SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934, FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
Commission File Number
0-28308
CollaGenex Pharmaceuticals, Inc.
----------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 52-1758016
- ---------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
301 South State Street, Newtown, PA 18940
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (215) 579-7388
--------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: X No:
------ ------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of September 30, 1998:
Class Number of Shares Common Stock
- ---------------------- ------------
$.01 par value 8,587,204
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<CAPTION>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1997 and September 30, 1998
December 31, September 30,
1997 1998
------------ -------------
(unaudited)
(in thousands except
share amounts)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 16,379 $ 11,296
Short-term investments ............................... 6,392 3,984
Interest receivable .................................. 88 80
Prepaid expenses ..................................... 190 500
-------- --------
Total current assets ............................ 23,049 15,860
Equipment, net .......................................... 103 109
Other assets ............................................ 13 13
-------- --------
Total assets .................................... $ 23,165 $ 15,982
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 551 $ 1,016
Accrued expenses ..................................... 1,906 2,363
-------- --------
Total current liabilities ....................... 2,457 3,379
-------- --------
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued and outstanding ............ -- --
Common stock, $0.01 par value; 25,000,000 shares
authorized; 8,567,579 and 8,587,204 shares issued
and outstanding in 1997 and 1998, respectively ..... 86 86
Additional paid-in capital ........................... 47,298 47,317
Deferred compensation ................................ (313) (222)
Deficit accumulated during the development stage ..... (26,363) (34,578)
-------- --------
Stockholders' equity ............................ 20,708 12,603
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity ...... $ 23,165 $ 15,982
======== ========
See accompanying notes to unaudited condensed consolidated financial statements.
2
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<TABLE>
<CAPTION>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the
Three Months and Nine Months Ended September 30, 1997 and 1998
and for the period from January 10, 1992 (inception) to September 30, 1998
(Unaudited)
Three Months Ended Nine Months Ended For the Period
September 30 September 30, from 1/10/92
-------------------------- -------------------------- (inception) to
1997 1998 1997 1998 9/30/98
----------- ----------- ----------- ----------- -------------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
License revenues ............................... $ -- $ 400 $ 300 $ 400 $ 1,125
Contract revenues .............................. -- 1 -- 8 17
----------- ----------- ----------- ----------- -----------
Total revenues ............................. -- 401 300 408 1,142
----------- ----------- ----------- ----------- -----------
Operating expenses incurred in the
development stage:
Research and development ....................... 1,554 1,801 3,626 4,198 21,560
General and administrative ..................... 1,802 2,419 4,156 5,230 17,021
----------- ----------- ----------- ----------- -----------
Total operating expenses ................ 3,356 4,220 7,782 9,428 38,581
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income ................................ 358 230 976 805 3,006
Interest expense ............................... -- -- -- -- (144)
----------- ----------- ----------- ----------- -----------
Net loss ............................... $ (2,998) $ (3,589) $ (6,506) $ (8,215) $ (34,577)
=========== =========== =========== =========== ===========
Accretion of undeclared dividends
attributable to mandatorily redeem-
able convertible preferred stock ................ $ -- $ -- $ -- $ -- $ 2,597
=========== =========== =========== =========== ===========
Net loss allocable to common
stockholders .................................... $ (2,998) $ (3,589) $ (6,506) $ (8,215) $ (37,174)
=========== =========== =========== =========== ===========
Net loss per share allocable to common
stockholders:
Basic .......................................... $ (0.35) $ (0.42) $ (0.79) $ (0.96)
Diluted ........................................ (0.35) (0.42) (0.79) (0.96)
=========== =========== =========== ===========
Shares used in computing net loss per share
allocable to common stockholders:
Basic .......................................... 8,543,579 8,586,735 8,201,251 8,576,337
Diluted ........................................ 8,543,579 8,586,735 8,201,251 8,576,337
=========== =========== =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
3
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<TABLE>
<CAPTION>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1998 and for
the period from January 10, 1992 (inception) to September 30, 1998
(Unaudited)
Nine Months Ended For the Period
September 30, from 1/10/92
------------------------ (inception) to
1997 1998 9/30/98
--------- --------- --------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .................................................. $ (6,506) $ (8,215) $(34,578)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash research and development expense ............ -- -- 514
Non-cash compensation expense ........................ 93 91 389
Non-cash consulting expense .......................... -- -- 15
Depreciation and amortization expense ................ 26 27 82
Change in assets and liabilities:
(Increase) decrease in interest receivable ...... (100) 8 (80)
Increase in prepaid expenses .................... (44) (310) (500)
Increase in other assets ........................ (2) -- (13)
Increase in accounts payable .................... 492 465 1,016
Increase in accrued expenses .................... 1,069 457 2,363
-------- -------- --------
Net cash used in operating activities ........................ (4,972) (7,477) (30,792)
-------- -------- --------
Cash flows from investing activities:
Organizational costs ...................................... -- -- (5)
Capital expenditures ...................................... (63) (33) (186)
Purchase of short-term investments (available for
sale) .................................................. (18,997) (3,474) (39,191)
Proceeds from the sale of short-term investments
(available for sale) ................................... 16,718 5,882 35,207
-------- -------- --------
Net cash provided by (used in) investing activities .......... (2,342) 2,375 (4,175)
-------- -------- --------
(Continued)
See accompanying notes to unaudited condensed consolidated financial statements.
4
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<PAGE>
<TABLE>
<CAPTION>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1998 and for
the period from January 10, 1992 (inception) to September 30, 1998
(Unaudited)
(Continued from preceding page)
Nine Months Ended For the Period
September 30, from 1/10/92
------------------------ (inception) to
1997 1998 9/30/98
--------- --------- --------------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of preferred stock ................. -- -- 13,508
Proceeds from issuance of common stock .................... 11,567 19 29,730
Proceeds from issuance of promissory notes ................ -- -- 3,150
Repayment of promissory note .............................. -- -- (125)
-------- -------- --------
Net cash provided by financing activities .................... 11,567 19 46,263
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ......... 4,253 (5,083) 11,296
Cash and cash equivalents at beginning of period ............. 9,848 16,379 --
-------- -------- --------
Cash and cash equivalents at end of period ................... $ 14,101 $ 11,296 $ 11,296
======== ======== ========
Supplemental disclosure of cash flows information:
Cash paid for interest .................................... $ -- $ -- $ 23
======== ======== ========
Supplemental schedule of non-cash financing activities:
Conversion of mandatorily redeemable convertible
preferred stock to common stock ......................... $ -- $ -- $ 19,628
======== ======== ========
Accretion of undeclared dividends attributable
to mandatorily redeemable convertible preferred
stock .................................................. $ -- $ -- $ 2,597
======== ======== ========
Conversion of promissory notes to preferred stock ............ $ -- $ -- $ 2,904
======== ======== ========
Deferred compensation ........................................ $ 142 $ -- $ 611
======== ======== ========
Preferred stock issued in connection with technology
license agreements ......................................... $ -- $ -- $ 498
======== ======== ========
See accompanying notes to unaudited condensed consolidated financial statements.
5
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<PAGE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 and 1998
(Unaudited)
(1) BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with generally accepted
accounting principles. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These unaudited condensed consolidated financial statements should
be read in conjunction with the Company's 1997 audited consolidated financial
statements and footnotes.
The accompanying unaudited condensed consolidated financial statements
include the results of the Company and its wholly-owned subsidiary (CollaGenex
International, Ltd.). All intercompany accounts and transactions have been
eliminated.
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements have been prepared on a basis
substantially consistent with the audited consolidated financial statements and
contain adjustments, all of which are of a normal recurring nature, necessary to
present fairly the Company's financial position as of September 30, 1998, its
results of operations for the three and nine months ended September 30, 1997 and
1998 and for the period January 10, 1992 (inception) to September 30, 1998, and
its cash flows for the nine months ended September 30, 1997 and 1998 and for the
period January 10, 1992 (inception) to September 30, 1998. Interim results are
not necessarily indicative of results anticipated for the full fiscal year.
(2) NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS
130 requires that all items defined as comprehensive income, including changes
in the amounts of certain items such as foreign currency translation adjustments
and gains and losses on certain securities, be shown as a component of
comprehensive income in a financial statement. The adoption of SFAS 130 had no
effect on the Company's unaudited condensed consolidated financial statements
contained herein, as the Company had no items of comprehensive income during any
period presented therein.
6
<PAGE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 and 1998
(Unaudited)
(Continued)
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"), was adopted by the Company on December 31, 1997. In accordance
with SFAS 128, all earnings per share data for periods prior to adoption should
be restated to conform to the new standard. There was no change in the
previously reported net loss per share for the three months and nine months
ended September 30, 1997 as computed under SFAS 128.
7
<PAGE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
CollaGenex Pharmaceuticals, Inc. (the "Company") is an emerging
pharmaceutical company focused on developing innovative medial therapies for the
treatment of diseases involving the destruction of the body's connective
tissues. The Company's core technology involves inhibiting the activity of
certain enzymes that degrade the connective tissues of the body. The Company's
first product, Periostat(R), was approved by the United States Food and Drug
Administration (the "FDA") in September 1998 for the treatment of adult
periodontitis, which affects approximately 67 million people in the United
States and is the leading cause of tooth loss. Periostat is a prescription
pharmaceutical capsule indicated as an adjunct to scaling and root planning
("SRP"), the most prevalent therapy for periodontitis, to promote attachment
level gain and to reduce pocket depth in patients with adult periodontitis.
Periostat will be shipped to wholesalers by mid-November and should be available
to patients in the United States no later than December 1, 1998. Substantially
all of the Company's expenditures to date have been for pharmaceutical
development activities, including the development of Periostat, and general and
administrative expenses.
Since inception, the Company has operated with a minimal number of
employees. Substantially all pharmaceutical development activities, including
clinical trials, have been contracted to independent contract research and other
organizations. Following approval from the FDA to market Periostat within the
United States, the Company has begun and anticipates that it will continue to
significantly increase the number of its employees over the next year, primarily
in sales and marketing and general and administrative areas. There can be no
assurance, however, that the Company will successfully market Periostat in the
United States or elsewhere.
The Company has incurred losses each year since inception and had an
accumulated deficit of $34.6 million at September 30, 1998. The Company expects
to continue to incur losses in the foreseeable future from expenditures on sales
and marketing, manufacturing, drug development and administrative activities.
Statements contained or incorporated by reference in this Quarterly Report
on Form 10-Q that are not based on historical fact are "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "estimate,"
"anticipate," "continue," or similar terms, variations of such terms or the
negative of those terms. This Form 10-Q contains forward-looking statements that
involve risks and uncertainties. The Company's business of selling, marketing
and developing pharmaceutical products is subject to a number of significant
risks, including risks relating to the implementation of the Company's sales and
marketing plans for Periostat, risks inherent in research and
8
<PAGE>
development activities, risks associated with conducting business in a highly
regulated environment, risks relating to the Company's Year 2000 compliance and
the Year 2000 compliance of the Company's vendors, suppliers, manufacturers,
distributors, marketing partners and certain other parties and uncertainty
relating to clinical trials of products under development. The success of the
Company depends to a large degree upon the market acceptance of Periostat by
periodontists, dental practitioners, other health care providers, patients and
insurance companies. Other than Periostat, which has been FDA approved for
marketing in the United States, there can be no assurance that any of the
Company's other product candidates will be approved by any regulatory authority
for marketing in any jurisdiction or, if approved, that any such products will
be successfully commercialized by the Company. The Company's actual results may
differ materially from the results discussed in the forward-looking statements
contained herein.
RESULTS OF OPERATIONS
From its founding through September 30, 1998, the Company had no revenues
from sales of its own products. The Company expects to have Periostat available
by prescription no later than December 1, 1998. Operating expenses consist of
research and development expenses and general and administrative expenses.
Research and development expenses consist primarily of funds paid to contract
research organizations for the provision of services and materials for drug
development and clinical trials. General and administrative expenses consist
primarily of personnel salaries and benefits, professional and consulting fees,
insurance, facilities and general office expenses. Following approval from the
FDA in September 1998 to market Periostat within the United States, the
Company's sales and marketing expenses have begun to increase and the Company
believes that its general and administrative expenses will continue to increase
during the next several years due to the expansion of the Company's commercial
infrastructure, primarily in sales and marketing.
The Company earned $8,000 and $1,000 in contract revenues for the nine
months and the three months ended September 30, 1998, respectively, and did not
recognize contract revenues in either of the comparable year earlier periods.
The Company earned an aggregate of $400,000 in licensing revenue during the nine
month and three month periods ending September 30, 1998, compared to an
aggregate of $300,000 for the nine months ended September 30, 1997. There were
no licensing revenues recorded during the three months ended September 30, 1997.
Licensing revenues achieved in 1998 were attributable to the Company's licensing
arrangement with Laboratoires Pharmascience S.A. ("Laboratoires Pharmascience")
executed in July 1998. Licensing revenues achieved in 1997 were attributable to
the Company's licensing arrangement with Boehringer Mannheim Italia.
Research and development expenses increased $572,000, or 15.8%, and
$247,000, or 15.9%, respectively, for the nine months and three months ended
September 30, 1998, over the comparable year earlier periods. Such increases
resulted primarily from expenses relating to a Phase 3b clinical trial for
Periostat initiated during the first quarter of 1998, the initiation of certain
pre-clinical studies for Nephrostat(R), the Company's compound for the treatment
of complications of diabetes, and consulting and product registration fees
associated with obtaining
9
<PAGE>
regulatory approval for Periostat in the United Kingdom. The Company anticipates
that the results from the Phase 3b clinical trial, if favorable, will be used to
support marketing activities for Periostat. There can be no assurance that the
Company will successfully market Periostat in the future.
General and administrative expenses increased $1.1 million, or 25.8%, and
$617,000, or 34.2%, respectively, for the nine months and three months ended
September 30, 1998, over the comparable year earlier periods. Such increases
were primarily due to the Company's pre-launch marketing activities related to
Periostat and sales and marketing efforts related to certain contractual
marketing arrangements entered into during 1997.
Interest income decreased $171,000, or 17.5%, and $128,000, or 35.8%,
respectively, for the nine months and three months ended September 30, 1998,
over the comparable year earlier periods. Such decreases were due to lower
balances in cash and short-term investments as a result of normal operating
activities since the Company's follow-on public offering of Common Stock in
April 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since its origin in January 1992, the Company has financed its operations
through private placements of preferred stock and common stock, an initial
public offering of 2,000,000 shares of common stock, which generated net
proceeds to the Company of approximately $18.0 million after underwriting fees
and related expenses, and a subsequent public offering of 1,000,000 shares of
common stock, which generated net proceeds to the Company of approximately $11.6
million after underwriting fees and related expenses. At September 30, 1998, the
Company had cash, cash equivalents and short-term investments of approximately
$15.3 million, a decrease of $7.5 million from the $22.8 million balance at
December 31, 1997. In accordance with investment guidelines approved by the
Company's Board of Directors, cash balances in excess of those required to fund
operations have been invested in short-term U.S. Treasury securities and
commercial paper with a credit rating no lower than A1/P1. The Company's working
capital of $12.5 million at September 30, 1998 reflected a decrease of $8.1
million in working capital from December 31, 1997.
The Company had no debt or capital leases outstanding (other than accounts
payable and accrued expenses) at September 30, 1998. On June 26, 1997, the
Company entered into a credit arrangement consisting of a $5,000,000 line of
credit (the "LOC") to support the future working capital needs of the Company.
The LOC will be unsecured as long as the Company's cash and investment balances
maintained with the lender or an affiliate of the lender equal or exceed $10.0
million. At the Company's option, the LOC will bear interest at either the prime
rate charged by the lender or LIBOR plus 2.15%. The LOC is terminable by the
lender at any time. No balance was outstanding under the LOC at September 30,
1998.
The Company anticipates that its existing working capital will be
sufficient to fund the Company's operations through at least 1998. The Company
is considering capital raising efforts to satisfy additional working capital
requirements. The Company's future capital requirements and the adequacy of its
available funds will depend on many factors, including the size and scope
10
<PAGE>
of the Company's sales and marketing activities with respect to Periostat, for
which the FDA granted approval to the Company in September 1998 to market within
the United States, the terms of agreements entered into with corporate partners,
if any, and the results of research and development and pre-clinical and
clinical studies for other applications of the Company's core technology. Over
the long term, the Company's liquidity is dependent on market acceptance of its
products and technology.
Year 2000 Compliance
The Company is presently assessing its state of readiness with respect to
the Year 2000 problem. The Company has been informed by the vendor of its
internal accounting, management and financial reporting applications that the
current version of such software is not presently Year 2000 compliant. In early
1999, the Company expects to install an upgraded version of such software which
the vendor has represented is Year 2000 compliant. Management does not
anticipate that Year 2000 issues will have a significant impact on its internal
accounting, management or financial reporting or result in a significant
commitment of resources to resolve potential problems with its systems
associated with this event. The Company is also presently conducting inquiries
of its outside vendors, suppliers, manufacturers, distributors and marketing
partners to assess their respective Year 2000 readiness. Upon completion of the
foregoing, the Company will be able to estimate the financial impact, if any,
should such parties fail to be Year 2000 compliant. The Company has not
developed a contingency plan with respect to Year 2000 issues should they arise.
European Monetary Union
On January 1, 1999, eleven of the fifteen member countries of the European
Union are scheduled to set fixed conversion rates between their existing legacy
currencies and the euro. At such time, these participating countries have agreed
to adopt the euro as their common legal currency. The eleven participating
countries will issue sovereign debt exclusively in euro and will redenominate
outstanding sovereign debt. The legacy currencies will continue to be used as
legal tender through January 1, 2002, at which point the legacy currencies will
be canceled and euro bills and coins will be used for cash transactions in the
participating countries.
The Company does not denominate its international licensing agreements in
foreign currencies. The Company currently does not believe that the euro
conversion will have a material impact on the Company's results of operations or
financial condition.
11
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PART II. OTHER INFORMATION
Item 5. Other Information
New Drug Application
On October 1, 1998, the Company announced that the FDA had granted final
approval to the Company to market Periostat within the United States for the
treatment of adult periodontitis. Periostat is a prescription pharmaceutical
capsule indicated as an adjunct to scaling and root planning to promote
attachment level gain and to reduce pocket depth in patients with adult
periodontitis. The Company expects to have Periostat available by prescription
no later than December 1, 1998. There can be no assurance that the Company will
successfully market Periostat in the United States or elsewhere.
Licensing Agreement
The Company executed a licensing agreement with Laboratoires Pharmascience
in July 1998 pursuant to which Laboratoires Pharmascience will manufacture and
distribute Periostat in France, Morocco, Algeria, Tunisia and other countries of
French speaking Africa. Pursuant to the agreement, Laboratoires Pharmascience
paid the Company a $400,000 non-refundable license fee on August 4, 1998. In
addition, Laboratoires Pharmascience agreed to pay additional fees upon the
achievement of future milestones and royalties upon future sales of Periostat in
such areas. The Company has agreed to use its reasonable efforts to obtain
applicable marketing authorization for Periostat in the licensing territory. The
non-refundable license fee was recorded as licensing revenue in the third
quarter of 1998.
Co-Promotion Agreement
The Company executed a Co-Promotion Agreement with SmithKline Beecham
Consumer Healthcare, L.P. ("SmithKline") in October 1998 pursuant to which the
Company will promote SmithKline's Denavir(R) product, an FDA approved
prescription pharmaceutical for the treatment of recurrent cold sores in healthy
adults, to the United States dental community. The agreement provides for
certain payments by SmithKline to the Company upon future sales of Denavir.
Distribution Services Agreement
The Company executed a Distribution Services Agreement with Cord
Logistics, Inc. ("Cord") in November 1998 pursuant to which Cord will act as the
Company's exclusive distribution agent for Periostat in the United States and
Puerto Rico. Under this agreement, Cord will warehouse and ship Periostat to
wholesalers from its distribution facility in Tennessee for a pre-negotiated fee
and will provide various financial and other support services to the Company.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
*10.1 - License Agreement dated as of June 30, 1998 by and between the
Company and Laboratoires Pharmascience S.A.
