<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 16, 1999
-----------------------
ILEX ONCOLOGY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-23413 94-3123681
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
11550 IH-10 West, Suite 100 San Antonio, Texas 78230
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 210-949-8200
------------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 1. Changes in Control of Registrant.
---------------------------------
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On July 16, 1999, the Company, its wholly owned subsidiary, ILEX
Products, Inc., a Delaware corporation ("Products"), and ILEX
Acquisition Inc., a Delaware corporation ("Purchaser"), and wholly
owned subsidiary of Products, entered into a Plan of Merger and
Acquisition Agreement (the Acquisition Agreement) with (i)
Convergence Pharmaceuticals, Inc., a Delaware corporation
("Convergence"), and (ii) Vikas Sukhatme, Raghuram Kalluri, Ralph
Weichselbaum, Donald Kufe, Glenn C. Rice and Tsuneya Ohno
(collectively, "the Shareholders"). Convergence, headquartered in
Boston, Massachusetts, was a privately held, research-based
pharmaceutical company with an emerging portfolio of angiogenisis
and DNA repair inhibitors. Under the terms of the Acquisition
Agreement, the Company acquired all of the issued and outstanding
shares of capital stock of Convergence ("Convergence Stock") in
exchange for 1,000,000 shares of common stock, $.01 par value, of
the Company ("ILEX Common Stock"). The Company also agreed to
issue up to an aggregate of 1,000,000 shares of ILEX Common Stock
to the holders of Convergence Stock upon achievement of certain
milestones. In addition, the Company issued options to purchase
50,000 shares of ILEX Common Stock to Glenn C. Rice and options to
purchase 25,000 shares of ILEX Common Stock to each of the other
Shareholders.
The acquisition was consummated on July 16, 1999, pursuant to the
terms of the Acquisition Agreement, upon (i) filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, pursuant to which Convergence merged with and into
Purchaser with Purchaser as the surviving corporation to such
merger and (ii) issuance by the Company of an aggregate of
1,000,000 shares of ILEX Common Stock to the shareholders of
Convergence. The amount paid by the Company for the Convergence
Stock was arrived at through negotiations between the Company, the
Shareholders and Convergence and was based on a variety of
factors, including, but not limited to, the prospect for
commercializing certain of the assets of Convergence and the
nature of the research-based pharmaceutical industry. The
acquisition will be accounted for using the purchase method of
accounting. The Company has granted certain registration rights
for the shares issued in connection with the acquisition. The
Company entered into an employment agreement with Glenn C. Rice
and consulting agreements with certain of the Shareholders in
connection with this acquisition. Following the acquisition, Glenn
C. Rice was elected as a director and a vice president of the
Company.
Item 3. Bankruptcy or Receivership.
---------------------------
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
----------------------------------------------
Not Applicable.
Item 5. Other Events.
-------------
On August 24, 1999, ILEX announced that L & I Partners, L.P., a
joint venture which ILEX has with LeukoSite, Inc., entered into an
agreement with Schering AG for the marketing and distribution of
CAMPATH(TM) in the United States, Europe and the rest of the world
except for most of East Asia (where LeukoSite and ILEX have
retained rights). The Agreement is attached hereto as Exhibit 99.1
and incorporated herein by reference. The foregoing description is
qualified by reference to such exhibit.
2
<PAGE> 3
Item 6. Resignations of Registrant's Directors.
---------------------------------------
Not Applicable.
Item 7. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements of Businesses Acquired.
--------------------------------------------
Convergence Pharmaceuticals, Inc.
--------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
1. Report of Independent Public Accountants 5
2. Balance Sheet As of December 31, 1998, and June 30, 1999 6
3. Statements of Operations for the Period From
Inception (August 4, 1998) to December 31, 1998,
for the Six Months Ended June 30, 1999, and
Cumulative for the Period From Inception to June
30, 1999 7
4. Statements of Stockholders' Equity for the Period From
Inception (August 4, 1998) to June 30, 1999 8
5. Statements of Cash Flows for the Period From Inception
(August 4, 1998) to June 30, 1999, and Cumulative for
the Period From Inception to June 30, 1999 9
6. Notes to Financial Statements 10
</TABLE>
(b) Pro Forma Financial Information.
--------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
1. Pro Forma Condensed Consolidated Financial Statements
Introduction 13
2. Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1999 14 - 15
3. Pro Forma Condensed Consolidated Statements of
Operations for the Year Ended December 31, 1998, and
the Six Months Ended June 30, 1999 16 - 17
4. Notes to Pro Forma Condensed Consolidated Financial
Statements 18
</TABLE>
3
<PAGE> 4
(c) Exhibit Index.
--------------
<TABLE>
<CAPTION>
Exhibit
Number Identification of Exhibit
------- -------------------------
<S> <C>
2.1 Plan of Merger and Acquisition
Agreement dated July 16, 1999, by and
among ILEX Oncology, Inc., ILEX
Acquisition Inc., Convergence
Pharmaceuticals, Inc., Vikas Sukhatme,
Raghuram Kalluri, Ralph Weichselbaum,
Donald Kufe, Glenn C. Rice and
Tsuneya Ohno (incorporated by
reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K
filed July 30, 1999)
10.1 Employment agreements dated July 16, 1999,
by and between ILEX Products, Inc., and
Glenn C. Rice (incorporated by reference
to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed July 30, 1999)
10.2 Registration Rights Agreement dated
July 16, 1999, among ILEX Oncology,
Inc., Vikas Sukhatme, Raghuram
Kalluri, Ralph Weichselbaum, Donald
Kufe, Glenn C. Rice, Tsuneya Ohno,
Stephan Dolezalek, Beth Israel
Deaconess Medical Center and Arch
Development Corporation (incorporated
by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K
filed July 30, 1999)
99.1* Distribution and Development
Agreement between L & I Partners,
L.P., and Schering AG, dated August
24, 1999 (filed herewith)
* Confidential treatment has been requested with
respect to certain portions of this document.
Such portions have been omitted and have been
filed separately with the Commission.
</TABLE>
Item 8. Change in Fiscal Year.
----------------------
Not applicable.
4
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Convergence Pharmaceuticals, Inc.:
We have audited the accompanying balance sheets of Convergence Pharmaceuticals,
Inc. (a Delaware corporation in the development stage), as of December 31, 1998,
and the related statements of operations, stockholders' equity and cash flows
for the period from inception (August 4, 1998) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Convergence Pharmaceuticals,
Inc., as of December 31, 1998, and the results of its operations and its cash
flows for the period from inception to December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
San Antonio, Texas
August 13, 1999
5
<PAGE> 6
CONVERGENCE PHARMACEUTICALS, INC.
---------------------------------
(A Development Stage Company)
-----------------------------
BALANCE SHEET AS OF DECEMBER 31, 1998 AND JUNE 30, 1999
-------------------------------------------------------
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ --------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 389
Prepaid expenses and other current assets -- 177
------- -------
Total current assets -- 566
------- -------
PROPERTY AND EQUIPMENT -- 387
Less- Accumulated depreciation -- (24)
------- -------
Total property and equipment -- 363
------- -------
Total assets $ -- $ 929
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ -- $ 99
Accrued liabilities 10 666
Current portion of convertible promissory note -- 1,000
------- -------
Total current liabilities 10 1,765
------- -------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, 200,000 shares authorized, no shares issued or
outstanding -- --
Common stock, $.001 par value; 10,000,000 shares authorized, no shares issued
or outstanding; 809,550 shares to be issued at par value 1 1
Additional paid-in capital (1) (1)
Deficit accumulated during the development stage (10) (836)
------- -------
Total stockholders' equity (10) (836)
------- -------
Total liabilities and stockholders' equity $ -- $ 929
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CONVERGENCE PHARMACEUTICALS, INC.
---------------------------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE PERIOD FROM INCEPTION (AUGUST 4, 1998)
----------------------------------------------
TO DECEMBER 31, 1998, FOR THE SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------
AND CUMULATIVE FOR THE PERIOD FROM INCEPTION TO JUNE 30, 1999
-------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
For the Cumulative
Period From For the Six for the Period
Inception Months From
(August 4, 1998) Ended Inception
to December 31, June 30, to June 30,
1998 1999 1999
---------------- ----------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUE $-- $-- $--
----- ----- -----
Total revenue -- -- --
----- ----- -----
OPERATING EXPENSES:
Research development -- 290 290
General and administrative 10 506 516
Direct cost of research services -- 17 17
----- ----- -----
Total operating expenses 10 813 823
----- ----- -----
OPERATING LOSS (10) (813) (823)
INTEREST EXPENSE, net -- 13 13
----- ----- -----
NET LOSS $ (10) $(826) $(836)
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
CONVERGENCE PHARMACEUTICALS, INC.
---------------------------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
FOR THE PERIOD FROM INCEPTION (AUGUST 4, 1998) TO JUNE 30, 1999
---------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
Common Stock Deficit
---------------------- Accumulated Total
Issued and Additional During the Stockholders'
Outstanding $.001 Par Paid-In Development Equity
Shares Value Capital Stage (Deficit)
----------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, inception (August 4, 1998) -- $-- $-- $-- $--
STOCK SUBSCRIBED TO FOUNDERS -- 1 (1) -- --
NET LOSS -- -- -- (10) (10)
---- ----- ----- ----- -----
BALANCE, December 31, 1998 -- 1 (1) (10) (10)
NET LOSS FOR THE PERIOD ENDED JUNE 30, 1999 (Unaudited) -- -- -- (826) (826)
---- ----- ----- ----- -----
BALANCE, June 30, 1999 (Unaudited) -- $ 1 $ (1) $(836) $(836)
==== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
CONVERGENCE PHARMACEUTICALS, INC.
---------------------------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE PERIOD FROM INCEPTION (AUGUST 4, 1998)
----------------------------------------------
TO JUNE 30, 1999, AND CUMULATIVE FOR THE PERIOD
-----------------------------------------------
FROM INCEPTION TO JUNE 30, 1999
-------------------------------
(In Thousands)
<TABLE>
<CAPTION>
Cumulative
For the Six for the
For the Months Period From
Year Ended Ended Inception to
December 31, June 30, June 30,
1998 1999 1999
------------ ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (10) $ (826) $ (836)
Adjustments to reconcile net loss to net cash used in operating
activities-
Depreciation and amortization -- 23 23
Increase in-
Prepaid and other assets -- (177) (177)
Accounts payable -- 99 99
Accrued liabilities 10 350 360
------- ------- -------
Net cash used in operating activities -- (531) (531)
------- ------- -------
INVESTING ACTIVITIES:
Purchase of Nissin -- (80) (80)
------- ------- -------
Net cash used in investing activities -- (80) (80)
------- ------- -------
FINANCING ACTIVITIES:
Borrowings of debt -- 1,000 1,000
------- ------- -------
Net cash provided by financing activities -- 1,000 1,000
------- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS -- 389 389
CASH AND CASH EQUIVALENTS, beginning of period -- -- --
------- ------- -------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 389 $ 389
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Net assets acquired in connection with acquisition $ -- $ 80 $ 80
======= ======= =======
Common stock issued at inception $ 1 $ -- $ 1
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
CONVERGENCE PHARMACEUTICALS, INC.
---------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1998
-----------------
(All Amounts In Thousands, Except Share Amounts)
1. ORGANIZATION AND DESCRIPTION
OF THE COMPANY:
----------------------------
The Company was incorporated on August 4, 1998, as Convergence Pharmaceuticals,
Inc. (Convergence or the Company). From inception through June 1999, the
Company's operations were nominal. On April 1, 1999, Convergence paid $80 for
all the outstanding stock of Nissin Molecular Biological Institute (Nissin).
This business combination was accounted for as a purchase (see Note 7).
Convergence is a biopharmaceutical company focused on the treatment of
oncongenic disease through the development of novel therapeutics. Convergence is
in the business of obtaining, developing and marketing certain intellectual
property in the areas of angiogenesis, cancer drug and radiation sensitizers and
chemotherapeutic agents. Convergence's product candidate portfolio includes six
proprietary antiangiogenic proteins and certain Collagen XVIII derivatives which
have shown significant antitumor activity in preclinical cancer models.
Additionally, Convergence has a license for an orally active small molecule
antiangiogenic drug and licensed technologies involving certain DNA repair
targets and lead molecule candidates.
Convergence is in the development stage and has not yet generated significant
operating revenues nor is there any assurance of future revenues. Convergence
continues to be subject to the risks and challenges associated with other
companies in a comparable stage of development including the ability to obtain
adequate financing to fund operations and development, dependence on key
individuals and entities, competition from larger companies and successful
development and marketing of its products. Accordingly, the Company's long-term
future success is uncertain. ILEX Oncology, Inc. (ILEX), the parent of
Convergence as of July 16, 1999 (see Note 8), has committed to providing
necessary financing to Convergence through January 1, 2000, to enable it to
sustain its planned activities.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
----------------------
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with maturities of 90 days
or less to be cash equivalents.
Fixed Assets and Depreciation
- -----------------------------
Fixed assets are recorded at cost less accumulated depreciation. Depreciation is
provided utilizing the straight-line method over the estimated useful life of
the asset. Additions and improvements that extend the useful life of the asset
are capitalized. Upon sales or retirement of property and equipment, the related
cost and accumulated depreciation are eliminated from the accounts and the
resulting gain or loss is recorded.
10
<PAGE> 11
Income Taxes
- ------------
The Company has incurred losses since inception for both book and tax purposes.
Accordingly, no income taxes have been provided for in the financial statements
for the period from inception (August 4, 1998) to December 31, 1998, for the six
months ended June 30, 1999, and cumulative for the period from inception to June
30, 1999. Additionally, a valuation allowance has been recorded to offset
deferred tax assets, which represent tax benefits, primarily certain future net
operating loss carryforwards, which were not realizable at December 31, 1998,
and June 30, 1999.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
3. COMMITMENTS AND CONTINGENCIES:
------------------------------
In January 1999, Convergence entered into consulting arrangements with its four
founders to assist in marketing and raising capital on behalf of Convergence
during the development stage of the Company. This contract was terminated upon
the purchase of Convergence by ILEX (see Note 8).
Convergence leases its office space and research facilities. The lease expires
in July 1999, with a renewal option for two additional years ending in 2001.
Subsequent to June 1999, Convergence exercised the option for the full two
years. The fixed minimum rental commitment for the lease until July 2001, not
including real estate taxes and other maintenance costs relating to the lease
which are to be paid by the Company, is approximately $360.
4. LONG-TERM LIABILITIES:
----------------------
In February 1999, Convergence issued a $1,000 convertible promissory note
bearing interest at 5.51 percent. As of June 1999, Convergence had made no
principal or interest payments. Subsequent to the purchase of Convergence by
ILEX, the note was called and ILEX paid the principal sum of this note together
with the accrued interest.
5. STOCKHOLDERS' EQUITY:
---------------------
During the fourth quarter of 1998, the founders of Convergence committed to
purchase 809,550 shares of Convergence stock at par value. As of June 30, 1999,
the subscriptions receivable had not been funded and therefore the shares not
issued. Subsequent to this date the subscription receivables were funded by the
founders.
6. RELATED PARTY:
--------------
Convergence paid approximately $190 to the founders through June 30, 1999, for
scientific consulting services. The Company believes that such consulting costs
represent arm's-length charges for the services provided.
7. ACQUISITION OF NISSIN:
----------------------
In April 1999, Convergence acquired all of the outstanding stock of Nissin for
cash consideration of $80. Convergence accounted for this business combination
as a purchase.
11
<PAGE> 12
The following unaudited pro forma consolidated results of operations for the six
months ended June 30, 1999, reflect the acquisition as if it had occurred on
January 1, 1999.
Revenue $ -
Net loss (1,279)
8. MERGER AND ACQUISITION:
-----------------------
On July 16, 1999, ILEX and Convergence entered into a Plan of Merger and
Acquisition Agreement (the Agreement) whereby Convergence was merged with and
into ILEX, with ILEX as the surviving corporation. ILEX accounted for this
business combination as a purchase. ILEX issued 1,000,000 shares of ILEX common
stock to the selling stockholders of Convergence, 40,000 of which were pledged
by the selling stockholders to secure indemnification obligations. Additionally,
ILEX assumed $1,000 of debt and $25 in accrued interest (see Note 4).
As additional consideration, 1,000,000 shares will be paid out in two equal
increments of 500,000 shares if two milestones are achieved. The first milestone
is defined as the initiation of treatment of the first patient following
initiation of a Phase I trial in the United States or Europe, which must occur
no later than December 31, 2001. The second milestone is defined as the
initiation of treatment of the first patient following initiation of a Phase II
trial in the United States or Europe, which must occur no later than December
31, 2002.
Concurrently with the Agreement, ILEX terminated the prior consulting agreements
with the four founders, agreed to pay the founders $50 each and entered into
four new agreements with the founders that included annual compensation for each
individual of $50 per year over a five-year period. The annual compensation per
founder for years two through five will be increased to the amounts below upon
the achievement of the first milestone, as previously defined, as follows:
Year Annual Compensation
---- -------------------
2 $ 75
3 100
4 125
5 125
Additionally, ILEX granted to the selling stockholders the option to purchase a
cumulative of 100,000 shares of ILEX's common stock at an option price of $9.94.
The option vests at the rate of 25 percent per year beginning in July 2000 and
is immediately exercisable upon the occurrence of a change in control of ILEX,
as defined in the option agreement.
12
<PAGE> 13
ILEX ONCOLOGY, INC.
-------------------
PRO FORMA CONDENSED CONSOLIDATED
--------------------------------
FINANCIAL STATEMENTS
--------------------
DECEMBER 31, 1998
-----------------
(Unaudited)
-----------
INTRODUCTION
- ------------
The following unaudited pro forma condensed consolidated financial statements
include the accounts of ILEX Oncology, Inc. (the Company, a Delaware
corporation), and Convergence Pharmaceuticals, Inc. (Convergence, a Delaware
corporation). All significant intercompany accounts and transactions have been
eliminated in consolidation. The pro forma condensed consolidated financial
statements of the Company have been adjusted to reflect the effects of the
Company's acquisition of Convergence. Under the terms of the Plan of Merger and
Acquisition Agreement (Agreement) by and between the Company and Convergence,
Convergence was acquired (Acquisition) through the issuance of one million
shares of the Company common stock valued at approximately $9.9 million. The
Acquisition was recorded using the purchase method of accounting.
The ILEX and Convergence columns in the following pro forma condensed
consolidated financial statements reflect the preacquisition historical
financial statements. The unaudited pro forma condensed consolidated balance
sheet assumes the Acquisition occurred on June 30, 1999. The unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1998, assumes the Acquisition occurred on August 4, 1998, the date of inception
of Convergence. The unaudited pro forma condensed consolidated statement of
operations for the six months ended June 30, 1999, assumes the Acquisition
occurred on January 1, 1999. In the opinion of management of the Company, all
adjustments necessary to present fairly the unaudited pro forma condensed
consolidated financial statements have been made.
These unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the Company's historical financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
13
<PAGE> 14
ILEX ONCOLOGY, INC.
-------------------
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
----------------------------------------------
JUNE 30, 1999
-------------
(Unaudited)
-----------
(In Thousands)
<TABLE>
<CAPTION>
June 30, 1999
--------------------------
ILEX Convergence Final
Oncology, Pharmaceuticals, Pro Forma Consolidated,
ASSETS Inc. Inc. Adjustments June 30, 1999
------ --------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,243 $ 389 $ (1,025)(f) $ 4,607
Investment in marketable securities 9,702 -- -- 9,702
Receivables, net of-
Billed 3,209 -- -- 3,209
Unbilled 2,591 -- -- 2,591
Prepaid expenses and other current assets 664 177 -- 841
-------- -------- -------- --------
Total current assets 21,409 566 (1,025) 20,950
-------- -------- -------- --------
NONCURRENT ASSETS:
Investment in marketable securities 275 -- -- 275
Investments in and advances to-
Research and development partnerships 1,379 -- -- 1,379
-------- -------- -------- --------
Total noncurrent assets 1,654 -- -- 1,654
-------- -------- -------- --------
PROPERTY AND EQUIPMENT 6,285 387 -- 6,672
Less- Accumulated depreciation (2,337) (24) 24 (d) (2,337)
-------- -------- -------- --------
3,948 363 24 4,335
-------- -------- -------- --------
Total assets $ 27,011 $ 929 $ (1,001) $ 26,939
======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
14
<PAGE> 15
ILEX ONCOLOGY, INC.
-------------------
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
----------------------------------------------
JUNE 30, 1999
-------------
(Unaudited)
-----------
(In Thousands)
<TABLE>
<CAPTION>
June 30, 1999
--------------------------
ILEX Convergence Final
LIABILITIES AND Oncology, Pharmaceuticals, Pro Forma Consolidated,
STOCKHOLDERS' EQUITY Inc. Inc. Adjustments June 30, 1999
-------------------- -------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable-
Related parties $ 58 $ -- $ -- $ 58
Other 859 99 -- 958
Accrued subcontractor costs-
Related parties 549 -- -- 549
Other 2,066 -- -- 2,066
Accrued liabilities 2,033 666 (25)(f) 2,674
Deferred revenue 3,110 -- -- 3,110
Current portion of convertible promissory
note -- 1,000 (1,000)(f) --
-------- -------- -------- --------
Total current liabilities 8,675 1,765 (1,025) 9,415
-------- -------- -------- --------
OTHER LONG-TERM LIABILITIES 491 -- -- 491
-------- -------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock -- -- -- --
Common stock 136 1 10 (a) 146
(1)(g)
Additional paid-in capital 76,598 (1) 9,930 (a) 87,182
1 (g)
630 (e)
24 (d)
Deferred compensation -- -- (630)(e) (630)
Accumulated deficit (58,372) (836) (10,776)(h) (69,148)
836 (g)
Less- Treasury stock, at cost (517) -- -- (517)
-------- -------- -------- --------
Total stockholders' equity 17,845 (836) 24 17,033
-------- -------- -------- --------
Total liabilities and stockholders' equity $ 27,011 $ 929 $ (1,001) $ 26,939
======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
15
<PAGE> 16
ILEX ONCOLOGY, INC.
