<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998.........................
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
- --------------------------------------------------------------------------------
COMMISSION FILE NUMBER
0-23641
ALLERGAN SPECIALTY THERAPEUTICS, INC.
A DELAWARE CORPORATION IRS EMPLOYER IDENTIFICATION
33-0779207
2525 DUPONT DRIVE, IRVINE, CALIFORNIA 92612
TELEPHONE NUMBER 714/246-4500
Indicate by a 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.
(1) X yes no
------ ------
(2) X yes no
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of May 8, 1998 there were 3,272,690 shares of callable Class A common stock
outstanding, and 1,000 shares of Class B common stock outstanding.
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ALLERGAN SPECIALTY THERAPEUTICS, INC.
FORM 10-Q FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(MARCH 10, 1998) TO MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Statement of Operations -
For the period from commencement of operations
(March 10, 1998) to March 31, 1998 3
Condensed Balance Sheets at March 31, 1998
and December 31, 1997 4
Condensed Statement of Cash Flows -
For the period from commencement of operations
(March 10, 1998) to March 31, 1998 5
Notes to Condensed Financial Statements 6-10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11-19
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 20
Signature 21
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Allergan Specialty Therapeutics, Inc.
(a development stage company)
Condensed Statement of Operations
For the period from commencement of operations
(March 10, 1998) to March 31, 1998
(In thousands, except share data)
<TABLE>
<S> <C>
Revenues:
Interest income $ 717
Costs and expenses:
Research and development 9,612
Technology fees 2,395
General and administrative expenses 15
-----------
Total costs and expenses $ 12,022
-----------
Net loss $ (11,305)
Basic and diluted loss per share $ (3.45)
===========
Weighted average common shares outstanding 3,273,690
</TABLE>
See accompanying notes to condensed financial statements.
3
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Allergan Specialty Therapeutics, Inc.
(a development stage company)
Condensed Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 188,904 $ 1
Interest receivable 211 --
Prepaid technology fees 1,960 --
Other assets 143 --
--------- ---------
$ 191,218 $ 1
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to Allergan, Inc. $ 2,682 $ --
Accounts payable and
accrued liabilities 3,055 --
--------- ---------
Total liabilities 5,737 --
Stockholders' equity:
Callable Class A Common stock,
$.01 par value; 6,000,000 shares
authorized, 3,272,690 issued
and outstanding 33 --
Class B Common stock,
$1.00 par value; 1,000 shares
authorized, issued and outstanding 1 --
Additional paid-in capital 196,752 1
Deficit accumulated during
development stage (11,305) --
--------- ---------
Total stockholders' equity 185,481 1
--------- ---------
$ 191,218 $ 1
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
4
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Allergan Specialty Therapeutics, Inc.
(a development stage company)
Condensed Statement of Cash Flows
For the period from commencement of operations
(March 10, 1998) to March 31, 1998
(In thousands)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss $(11,305)
Changes in operating assets and liabilities:
Interest receivable (211)
Other assets (143)
Prepaid technology fee (1,960)
Payable to Allergan, Inc. 2,682
Accounts payable and accrued liabilities 3,055
--------
Net cash used in operating activities (7,882)
FINANCING ACTIVITIES:
Issuance of common stock 200,001
Offering costs (3,215)
--------
Net cash provided by financing activities 196,785
--------
Net increase in cash and equivalents 188,903
Cash and equivalents at beginning of period 1
--------
Cash and equivalents at end of period $188,904
========
</TABLE>
See accompanying notes to condensed financial statemnets.
5
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Allergan Specialty Therapeutics, Inc.
Notes to Condensed Financial Statements
1. Basis of Presentation and Significant Accounting Policies
Allergan Specialty Therapeutics, Inc. ("ASTI" or the "Company") was
incorporated in Delaware on November 12, 1997 and commenced operations
on March 10, 1998. ASTI was formed for the purpose of conducting
research and development of potential human pharmaceutical products, and
to commercialize such products, most likely through licensing to
Allergan, Inc. (Allergan).
The Company is subject to risks associated with development stage
companies. All of the Company's efforts to date have been limited to
obtaining capital and board review of various research and development
proposals presented by Allergan. The Company does not yet generate any
revenues from product sales or royalties. Research and development is
performed by Allergan and the costs incurred are reimbursed by ASTI.
The accompanying financial statements at March 31, 1998 and for the
period from commencement of operations to March 31, 1998 is unaudited,
and in the opinion of management, includes all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the
financial information contained therein. These statements do not include
all disclosures required by generally accepted accounting principles.
The results of operations for the period ended March 31, 1998 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998.
Accounting for revenues and expenses
ASTI's revenues consist solely of interest and investment income. In
later years ASTI may also derive revenues from the sale or license of
its products, most likely through the sale of licensed products by
Allergan. Royalty and other product revenue will be recorded as earned.
ASTI incurs most of its expenses under its agreements with Allergan.
Research and development costs paid to Allergan under a Research and
Development Agreement (R&D Agreement) are recorded as research and
development expenses when incurred. Technology fees paid to Allergan
under a Technology License Agreement (Technology Agreement) are recorded
as technology fees on a straight-line basis over the life of the
Technology Agreement. Amounts paid to Allergan under a Services
Agreement are recorded as administrative expenses as incurred. See Note
2 for a description of the agreements between ASTI and Allergan.
Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
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Allergan Specialty Therapeutics, Inc.
Notes to Condensed Financial Statements
1. Basis of Presentation and Significant Accounting Policies (continued)
The Company invests its excess cash in money market funds and debt
instruments of financial institutions and corporations with strong
credit ratings. The Company has established guidelines with respect to
the diversification and maturities in order to maintain safety and
liquidity. The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents. At
March 31, 1998, all excess cash was invested in cash equivalents.
Per share information
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share,"
(EPS). SFAS No. 128 requires calculations for "basic earnings per share"
including only actual weighted shares outstanding and "diluted earnings
per share" including the effect of any common equivalent shares or other
items that are dilutive. The reconciliations of the numerators and
denominators of the basic and diluted earnings per share computations
for the period from commencement of operations (March 10, 1998) to March
31, 1998 are as follows:
<TABLE>
<CAPTION>
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Computation of basic and
diluted EPS: Income (loss)
available to common
stockholders $(11,305,000) 3,273,690 $(3.45)
</TABLE>
2. Arrangements with Allergan, Inc.
On March 10, 1998, 3,272,690 shares of callable Class A Common Stock of
ASTI, representing all of the issued and outstanding shares of such
class, were distributed by Allergan to the holders of record of Allergan
common stock at the close of business on February 17, 1998 (the
"Distribution"). Prior to the Distribution, Allergan contributed
$200,000,000 in cash to ASTI in exchange for all of the shares of ASTI
Common Stock.
On March 10, 1998, 1,000 shares of Class B Common Stock of ASTI,
representing all of the issued and outstanding shares of such class,
were issued to Allergan. As sole holder of all of the issued and
outstanding shares of Class B Common Stock, Allergan has the option to
repurchase all of the outstanding Class A Common Stock under specified
conditions.
7
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Allergan Specialty Therapeutics, Inc.
Notes to Condensed Financial Statements
2. Arrangements with Allergan, Inc. (continued)
In connection with the Distribution, ASTI and Allergan entered into a
number of agreements, including a Research and Development Agreement
(R&D Agreement), Technology License Agreement (Technology Agreement),
Services Agreement and License Option Agreement (License Agreement).
Pursuant to the R&D Agreement, ASTI reimbursed Allergan for research and
development costs of $9,612,000 incurred during the period from October
24, 1997 through March 31, 1998 with respect to the initial ASTI
Products and Pre-Selection Work, as defined. From time to time
thereafter, Allergan shall propose work plans, subject to ASTI board
approval, for the continued development of each of the initial ASTI
Products as well as other product candidates. ASTI is required to
utilize the cash initially contributed to ASTI by Allergan plus interest
and investment income thereon, less administrative expenses and
technology fees to conduct activities under the R&D Agreement. The R&D
Agreement specifies payment of Developed Technology Royalties and
Pre-Selection Product Payments by Allergan to ASTI under certain
conditions. Through March 31, 1998, no amounts have been earned by ASTI
with respect to Developed Technology Royalties or Pre-Selection Product
Payments.
Subject to certain limitations, the Technology Agreement grants ASTI an
exclusive license to research and develop all of Allergan's proprietary
and contractual rights with respect to certain retinoid and
neuroprotective technologies. As consideration for the exclusive
license, ASTI will pay a technology fee of $10,000,000 in year one;
$6,700,000 in year two; $3,300,000 in year three; and $2,000,000 in year
four commencing October 24, 1997. The technology fee is charged to
operations on a straight-line basis over the life of the Technology
Agreement. The technology fee is payable monthly in arrears provided,
however, that ASTI shall no longer be obligated to make such payments
beginning with any month following the date on which the total number of
ASTI Products either under development or licensed to Allergan pursuant
to the License Agreement is less than two. Through March 31, 1998, ASTI
paid $4,355,000 in technology fees, of which $1,960,000 is included in
prepaid technology fees in the accompanying balance sheet.
ASTI has granted Allergan an option to acquire a license to each product
developed under the R&D Agreement, including the Initial Products on a
country-by-country basis at any time until (a) with respect to the
United States, 30 days after clearance by the FDA to commercially market
such ASTI Product and (b) with respect to any other country, 90 days
after the earlier of (i) clearance by the appropriate regulatory agency
to commercially market the product and (ii) clearance by the FDA to
market the product in the United States. Upon exercise of the license
option, Allergan will make Product Payments to ASTI as defined in the
R&D Agreement. Through March 31, 1998, no license option has been
exercised. The license option will expire to the extent not previously
exercised, 30 days after the
8
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Allergan Specialty Therapeutics, Inc.
Notes to Condensed Financial Statements
2. Arrangements with Allergan, Inc. (continued)
expiration of Allergan's option to purchase all of the outstanding ASTI
Shares, described below.
In accordance with ASTI's Restated Certificate of Incorporation,
Allergan has the right to purchase all (but not less than all) of the
ASTI Class A Common Stock (the "Purchase Option"). Allergan may exercise
the Purchase Option by written notice to ASTI at any time during the
period beginning immediately after the Distribution and ending on
December 31, 2002; provided that such date will be extended for
successive six month periods if, as of June 30, 2001, ASTI has not paid
or accrued expenses for at least 95% of all Available Funds, as defined,
pursuant to the R&D Agreement. In any event, the Purchase Option will
expire 90 days after Allergan receives notice that the amount of cash
and marketable securities held by ASTI is less than $15 million.
If the Purchase Option is exercised, the exercise price will be the
greatest of:
(a) (i) 25 times the aggregate of (1) all worldwide payments with
respect to all Licensed Products, Developed Technology Products and
Pre-Selection Products for the four calendar quarters immediately
preceding the quarter in which the Purchase Option is exercised
(Base Period) and (2) all payments that would have been made and all
payments due to be made by Allergan to ASTI during the Base Period
if Allergan had not previously exercised its payment buy-out option
with respect to any product; provided, however, that, for the
purposes of the foregoing calculation, for any product which has not
been commercially sold during each of the four calendar quarters in
the Base Period, Allergan will be deemed to have made Product
Payments, Developed Technology Royalties and Pre-Selection Product
Payments to ASTI for each such quarter equal to the average of the
payments made during each of such calendar quarters during which
such product was commercially sold, less (ii) any amounts previously
paid to exercise any payment buy-out option for any product;
(b) the fair market value of 500,000 shares of Allergan Common Stock
determined as the average of the closing sales price of Allergan
Common Stock on the New York Stock Exchange for the 20 trading days
ending with the trading day that is two trading days prior to the
date of determination.
(c) $250 million less the aggregate amount of all technology fee
payments and research and development costs paid or incurred by ASTI
as of the date the Purchase Option is exercised; or
(d) $60 million.
In each case, the amount payable as the Purchase Option Exercise Price
will be reduced to the extent, if any, that ASTI's liabilities at the
time of exercise (other than liabilities under the R&D Agreement,
Services Agreement and the Technology Agreement) exceed ASTI's cash and
cash equivalents and short-term and long-term investments
9
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Allergan Specialty Therapeutics, Inc.
Notes to Condensed Financial Statements
2. Arrangements with Allergan, Inc. (continued)
(excluding the amount of Available Funds remaining at such time).
Allergan must pay the Purchase Option Exercise Price in cash.
ASTI and Allergan have entered into a Services Agreement pursuant to
which Allergan has agreed to provide ASTI with administrative services,
including accounting and legal services on a fully-burdened cost
reimbursement basis. The Services Agreement expires on December 31, 1998
and will be renewed automatically for successive one year periods during
the term of the R&D Agreement. ASTI may terminate the Services Agreement
at any time upon 60 days written notice.
3. In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued. SFAS No. 130 established standards for reporting comprehensive
income and its components. This standard increased disclosures in the
financial statements and had no impact on the Company's financial
position or results of operations.
10
<PAGE> 11
ALLERGAN SPECIALTY THERAPEUTICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
This Quarterly Report on Form 10-Q may contain certain projections, estimates
and other forward-looking statements that involve a number of risks and
uncertainties. While this outlook represents management's current judgment on
the future direction of the business, such risks and uncertainties could cause
actual results to differ materially from any future performance suggested below.
The Company undertakes no obligation to release publicly the results of any
revisions to these forward-looking statements to reflect events or circumstances
arising after the date hereof.
The following should be read in conjunction with "--Risks and Uncertainties"
below and the Company's Financial Statements and notes thereto in Item 1 above.
RESULTS OF OPERATIONS
- ---------------------
Revenues, consisting of net interest and investment income earned on investment
funds, were $717,000 from ASTI's commencement of operations, March 10, 1998,
through March 31, 1998. Interest income was earned during the period from March
10, the date Allergan contributed $200 million to ASTI, and March 31, 1998. In
the future, as ASTI's funds are used pursuant to the R&D Agreement and to pay
the Technology Fee pursuant to the Technology Agreement, lower cash balances
will be available for investment and therefore interest and investment income is
expected to decrease. During the period in which products are under development
and applications for regulatory clearance are submitted and reviewed, ASTI does
not anticipate revenues other than from interest and investment income.
Research and development expenses of $9,612,000 through March 31, 1998 related
primarily to development of ASTI Products and Pre-Selection Work from October
24, 1997 through March 31, 1998 and payment of Technology Fees of $4,355,000, of
which $1,960,000 is included in prepaid technology fees. ASTI's research and
development expenses are expected to increase during the remainder of 1998.
General and administrative expenses for the period ended March 31, 1998 were not
material as ASTI did not begin operations until March 10, 1998. It is
anticipated that such expenses will increase in future reporting periods,
particularly with respect to expenses under the Services Agreement pursuant to
which Allergan has agreed to provide ASTI with administrative services,
including accounting and legal services, on a fully-burdened cost reimbursement
basis.
In its early years, the results of operations of ASTI are expected to reflect
primarily interest and investment income on the funds contributed by Allergan,
and research and development expenses related to development of ASTI Products
and the Technology Fee. ASTI's net loss from commencement of operations through
March 31, 1998 was $11,305,000, or $(3.45) per share. ASTI is expected to
continue to record significant net losses in future periods, as expenses under
its agreements with Allergan are expected to continue to exceed investment
income.
11
<PAGE> 12
Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
RESULTS OF OPERATIONS (Continued)
- ---------------------------------
Under its agreements with Allergan, ASTI depends upon Allergan's operating and
accounting systems. Allergan has indicated to ASTI that Allergan's operating and
accounting systems applicable to ASTI are year 2000 compliant. ASTI does not
currently expect its financial condition or results of operations to be
materially adversely affected by year 2000 issues.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On March 9, 1998, Allergan contributed $200 million in cash to ASTI in exchange
for all of the issued and outstanding shares of callable Class A Common Stock of
ASTI. On March 10, 1998, Allergan distributed the Class A shares to holders of
Allergan common stock and ASTI commenced operations. The funds contributed by
Allergan, plus investment income earned thereon, will be used primarily to fund
the development of ASTI Products and to conduct related activities. Funds not
immediately required for development activities will be invested in low-risk
securities.
At March 31, 1998, ASTI had cash and cash equivalents of approximately $188.9
million. As ASTI's funds continue to be utilized pursuant to the R&D Agreement
and to pay the Technology Fee to Allergan, increasingly lower cash balances will
be available for investment.
Based on anticipated spending levels for the continued development of all the
current ASTI Products, it is expected that ASTI's funds for product development
will be exhausted during the next few years. At that time, product development
funding by ASTI will cease. However, several factors could impact the level and
timing of ASTI funding, including the addition of any new ASTI Products, the
discontinuation of the development of any ASTI Products, any commercial
arrangements between Allergan and other companies which would cause Allergan to
exercise its License Option with respect to any ASTI Product, any change in the
number of projects advancing to or continuing in later stages of development or
any adjustments in the rate of spending on products currently in development.
When ASTI's cash available for product development is below $15 million, certain
events will be triggered. First, Allergan's Purchase Option with respect to all
of the ASTI Class A Common Stock will terminate on the 90th day after ASTI
provides Allergan with a statement that, as of the end of any calendar month,
there are less than $15 million of Available Funds remaining. Such statement
will be accompanied by a report of ASTI's independent auditors. In addition,
Allergan has the right, for 30 days after expiration of the Purchase Option, to
license any or all ASTI Products which have not yet been licensed, on a
product-by-product and country-by-country basis. Allergan is under no obligation
to exercise the Purchase Option or the License Option with respect to any ASTI
Product. In the event that Allergan does not exercise the Purchase Option or the
License Option for all ASTI Products after ASTI's cash available for
12
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Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
RISKS AND UNCERTAINTIES
- -----------------------
product development is exhausted, ASTI will not have funds to continue or
complete development of any remaining products.
New Company. ASTI is a newly formed company and is subject to the risks inherent
in the establishment of a new business enterprise in the biotechnology industry.
ASTI will incur substantial losses for several years due to the long-term nature
of the research and development of pharmaceutical products through clinical
testing and the regulatory process, which losses may never be recovered.
No Assurance of Continued Research or Development of ASTI Products. There can be
no assurance that the ASTI Board of Directors will continue the funding of the
research and development of the initial ASTI Products, or that any ASTI Products
can be successfully researched, developed and/or commercialized within the
anticipated cost estimates or time frames, if at all. Certain of the ASTI
Products are at critical stages of research and development, and technical and
clinical outcomes are impossible to predict. Because of the long-range nature of
any pharmaceutical product research and development plan, research and
development of a particular product or products could accelerate, slow down or
be discontinued, and other unforeseen events could occur, all of which would
significantly affect the timing and amount of ASTI's expenditures on a
particular product, or in total. As a result, estimates of costs and timing of
research and development programs and for the use of Available Funds may not be
accurate. There can be no assurance that Allergan will recommend, or that ASTI
will approve, additional products for research and development as ASTI Products
beyond the initial ASTI Products.
