<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarter period ended December 31, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______ to ______
Commission File Number: 0-10640
COLLAGEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2300486
- ---------------------- ----------------------------------
State of Incorporation I.R.S. Employer Identification No.
2500 Faber Place, Palo Alto, California 94303
Telephone: (415) 856-0200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of January 31, 1997, Registrant had outstanding 8,766,077 shares of common
stock, exclusive of 1,947,900 shares held by the Registrant as treasury stock.
<PAGE> 2
COLLAGEN CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
- ----------------------------------- --------
<S> <C>
Consolidated Balance Sheets -
December 31, 1996 and June 30, 1996. . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income -
Three and six months ended December 31, 1996 and 1995. . . . . .. . . . . . .4
Consolidated Statements of Cash Flows -
Six months ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . .5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 6-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . .10-18
PART II. Other Information
- -------------------------------
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .19-22
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
</TABLE>
2
<PAGE> 3
COLLAGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996 *
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,052 $ 21,676
Short-term investments 6,641 3,691
Accounts receivable, net 10,314 9,508
Inventories, net 11,826 9,563
Other current assets, net 9,102 11,496
---------------- ----------------
Total current assets 53,935 55,934
Property and equipment, net 15,900 15,147
Intangible assets and goodwill, net 14,047 14,824
Investment in Target Therapeutics, Inc. 53,587 65,841
Other investments & assets, net 14,086 11,261
---------------- ----------------
$ 151,555 $ 163,007
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,029 $ 3,824
Other accrued liabilities 12,333 11,869
Income taxes payable 4,779 7,588
Notes payable 5,075 5,079
---------------- ----------------
Total current liabilities 25,216 28,360
Long-term liabilities:
Deferred income taxes 23,859 27,674
Other long-term liabilities 3,973 3,444
Minority interest 326 528
---------------- ----------------
Total long-term liabilities 28,158 31,646
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, authorized: 5,000,000 shares;
none issued and outstanding --- ---
Common stock, $.01 par value, authorized: 28,950,000 shares,
issued: 10,672,879 shares at December 31, 1996 (10,575,614
shares at June 30, 1996), outstanding: 8,724,979 shares at
December 31, 1996 (8,775,614 shares at June 30, 1996) 107 106
Additional paid-in capital 65,906 64,844
Retained earnings 44,827 42,378
Cumulative translation adjustment (919) (656)
Unrealized gain on available-for-sale investments 29,026 34,549
Treasury stock, at cost, 1,947,900 shares at December 31, 1996
(1,800,000 shares at June 30, 1996) (40,766) (38,220)
---------------- ----------------
Total stockholders' equity 98,181 103,001
---------------- ----------------
$ 151,555 $ 163,007
================ ================
</TABLE>
* Amounts derived from audited financial statements.
3
<PAGE> 4
COLLAGEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product Sales $ 19,057 $ 18,883 $ 35,842 $ 33,823
Other --- --- --- 2,000
----------- ---------- ---------- -----------
19,057 18,883 35,842 35,823
----------- ---------- ---------- -----------
Costs and expenses:
Cost of sales 5,321 5,074 10,466 9,071
Selling, general and administrative 10,479 10,467 19,328 18,769
Research and development 4,525 2,925 8,686 5,504
Acquired in-process research and development --- --- --- 14,800
----------- ---------- ---------- -----------
20,325 18,466 38,480 48,144
----------- ---------- ---------- -----------
Income (loss) from operations (1,268) 417 (2,638) (12,321)
Other income (expense):
Net gain on investments, principally
Target Therapeutics, Inc. 3,038 20,921 9,222 31,387
Equity in earnings (losses) of affiliates, net (123) 415 (597) (93)
Interest income 305 297 660 451
Interest expense (146) (40) (231) (52)
----------- ---------- ---------- -----------
Income before income taxes and minority interest 1,806 22,010 6,416 19,372
Provision for income taxes 957 12,540 3,400 18,453
Minority interest (162) --- (302) ---
----------- ---------- ---------- -----------
Net income $ 1,011 $ 9,470 $ 3,318 $ 919
=========== ========== ========== ===========
Net income per share $ .11 $ 1.05 $ .37 $ .10
=========== ========== ========== ===========
Shares used in calculating per share information 8,841 9,059 8,963 9,087
=========== ========== ========== ===========
</TABLE>
4
<PAGE> 5
COLLAGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------------------------
1996 1995
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,318 $ 919
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Acquired in-process research and development -- 14,800
Depreciation and amortization 3,107 2,968
Equity in losses of affiliates 597 93
Gain on investments, net of taxes paid of $5.2 million and (4,051) (14,502)
$16.9 million, respectively
Other adjustments related to changes in
assets and liabilities (4,776) 2,787
------------- ----------
Net cash provided by (used in) operating activities (1,805) 7,065
------------- ----------
Cash flows from investing activities:
Proceeds from sale of Target Therapeutics, Inc. stock, net of taxes paid 5,578 25,188
Proceeds from sales and maturities of short-term investments 1,675 3,123
Purchases of short-term investments (4,625) (1,318)
Expenditures for property and equipment (2,989) (1,332)
Increase in intangible and other assets (99) (458)
Expenditures for investments in and loans to affiliates (1,491) (6,198)
Acquisition of LipoMatrix, Incorporated, net of cash balances -- (22,608)
Accrued purchase consideration and other costs of
acquisition of LipoMatrix -- 22,527
------------- ------------
Net cash provided by (used in) investing activities (1,951) 18,924
------------- ------------
Cash flows from financing activities:
Repurchase of common stock (2,546) (3,034)
Net proceeds from issuance of common stock 1,063 41
Cash dividends paid (885) (676)
Net borrowing under bank loans 500 70
------------- ------------
Net cash used in financing activities (1,868) (3,599)
------------- ------------
Net increase (decrease) in cash and cash equivalents (5,624) 22,390
Cash and cash equivalents at beginning of period 21,676 6,155
------------- ------------
Cash and cash equivalents at end of period $ 16,052 $ 28,545
============= ============
</TABLE>
5
<PAGE> 6
COLLAGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Collagen
Corporation (the "Company"), a Delaware corporation, and its wholly-owned
and majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The Company operates in one industry
segment focusing on the development, manufacturing and sale of medical
devices. Investments in unconsolidated subsidiaries, and other investments
in which the Company has a 20% to 50% interest or otherwise has the ability
to exercise significant influence, are accounted for under the equity
method. Investments in companies in which the Company has less than 20%
interest with no readily determinable fair value are carried at cost or
estimated realizable value, if less, and those with a readily determinable
fair value are carried at market value.
The consolidated balance sheet as of December 31, 1996, the consolidated
statements of income for the three and six months ended December 31, 1996
and 1995, and the consolidated statements of cash flows for the six months
ended December 31, 1996 and 1995, have been prepared by the Company,
without audit. In the opinion of management, all necessary adjustments
(which include only normal recurring adjustments) have been made to present
fairly the financial position, results of operations and cash flows at
December 31, 1996 and for all periods presented. Interim results are not
necessarily indicative of results for a full fiscal year. The consolidated
balance sheet as of June 30, 1996 has been derived from the audited
consolidated financial statements at that date.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended June 30, 1996
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1996.
New Accounting Standard
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS#123"), which establishes a fair value method of
accounting for stock options and other equity instruments. The Company
adopted SFAS#123 beginning in fiscal year 1997 and will use the disclosure
method as described in the statement. The required disclosure will be
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1997.
6
<PAGE> 7
2. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
-------------- ---------------
<S> <C> <C>
Raw materials $ 1,090 $ 1,148
Work-in-process 4,456 3,630
Finished goods 6,280 4,785
-------------- ---------------
$ 11,826 $ 9,563
============== ===============
</TABLE>
3. Investment in Target Therapeutics, Inc. (Boston Scientific, Inc.)
The Company accounts for its investment in Target Therapeutics ("Target")
under the cost method as an available-for-sale equity security, which is
carried at market value. During the three and six months ended December 31,
1996, the Company sold 100,000 shares and 330,000 shares, respectively, of
Target common stock for a pre-tax gain of approximately $3.0 million and
$9.2 million, respectively. Target's common stock is quoted on The Nasdaq
Stock Market. The closing price of Target's stock at December 31, 1996 was
$42.00 per share. At December 31, 1996, the Company held 1,275,888 shares
of Target's common stock, or approximately a 9% ownership position in
Target.
At June 30, 1996 and December 31, 1996, the Company's shares of Target
common stock were recorded at the estimated fair value of $65.8 million and
$53.6 million, respectively. The $58.4 million unrealized gain ($65.8
million estimated fair value less $7.4 million cost) at June 30, 1996, and
the $47.7 million unrealized gain ($53.6 million estimated fair value less
$5.9 million cost) at December 31, 1996, on these available-for-sale
securities has been reported as a separate component of stockholders'
equity, net of tax.
On January 20, 1997, Boston Scientific Corporation (of Natick,
Massachusetts) and Target jointly announced the signing of a definitive
agreement to merge in a tax-free stock-for-stock transaction. Under the
merger agreement, Target's stockholders will receive 1.07 shares of Boston
Scientific Corporation ("Boston Scientific") common stock in exchange for
each share of Target common stock. The merger is expected to close during
the second calendar quarter of 1997. Assuming the planned merger is
completed, the Company's 1,275,888 shares of Target's common stock will be
exchanged for approximately 1,365,200 shares of Boston Scientific.
Additionally, the Company may be unable to sell additional Boston
Scientific/Target shares during the next six to nine months due to
accounting, and tax matters and other restrictions pertaining to the
merger.
Boston Scientific is a leading manufacturer of catheter-based devices that
can be inserted through small body openings and are used in heart surgery
and other operations. Boston Scientific common stock is quoted on the New
York Stock Exchange under the symbol BSX.
7
<PAGE> 8
Its closing price on January 31, 1997 was $68.25 per share.
4. Investment in Innovasive Devices, Inc.
Prior to October 1996, the Company's 844,000 shares of common stock of
Innovasive Devices, Inc. ("Innovasive Devices") were valued at cost or
$4,064,000 due to restrictions which prevented the sale of any of the
Company's shares of common stock of Innovasive Devices. Effective October
1996, restrictions were no longer applicable on approximately 473,000
shares of common stock which the Company holds in Innovasive Devices. As a
result, the Company now carries the non-restricted portion of its
investment in Innovasive Devices at market value or $3.7 million,
reflecting an unrealized gain of $1.4 million, which has been included in a
separate component of stockholders' equity, net of tax. The remaining
371,000 restricted shares of common stock continue to be valued at cost.
During the three and six months ended December 31, 1996, the Company did
not sell any of its shares of common stock of Innovasive Devices.
Innovasive Devices' common stock is quoted on The Nasdaq Stock Market. The
closing price of Innovasive Devices' common stock at December 31, 1996, was
$7.75 per share. At December 31, 1996, the Company held approximately a 12%
ownership position in Innovasive Devices.
5. Stock Repurchase Program
In February 1993, the Company's Board of Directors authorized a stock
repurchase program. Since the inception of the stock repurchase program in
February 1993, the Company has repurchased 1,947,900 shares of its common
stock at an average acquisition price of approximately $21 per share.
During the six months ended December 31, 1996, 147,900 shares were
repurchased and as of such date, the Company is authorized to repurchase an
additional 352,100 shares under the program. The Company currently plans to
keep the repurchased shares as treasury stock and may use this stock in
various company stock benefit plans.
6. Income Taxes
The provision for income taxes for the six months ended December 31, 1996
and 1995, was computed by applying the estimated annual income tax rates of
approximately 53% and 54% (excluding the impact of the acquired in-process
R&D charge for which no tax benefit was available), respectively, to income
before income taxes. The lower effective tax rate in the current year was
primarily a result of lower projected annual losses from foreign
subsidiaries.
8
<PAGE> 9
7. Per Share Information
Net income per share for the three and six months ended December 31, 1996
and 1995, have been computed based upon the weighted average number of
common stock and dilutive common stock equivalent shares outstanding.
Shares used in the per share computations are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months
Ended Ended
December 31, December 31,
---------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Common stock 8,690 8,916 8,827 8,954
Stock options 151 143 136 133
-------- -------- -------- --------
Weighted average number of common
stock and dilutive common stock
shares equivalent shares outstanding 8,841 9,059 8,963 9,087
======== ======== ======== ========
</TABLE>
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters discussed in
this report are forward=looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward=looking statements. Potential risks and uncertainties include,
without limitation, those mentioned in this report and, in particular the
factors described below under "Factors That May Affect Future Results of
Operations" as well as those under the same heading in the Company's Annual
Report on Form 10=K for the fiscal year ended June 30, 1996.
The Company
Collagen Corporation (the "Company") is a technology=based company that
develops, manufactures and markets biomedical devices for the treatment of
defective, diseased, traumatized or aging human tissues.
