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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 March 31, 1998
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.
1850 Embarcadero Road, Palo Alto, California 94303
Telephone: (650) 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 April 30, 1998, Registrant had outstanding 8,959,631 shares of common
stock, exclusive of 1,972,900 shares held by the Registrant as treasury stock.
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COLLAGEN CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
- ------------------------------ --------
<S> <C>
Consolidated Balance Sheets -
March 31, 1998 and June 30, 1997 3
Consolidated Statements of Operations -
Three and nine months ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-19
PART II. Other Information
Other Information 20-21
Signatures 22
</TABLE>
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COLLAGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997*
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,755 $ 18,481
Short-term investments 2,542 5,117
Accounts receivable, net 11,515 10,759
Inventories, net 13,612 14,293
Other current assets, net 8,002 9,314
--------- ---------
Total current assets 51,426 57,964
Property and equipment, net 15,418 15,260
Intangible assets and goodwill, net 12,576 14,764
Investment in Boston Scientific Corporation 75,455 83,874
Other investments and assets, net 14,999 13,049
--------- ---------
$ 169,874 $ 184,911
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,205 $ 2,638
Other accrued liabilities 13,850 13,638
Income taxes payable 9,883 9,376
Notes payable -- 70
--------- ---------
Total current liabilities 25,938 25,722
Long-term liabilities:
Deferred income taxes 32,293 35,448
Other long-term liabilities 1,703 3,795
--------- ---------
Total long-term liabilities 33,996 39,243
Commitments and contingencies
Minority interest 8 49
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: 10,924,127 shares at March 31, 1998 (10,756,935
shares at June 30, 1997), outstanding: 8,951,227 shares at
March 31, 1998 (8,809,035 shares at June 30, 1997) 110 108
Additional paid-in capital 68,900 67,204
Retained earnings 41,637 47,999
Cumulative translation adjustment (2,314) (1,717)
Unrealized gain on available-for-sale investments 42,806 47,069
Treasury stock, 1,972,900 shares at March 31, 1998
(1,947,900 shares at June 30, 1997) (41,207) (40,766)
--------- ---------
Total stockholders' equity 109,932 119,897
--------- ---------
$ 169,874 $ 184,911
========= =========
</TABLE>
* Amounts derived from audited financial statements at the date indicated.
(See notes to condensed consolidated financial statements)
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COLLAGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product Sales $ 20,114 $ 16,527 $ 63,067 $ 52,369
Costs and expenses:
Cost of sales 6,885 4,461 20,922 14,927
Selling, general and administrative 11,166 10,963 32,720 30,291
Officer separation cost -- 2,006 -- 2,006
Research and development 6,416 4,558 17,910 13,244
Acquired in-process research and development -- -- 10,530 --
-------- -------- -------- --------
Total operating costs and expenses 24,467 21,988 82,082 60,468
-------- -------- -------- --------
Loss from operations (4,353) (5,461) (19,015) (8,099)
Other income (expense):
Net gain on investments, principally Boston Scientific
Corporation (Target Therapeutics, Inc. in fiscal 1997) 4,964 -- 13,739 9,222
Equity in losses of affiliates, net (83) (133) (232) (730)
Interest income 164 238 702 897
Interest expense (15) (120) (50) (351)
-------- -------- -------- --------
Income (loss) before income taxes and minority interest 677 (5,476) (4,856) 939
Provision (benefit) for income taxes (250) (1,726) 651 1,674
Minority interest (11) (189) (38) (491)
-------- -------- -------- --------
Net income (loss) $ 938 $ (3,561) $ (5,469) $ (244)
======== ======== ======== ========
Net income (loss) per share-Basic $ .10 $ (.41) $ (.61) $ (.03)
======== ======== ======== ========
Net income (loss) per share-Diluted $ .10 $ (.41) $ (.61) $ (.03)
======== ======== ======== ========
Shares used in calculating net income (loss) per share-Basic 8,989 8,764 8,901 8,806
======== ======== ======== ========
Shares used in calculating net income (loss) per share-Diluted 9,071 8,764 8,901 8,806
======== ======== ======== ========
Cash dividends declared per share $ -- $ -- $ 0.10 $ 0.10
======== ======== ======== ========
</TABLE>
(See notes to condensed consolidated financial statements)
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COLLAGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-----------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,469) $ (244)
Adjustments to reconcile net loss to net cash used
in operating activities:
Acquired in-process research and development 10,530 --
Depreciation and amortization 4,946 4,524
Equity in losses of affiliates 232 730
Gain on investments, net of taxes paid of $0 and
$5.2 million in fiscal 1998 and 1997, respectively (13,739) (4,051)
Other adjustments related to changes in assets and
liabilities 364 (5,461)
-------- -------
Net cash used in operating activities (3,136) (4,502)
-------- -------
Cash flows from investing activities:
Proceeds from sale of Boston Scientific Corporation stock
(Target Therapeutics, Inc. in fiscal 1997), net of
taxes paid 14,716 5,578
Proceeds from sale of other affiliate stock 704 --
Proceeds from sales and maturities of short-term
investments 7,898 4,675
Purchases of short-term investments (5,324) (6,968)
Expenditures for property and equipment (3,382) (3,901)
Increase in intangible and other assets -- (36)
Expenditures for investments in and loans to affiliates,
net of repayments (1,125) (1,891)
Acquisition of shares of Cohesion Corporation (10,530) --
-------- -------
Net cash provided by (used in) investing activities 2,957 (2,543)
-------- -------
Cash flows from financing activities:
Repurchase of common stock (441) (2,547)
Net proceeds from issuance of common stock 1,698 1,734
Cash dividends paid (1,773) (1,754)
Proceeds from (repayment of) bank loans (2,031) 465
-------- -------
Net cash used in financing activities (2,547) (2,102)
-------- -------
Net decrease in cash and cash equivalents (2,726) (9,147)
Cash and cash equivalents at beginning of period 18,481 21,676
-------- -------
Cash and cash equivalents at end of period $ 15,755 $12,529
======== =======
(See notes to condensed consolidated financial statements)
</TABLE>
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COLLAGEN CORPORATION
NOTES TO CONDENSED 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
a 20% interest with either no readily determinable fair value or with
transfer restrictions are carried at cost or estimated realizable value,
if less, and those unrestricted investments with a readily determinable
fair value are carried at market value with the unrealized gains or
losses, net of tax, recorded as a component of stockholders' equity.
The consolidated balance sheet as of March 31, 1998, the consolidated
statements of operations for the three and nine months ended March 31,
1998 and 1997, and the condensed consolidated statements of cash flows for
the nine months ended March 31, 1998 and 1997, have been prepared by the
Company and are unaudited. 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 March 31, 1998 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, 1997 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 condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1997, the
Company's 1998 Proxy Statement for Special Meeting of Stockholders, and
the Cohesion Technologies, Inc. ("Cohesion Technologies") Registration
Statement on Form 10.
New Accounting Standards & Required Disclosures
Reporting Comprehensive Income and Disclosures About Segments of an
Enterprise and Related Information. In June 1997, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income," and Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures About Segments of
an Enterprise and Related Information," which will be required to be
adopted by the Company in fiscal 1999. Adoption of these statements is not
expected to have a significant
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impact on the Company's consolidated financial position, results of
operations or cash flows.
2. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------- -------
<S> <C> <C>
Raw materials $ 1,630 $ 938
Work-in-process 3,340 7,188
Finished goods 8,642 6,167
------- -------
$13,612 $14,293
======= =======
</TABLE>
3. Investment in Boston Scientific Corporation
The Company accounts for its investment in Boston Scientific Corporation
("Boston Scientific") as an available-for-sale equity security, which
accordingly is carried at market value. During the three and nine months
ended March 31, 1998, the Company sold 90,000 shares and 247,340 shares,
respectively, of Boston Scientific common stock for a pre-tax gain of
approximately $5.0 million and $13.7 million, respectively. Boston
Scientific common stock is quoted on the New York Stock Exchange under the
symbol BSX. The closing price of Boston Scientific common stock at March
31, 1998 was $67.50 per share. At March 31, 1998, the Company held
1,117,860 shares of Boston Scientific common stock and all holding
restrictions resulting from the acquisition of Target Therapeutics, Inc.
by Boston Scientific that were applicable at June 30, 1997, have expired.
Pursuant to a hedging strategy implemented by the Company in August 1997,
approximately 58% of the Company's position in Boston Scientific is
hedged, utilizing the purchase of puts and calls in combination to
minimize the downside risk of loss should the price of Boston Scientific
stock decline while allowing for limited upside participation should the
stock price rise. The call option is collateralized by shares of Boston
Scientific common stock held by the Company.
At March 31, 1998 and June 30, 1997, the Company's shares of Boston
Scientific common stock were recorded at $75.5 and $83.9 million,
respectively. The $70.7 million unrealized gain ($75.5 million estimated
fair value less $4.8 million cost) at March 31, 1998 and the $78.0 million
unrealized gain ($83.9 million estimated fair value less $5.9 million
cost) at June 30, 1997, on these available-for-sale securities has been
reported as a separate component of stockholders' equity, net of tax.
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. At March 31, 1998,
restrictions were no
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longer applicable on 295,000 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 as an
available-for-sale investment at market value, or $3.0 million, reflecting
an unrealized gain of $1.5 million, which has been included in a separate
component of stockholders' equity, net of tax. The remaining 549,000
restricted shares of common stock continue to be valued at cost.
During the three and nine months ended March 31, 1998, 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 under the symbol
IDEA. The closing price of Innovasive Devices common stock at March 31,
1998, was $10.00 per share. At March 31, 1998, the Company held
approximately a 9% ownership position in Innovasive Devices.
5. Acquisitions
The Company increased its ownership position in Cohesion Corporation (of
Palo Alto, California) from approximately 81% to approximately 99% in
December 1997. Cohesion Corporation is a privately-held company that is
focused on developing and commercializing proprietary surgical products,
including bioresorbable hemostatic devices and biosealants for tissue
repair and regeneration, to increase the effectiveness of and minimize
complications following open and minimally invasive surgeries. In
connection with the Company's purchase of substantially all the remaining
outstanding shares of Cohesion Corporation, $10.5 million of the purchase
price (which includes compensatory amounts pertaining to the purchase of
vested employee stock options) was allocated to in-process research and
development, and was expensed at the time of the investment. The Company
determined the amounts to be allocated to in-process technology for
Cohesion Corporation based on initial studies of whether technological
feasibility had been achieved and whether there was any alternative future
use for the technology. Such studies are still preliminary and are subject
to revision. The Company believes that the in-process technology has
no alternative future use after taking into consideration the potential
for both usage of the technology in different products and for resale of
the technology. At March 31, 1998, there were additional unvested options
outstanding providing for the purchase of the remaining shares of Cohesion
Corporation common stock.
Following the Spinoff and approval by Cohesion Technologies, Inc.
(Cohesion Technologies) Board of Directors, Cohesion Technologies
anticipates offering to exchange or substitute the outstanding options of
Cohesion Corporation for options to acquire approximately 620,000 shares
of the common stock of Cohesion Technologies. The new options are expected
to have an exercise price substantially less than the fair market value of
Cohesion's shares at the time of such exchange, based on an assumed ration
of 1.67 to 1 as anticipated and to be determined by the Board of
Directors. Assuming such offers are accepted by the Cohesion Corporation
option holders and assuming an expected fair value of $10.00 per share at
the date of the exchange, Cohesion Technologies expects to record a
non-cash compensation expense of approximately $1.5 million at the date of
the exchange in connection with vested options and an additional $4.5
million of deferred compensation to be amortized during the next three
fiscal years.
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6. Income Taxes
The provision for income taxes for the nine months ended March 31, 1998,
and 1997 was computed by applying the estimated annual income tax rate to
income before income taxes excluding the impact of the acquired in-process
R&D charge. The estimated annual income tax rate considers non-deductible
items such as goodwill amortization and excludes losses from certain
foreign subsidiaries.
7. Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128"), which was adopted on December 31, 1997. The Company was
required to change the method previously used to compute earnings per
share and to restate all prior periods. The adoption of SFAS 128 resulted
in no significant impact for the three and nine month periods ended March
31, 1998 and 1997 with respect to basic and diluted earnings per share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements, the accuracy of which is necessarily
subject to risks and uncertainties. These risks include among others, the timing
of product introductions, receipt of regulatory approvals, clinical efficacy of
and market demand for products, product development cycles, results of clinical
studies, development and rate growth of new markets, potential unfavorable
publicity regarding Collagen and/or Cohesion Technologies, Inc. ("Cohesion
Technologies") or their respective products, possible reversal of sales trends
and receipt of an IRS ruling that the proposed spin-off of Cohesion Technologies
(see "Separation of Aesthetics Technologies Group and Cohesion Technologies,
Inc." below), will not result in recognition of taxable income or loss by
Collagen or its stockholders for U.S. federal income tax purposes, among other
matters discussed in this report. Actual results are subject to risks and
uncertainties and actual events and results may differ significantly from the
discussion of such matters in the forward-looking statements. Such differences
may be based upon factors within Collagen Corporation's and Cohesion
Technologies' control, such as strategic planning decisions by management and
reallocation of internal resources, or on factors outside of Collagen
Corporation's and Cohesion Technologies' control, such as scientific advances by
third parties, introduction of competitive products and delays by regulatory and
tax authorities, as well as those factors under the heading "Factors That May
Affect Future Results of Operations" set forth below, those in Collagen's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997, and those in
Collagen's 1998 Proxy Statement for Special Meeting of Stockholders, and those
factors set forth under the heading "Risk Factors" in the Cohesion Technologies
Registration Statement on Form 10.
The Company
Collagen Corporation (the "Company") designs, develops, manufactures and markets
on a worldwide basis biomedical devices for the treatment of defective,
diseased, traumatized or aging human tissues. The Company's core products are
used principally in aesthetic and reconstructive applications, the treatment of
stress urinary incontinence, and bone repair. The Company markets its aesthetic
and reconstructive 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 continues to have a 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.
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Separation of Aesthetic Technologies Group and Cohesion Technologies Inc.