Although ASTI has received from Allergan a license to use Allergan Technology
for the purpose of researching, developing and commercializing ASTI Products,
some or all of the ASTI Products may require new technologies or enhancements or
modifications to existing Allergan Technology, and there can be no assurance
that such technology can or will be successfully developed or acquired. Even if
appropriate technology is available or developed, there can be no assurance that
such ASTI Products will be successfully researched or developed (or be
researched or developed in a timely fashion) or be proven to be safe and
efficacious in clinical trials.
Need for Regulatory Clearance. All ASTI Products, Developed Technology Products
and Pre-Selection Products will require FDA clearance before such products may
be lawfully marketed in the United States. Applications for FDA clearance must
be based on costly and extensive clinical trials designed to demonstrate safety
and efficacy. Clearance to market such products will also be required from
corresponding regulatory authorities in foreign countries before such products
may be marketed in those countries. Such clearance often involves pricing and
reimbursement approvals in addition to clearance based on safety and efficacy.
Delay in obtaining FDA and/or foreign regulatory clearance or pricing or
reimbursement approvals for any such product may have a material adverse effect
on the commercial success of such product. There can be no assurance that the
necessary regulatory clearances and approvals will be obtained in a timely
fashion
13
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Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (Continued)
RISKS AND UNCERTAINTIES (Continued)
- -----------------------------------
or, if obtained, that such clearances and approvals will not be revoked or
withdrawn.
No Assurance of Sufficiency of Funds or Availability of Additional Funds.
Allergan has contributed $200 million in cash to ASTI. Allergan has no
obligation to contribute additional funds to ASTI, and has no present intention
to do so. It is anticipated that if ASTI were to fund the continued research and
development of the initial ASTI Products through FDA review for marketing
clearance, the funding of these activities, together with any Pre-Selection Work
undertaken by Allergan and/or ASTI and funded by ASTI, would require
substantially all of the Available Funds. There can be no assurance that ASTI
will have sufficient funds to complete the research and development of any or
all of the ASTI Products, including the four initial ASTI Products.
Allergan's rights under the Allergan/ASTI Agreements may limit ASTI's ability to
raise funds, or may prevent ASTI from doing so, if ASTI needs additional funds
to continue or complete research and development of any ASTI Product. If ASTI
were to attempt to raise funds following the expiration of the Purchase Option,
ASTI would have very little cash, few assets and an undeterminable number of
products under research and development. Allergan would at that time have the
unilateral option to license any or all ASTI Products for such countries for
which Allergan's License Option had not previously expired. Third parties might
therefore be reluctant to lend money to ASTI, or to invest in ASTI.
No Assurance of Successful Manufacturing or Marketing. Even if ASTI Products are
developed and receive necessary regulatory clearances and approvals, there can
be no assurance that the ASTI Products will be successfully manufactured for
clinical trials or successfully manufactured or marketed for commercial sale. To
be successfully marketed, any ASTI Product must be manufactured in commercial
quantities in compliance with regulatory requirements and at an acceptable cost.
Any significant delays in the completion of validation and licensing of expanded
or new facilities could have a material adverse effect on the ability to
continue clinical trials of and ultimately to market ASTI Products on a timely
and profitable basis. If Allergan does not exercise its License Option for an
ASTI Product (and does not exercise the Purchase Option), ASTI will have to make
alternative arrangements for manufacturing that ASTI Product, and there can be
no assurance that ASTI will be able to do so.
If Allergan exercises its License Option for any ASTI Product, Allergan may need
to develop and/or expand its marketing capabilities to commercialize such
Licensed Product effectively. If Allergan exercises its License Option for any
ASTI Product, and does not at the time the product is to be commercialized have
a sales force in the relevant country or countries, Allergan will need to
arrange for marketing by third parties outside of the United States, and, if the
product is not within Allergan's target markets at such time, within the United
States. If Allergan does not exercise its License Option for an ASTI Product
(and does not exercise the Purchase Option), ASTI will need to find other means
to commercialize that ASTI
14
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Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (Continued)
RISKS AND UNCERTAINTIES (Continued)
- -----------------------------------
Product not involving Allergan, and there can be no assurance that ASTI will be
able to do so.
At the present time, ASTI does not have, nor, through the development stage of
the ASTI Products, does it expect to develop, any manufacturing or marketing
capability. If ASTI decides to manufacture or market one or more ASTI Products
itself, ASTI will need substantial additional funds. There is no assurance that
additional funds will be available, or will be available on attractive terms,
and Allergan has no obligation to supply any additional funds to ASTI. In
addition, ASTI may not use Available Funds for this purpose without Allergan's
consent.
If either Allergan or ASTI seeks a third party to manufacture or market an ASTI
Product, there can be no assurance that satisfactory arrangements can be
successfully negotiated or that any such arrangements will be on commercial
terms acceptable to Allergan or ASTI. In addition, even if ASTI decides to
license any ASTI Product to a third party, agreements with that third party, if
available, may be on terms less favorable to ASTI than the terms of the
Allergan/ASTI Agreements.
Even if acceptable manufacturing and marketing resources are available, there
can be no assurance that any ASTI Products will be accepted in the marketplace.
There can be no assurance that there will be adequate reimbursement by health
insurance companies or other third party payors for any ASTI Products that are
marketed.
No Assurance of Exercise of Allergan's Options. Allergan is not obligated to
exercise the License Option for any ASTI Product or to exercise the Purchase
Option, and Allergan will exercise any such option only if it is in Allergan's
best interest to do so. The timing of the exercise of the Purchase Option is
within Allergan's sole discretion, and Allergan may choose to exercise the
Purchase Option at a time when the Purchase Option Exercise Price is as low as
possible. Because the contractual relationship between Allergan and ASTI
contemplates that Allergan will perform research and development activities on
behalf of ASTI, in the event of Allergan's failure to exercise the Purchase
Option, ASTI would be required to seek alternative research and development
facilities, either independently or with a third party. There can be no
assurance that ASTI would be able to obtain access to adequate research and
development facilities in such event on a timely basis, on acceptable terms, or
at all. The timing of the exercise of the License Option with respect to any
Licensed Product is also within Allergan's sole discretion and thereafter
research, development and funding of any such product will be controlled by
Allergan.
Reliance on Proprietary Technologies; Unpredictability of Patent Protection.
Patent protection generally has been important in the pharmaceutical industry.
Therefore, ASTI's financial success may depend in part upon Allergan obtaining
strong patent protection for the technologies incorporated in ASTI Products.
Allergan will determine which patent applications to pursue, and the expense of
obtaining and maintaining patents covering Developed Technology will be shared
equally by Allergan and ASTI during the terms of the Research and Development
Agreement.
15
<PAGE> 16
Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (Continued)
RISKS AND UNCERTAINTIES (Continued)
- -----------------------------------
However, there can be no assurance that patents will be issued covering any
products, or that any existing patents or patents issued in the future will be
of commercial benefit. In addition, it is impossible to anticipate the breadth
or degree of protection that any such patents will afford, and there can be no
assurance that any such patents will not be successfully challenged in the
future. If Allergan is unsuccessful in obtaining or preserving patent
protection, or if any products rely on unpatented proprietary technology, there
can be no assurance that others will not commercialize products substantially
identical to such products.
Patents have been issued to third parties covering various therapeutic agents,
products and technologies. There can be no assurance that any ASTI Products,
Developed Technology Products or Pre-Selection Products will not infringe
patents held by third parties. In such event, licenses from such third parties
would be required, or their patents would have to be designed around. There can
be no assurance that such licenses would be available or that they would be
available on commercially attractive terms, or that any necessary redesign could
be successfully completed.
Allergan licenses certain intellectual property from third parties which it will
sublicense to ASTI pursuant to the Technology License Agreement. Specifically,
Allergan has licensed certain rights to its retinoid technology from Allergan
Ligand Retinoid Therapeutics, Inc. (ALRT) and certain rights to the technology
underlying Memantine from Children's Medical Center Corporation and Merz + Co.
GmbH & Co. ("Merz"). Under the terms of certain of its license agreements,
Allergan may be obligated to exercise diligence and make certain royalty and
milestone payments as well as incur costs related to filing and prosecuting the
underlying patents. Each agreement is terminable by either party upon notice if
the other party defaults in its obligations. Should Allergan default under any
of its agreements, Allergan and therefore ASTI may lose its right to market and
sell products based upon such licensed technology. In addition, there can be no
assurance that Allergan's licensors will meet their obligations to Allergan
pursuant to such licenses. In such event, ASTI's results of operations and
business prospects would be materially and adversely affected.
Competition. ASTI Products, Developed Technology Products and Pre-Selection
Products are likely to face competition from other therapies for the same
indications. Competitors potentially include any of the world's pharmaceutical
and biotechnology companies. Many pharmaceutical companies have greater
financial resources, technical staffs and manufacturing and marketing
capabilities than Allergan or ASTI. A number of companies have developed and are
developing competing technologies and products. To the extent that ASTI
Products, Developed Technology Products and Pre-Selection Products incorporate
therapeutic agents that are off-patent or therapeutic agents marketed by
multiple companies, such products will face more competition than products
incorporating proprietary therapeutic agents.
The fundamental technology underlying retinoids licensed to ASTI is also
cross-licensed to Ligand Pharmaceuticals Incorporated (Ligand) and therefore
competition from similar activities by Ligand and its collaborators in retinoids
is likely. In addition, pursuant to an
16
<PAGE> 17
Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (Continued)
RISKS AND UNCERTAINTIES (Continued)
- -----------------------------------
agreement between Allergan and Ligand, each party has been granted non-exclusive
rights to use any unsynthesized compounds developed by ALRT, provided that such
license will become exclusive with respect to any compound for which an IND is
filed with and accepted by the FDA. Accordingly, no assurance can be given that
Ligand will not be the first party to file an IND with respect to any retinoid
compound under research by ASTI, thereby preventing ASTI and Allergan from
undertaking any further research, development or commercialization with respect
to such compound.
Potential Conflicts of Interest Between Allergan and ASTI. Because Allergan may
develop and/or market products (including Developed Technology Products and
Pre-Selection Products) for its own account, independent of ASTI, that compete
directly with ASTI Products, Allergan and ASTI may have conflicting interests
with respect to certain products and/or certain markets. In addition, ASTI
Products, Developed Technology Products and Pre-Selection Products may compete
with one another. Allergan Technology excludes, and ASTI will have no rights
with respect to, any topical formulation of Tazarotene. Allergan is currently
marketing a topical formulation of Tazarotene for the treatment of psoriasis and
acne in the United States under the brand name "Tazorac" and outside of the
United States under the brand name "Zorac".
Dependence on Allergan for Personnel and Facilities. ASTI will depend
substantially on Allergan for research and development activities to be
performed under the Research and Development Agreement. Although ASTI may
perform directly, or engage other third parties to perform on its behalf, some
of these activities, it is likely that Allergan will be responsible for
executing substantially all of ASTI's research and development activities. While
Allergan believes that its current and planned personnel and facilities will be
adequate for the performance of its duties under the R&D Agreement, such
personnel will perform services in the same facilities for Allergan itself.
Subject to Allergan's obligation to use diligent efforts under the R&D
Agreement, Allergan may allocate its personnel and facilities as it deems
appropriate. Allergan's own research and development activities may restrict the
resources that otherwise would be available for performing Allergan's duties
under the Research and Development Agreement.
Relationship Between ASTI and Allergan May Limit ASTI's Activities and Market
Value. The terms of the Allergan/ASTI Agreements and ASTI's Restated Certificate
of Incorporation were not determined on an arm's-length basis and certain terms
may limit ASTI's activities and its market value.
ASTI's Restated Certificate of Incorporation prohibits ASTI from taking or
permitting any action that might impair Allergan's rights under the Purchase
Option. Prior to the expiration of the Purchase Option, ASTI may not, without
the consent of the holders of ASTI Class B Common Stock, merge or liquidate, or
sell, lease, exchange, transfer or dispose of any substantial assets, or amend
its Restated Certificate of Incorporation to alter the Purchase Option, ASTI's
authorized capitalization, or the
17
<PAGE> 18
Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (Continued)
RISKS AND UNCERTAINTIES (Continued)
- -----------------------------------
provisions of the Restated Certificate of Incorporation governing ASTI's Board
of Directors. Because Allergan owns all of the outstanding Class B Common Stock,
Allergan is able to influence significantly or control the outcome of any of the
foregoing actions requiring approval by the Class B stockholders of ASTI. The
ability of Allergan to significantly influence or control such matters, together
with the provisions of ASTI's Restated Certificate of Incorporation eliminating
the right of the ASTI stockholders to call special meetings of stockholders,
could affect the liquidity of the ASTI Shares and have an adverse effect on the
price of the ASTI Shares, and may have the effect of delaying or preventing a
change in control of ASTI, including transactions in which stockholders might
otherwise receive a premium for their shares over the current market price.
Neither the terms of the ASTI/Allergan Agreements nor ASTI's Restated
Certificate of Incorporation prohibit Allergan from transferring its ASTI Class
B Common Stock. The special rights accorded to the holder or holders of the ASTI
Class B Common Stock will expire upon expiration of the Purchase Option.
So long as the Purchase Option is exercisable, the market value of the ASTI
Shares will be limited by the Purchase Option Exercise Price. The Purchase
Option Exercise Price was determined by Allergan, giving consideration to the
structure of the Distribution, ASTI's planned business, the Allergan/ASTI
Agreements, advice given by Merrill Lynch, Pierce, Fenner & Smith Incorporated,
and such other factors as Allergan deemed appropriate. The Purchase Option
Exercise Price was not determined on an arm's-length basis.
The existence of the Purchase Option and Allergan's rights as holder of the ASTI
Class B Common Stock may inhibit ASTI's ability to raise capital. Additional
capital raised by ASTI, if any, would most likely reduce the per share proceeds
available to holders of ASTI Shares if the Purchase Option were exercised. The
existence of the Purchase Option and Allergan's rights as the holder of the ASTI
Class B Common Stock may inhibit a change of control and may make an investment
in ASTI Shares less attractive to certain potential stockholders, which could
adversely affect the liquidity and market value of ASTI Shares.
If Allergan exercises its License Option for any ASTI Product, Allergan will
have the right to commercialize the product with third parties on such terms as
Allergan deems appropriate. In such event, payments from Allergan to ASTI with
respect to the ASTI Product will be based solely on Sublicensing Revenues
received from such third parties.
Limitation on ASTI's Ability to License Products to Third Parties. ASTI has
granted Allergan the License Option, which is exercisable on a
product-by-product and country-by-country basis. During the term of the License
Option for each ASTI Product, ASTI will not be able to license such ASTI Product
to any party other than Allergan. Furthermore, ASTI may perform research with
respect to product candidates which become ASTI Products only if recommended by
Allergan and accepted by ASTI. In particular, it is expected that Allergan will
perform Pre-Selection Work with respect to various product candidates. If such
product candidates do not become ASTI
18
<PAGE> 19
Allergan Specialty Therapeutics, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (Continued)
RISKS AND UNCERTAINTIES (Continued)
- -----------------------------------
Products, ASTI will have no rights with respect thereto except the right to
receive limited royalties from Allergan on commercial sales of such products, if
any.
Possible Dilution; Reduction of Per Share Purchase Option Exercise Price. All
ASTI Shares issued by ASTI after the Distribution will be subject to the
Purchase Option, and the Purchase Option Exercise Price will not increase as a
result of any such issuance. Accordingly, if additional ASTI Shares were to be
issued, the percentage of the Purchase Option Exercise Price payable with
respect to each ASTI Share in the event Allergan exercises the Purchase Option
would be reduced. Liabilities, including any debt issued by ASTI, but excluding
any accounts payable to Allergan, will reduce the Purchase Option Exercise Price
to the extent that such liabilities exceed ASTI's cash, cash equivalents, and
short-term and long-term investments (excluding Available Funds), unless repaid
or discharged by ASTI prior to exercise of the Purchase Option.
No Dividends. ASTI's Restated Certificate of Incorporation prohibits the payment
of dividends from Available Funds.
19
<PAGE> 20
Allergan Specialty Therapeutics, Inc.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- Exhibits
(numbered in accordance with Item 601 of Regulation S-K)
10.1 Research and Development Agreement dated as of March 6, 1998
between Allergan, Inc. and ASTI
10.2 Technology License Agreement dated as of March 6, 1998 among
Allergan, Inc. and certain of its affiliates and ASTI
10.3 Services Agreement dated as of March 6, 1998 between Allergan, Inc.
and ASTI
10.4 License Option Agreement dated as of March 6, 1998 between
Allergan, Inc. and ASTI
10.5 Distribution Agreement dated as of March 6, 1998 between Allergan,
Inc. and ASTI
- Reports on Form 8-K. None.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1998 ALLERGAN SPECIALTY THERAPEUTICS, INC.
---------------------
/s/ Dwight J. Yoder
-----------------------------------------------
Dwight J. Yoder
Chief Financial Officer
and Duly Authorized Officer
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
10.1 Research and Development Agreement dated as of March 6, 1998 between
Allergan, Inc. and ASTI
10.2 Technology License Agreement dated as of March 6, 1998 among Allergan,
Inc. and certain of its affiliates and ASTI
10.3 Services Agreement dated as of March 6, 1998 between Allergan, Inc. and
ASTI
10.4 License Option Agreement dated as of March 6, 1998 between Allergan,
Inc. and ASTI
10.5 Distribution Agreement dated as of March 6, 1998 between Allergan, Inc.
and ASTI
</TABLE>
<PAGE> 1
EXHIBIT 10.1
RESEARCH AND DEVELOPMENT AGREEMENT
This Research and Development Agreement (the "Agreement") is made as of
the 6th day of March, 1998 between Allergan, Inc., a Delaware corporation
("Allergan"), and Allergan Specialty Therapeutics, Inc., a Delaware corporation
("ASTI").
BACKGROUND
A. ASTI has been formed for the purpose of research and developing human
pharmaceutical products, including products using Allergan Technology (as
defined below) and commercializing such products, most likely through licensing
to Allergan.
B. Allergan is engaged in the business of performing research,
development, marketing, manufacture and distribution of therapeutic and
prophylactic products.
C. ASTI desires that Allergan perform, on behalf of ASTI, research and
development activities directed toward the research and development of ASTI
Products (as defined below) and related activities.
Now, therefore, the parties agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party. "Control"
shall mean ownership of at least 50% of the shares of stock entitled to vote for
the election of directors in the case of a corporation, and at least 50% of the
interests in profits in the case of a business entity other than a corporation.
1.2 "Allergan Technology" shall mean all Proprietary Rights licensed
and/or sublicensed by Allergan and/or its Affiliates pursuant to the Technology
License Agreement.
1.3 "ALRT" shall mean Allergan Ligand Retinoid Therapeutics, Inc, a
Delaware corporation.
1.4 "ASTI Product" shall mean any dosage form of a compound which is the
subject of research and development as a potential human pharmaceutical product
which has been recommended by Allergan and accepted by ASTI's Board of Directors
for development as such under this Agreement. Such recommendations may be made
on a Field of Use basis. The following compounds have been selected as the
initial ASTI Products as of the date hereof: (i) Tazarotene (oral), (ii)
Memantine, (iii) AGN 4310 and (iv) a compound to be selected from
1.
<PAGE> 2
the RAR alpha-selective agonist class of retinoid compounds for the treatment of
various cancers.