The Company's revenues are derived primarily from the sale of products
principally used in reconstructive and cosmetic applications for the face and
breast, the treatment of stress urinary incontinence, and in bone repair. The
Company markets its reconstructive and cosmetic products directly and through a
network of international distributors and its stress urinary incontinence and
bone repair products through marketing partners.
In addition to internal research and development ("R&D") and joint product
development arrangements, the Company has an active program for developing new
products through affiliated companies in which the Company makes equity and debt
investments. The Company believes the formation of new companies allows each to
focus its technology on select market segments to bring products to market
efficiently and to expand its proprietary knowledge.
Aesthetic Technologies(TM) and Collagen Technologies Groups
The Board of Directors and management have reviewed various strategic
alternatives to improve the market's recognition of the intrinsic value of the
Company. As a result, the Company announced on January 8, 1997, that it will
formally separate the Aesthetic Technologies(TM) Group, its profitable aesthetic
and reconstructive surgery business, and form a new company, Aesthetic
Technologies(TM) Corporation. Aesthetic Technologies Corporation will focus on
developing its profitable aesthetic and reconstructive surgery business with
strong and growing product offerings that encompass many new exciting
technologies in aesthetic medicine. Management and the Board of Directors will
continue to evaluate strategies for Aesthetic Technologies Corporation, which
may include a public offering, a "spin=off" or a "split=off", among other
alternatives. The timing and nature of these actions will depend upon tax,
legal, market and other considerations.
10
<PAGE> 11
The Company's other business activities consist primarily of the Collagen
Technologies Group, which develops novel collagen and polymer materials, as well
as internal and affiliate company=sponsored product development programs in the
fields of orthopedics, soft=tissue repair, vascular surgery and ophthalmology.
The Collagen Technologies Group also manufactures and sells Collagraft(R) bone
graft matrix and Collagraft(R) bone graft matrix strip ("Collagraft bone graft
products") to the Company's marketing partner, Zimmer, Inc. ("Zimmer"), a
division of Bristol Myers=Squibb Company. In addition, Collagen Technologies
Group holds equity investments in and product development and supply agreements
with four privately held affiliates and equity investments in two public
companies, Target Therapeutics, Inc. ("Target") and Innovasive Devices, Inc.
("Innovasive Devices").
The planned formation of Aesthetic Technologies Corporation does not affect the
presentation of the Company's financial results presented for the three and six
months ended December 31, 1996.
Results of Operations
The following tables show for the periods indicated the percentage relationship
to product sales of certain items in the Consolidated Statements of Income.
<TABLE>
<CAPTION>
PERCENT OF PRODUCT SALES
Three Months Ended Six Months Ended
December 31, December 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product sales 100% 100% 100% 100%
Other revenues -- -- -- 6%
Costs and expenses:
Cost of sales 28% 27% 29% 27%
Selling, general and administrative 55% 55% 54% 56%
Research and development 24% 16% 24% 16%
</TABLE>
Product sales. Product sales of $19.1 million in the three months ended December
31, 1996, increased approximately $.2 million or 1%, compared to product sales
of $18.9 million for the same prior-year period. Product sales of $35.8 million
in the six months ended December 31, 1996, increased approximately $2.0 million
or 6%, compared to product sales of $33.8 million for the same prior-year
period. The increase in sales for the six months ended December 31, 1996, was
primarily due to the increase in international sales of plastic surgery and
dermatological products (which includes injectable collagen products,
Trilucent(TM) breast implant ("Trilucent"), and Hylaform(R) viscoelastic gel
("Hylaform gel") ) and an increase in revenue from direct sales of Contigen(R)
implant ("Contigen") to physician customers by C.R. Bard, Inc. ("Bard"), the
Company's marketing partner for Contigen. (See "Operating income/loss" below.)
11
<PAGE> 12
Worldwide sales of plastic surgery and dermatological products for the three and
six months ended December 31, 1996, were $16.8 million and $30.9 million, up 4%
and 7%, from sales of $16.1 million and $29.0 million, respectively, for the
same periods in the prior year. The increase in sales for the three and six
months ended December 31, 1996, was a result of sales growth in all plastic
surgery and dermatological product lines. The Company believes that the sales
growth in injectable collagen products in the current fiscal quarter and year
was a result of continued growth in distributor sales, increased demand by
consumers for a wide variety of aesthetic procedures and continued physician
interest in cosmetic procedures not reimbursed by third-party payers. The
Company anticipates continued dollar growth in future worldwide product sales in
these markets.
Worldwide unit sales of plastic surgery and dermatological products for the
three and six months ended December 31, 1996, increased approximately 11% and
12% over the same periods in the prior year. Domestically, implementation of
United States marketing programs designed to increase average treatment volume
per patient and to attract and retain new and existing patients, have favorably
impacted overall unit sales, but have unfavorably impacted realized revenue per
unit of product sold. The addition of Hylaform gel, which was launched in Europe
in November 1996, has also favorably impacted overall unit sales.
During the three and six months ended December 31, 1996, pursuant to terms of an
agreement between the Company and Bard, the Company recorded revenue of $1.7
million and $3.2 million, respectively, from Bard based on Bard's direct sales
of Contigen to physician customers. In June 1995, the Company announced that it
expected to ship little, if any, Contigen to Bard due to excess inventory at
Bard. The Company recorded minimal revenue from shipments of Contigen to Bard in
the three and six months ended December 31, 1996, and December 31, 1995. Future
revenue from shipments of Contigen to Bard is expected to resume in the fourth
quarter of fiscal 1997.
For the three and six months ended December 31, 1996, sales of Collagraft(R)
bone graft matrix and Collagraft(R) bone graft matrix strip ("Collagraft bone
graft products") to the Company's marketing partner, Zimmer, Inc. ("Zimmer"),
were approximately $290,000 and $1.0 million, respectively, compared to $844,000
and $1.8 million in the same periods in the prior year. The decrease in sales in
the current fiscal year period was due to lower than expected sales by Zimmer
and a consequent decrease in shipments from the Company. The Company expects
sales and shipments of Collagraft bone graft products for fiscal 1997 to be less
than those recorded during fiscal 1996.
A number of uncertainties exist surrounding the marketing and distribution of
Contigen and Collagraft bone graft products. The Company's primary means of
distribution for these products is through third party firms, Bard in the case
of Contigen and Zimmer in the case of Collagraft bone graft products. The
Company's business and financial results could be adversely affected in the
event that either or both of these parties are unable to market the products
effectively, anticipate customer demand accurately, or effectively manage
industry-wide pricing and cost containment pressures in health care.
Other revenues. Other revenues in the six months ended December 31, 1995
consisted of a final milestone payment of $2 million from Bard in accordance
with an agreement between the Company and Bard.
12
<PAGE> 13
Cost of sales. Cost of sales as a percentage of product sales was 28% and 29%
for the three and six months ended December 31, 1996, compared with 27% for both
periods in the prior year. The higher cost of sales as a percentage of product
sales in the current fiscal quarter and year was primarily a result of the
change in product mix (i.e., Trilucent and Hylaform gel) which has resulted in
higher costs per unit.
Due to the high fixed costs of the Company's Fremont, California manufacturing
facility, unit cost of manufacturing for collagen-based injectable products is
expected to remain highly dependent on the level of output at the Company's
manufacturing facility and continued demand for the collagen-based injectable
product lines. The Company anticipates that overall unit costs will be slightly
lower in fiscal 1997 compared to fiscal 1996.
SG&A. Selling, general and administrative ("SG&A") expenses were $10.5 million
in the three months ended December 31, 1996, which were unchanged from the same
prior-year period. SG&A expenses of $19.3 million in the six months ended
December 31, 1996, increased approximately $.5 million or 3%, compared to SG&A
expenses of $18.8 million for the same prior-year period. The increase in SG&A
expenses in the current fiscal year period resulted primarily from the inclusion
of six months of SG&A expenses of LipoMatrix, Incorporated ("LipoMatrix"), the
developer and manufacturer of Trilucent, and amortization expenses on purchased
intangibles and goodwill resulting from the acquisition of LipoMatrix compared
to four months for the same period in the prior year. SG&A expenses as a
percentage of product sales were 55% and 54% for the three and six months ended
December 31, 1996, compared to 55% and 56% for the same periods in the prior
year. The decrease in SG&A expenses as a percentage of product sales in the
current year period was primarily due to lower sales and marketing launch costs
for Trilucent combined with an increase in product sales. The Company expects
its SG&A expenses to increase slightly over the next several quarters,
approximately 1 to 2 percent per quarter, as a result of the expenses involved
in exploring and evaluating strategies for the new company, Aesthetic
Technologies Corporation.
R&D. Research and development ("R&D") expenses, which include expenditures for
regulatory compliance, were $4.5 million and $8.7 million (24% of product sales)
for the three and six months ended December 31, 1996, an increase of 55% and 58%
over $2.9 million and $5.5 million (16% of product sales), for the same periods
in the prior year. The increase in R&D spending in the current fiscal year
period was primarily attributable to the inclusion of six months of LipoMatrix
R&D expenses compared to four months for the same period in the prior year, the
inclusion of R&D expenses for Cohesion Corporation as a result of the Company
increasing its ownership percentage to 81% in June 1996 and the costs associated
with the commencement of Trilucent clinical trials in the United States and
Europe. The Trilucent clinical trials in the United States and Europe are
expected to take several years and may involve multiple product design changes
and clinical studies. The Company expects internal R&D spending in fiscal 1997
to be at levels higher than fiscal 1996 due to the inclusion of expenses of
Cohesion Corporation and a full year of expenses for LipoMatrix.
Acquired in-process research and development. The charge for acquired in-process
research and development ("in-process R&D") of $14.8 million in the six months
ended December 31, 1995, was a non-recurring charge related to the acquisition
of LipoMatrix. The value attributed to in-process R&D was determined by an
independent appraisal. Substantial effort, including clinical trials and
regulatory approval, still is required before Trilucent can be marketed in the
United States.
13
<PAGE> 14
Operating income/loss. Operating loss was $1.3 million for the three months
ended December 31, 1996, compared with an operating income of $417,000 for the
same prior-year period. The Company's consolidated operating loss was $2.6
million for the six months ended December 31, 1996, compared with a $12.3
million loss for the same prior-year period. The loss in the current fiscal year
was primarily due to the inclusion of six months of LipoMatrix operating
expenses compared to four months for the same period in the prior year, the
inclusion of the operating results of Cohesion Corporation, the costs associated
with commencing Trilucent clinical trials in the United States and Europe and
costs incurred to increase the manufacturing capacity for Trilucent implant. The
Company's consolidated $12.3 million operating loss for the six months ended
December 31, 1995, was primarily due to the $14.8 million acquisition-related,
non-recurring R&D charge related to LipoMatrix.
Compared with foreign exchange rates for the same prior-year quarter, the impact
of foreign exchange rates in the current fiscal quarter on operating income was
a net increase of $156,000 on equivalent local currency basis, resulting from a
decrease of approximately $251,000 in operating expenses, partially offset by a
decrease of approximately $95,000 in revenue. Compared with foreign exchange
rates for the same prior-year period, the impact of foreign exchange rates in
the current fiscal year on operating income was a net increase of $181,000 on
equivalent local currency basis, resulting from a decrease of approximately
$323,000 in operating expenses, partially offset by a decrease of approximately
$142,000 in revenue. Until December 1994, the Company's policy was to hedge
material foreign currency transaction exposures. At June 30, 1996 and December
31, 1996, no foreign currency transaction exposures were hedged. Unhedged net
foreign assets were $14.5 million and $17.0 million at June 30, 1996 and
December 31, 1996, respectively.
Gain on investments, net. In the three months ended December 31, 1996, the
Company recorded a gain on investments of $3.0 million ($1.3 million after taxes
of $1.7 million), resulting from the sale of 100,000 shares of Target
Therapeutics, Inc. ("Target") common stock. In the six months ended December 31,
1996, the Company recorded a gain on investments of $9.2 million ($4.0 million
after taxes of $5.2 million), resulting from the sale of 330,000 shares of
Target common stock. As the planned merger between Boston Scientific and Target
is completed, the Company may be unable to sell additional Boston
Scientific/Target shares during the next six to nine months due to accounting
and tax matters and other restrictions pertaining to the merger.
Equity in earnings/losses of affiliate companies. Equity in losses of affiliate
companies was approximately $123,000 for the three months ended December 31,
1996, compared to equity in losses of approximately $415,000 for the same
prior-year quarter. For the six months ended December 31, 1996, equity in losses
of affiliate companies was $597,000, compared with losses of $93,000 in the same
prior-year period.
The Company intends to continue to expand its new product development activities
through more equity investments in or loans to affiliate companies during fiscal
year 1997. These affiliate companies typically are in an early stage of
development and may be expected to incur substantial losses, which in turn will
have an adverse effect on the Company's operating results. There can be no
assurance that these investments will result in positive returns nor can there
be any assurance on the timing of any return on investment, or that the Company
will not lose its entire investment.