In October 1997, the Company announced that it had determined to proceed to
separate its Aesthetic Technologies Group and its Collagen Technologies Group
into two independent, publicly-traded companies. In December 1997, the Company
purchased substantially all of the remaining outstanding shares of Cohesion
Corporation and integrated Cohesion Corporation into the Company's Collagen
Technologies Group. The Collagen Technologies Group is expected to be spun off
as a separate company, named Cohesion Technologies, Inc., to Collagen
Corporation stockholders via a tax-free distribution by the second half of
calendar year 1998. In April 1998, a Form 10 Registration Statement and a Proxy
Statement pertaining to the planned spin-off of Cohesion Technologies to
Collagen Corporation stockholders were filed with the Securities and Exchange
Commission. The separation is subject to a number of conditions, including,
without limitation, receipt of a ruling from the Internal Revenue Service
("IRS") that the transaction will be tax-free to the Company and its
stockholders. The Company is currently awaiting a determination by the IRS. The
actual timing of the distribution, if any, will depend upon tax, legal, and
other considerations.
Search for Buyer of LipoMatrix, Inc.
In April 1998, the Company announced its plans to pursue a divestiture of its
LipoMatrix, Incorporated subsidiary ("LipoMatrix"), manufacturer of the
Trilucent(R) breast implant, thereby allowing the Company's aesthetic operations
to dedicate further resources to its core business which includes products for
soft tissue reconstruction and augmentation, skin care and stress urinary
incontinence. The Company believes there is potential value in the Trilucent
implant technology; however, the on-going expenses associated with the
Trilucent(R) implant are significant, especially with the prospect of U.S.
marketing clearance at least three to five years away. For the three and nine
months ended March 31, 1998, the Trilucent breast implant business contributed
net pre-tax losses of $0.9 million and $3.8 million, respectively. While the
Company pursues this divestiture, all Trilucent implant-related operations and
service to the Company's physician customers will continue as usual. The timing
of the divestiture of the LipoMatrix business is dependent upon identifying
interested parties in the medical device industry business.
Results of Operations
The following table shows for the periods indicated the percentage relationship
to product sales of certain items in the Consolidated Statements of Operations.
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PERCENT OF PRODUCT SALES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product sales 100% 100% 100% 100%
Costs and expenses:
Cost of sales 34% 27% 33% 29%
Selling, general and administrative 56% 66% 52% 58%
Officer separation cost -- 12% -- 4%
Research and development 32% 28% 28% 25%
Acquired in-process research and
development -- -- 17% --
</TABLE>
Product sales. Product sales of $20.1 million in the three months ended March
31, 1998, increased approximately $3.6 million or 22%, compared to product sales
of $16.5 million for the same prior-year period. Product sales of $63.1 million
in the nine months ended March 31, 1998, increased approximately $10.7 million
or 20%, compared to product sales of $52.4 million for the same prior-year
period. The increase in sales for the three months ended March 31, 1998,
compared with the same period in the prior year, primarily was due to the
increase in revenue from direct sales of Contigen(R) Bard collagen implant
("Contigen implant") to physician customers by C.R. Bard Inc. ("Bard"), the
Company's marketing partner for Contigen implant, and United States sales of
plastic surgery and dermatological products. The increase in United States sales
of plastic surgery and dermatological products primarily was due to the
introduction of SoftForm(R) facial implant ("SoftForm implant") and an increase
in sales of injectable collagen products. The increase in sales for the nine
months ended March 31, 1998, compared with the same period in the prior year
primarily was due to the increase in revenue from direct sales of Contigen
implant to physician customers by Bard, increase in United States sales of
SoftForm, increase in sales of Hylaform gel in certain European countries and an
increase in sales in Europe of Trilucent(TM) breast implant ("Trilucent
implant"), a triglyceride-filled breast implant. (See "Operating income/loss "
below.)
Worldwide sales of plastic surgery and dermatological products for the three and
nine months ended March 31, 1998 were $15.1 million and $48.6 million,
respectively, up 10% and 9%, respectively from sales of $13.7 million and $44.7
million for the same periods in the prior year. Worldwide unit sales of plastic
surgery and dermatological products for the three and nine months ended March
31, 1998 increased approximately 7% and 9%, respectively, over the same periods
in the prior year. The increases in both worldwide sales and units for the three
and nine month periods primarily were due to the introduction of SoftForm
implant in the United States and strong collagen injectable sales in the United
States, partially offset by lower sales of collagen injectable products by
international subsidiaries. In addition, the increase for the nine month period
was also due to an increase in sales in Europe of Trilucent implant. The Company
believes the increase in injectable collagen sales in the United States in the
three and nine months ended March 31, 1998, was a result of the continuation of
United States marketing programs designed to increase average treatment volume
per patient and to attract and retain new and existing patients, the
implementation of a new sales incentive program for its sales force, and contact
made with physicians not previously purchasing collagen-injectable products as a
result of the introduction of SoftForm implant. The Company anticipates
continued dollar growth in worldwide product sales of plastic surgery and
dermatological products during fiscal 1998. The Company announced previously its
plan to restructure manufacturing of the Trilucent implant to achieve
manufacturing efficiencies. This plan involves relocating shell manufacturing to
a third party and moving the filling process to its facilities in Fremont,
California. To implement this plan, the Company entered into an agreement in
December 1997 with Laboratoire Perouse Implant ("LPI") in France to manufacture
the Trilucent implant shell. The Company is electing to shift a portion of its
selling and marketing efforts away from this product during the transition to
LPI in an effort to avoid a short supply situation. As a result, the Company
does not anticipate
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growth in Trilucent implant sales in fiscal year 1998 over fiscal year 1997.
Additionally, the Company announced during the three months ended March 31,
1998, its plan to pursue a divestiture of LipoMatrix to dedicate further
resources to its core business. While the Company pursues divestiture, all
Trilucent implant-related operations and service will continue as usual.
During the three and nine months ended March 31, 1998, pursuant to the Company's
sales agreement with Bard, the Company recorded revenue of $2.1 million and $5.6
million, respectively, from Bard based on Bard's direct sales of Contigen
implant to physician customers compared to revenue of $2.0 million and $5.3
million, respectively, in the same periods in the prior year. In addition, the
Company recorded $2.7 million and $7.4 million, respectively, of revenue from
shipments of Contigen implant to Bard in the three and nine months ended March
31, 1998 and minimal revenue for the same period in the prior year due to
an excess inventory situation at Bard. The Company expects that revenues from
Contigen implant sales in fiscal 1998 will increase as a result of the
resumption of shipments of Contigen implant to Bard.
For the three and nine months ended March 31, 1998, 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 $136,000 and $1.1 million, respectively, compared to $597,000 and
$1.6 million in the same periods in the prior year. The Company expects sales of
Collagraft bone graft products in fiscal 1998 to be at levels slightly lower
than those of fiscal 1997 due to anticipated lower sales of Collagraft by
Zimmer.
A number of uncertainties exist surrounding the marketing and distribution of
Contigen implant 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 implant 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.
Cost of sales. Cost of sales as a percentage of product sales was 34% and 33%
for the three and nine months ended March 31, 1998, compared with 27% and 29%
for the same prior-year periods. The higher cost of sales as a percentage of
product sales in the three and nine months ended March 31, 1998, primarily was
due to the introduction of product line extensions from third parties, Hylaform
gel and SoftForm implant, and increased direct sales of Contigen implant to
physician customers by Bard. Both Hylaform gel and SoftForm implant are
manufactured by third parties and Contigen implant is distributed by a third
party and as a result, these products have higher costs per unit. Due to the
high fixed costs of the Company's Fremont, California manufacturing facility,
the unit cost of manufacturing is expected to remain highly dependent on the
level of output at the Company's manufacturing facility, which is affected by
incremental production of collagen-based injectable products. The Company
anticipates that cost of sales as a percentage of sales will decrease slightly
over the next several quarters due to anticipated lower cost per unit for
collagen injectable products.