1.5 "Available Funds" shall mean, as of any date of determination, $200
million plus any investment income earned thereon less (a) the aggregate amount
of all Research and Development Costs paid or incurred by ASTI as of such date,
(b) ASTI's aggregate reasonable ongoing administrative expenses paid or incurred
as of such date and, (c) the aggregate amount of all Technology Fee payments
paid or incurred by ASTI as of such date.
1.6 "Developed Technology" shall mean Proprietary Rights that (a) are
first generated, conceived or reduced to practice, as the case may be, by
Allergan or by any third party in the course of performing activities undertaken
pursuant to this Agreement or (b) are, in any manner, acquired by, or otherwise
obtained on behalf of, ASTI during the term of this Agreement from persons other
than Allergan and are necessary or useful to the research, development or
commercialization of ASTI Products or Pre-Selection Products.
1.7 "Developed Technology Product" shall mean any product (other than an
ASTI Product) (i) covered, at the time of sale in a country by one or more
unexpired patents issued in such country that are included in Developed
Technology and (ii) with respect to which Allergan receives any consideration.
1.8 "Developed Technology Royalties" shall mean the payments made by
Allergan to ASTI with respect to Net Sales of Developed Technology Products.
1.9 "Distribution" shall mean Allergan's distribution of all of the
outstanding shares of Class A Common Stock of ASTI to Allergan stockholders of
record on February 17, 1998.
1.10 "Distribution Agreement" shall mean the Distribution Agreement
dated as of the date hereof between Allergan and ASTI.
1.11 "FDA" shall mean the United States Food and Drug Administration or
any successor agency whose clearance is necessary to market an ASTI Product in
the United States.
1.12 "Field of Use" shall mean a particular disease state or set of
related disease states.
1.13 "License Option" shall mean the option granted to Allergan pursuant
to the License Option Agreement.
1.14 "License Option Agreement" shall mean the License Option Agreement
dated as of the date hereof between Allergan and ASTI.
1.15 "Major Market Country" shall mean any of the following countries:
United States, France, Germany, Italy, Japan or the United Kingdom.
1.16 "Net Sales" shall mean, with respect to any Licensed Product,
Developed Technology Product or Pre-Selection Product, the amount billed by
Allergan or its Affiliates to a third party which is not an Affiliate of the
selling party (unless such Affiliate is the end user of
2.
<PAGE> 3
such product, in which case the amount billed therefor shall be deemed to be the
amount that would be billed to a third party in an arm's length transaction) for
sales of such Licensed Product, Developed Technology Product or Pre-Selection
Product to third parties less the following items, as allocable to such Licensed
Product, Developed Technology Product or Pre-Selection Product: (i) trade
discounts, credits or allowances, (ii) credits or allowances additionally
granted upon returns, rejections or recalls (except where any such recall arises
out of Allergan's or its Affiliate's gross negligence, willful misconduct or
fraud), (iii) freight, shipping and insurance charges, (iv) taxes, duties or
other governmental tariffs (other than income taxes) and (v) government mandated
rebates.
1.17 "Pre-Selection Work" shall mean research and pre-clinical
development work involving one or more product candidates owned or controlled by
Allergan or a third party undertaken in order to determine the suitability of
such candidate for research and development by ASTI.
1.18 "Pre-Selection Product" shall mean a product, other than one which
becomes an ASTI Product, for which ASTI funds Pre-Selection Work.
1.19 "Pre-Selection Product Payments" shall mean the payments made by
Allergan to ASTI pursuant to Section 7.4 with respect to Net Sales of
Pre-Selection Products.
1.20 "Product Candidate" shall mean a potential ASTI Product or
potential Pre-Selection Product for which Allergan proposes a Work Plan in
accordance with Section 2.2.
1.21 "Product Research and Development Program" shall mean a program to
conduct research and development with respect to an ASTI Product.
1.22 "Proprietary Rights" shall mean data, inventions, information,
processes, know-how and trade secrets, and patents or patent applications
claiming any of the foregoing, owned by, licensed to or controlled by a person
and which such person has the right to license or sublicense. Proprietary Rights
shall not include trademarks.
1.23 "Purchase Option" shall mean that certain option contained in
ASTI's Restated Certificate of Incorporation pursuant to which Allergan has the
right to purchase all of the outstanding shares of ASTI Class A Common Stock.
1.24 "Research and Development Costs" shall mean the cost of the
activities undertaken pursuant to this Agreement, determined in accordance with
Exhibit A hereto.
1.25 "Specialty Royalty Payments" shall mean front-end distribution
fees, prepaid royalties or similar one-time, infrequent or special payments from
a sublicensee to Allergan with respect to a Licensed Product, a Developed
Technology Product or a Pre-Selection Product.
1.26 "Sublicensing Revenues" shall mean percentage-of-sales payments and
Specialty Royalty Payments received by Allergan from sublicensees with respect
to a Licensed Product, a Developed Technology Product or a Pre-Selection
Product.
3.
<PAGE> 4
1.27 "Technology Fee" shall mean payments to be made over a maximum
period of four (4) years by ASTI to Allergan pursuant to the Technology License
Agreement.
1.28 "Technology License Agreement" shall mean the Technology License
Agreement dated as of the date hereof between Allergan and ASTI.
1.29 "Therapeutic Agent" shall mean a drug, protein, peptide, gene,
compound or other pharmaceutically active ingredient.
1.30 "Work Plan" shall mean a work plan for research and development of
a potential ASTI Product or potential Pre-Selection Product including cost
estimates.
2. PRODUCT RESEARCH AND DEVELOPMENT PROGRAM.
2.1 PRODUCT CANDIDATE IDENTIFICATION PROCESS. On or before March 31,
1998 and at least annually thereafter, Allergan shall provide ASTI with a
proposed Work Plan covering activities to be undertaken by Allergan to identify
and conduct research and development with respect to Product Candidates for
consideration by ASTI under Sections 2.2, 2.3 and, as applicable, Section 2.4.
Promptly after Allergan provides ASTI with such proposed Work Plan, ASTI shall
notify Allergan of its acceptance or rejection of such proposed Work Plan.
2.2 PRODUCT CANDIDATE SELECTION.
(A) From time to time during the term of this Agreement, Allergan
shall present ASTI with Product Candidates recommended by Allergan for research
and development as ASTI Products, together with preliminary lifetime plans that
provide, for each such Product Candidate, an estimate of the total Research and
Development Costs for the Product Research and Development Program for such
Product Candidate through FDA review for clearance to market the resulting
product, milestones (including the timetable for the development of the
resulting product), detailed Work Plans for the first proposed stage of the
Product Research and Development Program and any other factors that Allergan
deems appropriate to determine whether to recommend the Product Candidate for
research and development.
(B) Promptly after Allergan recommends a Product Candidate for
research and development to ASTI, ASTI shall notify Allergan in writing of its
acceptance (in whole or in part) or rejection (in whole or in part) of the
initial Work Plan included with such recommendation. Upon written acceptance (in
whole or in part) of a Work Plan for a Product Candidate under this Section 2.2,
such Product Candidate shall be deemed to be an ASTI Product.
(C) If ASTI fails to accept a recommended Product Candidate for
research and development as an ASTI Product within 120 days of recommendation by
Allergan, then, subject to Section 7.4, ASTI shall have no rights with respect
to such Product Candidate; provided, however, that, at any time during the term
of this Agreement, ASTI may request Allergan to perform a Product Research and
Development Program for such Product Candidate and Allergan shall undertake its
duties with respect to such Product Research and Development Program, all in
4.
<PAGE> 5
accordance with this Section 2 and Section 3, unless, at the time of such
request, Allergan is then undertaking the research and development of such
Product Candidate for its own account or with a third party, or Allergan is
otherwise not permitted to undertake such research or development hereunder
because of an arrangement with a third party.
2.3 ASTI PRODUCTS AND PRE-SELECTION WORK. ASTI shall fund the Research
and Development Costs under Allergan approved Work Plans in accordance with
Section 4.1 for each of the initial ASTI Products specified in Section 1.4 and
for the Pre-Selection Work described in Exhibit B during the period from the
date on which ALRT ceased such funding (October 23, 1997) through March 31,
1998. On or before March 31, 1998, Allergan shall provide ASTI with a proposed
Work Plan and a lifetime plan for the continued development of each of such
initial ASTI Products and such initial Pre-Selection Work. On or before March
31, 1998, ASTI shall notify Allergan in writing of its acceptance (in whole or
in part) or rejection (in whole or in part) thereof.
2.4 PRE-SELECTION WORK. From time to time during the term of this
Agreement, Allergan may provide ASTI with a proposed Work Plan covering one or
more Pre-Selection Work projects with respect to Product Candidates which
Allergan designates as Pre-Selection Products. Promptly after Allergan provides
ASTI with such proposed Work Plan, ASTI shall notify Allergan of its acceptance
(in whole or in part) or rejection (in whole or in part) of such proposed Work
Plan. Allergan may propose to ASTI at any time that any Pre-Selection Product
(including any Pre-Selection Product relating to the Pre-Selection Work referred
to on Exhibit B) become an ASTI Product by complying with the procedures set
forth in Section 2.2. So long as an IND has not been filed with respect to a
Pre-Selection Product, Allergan may at any time, by providing notice to ASTI
(the "Reversion Notice"), cause all rights with respect to such Pre-Selection
Product to revert to Allergan, subject to Allergan's obligations to pay
Pre-Selection Product Payments and Developed Technology Royalties.
2.5 PARTIAL ACCEPTANCE. If ASTI accepts or rejects a Work Plan in part,
Allergan may either (i) perform the activities under the Work Plan as approved
by ASTI or (ii) propose a modified Work Plan to ASTI for approval.
3. RESEARCH AND DEVELOPMENT PROGRAMS; ALLERGAN SERVICES.
3.1 PRODUCT DEVELOPMENT--ASTI OBLIGATIONS. Once ASTI accepts a Work Plan
for an ASTI Product or a Pre-Selection Work pursuant to Section 2.2, 2.3 or 2.4,
ASTI shall use diligent efforts to complete such Work Plan, as amended from time
to time. ASTI shall request that Allergan or a third party perform the
activities under each such Work Plan; provided, however, that Allergan's prior
written consent shall be required for a third party to perform any activities
that involve Allergan Technology or that could affect Allergan's rights under
any agreement between Allergan and ASTI or Allergan's rights as holder of the
Class B Common Stock of ASTI. ASTI shall use diligent efforts to cause each
third party other than Allergan (or a third party engaged by Allergan) to
perform diligently the activities assigned it under a Work Plan.
5.
<PAGE> 6
3.2 PRODUCT DEVELOPMENT--ALLERGAN OBLIGATIONS; OTHER ALLERGAN
ACTIVITIES. ASTI hereby engages Allergan to perform product identification,
evaluation, research, development and related activities in accordance with the
tasks assigned to Allergan under the Work Plans accepted under Section 2, and to
undertake such other activities as the parties may agree. Allergan diligently
shall perform or cause to be performed such activities. In connection therewith,
Allergan shall make available such of its scientific and other personnel, and
shall take such steps as it deems necessary in order to perform its obligations
in accordance with the terms hereof, but Allergan is not obligated to devote any
specific amount of time or resources to activities hereunder. Allergan shall
have full discretion to determine from time to time the allocation of resources
of Allergan (facilities, equipment and personnel) that are available for
activities hereunder, and to determine from time to time the allocation of
resources of Allergan among such activities. ASTI understands, acknowledges and
agrees that Allergan may devote substantial time and resources to research and
development activities for other persons and for its own account, and as a
result, Allergan may develop and commercialize, or have commercialized, products
competitive with ASTI Products, Pre-Selection Products and Developed Technology
Products.
3.3 WORK PLANS. The parties understand and acknowledge that it is
difficult to predict accurately the activities that will be necessary to
complete any Work Plan, including the Research and Development Costs thereof,
and that significant uncertainties exist in any product development effort. ASTI
and Allergan shall cooperate in good faith to devise mutually acceptable Work
Plans for Product Research and Development Programs, Pre-Selection Work,
candidate identification activities and such other activities as the parties may
agree. Allergan and ASTI shall review each such Work Plan from time to time, and
with respect to a Work Plan for an ASTI Product no less often than at the end of
each stage of research and development, and shall revise each Work Plan as
appropriate such that each Work Plan remains a best estimate of the work to be
performed to complete the development objectives identified therein and of the
Research and Development Costs thereunder. ASTI shall not be obligated to pay
Research and Development Costs in excess of those provided for in approved Work
Plans, and Allergan shall not be obligated to perform work which would result in
Research and Development Costs exceeding those in approved Work Plans.
3.4 CONSULTATION. ASTI shall consult with Allergan and shall review with
Allergan from time to time the progress toward completion of the activities
under the Work Plans for each ASTI Product and Pre-Selection Work, including
without limitation, the status in each country for each ASTI Product for which
marketing clearance is being sought.
3.5 THIRD PARTY RIGHTS. Subject to the terms and conditions of this
Agreement, ASTI shall have discretion to attempt to obtain, using Available
Funds, any Proprietary Rights from any third party that ASTI reasonably
determines to be necessary or useful to conduct any Product Research and
Development Program, Pre-Selection Work or related activities under this
Agreement. Such Proprietary Rights shall be included in the Developed
Technology. The costs of obtaining any such Proprietary Rights shall be included
in the calculation of Research and Development Costs paid by ASTI pursuant to
this Agreement.
6.
<PAGE> 7
3.6 DEVELOPMENT ASSETS. Allergan shall own and have the right to use any
clinical supplies, materials and other assets purchased, manufactured or
developed pursuant to approved Work Plans ("Development Assets") and, until such
time as the License Option is exercised with respect to the product to which any
particular Development Asset pertains, shall use such Development Assets solely
in the development of ASTI Products under approved Work Plans.
3.7 NO USE OF AVAILABLE FUNDS. After either (i) such time as the License
Option for an ASTI Product in a country expires unexercised as to such country
or (ii) an investigational new drug application ("IND") is filed with the FDA
with respect to a Pre-Selection Product which has not been recommended by
Allergan and accepted by ASTI's Board of Directors as an ASTI Product, no
additional Available Funds shall be expended for the research or development of
such ASTI Product for sale in such country or such Pre-Selection Product, as
applicable.
3.8 NOTICES. Allergan shall notify ASTI within three business days after
Allergan receives notice of clearance to market any ASTI Product in any country.
Allergan shall promptly notify ASTI of the first commercial sale of an ASTI
Product, Developed Technology Product or Pre-Selection Product in any country.
4. PAYMENT FOR SERVICES; TIMING OF PAYMENTS.
4.1 PAYMENT OF RESEARCH AND DEVELOPMENT COSTS. In consideration of the
work to be carried out by Allergan hereunder, ASTI shall reimburse Allergan for
all Research and Development Costs incurred by Allergan in accordance with
accepted Work Plans. ASTI shall also reimburse Allergan for (i) Research and
Development Costs incurred with respect to the initial ASTI Products referred to
in Section 1.4 and (ii) Pre-Selection Work described in Exhibit B, which costs
are incurred from the date on which ALRT ceased such funding (October 23, 1997)
through March 31, 1998 in accordance with the Allergan approved Work Plans
therefor in effect as of the date hereof.
4.2 TIMING OF PAYMENTS. ASTI shall pay to Allergan monthly, in arrears,
all such Research and Development Costs incurred by Allergan during the
preceding calendar month, within 30 days after Allergan's invoice therefor.
4.3 SUFFICIENCY OF FUNDS. Neither ASTI nor Allergan makes any warranty,
express or implied, that Available Funds will be sufficient to complete the
development of any or all ASTI Products or the other activities contemplated
hereunder.
5. REPORTS AND RECORDS.
5.1 PRODUCT RESEARCH AND DEVELOPMENT PROGRAM REPORTS. Within 45 days
after the end of each calendar quarter, Allergan shall provide to ASTI, and ASTI
shall require each third party engaged by ASTI pursuant to Section 3.1 to
provide to ASTI and to Allergan, a reasonably detailed report setting forth (a)
a summary of the work performed hereunder by Allergan or such third party, as
appropriate, and its employees and agents during such quarter; and (b) the total
Research and Development Costs of such activities during such quarter and
cumulatively to date, for each Work Plan.
7.
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5.2 AVAILABLE FUNDS STATEMENT. Within 45 days after the end of each
calendar quarter, ASTI shall provide to Allergan a statement setting forth, as
of the end of such quarter, the Available Funds remaining.
5.3 PAYMENT REPORTS. Within 90 days after the end of each calendar
quarter for which payments are due under Section 7.4, Allergan shall render an
accounting to ASTI, on a product-by-product and country-by-country basis, with
respect to all payments due for such quarter under Section 7.4. Such report
shall indicate, for such quarter, the quantity and dollar amount of Net Sales
of, and Sublicensing Revenues with respect to, each Developed Technology Product
and each Pre-Selection Product by Allergan and its Affiliates, sublicensees,
distributors and marketing partners (and their Affiliates), with respect to
which payments are due; provided, however, that if Allergan shall not have
received from any foreign sublicensee, distributor or marketing partner a report
of its (and its Affiliates') sales for such quarter, then such sales shall be
included in the next quarterly report, and payments with respect to such report
shall be due in the next quarter. In case no payment is due for any calendar
quarter, Allergan shall so report. Allergan shall keep accurate records in
sufficient detail to enable the payments due hereunder to be determined.
5.4 RECORDS; REVIEW BY ACCOUNTANTS. Each of ASTI and Allergan shall keep
and maintain, in accordance with generally accepted accounting principles,
proper and complete records and books of account documenting all Research and
Development Costs and amounts paid or payable by Allergan to ASTI under this
Agreement, in the case of Allergan, and remaining Available Funds, in the case
of ASTI. Each of ASTI and Allergan shall have the right, once in each calendar
year during regular business hours and upon reasonable notice to the other
party, and at its own expense, to examine or to have examined by a certified
public accountant or similar person reasonably acceptable to the other party,
pertinent books and records of one another, for the sole purpose of determining
the correctness of amounts invoiced, paid or due under this Agreement and the
application of Available Funds by ASTI. Such examination shall take place not
later than two years following the year in question, and only one examination
may take place with respect to any period as to which such books and records are
examined. Each party shall obtain, for itself and for the other party, similar
reasonable rights to audit the Research and Development Costs of, and payments
with respect to Net Sales by, each third party engaged by ASTI pursuant to
Section 3.1 or appointed or permitted by Allergan to commercialize any product
as to which payments are due to ASTI hereunder.
6. TECHNOLOGY LICENSED FOR DEVELOPMENT.
6.1 LICENSE TO USE ALLERGAN TECHNOLOGY. ASTI hereby grants to Allergan a
sublicense to use the Allergan Technology and the Developed Technology solely
for the purpose of conducting the activities contemplated hereunder.
6.2 TERMINATION OF LICENSE. Termination of the license granted under the
Technology License Agreement automatically shall terminate the sublicense to the
Allergan Technology granted to Allergan pursuant to Section 6.1.
8.
<PAGE> 9
7. OWNERSHIP OF ASTI PRODUCTS AND DEVELOPED TECHNOLOGY; PATENTS; PAYMENTS TO
ASTI.