+10.2 - Exhibit A to the Manufacturing Agreement as of April 12, 1996 by
and between the Company and Applied Analytical Industries, Inc.,
filed with the Company's Registration Statement on Form S-1 (File
Number 333-3582) which became effective on June 20, 1996.
*10.3 - Co-Promotion Agreement dated October 13, 1998 between SmithKline
Beecham Consumer Healthcare, L.P. and the Company.
*10.4 - Distribution Services Agreement dated August 15, 1998 between
Cord Logistics, Inc. and the Company.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter to which this report
on Form 10-Q relates.
* Confidential treatment has been sought for a portion of this Exhibit.
+ Confidential treatment has been granted for a portion of this Exhibit.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CollaGenex Pharmaceuticals, Inc.
Date: November 13, 1998 By: /s/ Brian M. Gallagher, Ph.D.
------------------------------
Brian M. Gallagher, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1998 By: /s/ Nancy C. Broadbent
-----------------------
Nancy C. Broadbent
Chief Financial Officer (Principal
Financial and Accounting Officer)
==============================================================================
LICENSE AGREEMENT
PERIOSTAT(R)
BETWEEN
COLLAGENEX PHARMACEUTICALS, INC
&
COLLAGENEX INTERNATIONAL LIMITED
AND
LABORATOIRES PHARMASCIENCE S.A.
Dated and effective this 30th day of June 1998
==============================================================================
<PAGE>
==============================================================================
KNOW-HOW AND LICENSE AGREEMENT
==============================================================================
This KNOW-HOW AND LICENSE AGREEMENT (hereinafter "the Agreement") is made and
effective the 30th day of June 1998 by and between COLLAGENEX PHARMACEUTICALS,
INC a company organised and existing under the laws of the State of Delaware,
USA and having a place of business at 301 South State Street, Newtown,
Pennsylvania 18940, USA through its affiliate company COLLAGENEX INTERNATIONAL
LIMITED a company registered and existing under the laws of England and having
its registered office at The Old Stable Block, 7 Buttermarket, Thame,
Oxfordshire OX9 3EW, United Kingdom (hereinafter collectively "CollaGenex") and
LABORATOIRES PHARMASCIENCE S.A. a company organised and existing under the laws
of the Republic of France and having a place of business at 73 Boulevard de la
Mission Marchand, F - 92402 Courbevoie Cedex, France (hereinafter "Licensee")
WITNESSETH:
WHEREAS CollaGenex has developed and has rights to the Products as defined
herein and desires to grant a License to Licensee to market and sell the
Products in the Territory as defined herein and on the terms set forth herein;
and
WHEREAS Licensee desires to License the rights to the Products as defined herein
from CollaGenex for the purposes of marketing and selling the Products in the
Territory;
NOW, THEREFORE, in Consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereto, intending to be legally
bound, hereby undertake and agree as follows:-
1. DEFINITIONS
1.1. The term "Affiliate" shall mean any entity in which the party has a
direct or indirect ownership of at least fifty per cent (50%), or any
entity which directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with the
party.
1.2. The term "Commercial Sale" shall mean any sale which transfers title to
any Product, as defined herein, to a third party. Transfer of title to
an Affiliate of Licensee shall not constitute a Commercial Sale unless
such Affiliate is the intended end user of the Product.
1.3. The term "Confidential Information" shall mean any and all information
or any portion thereof disclosed to or otherwise acquired or observed by
either party or its employees,
<PAGE>
agents or Affiliates (each individually referred to as a "Recipient")
either directly or indirectly from the other party, including, but not
limited to, the Products and/or improvements, enhancements,
modifications, discoveries, claims, formulae, processes, apparatuses,
research, development, patents, Confidential Information, Know-how,
trade secrets, knowledge, designs, drawings, specifications, concepts,
data, reports, methods, documentation, methodology, pricing, marketing
plans, customer lists, salaries or business affairs, and any other
information or knowledge owned or developed or controlled by either
party, except for information which the Recipient can demonstrate:-
1.3.1. was at the time of disclosure to such Recipient part of the public
domain or thereafter becomes part of the public domain through no act or
omission by such Recipient; or
1.3.2. was lawfully in such Recipient's possession as evidenced by written
records prior to disclosure by the disclosing party and without any
obligation of confidentiality; or
1.3.3. was lawfully received by such Recipient after disclosure from a third
party without obligation of confidentiality and without violation by
said third party of any obligation of confidentiality to another party;
or
1.3.4. was required to be disclosed by law or court order.
1.4. The term "Improved Products" shall mean any major improvements to the
Products based on sub antimicrobial doses of doxycycline hyclate as an
inhibitor of collagenolytic activity for use in the treatment of any
form of periodontal disease. Examples of Improved Products include, but
may not be limited to (a) a once a day formulation of the Products (b)
any improvement resulting in patentable subject matter in the Territory.
A change in the salt for the product formulation as defined in Clause
1.7. hereof shall not constitute an Improved Product.
1.5. The term "Know-how" shall mean all data and information concerning the
Products.
1.6. The term "Net Sales" of the Products shall mean the gross invoice price
received and attributable to the Commercial Sale of the Products in the
Territory by Licensee or by an Affiliate of Licensee; less returns,
promotional allowances, import or export taxes, any tax or Governmental
charge levied on the sale, transportation or delivery of such Products
and borne by the seller thereof, commissions to third parties and
customary trade discounts actually taken.
1.7. The term "the Products" shall mean Periostat(R), the doxycycline
hyclate product developed by CollaGenex as a therapy for the treatment
of periodontal disease.
1.8. The term "the Territory" shall mean France, including its Departements
et Territories d'Outre-Mer ("DOM-TOM"); Morocco, Algeria, Tunisia and
the other countries of French speaking Africa.
<PAGE>
1.9. The term "Gross Margin" shall mean the difference between the Net Sales
price of the Products and the price paid by the Licensee to the
manufacturer of the Products plus any transport, duty or local taxes
incurred for the Licensee to receive the Products in its warehouse.
2. LICENSES AND OTHER RIGHTS
2.1. GRANT OF LICENSES. Subject to the limitations described below,
CollaGenex hereby grants to Licensee an exclusive License to use the
Know-how and an exclusive License to use, sell and distribute the
Products in the Territory. Licensee shall have no right to transfer,
assign or sub-license any of its rights hereunder to any third party,
other than Affiliates of Licensee, for any purposes, without the express
written consent of CollaGenex.
2.2. EXCLUSIVITY OF LICENSE. All exclusive licenses granted to Licensee
hereunder will be exclusive as to CollaGenex and all others. CollaGenex
shall retain title to, and be the owner of, any and all Confidential
Information.
2.3. PROHIBITED TRANSFERS. During the term of this Agreement, CollaGenex
agrees that, without Licensee's express written consent, CollaGenex will
not assign, sell, convey, lease, license, transfer, hypothecate,
encumber or suffer imposition of any lien on, grant any right or
interest in, or disclose to any third party in the Territory any of the
Confidential Information concerning the Products save as may be required
to obtain marketing authorisations for the Products in the Territory.
Licensee shall not disclose any Confidential Information furnished by
CollaGenex pursuant to Clause 2.1. hereof to third parties during the
term hereof, or any extension hereto, or at any time thereafter,
provided, however, that disclosure may be made of any such Confidential
Information to the extent necessary to market the Products to
purchasers; provided that such purchasers agree to be bound to a similar
non disclosure agreement. Licensee shall not use any Confidential
Information furnished by CollaGenex other than in the marketing of the
Products in the Territory and only during the term of this Agreement and
any extension hereto.
2.4. SUPPLY OF PRODUCTS. During the term hereof, and any extension hereto,
Licensee may either (a) purchase the Products for resale by Licensee in
the Territory from a European manufacturer licensed and/or approved by
CollaGenex and approved by the relevant regulatory bodies and/or holding
the relevant, current manufacturing certificates or approvals in the
country of manufacture to manufacture the Products and/or (b) purchase
the Products from another European source, approved in advance by
CollaGenex, such source to comply with all regulatory requirements for
the manufacture of the Products and for such manufacture to be carried
out under a confidentiality agreement. The terms and conditions for
supply of the Products shall be agreed upon by Licensee and such third
party manufacturers independent of CollaGenex. Relevant commitments from
the European manufacturing source to Licensee shall be attached to
<PAGE>
this Agreement as Appendix I, such Appendix I to be attached to this
Agreement within thirty (30) days of the effective date hereof.
CollaGenex will render all reasonable assistance to Licensee in
procuring supply of the Products for sale in the Territory. Licensee
shall be responsible for ensuring that all of the Products sourced from
a third party manufacturer shall be of merchantable quality and
otherwise manufactured in accordance with applicable law. Licensee may,
at its discretion, be permitted to source the Products from another
Licensee of CollaGenex, upon terms to be agreed between such Licensees,
provided that the other terms and conditions of this Clause 2.4. shall
be complied with. Other than as defined in Clause 12 hereof, the failure
of a manufacturing source to supply the Products to Licensee resulting
in Licensee having an out of stock situation that lasts up to three (3)
months shall not be cause for termination of this Agreement by
CollaGenex.
2.5. RIGHTS TO IMPROVED PRODUCTS. CollaGenex agrees to notify Licensee, in
writing, of any Improved Products in a reasonably timely manner. Unless
prevented by virtue of other licensing agreements with other licensees,
CollaGenex agrees to grant Licensee a "right of first refusal" for
ninety (90) days from the date of notification of the Improved Products
to negotiate a license agreement under reasonable commercial terms to
obtain (a) an exclusive right and license to use, sell and distribute
Improved Products in the Territory and (b) an exclusive right and
license under patents applicable to the Territory, if any, to use, sell
and distribute Improved Products in the Territory.
2.6. GOVERNMENT SUBMISSIONS. CollaGenex shall use all reasonable efforts to
obtain the applicable marketing authorisations for the Products in the
Territory from the relevant authorities, save where such applications
are made, by prior agreement, by Licensee; and to maintain such
marketing authorisations during the term hereof and any extension
hereto. CollaGenex shall be the owner and party of record sponsoring all
submissions to the regulatory authorities in the Territory with respect
to the Products and to the Improved Products. CollaGenex will furnish
Licensee with all Know-how and relevant documentation required by the
regulatory authorities in the Territory to allow Licensee to use, sell
and distribute the Products in the Territory.
Upon the request of CollaGenex, Licensee shall provide reasonable local
technical and local market knowledge assistance to CollaGenex and/or any
professional advisors to CollaGenex which shall include, but may not be
limited to, contract research and contract regulatory and similar
organisations; in obtaining and maintaining the marketing
authorisations.
2.7. COMMERCIAL INFORMATION. CollaGenex shall use its reasonable commercial
efforts to furnish Licensee with all commercial information in
CollaGenex's possession which may include, but may not be limited to;
market research data; marketing plans; sales plans; promotional
activities; conferences; seminars; exhibitions and the like in which
CollaGenex and/or Affiliates of CollaGenex and/or licensees of
CollaGenex outside of the Territory may be involved or concerned, and
relating to the Products, in English; within a reasonable period of such
commercial information becoming available
<PAGE>
to CollaGenex and which may reasonably be required by Licensee in order
for Licensee to fulfil its obligations hereunder. Licensee understands
and agrees that such commercial information may constitute Confidential
Information hereunder. Licensee shall be responsible for obtaining all
local commercial and pricing authorisations for the marketing of the
Products in the Territory in accordance with the regulations pertaining
to the Territory and shall keep CollaGenex or an Affiliate of CollaGenex
fully informed with regard to progress in obtaining such local
commercial and pricing authorisations.
3. LICENSING FEES AND ROYALTY PAYMENTS
3.1. MILESTONE PAYMENTS AND RUNNING ROYALTIES. In consideration of the
License granted under this Agreement, Licensee agrees to pay to
CollaGenex the following milestone payments at the time intervals
specified:-
3.1.1. The sum of $400,000.00 (four hundred thousand US dollars) upon the
signing of this Agreement, less any sums that may have been paid in
advance.
3.1.2. The sum of * US dollars) upon the
submission of the dossier for the marketing authorisation to the
relevant authorities in France or the submission of the dossier under
the European Mutual Recognition Procedure to a number of countries which
shall include France.
3.1.3. The sum of * US dollars) upon the
granting of the marketing authorisation in France whether or not this
shall have been obtained via direct submission to the French authorities
or under the European Mutual Recognition Procedure.
3.1.4. The sum of * US dollars)
upon the earlier of either (a) the granting of the lesser of (i) a
reimbursed price with a Gross Margin of at least *
or (ii) mutually agreed commercially acceptable pricing and
reimbursement price approvals by the Commission de Transparence and the
Comite Economique in France, or (b) the introduction of the Products in
the French market within the French medicines reimbursement system in
accordance with the provisions of Clause 8.5. hereof.
In addition, a running royalty will be paid in accordance with the
following terms:-
3.1.5. If the approved price in France shall generate a gross margin of *
or more to Licensee, a sum equivalent to *
of the Net Sales for the term of this Agreement or any extension
hereto; or
3.1.6. * plus * of the difference between
the Gross Margin and * with a minimum of *
and a maximum of * .
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
3.2. REPORTS AND PAYMENTS. Payments pursuant to Clauses 3.1.1., 3.1.2.,
3.1.3. and 3.1.4. inclusive hereof will be paid by Licensee to
CollaGenex, by a method designated by CollaGenex, within thirty (30)
days of the milestone or other event specified therein.
No payment shall be due in accordance with the provisions of Clause
3.1.1. hereof if, within thirty (30) days of the effective date of this
Agreement, the parties have met with an Expert Rapporteur to the French
Medicines Agency and have mutually agreed that there is no reasonable
probability of acceptance by the French Medicines Agency of an
application for a marketing authorisation in France and this Agreement
shall immediately terminate save as for the provisions of this Agreement
that shall survive termination.
Licensee undertakes and agrees to notify CollaGenex, in writing, within
seven (7) days of the commercial and pricing approvals specified in
Clause 3.1.4. hereof being obtained. Payments pursuant to Clauses 3.1.5.
and 3.1.6. hereof, as applicable, will be paid, as directed by
CollaGenex, within fifteen (15) days after the end of each calendar
quarter during the term hereof or any extension hereto with respect to
the applicable Net Sales made by Licensee and/or any Affiliate of
Licensee during each calendar quarter.
With each quarterly payment, Licensee will provide CollaGenex with a
written report stating the actual Net Sales made by the Licensee and/or
any Affiliate of Licensee during such prior calendar quarter and the
amount of royalties due to CollaGenex thereon pursuant to this Clause 3.
The minimum payment shown in Clause 10.3. hereof shall be payable
annually after calculation against the actual royalties remitted and any
shortfall remitted, in a manner to be designated by CollaGenex, within
thirty (30) days of the end of such quarter.
The parties have the option to mutually agree, at an appropriate time,
for royalties to be remitted in the European currency "the Euro" (or
such other designation as may be given to a common European currency)
provided that the parties have agreed an exchange rate, subject to the
terms above, of the Euro against the currency in which royalties had
been previously remitted or would have been remitted.
3.3. RECORDING AND INSPECTION. Licensee agrees that for a period of three (3)
years after delivery of each report referred to in Clause 3.2. above, it
shall keep at its principal place of business complete records of
applicable Net Sales received by Licensee and/or any Affiliate of
Licensee and all other information necessary to permit Licensee to
verify the accuracy of the calculations of Net Sales, and to make
regular entries in such records at its earliest business convenience for
the purpose of determining the Net Sales as defined herein.
For the sole purpose of verifying Licensee's performance of its
obligations to make payments hereunder, CollaGenex, solely through its
certified public accountant or authorised representative thereof or
other independent third party designee, will have the right to examine
Licensee's records reflecting such Net Sales and other information,
provided that such examination is made within three (3) years after the
close of the
<PAGE>
calendar year in respect of which Licensee's records are being examined,
conducted within Licensee's normal business hours, made after thirty
(30) days advance written notice to Licensee and limited to no more than
one examination in any one calendar year. The results of such
examination shall be made available to both parties. CollaGenex shall
bear the full cost of the performance of such examination, unless such
examination discloses a variance of more than two per cent (2%) from the
amount of the original report or payment calculation. In such case,
Licensee shall bear the full cost of the performance of such examination
and Licensee shall promptly pay to CollaGenex any variance disclosed in
such examination.
3.4. CURRENCY OF PAYMENT. All payments shall be made in United States dollars
(US$). Royalty payments in United States dollars pursuant to Clauses
3.1.5. and 3.1.6 hereof shall be translated at the rate of exchange at
which United States dollars are listed in the Wall Street Journal
against the French franc, or, as applicable, the Euro; at an average of
the daily rate during the calendar quarter in which Net Sales are
received by Licensee or by an Affiliate of Licensee.
3.5. METHOD OF PAYMENT. All payments shall be made in accordance with the
provisions of Clause 3.2. hereof by Direct Wire Transfer or other
generally accepted method of Bank to Bank currency transfer, all charges
to account of drawer, to an account of CollaGenex's definition and at
the sole discretion of CollaGenex.
4. TRADEMARK MATTERS
4.1. Licensee shall be permitted to use the trade mark "Periostat" in styles
and formats to be designated solely by CollaGenex for the marketing,
selling, advertising and distribution of the Products in the Territory.
4.2. Registration of the trade mark, maintenance and protection of such trade
mark, and all costs associated therewith shall be the sole
responsibility of CollaGenex.
4.3. Licensee shall promptly notify CollaGenex, in writing, in the event of
any infringement of the trade mark, or potential infringement of the
trade mark, in the Territory coming to its attention, or the attention
of one of its Affiliates, and shall assist CollaGenex, to the extent
requested and/or directed by CollaGenex, in protecting the trade mark in
the Territory.
5. REPRESENTATIONS WARRANTIES AND COVENANTS OF THE PARTIES
5.1. REPRESENTATIONS AND WARRANTIES OF COLLAGENEX. CollaGenex hereby
represents and warrants to Licensee that:-
5.1.1. it is a corporation duly organised, validly existing and in good
standing under the relevant laws of the State of Delaware, United States
of America and of England and has full corporate power and authority to
own its properties and to conduct the business in which it is now
engaged;
<PAGE>
5.1.2. it has full corporate power and authority to execute and deliver this
Agreement and to perform all of its obligations hereunder, and no
consent or approval of any other person or Governmental authority is
required therefor. The execution and delivery of this Agreement by
CollaGenex; the performance by CollaGenex of its covenants and
agreements hereunder and the consummation by CollaGenex of the
transactions contemplated hereby have been duly authorised by all
necessary corporate action. This Agreement constitutes a valid and
binding obligation of CollaGenex, enforceable against it in accordance
with its terms;
5.1.3. neither the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, violate any
provision of the Certificate of Incorporation or the Memorandum and
Articles of Association or Bye-Laws of CollaGenex or any law, statute,
ordinance, regulation, order, judgement or decree of any Court or
Governmental agency; or conflicts with or results in any breach of any
of the terms of or constitutes a default under or results in the
termination of or the creation of any lien pursuant to the terms of any
contract or agreement to which CollaGenex is a party or by which any of
the assets of CollaGenex is bound; and
5.1.4. CollaGenex has no knowledge of, and has received no notice of, any claim
of ownership or other adverse interest of any third party with respect
to the Products or the Confidential Information.
5.2. REPRESENTATIONS AND WARRANTIES OF LICENSEE. Licensee hereby warrants and
represents to CollaGenex that:-
5.2.1. it is a corporation duly organised, validly existing and in good
standing under the laws of the Republic of France and has full corporate
power and authority to own its properties and to conduct the business in
which it is now engaged.