13
<PAGE> 14
SG&A. Selling, general, and administrative ("SG&A") expenses were $11.2 million
for the three months ended March 31, 1998, an increase of 2% over $11.0 million
for the same prior-year period. SG&A expenses were $32.7 million for the nine
months ended March 31, 1998, an increase of approximately $2.4 million or 8%
compared to SG&A expenses of $30.3 million for the same prior-year period. SG&A
expenses as a percentage of product sales were 56% and 52% for the three and
nine months ended March 31, 1998, compared to 66% and 58% for the same
prior-year periods. The increase in SG&A expenses, in absolute dollars, in the
three and nine months ended March 31, 1998, primarily resulted from expenses
related to the separation of the Aesthetic Technologies Group and Cohesion
Technologies Inc., marketing costs related to the SoftForm implant and Hylaform
gel and consulting fees related to tax strategic planning, which more than
offset the expenses incurred in fiscal 1997 to prepare for trial in the
Company's trade secrets lawsuit against Matrix Pharmaceuticals. The Company
expects SG&A expenses in fiscal 1998 as a percentage of product sales to be at
levels lower than those of fiscal 1997.
Officer separation cost. The officer separation cost of $2.0 million in the
three and nine months ended March 31, 1997, 12% and 4% of product sales,
respectively, was a charge related to Howard Palefsky's separation package in
connection with Mr. Palefsky's resignation as the Company's Chief Executive
Officer. These costs include payments made to the former officer and costs
associated with a loan to Mr. Palefsky. Mr. Palefsky will continue to serve as
a consultant to the Company. In addition, by agreement, the Company expects to
continue to make payments to Mr. Palefsky during fiscal 1998 and 1999.
R&D. Research and development ("R&D") expenses, which include expenditures for
regulatory compliance, were $6.4 million and $17.9 million (32% and 28% of
product sales) for the three and nine months ended March 31, 1998, respectively,
an increase of 41% and 35% over $4.6 million and $13.2 million (28% and 25% of
product sales), for the same prior-year periods, respectively. The increase in
R&D spending in the three and nine months ended March 31, 1998, primarily was
attributable to the ramp-up of expenses to support programs, including clinical
trials, for CoSeal and CoStasis(TM) Hemostatic Device, the ramp-up of the human
recombinant program partially offset by lower Trilucent R&D expenses. Subsequent
to the close of the quarter, the Company announced the commencement of a pivotal
U.S. clinical study with the CoStasis hemostat, which is an atruamatic, liquid
hemostat designed for use in surgical procedures to control bleeding. CoStatis
hemostat is designed for use as a spray, to allow fast, uniform delivery over
large as well as intricate surface areas. The Company expects R&D spending in
fiscal 1998 to be at levels higher than fiscal 1997 primarily due to increased
expenses for the tissue adhesive sealant program and the human collagen
recombinant program.
Acquired in-process research and development. The charge for acquired in-process
research and development ("in-process R&D") of $10.5 million in the nine months
ended March 31, 1998, was a non-recurring charge related to the purchase of
substantially all of the remaining shares of Cohesion Corporation, including the
purchase of certain vested employee stock options. (See Note 5 of Notes to
Condensed Financial Statements.)
Loss from operations. Loss from operations was $4.4 million for the three months
ended March 31, 1998, compared with a loss from operations of $5.5 million for
the same prior-year period. The Company's consolidated operating loss was $19.0
million for the nine months ended March 31, 1998, compared with a $8.1 million
loss for the same prior-year period. The loss in the three months ended March
31, 1998, primarily was due to the ramp-up of R&D expenses to support planned
development programs, including clinical trials, for CoStasis hemostat and
CoSeal, the ramp-up of the
14
<PAGE> 15
Company's human collagen recombinant program, and expenses related to the
separation of the Aesthetic Technologies Group and Cohesion Technologies Inc.,
partially offset by higher Contigen implant and SoftForm implant sales. The loss
in the nine months ended March 31, 1998 primarily was due to acquired in-process
R&D, representing the purchase of substantially all of the remaining shares of
Cohesion, the ramp-up of R&D expenses to support planned development programs,
including clinical trials, for CoStasis hemostat and CoSeal, the ramp-up of the
Company's human collagen recombinant program, and expenses related to the
separation of the Aesthetic Technologies Group and Cohesion Technologies Inc.,
partially offset by higher Contigen implant sales, sales from product line
extensions, and increased Trilucent implant sales.
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 $33,000 on an equivalent local currency basis, resulting from
a decrease of approximately $474,000 in operating expenses, partially offset by
a decrease of approximately $441,000 in revenue. Compared with foreign exchange
rates for the same prior-year period, the impact of foreign exchange rates in
the nine months ended March 31, 1998 on operating income was a net increase of
$302,000 on an equivalent local currency basis, resulting from a decrease of
approximately $2,211,000 in operating expenses, partially offset by a decrease
of approximately $1,909,000 in revenue. Until December 1994, the Company's
policy was to hedge material foreign currency transaction exposures. At June 30,
1997 and March 31, 1998, no foreign currency transaction exposures were hedged.
Unhedged net foreign assets were $7.0 million and $7.6 million at March 31, 1998
and June 30, 1997, respectively.
Net gain on investments, principally Boston Scientific Corporation. In the three
months ended March 31, 1998, the Company recorded a pre-tax gain on investments
of $5.0 million primarily resulting from the sale of 90,000 shares of Boston
Scientific Corporation ("Boston Scientific") common stock compared to no sales
of Target Therapeutics, Inc. ("Target") common stock in the three months ended
March 31, 1997. In the nine months ended March 31, 1998, the Company recorded a
pre-tax gain on investments of $13.7 million, primarily resulting from the sale
of 247,340 shares of Boston Scientific common stock compared to $9.2 million
resulting from the sale of 330,000 shares of Target common stock in the nine
months ended March 31, 1997. The Company anticipates additional sales of Boston
Scientific common stock during the fourth quarter. However, the number of shares
sold will depend on market conditions and the anticipated cash needs of Cohesion
Technologies.
Equity in losses of affiliates, net. Equity in losses of affiliate companies was
approximately $83,000 for the three months ended March 31, 1998, compared to
equity in losses of approximately $133,000 for the same prior-year period. For
the nine months ended March 31, 1998, equity in losses of affiliate companies
was $232,000 compared with losses of $730,000 in the same prior-year period. The
decrease in equity in losses of affiliates for the three and nine months ended
March 31, 1998, primarily was due to lower CollOptics, Inc. ("CollOptics")
losses as a result of CollOptics reducing its R&D efforts until it obtains
additional funding.
The Company intends to continue to expand its new product development activities
through more equity investments in or loans to affiliate companies during the
fourth quarter of fiscal
15
<PAGE> 16
1998. 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.
Interest income. Interest income was $164,000 and $702,000 for the three and
nine months ended March 31, 1998, respectively, compared to $238,000 and
$897,000 for the same periods in the prior year. The decrease in the three and
nine months ended March 31, 1998, primarily was due to lower average cash, cash
equivalents and short-term investment balances and a lower average interest
rate.