7.1 OWNERSHIP OF ASTI PRODUCTS. Unless ASTI agrees otherwise, all ASTI
Products will be owned by ASTI or, in the case of a product licensed from a
third party (or a product incorporating a Therapeutic Agent licensed from a
third party), exclusively licensed to ASTI on a worldwide basis, with the right
to sublicense, and otherwise on terms granting rights substantially similar to
those rights ASTI would have as an owner, in either case subject to the License
Option.
7.2 OWNERSHIP OF DEVELOPED TECHNOLOGY. As between Allergan and ASTI,
Allergan shall own all Developed Technology, subject to the Technology License
Agreement.
7.3 PATENTS COVERING DEVELOPED TECHNOLOGY. Allergan shall determine
whether and to what extent to seek and maintain United States and/or foreign
patents covering any Developed Technology. Any such patents and applications
therefor shall be in Allergan's name and shall be owned by Allergan. In the
event that Allergan declines to seek patent protection for any Developed
Technology, ASTI will not have the right to do so. ASTI and Allergan each shall
pay one-half of the costs of obtaining and maintaining any such patents during
the term of this Agreement.
7.4 PAYMENTS BASED ON SALES OF DEVELOPED TECHNOLOGY PRODUCTS AND
PRE-SELECTION PRODUCTS.
(A) Allergan shall pay Developed Technology Royalties to ASTI, on
a country-by-country basis, equal to the sum of (i) 1% of Allergan's Net Sales
in the relevant country of each Developed Technology Product plus (ii) 10% of
any Sublicensing Revenues with respect to such Developed Technology Product.
Only one payment under this Section 7.4 shall be payable by Allergan to ASTI
with respect to Net Sales of each Developed Technology Product in any country,
regardless of the number of patents covering such Developed Technology Product
in such country. Subject to Section 7.5, payments with respect to sales of a
Developed Technology Product in any country shall be made by Allergan until the
expiration of the last to expire of the patent or patents covering such
Developed Technology Product in any country.
(B) Allergan shall make Pre-Selection Product Payments to ASTI
equal to the sum of (i) 1% of Allergan's Net Sales of each Pre-Selection Product
plus (ii) 10% of any Sublicensing Revenues with respect to such Pre-Selection
Product. Subject to Section 7.5, payments with respect to sales of a
Pre-Selection Product shall be made by Allergan until seven years after the
first commercial sale of such Pre-Selection Product in the first Major Market
Country in which such product is commercially sold.
(C) In determining payments due under this Section 7.4, Net Sales
by Allergan shall be reduced by the dollar amount of any license or similar
payments made by or due from Allergan or its Affiliates to third parties with
respect to any such sales of such Developed Technology Product or Pre-Selection
Product. If license or similar payments are made to third
9.
<PAGE> 10
parties with respect to sales of such products and to sales of other products,
Allergan shall allocate such payments, if necessary, in a commercially
reasonable manner.
(D) Notwithstanding the foregoing, if a product is both a
Developed Technology Product and a Pre-Selection Product, amounts payable under
this Section 7.4 with respect to such product for any period of time shall be
limited to the sum of (i) 1% of Allergan's Net Sales plus (ii) 10% of any
Sublicensing Revenues.
7.5 BUY-OUT OF PAYMENTS BASED ON SALES OF DEVELOPED TECHNOLOGY PRODUCTS
AND PRE-SELECTION PRODUCTS.
(A) Allergan shall have the option with respect to each Developed
Technology Product and each Pre-Selection Product, in its discretion, at any
time after the end of the twelfth calendar quarter during which such product was
commercially sold in a country, to buy out its remaining obligation to make
payments under Section 7.4 with respect to sales of such Developed Technology
Product or Pre-Selection Product in such country. The buy out price shall be an
amount equal to 15 times the payments made by or due from Allergan to ASTI under
Section 7.4 with respect to sales of such Developed Technology Product or
Pre-Selection Product in such country for the four calendar quarters immediately
preceding the quarter in which the buy out option is exercised.
(B) Allergan shall have the option with respect to each Developed
Technology Product and each Pre-Selection Product, in its discretion, at any
time after the end of the twelfth calendar quarter during which such product was
commercially sold in either the United States or two other Major Market
Countries, to buy out its remaining worldwide obligations to make payments under
Section 7.4 with respect to sales of such Developed Technology Product or
Pre-Selection Product. The buyout price shall be an amount equal to (i) 20 times
(A) the payments made by or due from Allergan to ASTI under Section 7.4 with
respect to sales of such Developed Technology Product or Pre-Selection Product,
plus (B) such payments as would have been made by or due from Allergan to ASTI
if Allergan had not exercised any country-specific buy-out option with respect
to such Developed Technology Product or Pre-Selection Product, in each case, for
the four calendar quarters immediately preceding the quarter in which the
buy-out option is exercised, less (ii) any amounts previously paid to exercise
any country- specific buy-out option with respect to such Developed Technology
Product or Pre-Selection Product.
7.6 PAYMENTS. Payments shown by each calendar quarter report described
in Section 5.3 to have accrued shall be due and payable on the date the report
is due and shall be paid in United States dollars. Any and all taxes due or
payable on such payments or with respect to the remittance thereof shall be
deducted from such payments and shall be paid by Allergan to the proper taxing
authorities, and proof of payment shall be secured and sent to ASTI as evidence
of such payment. The rate of exchange to be used in computing the amount of
United States dollars due to ASTI in satisfaction of payment obligations with
respect to sales in foreign countries shall be calculated by converting the
amount due in such foreign currency into United States dollars based on the rate
for the purchase of United States dollars with such currency as published in the
10.
<PAGE> 11
Wall Street Journal on the last business day of the calendar quarter for which
payment is being made.
7.7 CERTAIN FOREIGN PAYMENTS. If governmental regulations prevent
remittance from any foreign country of any amounts due under Section 7.4 with
respect to that country, Allergan shall so notify ASTI in writing, and the
obligation under this Agreement to make payments with respect to sales in that
country shall be suspended (but the amounts due but not paid shall continue to
accrue) until such remittances are possible. ASTI shall have the right, upon
written notice to Allergan, to receive payment in any such country in the local
currency.
7.8 LATE PAYMENTS. Any payments due hereunder that are not made when due
shall accrue interest at the lesser of 10% per annum or the maximum rate as may
be allowed by law, beginning on the date when ASTI notifies Allergan that such
payments are overdue.
8. ACCESS TO INFORMATION; CONFIDENTIALITY.
8.1 ACCESS. Subject to the terms of this Agreement, each party shall be
permitted access to the premises of the other during normal business hours, for
the purpose of monitoring the progress of activities under this Agreement. Each
party shall keep full and complete records and notebooks containing all
experiments performed during its work under this Agreement and the results
thereof. Such items and copies of all documentation shall be available during
normal business hours for inspection by the other party. In addition, each party
shall provide to the other such other information as reasonably may be
requested.
8.2 THIRD PARTIES. ASTI and Allergan shall cause each third party
engaged pursuant to Section 3.1 or 3.2 to provide access similar to that to be
provided pursuant to Section 8.1, for the benefit of both ASTI and Allergan.
8.3 PRODUCT LISTS. Allergan shall maintain a complete list of ASTI
Products, Developed Technology Products and Pre-Selection Products at all times.
Confirmation of the completeness and accuracy of such list shall be made at any
time upon the reasonable request of ASTI.
8.4 CONFIDENTIALITY. During the term of this Agreement and for a period
of ten years following its termination, each party shall maintain in confidence
all Proprietary Rights of the other; provided, however, that nothing contained
herein shall prevent either party from disclosing any Proprietary Rights to the
extent that such Proprietary Rights (a) are required to be disclosed in
connection with researching and developing ASTI Products, conducting
Pre-Selection Work, conducting related activities, securing necessary
governmental authorization for the marketing of ASTI Products or Pre-Selection
Products, or directly or indirectly making, using or selling ASTI Products or
Pre-Selection Products, as permitted or provided for in the agreements between
the parties, (b) are required to be disclosed by law for the purpose of
complying with governmental regulations, (c) are disclosed to sublicensees,
distributors or marketing partners or potential sublicenses, distributors or
marketing partners permitted under the agreements between the parties in
connection with the proposed or actual research, development, manufacturing or
marketing of ASTI Products or Pre-Selection Products, subject to similar
obligations of
11.
<PAGE> 12
confidentiality on the part of such third parties as required by the agreements
between the parties, (d) are known to or used by the recipient prior to the date
hereof (other than through disclosure by or on behalf of the other party) as
evidenced by the recipient's written records, (e) are lawfully disclosed to the
recipient by a third party having the right to disclose such information to the
recipient, or (f) either before or after the time of disclosure to the
recipient, become known to the public other than by an unauthorized act or
omission of the recipient or any of the recipient's employees or agents;
provided that clause (d) does not give Allergan the right to disclose
Proprietary Rights that relate exclusively to ASTI Products; provided further
that, ASTI may disclose Allergan Proprietary Rights to third parties only in
accordance with the provisions of Section 10.3 hereof and in accordance with the
provisions of the Technology License Agreement. The obligations of each of the
parties pursuant to this Section 8.4 shall survive the termination of this
Agreement for any reason. Any breach of this Section 8.4 may result in
irreparable harm, and in the event of a breach, the aggrieved party shall be
entitled to seek injunctive relief (without the need to post a bond) in addition
to any other remedies available at law or in equity.
9. PUBLIC DISCLOSURE.
9.1 PUBLIC DISCLOSURE. The parties will work together with respect to
public statements disclosing the status of and results under Product Research
and Development Programs and related matters. Except to the extent previously
disclosed pursuant to the terms hereof, neither party shall disclose to third
parties nor originate any publicity, news release or public announcement,
written or oral, whether to the public, the press, stockholders or otherwise,
referring to activities conducted, or the parties' performance under, this
Agreement, except such announcements, as in the opinion of the counsel for the
party making such announcement, are required by law, including United States
securities laws, rules or regulations, without the prior written consent of the
other party. If a party decides to make an announcement it believes to be
required by law with respect to this Agreement, it will give the other party
such notice as is reasonably practicable and an opportunity to comment upon the
announcement.
10. COVENANTS.
10.1 USE OF AVAILABLE FUNDS. Unless Allergan agrees otherwise, ASTI
agrees to expend all Available Funds for activities undertaken pursuant to this
Agreement. Pending application of all Available Funds as set forth above,
Available Funds shall be invested in securities issued or guaranteed as to
principal and interest by the United States, or by a person controlled or
supervised by or acting as an instrumentality of the government of the United
States pursuant to authority granted by the Congress of the United States, or
any certificate of deposit for any of the foregoing, or any other types of high
quality marketable investment securities that are proposed by ASTI and are
approved by Allergan in its sole discretion.
10.2 NEGATIVE PLEDGE. ASTI shall not create, incur, assume or suffer to
exist any lien upon or with respect to, or otherwise take any action with
respect to, Available Funds so as to prevent or interfere with full expenditure
of such funds for activities under this Agreement in accordance with Section
10.1.
12.
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10.3 NO INCONSISTENT AGREEMENTS. Without the written consent of
Allergan, ASTI shall not enter into any agreement or arrangement that is in any
way inconsistent with or that could adversely affect Allergan Technology or
Allergan's rights under any agreement between Allergan and ASTI, or that is in
any way inconsistent with or that could adversely affect Allergan's rights as
holder of the Class B Common Stock of ASTI. ASTI must include in any agreement
between ASTI and a third party relating to ASTI Products and/or activities
hereunder such provisions as Allergan reasonably deems appropriate to protect
Allergan Technology and to protect Allergan's rights under any agreement between
Allergan and ASTI and as a holder of the Class B Common Stock of ASTI (including
Allergan's rights under the Purchase Option).
11. EFFECTIVE DATE; TERM AND TERMINATION.
11.1 EFFECTIVE DATE. The effective date of this Agreement shall be the
date of the Distribution.
11.2 AUTOMATIC TERMINATION. This Agreement shall terminate upon exercise
or expiration of the Purchase Option, except that Allergan's obligations to make
payments to ASTI with respect to Developed Technology Products and Pre-Selection
Products shall continue after expiration of the Purchase Option as provided in
Section 7 hereof.
11.3 OTHER TERMINATION. Either party may, in its discretion, terminate
this Agreement in the event that the other party:
(A) breaches any material obligation hereunder or under the
Technology License Agreement, the License Option Agreement, or any license
thereunder, and such breach continues for a period of 60 days after written
notice thereof by the terminating party to the other party; or
(B) enters into any proceeding, whether voluntary or otherwise,
in bankruptcy, reorganization or arrangement for the appointment of a receiver
or trustee to take possession of its assets or any other proceeding under any
law for the relief of creditors, or makes an assignment for the benefit of its
creditors.
12. FORCE MAJEURE.
12.1 FORCE MAJEURE. Neither party to this Agreement shall be liable for
failure or delay in the performance of any of its obligations hereunder, if such
failure or delay is due to causes beyond its reasonable control including,
without limitation, acts of God, earthquakes, fires, strikes, acts of war, or
intervention of any governmental authority, but any such delay or failure shall
be remedied by such party as soon as possible after the removal of the cause of
such failure or delay.
13. MISCELLANEOUS.
13.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party hereto
of a breach of any provisions of this Agreement shall not be implied and shall
not be valid unless
13.
<PAGE> 14
such waiver is recited in writing and signed by such party. Failure of any party
to require, in one or more instances, performance by the other party in strict
accordance with the terms and conditions of this Agreement shall not be deemed a
waiver or relinquishment of the future performance of any such terms or
conditions or of any other terms and conditions of this Agreement. A waiver by
either party of any term or condition of this Agreement shall not be deemed or
construed to be a waiver of any other term or condition of this Agreement. All
rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of either party. This
Agreement may not be amended except in a writing signed by both parties.
13.2 ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that Allergan may assign
such rights and obligations hereunder to an Affiliate of Allergan or to any
person or entity with which Allergan is merged or consolidated or which acquires
all or substantially all of the assets of Allergan.
13.3 DISPUTE RESOLUTION. In the event of any dispute, the parties shall
refer such dispute to the CEO of ASTI and the CEO of Allergan for attempted
resolution by good faith negotiations within sixty (60) days after such referral
is made. During such period of good faith negotiations, any applicable time
periods under this Agreement shall be tolled. In the event such executives are
unable to resolve such dispute within such sixty (60) day period, the parties
shall submit their dispute to binding arbitration before a retired California
Superior Court Judge at J.A.M.S./Endispute located in Orange, California, such
arbitration to be conducted pursuant to the J.A.M.S./Endispute procedure rules
for commercial disputes then in effect. The award of the arbitrator shall
include an award of reasonable attorneys' fees and costs to the prevailing
party.
13.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
13.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California as applied to residents of
that state entering into contracts to be performed in that state.
13.6 HEADINGS. The section headings contained in sections of this
Agreement are included for convenience only and form no part of the Agreement
between the parties.
13.7 NOTICES. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail, postage prepaid, and addressed as
follows:
If to Allergan: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92715
Facsimile: (714) 246-4774
Attention: Corporate Vice President, General Counsel
14.
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If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of mailing
or upon receipt if sent by facsimile (but only if followed by certified or
registered confirmation). Either party may change the address at which notice is
to be received by written notice pursuant to this Section 13.7.
13.8 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified,
if possible, to the minimum extent necessary to make it valid and enforceable
or, if such modification is not possible, it shall be stricken and the remaining
provisions shall remain in full force and effect.
13.9 RELATIONSHIP OF THE PARTIES. For purposes of this Agreement, ASTI
and Allergan shall be deemed to be independent contractors, and anything in this
Agreement to the contrary notwithstanding, nothing herein shall be deemed to
constitute ASTI and Allergan as partners, joint venturers, coowners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way obligate the other party, except as expressly authorized in
writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume or be liable for any liabilities
or obligations of the other party, whether past, present or future.
13.10 SURVIVAL. The provisions of Sections 1, 7, 8.3, 8.4, 11, 13.1,
13.3, 13.5, 13.6, 13.7, 13.8, 13.9, and this Section 13.10, and of Sections 4
and 5 to the extent of obligations under such sections relating to periods prior
to termination of this Agreement, shall survive the termination for any reason
of this Agreement. Any payments due under this Agreement with respect to any
period prior to its termination shall be made notwithstanding the termination of
this Agreement. Neither party shall be liable to the other due to the
termination of this Agreement as provided herein, whether in loss of good will,
anticipated profits or otherwise.
15.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ALLERGAN, INC.
By: /s/ LESTER J. KAPLAN
-------------------------------------------
Title: Corporate Vice President,
Science & Technology
----------------------------------------
ALLERGAN SPECIALTY THERAPEUTICS, INC.
By: /s/ LESTER J. KAPLAN
-------------------------------------------
Title: Chief Executive Officer
----------------------------------------
16.
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EXHIBIT A
CALCULATION OF RESEARCH AND DEVELOPMENT COSTS
Allergan shall charge ASTI for both "direct" and "indirect" Research and
Development Costs based on Allergan's internal R&D Project Accounting System or
such other comparable successor system as Allergan may use to gather such costs.
Direct costs include third party contract costs, such as those expenses paid to
outside vendors which can be directly identified to a specific research and
development program or project (see Exhibit A1). Indirect costs include the
fully absorbed cost of labor (labor plus overhead) which can be specifically
identified with or physically traced to a project using the Allergan Project
Reporting System. The allocation of such indirect costs is based on timecards
which all Allergan R&D employees who work directly on research and development
projects complete each month (see Exhibit A2).
In order to fully and fairly allocate all allocable overhead to projects
undertaken by Allergan hereunder, an amount equal to 10% of the total Research
and Development Costs determined in accordance with the above provisions
(exclusive of the costs charged to Allergan or ASTI pursuant to contracts with
third parties for the performance of services related to research and
development hereunder) will also be added to the amount charged to ASTI.
17.
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EXHIBIT A1
RESEARCH AND DEVELOPMENT DIRECT COSTS
The following is a list of the types of expenses which are considered as
"direct" in Exhibit A and would be billable to ASTI when they can be directly
identified with ASTI research and development:
Collaborative research agreement payments
Payments for compound supply
Payments for biologicals
Payments for chemical precursors
Payment for clinical studies
Payment for toxicological, pharmacokinetic studies and other outside services
Payment for other Allergan functions (non-R&D) which provide services
Payment for research grants
Payment for consulting services
Hiring expenses for people who will work predominantly on ASTI projects
Milestone payments to third parties
Project travel, entertainment and related expenses
Capital equipment purchased exclusively for ASTI projects
Miscellaneous project expenses
Regulatory and filing fees
Telephone and communications
Patent and trademark expenses
Software
18.
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EXHIBIT A2
RESEARCH AND DEVELOPMENT INDIRECT COSTS
The following is a list of the types of expenses which are considered as
"indirect" in Exhibit A and would be billable to ASTI when they can be
identified with ASTI research and development:
Salaries and fringe benefits of people working directly on ASTI projects
Salaries and fringe benefits of people managing and supporting those working
directly on ASTI projects
General supplies and chemicals
General Information Systems and communications support
General equipment depreciation
General facilities depreciation, utilities, rent
Miscellaneous indirect expenses
Miscellaneous general and administrative expenses
19.