-------------------
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------
(Unaudited)
-----------
(In Thousands)
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31, Final
1998, 1998, Consolidated,
ILEX Convergence Year Ended
Oncology, Pharmaceuticals, Pro Forma December 31,
Inc. Inc. Adjustments 1998
----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUE:
Product development $ 4,622 $ -- $ -- $ 4,622
Contract research services 9,650 -- -- 9,650
-------- -------- -------- --------
Total revenue 14,272 -- -- 14,272
-------- -------- -------- --------
OPERATING EXPENSES:
Research development 15,509 -- -- 15,509
General and administrative 6,534 10 83 (b) 6,776
83 (c)
66 (e)
Direct cost of research services 9,313 -- -- 9,313
-------- -------- -------- --------
Total operating expenses 31,356 10 232 31,598
-------- -------- -------- --------
OPERATING LOSS (17,084) (10) (232) (17,326)
OTHER INCOME (EXPENSE), net:
Equity in losses of-
Research and development partnerships (4,453) -- -- (4,453)
Contract research affiliate (1,541) -- -- (1,541)
Interest income, net 1,850 -- -- 1,850
-------- -------- -------- --------
NET LOSS $(21,228) $ (10) $ (232) $(21,470)
======== ======== ======== ========
NET LOSS PER SHARE $ (1.71) $ (1.67)
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING 12,450 417 (a) 12,867
======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
16
<PAGE> 17
ILEX ONCOLOGY, INC.
-------------------
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------
(Unaudited)
-----------
(In Thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30, 1999
------------------------------ Final
ILEX Convergence Consolidated,
Oncology, Pharmaceuticals, Pro Forma Six Months Ended
Inc. Inc. Adjustments June 30, 1999
--------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
REVENUE:
Product development $ 2,069 $ - $ - $ 2,069
Contract research services 5,567 - - 5,567
--------- ----------- --------- ---------
Total revenue 7,636 - - 7,636
--------- ----------- --------- ---------
OPERATING EXPENSES:
Research and development costs 7,496 290 - 7,786
General and administrative 2,514 506 100 (b) 3,212
13 (c)
79 (e)
Direct cost of research services 6,175 17 - 6,192
Special charges 13,883 - - 13,883
--------- ----------- --------- ---------
Total operating expenses 30,068 813 192 31,073
--------- ----------- --------- ---------
OPERATING LOSS (22,432) (813) (192) (23,437)
OTHER INCOME (EXPENSE), net:
Equity in losses of-
Research and development partnerships (1,888) - - (1,888)
Contract research affiliate (3,310) - - (3,310)
Interest income (expense), net 540 (13) 25 (f) 552
Gain (loss) on sale of securities 1 - - 1
--------- ----------- --------- ---------
NET LOSS $ (27,089) $ (826) $ (167) $ (28,082)
========= =========== ========= =========
NET LOSS PER SHARE $ (2.11) $ (2.03)
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING 12,829 1,000 (a) 13,829
========= ========= =========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
17
<PAGE> 18
ILEX ONCOLOGY, INC.
-------------------
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
DECEMBER 31, 1998
-----------------
(Unaudited)
-----------
(In Thousands, Except Share Amounts)
PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AND STATEMENTS OF
OPERATIONS ADJUSTMENTS:
- --------------------------------
(a) Represents fair value of 1,000,000 ILEX common shares, $.01 par value,
given as consideration in the acquisition. For the year ended December
31, 1998, the weighted average number of shares of common stock are
reflected from the period of inception (August 4, 1998) of Convergence
to year-end.
(b) Reflects pro rata consideration given to Convergence founders in
relation to revised consulting agreements as part of the Acquisition.
For the year ended December 31, 1998, these amounts are reflected from
the period of inception (August 4, 1998) of Convergence to year-end.
(c) Reflects additional compensation paid to an officer of Convergence as
part of the Agreement. For the year ended December 31, 1998, these
amounts are reflected from the period of inception (August 4, 1998) of
Convergence to year-end.
(d) Reflects the elimination of accumulated depreciation recorded by
Convergence.
(e) Six hundred thirty thousand dollars represents the estimated fair value
of 100,000 options issued pursuant to consulting agreements entered
into with the former owners of Convergence. The fair value of the
options was calculated by using an option pricing model which
approximates the Black-Scholes option pricing model. Assumptions used
included a market price per share of $9.94, an exercise price of $9.94
per share, an expected term of 10 years, anticipated volatility of
approximately 40 percent, anticipated annual rate of quarterly
dividends of $0 and a risk free rate of return of approximately 6.5
percent. At December 31, 1998, and June 30, 1999, pro forma
amortization expense of this fair value is $66 and $79, respectively.
(f) Reflects repayment of $1.0 million convertible promissory note called
by the noteholder at the date of acquisition, including accrued
interest of $25.
(g) Reflects elimination of Convergence's equity accounts.
(h) Reflects in process research and development costs that were charged
off at the date of acquisition. These nonrecurring charges which
resulted directly from the acquisition are not included in the pro
forma condensed consolidated statement of operations.
18
<PAGE> 19
SIGNATURE
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.
ILEX ONCOLOGY, INC.
By /s/ Michael T. Dwyer
-----------------------------------
Michael T. Dwyer
Vice President and Chief Financial
Officer (Chief Financial and
Accounting Officer)
DATE: September 21, 1999
19
<PAGE> 1
CONFIDENTIAL TREATMENT
EXHIBIT 99.1
TO FORM 8-K FOR
ILEX ONCOLOGY, INC.
DISTRIBUTION AND DEVELOPMENT AGREEMENT
This Distribution and Development Agreement ("AGREEMENT") is entered
into as of August 24, 1999 (the "Effective Date") by and between L&I Partners,
L.P., a Delaware partnership, having its principal place of business at 11550
1H-10 West, Suite 100, San Antonio, Texas 78230 ("L&I") and with Schering AG a
German corporation, having a principal place of business at 13342 Berlin,
Germany (hereinafter "DISTRIBUTOR").
WITNESSETH
WHEREAS, the parties hereto desire that DISTRIBUTOR engage in the
distribution in the TERRITORY (as hereinafter defined) of the PRODUCT (as
hereinafter defined); and
WHEREAS, L&I and DISTRIBUTOR desire to set forth in this AGREEMENT the
terms and conditions of such distribution.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" shall mean with respect to a PARTY any corporation or
other business entity that directly or indirectly controls, is
controlled by, or is under common control with such PARTY. Control
means ownership or other beneficial interest in fifty percent (50%) or
more of the voting stock or other voting interest of a corporation or
other business entity, or the power to direct or cause the direction
of the management or policies of an entity. LEUKOSITE and ILEX are
AFFILIATES of L&I as is any corporation or business entity that
directly or indirectly controls, is controlled by, or is under common
control with LEUKOSITE or ILEX.
1.2 "AGENCY" shall mean any governmental or regulatory authority in the
TERRITORY responsible for granting approvals or registrations for
marketing of PRODUCT in the TERRITORY.
1.3 "APLS" shall mean the Advertising and Promotional Labeling Staff (or
successor unit) of the FDA's Center for Biologics Evaluation and
Research.
<PAGE> 2
1.4 "APPROPRIATE PERCENTAGE" for PRODUCT for each INDICATION means:
(i) ****** of positive EARNINGS. (1)
(ii) ****** of negative EARNINGS.
1.5 "BERLEX" means DISTRIBUTOR'S US AFFILIATE, Berlex Laboratories, Inc.
1.6 "BI" shall mean Boehringer Ingelheim Pharma KG.
1.7 "BI AGREEMENT" shall mean the Supply Agreement between L&I and BI
dated June 4th, 1999 with respect to CAMPATH 1H and any amendments
thereto.
1.8 "BLA" means a Biologics License Application from the Food and Drug
Administration.
1.9 "BTG" means British Technology Group Limited.
1.10 "BTG AGREEMENT" means the March 31, 1997 agreement between BTG and
LEUKOSITE with respect to Campath I-H and any amendments thereto
including but not limited to the Deed of Variation of Appendix I.
1.11 "BTG CONSENT LETTER" means the letter from BTG to DISTRIBUTOR dated as
of the Effective Date in the form set out in Appendix H to this
AGREEMENT.
1.12 "BTG DEED OF VARIATION" means the Deed of Variation to the BTG
Agreement made between LEUKOSITE and BTG and dated as of the Effective
Date in the form set out in Appendix I to this AGREEMENT.
1.13 "BTG ROYALTIES" shall mean the royalties payable by L&I and/or
LEUKOSITE to British Technology Group Limited pursuant to Section 6 of
the BTG AGREEMENT in respect of PRODUCT sold or otherwise disposed of
by DISTRIBUTOR, its AFFILIATES or their SUBDISTRIBUTORS in the
TERRITORY.
1.14 "CALENDAR QUARTER" shall mean the period of three consecutive calendar
months ending on March 31, June 30, September 30 or December 31, as
the case may be.
1.15 "CLINICAL TRIAL" shall mean CAM 211 pivotal study being presently
conducted by L&I.
1.16 "CLL INDICATION" means the treatment of chronic lymphocytic leukemia
in humans.
1.17 "COST OF GOODS" shall mean the aggregate of the following, determined
in a reasonable manner in accordance with GAAP (i) the amount(s) paid
by L&I to a THIRD
- ----------------------
(1) "Confidential treatment requested: material has been omitted and
filed separately with the Commission".
2
<PAGE> 3
PARTY(IES) or to the DISTRIBUTOR, if applicable, for (a) manufacture
of FINAL FORM PRODUCT or FILLED PRODUCT, as applicable; (b)
transportation, storage and insurance for delivery to DISTRIBUTOR of
FINAL FORM PRODUCT or, if applicable, FILLED PRODUCT ; and (c)
performance of manufacturing and quality assurance activities (if any)
in relation to the PRODUCT; and (ii) any direct expenses incurred by
L&I associated with L&I's manufacturing and quality assurance
activities (if any) in relation to the PRODUCT.
1.18 "DEVELOPMENT COMMITTEE" shall mean the Committee of Section 10.
1.19 "DEVELOPMENT EXPENSES" means the aggregate amount of expenses incurred
for developing and obtaining regulatory approval of PRODUCT for an
INDICATION in accordance with a DEVELOPMENT PLAN or PRELIMINARY WORK
PLAN, as the case may be, determined in a reasonable manner in
accordance with GAAP, including but not limited to: (i) direct labor
(salaries, wages and employee benefits but excluding any employee
benefits associated with equity incentive plans); (ii) materials and
supplies; (iii) allocated maintenance and depreciation costs for
building space directly dedicated to the development of the PRODUCT
but excluding costs and charges relating to unused capacity,
development of other products, and amortization of property, plant and
equipment not directly related to development of PRODUCT for an
INDICATION in accordance with a DEVELOPMENT PLAN or PRELIMINARY WORK
PLAN; and (iv) payments made to THIRD PARTIES for services in
connection with such development which are supported by invoices
describing the work performed; and (v) insurance, telephone expenses,
training, software amortization costs, travel and supplies. Such costs
shall not include general overhead costs occurring from units that are
not directly engaged in the development of the PRODUCT for an
INDICATION in accordance with a DEVELOPMENT PLAN or PRELIMINARY WORK
PLAN. If DEVELOPMENT EXPENSES are incurred by an AFFILIATE, they shall
be determined and charged as set forth in this Section 1.19.
1.20 "DEVELOPMENT PLAN" means a plan for developing PRODUCT in the
TERRITORY for an OTHER INDICATION that has been approved by the
DEVELOPMENT COMMITTEE and that includes a budget, design of clinical
studies and timelines.
1.21 "DISTRIBUTOR BTG LETTER" means the letter from DISTRIBUTOR to BTG
dated as of the Effective Date in the form set out in Appendix A to
this AGREEMENT.
1.22 "EARNINGS" means the positive or negative amount that is calculated
for PRODUCT for each INDICATION in the PROFIT SHARING TERRITORY, in
accordance with GAAP, by deducting from NET SALES (if any) thereof the
following:
(i) COST OF GOODS for FINAL FORM PRODUCT that is sold in the
PROFIT SHARING TERRITORY, charged on a first-in first-out basis,
(ii) SELLING EXPENSES for PRODUCT in the PROFIT SHARING
TERRITORY,
3
<PAGE> 4
(iii) MARKETING EXPENSES for PRODUCT in the PROFIT SHARING
TERRITORY, provided, however, that MARKETING EXPENSES for a PRODUCT
for an INDICATION in a YEAR are only deductible against EARNINGS up to
the amount agreed to by DISTRIBUTOR and L&I pursuant to Section
3.1(c),
(iv) distribution expenses for PRODUCT in the PROFIT SHARING
TERRITORY (including monies paid to THIRD PARTIES),
(v) REIMBURSABLE MARKETING EXPENSES for PRODUCT in the PROFIT
SHARING TERRITORY,
(vi) THIRD PARTY ROYALTIES for PRODUCT in the PROFIT SHARING
TERRITORY,
(vii) cost of out-of-date, spoiled, lost or destroyed FINAL
FORM PRODUCT for the PROFIT SHARING TERRITORY.
(viii) RECALL EXPENSE for PRODUCT in the PROFIT SHARING
TERRITORY,
(ix) insurance premiums payable for PRODUCT for the PROFIT
SHARING TERRITORY, including product liability insurance but excluding
product liability expenses, such as the cost of defense, settlement
and damage awards.
(x) amounts paid for co-promotion under Section 3.9.
1.23 "EMEA" shall mean the European Medicines Evaluation Agency.
1.24 "FILLED PRODUCT" means PRODUCT manufactured in accordance with the
SPECIFICATIONS that is filled but not packaged and labeled.
1.25 "FINAL FORM PRODUCT" shall mean PRODUCT in accordance with the
SPECIFICATIONS that is fully formulated, in final form packaged and
labeled for ultimate consumer use.
1.26 "FIRM ORDER" means an order for PRODUCT placed with L&I that cannot be
reduced.
1.27 "FIRST COMMERCIAL SALE" of PRODUCT shall mean the first sale for use
or consumption by the general public of such PRODUCT in the United
States after AGENCY approval of the PRODUCT has been granted.
1.28 "GAAP" shall mean United States Generally Accepted Accounting
Principles.
1.29 "ILEX" means ILEX Oncology, Inc., a Delaware corporation.
1.30 "INDICATION(S)" means the CLL INDICATION and OTHER INDICATIONS.
1.31 "LEUKOSITE" means LeukoSite, Inc., a Delaware corporation.
1.32 "MAJOR COUNTRIES" means Germany, France, Italy, Spain and United
Kingdom.
1.33 "MARKETING COMMITTEE" shall mean the MARKETING COMMITTEE of Section
3.1(a).
4
<PAGE> 5
1.34 "MARKETING EXPENSES" shall mean all costs and expenses incurred by the
AFFILIATE of DISTRIBUTOR that distributes in the PROFIT SHARING
TERRITORY for marketing associated with launch, advertising and sales
promotion (including, without limitation, expenses of patient programs
such as those involving compassionate use, indigents, uninsured and
underinsured, training, disease information and management, and
compliance; expenses related to promotional publications, space or
time in various media, direct mail campaigns, samples, advertising
agency fees and other promotional activities); phase IV studies
(whether or not required by a regulatory agency). Such expenses
include allocated maintenance and depreciation costs for building
space directly dedicated to the marketing of a PRODUCT, but exclude
costs and charges relating to unused capacity, marketing of other
products, and amortization of property, plant and equipment not
directly related to marketing of a PRODUCT, in each case determined in
accordance with GAAP. MARKETING EXPENSE does not include SELLING
EXPENSES. In each YEAR, MARKETING EXPENSES deductible against EARNINGS
shall not exceed the amount in the MARKETING PLAN.
1.35 "MARKETING PLAN" means the MARKETING PLAN of Section 3.1.
1.36 "MSL" means medical science liaison staff members who contact key
thought leaders in oncology to initiate or conduct medical and
scientific dialog with respect to PRODUCT.
1.37 "NET SALES" shall mean with respect to PRODUCT that sum determined by
deducting from the gross amount invoiced by DISTRIBUTOR or its
AFFILIATES or any of their SUBDISTRIBUTORs for PRODUCT sold for use in
the TERRITORY in an arms length transaction to customers who are not
AFFILIATES of DISTRIBUTOR or their SUBDISTRIBUTORs: (i) transportation
charges and insurance charges relating thereto; (ii) trade, quantity
or cash discounts, to the extent allowed; (iii) rebates, chargebacks,
credits or allowances, if any, given or made on account of price
adjustments, or returns, to the extent made; (iv) any and all Federal,
state or local government rebates, whether in existence now, or
enacted at any time during the term of this AGREEMENT, to the extent
made; (v) any tax (not including income taxes or similar taxes),
customs duty, excise or other governmental charge upon or measured by
the production, sale, transportation, delivery or use of the PRODUCT;
and (vi) reasonable allowance for bad debts not to exceed one percent
of gross amount invoiced; in each case determined in accordance with
DISTRIBUTOR'S normal internal accounting practices and GAAP (or, in
the case of DISTRIBUTOR'S non-United States business, International
Accounting Standards.)
For the purpose of calculating NET SALES, the PARTIES recognize that
(a) a DISTRIBUTOR'S customers may include entities in the chain of
commerce who enter into agreements with DISTRIBUTOR as to price even
though title to the PRODUCT does not pass directly from DISTRIBUTOR to
such customers, and even though payment for such PRODUCT is not made
by such customers directly to DISTRIBUTOR; and (b) in such cases
chargebacks paid by DISTRIBUTOR to or through a THIRD PARTY (such as a
wholesaler) can be deducted by a DISTRIBUTOR from gross revenue in
order to
5
<PAGE> 6
calculate a DISTRIBUTOR'S Net Sales. Any deductions listed above which
involve a payment by a DISTRIBUTOR shall be taken as a deduction
against aggregate sales for the period in which the payment is made or
deduction is taken.
In the event that DISTRIBUTOR or its AFFILIATES sells through or to a
SUBDISTRIBUTOR, or DISTRIBUTOR sells through an AFFILIATE, then NET
SALES shall be calculated based on the amount invoiced by DISTRIBUTOR
or its AFFILIATES or their SUBDISTRIBUTOR to an entity that is not an
AFFILIATE or SUBDISTRIBUTOR.
1.38 "OPT OUT OPTION" shall have the meaning set forth in Section 12.1
(c)(ii).
1.39 "OTHER CANCER INDICATION(S)" means the treatment of cancer, other than
a CLL INDICATION, in humans. For the avoidance of doubt, it is agreed
that transplantation procedures in humans for the treatment of cancer
constitutes an OTHER CANCER INDICATION.
1.40 "OTHER INDICATIONS" means OTHER CANCER INDICATIONS and OTHER
NON-CANCER INDICATIONS.
1.41 "OTHER NON-CANCER INDICATION(S)" means one or more of the following
indications: the treatment of rheumatoid arthritis in humans; the
treatment of multiple sclerosis in humans; therapeutic indications in
human transplantation (other than for treatment of cancer); and any
other indications as to which L&I obtains rights under the BTG
AGREEMENT, in each case other than the CLL INDICATION or OTHER CANCER
INDICATIONS.
1.42 "OTHER TERRITORY" shall mean all countries of the TERRITORY other than
the PROFIT-SHARING TERRITORY.
1.43 "PARTY(IES)" shall mean DISTRIBUTOR and/or L&I, as the case may be.
1.44 "PAYMENT AMOUNT" means for PRODUCT for an OTHER NON-CANCER INDICATION
******(2) percent of the aggregate of (i) total sales for all PRODUCT
for such INDICATION in the YEAR that has the highest total sales
therefor in the United States in any YEAR of the first five YEARS
after initial launch of a PRODUCT for such INDICATION in the United
States and (ii) total sales for all PRODUCT for such INDICATION in the
YEAR that has the highest total aggregate sales therefor in countries
of the TERRITORY other than the United States in any YEAR of the first
five YEARS after initial launch of a PRODUCT for such INDICATION in
Europe.
- -------------------
(2) "Confidential treatment requested: material has been omitted and
filed separately with the Commission".
6
<PAGE> 7
1.45 "PRELIMINARY DEVELOPMENT PLAN" means a compilation of information
and/or data of the type that is sufficient to conduct a pre-IND
meeting with the FDA for PRODUCT for an OTHER NON-CANCER INDICATION.
1.46 "PRELIMINARY WORK PLAN" means a plan for performing non-clinical or
exploratory clinical research, including a budget, with respect to
PRODUCT for an OTHER NON-CANCER INDICATION.
1.47 "PRIME" means "prime rate" as publicly announced by the Bank of
America National Trust and Savings Association in San Francisco as its
prime rate as set forth on the REUTERS screen (USPRIME1). Interest
shall be calculated on the actual number of days elapsed over a 365
-day year.
1.48 "PRODUCT" shall mean the humanized antibody directed against CD-52
known as Campath 1H and any product containing such antibody as an
active ingredient.
1.49 "PROFIT SHARING TERRITORY" means the United States of America.
1.50 "RECALL EXPENSE" shall mean the cost and expense for recall or market
withdrawal of PRODUCT in the PROFIT SHARING TERRITORY required or
requested by a governmental authority having jurisdiction thereover or
as a result of a decision of the MARKETING COMMITTEE, including, but
not limited to, expenses incurred for replacement of PRODUCT, all in
accordance with GAAP.
1.51 "REIMBURSABLE MARKETING EXPENSES" shall mean the MARKETING EXPENSES
incurred in the PROFIT-SHARING TERRITORY with respect to PRODUCT for
an INDICATION prior to launch thereof incurred by the AFFILIATE of
DISTRIBUTOR that is distributing PRODUCT in the PROFIT-SHARING
TERRITORY, with one-eighth (1/8) of the aggregate thereof being
charged against EARNINGS for the PRODUCT for the CLL INDICATION in
each of the eight CALENDAR QUARTERS after launch thereof. The
REIMBURSABLE MARKETING EXPENSES for the CLL INDICATION shall not
exceed ****** ******(3). For OTHER INDICATIONS, the maximum amount
shall be determined by the MARKETING COMMITTEE.
1.52 "SELLING EXPENSES" means the aggregate amount of all direct
incremental expenses incurred for the sales force and sales force
management by the AFFILIATE of DISTRIBUTOR that is distributing
PRODUCT in the PROFIT-SHARING TERRITORY, all in accordance with GAAP
and all only as they relate to sale of PRODUCT for an INDICATION in
the PROFIT-SHARING TERRITORY, including but not limited to salaries,
commissions, sales incentive payments, sales training
- -------------------
(3) "Confidential treatment requested: material has been omitted and
filed separately with the Commission".
7
<PAGE> 8
expenses, and travel expenses. The SELLING EXPENSES deductible against
EARNINGS for each YEAR for PRODUCT for the CLL INDICATION shall not
exceed the lesser of the amount in the MARKETING PLAN or ******(3)
(proportionately adjusted for part of a YEAR) which ******(4) limit
shall be adjusted by applying the following factor:
BA * CPI
BCPI
BA = *************************************************(5)
BCPI = the Bureau of Labor Statistics Consumer
Price Index for All Urban Consumers; All cities;
All Items for January 1, 2000; and
CPI = the Bureau of Labor Statistics Consumer
Price Index for All Urban Consumers; All cities; All
Items for January of the current year.