Provision for income taxes. The provision for income taxes for the nine months
ended March 31, 1998 prior to the in-process R&D charge was approximately 31% as
compared to 54% for the corresponding period in 1997. The decrease in the
estimated annual tax rate results primarily from fluctuations in estimated
annual pretax income without similar changes in non-deductible goodwill
amortization in addition to deductibility of losses of foreign subsidiaries
which previously could not be offset against U.S. federal taxable income.
Additionally, the provision for income taxes for the nine months ended March 31,
1998 reflects a tax benefit of approximately $1.1 million which was recorded in
the second quarter of fiscal 1998. This benefit relates to certain expenses
included in the in-process R&D charge that are deductible for income tax
purposes.
The Company recorded a tax benefit for the three months ended March 31, 1998 of
approximately $0.3 million which primarily resulted from foreign losses which
previously could not be offset against U.S. federal taxable income.
Liquidity and Capital Resources
At March 31, 1998, the Company's cash and cash equivalents were $15.8 million
compared to $18.5 million at June 30, 1997. Net cash used in operating
activities was approximately $3.1 million in the nine months ended March 31,
1998, compared to approximately $4.5 million of net cash used in operating
activities for the same prior-year period.
The $3.1 million of net cash used in operating activities in the nine months
ended March 31, 1998, mainly was attributable to a $3.5 million net loss after
adjusting for gain on investments (net of taxes paid), depreciation and
amortization expense, equity in losses of affiliates, and acquired in-process
research and development, a $1.3 million increase in accounts receivable
resulting from the resumption of Contigen implant shipments to Bard, partially
offset by a $700,000 decrease in inventory and a $500,000 increase in accounts
payable.
The $400,000 of net cash provided by investing and financing activities in the
nine months ended March 31, 1998, primarily was due to proceeds of $14.7 million
(net of taxes paid) from the sale of 247,340 shares of common stock of Boston
Scientific by the Company, proceeds of $7.9 million received from the sale of
short-term investments, proceeds of $1.7 million from the issuance of 167,192
shares of the Company's
16
<PAGE> 17
common stock and proceeds of approximately $700,000 from the sale of the
Company's shares in affiliates, partially offset by payments totaling $10.5
million for the purchase of substantially all of the remaining equity interests
in Cohesion Corporation, payments of $5.3 million to purchase short-term
investments, capital expenditures of approximately $3.4 million, repayment of
$2.0 million of the Company's credit facility, payment of cash dividends of
approximately $1.8 million to the Company's stockholders in July 1997 and
January 1998, net payments of approximately $1.1 million for additional
investments made in and loans to affiliates and a payment of approximately
$500,000 to repurchase 25,000 shares of the Company's common stock.
The Company anticipates capital expenditures, equity investments in, and loans
to affiliate companies to be approximately $18.0 million in fiscal 1998. As
of March 31, 1998, the Company's capital expenditures, equity investments in,
and loans to affiliate companies totaled approximately $15.0 million. 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 172,900 shares as of March 31, 1998. Approximately
327,100 shares remain to be repurchased according to the Board of Director's
authorization. In November 1997, the Board of Directors declared a dividend of
ten cents per share for stockholders of record as of December 15, 1997. This
dividend totaled approximately $893,000 and was paid to stock holders on January
15, 1998. Neither the Company nor Cohesion Technologies anticipate paying
dividends after the Spinoff.
The Company's principal sources of liquidity include cash generated from
operations, sales of Boston Scientific common stock, and the Company's cash,
cash equivalents, and short-term investments. At March 31, 1998, the Company
held 1,117,860 shares of Boston Scientific common stock and all holding
restrictions resulting from the acquisition of Target by Boston Scientific that
were applicable at June 30, 1997, had expired. The Company's Board of Directors
has authorized the Company to sell portions of its holdings in Boston
Scientific. The Company anticipates that stock sales pursuant to this
authorization will be made from time to time with the objective of generating
cash, for among other things, further investments in both current and new
affiliate companies. The Company believes that the above sources of liquidity
should be adequate to fund its anticipated cash needs through at least the next
twelve months.
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 Company's results of
operations could be significantly affected by fluctuations in foreign currency
exchange rates or disruptions to shipments.
Sales of the Company's collagen-based injectable products, Zyderm(R) I implant,
Zyderm(R) II implant and Zyplast(R) implant, as well as Trilucent implant and
Contigen implant, accounted for approximately 89% of consolidated product sales
for the quarter ended March 31, 1998 and 87% of consolidated product sales for
the nine months
17
<PAGE> 18
ended March 31, 1998. The Company's product sales may continue to consist
primarily of sales of these principal products. Factors such as adverse rulings
by regulatory authorities, product liability lawsuits, the introduction of
competitive products by third parties, other loss of market acceptance or other
adverse publicity for these principal products may significantly and adversely
affect the Company's sales of these products.
The Company's quarterly operating results may vary significantly in the future
depending upon factors such as the timing of significant orders and shipments,
changes in pricing policies by the Company and its competitors, increased
competition, demand for the Company's products, the number, timing and
significance of new product and product enhancement announcements by the Company
and its competitors, the ability of the Company to develop, introduce and market
new and enhanced versions of the Company's products on a timely basis, the mix
of direct and indirect sales, the timing of investments in affiliate companies
and general economic factors, among others. If revenue levels are below
expectations, operating results are likely to be materially adversely affected.
In particular, because only a small portion of the Company's expenses varies
with revenue in the short term, net income may be disproportionately affected by
a reduction in revenue.
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 is located in one primary facility 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 or other
facilities.
The Company is involved in various legal actions arising in the course of
business, some of which involve product liability 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 in the future, be 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. 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 Food and Drug
Administration
18
<PAGE> 19
("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 United States, 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 United States could adversely affect the Company.
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 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.
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost is estimated at approximately $600,000 (which will be incurred over
the next two fiscal years) and substantially all costs are expected to be
capitalized. To date, the Company has incurred nominal costs.
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, 1997,
and in the Company's 1998 Proxy Statement for Special Meeting of Stockholders,
and those factors described under the heading "Risk Factors" in the Cohesion
Technologies Registration Statement on Form 10.
19
<PAGE> 20
PART II. OTHER INFORMATION
COLLAGEN CORPORATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 10.95* Chemical Peel Manufacturing and Sale License
Amendment with Cosmederm Technologies, Inc.,
dated February 27, 1998
Exhibit 2.1* Separation and Distribution Agreement by and
between Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.97* Collagen Supply Agreement by and between
Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.98* Recombinant Technology Development and
License Agreement by and between Collagen
Corporation and Cohesion Technologies, Inc.,
dated January 1, 1998
20
* Confidential treatment has been or will be timely requested for a portion of
this document.
<PAGE> 21
Exhibit 10.99 Tax Allocation and Indemnity Agreement by and
between Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.100 Services Agreement by and between Collagen
Corporation and Cohesion Technologies, Inc.,
dated January 1, 1998
Exhibit 10.101 Benefits Agreement by and between Collagen
Corporation and Cohesion Technologies, Inc.,
dated January 1, 1998
Exhibit 10.102 Vitrogen International Distribution Agreement by
and between Collagen International, Inc. and
Cohesion Technologies, Inc., dated
January 1, 1998
Exhibit 10.103 Assignment and License Agreement by and
between Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.104* Collagraft Supply Agreement by and between
Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 27 Financial Data Schedule
* Confidential treatment has been or will be timely requested for a
portion of this document.