14
<PAGE> 15
Interest income. Interest income was $305,000 and $660,000 for the three and six
months ended December 31, 1996, respectively, compared with $297,000 and
$451,000 for the same periods in the prior year. The increase in the current
fiscal year was primarily due to higher average short-term investment balances,
resulting primarily from the sale of Target stock.
Income tax. The provision for income taxes for the six months ended December 31,
1996 and 1995, was computed by applying the estimated annual income tax rates of
approximately 53% and 54% (excluding the impact of the acquired in-process R&D
charge for which no tax benefit was available), respectively, to income before
income taxes. The lower effective tax rate in the current year was primarily a
result of lower projected annual losses from foreign subsidiaries.
Liquidity and Capital Resources
At December 31, 1996, the Company's cash, cash equivalents and short-term
investments were $22.7 million compared to $25.4 million at June 30, 1996. Net
cash used in operating activities was approximately $1.8 million in the six
months ended December 31, 1996, compared to approximately $7.1 million of net
cash provided by operating activities for the same prior-year period.
The $1.8 million of net cash used in operating activities in the six months
ended December 31, 1996, was mainly attributable to a $2.8 million decrease in
income taxes payable resulting from estimated payments made related to the sales
of Target stock, a $2.3 million increase in inventory, a $.8 million increase in
accounts receivable, a $.3 million decrease in accounts payable and accrued
liabilities, a $.3 million unfavorable foreign currency translation impact, a
$.2 million decrease in the minority interest liability, partially offset by
$2.9 million of net income after adjusting for depreciation and amortization
expense, equity in losses (earnings) and gain on investments (net of taxes paid)
and a $2.0 million decrease in miscellaneous receivables related to the sales of
Target stock.
The $3.8 million of net cash used in investing and financing activities in the
six months ended December 31, 1996, was primarily due to payments of $4.6
million to purchase short-term investments, capital expenditures of
approximately $3.0 million, payments of approximately $2.5 million to repurchase
147,900 shares of the Company's common stock at an average acquisition price of
approximately $17.00 per share, payments of approximately $1.5 million for
additional investments in affiliates, and payment of cash dividends of
approximately $.9 million to the Company's stockholders in July 1996, partially
offset by proceeds of $5.6 million net of taxes paid ($10.8 million proceeds
less taxes paid of $5.2 million ) from the sale of 330,000 shares of common
stock of Target by the Company during the year, $1.7 million proceeds received
from the sale of short-term investments, and $1.1 million from the issuance of
approximately 97,000 shares of the Company's common stock.
The Company anticipates capital expenditures, equity investments in, and loans
to affiliate companies to be approximately $12 million in fiscal 1997. As of
December 31, 1996, the Company's capital expenditures, equity investments in,
and loans to affiliate companies totaled approximately $4.5 million. In November
1996, the Company's Board of Directors declared a cash dividend of 10 cents per
share to stockholders of record on December 16, 1996. This dividend totaled
approximately $869,000 and was paid to stockholders on January 15, 1997. The
Company anticipates that the Board of Directors will review the possibility of
declaring an
15
<PAGE> 16
additional dividend before the end of the current fiscal year. Additionally, in
June 1996, the Board of Directors authorized the Company to repurchase an
additional 500,000 shares of the Company's common stock in the open market, of
which the Company has repurchased 147,900 shares as of December 31, 1996.
The Company's principal sources of liquidity include cash generated from
operations, sales of Target stock, and its cash, cash equivalents and short-term
investments. During the fiscal quarter ended September 30, 1994, the Company's
Board of Directors authorized the Company to sell portions of its holdings of
Target's common stock. Between July 1, 1994 and December 31, 1996, the Company
sold an aggregate of 3,312,500 shares of Target common stock (adjusted for a
two-for-one stock split in December 1995) for an aggregate pre-tax gain of
approximately $101.1 million ($116.6 million proceeds less cost basis of $15.5
million). At December 31, 1996, the Company held 1,275,888 shares of Target's
common stock. The Company anticipates that stock sales pursuant to the
authorization will be made from time to time, under SEC Rule 144, with the
objective of generating cash, for, among other things, further investments in
both current and new affiliate companies. As the planned merger between Boston
Scientific and Target is completed, the Company may be unable to sell additional
Boston Scientific/Target shares during the next six to nine months due to
accounting and tax matters and other restrictions pertaining to the merger.
In addition, the Company established a $7.0 million revolving credit facility
with a bank in November 1994, which was subsequently increased to $15.0 million
in December 1995. As of December 31, 1996, $10.0 million of this credit facility
remained unused. Additionally, the Company has a $3.1 million (4.1 million Swiss
Francs) credit facility that was established by LipoMatrix prior to the
Company's acquisition of LipoMatrix, of which $843,000 (1.1 million Swiss
Francs) remained unused as of December 31, 1996.
The Company's capital requirements will depend on numerous factors, including
market acceptance and demand for the Company's products; the resources the
Company devotes to the development, manufacture and marketing of its products;
the progress of the Company's clinical research and product development
programs; the extent to which the Company enters into collaborative
relationships with third parties and the scope of the Company's obligations in
such relationships; the receipt of, and the time required to obtain, regulatory
clearances and approvals; the resources required to protect the Company's
intellectual property and other factors. The timing and amount of such capital
requirements cannot be accurately predicted. Funds may also be used for the
acquisition of businesses, products and technologies that are complementary to
those of the Company. The Company believes that its current sources of liquidity
should be adequate to fund its anticipated capital requirements through at least
the next 18 months. However, during this period or thereafter, the Company may
require additional financing. There can be no assurance that such additional
financing will be available on terms favorable to the Company or at all.
Factors That May Affect Future Results of Operations
A large portion of the Company's revenues in recent years has come from its
international operations. As a result, the Company's operations and financial
results could be significantly affected by international factors, including
numerous regulatory agencies, changes in foreign currency exchange rates and
foreign economic and political conditions generally. The
16
<PAGE> 17
Company's operating strategy takes into account changes in these factors over
time; however, the Company's results of operations could be significantly
affected in the short term by fluctuations in foreign currency exchange rates or
disruptions to shipments.
All of the Company's manufacturing capacity for collagen products, the majority
of its research and development activities, its corporate headquarters, and
other critical business functions are located near major earthquake faults. In
addition, all of the Company's manufacturing capacity for collagen-based
products and Trilucent are located in two primary facilities (one for
collagen-based products and one for Trilucent), with the Company currently
maintaining only limited amounts of finished product inventory. While the
Company has some limited protection in the form of disaster recovery programs
and basic insurance coverage, the Company's operating results and financial
condition would be materially adversely affected in the event of a major
earthquake, fire or other similar calamity, affecting its manufacturing
facilities.
The Company is involved in various legal actions arising in the course of
business, some of which involve product liability and intellectual property
claims. The Company operates in an industry susceptible to claims that may
allege that the use of the Company's technology or products has resulted in
adverse effects or infringes on third-party technology. With respect to product
liability claims, such risks will exist even with respect to those products that
have received or in the future may receive regulatory approval for commercial
sale. It is possible that adverse product liability or intellectual property
actions could negatively affect the Company's future results of operations.
The Company has been and may be in the future the subject of negative publicity,
which can arise from various sources, ranging from the news media on cosmetic
procedures in general to legislative and regulatory investigations specific to
the Company concerning, among other things, the safety and efficacy of its
products. The Company is confident of the safety and effectiveness of its
products; however, there can be no assurance that such investigations or
negative publicity from such investigations or from the news media will not
result in a material adverse effect on the Company's future financial position,
its results of operations or the market price of its stock. In addition,
significant negative publicity could result in an increased number of product
liability claims.
The Company's manufacturing activities and products sold in the United States
are subject to extensive and rigorous regulations by the FDA and by comparable
agencies in certain foreign countries where these products are manufactured or
distributed. The FDA regulates the manufacture and sale of medical devices in
the U.S., including labeling, advertising and record keeping. Failure to obtain,
or delays in obtaining, the required regulatory approvals for new products, as
well as product recalls, both inside and outside of the U.S. could adversely
affect the Company. The Company is conducting Trilucent clinical trials in
Europe and the United States, which are expected to take several years and may
involve multiple product design changes and clinical studies.
Due to the factors noted above, as well as other factors that may affect the
Company's operating results, the Company's future earnings and stock price may
be subject to significant volatility, particularly on a quarterly basis. Any
shortfall in revenue or earnings from levels expected by securities analysts
could have an immediate and significant adverse effect on the trading price of
the Company's common stock in any given period. Additionally, the Company may
not learn of, or be able to confirm, such shortfalls until late in the fiscal
quarter, or following the end of the quarter, which could result in an even more
immediate and adverse effect on the
17
<PAGE> 18
trading price of the Company's common stock. Finally, the Company participates
in a highly dynamic industry, which often results in significant volatility of
the Company's common stock.
For a more complete discussion of risks and uncertainties involving the
Company's business, please see the risks factors described under the heading
"Factors That May Affect Future Results of Operations" set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996.
18
<PAGE> 19
PART II. OTHER INFORMATION
COLLAGEN CORPORATION
Item 1. Legal Proceedings
On December 21, 1994, the Company filed suit against Matrix
Pharmaceutical, Inc., ("Matrix") alleging fraud, misappropriation of
trade secrets, unfair competition, breach of fiduciary duty, inducing
breach of contract, breach of duty of loyalty and tortious
interference. The Company alleges that Matrix, which uses collagen for
certain drug delivery applications, unlawfully obtained the Company's
confidential and proprietary information relating to Collagen's
products and operations by hiring ten former employees that the
Company alleges had access to or were knowledgeable about the
Company's proprietary information. On February 12, 1995, Matrix denied
the Company's allegations and filed a cross-complaint charging the
Company with, among other things, unfair competition, defamation and
restraint of trade. Matrix also has requested certain declaratory
relief. Howard Palefsky, the Company's Chairman of the Board and Chief
Executive Officer, was personally named as an additional defendant to
the Matrix defamation charge. On September 24, 1996, a Demurrer and
Motion to Strike Matrix's third amended complaint was sustained in
Collagen's favor, dismissing Matrix's anti-trust and common law
restraint of trade claims. A trial date has been scheduled for April
7, 1997. Collagen and Matrix currently are engaged in discovery.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
A. On October 30, 1996, the Registrant held its Annual Meeting of
Stockholders.
B. As listed below, all of management's nominees for directors were
elected at the meeting pursuant to proxies solicited pursuant to
Regulation 14 under the Securities and Exchange Act of 1934 (in
thousands).
19
<PAGE> 20
<TABLE>
<CAPTION>
No. of No. of No of No of No of
Votes Votes Votes Votes Broker Non-
Name of Nominee For Against Withheld Abstained Votes
- --------------- --- ------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Reid W. Dennis 7,697 0 492 0 0
Howard D. Palefsky 7,692 0 497 0 0
Anne L. Bakar 7,697 0 492 0 0
John R. Daniels, MD 7,679 0 510 0 0
William G. Davis 7,698 0 491 0 0
Craig W. Johnson 7,697 0 492 0 0
Rodney Perkins, MD 7,678 0 511 0 0
Gary S. Petersmeyer 7,675 0 514 0 0
Roger H. Salquist 7,694 0 495 0 0
</TABLE>
C. The adoption of an amendment to the 1994 Stock Option Plan to
increase the number of shares of common stock reserved for
issuance thereunder by 400,000 shares was approved with
5,096,210 shares voting in favor, 2,948,817 shares voting
against and 55,520 shares abstaining.
D. The appointment of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending June 30, 1997 was
ratified with 8,118,886 shares voting in favor, 57,820 voting
against and 12,543 shares abstaining.
Item 5. Other Information
On February 10, 1997, the Board of Directors made the following
appointments: Gary Petersmeyer was appointed Chief Executive Officer
of Collagen Corporation in addition to retaining the title of
President, succeeding Howard D. Palefsky who will remain as Chairman
of the Board of Directors; David Foster was promoted to Senior Vice
President of Collagen Corporation and General Manager of Collagen
Technologies Group; Norman Halleen was appointed Vice President,
Finance and Chief Financial Officer and Jean-Pierre CapDevielle was
appointed Vice President and Managing Director, International.