For all OTHER INDICATIONS, the amount deductible in a YEAR against
EARNINGS shall not exceed the amount in the MARKETING PLAN.
1.53 "SPECIFICATIONS" shall have the meaning set forth in Section 1.9 of
the BI AGREEMENT.
1.54 "SUBDISTRIBUTOR" shall mean an entity other than an AFFILIATE through
which DISTRIBUTOR routinely conducts all of its sales business of
PRODUCT in a particular country of the TERRITORY, and which entity
assumes the marketing, promotional, distribution and sales obligations
of DISTRIBUTOR in any country. SUBDISTRIBUTOR excludes THIRD PARTIES
such as wholesalers, pharmacists, hospitals, and health management
organizations.
1.55 "TERRITORY" shall mean all countries of the world except those of
Appendix C.
1.56 "THIRD PARTY" shall mean a person or entity other than DISTRIBUTOR,
L&I, LEUKOSITE, ILEX or their respective AFFILIATES.
1.57 "THIRD PARTY ROYALTIES" shall mean the BTG ROYALTIES and any other
royalties payable to THIRD PARTIES pursuant to the THIRD PARTY
agreements listed in Appendix G as of the Effective Date, or
subsequently added thereto with the consent of the DISTRIBUTOR in
respect of sales of the PRODUCT by the DISTRIBUTOR, its AFFILIATES and
SUBDISTRIBUTORS
1.58 "TRADEMARK" shall mean CAMPATH(R).
- ---------------------
(4) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(5) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
8
<PAGE> 9
1.59 "YEAR" shall mean the 12-month period beginning on January 1, except
that the initial YEAR shall extend from the Effective Date until
December 31st of the calendar year of the Effective Date (such that it
may include less than 12 months).
2. APPOINTMENT
2.1 GRANT OF DISTRIBUTION RIGHTS.
(a) L&I hereby appoints DISTRIBUTOR as the exclusive distributor
of the PRODUCT in the TERRITORY for use only in the TERRITORY
for the CLL INDICATION and for OTHER INDICATIONS, each for
the term set forth in Article 18 (unless earlier terminated
pursuant to this AGREEMENT), and DISTRIBUTOR accepts such
appointment.
(b) DISTRIBUTOR agrees that DISTRIBUTOR (i) will sell and
distribute PRODUCT in the TERRITORY only for the INDICATIONS
for which DISTRIBUTOR retains distribution rights under this
AGREEMENT; (ii) will only sell in the TERRITORY PRODUCT which
is purchased from L&I; and (iii) will only sell PRODUCT in
the TERRITORY under the TRADEMARK.
(c) DISTRIBUTOR agrees to distribute the PRODUCT for an
INDICATION only in accordance with the terms, conditions and
purposes of this AGREEMENT, and, in the PROFIT-SHARING
TERRITORY, only in accordance with the MARKETING PLAN
therefor.
2.2 LIMITATION ON DISCOUNTING.
DISTRIBUTOR agrees that DISTRIBUTOR will not without L&I's written
consent discount the selling price of PRODUCT in order to promote the
sales of other products of DISTRIBUTOR and that it will conduct all
price negotiations in good faith on an arms length basis provided,
however, that the foregoing should not be interpreted as permitting
L&I to set prices in countries of the European Union. It is expressly
understood that L&I cannot provide such consent unless L&I receives
the consent of BTG.
2.3 SALES THROUGH SUBDISTRIBUTORS.
DISTRIBUTOR intends to sell PRODUCT through its AFFILIATES in
countries where DISTRIBUTOR has AFFILIATES in the TERRITORY and in
Germany through DISTRIBUTOR'S existing distributor Medac GmbH. L&I
consents to Medac GmbH as a SUBDISTRIBUTOR. DISTRIBUTOR can sell
product in the TERRITORY through SUBDISTRIBUTORs only as follows:
(i) Without the consent of L&I, through SUBDISTRIBUTORs of DISTRIBUTOR
that distribute FLUDARA(R) in countries of the TERRITORY (other than
MAJOR COUNTRIES) where FLUDARA(R) is sold through SUBDISTRIBUTORs; and
9
<PAGE> 10
(ii) With the consent of L&I, in all countries of the TERRITORY not
included in Section 2.3(i), which consent shall not be unreasonably
withheld or delayed.
3. MARKETING IN THE PROFIT-SHARING TERRITORY
3.1 MARKETING COMMITTEE.
(a) The marketing and selling of PRODUCT in the PROFIT SHARING
TERRITORY for (i) the CLL INDICATION and (ii) OTHER
INDICATIONS for which DISTRIBUTOR retains distribution rights
shall be overseen by a committee composed of four members,
with DISTRIBUTOR appointing two (2) members and L&I two (2)
members (the "MARKETING COMMITTEE"), with a member appointed
by DISTRIBUTOR being Chairman of the MARKETING COMMITTEE.
(b) The MARKETING COMMITTEE shall meet at the call of the
Chairman, but not less than once each CALENDAR QUARTER of
each YEAR, at the offices of BERLEX or such other place
designated by the Chairman. A quorum for the conduct of
business at any meeting of the MARKETING COMMITTEE shall
consist of at least one representative of DISTRIBUTOR and at
least one L&I representative. L&I and DISTRIBUTOR shall each
have one vote and all decisions shall be by unanimous vote.
(c) By no later than July 1 of each YEAR, commencing with the
YEAR in which a BLA for the PRODUCT for the CLL INDICATION is
obtained, DISTRIBUTOR shall submit to the MARKETING COMMITTEE
a proposed MARKETING PLAN for sales and marketing of each
INDICATION for PRODUCT which is to be distributed by
DISTRIBUTOR in the PROFIT-SHARING TERRITORY. The PARTIES will
agree to a reasonable timetable for the submission of the
MARKETING PLAN for the YEAR in which initial BLA approval is
anticipated. Each MARKETING PLAN shall include for the
following YEAR: (i) a budget, including an estimate of
SELLING EXPENSES, MARKETING EXPENSES and other expenses for
the PRODUCT; (ii) an estimate of PRODUCT to be ordered under
Section 6.1; (iii) a price range for sales of PRODUCT based
on a study made by an expert selected by the MARKETING
COMMITTEE; (iv) an outline of marketing and detail strategies
and tactics; (v) Phase IV studies, if any, for PRODUCT for
each INDICATION; and (vi) any other information reasonably
requested by a member of the MARKETING COMMITTEE that is
within the possession of DISTRIBUTOR.
The MARKETING COMMITTEE shall discuss such plan, including
any proposed amendments and/or additions thereto, and shall
decide upon a final plan by the end of the third CALENDAR
QUARTER of the YEAR in which the plan is submitted. The final
plan for each INDICATION for PRODUCT approved by the
MARKETING COMMITTEE is the MARKETING PLAN for the following
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<PAGE> 11
YEAR. The approved MARKETING PLAN shall provide for a
national selling effort, inclusion in the BERLEX annual
action plan and in the BERLEX annual sales incentive
compensation plan in a manner that does not disadvantage
PRODUCT taking into consideration, without limitation,
PRODUCT profile, size of the market, profit potential,
approved labeling and reimbursement approval status. Once
approved, a MARKETING PLAN for a YEAR can only be amended by
a decision of the MARKETING COMMITTEE.
(d) In addition to approval of the MARKETING PLAN, the MARKETING
COMMITTEE shall discuss, review and monitor marketing of
PRODUCT in accordance with the MARKETING PLAN therefor,
discuss future planning for the marketing of PRODUCT for an
INDICATION, and coordinate and implement any required recall
of PRODUCT. It is specifically understood, however, that the
management and direction of marketing and sales activities
and the implementation of the MARKETING PLAN shall be managed
by DISTRIBUTOR rather than the MARKETING COMMITTEE.
If the MARKETING COMMITTEE fails to reach agreement as to any
matter, the PARTIES agree to exert all reasonable efforts to
arrive at a mutually acceptable resolution, including a
meeting between the Head of the SBU Therapeutics of BERLEX
and a manager of the General Partner of L&I, and if such
resolution is not reached within thirty (30) days, and
subject to Section 3.2(c), DISTRIBUTOR shall have the right
to make the final decision except as provided in Sections
3.1(e), 3.1(f) and 3.1(g), which decisions require the mutual
consent of DISTRIBUTOR and L&I.
(e) DISTRIBUTOR and L&I shall agree to a range of average prices
of PRODUCT for an INDICATION for a YEAR by no later than
November 30th of the previous YEAR, and the price charged by
DISTRIBUTOR for PRODUCT for an INDICATION for a YEAR shall
result in an average price therefor within the agreed to
average price range for such YEAR.
(f) DISTRIBUTOR and L&I shall agree in writing to the maximum
MARKETING EXPENSES that can be charged against EARNINGS for
PRODUCT for an INDICATION in a YEAR by no later than November
30th of the previous YEAR.
(g) DISTRIBUTOR and L&I shall agree to the maximum PREMARKETING
EXPENSES and the MAXIMUM SELLING EXPENSES for PRODUCT for
each of the OTHER INDICATIONS for the purpose of calculating
EARNINGS therefor prior to BLA approval thereof.
3.2 Marketing Effort of DISTRIBUTOR
(a) During the term of this AGREEMENT, for each INDICATION for which
there is a MARKETING PLAN, DISTRIBUTOR shall manage and direct the marketing
effort for the PRODUCT pursuant to the MARKETING PLAN approved by the MARKETING
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<PAGE> 12
COMMITTEE. DISTRIBUTOR shall exercise commercially reasonable efforts to
promote, market and sell PRODUCT in the PROFIT-SHARING TERRITORY in accordance
with the MARKETING PLAN and shall maintain, at its own cost and expense, an
adequate sales organization for this purpose. DISTRIBUTOR shall keep L&I
advised of general market, economic and regulatory developments that may affect
the sale of such PRODUCT in the PROFIT-SHARING TERRITORY.
(b) DISTRIBUTOR agrees to provide L&I with DISTRIBUTOR'S annual
sales forecast for PRODUCT to be sold in the TERRITORY for
each INDICATION as to which DISTRIBUTOR retains distribution
rights for the purpose of assisting L&I in its financial
planning. Sales forecasts shall not be binding on
DISTRIBUTOR.
(c) With respect to PRODUCT for the CLL INDICATION in the
PROFIT-SHARING TERRITORY, the MARKETING PLAN shall provide
for efforts with respect to marketing and sales that are at
least comparable to the efforts with respect to FLUDARA(R)
prior to expiration of patent protection for FLUDARA(R), and
in the first twelve (12) months after PRODUCT launch for the
CLL INDICATION in the PROFIT-SHARING TERRITORY, the MARKETING
PLAN shall provide for marketing and selling efforts that are
at least equal to those exerted in the industry with respect
to oncology products of equivalent potential for such period.
3.3 Earnings Reports.
(a) In the PROFIT-SHARING TERRITORY, with respect to PRODUCT for the
CLL INDICATION and for each OTHER INDICATION for which DISTRIBUTOR retains
distribution rights, after BLA approval thereof, within thirty (30) days after
the end of each CALENDAR QUARTER of each YEAR, DISTRIBUTOR shall provide L&I
with a separate report of the EARNINGS for PRODUCT for each such INDICATION
(either positive or negative) for the CALENDAR QUARTER. Within sixty (60) days
after the end of each YEAR, DISTRIBUTOR shall provide L&I with a separate
report of EARNINGS for PRODUCT for each INDICATION (either positive or
negative) in the PROFIT-SHARING TERRITORY. Each CALENDAR QUARTER and YEAR
report shall contain the following information:
(i) Quantity of PRODUCT sold by DISTRIBUTOR, and its
AFFILIATES and if applicable, its SUBDISTRIBUTORs.
(ii) Total amount invoiced for PRODUCT;
(iii) Calculation of NET SALES.
(iv) A separate calculation for each of items (i) to
(x) to be deducted from EARNINGS;
(v) Calculation of amount due to or to be paid by
L&I under Section 3.4 or 3.5, as the case may be; and
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<PAGE> 13
(vi) Any other information reasonably requested by
L&I and within the possession of DISTRIBUTOR for determining
amount due to or to be paid by L&I.
(b) The reports for each YEAR shall be audited reports and shall be
charged against EARNINGS.
3.4 QUARTERLY PAYMENT OF APPROPRIATE PERCENTAGE.
(a) In the PROFIT-SHARING TERRITORY, for each CALENDAR QUARTER in
which the EARNINGS for PRODUCT for the CLL INDICATION are
positive, and subject to Section 3.7, for each CALENDAR
QUARTER in which the EARNINGS for PRODUCT for an OTHER
INDICATION for which DISTRIBUTOR retains distribution rights
are positive, BERLEX shall pay to L&I its APPROPRIATE
PERCENTAGE of such positive EARNINGS for each such INDICATION
within sixty (60) days after the end of the applicable
CALENDAR QUARTER or thirty (30) days after the delivery of
the report of EARNINGS for such CALENDAR QUARTER, whichever
is earlier.
(b) For the PROFIT-SHARING TERRITORY for each CALENDAR QUARTER in
which the EARNINGS for a PRODUCT for the CLL INDICATION are
negative and, subject to Section 3.7, in each CALENDAR
QUARTER in which the EARNINGS for PRODUCT for OTHER
INDICATIONS for which DISTRIBUTOR retains distribution rights
are negative, L&I shall pay to DISTRIBUTOR the APPROPRIATE
PERCENTAGE of such negative EARNINGS for each such INDICATION
within sixty (60) days after L&I receives the report under
Section 3.3 that includes such negative EARNINGS.
3.5 YEARLY PAYMENT OF APPROPRIATE PERCENTAGE.
With respect to the PROFIT-SHARING TERRITORY, within sixty (60) days
of the end of each YEAR, DISTRIBUTOR shall separately determine
EARNINGS for PRODUCT for the YEAR for the CLL INDICATION and, subject
to Section 3.7, for each OTHER INDICATION as to which DISTRIBUTOR
retains distribution rights and L&I shall receive or pay the
APPROPRIATE PERCENTAGE of the EARNINGS therefor for the applicable
YEAR, adjusted for the aggregate of the amounts received and/or paid
by L&I under Section 3.4 for the CALENDAR QUARTERS of the appropriate
YEAR. Any payment due from DISTRIBUTOR shall be made within ninety
(90) days of the end of the applicable YEAR, or thirty (30) days after
delivery of the report of EARNINGS for such YEAR, whichever is
earlier. Any payment due to DISTRIBUTOR shall be made within thirty
(30) days after L&I receives the yearly report under Section 3.3.
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<PAGE> 14
3.6 CREDIT TOWARD LOAN BALANCE.
For each YEAR in which EARNINGS are positive, beginning five YEARS
after launch of PRODUCT for an INDICATION in the PROFIT-SHARING
TERRITORY, until the outstanding portion of the loans made pursuant to
Section 9.1(a) and the interest thereon is repaid, in addition to the
amounts payable under Section 3.4 and 3.5, L&I shall be credited with
an additional ******(6) percent of positive EARNINGS for PRODUCT for
each INDICATION, if any, within sixty (60) days after the end of the
YEAR, which DISTRIBUTOR shall retain and apply to repayment of the
outstanding portion of the loan and interest thereon made pursuant to
Section 9.1(a).
3.7 PAYMENT IN LIEU OF EARNINGS.
In the event that L&I does exercise its OPT OUT OPTION with regard to
development of PRODUCT for an OTHER NON-CANCER INDICATION in the
PROFIT SHARING TERRITORY, and DISTRIBUTOR continues such funding and
BLA approval for PRODUCT for such OTHER NON-CANCER INDICATION is
obtained, L&I shall not be required to make or entitled to receive
payments under Sections 3.4 and 3.5 based on EARNINGS in the PROFIT
SHARING TERRITORY, and in lieu thereof, L&I shall receive ******(7)
percent of NET SALES of PRODUCT for such OTHER INDICATION in the
PROFIT SHARING TERRITORY which shall be due and payable with respect
to NET SALES thereof in a CALENDAR QUARTER within sixty (60) days
after the end of the CALENDAR QUARTER. In addition, the report due
under Section 3.3 for a PRODUCT for such OTHER NON-CANCER INDICATION
may only include items (i), (ii), (iii) and (vi) and a calculation of
the amount due under this Section 3.7.
3.8 RECORDKEEPING BY DISTRIBUTOR.
DISTRIBUTOR shall keep, and shall cause each of its AFFILIATES to
keep, and if applicable, their SUBDISTRIBUTORs, full and accurate
books of account containing all particulars that may be necessary for
the purpose of calculating EARNINGS and NET SALES and all payments
payable to L&I in the PROFIT-SHARING TERRITORY for PRODUCT sold in the
PROFIT-SHARING TERRITORY. Such books of account shall be kept at their
principal place of business and, with all necessary supporting data
shall, for the three (3) years next following the end of the calendar
year to which each shall pertain be open for inspection by an
independent certified accountant selected by L&I
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(6) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(7) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 15
and reasonably acceptable to DISTRIBUTOR upon reasonable notice during
normal business hours at L&I's expense for the sole purpose of
verifying payments or compliance with this AGREEMENT, but in no event
(subject to Section 13.16) more than once in each YEAR. All information
and data offered shall be used only for the purpose of verifying
payments. In the event that such inspection shall indicate that in any
YEAR the payments which should have been paid by DISTRIBUTOR are at
least five percent (5%) greater than those which were actually paid by
DISTRIBUTOR, or that, in the case of negative EARNINGS, the amounts
that were paid by L&I to DISTRIBUTOR are at least five percent (5%)
more than those that should have been paid by L&I, then DISTRIBUTOR
shall pay the cost of such inspection. All underpayments and
overpayments are immediately due and payable.
3.9 CO-PROMOTION.
(a) L&I shall have the right itself and/or to designate one or
more of either LEUKOSITE or ILEX to co-promote with
DISTRIBUTOR or its AFFILIATE, as the case may be, in the
PROFIT-SHARING TERRITORY, PRODUCT for the CLL INDICATION and
OTHER CANCER INDICATIONS by written notice to DISTRIBUTOR at
least six (6) months prior to the contemplated initiation of
such co-promotion.
(b) The co-promoting PARTY shall co-promote such PRODUCT in a
YEAR in accordance with the approved MARKETING PLAN for such
YEAR through MSL activities. The number of personnel employed
to co-promote shall not exceed twelve in the United States,
and shall only conduct activities similar to those conducted
by BERLEX'S MSL staff. DISTRIBUTOR and L&I will coordinate
the activities of the L&I MSL staff to optimize utilization
and avoid duplication of effort.
(c) For each CALENDAR QUARTER, DISTRIBUTOR shall pay to the
co-promoting PARTY direct expenses for the MSL force and MSL
force management, all only as it relates to co-promotion of
PRODUCT under this Section 3.9 which shall be due and payable
sixty (60) days after submission of an invoice therefor, but
shall not exceed the average cost incurred by BERLEX for its
own MSL staff members assigned to PRODUCT for an oncology
indication. DISTRIBUTOR shall have the right to audit the
expenses charged to DISTRIBUTOR pursuant to this Section on
the same terms set forth in Section 6.12 for L&I's audits of
DISTRIBUTOR.
(d) L&I shall have the right to terminate the co-promotion by six
(6) months' prior written notice.
3.10 PAYMENT OF INSURANCE PREMIUMS
DISTRIBUTOR shall pay the cost and expense of insurance premiums for
L&I with respect to PRODUCT in the PROFIT SHARING TERRITORY, including
product
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<PAGE> 16
liability insurance but excluding product liability expenses, such as
the cost of defense, settlement and damage, within thirty (30) days of
invoice therefor. The payment made under this Section 3.10 shall be
deductible against EARNINGS.
4. MARKETING IN THE OTHER TERRITORY
4.1 SALES FORECAST
The DISTRIBUTOR agrees to provide L&I with DISTRIBUTOR'S annual sales
forecast for PRODUCT to be sold in the OTHER TERRITORY for each
INDICATION as to which DISTRIBUTOR retains distribution rights for the
purpose of assisting L&I in its financial planning. Sales forecasts
shall not be binding on the DISTRIBUTOR.
4.2 MARKETING EFFORTS
(a) In MAJOR COUNTRIES, DISTRIBUTOR shall exert reasonable
commercial efforts to market and sell PRODUCT for each
INDICATION in each country in which such PRODUCT is approved
for sale. Such reasonable commercial efforts shall take into
consideration, without limitation, PRODUCT profile, size of
the market, profit potential, approved labeling,
reimbursement approval status, and other factors that a
reasonable business person would take into consideration in
determining the extent of effort to exert in the marketing
and selling of PRODUCT.
(b) In countries of the OTHER TERRITORY which are not MAJOR
COUNTRIES, DISTRIBUTOR shall notify L&I, in writing, as to
whether it intends to pursue commercialization of a PRODUCT
for an INDICATION as to which DISTRIBUTOR retains
distribution rights no later than ninety (90) days after
regulatory approval thereof in Europe. With respect to any
countries as to which DISTRIBUTOR does not provide such
written notice, or, having given notice, subsequently
notifies L&I of an intention not to pursue commercialization,
L&I or DISTRIBUTOR shall have the right to grant distribution
rights in such country to a THIRD PARTY by sixty (60) days'
prior written notice to the other, identifying the
country(ies), the THIRD PARTY and the terms and conditions
thereof. Unless the PARTY receiving the notice provides
reasonable written objection thereto within such sixty (60)
day period on the basis that the granting of such rights will
adversely affect marketing and sale of PRODUCT for such
INDICATION in a country in which PRODUCT is being, or is to
be, distributed by DISTRIBUTOR, or to the terms and
conditions of the distribution rights, then such distribution
rights shall be granted to such THIRD PARTY and L&I, and
DISTRIBUTOR shall share, on a ****** ******(8) basis,
respectively, the costs and benefits incurred with respect to
the granting of such distribution rights.
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(8) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 17
(c) With respect to PRODUCT for an INDICATION to which SCHERING
has distribution rights, SCHERING agrees to provide to L&I a
separate marketing plan for PRODUCT for each INDICATION for
each MAJOR COUNTRY of the OTHER TERRITORY and an aggregate
marketing plan for all other countries of the OTHER TERRITORY
for each YEAR by October 1 of the previous YEAR, which
marketing plan shall contain information similar to that
included in marketing plans for DISTRIBUTOR'S product in such
countries that qualify for primary promotion (for example
FLUDARA(R)) and within sixty (60) days after the end of each
YEAR, DISTRIBUTOR shall provide L&I with a written report
with respect to the results for the applicable YEAR as
compared to the marketing plan for the applicable YEAR for
each country in the OTHER TERRITORY for PRODUCT for each
INDICATION.