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EXHIBIT 10.2
TECHNOLOGY LICENSE AGREEMENT
This Technology License Agreement (this "Agreement") is made as of the
6th day of March, 1998 among Allergan, Inc., a Delaware corporation
("Allergan"), each Allergan Affiliate listed on the signature page hereto (an
"Allergan Affiliate") and Allergan Specialty Therapeutics, Inc., a Delaware
corporation ("ASTI").
BACKGROUND
A. ASTI has been formed for the purpose of researching and developing
human pharmaceutical products, including products using Allergan Technology (as
defined herein), and commercializing such products, most likely through
licensing to Allergan.
B. Allergan and ASTI have entered into the Research and Development
Agreement (as defined herein) for the research and development of such products
and related activities.
C. Allergan is willing to grant to ASTI a license to use Allergan
Technology solely for the purposes set forth above on the terms set forth herein
and in the Research and Development Agreement and the License Option Agreement
(as defined herein).
Now, therefore, the parties agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party. "Control"
shall mean ownership of at least 50% of the shares of stock entitled to vote for
the election of directors in the case of a corporation, and at least 50% of the
interests in profits in the case of a business entity other than a corporation.
1.2 "Allergan Technology" shall mean all Proprietary Rights, whether
patented or unpatented, owned by, licensed to or controlled by Allergan, as of
the date of this Agreement or during the term of the Research and Development
Agreement, relating to retinoid and neuroprotective technologies, including but
not limited to Tazarotene, Memantine and other glutamate and ion channel
blockers and Allergan's and each Allergan Affiliate's rights under the
agreements listed on Exhibit A hereto. "Allergan Technology" shall also include
any additional technology which Allergan designates expressly in a writing
delivered to ASTI as Allergan Technology for purposes of this Agreement.
Notwithstanding the foregoing, however, in no event shall "Allergan Technology"
include, and ASTI shall have no rights with respect to, (i) any topical
formulation of Tazarotene or the research, development, manufacture or
commercial sale
1.
<PAGE> 2
or other use thereof or (ii) the commercial sale of Memantine and/or products
incorporating or based on Memantine outside of the United States.
1.3 "ASTI Product" shall mean any dosage form of a compound which is the
subject of research and development as a potential human pharmaceutical product
which has been recommended by Allergan and accepted by ASTI's Board of Directors
for development as such under the Research and Development Agreement. Such
recommendations may be made on a Field of Use basis. The following compounds
have been selected as the initial ASTI Products as of the date hereof: (i)
Tazarotene (oral), (ii) Memantine, (iii) AGN 4310 and (iv) a compound to be
selected from the RAR alpha-selective agonist class of retinoid compounds for
the treatment of various cancers.
1.4 "Developed Technology" shall mean Proprietary Rights that (a) are
first generated, conceived or reduced to practice, as the case may be, by
Allergan or by any third party in the course of performing activities undertaken
pursuant to the Research and Development Agreement or (b) are, in any manner,
acquired by, or otherwise obtained on behalf of, ASTI during the term of the
Research and Development Agreement from persons other than Allergan and are
necessary or useful to the research, development or commercialization of ASTI
Products or Pre-Selection Products.
1.5 "Distribution" shall mean Allergan's distribution of all of the
outstanding shares of Class A Common Stock of ASTI to Allergan stockholders of
record on March 10, 1998.
1.6 "Field of Use" shall mean a particular disease state or set of
related disease states.
1.7 "Infringing Product" shall mean any product sold by a third party
which infringes or is alleged to infringe any patent or patents licensed to ASTI
hereunder and covering an ASTI Product.
1.8 "License Agreement" shall mean an exclusive license agreement for a
particular ASTI Product between Allergan and ASTI, entered into as a result of
Allergan's exercise of the License Option for such product.
1.9 "License Option" shall mean the option granted to Allergan pursuant
to the License Option Agreement.
1.10 "License Option Agreement" shall mean the License Option Agreement
dated as of the date hereof between Allergan and ASTI.
1.11 "Pre-Selection Work" shall mean research and pre-clinical
development work involving one or more product candidates owned or controlled by
Allergan or a third party funded by ASTI pursuant to the Research and
Development Agreement and undertaken in order to determine the suitability of
such candidate for research and development.
1.12 "Pre-Selection Product" shall mean a product, other than one which
becomes an ASTI Product, for which ASTI funds Pre-Selection Work.
2.
<PAGE> 3
1.13 "Pre-Existing Rights" shall mean the rights of each party other
than Allergan under the agreements listed on Exhibit A.
1.14 "Proprietary Rights" shall mean data, inventions, information,
processes, know-how and trade secrets, and patents or patent applications
claiming any of the foregoing, owned by, licensed to or controlled by a person
and which such person has the right to license or sublicense. Proprietary Rights
shall not include trademarks.
1.15 "Purchase Option" shall mean that certain option contained in
ASTI's Restated Certificate of Incorporation pursuant to which Allergan has the
right to purchase all of the outstanding shares of ASTI Class A Common Stock.
1.16 "Research and Development Agreement" shall mean the Research and
Development Agreement dated as of the date hereof between Allergan and ASTI.
1.17 "Therapeutic Agent" shall mean a drug, protein, peptide, gene,
compound or other pharmaceutically active ingredient.
2. LICENSE.
2.1 GRANT OF LICENSE. Allergan hereby grants to ASTI, on the terms and
conditions of this Agreement, a worldwide (except as set forth below), exclusive
license (subject to the Pre-Existing Rights), in perpetuity, with the right to
sublicense (as set forth below), to use the Allergan Technology to research and
develop ASTI Products, to conduct related activities (including Pre-Selection
Work), and to commercialize ASTI Products, but for no other purposes whatsoever;
provided, however, that, the foregoing license shall exclude (i) the research,
development, manufacture or commercial sale or other use of any topical
formulation of Tazarotene and (ii) the commercial sale of Memantine and/or
products incorporating or based on Memantine outside of the United States. ASTI
shall not sublicense any Allergan Technology to, or enter into other
arrangements with respect to any Allergan Technology with, any third party for
any purpose, except as set forth in Sections 2.2 and 2.3 hereof.
2.2 PERMITTED SUBLICENSES.
(A) Except as set forth in Section 2.2(b) hereof, ASTI may grant
sublicenses to Allergan and third parties to use the Allergan Technology solely
for the purpose of performing activities in connection with the research and
development of ASTI Products and conducting related activities (including
Pre-Selection Work); provided however, that, during the term of the Research and
Development Agreement, any such sublicenses shall be granted in accordance with
the terms of the Research and Development Agreement.
(B) If the License Option with respect to any ASTI Product in one
or more countries expires unexercised, from and after expiration of such License
Option in any such country, ASTI may sublicense Allergan Technology to a third
party or third parties solely to the extent necessary to complete the
development of, or to make (or have made) and use such ASTI Product, or to sell
(or have sold) such ASTI Product in such country.
3.
<PAGE> 4
2.3 CONDITIONS OF SUBLICENSES. Each sublicensee shall execute such
agreements as Allergan reasonably deems appropriate to protect the Allergan
Technology and to protect Allergan's rights under all agreements between
Allergan and ASTI and under the Purchase Option. Each sublicensee shall have all
the duties of ASTI hereunder with respect to such sublicense, and each
sublicensee shall acknowledge these duties to Allergan in writing. No sublicense
shall have the effect of relieving ASTI of any of its obligations hereunder.
2.4 PRIOR AND FUTURE GRANTS. ASTI understands and acknowledges that
Allergan is in the business of researching and developing products incorporating
the Allergan Technology for its own account and under arrangements with third
parties, and as a result, the license granted hereunder is limited strictly to
use the Allergan Technology for the purpose of researching and developing ASTI
Products and conducting related activities (including Pre-Selection Work) and
commercializing ASTI Products. ASTI acknowledges that Allergan may use and may
grant third party licenses to use the Allergan Technology for any and all other
purposes.
2.5 LICENSE TO ALLERGAN. In addition, in the event that Allergan
provides ASTI with a Reversion Notice (as such term is defined in Section 2.4 of
the Research and Development Agreement) with respect to a Pre-Selection Product,
ASTI hereby grants to Allergan, effective upon the date of such Reversion
Notice, a worldwide, exclusive (even as to ASTI), perpetual license, with the
right to sublicense, to conduct research and development with respect to such
Pre-Selection Product and to make, have made, use, sell, have sold, import and
export such Pre-Selection Product, subject to Allergan's obligation to pay
Pre-Selection Product Payments and Developed Technology Royalties (as such terms
are defined in the Research and Development Agreement).
3. COVENANTS OF ASTI.
3.1 DILIGENCE. ASTI promptly shall commence and shall use diligent
efforts to develop ASTI Products in accordance with approved work plans and cost
estimates under the Research and Development Agreement, subject to Allergan
diligently undertaking its obligations thereunder.
3.2 TECHNOLOGY FEE. ASTI shall pay Allergan in arrears the following
Technology Fee payments:
(A) $833,333 per month for the first twelve months following
October 23, 1997;
(B) $558,333 per month on the same day of each of the next twelve
months;
(C) $275,000 per month on the same day of each of the next twelve
months; and
(D) $166,667 per month on the same day of each of the next twelve
months;
4.
<PAGE> 5
provided, however, that ASTI shall no longer be obligated to make such payment
beginning with any month following the date on which the total number of ASTI
Products either under development by ASTI pursuant to the Research and
Development Agreement or licensed to Allergan pursuant to Allergan's exercise of
the License Option is less than two.
3.3 PRE-EXISTING OBLIGATIONS. ASTI agrees to perform and timely
discharge all of Allergan's and/or each Allergan Affiliate's obligations and
duties under each of the agreements listed on Exhibit A, including but not
limited to any and all royalty, milestone, non-disclosure, patent filing and/or
prosecution license grant and/or license back and/or similar or related
obligations and duties.
4. PATENTS.
4.1 INFRINGEMENT. Each party shall promptly notify the other of any
infringement or alleged infringement known to such party of any patent covering
Allergan Technology, by the manufacture, development, use or sale by a third
party of any Infringing Product.
4.2 ACTION BY ALLERGAN. Subject to the provisions of the Research and
Development Agreement and any License Agreement, in the event of any such
alleged infringement, Allergan shall have the right, at its own expense and with
the right to all recoveries, to take appropriate action to restrain such alleged
infringement. If Allergan takes any such action, ASTI shall cooperate fully with
Allergan in its pursuit thereof, at Allergan's expense, to the extent reasonably
requested by Allergan. If Allergan brings an action under this Section 4.2, the
parties shall share equally any recoveries, after Allergan is reimbursed for its
expenses of bringing the action (including reasonable attorneys' fees).
4.3 ACTION BY ASTI. If (a) the Infringing Product is substantially
similar to an ASTI Product (in that the Infringing Product incorporates the same
active Therapeutic Agent or Agents as such ASTI Product and, in the case of an
ASTI Product that utilizes Allergan drug delivery technology, a drug delivery
system substantially similar to the Allergan drug delivery system) for which the
License Option has expired unexercised, and (b) within 90 days after the written
notice from either party described above (or at any time thereafter), Allergan
has not taken appropriate action to restrain such alleged infringement, and (c)
at such time, the annualized unit sales volume of such Infringing Product in a
country over a period of at least two calendar quarters, equals or exceeds 25%
of the annualized unit sales volume of the related ASTI Product in such country
during the same period, then ASTI shall have the right, at its own expense and
with the right to all recoveries, to take such action as it deems appropriate to
restrain such alleged infringement. If ASTI takes any such action, Allergan
shall cooperate with ASTI in its pursuit thereof, at ASTI's expense, to the
extent reasonably requested by ASTI. If the third party in any such action
brings a counteraction for invalidation or misuse of a patent covering the
Allergan Technology or the ASTI Product, ASTI shall promptly notify Allergan,
and Allergan may, within six months after the notification, join and participate
in such action at its own expense. ASTI shall not settle any such action
relating to any alleged infringement which in any manner would adversely affect
Allergan Technology without the prior written consent of Allergan.
5.
<PAGE> 6
5. CONFIDENTIALITY OF INFORMATION.
5.1 CONFIDENTIALITY. During the term of this Agreement and for a period
of ten years following its termination, ASTI shall maintain in confidence all
Allergan Technology; provided, however, that nothing contained herein shall
prevent ASTI from disclosing any Allergan Technology to the extent such Allergan
Technology (a) is required to be disclosed in connection with researching or
developing ASTI Products, conducting Pre-Selection Work, conducting related
activities, securing necessary governmental authorization for the marketing of
ASTI Products, or directly or indirectly making, using or selling ASTI Products,
as permitted or provided for in the agreements between the parties, (b) is
required to be disclosed by law for the purpose of complying with governmental
regulations, (c) is disclosed in connection with any sublicense permitted
hereunder, (d) is known to or used by ASTI prior to the date hereof (other than
through disclosure by or on behalf of Allergan) as evidenced by ASTI's written
records, (e) is lawfully disclosed to ASTI by a third party having the right to
disclose such information to ASTI, or (f) either before or after the time of
disclosure to ASTI, becomes known to the public other than by an unauthorized
act or omission of ASTI or any of ASTI's employees or agents. Any disclosure of
Allergan Technology to third parties shall be made subject to similar
obligations of confidentiality on the part of such third parties. The
obligations of ASTI pursuant to this Section 5.1 shall survive the termination
of this Agreement for any reason. Any breach of this Section 5.1 may result in
irreparable harm to Allergan, and in the event of a breach, Allergan shall be
entitled to seek injunctive relief (without the need to post a bond) in addition
to any other remedies available at law or in equity .
6. DISCLAIMER.
6.1 DISCLAIMER CONCERNING ALLERGAN TECHNOLOGY. ALLERGAN DISCLAIMS ANY
EXPRESS OR IMPLIED WARRANTY (A) THAT ANY ALLERGAN TECHNOLOGY, OR THE USE
THEREOF, OR ANY PRODUCTS INCORPORATING OR MANUFACTURED BY THE USE THEREOF, WILL
BE FREE FROM CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF
PROPRIETARY INFORMATION OF ANY THIRD PARTY AND (B) OF THE ACCURACY, RELIABILITY,
TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS OR MERCHANTABILITY OF THE
ALLERGAN TECHNOLOGY OR ITS SUITABILITY OR FITNESS FOR ANY PURPOSE WHATSOEVER
INCLUDING, WITHOUT LIMITATION, THE DESIGN, RESEARCH, DEVELOPMENT, MANUFACTURE,
USE OR SALE OF PRODUCTS. ALLERGAN DISCLAIMS ALL OTHER WARRANTIES OF WHATEVER
NATURE, EXPRESS OR IMPLIED.
7. REPORTS OF ADVERSE REACTIONS.
7.1 REPORTS OF ADVERSE REACTIONS. During the term of this Agreement,
each party shall promptly inform the other party of any information that it
obtains or develops regarding the efficacy or safety of an ASTI Product and
shall promptly report to the other party any information or notice of adverse or
unexpected reactions or side effects related to the utilization or medical
administration of an ASTI Product. Further, during the term of this Agreement,
each
6.
<PAGE> 7
party shall promptly inform the other of any information that it obtains or
develops regarding the safety of any Allergan Technology as related to the ASTI
Products. Each such party shall permit the other to comply with the adverse
reaction reporting obligations under the United States Food, Drug and Cosmetic
Act, or similar statutory provisions, and regulations thereunder and shall
assist the other party in complying therewith, with respect to the ASTI
Products. When appropriate, the parties will execute a standard operating
procedure to cover the foregoing. ASTI agrees and acknowledges that Allergan may
provide information it obtains under this Section 7.1 to Allergan's other
clients developing and/or commercializing products incorporating the same
Allergan drug delivery systems as are incorporated in the ASTI Products.
8. EFFECTIVE DATE; TERMINATION.
8.1 EFFECTIVE DATE. This Agreement shall become effective on the date of
the Distribution.
8.2 TERMINATION FOR BREACH. Either party may terminate this Agreement
effective upon the giving of written notice of such termination to the other
party in the event such other party breaches any of its material obligations
hereunder or under the License Option Agreement and such breach continues for a
period of 60 days after written notice thereof by the terminating party to the
other party.
8.3 AUTOMATIC TERMINATION. This Agreement shall automatically terminate
upon termination by ASTI of the Research and Development Agreement other than
due to a breach by Allergan, or upon termination by Allergan of the Research and
Development Agreement due to a breach by ASTI.
8.4 TERMINATION OF SUBLICENSES. Termination by Allergan of this
Agreement shall automatically terminate any sublicenses granted by ASTI
hereunder.
9. FORCE MAJEURE.
9.1 FORCE MAJEURE. Neither party to this Agreement shall be liable for
failure or delay in the performance of any of its obligations hereunder if such
failure or delay is due to causes beyond its reasonable control, including,
without limitation, acts of God, earthquakes, fires, strikes, acts of war, or
intervention of any governmental authority, but any such delay or failure shall
be remedied by such party as soon as possible after the removal of the cause of
such failure or delay.
10. INDEMNIFICATION.
10.1 INDEMNITY. ASTI shall indemnify, defend and hold Allergan harmless
from and against any and all liabilities, claims, demands, damages, costs,
expenses or money judgments incurred by or rendered against Allergan and its
Affiliates, which arise out of the use, design, labeling, manufacture,
processing, packaging, sale or commercialization of the ASTI Products by ASTI,
its Affiliates and permitted subcontractors and sublicensees (other than
Allergan and its Affiliates, subcontractors, sublicensees, distributors and
others operating under arrangements
7.
<PAGE> 8
with or through Allergan). Allergan shall permit ASTI's attorneys, at ASTI's
discretion and cost, to control the defense of any claims or suits as to which
Allergan may be entitled to indemnity hereunder, and Allergan agrees not to
settle any such claims or suits without the prior written consent of ASTI.
Allergan shall have the right to participate, at its own expense, in the defense
of any such claim or demand to the extent it so desires.
10.2 NOTICE. Allergan shall give ASTI prompt notice in writing, in the
manner set forth in Section 11.7 below, of any claim or demand made against
Allergan for which Allergan may be entitled to indemnification under Section
10.1.
11. MISCELLANEOUS.
11.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party hereto
of a breach of any provisions of this Agreement shall not be implied and shall
not be valid unless such waiver is recited in writing and signed by such party.
Failure of any party to require, in one or more instances, performance by the
other party in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver or relinquishment of the future performance of any
such terms or conditions or of any other terms and conditions of this Agreement.
A waiver by either party of any term or condition of this Agreement shall not be
deemed or construed to be a waiver of any other term or condition of this
Agreement. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be a
limitation of any other remedy, right, undertaking, obligation or agreement of
either party. This Agreement may not be amended except in a writing signed by
both parties.
11.2 ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that Allergan may assign
such rights and obligations hereunder to an Affiliate of Allergan or to any
person or entity with which Allergan is merged or consolidated or which acquires
all or substantially all of the assets of Allergan.