B. Reports on Form 8-K
None
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: May 14, 1998 /s/ Norman Halleen
------------ -------------------------------
Norman Halleen
Vice President Finance
Chief Financial Officer
22
<PAGE> 23
COLLAGEN CORPORATION
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
Exhibit 10.95* Chemical Peel Manufacturing and Sale License
Amendment with Cosmederm Technologies, Inc., dated
February 27, 1998
Exhibit 2.1* Separation and Distribution Agreement by and
between Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.97* Collagen Supply Agreement by and between
Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.98* Recombinant Technology Development and
License Agreement by and between Collagen
Corporation and Cohesion Technologies, Inc.
dated January 1, 1998
Exhibit 10.99 Tax Allocation and Indemnity Agreement by and
between Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.100 Services Agreement by and between Collagen
Corporation and Cohesion Technologies, Inc.
dated January 1, 1998
Exhibit 10.101 Benefits Agreement by and between Collagen
Corporation and Cohesion Technologies, Inc.
dated January 1, 1998
Exhibit 10.102 Vitrogen International Distribution Agreement by
and between Collagen International, Inc. and
Cohesion Technologies, Inc., dated
January 1, 1998
Exhibit 10.103 Assignment and License Agreement by and
between Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 10.104* Collagraft Supply Agreement by and between
Collagen Corporation and Cohesion
Technologies, Inc., dated January 1,
1998
Exhibit 27 Financial Data Schedule
* Confidential treatment has been or will be timely requested for a portion of
this document.
<PAGE> 1
EXHIBIT 10.95
Application for an order granting
confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange
Act of 1934 has been or will be timely
made. Confidential portions of this docu-
ment have been redacted and marked with an
[*] and have been filed with the Securities
and Exchange Commission separately with such
application.
CHEMICAL PEEL MANUFACTURING
AND SALE LICENSE AMENDMENT
This Amendment is between Collagen corporation ("Collagen") and
Cosmederm Technologies, Inc. ("Cosmederm"), effective February 27, 1998.
RECITALS
A. Collagen and Cosmederm are party to a License, Supply and
International Distribution Agreement dated as of September 6, 1996 (the
"Original Agreement"). Pursuant to Section 7.1 of the Original Agreement,
Cosmederm proposed a chemical peel product to Collagen (the "Peel Product"). As
of July 1, 1997 the parties entered into an amendment of the Original agreement
(the "Development Amendment"), calling for the development of the Peel Product.
The Parties now wish to amend the Original Agreement to provide for the
manufacture and sale of the Peel Product.
AGREEMENT
1. The Peel Product is added to Section 2.5 and Exhibit A of the
Original Agreement as a Licensed Product. Except as set forth in this Amendment,
all provisions of the Original Agreement shall be applicable to the Peel Product
as a Licensed Product.
2. The Peel Product shall be manufactured by Cosmederm in
"18-treatment kits," each consisting of a 2 ounce bottle of degreaser, a 2 ounce
bottle of 70% glycolic peel, 2 ounce bottle of neutralizer, and 18 0.25 ounce
tubes of post-peel moisturizer. Cosmederm's shipments shall be in bulk-packed,
customer-ready packaging. The transfer price for each "18-treatment kit" shall
be the greater of [*], or [*] of Collagen's Average Realized Price for such
Peel Product for the calendar quarter in which Cosmederm's shipment is made.
Collagen shall initially pay the transfer price based on the [*] amount;
within 30 days after the end of each calendar quarter, Collagen shall calculate
the Average Realized Price for such quarter and send Cosmederm a statement of
such calculation, accompanied by payment of any indicated increment (if the
[*] price for such quarter was higher than the [*] price).
"Average Realized Price" means the average per-unit amount actually
received by Collagen from the sale or transfer of the Peel Product,
with gross revenues (including any revenues from extra sample units
beyond those contemplated by Paragraph 3 of this Amendment) reduced
by (i) promotional allowances, rejections (product refused by
customer), returns, volume discounts, and, to the extent included in
Collagen's sale or
<PAGE> 2
transfer price, (ii) freight, transport, packaging, insurance charges
associated with transportation, taxes, tariffs and import/export duties.
None of the above reductions shall be allowed, in any case, unless it is
delineated as a clear line item on Collagen's invoice; provided that for
non-U.S. invoices if it is not Collagen's normal practice in the particular
country to include any such item as a clear line item on the invoice, the
reduction shall be allowed for such item if Collagen provides clear
equivalent documentation of the item amount.
If Collagen changes the packaging requirement, the transfer price will be
renegotiated.
3. Cosmederm will manufacture for Collagen [*] "unit dose" peels,
consisting of unit dose "samples" of each of the four peel products in unit
dose packaging. These unit dose peels will e used for a special launch activity
in the USA and will not be sold to physicians. Cosmederm and Collagen will
address other geographical launches as appropriate. The special transfer price
for the [*] unit dose peels is [*] each.
4. If Cosmederm is in Chapter 7 bankruptcy proceedings and is no longer
conducting full operations, Collagen shall have a right (equivalent to the
right under Section 4.1 of the Original Agreement) to manufacture and have
manufactured all the Licensed Products, including the Peel Product. The royalty
provisions of Section 6.3-6.7 of the Original Agreement would apply.
5. If any Licensed Product, including the Peel Product, is sold together
with any other product(s) for a "package discount" price, then for the purpose
of calculating royalties, Net Sales, Average Realized Price or any other
applicable value, the gross revenues and applicable reduction items for such
Licensed Product in such package shall be deemed to be allocated between such
Licensed Product and the other package product(s) in accordance with the
formula A/(A+B), where A is the standalone wholesale list price of such
Licensed Product and B is the standalone wholesale list price of the other
package product(s).
6. If Collagen requires from Cosmederm, with regard to the Peel Product,
any additional research, development,packaging, manufacturing, and marketing
claims support work which is over and above that specified in the Development
Amendment, Cosmederm shall be entitled to be paid for such additional work at
Cosmederm's standard rates.
7. If addition to all other royalties and other payments due from
Collagen to Cosmederm under the Original Agreement (including the Development
Amendment), there shall be an overriding royalty of [*] of Net Sales of all
Licensed Products sold by Collagen for end use in Europe (the "European
Non-Recurring Overriding Royalty") and an overriding royalty of [*] of Net
Sales of all Licensed Products sold by Collagen for end use outside
2.
<PAGE> 3
Europe (the "Non-European Non-Recurring Overriding Royalty"). The European
Non-Recurring Overriding Royalty shall cease after [*] of European
Non-Recurring Overriding Royalty payments have accrued on a cumulative basis.
The Non-European Non-Recurring Overriding Royalty shall cease after [***] of
Non-European Non-Recurring Overriding Royalty payments have accrued on a
cumulative basis. Payment of the European and Non-European Non-Recurring
Overriding Royalties shall be on a quarterly basis under Sections 6.3-6.7 of the
Original Agreement, as the accrue.
8. Collagen shall forthwith lend Cosmederm [*] against delivery by
Cosmederm of a convertible note in the form of Exhibit A hereto.