5. ORPHAN DRUG EXCLUSIVITY.
(a) To the fullest extent permitted by law, the PARTIES agree
that DISTRIBUTOR will have the right to claim and use any
taxation credits (accruing to DISTRIBUTOR after the Effective
Date), deductions or other taxation benefits available as a
result of funding by DISTRIBUTOR, in whole or part, of
clinical studies for an INDICATION for PRODUCT that has been
designated as an orphan indication by FDA, and similar
taxation benefits available in other countries of the
TERRITORY. L&I agrees that it will take such reasonable
actions as DISTRIBUTOR may request to permit DISTRIBUTOR to
obtain such taxation benefits, including without limitation
sharing with DISTRIBUTOR ownership of orphan drug petitions,
designations, and grants of exclusivity; provided, however,
that L&I shall not be required by this Section to share with
DISTRIBUTOR ownership or sponsorship of any BLA for PRODUCT.
With respect to any transfer of rights or ownership under
this Section 5, such transfer shall be made in a manner such
that such rights and/or ownership by DISTRIBUTOR is
automatically terminated when DISTRIBUTOR'S rights to PRODUCT
for the applicable INDICATION are terminated under this
AGREEMENT. For avoidance of doubt, the PARTIES state that if
L&I has complied with the requirements of this Section, L&I
shall have no liability to DISTRIBUTOR in the event that
DISTRIBUTOR is unable to avail itself of favorable taxation
treatment contemplated by this Section.
(b) DISTRIBUTOR shall have the right to nominate one or more of
DISTRIBUTOR'S AFFILIATES to exercise the rights set forth in
this section.
6. PURCHASE OF PRODUCTS
6.1 PURCHASE AND SALE REQUIREMENTS.
(a) Subject to Section 6.3 and Section 8, L&I shall sell and
DISTRIBUTOR shall purchase an amount of FINAL FORM PRODUCT or
FILLED PRODUCT as
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<PAGE> 18
applicable for INDICATIONS equal to DISTRIBUTOR'S
requirements in the TERRITORY.
(b) Subject to availability of FINAL FORM PRODUCT or FILLED
PRODUCT as applicable from L&I, DISTRIBUTOR shall maintain
sufficient inventories of PRODUCT to enable DISTRIBUTOR to
effectively satisfy demand for PRODUCT in the TERRITORY.
(c) Unless otherwise agreed between the PARTIES, L&I shall sell
and DISTRIBUTOR shall purchase PRODUCT as FINAL FORM PRODUCT
for sale in the PROFIT-SHARING TERRITORY and as FILLED PRODUCT
for production of FINAL FORM PRODUCT for sale in the OTHER
TERRITORY.
(d) DISTRIBUTOR shall purchase from L&I 60,000 ampoules of FILLED
PRODUCT in October 1999; 90,000 ampoules of FILLED PRODUCT in
January 2000, and 60,000 ampoules of FILLED PRODUCT in April
2000. With respect to the FILLED PRODUCT purchased under this
Section 6.1(d), title to and risk of loss with respect to
FILLED PRODUCT shall pass to DISTRIBUTOR when produced by BI.
BI shall maintain possession of the FILLED PRODUCT until
DISTRIBUTOR requests shipment thereof as FINAL FORM PRODUCT or
FILLED PRODUCT. DISTRIBUTOR shall pay to L&I the COST OF GOODS
for the FILLED PRODUCT that has been incurred as of such time
within thirty (30) days of invoice therefor, which shall be no
earlier than the date that FILLED PRODUCT is produced by BI.
FILLED PRODUCT purchased under this Section 6.1(d) that is to
be sold by DISTRIBUTOR in the PROFIT-SHARING TERRITORY shall be
converted to FINAL FORM PRODUCT by BI. FILLED PRODUCT that is
purchased by DISTRIBUTOR that is to be sold in the OTHER
TERRITORY shall be converted to FINAL FORM PRODUCT by
DISTRIBUTOR. At the time of shipment of PRODUCT to DISTRIBUTOR
under this Section 6.1(d), DISTRIBUTOR shall pay to L&I the
COST OF GOODS therefor, less any portion of COST OF GOODS
previously paid under this Section 6.1(d). The COST OF GOODS of
such ampoules sold in the PROFIT-SHARING TERRITORY shall be
charged against EARNINGS when sold. DISTRIBUTOR and L&I agree
that they will cooperate with each other and use all reasonable
efforts to obtain the agreement of BI to reduce the quantity
that is to be purchased under this Section 6.1(d). In the event
that a surcharge is paid to BI under the BI AGREEMENT for
failure to make the minimum purchases required by Section 2.8
of the BI AGREEMENT in the first full YEAR after launch of the
PRODUCT, then as to the portion of the minimum purchase
deficiency that results from the purchase of excess inventory
under Section 6.1(d), DISTRIBUTOR shall have the right to
credit one-twentieth of the amount paid by DISTRIBUTOR for such
portion under Section 8.2(iv) against amounts to be paid to L&I
under Section 3.4(a) for the first twenty CALENDAR QUARTERS. If
EARNINGS in any such first twenty CALENDAR QUARTERS should be
negative, the amount payable by L&I to DISTRIBUTOR pursuant to
Section 3.4(b) will be increased by one-
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<PAGE> 19
twentieth of the amount paid by DISTRIBUTOR for such portion
under Section 8.2(iv).
6.2 CERTAIN PACKAGING AND LABELING BY DISTRIBUTOR.
(a) In view of DISTRIBUTOR'S expertise in the production and
release of pharmaceutical products, and taking into account
DISTRIBUTOR'S experience in dealing with and proximity to BI,
it is agreed that DISTRIBUTOR shall carry out the following
activities in respect of PRODUCT to be sold in the OTHER
TERRITORY: (i) labeling and packaging of FILLED PRODUCT to
produce FINAL FORM PRODUCT; and (ii) quality assurance and
quality control services necessary to provide for final
release of FINAL FORM PRODUCT. Only DISTRIBUTOR'S direct
costs and expenses with respect to the activities to be
performed pursuant to this Section 6 (including loss for
normal packaging losses) shall be COST OF GOODS for Section
6.7(a)(v).
(b) With respect to the services described in Section 6.2(a),
DISTRIBUTOR warrants and represents that the FINAL FORM
PRODUCT to be produced by DISTRIBUTOR for L&I hereunder shall
be labeled, packaged and released in accordance with the
SPECIFICATIONS, and such services shall be performed
according to Good Manufacturing Practices standards and known
and published standards of EMEA applicable as of the time the
activities performed by DISTRIBUTOR are undertaken, and in
accordance with all other laws, rules and regulations
applicable in the country where the activities are performed.
DISTRIBUTOR further warrants and represents that the
activities being performed by DISTRIBUTOR shall not result in
any lien or claim on PRODUCT which affects title. DISTRIBUTOR
makes no other warranties and representations with respect to
the activities to be performed by DISTRIBUTOR pursuant to
this Section.
6.3 PRIORITY IN SUPPLY.
L&I shall use commercially reasonable efforts to satisfy DISTRIBUTOR'S
requirements for FINAL FORM PRODUCT or FILLED PRODUCT as applicable.
However, L&I's obligation to supply FINAL FORM PRODUCT or FILLED
PRODUCT, as applicable, under Section 6.1 hereof shall at all times be
subject to the condition that L&I is able to obtain a sufficient
supply of such PRODUCT for sale both inside and outside of the
TERRITORY. In the event that PRODUCT available to L&I is in short
supply, L&I shall notify DISTRIBUTOR of such shortage as soon as
possible. In the event there is a short supply of PRODUCT and L&I
cannot supply PRODUCT to DISTRIBUTOR in an amount equal to
DISTRIBUTOR'S FIRM ORDER, then L&I shall allocate available PRODUCT to
DISTRIBUTOR in each month that such a shortfall exists in an amount
equal to the product of (i) the amount of available PRODUCT for that
month (and in each month thereafter until the shortfall to DISTRIBUTOR
is remedied) and (ii) a fraction the numerator of which is the
aggregate quantity of FIRM ORDERS made by DISTRIBUTOR over the
subsequent twelve (12) month period including the shortfall
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<PAGE> 20
months and (y) the aggregate quantity of PRODUCT over the same twelve
(12) month period required by L&I outside the TERRITORY by reference
to FIRM ORDERS placed with THIRD PARTY manufacturers for L&I's
requirements.
6.4 TITLE, RISK.
(a) Except as provided in Section 6.1(d), title to FINAL FORM
PRODUCT or FILLED PRODUCT sold hereunder shall pass to
DISTRIBUTOR when L&I delivers FINAL FORM PRODUCT or FILLED
PRODUCT to DISTRIBUTOR. Except as provided in Section 6.1(d),
risk of loss of or damage to FINAL FORM PRODUCT or FILLED
PRODUCT shall pass to DISTRIBUTOR upon delivery to
DISTRIBUTOR. The cost of freight and insurance for delivery
of PRODUCT (either as FILLED PRODUCT or as FINAL FORM PRODUCT
to DISTRIBUTOR'S designated destination shall be paid by L&I.
The common carrier shall be designated by DISTRIBUTOR.
(b) In the United States, DISTRIBUTOR shall maintain or cause any
person or entity that is in possession of PRODUCT to maintain
insurance against loss or destruction of PRODUCT, or in the
alternative have in place a reasonable program of self
insurance. Insurance premiums for such insurance of
DISTRIBUTOR may be deducted from EARNINGS.
6.5 SUPERIORITY OF AGREEMENT.
The PARTIES agree that the provisions of this AGREEMENT shall prevail
over any inconsistent statements or terms contained in any other
documents passing between the PARTIES, such as, but not limited to,
any purchase order, acknowledgement, confirmation or notice.
6.6 PRICE FOR PROFIT-SHARING TERRITORY.
The price for PRODUCT sold to DISTRIBUTOR for sale in the PROFIT
SHARING TERRITORY shall be the COST OF GOODS for FINAL FORM PRODUCT,
and shall be due and payable within thirty (30) days of invoice
therefor, which shall be no earlier than date of shipment of FINAL
FORM PRODUCT.
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6.7 PRICE FOR OTHER TERRITORY.
(a) The price of PRODUCT to be sold in the OTHER TERRITORY shall
be the sum of:
(i) The COST OF GOODS for FILLED PRODUCT which shall be
due and payable within thirty (30) days of invoice
therefor, which shall be no earlier than date of
shipment of FILLED PRODUCT ; plus
(ii) Subject to sub-sections 6.7(a)(iii), (iv) and (v)
below, ******(9) of NET SALES of PRODUCT for an
INDICATION sold in a country in the OTHER TERRITORY.
(iii) In the event that L&I exercises its OPT-OUT OPTION
in respect of a PRODUCT for an OTHER NON-CANCER
INDICATION, the portion of the price to be paid
under Section 6.7(a)(ii) shall be reduced to
******(10).
(iv) In the event that one or more THIRD PARTY(IES) sells
a generic equivalent of PRODUCT for an INDICATION in
any country of the OTHER TERRITORY in any YEAR in an
aggregate amount such that the quantity of units of
PRODUCT sold by the generic intruder is equal to at
least twenty percent (20%) of DISTRIBUTOR's sales
volume of units of PRODUCT for such INDICATION in
such country for such YEAR (such test to be
calculated using an equivalent volume of PRODUCT per
unit, as measured by IMS data, or data of another
market research company agreed by the PARTIES if IMS
data are not available), the portion of the price to
be paid under Section 6.7(a)(ii) above shall be
reduced to ******(11) for such PRODUCT for such
INDICATION in such country of such YEAR or pro-rated
part thereof, as applicable. The adjustment required
by the preceding portion of this Section 6.7(a)(iv)
shall be made by adjusting the payment for the last
CALENDAR QUARTER for the applicable YEAR. In the
event that DISTRIBUTOR can demonstrate that the
portion of the price paid for PRODUCT for an
INDICATION in a country in a YEAR under this Section
6.7(a)(iv) is more than ******(12) times the amount
earned by DISTRIBUTOR (calculated in a manner similar
to EARNINGS), then the payment for that
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(9) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
(10) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
(11) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
(12) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
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<PAGE> 22
YEAR for PRODUCT for that INDICATION in such country
under this Section 6.7(a)(iv) shall be adjusted by
adjusting such payment for the last CALENDAR QUARTER
so that such payments for that YEAR are no greater
than ******(13) times such earnings. In the event
that the circumstances described in Section
6.7(a)(iii) and 6.7(a)(iv) both apply, the payment
for the relevant YEAR for PRODUCT in the relevant
country and relevant INDICATION shall be the lower
of the two rates applicable under such two Sections.
(v) In the event that in a CALENDAR QUARTER
in a country in the OTHER TERRITORY the sum of the
COST OF GOODS (which includes the limitation of
Section 6.2(a)) and THIRD PARTY ROYALTIES (including
royalties paid pursuant to Section 13.14) for a
PRODUCT in such CALENDAR QUARTER exceeds ******(14)
of NET SALES in such country, then the amount to be
paid therefor under Section 6.7(a)(ii) shall be
reduced by subtracting therefrom ******(15) for each
one percent by which such sum exceeds ******(16). For
example, if the royalty rate is ******(17) and the
sum is ******(18), then the ******(19) from Section
6.7(a)(ii) is reduced to ******(20). This Section
6.7(a)(iv) is not applicable to payments under
Section 6.7(a)(ii) that have been reduced under
Section 6.7(a)(iv) The adjustment required by this
Section 6.7(a)(v) shall be made within sixty (60)
days after the end of each YEAR for each applicable
CALENDAR QUARTER of such YEAR.
6.8 THIRD PARTY ROYALTIES.
(a) In addition to any other payments due under this AGREEMENT in
the TERRITORY, DISTRIBUTOR shall reimburse to L&I all THIRD
PARTY ROYALTIES for the CLL INDICATION and for OTHER
INDICATIONS as to
- --------------------
(13) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(14) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(15) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(16) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(17) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(18) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(19) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(20) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 23
which DISTRIBUTOR retains distribution rights. L&I shall
provide to DISTRIBUTOR a schedule specifying when such THIRD
PARTY ROYALTIES are payable, and DISTRIBUTOR shall make such
payments to L&I at least fifteen (15) days prior to the time
that L&I is required to make such THIRD PARTY payment.
(b) In the event that it is necessary for L&I to enter into a
license agreement with a THIRD PARTY in order for DISTRIBUTOR
to be able to sell or continue to sell PRODUCT in the
TERRITORY or for L&I to supply PRODUCT to DISTRIBUTOR, L&I
shall notify DISTRIBUTOR as soon as it becomes aware of such
necessity. L&I shall negotiate such license agreement in good
faith taking into account any comments made by DISTRIBUTOR. A
THIRD PARTY shall be added to Appendix G only with the
consent of DISTRIBUTOR, which consent shall not be
unreasonably withheld or delayed. Any disagreement under this
Section 6.8(b) as to the reasonableness of adding a THIRD
PARTY license to Appendix G shall be resolved by arbitration
pursuant to Section 19.6.
(c) In the TERRITORY, L&I agrees to pay royalties to a THIRD
PARTY to the extent that DISTRIBUTOR has paid L&I royalties
pursuant to this Section 6.8. Outside of the TERRITORY, L&I
shall make royalty payments that are due under any license
agreement that is included in Appendix G.
(d) In the event that a THIRD PARTY disputes any royalty payment
with respect to PRODUCT in the TERRITORY pursuant to a
license of Appendix G, until such dispute is resolved,
DISTRIBUTOR shall pay the disputed amount. DISTRIBUTOR and
L&I shall cooperate in good faith to resolve such dispute so
that DISTRIBUTOR is not obliged to pay THIRD PARTY ROYALTIES
which L&I is not contractually obliged to pay under the
applicable THIRD PARTY licenses in respect of sales of
PRODUCT by DISTRIBUTOR, its AFFILIATES or their
SUBDISTRIBUTORS in the TERRITORY.
6.9 PAYMENT FOR PRODUCT.
The portion of the price for PRODUCT set forth in Section 6.7(a)(ii)
shall be paid within sixty (60) days after the CALENDAR QUARTER in
which PRODUCT is sold.
6.10 DELIVERY OF ACCOUNTING.
(a) Within sixty (60) days after the end of each CALENDAR QUARTER,
DISTRIBUTOR shall deliver to L&I a full and accurate accounting with
respect to PRODUCT sold in the OTHER TERRITORY as follows:
(i) Quantity of each PRODUCT sold by transaction type (by
country) by DISTRIBUTOR, and its AFFILIATES and if applicable, it's
SUBDISTRIBUTORs.
(ii) Gross Sales.
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<PAGE> 24
(iii) Calculation of NET SALES (by country) in local
currency.
(iv) Exchange rates for converting each local currency into
U.S. Dollars for each month of the CALENDAR QUARTER.
(v) NET SALES in U.S. dollars in each country.
(vi) Calculation of total compensation payable to L&I.
(vii) COST OF GOODS to the extent that DISTRIBUTOR is
claiming a reduction under Section 6.7(a)(v).
(viii) To the extent that an adjustment under Section
6.7(a)(iv) is claimed by DISTRIBUTOR, the information and accounting
that demonstrates that the requirements of Section 6.7(a)(iv) have
been met.
(ix) Any other information reasonably requested by L&I and
in the possession of DISTRIBUTOR.
(b) To the extent that CALENDAR QUARTER gross sales information
of AFFILIATES and SUBDISTRIBUTORS required by Section 6.10(a)
is not within the possession of DISTRIBUTOR, then DISTRIBUTOR
shall be excused from reporting such gross sales on a
CALENDAR QUARTERLY basis and instead for such countries the
following information will be submitted in lieu of CALENDAR
QUARTERLY gross sales as part of the accounting, with the
CALENDAR QUARTERLY accounting for the fourth CALENDAR
QUARTER, DISTRIBUTOR shall report total gross sales for the
applicable YEAR for at least the MAJOR COUNTRIES and the ten
(10) additional countries of the OTHER TERRITORY with the
highest NET SALES of PRODUCT; provided, however, that if the
NET SALES of the countries of the OTHER TERRITORY for which
DISTRIBUTOR reports annual gross sales in lieu of CALENDAR
QUARTERLY gross sales, and the countries of the OTHER
TERRITORY for which DISTRIBUTOR reports gross sales on a
CALENDAR QUARTERLY basis do not equal at least seventy-five
percent (75%) of the total NET SALES of the OTHER TERRITORY,
then DISTRIBUTOR shall report annual gross sales of such
additional countries of the OTHER TERRITORY as shall be
necessary such that the countries of the OTHER TERRITORY for
which DISTRIBUTOR is reporting gross sales at least on an
annual basis equals or exceeds the seventy five percent (75%)
test. If the foregoing sentence becomes operative for any
country of the OTHER TERRITORY, then DISTRIBUTOR shall
promptly make available to L&I a copy of the relevant parts
of DISTRIBUTOR'S accounting handbook, which describes how
controllers within DISTRIBUTOR'S AFFILIATES are to account
for NET SALES.
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<PAGE> 25
6.11 CURRENCY CONVERSION.
Payments by DISTRIBUTOR to L&I under this Agreement shall be made in
U.S. dollars. Except for NET SALES in the United States, where
payments are based on NET SALES in countries other than the member
states of the European Currency Union, the amount of such payments
expressed in the currency of each country shall be converted into Euro
at the exchange rate of the last date of the applicable CALENDAR
QUARTER. The applicable exchange rate will be the EURO foreign
exchange reference spot rate published daily by the European Central
Bank, Frankfurt / Main. If no EURO foreign exchange reference spot
rate is determined for the relevant currency, the PARTIES shall agree
upon another reference rate. Finally, the payable EURO amount shall be
converted into US Dollars by the EURO foreign exchange reference spot
rate published by the European Central Bank, Frankfurt / Main, at the
last day of the applicable CALENDAR QUARTER. These EURO foreign
exchange reference spot rates are currently published by REUTERS on
screen "ECB37".
6.12 RECORDKEEPING BY DISTRIBUTOR.
(a) DISTRIBUTOR shall keep, and shall cause each of its
AFFILIATES to keep, and if applicable, their SUBDISTRIBUTORs,
full and accurate books of account containing all particulars
that may be necessary for the purpose of calculating NET
SALES and all payments payable to L&I for PRODUCT in the
OTHER TERRITORY. Such books of account shall be kept at their
principal place of business and, with all necessary
supporting data shall, for the three (3) years next following
the end of the calendar year to which each shall pertain be
open for inspection by an independent certified accountant
selected by L&I and reasonably acceptable to DISTRIBUTOR upon
reasonable notice during normal business hours at L&I's
expense for the sole purpose of verifying payments or
compliance with this AGREEMENT, but in no event (subject to
Section 13.16) more than once in each YEAR. All information
and data offered shall be used only for the purpose of
verifying payments. In the event that such inspection shall
indicate that in any YEAR that the payments which should have
been paid by DISTRIBUTOR are at least five percent (5%)
greater than those which were actually paid by DISTRIBUTOR,
DISTRIBUTOR shall pay the cost of such inspection. All
underpayments and overpayments are immediately due and
payable.
(b) At the request of L&I, DISTRIBUTOR shall provide beginning
and ending inventories for each of up to ten (10) countries
of the OTHER TERRITORY for a requested YEAR, provided,
however, that such request shall be made no more than once
each YEAR.
6.13 MANUFACTURER OTHER THAN BI.
(a) L&I is currently supplying PRODUCT to DISTRIBUTOR that is
manufactured under the BI AGREEMENT. In the event that L&I
intends to supply PRODUCT
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<PAGE> 26
to DISTRIBUTOR manufactured by an entity other than BI
(either in place of PRODUCT manufactured by BI or in addition
to PRODUCT manufactured by BI), then L&I shall provide
written notice thereof to DISTRIBUTOR. L&I shall have the
right to supply PRODUCT to DISTRIBUTOR manufactured by the
entity identified in L&I's notice unless such entity is
unsuitable for at least one of the following reasons and
within thirty (30) days after receipt of L&I's notice
DISTRIBUTOR notifies L&I that it objects to receiving PRODUCT
manufactured by the entity identified in L&I's notice for at
least one of the following reasons: the proposed manufacturer
(i) has a documented history of non-compliance with
specifications, laws and regulations governing the
manufacture of pharmaceutical products; or (ii) has a
documented history of material failure to deliver products in
accordance with the customer's delivery schedule; or (iii) is
in litigation with DISTRIBUTOR, or DISTRIBUTOR, at the time,
in good faith, notifies L&I that DISTRIBUTOR expects to be in
litigation with such manufacturer . If L&I disagrees with
DISTRIBUTOR that the asserted ground or grounds is
applicable, the issue shall be submitted to arbitration under
Section 19.6.
