHgdyc3lzYN2YSPpPl3UFupZmElic3WAVo0UbwVX75sbKwsw5qzMXU gkShVzwEyCSvWqf7ItjwPQ== 0000893220-07-001667.txt : 20070504 0000893220-07-001667.hdr.sgml : 20070504 20070504161331 ACCESSION NUMBER: 0000893220-07-001667 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070504 DATE AS OF CHANGE: 20070504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOSE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000877902 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 133549286 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27718 FILM NUMBER: 07820588 BUSINESS ADDRESS: STREET 1: 102 ROCK RD CITY: HORSHAM STATE: PA ZIP: 19044 BUSINESS PHONE: 2159819000 MAIL ADDRESS: STREET 1: 102 ROCK ROAD CITY: HORSHAM STATE: PA ZIP: 19044 FORMER COMPANY: FORMER CONFORMED NAME: NEOSE PHARMACEUTICALS INC DATE OF NAME CHANGE: 19950817 10-Q 1 w34357e10vq.htm FORM 10-Q NEOSE TECHNOLOGIES, INC. e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007.


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27718

NEOSE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		13-3549286

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

102 Rock Road Horsham, Pennsylvania		19044

(Address of principal executive offices)		(Zip Code)

(215) 315-9000

(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 54,398,343 shares of common stock, $.01 par value, were outstanding as of May 1, 2007.

NEOSE TECHNOLOGIES, INC.

INDEX


		Page
PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements (unaudited)

	Balance Sheets as of March 31, 2007 and December 31, 2006		3

	Statements of Operations for the three months ended March 31, 2007 and 2006		4

	Statements of Cash Flows for the three months ended March 31, 2007 and 2006		5

	Notes to Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31

Item 4.	Controls and Procedures		32

PART II.	OTHER INFORMATION:

Item 6.	Exhibits		33

SIGNATURES			34
Amended and Restated Employment Agreement
Form of Change of Control Agreement
Change of Control Agreement
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer pursuant to Section 906
Certification of Chief Financial Officer pursuant to Section 906

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Neose Technologies, Inc.

Balance Sheets
(unaudited)
(in thousands, except per share amounts)


	March 31,			December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	44,588		$	16,388
Accounts receivable		746			286
Prepaid expenses and other current assets		1,412			1,284

Total current assets		46,746			17,958
Property and equipment, net		14,419			13,104
Intangible and other assets, net		74			181

Total assets	$	61,239		$	31,243

Liabilities and Stockholders’ Equity
Current liabilities:
Note payable	$	328		$	—
Current portion of long-term debt and capital lease obligations		1,321			1,251
Accounts payable		2,038			1,848
Accrued compensation		1,460			1,772
Accrued expenses		5,041			4,749
Deferred revenue		644			645

Total current liabilities		10,832			10,265
Warrant liability		17,115			—
Long-term debt and capital lease obligations, net of current portion		543			580
Deferred revenue, net of current portion		4,168			4,329
Other liabilities		520			510

Total liabilities		33,178			15,684

Stockholders’ equity:
Preferred stock, par value $.01 per share, 5,000 shares authorized, none issued		—			—
Common stock, par value $.01 per share, 75,000 shares authorized; 54,388 and 32,972 shares issued and outstanding		544			330
Additional paid-in capital		311,502			281,556
Accumulated deficit		(283,985	)		(266,327	)

Total stockholders’ equity		28,061			15,559

Total liabilities and stockholders’ equity	$	61,239		$	31,243

The accompanying notes are an integral part of these financial statements.

Neose Technologies, Inc.

Statements of Operations
(unaudited)
(in thousands, except per share amounts)


	Three months ended March 31,
	2007			2006
Revenue from collaborative agreements	$	1,237		$	2,396


Operating expenses:
Research and development		9,812			7,311
General and administrative		2,965			2,928

Total operating expenses		12,777			10,239

Operating loss		(11,540	)		(7,843	)
Increase in fair value of warrant liability		(6,350	)		—
Interest income		272			366
Interest expense		(40	)		(308	)

Net loss	$	(17,658	)	$	(7,785	)


Basic and diluted net loss per share	$	(0.47	)	$	(0.24	)


Weighted-average shares outstanding used in computing basic and diluted net loss per share		37,493			32,783

The accompanying notes are an integral part of these financial statements.

Neose Technologies, Inc.

Statements of Cash Flows
(unaudited)
(in thousands)


	Three months ended
	March 31,
	2007			2006
Cash flows from operating activities:

Net loss	$	(17,658	)	$	(7,785	)
Adjustments to reconcile net loss to net cash used in operating activities:
Increase in fair value of warrant liability		6,350			—
Depreciation and amortization expense		580			506
Non-cash compensation expense		466			823
Non-cash rent expense		130			—
Loss (gain) on disposition of property and equipment		3			(2	)

Changes in operating assets and liabilities:
Accounts receivable		(460	)		740
Prepaid expenses and other current assets		(259	)		(511	)
Other assets		(16	)		—
Accounts payable		320			420
Accrued compensation		(312	)		1
Accrued expenses		1,397			(80	)
Deferred revenue		(162	)		(906	)
Other liabilities		10			12

Net cash used in operating activities		(9,611	)		(6,782	)


Cash flows from investing activities:
Purchases of property and equipment		(2,636	)		(170	)
Proceeds from sale of equipment and assets held for sale		—			7

Net cash used in investing activities		(2,636	)		(163	)


Cash flows from financing activities:
Proceeds from issuance of debt		366			539
Repayments of debt		(378	)		(1,161	)
Proceeds from issuance of common stock and warrants, net		40,459			—


Net cash provided by (used in) financing activities		40,447			(622	)


Net increase (decrease) in cash and cash equivalents		28,200			(7,567	)

Cash and cash equivalents, beginning of period		16,388			37,738


Cash and cash equivalents, end of period	$	44,588		$	30,171

The accompanying notes are an integral part of these financial statements.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

1. Background

Neose Technologies, Inc. is a clinical-stage biopharmaceutical company focused on the development of next-generation therapeutic proteins, which we believe will be competitive with best-in-class protein drugs currently on the market. Our lead therapeutic protein candidates are GlycoPEG-EPO (NE-180) and GlycoPEG-GCSF.

NE-180 is a long-acting version of erythropoietin (EPO) produced in insect cells. EPO is prescribed to stimulate production of red blood cells, and is approved for sale in major markets around the world for treatment of chemotherapy-induced anemia and anemia associated with chronic renal failure. NE-180 is being developed for the treatment of anemia in adult cancer patients with non-myeloid malignancies receiving chemotherapy and for the treatment of anemia associated with chronic kidney disease, including patients on dialysis and patients not on dialysis. During 2006, we completed a Phase I clinical trial for NE-180 in Switzerland. In January 2007, we received approval from Swissmedic, the Swiss Agency for Therapeutic Products, for the initiation of a Phase II human trial to evaluate the safety, tolerability and dose response of NE-180 in cancer patients receiving platinum-based chemotherapy. In March 2007, we received approval from the U.S. Food and Drug Administration (FDA) to initiate clinical trials in the U.S. in response to our amended Investigational New Drug application (IND).

Our second proprietary protein, GlycoPEG-GCSF, is a long-acting version of granulocyte colony stimulating factor (G-CSF) that we are co-developing with BioGeneriX AG, a company of the ratiopharm Group. G-CSF is prescribed to stimulate production of neutrophils (a type of white blood cell) and is approved for sale in major markets around the world for treatment of neutropenia associated with myelosuppressive chemotherapy. In November 2006, BioGeneriX initiated the first of two planned Phase I clinical trials for GlycoPEG-GCSF. In March 2007, BioGeneriX initiated the second Phase I clinical trial for GlycoPEG-GCSF. We expect BioGeneriX to complete both Phase I clinical trials during 2007.

We have also entered into two agreements with Novo Nordisk A/S to use our GlycoPEGylation™ technology to develop and commercialize next-generation versions of Factors VIIa, VIII and IX, one of which, Factor VIIa, is currently marketed by Novo Nordisk. In 2006, we successfully completed technical transfer of the manufacturing process for GlycoPEG-FVIIa to Novo Nordisk, who performed preclinical pharmacokinetic and pharmacodynamic studies, and conducted other preclinical activities, on Factors VIIa and IX. Novo Nordisk has announced that they plan to initiate Phase I clinical studies for Factor VIIa in 2007. Factor VIIa is used in the treatment of bleeding episodes and for the prevention of bleeding during surgery or invasive procedures in patients with congenital hemophilia with inhibitors to coagulation factors VIII or IX.

We believe that our enzymatic pegylation technology, GlycoPEGylation, can improve the drug properties of therapeutic proteins by building out, and attaching polyethylene glycol (PEG) to, carbohydrate structures on the proteins. We are using our technology to develop proprietary

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

versions of protein drugs with proven safety and efficacy and to improve the therapeutic profiles of proteins being developed by our partners. We expect these modified proteins, such as NE-180 and GlycoPEG-GCSF, to offer significant advantages, including less frequent dosing and possibly improved efficacy, over the original versions of the drugs now on the market, as well as to meet or exceed the pharmacokinetic profile of next-generation versions of the drugs now on the market. We believe this strategy of targeting drugs with proven safety and efficacy allows us to lower the risk profile of our proprietary development portfolio as compared to de novo protein drug development. We intend to continue to focus our research and development resources on therapeutic proteins that we believe have the highest probability of clinically meaningful therapeutic profile improvements from our technology and are in commercially attractive categories.

We have incurred losses each year since inception. As of March 31, 2007, we had an accumulated deficit of $283,985. We expect to spend significant amounts to expand our research and development on our proprietary drug candidates and technology, maintain and expand our intellectual property position, and expand our business development and commercialization efforts. Given our planned level of operating expenses, we expect to continue incurring losses for some time.

We believe that our existing cash and cash equivalents, expected proceeds from collaborations and license arrangements, and interest income should be sufficient to meet our operating and capital requirements at least through the second quarter of 2008, although changes in our collaborative relationships or our business, whether or not initiated by us, may cause us to deplete our cash and cash equivalents sooner than the above estimate. We will require significant amounts of additional capital in the future to fund our operations, and we do not have any assurance that funding will be available when we need it on terms that we find favorable, if at all. If we are unable to raise additional capital when required, we may need to delay, scale back, or eliminate some or all of our research and development programs.

We have not yet developed any products or commercialized any products or technologies, and we may never be able to do so. Even if we are successful in developing products that are approved for marketing, we will not be successful unless our products, and products incorporating our technology, gain market acceptance. Our operations are subject to risks and uncertainties other than mentioned above including, among others, the uncertainty of product development, including our dependence upon third parties to conduct our clinical trials and to manufacture our product candidates and the materials used to make them, and unexpected delays or unfavorable results in our clinical trials; our limited product development and manufacturing experience; our dependence upon collaborative partners to develop and commercialize products incorporating our technology and the success of collaborative relationships; the uncertainty of intellectual property rights; the risk of development and commercialization of competitive products by others that are more effective, less costly, or otherwise gain greater market acceptance; and the uncertainty of the impact of government

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

regulation on our operations, including achieving regulatory approvals for our products or products incorporating our technology, and changes in health care reimbursement policies.

2. Interim Financial Information

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for presentation of interim financial statements. Accordingly, the unaudited financial statements do not include all the information and footnotes necessary for a comprehensive presentation of the financial position, results of operations, and cash flows for the periods presented. In our opinion, however, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. You should not base your estimate of our results of operations for 2007 solely on our results of operations for the three months ended March 31, 2007. You should read these unaudited financial statements in combination with the other Notes in this section; the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 2 of this Form 10-Q; and the Financial Statements, including the Notes to the Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2006.

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the financial statements, the disclosure of contingent assets and liabilities as of 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.

Warrant Liability

We follow Emerging Issues Task Force (EITF) No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (EITF 00-19), which provides guidance for distinguishing among permanent equity, temporary equity and assets and liabilities. EITF 00-19 requires liability classification of warrants that may be settled in cash at the option of warrant holders. Our warrants issued in March 2007 permit net cash settlement in certain change of control circumstances at the option of the warrant holders, and are, therefore, classified as a liability on our Balance Sheets (see Note 10).

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

fluctuation based on changes in our stock price, expected volatility, remaining contractual life and the risk-free interest rate. The market price for our common stock has been and may continue to be volatile. Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of the warrants.

In connection with the March 2007 equity financing, we were obligated to file a registration statement with the SEC for the registration of the total number of shares sold to the investors and shares issuable upon exercise of the warrants. We are required under an agreement to use commercially reasonable efforts to cause the registration to be declared effective by the SEC and to remain continuously effective until such time when all of the registered shares are sold. In the event we fail to file a registration statement on or before the filing date, or fail to meet other legal requirements in regards to the registration statement, we will be obligated to pay the investors, as partial liquidated damages and not as a penalty, an amount in cash equal to 1% of the aggregate purchase price paid by investors for each monthly period that the registration statement is not effective, up to 24%. We follow Financial Accounting Standards Board (FASB) Staff Position No. EITF 00-19-2, Accounting for Registration Payment Arrangements (EITF 00-19-2), which specifies that registration payment arrangements should play no part in determining the initial classification of, and subsequent accounting for, securities to which the payments relate. Contingent obligations in a registration payment arrangement are separately analyzed under Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss. If we determine a registration payment arrangement in connection with the securities issued in March 2007 is probable and can be reasonably estimated, a liability will be recorded. As of March 31, 2007, we concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related contingent liability as of March 31, 2007.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted-average number of common shares outstanding for the period and the number of additional shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares are excluded from the calculation of diluted net loss per share if the effect on net loss per share is antidilutive. Our diluted net loss per share is equal to basic net loss per share for all reporting periods presented because giving effect in the computation of diluted net loss per share to the exercise of outstanding stock options and warrants or settlement of RSUs would have been antidilutive.

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, requires disclosure of comprehensive income (loss) in the financial statements. Comprehensive income (loss) is comprised of net

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes changes to equity that are not included in net income (loss). Our comprehensive loss for the three months ended March 31, 2007 and 2006 was comprised only of our net loss, and was $17,658 and $7,785, respectively.

Fair Value of Financial Instruments

The fair value of financial instruments is the amount for which instruments could be exchanged in a current transaction between willing parties. As of March 31, 2007, the carrying values of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and accrued compensation equaled or approximated their respective fair values because of the short duration of these instruments. The fair value of our debt and capital lease obligations was estimated by discounting the future cash flows of each instrument at rates recently offered to us for similar debt instruments offered by our lenders. As of March 31, 2007, the fair and carrying values of our debt and capital lease obligations were $2,206 and $2,192 respectively.

Recent Accounting Pronouncements

In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment to FASB Statement No. 115 (SFAS No. 159), which allows companies to choose, at specific election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of SFAS No. 159 on our financial statements and related disclosures.