20
<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 3.4 - By-Laws, as amended on August 9, 1996, effective
October 30, 1996
Exhibit 10.67(e) - Eighth Amendment, dated December 31, 1996, to
Credit Agreement dated November 15, 1994 by and between the Bank of
New York and the Registrant
Exhibit 10.86 * - License, Supply and International Distribution
Agreement between Registrant and Cosmederm Technologies, Inc., dated
September 6, 1996
Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K
None
- --------
* Confidential treatment is requested for a portion of this document.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLLAGEN CORPORATION
Date: February 13, 1997 /s/ Norman Halleen
----------------- ------------------
Norman Halleen
Vice President, Finance and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
<PAGE> 23
COLLAGEN CORPORATION
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
Exhibit 3.4 By-Laws, as amended on August 9, 1996, effective
October 30, 1996
Exhibit 10.67(e) Eighth Amendment, dated December 31, 1996, to Credit
Agreement dated November 15, 1994 by and between the
Bank of New York and the Registrant
Exhibit 10.86* License, Supply and International Distribution
Agreement between Registrant and Cosmederm
Technologies, Inc., dated September 6, 1996
Exhibit 27 Financial Data Schedule
- --------
* Confidential treatment is requested for a portion of this document.
22
<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
COLLAGEN CORPORATION
<PAGE> 2
BY-LAWS OF
COLLAGEN CORPORATION
TABLE OF CONTENTS
PAGE
----
ARTICLE I CORPORATE OFFICES.................................................1
1.1 REGISTERED OFFICE...............................................1
1.2 OTHER OFFICES...................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS.........................................1
2.1 PLACE OF MEETINGS...............................................1
2.2 ANNUAL MEETING..................................................1
2.3 SPECIAL MEETING.................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES..........................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE....................3
2.7 QUORUM..........................................................3
2.8 ADJOURNED MEETING; NOTICE.......................................4
2.9 CONDUCT OF BUSINESS.............................................4
2.10 VOTING.........................................................4
2.11 WAIVER OF NOTICE...............................................5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING........5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS....5
2.14 PROXIES........................................................6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE..........................6
ARTICLE III DIRECTORS.......................................................7
3.1 POWERS..........................................................7
3.2 NUMBER OF DIRECTORS.............................................7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.........9
3.4 RESIGNATION AND VACANCIES.......................................9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.......................10
3.6 REGULAR MEETINGS...............................................10
3.7 SPECIAL MEETINGS; NOTICE.......................................10
3.8 QUORUM.........................................................11
3.9 WAIVER OF NOTICE...............................................11
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.............11
<PAGE> 3
BY-LAWS OF
COLLAGEN CORPORATION
TABLE OF CONTENTS
(continued)
PAGE
----
3.11 FEES AND COMPENSATION OF DIRECTORS............................11
3.12 APPROVAL OF LOANS TO OFFICERS.................................12
3.13 REMOVAL OF DIRECTORS..........................................12
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS............................12
ARTICLE IV COMMITTEES......................................................12
4.1 COMMITTEES OF DIRECTORS........................................12
4.2 COMMITTEE MINUTES..............................................13
4.3 MEETINGS AND ACTION OF COMMITTEES..............................13
ARTICLE V OFFICERS.........................................................14
5.1 OFFICERS.......................................................14
5.2 APPOINTMENT OF OFFICERS........................................14
5.3 SUBORDINATE OFFICERS...........................................14
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................14
5.5 VACANCIES IN OFFICES...........................................15
5.6 PRESIDENT......................................................15
5.7 VICE PRESIDENTS................................................15
5.8 SECRETARY......................................................15
5.9 CHIEF FINANCIAL OFFICER........................................16
5.10 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................16
5.11 AUTHORITY AND DUTIES OF OFFICERS..............................16
ARTICLE VI INDEMNITY.......................................................17
6.1 THIRD PARTY ACTIONS............................................17
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION..................17
6.3 SUCCESSFUL DEFENSE.............................................18
6.4 DETERMINATION OF CONDUCT.......................................18
6.5 PAYMENT OF EXPENSES IN ADVANCE.................................18
6.6 INDEMNITY NOT EXCLUSIVE........................................18
6.7 INSURANCE INDEMNIFICATION......................................18
6.8 THE CORPORATION................................................19
6.9 EMPLOYEE BENEFIT PLANS.........................................19
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES...19
ARTICLE VII RECORDS AND REPORTS............................................20
7.1 MAINTENANCE AND INSPECTION OF RECORDS..........................20
7.2 INSPECTION BY DIRECTORS........................................20
-ii-
<PAGE> 4
BY-LAWS OF
COLLAGEN CORPORATION
TABLE OF CONTENTS
(continued)
PAGE
----
7.3 ANNUAL STATEMENT TO STOCKHOLDERS...............................20
ARTICLE VIII GENERAL MATTERS...............................................21
8.1 CHECKS.........................................................21
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS...............21
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.........................21
8.4 SPECIAL DESIGNATION ON CERTIFICATES............................22
8.5 LOST CERTIFICATES..............................................22
8.6 CONSTRUCTION; DEFINITIONS......................................22
8.7 DIVIDENDS......................................................23
8.8 FISCAL YEAR....................................................23
8.9 SEAL...........................................................23
8.10 TRANSFER OF STOCK.............................................23
8.11 STOCK TRANSFER AGREEMENTS.....................................23
8.12 REGISTERED STOCKHOLDERS.......................................23
ARTICLE IX AMENDMENTS......................................................24
-iii-
<PAGE> 5
BY-LAWS
OF
COLLAGEN CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent of the votes at that meeting.
<PAGE> 6
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, any
vice president, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 4
and 5 of this Article II, that a meeting will be held at the time requested by
the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 3 shall be construed as limiting, fixing, or affecting
the time when a meeting of stockholders called by action of the board of
directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these by-laws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 60 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person
-2-
<PAGE> 7
whom the stockholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the corporation which are beneficially owned by
such person and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
person's written consent to being named in the proxy statement as a nominee and
to serving as a Director if elected); and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the corporation's books, of
such stockholder and (ii) the class and number of shares of the corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a Director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 2.5. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the By-Laws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the Chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
-3-
<PAGE> 8
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
by-laws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 CONDUCT OF BUSINESS
The Chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.14 of these
by-laws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.11, or as
may be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, each
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been properly placed in
nomination (in accordance with these by-laws) prior to commencement of the
voting and the stockholder requesting cumulative voting has given notice prior
to commencement of the voting of the stockholder's intention to cumulate votes.
If cumulative voting is properly requested, each holder of stock, or of any
class or classes or of a series or series thereof, who elects to cumulate votes
shall be entitled to as many votes as equals the number of votes which (absent
this provision as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected by him, and he may cast all of such votes for
a single director or may distribute them among the number to be voted for, or
for any two or more of them, as he may see fit.
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2.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these by-laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
by-laws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required by this chapter to be taken at any annual or special meeting of
stockholders of the corporation, or any action that may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for
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the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.14 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each
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stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. Such list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these by-laws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of eight persons until changed by
a proper amendment of this Section 3.2.*
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
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* See amendments to this section at end of document.
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3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these by-laws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these by-laws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
by-laws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these by-laws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
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If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice
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need not specify the purpose or the place of the meeting, if the meeting is to
be held at the principal executive office of the corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these by-laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these by-laws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these by-laws, the board of directors shall have the authority to fix the
compensation of directors.
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3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these by-laws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as shareholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire board of
directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS
The corporation may also have, at the discretion of the board of
directors, a chairman of the board of directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting,
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whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the by-laws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the by-laws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these by-laws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting),
with such changes in the context of those by-laws as are necessary to substitute
the committee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee, that special meetings of committees may also be called by
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resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these by-laws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and any such other officers as
may be appointed in accordance with the provisions of Section 5.3 of these
by-laws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
by-laws, shall be appointed by the board of directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these by-laws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance
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of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.6 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, the president shall be the
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction, and control of the
business and the officers of the corporation. He shall preside at all meetings
of the stockholders and, in the absence or nonexistence of a chairman of the
board, at all meetings of the board of directors. He shall have the general
powers and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the board of directors or these by-laws.
5.7 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these
by-laws, the president or the chairman of the board.
5.8 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share
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register, showing the names of all stockholders and their addresses, the number
and classes of shares held by each, the number and date of certificates
evidencing such shares, and the number and date of cancellation of every
certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these by-laws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these by-laws.
5.9 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all his transactions as chief financial officer and of the financial condition
of the corporation, and shall have other powers and perform such other duties as
may be prescribed by the board of directors or the by-laws.
5.10 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
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ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
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6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the Board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any
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<PAGE> 23
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, office, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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<PAGE> 24
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive offices or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these by-laws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
-20-
<PAGE> 25
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these by-laws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or
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<PAGE> 26
back of each stock certificate issued to represent any such partly paid shares,
upon the books and records of the corporation in the case of uncertificated
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated. Upon the declaration of any
dividend on fully paid shares, the corporation shall declare a dividend upon
partly paid shares of the same class, but only upon the basis of the percentage
of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these by-laws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
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<PAGE> 27
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in (i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such
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<PAGE> 28
owner, shall be entitled to hold liable for calls and assessments the person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE IX
AMENDMENTS
The by-laws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
by-laws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal by-laws.
-24-
<PAGE> 29
AMENDMENT TO THE BY-LAWS
OF COLLAGEN CORPORATION
On November 16 and 17, 1990 the Board of Directors of Collagen
Corporation (the "Company") amended the Company's By-laws as follows:
RESOLVED: That the first sentence of Section 3.2 of the By-Laws of
the Company is amended to read as follows:
"The Board of Directors shall consist of nine persons until
changed by a proper amendment of this Section 3.2."
<PAGE> 30
AMENDMENT TO THE BY-LAWS
OF COLLAGEN CORPORATION
On May 10, 1991 the Board of Directors of Collagen Corporation (the
"Company") amended the Company's By-Laws as follows:
RESOLVED: That Article III, Section 3.2 of the By-Laws of the
Company is amended to increase the authorized number of the
Company's directors to ten.
<PAGE> 31
AMENDMENT TO THE BY-LAWS
OF COLLAGEN CORPORATION
On November 12, 1993 the Board of Directors of Collagen Corporation
(the "Company") amended the Company's By-Laws as follows:
RESOLVED: That Article III, Section 3.2 of the By-Laws of the
Company is amended to increase the authorized number of the
Company's directors to eleven.
<PAGE> 32
AMENDMENT TO THE BY-LAWS
OF COLLAGEN CORPORATION
On November 12, 1993, the Board of Directors of Collagen Corporation
(the "Company") amended the Company's By-Laws as follows:
RESOLVED: That the Bylaws of the Company are amended to increase
the size of the Board of Directors to eleven persons.
<PAGE> 33
AMENDMENT TO THE BY-LAWS
OF COLLAGEN CORPORATION
On February 9 and 10, 1995, the Board of Directors of Collagen
Corporation (the "Company") amended the Company's By-Laws as follows:
RESOLVED: That the Bylaws of the Company are amended to increase
the size of the Board of Directors to twelve persons.
<PAGE> 34
AMENDMENT TO THE BYLAWS
OF COLLAGEN CORPORATION
On February 9 and 10, 1995, the Board of Directors of Collagen
Corporation (the "Company") amended the Company's Bylaws as follows:
RESOLVED: That the Bylaws of the Company are amended to increase
the size of the Board of Directors to twelve persons.
<PAGE> 35
AMENDMENT TO THE BYLAWS
OF COLLAGEN CORPORATION
On August 9, 1996, the Board of Directors of Collagen Corporation (the
"Company") amended the Company's Bylaws as follows, effective immediately prior
to the Annual Meeting of Stockholders to be held on October 30, 1996:
RESOLVED: That the Bylaws of the Company are amended to set the
authorized number of directors at nine.
<PAGE> 1
EXHIBIT 10.67(E)
EIGHTH AMENDMENT TO THE
CREDIT AGREEMENT
This EIGHTH AMENDMENT TO THE CREDIT AGREEMENT (this "Amendment") is
dated as of December 31, 1996 and entered into by and among Collagen
Corporation, a Delaware corporation (the "Borrower"), and The Bank of New York
(the "Bank"), and is made with reference to that certain Credit Agreement dated
as of November 15, 1994, by and among the Borrower and the Bank, as amended (the
"Credit Agreement"). Capitalized terms used herein without definition shall have
the same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the Borrower and the Bank desire to amend the certain
financial covenants set forth in the Credit Agreement, and to make certain other
amendments to the Credit Agreement hereinafter set forth; and
WHEREAS, the Bank is willing to agree to the requested amendments,
subject to the terms of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT
1.1. AMENDMENT TO SECTION 1.1 (REVOLVING CREDIT LOANS).
Section 1.1 of the Credit Agreement is hereby amended by adding
thereto the following new subsection (g) at the end thereof:
(g) Margin Loan Collateral. At the Borrower's option, so
long as no Event of Default has occurred and remains uncured hereunder or under
any other Loan Document, a portion of the Eligible Margin Loan Collateral may be
released from the Lien of the Security Agreement upon the Borrower's written
request to the Bank, provided that at the time of such request and after giving
effect thereto (i) the principal amount of the Margin Loans shall not exceed the
Margin Loan Borrowing Base, (ii) the Borrower shall not be in default under
Section 5.21, and (iii) the Bank deems that the Borrower is in compliance with
this Agreement and the other Loan Documents. Such requests shall not be
submitted more frequently than quarterly and shall be accompanied by a
certificate executed by the Borrower's chief financial officer certifying that
no Event of Default has occurred and remains uncured under this Agreement or any
other Loan Document.