9. Except as expressly set forth herein the Original Agrement (as
modified by the Development Amendment) remains unchanged and in full force and
effect.
COLLAGEN CORPORATION
By: /s/ REBECCA A. STIRN
----------------------------------------
Rebecca A. Stirn
V.P. Sales and Marketing
COSMEDERM TECHNOLOGIES, INC.
By: /s/ DEV PURKAYASTHA
----------------------------------------
Dev Purkayastha, Chief Executive
Officer
3.
<PAGE> 4
EXHIBIT A
San Diego, California
February 27, 1998
COSMEDERM TECHNOLOGIES, INC.
CONVERTIBLE PROMISSORY NOTE
Cosmederm Technologies, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to Collagen Corporation, or order (the
"Holder"), the principal amount of [*] (the "Amount").
1. Convertible Promissory Note ("Note").
1.1 Interest Rate. This Note shall not bear interest before maturity.
From and after maturity, this Note shall bear simple interest at 10% per annum.
1.2 Payment. Subject to the provisions of Section 2 regarding
conversion of this Note, the Amount shall become due and payable on [*].
Payment and any prepayment under Section 1.3 below shall be made at the offices
or residence of the Holder, or at such other place as the Holder shall have
designated to the Company in writing, in lawful money of the United States of
America.
1.3 Prepayment. This Note may be prepaid, in whole or in part, at any
time without premium or penalty.
2. Conversion.
2.1 Mandatory Conversion. In the event the Company completes a
subsequent equity financing in which shares of the Company's Preferred Stock are
issued and in which the Company raises at least [*] excluding conversion of
this Note (a "Qualified Equity Financing"), the Amount shall automatically and
immediately be converted into that number of fully paid and nonassessable shares
of the series of Preferred Stock of the Company sold in the Qualified Equity
Financing (the "New Equity Shares") as is equal to the Amount divided by the per
share purchase price of the New Equity Shares (the "Per Share Price"), with any
fraction of a share rounded down to the next whole share of the New Equity
Shares. Notwithstanding the foregoing, if the equity financing occurs in
connection with a transaction described in (i) or (ii) below, the definition of
a Qualified Equity Financing shall not include such equity financing unless the
Company and the third party entering into such transaction mutually so
determine: (i) any arrangement between the Company and any third party for any
research or development involving the Company (including, without limitation,
any arrangement that includes provision for research support, product
development and/or testing support) or (ii) any arrangement to commercialize any
products resulting from the research or development programs of the Company
<PAGE> 5
(including, without limitation, an arrangement to develop, make, use and/or sell
any such products). The Holder shall have no right to negotiate any of the terms
or conditions upon which the New Equity Shares shall be issued, which
negotiation shall be conducted solely among the Company and the purchasers of
the New Equity Shares.
2.2 Optional Conversion. The Company shall notify the Holder if the
Company decides that it will no longer be seeking to complete before [*] a
Qualified Equity Financing. From and after the date of delivery of such notice,
or, if there is no such notice, then from and after [*] (provided that the
Company has not completed a Qualified Equity Financing before [*]), at the
option of either the Holder or the Company the Amount shall be converted into
that number of fully paid and nonassessable shares of Series C Preferred Stock
of the Company as is equal to the Amount divided by [*] with any fraction of a
share rounded down to the next whole share of Series C Preferred Stock.
2.3 Conversion Procedure. Written notice of the Qualified Equity
Financing shall be delivered to the Holder of this Note on or before the
scheduled closing date of the Qualified Equity Financing (the "Conversion
Date"), at the address last shown on the records of the Company for the Holder
or given by the Holder to the Company for the purpose of notice (or, if no such
address appears or is given, at the place where the principal executive office
or residence of the Holder is located), notifying the Holder of the conversion
to be effected, including specifying (i) the Amount, (ii) the Per Share Price,
(iii) a term sheet setting forth the rights, preferences, privileges and terms
and conditions of issuance and sale of the New Equity Shares and (iv) the
Conversion Date.
2.4 Optional Conversion Procedure. Written notice of the Company's
exercise of its conversion option under Section 2.2 shall be delivered to the
Holder of this Note on or before the scheduled conversion date, at the address
last shown on the records of the Company for the Holder or given by the Holder
to the Company for the purpose of notice (or, if no such address appears or is
given, at the place where the principal executive office or residence of the
Holder is located), notifying the Holder of the conversion to be effected,
including specifying (i) the Amount, (ii) the [*] conversion price, and (iii)
the conversion date. Written notice of the Holder's exercise of its conversion
option under Section 2.2 shall be delivered to the Company (accompanied by this
Note) on or before the scheduled conversion date, notifying the Company of the
conversion to be effected and the conversion date.
2.5 Termination of Rights Upon Mandatory or Optional Conversion.
Conversion shall be deemed effective on the scheduled conversion date and the
Holder of this Note shall have no further rights under this Note, whether or not
this Note is surrendered. The Holder is nonetheless obligated to surrender this
Note. Notwithstanding the foregoing, conversion at the option of the Holder
under Section 2.2 cannot be effected without surrender of this Note.
2.6 Delivery of Stock Certificates. As promptly as practicable after
any conversion of this Note, the Company, at its expense, shall issue and
deliver to the Holder of this Note a certificate or certificates evidencing the
number of full shares of Preferred Stock issuable to Holder upon any such
conversion.
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<PAGE> 6
2.7 Full Participation. Upon conversion, the Holder shall be given
the opportunity to become a party, by signature thereon, to all investor
agreements which are part of the Qualified Equity Financing or, as the case may
be, to add the new Series C shares to the investor agreements which apply to the
September 1996 Series C round.
3. Miscellaneous.
3.1 Acceleration. Upon the happening of any of the following events,
the Holder may, at its option, declare immediately due and payable the entire
unpaid principal amount of this Note, together with all interest thereon, plus
any other amounts payable at the time of such declaration pursuant to this Note.
Such events are the following: (1) the Company shall admit in writing its
inability to pay its debts as they become due, shall make a general assignment
for the benefit of creditors or shall file any petition or action for relief
under any bankruptcy, reorganization, insolvency or moratorium law, or any other
law or laws for the relief of, or relating to, debtors; or (2) an involuntary
petition shall be filed against the Company under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws for the
relief of, or relating to, debtors unless such petition shall be dismissed or
vacated within sixty (60) days of the date thereof.
3.2 Transfer of Note. This Note shall not be transferable or
assignable in any manner and no interest shall be pledged or otherwise
encumbered by the Holder without the express written consent of the Company, and
any such attempted disposition of this Note or any portion hereof shall be of no
force or effect.
3.3 Titles and Subtitles. The titles and subtitles used in this Note
are for convenience only and are not to be considered in construing or
interpreting this Note.
3.4 Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Note, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
3.5 Amendments and Waivers. This Note may not be amended or waived
(either generally or in a particular instance and either retroactively or
prospectively), except with the written consent of the Company and the Holder.
3.6 Severability. If one or more provisions of this Note are held to
be unenforceable under applicable law, such provision shall be excluded from
this Note and the balance of the Note shall be interpreted as if such provision
were so excluded and shall be enforceable in accordance with its terms.
3.7 Governing Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of California, without giving
effect to its conflicts of laws principles.