(b) L&I shall specify, in the notice provided for in sub-section
6.13(a) above: (i) its reasons for proposing a change of
and/or an additional manufacturer; (ii) a reasonable forecast
of the aggregate cost to L&I therefor, including all costs of
obtaining regulatory approval of the manufacturer in the
TERRITORY; and (iii) the financial and other benefits which
L&I expects will result from such a change of manufacturer.
Within sixty days of receipt of such notice, DISTRIBUTOR
shall notify L&I in writing whether DISTRIBUTOR is willing to
bear ******(21) of the costs of effecting such a change of
and/or an additional manufacturer. If DISTRIBUTOR is not
willing to bear ******(22) of such costs and L&I nevertheless
proceeds to make the proposed change, the COST OF GOODS for
PRODUCT supplied by such new manufacturer shall be deemed to
be the same as the average COST OF GOODS of PRODUCT supplied
by BI in the three calendar years preceding such change of
and/or an additional manufacturer. If DISTRIBUTOR agrees to
bear ******(23) of such costs, L&I shall consult with
DISTRIBUTOR on the negotiation of the agreement with the new
manufacturer and L&I shall not, without the prior written
consent of DISTRIBUTOR, enter into any agreement which
provides for costs to L&I and DISTRIBUTOR in excess of those
included in the forecast referred to in (ii) above or which
includes terms materially more adverse in their effect on
DISTRIBUTOR than the terms of the BI Agreement.
(c) If DISTRIBUTOR has objected to the alternative or additional
manufacturer proposed by L&I pursuant to sub-section 6.13(a)
above, then the sixty day period
- ------------------
(21) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(22) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 27
specified in sub-section 6.13(b) above shall not start until
DISTRIBUTOR has withdrawn such objection or an arbitrator has
decided that DISTRIBUTOR does not have grounds for such
objection, whichever is the earlier.
(d) In the event that there is a new manufacturer as a result of
BI failing to meet BI's obligations under the BI AGREEMENT
and/or BI terminating the BI AGREEMENT and/or expiration of
the BI AGREEMENT and/or BI not having the capacity to produce
PRODUCT forecasted by L&I and/or DISTRIBUTOR, then
notwithstanding Section 6.13(b), DISTRIBUTOR shall bear
one-third of the cost of effecting a change in and/or
providing an additional manufacturer.
(e) In the event that L&I intends to change the process for
manufacturing PRODUCT, DISTRIBUTOR shall be provided notice
thereof as provided in Section 6.13(a). In addition to
DISTRIBUTOR'S rights under Section 6.13(a), DISTRIBUTOR shall
have the right to object to a manufacturer and/or a change to
the process on the basis that it will put the PRODUCT at risk
in the marketplace by written objection to L&I within thirty
(30) days after such notice from L&I. The PARTIES shall then
exert reasonable efforts to insure that such change in
process or change in manufacturer does not put the PRODUCT at
risk in the marketplace.
6.14 ALTERNATE FORECASTING/ORDERING PROCEDURES.
In the event that L&I is supplying PRODUCT to DISTRIBUTOR that is
being manufactured for L&I by a manufacturer other than BI, then
DISTRIBUTOR shall provide forecasts and place orders under this
AGREEMENT in a manner that is consistent with the manufacturer's
requirements.
7. PAYMENT
7.1 (a) All payments under this AGREEMENT shall be remitted in
immediately available funds.
(b) In the event that any payment due hereunder is not made when
due, the payment shall accrue interest beginning on the first
day of the month following the date when such payment was
due, at PRIME plus one percent, the interest being compounded
on the last day of each calendar month; provided that in no
event shall said annual rate exceed the maximum legal
interest rate for corporations. Such payment when made shall
be accompanied by all interest accrued. Said interest and the
payment and acceptance thereof shall not negate or waive the
right of the receiving PARTY to any other remedy, legal or
equitable, to which the receiving PARTY may be entitled
because of the delinquency of the payment.
8. BI AGREEMENT
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<PAGE> 28
8.1 ACTIVITIES UNDER BI AGREEMENT.
(a) DISTRIBUTOR has been provided with a copy of the BI AGREEMENT
and acknowledges and agrees that PRODUCT to be supplied by
L&I to DISTRIBUTOR that will be manufactured and supplied
under the BI AGREEMENT is subject to the terms and conditions
of the BI AGREEMENT.
(b) L&I and DISTRIBUTOR shall agree to Standard Operating
Procedures that will give DISTRIBUTOR responsibility for
managing logistical and operational details with BI with
respect to PRODUCT to be supplied to DISTRIBUTOR that is
manufactured under the BI AGREEMENT.
(c) L&I agrees to consult with DISTRIBUTOR as material issues
arise in the relationship between L&I and BI; provided,
however, that L&I shall have the right within its sole
discretion to decide and make all decisions with respect to
all aspects thereof provided, however, that L&I shall not
make any change to the SPECIFICATIONS which could have an
effect on the quality of the PRODUCT without the prior
written consent of DISTRIBUTOR, such consent not to be
unreasonably withheld or delayed. The PARTIES agree that such
consultation shall occur in the event that L&I is called upon
to give its consent to a manufacturing subcontractor pursuant
to Section 2.4 of the BI AGREEMENT, but the final decision
with respect thereto is within the sole discretion of L&I.
(d) Following execution of this AGREEMENT, the PARTIES will
endeavor to negotiate with BI lower minimum purchase
requirements and shorter lead times than those currently set
forth in the BI AGREEMENT for the submission of forecasts and
purchase orders. Initiation and timing of the approach to BI
to commence such negotiations, and management of the
negotiations, shall be at the sole discretion and under the
control of L&I.
8.2 FORECASTS; ORDERS; WARRANTIES.
For the period during which PRODUCT supplied by L&I to DISTRIBUTOR is
being manufactured under the BI AGREEMENT:
(i) DISTRIBUTOR agrees to place orders and
to make forecasts for PRODUCT in accordance with the
requirements of the BI AGREEMENT and that any claims
with respect to defective or non-conforming PRODUCT
shall be made in accordance with and are governed
and limited by the BI AGREEMENT. In particular and
without limitation, rolling forecasts and firm
orders are to be placed in accordance with Section
2.5 of the BI AGREEMENT. In making orders,
DISTRIBUTOR shall indicate the quantity of PRODUCT
being ordered for the PROFIT SHARING TERRITORY and
OTHER TERRITORY, respectively. DISTRIBUTOR shall
have the rights set forth in Sections 3.2 and 3.3 of
the BI AGREEMENT regarding testing of PRODUCT,
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<PAGE> 29
auditing of BI (subject to the consent of BI), and
rejection of defective PRODUCT.
(ii) L&I warrants and represents that the
PRODUCT to be supplied to DISTRIBUTOR hereunder
corresponds to the SPECIFICATIONS and shall be
produced according to current Good Manufacturing
Practices standards as of the date and time of
production and in accordance with all applicable
laws, rules and regulations in the country where
produced. L&I further warrants and represents that
the PRODUCT shall be delivered to DISTRIBUTOR free
and clear of liens and claims which affect title.
L&I makes no other warranties and representations
with respect to the manufacture of PRODUCT.
Notwithstanding anything else to the contrary, L&I's
liability with respect to any such warranty or
representation is limited to the amount and in the
manner set forth in Section 3.6 of the BI AGREEMENT.
The warranties and representations of L&I set forth
in this Section 8.2(ii) shall not apply to the
activities of DISTRIBUTOR performed pursuant to
Section 6.2; in such case the warranties and
representations of L&I shall apply only to FILLED
PRODUCT.
(iii) L&I agrees to provide DISTRIBUTOR
with the documentation provided by BI to L&I under
Section 3.8 of the BI AGREEMENT.
(iv) In the event that L&I fails to
purchase the minimum quantities of PRODUCT specified
in Section 2.8 of the BI AGREEMENT and L&I is
obligated to pay a surcharge under Section 5.2 of
the BI AGREEMENT, then, subject to Section 6.13,
DISTRIBUTOR shall pay to L&I the amount of such
surcharge ("Surcharge"). The Surcharge paid by
DISTRIBUTOR, multiplied by the "Fraction" (as
hereinafter defined), shall be COST OF GOODS for the
PROFIT SHARING TERRITORY for the applicable YEAR and
the remainder thereof shall be COST OF GOODS for the
OTHER TERRITORY under Section 6.7(b) of this
AGREEMENT. The "Fraction" has as a numerator the NET
SALES of PRODUCT by DISTRIBUTOR in the PROFIT
SHARING TERRITORY in the applicable YEAR and, as the
denominator, NET SALES of PRODUCT in the TERRITORY
for the applicable YEAR.
(v) In the event that a payment is due to BI
under Section 8.5 of the BI AGREEMENT, DISTRIBUTOR
shall pay ******(23) of such amount.
(vi) In the event that L&I receives a
credit or no charge replacement of PRODUCT from BI
for PRODUCT for which L&I has
- --------------------
(23) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 30
received payment from DISTRIBUTOR, L&I will credit
DISTRIBUTOR for such amount. Where DISTRIBUTOR
notifies L&I of a claim for such credit or no charge
replacement under the BI AGREEMENT, L&I will use all
reasonable efforts to obtain such credit or no
charge replacement to the extent permitted under the
BI AGREEMENT.
9. LOAN.
9.1 (a) DISTRIBUTOR agrees to make a loan to L&I of Thirty million dollars
($30,000,000) in the following amounts and at the following times in
order to assist L&I in meeting L&I's financial obligations under this
AGREEMENT:
(i) ******(24)
(ii) ******(25)
(iii) ******(26)
(iv) ******(27)
(v) ******(28) provided, however that DISTRIBUTOR'S
obligation to make the payment contemplated by this
subsection shall not become due until DISTRIBUTOR'S option to
terminate this AGREEMENT pursuant to Section 11.1(c) has
expired without DISTRIBUTOR having terminated this AGREEMENT.
(vi) ******(29) provided, however, that DISTRIBUTOR'S
obligation to make the payment contemplated by this
subsection shall not become due until DISTRIBUTOR'S option to
terminate this AGREEMENT pursuant to section 11.1(c) has
expired without DISTRIBUTOR having terminated this AGREEMENT.
- --------------------
(24) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(25) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(26) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(27) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(28) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(29) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
30
<PAGE> 31
(b) The loans that are made under Section 9.1(a) shall bear
interest at PRIME plus one percent (1%) per annum.
(c) To the extent that the outstanding principal of any loan made
pursuant to Section 9(a) has not been reduced under Sections
12.2 and 12.3, such outstanding principal and any accumulated
interest are repayable to DISTRIBUTOR out of L&I's portion of
positive EARNINGS payable to L&I pursuant to Section 3.6.
(d) L&I shall have no liability for repayment of the loans except
in accordance with the provisions of Sections 3.6, 12.2 and
12.3.
10. DEVELOPMENT COMMITTEE
10.1 (a) The development of PRODUCT in the TERRITORY for INDICATIONS
shall be managed and directed by a committee composed of four
members, with DISTRIBUTOR appointing two (2) members and L&I
two (2) members (the "DEVELOPMENT COMMITTEE"), with a member
appointed by L&I being Chairman of the DEVELOPMENT COMMITTEE.
(b) The DEVELOPMENT COMMITTEE shall meet at least once each
CALENDAR QUARTER at the call of the Chairman in person or by
telephone. A quorum for the conduct of business at any
meeting of the DEVELOPMENT COMMITTEE shall consist of at
least one representative of DISTRIBUTOR and at least one L&I
representative. Each of L&I and DISTRIBUTOR shall have one
vote, and all decisions shall be reached by a unanimous vote.
The PARTIES shall cause the DEVELOPMENT COMMITTEE to review
and vote on each submitted DEVELOPMENT PLAN, PRELIMINARY WORK
PLAN and PRELIMINARY WORK PLAN.
(c) The DEVELOPMENT COMMITTEE shall review each approved
DEVELOPMENT PLAN at least once each YEAR or at the request of
any member, and shall decide whether or not to amend the
DEVELOPMENT PLAN.
(d) If there is a tie vote in the DEVELOPMENT COMMITTEE as to a
DEVELOPMENT PLAN or any amendment thereto, or PRELIMINARY
DEVELOPMENT PLAN or PRELIMINARY WORK PLAN, L&I and
DISTRIBUTOR agree to exert all reasonable efforts to arrive
at a mutually acceptable resolution, including a meeting
between the Head of the Therapeutics SBU of DISTRIBUTOR and a
manager of the General Partner of L&I. If such a dispute
relates to OTHER INDICATIONS and resolution is not reached
within thirty (30) days, then dispute resolution shall be as
set forth in Section 12 for the particular INDICATION under
discussion.
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<PAGE> 32
11. DEVELOPMENT FOR CLL INDICATIONS
11.1 (a) With respect to PRODUCT for the CLL INDICATION, L&I shall
bear the cost and expense of the CLINICAL TRIAL and shall
exert commercially reasonable efforts to complete the
CLINICAL TRIAL. If the CLINICAL TRIAL is successful, L&I
shall bear the cost and expense for filing and obtaining
approval of a BLA in the United States based on such CLINICAL
TRIAL, and shall exert commercially reasonable efforts to
file and obtain such BLA.
(b) If the CLINICAL TRIAL is not successful, or if a BLA is not
approved in the United States based solely on the CLINICAL
TRIAL, and DISTRIBUTOR and/or L&I reasonably believe that
additional clinical work should be done to obtain BLA
approval for the CLL INDICATION, then at the option of L&I,
L&I shall either (i) pay the expense of such additional
clinical work to obtain BLA approval for the CLL INDICATION;
or (ii) L&I and DISTRIBUTOR shall initiate good-faith
negotiations to reach agreement with respect to L&I and
DISTRIBUTOR sharing the expenses of such clinical work and an
appropriate reduction in the APPROPRIATE PERCENTAGE for
PRODUCT for the CLL INDICATION.
(c) In the event that a BLA is obtained in the United States or a
BLA equivalent is obtained from the EMEA, in either case for
the CLL INDICATION, and if DISTRIBUTOR concludes that the
labeling is such that the PRODUCT that is the subject of such
BLA or BLA equivalent is not commercially viable, then
DISTRIBUTOR shall have the right to do one of the following,
by written notice to L&I, within thirty (30) days after
receipt from L&I of notice of such BLA or such BLA equivalent
approval and a copy of all approval correspondence received
by L&I from the applicable AGENCY:
i) Terminate this AGREEMENT, in which case
DISTRIBUTOR shall not be required to make the loan payments
under (x) Section 9(a)(v), if the termination is made within
thirty (30) days after receipt from L&I of the notice and
correspondence described above relating to BLA approval; or
(y) under Section 9(a)(vi) if the termination is made within
thirty (30) days after receipt from L&I of the notice and
correspondence described above relating to BLA equivalent
approval; or
(ii) Request L&I to perform additional clinical work
to extend the label for the CLL INDICATION, in which case
DISTRIBUTOR shall reimburse L&I for ******(30) of such
DEVELOPMENT EXPENSES on a CALENDAR QUARTER basis as such
expenses are incurred, within thirty (30) days after receipt
of an invoice therefor; provided, however, that such
- -----------------
(30) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
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DEVELOPMENT EXPENSES shall not exceed a total of four million
dollars ($4,000,000) without the consent of both PARTIES.
(d) With respect to PRODUCT for the CLL INDICATION, L&I shall
exert commercially reasonable efforts to obtain EMEA approval
therefor in Europe and L&I shall bear the cost and expense
thereof. Pricing approvals, if any, shall be obtained at the
cost and expense of DISTRIBUTOR.
(e) In Europe, L&I shall use commercially reasonable efforts to
obtain EMEA approval for PRODUCT for the extension of the CLL
INDICATION in accordance with Appendix D. L&I shall pay all
of the DEVELOPMENT EXPENSES therefor, provided, however, that
DISTRIBUTOR shall pay to L&I ******(31) of such DEVELOPMENT
EXPENSES on a quarterly basis as such expenses are incurred,
within thirty (30) days of invoice therefor.
(f) With respect to PRODUCT for the CLL INDICATION in countries
of the TERRITORY other than the United States and those
countries covered by the EMEA, L&I shall exert commercially
reasonable efforts to develop and obtain regulatory approval
therefor in any country where DISTRIBUTOR desires to market
the PRODUCT. L&I shall pay the DEVELOPMENT EXPENSES therefor
and DISTRIBUTOR shall reimburse L&I for ******(32) of such
DEVELOPMENT EXPENSES on a quarterly basis as such expenses
are incurred, within thirty (30) days of receipt of an
invoice therefor. In the event that L&I materially fails to
exert commercially reasonable efforts to develop and obtain
regulatory approval of the PRODUCT for the CLL INDICATION in
one or more countries of the TERRITORY as provided in this
Section 11.1(f), DISTRIBUTOR may, after forty-five (45) days
prior written notice to L&I, undertake such development and
approval and complete it at DISTRIBUTOR'S own expense if
during such notice period L&I has not begun to carry out such
work in a manner reasonably likely to accomplish the desired
objective. DISTRIBUTOR shall be entitled to commercially
reasonable assistance from L&I to accommodate DISTRIBUTOR'S
efforts, including providing data and study reports in the
possession of L&I, if necessary to permit the exercise by
DISTRIBUTOR of its rights under this Section 11.1(f).
******(33) of all costs reasonably incurred by DISTRIBUTOR in
carrying out activities under this Section shall be
reimbursed to DISTRIBUTOR by L&I on a CALENDAR QUARTER basis
as such expenses are incurred following receipt by L&I of
DISTRIBUTOR'S invoice therefor, or may be deducted by
DISTRIBUTOR
- -----------------------
(31) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
(32) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
(33) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
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from any payments due from DISTRIBUTOR to L&I under this
AGREEMENT, at the option of DISTRIBUTOR. The remedy provided
in this Section 11.1(f) shall be the sole remedy for L&I's
failure to perform L&I's obligations under this Section
11.1(f).
12. DEVELOPMENT FOR OTHER INDICATIONS
12.1 (a) Any PARTY shall have the right to propose to the DEVELOPMENT
COMMITTEE that the PRODUCT be studied for an OTHER
INDICATION. Proposals to the DEVELOPMENT COMMITTEE concerning
the study of an OTHER CANCER INDICATION shall be initiated by
submitting a DEVELOPMENT PLAN to the DEVELOPMENT COMMITTEE.
Proposals to the DEVELOPMENT COMMITTEE concerning the study
of an OTHER NON-CANCER INDICATION shall be initiated by
submitting either a PRELIMINARY WORK PLAN or a DEVELOPMENT
PLAN to the DEVELOPMENT COMMITTEE.
(b) With regard to an OTHER CANCER INDICATION, the PARTIES must
both agree to the DEVELOPMENT PLAN or the OTHER CANCER
INDICATION will not be developed. If a DEVELOPMENT PLAN for
an OTHER CANCER INDICATION is approved by the DEVELOPMENT
COMMITTEE, then L&I shall perform the work under the
DEVELOPMENT PLAN and pay one hundred percent (100%) of the
DEVELOPMENT EXPENSES. DISTRIBUTOR shall pay to L&I ******(34)
of such DEVELOPMENT EXPENSES on a CALENDAR QUARTER basis as
such expenses are incurred, within thirty (30) days of
receipt of L&I's invoice therefor.
(c) With regard to an OTHER NON-CANCER INDICATION:
(i) If either PARTY submits a PRELIMINARY WORK PLAN for
an OTHER NON-CANCER INDICATION to the DEVELOPMENT
COMMITTEE, the DEVELOPMENT COMMITTEE shall decide
whether to approve the PRELIMINARY WORK PLAN. For
the first five (5) YEARS, if the DEVELOPMENT
COMMITTEE cannot agree whether to approve such a
PRELIMINARY WORK PLAN, then the decision of L&I
shall control. After the first five (5) YEARS, work
under such a PRELIMINARY WORK PLAN shall not proceed
unless the PARTIES agree. Aggregate funding under
such PRELIMINARY WORK PLANS for the first five (5)
YEARS shall not exceed one million dollars
($1,000,000) per YEAR without the consent of both
PARTIES. L&I shall perform the work under the
PRELIMINARY WORK PLAN and pay one hundred percent
(100%) of the DEVELOPMENT EXPENSES.
- --------------------
(34) "Confidential treatment requested: material has been omitted and
filed separately with the Commission".
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DISTRIBUTOR shall pay to L&I ******(35) of such
DEVELOPMENT EXPENSES on a CALENDAR QUARTER basis as
such expenses are incurred, within thirty (30) days
of receipt of L&I's invoice therefor.
(ii) With respect to OTHER NON-CANCER INDICATIONS, no
DEVELOPMENT PLAN shall be submitted to the
DEVELOPMENT COMMITTEE in advance of each PARTY being
supplied with a PRELIMINARY DEVELOPMENT PLAN. If
either PARTY submits such a DEVELOPMENT PLAN to the
DEVELOPMENT COMMITTEE, the DEVELOPMENT COMMITTEE
shall decide whether to approve the DEVELOPMENT
PLAN. During the first five (5) YEARS, if the
PARTIES cannot agree the decision of L&I shall
control. After the first five (5) years, both
PARTIES must agree to such a DEVELOPMENT PLAN. If a
DEVELOPMENT PLAN is approved by the DEVELOPMENT
COMMITTEE, either because the DEVELOPMENT COMMITTEE
reached agreement, or during the first five (5)
YEARS, because of the decision of L&I, L&I shall
perform the work under the DEVELOPMENT PLAN and pay
one hundred percent (100%) of the DEVELOPMENT
EXPENSES. DISTRIBUTOR shall pay to L&I ******(36) of
such DEVELOPMENT EXPENSES on a CALENDAR QUARTER
basis as such expenses are incurred, within thirty
(30) days of receipt of L&I's invoice therefor.
Within thirty (30) days of approval of the
DEVELOPMENT PLAN by the DEVELOPMENT COMMITTEE or, at
any time thereafter, by ninety (90) days' prior
written notice, either PARTY shall have the right to
serve notice on the other PARTY that it will not
fund its portion of the DEVELOPMENT EXPENSES as
described in the previous two sentences (the "OPT
OUT OPTION"). If the DISTRIBUTOR chooses to fund its
portion of DEVELOPMENT EXPENSES under an approved
DEVELOPMENT PLAN, then it shall have equal
participation with L&I in the design of clinical
protocols and conduct of activities under the
DEVELOPMENT PLAN.