<PAGE> 2
SECTION 2. AMENDMENTS TO SECTION 5.14 AND 5.15 OF THE CREDIT
AGREEMENT APPLICABLE THROUGH THE FISCAL QUARTER OF THE
BORROWER ENDING DECEMBER 31, 1996
2.1. AMENDMENT TO SECTION 5.14 (DEBT/OPERATING CASH FLOW
RATIO).
The Bank hereby suspends the applicability of Sections 5.14 of
the Credit Agreement (Debt/Operating Cash Flow Ratio) for the fiscal quarter of
the Borrower ending December 31, 1996.
2.2. AMENDMENT TO SECTION 5.15 (INTEREST COVERAGE RATIO).
The Bank hereby suspends the applicability of Section 5.15 of the
Credit Agreement (Interest Coverage Ratio) for the fiscal quarter of the
Borrower ending December 31, 1996.
2.3. APPLICABILITY OF THE AMENDMENTS TO SECTIONS 5.14 AND
5.15 SET FORTH IN SECTION 1.1 AND 1.2 HEREOF.
The amendments in Sections 1.1 and 1.2 hereof shall be effective
only for the fiscal quarter of the Borrower ending December 31, 1996.
SECTION 3. AMENDMENTS TO SECTION 5.14 AND 5.15 OF THE CREDIT
AGREEMENT APPLICABLE AFTER DECEMBER 31, 1996
3.1. AMENDMENT TO SECTION 5.14 (DEBT/OPERATING CASH FLOW RATIO).
Section 5.14 of the Credit Agreement is hereby deleted in its
entirety and in its place and stead shall appear the following:
Section 5.14. Debt/Operating Cash Flow Ratio
On any Collateral Shortfall Date, permit the Debt/Operating
Cash Flow Ratio to exceed 1.5:1 on such date.
3.2. AMENDMENT TO SECTION 5.15.
Section 5.15 of the Credit Agreement is hereby deleted in its
entirety and in its place and stead shall appear the following:
Section 5.15 Interest Coverage Ratio
On any day on Collateral Shortfall Date, permit the
Interest Coverage Ratio to be less than 3.0:1 on such date.
<PAGE> 3
3.3. APPLICABILITY OF THE AMENDMENTS TO SECTIONS 5.14 AND 5.15
SET FORTH IN SECTION 3.1 AND 3.2 HEREOF.
The amendments in Sections 3.1 and 3.2 hereof shall be effective
at all times after December 31, 1996.
SECTION 4. ADDITIONAL AMENDMENTS TO ARTICLE 5 OF THE CREDIT AGREEMENT
4.1. NEW SECTION 5.21.
Article 5 of the Credit Agreement is hereby amended by adding
thereto the following new Section 5.21:
Section 5.21. Minimum Pledged Target Stock.
Permit the number of shares of Target included in the
Pledged Stock (as such term is defined in the Pledge Agreement)
to be less than 530,000 shares.
4.2. NEW SECTION 5.22.
Article 5 of the Credit Agreement is hereby further amended by
adding thereto the following new Section 5.22:
Section 5.22. Minimum Cash Equivalents.
Permit at any time the Value of the Eligible Cash
Equivalents be less than one-half of the principal amount of the Loans
outstanding at such time.
SECTION 5. AMENDMENTS TO SECTION 9.1(A) (DEFINITIONS)
5.1. AMENDMENT TO SECTION 9.1(A).
Section 9.1(a) of the Credit Agreement is hereby amended by
adding thereto the following new definition:
"Collateral Shortfall Date" means any date on which the sum
of (i) 100% of the Value of Eligible Cash Equivalents, plus (ii)
50% of the Value of Eligible Margin Loan Collateral shall be less
than the total Loans outstanding on such date.
5.2. ADDITIONAL AMENDMENTS TO SECTION 9.1(A).
Section 9.1(a) of the Credit Agreement is hereby further amended
by deleting the definitions of "Collateral Value" and "Eligible Collateral" and
substituting therefor the following new definitions thereof:
<PAGE> 4
"Collateral Value" means the Value of each item of
Eligible Collateral multiplied by the percentage set forth below
for each such item of Eligible Collateral:
Item of
Eligible Collateral Percentage
------------------- ----------
Eligible Cash Equivalents 100%
Eligible Margin Loan Collateral 50%
"Eligible Collateral" means, collectively, and at any
time, all Eligible Cash Equivalents and Eligible Margin Loan
Collateral in which, at such time, the Bank has a perfected
pledge and security interest subject to no Liens other than
Permitted Liens.
SECTION 6. EFFECTIVENESS OF THIS AMENDMENT
This Amendment shall be effective upon the Bank's receipt of a
duly executed counterpart of this Amendment.
SECTION 7. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to the Bank that the following statements are true,
correct and complete:
7.1. CORPORATE POWER AND AUTHORITY. The Borrower has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement.
7.2. AUTHORIZATION OF AGREEMENTS. The execution, delivery and
performance of this Amendment and the performance of the Credit Agreement have
been duly authorized by all necessary corporate action by the Borrower.
7.3. NO CONFLICT. The execution, delivery and performance by
the Borrower of this Amendment and the performance by the Borrower of the Credit
Agreement do not and will not (i) violate any provision of any law, rule or
regulation applicable to the Borrower or any of its Subsidiaries, the
Certificate of Incorporation or Bylaws of the Borrower or any of its
Subsidiaries or any order, judgment or decree of any court or other agency of
the government binding on the Borrower or any of its Subsidiaries, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contract of the Borrower or any of its Subsidiaries,
(iii) result in or require the creation or imposition of any Lien upon any of
their properties or assets, or (iv) require any approval of stockholders or any
approval or consent of any Person under any Contract of the Borrower or any of
its Subsidiaries except for such approvals or consents which have been obtained
on or before the date hereof and disclosed in writing to the Bank.
<PAGE> 5
7.4. GOVERNMENTAL CONSENTS. The execution and delivery by the
Borrower of this Amendment and the performance by the Borrower of the Credit
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any Federal, state or other
governmental authority or regulatory body or other Person.
7.5. BINDING OBLIGATION. This Amendment, when executed and
delivered, will be, and the Credit Agreement is, the legally valid and binding
obligations of the Borrower, enforceable against it in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
7.6. INCORPORATION OR REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Article 4 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof to the same extent as though made on and
as of that date, except to the extent that such representations and warranties
specifically relate to an earlier date, in which case they are true, correct and
complete in all material respects as of such earlier date.
7.7. ABSENCE OF DEFAULT. No event has occurred and is continuing
or will result from the execution of this Amendment which would constitute an
Event of Default or a Potential Event of Default.
SECTION 8. MISCELLANEOUS
8.1. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(a) On and after the date hereof, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import referring in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Credit Agreement as amended by this Amendment.
(b) Except as specifically amended by this Amendment, the
Credit Agreement, Pledge Agreement and the other Loan Documents shall
remain in full force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this
Amendment shall not, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Bank under,
the Credit Agreement, the Pledge Agreement or any of the other Loan
Documents except as may be expressly provided for herein.
8.2. FEES AND EXPENSES. Borrower acknowledges that all costs,
fees and expenses as described in Section 8.2 of the Credit Agreement incurred
by the Bank and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of the Borrower.
<PAGE> 6
8.3. EXECUTION IN COUNTERPART. This Amendment may be executed
in any number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument.
8.4. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
apart of this Amendment for any other purpose or be given any substantive
effect.
8.5. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED
TO BE MADE UNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written by their respective officers
thereunto duly authorized.
COLLAGEN CORPORATION
By: /s/ David Foster
----------------------------
Name: David Foster
--------------------------
Title: Vice President and Chief
Financial Officer
-------------------------
THE BANK OF NEW YORK
By: /s/ Elizabeth Ying
----------------------------
Name: Elizabeth Ying
--------------------------
Title: Vice President
-------------------------
<PAGE> 1
EXHIBIT 10.86
LICENSE, SUPPLY AND INTERNATIONAL DISTRIBUTION AGREEMENT
This License, Supply and International Distribution Agreement (the
"Agreement") is entered into effective as of September 6, 1996 (the "Effective
Date") by and between Collagen Corporation, a Delaware corporation with offices
at 2500 Faber Place, Palo Alto, CA 94303 ("Collagen"), and Cosmederm
Technologies, Inc., a Delaware corporation with offices at La Jolla Corporate
Center, 3252 Holiday Court, La Jolla, CA 92037 ("Cosmederm"). The parties agree:
1.0 Background.
1.1 Collagen is in the business of researching, developing,
manufacturing, and marketing biocompatible products for the treatment of
defective, diseased, traumatized, and aging tissues.
1.2 Cosmederm is in the business of researching, developing and
manufacturing cosmetic and dermatologic products.
1.3 Cosmederm desires Collagen, and Collagen agrees, to market certain
of Cosmederm's proprietary cosmetic and dermatologic products pursuant to the
terms and conditions of this Agreement.
2.0 Definitions.
2.1 "Affiliate" shall mean any entity which controls, is controlled by,
or is under common control with Collagen.
2.2 "Collagen Field" shall mean throughout the Territory the sale of
the Licensed Products for in-office dispensing under the supervision of a
licensed physician, including, but not limited to, dermatologists, plastic
surgeons, general practitioners, and gynecologists and the free distribution of
samples of Licensed Products to medical professionals. For purposes of this
Agreement, the words "sell" and "sale" shall be deemed to include the free
distribution of samples of Licensed Products to medical professionals.
2.3 "Licensed Know How" shall mean any and all unpatented inventions,
data, processes, compositions, techniques, improvements, derivatives,
formulations, and other technical information proprietary to Cosmederm which are
useful and/or necessary to the sale of Licensed Products in existence as of the
Effective Date or created or acquired (including by license to the greatest
extent permitted under the terms of any such license) by Cosmederm during the
term of this Agreement, including any and all methods proprietary to Cosmederm
for the use or, in the event Collagen exercises a right to manufacture under
Section 4.1, manufacture of the Licensed Products.
<PAGE> 2
2.4 "Licensed Patents" shall mean any and all United States and foreign
patents which are granted on the inventions described in:
United States Date filed International Date filed
------------- ---------- ------------- ----------
Application No. Application No.
--------------- ---------------
* * * *
* * * *
* * * *
* * * *
* * * *
* *
* * * *
having claims reading on any Licensed Product or methods for manufacture or use
of any Licensed Product, owned by, or licensed (to the greatest extent permitted
under the terms of any such license) to Cosmederm during the term of this
Agreement, including any continuations, divisions, reissues, re-examinations,
re-registrations, and all foreign counterparts thereof.
2.5 "Licensed Product(s)" shall mean the initial * products identified
in Exhibit A and any and all products developed and sold pursuant to Section 7.
2.6 "Licensed Technology" shall mean Licensed Know How and Licensed
Patents.
2.7 "Mark(s)" shall mean any and all trademarks, trade names, logos,
and slogans which Cosmederm may at any time during the term of this Agreement
own, adopt, use, or register with respect to the Licensed Products, other than
the Cosmederm name and any trademarks, logos or slogans incorporating the
Cosmederm name.
2.8 "Net Sales" shall mean * .
2.9 "Territory" shall mean all of the countries of the world.
3.0 Grants of Rights.
3.1 Cosmederm hereby grants Collagen and Affiliates * license under the
Licensed Technology, to use (but only in performing development pursuant to a
joint development plan as
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agreed pursuant to Section 7 and testing pursuant to the final sentence of
Section 13.1), make and/or have made (but in either case only pursuant to the
second sentence of Section 4.1), and sell the Licensed Products within the
Collagen Field throughout the Territory pursuant to the terms and conditions of
this Agreement. The parties acknowledge that L'Oreal, S.A. may exercise its
option * under the Licensed Technology within the Collagen Field (and other
fields) throughout the Territory to sell products which incorporate the Licensed
Technology; provided, that Cosmederm (i) shall at all times during the effective
term of this Agreement use its best efforts to exclude from such co-exclusive
license any and all formulations developed pursuant to Section 7.0 of this
Agreement, and/or sold by Collagen, Affiliates and sublicensed subdistributors
under this Agreement, expressly including, but not limited to, the Licensed
Products identified on Exhibit A, and (ii) shall not at any time during the
effective term of this Agreement reveal to L'Oreal, S.A. (or to any other third
party licensee) any formulas or other proprietary technical information relating
to any and all formulations developed pursuant to Section 7.0 of this Agreement
and/or the Licensed Products identified on Exhibit A. Collagen further
acknowledges that Cosmederm and any licensees shall be allowed to distribute
free samples of any products (other than any Licensed Product) to medical
professionals. Collagen and Affiliates shall have no right to sublicense, except
Collagen may sublicense the license-to-sell in a particular foreign country to
any subdistributor which is part of Collagen's standard system of distribution
in that country and Collagen may sublicense the license-to-make to contract
manufacturers to make Licensed Products for Collagen as may be allowed by the
second sentence of Section 4.1.