11.3 DISPUTE RESOLUTION. In the event of any dispute, the parties shall
refer such dispute to the CEO of ASTI and the CEO of Allergan for attempted
resolution by good faith negotiations within sixty (60) days after such referral
is made. During such period of good faith negotiations, any applicable time
periods under this Agreement shall be tolled. In the event such executives are
unable to resolve such dispute within such sixty (60) day period, the parties
shall submit their dispute to binding arbitration before a retired California
Superior Court Judge at J.A.M.S./Endispute located in Orange, California, such
arbitration to be conducted pursuant to the J.A.M.S./Endispute procedure rules
for commercial disputes then in effect. The award of the arbitrator shall
include an award of reasonable attorneys' fees and costs to the prevailing
party.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
8.
<PAGE> 9
11.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California as applied to residents of
that state entering into contracts to be performed in that state.
11.6 HEADINGS. The section headings contained in this Agreement are
included for convenience only and form no part of the Agreement between the
parties.
11.7 NOTICES. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail, postage prepaid, and addressed as
follows:
If to Allergan
and/or any
Allergan Affiliate: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: Corporate Vice President,
General Counsel
If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of
mailing or upon receipt if sent by facsimile (but only if followed by certified
or registered confirmation). Either party may change the address at which notice
is to be received by written notice pursuant to this Section 11.7.
11.8 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified,
if possible, to the minimum extent necessary to make it valid and enforceable
or, if such modification is not possible, it shall be stricken and the remaining
provisions shall remain in full force and effect.
11.9 RELATIONSHIP OF THE PARTIES. For purposes of this Agreement, ASTI
and Allergan shall be deemed to be independent contractors, and anything in this
Agreement to the contrary notwithstanding, nothing herein shall be deemed to
constitute ASTI and Allergan as partners, joint venturers, co owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way obligate the other party, except as expressly authorized in
writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume or be liable for any liabilities
or obligations of the other party, whether past, present or future.
9.
<PAGE> 10
11.10 SURVIVAL. The provisions of Sections 1, 5, 6, 7, 10, 11.1, 11.3,
11.5, 11.6, 11.7, 11.8, 11.9 and this Section 11.10 shall survive the
termination for any reason of this Agreement. Any payments due under this
Agreement with respect to any period prior to its termination shall be made
notwithstanding the termination of this Agreement. Neither party shall be liable
to the other due to the termination of this Agreement as provided herein,
whether in loss of good will, anticipated profits or otherwise.
10.
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
ALLERGAN SPECIALTY
THERAPEUTICS, INC.
By: /s/ LESTER J. KAPLAN
--------------------------------------
Title: Chief Executive Officer
-----------------------------------
ALLERGAN, INC.
By: /s/ LESTER J. KAPLAN
--------------------------------------
Title: Corporate Vice President, Research & Technology
-----------------------------------------------
ALLERGAN AFFILIATES:
ALLERGAN AMERICA, INC.
By: /s/ SUSAN J. GLASS
--------------------------------------
Title: Assistant Secretary
-----------------------------------
ALLERGAN PHARMACEUTICALS (IRELAND) LTD., INC.
By: /s/ SUSAN J. GLASS
--------------------------------------
Title: Assistant Secretary
-----------------------------------
VISION PHARMACEUTICALS, L.P.
A Texas limited partnership, dba Allergan,
by Allergan General, Inc.,
its general partner
By: /s/ SUSAN J. GLASS
--------------------------------------
Title: Assistant Secretary
-----------------------------------
11.
<PAGE> 12
EXHIBIT A
Exclusive License Agreement dated August 23, 1995 among Children's
Medical Center Corporation, Allergan, Allergan America, Inc. ("Allergan
America") and Allergan Pharmaceuticals (Ireland) Ltd., Inc.
("Allergan-Ireland").
License and Supply Agreement dated February 28, 1997 among Merz + Co.
GmbH & Co., Vision Pharmaceuticals L.P. ("Vision"), Allergan America,
Allergan-Ireland and Allergan.
Collaborative Research, Development and Marketing Agreement dated
November 20, 1996 between Cambridge NeuroScience, Inc. and Vision.
Amended and Restated Technology Cross License Agreement dated September
24, 1997 among Ligand Pharmaceuticals Incorporated, Allergan and Allergan Ligand
Retinoid Therapeutics, Inc.
Cross License Agreement dated March 6, 1998 among Allergan, Allergan
America, Allergan-Ireland and Vision.
12.
<PAGE> 1
EXHIBIT 10.3
SERVICES AGREEMENT
This Services Agreement (the "Agreement") is made as of the 6th day of
March, 1998 between Allergan, Inc., a Delaware corporation ("Allergan"), and
Allergan Specialty Therapeutics, Inc., a Delaware corporation ("ASTI").
BACKGROUND
ASTI desires that Allergan provide certain services to ASTI, and
Allergan desires to provide such services, on the terms and conditions set forth
herein.
NOW, THEREFORE, the parties agree as follows:
1. SERVICES. Upon request by ASTI, Allergan will supply ASTI with any
number of the following services: accounting, legal, stockholder relations, cash
management and similar management and administrative services, as mutually
agreed. Such services will be provided at reasonable times and upon reasonable
notice, as mutually agreed.
2. COMPENSATION. ASTI shall pay Allergan's "Costs" in providing such
services, monthly in arrears, within 30 days of the date of Allergan's invoice.
Allergan's "Costs", for purposes of this Agreement, shall include reimbursement
for (i) Allergan's direct and indirect expenses relating to the services
provided hereunder and (ii) the cost of assets purchased for use solely on
behalf of ASTI, the purchase of which is approved by ASTI. In order to fully and
fairly allocate all allocable overhead to services performed by Allergan
hereunder, an amount equal to 10% of the total Costs determined in accordance
with the above provisions (exclusive of the costs charged to Allergan or ASTI by
third parties) will also be added to the amount charged to ASTI.
3. TERM AND TERMINATION. The initial term of this Agreement shall
commence on the date hereof and shall terminate on December 31, 1998.
Thereafter, this Agreement shall automatically be renewed for successive terms
of one year each unless written notice of termination is given by the
terminating party to the other party at least 30 days in advance of the
expiration of any term; provided, however, that in no event shall the renewal
term extend past the date that is 180 days after the exercise or expiration of
the option granted to Allergan pursuant to ASTI's Restated Certificate of
Incorporation to purchase all but not less than all of the shares of Class A
Common Stock of ASTI. ASTI may, in its discretion, terminate this Agreement at
any time upon 60 days written notice to Allergan. Either party may, in its
discretion, terminate this Agreement by written notice to the other party in the
event that the other party (a) breaches any material obligations hereunder or
under the Technology License Agreement, the Research and Development Agreement
or the License Option Agreement, each dated as of the date hereof and between
Allergan and ASTI, or any license granted to Allergan under the License Option
Agreement, which breach continues for a period of 60 days after written notice
thereof, or (b) enters into any proceeding, whether voluntary or involuntary, in
bankruptcy, reorganization
1.
<PAGE> 2
or arrangement for the appointment of a receiver or trustee to take possession
of such party's assets or any other proceeding under any law for the relief of
creditors, or makes an assignment for the benefit of its creditors.
4. INDEMNIFICATION OF ALLERGAN. ASTI hereby agrees to indemnify, protect
and hold Allergan harmless from any and all liabilities, costs or expenses
incurred by Allergan as a result of services rendered by it under this
Agreement, including, without limitation, lawsuits of and claims by third
parties, except for liabilities, costs or expenses resulting from Allergan's
gross negligence or willful misconduct. Allergan shall give ASTI prompt notice,
in writing, in the manner set forth in Section 6.7 below, of any claim or demand
made against Allergan for which Allergan may be entitled to indemnification
under this Section 4.
5. FORCE MAJEURE. Allergan shall not be liable for failure or delay in
performance of any of its obligations hereunder if such failure or delay is due
to causes beyond its reasonable control including, without limitation, acts of
God, fires, earthquakes, strikes, acts of war, or intervention of any
governmental authority, but any such delay or failure shall be remedied by
Allergan as soon as possible after the removal of the cause of such failure or
delay.
6. MISCELLANEOUS.
6.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party
hereto of a breach of any provisions of this Agreement shall not be implied and
shall not be valid unless such waiver is recited in writing and signed by such
party. Failure of any party to require, in one or more instances, performance by
the other party in strict accordance with the terms and conditions of this
Agreement shall not be deemed a waiver or relinquishment of the future
performance of any such terms or conditions or of any other terms and conditions
of this Agreement. A waiver by either party of any term or condition of this
Agreement shall not be deemed or construed to be a waiver of such term or
condition for any other term. All rights, remedies, undertakings, obligations
and agreements contained in this Agreement shall be cumulative and none of them
shall be a limitation of any other remedy, right, undertaking, obligation or
agreement of either party. This Agreement may not be amended except in a writing
signed by both parties.
6.2 ASSIGNMENT. Neither party may assign its rights and
obligations hereunder without the prior written consent of the other party,
which consent may not be unreasonably withheld; provided, however, that Allergan
may assign such rights and obligations hereunder to an Affiliate of Allergan or
any person or entity with which Allergan is merged or consolidated or which
acquires all or substantially all of the assets of Allergan.
6.3 DISPUTE RESOLUTION. In the event of any dispute, the parties
shall refer such dispute to the CEO of ASTI and the CEO of Allergan for
attempted resolution by good faith negotiations within sixty (60) days after
such referral is made. During such period of good faith negotiations, any
applicable time periods under this Agreement shall be tolled. In the event such
executives are unable to resolve such dispute within such sixty (60) day period,
the parties shall submit their dispute to binding arbitration before a retired
California Superior Court Judge at J.A.M.S./Endispute located in Orange,
California, such arbitration to be conducted pursuant to
2.
<PAGE> 3
the J.A.M.S./Endispute procedure rules for commercial disputes then in effect.
The award of the arbitrator shall include an award of reasonable attorneys' fees
and costs to the prevailing party.
6.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
6.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of California as applied to
residents of that state entering into contracts wholly to be performed in that
state.
6.6 HEADINGS. The section headings contained in this Agreement
are included for convenience only and form no part of the Agreement between the
parties.
6.7 NOTICES. Notices required under this Agreement shall be in
writing and sent by registered or certified mail, postage prepaid, or by
facsimile and confirmed by registered or certified mail and addressed as
follows:
If to Allergan: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: Corporate Vice President,
General Counsel
If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and
Chief Executive Officer
All notices shall be deemed to be effective five days after the date of mailing
or upon receipt if sent by facsimile (but only if followed by certified or
registered confirmation). Either party may change the address at which notice is
to be received by written notice pursuant to this Section 6.7.
6.8 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, it shall be
modified, if possible, to the minimum extent necessary to make it valid and
enforceable or, if such modification is not possible, it shall be stricken and
the remaining provisions shall remain in full force and effect.
6.9 RELATIONSHIP OF THE PARTIES. For purposes of this Agreement,
ASTI and Allergan shall be deemed to be independent contractors, and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute ASTI and Allergan as partners, joint venturers, co-owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to
3.
<PAGE> 4
make any statements or representations on behalf of the other party or in any
way obligate the other party, except as expressly authorized in writing by the
other party. Anything in this Agreement to the contrary notwithstanding, no
party hereto shall assume nor shall be liable for any liabilities or obligations
of the other party, whether past, present or future.
6.10 SURVIVAL. The provisions of Sections 4, 6.3, 6.5, 6.6, 6.7,
6.8, 6.9 and this Section 6.10 shall survive the termination for any reason of
this Agreement. Any payments due under this Agreement with respect to any period
prior to its termination shall be made notwithstanding the termination of this
Agreement. Neither party shall be liable to the other due to the termination of
this Agreement as provided herein, whether in loss of good will, anticipated
profits or otherwise.
4.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
ALLERGAN, INC.
By: /s/ LESTER J. KAPLAN
--------------------------------------------
Title: Corporate Vice President,
Science & Technology
----------------------------------------
ALLERGAN SPECIALTY THERAPEUTICS, INC.
By: /s/ LESTER J. KAPLAN
--------------------------------------------
Title: Chief Executive Officer
----------------------------------------
5.
<PAGE> 1
EXHIBIT 10.4
LICENSE OPTION AGREEMENT
This License Option Agreement (the "Agreement") is made as of the 6th
day of March, 1998 by and between Allergan, Inc., a Delaware corporation
("Allergan"), and Allergan Specialty Therapeutics, Inc., a Delaware corporation
("ASTI").
BACKGROUND
A. ASTI has been formed for the purpose of researching and developing
human pharmaceutical products, including products using Allergan Technology (as
defined herein) and commercializing such products, most likely through licensing
to Allergan.
B. As of the date hereof, Allergan and ASTI have entered into a
Technology License Agreement and a Research and Development Agreement.
C. ASTI desires to grant to Allergan an option to commercialize the
products developed by ASTI under the Research and Development Agreement as set
forth herein.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party. "Control"
shall mean ownership of at least 50% of the shares of stock entitled to vote for
the election of directors in the case of a corporation, and at least 50% of the
interests in profits in the case of a business entity other than a corporation.
1.2 "ASTI Product" shall mean any dosage form of a compound which is the
subject of research and development as a potential human pharmaceutical product
which has been recommended by Allergan and accepted by ASTI's Board of Directors
for development as such under the Research and Development Agreement. Such
recommendations may be made on a Field of Use basis. The following compounds
have been selected as the initial ASTI Products as of the date hereof: (i)
Tazarotene (oral), (ii) Memantine, (iii) AGN 4310 and (iv) a compound to be
selected from the RAR alpha-selective agonist class of retinoid compounds for
the treatment of various cancers.
1.3 "Distribution" shall mean Allergan's distribution of all of the
outstanding shares of Class A Common Stock of ASTI to Allergan stockholders of
record on February 17, 1998.
1.4 "FDA" shall mean the United States Food and Drug Administration or
any successor agency whose clearance is necessary to market an ASTI Product in
the United States.
1.
<PAGE> 2
1.5 "Field of Use" shall mean a particular disease state or set of
related disease states.
1.6 "License Agreement" shall mean an exclusive license agreement for a
particular ASTI Product between Allergan and ASTI, in the form of Exhibit A to
this Agreement.
1.7 "License Option" shall mean the option granted to Allergan pursuant
to Section 2 of this Agreement.
1.8 "Product Payments" shall have the meaning set forth in Section 3.1
of the License Agreement.
1.9 "Proprietary Rights" shall mean data, inventions, information,
processes, know-how and trade secrets, and patents or patent applications
claiming any of the foregoing, owned by, licensed to or controlled by a person
and which such person has the right to license or sublicense. Proprietary Rights
shall not include trademarks.
1.10 "Purchase Option" shall mean that certain option contained in
ASTI's Restated Certificate of Incorporation pursuant to which Allergan has the
right to purchase all of the outstanding shares of ASTI Class A Common Stock.
1.11 "Research and Development Agreement" shall mean the Research and
Development Agreement dated as of the date hereof between Allergan and ASTI.
1.12 "Technology License Agreement" shall mean the Technology License
Agreement dated as of the date hereof between Allergan and ASTI.
2. LICENSE OPTION.
2.1 GRANT OF LICENSE OPTION. On the terms and subject to the conditions
of this Agreement, ASTI hereby grants to Allergan an option to obtain an
exclusive license with respect to each ASTI Product, exercisable on a
product-by-product and country-by-country basis as described in Section 2.2.
2.2 TIME FOR EXERCISE.
(A) Allergan may exercise the License Option with respect to any
ASTI Product on a country-by-country basis at any time during the period
beginning on the date hereof and ending (i) with respect to the United States,
30 days after clearance by the FDA to market such ASTI Product in the United
States, and (ii) with respect to any other country, 90 days after the earlier of
(A) clearance by the appropriate regulatory agency to market such ASTI Product
in such country and (B) clearance by the FDA to market such ASTI Product in the
United States. Notwithstanding the foregoing, the License Option shall expire,
to the extent not previously exercised, at the close of business on the 30th day
after the expiration of the Purchase Option or, with respect to a particular
ASTI Product, upon exercise by Allergan of the global buy-out option for such
ASTI Product under the License Agreement for such ASTI Product. In any case,
Allergan must exercise the License Option for a particular ASTI Product in a
particular country
2.
<PAGE> 3
prior to the first commercial sale of such product in such country by Allergan
or any of its Affiliates, sublicensees, distributors or marketing partners.
(B) The License Option for any ASTI Product in any country will
expire if not exercised within the time periods described above. In addition,
the License Option for any ASTI Product will expire, with respect to all
countries for which it has not yet been exercised, upon exercise by Allergan of
the global buy-out option for such ASTI Product under the License Agreement for
such ASTI Product.
(C) ASTI will notify Allergan in writing within 10 business days
of receipt of each clearance to market any ASTI Product in any country.
2.3 MANNER OF EXERCISE. Allergan shall exercise its License Option by
delivering to ASTI, within the time period described in Section 2.2 above, a
written notice of exercise specifying the ASTI Product and the country or
countries as to which the License Option is exercised. A License Agreement for
such ASTI Product shall be deemed to be effective in such country or countries
as of the date of such notice of exercise, without the necessity of any
additional action by the parties. For the convenience of the parties, however,
Allergan shall, promptly after delivery of such notice, forward to ASTI two
executed copies of a License Agreement dated the effective date thereof and
containing completed Attachments A and B. ASTI shall execute both copies and
return one to Allergan as soon as possible. Failure of either or both of the
parties to execute such License Agreement shall not, however, affect the
effectiveness of the license granted thereby. The parties shall enter into a
separate License Agreement for each ASTI Product as to which Allergan elects to
exercise a License Option. For convenience, the parties shall amend Attachment B
to a License Agreement to add a country or countries in cases where a License
Option is being exercised for an ASTI Product for which a License Option already
has been exercised in another country or countries. Such amendment shall set
forth the additional country or countries and the dates of exercise of the
License Option for such countries.
2.4 DEVELOPMENT ASSETS. If Allergan does not exercise the License Option
for any ASTI Product in any country prior to the expiration of such License
Option or, if Allergan notifies ASTI expressly in writing that it will not
exercise the License Option for an ASTI Product, Allergan shall make available
to ASTI for further development and commercialization activities at no charge,
all clinical supplies, materials and other assets purchased, manufactured or
developed for use in the development of such ASTI Product with respect to such
country to the extent such assets will not be used under the Research and
Development Agreement.
3. NO CONFLICT.
ASTI agrees that no license, sale or other commercialization of any ASTI
Product has been or shall be made or offered to any person or entity on any
basis that is or will be in conflict with this Agreement or any License
Agreement.
3.
<PAGE> 4
4. ACCESS TO INFORMATION.
4.1 INFORMATION AVAILABLE TO ALLERGAN. ASTI shall make available to
Allergan, at all reasonable times, all available information relating to all
ASTI Products as to which the License Option remains exercisable so as to enable
Allergan to determine whether and when to exercise its License Option.
4.2 CONSULTATION WITH ALLERGAN. ASTI shall consult with Allergan and
inform Allergan on a continuing basis of the current state of research and
development of all ASTI Products as to which the License Option remains
exercisable and will review from time to time with Allergan the progress towards
completion of the ASTI Products.