In December 2006, the FASB issued EITF 00-19-2, which addresses an issuer’s accounting for registration payment arrangements. EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. EITF 00-19-2 further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable accounting literature without regard to the contingent obligation to transfer consideration pursuant to the registration arrangement. EITF 00-19-2 was effective immediately for new and modified registration payment arrangements. The adoption of EITF 00-19-2 did not have any impact on our financial statements and related disclosures.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which is applicable for fiscal years beginning after November 15, 2007. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No.157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Although SFAS No. 157 does not require any new fair value measurements, its application may, for some entities, change current practices related to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. We are currently evaluating the impact of the adoption of SFAS No.157 on our financial statements and related disclosures.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which is applicable for fiscal years beginning after December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position reported or expected to be reported on a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We adopted the provisions of FIN 48 on January 1, 2007. Upon adoption of FIN 48 and through March 31, 2007, we determined that we had no liability for uncertain income taxes as prescribed by FIN 48. Our policy is to recognize potential accrued interest and penalties related to the liability for uncertain tax benefits, if applicable, in income tax expense. The tax years back to 2003 remain open to examination by the major taxing jurisdictions where we file. Net operating loss and credit carryforwards from earlier periods also remain open to examination by taxing authorities, and will for a period post utilization. We do not anticipate any events during 2007 that would require the Company to record a liability related to any uncertain income taxes.

4. Supplemental Disclosure of Cash Flow Information

The following table contains additional cash flow information for the periods reported:


	Three months ended
	March 31,
	2007			2006
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	41		$	309


Non-cash investing activities:
Decrease in accrued property and equipment included in accounts payable and accrued expenses	$	(1,235	)	$	(108	)

Assets acquired under capital leases	$	374		$	—


Non-cash financing activities:
Initial measurement of warrant liability (see Note 10)	$	10,765		$	—

Conversion of accrued compensation from liability to equity classified award upon grant of restricted stock units (see Note 12)	$	—		$	129

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	March 31,		December 31,
	2007		2006
Prepaid insurance (see Note 8)	$	401	$	86
Prepaid maintenance agreements		192		162
Prepaid clinical and non-clinical studies		124		124
Prepaid contract research and development services		—		228
Prepaid rent		73		195
Other prepaid expenses		321		262
Other current assets		301		227

	$	1,412	$	1,284

6. Property and Equipment

Property and equipment consisted of the following:


	March 31,			December 31,
	2007			2006
Leasehold improvements	$	12,738		$	9,817
Laboratory, manufacturing, and office equipment		6,767			5,874
Construction-in-progress		96			2,142

		19,601			17,833
Less accumulated depreciation and amortization		(5,182	)		(4,729	)

	$	14,419		$	13,104

In February 2007, we completed construction of leasehold improvements to a facility that we currently lease in Horsham, Pennsylvania. We spent $3,160 for these improvements, of which $2,111 was included in construction-in-progress as of December 31, 2006.

Laboratory, manufacturing, and office equipment as of March 31, 2007 and December 31, 2006 included $496 and $122, respectively, of assets acquired under capital leases. Accumulated depreciation and amortization as of March 31, 2007 and December 31, 2006 included $65 and $47, respectively, related to assets acquired under capital leases. Depreciation expense, which includes amortization of assets acquired under capital leases, was $457 and $352 for the three months ended March 31, 2007 and 2006, respectively. During the three months ended March 31, 2007, we capitalized $9 of interest expense in connection with our facility improvement projects. We did not capitalize any interest incurred during the three months ended March 31, 2006.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

7. Intangible and Other Assets

Acquired Intellectual Property

During the three months ended March 31, 2007, we completed the scheduled amortization of the carrying value of acquired intellectual property. As of December 31, 2006, the carrying value of intellectual property was $123.

Deposits

As of March 31, 2007 and December 31, 2006, deposits were $74 and $58, respectively.

8. Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following:


	March 31,			December 31,
	2007			2006
Notes payable to equipment lender, secured by equipment and facility improvements, interest rates from 8.1% to 9.5%, due 2007 to 2008	$	890		$	1,101
Term loan from landlord (unsecured), annual interest at 13.0%, due June 2008		520			622
Note payable, secured by insurance policies, annual interest at 5.7%, due November 2007		328			¾

Subtotal		1,738			1,723
Capital lease obligations		454			108

Total debt		2,192			1,831
Less note payable, secured by insurance policies		(328	)		¾
Less current portion		(1,321	)		(1,251	)

Total debt, net of current portion	$	543		$	580

Note Payable Secured by Insurance Policies

In March 2007, we borrowed $367 to finance insurance policy premiums due on certain insurance policies. The insurance policy premiums, net of amortization, are included in prepaid expenses and other current assets on our Balance Sheets at March 31, 2007 (see Note 5). We are required to pay $42 of principal and interest during each of the nine months beginning on March 15, 2007 and ending on November 15, 2007. To secure payment of the amounts financed, we granted the lender a security interest in (a) all unearned premiums or dividends payable under the policies, (b) loss payments which may reduce the unearned premiums, subject to any mortgagee or loss payee interests, and (c) any interest in any state guarantee fund relating to the policies.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

9. Accrued Expenses

Accrued expenses consisted of the following:


	March 31,		December 31,
	2007		2006
Clinical trials and non-clinical studies	$	2,681	$	625
Professional fees		1,148		1,469
Contract research and development services		721		1,283
Property and equipment		139		1,244
Other expenses		352		128

	$	5,041	$	4,749

10. Warrant Liability

In March 2007, we sold, through a private placement, 21,415 shares of our common stock and warrants to purchase 9,637 shares of common stock with an exercise price of $1.96 (see Note 11). The warrants have a five-year term and are immediately exercisable. The warrant agreement contains a net cash settlement feature, which is available to the warrant holders at their option, in certain change of control circumstances. As a result, under EITF 00-19, the warrants are required to be classified as a liability at their current fair value in our Balance Sheets, estimated using the Black-Scholes option-pricing model. Upon issuance of the warrants on March 13, 2007, we recorded the warrant liability at its initial fair value of $10,765. Warrants that are classified as a liability are revalued at each reporting date until the warrants are exercised or expire with changes in the fair value reported in our Statements of Operations as non-operating income or expense. At March 31, 2007, the aggregate fair value of these warrants increased to $17,115, from their initial fair value, resulting in a non-operating expense of $6,350 during the three months ended March 31, 2007. Assumptions used for the Black-Scholes option-pricing models as of March 13, 2007 and March 31, 2007 are as follows:


	March 13, 2007			March 31, 2007
Expected volatility		75	%		75	%
Remaining contractual term (years)		5.0			4.9
Risk-free interest rate		4.41	%		4.54	%
Expected dividend yield		0	%		0	%
Common stock price	$	1.79		$	2.57

11. Stockholders’ Equity

In March 2007, we sold, through a private placement, 21,415 shares of our common stock and warrants to purchase 9,637 shares of our common stock, including 4,950 shares of our

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

common stock and warrants to purchase 2,228 shares of our common stock to investment funds affiliated with certain members of our board of directors, at a price of $2.02 per unit, generating net proceeds of $40,459. Each unit consisted of one share of common stock and a warrant to purchase 0.45 shares of our common stock. The warrants have a five-year term and an exercise price of $1.96 per share.

12. Equity-based Compensation

The following table summarizes the status of stock options as of March 31, 2007 and changes during the three months then ended:


								Weighted-
				Weighted-				average
				average		Aggregate		remaining
				exercise		intrinsic		contractual
	Shares			price		value		life (years)
Outstanding at January 1, 2007		5,281		$	11.61
Granted		1,259			2.39
Exercised		¾			¾
Forfeited		(50	)		3.21
Expired		(52	)		6.21

Outstanding at March 31, 2007		6,438		$	9.91	$	416		6.8

Vested at March 31, 2007 and expected to vest		5,794		$	10.68	$	327		6.7

Exercisable at March 31, 2007		3,840		$	14.50	$	70		5.3

Fair Value Disclosures

During the three months ended March 31, 2007, we recorded $466 of compensation cost for share-based payments in our Statements of Operations, all of which related to equity-classified awards. During the three months ended March 31, 2006, we recorded $844 of compensation cost for share-based payment arrangements in our Statements of Operations, of which $21 related to liability-classified awards. The weighted-average fair value of stock options granted during the three months ended March 31, 2007 and 2006 was $1.64 and $1.86, respectively. There were no stock options exercised during the three months ended March 31, 2007 and 2006.

As of March 31, 2007, there was $2,772 of total unrecognized compensation cost, which includes the impact of expected forfeitures, related to unvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.4 years.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

Non-employee Stock Options

During the three months ended March 31, 2007, we recognized $39 of compensation expense in connection with the vesting of stock options granted to non-employees. The was no compensation expense or gain in connection with the vesting of stock options granted to non-employees for the three months ended March 31, 2006.

Restricted Stock Units

A summary of the status of Restricted Stock Units (RSUs) as of March 31, 2007, and changes during the three months then ended, is presented in the following table:

Weighted-

average

Aggregate

grant-date

intrinsic

fair value

value

Outstanding at January 1, 2007

128

2.34

Awarded

Settled

Forfeited

Outstanding at March 31, 2007

128

2.34

329

Vested at March 31, 2007 and expected to vest

128

2.34

329

During the three months ended March 31, 2007, we recorded $6 of expense for RSUs, all of which related to equity-classified RSUs. During the three months ended March 31, 2006, we recorded $102 of expense for RSUs, of which $81 related to equity-classified RSUs. The number of shares and aggregate fair value of RSUs that vested during the three months ended March 31, 2007 were 19 and $44, respectively.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

13. Collaborative Agreements and Significant Customer Concentration

A summary of revenue recognized under our collaborative agreements during the three months ended March 31, 2007 and 2006 is presented in the following table:


	Three months ended
	March 31,
	2007		2006
Novo Nordisk
Research and development funding	$	556	$	742
Substantive milestones		—		750
License fees		148		104

		704		1,596


BioGeneriX
Research and development funding		519		671
License fees		14		129

		533		800

	$	1,237	$	2,396

Novo Nordisk A/S Agreements

We have two agreements with Novo Nordisk A/S to use our GlycoPEGylation technology to develop and commercialize next-generation versions of Factors VIIa, VIII and IX, one of which, Factor VIIa, is currently marketed by Novo Nordisk. Under these agreements, we received a non-refundable, upfront fee of $4,300, which is being amortized to revenue over the expected performance period. Novo Nordisk is responsible for funding our research and development activities under the agreements, and we may receive up to $52,200 in milestone payments based on the progress of the programs.

In December 2005, we amended our agreements with Novo Nordisk to provide for an additional project related to one protein and two additional milestone payments to be made to us upon the occurrence of certain events related to the additional project. During the three months ended March 31, 2006, we received two payments upon the occurrence of substantive events related to the additional project.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

BioGeneriX AG Agreements

We have an agreement with BioGeneriX AG to use our proprietary GlycoPEGylation technology to develop a long-acting version of G-CSF. In connection with the agreement, we received from BioGeneriX a non-refundable, upfront fee, which is being recognized to revenue over the expected performance period of 18 years. In October 2006, we entered into an amendment of this agreement. Under the agreement, as amended, we and BioGeneriX shared the expenses of preclinical development. BioGeneriX is responsible for supplying the protein and funding the clinical development program and we are responsible for supplying enzyme reagents and sugar nucleotides. As of January 1, 2007, BioGeneriX is responsible for the cost of reagent supply.

In April 2005, we entered into a research, co-development and commercialization agreement with BioGeneriX for a GlycoPEGylated erythropoietin made in CHO cells (GlycoPEG-CHO-EPO). We received a non-refundable payment in connection with the execution of this agreement. The agreement provided for us to conduct research on behalf of BioGeneriX for up to 12 months and grant BioGeneriX the right to obtain an exclusive, worldwide license to use our enzymatic technologies to develop and commercialize a long-acting version of the target protein. During the three months ended March 31, 2006, we recorded $500 of research and development funding revenue pursuant to this agreement. Under an amendment to the agreement entered into in October 2006, BioGeneriX had until December 31, 2006 to exercise the option. BioGeneriX did not exercise the option and all rights to Neose’s GlycoPEGylation technology as it applies to GlycoPEG-CHO-EPO reverted to Neose.

14. Restructurings and Employee Severance Costs

2007 Restructuring

In March 2007, we initiated a restructuring of operations designed to allow for significantly higher clinical development costs for NE-180 while keeping anticipated 2007 net cash spending consistent with 2006 levels (2007 Restructuring). The 2007 Restructuring included a workforce reduction of approximately 40%. We have not determined if we will incur any contract termination charges in connection with the 2007 Restructuring.

The employee severance costs incurred for the 2007 Restructuring were payable pursuant to an employee severance plan established in August 2005. Our net loss for the three months ended March 31, 2007 included $644 of employee severance costs related to the 2007 Restructuring, of which $568 was included in research and development expenses and $76 was included in general and administrative expenses. Of these amounts, $643 remained unpaid and was included in accrued compensation as of March 31, 2007. We expect to pay the remaining obligations related to the 2007 Restructuring by September 2007.

Neose Technologies, Inc.

Notes to Financial Statements
(unaudited)
(in thousands, except per share amounts)

In connection with the 2007 Restructuring, we committed to pay future cash retention bonuses to certain employees who were not given notice of termination in March 2007, contingent on their not voluntarily terminating their employment prior to December 31, 2007. In connection with this commitment, we expect to pay $353 of retention bonuses, none of which was included in accrued compensation on our Balance Sheets as of March 31, 2007. We also granted stock options to all employees as part of an employee retention program. These options will vest 50% on September 27, 2007 and 50% on March 27, 2008 for all holders who have not terminated their employment prior to the vesting dates. The aggregate fair market value of the options was $1,332, which is being recognized ratably as compensation expense over the vesting period.

2006 Restructuring

In September 2006, we implemented a restructuring of operations in connection with the sale of the Witmer Road Facility (2006 Restructuring). The employee severance costs incurred for the 2006 Restructuring were payable pursuant to an employee severance plan established in August 2005. All of our obligations related to this restructuring were paid by March 31, 2007.