3.2 Cosmederm hereby grants Collagen and Affiliates * license to use
the Marks in making and/or having made (but in either case only pursuant to the
second sentence of Section 4.1) and selling the Licensed Products within the
Collagen Field throughout the Territory pursuant to the terms and conditions of
this Agreement. Cosmederm shall not at any time use, and shall not at any time
license, sell or otherwise transfer rights under the Marks to any third party,
expressly including L'Oreal, S.A., for use in association with the sale of
products which incorporate the Licensed Technology within the Collagen Field
within the Territory. Collagen and Affiliates shall have no right to sublicense,
except Collagen may sublicense with regard to use-in-selling in a particular
foreign country to any subdistributor which is part of Collagen's standard
system of distribution in that country and Collagen may sublicense with regard
to use-in-making to contract manufacturers to make Licensed Products for
Collagen as may be allowed by the second sentence of Section 4.1.
3.3 Cosmederm hereby grants Collagen and Affiliates * fully-paid-up
license to use the COSMEDERM tradename and all intellectual property rights
therein in making and/or having made (but in either case only pursuant to the
second sentence of Section 4.1) and selling the Licensed Products within the
Collagen Field throughout the Territory pursuant to the terms and conditions of
this Agreement. Collagen and Affiliates shall have no right to sublicense,
except Collagen may sublicense with regard to use-in-selling in a particular
foreign country to any subdistributor which is part of Collagen's standard
system of distribution in that country and Collagen may sublicense with regard
to use-in-making to contract manufacturers to make Licensed Products for
Collagen as may be allowed by the second sentence of Section 4.1.
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Collagen acknowledges that Cosmederm and any licensees shall be allowed to
distribute free samples of any products (other than any Licensed Product) to
medical professionals.
3.4 Cosmederm shall not use, and shall not license, sell or otherwise
transfer rights under the COSMEDERM tradename to any third party for use in
association with the sale of the products which incorporate the Licensed
Technology within the Collagen Field within the Territory during the term of
this Agreement. Collagen acknowledges that Cosmederm and any licensees shall be
allowed to distribute free samples of any products (other than any Licensed
Product) to medical professionals.
3.5 Cosmederm represents and warrants to Collagen and Affiliates that
Cosmederm owns the Licensed Technology and has any and all rights necessary to
grant the rights granted to Collagen and Affiliates pursuant to this Agreement.
4.0 Supply.
4.1 Supply. The parties agree that Cosmederm shall manufacture and
supply to Collagen the Licensed Products specified in Exhibit A during the
effective term of this Agreement subject to the transfer price specified in
Section 5.1 (but not subject to the royalty specified in Section 6.1).
Notwithstanding the immediately preceding sentence, in the event that at any
time during the effective term of this Agreement (i) Cosmederm materially fails
to meet its supply obligations under * purchase orders issued by Collagen
pursuant to Section 4.4 within * , or (ii) there is a change in the control of
Cosmederm, thereafter, Collagen shall during the effective term of this
Agreement have the right, but not the obligation, to manufacture, or have
manufactured, any and all Licensed Product(s) subject to the royalty rate
specified in Section 6.1 (but not subject to the transfer price specified in
Section 5.1.) Further, in the event that at any time during the effective term
of this Agreement Cosmederm elects not to supply any Licensed Product(s) to
Collagen, specifically including, but not limited to, the failure to agree upon
terms of Cosmederm's manufacture of Licensed Product(s) under Section 7.2,
thereafter, Collagen shall during the effective term of this Agreement have the
right, but not the obligation, to manufacture, or have manufactured, such
Licensed Product(s) subject to the royalty rate specified in Section 6.1 (but
not subject to the transfer price specified in Section 5.1.)
4.2 Performance Obligations. Cosmederm shall at all times during the
effective term of this Agreement, use Cosmederm's reasonable best efforts to
supply Collagen with Collagen's requirements for each and every Licensed Product
except as Cosmederm may elect under Section 4.1(ii). Collagen shall at all times
during the effective term of this Agreement use its reasonable best efforts to
commercialize and sell each and every Licensed Product.
4.3 Marks. The parties shall mutually agree upon the Marks. Any and all
Licensed Products sold or otherwise distributed pursuant to the terms and
conditions of this Agreement shall be branded exclusively with the Marks, and
shall bear both Cosmederm and Collagen tradenames. The exact usage and placement
of such tradenames shall be mutually agreed by the parties in good faith.
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4.4 Purchase Orders. All purchase orders for Licensed Products shall be
initiated in writing by Collagen and shall include a requested delivery date.
Such purchase orders should be received by Cosmederm at least * prior to such
requested delivery date. The minimum aggregate purchase order size is * and the
minimum purchase order size per SKU is * . All purchase orders shall be
non-cancelable. All purchase orders, to the extent they would result in calendar
quarter deliveries not in excess of * of the amount last forecasted by Collagen
for such period, shall be shipped by the later of (i) * after receipt of such
order, or (ii) by the shipment request date set forth on such purchase order.
Any purchase order, to the extent it would result in calendar quarter deliveries
in excess of * of the amount last forecasted by Collagen for such period and
which is not (as to such excess amount) rejected by Cosmederm within * of
receipt shall be deemed accepted by Cosmederm upon its receipt of such purchase
order, and shall be shipped by the later of (i) * after receipt of such order,
or (ii) by the shipment request date set forth on such purchase order. In any
event, Cosmederm will use its reasonable best efforts to deliver Licensed
Products at the times and in the amounts specified in Collagen's accepted
purchase orders. Cosmederm agrees to promptly inform Collagen of any potential
failure to meet the delivery time specified in a purchase order.
4.5 Forecasts. Commencing with Collagen's first order for Licensed
Products, and at the beginning of each calendar quarter thereafter, Collagen
shall provide Cosmederm rolling written forecasts of Collagen's estimated
requirements of Licensed Products to be delivered for each of the * . Forecasts
provided to Cosmederm by Collagen pursuant to this Section 4.5 shall be prepared
in good faith by Collagen and represent Collagen's reasonable expectation of its
purchase requirements for the forecasted period, but shall be advisory in nature
only and shall not be binding on Collagen. Cosmederm shall be prepared to
deliver at * of Collagen's last forecasted needs for a given calendar quarter.
The "last" forecast refers to the forecast for a quarter delivered * before the
first day of such quarter. Cosmederm and Collagen shall keep each other apprised
in good faith of their respective requirements, projections, production
capability limitations and similar matters.
4.6 Conflicting Terms. In ordering and delivering the Licensed Products
hereunder, Cosmederm and Collagen may use their standard forms, but nothing in
such form shall be construed to amend or modify the terms of this Agreement and,
in the case of conflict herewith, the terms of this Agreement shall control.
4.7 Certificate of Conformity. All Licensed Products delivered by
Cosmederm under this Agreement shall be accompanied by a Certificate of
Conformity issued by Cosmederm warranting that all Licensed Products delivered
under such Certificate of Conformity shall meet the acceptance specifications to
be mutually agreed and called out in Exhibit B, including, but not limited to,
labeling, packaging and product specifications (the "Acceptance
Specifications.") Cosmederm will promptly replace (or, at Cosmederm's sole
option in any particular case, give Collagen credit for such returns at
Collagen's published wholesale prices) any and all Licensed Products returned by
a customer or an enduser within * of purchase and forwarded by Collagen to
Cosmederm within * of such return to the extent any such returns result from the
formulation and/or manufacture by Cosmederm of Licensed Products which do not
meet the Acceptance Specifications.
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4.8 Acceptance. Acceptance by Collagen of Licensed Products delivered
by Cosmederm shall be pursuant to the Certificate of Conformity issued by
Cosmederm pursuant to Section 4.7 and visual inspection by Collagen. Collagen's
failure to send a written rejection notice within * after delivery shall
conclusively be deemed to constitute acceptance. In the event that any shipment,
or part of any shipment, is found upon such visual inspection not to be in
accordance with the Acceptance Specifications, Collagen shall have the right to
reject such shipment, or part of shipment, within * after delivery by Cosmederm;
provided, that such shipment, or part of shipment, has not been used up by
Collagen or shipped to customers. A shipment, or part of a shipment, may be
rejected by Collagen only upon written notice to Cosmederm stating the reason(s)
for rejection. Upon receiving any such notice, Cosmederm shall use its
reasonable best efforts to replace rejected Licensed Products, and to redeliver
to Collagen replacement Licensed Products as soon as possible and in no event
more than * after Cosmederm's receipt of Collagen's written notice of rejection
(or, at Cosmederm's sole option in any particular case, give Collagen credit for
such rejected Licensed Products at Collagen's published wholesale prices).
4.9 Shipment. All shipments will be FOB Collagen's manufacturing
facility in Fremont, California and/or such other place(s) as Collagen shall
direct. Risk of loss will pass to Collagen upon delivery to such facility. ** .
Cosmederm will be responsible for filing any and all freight claims. Collagen
may request a specific carrier and mode of shipment, but Cosmederm may arrange
for an alternative carrier and mode of shipment, provided that Collagen consents
to such alternative carrier and mode of shipment, such consent to not be
unreasonably withheld. Notwithstanding the foregoing, if Collagen's choice of
specific carriers, choice of mode of shipment, choice of ship-to location(s)
outside the continental United States, and/or direction to ship to multiple
locations results in higher freight, insurance and/or other shipping expenses
than using Cosmederm's normal truck delivery to a single location in the
continental United States, then Collagen shall pay the excess.
4.10 Payment. Collagen shall pay Cosmederm the transfer price specified
in Section 5.1 within * after receiving an invoice covering an accepted order.
4.11 Inspection of Manufacturing Facilities and Process. At any time
during the term of this Agreement, Collagen shall have the right to have, at
Collagen's expense, and Cosmederm shall permit, Collagen's authorized
representative(s) to inspect the manufacture of Licensed Products. Cosmederm
agrees at all times to provide Collagen at least * notice in writing prior to
the scheduled date of a manufacturing run of Licensed Products so that Collagen
representative(s) may be present.
5.0 Transfer Prices and Payment of Transfer Prices.
5.1 Transfer prices for any and all Licensed Product(s) initially
specified in Exhibit A which are manufactured by Cosmederm pursuant to the first
sentence of Section 4.1 shall be calculated as * of Collagen's published
wholesale price of such Licensed Product as of the date of delivery by
Cosmederm. Collagen shall promptly notify Cosmederm of all changes in its
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published wholesale prices. The parties shall mutually agree upon the transfer
prices for any additional Licensed Products manufactured by Cosmederm pursuant
to Sections 7.1 and 7.2. Collagen agrees upon Cosmederm's request to discuss in
good faith adjusting the transfer price for the Licensed Product(s) initially
specified in Exhibit A upon Cosmederm's demonstration of convincing evidence of
commercial factors in support of such a proposed adjustment. The parties shall
mutually agree upon the size, quantity, packaging and transfer price, if any,
for sample products.
6.0 Royalty.
6.1 Royalty Rates. In the event that Collagen manufactures or
sublicenses the manufacture of Licensed Product(s) under the second sentence of
Section 4.1, Collagen shall pay to Cosmederm royalties based on the Net Sales of
such Licensed Product(s) and calculated at the rate of (i) * for each and every
such Licensed Product(s) which is a prescription drug, (ii) * for each and every
such Licensed Product(s) which is classified as an OTC drug, but does not
require a physician's prescription, and (iii) * for each and every such Licensed
Product(s) which is a cosmetic product. The parties acknowledge that each of the
initial * Licensed Products specified in Exhibit A are cosmetic products and
shall agree on the characterization of any additional Licensed Products prior to
manufacture.
6.2 Royalty Rate Adjustment. In the event that in any given calendar
year during the effective term of this Agreement, the cumulative Net Sales of
all royalty-bearing Licensed Products sold throughout the Territory which are
cosmetic products exceeds * , the applicable royalty rate for sales of such
royalty-bearing, cosmetic Licensed Products in excess * for the remainder of
such calendar year only shall be * .