(iii) The decisions of the PARTIES to pay their portion of
DEVELOPMENT EXPENSES or to exercise their OPT OUT
OPTIONS shall have the following consequences:
(A) In the event that DISTRIBUTOR elects to fund DEVELOPMENT
EXPENSES and L&I exercises its OPT OUT OPTION for PRODUCT for
an OTHER NON-CANCER INDICATION, then L&I shall perform the
work under the DEVELOPMENT PLAN for such INDICATION and
DISTRIBUTOR shall pay for one hundred percent (100%) of the
DEVELOPMENT EXPENSES, which
- --------------------
(35) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(36) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 36
shall be due and payable on a CALENDAR QUARTER basis as such
expenses are incurred, within thirty (30) days after receipt
of L&I's invoice therefor.
(B) In the event that DISTRIBUTOR exercises its OPT OUT OPTION
with respect to such a DEVELOPMENT PLAN, then any and all
rights of DISTRIBUTOR under this AGREEMENT for PRODUCT for
the OTHER NON-CANCER INDICATION of the DEVELOPMENT PLAN shall
be terminated upon receipt of such notice.
(C) Subject to DISTRIBUTOR making the payments due from
DISTRIBUTOR under Section 12.1(b) and (c)(ii) and
(c)(iii)(A), as the case may be, L&I shall use commercially
reasonable efforts to develop and obtain regulatory approval
for PRODUCT for each OTHER NON-CANCER INDICATION in each
country of the TERRITORY for which there is a DEVELOPMENT
PLAN for PRODUCT for such OTHER NON-CANCER INDICATION, all in
accordance with the applicable DEVELOPMENT PLAN.
(D) If after DISTRIBUTOR exercises it OPT OUT OPTION L&I decides
to offer rights to a THIRD PARTY for such PRODUCT for such
OTHER NON-CANCER INDICATION after completion of clinical
studies, L&I shall provide written notice thereof to
DISTRIBUTOR and if DISTRIBUTOR is interested in obtaining
such rights as evidenced by written notice from DISTRIBUTOR
within thirty (30) days thereafter, then L&I will negotiate
with DISTRIBUTOR for a period of one month in an attempt to
enter into an agreement with DISTRIBUTOR with respect to such
rights, but neither DISTRIBUTOR nor L&I shall be obligated to
enter into such an agreement. If the PARTIES have not entered
into an agreement within thirty (30) days after initiating
such negotiation, L&I shall have the right to offer or grant
rights to any person or entity on any terms or conditions
within the sole discretion of L&I.
(E) If after DISTRIBUTOR exercises its OPT OUT OPTION with
respect to PRODUCT for an OTHER NON-CANCER INDICATION and if
prior to initiating clinical studies there is a substantial
change to the DEVELOPMENT PLAN in effect at the time of the
election, L&I shall provide written notice thereof to
DISTRIBUTOR and if DISTRIBUTOR is interested in developing
PRODUCT for such OTHER NON-CANCER INDICATION as evidenced by
written notice from DISTRIBUTOR within thirty (30) days
thereafter, then L&I will negotiate with DISTRIBUTOR for a
period of one month in an attempt to enter into an agreement
with DISTRIBUTOR with respect to such rights, but neither
DISTRIBUTOR nor L&I shall be obligated to enter into such an
agreement. If the parties have not entered into an agreement
within thirty (30) days after initiating such negotiation,
L&I shall have the right to offer or grant rights to any
person or entity on any terms or conditions within the sole
discretion of L&I.
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<PAGE> 37
(F) At the time of approval of a DEVELOPMENT PLAN for PRODUCT for
an OTHER NON-CANCER INDICATION which is to be funded by both
L&I and DISTRIBUTOR, L&I and DISTRIBUTOR shall agree to a
plan by which L&I or DISTRIBUTOR is to receive a royalty for
PRODUCT for such OTHER NON-CANCER INDICATION in the event
that L&I or DISTRIBUTOR exercises, as the case may be, its
right to terminate funding of a DEVELOPMENT PLAN for PRODUCT
for such OTHER INDICATION after an agreed to amount of money
has been spent under the DEVELOPMENT PLAN for such OTHER
NON-CANCER INDICATION. It is understood that if L&I
terminates funding, such royalty shall be in addition to any
other payments to which L&I is entitled under this AGREEMENT
and the determined royalty shall be the same for L&I and
DISTRIBUTOR.
(G) If DISTRIBUTOR exercises its OPT OUT OPTION with respect to
PRODUCT for an OTHER NON-CANCER INDICATION, L&I's development
thereof, if any, shall not be subject to the authority of the
DEVELOPMENT COMMITTEE.
(H) Within forty-five (45) days after L&I obtains approval to
market PRODUCT for an OTHER NON-CANCER INDICATION in the
United States or a MAJOR COUNTRY of the TERRITORY, whichever
is earlier, DISTRIBUTOR shall pay to L&I, the PAYMENT AMOUNT
for PRODUCT for such OTHER NON-CANCER INDICATION, provided
that at such time DISTRIBUTOR'S right to distribute PRODUCT
for such OTHER NON-CANCER INDICATION has not been terminated.
The amount paid at such time shall be based on a good faith
estimate at the time of the PAYMENT AMOUNT as made by a THIRD
PARTY agreed to by L&I and DISTRIBUTOR and the payment shall
be adjusted upwardly or downwardly at the time that the
actual PAYMENT AMOUNT can be determined by DISTRIBUTOR by
either paying an additional amount to L&I or L&I refunding
any excess amount paid. It is expressly understood that the
payment of this Section 12.1(c)(iii)(H) shall be paid only
once for each of the rheumatoid arthritis, transplantation
and multiple sclerosis INDICATIONS.
(I) With respect to a proposed DEVELOPMENT PLAN for an OTHER
NON-CANCER INDICATION, if the DEVELOPMENT PLAN is directed to
developing PRODUCT with the same formulation and/or with the
same strength as PRODUCT for the CLL INDICATION or an OTHER
CANCER INDICATION that is then being developed or distributed
under this AGREEMENT, then L&I shall provide objective
evidence to DISTRIBUTOR that it is commercially unreasonable
to develop PRODUCT for such INDICATION with a different
strength and/or formulation, as the case may be. Within
thirty (30) days thereafter, DISTRIBUTOR shall notify L&I in
writing whether or not it agrees with L&I. If DISTRIBUTOR
disagrees, then DISTRIBUTOR shall provide with such notice
the reasons for such disagreement. If DISTRIBUTOR and L&I do
not resolve such disagreement, then either PARTY can submit
the disagreement to arbitration pursuant to Section 19.6. If
DISTRIBUTOR agrees with L&I, or L&I's position is determined
to be correct in
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<PAGE> 38
an arbitration pursuant to Section 19.6, and DISTRIBUTOR
exercises its OPT-OUT OPTION, the provisions of Section
13.6(a)(vi) shall not be applicable to PRODUCT for such
INDICATION, as set forth in such DEVELOPMENT PLAN.
(J) If DISTRIBUTOR exercises its OPT-OUT OPTION with respect to a
PRODUCT for an OTHER NON-CANCER INDICATION after initiation
of development thereof under a DEVELOPMENT PLAN, then the
provisions of Section 13.6(a)(vi) shall not be applicable to
PRODUCT for such INDICATION, as set forth in such DEVELOPMENT
PLAN.
12.2 LOAN REDUCTIONS
With respect to any portion of DEVELOPMENT EXPENSES paid by L&I
pursuant to Section 11 or Section 12 that DISTRIBUTOR is not obligated
to reimburse pursuant to Sections 11 or 12 ("Non-Reimbursed Portion")
to the extent that there is any unpaid principal on loans made to L&I
pursuant to Section 9, DISTRIBUTOR shall forgive the outstanding
principal amount of such loan and any interest thereon in an amount
equal to such "Non-Reimbursed Portion" upon receipt of an invoice
therefor from L&I.
12.3. FURTHER LOAN REDUCTIONS
DISTRIBUTOR shall credit to L&I an amount equal to ten percent (10%)
of DEVELOPMENT EXPENSES paid by L&I under Sections 11 and 12 (whether
or not reimbursed by DISTRIBUTOR) by reducing the outstanding
principal amount of any loan made by DISTRIBUTOR to L&I pursuant to
Section 9 effective upon receipt of an invoice therefor from L&I.
12.4 DISTRIBUTOR AUDIT RIGHTS
L&I shall keep and shall cause each of its AFFILIATES and its and
their contractors to keep full and accurate records and books of
account containing all particulars that may be necessary for the
purpose of calculating DEVELOPMENT EXPENSES to be charged to
DISTRIBUTOR pursuant to this AGREEMENT. Such books of account shall be
kept at their principal places of business and, with all necessary
supporting data shall, for the three (3) years next following the end
of the calendar year to which each shall pertain be open for
inspection by an independent certified accountant selected by
DISTRIBUTOR and reasonably acceptable to L&I upon reasonable notice
during normal business hours at DISTRIBUTOR'S expense for the sole
purpose of verifying charges in compliance with this AGREEMENT, but in
no event more than once each calendar year. All information and data
offered shall be used only for the purpose of verifying charges to
DISTRIBUTOR. In the event that such inspection shall indicate that in
any calendar year the charges which were paid by DISTRIBUTOR were
overstated by at least five percent (5%), then L&I shall pay the cost
of the inspection. All underpayments and overpayments are immediately
due and payable.
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<PAGE> 39
12.5 L&I shall have the right to have work performed on its behalf under
Section 12 by a THIRD PARTY provided, however, that L&I shall be
responsible for the work performed by a THIRD PARTY.
13. OTHER RESPONSIBILITIES
13.1 COMPLIANCE WITH LAW.
In distributing marketing and selling of PRODUCT in the TERRITORY,
DISTRIBUTOR shall comply with all provisions of the laws, rules and
regulations applicable in the TERRITORY.
13.2 PROHIBITION ON EXPORTS.
DISTRIBUTOR agrees not to export PRODUCT outside the TERRITORY without
the express permission of L&I. L&I agrees not to sell or permit the
sale in the TERRITORY by THIRD PARTIES of PRODUCT for an INDICATION
for which DISTRIBUTOR has distribution rights in the TERRITORY.
13.3 NEGATION OF PARTNERSHIP; ETC.
The appointment of DISTRIBUTOR hereunder shall not create a joint
venture, or any employer-employee relationship or principal-agency
relationship between L&I and DISTRIBUTOR. Nothing under this AGREEMENT
shall be deemed to authorize DISTRIBUTOR to act for, represent, or
bind L&I or any of its AFFILIATES. Nothing under this AGREEMENT shall
be deemed to authorize L&I to act for, represent, or bind DISTRIBUTOR
or any of its AFFILIATES. This AGREEMENT does not create a partnership
for United States federal income tax purposes (as defined in Section
761 of the United States Internal Revenue Code), for any United States
state or local jurisdiction, or in any country other than the United
States. Therefore there is no requirement to file Form 1065, United
States Partnership Return of Income, any similar United States state
or local income tax return, or any similar document with tax
authorities in any other country.
13.4 CONFIDENTIALITY.
(a) During the term of this AGREEMENT, it is contemplated that a
PARTY will disclose to the other PARTY proprietary and
confidential technology, specifications, technical
information and the like which are owned or controlled by or
licensed to a PARTY ("Confidential Information"). The
receiving PARTY agrees to retain the disclosing PARTY's
Confidential Information in confidence and not to disclose
any such Confidential Information to a THIRD PARTY without
the prior written consent of the disclosing PARTY and to use
the disclosing PARTY's Confidential Information only for the
purposes of this AGREEMENT. The obligations of
confidentiality will not apply to Confidential Information
which:
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<PAGE> 40
(i) was known to the receiving PARTY or
generally known to the public prior to its
disclosure hereunder;
(ii) subsequently becomes known to the
public by some means other than a breach of this
AGREEMENT;
(iii) is subsequently disclosed to the
receiving PARTY by a THIRD PARTY having a lawful
right to make such disclosure, or is developed by
the receiving PARTY independently of the disclosure
of the disclosing PARTY;
(iv) is required by law or bona fide legal
process to be disclosed provided that the receiving
PARTY takes all reasonable steps to restrict and
maintain confidentiality of such disclosure and
provides reasonable prior notice to the disclosing
PARTY;
(v) is approved for release by the PARTIES;
or
(vi) is preclinical or clinical data or
other information concerning PRODUCT which
DISTRIBUTOR is reasonably required to disclose to
consultants (such as advertising agencies,
reimbursement experts and marketing research
companies), customers, healthcare professionals,
consumers or regulatory agencies as part of its
routine advertising or promotional activities or
medical education, professional services, adverse
event investigation and reporting, or PRODUCT
quality or complaint investigation and reporting
functions, or which is disclosed by DISTRIBUTOR to
AFFILIATES and SUBDISTRIBUTORS in order to allow
them to market and sell PRODUCT in their respective
countries of the TERRITORY as permitted by this
AGREEMENT (provided that such AFFILIATES and
SUBDISTRIBUTORS agree to be bound by the
confidentiality obligations set forth in this
Section).
(b) Upon termination or expiration of this AGREEMENT, each PARTY
shall return to the other PARTY all tangible forms of
Confidential Information furnished by the other PARTY,
including all copies thereof and all memoranda of oral
disclosure, except that each PARTY may retain one copy in its
files to ensure compliance with any legal obligations.
(c) This Section shall survive until the tenth anniversary of the
termination or expiration of this AGREEMENT.
(d) With respect to Confidential Information that is know-how
under the BTG AGREEMENT, DISTRIBUTOR agrees to maintain the
confidentiality thereof in accordance with the DISTRIBUTOR
BTG LETTER.
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<PAGE> 41
(e) Publicity Review. Neither PARTY shall originate any written
publicity, news release, or other announcement or statement
relating to this AGREEMENT, performance hereunder, or the
existence of an arrangement between the PARTIES (collectively
a "Written Disclosure"), without the prompt prior review and
written approval of the other PARTY, which approval shall not
be unreasonably withheld or delayed. Notwithstanding the
foregoing, either PARTY may make any public Written
Disclosure it believes in good faith based upon the advice of
counsel is required by applicable law, rule or regulation or
any listing or trading agreement concerning its or its
AFFILIATES publicly traded securities; provided, however,
that such Written Disclosure shall minimize to the extent
possible the financial information disclosed, and that prior
to making such Written Disclosure, the disclosing PARTY shall
provide to the other party a copy of the materials proposed
to be disclosed and provide the receiving PARTY with an
opportunity to promptly review the Written Disclosure.
13.5 APPOINTMENT OF AUTHORIZED AGENT.
(a) As promptly as possible following the first
approval of a BLA for PRODUCT by FDA, L&I shall, to
the fullest extent possible, authorize DISTRIBUTOR
in writing to represent L&I for purposes of dealing
with APLS in regard to all of DISTRIBUTOR'S
activities with respect to the distribution of the
PRODUCT in the United States (which appointment
DISTRIBUTOR shall acknowledge in writing).
DISTRIBUTOR'S activities to market and promote the
PRODUCT will continue to be conducted as an
independent contractor and not as a promotional
agent of L&I. To the extent permitted by FDA,
DISTRIBUTOR shall have authority to deal with APLS
concerning all matters regulated by APLS in
connection with DISTRIBUTOR'S activities as
distributor of the PRODUCT, including without
limitation submission of advertising and promotional
materials and responding (orally and in written
form) to FDA questions, observations and complaints
concerning DISTRIBUTOR'S advertising and promotional
materials for PRODUCT. In the event that FDA
contacts L&I concerning matters that have been
delegated to DISTRIBUTOR pursuant to this Section,
L&I shall attempt to refer FDA to DISTRIBUTOR (and
if such attempt is unsuccessful, shall immediately
notify and, to the extent possible in the
circumstances, permit DISTRIBUTOR to intervene with
FDA and handle the matter).
(b) While acting under Section (a) above,
DISTRIBUTOR shall copy L&I on all correspondence to
FDA contemporaneously with the submission of such
correspondence to FDA (including full copies of all
advertising and promotional materials), shall
promptly copy L&I on all correspondence received
from FDA; shall contact L&I the day of receipt of
any communication from FDA that relates to or
threatens imposition of any penalty; and shall
promptly copy L&I on all contact reports prepared by
DISTRIBUTOR concerning any phone calls or meetings
with FDA.
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<PAGE> 42
(c) If at any point DISTRIBUTOR ceases to be the
distributor of PRODUCT in the United States, then
DISTRIBUTOR shall promptly resign this authority to
represent L&I upon written notice from L&I, and L&I
shall promptly so notify FDA in writing.
(d) If the PARTIES are not successful in having
DISTRIBUTOR authorized to represent L&I in these
matters before ALPS as set forth in Section 13.5
(a), then this Section 13.5 (d) shall be applicable.
L&I shall promptly inform DISTRIBUTOR of
communications with FDA concerning DISTRIBUTOR'S
advertising and promotional materials and promptly
provide DISTRIBUTOR with copies of FDA
correspondence. Prior to communicating with FDA
about DISTRIBUTOR'S advertising and promotional
materials, L&I shall consult with DISTRIBUTOR, and
shall transmit the DISTRIBUTOR position on the
applicable matter to FDA. To the extent permitted by
FDA, L&I shall include DISTRIBUTOR in all meetings
and conference calls with FDA relating to
DISTRIBUTOR'S advertising and promotional materials,
and during such meetings and conference calls shall
not make proposals or accede to FDA proposals which
have not been previously cleared with DISTRIBUTOR.
L&I shall promptly provide to DISTRIBUTOR copies of
all L&I contact reports and meeting minutes relating
to interaction with FDA relating to DISTRIBUTOR
advertising and promotional materials. Written
submissions to FDA concerning DISTRIBUTOR'S
advertising and promotional materials shall be
prepared by DISTRIBUTOR and submitted by L&I. L&I
shall keep DISTRIBUTOR promptly informed of the
status of matters at FDA involving DISTRIBUTOR'S
advertising and promotional materials.
(e) The rights and obligations of DISTRIBUTOR under
this Section 13.5 shall be exercised by
DISTRIBUTOR'S United States AFFILIATE.
13.6 EXCLUSIVITY PROTECTION FOR DISTRIBUTOR.
(a) L&I will not:
(i) except as permitted by this AGREEMENT, sell PRODUCT
in a country for an INDICATION for which DISTRIBUTOR
is then distributing the PRODUCT, or for which
DISTRIBUTOR is entitled to distribute the PRODUCT,
under this AGREEMENT;
(ii) encourage in any way the off label use of the
PRODUCT in a country for any INDICATION for which
DISTRIBUTOR is then distributing the PRODUCT, or for
which DISTRIBUTOR is entitled to distribute PRODUCT,
under this AGREEMENT;
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<PAGE> 43
(iii) other than for the benefit of and at the express
request of DISTRIBUTOR, sponsor or otherwise support
medical education or similar programs designed to
foster use of the PRODUCT in a country for any
INDICATION for which DISTRIBUTOR is then
distributing the PRODUCT, or for which DISTRIBUTOR
is entitled to distribute the PRODUCT, under this
AGREEMENT;
(iv) other than for the benefit of and at the express
request of DISTRIBUTOR, seek approval in a country
of the OTHER NON-CANCER INDICATION by way of a
supplement or amendment of any BLA or foreign
equivalent under which DISTRIBUTOR is distributing
the PRODUCT, or for which DISTRIBUTOR is entitled to
distribute the PRODUCT, under this AGREEMENT;
(v) market the PRODUCT under the TRADEMARK;
(vi) except for the benefit of and at the express request
of DISTRIBUTOR, sell PRODUCT for an OTHER NON-CANCER
INDICATION by way of a PRODUCT with the same package
size as the PRODUCT being distributed by DISTRIBUTOR
and subject to Section 12.1(c)(iii)(I) and (J) with
the same formulation or strength as the PRODUCT
being distributed by DISTRIBUTOR.
(b) In the event that DISTRIBUTOR can demonstrate by objective
proof that PRODUCT distributed by L&I or any licensee or
distributor of L&I other than DISTRIBUTOR is being used for
an INDICATION for which DISTRIBUTOR retains distribution
rights granted by L&I, and that for any CALENDAR QUARTER in a
country of the TERRITORY such use exceeds five percent (5%)
of DISTRIBUTOR'S sales of PRODUCT for such CALENDAR QUARTER,
then within thirty (30) days of such demonstration by
DISTRIBUTOR and within thirty (30) days of each CALENDAR
QUARTER thereafter that such use exceeds five percent (5%),
L&I shall pay to DISTRIBUTOR, a sum equal to ******(37) of the
gross sales of L&I, or the licensee or distributor of L&I, as
applicable, of the amount of such PRODUCT that is used for
such INDICATION in such country for such CALENDAR QUARTER.
Any dispute arising under this Section shall be resolved by
binding arbitration pursuant to Section 19.6. DISTRIBUTOR'S
remedy hereunder is without prejudice to L&I's obligations
pursuant to Section 13.6(a).
(c) L&I will cause its distributors and licensees of any OTHER
NON-CANCER INDICATION to agree in writing to the terms of
Section 13.6(a) and (b), and will provide a copy of such
writing to DISTRIBUTOR promptly following its
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(37) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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<PAGE> 44
execution. DISTRIBUTOR will be named a third party
beneficiary of such writing, with the right to seek legal
remedies to enforce the terms of such writing.
13.7 EXCLUSIVITY PROTECTION FOR L&I.
(a) DISTRIBUTOR will not market or sell PRODUCT other than
pursuant to the rights granted to and retained by DISTRIBUTOR
under this AGREEMENT.
(b) DISTRIBUTOR will not encourage in any way the off label use
of the PRODUCT sold by DISTRIBUTOR for any INDICATION in any
country for which DISTRIBUTOR does not have or no longer has
distribution rights under this AGREEMENT.
(c) DISTRIBUTOR will not sponsor or otherwise support medical
education or similar programs designed to foster use of the
PRODUCT in any country for any INDICATION for which
DISTRIBUTOR does not have or no longer has distribution
rights under this AGREEMENT.