In connection with the 2006 Restructuring, we committed to pay future cash retention bonuses to certain employees who were not given notice of termination in September 2006, contingent on their not voluntarily terminating their employment prior to the payment date. In connection with this commitment, we expect to pay $272 of retention bonuses in the first half of 2007, all of which was included in accrued compensation as of March 31, 2007. Our net loss for the three months ended March 31, 2007 included $104 of expense related to these cash retention bonuses, of which $94 was included in research and development expenses and $10 was included in general and administrative expenses. We also granted stock options to certain employees as part of an employee retention program. These options will vest in full either on July 1, 2007 for all holders who have not voluntarily terminated their employment prior to the vesting date or on their termination date for those employees who were involuntarily terminated in the 2007 Restructuring. The aggregate fair market value of the options was $605, which is being recognized ratably as compensation expense over the vesting period.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995:

This report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts and include, but are not limited to, statements about our plans, objectives, representations and contentions that typically may be identified by use of terms such as “anticipate,” “believe,” “estimate,” “plan,” “may,” “expect,” “intend,” “could,” “potential,” and similar expressions, although some forward-looking statements are expressed differently. These forward-looking statements include, among others, the statements about our:

	•		estimate that our existing cash and cash equivalents, expected proceeds from collaborations and license agreements, and interest income should be sufficient to meet our operating and capital requirements at least through the second quarter of 2008;

	•		expected losses;

	•		expectations for future capital requirements;

	•		expectations for increases in operating expenses;

	•		expectations for increases in research and development, and marketing, general and administrative expenses in order to develop products, procure commercial quantities of reagents and products, and commercialize our technology;

	•		expectations regarding the scope and expiration of patents;

	•		expectations regarding the timing of non-clinical activities, regulatory meetings and submissions, as well as the progression of clinical trials, for NE-180 and GlycoPEG-GCSF;

	•		expectations for the development of long-acting versions of EPO and G-CSF, and subsequent proprietary drug candidates;

	•		expectations regarding net cash utilization;

	•		expectations for generating revenue; and

	•		expectations regarding the timing and character of new or expanded collaborations and for the performance of our existing collaboration partners in connection with the development and commercialization of products incorporating our technology.

You should be aware that the forward-looking statements included in this report represent management’s current judgment and expectations, but our actual results, events and

performance could differ materially from those in the forward-looking statements. Potential risks and uncertainties that could affect our actual results include the following:

	•		our ability to obtain the funds necessary for our operations;

	•		our ability to meet forecasted timelines due to internal or external causes;

	•		unfavorable non-clinical and clinical results for our products;

	•		our ability to develop commercial-scale manufacturing processes for our products and reagents, either independently or in collaboration with others;

	•		the performance of our CROs and CMOs;

	•		our ability to enter into and maintain collaborative arrangements;

	•		our ability to obtain adequate sources of proteins and reagents;

	•		our ability to develop and commercialize products without infringing the patent or intellectual property rights of others;

	•		our ability to expand and protect our intellectual property and to operate without infringing the rights of others;

	•		our ability and our collaborators’ ability to develop and commercialize therapeutic proteins and our ability to commercialize our technology;

	•		our ability to attract and retain key personnel;

	•		our ability to compete successfully in an intensely competitive field; and

	•		general economic conditions.

These and other risks and uncertainties that could affect our actual results are discussed in this report and in our other filings with the SEC, particularly in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2006 in the section entitled “Risk Factors.”

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance, or achievements. We do not assume responsibility for the accuracy and completeness of the forward-looking statements other than as required by applicable law. We do not undertake any duty to update any of the forward-looking statements after the date of this report to conform them to actual results, except as required by the federal securities laws.

You should read this section in combination with the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2006, included in our Annual Report on Form 10-K for the year ended December 31, 2006 and in our 2006 Annual Report to Stockholders.

Overview

Neose Technologies, Inc. is a clinical-stage biopharmaceutical company focused on the development of next-generation therapeutic proteins that we believe will be competitive with best-in-class protein drugs currently on the market. Our lead therapeutic protein candidates are NE-180 and GlycoPEG-GCSF. In 2005, the EPO and G-CSF drug categories had aggregate worldwide sales of approximately $11.2 billion and $4.0 billion, respectively.

NE-180 is a long-acting version of EPO produced in insect cells. EPO is prescribed to stimulate production of red blood cells, and is approved for sale in major markets around the world for treatment of chemotherapy-induced anemia and anemia associated with chronic renal failure. NE-180 is being developed for the treatment of anemia in adult cancer patients with non-myeloid malignancies receiving chemotherapy and for the treatment of anemia associated with chronic kidney disease, including patients on dialysis and patients not on dialysis. During 2006, we completed a Phase I clinical trial for NE-180 in Switzerland. In January 2007, we received approval from Swissmedic, the Swiss Agency for Therapeutic Products, for the initiation of a Phase II human trial to evaluate the safety, tolerability and dose response of NE-180 in cancer patients receiving platinum-based chemotherapy. In March 2007, we received clearance from the U.S. Food and Drug Administration (FDA) to initiate clinical trials in the U.S. in response to our amended Investigational New Drug application (IND).

Our second proprietary protein, GlycoPEG-GCSF, is a long-acting version of G-CSF that we are co-developing with BioGeneriX AG, a company of the ratiopharm Group. G-CSF is prescribed to stimulate production of neutrophils (a type of white blood cell) and is approved for sale in major markets around the world for treatment of neutropenia associated with myelosuppressive chemotherapy. In November 2006, BioGeneriX initiated the first of two planned Phase I clinical trials for GlycoPEG-GCSF. In March 2007, BioGeneriX initiated the second Phase I clinical trial for GlycoPEG-GCSF. We expect BioGeneriX to complete both Phase I clinical trials during 2007.

We believe that our enzymatic pegylation technology, GlycoPEGylation, can improve the drug properties of therapeutic proteins by building out, and attaching PEG to, carbohydrate structures on the proteins. We are using our technology to develop proprietary versions of protein drugs with proven safety and efficacy and to improve the therapeutic profiles of proteins being developed by our partners. We expect these modified proteins to offer significant advantages, including less frequent dosing and possibly improved efficacy, over the original versions of the drugs now on the market, as well as to meet or exceed the pharmacokinetic

profile of next- generation versions of the drugs now on the market. We believe this strategy of targeting drugs with proven safety and efficacy allows us to lower the risk profile of our proprietary development portfolio as compared to de novo protein drug development. We intend to continue to focus our research and development resources on therapeutic proteins that we believe have the highest probability of clinically meaningful therapeutic profile improvements from our technology and are in commercially attractive categories.

In March 2007, we sold, through a private placement, 21.4 million shares of common stock and warrants to purchase 9.6 million shares of our common stock, including 5.0 million shares of our common stock and warrants to purchase 2.2 million shares of our common stock to investment funds affiliated with certain members of our board of directors, at a price of $2.02 per unit, generating net proceeds of $40.5 million. Each unit consisted of one share of common stock and a warrant to purchase 0.45 shares of common stock. The warrants have a five-year term and an exercise price of $1.96 per share.

In March 2007, we initiated a restructuring of operations designed to allow for significantly higher clinical development costs for NE-180 while keeping anticipated 2007 net cash spending consistent with 2006 levels. The restructuring included a workforce reduction of approximately 40%. We incurred restructuring costs of approximately $0.6 million, most of which will be paid during the first half of 2007. We have not yet determined if we will incur any contract termination charges in connection with the restructuring.

We have incurred operating losses each year since our inception. As of March 31, 2007, we had an accumulated deficit of $284.0 million. We expect additional losses over the next several years as we continue product research and development efforts and expand our intellectual property portfolio. We have financed our operations through private and public offerings of equity securities, proceeds from debt financings, and revenues from our collaborative agreements.

Liquidity and Capital Resources

Overview

We had $44.6 million in cash and cash equivalents as of March 31, 2007, compared to $16.4 million as of December 31, 2006. The increase was due to the sale through a private placement of 21.4 million shares of common stock and warrants to purchase 9.6 million shares of common stock, generating net proceeds of $40.5 million. These additional funds were partially offset by the continued funding of our operating activities, capital expenditures, and debt repayments. We anticipate average quarterly spending during the remainder of 2007 of approximately $8.0 million to fund our operating activities, including clinical trial, process development and manufacturing costs associated with the development of NE-180, and capital expenditures and debt repayments.

The development of next-generation proprietary protein therapeutics, which we are

pursuing both independently and in collaboration with selected partners, will require substantial expenditures by us and our collaborators. We plan to continue financing our operations through private and public offerings of equity securities, proceeds from debt financings, and proceeds from existing and future collaborative agreements. Because our 2007 revenues could be substantially affected by entering into new collaborations and on the financial terms of any new collaborations, we cannot estimate our 2007 revenues. Other than proceeds from our collaborations with Novo Nordisk and BioGeneriX, and any future collaborations with others, we do not expect to generate significant revenues until such time as products using our technologies are commercialized, which is not expected during the next several years. We expect an additional several years to elapse before we can expect to generate sufficient cash flow from operations to fund our operating and investing requirements. We believe that our existing cash and cash equivalents, expected revenue from collaborations and license arrangements, and interest income should be sufficient to meet our operating and capital requirements at least through the second quarter of 2008. We will need to raise substantial additional funds to continue our business activities and fund our operations until we are generating sufficient cash flow from operations. If we are unable to raise additional capital when required, we may need to delay, scale back, or eliminate some or all of our research and development programs.

Operating Activities

Net cash used in operating activities was $9.6 million and $6.8 million during the three months ended March 31, 2007 and 2006, respectively. The increase for the 2007 period was primarily due to higher research expenditures and costs associated with the initiation in February 2007 of the Phase II clinical study of NE-180 in Europe and was partially offset by lower payroll and operational costs resulting from the restructuring we implemented in 2006. Fluctuations in operating items vary period-to-period due to, among other factors, the timing of research and development activities, such as the initiation and progress of clinical trials and non-clinical studies.

Investing Activities

During the three months ended March 31, 2007 and 2006, we invested $2.6 million and $0.2 million, respectively, in property and equipment. In February 2007, we completed construction of leasehold improvements to a facility that we currently lease in Horsham, Pennsylvania. We spent $3.2 million for these improvements, of which $2.1 million was included in construction-in-progress as of December 31, 2006. We anticipate additional capital expenditures during the remainder of 2007 of approximately $0.8 to $1.0 million. We may finance some or all of these capital expenditures through capital leases or the issuance of new debt or equity. The terms of any new debt could require us to maintain a minimum cash and investments balance, or to transfer cash into an escrow account to collateralize some portion of the debt, or both.

Financing Activities

Equity Financing Activities

In March 2007, we sold, through a private placement, 21.4 million shares of our common stock and warrants to purchase 9.6 million shares of our common stock, including 5.0 million shares of our common stock and warrants to purchase 2.2 million shares of our common stock to investment funds affiliated with certain members of our board of directors, at a price of $2.02 per unit, generating net proceeds of $40.5 million. Each unit consisted of one share of common stock and a warrant to purchase 0.45 shares of our common stock. The warrants have a five-year term and an exercise price of $1.96 per share.

Debt Financing Activities

Our total debt increased to $2.2 million as of March 31, 2007, compared to $1.8 million as of December 31, 2006. This increase primarily resulted from $0.4 million in proceeds from the issuance of debt to finance insurance policy premiums as well as $0.4 million in assets purchased under capital leases, and was partially offset by planned debt principal repayments of $0.4 million.

Note Payable Secured by Insurance Policies

In March 2007, we borrowed $0.4 million to finance insurance policy premiums due on certain insurance policies. The insurance policy premiums, net of amortization, are included in prepaid expenses and other current assets on our Balance Sheets as of March 31, 2007. We are required to pay $42,000 of principal and interest during each of the nine months beginning on March 15, 2007 and ending on November 15, 2007. The interest is calculated based on an annual percentage rate of 5.7%. To secure payment of the amounts financed, we granted the lender a security interest in (a) all unearned premiums or dividends payable under the policies, (b) loss payments which may reduce the unearned premiums, subject to any mortgagee or loss payee interests, and (c) any interest in any state guarantee fund relating to the policies.

Term Loan from Landlord

In May 2004, we borrowed $1.5 million from the landlord of our leased facilities in Horsham, Pennsylvania. As of March 31, 2007, the outstanding principal balance under this agreement was $0.5 million. The terms of the financing require us to pay monthly principal and interest payments over 48 months at an interest rate of 13%. During the twelve months ending March 31, 2008, we will be required to make principal and interest payments totaling $0.5 million under this agreement.

Equipment Loans

As of March 31, 2007, we owed $0.9 million to an equipment lender that financed the purchase of certain equipment and facility improvements, which collateralize the amounts borrowed. Our last payment is scheduled for September 2008, and interest rates applicable to the equipment loan range from 8.1% to 9.5%. During the twelve months ending March 31, 2008, we will make principal and interest payments totaling $0.7 million under these agreements.

Capital Lease Obligations

The terms of our capital leases require us to make monthly payments through February 2012. As of March 31, 2007, the present value of aggregate minimum lease payments under these agreements was $0.5 million. Under these agreements, we will be required to make lease payments totaling $0.2 million during the twelve months ending March 31, 2008.

Operating Leases

We lease laboratory, office, warehouse facilities, and equipment under operating lease agreements. In 2002, we entered into a lease agreement for our Rock Road Facility. The initial term of this lease ends 2022, at which time we have an option to extend the lease for an additional five years, followed by another option to extend the lease for an additional four and one-half years. This lease contains escalation clauses, under which the base rent increases annually by 2%. We lease approximately 5,000 square feet of office and warehouse space in Horsham, Pennsylvania under a lease agreement that expires April 2007. In January 2007, we entered into a five-year lease agreement for approximately 6,800 square feet of office and warehouse space in Horsham, Pennsylvania to replace similar space.

Summary of Contractual Obligations

A summary of our obligations to make future payments under contracts existing as of December 31, 2006 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2006. The Liquidity and Capital Resources section of this Form 10-Q describes obligations from any material contracts entered into during the three months ended March 31, 2007.

Off-Balance Sheet Arrangements

We are not involved in any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect that is material to investors on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2006. Except as described below, there have not been any changes or additions to our critical accounting policies during the three months ended March 31, 2007.

Warrant Liability

in cash at the option of warrant holders. Our warrants issued in March 2007 permit net cash settlement in certain change of control circumstances at the option of the warrant holders, and, therefore, are classified as a liability on our Balance Sheets.

We record the warrant liability at its fair value using the Black-Scholes option-pricing model and revalue it at each reporting date until the warrants are exercised or expire. Changes in the fair value of the warrants are reported in our Statements of Operations as non-operating income or expense. The fair value of the warrants is subject to significant fluctuation based on changes in our stock price, expected volatility, remaining contractual life and the risk-free interest rate. The market price for our common stock has been and may continue to be volatile. Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of the warrants.

Results of Operations

We recorded a net loss of $17.7 million and $7.8 million during the three months ended March 31, 2007 and 2006, respectively. The following sections explain the changes between the reporting periods in each component of net loss.

Revenue from Collaborative Agreements

Our revenue from collaborative agreements has historically been derived from a few major collaborators. Our collaborative agreements provide for some or all of the following elements: license fees, research and development funding, milestone revenues, and royalties on product sales. A summary of revenue recognized under our collaborative agreements during the three months ended March 31, 2007 and 2006 is presented in the following table (in thousands):


	Three months ended
	March 31,
	2007		2006
Novo Nordisk
Research and development funding	$	556	$	742
Substantive milestones		—		750
License fees		148		104

		704		1,596


BioGeneriX
Research and development funding		519		671
License fees		14		129

		533		800

	$	1,237	$	2,396

Revenue from collaborative agreements during the three months ended March 31, 2007 and 2006 was $1.2 million and $2.4 million, respectively. The decrease in revenue was primarily due to recognition of revenue for a substantive milestone under our collaborations with Novo Nordisk in 2006.