5.2.2. it has full corporate power and authority to execute and deliver this
Agreement and to perform all of its obligations hereunder, and no
consent or approval of any other person or Governmental authority is
required therefor. The execution and delivery of this Agreement by
Licensee; the performance by Licensee of its covenants and agreements
hereunder and the consummation by Licensee of the transactions
contemplated hereby have been duly authorised by all necessary corporate
action. This Agreement constitutes a valid and legally binding
obligation of Licensee, enforceable against it in accordance with its
terms; and
5.2.3. neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, violates any
provision of the organisational or governing documents of Licensee nor
any law, statute, ordinance, regulation, order, judgement or decree of
any Court or Governmental agency, or conflicts with or results in any
breach of any of the terms of or constitutes a default under or results
in the termination of or the creation of any lien pursuant to the terms
of any contract or agreement to which Licensee is a party or by which
any of the assets of Licensee is bound.
<PAGE>
5.2.4. it will comply in all respects with the legal requirements of the
Territory relating to the sourcing, storage, marketing, sale and
distribution of the Products.
6. INDEMNIFICATION
6.1. INDEMNIFICATION BY THE PARTIES. Each of the parties hereto will
indemnify the other party from and against any and all losses, claims,
demands, obligations, liabilities, costs, expenses or damages of any
kind or nature (collectively "Damages"), including, but not limited to,
reasonable fees of attorneys; accountants and other professionals,
incurred by the indemnified party as a result of any claim or proceeding
brought against the indemnified party by any person not a party to this
Agreement, to the extent that such claim or proceeding is based on any
of the representations or warranties contained in this Agreement being
untrue or upon breach of any of the provisions of this Agreement;
provided that the indemnified party promptly notifies the indemnifying
party of any such claim or proceeding in writing and gives the
indemnifying party the opportunity to defend or settle such claim or
proceeding. The indemnified party agrees to co-operate with the
indemnifying party, at the indemnifying party's expense, in defending or
settling such claim or proceeding.
6.2. PRODUCT INDEMNIFICATION. Licensee agrees to defend, indemnify and hold
harmless CollaGenex from any and all Damages arising from injury or
damage to persons or property (including, without limitation, product
liability) resulting directly or indirectly from Licensee's sourcing,
storage, marketing, sale and distribution of the Products in the
Territory. CollaGenex warrants to Licensee that all data submitted by
CollaGenex to the appropriate regulatory authority in France or in any
other country where CollaGenex has applied for or may apply for
marketing authorisations are an accurate representation of clinical
trial and other data, to the best of CollaGenex's knowledge and belief,
as warranted by CollaGenex to the appropriate regulatory authorities.
7. CONFIDENTIALITY
7.1. CONFIDENTIALITY. Except to the extent expressly authorised by this
Agreement or otherwise agreed in writing, the parties agree that, for
the term of this Agreement any extension thereto and for a period of
seven (7) years thereafter, the Recipient shall keep completely
confidential and shall not publish or cause to be published or otherwise
disclose and shall not use for any purposes any Confidential Information
furnished to it by the other party or developed pursuant to this
Agreement; provided, however, that after the expiration or termination
of this Agreement, or any extension hereto, either party shall be free
to exploit commercially in any manner any proprietary information and
technology which belongs solely or jointly to it.
7.2. AUTHORISED DISCLOSURE. Each party may disclose Confidential Information
of the party to its employees, agents and Affiliates who (a) are
required to know such information in connection with the permitted use
of such information hereunder and who (b) are bound by customary non-use
and confidentiality obligations as set forth in this Clause 7.
<PAGE>
7.3. BUSINESS TERMS. The parties acknowledge and agree that the financial
terms contained in Clause 3 of this Agreement shall be considered as
Confidential Information hereunder. The parties further agree that
publication of the existence of this Agreement may be of significant
commercial value to each party and the parties agree to allow the
publication of press releases announcing the Agreement by either party,
but only following approval by both parties of the content of such press
releases, or as required by law.
8. TERM AND TERMINATION AND REVERSION OF TECHNOLOGY
8.1. TERM. The term of this Agreement shall be for a period of fifteen (15)
years from the date of first Commercial Sale of the Products in the
Territory and shall thereafter be extended for consecutive five (5) year
terms unless either party shall give the other written notice of
termination eighteen (18) months prior to the end of the applicable
term.
8.2. MUTUAL TERMINATION. The parties hereto may terminate this Agreement by
mutual written consent. Such termination shall be effective sixty (60)
days after such a determination or upon such other date as the parties
may mutually agree.
8.3. TERMINATION RELATED TO REGISTRATION. The parties agree that gaining the
necessary marketing authorisation for the Products in France is pivotal
to this Agreement. CollaGenex agrees to keep Licensee informed regarding
the progress towards necessary regulatory approvals but neither party
shall be liable to the other in the event of delays directly relating to
the actions of a regulatory authority and neither party shall have the
right to terminate this Agreement in relation to regulatory timeframes
except in accordance with Clause 8.2. hereof. CollaGenex undertake and
agree that the dossier will be submitted to the appropriate authorities
in France either direct or via the European Mutual Recognition Procedure
within three years of the effective date of this Agreement.
8.4. TERMINATION OF LICENSE WITHOUT CAUSE. Licensee may terminate this
Agreement and revert its rights to source, use, market, sell and
distribute the Products in the Territory under this Agreement at any
time upon * days written notice to
CollaGenex. Such reversion shall be free of any continuing lien on, or
grant of any right or interest in, the Products or the Confidential
Information. In the event of such termination, no further payments
relating to the milestones specified in Clauses 3.1.2., 3.1.3. and
3.1.4. hereof relating to the Products shall accrue or be due under this
Agreement subsequent to the effective date of such termination;
provided, however, that Licensee shall pay to CollaGenex any royalties
accrued on Net Sales prior to the effective date of the termination of
the License under this Clause 8.4.
8.5. TERMINATION BY FAILURE OF LICENSEE TO MARKET. CollaGenex shall have the
right to terminate this Agreement should Licensee fail to initiate and
maintain for the term of this Agreement an active marketing, sales and
distribution programme and launch the Product in France within
* days of written advice from CollaGenex that the
marketing authorisation has been granted and/or written advice from
Licensee to CollaGenex in accordance with Clause 3.1.4. hereof that the
reimbursement
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
price has been published in the "JOURNAL OFFICIEL", or Licensee has
received official notification that reimbursement for the Products will
not be granted, whichever shall be the later.
8.6. BREACH OF MATERIAL OBLIGATIONS. Failure by either party to comply with
any of the material obligations contained in this Agreement shall
entitle the other party to give to the party in default notice
specifying the nature of the default and requiring such party to remedy
such default. If such default is not remedied within ninety (90) days
(or, if the default cannot be remedied within such ninety day period and
the party in default does not commence and diligently continue actions
to remedy such default), the notifying party shall be entitled, without
prejudice to any of its other rights conferred on it by this Agreement,
to all remedies available to it by law or in equity, including, without
limitation, the termination of this Agreement.
8.7. INSOLVENCY OR BANKRUPTCY. Either party may, in addition to any other
remedies available to it by law or in equity, terminate this Agreement
by written notice to the other party in the event the other party shall
have become insolvent or bankrupt, or shall have made an assignment for
the benefit of its creditors, or there shall have been appointed a
trustee or receiver of the other party for all or a substantial part of
its property, or any case or proceeding shall have been commenced or
other action taken by or against the other party in bankruptcy or
seeking re-organisation, liquidation, dissolution, winding-up
arrangement, composition or re-adjustment of its debts or any relief
under any bankruptcy, insolvency, re-organisation or other similar act
or law of any jurisdiction now or hereafter in effect, or there shall
have been issued a warrant of attachment, execution or distraint or
similar process against any substantial part of the property of the
other party, and any such event shall have continued for sixty (60) days
undismissed, unbonded and undischarged.
8.8. RIGHT TO SELL STOCK ON HAND. Upon the termination of the License granted
hereunder for any reason other than a failure to remedy a material
breach of this Agreement by Licensee, Licensee shall have the right to
complete all work in progress and for one year (or such longer period as
the parties may reasonably and mutually agree) to dispose of all of the
Products then on hand by way of normal trade sales in the Territory, and
royalties shall be paid to CollaGenex with respect to such sales of the
Products as though such License had not terminated or expired.
8.9. EFFECT OF TERMINATION. In the event of termination of this Agreement,
except as otherwise provided for herein; all rights to the Products and
the Confidential Information shall revert to CollaGenex who shall be
free to develop, license or otherwise exploit the Products and the
Confidential Information in the Territory as it deems appropriate and
Licensee shall (a) take whatever steps are reasonably necessary and
appropriate to revert to CollaGenex all rights in the Products and the
Confidential Information in the Territory and (b) return to CollaGenex
all information relating to the Products and the Confidential
Information without retaining any copies or extracts therefrom save as
may be required to identify the obligations of Licensee under this
Agreement and (c) make no further use of
<PAGE>
any of the Confidential Information and (d) take whatever steps are
reasonably necessary and appropriate to transfer to CollaGenex or its
designees all submissions to regulatory authorities (or any part
thereof) in the Territory and (e) to immediately cease to use the Trade
Marks and in the event that (contrary to the intention of CollaGenex)
the Licensee has acquired any rights in or over the trade marks to
transfer the same, unencumbered, to CollaGenex and (f) to take no
actions that would in any way have a negative effect on the sales of the
Products in the Territory.
8.10. SURVIVING RIGHTS. Any termination under this Agreement shall be without
prejudice to the rights and remedies of either party with respect to any
provisions of this Agreement or arising out of breaches prior to such
termination and shall not relieve either of the parties of any
obligation or liability accrued hereunder prior to such termination,
including, without limitation, indemnity obligations, nor rescind or
give rise to any right to rescind anything done or any payments made or
other consideration given hereunder prior to the time of such
termination and shall not affect in any manner any vested rights of
either party arising out of this Agreement prior to such termination.
9. NON COMPETE CLAUSE
Licensee shall not, during the term of this Agreement, or any extension
hereto, or for a period of two (2) years after the expiration or
termination of this Agreement, or any extension hereto; manufacture,
cause to have manufactured by a third party on its behalf, market, sell
or distribute any other products containing low dose doxycycline hyclate
as a therapy for periodontal disease.
10. BEST ENDEAVOURS AND MINIMUM PERFORMANCE
10.1. Licensee shall, during the term of this Agreement and any extension
hereto, use its best endeavours to develop the sales of the Products in
the Territory.
10.2. Within sixty (60) days of the signing of this Agreement, Licensee shall
provide to CollaGenex, for approval by CollaGenex, a forecast of sales
of the Products in the Territory, such forecast to attach to and form
part of this Agreement as Appendix II, for each of the three years
following the date of first Commercial Sale of the Products in the
Territory and this Schedule II will be updated by Licensee on an annual
basis, in accordance with Licensee's own business and budget planning
process, and such updates will include the following years so that at
all times CollaGenex shall have a three year forecast of sales of the
Products in the Territory. Such forecasts shall reasonably reflect
actual historical Commercial Sales and Commercial Sales trends, if any.
Prior to first Commercial Sale, any changes to Schedule II shall be
subject to the approval of CollaGenex. Such schedule, in the agreed
format of Appendix II, shall be furnished by Licensee to CollaGenex by
no later than the 1st January of each calendar year for the term of this
Agreement and any extension hereto.
10.3. Upon the acceptance by CollaGenex of Schedule II to this Agreement (as
described in Clause 10.2. hereof) there shall be *
during the first twelve (12)
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
month period from date of first Commercial Sale of the Products in the
Territory. In the second twelve (12) month period from date of first
Commercial Sale of the Products in the Territory, the Minimum
Performance as defined in this Clause 10.3. shall be *
of the most recent forecast for such period. Commencing with the
third twelve (12) month period from the date of first Commercial Sale of
the Products in the Territory, and for each twelve (12) month period
thereafter, a sum equivalent to * of the most
recent forecast for such period shall be agreed as the Minimum
Performance of Licensee for such period, hereinafter "the Minimum
Performance".
In the event of the actual Net Sales of Licensee, as defined herein,
being less than the Minimum Performance, then Licensee shall have the
right to pay the royalty as defined in Clauses 3.1.5. and 3.1.6. hereof
based on the Minimum Performance as defined herein in order to retain
its rights under this Agreement, failing which CollaGenex shall have the
right to terminate this Agreement in accordance with the provisions
hereof.
11. MISCELLANEOUS PROVISIONS
11.1. FURTHER ASSURANCES. The parties hereto agree to execute and deliver such
other documents, instruments and agreements and to take such other
actions as may be necessary, proper or appropriate to carry out the
terms of this Agreement.
11.2. NOTICES. All notices required or permitted under this Agreement shall be
in writing and delivered by any method providing proof of delivery. Any
notice shall be deemed to have been given on date of receipt. Notices
shall be delivered to the parties at the following addresses until a
different address has been designated by notice to the other party:
If to CollaGenex: CollaGenex Pharmaceuticals, Inc.,
301 South State Street,
Newtown,
Pennsylvania 18940,
United States of America.
Attention: Robert A. Ashley
CollaGenex International Limited,
The Old Stable Block,
7 Buttermarket,
Thame,
Oxfordshire OX9 3EW,
United Kingdom.
Attention: David A. Pettit
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
with copies to: Buchanan Ingersoll,
College Center,
500 College Road East,
Princeton,
New Jersey 08540,
United States of America.
Attention: David J. Sorin
If to Pharmascience: Laboratoires Pharmascience S.A.,
73 Boulevard de la Mission Marchand,
F - 92402 Courbevoie Cedex,
France.
Attention: Gerald VIEUILLE
11.3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
11.4. RECORDATION. If either CollaGenex or Licensee so requests in writing,
the parties will promptly file and record with any applicable office or
authority, a copy or memorandum of this Agreement and any other
agreement granting Licensee rights in the Products and in the
Confidential Information.
11.5. ENTIRE AGREEMENT, MODIFICATIONS. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter
hereof, and no modification, amendment, change or supplement shall be
effective unless in writing and signed by the authorised officers of the
parties. This Agreement supercedes all prior understandings,
negotiations and agreements, whether written or oral, relating to the
subject matter hereof.
11.6. WAIVER. The waiver by either party of a breach or default of any of the
provisions contained herein shall be in writing and shall not be
construed as a waiver of any succeeding breach or default or of the
provision itself.
11.7. EXPENSES. Except as may be otherwise provided for in this Agreement,
each of the parties hereto shall bear such party's own expenses in
connection with this Agreement and the transaction contemplated hereby.
11.8. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of England and the Courts of England shall be
deemed the Courts of competent jurisdiction.
11.9. CLAUSE HEADINGS. The clause headings in this Agreement are solely for
convenience or reference and shall not affect the interpretation or
construction of this Agreement or any of the provisions hereof.
<PAGE>
11.10. SEVERABILITY. If any provision of this Agreement shall be held to be
illegal or unenforceable, such holding shall not affect the validity or
enforceability of any of the other provisions of this Agreement.
11.11. BINDING EFFECT, ASSIGNMENT. This Agreement shall be binding upon and
insure to the benefit of each of CollaGenex and Licensee and each of
their respective successors and assigns. Licensee may not assign its
rights and obligations hereunder without the prior written consent of
CollaGenex. CollaGenex may assign its rights and obligations hereunder
to a subsidiary or Affiliate of CollaGenex.
11.12. INDEPENDENT CONTRACTORS. Nothing in this Agreement shall create any
association, partnership or joint venture between the parties hereto, it
being understood and agreed that the parties are independent contractors
and neither party shall have the power or authority to obligate the
other in any way.
11.13. APPROPRIATE WORDS. Except where the context otherwise requires, words
denoting the singular include the plural and vice versa; words denoting
one gender include all genders; words denoting persons include firms and
corporations and vice versa.
11.14. REFERENCE TO STATUTES. Reference to any statute, statutory provision or
regulation includes a reference to the statute or statutory provision or
regulation as from time to time amended, extended or re-enacted.
11.15. TIME OF THE ESSENCE. Time of payment should be of the essence of the
Agreement for any payment to be made by the Licensee, its affiliates or
assigns as the case may be pursuant to Clause 3 of this Agreement or
otherwise.
12. FORCE MAJEURE
12.1. All incidences of force majeure (being circumstances beyond the
reasonable control of either party and which have, or may have, a
material affect on the ability to perform under this Agreement
including, but not limited to, failure of power or other utility or
sanitary supplies; fire; flood; earthquake; explosion; riot; strike or
lock-out of that party's own workforce; civil insurrection or unrest;
terrorist activity; war and regulations of any Governmental,
transnational or local authority) shall for the duration and to the
extent of the effects caused thereby release the parties from the
performance of their contractual obligations hereunder.
12.2. The party who has suffered the force majeure ("the Affected Party")
shall notify the other party without delay of any such incidents
occurring and the parties shall discuss the effects of such incidents on
this Agreement and the measures to be taken.
12.3. Each party shall endeavour and take all reasonable steps to avoid or
restrict any force majeure.
<PAGE>
12.4. In the event of an incident or incidents of force majeure, the parties
shall as soon as reasonably possible resume performance of their
obligations hereunder but in the event that the force majeure has
prevailed for a continuous period in excess of six (6) months, the party
which is not the Affected Party may terminate this Agreement by notice
in writing, citing force majeure, to the Affected Party.
IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE SIGNED BY
THEIR DULY AUTHORISED REPRESENTATIVES THE DAY AND YEAR FIRST ABOVE WRITTEN
COLLAGENEX PHARMACEUTICALS, INC
by
/s/ BM Gallagher
- ------------------------------------------------
Brian M. Gallagher, President and Chief Executive Officer
Attest
/s/ Lisa Shultz
- ------------------------------------------------
COLLAGENEX INTERNATIONAL LIMITED
by
/s/ Robert A. Ashley
- ------------------------------------------------
Robert A. Ashley, Managing Director
LABORATOIRES PHARMASCIENCE S.A.
by
/s/ Jean-Paul Berthome
- ------------------------------------------------
Jean-Paul BERTHOME, President and
Chief Executive Officer
EXHIBIT A
The parties have mutually agreed to the following PRODUCT pricing and
minimum unit purchase order quantities:
Packaged Product (Packaged by AAI) Bottles of ***
- ---------------- --------------
Minimum Unit Purchase Order Quantity ***
Cost per Bottle* ***
==============
Bulk Product Capsules
- ------------ --------
Minimum Unit Purchase Order Quantity ***
Cost per Capsule* ***
==============
*These costs exclude the following items:
1. Cost of acquiring the active ingredient.
2. Cost of shipping.
Applied Analytical Industries, Inc. CollaGenex, Inc.
/s/ (illegible) /s/ Nancy C. Broadbent
- ---------------------------------- ----------------------
Authorized Officer Authorized Officer
Date:4-23-97 Date: 6/15/98
---------------------------- -----------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT A
The parties have mutually agreed to the following PRODUCT pricing and
minimum unit purchase order quantities:
Packaged Product (Packaged by PCI) Bottles of ***
- ---------------- --------------
Minimum Unit Purchase Order Quantity ***
Cost per Bottle* ***
==============
Bulk Product Capsules
- ------------ --------------
Minimum Unit Purchase Order Quantity ***
Cost per Capsule* ***
==============
*These costs exclude the following items:
1. Cost of acquiring the active ingredient.
2. Cost of shipping.
Applied Analytical Industries, Inc. CollaGenex, Inc.
/s/ (illegible) /s/ Nancy C. Broadbent
- ---------------------------------- ----------------------
Authorized Officer Authorized Officer
Date:4-23-97 Date: 6/15/98
---------------------------- -----------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
EXECUTION COPY
CO-PROMOTION AGREEMENT
between
SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P.
and
COLLAGENEX PHARMACEUTICALS, INC.
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CO-PROMOTION AGREEMENT
between
SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P.
and
COLLAGENEX PHARMACEUTICALS, INC.