6.3 Reports. After the first commercial sale of a Licensed Product
manufactured by or on behalf of Collagen, Collagen shall make quarterly written
reports to Cosmederm within *, stating in reasonably specific detail, on a
country-by-country basis, (i) the number of units of each Licensed Product
directly or indirectly sold by Collagen, Affiliates or sublicensed
subdistributors during the reporting period and the calculation of Net Sales
from such gross sales, (ii) the royalties payable under this Agreement on such
sales of units of each Licensed Product during the reporting period, (iii) the
exchange rates used in converting foreign currencies to United States dollars in
the calculation of such royalties, and (iv) the withholding taxes, if any,
required by law to be deducted from such royalties. With respect to royalties
payable on sales of units of the Licensed Products invoiced in United States
dollars, the gross sales, Net Sales, and royalties payable to Cosmederm shall be
expressed in United States dollars. With respect to royalties payable on sales
of units of the Licensed Products invoiced in a currency other than United
States dollars, the gross sales, Net Sales and amounts payable to Cosmederm
shall be expressed in the domestic currency of the country in which the sale was
together with the United States dollar equivalent of the royalty payable,
calculated using the average of the buying and selling exchange rates quoted by
Bank of America (San Francisco) at the close of business on the last banking day
of the calendar quarter prior to the date of payment.
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6.4 Royalty Payments. Concurrently with the making of each such report,
Collagen shall pay to Cosmederm the royalty payments due under Section 6.1 on
sales of units of the Licensed Products during the quarter covered by such
report. All payments shall be in United States dollars.
6.5 One Royalty. For purposes of this Agreement, each Licensed Product
sold hereunder shall be sold only once in a royalty-generating transaction, and
subsequent sales or transfers of such Licensed Product shall not result in any
additional royalty payment hereunder.
6.6 Taxes. In the event that Collagen is required by law to deduct
withholding taxes from royalty payments which would otherwise be payable to
Cosmederm hereunder, Collagen will promptly provide Cosmederm with all
documentation reasonably required by Cosmederm to obtain a corresponding
reduction in Cosmederm's United States taxes.
6.7 Audits. Collagen shall keep, and cause each Affiliate and each
sublicensed subdistributor to keep, true and accurate books of account and
records in sufficient detail to properly determine the royalties payable to
Cosmederm in connection with the distribution of the Licensed Products. Collagen
shall keep, and cause each Affiliate and each sublicensed subdistributor to
keep, such books and records for at least three (3) years following the end of
the calendar quarter to which they pertain, and shall make available, and cause
each Affiliate and each sublicensed subdistributor to make available, such books
and records for inspection during such three (3) year period by a certified
public accountant retained by Cosmederm for such purpose, solely for the purpose
of verifying Cosmederm's royalty payments hereunder. Such inspections may be
made no more than once in any twelve (12) month period, at reasonable times
mutually agreed upon by the parties after at least five (5) days written notice
to Collagen. The certified public accountant shall execute a confidentiality
agreement reasonably acceptable to Collagen prior to commencing any such
inspection. All such inspections conducted shall be at Cosmederm's expense,
unless an underpayment exceeding * of the amount payable for the period covered
by the inspection is established in the course of any such inspection, whereupon
all costs relating to such inspection shall be paid by Collagen.
7.0 Rights of First Offer.
7.1 Cosmederm shall fully disclose to Collagen (to the greatest extent
that Cosmederm is not contractually prohibited from doing so) in writing any
additional human cosmetic and dermatologic products, including, but not limited
to, acne products, therapeutic emollients and moisturizers, therapeutic
shampoos, skin treatment products and pigment lightening creams which
incorporate the Licensed Technology, Cosmederm contemplates developing with the
Licensed Technology during the effective term of this Agreement. Collagen shall
have * after Collagen's receipt of such disclosure to determine whether or not
Collagen is interested in pursuing such new product
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opportunity within the Collagen Field and to so inform Cosmederm. In the event
that Collagen does not within * inform Cosmederm in writing that Collagen is
interested in pursuing any such proposed product opportunity, then Cosmederm
shall be able to pursue such new product opportunity by itself or with any third
party. If Collagen informs Cosmederm in writing that Collagen is interested in
pursuing such new product opportunity, the parties shall enter into good faith
and exclusive negotiations for up to * regarding the possible terms of an
agreement, including but not limited to the supply and transfer pricing terms,
pursuant to which Cosmederm and Collagen may jointly develop, manufacture,
and/or sell such new product. In the event the parties do not reach such an
agreement within such * , then Cosmederm shall be able to pursue such new
product opportunity with any third party (or by itself), but under terms and
conditions no more favorable than those finally offered to Collagen.
7.2 Collagen shall fully disclose to Cosmederm in writing any
additional cosmetic and dermatologic products for the Collagen Field, including,
but not limited to, acne products, therapeutic emollients and moisturizers,
therapeutic shampoos, skin treatment products and pigment lightening creams,
Collagen desires to develop with the Licensed Technology during the term of this
Agreement. Cosmederm agrees to negotiate with Collagen exclusively and in good
faith regarding the joint development of such product, and to use Cosmederm's
best efforts to conclude an agreement between the parties pursuant to which
Cosmederm and Collagen may jointly develop, Collagen and/or Cosmederm may
manufacture, and Collagen may sell such new product. In the event that Collagen
does manufacture, directly or indirectly, any such additional Licensed
Product(s) independently of Cosmederm, Cosmederm shall cooperate fully and
diligently with Collagen's efforts to manufacture and commercialize such new
product(s). For avoidance of doubt, (i) Collagen shall have the right, but not
the obligation, to manufacture (or have manufactured) any Licensed Product
proposed by Collagen and developed by the parties under this Section 7.2 in the
event that the parties do not agree upon manufacturing terms pursuant to which
Cosmederm would manufacture such Licensed Product, and (ii) Cosmederm shall be
entitled to receive the royalty called for in Section 6.1 on each and every
Licensed Product manufactured and sold by Collagen, Affiliates or sublicensees
under this Agreement. If the parties are unable to mutually agree upon the terms
and conditions of a development agreement, neither party shall develop,
manufacture or sell such product.
8.0 Licensed Product Development
8.1 Cosmederm shall be responsible for * of all research, development,
manufacturing and marketing claims support costs of the Licensed Products
specified in Exhibit A. Collagen is responsible for * of all other marketing,
sales and distribution costs for the Licensed Products specified in Exhibit A,
including, but not limited to, consumer acceptance studies, focus groups, and
test market studies. The parties may mutually agree upon the allocation of costs
related to the joint development of any additional Licensed Product(s) proposed
by either Collagen or Cosmederm pursuant to Sections 7.1 and 7.2.
9.0 Indemnities.
9.1 Collagen's Indemnity. Cosmederm shall defend, indemnify and hold
Collagen harmless against all damages, costs (including reasonable attorneys'
fees) or other liability, actually incurred by Collagen, or assessed against
Collagen by a court, arbitrator or government agency of competent jurisdiction,
arising from any claim, suit or proceeding based on a third party claim of
intellectual property infringement related to the Licensed Technology or product
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liability (to the extent such claim is related to Cosmederm's supplying Licensed
Product(s) not meeting the Acceptance Specifications, and/or if such product
liability arises from or is related to the product design of Licensed Products
designed solely by Cosmederm) brought individually or severally against Collagen
as a result of Collagen's distribution of Licensed Products. Collagen shall
provide Cosmederm with prompt notification of any such claim, suit or
proceeding, and shall provide Cosmederm with reasonable assistance, at
Cosmederm's expense, in connection with the defense or settlement thereof.
Cosmederm shall have sole control of the defense or settlement of any such
claim, suit or proceeding, subject to Collagen's right to step in and assume
control of such defense in the event Cosmederm refuses to conduct such defense.
No settlement shall be binding on Collagen without Collagen's written consent.
However, should Collagen refuse to consent to a settlement arranged by
Cosmederm, then Cosmederm may (but shall not be obligated to) pay Collagen the
indicated settlement amount; if Cosmederm does so, Cosmederm shall thereupon be
relieved of all further responsibility to Collagen under this Section 9.1.
9.2 Cosmederm's Indemnity. Collagen shall defend, indemnify and hold
Cosmederm harmless against all damages, costs (including reasonable attorneys'
fees) or other liability, actually incurred by Cosmederm, or assessed against
Cosmederm by a court arbitrator or government agency of competent jurisdiction,
arising from any claim, suit or proceeding brought individually or severally
against Cosmederm to the extent such claim, suit or proceeding is the result of
Licensed Product(s) manufactured by Collagen (or Collagen's manufacturing
sublicensees) which fail to meet the Acceptance Specifications, and/or arises
from or is related to marketing claims made by Collagen and not approved by
Cosmederm and/or product design of Licensed Products designed solely by
Collagen. Cosmederm shall provide Collagen with prompt notification of any such
claim, suit or proceeding, and shall provide Collagen with reasonable
assistance, at Collagen's expense, in connection with the defense or settlement
thereof. Collagen shall have sole control of the defense or settlement of any
such claim, suit or proceeding, subject to Cosmederm's right to step in and
assume control of such defense in the event Collagen refuses to conduct such
defense. No settlement shall be binding on Cosmederm without Cosmederm's written
consent. However, should Cosmederm refuse to consent to a settlement arranged by
Collagen, then Collagen may (but shall not be obligated to) pay Cosmederm the
indicated settlement amount; if Collagen does so, Collagen shall thereupon be
relieved of all further responsibility to Cosmederm under this Section 9.2.
10.0 Limitation of Liability.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOST
PROFITS OR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES OF SUCH
OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS
AGREEMENT OR THE ACTIVITIES CONTEMPLATED BY THIS AGREEMENT. THESE LIMITATIONS
SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
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11.0 Confidentiality.
11.1 The parties may, from time to time and in connection with the work
contemplated under this Agreement, disclose to each other Confidential
Information. "Confidential Information" shall mean any confidential and
proprietary information, disclosed either in writing or orally, and either
obviously such or identified as such by the disclosing party within thirty (30)
days of such disclosure. Each party shall keep strictly confidential and not use
such Confidential Information except for the purposes set forth in this
Agreement. Confidential Information shall not include information which:
(i) the receiving party can by written records show has already
lawfully come into its possession at the time of disclosure;
(ii) is or later becomes part of the public domain through no
fault of the receiving party;
(iii) is later communicated lawfully to the receiving party by a
third party not bound by confidentiality;
(iv) the receiving party can show by written records is later
developed independently by the receiving party without any use of the disclosing
party's Confidential Information; or
(v) is required by law or regulation to be disclosed; however,
that the party subject to such disclosure requirement provides written notice to
the other party promptly to enable such other party to seek a protective order
or otherwise prevent or limit disclosure of such Confidential Information.
Either party may disclose Confidential Information to any third party
having a valid need to know so long as the disclosing party and such third party
have entered into a written confidentiality agreement, of which the original
disclosing party is a third party beneficiary, containing restrictions on
further disclosure and use no less stringent than the provisions of this Section
11.1.
11.2 Upon expiration or termination of this Agreement, each party shall
promptly deliver to the other party all records, notes and other documents, in
whatever medium (and including all copies) in its possession or control
containing Confidential Information belonging to the other party, except that
each party may retain one copy of Confidential information to be held by its
legal department solely for archival purposes.
12.0 Patent and Trademark Prosecution.
12.1 Cosmederm shall, at its sole expense, prosecute, maintain and
defend the Licensed Technology throughout the Territory and the Marks throughout
the countries specified in Exhibit C. Collagen shall, at its sole election and
expense, prosecute, maintain and defend the Marks
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throughout the remainder of the Territory. Collagen and Cosmederm shall each
provide the other reasonable assistance in any actions necessary for such
prosecution, maintenance and defense. Collagen may, at its sole election and at
Cosmederm's expense (and in Cosmederm's name and for Cosmederm's benefit),
prosecute, maintain and/or defend any Licensed Patents, or Marks in the event
that Cosmederm fails to promptly initiate, and diligently pursue, any
prosecution, maintenance and/or defense of any such Licensed Patents, or Marks
upon Collagen's written request throughout the countries specified in Exhibit C.
Cosmederm shall fully and promptly cooperate with any such prosecution,
maintenance and/or defense by Collagen.
13.0 Regulatory Approvals.
13.1 In the event that the approval or authorization of any regulatory
agency or body is required to permit Collagen to lawfully sell as a cosmetic
product any Licensed Product(s) specified in Exhibit A within the Collagen Field
anywhere within the Territory, Cosmederm shall at its sole expense obtain such
regulatory approval and authorization. Collagen shall fully and diligently
cooperate with all such Cosmederm efforts. Collagen shall at its sole expense be
primarily responsible for performing such tests as may be required for obtaining
regulatory approvals and authorizations for any additional Licensed Product(s),
for bearing all expenses in obtaining such regulatory approvals and
authorizations, and for determining the manner in which such regulatory
approvals and authorizations shall be sought. Cosmederm shall fully and
diligently cooperate with all such Collagen efforts.