(d) In the event that L&I can demonstrate by objective proof that
PRODUCT distributed by DISTRIBUTOR is being used for an
INDICATION in a country for which DISTRIBUTOR no longer has
distribution rights under this AGREEMENT and that such use of
such PRODUCT for such INDICATION in such country for any
CALENDAR QUARTER exceeds five percent (5%) of L&I's (or its
distributor's or licensee's) sales of PRODUCT for such
CALENDAR QUARTER in such country, then within thirty (30)
days of such demonstration by L&I and within thirty (30) days
of each CALENDAR QUARTER thereafter that such situation
exists, DISTRIBUTOR shall pay to L&I, a sum equal to
******(38) of the gross sales of DISTRIBUTOR of the amount of
PRODUCT that is used for such INDICATION in such country in
such CALENDAR QUARTER. Any dispute arising under this Section
shall be resolved by binding arbitration pursuant to Section
19.6. L&I's remedy hereunder is without prejudice to
DISTRIBUTOR'S obligations pursuant to Section 13.7(a).
13.8 OWNERSHIP OF REGULATORY LICENSES.
L&I shall own all regulatory licenses for PRODUCT in the TERRITORY.
13.9 AFFILIATES AND SUBDISTRIBUTORS.
DISTRIBUTOR and L&I may each perform its obligations and exercise its
rights under this AGREEMENT personally or thorough one or more
AFFILIATES, although DISTRIBUTOR or L&I as the case may be shall
nonetheless be solely responsible for the
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(38) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
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performance of its AFFILIATES with respect to such obligations
performed by an AFFILIATE. DISTRIBUTOR shall not permit any of its
AFFILIATES to commit any act (including any act of omission) which
DISTRIBUTOR is prohibited hereunder from committing directly. Subject
to Section 2.3, DISTRIBUTOR may perform its obligations and exercise
its rights under this AGREEMENT personally or through one or more
SUBDISTRIBUTORS, although DISTRIBUTOR shall nonetheless be solely
responsible for the performance of its SUBDISTRIBUTORS. DISTRIBUTOR
shall not permit any SUBDISTRIBUTOR to commit any act (including any
act of omission) which DISTRIBUTOR is prohibited hereunder from
committing directly. DISTRIBUTOR warrants and guarantees that all of
its AFFILIATES, and its SUBDISTRIBUTORS will perform in accordance
with this AGREEMENT as if they were signatories to this AGREEMENT.
DISTRIBUTOR shall be liable to L&I for any breach of this AGREEMENT by
any of its AFFILIATES or SUBDISTRIBUTORS. L&I shall not permit any of
its AFFILIATES to commit any act that L&I is prohibited from
performing under this AGREEMENT.
13.10 REPORTS.
(a) In addition to the reports, record-keeping and accounting
required by other portions of this AGREEMENT, DISTRIBUTOR
covenants and agrees that DISTRIBUTOR will provide L&I with
the reports, information and forecasts required by clauses
6.6, 8.1,16.5.1, and 16.5.3 of the BTG AGREEMENT to the
extent only that such reports, information and forecasts
relate to PRODUCT for INDICATIONS for which DISTRIBUTOR has
distribution rights in the TERRITORY. L&I shall not, without
the prior written consent of DISTRIBUTOR (such consent not to
be unreasonably withheld or delayed) agree with BTG to any
amendment to the BTG AGREEMENT which would increase the
obligations to be assumed by DISTRIBUTOR under this Section
13.10 beyond those existing on the EFFECTIVE DATE.
(b) As soon as practicable following signature of this AGREEMENT,
L&I shall procure for DISTRIBUTOR the opportunity (together
with L&I) to explain to BTG DISTRIBUTOR's sales
accounting system. L&I and DISTRIBUTOR agree to use
reasonable commercial efforts to achieve agreement with BTG
that BTG will accept DISTRIBUTOR's reporting of sales
information pursuant to Section 6.10 of this AGREEMENT as
satisfactory performance by DISTRIBUTOR of the obligations of
L&I pursuant to Section 8.1 of the BTG Agreement.
13.11 PATENT MARKINGS.
DISTRIBUTOR agrees to include appropriate patent markings specified by
L&I on FINAL FORM PRODUCT distributed under this AGREEMENT.
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13.12 PRECLINICAL AND CLINICAL DATA.
Promptly following the Effective Date, L&I shall provide to
DISTRIBUTOR copies of all preclinical and clinical data available to
L&I relating to PRODUCT. Promptly following BLA filing, L&I shall
provide a copy of the BLA to DISTRIBUTOR, and following BLA approval,
shall promptly provide to DISTRIBUTOR any changed sections of the BLA.
Thereafter, L&I shall promptly provide to DISTRIBUTOR any supplements
to the BLA and any correspondence with FDA concerning the BLA. The
requirements of this Section shall also apply to foreign equivalents
of the BLA, except that duplicate information need not be furnished to
DISTRIBUTOR more than once.
13.13 INFRINGEMENT BY THIRD PARTIES.
In the event that in a country of the TERRITORY a THIRD PARTY is
selling PRODUCT for an INDICATION for which DISTRIBUTOR retains rights
under this AGREEMENT, and such sale infringes a patent owned by or
licensed to L&I, the PARTIES shall consult with each other as to the
appropriate action. If, after such consultation, DISTRIBUTOR and L&I
desire to initiate an infringement action, to the extent that L&I has
the right to do so, L&I shall initiate and prosecute such infringement
action taking into account DISTRIBUTOR'S comments. The cost and
expense of such action and any recovery therefrom shall be split
between L&I and DISTRIBUTOR on the basis of ****** ******(39)
respectively. If one PARTY wishes to proceed and the other PARTY does
not, that PARTY may proceed at its own cost, retaining all recovery
therefrom. To the extent that any patent is licensed under the BTG
AGREEMENT, this Section 13.13 is subject to clause 19 of the BTG
AGREEMENT.
13.14 INFRINGEMENT OF THIRD PARTY RIGHTS.
In the event that any THIRD PARTY brings or threatens to bring an
action against L&I and/or DISTRIBUTOR (or one of their respective
AFFILIATES, or in the case of DISTRIBUTOR, a SUBDISTRIBUTOR) alleging
that the manufacture or sale or use of PRODUCT in the TERRITORY for an
INDICATION for which DISTRIBUTOR has distribution rights constitutes
an infringement of such THIRD PARTY'S patent or other intellectual
property rights, L&I and DISTRIBUTOR shall consult on how best to
defend or settle such action. L&I shall have the right to handle the
defense of such action, but if L&I fails to do so, L&I shall permit
DISTRIBUTOR to handle such defense. Any damages awarded to such THIRD
PARTY and all costs of defending such action shall be borne (i) by L&I
and DISTRIBUTOR in the PROFIT SHARING TERRITORY in the ratio of
******(40) respectively and (ii) only by DISTRIBUTOR in the OTHER
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(39) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
(40) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission."
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TERRITORY, and any royalties paid by DISTRIBUTOR to a THIRD PARTY for
the OTHER TERRITORY as a result of such action shall be THIRD PARTY
ROYALTIES under Section 6.7(a)(v). Neither PARTY may enter into a
settlement of such action without the consent of the other, such
consent not to be unreasonably withheld or delayed.
13.15 SUPERIORITY OF INDEMNITY PROVISIONS.
To the extent that any provision of Section 13.14 is inconsistent with
the indemnity provisions of Section 15, the provisions of Section
13.14 shall prevail.
13.16 COORDINATION OF INSPECTION RIGHTS.
L&I shall use reasonable efforts to coordinate the inspection rights
of Sections 3.8 and 6.12 of this AGREEMENT with BTG so that if BTG and
L&I are to each inspect in a YEAR that such inspection shall occur at
the same time, provided, however, that under each such section, L&I
and BTG may each individually and separately conduct inspection once a
YEAR.
14. TRADEMARK AND TRADE DRESS
14.1 DISTRIBUTOR acknowledges L&I's ownership in or license to the
TRADEMARK and agrees that any and all uses thereof by DISTRIBUTOR in
distributing PRODUCT under this AGREEMENT shall (i)inure to the
benefit of L&I and/or its licensor; (ii)be in a manner that does not
adversely affect the TRADEMARK and/or L&I'S and/or its licensor's
interest therein. .
14.2 DISTRIBUTOR agrees that DISTRIBUTOR will not use the TRADEMARK except
on PRODUCT distributed by DISTRIBUTOR under and in accordance with the
terms and conditions of this AGREEMENT.
14.3 In any country in the TERRITORY in which DISTRIBUTOR retains
distribution rights to PRODUCT under this AGREEMENT, L&I will not
grant rights to a THIRD PARTY to the TRADEMARK and will not use the
TRADEMARK with respect to any product.
14.4 The packaging and trade dress for PRODUCT shall be consistent with the
trade dress used by DISTRIBUTOR for distributing DISTRIBUTOR'S other
products and shall be approved by both L&I and DISTRIBUTOR and shall
be in accordance with all applicable laws, rules and regulations
applicable thereto.
14.5 In the event that in any country of the TERRITORY, it is required or
desirable that DISTRIBUTOR, its AFFILIATES or their SUBDISTRIBUTORS be
recorded as an authorized user of the TRADEMARK, the PARTIES shall
cooperate with each other to effect same.
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15. INDEMNITY
15.1 INDEMNIFICATION BY DISTRIBUTOR FOR NEGLIGENCE, WILLFUL MISCONDUCT, OR
BREACH.
DISTRIBUTOR shall indemnify and hold harmless L&I and its AFFILIATES
and their licensors (including, but not limited to, BTG and its
licensor) and their respective employees, agents, officers, managers,
partners and directors and each of them (an "L&I Indemnified Party")
from and against any and all THIRD PARTY claims, causes of action,
losses, damages and costs (including reasonable attorney's fees) of
any nature made or asserted against an L&I Indemnified Party or
lawsuits or other proceedings filed or otherwise instituted against a
L&I Indemnified Party, in each case by a THIRD PARTY (hereinafter
individually and collectively (an) "L&I Loss(es)") resulting from or
arising out of the packaging, use, marketing or sale by DISTRIBUTOR
its AFFILIATES or their SUBDISTRIBUTORS of PRODUCT in the TERRITORY,
but solely to the extent that such L&I Loss(es) arise out of or result
from the (i) negligence or willful misconduct of DISTRIBUTOR, or the
breach by DISTRIBUTOR of any of its representations or warranties or
obligations or covenants hereunder and/or (ii) the negligence or
willful misconduct of or breach of obligations or covenants hereunder
by AFFILIATES of DISTRIBUTOR or SUBDISTRIBUTORS of DISTRIBUTOR or its
AFFILIATES in performing under or pursuant to or exercising rights
under this AGREEMENT.
15.2 INDEMNIFICATION BY L&I FOR NEGLIGENCE, WILLFUL MISCONDUCT, OR BREACH.
L&I shall indemnify and hold harmless DISTRIBUTOR and its AFFILIATES
and their SUBDISTRIBUTORS, and their respective employees, agents,
officers, managers, partners and directors and each of them (a
"DISTRIBUTOR Indemnified Party") from and against any and all THIRD
PARTY claims, causes of action, losses, damages and costs (including
reasonable attorney's fees) of any nature made or asserted against
a DISTRIBUTOR Indemnified Party, in each case by a THIRD PARTY
(hereinafter individually and collectively (a) "DISTRIBUTOR Loss(es)"
resulting from or arising out of the manufacture, use, marketing or
sale of PRODUCT in the TERRITORY but solely to the extent that such
DISTRIBUTOR Loss(es) arise out of or result from (i) the negligence or
willful misconduct of L&I, or the breach by L&I of any of its
representations or warranties or obligations or covenants hereunder
and/or (ii) the negligence or willful misconduct of or breach of
obligations or covenants hereunder by AFFILIATES of L&I in performing
under or pursuant to or exercising rights under this AGREEMENT.
15.3 GENERAL INDEMNIFICATION BY DISTRIBUTOR.
DISTRIBUTOR shall indemnify and hold harmless any and all L&I
Indemnified Party(ies) from and against any and all L&I Losses
resulting from or arising out of the use, marketing or sale by
DISTRIBUTOR its AFFILIATES or their SUBDISTRIBUTORS of PRODUCT in the
TERRITORY to the extent that such L&I Loss(es) are not within the
provisions of Sections 15.1 or 15.2 and to the extent that such
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L&I Loss(es) exceed any amount recoverable by L&I Indemnified
Party(ies) under any applicable L&I Indemnified Party(ies) insurance;
provided, however, that DISTRIBUTOR'S liability under this section 15.3
shall not exceed ******(41) of such L&I Loss(es) in the PROFIT SHARING
TERRITORY and ******(42) of such L&I Losses in the OTHER TERRITORY.
15.4 GENERAL INDEMNIFICATION BY L&I.
L&I shall indemnify and hold harmless any and all DISTRIBUTOR
Indemnified Party(ies) from and against any and all DISTRIBUTOR
Loss(es) resulting from or arising out of the manufacture, use,
marketing, or sale of the PRODUCT in the TERRITORY to the extent that
such DISTRIBUTOR Loss(es) are not within the provisions of Section
15.1 or 15.2 and to the extent that such DISTRIBUTOR Loss(es) exceed
any amount recoverable by DISTRIBUTOR Indemnified Party(ies) under any
applicable DISTRIBUTOR Indemnified Party(ies) insurance; provided,
however, that L&I's liability under this section 15.4 shall not exceed
******(43) of such DISTRIBUTOR Loss(es) in the PROFIT SHARING TERRITORY
and ******(44)of such DISTRIBUTOR Losses in the OTHER TERRITORY.
15.5 CONDITIONS TO INDEMNIFICATION.
A person or entity that intends to claim indemnification under this
Section 15 (the "Indemnitee") shall promptly notify the other party
(the "Indemnitor") of any DISTRIBUTOR Loss(es) or L&I Loss(es) as the
case may be in respect of which the Indemnitee intends to claim such
indemnification. Indemnitor shall have the right to control the
defense of any DISTRIBUTOR Loss(es) or L&I Loss(es) as the case may be
as to which the obligation to indemnify the Indemnitee has been
acknowledged by the Indemnitor in writing under Section 15.1 or 15.2.
Under Sections 15.3 and 15.4, L&I shall have the right to control the
defense in the PROFIT SHARING TERRITORY and DISTRIBUTOR shall have
such right in the OTHER TERRITORY. The indemnity agreement in this
Section 15 shall not apply to amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected
without the consent of the Indemnitor, which consent shall not be
withheld or delayed unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such
action, only if prejudicial to its ability to defend such action,
shall relieve such Indemnitor of any liability to the Indemnitee under
this Section 15, but the omission so to deliver notice to the
Indemnitor will not relieve it of any liability that it may have to
any
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(42) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(43) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(44) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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Indemnitee otherwise than under this Section 15. The Indemnitee under
this Section 15, its employees and agents, shall cooperate fully with
the Indemnitor and its legal representatives in the investigations and
defense of any action, claim or liability covered by this
indemnification. The Indemnitee shall have the right to participate in
the defense of such action.
15.6 INSURANCE.
Each PARTY agrees to obtain and maintain in effect a policy or
policies of insurance covering its indemnity obligations hereunder.
Such policies shall be issued by one or more reputable insurers
reasonably acceptable to the other PARTIES, and shall contain terms of
coverage reasonably acceptable to the other PARTIES. The policy limits
of the policy or policies obtained shall be at least one million
dollars ($1,000,000). Upon the request of any other PARTY to this
Agreement, each PARTY shall provide evidence of insurance coverage in
compliance with this Section to the other PARTIES. In lieu of the
insurance coverage described above, any PARTY shall have the right to
undertake a program of self-insurance to cover its indemnity
obligations hereunder, with financial protection at least equivalent
to the policy limits described above; provided, however, that such
program of self-insurance shall be reasonably acceptable to the other
PARTY to this Agreement. The obligations described in this Section
shall survive the termination or expiration of this AGREEMENT and
continue to bind the PARTIES for five (5) years after the expiration
date of the last PRODUCT commercialized by DISTRIBUTOR in any country
of the TERRITORY pursuant to this AGREEMENT.
16. ADVERSE REACTIONS; COMPLAINTS
16.1 PREPARATION OF STANDARD OPERATING PROCEDURE.
(a) Promptly following the execution of this AGREEMENT the
PARTIES agree to enter into a standard operating procedure to
govern collection, investigation and reporting to regulatory
authorities of PRODUCT-related adverse drug experience
reports, quality reports, and complaint reports, such that
all of the PARTIES can comply with their legal obligations
worldwide. The standard operating procedure will be promptly
amended as changes in legal obligations require.
16.2 AGENCY ACTION.
The PARTIES agree to notify each other as soon as possible of any
information received by a PARTY regarding any threatened or pending
action by an AGENCY which may affect the safety or efficacy claims of
PRODUCT or the continued marketing of such PRODUCT.
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16.3 RECALLS.
(a) If any governmental authority having jurisdiction requires or
reasonably requests any PARTY to recall any PRODUCT due to a
defect in the manufacture, processing, packaging or labeling
of PRODUCT or for any other reason whatsoever, such PARTY
shall immediately notify all of the other PARTIES to this
AGREEMENT. EITHER PARTY shall also have the right to initiate
this recall procedure absent a request from a governmental
authority after consultation with the other PARTY, provided,
however, that if L&I decides to initiate a recall in the
OTHER TERRITORY and DISTRIBUTOR does not agree to such
recall, then ******(45) of the cost and expense thereof shall
be paid by L&I and ******(46) by DISTRIBUTOR.
(b) Prior to commencing any recall, DISTRIBUTOR shall review with
L&I the proposed manner in which the recall is to be carried
out. DISTRIBUTOR agrees to follow any reasonable advice of
L&I as to the manner of completing the recall, so long as
such advice is agreeable to the governmental authority
involved, if any.
DISTRIBUTOR shall carry out the recall in the manner agreed
upon between L&I and DISTRIBUTOR in as expeditious a manner
as possible and in such a way as to cause the least
disruption to the sales of the PRODUCT and to preserve the
goodwill and reputation attached to the PRODUCT and to the
names of DISTRIBUTOR, LEUKOSITE, ILEX and L&I.
(c) DISTRIBUTOR agrees that appropriate records and procedures
will be maintained to permit a recall of PRODUCT.
(d) Subject to Section 16.3(a) and deduction against EARNINGS as
a RECALL EXPENSE, DISTRIBUTOR shall pay for and bear the cost
and expense of any recall under this Section 16.3.
17. WARRANTIES
17.1 MUTUAL WARRANTY.
Each party warrants and represents that it has the full right and
authority to enter into this AGREEMENT and that it is not aware of any
impediment which would inhibit its ability to perform the terms and
conditions imposed on it.
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(45) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
(46) "Confidential treatment requested: material has been omitted and
filed Separately with the Commission".
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17.2 L&I WARRANTIES.
(a) L&I warrants and represents that
(i) as of the Effective Date the BTG AGREEMENT is in full
force and effect; prior to the Effective Date L&I has provided
DISTRIBUTOR with an accurate and complete copy of the BTG AGREEMENT,
including all amendments thereto and documents incorporated therein by
reference.
(ii) as of the Effective Date, neither L&I nor LEUKOSITE has
received any notice from BTG that either LEUKOSITE or L&I is presently
in breach of the BTG AGREEMENT;
(iii) during the term of the AGREEMENT neither L&I nor
LEUKOSITE will amend the BTG AGREEMENT in a manner that materially
affects DISTRIBUTOR'S rights or obligations under this AGREEMENT
without the prior written consent of DISTRIBUTOR. For the avoidance of
doubt, the PARTIES agree that any charge resulting in an increase in
payments payable by DISTRIBUTOR hereunder shall constitute a change
which materially affects DISTRIBUTOR'S rights;
(iv) during the term of this AGREEMENT, L&I and LEUKOSITE
will make all payments required by the BTG AGREEMENT, when due
provided that with respect to the BTG AGREEMENT in the TERRITORY,
DISTRIBUTOR has met DISTRIBUTOR'S obligations under Section 6.8;
(v) as of the Effective Date, without having made an
investigation, L&I has no knowledge of a granted patent in the
TERRITORY which would be infringed by the manufacture, use or sale of
PRODUCT for the INDICATIONS in the TERRITORY, provided, however, that
this warranty is not applicable to the patents licensed under the BTG
AGREEMENT or to those of Appendix E;
(vi) as of the Effective Date, L&I has not received any
notices of infringement of THIRD PARTY patent rights by the
manufacture, use or sale of PRODUCT for the INDICATIONS in the
TERRITORY;
(vii) as of the Effective Date, L&I has not received an
opinion of counsel that any patent owned by L&I or licensed to L&I
under the BTG AGREEMENT relating to the manufacture, use or sale of
PRODUCT for the INDICATIONS in the TERRITORY is invalid or
unenforceable;
(viii) as of the Effective Date of this AGREEMENT, it has
made available to DISTRIBUTOR all information in L&I's, LEUKOSITE'S
and ILEX'S possession or control or of which it is aware as of the
Effective Date, concerning safety, efficacy, side effects, or toxicity
of the PRODUCT, or sensitivity reactions to the PRODUCT, associated
with any clinical use, studies, investigations, or tests of the
PRODUCT (animal or human), whether or not determined to be
attributable to the PRODUCT;
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(ix) it has conducted or has caused its contractors or
consultants to conduct and will in the future conduct, the preclinical
and clinical studies of the PRODUCT, which, in all material respects,
is in accordance with applicable United States law, known or published
standards of the FDA and EMEA, and the scientific standards applicable
to the conduct of studies in the United States and the European Union,
including without limitation for the United States Good Laboratories
Practices regulations, Good Manufacturing Practices Regulations, and
Good Clinical Practices guidelines;
(x) it has not employed (and, to the best of its knowledge,
has not used a contractor or consultant that has employed) and in the
future will not employ (or, to the best of its knowledge, use any
contractor or consultant that employs) any individual or entity
debarred by the FDA (or subject to a similar sanction of EMEA), or, to
the best knowledge of L&I, any individual who or entity which is the
subject of an FDA debarment investigation or proceeding (or similar
proceeding of EMEA), in the conduct of the preclinical or clinical
studies of the PRODUCT; and
(xi) it is the owner or licensee of the TRADEMARK in the
countries set forth in Appendix F.
17.3 NEGATION OF OTHER REPRESENTATIONS AND WARRANTIES.
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT NEITHER
PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND
EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR VALIDITY OF
ANY PATENTS ISSUED OR PENDING.
17.4 THIRD PARTY LICENSES.
In negotiating THIRD PARTY licenses , L&I will use its commercially
reasonable efforts to obtain a consent (a "Consent") from L&I's
licensors of Appendix G. Such Consent shall contain the agreement of
such licensor to (i) give reasonable written notice to DISTRIBUTOR
prior to terminating the underlying license or contract; (ii) provide
DISTRIBUTOR a reasonable period to cure any default under such license
or contract; and (iii) if the licensor seeks to terminate the license
to L&I, to grant the license to DISTRIBUTOR on the same terms as it
was granted to L&I. The failure to obtain such a consent shall not be
a breach of this AGREEMENT.