Because our 2007 revenue could be substantially affected by entering into new collaborations and on the financial terms of any new collaborations, we cannot estimate our 2007 revenue. Material cash inflows from proprietary drug development projects are highly uncertain, and we cannot reasonably estimate the period in which we will begin to receive, if ever, material net cash inflows from our major research and development projects. Cash inflows from development-stage products are dependent on several factors, including entering into collaborative agreements, the achievement of certain milestones, and regulatory approvals. We may not receive milestone payments from any existing or future collaborations if a development-stage product fails to meet technical or performance targets or fails to obtain the required regulatory approvals. Further, our revenue from collaborations will be affected by the levels of effort committed and made by our collaborative partners. Even if we achieve technical success in developing drug candidates, our collaborative partners may discontinue development, may not devote the resources necessary to complete development and commence marketing of these products, or they may not successfully market potential products.

Research and Development Expense

Our lead therapeutic protein candidates are NE-180 and GlycoPEG-GCSF. NE-180 is a long-acting version of EPO produced in insect cells. EPO is prescribed to stimulate production of red blood cells, and is approved for sale in major markets around the world for treatment of chemotherapy-induced anemia and anemia associated with chronic renal failure. NE-180 is being developed for the treatment of anemia in adult cancer patients with non-myeloid malignancies receiving chemotherapy and for the treatment of anemia associated with chronic kidney disease, including patients on dialysis and patients not on dialysis. During 2006, we completed a Phase I clinical trial for NE-180 in Switzerland. In January 2007, we received approval from Swissmedic, the Swiss Agency for Therapeutic Products, for the initiation of a Phase II human trial to evaluate the safety, tolerability and dose response of NE-180 in cancer patients receiving platinum-based chemotherapy. In March 2007, we received clearance from the FDA to initiate clinical trials in the U.S. in response to our amended IND.

We have also entered into two agreements with Novo Nordisk A/S to use our GlycoPEGylation technology to develop and commercialize next-generation versions of Factors VIIa, VIII and IX, one of which, Factor VIIa, is currently marketed by Novo Nordisk. In 2006, we successfully completed technical transfer of the manufacturing process for GlycoPEG-FVIIa to Novo Nordisk, who performed preclinical pharmacokinetic and pharmacodynamic studies, and conducted other preclinical activities, on Factors VIIa and IX. Novo Nordisk has announced that they plan to initiate Phase I clinical studies for Factor VIIa in 2007. Factor VIIa is used in the treatment of bleeding episodes and for the prevention of bleeding during surgery or invasive

procedures in patients with congenital hemophilia with inhibitors to coagulation factors VIII or IX.

We conduct exploratory research, both independently and with collaborators, on therapeutic candidates, primarily proteins, for development using our enzymatic technology. Successful candidates may be advanced for development through our own proprietary drug program or through our partnering and licensing program, or a combination of the two. Although our primary focus is the development of long-acting proteins, we are also conducting research to assess opportunities to use our enzymatic technology in other areas, such as glycopeptides and glycolipids. We expect to continue this research during 2007.

Our current research and development projects are divided between two categories: (i) GlycoPEGylation and (ii) Other Glycotechnology Programs, which includes projects investigating opportunities to use our enzymatic technologies in other areas, such as glycolipids. The following chart sets forth our projects in each of these categories and the stage to which each has been developed:


	Development Stage	Status
GlycoPEGylation:
NE-180	Clinical (Phase II)	Active
GlycoPEG-GCSF	Clinical (Phase I)	Active
Other protein projects	Research/Preclinical	Active

Other Glycotechnology Programs:
Non-protein therapeutic applications	Research	Active
Nutritional applications	N/A	Evaluating
		outlicensing
		opportunities

The process of bringing drugs from the preclinical research and development stage through Phase I, Phase II, and Phase III clinical trials to FDA or other regulatory approval is time consuming and expensive. Because our announced product candidates are currently in the early clinical and preclinical stages, and there are a variety of potential intermediate clinical and non-clinical outcomes that are inherent in drug development, we cannot reasonably estimate either the timing or costs we will incur to complete these research and development projects. In addition, the timing and costs to complete our research and development projects will be affected by the timing and nature of any collaboration agreements we may enter into with a third party, neither of which we can currently estimate.

For each of our research and development projects, we incur both direct and indirect expenses. Direct expenses include salaries and other costs of personnel, raw materials, and supplies for each project. We may also incur third-party costs related to these projects, such as contract research, consulting and non-clinical development costs. Indirect expenses include depreciation expense and the costs of operating and maintaining our facilities, property, and equipment, to the extent used for our research and development projects, as well as the costs of general management of our research and development projects.

Our research and development expenses during the three months ended March 31, 2007 and 2006 were $9.8 million and $7.3 million, respectively. The increase in research and development expenses during the 2007 period as compared to the 2006 period was primarily due to higher costs associated with the initiation in February 2007 of the Phase II clinical study of NE-180 in Europe. A $0.6 million decrease in payroll related costs resulting from the restructuring that occurred in September 2006 was offset by $0.6 million of employee severance related costs related to the restructuring that occurred in March 2007. The following table illustrates research and development expenses incurred during the three months ended March 31, 2007 and 2006 for our significant groups of research and development projects (in thousands):


	Three months ended
	March 31,
	2007		2006
GlycoPEGylation	$	6,492	$	4,246
Other Glycotechnology Programs		35		152
Indirect expenses		3,285		2,913

	$	9,812	$	7,311

GlycoPEGylation

Our GlycoPEGylation expenses result primarily from development activities, including process, non-clinical and clinical development, associated with our proprietary drug development programs. These expenses increased during the 2007 period primarily due to the initiation of the Phase II clinical trial for NE-180.

Other Glycotechnology Programs

Research and development expenses related to our Other Glycotechnology Programs decreased during the 2007 periods compared to the 2006 periods due to lower payroll and decreased supplies for early stage research.

Indirect expenses

Indirect research and development expenses increased during the 2007 period primarily due to costs related to the relocation of some our laboratories to our Rock Road facility in February 2007.

General and Administrative Expense

General and administrative expenses during the three months ended March 31, 2007 and 2006 were $3.0 million and $2.9 million, respectively.

Other Income and Expense

In connection with the sale of our common stock and warrants to purchase shares of our common stock in March 2007, we recorded the warrants as a liability at their initial fair value using the Black-Scholes option-pricing model and revalue them at each reporting date until they are exercised or expire. Changes in the fair value of the warrants are reported in our Statements of Operations as non-operating income or expense. During the three months ended March 31, 2007, we recorded a non-operating expense of $6.4 million related to the increase in fair value of these warrants since their issuance date. The market price for our common stock has been and may continue to be volatile. Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of these warrants.

Interest income during the three months ended March 31, 2007 and 2006 was $272,000 and $366,000, respectively. The decrease during the 2007 period compared to the 2006 period was primarily due to lower cash balances for the majority of the quarter. Our interest income during the remainder of 2007 is difficult to project, and will depend largely on prevailing interest rates and whether we receive cash from entering into any new collaborative agreements or by completing any additional equity or debt financings during the year.

Interest expense during the three months ended March 31, 2007 and 2006 was $40,000 and $308,000, respectively. Lower average debt balances in the 2007 period accounted for the decrease. Our interest expense during the remainder of 2007 is difficult to project and will depend on whether we enter into any new debt agreements. See “Financing Activities – Debt Financing Activities” in the Liquidity and Capital Resources section of this Form 10-Q for a description of the material features of our debt financings.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Equity Price Risk

We are exposed to certain risks arising from changes in the price of our common stock, primarily due to the potential effect of changes in fair value of the warrant liability related to the warrants issued in March 2007. The warrant liability is revalued at its current fair value using the Black-Scholes option-pricing model at each reporting date until the warrants are exercised or expire, and is subject to significant increases or decreases in value due to the effects of changes in the price of our common stock at period end and the related calculation of volatility. Changes in the fair value of warrants are reported in our Statements of Operations as non-operating income or expense.

Foreign Exchange Risk

We have entered into some agreements denominated, wholly or partly, in Euros or other foreign currencies, and, in the future, we may enter into additional, significant agreements denominated in foreign currencies. If the values of these currencies increase against the dollar, our costs would increase. To date, we have not entered into any contracts to reduce the risk of fluctuations in currency exchange rates. In the future, depending upon the amounts payable under any such agreements, we may enter into forward foreign exchange contracts to reduce the risk of unpredictable changes in these costs. However, due to the variability of timing and amount of payments under any such agreements, foreign exchange contracts may not mitigate the potential adverse impact on our financial results.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such phrase is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (Exchange Act), as of the end of the period covered by this report on Form 10-Q. Based on that evaluation, our management concluded that these controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, as amended, is recorded, processed, summarized and reported as specified in SEC rules and forms. There were no changes during our last fiscal quarter in these controls or procedures identified in connection with the evaluation, or in other factors that have materially affected, or are reasonable likely to materially affect, these controls or procedures.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits


		10.1		Commercial Premium Finance Agreement and Promissory Note from Neose Technologies, Inc. to AFCO Credit Corporation dated March 6, 2007. (Exhibit 10.44)(1)

		10.2		Securities Purchase Agreement by and among Neose Technologies, Inc. and the purchasers appearing on the signature pages thereto dated March 8, 2007. (Exhibit 10.1)(2)

		10.3		Registration Rights Agreement by and among Neose Technologies, Inc. and the purchasers appearing on the signature pages thereto dated March 8, 2007. (Exhibit 10.2)(2)

		10.4		Form of Common Stock Purchase Warrant (U.S.), dated March 8, 2007. (Exhibit 10.3)(2)

		10.5		Form of Common Stock Purchase Warrant (Non-U.S.), dated March 8, 2007. (Exhibit 10.4)(2)

		10.6*††		Amended and Restated Employment Agreement between Neose Technologies, Inc. and George J. Vergis, Ph. D. dated April 30, 2007.

		10.7*††		Form of Change of Control Agreement between Neose Technologies, Inc. and Certain Executive Officers dated April 30, 2007.

		10.8*††		Change of Control Agreement between Neose Technologies, Inc. and Debra J. Poul dated April 30, 2007.

		31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

††		Compensation plans and arrangements for executives and others.

(1)		Filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2006.

(2)		Filed as an Exhibit to our Current Report on Form 8-K filed with the SEC on March 13, 2007.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	NEOSE TECHNOLOGIES, INC.

Date: May 4, 2007	By:	/s/ A. Brian Davis

		A. Brian Davis
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer and Duly Authorized Signatory)

Exhibit Index


Exhibit		Description

10.6		Amended and Restated Employment Agreement between Neose Technologies, Inc. and George J. Vergis. Ph. D. dated April 30, 2007.

10.7		Form of Change of Control Agreement between Neose Technologies, Inc. and Certain Executive Officers dated April 30, 2007.

10.8		Change of Control Agreement between Neose Technologies, Inc. and Debra J. Poul dated April 30, 2007.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.6 2 w34357exv10w6.htm AMENDED AND RESTATED EMPLOYMENT AGREEMENT exv10w6

Exhibit 10.6

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), is dated as of April 30, 2007 (the “Amendment Date”), by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and GEORGE J. VERGIS, PH.D. (the “Executive”).

Background

The Executive and the Company are parties to an Employment Agreement dated as of May 4, 2006 (“Original Agreement”). The Executive and the Company desire to amend and restate the Original Agreement setting forth the terms and conditions of his employment as the President and Chief Executive of the Company, as set forth herein.

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1. Employment.

1.1. Term. The Company agrees to employ the Executive in accordance with the terms of this Agreement and the Executive agrees to accept such continued employment, effective on the Effective Date and continuing until terminated pursuant to Section 4 hereof (the “Term”).

1.2. Positions. During the Term, the Executive will serve as President and Chief Executive Officer of the Company, reporting directly to the Board. The Board agrees to nominate the Executive for reelection to the Board at each annual meeting of the Company’s stockholders occurring during the Term and at which the Executive’s term as a director is scheduled to expire.

1.3. Duties. The Executive will perform such duties and functions as are customarily performed by the president and chief executive officer of an enterprise the size and nature of the Company, including the duties and functions from time to time assigned to him by the Board. Without limiting the generality of the foregoing, the Executive will be responsible for all aspects of the Company’s performance, including strategy, research and development, business development, sales and marketing, operations, manufacturing, technology development and licensing, corporate development, information management, finance, legal, patent, regulatory, human resources, investor relations and corporate communications.

1.4. Place of Performance. The Executive shall perform his services hereunder at the principal executive offices of the Company, which are currently located in Horsham, Pennsylvania; provided, however, that the Executive will be required to travel from time to time for business purposes.

1.5. Time Devoted to Employment. The Executive will devote his best efforts and substantially all of his business time and services to the performance of his duties under this Agreement. Notwithstanding the foregoing, the Executive may engage in charitable, community

service and industry association activities, and, with the approval of the Board (which approval will not be unreasonably withheld), may serve as a member of boards of directors of other companies or organizations, which, in the judgment of the Board, will not present any conflict of interest with the Company, so long as those activities do not interfere with the performance of his duties under this Agreement.

2. Compensation, Benefits and Expense Reimbursements.

2.1. Base Salary. The Executive shall receive an initial annual salary of $350,000 (the “Base Salary”), paid semi-monthly or otherwise in accordance with the Company’s customary payroll practices, as in effect from time to time. Future salary reviews will be undertaken by the Board of Directors annually.

2.2. Bonus. The Executive will be eligible to receive an annual bonus (the “Annual Bonus”) for each completed calendar year during the Term. The target amount of the Annual Bonus is 75% of the Base Salary for the applicable calendar year. The specific goals and objectives that must be met to receive the target bonus will be established by mutual agreement by the Board and the Executive within 90 days following the commencement of each calendar year during the Term, and within 30 days following the Effective Date for the initial, partial calendar year of the Term. The Company will endeavor to pay the Annual Bonus, if any, within two and one-half months following the end of the calendar year to which the Annual Bonus relates.

2.3. Equity Incentive. The Board has authorized the grant to the Executive, effective February 15, 2006 (“Grant Date”), of options to purchase 300,000 shares of the Company’s common stock (the “Stock Option”) with a per share exercise price equal to the fair market value of a share of common stock on the Grant Date. The Stock Option will vest in four equal, annual installments commencing on February 15, 2007, the first anniversary of the Grant Date, be reflected in a stock option agreement identical in all material respects to the Company’s Form Stock Option Agreement and be non-qualified stock options. The Stock Option will be subject in all respects to the terms of the Company’s 2004 Equity Incentive Plan.

2.4. Expenses. The Executive will be entitled to reimbursement by the Company for all expenses reasonably incurred by him in connection with the performance of his duties, including, without limitation, travel and entertainment expenses reasonably related to the business of the Company, in accordance with the policies and procedures established from time to time by the Company.