4.3 CONSULTATION WITH ASTI. In the event that the License Option with
respect to one or more ASTI Products in one or more countries expires
unexercised, Allergan shall make available to ASTI all information reasonably
available to Allergan relating to such ASTI Products and Allergan's previous
contacts with potential sublicensees, distributors or marketing partners for
such ASTI Products in such countries.
5. EFFECTIVE DATE; TERMINATION.
5.1 EFFECTIVE DATE. This Agreement shall become effective on the date of
the Distribution.
5.2 TERMINATION. This Agreement shall terminate on the earlier of (a)
the date of expiration of the License Option for all of the ASTI Products and
(b) 30 days after expiration of the Purchase Option.
6. MISCELLANEOUS.
6.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party hereto of
a breach of any provisions of this Agreement shall not be implied and shall not
be valid unless such waiver is recited in writing and signed by such party.
Failure of any party to require, in one or more instances, performance by the
other party in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver or relinquishment of the future performance of any
such terms or conditions or of any other terms and conditions of this Agreement.
A waiver by either party of any term or condition of this Agreement shall not be
deemed or construed to be a waiver of such term or condition for any other term.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of either party. This
Agreement may not be amended except in a writing signed by both parties.
6.2 ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that Allergan may assign
such rights and obligations hereunder to
4.
<PAGE> 5
an Affiliate of Allergan or any person or entity with which Allergan is merged
or consolidated or which acquires all or substantially all of the assets of
Allergan.
6.3 DISPUTE RESOLUTION. In the event of any dispute, the parties shall
refer such dispute to the CEO of ASTI and the CEO of Allergan for attempted
resolution by good faith negotiations within sixty (60) days after such referral
is made. During such period of good faith negotiations, any applicable time
periods under this Agreement shall be tolled. In the event such executives are
unable to resolve such dispute within such sixty (60) day period, the parties
shall submit their dispute to binding arbitration before a retired California
Superior Court Judge at J.A.M.S./Endispute located in Orange, California, such
arbitration to be conducted pursuant to the J.A.M.S./Endispute procedure rules
for commercial disputes then in effect. The award of the arbitrator shall
include an award of reasonable attorneys' fees and costs to the prevailing
party.
6.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
6.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California as applied to residents of
that state entering into contracts wholly to be performed in that state.
6.6 HEADINGS. The section headings contained in this Agreement are
included for convenience only and form no part of the Agreement between the
parties.
6.7 NOTICES. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail and addressed as follows:
If to Allergan: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: Corporate Vice President, General Counsel
If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of
mailing or upon receipt if sent by facsimile (but only if followed by certified
or registered confirmation). Either party may change the address at which notice
is to be received by written notice pursuant to this Section 6.7.
5.
<PAGE> 6
6.8 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified,
if possible, to the minimum extent necessary to make it valid and enforceable
or, if such modification is not possible, it shall be stricken and the remaining
provisions shall remain in full force and effect.
6.9 RELATIONSHIP OF THE PARTIES. For purposes of this Agreement, ASTI
and Allergan shall be deemed to be independent contractors, and anything in this
Agreement to the contrary notwithstanding, nothing herein shall be deemed to
constitute ASTI and Allergan as partners, joint venturers, co owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way obligate the other party, except as expressly authorized in
writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume nor shall be liable for any
liabilities or obligations of the other party, whether past, present or future.
6.10 SURVIVAL. The provisions of Sections 1, 2.4, 4.3, 6.1, 6.3, 6.5,
6.7, 6.8, 6.9 and this Section 6.10 shall survive the termination for any reason
of this Agreement. Any payments due under this Agreement with respect to any
period prior to its termination shall be made notwithstanding the termination of
this Agreement. Neither party shall be liable to the other due to the
termination of this Agreement as provided herein, whether in loss of good will,
anticipated profits or otherwise.
6.
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
ALLERGAN, INC.
By: /s/ LESTER J. KAPLAN
-------------------------------------------
Title: Corporate Vice President,
Science & Technology
----------------------------------------
ALLERGAN SPECIALTY THERAPEUTICS, INC.
By: /s/ LESTER J. KAPLAN
-------------------------------------------
Title: Chief Executive Officer
----------------------------------------
7.
<PAGE> 8
EXHIBIT A
FORM OF LICENSE AGREEMENT
This License Agreement (the "Agreement") is made this ____ day of
_______________ , _____, by and between Allergan, Inc., a Delaware corporation
("Allergan"), and Allergan Specialty Therapeutics, Inc. ("ASTI"), a Delaware
corporation.
BACKGROUND
A. ASTI and Allergan have entered into a License Option Agreement and
certain other agreements dated as of March 6, 1998.
B. Section 2 of the License Option Agreement provides for a license, the
terms of which are to be set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party. "Control"
shall mean ownership of at least 50% of the shares of stock entitled to vote for
the election of directors in the case of a corporation, and at least 50% of the
interests in profits in the case of a business entity other than a corporation.
1.2 "Research and Development Cost(s)" shall mean the cost of activities
undertaken pursuant to the Research and Development Agreement with respect to
the Licensed Product, determined in accordance with Exhibit A thereto.
1.3 "Infringing Product" shall mean any product sold by a third party,
other than pursuant to an agreement with Allergan, (i) which incorporates the
same Therapeutic Agent or Agents as incorporated in the Licensed Product and
(ii) which infringes or is alleged to infringe any patent or patents owned by,
licensed to or controlled by Allergan.
1.4 "License Option Agreement" shall mean the License Option Agreement
between Allergan and ASTI dated as of March 6, 1998.
1.5 "Licensed Product" shall mean the product listed on Exhibit A
hereto.
1.6 "Major Market Country" shall mean any of the following countries:
the United States, France, Germany, Italy, Japan or the United Kingdom.
1.7 "Net Sales" shall mean, with respect to a product, the amount billed
by Allergan or its Affiliates to a third party which is not an Affiliate of the
selling party (unless such Affiliate
8.
<PAGE> 9
is the end user of such product, in which case the amount billed therefor shall
be deemed to be the amount that would be billed to a third party in an arm's
length transaction) for sales of such product to third parties less the
following items, as allocable to such product: (i) trade discounts, credits or
allowances, (ii) credits or allowances additionally granted upon returns,
rejections or recalls (except where any such recall arises out of Allergan's or
its Affiliate's gross negligence, willful misconduct or fraud), (iii) freight,
shipping and insurance charges specifically included in the billing amount, (iv)
taxes, duties or other governmental tariffs (other than income taxes)
specifically included in the billing amount and (v) government mandated rebates.
1.8 "Research and Development Agreement" shall mean the Research and
Development Agreement between Allergan and ASTI dated as of March 6, 1998.
1.9 "Specialty Royalty Payments" shall mean front-end distribution fees,
prepaid royalties or similar one-time, infrequent or special payments from a
sublicense to Allergan with respect to a Licensed Product.
1.10 "Sublicensing Revenues" shall mean percentage-of-sales payments and
Specialty Royalty Payments received by Allergan from sublicensees with respect
to a Licensed Product.
1.11 "Territory" shall mean the country or countries listed on Exhibit B
hereto, as amended from time to time by the parties in connection with the
exercise by Allergan of its option for additional countries under the License
Option Agreement or the surrender by Allergan of its rights to commercialize the
Licensed Product in any country or countries.
1.12 "Therapeutic Agent" shall mean a drug, protein, peptide, gene,
compound or other pharmaceutically active ingredient.
2. GRANT OF LICENSE.
2.1 GRANT. ASTI hereby grants to Allergan an exclusive, perpetual
license, with the right to sublicense, to research, develop, make, have made and
use the Licensed Product and to sell and have sold the Licensed Product in the
Territory. Allergan agrees to use diligent efforts to conduct or have conducted
any remaining activities necessary to complete the development of the Licensed
Product in the Territory through regulatory clearance to market the Licensed
Product in the Territory. Such activities will be undertaken at no cost to ASTI,
unless ASTI agrees otherwise in writing. Promptly after regulatory clearance,
Allergan shall commence and continue to use diligent efforts to commercialize
the Licensed Product in each Major Market Country of the Territory through the
manufacture and sale or the sublicensing of the Licensed Product, devoting to
the Licensed Product the same resources as other pharmaceutical companies of
similar size devote to products with similar market potential and with similar
relative importance to their product portfolios. Allergan may use reasonable
business discretion in the allocation of its technological and monetary
resources in performing its obligations hereunder, taking into account not only
the Licensed Product but also activities for its own account and its obligations
under its other agreements with third parties. ASTI acknowledges that Allergan
will continue to own and have the right to use any clinical supplies, materials
and other assets
9.
<PAGE> 10
purchased, manufactured or developed for use in the development of such Licensed
Product, without any additional payment to or reimbursement of ASTI.
2.2 NO OTHER COMMERCIALIZATION. Allergan shall not commercialize the
Licensed Product in any country except pursuant to this Agreement.
3. PRODUCT PAYMENTS.
3.1 PAYMENTS.
(A) Allergan shall make payments to ASTI ("Product Payments")
with respect to the Licensed Product as follows:
(I) if the Licensed Product is sold by Allergan, royalties
of up to a maximum of 6% of Allergan's Net Sales of the Licensed Product
determined as follows: (A) 1% of such Net Sales, plus (B) an additional 0.1% of
such Net Sales for each full $1 million of Research and Development Costs of the
Licensed Product that have been paid by ASTI prior to such quarter end; and
(II) if the Licensed Product is sold by a third party,
sublicensing fees of up to a maximum of 50% of Sublicensing Revenues with
respect to such Licensed Product determined as follows: (A) 10% of such
Sublicensing Revenues, plus (B) an additional 1% of such Sublicensing Revenues
for each full $1 million of Research and Development Costs of the Licensed
Product that have been paid by ASTI prior to such quarter end.
Notwithstanding the foregoing, Product Payments for any quarter will not exceed
3% of Net Sales, on a quarterly basis, in the Territory for the first twelve
calendar quarters during which the Licensed Product is commercially sold in the
first Major Market Country.
(B) In determining Product Payments, Research and Development
Costs shall be determined as of the last day of each calendar quarter, in order
to determine the rates payable with respect to Net Sales for the next calendar
quarter for all countries included in the Territory as of the first day of such
next calendar quarter, and for any country added to the Territory during such
next calendar quarter.
(C) In determining Product Payments, Net Sales by and
Sublicensing Revenues of Allergan shall be reduced by the dollar amount of any
license or similar payments made by or due from Allergan or its Affiliates to
third parties with respect to sales of such Licensed Product in the Territory.
If license or similar payments are made to third parties with respect to sales
of both the Licensed Product in the Territory and to sales of other products,
Allergan shall allocate such payments, if necessary, in a commercially
reasonable manner.
3.2 TERM OF PAYMENTS. The obligation to make Product Payments hereunder
shall continue until seven years after the date of the first commercial sale of
the Licensed Product in any Major Market Country, and shall terminate as to all
countries at the end of such seven-year period.
10.
<PAGE> 11
3.3 BUY-OUT OF PAYMENTS.
(A) Allergan shall have the option, in its discretion, at any
time after the end of the twelfth calendar quarter during which the Licensed
Product was commercially sold in any country, to buy out its remaining
obligations to make Product Payments with respect to Net Sales and Sublicensing
Revenues of such Licensed Product in such country. The buy-out price shall be an
amount equal to 15 times the Product Payments made by or due from Allergan to
ASTI with respect to Net Sales and Sublicensing Revenues of such Licensed
Product in such country for the four calendar quarters immediately preceding the
quarter in which the buy-out option is exercised, plus 15 times such additional
Product Payments as would have been made but for the 3% limit set forth in
Section 3.1 on Product Payments for such period.
(B) Allergan shall have the option, in its discretion, at any
time after the end of the twelfth calendar quarter during which the Licensed
Product was commercially sold in either the United States or two other Major
Market Countries, to buy out its remaining obligations to make Product Payments
with respect to Net Sales and Sublicensing Revenues of such Licensed Product in
the Territory. The buy-out price shall be an amount equal to (i) 20 times (A)
the Product Payments made by or due from Allergan to ASTI for such Licensed
Product in the Territory, plus (B) such payments as would have been made by or
due from Allergan to ASTI if Allergan had not exercised any country-specific
buy-out option with respect to Net Sales and Sublicensing Revenues of such
Licensed Product, plus (C) such additional Product Payments as would have been
made but for the 3% limit set forth in Section 3.1 on Product Payments for such
period, in each case, for the four calendar quarters immediately preceding the
quarter in which the buy-out option is exercised, less (ii) any amounts
previously paid to exercise any country-specific buy-out option with respect to
Net Sales and Sublicensing Revenues of such Licensed Product.
4. ACCOUNTING.
4.1 REPORTS. Within 90 days after the end of each calendar quarter for
which Product Payments are due, Allergan shall render an accounting to ASTI, on
a country-by-country basis, with respect to all Product Payments due for such
quarter. Such report shall indicate, for such quarter, the quantity and dollar
amount of Net Sales of the Licensed Product by Allergan and its Affiliates,
sublicensees, distributors and marketing partners (and their Affiliates), or
other consideration with respect to Net Sales, with respect to which payments
are due; provided, however, that if Allergan shall not have received from any
sublicensee, distributor or marketing partner a report of its (and its
Affiliates') sales for such quarter, then such sales shall be included in the
next quarterly report. In case no Product Payments are due for any calendar
quarter, Allergan shall so report
4.2 RECORDS; REVIEW BY ACCOUNTANTS. Allergan shall keep and maintain, in
accordance with generally accepted accounting principles, proper and complete
records and books of account documenting all amounts paid or payable by Allergan
to ASTI. ASTI shall have the right, once in each calendar year during regular
business hours and upon reasonable notice to Allergan, at ASTI's expense, to
examine or have examined by a certified public accountant or similar person,
such of the records of Allergan as may be necessary to verify the
11.
<PAGE> 12
accuracy of the reports and payments made under this Agreement. Such examination
shall take place not later than two years following the year in question, and
only one examination may take place with respect to any period as to which such
books and records are examined. Allergan shall obtain, for itself and for ASTI,
similar reasonable rights to audit information pertaining to Net Sales from each
party appointed to commercialize any product as to which payments are due to
ASTI hereunder.
5. TIMES AND CURRENCIES OF PAYMENTS.
5.1 PAYMENTS. Payments shown by each calendar quarter report to have
accrued shall be due and payable on the date such report is due and shall be
paid in United States dollars. Any and all taxes due or payable on such payments
or with respect to the remittance thereof shall be deducted from such payments
and shall be paid by Allergan to the proper taxing authorities, and proof of
payment shall be secured and sent to ASTI as evidence of such payment. The rate
of exchange to be used in computing the amount of the United States dollars due
to ASTI in satisfaction of payment obligations with respect to sales in foreign
countries shall be calculated by converting the amount due in such foreign
currency into United States dollars at the rate for the purchase of United
States dollars with such currency as published in The Wall Street Journal on the
last business day of the calendar quarter for which payment is being made.
5.2 CERTAIN FOREIGN PAYMENTS. If governmental regulations prevent
remittance from any foreign country of any amounts due under Section 3.1 in
respect of that country, Allergan shall so notify ASTI in writing, and the
obligation under this Agreement to make payments with respect to sales in that
country shall be suspended (but the amounts due but not paid shall continue to
accrue) until such remittances are possible. ASTI shall have the right, upon
written notice to Allergan, to receive payment in any such country in the local
currency.
5.3 LATE PAYMENTS. Any payments due hereunder that are not made when due
shall bear interest at the lesser of 10% per annum or the maximum rate as may be
allowed by law, beginning on the date when ASTI has notified Allergan that such
payments are overdue.
6. PATENT INFRINGEMENT.
6.1 NOTICE. Each party shall promptly notify the other party of use or
sale by a third party of an Infringing Product.
6.2 LEGAL ACTION. If a third party manufactures or sells an Infringing
Product, Allergan may, at its own expense, bring legal action to restrain such
infringement and for damages. Any recoveries resulting from any such action
shall be first applied to reimburse Allergan for its expenses (including
reasonable attorneys' fees) incurred in bringing the action. ASTI will be
entitled to a share of the remaining recoveries in the same percentage as the
percentage of Net Sales as to which Product Payments are due to ASTI during the
period of the infringement or alleged infringement. If (a) Allergan fails to
take the necessary steps to restrain such infringement or alleged infringement
by litigation or otherwise within 90 days after either party's notice described
in Section 6.1, (b) if the infringement or alleged infringement occurs during a
period for which ASTI is entitled to receive Product Payments hereunder, and (c)
if over
12.
<PAGE> 13
a period of at least two calendar quarters such Infringing Product achieves an
annualized unit sales volume in the country of infringement equal to 25% of the
annualized unit sales volume of the Licensed Product sold by Allergan and its
Affiliates, sublicensees, distributors and marketing partners (and their
Affiliates) in such country during such year, then ASTI may institute, in its
own name, at its own expense and with the right to all recoveries, such
litigation or other appropriate action as it may deem appropriate to restrain
such infringement, provided that ASTI has first given to Allergan 60 days
advance notice of its intention to take such action, and provided further, that
Allergan has not itself taken appropriate action during such 60 day period.
6.3 COOPERATION. If either party desires to bring an action in
accordance with Section 6.2, the other party agrees to cooperate fully with the
party bringing such action in the pursuit thereof, at the expense of the party
bringing such action and to the extent reasonably requested by such party. If
the third party in any such action brought by ASTI brings a counteraction for
invalidation or misuse of a patent covering the Licensed Product, ASTI promptly
shall notify Allergan and Allergan may, within six months of the notification,
join and participate in such action at its own expense.
6.4 SETTLEMENT. Each party agrees not to settle any action it brings in
a manner that would adversely affect the other party without the other party's
prior written approval.
7. EFFECTIVE DATE AND TERM.
7.1 EFFECTIVE DATE AND TERM. This Agreement will become effective in
accordance with Section 2.3 of the License Option Agreement and, unless
terminated in accordance with any of the provisions hereof, shall remain in full
force and effect thereafter.
8. INDEMNIFICATION.
8.1 INDEMNITY. Allergan shall indemnify, defend and hold ASTI (and its
Affiliates) harmless from and against any and all liabilities, claims, demands,
damages, costs, expenses or money judgments incurred by or rendered against ASTI
and its Affiliates, which arise out of the use, design, labeling or manufacture,
processing, packaging, sale or commercialization of the Licensed Product by
Allergan, its Affiliates, subcontractors, sublicensees, distributors and
marketing partners (and their Affiliates). ASTI shall permit Allergan's
attorneys, at Allergan's discretion and cost, to control the defense of any
claims or suits as to which ASTI may be entitled to indemnification hereunder,
and ASTI agrees not to settle any such claims or suits without the prior written
consent of Allergan. ASTI shall have the right to participate, at its own
expense, in the defense of any such claim or demand to the extent it so desires.
8.2 NOTICE. ASTI shall give Allergan prompt notice in writing, in the
manner set forth in Section 11.7 below, of any claim or demand made against ASTI
for which ASTI may be entitled to indemnification under Section 8.1.
13.