1. DEFINITIONS..............................................
2. APPOINTMENT..............................................
3. DUTIES OF THE PARTIES....................................
3.1. ROMOTION OF DENAVIR(R)..........................
3.2. SALES TRAINING..................................
3.3. SAMPLES.........................................
3.4 OVERSIGHT TEAM..................................
4. COMPENSATION.............................................
5. TRADEMARKS...............................................
6. CLINICAL TRIALS..........................................
7. COMMUNICATIONS...........................................
8. ADVERSE EXPERIENCE REPORTING AND
REGULATORY MATTERS.....................................
9. MISCELLANEOUS............................................
10. RETURN/RECALL............................................
11. FORCE MAJEURE............................................
12. SECRECY AND NON-USE......................................
13. TERM AND TERMINATION.....................................
14. RECORDKEEPING PROVISIONS.................................
15. WARRANTIES, REPRESENTATIONS, INSURANCE AND
INDEMNIFICATIONS.......................................
16. WAIVER/MODIFICATION......................................
17. HEADINGS.................................................
18. GOVERNING LAW............................................
19. SEPARABILITY.............................................
20. ENTIRE AGREEMENT.........................................
21. NOTICE...................................................
22. DISPUTE RESOLUTION.......................................
23. PUBLIC ANNOUNCEMENTS.....................................
24. ASSIGNMENT...............................................
25. EXECUTION IN COUNTERPARTS................................
SIGNATURES...............................................
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CO-PROMOTION AGREEMENT
SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P.-COLLAGENEX
PHARMACEUTICALS, INC.
THIS CO-PROMOTION AGREEMENT (hereinafter "AGREEMENT"), effective as of
October 13, 1998 (hereinafter "EFFECTIVE DATE"), is entered into by CollaGenex
Pharmaceuticals, Inc., a company organized and existing under the laws of the
state of Delaware, U.S.A., and having its principal office at 301 South State
Street, Newtown, Pennsylvania 18940 (hereinafter "COMPANY"), and SmithKline
Beecham Consumer Healthcare, L.P., a Delaware limited partnership having its
principal office at 100 Beecham Drive, Pittsburgh, PA 15230 (hereinafter "SB").
WHEREAS, the COMPANY desires to obtain the right from SB to engage in
the direct PERSONAL SELLING (as hereinafter defined) and PROMOTION (as
hereinafter defined) in the TERRITORY (as hereinafter defined) of DENAVIR(R) (as
hereinafter defined) to TARGET PRESCRIBERS (as hereinafter defined); and
WHEREAS, SB desires to grant COMPANY such right for a certain period of
time on the terms and conditions set forth in this AGREEMENT;
NOW, THEREFORE, in consideration of the covenants and obligations
expressed herein, and intending to be legally bound, and otherwise to be bound
by proper and reasonable conduct, the parties agree as follows
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1. DEFINITIONS
1.1 "AFFILIATE(S)" shall mean any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly owns,
is owned by or is under common ownership with a party to this AGREEMENT
where "owns" or "ownership" means possession of at least fifty percent
(50%) of the equity (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular
jurisdiction) having the power to vote on or direct the affairs of the
entity and any person, firm, partnership, corporation or other entity
actually controlled by, controlling or under common control with a
party to this AGREEMENT.
1.2 "AGENCY(IES)" shall mean any and all state and federal governmental
regulatory authority(ies) in the TERRITORY responsible for granting
approvals for the sale of pharmaceutical products, including, without
limitation, DENAVIR(R).
1.3 "PERSONAL SALE" shall mean a face-to-face meeting, in an individual or
group practice setting, between a TARGET PRESCRIBER, and a professional
sales representative of COMPANY, as documented by COMPANY's call
reporting system, during which a MAJOR PRESENTATION of DENAVIR(R) is
made to such health care professional, provided that for any such
meeting to be within the scope of the term `PERSONAL SALE', no more
than two (2) MAJOR PRESENTATIONS and, when appropriate, one minor
presentation of Periocheck (a chair-side assay that tests for the
presence of neutral protease enzymes) may be carried out. When used as
a verb, "PERSONAL SELLING" shall mean to engage in a PERSONAL SALE.
1.4 "DENAVIR(R)" shall mean SB's prescription brand of penciclovir cream,
in all dosage forms and package configurations, and all prescription
indications for which SB has received all requisite marketing approvals
from the AGENCIES as of the EFFECTIVE DATE, or receives during the TERM
OF THE AGREEMENT. For the avoidance of doubt, the term "DENAVIR(R)"
shall not include penciclovir cream, in any dosage form or package
configuration, for any over-the-counter indications.
1.5 "DENAVIR(R) PROMOTION INITIATION DATE " shall mean the date, as
confirmed by COMPANY in writing to SB, of COMPANY's commencement of
PERSONAL SELLING and PROMOTION of DENAVIR(R) in the TERRITORY to TARGET
PRESCRIBERS, provided such commencement is on or before the date set
forth in paragraph 3.1.3.
1.6 "DENAVIR(R) PRESCRIPTION BASELINE" shall mean, for any particular
period, the number of prescriptions of DENAVIR(R) attributable to
TARGET PRESCRIBERS which are projected to be generated as a result of
SB marketing tactics during such period and seasonal and historical
business trends. For the first PROMOTION PERIOD, the DENAVIR(R)
PRESCRIPTION BASELINE shall be equal to * prescriptions of
DENAVIR(R). DENAVIR(R) PRESCRIPTION BASELINE for additional PROMOTION
PERIODS, if any, shall be mutually agreed upon by the parties. The
calculation of the
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
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DENAVIR(R) PRESCRIPTION BASELINE for the first PROMOTION PERIOD is
attached hereto as Appendix A.
1.7 "GROSS PRESCRIPTIONS" shall mean, for any particular time period, the
number of prescriptions for DENAVIR(R) which are attributable to TARGET
PRESCRIBERS for the particular time period, as reported to SB by the
NDC Monthly Prescriber by Specialty Report, or such other third party
reporting system mutually agreed upon by the parties.
1.8 "INCREMENTAL RX" shall mean, for any particular time period, GROSS
PRESCRIPTIONS during such time period minus the DENAVIR(R) PRESCRIPTION
BASELINE for such time period (as determined in accordance with
Paragraph 1.6).
1.9 "PERIOSTAT(R)" shall mean COMPANY's brand of doxycycline, in all dosage
forms and package configurations, and all indications for which COMPANY
may receive all requisite marketing approvals from the AGENCIES prior
to or during the TERM OF THE AGREEMENT.
1.10 "MAJOR PRESENTATION" shall mean a full pharmaceutical product
presentation during which key attributes of such product, including
without limitation safety and efficacy, are verbally presented.
1.11 "PROMOTION" shall mean those activities normally undertaken by a
pharmaceutical company's sales force to implement marketing plans and
strategies aimed at encouraging the appropriate use of a particular
prescription pharmaceutical product. When used as a verb, "PROMOTE"
shall mean to engage in such activities.
1.12 "PROMOTION PERIOD" shall mean a period of time established in
accordance with this Agreement. The first PROMOTION PERIOD shall be the
period of time following the DENAVIR(R) PROMOTION INITIATION DATE
through March 31, 1999. Subsequent PROMOTION PERIODS, if any, shall be
mutually agreed upon by the parties.
1.13 "TARGET PRESCRIBERS: shall mean board eligible/certified dentists.
1.14 "TERM OF THE AGREEMENT" shall mean the period of time beginning on the
EFFECTIVE DATE and ending March 31, 1999, unless extended in accordance
with Paragraph 13.1.
1.15 "TERRITORY" shall mean the fifty (50) states of the United States of
America and the District of Columbia.
1.16 "THIRD PARTY(IES)" shall mean any party other than a party to this
AGREEMENT or an AFFILIATE.
2. APPOINTMENT
2.1 During the TERM OF THE AGREEMENT, SB grants COMPANY the right to
directly PROMOTE and conduct PERSONAL SELLING of DENAVIR(R) to TARGET
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PRESCRIBERS in the TERRITORY, in accordance with the terms and
conditions set forth in this AGREEMENT. For the avoidance of doubt,
COMPANY shall have no rights to PROMOTE or conduct PERSONAL SELLING of
DENAVIR(R) as an over-the-counter product pursuant to this AGREEMENT.
3. DUTIES OF THE PARTIES
---------------------
3.1 PROMOTION OF DENAVIR(R)
3.1.1 During the TERM OF THE AGREEMENT after the DENAVIR(R)
PROMOTION INITIATION DATE, COMPANY shall diligently PROMOTE
and conduct PERSONAL SELLING of DENAVIR(R) to TARGET
PRESCRIBERS in the TERRITORY. COMPANY warrants and represents
that any professional sales representatives (or equivalents
thereof) used by COMPANY to PROMOTE DENAVIR(R) to TARGET
PRESCRIBERS, in furtherance of this AGREEMENT, shall do so
solely in accordance with the provisions of this AGREEMENT.
3.1.1.1 During the TERM OF THE AGREEMENT, the position of the
MAJOR PRESENTATION of DENAVIR(R) during all PERSONAL
SALES to TARGET PRESCRIBERS shall be either in the
first or in the second position.
3.1.1.2 Notwithstanding Paragraph 3.1.1.1, COMPANY will
employ its expertise, best professional judgment, and
working relationship with TARGET PRESCRIBERS, in the
TERRITORY to ensure that its professional sales force
positions DENAVIR(R) to ensure maximum prescription
generation within each PERSONAL SALE.
3.1.2 During the TERM OF THE AGREEMENT after the DENAVIR(R)
PROMOTION INITIATION DATE, COMPANY's management of its
professional representatives shall reflect its commitment to
the PROMOTION of DENAVIR(R) to TARGET PRESCRIBERS, in the
TERRITORY as a major priority to COMPANY.
3.1.3 COMPANY shall commence PROMOTION and PERSONAL SELLING of
DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY no later
than one (1) week after COMPANY completes its launch/training
meeting for DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY.
The launch/training meeting of DENAVIR(R) is scheduled to be
held on October 13, 1998 in Philadelphia, PA (the "Launch
Meeting").
3.1.4 Except as specifically set forth herein, SB shall retain full
control of all activities with respect to DENAVIR(R),
including, without limitation, all regulatory, clinical,
marketing, distribution and manufacturing matters. In
particular, SB shall retain full control of the following
matters:
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3.1.4.1 The types of promotional materials and literature
(including quantities) and other support that will be
provided by SB, provided that such support shall be
in accordance with Paragraph 3.1.5.
3.1.4.2 The quantity and timing of distribution of samples of
DENAVIR(R) to be used by COMPANY to PROMOTE
DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY,
provided that such support shall be in accordance
with Paragraph 3.1.3; and
3.1.4.3 The guidelines for the use of promotional materials
and literature by COMPANY's professional sales force
in their PERSONAL SELLING and PROMOTION of DENAVIR(R)
to TARGET PRESCRIBERS in the TERRITORY.
3.1.5 All promotional materials, literature and samples to be used
by COMPANY in the TERRITORY in connection with the PROMOTION
of DENAVIR(R) to the TARGET PRESCRIBERS shall be supplied to
COMPANY by SB. The parties shall share the costs and expenses
for the production of promotional materials and literature in
accordance with Paragraph 3.1.12. The storage by COMPANY and
distribution of such promotional materials and literature to
COMPANY's professional representatives shall be at COMPANY's
expense. Sample storage and distribution will be handled in
accordance with Paragraph 3.3.
3.1.5.1 The determination of the content of the promotional
materials and literature related to DENAVIR(R) to
TARGET PRESCRIBERS in the TERRITORY shall be solely
within the control of SB. The quantity and the method
of distribution of such materials shall be mutually
agreed upon by the parties; provided that in no event
shall such materials be distributed to COMPANY less
often than SB's standard promotional cycles for such
materials. SB shall periodically provide guidelines
to COMPANY concerning the distribution of such
materials to TARGET PRESCRIBERS. The parties agree to
discuss in good faith the desirability of having the
names and logos of both SB and COMPANY appear on
certain promotional materials.
3.1.5.2 In connection with the PERSONAL SELLING and PROMOTION
of DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY,
COMPANY warrants and represents that (a) it and its
professional sales representatives shall use only
promotional materials, literature, and samples
provided by SB under this AGREEMENT, (b) such
materials, literature, and samples shall be used by
COMPANY only for the purposes of this AGREEMENT, (c)
all materials, literature and samples which are not
used during the TERM OF THE AGREEMENT shall be
returned to SB as soon as practicable after the
expiration or termination of this AGREEMENT, and (d)
any promotional material, promotional
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literature, and samples supplied by SB shall not be
misbranded, changed, altered or adulterated prior to
their distribution by COMPANY or its professional
sales representatives. All copyright and other
intellectual property rights as well as any other
rights and interests with respect to such materials,
literature and samples shall remain vested in SB.
3.1.6 COMPANY hereby warrants and represents that, in the course of
its PERSONAL SELLING and PROMOTION of DENAVIR(R) to TARGET
PRESCRIBERS in the TERRITORY, it will (a) limit its claims of
efficacy and safety for DENAVIR(R) to those which are
consistent with SB's approved product circular for DENAVIR(R),
(b) not delete or modify claims of efficacy and safety in the
PROMOTION of DENAVIR(R) so that they are different in any way
from those which are contained in SB's approved product
circular for DENAVIR(R), or make any changes in promotional
materials and literature provided by SB, and (c) PROMOTE and
make PERSONAL SALES of DENAVIR(R) to TARGET PRESCRIBERS in the
TERRITORY in strict adherence to regulatory, professional, and
legal requirements and the American Medical Association Gifts
to Physicians From Industry Guidelines.
3.1.7 COMPANY further warrants and represents that, in connection
with its PERSONAL SELLING and PROMOTION of DENAVIR(R) to
TARGET PRESCRIBERS in the TERRITORY, it shall comply with all
of the applicable state and federal laws and regulations of
the TERRITORY, and shall not knowingly or negligently do
anything which will jeopardize the goodwill or reputation of
DENAVIR(R).
3.1.8 The professional representatives of COMPANY who are utilized
by COMPANY in accordance with this AGREEMENT shall remain
exclusively under the authority of COMPANY's field sales
management. Except as otherwise provided in Paragraphs 3.1 and
3.2, COMPANY shall have full responsibility for the
dissemination of information for the PERSONAL SELLING and
PROMOTION of DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY
to its professional sales representatives based on information
provided to COMPANY by SB under this AGREEMENT.
3.1.9 The parties shall cooperate in conventions and related
educational activities, when such cooperation would be
mutually beneficial, for the PROMOTION of DENAVIR(R) to TARGET
PRESCRIBERS in the TERRITORY where effective synergies can be
attained, as mutually agreed upon by the parties. The funding
of expenses related to such activities will be apportioned
between the parties pursuant to terms to be mutually agreed
upon.
3.1.10 SB shall have the sole right and responsibility for
establishing and modifying the terms and conditions with
respect to the sale of DENAVIR(R) in the TERRITORY, including
the selling price, as well as any terms and conditions
relating to or
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affecting the price at which DENAVIR(R) will be sold, any
discount attributable to payments on receivables, distribution
of DENAVIR(R) in the TERRITORY, credit to be granted or
refused, and the like.
3.1.11 All sales of DENAVIR(R) in the TERRITORY, including those
attributable to TARGET PRESCRIBERS, shall be booked by SB.
3.1.12 SB shall be responsible for the costs and expenses related to
the production of promotional material, literature, and sales
aids for the PERSONAL SALES reasonably expected to be
conducted in the period from the EFFECTIVE DATE through
December 31, 1998. Thereafter, the parties shall equally share
the costs and expenses related to the production of
promotional material, literature, sales aids; provided that
neither party shall be obligated to contribute more than
$50,000 in the aggregate toward such costs and expenses for
the remainder of the first PROMOTION PERIOD, unless otherwise
agreed upon by the parties.
3.2 SALES TRAINING
3.2.1 COMPANY shall pay for all expenses incurred by COMPANY which
are associated with the Launch Meeting and all subsequent
training meetings for its professional representatives, except
as otherwise provided in Paragraph 3.2.2. SB shall bear all
expenses incurred by SB which are associated with its
participation in the Launch Meeting.
3.2.2 SB shall, at its expense, provide the COMPANY's current sales
representatives with promotional training regarding the
PERSONAL SELLING and PROMOTION of DENAVIR(R) to TARGET
PRESCRIBERS in the TERRITORY at the Launch Meeting, provided
that such training shall be at the same level of product
training as that which would be provided to SB's own sales
representatives who have previous professional pharmaceutical
sales experience. After the Launch Meeting, SB shall provide
promotional training of newly hired COMPANY sales
representatives regarding the PERSONAL SELLING and PROMOTION
of DENAVIR(R) at regularly scheduled meetings that SB has
organized for its own sales force. COMPANY shall bear all
travel and living expenses incurred by COMPANY related to all
such training of its professional sales representatives.
3.2.3 During the TERM OF THE AGREEMENT, COMPANY shall obtain all
training materials it may reasonably require related to the
promotion of DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY
from SB The training materials used by SB in the training of
COMPANY sales representatives in accordance with Paragraphs
3.2.1 and 3.2.2 shall be provided to COMPANY at SB's expense.
3.2.4 During the TERM OF THE AGREEMENT, COMPANY shall train their
sales representatives and clinical safety representatives on
the collection of data for
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Adverse Experiences (as defined in Paragraph 8.1), and the
reporting thereof to SB, in accordance with the procedures and
timelines set out in Article 8.
3.3 SAMPLES
3.3.1 Samples of DENAVIR(R) to be used by COMPANY under this
AGREEMENT shall be sent to COMPANY or its designees at the
expense (internally charged standard unit cost plus shipping
and handling) of SB. The storage and distribution of such
samples to professional representatives shall be at COMPANY's
expense.
3.3.2 COMPANY shall receive amounts of such samples as determined by
SB, and at appropriate intervals which reasonably comply, to
the extent possible, with both SB's and COMPANY's shipping
schedules. SB shall periodically provide COMPANY with
guidelines concerning the distribution of samples to TARGET
PRESCRIBERS.
3.3.3 COMPANY warrants and represents that it shall establish,
maintain and adhere to written procedures to assure that
COMPANY's receipt, storage and distribution of samples, and
all of its professional sales representatives to whom such
samples are distributed, comply with all requirements of the
AGENCIES including the Prescription Drug Marketing Act of 1987
(as such may be subsequently modified), as well as reasonable
compliance with the U.S. Food and Drug Administration's
proposed regulations, published at 59 Fed. Reg. p11842, March
14, 1994. Specifically, such procedures shall include a
requirement that COMPANY shall notify SB immediately upon
learning that any samples shipped by SB to COMPANY have been
lost or have not been received as scheduled. Furthermore, such
procedures shall include a requirement that COMPANY shall be
responsible for reporting directly to the relevant AGENCY any
known thefts or significant losses of samples, as such is
required by AGENCY policy or regulation, and COMPANY shall
promptly provide SB with a complete copy of any such report.
In the event that COMPANY or any of its professional
representatives fails to comply or causes SB to fail to comply
with any of the requirements of the Prescription Drug
Marketing Act of 1987 (as such may be subsequently modified)
and a civil penalty is assessed against SB or any of its
AFFILIATES or employees, then COMPANY shall hold harmless and
indemnify SB, its AFFILIATES and their officers, directors,
shareholders, employees, successors and assigns from and
against any such civil penalty or other damages or losses
related thereto, including attorneys' fees.
3.3.4 Upon reasonable advance notice to COMPANY, SB shall be
entitled, at SB's expense, to conduct an inspection and audit
of COMPANY's sample allocation at any of COMPANY's owned or
controlled facilities where samples of DENAVIR(R) received
from SB under this AGREEMENT are stored. The purpose of such
inspection and audit shall be solely to ensure compliance with
the applicable provisions of the Prescription Drug Marketing
Act of 1987 (as such
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may be subsequently modified) and with the provisions of this
AGREEMENT, as well as to copy records relating to sample
receipt, storage and distribution.
3.3.5 Upon the termination or expiration of the AGREEMENT, COMPANY
shall promptly return, at COMPANY'S expense, to SB's
designated distribution center, any samples of DENAVIR(R)
received by COMPANY from SB under this AGREEMENT which are
still in its or its sales representatives possession.