2.5. Other Benefits. The Executive will be entitled to participate in any benefit plans, policies or arrangements sponsored or maintained by the Company from time to time for its senior executive officers (which benefits, as of this date, include the right to participate in the Company’s 401(k), employee stock purchase, medical, and dental plans, and coverage under the Company’s group life and disability insurance policies). Notwithstanding the foregoing, the Executive’s eligibility for and participation in any of the Company’s employee benefit plans, policies or arrangements will be subject to the terms and conditions of such plans, policies or arrangements. Moreover, subject to the terms and conditions of such plans, policies or arrangements, the Company may amend, modify or terminate such plans, policies or

arrangements at any time for any reason. In addition, the cost of the Executive’s annual physical examination shall be borne by the Company, to the extent not covered by the Company’s medical plan.

2.6. Vacations. In addition to holidays observed by the Company, the Executive shall be entitled to four (4) weeks paid vacation time during each year of employment consistent with Company policies, as in effect from time to time.

3. [Reserved]

4. Termination.

4.1. In General. The Company may terminate the Executive’s employment at any time. The Executive may terminate his employment at any time, provided that, before the Executive may voluntarily terminate his employment with the Company other than for Good Reason, he must provide 90 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company. Upon any termination of the Executive’s employment with the Company for any reason: (i) the Executive (unless otherwise requested by the Board) concurrently will resign all officer or director positions he holds with the Company, its subsidiaries or affiliates, and (ii) the Company will pay to the Executive all accrued but unpaid compensation (including without limitation salary and bonus) through the date of termination, and (iii) except as explicitly provided in Sections 4, 6 or 7, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Executive. The foregoing will not be construed to limit the Executive’s right to payment or reimbursement for claims incurred prior to the date of such termination under any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

4.2. Termination without Cause or for Good Reason.

4.2.1. If the Executive’s employment by the Company ceases due to a termination by the Company without Cause or a resignation by the Executive for Good Reason, then, in addition to the payments and benefits provided for in Section 4.1 above and subject to Section 8 below: (a) the Company will pay to the Executive a cash amount equal to pro-rata portion of the target Annual Bonus for the calendar year in which the termination occurs, determined by multiplying the target Annual Bonus by a fraction, the numerator of which is the number of days during the year that transpired before the date of the Executive’s termination of employment and the denominator of which is 365, (b) the Company will pay to the Executive on a cash amount equal to the sum of (i) one year of the Executive’s Base Salary as in effect on such date, and (ii) the target Annual Bonus amount applicable for the calendar year in which the termination occurs, (c) to the extent not previously paid, the Company will pay to the Executive any Annual Bonus payable with respect to a calendar year that ended prior to such termination, (d) all outstanding stock options then held by the Executive (including the Stock Option) will immediately become vested and exercisable with respect to that number of additional shares of the Company’s common stock with respect to which such stock options would have become vested and exercisable had the Executive remained continuously employed by the Company for an additional 12 months following his cessation of employment and will remain exercisable for

the shorter of (i) the 12-month period immediately following the Executive’s cessation of employment, or (ii) the period remaining until the scheduled expiration of the option (determined without regard to the executive’s cessation of employment), and (d) the Company will pay to the Executive the additional amount, if any, payable pursuant to Section 7 below; provided that if the Company’s obligation to make the payments provided for in this Section 4.2.1 arises due to a cessation of the Executive’s employment due to his death or Disability (as defined below), the cash payments described in clauses (a), (b) and (c) of this Section 4.2.1 will be offset by the amount of benefits paid to the Executive (or his representative(s), heirs, estate or beneficiaries) pursuant to the life insurance or long-term disability plans, policies or arrangements of the Company by virtue of his death or that Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company).

4.2.2. For purposes of this Agreement, the Executive’s employment will be deemed to have been terminated without “Cause” if his employment is terminated as a result of his death or Disability or is terminated by the Company other than as a result of fraud, embezzlement, or any other illegal act committed intentionally by the Executive in connection with his employment or the performance of his duties as an officer or director of the Company. For purposes of this Agreement, “Disability” means the Executive’s inability, by reason of any physical or mental impairment, to substantially perform his regular duties as contemplated by this Agreement, as determined by the Board in its sole discretion (after affording the Executive the opportunity to present his case), which inability is reasonably contemplated to continue for at least one year from its commencement and at least 90 days from the date of such determination.

4.2.3. For purposes of this Agreement, “Good Reason” means, without the Executive’s prior written consent, any of the following:

(a) a change in the Executive’s title (not including the election of the Executive as Chairman of the Board);

(b) a reduction in the Executive’s authority, duties or responsibilities, or the assignment to the Executive of duties that are inconsistent, in a material respect, with Executive’s position;

(c) the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces Executive’s commuting time;

(d) a reduction in the Base Salary or in the target amount, expressed as a percentage of Base Salary, of the Annual Bonus; or

(e) the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Executive provides the Company with written objection to the event or condition within 60 days following the Executive’s knowledge of the occurrence thereof, the Company does not reverse or otherwise

cure the event or condition within 30 days of receiving that written objection and the Executive resigns his employment within 90 days following the expiration of that cure period.

5. Restrictive Covenants. As consideration for all of the payments to be made to the Executive pursuant to Sections 2, 4 and 6 of this Agreement, as well as for any equity incentive awards that the Executive may receive from the Company, the Executive agrees to be bound by the provisions of this Section 5 (the “Restrictive Covenants”). These Restrictive Covenants will apply without regard to whether any termination of the Executive’s employment is initiated by the Company or the Executive, and without regard to the reason for that termination.

5.1. Covenant Not To Compete. The Executive covenants that, during the period beginning on the Effective Date and ending on the first anniversary of the termination of the Executive’s employment with the Company for any reason (the “Restricted Period”), he will not (except in his capacity as an employee or director of the Company) do any of the following, directly or indirectly, anywhere in the world:

5.1.1. engage or participate in any business competitive with the Business (as defined below);

5.1.2. become interested in (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) any person, firm, corporation, association or other entity engaged in any business competitive with the Business. Notwithstanding the foregoing, the Executive may hold up to 4.9% of the outstanding securities of any class of any publicly-traded securities of any company;

5.1.3. engage in any business, or solicit or call on any customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person with whom the Company shall have dealt or any prospective customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person that the Company shall have identified and solicited at any time during the Executive’s employment by the Company for a purpose competitive with the Business;

5.1.4. influence or attempt to influence any employee, consultant, customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person to terminate or modify any written or oral agreement, arrangement or course of dealing with the Company; or

5.1.5. solicit for employment or employ or retain (or arrange to have any other person or entity employ or retain) any person who has been employed or retained by the Company within the 12 months preceding the termination of the Executive’s employment with the Company for any reason.

5.2. Confidentiality. The Executive recognizes and acknowledges that the Proprietary Information (as defined below) is a valuable, special and unique asset of the business of the Company. As a result, both during the Term and thereafter, the Executive will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for his own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information; provided, however, that the Executive may

during the Term disclose Proprietary Information to third parties as may be necessary or appropriate to the effective and efficient discharge of his duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law. If the Executive or any of his representatives becomes legally compelled to disclose any of the Proprietary Information, the Executive will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. The non-disclosure and non-use obligations with respect to Proprietary Information set forth in this Section 5.2 shall not apply to any information that is in or becomes part of the public domain through no improper act on the part of the Executive.

5.3. Property of the Company.

5.3.1. Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company. The Executive will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of his duties to the Company. If the Executive removes such materials or property in the performance of his duties, the Executive will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose. The Executive will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which he may have access or become familiar in the course of his employment, except to the extent necessary in the performance of his duties. Upon termination of the Executive’s employment with the Company, he will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in his possession.

5.3.2. Intellectual Property. The Executive agrees that all the Intellectual Property (as defined below) will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole and exclusive property of the Company. To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, the Executive retains any interest in the Intellectual Property, the Executive hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Executive may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property. The Executive further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company, at the Company’s sole cost and expense, to perfect, maintain or otherwise protect its rights in the Intellectual Property. If the Company is unable after reasonable efforts to secure the Executive’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Executive’s incapacity or any other reason whatsoever, the Executive hereby designates and appoints the Company or its

designee as the Executive’s agent and attorney-in-fact, to act on his behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s rights in the Intellectual Property. The Executive acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

5.4. Definitions. For purposes of this Agreement, the following terms have the meanings defined below:

5.4.1. “Business” means research, development, manufacture, supply, marketing, licensing, use and sale of biologic, pharmaceutical and therapeutic materials and products and related process technology including, without limitation, research, development, manufacture, supply, marketing, licensing, use and sale of products and technology directed to (a) the enzymatic synthesis of complex carbohydrates for use in food, cosmetic, therapeutic, consumer and industrial applications, (b) enzymatic synthesis or modification of the carbohydrate portion of proteins or lipids, (c) carbohydrate-based therapeutics and (d) the development of protein therapeutics using siallylation, fucosylation, glycosylation, GlycoPEGylation™, or GlycoConjugation™ .

5.4.2. “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Executive (i) at any time and at any place while the Executive is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Executive by the Company.

5.4.3. “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property) (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing

data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

5.5. Acknowledgements. The Executive acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Executive will hold within the Company. The Executive further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to promote the Executive and that the Company would not have entered into this Agreement or otherwise promoted the Executive in the absence of the Restrictive Covenants.

5.6. Remedies and Enforcement Upon Breach.

5.6.1. Specific Enforcement. The Executive acknowledges that any breach by him, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Executive shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by the Executive, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

5.6.2. Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

5.6.3. Accounting. If the Executive breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Executive as the result of such breach. This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

5.6.4. Enforceability. If any court holds the Restrictive Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

5.6.5. Disclosure of Restrictive Covenants. The Executive agrees to disclose the existence and terms of the Restrictive Covenants to any employer that the Executive may work for during the Restricted Period.

5.6.6. Extension of Restricted Period. If the Executive breaches Section 5.1 in any respect, the restrictions contained in that section will be extended for a period equal to the period that the Executive was in breach.

6. Change in Control.

6.1. Certain Terminations Following a Change in Control. If the Executive’s employment with the Company ceases within eighteen months following a Change in Control (as defined below) as a result of a termination by the Company without Cause (not including, solely for purposes of this Section 6, a termination as a result of the Executive’s death or Disability) or a resignation by the Executive for Good Reason, then:

6.1.1. the Restricted Period will be extended by eighteen months;

6.1.2. subject to Section 8 and in lieu of the payments and benefits provided for in Section 4.2, (a) the Company will pay to the Executive a cash amount equal to pro-rata portion of the target Annual Bonus for the calendar year in which the termination occurs, determined by multiplying the target Annual Bonus by a fraction, the numerator of which is the number of days during the year that transpired before the date of the Executive’s termination of employment and the denominator of which is 365, (b) the Company will pay to the Executive a cash amount equal to the sum of (i) 2.5 times the Executive’s Base Salary as in effect on such date, and (ii) 2.5 times the target Annual Bonus amount applicable for the calendar year in which the termination occurs, (c) to the extent not previously paid, the Company will pay to the Executive any Annual Bonus payable with respect to a calendar year that ended prior to that termination, (d) all outstanding stock options then held by Executive (including the Stock Option) will then become fully vested and immediately exercisable and will remain exercisable for the shorter of (i) the 30-month period immediately following the Executive’s cessation of employment, or (ii) the period remaining until the scheduled expiration of the option (determined without regard to the Executive’s cessation of employment), and (d) the Company will pay to the Executive the additional amount, if any, payable pursuant to Section 7 below.

6.2. Definitions. For purposes of this Agreement, the term “Change in Control” means a change in ownership or control of the Company effected through any of the following transactions:

6.2.1. the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

6.2.2. a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have

been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

6.2.3. the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a stockholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

6.2.4. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

7. Parachute Payments.

7.1. Generally. All amounts payable to the Executive under this Agreement will be made without regard to whether the deductibility of such payments (considered together with any other entitlements or payments otherwise paid or due to the Executive) would be limited or precluded by Section 280G of the Code and without regard to whether such payments would subject the Executive to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

7.2. Gross-Up. If all or any portion of the payments or other benefits provided under any section of this Agreement, either alone or together with any other payments and benefits which the Executive receives or is entitled to receive from the Company or its affiliates (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, the Executive will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by the Executive after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment provided for in this Section 7.2, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

7.3. Measurements and Adjustments. The determination of the amount of the payments and benefits paid and payable to the Executive and whether and to what extent payments under Section 7.2 are required to be made will be made at the Company’s expense by an independent auditor selected by mutual agreement of the Company and the Executive, which auditor shall provide Executive and the Company with detailed supporting calculations with

respect to its determination within fifteen (15) business days of the receipt of notice from the Executive or the Company that the Executive has received or will receive a payment that is potentially subject to the Parachute Excise Tax. For the purposes of determining whether any payments will be subject to the Parachute Excise Tax and the amount of such Parachute Excise Tax, such payments will be treated as “parachute payments” within the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Parachute Excise tax, unless and except to the extent that in the opinion of the accountants such payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Parachute Excise Tax. For purposes of determining the amount of the Gross-up Payment, if any, the Executive shall be deemed to pay federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the gross-up payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the gross-up payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Executive’s adjusted gross income); and to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in the Executive’s adjusted gross income. Any Gross-up Payment shall be paid by the Company at the time the Executive is entitled to receive the Payment. Any determination by the auditor shall be binding upon the Company and the Executive.

7.4. In the event of any underpayment or overpayment to the Executive (determined after the application of Section 7.2), the amount of such underpayment or overpayment will be, as promptly as practicable, paid by the Company to the Executive or refunded by the Executive to the Company, as the case may be, with interest at the applicable federal rate specified in Section 7872(f)(2) of the Code.

8. Timing of Payments Following Termination.

8.1. Notwithstanding any provision of this Agreement, the payments and benefits described in Sections 4.2, 6 and 7 are conditioned on the Executive’s execution and delivery to the Company, within 60 days following his cessation of employment, of a release substantially identical to that attached hereto as Exhibit I in a manner consistent with the requirements of the Older Workers Benefit Protection Act (the “Mutual Release”). The amounts described in Sections 4.2.1 and 6.1.2 will be paid in a lump sum, on the eighth day following the Executive’s execution and delivery of the Mutual Release (provided that the Mutual Release has not been revoked by the Executive). The Company covenants that if the Executive executes the Mutual Release, the Company will also execute the Mutual Release.

8.2. IRC Section 409A. To the extent compliance with the requirements of Treas. Reg. §1.409A-3(i)(2) or any successor provision is necessary to avoid the application of an additional tax under Section 409A of the Code on payments due to the Executive upon or following his separation from service, then, notwithstanding any other provision of this

Agreement (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following the Executive’s separation from service will be deferred (without interest) and paid to the Executive in a lump sum immediately following that six month period.

9. Miscellaneous.

9.1. No Liability of Officers and Directors for Severance Upon Insolvency. Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Executive hereby (a) waives any right to claim payment of amounts owed to him, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

9.2. Other Agreements. The Executive represents and warrants to the Company that there are no restrictions, agreements or understandings whatsoever to which he is a party that would prevent or make unlawful his execution of this Agreement, that would be inconsistent or in conflict with this Agreement or Executive’s obligations hereunder, or that would otherwise prevent, limit or impair the performance by Executive of his duties under this Agreement.