14.0 Term and Termination.
14.1 Initial Term. This Agreement shall become effective on the
Effective Date and shall continue in effect for all Licensed Products, unless
terminated in accordance with Sections 14.3, 14.4, 14.5 or 14.6, for an initial
term of * from the date of Cosmederm's first delivery of a commercial lot of any
Licensed Product (the "Initial Term") plus any renewal term(s) as provided in
Section 14.2.
14.2 Renewal Terms. Collagen may at its sole election renew this
Agreement , by giving written notice to Cosmederm at least * before the
expiration of the Initial Term (or any Renewal Term) for another * ("Renewal
Term(s)"), so long as the Net Sales of the Licensed Products sold by Collagen
and Affiliates and sublicensed subdistributors during Year 5 of the Initial
Term, or if applicable, Year 5 of the then-ending Renewal Term, throughout the
Territory equal or exceed * (such amount shall be adjusted to the extent any
deficit is attributable, in whole or in part, to any act or failure to act of
Cosmederm, including, but not limited to, Cosmederm's failure to supply
sufficient quantities of any Licensed Product(s) to Collagen and/or any action
or requirement of the United States Food and Drug Administration or state
regulatory equivalent). In the event that such Net Sales of the Licensed
Products are less than * (or less than any applicable adjusted amount) and
Collagen, at Collagen's sole election, desires to renew this Agreement for a
Renewal Term, Collagen's right to renew shall be subject to Collagen, before or
within * after sending the renewal notice:
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*Confidential treatment requested.
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<PAGE> 13
(i) in the event that Cosmederm is then manufacturing one hundred
percent (100%) of Licensed Products(s) being sold by Collagen, Affiliates and
sublicensed subdistributors, placing a purchase order (for delivery in no less
than * nor more than * for a sufficient total number of units of such Licensed
Product(s) from Cosmederm to equal the deficiency in the Section 14.2 minimum
Net Sales,
(ii) in the event that Collagen is then manufacturing one hundred
percent (100%) of Licensed Products(s) being sold by Collagen, Affiliates and
sublicensed subdistributors, paying Cosmederm an additional payment equal to the
incremental royalty which Cosmederm would have been entitled to if Collagen had
sold sufficient total units of Licensed Product(s) to meet the Section 14.2
minimum Net Sales, or
(iii) in the event that both Cosmederm and Collagen are then
manufacturing Licensed Product(s), Collagen shall, in a proportion equal to the
ratio of the dollar amount of such Licensed Product(s) manufactured by Cosmederm
and Collagen, respectively, place a purchase order according to (i) above and
pay to Cosmederm an additional incremental royalty payment according to (ii)
above which together equal the total dollar amount to which Cosmederm would have
been entitled to if Collagen had met the Section 14.2 minimum Net Sales.
All such purchases and royalty payments shall be deemed made in the
shortfall Year, not the following Year. In the event that and so long as a valid
United States patent is not in effect at any time during Year 5, the Net Sales
performance figure specified in this Section 14.2 shall be reduced by * .
14.3 Default. If either party defaults in the performance of any of its
material obligations hereunder and if such default is not corrected within *
after written notice thereof by the other party, then the nondefaulting party,
at its option, may, in addition to any other remedies it may have, terminate
this Agreement by giving written notice of termination to the defaulting party.
14.4 Insolvency. This Agreement may be terminated by either party, on
notice, (i) upon the institution by the other party of insolvency, receivership
or bankruptcy proceedings or any other proceedings for the settlement of its
debts, (ii) upon the institution of such proceedings against the other party,
which are not dismissed or otherwise resolved in its favor within sixty (60)
days thereafter, (iii) upon the other party's making a general assignment for
the benefit of creditors, or (iv) upon the other party's dissolution or ceasing
to conduct business in the normal course.
14.5 Cosmederm's Right to Buy Collagen Out. Cosmederm may at its sole
election terminate this Agreement at any time after the expiration of the
Initial Term by providing Collagen * prior written notice and paying to Collagen
an amount equal to * of Collagen, Affiliates and sublicensed subdistributors.
14.6 Failure to Meet Minimums. If Collagen, Affiliates and sublicensed
subdistributors fail to sell in any Year at least the minimum Net Sales of all
Licensed Product(s)
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*Confidential treatment requested.
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<PAGE> 14
as set forth in Exhibit D (and so long as such failure is not attributable, in
whole or in part, to any act or failure to act of Cosmederm, including, but not
limited to, Cosmederm's failure to supply sufficient quantities of any Licensed
Product(s) to Collagen and/or any action or requirement of the United States
Food and Drug Administration or state regulatory equivalent), Cosmederm may, at
its sole election, notify Collagen in writing of Cosmederm's intent to terminate
this Agreement. Cosmederm may terminate this Agreement * after such notice
unless Collagen has, at Collagen's sole election, within such * period done one
of the following:
(i) in the event that Cosmederm is then manufacturing one hundred
percent (100%) of Licensed Products(s) being sold by Collagen, Affiliates and
sublicensed subdistributors, place a purchase order (for delivery in no less
than * nor more than * for a sufficient total number of units of such Licensed
Product(s) from Cosmederm to equal the deficiency in the applicable minimum Net
Sales,
(ii) in the event that Collagen is then manufacturing one hundred
percent (100%) of Licensed Products(s) being sold by Collagen, Affiliates and
sublicensed subdistributors, pay to Cosmederm an additional payment equal to the
incremental royalty which Cosmederm would have been entitled to if Collagen had
sold sufficient total units of Licensed Product(s) to meet the applicable
minimum Net Sales, or
(iii) in the event that both Cosmederm and Collagen are then
manufacturing Licensed Product(s), Collagen shall, in a proportion equal to the
ratio of the dollar amount of such Licensed Product(s) manufactured by Cosmederm
and Collagen, respectively, place a purchase order according to (i) above and
pay to Cosmederm an additional incremental royalty payment according to (ii)
above which together equal the total dollar amount to which Cosmederm would have
been entitled to if Collagen had met the applicable minimum Net Sales.
All such purchases and royalty payments shall be deemed made in the
shortfall Year, not the following Year.
14.7 Marks. The parties each acknowledge that neither party shall be
entitled to make any use of the Marks after the termination or expiration of
this Agreement.
14.8 Survival. Sections 6.3, 6.4, 6.7, 9, 10, 11 and 14.7 shall survive
any termination or expiration of this Agreement
15.0 Miscellaneous Provisions
15.1 Governing Law. This Agreement shall be construed in accordance
with the laws of California without reference to its conflict of laws
principles.
15.2 Further Acts and Instruments. Each party agrees to execute,
acknowledge and deliver such further instruments and to do all such other acts
as may be necessary or appropriate to carry out the purpose and intent of this
Agreement.
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*Confidential treatment requested.
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<PAGE> 15
15.3 Assignment. Neither this Agreement nor any interest hereunder
shall be assignable by either party by operation of law or otherwise without the
prior written consent or agreement of the other (which consent shall not be
unreasonably withheld), except in connection with a sale or transfer of all or
substantially all of its business unit to which this Agreement relates. It is
agreed that, for this purpose, the smallest applicable Collagen business unit is
the Aesthetics Technologies division, or its successor. This Agreement shall
inure to the benefit of and shall be binding upon the parties and their
successors and permitted assigns, and the name of a party appearing herein shall
be deemed to include the names of such party's successors and permitted assigns
to the extent necessary to carry out the intent of this Agreement.
15.4 Notices. Any notice required by this Agreement shall be deemed to
have been fully given when sent by facsimile with a copy sent by express
courier, addressed in the case of Collagen to:
Collagen Corporation
2500 Faber Place
Palo Alto, California 94303
Attention: President
Facsimile: (415) 354-4752
or in the case of Cosmederm to:
Cosmederm Technologies, Inc.
La Jolla Corporate Center
3252 Holiday Court
La Jolla, CA 92037
Attention: Chief Executive Officer
Facsimile: (619) 550-7075
or at such other addresses as may be given from time to time in accordance with
the terms of this notice provision.
15.5 Entire Agreement; Amendments. This Agreement constitutes the
entire and only agreement between the parties relating to the subject matter
hereof, and all prior and contemporaneous negotiations, representations, and
understandings, except the Mutual Disclosure of Confidential Information
Agreement dated April 12, 1996, are superseded hereby. No agreements altering or
supplementing the terms hereof may be made except by means of a written document
signed by the duly authorized representatives of the parties.
15.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE> 16
15.7 Independent Contractors. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the parties. All activities by the parties
hereunder shall be performed by them as independent contractors. No party shall
incur any debts or make any commitments for or on behalf of the other party,
unless specifically authorized in writing by an officer of the other party.
15.8 No Waiver for Failure to Enforce Compliance. Failure of any party
to insist upon strict observance of or compliance with any of the terms of this
Agreement in one or more instances shall not be deemed to be a waiver of its
rights to insist upon observance of or compliance with such term thereafter, or
with any of the other terms of this Agreement.
15.9 Force Majeure. No failure or omission of a party hereunder in the
performance of any obligation according to this Agreement shall be deemed a
breach of the Agreement or create any liability if the same shall arise from any
cause or causes beyond the control of, and not resulting from the negligence of,
such party, including, but not limited to, acts of God; acts or omissions of any
government; any rule, regulation or order issued by any governmental authority
or by any officer, department, agency or instrument thereof; fire; storm; flood;
natural phenomenon; earthquake; accident; war; rebellion; insurrection; riot;
invasion; strike; lockout; or other kind of force majeure. Each party agrees to
notify the other promptly of any circumstance delaying its performance hereunder
and to resume performance as soon thereafter as is reasonably practicable.
15.10 Press Release. Upon execution of this Agreement, the parties
shall make a public announcement regarding the collaboration herein by issuing
an agreed press release. Thereafter, neither party shall without the other's
consent (such consent not to be unreasonably withheld) make any public release
using the other party's name or referring to the other party, except that
consent shall not be required for uses or references in product marketing
materials or where such uses or references are affirmatively required by law.
The undersigned are duly authorized to execute this Agreement on behalf
of Cosmederm and Collagen effective as of the date first above written.
COLLAGEN CORPORATION COSMEDERM TECHNOLOGIES, INC.
BY: /s/ Howard D. Palefsky BY: /s/ Anne Crossway, Ph.D.
---------------------------- ------------------------------
PRINT NAME: Howard D. Palefsky PRINT NAME: Anne Crossway, Ph.D.
-------------------- ----------------------
TITLE: Chief Executive Officer TITLE: Chief Executive Officer
----------------------- -------------------------
- 16 -
<PAGE> 17
EXHIBIT A
LICENSED PRODUCTS
1. One mutually agreed formulation of a facial treatment lotion with 15%
lactic acid and with CT-746.
2. One mutually agreed formulation of a facial treatment hydrogel with 15%
lactic acid and with CT-746.
3. One mutually agreed formulation of a facial treatment cream with 15% lactic
acid and with CT-746.
4. One mutually agreed formulation of a facial treatment cleanser with 0.1%
lactic acid and with CT-746.
5. One mutually agreed formulation of a facial treatment toner with 0.5%
lactic acid and with CT-746.
<PAGE> 18
EXHIBIT B
ACCEPTANCE SPECIFICATIONS
[TO BE MUTUALLY AGREED.]
<PAGE> 19
EXHIBIT C
COUNTRIES IN WHICH COSMEDERM SHALL PROSECUTE, MAINTAIN AND DEFEND THE MARKS
*
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*Confidential treatment requested.
<PAGE> 20
EXHIBIT D
PERFORMANCE MINIMUMS
For purposes of this Exhibit D, a "Year" of distribution of Licensed
Products shall commence on the date of Cosmederm's first delivery of a
commercial lot of any Licensed Product, or an anniversary of such date.
Year 1 - Net Sales of *
Year 2 - Net Sales of *
Year 3 - Net Sales of *
Year 4 - Net Sales of *
Year 5 -- Net Sales of *
* Year 6 and thereafter - Net Sales equal to *
In the event that and so long as a valid United States patent is not in effect
at any time during Year 3 or thereafter, the performance minimums specified
above shall be reduced by *.
* Assumes a Renewal Term is in effect.
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*Confidential treatment requested.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000021686
<NAME> COLLAGEN CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 16,052
<SECURITIES> 0
<RECEIVABLES> 10,314
<ALLOWANCES> 0
<INVENTORY> 11,826
<CURRENT-ASSETS> 53,935
<PP&E> 15,900
<DEPRECIATION> 0
<TOTAL-ASSETS> 151,555
<CURRENT-LIABILITIES> 25,216
<BONDS> 0
0
0
<COMMON> 107
<OTHER-SE> 98,074
<TOTAL-LIABILITY-AND-EQUITY> 151,555
<SALES> 35,842
<TOTAL-REVENUES> 35,842
<CGS> 10,466
<TOTAL-COSTS> 10,466
<OTHER-EXPENSES> 28,014
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 6,416
<INCOME-TAX> 3,400
<INCOME-CONTINUING> 3,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,318
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