3.3.6 The parties understand and acknowledge that COMPANY does not
currently have the procedures in place to receive, store
and/or distribute samples to TARGET PRESCRIBERS in accordance
with the terms of this Agreement. Therefore, until such time
as COMPANY is able to receive, store and/or distribute samples
to TARGET PRESCRIBERS in accordance with the terms of this
Agreement, COMPANY shall not be required to do so; provided,
however, that COMPANY agrees to use good faith efforts to be
able to receive, store and distribute samples to TARGET
PRESCRIBERS in accordance with the terms of this Agreement
prior to January 1, 1999.
3.4 OVERSIGHT TEAM
3.4.1 Within fifteen (15) days following the EFFECTIVE DATE, the
parties shall form a team which shall have oversight
responsibility for the parties' performance of their
respective obligations under this AGREEMENT. The team shall be
known as the "Oversight Team", and it shall be composed of, at
least, a product manager representative from each party
("Product Manager"). The Product Manager for each party shall
be the point person for such party with respect to all
activities related to the training, PROMOTION and PERSONAL
SELLING of DENAVIR(R) under this AGREEMENT, including
assisting sales training personnel and product and sales
management teams. The Product Managers shall meet
periodically, as often as is necessary, formally or
informally, with face-to-face meetings alternating between SB
facilities and COMPANY facilities, provided that the first
such meeting shall be held no later than thirty (30) days
after the EFFECTIVE DATE. Each party may replace its Product
Manager at any time, upon at least one (1) week's prior
written notice to the other party.
4. COMPENSATION
4.1 SB shall pay COMPANY compensation during each PROMOTION PERIOD
according to the following procedure. The DENAVIR(R)
PRESCRIPTION BASELINE applicable to such PROMOTION PERIOD
shall be subtracted from the amount of GROSS PRESCRIPTIONS for
such PROMOTION PERIOD, and COMPANY shall be entitled to an
amount equal to INCREMENTAL RX multiplied by * .
4.2 For the first PROMOTION PERIOD, SB shall pay COMPANY the
payments outlined in Paragraph 4.1 within sixty (60) days
after the end of the first PROMOTION PERIOD. For any
subsequent PROMOTION PERIODS (if any) during the TERM OF THE
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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AGREEMENT, SB shall pay COMPANY the payments outlined in
Paragraph 4.1 in quarterly installments, each installment to
be paid within sixty (60) days after the end of the quarter.
4.3 In the event that the first PROMOTION PERIOD does not commence
until after November 1, 1998, the DENAVIR(R) PRESCRIPTION
BASELINE for such period shall be proportionally reduced to
reflect the reduced period of time of the first PROMOTION
PERIOD, as mutually agreed upon by the parties.
4.4 In the event this AGREEMENT is terminated prior to the
completion of any PROMOTION PERIOD, the amount of compensation
that SB will be obligated to pay COMPANY shall be based upon
an adjusted DENAVIR(R) PRESCRIPTION BASELINE that reflects the
reduced term of the PROMOTION PERIOD. In particular, the
DENAVIR(R) PRESCRIPTION BASELINE and GROSS PRESCRIPTIONS for
the abbreviated PROMOTION PERIOD shall be appropriately
reduced based on the actual number of months that have elapsed
during the PROMOTION PERIOD as compared to the number of
months in the original PROMOTION PERIOD.
4.5 In the event SB terminates this AGREEMENT pursuant to
Paragraph 13.4 below, SB shall be obligated to pay COMPANY
compensation for an additional one month period following the
effective date of such termination. Such compensation shall be
calculated in accordance with this Section 4.
5. TRADEMARKS
5.1 DENAVIR(R) shall be PROMOTED and PERSONAL SALES shall be made
by COMPANY to TARGET PRESCRIBERS in the TERRITORY under the
trademark "DENAVIR(R)", which trademark is owned by SB.
5.2 This AGREEMENT does not constitute a grant of any property
right or interest to COMPANY, by license or otherwise, in
DENAVIR(R) or in any other trademarks owned by SB or any
AFFILIATE, or to use any such trademark for any purpose,
except to the extent that such use is necessary to enable
COMPANY to PROMOTE and make PERSONAL SALES of DENAVIR(R) in
accordance with this AGREEMENT. COMPANY hereby expressly
acknowledges its recognition of the validity of the title of
SB or its AFFILIATES to the trademarks and trade names in the
TERRITORY used by SB or its AFFILIATES in connection with
DENAVIR(R), whether registered or not. SB shall own all such
trademarks and trade names and shall retain such ownership
upon termination or expiration of this AGREEMENT
5.3 COMPANY shall not undertake any action in respect of the
registration, renewal, or infringement of SB's trademarks or
trade names without SB's written consent.
6. CLINICAL TRIALS
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6.1 During the TERM OF THE AGREEMENT, COMPANY shall not conduct or
commission pre-clinical, clinical, or other studies and/or
trials with respect to DENAVIR(R).
7. COMMUNICATIONS
7.1 COMPANY shall promptly communicate to SB all material
comments, requests and inquiries of the medical profession or
any other THIRD PARTIES and all information relating to
DENAVIR(R), including without limitation, market and safety
information, within the TERRITORY, of which it becomes aware.
All responses to the medical profession or such other THIRD
PARTIES shall be handled solely by SB. The parties shall
cooperate with one another to the extent necessary to fully
respond to such communications.
7.2 The parties shall assist one another (as requested) with
respect to communications from AGENCIES. All communications
with AGENCIES concerning DENAVIR(R), including, without
limitation, all communications related to adverse reaction
reporting, shall be the sole responsibility of SB. The parties
shall fully cooperate with one another to the extent necessary
to fully respond to such communications.
7.3 COMPANY shall promptly notify SB of market, economic,
regulatory and other developments of which COMPANY becomes
aware which may affect the sale of DENAVIR(R) to TARGET
PRESCRIBERS in the TERRITORY. SB shall promptly notify COMPANY
of any Adverse Experiences (as defined in Paragraph 8 below)
of which it becomes aware.
8. ADVERSE EXPERIENCE REPORTING AND REGULATORY MATTERS
8.1 The term "Adverse Experience(s)" as used in this Article 8
shall mean any noxious, pathological or unintended change in
anatomical, physiological or metabolic function as indicated
by physical signs, symptoms and/or laboratory changes
occurring in clinical trials, post-marketing surveillance, or
clinical practice during use of DENAVIR(R), or published in
the medical literature, whether or not considered causally
related to the DENAVIR(R). This includes an exacerbation of a
pre-existing condition, intercurrent illness, drug
interaction, significant worsening of a disease under
investigation or treatment, and significant failure of
expected pharmacological or biological action.
8.2 With respect to Adverse Experiences, the following shall apply
in all circumstances:
(a) During the TERM OF THE AGREEMENT SB will have exclusive
responsibility and authority to report Adverse Experiences reported to
it in respect of DENAVIR(R) to the appropriate AGENCIES in the TERRITORY
in accordance with the laws and regulations thereof.
(b) An Adverse Experience will be considered 'serious' if it is any
one or more of the following, i.e., fatal, life threatening, persistent
or significant disability or
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incapacity, results in hospitalization or prolongation of
hospitalization, a congenital abnormality/birth defect, a carcinoma, or
an overdose. In addition, any Adverse Experience which suggests a
significant hazard, contraindication, side effect, precaution or
requires surgical intervention to prevent one of the outcomes listed
above that may be associated with the use of DENAVIR(R) will be
considered a serious Adverse Experience.
(c) All Adverse Experience reports and queries for SB should be
addressed to SmithKline Beecham Product Information, Attention: Roya
Behbahani FP 1015, One Franklin Plaza, Philadelphia, PA 19101 (phone
800-366-8900 x6337) (fax 1-215-751-3148) and for COMPANY should be
addressed to Mary Granados, Collagenex Pharmaceuticals, Inc., 301
South State Street, Newtown, Pennsylvania 18940 (phone 1-888-339-5678)
(fax 1-770-693-9300), or such other safety representative as may be
designated by SB for SB or by COMPANY for COMPANY.
(d) The local U.S. safety department of each party will report
to the local U.S. safety department of the other party all Adverse
Experiences reported to it in respect of DENAVIR(R) as follows:
(i) fatal unexpected and life-threatening unexpected Adverse
Experiences by telephone or facsimile within one (1) calendar day of
receipt;
(ii) all other serious Adverse Experiences in writing within five
(5) calendar days of receipt;
(iii) a summary of all Adverse Experiences, serious and non-
serious, in writing on a monthly basis, indicating those cases which
have previously been reported to the other party.
Further information received on any serious Adverse Experience (or any
information which changes an Adverse Experience from non-serious to
serious) will also be reported to the other party within one (1) or
five (5 ) calendar days of receipt by the central safety department,
according to the above criteria.
8.3 The parties agree throughout the duration of this AGREEMENT to maintain
records and otherwise establish procedures to assure compliance with
all regulatory, professional, and other legal requirements which apply
the promotion and marketing of DENAVIR(R).
9. MISCELLANEOUS
9.1 SB shall be exclusively responsible for accepting and filling purchase
orders, billing, and returns with respect to DENAVIR(R), except as
otherwise provided in Paragraph 10.1. COMPANY shall immediately direct
any inquiries related to orders or matters related thereto it receives
for DENAVIR(R) to SB for acceptance or rejection, which acceptance or
rejection shall be at SB's sole discretion.
9.2 The appointment of COMPANY under Article 2 shall not create a joint
venture, or an employer-employee relationship or a principal-agent
relationship other than as
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specifically provided in this AGREEMENT, with respect to terms and
conditions of the PROMOTION and PERSONAL SELLING of DENAVIR(R) to
TARGET PRESCRIBERS in the TERRITORY.
9.3 Nothing in this AGREEMENT shall be deemed to authorize either party to
act for, represent, or bind the other party or any of its AFFILIATES
other than as specifically provided by this AGREEMENT.
9.4 Neither party shall have any responsibility for the hiring, firing,
compensation or benefits of the other party's employees. No employee or
representative of a party shall have any authority to bind or obligate
the other party to this AGREEMENT for any sum or in any manner
whatsoever, or to create or impose any contractual or other liability
on the other party without said party's authorized written approval.
10. RETURN/RECALL
10.1 Any DENAVIR(R) or DENAVIR(R) related items returned to COMPANY shall be
shipped by COMPANY to SB's facility identified by SB as the point for
receiving returned goods, with any reasonable or authorized shipping or
other documented direct cost to be paid by SB.
10.2 At SB's request, COMPANY will promptly assist SB in obtaining and
receiving any samples of DENAVIR(R) or DENAVIR(R) related items that
have been recalled, and any reasonable and necessary direct documented
costs incurred by COMPANY with respect to participating in such recall
shall be reimbursed by SB.
11. FORCE MAJEURE
11.1 Neither of the parties shall be liable or be in breach of any provision
of this AGREEMENT for any failure or omission on its part to perform
any obligation because of force majeure, including, but not limited to
war, riot, fire, explosion, flood, sabotage, accident or breakdown of
machinery; unavailability of fuel, labor, containers or transportation
facilities; accidents of navigation or breakdown or damages of vessels,
or other conveyances for air, land or sea; other impediments or
hindrances to transportation; strike or other labor disturbances; or
any other cause beyond the control of the party; and provided that such
failure or omission resulting from one of the above causes is cured as
soon as practicable after the occurrence of one or more of the
above-mentioned.
12. SECRECY AND NON-USE
12.1 All confidential information which is received by either party from the
other party during the TERM OF THE AGREEMENT shall be maintained in
strict confidence by the receiving party. All confidential information
whether generated by SB or COMPANY shall be disclosed only to SB or
COMPANY employees and consultants who have been instructed to treat
such information in strict confidence and on a "need-to-know" basis.
This information shall be protected from disclosure to THIRD PARTIES
with at least the
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same degree of care used by such employees when dealing with their
employer's confidential information, but in no event less than
reasonable care. Further, such information shall not be disclosed to
any other person, firm, or AGENCY, governmental or private, or used for
purposes other than set forth herein, without the prior written consent
of the disclosing party except to the extent that the information:
12.1.1 is known at the time of its receipt by the receiving party and
is documented in its tangible records, or
12.1.2 is properly in the public domain, or
12.1.3 is subsequently disclosed to the receiving party by a THIRD
PARTY who may lawfully do so, or
12.1.4 is independently developed by the receiving party, or
12.1.5 is required by law or regulation to be disclosed to
governmental agencies.
This provision shall survive termination of this AGREEMENT for a period
of five (5) years.
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12.2 Upon termination or expiration of this AGREEMENT, and upon the request
of the disclosing party, the receiving party shall return all such
information and copies thereof in its possession, except that the
receiving party may keep one copy of such information in its legal
department confidential files solely for archival purposes. Such
archival copy will be deemed to be the confidential information of the
disclosing party, and will not be copied or distributed in any manner
without the express prior written permission of the disclosing party,
except as otherwise provided in Paragraph 12.1.
13. TERM AND TERMINATION
13.1 The TERM OF THE AGREEMENT is as defined in Paragraph 1.14, and the
AGREEMENT shall expire upon the expiration of the period outlined in
Paragraph 1.14 unless the parties mutually agree, in writing, to extend
the TERM OF THE AGREEMENT in accordance with Paragraph 13.6. The
AGREEMENT may be terminated earlier than the expiration of the TERM OF
THE AGREEMENT as provided in this Article 13.
13.2 Notwithstanding Paragraph 13.3 below, SB may terminate the AGREEMENT at
any time, upon five (5) days written notice, if SB reasonably
determines that COMPANY has breached any warranty or representation
made by COMPANY under this AGREEMENT, including, without limitation,
those outlined in Paragraphs 3.1.1, 3.1.5.2, 3.1.6, 3.1.7, or if SB
reasonably determines that COMPANY is otherwise acting illegally in the
manner in which it is PERSONAL SELLING or PROMOTING DENAVIR(R) in the
TERRITORY, or if SB reasonably determines that COMPANY is interfering
with SB's rights under Paragraph 3.1.10.
13.3 If either party materially fails or neglects to perform material
covenants or provisions of this AGREEMENT and if such default is not
corrected within thirty (30) days after receiving written notice from
the other party with respect to such default, such other party shall
have the right to terminate this AGREEMENT by giving written notice to
the party in default provided the notice of termination is given prior
to correction of the default.
13.4 SB may terminate the AGREEMENT at any time by giving COMPANY at least
thirty (30) days written notice thereof for business or strategic
reasons, including, without limitation, in the event:
(a) DENAVIR(R) is approved by the appropriate AGENCIES for
sale in the TERRITORY as an over-the-counter product; or
(b) SB determines, in its sole discretion, to embark upon a
direct to consumer advertising effort for DENAVIR(R) in the TERRITORY;
or
(c) SB determines, in its sole discretion, to directly conduct
PERSONAL SALES and PROMOTE DENAVIR(R) to TARGET PRESCRIBERS in the
TERRITORY.
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13.5 COMPANY may terminate the AGREEMENT at any time by giving SB at least
thirty (30) days written notice thereof for business or strategic
reasons.
13.6 In the event that the AGREEMENT expires in accordance with Paragraph
13.1, or is terminated by either SB or COMPANY in accordance with
Paragraphs 13.4 or 13.5, respectively, SB and COMPANY agree to discuss
in good faith for no more than thirty (30) days (or such longer or
shorter period as may be mutually agreed upon by the parties) the terms
and conditions of an arrangement pursuant to which the parties would
continue to work together to promote and/or market products to TARGET
PRESCRIBERS including, without limitation, DENAVIR(R) and PERIOSTAT(R);
provided, however, that it is expressly understood and agreed that
neither party shall be under any obligation to enter into such an
arrangement. The parties acknowledge and understand that the terms and
conditions of such an arrangement may be substantially different than
the terms of this AGREEMENT as a result of changes in circumstances,
including, without limitation, the approval of DENAVIR(R) by the
appropriate AGENCIES for marketing and sale in the TERRITORY as
over-the-counter product.
13.7 Either party may terminate this AGREEMENT if, at any time, the other
party shall file in any court or agency pursuant to any statute or
regulation of any state or country, a petition in bankruptcy or
insolvency or for reorganization or for an arrangement or for the
appointment of a receiver or trustee of the party or of its assets, or
if the other party proposes a written agreement of composition or
extension of its debts, or if the other party shall be served with an
involuntary petition against it, filed in any insolvency proceeding,
and such petition shall not be dismissed with sixty (60) days after the
filing thereof, or if the other party shall propose or be a party to
any dissolution or liquidation, or if the other party shall make an
assignment for the benefit of creditors.
13.8 SB may terminate this AGREEMENT upon thirty (30) day written notice in
the event either party is the subject of a "Change of Control." For
purposes of this Paragraph, a "Change of Control" shall mean (i) the
sale or conveyance of all or substantially all of the party's property,
business or assets, whether tangible or intangible, or (ii) the merger
or consolidation with any other corporation (other than an AFFILIATE)
or (iii) the completion of any transaction or series of related
transactions in which more than fifty percent (50%) of the voting power
or equity interests of the party are disposed of.
13.9 During any period preceding the effective date of termination, each
party shall continue to diligently fulfill all obligations of this
AGREEMENT, which shall continue to apply during such period in
accordance with the provisions of this AGREEMENT.
13.10 The termination of this AGREEMENT shall not affect SB's obligations to
pay any amount owing to COMPANY which accrued prior to the effective
date of termination. Termination or expiration of this AGREEMENT shall
terminate all obligations and rights between the parties arising from
this AGREEMENT except those described in Article 12 and Paragraphs 4.5,
13.6, 13.10, 14.3, 15.2, 15.3, 15.4 and 15.5, as well as any other
provision which, by its terms, is stated to survive the termination or
expiration of this
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AGREEMENT. In addition, any other provision required to interpret and
enforce the parties' rights and obligations under this AGREEMENT also
shall survive to the extent required for the full observation and
performance of this AGREEMENT by the parties hereto.
14. RECORDKEEPING PROVISIONS
14.1 As a courtesy, COMPANY agrees to use good faith efforts to submit to
SB, within twenty (20) days of the end of each month during the TERM OF
THIS AGREEMENT, an accounting of all PERSONAL SALES made by COMPANY
sales representatives for DENAVIR(R) to TARGET PRESCRIBERS in the
TERRITORY made during such month, and any other information in
COMPANY's possession which SB reasonably deems necessary regarding all
such PERSONAL SALES; provided, however, that is expressly understood
and agreed that failure of COMPANY to provide such reports to SB shall
not be deemed a material breach of this Agreement (so long COMPANY uses
good faith efforts to provide such reports). The PERSONAL SALES reports
shall be in a form mutually acceptable to both parties. In the event
SB, in good faith, believes that such information is inaccurate,
COMPANY and SB shall promptly meet to attempt to reach a mutually
acceptable conclusion on such matter. In the event the parties cannot
reach such mutually acceptable conclusion, SB may pursue its audit
option under Paragraph 14.2.
14.2 SB, at its expense, may request and COMPANY shall permit an
independent, certified public accountant, except one to whom COMPANY
has a reasonable objection, to have access during ordinary business
hours to COMPANY's records necessary to determine the correctness of
any data supplied to SB by COMPANY under Paragraph 14.1. Such
examination shall not take place more than once for each given
PROMOTION PERIOD.