9.3. Successors and Assigns. The Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise. The duties of the Executive hereunder are personal to the Executive and may not be assigned by him.

9.4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

9.5. Enforcement. Any legal proceeding arising out of or relating to this Agreement will be instituted in the United States District Court for the Eastern District of Pennsylvania, or if that court does not have or will not accept jurisdiction, in any court of general jurisdiction in the Commonwealth of Pennsylvania, and the Executive and the Company hereby consent to the personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s) that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

9.6. Waivers; Separability. The waiver by either party hereto of any right hereunder or any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise. No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. If any provision of this Agreement shall be declared to be invalid or unenforceable, in

whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

9.7. Notices. All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when hand-delivered or sent by first-class, registered or certified mail, nationally recognized overnight delivery service, or by facsimile with a machine-generated confirmation (and with a confirmation copy sent by one of the other methods listed above) to the other party at the address set forth below:

If to the Company, to:

Neose Technologies, Inc.
102 Rock Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9200

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Executive, to:

George J. Vergis, Ph.D.
204 Weeks Pond Road
New Hope, PA 18938

With a copy to:
Edmonds & Co., P.C.
420 Fifth Avenue, 25^th Floor
New York, New York 10018
Attn: Robert C. Edmonds, Esq.
Fax: 212-703-5440

or to such other address as may be specified in a notice given by one party to the other party hereunder.

9.8. Entire Agreement; Amendments. As of the Effective Date, this Agreement and the attached exhibits contain the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the subject matter

(including, without limitation, that certain letter agreement between the Executive and the Company dated July 2, 2001 and that certain Change in Control Agreement between the Executive and the Company dated October 11, 2002). This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

9.9. Withholding. The Company will withhold from any payments due to Executive, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

9.10. Headings Descriptive. The headings of sections and paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

9.11. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.


	NEOSE TECHNOLOGIES, INC.
	By:	/s/ A. Brian Davis
		A. Brian Davis
		Senior Vice President & CFO



	/s/ George J. Vergis, Ph.D.
	GEORGE J. VERGIS, PH.D.

Exhibit I

Mutual Release and Non-Disparagement Agreement

THIS MUTUAL RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Mutual Release”) is made as of the ___day of ___, ___by and between GEORGE J. VERGIS, Ph.D. (“Executive”) and NEOSE TECHNOLOGIES, INC. (the “Company”).

WHEREAS, Executive’s employment with the Company has ceased; and

WHEREAS, Executive has resigned as an officer and/or director of the Company and each of its subsidiaries and affiliates; and

WHEREAS, pursuant to Section[s] 4[[,] [and] 6 [and 7]] of the Amended and Restated Employment Agreement by and between the Company and Executive dated April 30, 2007 (the “Employment Agreement”), the Company has agreed to pay Executive certain amounts and to provide him with certain rights and benefits, subject to the execution of this Mutual Release.

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1. Consideration. Executive acknowledges that: (i) the payments, rights and benefits set forth in Section[s] 4[[,] [and] 6 [and 7]] of the Employment Agreement constitute full settlement of all his rights under the Employment Agreement, (ii) he has no entitlement under any other severance or similar arrangement maintained by the Company, and (iii) except as otherwise provided specifically in this Mutual Release, the Company does not and will not have any other liability or obligation to Executive. Executive further acknowledges that, in the absence of his execution of this Mutual Release, the benefits and payments specified in Section[s] 4[[,] [and] 6 [and 7]] of the Employment Agreement would not otherwise be due to Executive.

SECTION 2. Mutual Release and Covenant Not to Sue.

2.1. The Company (including for purposes of this Section 2.1, its parents, affiliates and subsidiaries) hereby fully and forever releases and discharges Executive (and his heirs, executors and administrators), and Executive hereby fully and forever releases and discharges Company (including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present) from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Mutual Release, out of Executive’s employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law.

2.2. Executive expressly represents that he has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2.2, its parents, affiliates and subsidiaries) and that he has not assigned any claim against the Company or any affiliate to any other person or entity. The Company expressly represents that it has not filed a lawsuit or initiated any other administrative proceeding against Executive and that it has not assigned any

claim against Executive to any other person or entity. Both Executive and the Company further promise not to initiate a lawsuit or to bring any other claim against the other arising out of or in any way related to Executive’s employment by the Company or the termination of that employment. This Mutual Release will not prevent Executive from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by Executive for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

2.3. The foregoing will not be deemed to release the Executive or the Company from (a) claims solely to enforce this Mutual Release, (b) claims solely to enforce Sections 4, 5, [6], [7] or 9 of the Employment Agreement, or (c) claims solely to enforce the terms of any equity incentive award agreement between Executive and the Company, or (d) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and Executive or under any similar agreement.

SECTION 3. Restrictive Covenants. Executive acknowledges that restrictive covenants contained in Section 5 of the Employment Agreement will survive the termination of his employment. Executive affirms that those restrictive covenants are reasonable and necessary to protect the legitimate interests of the Company, that he received adequate consideration in exchange for agreeing to those restrictions and that he will abide by those restrictions.

SECTION 4. Non-Disparagement. The Company (meaning, solely for this purpose, the Company’s directors and executive officers and other individuals authorized to make official communications on the Company’s behalf) will not disparage Executive or Executive’s performance or otherwise take any action which could reasonably be expected to adversely affect Executive’s personal or professional reputation. Similarly, Executive will not disparage the Company or any of its directors, officers, agents or employees or otherwise take any action which could reasonably be expected to adversely affect the reputation of the Company or the personal or professional reputation of any of the Company’s directors, officers, agents or employees.

SECTION 5. Cooperation. Executive further agrees that, subject to reimbursement of his reasonable expenses, he or she will cooperate fully with the Company and its counsel with respect to any matter (including litigation, investigations, or governmental proceedings) which relates to matters with which Executive was involved during his employment with the Company. Executive shall render such cooperation in a timely manner on reasonable notice from the Company.

SECTION 6. Rescission Right. Executive expressly acknowledges and recites that (a) he has read and understands the terms of this Mutual Release in its entirety, (b) he has entered into this Mutual Release knowingly and voluntarily, without any duress or coercion; (c) he has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Mutual Release before signing it; (d) he was provided twenty-one (21) calendar days after receipt of the Mutual Release to consider its terms before signing it; and (e) he or she is provided seven (7) calendar days from the date of signing to terminate and revoke this Mutual Release, in which case this Mutual Release shall be unenforceable, null and void. Executive may revoke this Mutual Release during those seven (7) days by hand delivering written notice of revocation to the Company at the address specified in Section 9.7 of the Employment Agreement.

SECTION 7. Challenge. If Executive violates or challenges the enforceability of any provisions of the Restrictive Covenants or this Mutual Release, no further payments, rights or benefits under Section[s] [4.2[[,] [and] 6 [and 7]] of the Employment Agreement will be due to Executive.

SECTION 8. Miscellaneous.

8.1 No Admission of Liability. This Mutual Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by the Company to Executive. There have been no such violations, and the Company specifically denies any such violations.

8.2 No Reinstatement. Executive agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

8.3 Successors and Assigns. This Mutual Release shall inure to the benefit of and be binding upon the Company and Executive and their respective successors, executors, administrators and heirs. Executive not may make any assignment of this Mutual Release or any interest herein, by operation of law or otherwise. The Company may assign this Mutual Release to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise.

8.4 Severability. Whenever possible, each provision of this Mutual Release will be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Mutual Release is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Mutual Release will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.

8.5 Entire Agreement; Amendments. Except as otherwise provided herein, this Mutual Release contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating subject matter hereof. This Mutual Release may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

8.6 Governing Law. This Mutual Release shall be governed by, and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the application of the principles of conflicts of laws.

8.7 Counterparts and Facsimiles. This Mutual Release may be executed, including execution by facsimile signature, in multiple counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

[This space left blank intentionally; signature page follows.]

IN WITNESS WHEREOF, the Company has caused this Mutual Release to be executed by its duly authorized officer, and Executive has executed this Mutual Release, in each case as of the date first above written.


		NEOSE TECHNOLOGIES, INC.

		By:

				A. Brian Davis
				Senior Vice President & Chief Financial Officer

		GEORGE VERGIS

EX-10.7 3 w34357exv10w7.htm FORM OF CHANGE OF CONTROL AGREEMENT exv10w7

Exhibit 10.7


David A. Zopf, M.D.		Executive Vice President and Chief Scientific Officer
A. Brian Davis		Senior Vice President and Chief Financial Officer
Valerie M. Mulligan		Senior Vice President, Quality and Regulatory Affairs
Bruce A. Wallin		Senior Vice President, Clinical Development and
		Chief Medical Officer

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), is dated as of April 30, 2007, by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and (the “Employee”).

Background

The Employee, a senior executive of the Company, and the Company are parties to a Change of Control Agreement dated October _, 2002 (“Original Agreement”), pursuant to which the Company and the Employee established certain protections for the Employee in the event of his or her termination of employment. The parties desire to replace the Original Agreement with this Agreement.

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1. Definitions. As used herein:

1.1. “Base Salary” means, as of any given date, the annual base rate of salary payable to the Employee by the Company, as then in effect; provided, however, that in the case of a resignation by the Employee for the Good Reason described in Section 1.8.4, “Base Salary” will mean the annual base rate of salary payable to the Employee by the Company, as in effect immediately prior to the reduction giving rise to the Good Reason.

1.2. “Board” means the Board of Directors of the Company.

1.3. “Business” means research, development, manufacture, supply, marketing, licensing, use and sale of biologic, pharmaceutical and therapeutic materials and products and related process technology directed to (a) the enzymatic synthesis of complex carbohydrates for use in food, cosmetic, therapeutic, consumer and industrial applications, (b) enzymatic synthesis or modification of the carbohydrate portion of proteins or lipids, or modification of proteins or lipids through the attachment of carbohydrates, (c) carbohydrate-based therapeutics, and (d) the development of protein therapeutics using sialylation, fucosylation, glycosylation, GlycoPEGylation™, or GlycoConjugation™.

1.4. “Cause” means fraud, embezzlement, or any other serious criminal conduct that adversely affects the Company committed intentionally by the Employee in connection with

his or her employment or the performance of his or her duties as an officer or director of the Company or the Employee’s conviction of, or plea of guilty or nolo contendere to, any felony.

1.5. “Change in Control” means a change in ownership or control of the Company effected through:

1.5.1. the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

1.5.2. a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

1.5.3. the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

1.5.4. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

1.6. “Code” means Internal Revenue Code of 1986, as amended.

1.7. “Disability” means the Employee’s inability, by reason of any physical or mental impairment, to substantially perform his or her regular duties as contemplated by this Agreement, as determined by the Board in its sole discretion (after affording the Employee the opportunity to present his or her case), which inability is reasonably contemplated to continue for at least one year from its commencement and at least 90 days from the date of such determination.

1.8. “Good Reason” means, without the Employee’s prior written consent, any of the following:

1.8.1. an adverse change in the Employee’s title;

1.8.2. a reduction in the Employee’s authority, duties or responsibilities, or the assignment to the Employee of duties that are inconsistent, in a material respect, with Employee’s position;

1.8.3. the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Employee’s commuting time;

1.8.4. a reduction in the Employee’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Employee’s Target Bonus;

1.8.5. the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Employee provides the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection and the Employee resigns his or her employment within 90 days following the expiration of that cure period.

1.9. “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Employee (i) at any time and at any place while the Employee is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Employee by the Company.

1.10. “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property), (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research,

studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

1.11. “Pro Rata Bonus” means, with respect to each calendar year, a pro-rata bonus for such year equal to the amount of Employee’s Target Bonus for such year multiplied by a fraction, the numerator of which is the number of days during the year that transpired before the date of the Employee’s termination of employment and the denominator of which is 365.

1.12. “Release” means a release substantially identical to the one attached hereto as Exhibit A.

1.13. “Restricted Period” means (i) in the case of a cessation of employment described in Section 3, the period beginning on the date hereof and ending eighteen months after such cessation, and (ii) in the case of any other cessation of employment, the period beginning on the date hereof and ending on the first anniversary of such cessation.

1.14. “Restrictive Covenants” means the covenants set forth in Sections 6.1, 6.2 and 6.3 of this Agreement.

1.15. “Target Bonus” means, with respect to any year, the target amount of the annual bonus payable to the Employee with respect to that year, whether under an employment or incentive agreement, under any bonus plan or policy of the Company, or otherwise, and whether or not all applicable performance goals have been met and conditions to the payment of such bonus have been satisfied.

2. Termination.

2.1. In General. The Company may terminate the Employee’s employment at any time. The Employee may terminate his or her employment at any time, provided that before the Employee may voluntarily terminate his or her employment with the Company, he or she must provide 30 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company. Upon any termination of the Employee’s employment with the Company for any reason: (a) the Employee (unless otherwise requested by the Board) concurrently will resign any officer or director positions he or she holds with the Company, its subsidiaries or affiliates, and (b) the Company will pay to the Employee all accrued but unpaid compensation (including without limitation salary and bonus) through the date of termination, and (c) except as explicitly provided in Sections 2, 3 or 4, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Employee. The foregoing will not be construed to limit the Employee’s right to payment or reimbursement for claims incurred under any insurance contract funding an

employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

2.2. Termination Without Cause or For Good Reason. If the Employee’s employment by the Company ceases due to a termination by the Company without Cause or a resignation by the Employee for Good Reason, then, in addition to the payments and benefits provided for in Section 2.1 above and subject to Section 5 below, the Company will:

2.2.1. Pay to the Employee a lump sum cash payment equal to the Pro-Rata Bonus for the calendar year in which the termination occurs;

2.2.2. Pay to the Employee a lump sum cash payment equal to the sum of (i) Employee’s Base Salary, as in effect on such date, and (ii) Employee’s Target Bonus for the calendar year in which the termination occurs;

2.2.3. Continue to provide medical benefits to the Employee (and, if covered immediately prior to such termination, his or her spouse and dependents) for a period of one year commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination; and

2.2.4. Arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee.

2.3. Termination Due to Death or Disability. If the Employee’s employment by the Company ceases due to death or Disability, then, in addition to the payments and benefits provided for in Section 2.1 above and subject to Section 5 below, the Company will pay to Employee the payments and provide to Employee the benefits described in Sections 2.2.1, 2.2.2, 2.2.3 and 2.2.4, provided that the cash payments described in such Sections will be offset by the actuarial present value of the benefits paid or payable to the Employee (or his or her representatives, heirs, estate or beneficiaries) pursuant to any life insurance or disability plans, policies or arrangements of the Company by virtue of his or her death or such Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company).