<PAGE> 14
9. DISCLAIMERS.
ASTI DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY (A) THAT THE LICENSED PRODUCT OR
ANY TECHNOLOGY INCORPORATED THEREIN, OR THE MANUFACTURE, USE OR SALE THEREOF,
WILL BE FREE FROM CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF
PROPRIETARY INFORMATION OF ANY THIRD PARTY AND (B) OF THE ACCURACY, RELIABILITY,
TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS OR MERCHANTABILITY OF THE
LICENSED PRODUCT OR ANY TECHNOLOGY INCORPORATED THEREIN OR THEIR SUITABILITY OR
FITNESS FOR ANY PURPOSE WHATSOEVER INCLUDING, WITHOUT LIMITATION, THE RESEARCH,
DESIGN, DEVELOPMENT, MANUFACTURE, USE OR SALE OF THE LICENSED PRODUCT. ASTI
DISCLAIMS ALL OTHER WARRANTIES OF WHATEVER NATURE, EXPRESS OR IMPLIED.
10. TERMINATION.
10.1 TERMINATION BY ASTI. ASTI may, in its discretion, terminate this
Agreement in the event that Allergan:
(A) breaches any of its material obligations hereunder and such
breach continues for a period of 60 days after written notice thereof; or
(B) enters into any proceeding, whether voluntary or otherwise,
in bankruptcy, reorganization or arrangement for the appointment of a receiver
or trustee to take possession of Allergan's assets or any other proceedings
under any law for the relief of creditors or makes an assignment for the benefit
of its creditors.
10.2 TERMINATION BY ALLERGAN. Allergan may terminate this Agreement with
respect to one or more countries included in the Territory upon 30 days' prior
written notice to ASTI if Allergan elects for any reason to discontinue
commercialization of the Licensed Product in such country.
10.3 CONSEQUENCES OF TERMINATION. Termination of this Agreement for any
reason in accordance with the terms hereof shall be without prejudice to:
(A) ASTI's right to receive all payments accrued under Section 3
prior to the effective date of such termination; and
(B) any other remedies which either party may then or thereafter
have hereunder or otherwise. If this Agreement terminates pursuant to this
Section 10, Allergan shall immediately discontinue any promotion and sales of
the Licensed Product. Notwithstanding the foregoing, in the event of any
termination under this Section 10, Allergan may sell its inventory in stock on
the date of termination for a period of up to six months after the termination,
and shall remit payments to ASTI in respect thereto in accordance with this
Agreement.
14.
<PAGE> 15
11. MISCELLANEOUS.
11.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party hereto
of a breach of any provisions of this Agreement shall not be implied and shall
not be valid unless such waiver is recited in writing and signed by such party.
Failure of any party to require, in one or more instances, performance by the
other party in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver or relinquishment of the future performance of any
such terms or conditions or of any other terms and conditions of this Agreement.
A waiver by either party of any term or condition of this Agreement shall not be
deemed or construed to be a waiver of such term or condition for any other term.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of either party. This
Agreement may not be amended except in a writing signed by both parties.
11.2 ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that Allergan may assign
such rights and obligations hereunder to an Affiliate of Allergan or to any
person or entity with which Allergan is merged or consolidated or which acquires
all or substantially all of the assets of Allergan.
11.3 DISPUTE RESOLUTION. In the event of any dispute, the parties shall
refer such dispute to the CEO of ASTI and the CEO of Allergan for attempted
resolution by good faith negotiations within sixty (60) days after such referral
is made. During such period of good faith negotiations, any applicable time
periods under this Agreement shall be tolled. In the event such executives are
unable to resolve such dispute within such sixty (60) day period, the parties
shall submit their dispute to binding arbitration before a retired California
Superior Court Judge at J.A.M.S./Endispute located in Orange, California, such
arbitration to be conducted pursuant to the J.A.M.S./Endispute procedure rules
for commercial disputes then in effect. The award of the arbitrator shall
include an award of reasonable attorneys' fees and costs to the prevailing
party.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
11.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California as applied to residents of
that state entering into contracts to be performed in that state.
11.6 HEADINGS. The headings set forth at the beginning of the various
sections of this Agreement are for convenience and form no part of the Agreement
between the parties.
11.7 NOTICES. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail, postage prepaid, and addressed as
follows:
15.
<PAGE> 16
If to Allergan: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: Corporate Vice President, General Counsel
If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of mailing
or upon receipt if sent by facsimile (but only if followed by certified or
registered confirmation). Either party may change the address at which notice is
to be received by written notice pursuant to this Section 11.7.
11.8 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified,
if possible, to the minimum extent necessary to make it valid and enforceable
or, if such modification is not possible, it shall be stricken and the remaining
provisions shall remain in full force and effect.
11.9 RELATIONSHIP OF THE PARTIES. For all purposes of this Agreement,
ASTI and Allergan shall be deemed to be independent contractors and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute ASTI and Allergan as partners, joint venturers, co-owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way to obligate the other party, except as expressly authorized
in writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume nor shall be liable for any
liabilities or obligations of the other party, whether past, present or future.
11.10 SURVIVAL. The provisions of Sections 1, 4.2, 8, 9, 10.3, 11.1,
11.3, 11.5, 11.6, 11.7, 11.8, 11.9, and this Section 11.10 shall survive the
termination for any reason of this Agreement. Any payments due under this
Agreement with respect to any period prior to its termination shall be made
notwithstanding the termination of this Agreement. Neither party shall be liable
to the other due to the termination of this Agreement as provided herein,
whether in loss of good will, anticipated profits or otherwise.
11.11 FORCE MAJEURE. Neither party to this Agreement shall be liable for
failure or delay in the performance of any of its obligations hereunder, if such
failure or delay is due to causes beyond its reasonable control including,
without limitation, acts of God, earthquakes, fires, strikes, acts of war, or
intervention of any governmental authority, but any such delay or failure shall
be remedied by such party as soon as possible after the removal of the cause of
such failure or delay.
16.
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
ALLERGAN, INC.
By:
----------------------------------------
Title:
-------------------------------------
ALLERGAN SPECIALTY THERAPEUTICS, INC.
By:
----------------------------------------
Title:
-------------------------------------
17.
<PAGE> 18
ATTACHMENT A
LICENSED PRODUCT
18.
<PAGE> 19
ATTACHMENT B
TERRITORY
DATE OF EXERCISE COUNTRY
2.
<PAGE> 1
EXHIBIT 10.5
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made as of the 6th day
of March, 1998 between Allergan, Inc., a Delaware corporation ("Allergan"), and
Allergan Specialty Therapeutics, Inc., a Delaware corporation ("ASTI").
BACKGROUND
A. Allergan is the holder of all of the issued and outstanding shares of
capital stock of ASTI. Allergan intends to make a $200 million capital
contribution to ASTI, to license certain technology to ASTI, and to make other
arrangements in order to establish ASTI as a separate enterprise for the purpose
of researching and developing human pharmaceutical products and commercializing
such products, most likely through licensing to Allergan.
B. Allergan intends to distribute all of the ASTI Shares (as defined
below) to the holders of Allergan Common Stock.
Now, therefore, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
1.2 "Agent" shall mean First Chicago Trust Company of New York, as
distribution agent, appointed by Allergan to set up book entry accounts under
the Direct Registration System representing the ASTI Shares pursuant to the
Distribution.
1.3 "Allergan/ASTI Agreements" shall mean this Agreement, the Research
and Development Agreement, the Technology License Agreement, the License Option
Agreement, the Services Agreement and the Purchase Option.
1.4 "Allergan Common Stock" shall mean the Common Stock, par value $0.01
per share, of Allergan.
1.5 "Commission" shall mean the Securities and Exchange Commission.
1.6 "ASTI Shares" shall mean the Class A Common Stock, par value $0.01
per share, of ASTI.
1.
<PAGE> 2
1.7 "Distribution" shall mean the distribution of ASTI Shares to holders
of record on February 17, 1998 of Allergan Common Stock immediately following
completion of the transactions contemplated in Sections 2 and 3 hereof.
1.8 "Distribution Date" shall mean the proposed date of effecting the
Distribution, which is anticipated to occur on or about March 10, 1998.
1.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.10 "Form 8-A" shall mean the registration statement on Form 8-A to be
filed by ASTI with the Commission to effect the registration of the ASTI Shares
pursuant to the Exchange Act.
1.11 "License Option Agreement" shall mean the License Option Agreement
dated as of the date hereof between Allergan and ASTI.
1.12 "Prospectus" shall mean the prospectus to be distributed to the
holders of Allergan Common Stock in connection with the Distribution.
1.13 "Purchase Option" shall mean that certain option contained in
ASTI's Restated Certificate of Incorporation pursuant to which Allergan has the
right to purchase all, but not less than all, of the outstanding ASTI Shares.
1.14 "Record Date" shall mean the close of business on February 17, 1998
or such other date as is determined by the Allergan Board of Directors or any
committee thereof.
1.15 "Registration Statement" shall mean the registration statement on
Form S-1 registering the issuance of ASTI Shares pursuant to the Distribution.
1.16 "Research and Development Agreement" shall mean the Research and
Development Agreement dated as of the date hereof between Allergan and ASTI.
1.17 "Services Agreement" shall mean the Services Agreement dated as of
the date hereof between Allergan and ASTI.
1.18 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.19 "Technology License Agreement" shall mean the Technology License
Agreement dated as of the date hereof between Allergan and ASTI.
2. PRELIMINARY ACTION.
2.1 REGISTRATION STATEMENT AND PROSPECTUS. ASTI has prepared and filed
the Registration Statement with the Commission. Subject to the conditions set
forth herein, Allergan and ASTI shall use reasonable efforts to cause the
Registration Statement to become effective under the Securities Act. ASTI has
prepared, and Allergan shall cause to be mailed, the Prospectus to the record
holders on the Record Date of Allergan Common Stock.
2.
<PAGE> 3
2.2 FORM 8-A. ASTI has prepared and filed with the Commission a Form 8-A
which includes or incorporates by reference relevant portions of the
Registration Statement. Subject to the conditions set forth herein, ASTI shall
use reasonable efforts to cause the Form 8-A to become effective under the
Exchange Act.
2.3 BLUE SKY. ASTI shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the Distribution to permit
the ASTI Shares to be distributed as described in the Prospectus.
2.4 LISTING. ASTI has prepared and filed an application to effect the
listing of the ASTI Shares on the Nasdaq National Market. ASTI shall use
reasonable efforts to cause the ASTI Shares to be so listed.
2.5 NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each party hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any agreements or the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable laws. Notwithstanding the foregoing, the
parties shall use reasonable efforts to obtain all consents and approvals, to
enter into all agreements and to make all filings and applications which may be
required for the consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable regulatory filings or
consents under federal or state laws and all necessary consents, approvals,
agreements, filings and applications.
3. ISSUE AND SALE OF ASTI SHARES.
3.1 PURCHASE OF ASTI CLASS A COMMON STOCK. Prior to the Distribution
Date and in consideration of Allergan's contribution of $200 million in cash to
ASTI, ASTI will issue to Allergan that number of ASTI Shares such that Allergan
may distribute to holders of Allergan Common Stock one ASTI Share for every 20
shares of Allergan Common Stock held on the Record Date. Allergan and ASTI
acknowledge that all of the ASTI Shares held by Allergan will be distributed by
Allergan to the holders of outstanding shares of Allergan Common Stock.
4. THE DISTRIBUTION.
4.1 THE DISTRIBUTION. ASTI shall take all steps required by Allergan or
the Agent to effect the Distribution. Prior to the Distribution, and upon
receipt of the capital contribution described in Section 3 hereof, ASTI shall
cause to be issued to Allergan a certificate or certificates representing a
sufficient number of ASTI Shares so that Allergan may distribute one ASTI Share
for every 20 shares of Allergan Common Stock held on the Record Date.
4.2 EXPENSES OF DISTRIBUTION. All expenses related in any way to the
Distribution, including without limitation all legal, financial advisory and
accounting fees of Allergan and ASTI, shall be borne by ASTI.
3.
<PAGE> 4
5. ADDITIONAL ASSURANCES; INDEMNIFICATION.
5.1 MUTUAL ASSURANCES. Allergan and ASTI agree to cooperate with respect
to the implementation of the Allergan/ASTI Agreements and to execute such
further documents and instruments as may be necessary to confirm the
transactions contemplated thereby.
5.2 INDEMNIFICATION. If Allergan exercises the Purchase Option, from and
after such exercise, Allergan shall indemnify, defend and hold harmless ASTI's
officers and directors to the same extent as provided in ASTI's Restated
Certificate of Incorporation.
5.3 NOTICE. Any person entitled to indemnification pursuant to Section
5.2 shall give Allergan prompt notice in writing, in the manner set forth in
Section 7.7 below, of any claim or demand made against such person for which
such person may be entitled to indemnification under Section 5.2.
6. CONDITIONS TO EFFECTIVENESS OF DISTRIBUTION.
The Distribution shall be subject to the satisfaction or waiver by
Allergan of the following conditions and the satisfaction or waiver by ASTI of
the conditions in Sections 6.8 and 6.9:
6.1 BOARD APPROVAL. The Allergan/ASTI Agreements (including exhibits and
schedules) shall have been approved by the Board of Directors of Allergan and
ASTI and shall have been executed and delivered by appropriate officers of
Allergan and ASTI, and the Allergan Board of Directors (or a committee thereof)
shall have declared a dividend of the ASTI Shares as of the Record Date to the
holders of record of the Allergan Common Stock.
6.2 SECURITIES LAW COMPLIANCE. The transactions contemplated hereby
shall be in compliance with applicable federal and state securities laws, and
the Registration Statement shall have been declared effective and no stop orders
shall have been instituted with respect thereto under the Securities Act.
6.3 RESTATED CERTIFICATE OF INCORPORATION. The Restated Certificate of
Incorporation of ASTI shall have been adopted by the Board of Directors,
approved by Allergan as sole stockholder of ASTI, and filed with the Delaware
Secretary of State.
6.4 FORM 8-A EFFECTIVE. The Form 8-A shall have become effective under
the Exchange Act.
6.5 LISTING APPLICATION APPROVED. The ASTI Shares shall be approved for
quotation on the Nasdaq National Market.
6.6 FAIRNESS OPINION. Allergan shall have received an opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, investment advisor to Allergan, in
form and substance satisfactory to Allergan, to the effect that (i) from a
financial point of view, the Distribution provides a reasonable structure to
pursue the financial objectives described in the Prospectus of
4.
<PAGE> 5
Allergan and (ii) from a financial point of view, the Distribution is fair to
the stockholders of Allergan.
6.7 PERMITS AND LICENSES. ASTI shall have received such permits and
licenses as may be necessary for the purpose of commencing operations
contemplated by the Allergan/ASTI Agreements.
6.8 CONSENTS. Each of Allergan and ASTI shall have received such
consents, and shall have received executed copies of such agreements or
amendments of agreements, as it shall deem necessary in connection with the
completion of the transaction contemplated by this Agreement.
6.9 OTHER INSTRUMENTS. All actions and other documents and instruments
deemed necessary or advisable in connection with the transactions contemplated
hereby shall have been taken or executed, as the case may be, in form and
substance satisfactory to Allergan and ASTI.
6.10 LEGAL PROCEEDINGS. No legal proceedings affecting or arising out of
the transactions contemplated hereby or which could otherwise affect Allergan or
ASTI in a materially adverse manner shall have been commenced or threatened
against Allergan, ASTI or the directors or officers of either Allergan or ASTI.
6.11 MATERIAL CHANGES. No material adverse change shall have occurred
with respect to Allergan or ASTI, the securities markets (either generally or
with respect to Allergan or ASTI) or general economic or financial conditions
which shall, in the reasonable judgment of Allergan, make the transactions
contemplated by this Agreement inadvisable.
6.12 OTHER CONDITIONS. Such other conditions as may be set by the
Allergan Board of Directors or any committee thereof in the resolutions
authorizing the Distribution shall have been satisfied.
7. MISCELLANEOUS.
7.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party hereto of
a breach of any provisions of this Agreement shall not be implied and shall not
be valid unless such waiver is recited in writing and signed by such party.
Failure of any party to require, in one or more instances, performance by the
other party in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver or relinquishment of the future performance of any
such terms or conditions or of any other terms and conditions of this Agreement.
A waiver by either party of any term or condition of this Agreement shall not be
deemed or construed to be a waiver of such term or condition for any other term.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of either party. This
Agreement may not be amended except in a writing signed by both parties.
5.
<PAGE> 6
7.2 ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that Allergan may assign
such rights and obligations hereunder to an Affiliate of Allergan or to any
person or entity with which Allergan is merged or consolidated or which acquires
all or substantially all of the assets of Allergan.
7.3 DISPUTE RESOLUTION. In the event of any dispute, the parties shall
refer such dispute to the Chief Executive Officer ("CEO") of ASTI and the CEO of
Allergan for attempted resolution by good faith negotiations within sixty (60)
days after such referral is made. During such period of good faith negotiations,
any applicable time periods under this Agreement shall be tolled. In the event
such executives are unable to resolve such dispute within such sixty (60) day
period, the parties shall submit their dispute to binding arbitration before a
retired California Superior Court Judge at J.A.M.S./Endispute located in Orange,
California, such arbitration to be conducted pursuant to the J.A.M.S./Endispute
procedure rules for commercial disputes then in effect. The award of the
arbitrator shall include an award of reasonable attorneys' fees and costs to the
prevailing party.
7.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
7.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California as applied to residents of
that state entering into contracts to be performed in that state.
7.6 HEADINGS. The headings set forth at the beginning of the various
sections of this Agreement are for convenience and form no part of the Agreement
between the parties.
7.7 NOTICES. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail, postage prepaid, and addressed as
follows:
If to Allergan: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: Corporate Vice President, General Counsel
If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of
mailing or upon receipt if sent by facsimile (but only if followed by certified
or registered confirmation). Either
6.
<PAGE> 7
party may change the address at which notice is to be received by written notice
pursuant to this Section 7.7.
7.8 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified,
if possible, to the minimum extent necessary to make it valid and enforceable
or, if such modification is not possible, it shall be stricken and the remaining
provisions shall remain in full force and effect.
7.9 RELATIONSHIP OF THE PARTIES. For all purposes of this Agreement,
ASTI and Allergan shall be deemed to be independent contractors and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute ASTI and Allergan as partners, joint venturers, coowners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way to obligate the other party, except as expressly authorized
in writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume nor shall be liable for any
liabilities or obligations of the other party, whether past, present or future.
7.10 SURVIVAL. The provisions of Sections 1, 5, 7.1, 7.3, 7.5, 7.6, 7.7,
7.8 and this Section 7.10 shall survive the termination for any reason of this
Agreement. Any payments due under this Agreement with respect to any period
prior to its termination shall be made notwithstanding the termination of this
Agreement. Neither party shall be liable to the other due to the termination of
this Agreement as provided herein, whether in loss of good will, anticipated
profits or otherwise.
7.
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALLERGAN, INC.
By: /s/ LESTER J. KAPLAN
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Title: Corporate Vice President,
Science & Technology
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ALLERGAN SPECIALTY THERAPEUTICS, INC.
By: /s/ LESTER J. KAPLAN
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Title: Chief Executive Officer
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8.