14.3 SB shall keep accurate records in sufficient detail to enable the
amount due to COMPANY under Article 4 to be determined. In this regard,
SB shall submit to COMPANY, within sixty (60) days after the end of the
first PROMOTION PERIOD and after each quarter during each subsequent
PROMOTION PERIOD, if any, a statement of all GROSS PRESCRIPTIONS during
such period and the calculation of INCREMENTAL RX for such period. Upon
COMPANY's request, and at its expense, SB shall permit an independent,
certified public accountant, except one to whom SB has a reasonable
objection, to have access during ordinary business hours to SB's
records, but only to the extent necessary to determine the correctness
of any report or payment. Such examination shall not take place more
than once for any given PROMOTION PERIOD. These requests with respect
to any PROMOTION PERIOD shall terminate twelve (12) months after the
end of such PERIOD. No information other than a statement as to the
correctness of any report or payment shall be supplied to COMPANY by
such accountant. In the event of a determination by the independent,
certified public accountant that there has been an inaccurate report or
payment made hereunder, an appropriate adjustment shall be made to the
next payment due to COMPANY. In the event the audit reveals an
underpayment by SB of greater than five percent (5%), SB shall
reimburse COMPANY for the reasonable costs and expenses associated with
the audit.
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15. WARRANTIES, REPRESENTATIONS, INDEMNIFICATIONS & INSURANCE
15.1 Each party warrants and represents to the other that it has the full
right and authority to enter into this AGREEMENT, and that it is not
aware of any impediment that would inhibit its ability to perform any
of its obligations under this AGREEMENT.
15.2 SB shall defend, indemnify and hold harmless COMPANY, its officers,
directors, shareholders, employees, successors and assigns from and
against all claims, complaints, or lawsuits for damages that arise (i)
as a result of the activities of any employee or agent of SB or anyone
acting on behalf of SB, such as any of its employees, agents or
representatives, including, but not limited to, negligence, malfeasance
or willful misconduct, (ii) as a result of personal injury, death or
tangible personal property damage that is alleged to have been caused
by or attributed to any DENAVIR(R) which is dispensed, utilized,
ingested, and/or administered in the TERRITORY, provided:
(a) SB shall not be obligated under this Paragraph if it is shown by
evidence acceptable in a court of law having jurisdiction over the
subject matter and meeting the appropriate degree of proof for such
action, that (i) the injury was the result of the performance by any
employee or agent of COMPANY or anyone acting on behalf of COMPANY, such
as any of its employees, agents or representatives, including, but not
limited to, negligence, malfeasance or willful misconduct, unless the
primary legal theory of the complaint is related to a product defect due
to a failure to inform and COMPANY has followed the training and
instructions provided by SB under this AGREEMENT, or (ii) the injury was
the result of the failure to adhere to the terms of this AGREEMENT by
any employee or agent of COMPANY or anyone acting on behalf of COMPANY,
such as any of its employees, agents or representatives, including, but
not limited to, negligence, malfeasance or willful misconduct, or (iii)
the injury was the result of a breach of any warranty or representation,
whether express or implied, made by COMPANY under this AGREEMENT;
(b) SB shall have no obligation under this Paragraph unless COMPANY
(i) gives SB prompt written notice of any claim or lawsuit or other
action for which it seeks to be indemnified under this AGREEMENT, (ii)
SB is granted full authority and control over the defense, including
settlement, against such claim or lawsuit or other action, and (iii)
COMPANY cooperates fully with SB and its agents in defense of the claims
or lawsuit or other action; and
(c) COMPANY shall have the right to participate in the defense of
any such claim, complaint, suit, proceeding or cause of action referred
to in this Paragraph utilizing attorneys of its choice, at its own
expense, provided, however, that SB shall have full authority and
control to handle any such claim, complaint, suit, proceeding or cause
of action, including any settlement or other disposition thereof, for
which COMPANY seeks indemnification under this Paragraph.
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15.3 COMPANY shall defend, indemnify and hold harmless SB, its officers,
directors, shareholders, employees, successors and assigns from and
against all claims, complaints, or lawsuits for damages that arise (i)
as a result of the activities of any employee or agent of COMPANY or
anyone acting on behalf of COMPANY, such as any of its employees,
agents or representatives, including, but not limited to, negligence,
malfeasance or willful misconduct, or (ii) as a result of the failure
to adhere to the terms of this AGREEMENT by any employee or agent of
COMPANY or anyone acting on behalf of COMPANY, such as any of its
employees, agents or representatives, including, but not limited to,
negligence, malfeasance or willful misconduct, or (iii) as a result of
a breach of any warranty or representation, whether express or implied,
made by COMPANY under this AGREEMENT, provided that:
(a) COMPANY shall not be obligated under this Paragraph if it is
shown by evidence acceptable in a court of law having jurisdiction over
the subject matter and meeting the appropriate degree of proof for such
action, that the injury was the result of the performance by any
employee or agent of SB or anyone acting on behalf of SB, such as any of
its employees, agents or representatives, including, but not limited to,
negligence, malfeasance or willful misconduct;
(b) COMPANY shall have no obligation under this Paragraph unless SB
(i) gives COMPANY prompt written notice of any claim or lawsuit or other
action for which it seeks to be indemnified under this AGREEMENT, (ii)
COMPANY is granted full authority and control over the defense,
including settlement, against such claim or lawsuit or other action, and
(iii) SB cooperates fully with COMPANY and its agents in defense of the
claims or lawsuit or other action; and
(c) SB shall have the right to participate in the defense of any
such claim, complaint, suit, proceeding or cause of action referred to
in this Paragraph utilizing attorneys of its choice, at its own expense,
provided, however, that COMPANY shall have full authority and control to
handle any such claim, complaint, suit, proceeding or cause of action,
including any settlement or other disposition thereof, for which SB
seeks indemnification under this Paragraph.
15.4 Notwithstanding the provisions of Paragraphs 15.2 and 15.3, above, SB
and COMPANY agree and understand that, in the event of a claim,
complaint, suit, proceeding or cause of action brought against one
party containing allegations of liability based on activities for which
such party was responsible, such party shall control and bear financial
responsibility for its own defense; unless the other party agrees to
control and bear financial responsibility of such defense.
15.5 Immediately upon DENAVIR(R) PROMOTION INITIATION DATE, and for a period
of five (5) years after the expiration of this AGREEMENT or the earlier
termination thereof, each party shall obtain and/or maintain,
respectively, at its sole cost and expense, product liability insurance
in amounts, respectively, which are reasonable and customary in the
U.S. pharmaceutical industry for companies of comparable size and
activities at the
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respective place of business of each party. Such product liability
insurance shall insure against all liability, including personal
injury, physical injury, or property damage arising out of the
manufacture, sale, distribution or marketing of DENAVIR(R) in the
TERRITORY. Each party shall provide written proof of the existence of
such insurance to the other party upon request.
16. WAIVER/MODIFICATION
16.1 Any term or condition of this AGREEMENT may be waived or modified at
any time by the party entitled to the benefit thereof by a written
instrument executed by both parties. No delay or failure on the part of
any party in exercising any rights hereunder and no partial or single
exercise thereof, will constitute a waiver of such rights or of any
rights hereunder.
17. HEADINGS
17.1 The headings used in this AGREEMENT are intended for guidance only and
shall not be considered part of the written understanding between the
parties hereto.
18. GOVERNING LAW
18.1 This AGREEMENT shall be construed and the respective rights of the
parties hereto determined according to substantive laws of the
Commonwealth of Pennsylvania notwithstanding the provisions governing
conflict of laws under such law to the contrary.
19. SEPARABILITY
19.1 In the event any portion of this AGREEMENT shall be held illegal, void
or ineffective, the remaining portions shall remain in full force and
effect.
19.2 If any of the terms or provisions of this AGREEMENT are in conflict
with any applicable statute or rule of law, then such terms or
provisions shall be deemed inoperative to the extent that they may
conflict therewith and shall be deemed to be modified to conform with
such statute or rule of law.
19.3 In the event that the terms and conditions of this AGREEMENT are
materially altered as a result of Paragraphs 19.1 or 19.2, the parties
will renegotiate the terms and conditions of this AGREEMENT to resolve
any inequities.
20. ENTIRE AGREEMENT
20.1 This AGREEMENT contains the entire agreement between the parties in
respect of the subject matter hereof and supersedes and cancels all
previous agreements, negotiations, commitments and writings between the
parties hereto in respect of the subject matter hereof and may not be
changed or modified in any manner or released, discharged, abandoned or
otherwise terminated unless in writing and signed by the duly
authorized officers or representatives of the parties.
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21. NOTICE
21.1 Any notice or request required or permitted to be given in connection
with this AGREEMENT shall be deemed to have been sufficiently given if
sent by pre-paid registered mail or telecopier to the intended
recipient at the address set forth below or such other business address
as may have been furnished in writing by the intended recipient to the
sender. The date of mailing or telecopying shall be deemed to be the
effective date on which notice was given, provided that all telecopies
shall contain a provision requiring the intended recipient to confirm
receipt and such telecopy shall not be effective unless confirmation of
its receipt is received within twenty-four (24) hours of its
transmission.
Any notice required to be given to COMPANY shall be addressed to:
Collagenex Pharmaceuticals, Inc.
301 South State Street
Newtown, Pennsylvania 18940
Attention: President
Any notice required to be given to SB shall be addressed to:
SmithKline Beecham Consumer Healthcare
100 Beecham Drive
Pittsburgh, PA 15230
Attention: Director, Medical Sales
Copy to:
SmithKline Beecham Corporation
One Franklin Plaza (FP2360)
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: Corporate Legal
22. DISPUTE RESOLUTION
22.1 Any dispute, controversy or claim arising out of or relating to this
AGREEMENT (hereinafter collectively referred to as "Dispute") shall be
attempted to be settled by the parties, in good faith, by submitting
each such Dispute to the Oversight Committee in an effort to effect a
mutually acceptable resolution thereof. In the event no mutually
acceptable resolution is achieved within fourteen (14) calendar days
after submission to the Oversight Committee, then the Oversight
Committee shall submit each such Dispute to the President of SB's US
Consumer Healthcare (with a copy to SB's Corporate Legal Department)
and to the Office of President & CEO of COMPANY (with a copy to
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COMPANY's legal department) in an effort to effect a mutually
acceptable resolution thereof. In the event no mutually acceptable
resolution is achieved within fourteen calendar (14) days after
submission to such persons, then each party shall be entitled to seek
relief for such Dispute by using any appropriate mechanism which may be
available, such as, but not limited to, judicial relief.
23. PUBLIC ANNOUNCEMENTS
23.1 No public announcement or other disclosure to THIRD PARTIES concerning
the existence of or terms of this AGREEMENT shall be made, either
directly or indirectly, by any party to this AGREEMENT, except as may
be legally required or as may be required for recording purposes,
without first obtaining the approval of the other party and agreement
upon the nature and text of such announcement or disclosure. The party
desiring to make any such public announcement or other disclosure shall
inform the other party of the proposed announcement or disclosure in
reasonably sufficient time prior to public release, and shall provide
the other party with a written copy thereof, in order to allow such
other party to comment upon such announcement or disclosure. Each party
agrees that it shall cooperate fully with the other with respect to all
disclosures regarding this AGREEMENT to the Securities Exchange
Commission and any other governmental or regulatory agencies, including
requests for confidential treatment of proprietary information of
either party included in any such disclosure. The parties agree that
the material financial terms of this Agreement are sensitive commercial
information for which confidential treatment should be obtained.
24. ASSIGNMENT
24.1 This AGREEMENT and the promotion rights herein granted shall be binding
upon and inure to the benefit of the successors in interest of the
respective parties. Neither this AGREEMENT nor any interest hereunder
shall be assignable (including by operation of law) by either party
without the prior written consent of the other; provided, however, that
SB may assign this AGREEMENT to any AFFILIATE, or to any corporation
with which it may merge or consolidate or to which it may transfer all
or substantially all of its assets to which this AGREEMENT relates,
without obtaining the consent of COMPANY.
25. EXECUTION IN COUNTERPARTS
25.1 This AGREEMENT may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be executed by
their duly authorized officers or representatives.
COLLAGENEX PHARMACEUTICALS, INC.
By: /s/ BM Gallagher
------------------------------------------
Title: President & CEO
---------------------------------------
SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P., a Delaware Limited Partnership
By: /s/ Illegible
------------------------------------------
Title: VP & Director, Medical Marketing and Sales
-------------------------------------------
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APPENDIX A
Calculation of the DENAVIR(R) PRESCRIPTION BASELINE for the first PROMOTION
PERIOD
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DISTRIBUTION SERVICES AGREEMENT
This agreement is made as of August 15, 1998, between CollaGenex
Pharmaceuticals, Inc., a Delaware corporation ("Client"), and CORD Logistics,
Inc., an Ohio corporation ("CORD").
Background Information
A. Client is, among other things, in the business of developing and
marketing pharmaceutical products in the United States, the District of Columbia
and Puerto Rico (the "Territory").
B. CORD is, among other things, in the business of distributing
pharmaceutical products to wholesalers, specialty distributors, physicians,
clinics, hospitals, retail pharmacies, and other health care providers in the
Territory, and of providing Information Systems and other services that support
its clients' use of its distribution capabilities.
C. Client desires to engage CORD as its exclusive distribution agent for
Periostat(R) (the "Product") in the Territory, following FDA approval of
Periostat(R), and to perform certain other services described in this agreement,
all upon the terms and conditions set forth in this agreement.
Statement of Agreement
Customer and CORD (the "Parties") hereby acknowledge the accuracy of the
above Background Information and agree as follows:
Section 1. Appointment. Upon the terms and conditions described in this
agreement, Customer hereby appoints CORD as its exclusive distribution agent in
the Territory for distribution of the Product and Product samples (collectively,
the "Product") to Clients's direct customers ("Customers").
CORD's services to Client shall be as described below and in the Operating
Guidelines (defined in Section 6) to this agreement (the "Services"). Changes to
such Operating Guidelines may only be made with the prior written approval of
CORD and Client. Such requirements in the Operating Guidelines may be
supplemented or amended from time to time by Client with 30 days prior notice to
and approval by CORD, which approval shall not be unreasonably withheld. If CORD
notifies Client in good faith that any such supplement or amendment will require
a material modification to the CORD Facility or CORD's procedures or
requirements which are unique and specific to the Product or the Services
resulting in a material increase to CORD's anticipated costs and expenses, then
Client and CORD shall consult regarding such reasonable costs and expenses
(hereinafter, simply "unique costs") and the parties shall negotiate the extent
to which Client shall pay such unique costs resulting from that modification.
Section 2. Product Supply, Warehousing and Storage. Client shall ship the
Product to CORD at CORD's distribution facility currently located at 1135 Heil
Quaker Boulevard, Suite 100, La Vergne, TN 37086 or to such other distribution
facility in the Territory as may be designated by CORD (individually or
collectively, the "CORD Facility"), in sufficient quantities to meet Client's
anticipated Customer orders. CORD shall visually inspect each shipment of the
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Product for external damage or loss in transit and notify Client of such damage
or loss within ten days following discovery of such damage or loss by CORD.
Client shall provide CORD with projections of its anticipated quarterly
shipments of Product to CORD no later than 30 days prior to the beginning of
each quarter. CORD shall store the Product in the CORD Facility in accordance
with the requirements outlined in the Operating Guidelines. Client shall pay all
costs and expenses of delivering the Product to the CORD Facility. CORD will
never take title to the Product, even when such Product is located at the CORD
Facility.
Section 3. Standard Product Distribution. All Customer orders shall be
processed by CORD as described in the Operating Guidelines.
Customer orders will be delivered by a courier mutually chosen by Client
and CORD. CORD will invoice Client for such handling services and freight cost
on a monthly basis. CORD will use reasonable efforts to manage any claims by
Client against the courier, provided, however, that CORD shall not be be held
responsible for all lost or damaged shipments.
In addition, Client shall reimburse CORD for all costs and handling
expenses of packaging material used for shipping the Product and all business
forms unique to Client (e.g., packing slips, invoices, etc.).
The Product shall be shipped on a first expiration date-first out basis or
as otherwise directed by Client. In addition, CORD shall establish (and Client
shall approve) procedures for the processing and shipment of emergency orders on
weekends and holidays, provided that Client shall separately pay all increased
costs resulting from such orders.
Section 4. Product Prices. Within thirty days prior to launch, Client shall
deliver to CORD a Product price list for Customers who purchase the Product (the
"Customer Price List"). Client shall notify CORD of any change in the Customer
Price List not less than 10 business days prior to the effective date of any
such change. The Parties hereby acknowledge that Client, and not CORD, is the
seller of the Product to Customers.
Section 5. Financial Support Services.
(a) CORD shall perform the, billing, contract pricing maintenance, cash
application, collections, chargeback processing, and reporting services
described in the Operating Guidelines (the "Financial Support Service).
(b) CORD shall have no obligation to pay for the Product or to reimburse
Client for any losses incurred in connection with the failure of any Customer to
pay Client any amount due.
(c) Customers shall be directed to make payments for the Products in
accordance with the Operating Guidelines.
Section 6. Operating Guidelines. CORD and Client have developed the
"operating guidelines" relating to the product and the services, which define
and document the responsibilities of CORD and Client in support of the
relationship described in this agreement (the "Operating Guidelines"). The
Operating Guidelines are attached as Exhibit D to this
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Agreement. CORD and Client shall comply in all material respects with the
Operating Guidelines. All Operating Guidelines shall be implemented in good
faith and in a commercially reasonable manner, subject to the qualifications set
forth therein; provided that in the event of any inconsistency between the
Operating Guidelines and the other provisions of this agreement, the other
provisions of this agreement shall control. The Operating Guidelines may be
amended from time to time upon the mutual agreement of CORD and Client.
Section 7. Returns and Recalls. CORD shall assist in the processing of
Product returns, including recall returns. The fees to be paid to CORD for these
return services are described in Section 8.
CORD shall process Customer Product return authorizations and credits as
set forth in the Operating Guidelines ("Product Return Services"). The fee for
such Product Return Services by CORD will be included as a part of the Customer
Service Fees described in Section 8.
If Client is required to recall, or, on its own initiative, recalls any
Product, CORD will assist Client with that recall in all ways reasonably
requested by Client ("Product Recall Services"); provided that Client shall pay
to CORD an amount equal to all reasonable costs incurred by CORD in connection
with any such Product Recall Services..
Section 8. Fees. As compensation for the Services, Client shall pay CORD
the fees described below (the "Fees"):
a) Implementation Fees. Shall be in the amount specified in Exhibit A (the
"Fee Schedule").
b) Storage/Distribution Fees. This component of the Fees shall cover
storage of product and distribution services. These
Storage/Distribution Fees shall be based upon the number of pallets
stored per month at the Facility, and the number of Invoice Lines
(defined below) of Product shipped from the CORD Facility or the number
of Invoice Lines of Product returns received at the CORD Facility. The
Storage/Distribution Fees shall be calculated as described in (the Fee
Schedule) and the following provisions of this section. For purposes of
this agreement, the term "Invoice Line" shall mean: (i) for each
shipment of Product to a Customer, each distinct Product SKU
(shelf-keeping unit) specified in the packing slip, shipping manifest,
or other similar document dispatched with such shipment and (ii) for
each Customer return processed, including recall returns, each distinct
SKU included as part of that return. For each calendar month, the total
number of Invoice Lines to be calculated for purposes of determining
the amount of the Storage/Distribution Fees payable for that month
shall be determined by aggregating the Invoice Lines contained in all
shipments completed and returns processed during such month.
c) Information System Access and Use Fees. This component of the Fees
shall cover Client's access and use of CORD's or an affiliate of CORD's
Information System, consisting of the computer hardware and software
and other components described in the attached Exhibit B (the "Order
Entry System"), and other services relating to Client's use of the
System which are described in that Exhibit. Access to the Order
Entry System shall be provided pursuant to a
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System Access Agreement in the form of the attached Exhibit C, which
agreement (the "System Access Agreement") shall be executed by the
Parties concurrently with this agreement. The Order Entry System shall
be made available to Client's Facility so long as Client first has in
place a local area network sufficient to support all Client terminals
and personal computers which will have access to the Order Entry System
and a centralized server sufficient for data storage related to
Client's use of the Order Entry System. All costs and expenses
associated with establishing initial hook-up of all communication and
electronic information lines necessary for interface of the Order Entry
System with Client's information systems [located at 301 South State
Street, Newtown, PA 18940], will be included in the Implementation Fee.