2.4. The payments and benefits described in Sections 2.2 and 2.3 are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

3. Certain Terminations Following a Change in Control. If the Employee’s employment with the Company ceases within twelve months following a Change in Control as a result of a termination by the Company without Cause or a resignation by the Employee for Good Reason, then in lieu of the payments and benefits provided for in Section 2.2,:

3.1. The Company will pay to the Employee on the date of termination a lump sum cash payment equal to the Pro-Rata Bonus for the calendar year in which the termination occurs;

3.2. The Company will pay to the Employee on the date of termination a lump sum cash payment equal to the sum of (i) eighteen months of the Employee’s Base Salary as in effect on such date, and (ii) the product of 1.5 times the Employee’s Target Bonus for the calendar year in which the termination occurs;

3.3. The Company will continue to provide medical benefits to the Employee (and, if covered immediately prior to such term, his or her spouse and dependents) for a period of eighteen months commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination;

3.4. The Company will arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee; and

3.5. All outstanding stock options then held by the Employee will then become fully vested and immediately exercisable and will remain exercisable and, notwithstanding any inconsistent language in any equity incentive plan or agreement, will remain exercisable for the shortest of (a) the 18 month period immediately following the Employee’s termination of employment, (b) the period remaining until the scheduled expiration of the option (determined without regard to the Employee’s termination of employment), or (c) the longest period that does not result in the option becoming subject to an additional tax under Section 409A of the Code.

4. Parachute Payments.

4.1. Generally. All amounts payable to the Employee under this Agreement will be made without regard to whether the deductibility of such payments (considered together with any other entitlements or payments otherwise paid or due to the Employee) would be limited or precluded by Section 280G of the Code and without regard to whether such payments would subject the Employee to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

4.2. Gross-Up. If all or any portion of the payments or other benefits provided under any section of this Agreement, either alone or together with any other payments and benefits which the Employee receives or is entitled to receive from the Company or its affiliates (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “Payment”) would result in the imposition of a Parachute Excise Tax, the Employee will be entitled to an additional payment (the “Gross-up Payment”) in an amount such that the net amount of the Payment and the Gross-up Payment retained by the Employee after the calculation and deduction of all excise taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and excise tax (including any interest or penalties imposed with respect to such taxes) on the Gross-up Payment provided for in this Section 4.2, and taking into account any lost or reduced tax deductions on account of the Gross-up Payment, shall be equal to the Payment.

4.3. Measurements and Adjustments. The determination of the amount of the payments and benefits paid and payable to the Employee, and whether and to what extent payments under Section 4.2 are required to be made, will be made at the Company’s expense by an independent auditor selected by mutual agreement of the Company and the Employee, which auditor shall provide the Employee and the Company with detailed supporting calculations with respect to its determination within 15 business days after the receipt of notice from the Employee or the Company that the Employee has received or will receive a payment that is potentially subject to the Parachute Excise Tax. For the purposes of determining whether any payments will be subject to the Parachute Excise Tax and the amount of such Parachute Excise Tax, such payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Parachute Excise tax, unless and except to the extent that, in the opinion of independent accounting experts reasonably selected by the Company, such payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Parachute Excise Tax. For purposes of determining the amount of the Gross-up Payment, if any, the Employee shall be deemed to pay federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the gross-up payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the gross-up payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Employee’s adjusted gross income); and to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the gross-up payment in the Employee adjusted gross income. Any Gross-up Payment shall be paid by the Company at the time the Employee is entitled to receive the Payment. Any determination by the auditor shall be binding upon the Company and the Employee.

4.4. Underpayment or Overpayment. In the event of any underpayment or overpayment to the Employee (determined after the application of Section 4.2), the amount of such underpayment or overpayment will be, as promptly as practicable, paid by the Company to the Employee or refunded by the Employee to the Company, as the case may be, with interest at the applicable federal rate specified in Section 1274(d) of the Code.

5. Timing of Payments Following Termination.

5.1. Subject to Section 5.2, and notwithstanding any other provision of this Agreement, the payments and benefits described in Sections 2, 3 and 4 are conditioned on the Employee’s execution and delivery to the Company, within 60 days following cessation of employment, of a Release in a manner consistent with the Older Workers Benefit Protection Act and any similar state law that is applicable. The amounts described in Sections 2.2 or 3 (as applicable) will be paid in a lump sum, on the eighth day following the Employee’s execution and delivery of the Release, provided the Release has not been revoked by the Employee.

5.2. To the extent the compliance with requirements of Treas. Reg. §1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Code on payments due to the Employee upon or following separation from service, then notwithstanding any other provision of this Agreement (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following the Employee’s separation from service will be deferred (without interest) and paid to the Employee in a lump sum immediately following that six month period.

6. Restrictive Covenants. As consideration for all of the payments to be made to the Employee pursuant to Sections 2, 3, and 4 of this Agreement, the Employee agrees to be bound by the Restrictive Covenants set forth in this Section 6. The Restrictive Covenants will apply without regard to whether any termination of the Employee’s employment is initiated by the Company or the Employee, and without regard to the reason for that termination.

6.1. Covenant Not To Compete. The Employee covenants that, during the Restricted Period, the Employee will not (except in his or her capacity as an employee or director of the Company or with the prior consent of the Company) do any of the following, directly or indirectly, anywhere in the world:

6.1.1. engage or participate in any business competitive with the Business;

6.1.2. become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) in any person, firm, corporation, association or other entity engaged in any business competitive with the Business. Notwithstanding the foregoing, the Employee may hold up to 4.9% of the outstanding securities of any class of any publicly-traded securities of any company;

6.1.3. engage in any business, or solicit or call on any customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person with whom the Company shall have dealt or any prospective customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person that the Company shall have identified and solicited at any time during the Employee’s employment by the Company for a purpose competitive with the Business;

6.1.4. influence or attempt to influence any employee, consultant, customer, supplier, licensor, licensee, contractor, agent, representative, advisor, strategic partner, distributor or other person to terminate or adversely modify any written or oral agreement, arrangement or course of dealing with the Company; or

6.1.5. solicit for employment or employ or retain (or arrange to have any other person or entity employ or retain) any person who has been employed or retained by the Company within the 12 months preceding the termination of the Employee’s employment with the Company for any reason.

6.2. Confidentiality. The Employee recognizes and acknowledges that the Proprietary Information is a valuable, special and unique asset of the business of the Company. As a result, both during the Employee’s employment by the Company and thereafter, the

Employee will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for his or her own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information, provided that the Employee may during his or her employment by the Company disclose Proprietary Information to third parties as may be necessary or appropriate to the effective and efficient discharge of his or her duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law. If the Employee or any of his or her representatives becomes legally compelled to disclose any of the Proprietary Information, the Employee will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. The non-disclosure and non-use obligations with respect to Proprietary Information set forth in this Section 6.2 shall not apply to any information that is in or becomes part of the public domain through no improper act on the part of the Employee.

6.3. Property of the Company.

6.3.1. Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company. The Employee will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of his or her duties to the Company. If the Employee removes such materials or property in the performance of his or her duties, the Employee will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose. The Employee will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which he or she may have access or become familiar in the course of his or her employment, except to the extent necessary in the performance of his or her duties. Upon termination of the Employee’s employment with the Company, he or she will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in his or her possession.

6.3.2. Intellectual Property. The Employee agrees that all the Intellectual Property will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole and exclusive property of the Company. To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, the Employee retains any interest in the Intellectual Property, the Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that the Employee may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property. The Employee further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the

Intellectual Property. If the Company is unable after reasonable efforts to secure the Employee’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Employee’s incapacity or any other reason whatsoever, the Employee hereby designates and appoints the Company or its designee as the Employee’s agent and attorney-in-fact, to act on his or her behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company’s rights in the Intellectual Property. The Employee acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.

6.4. Acknowledgments. The Employee acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Employee holds within the Company. The Employee further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to enter into this Agreement and that the Company would not have entered into this Agreement in the absence of the Restrictive Covenants.

6.5. Remedies and Enforcement Upon Breach.

6.5.1. Specific Enforcement. The Employee acknowledges that any breach by him or her, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by the Employee, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

6.5.2. Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

6.5.3. Accounting. If the Employee breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Employee as the result of such breach. This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

6.5.4. Enforceability. If any court holds the Restrictive Covenants unenforceable by reason of their breadth or scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographic scope of such Restrictive Covenants.

6.5.5. Disclosure of Restrictive Covenants. The Employee agrees to disclose the existence and terms of the Restrictive Covenants to any employer that the Employee may work for during the Restricted Period.

6.5.6. Extension of Restricted Period. If the Employee breaches Section 6.1 in any respect, the restrictions contained in that section will be extended for a period equal to the period that the Employee was in breach.

7. Miscellaneous.

7.1. No Liability of Officers and Directors for Severance Upon Insolvency. Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Employee hereby (a) waives any right to claim payment of amounts owed to him or her, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

7.2. Successors and Assigns. The Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise. The rights of the Employee hereunder are personal to the Employee and may not be assigned by him.

7.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

7.4. Enforcement. Any legal proceeding arising out of or relating to this Agreement will be instituted in the United States District Court for the Eastern District of Pennsylvania, or if that court does not have or will not accept jurisdiction, in any court of general jurisdiction in the Commonwealth of Pennsylvania, and the Employee and the Company hereby consent to the personal and exclusive jurisdiction of such courts and hereby waive any objections that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

7.5. Waivers; Separability. The waiver by either party hereto of any right hereunder or any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise. No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

7.6. Notices. All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered

personally or upon mailing by registered or certified mail, postage prepaid, return receipt requested, as follows:

If to the Company, to:

Neose Technologies, Inc.
102 Rock Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Employee, to:

or to such other address as may be specified in a notice given by one party to the other party hereunder.

7.7. Entire Agreement; Amendments. This Agreement and the attached exhibit contain the entire agreement and understanding of the parties relating to the provision of severance benefits upon termination, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including without limitation the Retention Agreement dated , the Noncompetition and Confidentiality Agreement dated , and the Original Agreement between the Employee and Company. This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

7.8. Withholding. The Company will withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

7.9. Headings Descriptive. The headings of sections and paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

7.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.


		NEOSE TECHNOLOGIES, INC.

		By:

				George J. Vergis, Ph.D. President and Chief Executive Officer


				Employee

Exhibit A
Release and Non-Disparagement Agreement

THIS RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Release”) is made as of the ___ day of , ___by and between (the “Employee”) and NEOSE TECHNOLOGIES, INC. (the “Company”).

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

WHEREAS, pursuant to Section[s] [2] [3] [and 4] of the Change of Control Agreement by and between the Company and the Employee dated as of April 30, 2007 (the “Change of Control Agreement”), the Company has agreed to pay the Employee certain amounts and to provide him or her with certain rights and benefits, subject to the execution of this Release.

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1. Consideration. The Employee acknowledges that: (a) the payments, rights and benefits set forth in Section[s] [2] [3] [and 4] of the Change of Control Agreement constitute full settlement of all of his or her rights under the Change of Control Agreement, (b) he or she has no entitlement under any other severance or similar arrangement maintained by the Company, and (c) except as otherwise provided specifically in this Release, the Company does not and will not have any other liability or obligation to the Employee. The Employee further acknowledges that, in the absence of his or her execution of this Release, the payments and benefits specified in Section[s] [2] [3] [and 4] of the Change of Control Agreement would not otherwise be due to the Employee.

SECTION 2. Release and Covenant Not to Sue. The Employee hereby fully and forever releases and discharges the Company and its parents, affiliates and subsidiaries, including all predecessors and successors, assigns, officers, directors, trustees, employees, agents and attorneys, past and present, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities, of whatever kind or nature, direct or indirect, in law, equity or otherwise, whether known or unknown, arising through the date of this Release, out of his or her employment by the Company or the termination thereof, including, but not limited to, any claims for relief or causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other federal, state or local statute, ordinance or regulation regarding discrimination in employment and any claims, demands or actions based upon alleged wrongful or retaliatory discharge or breach of contract under any state or federal law. The Employee expressly represents that he or she has not filed a lawsuit or initiated any other administrative proceeding against the Company (including for purposes of this Section 2, its parents, affiliates and subsidiaries), and that he or she has not assigned any claim against the Company (or its parents, affiliates and subsidiaries) to any other person or entity. The Employee further promises not to initiate a lawsuit or to bring any other claim against the Company (or its parents, affiliates and subsidiaries) arising out of or in any way related to his or her employment by the Company or the termination of that employment. The forgoing will not be deemed to release the Company from (a) claims solely to enforce this Release, (b) claims solely to enforce Section[s] [2] [3] [and 4] of the Change of Control Agreement, (c) claims for indemnification under the Company’s By-Laws, under any indemnification agreement between the Company and the Employee or under any similar agreement or (d) claims solely to enforce the terms of any equity incentive award agreement

between the Employee and the Company. This Release will not prevent the Employee from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); provided, however, that any claims by the Employee for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be barred.

SECTION 3. Restrictive Covenants. The Employee acknowledges that the terms of Section 6 of the Change in Control Agreement will survive the termination of his or her employment. The Employee affirms that the restrictions contained in Section 6 of the Change in Control Agreement are reasonable and necessary to protect the legitimate interests of the Company, that he or she received adequate consideration in exchange for agreeing to those restrictions and that he or she will abide by those restrictions.

SECTION 4. Non-Disparagement. The Company (meaning, solely for this purpose, Company’s directors and executive officers and other individuals authorized to make official communications on Company’s behalf) will not disparage the Employee or the Employee’s performance or otherwise take any action which could reasonably be expected to adversely affect the Employee’s personal or professional reputation. Similarly, the Employee will not disparage Company or any of its directors, officers, agents or employees or otherwise take any action which could reasonably be expected to adversely affect the reputation of the Company or the personal or professional reputation of any of the Company’s directors, officers, agents or employees.

SECTION 5. Cooperation. The Employee further agrees that, subject to reimbursement of his or her reasonable expenses, he or she will cooperate fully with the Company and its counsel with respect to any matter (including litigation, investigations, or governmental proceedings) which relates to matters with which the Employee was involved during his or her employment with Company. The Employee shall render such cooperation in a timely manner on reasonable notice from the Company.

SECTION 6. Rescission Right. The Employee expressly acknowledges and recites that (a) he or she has read and understands this Release in its entirety, (b) he or she has entered into this Release knowingly and voluntarily, without any duress or coercion; (c) he or she has been advised orally and is hereby advised in writing to consult with an attorney with respect to this Release before signing it; (d) he or she was provided 21 calendar days after receipt of the Release to consider its terms before signing it (or such longer period as is required for this Release to be effective under the Age Discrimination in Employment Act or any similar state law); and (e) he or she is provided seven (7) calendar days from the date of signing to terminate and revoke this Release (or such longer period required by applicable state law), in which case this Release shall be unenforceable, null and void. The Employee may revoke this Release during those seven (7) days (or such longer period required by applicable state law) by providing written notice of revocation to the Company.

SECTION 7. Challenge. If the Employee violates or challenges the enforceability of any provisions of the Noncompetition Agreement or this Release, no further payments, rights or benefits under Section[s] [2] [3] [and 4] of the Change of Control Agreement will be due to the Employee.

SECTION 8. Miscellaneous.