17.5 DISTRIBUTOR PAYMENTS UNDER BTG AGREEMENT.
(a) In the event that L&I fails to make a payment
that is due and payable under the BTG AGREEMENT, and
DISTRIBUTOR makes such payment to BTG on behalf of L&I, then
L&I shall pay such amount to DISTRIBUTOR,
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unless such amount is an amount that DISTRIBUTOR should have
paid and did not pay to L&I under Section 6.8 of this
AGREEMENT.
(b) In the event that there is a breach of the BTG
AGREEMENT or a notice of termination thereof, DISTRIBUTOR and
L&I shall cooperate with each other to cure such breach
and/or obtain a withdrawal of the notice of termination, as
the case may be provided, however, that DISTRIBUTOR shall
have the right within its sole discretion to decide if, when
and how to exercise its rights under the BTG CONSENT LETTER.
18. TERM AND TERMINATION
18.1 TERM.
This AGREEMENT is effective as of the date first above written and,
unless sooner terminated as provided herein, shall continue for as
long as DISTRIBUTOR is distributing the PRODUCT in the TERRITORY.
18.2 AGREEMENT TERMINATION.
This AGREEMENT may be terminated by either PARTY if:
(a) (i) the other PARTY fails to observe, perform or otherwise
breaches any of its material covenants, agreements or
obligations under this AGREEMENT in any material respect and
(ii) such failure continues for a period of thirty (30) days
after receipt by the other party of notice thereof from the
party specifying such failure. In the event of a non-monetary
breach, if the breach is not reasonably capable of being
cured within the thirty (30) day period, and the breaching
PARTY is making a good faith effort to cure the breach, the
notifying PARTY may not terminate this AGREEMENT pursuant to
this subsection without a further ninety (90) days elapsing
from the original notice of breach without the breach having
been cured.
(b) the other party files or institutes bankruptcy,
reorganization, liquidation, receivership or similar
proceedings under any debt relief laws or fails for more than
sixty (60) days to take steps to oppose the initiation of
such actions against it.
18.3 USE OF PRODUCT AFTER TERMINATION.
Upon the termination of this AGREEMENT under Section 18.2 or 18.6 for
any reason other than for breach of this AGREEMENT by DISTRIBUTOR,
DISTRIBUTOR shall have the right to sell all PRODUCT in inventory at
the time of termination. All such sales of PRODUCT shall be subject to
the terms of this AGREEMENT, as in effect immediately prior to
termination. If this AGREEMENT terminates for any breach by
DISTRIBUTOR, then L&I may at its discretion buy back all or part of
the PRODUCT that remain in the possession of DISTRIBUTOR and are in
good condition with a reasonable remaining shelf life. All PRODUCT
which is not repurchased by L&I within
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four (4) weeks after termination shall be immediately destroyed by
DISTRIBUTOR at DISTRIBUTOR'S expense. Upon termination of this
AGREEMENT, DISTRIBUTOR shall discontinue use of the TRADEMARK and
discontinue marketing and sale of PRODUCT, except in connection with
any sale of inventory as provided in this Section.
18.4 NO LOAN REPAYMENT.
Without limiting in any way DISTRIBUTOR's rights to recover damages
from L&I in contract or tort or otherwise arising out of any breach by
L&I of this AGREEMENT, upon termination of this AGREEMENT for any
reason whatsoever, DISTRIBUTOR shall not be entitled to repayment of
any loans or payments made to L&I under this AGREEMENT, with the
outstanding loan amounts and any unpaid interest thereon being a fee
for termination of this AGREEMENT.
18.5 REPURCHASE OF CERTAIN PRODUCT.
(a) L&I shall purchase from DISTRIBUTOR any PRODUCT that was
purchased by DISTRIBUTOR from L&I under Section 6.1(d) that
is in the possession of DISTRIBUTOR at COST OF GOODS therefor
in the event that (a) DISTRIBUTOR terminates this AGREEMENT
under Section 11.1(c) or Section 18.6 or under Section 18.2
as a result of a breach thereof by L&I ; or, (b) if this
AGREEMENT is not terminated in the event that any such
PRODUCT cannot be commercially sold.
(b) If L&I is obligated to purchase PRODUCT under Section
18.5(a), L&I shall have the right to pay such amount in
twelve (12) equal consecutive CALENDAR QUARTERLY installments
commencing on the date that is thirty (30) days after (i) the
date of DISTRIBUTOR'S termination notice; or (ii) if the
AGREEMENT is not terminated the date of DISTRIBUTOR'S notice
to L&I that the PRODUCT cannot be sold, as applicable, plus
interest on the unpaid balance at PRIME plus one percent. If
this AGREEMENT has not been terminated to the extent that any
such PRODUCT can be reworked and relabeled in accordance with
applicable law, rules or regulation, DISTRIBUTOR and L&I
shall use reasonable efforts to rework and relabel such
PRODUCT (at the expense of L&I) and if as reworked and
relabeled, the PRODUCT lawfully can be commercially sold in
the United States; L&I shall not be required to purchase such
PRODUCT.
18.6 TERMINATION OF BTG AGREEMENT.
(a) In the event that the BTG AGREEMENT is terminated and
DISTRIBUTOR exercises the rights granted to DISTRIBUTOR by
BTG under the BTG CONSENT LETTER to become a licensee of BTG,
then this AGREEMENT shall remain in full force and effect and
DISTRIBUTOR and L&I shall make such amendments to this
AGREEMENT as are required to meet DISTRIBUTOR'S obligations
under the BTG AGREEMENT to enable DISTRIBUTOR to continue to
sell the PRODUCT under the AGREEMENT while preserving the
economic
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terms of this AGREEMENT for both L&I and SCHERING. In the
event that the BTG Agreement is terminated and DISTRIBUTOR
does not exercise its rights to become a licensee of BTG
pursuant to the BTG CONSENT LETTER, then DISTRIBUTOR shall
have the right to terminate this AGREEMENT.
(b) A termination of the BTG AGREEMENT shall not be a breach of
this AGREEMENT and L&I shall have no liability to DISTRIBUTOR
for a termination of the BTG AGREEMENT.
(c) In the event that the BTG AGREEMENT is terminated and
DISTRIBUTOR becomes a licensee of BTG pursuant to the terms
of the BTG CONSENT LETTER, then to the extent permitted by
the license between DISTRIBUTOR and BTG, L&I shall have the
right to manufacture or have PRODUCT manufactured for sale to
DISTRIBUTOR.
(d) If DISTRIBUTOR exercises its rights to become a licensee of
BTG, DISTRIBUTOR acknowledges that it is becoming such a
licensee under the terms and conditions of the BTG AGREEMENT
and agrees that it will not amend the BTG AGREEMENT in a
manner that materially affects L&I's rights or obligations
under this AGREEMENT without the prior written consent of
L&I.
18.7 EFFECT ON OUTSTANDING OBLIGATIONS.
The termination of this AGREEMENT shall not affect any then
outstanding obligations of DISTRIBUTOR or L&I hereunder, including but
not limited to any payments owed under the provisions of this
AGREEMENT while it was in effect and payment for binding and partially
binding orders under Section 6 and 8.2(i) (but subject to Section
18.5), nor preclude either PARTY from pursuing all rights and remedies
it may have at law or in equity with respect to any breach of this
AGREEMENT nor prejudice either PARTY's right to obtain performance of
any obligation provided for in this AGREEMENT that survives
termination of this AGREEMENT. Any such amount owed to a party shall
be paid within thirty (30) days of the termination of this AGREEMENT.
For the avoidance of doubt, DISTRIBUTOR is not required to make any
loan that is not due to be made under Section 9.1(a) as of the
effective date of termination. The provisions of Sections 3.8, 6.12,
12.4, 13.3, 13.4, 13.5(c), 13.10(a), 14.1, 14.2, 15, 18.3, 18.4, 18.5,
18.6, 18.7, and 19 and any other provisions, which by their intent are
meant to survive termination of this AGREEMENT, shall survive the
termination of this AGREEMENT for the longest period permitted by
applicable law.
18.8 TERMINATION BY DISTRIBUTOR WITHOUT CAUSE.
At any time after five (5) years after the Effective Date, DISTRIBUTOR
shall have the right to terminate this AGREEMENT in the entirety or
its distribution rights with respect to PRODUCT in the PROFIT-SHARING
TERRITORY or in all countries of the OTHER TERRITORY by eighteen (18)
months' prior written notice to L&I. For avoidance of doubt the
PARTIES state that the earliest point at which DISTRIBUTOR
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may terminate this AGREEMENT pursuant to this Section 18.8 is by a
termination notice delivered to L&I forty-two months following the
Effective Date, terminating this AGREEMENT as of the fifth (5th)
anniversary of the Effective Date.
19. MISCELLANEOUS PROVISIONS
19.1 CHOICE OF LAW; VENUE.
This AGREEMENT shall be governed by and construed in accordance with
the laws of the State of Delaware without giving effect to its
conflict of law rules and regulations. Any legal action arising under
this AGREEMENT shall be brought in the United States District Court
located in Delaware. DISTRIBUTOR and L&I hereby submit and consent to
jurisdiction in the State of Delaware and hereby consent to venue in
such court.
19.2 INTEGRATION; AMENDMENT.
This AGREEMENT and appendices referred to herein and the agreement of
Appendix J set forth the entire agreement and understanding between
the PARTIES as to the subject matter thereof and supersedes all prior
agreements in this respect. There shall be no amendments or
modifications to this AGREEMENT, except by a written document which is
signed by both PARTIES.
19.3 HEADINGS.
The headings in this AGREEMENT have been inserted for the convenience
of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular article or
section.
19.4 WAIVER.
Any delay in enforcing a party's rights under this AGREEMENT or any
waiver as to a particular default or other matter shall not constitute
a waiver of a party's right to the future enforcement of its rights
under this AGREEMENT, excepting only as to an expressed written and
signed waiver as to a particular matter for a particular period of
time.
19.5 INVALIDITY.
In the event any provision of this AGREEMENT should be held invalid,
illegal or unenforceable, the remaining provisions shall not be
affected or impaired and the PARTIES will use all reasonable efforts
to replace the applicable provision with a valid, legal and
enforceable provision which insofar as practical implements the
purposes hereof, provided, however, that if the PARTIES fail to reach
such agreement within sixty (60) days, a PARTY whose rights or
obligations are materially affected as a result of a provision being
held invalid, illegal or unenforceable may terminate this AGREEMENT.
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19.6 ARBITRATION.
In the event the PARTIES are unable to reach agreement with respect to
any matter which is to be subject to arbitration in accordance with
Section 6.8(b), 6.13, 12.1(c)(iii)(I), 13.6 or 13.7, such will be
determined through binding arbitration in accordance with the
Commercial Rules of Arbitration of the American Arbitration
Association. The site of the arbitration shall be New York, New York.
The arbitration panel shall be comprised of three (3) arbitrators.
Each PARTY shall be entitled to appoint one arbitrator. The PARTIES
shall appoint their respective arbitrators within thirty (30) days
after submission for arbitration. If either PARTY shall fail to make
timely appointment of its arbitrator, the arbitration shall be heard
and decided by the sole arbitrator duly appointed by the other PARTY.
Where both PARTIES have timely appointed their respective arbitrators,
the two arbitrators so appointed shall agree on the appointment of the
third arbitrator from the list of arbitrators maintained by the
American Arbitration Association. If the PARTIES' appointed
arbitrators shall fail to agree within thirty (30) days from the date
both PARTIES' arbitrators have been appointed, on the identity of the
third arbitrator, then such arbitrator shall be appointed by the
appropriate administrative body of the American Arbitration
Association.
Within ten (10) days of appointment of the full arbitration panel, the
PARTIES shall exchange their final proposed positions with respect to
the matters to be arbitrated, which shall approximate as closely as
possible the closest positions of the PARTIES previously taken in the
negotiations. Within thirty (30) days of appointment of the
arbitration Panel, each PARTY shall submit to the arbitrators a copy
of the proposed position which it previously delivered to the other
PARTY, together with a brief or other written memorandum supporting
the merits of its proposed position. The arbitration panel shall
promptly convene a hearing, at which time each PARTY shall have one
(1) hour to argue in support of its proposed position. The PARTIES
will not call any witnesses in support of their arguments.
The arbitration panel shall select either of the PARTY's proposed
position on the issue as the binding final decision to be embodied as
an agreement between the PARTIES. In making their selection, the
arbitrators shall not modify the terms or conditions of either PARTY's
proposed position; nor will the arbitrators combine provisions from
both proposed position. In making their selection, the arbitrators
shall consider the terms and conditions of this AGREEMENT, the
relative merits of the proposed position and the written and oral
arguments of the PARTIES. In the event the arbitrators seek the
guidance of the law of any jurisdiction, the law of the State of
Delaware shall govern.
The arbitrators shall make their decision known to the PARTIES as
quickly as possible by delivering written notice of their decision to
both PARTIES. Such written notice need not justify their decision. The
PARTIES will execute any and all papers necessary to obligate the
PARTIES to the position selected by the arbitration Panel within five
(5) days of receipt of notice of such selection. The decision of the
arbitrators shall be final
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and binding on the PARTIES, and specific performance may be ordered by
any court of competent jurisdiction.
The PARTIES will bear their own costs in preparing for the
arbitration. The costs of the arbitrators will be equally divided
between the PARTIES.
20. FORCE MAJEURE
20.1 Neither party shall be liable to the other for any default hereunder,
which is not a payment default, which is due to cause beyond the
control of the party in default, including but not limited to the
actions or inactions of any government agency or instrumentality;
breakdown of plant or machinery or shortages of labor, fuel,
transportation of materials, fires, floods, earthquakes, war, riots or
instructions. If either party shall seek to rely on Force Majeure it
shall give written notice to the other indicating the details of the
act which it claims has put due performance of its obligations beyond
its control. In addition, the affected party shall exert all
reasonable efforts to eliminate or cure any Force Majeure event and to
resume performance with all possible speed. In the event this cannot
be done within six (6) months, the parties shall either resolve the
matter by mutual agreement or terminate this AGREEMENT. Each PARTY
shall retain its legal remedies notwithstanding the operation of this
Section.
21. SUCCESSORS
21.1 Subject to Section 22, the rights and obligations included in this
AGREEMENT shall be binding upon the parties hereto and their
successors and assigns.
22. ASSIGNMENT
22.1 This AGREEMENT may not be assigned by either PARTY without the written
consent of the other PARTY, provided, however, that either PARTY shall
have the right to assign this AGREEMENT in connection with the sale or
transfer of all or substantially all of its assets or in the
connection with a merger or consolidation or similar transaction, and
further, with respect to L&I a transfer of its assets to one or more
of its partners or a sale of the partnership.
23. NOTICES
23.1 Any notice to be given under this AGREEMENT shall be effective when
received at the address set forth below by registered or certified
mail or an express delivery service. Notices shall be delivered to the
respective PARTIES at the addresses set forth below:
To L&I: L&I Partners, L.P.
c/o ILEX Oncology, Inc.
11550 IH-10 West, Suite 100
San Antonio, TX 78230
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and
L&I Partners, L.P.
c/o Leukosite, Inc.
215 First Street
Cambridge, MA 02142
Copy to: Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein
6 Becker Farm Road
Roseland, New Jersey 07068
Fax: (973) 994-1744
ATTN: Elliot M. Olstein, Esq.
To SCHERING:
Schering Aktiengesellschaft
13342 Berlin
Germany
Attention: Head of Oncology SBU
Copy to:
Schering Aktiengesellschaft
13342 Berlin
Germany
Attention: Legal Department
Each PARTY shall have the right to designate a separate address for receipt of
purchase orders, forecasts, acknowledgements, invoices and other routine
correspondence relating to supply of PRODUCT.
24. LIMITATION ON COMMITTEE ACTIVITY.
Notwithstanding the creation of the DEVELOPMENT COMMITTEE or MARKETING
COMMITTEE, or any subcommittees thereof, each PARTY to this AGREEMENT shall
retain the rights, powers, and discretion granted to it hereunder, and neither
the DEVELOPMENT COMMITTEE, MARKETING COMMITTEE, nor any subcommittees thereof
shall be delegated or vested with any such rights, powers, or discretion unless
such delegation or vesting is expressly provided for herein or the PARTIES
expressly so agree in writing. Neither the DEVELOPMENT COMMITTEE, MARKETING
COMMITTEE, nor any subcommittee shall have the power to amend or modify this
AGREEMENT which may be amended or modified only as provided in Section 19.2.
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25. AMBIGUITIES.
Ambiguities, if any, in this AGREEMENT shall not be construed against
either PARTY, irrespective of which PARTY may be deemed to have authored the
ambiguous provision.
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IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to
be executed by their respective representatives hereunto duly authorized as of
the day and year first above-written.
SCHERING, A.G. L&I PARTNERS, L.P.
By: By:
------------------------- --------------------------
Name: Name:
----------------------- ------------------------
Title: Title:
---------------------- -----------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. DEFINITIONS..................................................1
2. APPOINTMENT..................................................9
2.1 Grant of Distribution Rights.................................9
2.2 Limitation on Discounting....................................9
2.3 Sales Through SUBDISTRIBUTORS................................9
3. MARKETING IN THE PROFIT-SHARING TERRITORY...................10
3.1 Marketing Committee.........................................10
3.2 Marketing Effort of DISTRIBUTOR.............................11
3.3 Earnings Reports............................................12
3.4 QUARTERLY Payment of APPROPRIATE PERCENTAGE.................13
3.5 YEARLY Payment of APPROPRIATE PERCENTAGE....................13
3.6 Credit Toward Loan Balance..................................14
3.7 Payment in Lieu of EARNINGS.................................14
3.8 Recordkeeping by DISTRIBUTOR................................14
3.9 Co-Promotion................................................15
3.10 Payment of Insurance Premiums...............................15
4. MARKETING IN THE OTHER TERRITORY............................16
4.1 Sales Forecast..............................................16
4.2 Marketing Efforts...........................................16
5. ORPHAN DRUG EXCLUSIVITY.....................................17
6. PURCHASE OF PRODUCTS........................................17
6.1 Purchase and Sale Requirements..............................17
6.2 Certain Packaging and Labeling by DISTRIBUTOR...............19
6.3 Priority in Supply..........................................19
6.4 Title, Risk.................................................20
6.5 Superiority of AGREEMENT....................................20
6.6 Price for PROFIT-SHARING TERRITORY..........................20
6.7 Price for OTHER TERRITORY...................................21
6.8 THIRD PARTY Royalties.......................................22
6.9 Payment for PRODUCT.........................................23
</TABLE>
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<TABLE>
<S> <C> <C>
6.10 Delivery of Accounting.....................................23
6.11 Currency Conversion........................................25
6.12 Recordkeeping by DISTRIBUTOR...............................25
6.13 Manufacturer other than BI.................................25
6.14 Alternate Forecasting/Ordering Procedures..................27
7. PAYMENT....................................................27
BI Agreement...............................................27
8.1 Activities Under BI AGREEMENT..............................28
8.2 Forecasts; Orders; Warranties..............................28
9. LOAN.......................................................30
10. DEVELOPMENT COMMITTEE......................................31
11. DEVELOPMENT FOR CLL INDICATIONS............................32
12. DEVELOPMENT FOR OTHER INDICATIONS..........................34
12.2 Loan Reductions............................................38
12.3. Further Loan Reductions....................................38
12.4 DISTRIBUTOR Audit Rights...................................38
13. OTHER RESPONSIBILITIES.....................................39
13.1 Compliance with Law........................................39
13.2 Prohibition on Exports.....................................39
13.3 Negation of Partnership; Etc...............................39
13.4 Confidentiality............................................39
13.5 Appointment of Authorized Agent............................41
13.6 Exclusivity Protection For DISTRIBUTOR.....................42
13.7 Exclusivity Protection For L&I..............................44
13.8 Ownership of Regulatory Licenses............................44
13.9 AFFILIATES and SUBDISTRIBUTORS..............................44
13.10 Reports.....................................................45
13.11 Patent Markings.............................................45
13.12 Preclinical and Clinical Data...............................46
13.13 Infringement by Third Parties...............................46
13.14 Infringement of Third Party Rights..........................46
13.15 Superiority of Indemnity Provisions.........................47
13.16 Coordination of Inspection Rights...........................47
</TABLE>
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<TABLE>
<S> <C> <C>
14. TRADEMARK AND TRADE DRESS..........................................47
15. INDEMNITY..........................................................48
15.1 Indemnification by Distributor for Negligence,
Willful Misconduct, or Breach.............................48
15.2 Indemnification by L&I for Negligence, Willful
Misconduct, or Breach.....................................48
15.3 General Indemnification by DISTRIBUTOR ...................48
15.4 General indemnification by L&I........................... 49
15.5 Conditions to Indemnification.............................49
15.6 Insurance.................................................50
16. ADVERSE REACTIONS; COMPLAINTS......................................50
16.1 Preparation of Standard Operating Procedure...............50
16.2 Agency Action.............................................50
16.3 Recalls...................................................51
17. WARRANTIES.........................................................51
17.1 Mutual Warranty...........................................51
17.2 L&I Warranties............................................52
17.3 Negation of other Representations and Warranties..........53
17.4 Third Party Licenses......................................53
17.5 DISTRIBUTOR Payments Under BTG AGREEMENT..................53
18. TERM AND TERMINATION...............................................54
18.1 Term......................................................54
18.2 Agreement Termination.....................................54
18.3 Use of PRODUCT after Termination..........................54
18.4 No Loan Repayment.........................................55
18.5 Repurchase of Certain Product.............................55
18.6 Termination of BTG AGREEMENT..............................55
18.7 Effect on Outstanding Obligations.........................56
18.8 Termination by DISTRIBUTOR Without Cause..................56
19. MISCELLANEOUS PROVISIONS...........................................57
19.1 Choice of Law; Venue......................................57
19.2 Integration; Amendment....................................57
19.3 Headings..................................................57
19.4 Waiver....................................................57
</TABLE>
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<TABLE>
<S> <C> <C>
19.5 Invalidity................................................57
19.6 Arbitration...............................................58
20. FORCE MAJEURE......................................................59
21. SUCCESSORS.........................................................59
22. ASSIGNMENT.........................................................59
23. NOTICES............................................................59
24. LIMITATION ON COMMITTEE ACTIVITY...................................60
25. AMBIGUITIES........................................................61
</TABLE>
iv