Client shall have sole responsibility for all costs and expenses
associated with maintaining all such communication and electronic
information lines. CORD and Client shall each assign knowledgeable and
qualified employees to facilitate the use of the Order Entry System as
contemplated by this agreement.
d) Financial Support Services Fees. This component of the Fees shall be
for cash application, collections services, contract pricing
maintenance and reporting services, and chargeback processing described
in the Operating Guidelines, which fees (the "Financial Support
Services Fees") shall be in the amount specified in Exhibit A.
e) Customer Service Fees. This component of the Fees shall be a monthly
fee as compensation for the Customer Services performed pursuant to the
Operating Guidelines, which fees (the "Customer Service Fee") shall be
in the amount specified in Exhibit A.
f) Chargeback/Contract System Access and Use Fee. This Fee shall be as
compensation for the access and use of CORD's chargeback and contract
administration software, which fees (the "Chargeback/Contract Fee") are
included in the monthly system Access Fee, specified in Exhibit A.
g) Electronic Data Interchange Set-up, Maintenance, Access and Use Fees.
This component of the Fees shall be as compensation for services
related to the set-up and maintenance of Electronic Data Interchange
("EDI") transaction capabilities between Client and its Customers, and
access and use of a healthcare industry value-added network through
CORD for the processing of EDI transactions between Client and its
Customers, which fees are included in the Information System Fees in
Exhibit A.
Following the end of each calendar month, CORD shall issue an invoice to
Client for the Fees payable with respect to CORD's performance of the Services
for the prior month. The Fees or other amounts owed to CORD by Client under this
agreement shall be payable within 30 days of the date of CORD's invoice for such
Fees or other amounts. If the Fees or other amounts payable to CORD under this
agreement are not paid when due, then CORD shall have the right to impose a
service charge on the unpaid amount calculated at the rate of 1.5% per month (or
the maximum rate permitted by law if such rate is less than 1.5% per month)
until such amount is paid in full.
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If CORD can reasonably demonstrate that the costs for providing the
Services have materially increased, or are likely to materially increase in the
coming year due to the adoption of any applicable law or regulation, or any
material change in the interpretation or administration thereof (a "Cost
Adjustment"), then CORD may propose an increase to the applicable component of
the Fees as of any anniversary of the Commencement Date by an amount designed to
eliminate any Cost Adjustment; provided that the costs used for determining such
increases shall be reasonably determined under Generally Accepted Accounting
Principles and cost allocation methods applied on a consistent basis. CORD shall
notify Client of any such proposed Cost Adjustment not less than 120 days in
advance. If CORD and Client cannot agree on such proposed Cost Adjustment, then
Client may terminate this agreement on 90 days notice, and no Cost Adjustment
will apply during such remaining 90 days until termination.
Section 10. Term and Termination. (a) The initial term of this agreement
(the "Initial Term") shall begin on the date that inventory of the Product is
first entered into the Order Entry System (the "Commencement Date") and continue
until the third anniversary of the Commencement Date, unless or until terminated
sooner pursuant to the other provisions of this section. After the Initial Term,
this agreement shall renew automatically for successive renewal terms of one
year each unless notice of termination is given by any Party at least 90 days
prior to the end of the term then in effect, in which case this agreement shall
terminate at the end of that term. Any reference in this agreement to the "term
of this agreement" shall include the Initial Term and any such renewal terms.
(b) Either Party shall have the right to terminate this agreement upon the
breach by the other Party of a material provision of this agreement and that
Party's failure to cure such breach within 30-days following written notice
thereof from the non-breaching Party or, in the event such failure is not
capable of being cured within such 30-day period, the breaching Party's failure
to continue to diligently prosecute such cure thereafter; provided, that, with
respect to any failure to make any payment when due under this agreement, such
period in which to cure shall be reduced to 10 days.
(c) Either Party shall have the right to terminate this agreement
immediately upon notice to the other Party following the commencement of any
bankruptcy or insolvency proceeding (whether voluntary or involuntary) with
respect to such other Party or its assets, the general assignment for the
benefit of creditors by such other Party, or the appointment of a receiver,
trustee or liquidator by or for such other Party.
(d) Sections 13 and 15 through 18, inclusive, and the first paragraph under
"Warehousing" in the Operating Guidelines in Exhibit D of this agreement shall
survive the termination of this agreement, and no termination of this agreement
shall affect any liabilities arising, or based upon acts or omissions occurring,
prior to the date of such termination.
Section 11. Audits. Client shall have the right during normal business
hours (i.e., 8:00 a.m. to 5:00 p.m. local time), upon reasonable prior notice,
to: (a) review and audit CORD's records relating directly to Product received at
and shipped from the CORD Facility; (b) conduct, together with representatives
of CORD, an inventory of the Product at the CORD Facility ;and (c) conduct
together with representatives of CORD, a tour of the CORD Facility. CORD will
maintain its records relating to the Product for at least three years.
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Section 12. Compliance With Laws. Each Party shall conduct its activities
in connection with this agreement in substantial compliance with all applicable
laws, rules, regulations, and order of governmental entities..
Section 13. Representations and Warranties. Each Party represents and
warrants to the other that: (a) it has full power and authority to enter into
this agreement and perform and observe all obligations and conditions to be
performed or observed by it under this agreement without any restriction by any
other agreement or otherwise; (b) the execution, delivery and performance of
this agreement have been duly authorized by all necessary corporate action of
that Party; and (c) this agreement constitutes the legal, valid and binding
obligation of that Party. Client further represents and warrants to CORD that
the Product is and shall be manufactured in conformity with the Food, Drug, and
Cosmetic Act, as amended, and all other applicable laws, rules, regulations, and
order of governmental entities..
Section 14. Taxes. Client shall pay when due all sales, use, gross
receipts, excise, and personal property taxes associated with the Product
(excluding any personal property tax associated with CORD's equipment used in
connection with the Services), and other taxes or similar charges now or
hereafter imposed as a result of the transactions contemplated by this
agreement, none of which have been included in the fees payable to CORD under
this agreement; provided that the amounts payable by Client under this section
shall not include taxes based on the net income of CORD.
Section 15. Trademarks. Neither Party shall have the right to use the name
of the other Party or any affiliate of the other Party, or the other Party's or
such affiliates' trademarks, patents, service marks, logos, or other similar
marks in any manner except with the prior written approval of that Party;
provided that the foregoing shall not prohibit CORD's use of Client' names or
marks in connection with the performance of the Services in a manner consistent
with this agreement, the past practices of the Parties or their affiliates, or
the practices within the industry.
Section 16. Confidentiality. Each Party acknowledges that as a result of
this agreement it may learn and have access to trade secrets and other
confidential and proprietary information of the other Party, including without
limitation financial information, information regarding business practices and
techniques, and systems and technology information (the "Confidential
Information"); provided that, for purposes of this agreement, Confidential
Information shall not include information disclosed by one Party to the other to
the extent that such information: (a) is or becomes generally available in the
industry in which the disclosing Party engages in business without any violation
of this agreement by the other Party; (b) is already legally known to the other
Party or any of its affiliates at the time of its disclosure by the disclosing
Party; or (c) becomes known to the other Party or any of its affiliates from a
source, not known to the other Party to be legally prohibited from discussing
such information. (d) is independently developed by the other Party or any of
its affiliates. The specific material terms of this agreement shall be deemed to
be the Confidential Information of each Party.
Neither Party shall, directly or indirectly, at any time: (i) disclose to
any person or entity any Confidential Information of the other Party (whether
learned before or after the date of this agreement), or (ii) use, or permit or
assist any person or entity to use, any such Confidential Information, excepting
only: (A) disclosures required by law, as reasonably determined by the
disclosing receiving Party or its legal counsel, and (B) disclosures on a
confidential basis to directors,
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officers, employees, and agents of that Party or its affiliates who have a
reasonable need to know such Confidential Information in the normal course of
business of that Party or any of that Party's affiliates.
The obligations of confidentiality hereunder shall survive the termination
of this agreement for a period of three (3) years. Upon termination of this
agreement (for any reason) each Party shall promptly: (i) return to the other
Party all documentation and other materials (including copies of original
documentation or other materials) containing any Confidential Information of the
other Party; or (ii) with the other Party's consent, which consent will not be
unreasonably withheld, certify to the other Party, pursuant to a certificate in
form and substance satisfactory to the other Party, as to the destruction of all
such documentation and other materials.
Section 17. Indemnification. Each Party shall indemnify and hold harmless
the other and its parent and affiliates, and each of their directors, officers,
employees, agents, and representatives from and against all claims, liabilities,
losses, damages, costs, and expenses (including without limitation reasonable
attorneys' fees) arising directly or indirectly out of any failure of that Party
to perform and observe fully all obligations and conditions to be performed or
observed by that Party pursuant to this agreement or any breach of any warranty
made by that Party in this agreement. Client further agrees to indemnify and
hold harmless CORD and its parent and affiliates and each of their directors,
officers, employees, agents and representatives from and against all claims,
liability, losses, damages, costs, and expenses (including without limitation
reasonable attorney's fees) arising directly or indirectly out of injury or
death to person or property alleged to have been caused by any defect in Clients
Product. NOTWITHSTANDING THE FOREGOING, OR ANY OTHER PROVISION OF THIS AGREEMENT
TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, OR OTHER SIMILAR DAMAGES ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
Section 18. Insurance. During the term of this agreement and for as long
thereafter as necessary to cover claims resulting from this agreement, Client
shall maintain: (i) product liability and commercial general liability insurance
having a limit of not less than $10 million; and (ii) property damage insurance
at replacement value for the Product located at the CORD Facility or in transit
to or from the CORD Facility, pursuant to one or more insurance policies with
reputable insurance carriers. Cardinal Health, Inc. and its subsidiaries shall
be designated as "additional insureds" under the product liability and
commercial general liability insurance policy(ies) and as "loss payees" under
the property damage insurance policy(ies). Prior to the Commencement Date,
Client shall deliver to CORD certificates evidencing such insurance. Client
shall not cause or permit such insurance to be canceled or modified to
materially reduce its scope or limits of coverage during the term of this
agreement or thereafter as provided above. Except for any losses resulting
solely from the negligence or intentional misconduct of CORD, Client shall bear
all risk of loss or damage with respect to the Product, whether located at the
CORD Facility or otherwise.
Section 19. Relationship of the Parties. The relationship among the Parties
is and shall be that of independent contractors. This agreement does not
establish or create a partnership or joint venture among the Parties.
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Section 20. Notices. Any notice or other communication required or desired
to be given to any Party under this agreement shall be in writing and shall be
deemed given: (a) three business days after such notice is deposited in the
United States mail, first-class postage prepaid, and addressed to that Party at
the address for such Party set forth at the end of this agreement; (b) one
business day after delivered to Federal Express, Airborne, or any other similar
express delivery service for delivery to that Party at that address; or (c) when
sent by facsimile transmission, with electronic confirmation, to that Party at
its facsimile number set forth at the end of this agreement. Any notice
delivered by facsimile transmission will be deemed delivered upon electronic
confirmation provided the notice is also deposited in the U.S. mail, first-class
postage prepaid. Any Party may change its address or facsimile number for
notices under this agreement by giving the other Parties notice of such change.
Section 21. Remedies. Each Party acknowledges that in the event of any
violation by that Party of any of the provisions of Section 15 and 16 of this
agreement, the other Party would suffer irreparable harm and its remedies at law
would be inadequate. Accordingly, in the event of any violation or attempted
violation of any such provisions by either Party, the other Party shall be
entitled to a temporary restraining order, temporary and permanent injunctions,
specific performance, and other equitable relief, without any showing of
irreparable harm or damage or the posting of any bond. The rights and remedies
of each Party under this agreement shall be cumulative and in addition to any
other rights or remedies available to such Party, whether under any other
agreement, at law, or in equity.
Section 22. Governing Law. All questions concerning the validity or meaning
of this agreement or relating to the rights and obligations of the Parties with
respect to performance under this agreement shall be construed and resolved
under the laws of the State of Delaware.
23 Severability. The intention of the Parties is to comply fully with all
laws and public policies, and this agreement shall be construed consistently
with all laws and public policies to the extent possible. If and to the extent
that any court of competent jurisdiction determines that it is impossible to
construe any provision of this agreement consistently with any law or public
policy and consequently holds that provision to be invalid, such holding shall
in no way affect the validity of the other provisions of this agreement, which
shall remain in full force and effect.
Section 24. Non-waiver. No failure by either Party to insist upon strict
compliance with any term of this agreement, to exercise any option, to enforce
any right, or to seek any remedy upon any default of the other Party shall
affect, or constitute a waiver of, the first Party's right to insist upon strict
compliance, to exercise that option, to enforce that right, or to seek that
remedy with respect to that default or any prior, contemporaneous, or subsequent
default. No custom or practice of the Parties at variance with any provision of
this agreement shall affect, or constitute a waiver of, that Party's right to
demand strict compliance with all provisions of this agreement.
Section 25. Force Majeure. If the performance of any part of this agreement
by either Party shall be affected for any length of time by fire or other
casualty, government restrictions, war, riots, strikes or labor disputes, lock
out, transportation delays, acts of God, or any other causes which are beyond
the control of the Parties, such Party shall not be responsible for delay or
failure of performance of this agreement for such length of time, provided,
however, that the obligation of one Party to pay amounts due to any other Party
shall not be subject to the provisions of this section.
8
<PAGE>
Section 26. Genders and Numbers. Where permitted by the context, each
pronoun in this agreement includes the same pronoun in the other genders or
numbers and each noun used in this agreement includes the same noun in other
genders.
Section 27. Complete Agreement. This agreement (together with the exhibits
attached hereto and the other documents referred to herein, all of which are
hereby incorporated herein by reference) contains the entire agreement between
the Parties and supersedes all prior or contemporaneous discussions,
negotiations, representations, warranties, or agreements relating to the subject
matter of this agreement. No changes to this agreement shall be made or be
binding on either Party unless made in writing and signed by both Parties.
Section 28. Successors. Except as set forth in this Section 28, neither
Party shall have the right to assign this agreement or any of such Party's
rights or obligations under this agreement without the prior written consent of
the other Party, which consent shall not be unreasonably withheld. Subject to
the preceding sentence, this agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective successors and
assigns of the Parties.
CollaGenex Pharmaceuticals, Inc. CORD Logistics, Inc.
By:/s/ Nancy C. Broadbent By:/s/ Frank C. Wegerson
---------------------------- ------------------------------
(Name) Nancy C. Broadbent Frank C. Wegerson
(Title) Vice President Vice President & General Manager
Initials: NCB Initials: FCW
----- -----
Address: Address:
301 South State Street 1135 Heil Quaker Blvd, #100
Attn: Controller Attn: Vice President & General Manager
Newtown, PA 18940 LaVergne, TN 37086
FAX:: (215) 579-8577 FAX: (615) 793-4783
9
<PAGE>
Exhibits
Exhibit A Fee Schedule
Exhibit B Order Entry System
Exhibit C System Access Agreement
Exhibit D Operating Guidelines
10
<PAGE>
EXHIBIT A
---------
FEE SCHEDULE
------------
1) Program Implementation Fees - One-Time Start-Up: $ *
($ * payable completion Year 1, $ * Year 2; $ *
completion Year 3)
2) Information Systems Fees
a) Information System Access Fees:
Monthly System Access Fee: $ * beginning Year 3
3) Customer Service Fees
a) Monthly Fixed Fee: $ *
b) * $ *
4) Financial Services Fees
a) Monthly Fixed Fee: $ *
b) * $ *
5) Distribution Fees:
Fixed Expense Pallet Storage: $ * Pallet/Month
a) Assuming 90-day Inventory on Hand
b) Fees Billed Monthly, Audited Weekly, Adjusted for Variance Quarterly
Quarterly
c) * Assumes 42"x48"x48" stacked pallet. (Implementation Planning
may yield alternate Pallet Configurations which, in turn, may
yield different Monthly Pallet Charges and will be amended.)
Variable Line Charge for Pick/Pack/Stage:
a) Per Line Product Fee: $ *
b) Per Piece Product Return Fee: $ *
c) Per Line Samples and Literature $ *
4) Other Client Incurred Fees will be paid by CORD and Billed to Client
a) Transportation Charges, Per Client Specifications plus 5%
administration fee
b) Packaging and Container Charges, Per Client Specifications
plus 15% administration fee
c) Third-Party Destruction Charges, Per Client Specifications
plus 5% administration fee
Future Price Increases: The above fees will be held firm through *
. A * per annum price increase will apply to services
described above effective * .
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
11
<PAGE>
EXHIBIT B
---------
ORDER ENTRY SYSTEM
------------------
A. System Access
-------------
Includes access to CORD's processor and operating systems (Monday through Friday
12 hours per day (5:30 a.m. to 5:30 p.m., Pacific Standard Time), excluding
holidays.
B. Software Access and Maintenance
-------------------------------
Includes access to CORD's or an affiliate of CORD's standard software. CORD or
an affiliate of CORD shall perform necessary modification to bring the systems
in compliance with the standard functionality described below.
Customer service
Reports necessary to perform Medicaid rebate calculations.
Billing (Customization of invoicing/packing slips)
Inventory tracking and reporting
Lot tracking
Order entry
Warehousing
Returns processing
Ability to download system data to Client's processors for reporting writing
All standard reports
Contracts/pricing maintenance and chargeback processing
Systems Development/Additional Services:
Client bears financial responsibility for customization beyond the standard
systems functionality described above. Such customization performed by CORD or
its representatives (exclusive of the base package) in connection with this
agreement shall be billed to Client as follows:
Systems and software development--$ * per hour per person, plus travel.
On-site training--$ * per hour/person, plus travel.
Supplies, equipment and other, to be agreed upon by both parties.
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
12
<PAGE>
EXHIBIT C
---------
SYSTEM ACCESS AGREEMENT
-----------------------
This agreement is made as of _January 1, 1998, between CORD Logistics,
Inc., an Ohio corporation ("Licensor"), and CollaGenex Pharmaceuticals, Inc., a
Delaware Corporation ("Licensee"), who hereby agree as follows:
1. System Access; Maintenance Obligations. On the terms and subject
to the conditions described in this agreement and the Distribution Services
Agreement having the same date as this agreement between Licensor and Licensee
(the "Distribution Agreement"), Licensor hereby grants to Licensee a
nonexclusive license (the "License") to utilize Licensor's Order Entry System,
consisting of the computer hardware, software, and other components described in
Exhibit B to the Distribution Agreement (collectively, the "System"), for the
information processing needs of Licensee in connection with the Services to be
provided by Licensor under the Distribution Agreement. Licensee shall maintain
during the term of this agreement the network and local area network (including
without limitation centralized server) requirements for the System described in
the Distribution Agreement.
During the term of this agreement, Licensee shall employ reasonable
security measures and policies designed to safeguard the integrity,
accessibility, and confidentiality of all of Licensee's data resident on the
System and establish reasonable disaster and emergency recovery plans designed
to minimize disruption from System operation interruptions. Licensee shall have
the right to review the operation of the System from time to time upon
reasonable prior notice from Licensee to Licensor; provided that such reviews
shall be conducted in a manner to avoid disruption of Licensor's business
operations to the extent possible.
2. Proprietary Rights. Licensee shall have the right to use access
the System during the term of this agreement as expressly provided in paragraph
1 of this agreement, but not otherwise. Licensee shall not assign or otherwise
transfer, disclose, copy, modify, or decompile the System or any part thereof.
The System and all parts thereof, in all of their tangible and intangible
manifestations, all existing or new enhancements, developments, derivative
works, and other adaptions or modifications to the System (or any part thereof),
and all related proprietary rights, are and shall remain the exclusive property
of Licensor. Except for the License, Licensee shall have no right, title, or
interest in or to the System or any part thereof. Upon termination of this
agreement, Licensee shall promptly return to Licensor all portions of the System
then in Licensee's possession or under its control.