8.1. No Admission of Liability. This Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by

the Company to the Employee. There have been no such violations, and the Company specifically denies any such violations.

8.2. No Reinstatement. The Employee agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

8.3. Successors and Assigns. This Release shall inure to the benefit of and be binding upon the Company and the Employee and their respective successors, executors, administrators and heirs. The Employee may make any assignment of this Release or any interest herein, by operation of law or otherwise. The Company may assign this Release to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise.

8.4. Severability. Whenever possible, each provision of this Release will be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Release is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Release will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.

8.5. Entire Agreement; Amendments. Except as otherwise provided herein, this Release contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the subject matter hereof. This Release may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

8.6. Governing Law. This Release shall be governed by, and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the application of the principles of conflicts of laws.

8.7. Counterparts and Facsimiles. This Release may be executed, including execution by facsimile signature, in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.


		NEOSE TECHNOLOGIES, INC.

		By:
		Name & Title:


		EMPLOYEE

EX-10.8 4 w34357exv10w8.htm CHANGE OF CONTROL AGREEMENT exv10w8

Exhibit 10.8

CHANGE OF CONTROL AGREEMENT

THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), is dated as of April 30, 2007, by and between NEOSE TECHNOLOGIES, INC. (the “Company”) and Debra J. Poul (the “Employee”).

Background

The Employee, a senior executive of the Company, and the Company are parties to a Change of Control Agreement dated October 7, 2002 (“Original Agreement”), pursuant to which the Company and the Employee established certain protections for the Employee in the event of his or her termination of employment. The parties desire to replace the Original Agreement with this Agreement.

Terms

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, and intending to be bound hereby, the parties agree as follows:

1. Definitions. As used herein:

1.2. “Board” means the Board of Directors of the Company.

1.3. “Cause” means fraud, embezzlement, or any other serious criminal conduct that adversely affects the Company committed intentionally by the Employee in connection with his or her employment or the performance of her duties as an officer or director of the Company or the Employee’s conviction of, or plea of guilty or nolo contendere to, any felony.

1.4. “Change in Control” means a change in ownership or control of the Company effected through:

1.4.1. the direct or indirect acquisition by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

1.4.2. a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board

members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

1.4.3. the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a shareholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

1.4.4. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

1.5. “Code” means Internal Revenue Code of 1986, as amended.

1.6. “Disability” means the Employee’s inability, by reason of any physical or mental impairment, to substantially perform her regular duties as contemplated by this Agreement, as determined by the Board in its sole discretion (after affording the Employee the opportunity to present her case), which inability is reasonably contemplated to continue for at least one year from its commencement and at least 90 days from the date of such determination.

1.7. “Good Reason” means, without the Employee’s prior written consent, any of the following:

1.7.1. an adverse change in the Employee’s title;

1.7.2. a reduction in the Employee’s authority, duties or responsibilities, or the assignment to the Employee of duties that are inconsistent, in a material respect, with Employee’s position;

1.7.3. the relocation of the Company’s headquarters more than 15 miles from Horsham, Pennsylvania, unless such move reduces the Employee’s commuting time;

1.7.4. a reduction in the Employee’s Base Salary or in the amount, expressed as a percentage of Base Salary, of the Employee’s Target Bonus;

1.7.5. the Company’s failure to pay or make available any material payment or benefit due under this Agreement or any other material breach by the Company of this Agreement.

However, the foregoing events or conditions will constitute Good Reason only if the Employee provides the Company with written objection to the event or condition within 60 days following the occurrence thereof, the Company does not reverse or otherwise cure the event or condition within 30 days of receiving that written objection and the Employee resigns her employment within 90 days following the expiration of that cure period.

1.8. “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications claiming such inventions, (b) all trademarks, service marks, trade dress, logos, trade names, fictitious names, brand names, brand marks and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methodologies, technical data, designs, drawings and specifications), (f) all computer software (including data, source and object codes and related documentation), (g) all other proprietary rights, (h) all copies and tangible embodiments thereof (in whatever form or medium), or similar intangible personal property which have been or are developed or created in whole or in part by the Employee (i) at any time and at any place while the Employee is employed by Company and which, in the case of any or all of the foregoing, are related to and used in connection with the business of the Company, or (ii) as a result of tasks assigned to the Employee by the Company.

1.9. “Proprietary Information” means any and all information of the Company or of any subsidiary or affiliate of the Company. Such Proprietary Information shall include, but shall not be limited to, the following items and information relating to the following items: (a) all intellectual property and proprietary rights of the Company (including without limitation Intellectual Property), (b) computer codes or instructions (including source and object code listings, program logic algorithms, subroutines, modules or other subparts of computer programs and related documentation, including program notation), computer processing systems and techniques, all computer inputs and outputs (regardless of the media on which stored or located), hardware and software configurations, designs, architecture and interfaces, (c) business research, studies, procedures and costs, (d) financial data, (e) distribution methods, (f) marketing data, methods, plans and efforts, (g) the identities of actual and prospective customers, contractors and suppliers, (h) the terms of contracts and agreements with customers, contractors and suppliers, (i) the needs and requirements of, and the Company’s course of dealing with, actual or prospective customers, contractors and suppliers, (j) personnel information, (k) customer and vendor credit information, and (l) any information received from third parties subject to obligations of non-disclosure or non-use. Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

1.10. “Pro Rata Bonus” means, with respect to each calendar year, a pro-rata bonus for such year equal to the amount of Employee’s Target Bonus for such year multiplied by a fraction, the numerator of which is the number of days during the year that transpired before the date of the Employee’s termination of employment and the denominator of which is 365.

1.11. “Release” means a release substantially identical to the one attached hereto as Exhibit A.

1.12. “Restrictive Covenants” means the covenants set forth in Sections 6.1, 6.2 and 6.3 of this Agreement.

1.13. “Target Bonus” means, with respect to any year, the target amount of the annual bonus payable to the Employee with respect to that year, whether under an employment or incentive agreement, under any bonus plan or policy of the Company, or otherwise, and whether or not all applicable performance goals have been met and conditions to the payment of such bonus have been satisfied.

2. Termination.

2.1. In General. The Company may terminate the Employee’s employment at any time. The Employee may terminate her employment at any time, provided that before the Employee may voluntarily terminate her employment with the Company, she must provide 30 days prior written notice (or such shorter notice as is acceptable to the Company) to the Company. Upon any termination of the Employee’s employment with the Company for any reason: (a) the Employee (unless otherwise requested by the Board) concurrently will resign any officer or director positions she holds with the Company, its subsidiaries or affiliates, and (b) the Company will pay to the Employee all accrued but unpaid compensation (including without limitation salary and bonus) through the date of termination, and (c) except as explicitly provided in Sections 2, 3 or 4, or otherwise pursuant to COBRA, all compensation and benefits will cease and the Company will have no further liability or obligation to the Employee. The foregoing will not be construed to limit the Employee’s right to payment or reimbursement for claims incurred under any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.

2.2.1. Pay to the Employee a lump sum cash payment equal to the Pro-Rata Bonus for the calendar year in which the termination occurs;

2.2.4. Arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee.

Employee the payments and provide to Employee the benefits described in Sections 2.2.1, 2.2.2, 2.2.3 and 2.2.4, provided that the cash payments described in such Sections will be offset by the actuarial present value of the benefits paid or payable to the Employee (or her representatives, heirs, estate or beneficiaries) pursuant to any life insurance or disability plans, policies or arrangements of the Company by virtue of her death or such Disability (including, for this purpose, only that portion of such life insurance or disability benefits funded by the Company or by premium payments made by the Company).

2.4. The payments and benefits described in Sections 2.2 and 2.3 are in lieu of (and not in addition to) any other severance arrangement maintained by the Company.

3.1. The Company will pay to the Employee on the date of termination a lump sum cash payment equal to the Pro-Rata Bonus for the calendar year in which the termination occurs;

3.3. The Company will continue to provide medical benefits to the Employee (and, if covered immediately prior to such term, her spouse and dependents) for a period of eighteen months commencing from the date of the Employee’s termination of employment at a monthly cost to the Employee equal to the Employee’s monthly contribution, if any, toward the cost of such coverage immediately prior to such termination;

3.4. The Company will arrange for the provision to the Employee of reasonable executive outplacement services by a provider selected by the mutual agreement of the Company and the Employee ; and

4. Parachute Payments.

precluded by Section 280G of the Code and without regard to whether such payments would subject the Employee to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code (the “Parachute Excise Tax”).

Employee is entitled to receive the Payment. Any determination by the auditor shall be binding upon the Company and the Employee.

5. Timing of Payments Following Termination.

5.2. To the extent compliance with the requirements of Treas. Reg. §1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Code on payments due to the Employee upon or following her separation from service, then notwithstanding any other provision of this Agreement (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following the Employee’s separation from service will be deferred (without interest) and paid to the Employee in a lump sum immediately following that six month period.

6.1. Confidentiality. The Employee recognizes and acknowledges that the Proprietary Information is a valuable, special and unique asset of the business of the Company. As a result, both during the Employee’s employment by the Company and thereafter, the Employee will not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for her own benefit, or for any purpose other than the exclusive benefit of the Company, any Proprietary Information, provided that the Employee may during her employment by the Company disclose Proprietary Information to third parties as may be necessary or appropriate to the effective and efficient discharge of her duties as an employee hereunder (provided that the third party recipient has signed the Company’s then-approved confidentiality or similar agreement) or as such disclosures may be required by law. If the Employee or any of her representatives becomes legally compelled to disclose any of the Proprietary Information, the Employee will provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. The non-disclosure

and non-use obligations with respect to Proprietary Information set forth in this Section 6.2 shall not apply to any information that is in or becomes part of the public domain through no improper act on the part of the Employee.

6.2. Property of the Company.

6.2.1. Proprietary Information. All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company. The Employee will not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless necessary or appropriate in the performance of her duties to the Company. If the Employee removes such materials or property in the performance of her duties, the Employee will return such materials or property to their proper files or places of safekeeping as promptly as possible after the removal has served its specific purpose. The Employee will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property or any other oral or written information to which she may have access or become familiar in the course of his or her employment, except to the extent necessary in the performance of her duties. Upon termination of the Employee’s employment with the Company, she will leave with the Company or promptly return to the Company all originals and copies of such materials or property then in her possession.

6.3. Acknowledgments. The Employee acknowledges that the Restrictive Covenants are reasonable and necessary to protect the legitimate interests of the Company and its affiliates and that the duration and geographic scope of the Restrictive Covenants are reasonable given the nature of this Agreement and the position the Employee holds within the Company. The Employee further acknowledges that the Restrictive Covenants are included herein in order to induce the Company to enter into this Agreement and that the Company would not have entered into this Agreement in the absence of the Restrictive Covenants.

6.4. Remedies and Enforcement Upon Breach.

6.4.1. Specific Enforcement. The Employee acknowledges that any breach by her, willfully or otherwise, of the Restrictive Covenants will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. The Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach by the Employee, the Company shall have the right to enforce the Restrictive Covenants by seeking injunctive or other relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company.

6.4.2. Judicial Modification. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration of such provision, such court shall have the power to modify such provision and, in its modified form, such provision shall then be enforceable.

6.4.3. Accounting. If the Employee breaches any of the Restrictive Covenants, the Company will have the right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Employee as the result of such breach. This right and remedy will be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity.

7. Miscellaneous.

7.1. No Liability of Officers and Directors for Severance Upon Insolvency. Notwithstanding any other provision of the Agreement and intending to be bound by this provision, the Employee hereby (a) waives any right to claim payment of amounts owed to her, now or in the future, pursuant to this Agreement from directors or officers of the Company if the Company becomes insolvent, and (b) fully and forever releases and discharges the Company’s officers and directors from any and all claims, demands, liens, actions, suits, causes of action or judgments arising out of any present or future claim for such amounts.

7.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws.

7.6. Notices. All notices and communications that are required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered

personally or upon mailing by registered or certified mail, postage prepaid, return receipt requested, as follows:

If to the Company, to:

Neose Technologies, Inc.
102 Rock Road
Horsham PA 19044
Attn: General Counsel
Fax: 215-315-9100

With a copy to:

Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Barry M. Abelson, Esquire
Fax: 215-981-4750

If to Employee, to:

Debra J. Poul
1320 Beaumont Drive
Gladwyne, PA 19035-1302

or to such other address as may be specified in a notice given by one party to the other party hereunder.

7.7. Entire Agreement; Amendments. This Agreement and the attached exhibit contain the entire agreement and understanding of the parties relating to the provision of severance benefits upon termination, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to that subject, including without limitation the Noncompetition and Confidentiality Agreement by and between the Employee and the Company dated September 26, 1996 and the letter dated August 23, 2005, and the Change of Control Agreement dated October 11, 2005 between the Employee and Company. This Agreement may not be changed or modified, except by an Agreement in writing signed by each of the parties hereto.

7.8. Withholding. The Company will withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law.

7.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.


		NEOSE TECHNOLOGIES, INC.

		By:		/s/ George J. Vergis, Ph.D.

				George J. Vergis, Ph.D.
				President and Chief Executive Officer

				/s/ Debra J. Poul

				Debra J. Poul

Exhibit A
Release and Non-Disparagement Agreement

THIS RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Release”) is made as of the ___ day of , ___by and between (the “Employee”) and NEOSE TECHNOLOGIES, INC. (the “Company”).

WHEREAS, the Employee’s employment as an executive of the Company has terminated; and

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

SECTION 8. Miscellaneous.

8.1. No Admission of Liability. This Release is not to be construed as an admission of any violation of any federal, state or local statute, ordinance or regulation or of any duty owed by

the Company to the Employee. There have been no such violations, and the Company specifically denies any such violations.

8.2. No Reinstatement. The Employee agrees that he or she will not apply for reinstatement with the Company or seek in any way to be reinstated, re-employed or hired by the Company in the future.

IN WITNESS WHEREOF, the Company has caused this Release to be executed by its duly authorized officer, and the Employee has executed this Release, in each case as of the date first above written.


		NEOSE TECHNOLOGIES, INC.

		By:
		Name & Title:


		EMPLOYEE

EX-31.1 5 w34357exv31w1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER exv31w1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, George J. Vergis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Neose Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared; and

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


5/4/07		/s/ George J. Vergis

Date		George J. Vergis
		Chief Executive Officer and President

EX-31.2 6 w34357exv31w2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER exv31w2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, A. Brian Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Neose Technologies, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


5/4/07		/s/ A. Brian Davis

Date		A. Brian Davis
		Senior Vice President and Chief Financial Officer

EX-32.1 7 w34357exv32w1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 exv32w1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Neose Technologies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George J. Vergis, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ George J. Vergis

George J. Vergis
Chief Executive Officer and President

Date: 5/4/07

EX-32.2 8 w34357exv32w2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 exv32w2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Neose Technologies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, A. Brian Davis, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ A. Brian Davis

A. Brian Davis
Senior Vice President and Chief Financial Officer

Date: 5/4/07

-----END PRIVACY-ENHANCED MESSAGE-----

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