3. Warranties. Licensee acknowledges that it has had adequate
opportunity to review the System and its features and operation, and Licensee
accepts the System "AS IS" for its use as contemplated in the Distribution
Agreement. Licensor hereby warrants that the System will record, process,
calculate, present, and, where appropriate, insert true and accurate dates and
calculations for calendar dates falling on or after January 2000. LICENSOR MAKES
NO REPRESENTATIONS OR WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, RELATING DIRECTLY OR
INDIRECTLY TO THE SYSTEM OR ANY PART THEREOF, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES OF QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE.
4. Limitation On Liability. LICENSOR SHALL NOT BE LIABLE FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, OR OTHER SIMILAR DAMAGES ARISING DIRECTLY OR
INDIRECTLY OUT OF THE USE OR INABILITY TO USE THE SYSTEM OR ANY PART THEREOF,
EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER CLAIMED UNDER
CONTRACT, TORT, OR ANY OTHER LEGAL THEORY.
IF ANY OF THE LIMITATIONS ON THE LIABILITY OF LICENSOR CONTAINED IN THIS
AGREEMENT ARE FOUND TO BE INVALID OR UNENFORCEABLE FOR ANY REASON, THEN LICENSOR
AND LICENSEE EXPRESSLY AGREE THAT THE MAXIMUM AGGREGATE LIABILITY OF LICENSOR
FOR ALL CLAIMS RELATING TO THE SYSTEM SHALL NOT EXCEED 100% OF THE AGGREGATE
BASE PACKAGE FEES PAID BY LICENSEE TO LICENSOR FOR LICENSEE'S USE OF THE SYSTEM
UNDER THE DISTRIBUTION AGREEMENT.
5. Taxes. Licensee shall pay when due all sales, use, gross
receipts, excise, property, and other taxes or similar charges (other than taxes
based upon Licensor's net income) now or hereafter imposed as a result of the
transactions contemplated by this agreement.
13
<PAGE>
6. Term. The term of this agreement shall begin upon Licensee's
initial use of the System as evidenced by the first entry of inventory into the
System (which may be a date earlier than the Commencement Date specified for the
Distribution Agreement) and shall end: (a) automatically upon the termination of
the Distribution Agreement (for any reason), or (b) on any earlier date
specified by Licensee in notice to Licensor given not less than 180 days prior
to the specified termination date; provided that: (i) paragraph 2 through 5,
inclusive, and paragraph 8 of this agreement shall survive the termination of
this agreement, and (ii) no termination of this agreement shall affect any
liabilities arising, or based upon acts or omissions occurring, prior to such
termination.
Licensee shall continue to have access to the System for a reasonable
period of time (not to exceed 60 days) following termination of this agreement
solely for purposes of retrieving and transferring to a separate system
Licensee's data relating to its pre-termination operations, and Licensor shall
reasonably cooperate with Licensee to preserve the integrity and accessibility
of Licensee's data during such period; provided that, during such period,
Licensee shall continue to pay the full Base Package and other fees payable by
Licensee under the Distribution Agreement and comply with all other requirements
imposed upon Licensee under this agreement.
7. Notices. Any notice or other communication required or desired to
be given to either party under this agreement shall be in writing and shall be
deemed given: (a) three days after mailing, if deposited in the United States
mail, first-class postage prepaid, and addressed to that party at its address
set forth at the end of this agreement; (b) when received if delivered to
Federal Express or any other similar overnight delivery service for delivery to
that party at that address; or (c) when sent by facsimile transmission, with
electronic confirmation, to that party at its facsimile number set forth at the
end of this agreement. Either party may change its address or facsimile number
for notices under this agreement by giving the other party notice of such
change.
8. Remedies. Licensee each shall indemnify Licensor and its
affiliates, directors, officers, employees, agents, and representatives against
all claims, liabilities, losses, damages, costs, and expenses (including without
limitation reasonable attorneys' fees) arising directly or indirectly out of any
failure of Licensee to perform and observe fully all obligations and conditions
to be performed or observed by Licensee pursuant to this agreement. Licensee
acknowledges that in the event of any violation by it of any of the provisions
of paragraph 2 of this agreement, Licensor would suffer irreparable harm and its
remedies at law would be inadequate. Accordingly, in the event of any violation
or attempted violation of any such provisions by Licensee, Licensor shall be
entitled to a temporary restraining order, temporary and permanent injunctions,
specific performance, and other equitable relief, without any showing of
irreparable harm or damage or the posting of any bond, in addition to any other
rights or remedies which may be available to Licensor.
9. Force Majeure. Notwithstanding any other provisions of this
agreement or the Distribution Agreement to the contrary, each party's
obligations under this agreement (exclusive of payment obligations) shall be
excused if and to the extent that any delay or failure to perform such
obligations is due to fire or other casualty, material shortages, strikes or
labor disputes, acts of God, or other causes beyond the reasonable control of
that party.
10. Successors. Licensee shall not assign or otherwise transfer this
agreement or any of its rights or obligations under this agreement without the
prior written consent of Licensor, which consent shall not be unreasonably
withheld. Subject to the preceding sentence, this agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the respective
successors and assigns of each party.
11. Interpretation. This agreement shall be governed by and
construed in accordance with the laws of the State of Ohio. If and to the extent
that any court of competent jurisdiction determines that it is impossible to
construe any provision of this agreement consistently with any law or public
policy and consequently holds that provision to be invalid, such holding shall
in no way affect the validity of the other provisions of this agreement, which
shall remain in full force and effect.
<PAGE>
12. Complete Agreement. This agreement (together with the
Distribution Agreement, which is hereby incorporated herein by reference)
constitutes the entire agreement between the parties with respect to the subject
matter of this agreement and supersedes all prior or contemporaneous
discussions, negotiations, representations, warranties, or agreements relating
to the subject matter of this agreement. This agreement may not be amended or
otherwise modified except by a written instrument signed by each party.
14
<PAGE>
CollaGenex Pharmaceuticals, Inc. CORD Logistics, Inc.
By:/s/ Nancy C. Broadbent By:/s/ Frank C. Wegerson
---------------------------- -----------------------------------
(Name) Nancy C. Broadbent Frank C. Wegerson
(Title) Vice President Vice President & General Manager
Initials: NCB Initials: FCW
--- ---
Address: Address:
301 South State Street 1135 Heil Quaker Blvd, #100
Attn: Controller Attn: Vice President & General Manager
Newtown, PA 18940 LaVergne, TN 37086
FAX: (215) 579-8577 FAX: (615) 793-4783
15
<PAGE>
EXHIBIT D
COLLAGENEX PHARMACEUTICALS INC./CORD LOGISTICS, INC.
OPERATING GUIDELINES
In execution of the Distribution Services Agreement, CORD Logistics, Inc.
("CORD") will follow the Operating Guidelines as developed jointly with
CollaGenex Pharmaceuticals Inc. ("CollaGenex"). These Operating Guidelines are
in addition to CORD Information Systems Operating Instructions, as well as the
CORD Standard Operating Procedures ("SOPs"). Copies of these documents are
maintained by both parties and will be reviewed, and updated if necessary, from
time to time as mutually agreed, but not less than once per calendar year.
WAREHOUSING
- -----------
CORD will maintain its warehouse facility in accordance with all state and
federal licensing requirements and will ensure full compliance with Prescription
Drug Marketing Act and FDA guidelines and regulations. CORD will ensure full
compliance with all cGMP, SOP and QA procedures. Documented training programs
will be maintained by CORD.
CORD will comply with storage, handling and shipping conditions designated by
CollaGenex for the Products. Products will be stored in an area with secured
access, accessible only to authorized CORD personnel as agreed to by CollaGenex
and CORD.
Inventory will be received into and tracked on an automated inventory system
capable of full lot tracking on a shipment by shipment basis. Inventory must be
recorded and controlled by SKU, by lot number and by expiration date. Any
quarantined Product must be physically segregated and appropriately labeled.
Quarantined Product can only be released from quarantine status in the automated
inventory system by an authorized CollaGenex or, if designated by CollaGenex, a
CORD QA employee and physically released by an authorized CORD employee.
Inventory will be routinely verified by CORD through weekly cycle counts. Should
deviations occur, CollaGenex and CORD will jointly determine corrective actions
required. CollaGenex and their auditors will have access for pre-arranged
physical inventory observations. CORD will notify CollaGenex of all expired
Product or Product which has reached "short dated" status, specified by
CollaGenex to be six months prior to expiration date. Disposition of returned,
rejected or expired Product must be handled according to CollaGenex's direction.
DISTRIBUTION
- ------------
CORD and CollaGenex will agree upon a common carrier that provides the most
favorable rates and pick up schedule. CORD will procure and bill CollaGenex for
all shipping materials in accordance with this Agreement. CORD's proposal. All
Product will be shipped utilizing packaging and shipping carton(s) as deemed
appropriate by CORD. Unless instructed otherwise by CollaGenex, shipping will
occur based on the shipping procedures provided by CollaGenex.
CORD will comply with First to Expire, First Out (FEFO) inventory allocation.
Any deviations from FEFO must have prior approval by CollaGenex in writing.
Page 1
<PAGE>
CORD will perform quality verification by an individual other than the employee
whom picked the order, on all CollaGenex shipments. All orders will be confirmed
on the same business day in which shipment occurs.
CORD will establish an account for CollaGenex with the carrier selected by CORD
and approved by CollaGenex. If UPS is the selected carrier, shipping charges
will be billed directly to CORD's account and passed through to CollaGenex per
the Distribution Agreement. All freight and insurance will be paid by
CollaGenex. Title will pass to the customer at the point of delivery to a common
carrier. CORD will perform proof of delivery or freight claim services on behalf
of the customer for CollaGenex. In the event of legitimate customer claims, CORD
will issue a credit to the customer for the invoice amount. CollaGenex will
approve all such credits.
CUSTOMER CREDIT
- ---------------
CollaGenex will determine the customers to whom it will sell on a direct basis.
Customer class definitions will be established and customers will be grouped
according to their functional criteria. Wholesalers will be required to sign the
CollaGenex Distributor Agreement form which will automatically renew on an
annual basis until terminated by either Party.
CollaGenex will assign credit limits to customers. The CORD system will monitor
orders and outstanding accounts receivable against such credit limit and hold
orders as needed. Additionally, CollaGenex may elect to place a customer's
account on credit hold so that all orders are reviewed prior to shipment. All
orders held for credit limits or for credit hold will be reviewed and approved
by CollaGenex prior to shipment.
CORD will be responsible for inputting and for maintaining customer profiles.
The initial set up will be verified to information provided by CollaGenex.
Subsequent customers will be added after a customer profile automation form has
been completed by CollaGenex.
CUSTOMER SERVICE
- ----------------
CORD will staff the CollaGenex Customer Service line from 7:00 a.m. - 6:00 p.m.
central standard time. No more than two rings will occur before the customer's
call is handled. As a backup to the customer service representatives, a voice
mail system will be maintained to accept telephone orders and to collect
messages from customers. CORD's dedicated customer service line for CollaGenex
will incorporate programming to forward calls to a CollaGenex designated
clinical service phone number if calls of a clinical nature are received outside
of regular customer service hours. CORD's Customer Service representative will
be knowledgeable about CollaGenex and the Product and will conduct themselves in
a courteous and professional manner.
Orders
- ------
Orders will be accepted via EDI, telephone, fax or mail. All orders received by
2:00 p.m. central time and validated as approved orders will be shipped
according to CollaGenex's shipping procedures. EDI orders will be collected
throughout the day, accordingly to a pre-determined scheduled developed by CORD
and CollaGenex. EDI Orders received after 12:00 p.m. central time will be
shipped the following shipping day, excepting holidays and days designated by
CollaGenex as non-shipment dates.
Page 2
<PAGE>
Customers must order according to CollaGenex minimum order and order line
quantity as stated in the CollaGenex Distributor Agreement and on Product
ordering instructions.
CollaGenex will instruct its customers to place orders based on the CollaGenex
Distribution Agreement. However at CollaGenex's discretion, the policy may not
be enforced at launch. Post-launch customer order frequency will be monitored
via a report furnished by CORD. Customers habitually exceeding the order
frequency policy may be required to pay freight costs. CollaGenex will determine
when this policy will be enforced and will notify CORD of the specific
instructions for enforcement in writing.
CollaGenex reserves the right to limit quantities, to hold or to refuse orders.
These decisions will be executed by CORD.
CORD will ensure order entry accuracy of 98% or higher for all order lines
processed during each calendar quarter. Errors which may occur within this
tolerance range are wrong Product NDC input or incorrect order quantity input.
Should deviations occur outside the tolerance range, CollaGenex and CORD will
jointly determine corrective actions.
Pricing and Terms
- -----------------
CollaGenex will publish terms to wholesalers and warehouse chains. Those
standard terms are 2% - 30 days; net 31 days. Contracted customers may have
non-standard terms.
List prices for wholesalers and warehouse chains will be published by CollaGenex
and are subject to change from time to time at the sole discretion of
CollaGenex. Contract prices will be determined by CollaGenex on a contract by
contract basis. CollaGenex will notify CORD of such price changes with
sufficient notice for update of the CORD system files. Advance notice to
customers may or may not be provided, at CollaGenex's discretion. All customer
notifications will be developed by CORD and approved by CollaGenex.
All system maintenance of pricing and terms will be performed by CORD.
CollaGenex will provide to CORD in writing any changes to prices or terms. CORD
will be responsible for updating the CORD system within 24 to 48 hours of
receipt of such notice. All CORD employees are bound by the confidentiality
provisions of the Agreement between CORD and CollaGenex and, as such, shall not
disclose CollaGenex sales data or pricing information outside the specific CORD
employees who have a need to know of this information in the course of
performing their routine job responsibilities.
CORD will provide the necessary reports within time frames to be agreed by the
parties to ensure CollaGenex can comply with the reporting requirements of
Medicaid (OBRA), Veterans HealthCare Act, PHS Covered Entities, and state rebate
programs. CollaGenex will define reporting requirements against which CORD will
produce the required reports.
INVOICING
- ---------
CORD Customer Service will ensure all invoices are mailed or, once an EDI
invoicing system is implemented, transmitted via EDI the same business day as
the shipment occurs; or by noon the following business day.
Page 3
<PAGE>
For any order shipped after the close of business, the invoice will be prepared
and mailed the following business day.
Once an EDI invoicing system is fully and jointly implemented by CORD and
CollaGenex, CORD will execute and complete EDI testing for additional CollaGenex
customers within 30 days of the customer's request.
PRIME VENDOR PROGRAM/CHARGEBACKS
- --------------------------------
CollaGenex may enter into prime vendor arrangements for contract or government
mandated pricing arrangements. CollaGenex has the right to accept or refuse the
contractee's request to be named prime vendor. Once EDI chargeback processing is
available, CollaGenex, where possible, will encourage the contract customer to
select a wholesaler with full EDI capabilities, receipt of bid award
notification, chargeback submission, chargeback reconciliation and credit
invoicing to serve as their prime vendor.
CORD, on behalf of CollaGenex, will run chargeback processing daily with
reconciliation of chargeback discrepancies within 5 working days. The chargeback
SOP will define the parameters available to CORD to resolve discrepancies.
All chargebacks will be processed according to the chargeback policy for
CollaGenex. All validated chargeback submissions will be settled via credit
invoice. CollaGenex will not make advance payments or authorize advance
deductions of chargebacks.
Prime vendors will be instructed that all returns from CollaGenex's contract
customers must be reported as a reverse chargeback. CollaGenex will maintain the
right to audit a prime vendor's records related to chargeback requests.
ACCOUNTS RECEIVABLE
- -------------------
CollaGenex will open and maintain a lockbox. CORD will receive the notification
of lockbox deposits along with the customer's remittance information. CORD will
reconcile and apply the cash receipt to the outstanding accounts receivable on
the same day as received from the bank or within 24 hours of receipt. CORD will
have no access to funds in the lockbox. To aid the cash application process,
CollaGenex will authorize accounts receivable payment terms of one day past
published terms. This grace period will not be communicated to customers. For
payments received with a postmark beyond the payment terms grace period, the
discount will be disallowed and maintained as a balance due on the Accounts
Receivable account. CORD will notify the customer of the outstanding balance via
a letter to be developed by CORD
Accounts Receivable will be monitored by CORD with appropriate collection action
taken as directed by CollaGenex. The performance measurement for CORD is
confirmation of the strict compliance with the SOP for collection of past due
receivables.
GOVERNMENT REPORTING
- --------------------
Within the first five business days following a calendar quarter end, CORD
personnel will provide the following Government reports to CollaGenex:
Page 4
<PAGE>
IFF Direct Sales Report
IFF Indirect Sales Report
AMP Report
Non FAMP Report
Best Price Report
Most Favored Price Report
CORD will also make available all supporting schedules and source documents to
be used by CollaGenex to perform verification of the Government reports as they
deem necessary.
RETURN GOODS/RECALLS
- --------------------
Returns
- -------
Returns will be processed according to the Return Procedures defined by
CollaGenex.
CORD will complete the processing of all returns and issue credits within 5
business days of receipt of the return.
Recalls
- -------
Recalls will be processed according to Recall Procedures defined by CollaGenex.
CORD will provide the necessary recall reporting using the CORD CIS Recall and
lot history reports.
MONTH-END CLOSE
- ---------------
CORD will comply with all month-end reporting requirements as specified by
CollaGenex. CollaGenex will complete its close by the 5th working day after the
last day of the month being closed.
LAUNCH REQUIREMENTS
- -------------------
CORD will make all efforts, as previously approved by CollaGenex, to support
CollaGenex requirements for a quick entry into the marketplace. Activities that
CORD will perform include pre-loading customer orders, pick/pack/ship within 24
hours of FDA approval or Product availability from CollaGenex. Specific launch
instructions will be developed by CollaGenex.
SYSTEMS
- -------
CollaGenex retains ownership to all data in the CORD CIS system related to
CollaGenex's business. All CollaGenex data must be segregated within the system
with appropriate system access. CollaGenex must have on-line access to inventory
records, lot tracking, customer profiles, item maintenance, pricing and terms,
and other critical data as defined in the procedures. Reporting and interfaces
will be defined by CollaGenex and jointly agreed upon with CORD. CORD will
maintain all systems within the change control SOPs. CORD's CIS processor will
be accessible by CollaGenex 7:30 a.m. - 7:30 p.m. central time Monday through
Friday except for routine, schedule maintenance. Unscheduled system downtime per
calendar quarter shall not exceed 2% of the normally accessible access hours.
CORD will immediately notify CollaGenex of any system
Page 5
<PAGE>
problem that might affect services and an estimated time for restoration of
system access. Daily system backups of changed object files and weekly fully
system backups will be performed according to Regional Data Center SOP #RDC-004.
Fire proof offsite storage is utilized for the safekeeping of the weekly full
backups.
AUDITS/INSPECTIONS
- ------------------
Upon reasonable prior notice, CollaGenex personnel and their representatives
will have access to CORD facilities for review and audit of CORD's records to
assure compliance to cGMP and contractual agreements and to conduct, together
with CORD representatives, periodic inventories of CollaGenex Products.
CORD will assist with inspections/audits of the Federal Food & Drug
Administration or other governmental or official agencies. CORD will notify
CollaGenex immediately of any such audits that are of an unscheduled nature.
CONTINUOUS IMPROVEMENT
- ----------------------
CollaGenex and CORD will meet quarterly to review performance and to jointly
develop continuous improvement to the CollaGenex services.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0001012270
<NAME> CollaGenex Pharmaceuticals, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 11,296
<SECURITIES> 3,984
<RECEIVABLES> 80
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,860
<PP&E> 186
<DEPRECIATION> 77
<TOTAL-ASSETS> 15,982
<CURRENT-LIABILITIES> 3,379
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 12,517
<TOTAL-LIABILITY-AND-EQUITY> 15,982
<SALES> 0
<TOTAL-REVENUES> 408
<CGS> 0
<TOTAL-COSTS> 9,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,215)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,215)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,215)
<EPS-PRIMARY> (0.96)
<EPS-DILUTED> (0.96)
</TABLE>