COSMEDERM TECHNOLOGIES, INC.,
a Delaware corporation
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<PAGE> 1
EXHIBIT 2.1
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND BETWEEN
COLLAGEN CORPORATION AND
COHESION TECHNOLOGIES CORPORATION
EFFECTIVE AS OF JANUARY 1, 1998
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TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS...............................................................1
1.1 Action....................................................................1
1.2 Affiliate.................................................................2
1.3 Agent.....................................................................2
1.4 Agreement.................................................................2
1.5 Ancillary Agreements......................................................2
1.6 Applicable Deadline.......................................................2
1.7 Arbitration Act...........................................................2
1.8 Arbitration Demand Date...................................................2
1.9 Arbitration Demand Notice.................................................2
1.10 Assets...................................................................2
1.11 Benefits Agreement.......................................................4
1.12 Change of Control........................................................4
1.13 Code.....................................................................4
1.14 Collagen Business........................................................4
1.15 Collagen Common Stock....................................................5
1.16 Collagen Field...........................................................5
1.17 Collagen Group...........................................................5
1.18 Collagen Indemnitees.....................................................5
1.19 Collagen Supply Agreement................................................5
1.20 Collagraft Supply Agreement..............................................5
1.21 Commission...............................................................5
1.22 Consents.................................................................5
1.23 Delayed Transfer Assets..................................................5
1.24 Delayed Transfer Liabilities.............................................5
1.25 Distribution.............................................................5
1.26 Distribution Date........................................................6
1.27 Effective Date...........................................................6
1.28 Environmental Law........................................................6
1.29 Environmental Liabilities................................................6
1.30 Escalation Notice........................................................6
1.31 Exchange Act.............................................................6
1.32 Excluded Assets..........................................................6
1.33 Excluded Liabilities.....................................................6
1.34 Governmental Approvals...................................................7
1.35 Governmental Authority...................................................7
1.36 Group....................................................................7
1.37 Improvements.............................................................7
1.38 Indemnifying Party.......................................................7
1.39 Indemnitee...............................................................7
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TABLE OF CONTENTS
(continued)
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1.40 Indemnity Payment........................................................7
1.41 Information..............................................................7
1.42 Insurance Policies.......................................................7
1.43 Insurance Proceeds.......................................................7
1.44 Intellectual Property Rights.............................................8
1.45 Liabilities..............................................................8
1.46 License Agreement........................................................8
1.47 Licensed Technology......................................................8
1.48 Manufactured Product or Material.........................................8
1.49 Nasdaq National Market...................................................8
1.50 Notice of Infringement...................................................8
1.51 Persistence Technology...................................................8
1.52 Persistence Agreement....................................................8
1.53 Person...................................................................9
1.54 Prime Rate...............................................................9
1.55 Recombinant Technology...................................................9
1.56 Recombinant Agreement....................................................9
1.57 Record Date..............................................................9
1.58 Research and Development Agreements......................................9
1.59 Retained Receivables.....................................................9
1.60 Retained Technology......................................................9
1.61 Securities Act...........................................................9
1.62 Security Interest........................................................9
1.63 Separation..............................................................10
1.64 Services Agreement......................................................10
1.65 Subsidiary..............................................................10
1.66 Tax Allocation Agreement................................................10
1.67 Taxes...................................................................10
1.68 Technologies Assets.....................................................10
1.69 Technologies Business...................................................10
1.70 Technologies Common Stock...............................................10
1.71 Technologies Contracts..................................................10
1.72 Technologies Group......................................................11
1.73 Technologies Indemnitees................................................11
1.74 Technologies Liabilities................................................11
1.75 Third Party Claim.......................................................11
1.76 Transferred Receivables................................................11
1.77 Transferred Technology..................................................11
1.78 Vitrogen International Distribution Agreement...........................11
ARTICLE II - THE SEPARATION..........................................................11
2.1 Transfer of Assets, Assumption of Liabilities and Issuance of
Technologies Stock.......................................................11
2.2 Technologies Assets......................................................12
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(continued)
<TABLE>
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2.3 Technologies Liabilities.................................................14
2.4 Transfer of Employees....................................................15
2.5 Documents Relating to Transfer of Real Property Interests and Tangible
Property Located Thereon.................................................16
2.6 Documents Relating to Other Transfers of Assets and Assumption of
Liabilities..............................................................16
2.7 Other Ancillary Agreements...............................................16
2.8 Disclaimer of Representations and Warranties.............................16
2.9 Governmental Approvals and Consents......................................17
2.10 Novation and Assignment of Assumed Technologies Liabilities.............18
ARTICLE III - THE DISTRIBUTION.......................................................19
3.1 The Distribution.........................................................19
3.2 Actions Prior to the Distribution........................................20
3.3 Conditions to Distribution...............................................20
3.4 Fractional Shares........................................................21
3.5 The Technologies Board of Directors......................................21
ARTICLE IV - INDEMNIFICATION.........................................................22
4.1 Indemnification by Collagen..............................................22
4.2 Indemnification by Technologies..........................................23
4.3 Indemnification Obligations Net of Insurance Proceeds and Other Amounts..23
4.4 Procedures for Indemnification of Third Party Claims.....................24
4.5 Additional Matters.......................................................25
4.6 Remedies Cumulative......................................................26
4.7 Survival of Indemnities..................................................26
ARTICLE V - Intellectual Property Enforcement and Indemnity..........................26
5.1 Enforcement..............................................................26
5.2 Third Party Claims.......................................................28
ARTICLE VI - INTERIM OPERATIONS AND CERTAIN OTHER MATTERS............................30
6.1 Insurance Matters........................................................30
6.2 Collection of Accounts Receivable........................................32
6.3 Certain Business Matters.................................................33
6.4 Late Payments............................................................34
ARTICLE VII - EXCHANGE OF INFORMATION; CONFIDENTIALITY...............................34
7.1 Agreement for Exchange of Information; Archives..........................34
7.2 Ownership of Information.................................................35
7.3 Compensation for Providing Information...................................35
7.4 Record Retention.........................................................35
7.5 Limitation of Liability..................................................35
7.6 Other Agreements Providing for Exchange of Information...................35
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(continued)
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7.7 Production of Witnesses; Records; Cooperation..........................36
7.8 Confidentiality........................................................37
7.9 Protective Arrangements................................................37
ARTICLE VIII - ARBITRATION; DISPUTE RESOLUTION.......................................38
8.1 Agreement to Arbitrate.................................................38
8.2 Escalation.............................................................38
8.3 Demand for Arbitration.................................................39
8.4 Arbitrators............................................................39
8.5 Hearings...............................................................40
8.6 Discovery and Certain Other Matters....................................41
8.7 Certain Additional Matters.............................................42
8.8 Limited Court Actions..................................................42
8.9 Continuity of Service and Performance..................................43
8.10 Law Governing Arbitration Procedures...................................43
ARTICLE IX - FURTHER ASSURANCES AND ADDITIONAL COVENANTS.............................43
9.1 Further Assurances.....................................................43
9.2 Qualification as Tax-Free Distribution.................................45
ARTICLE X - TERMINATION..............................................................46
10.1 Termination............................................................46
ARTICLE XI - MISCELLANEOUS...........................................................46
11.1 Counterparts; Entire Agreement; Corporate Power........................46
11.2 Right To Offset Payments...............................................46
11.3 Governing Law..........................................................47
11.4 Assignability..........................................................47
11.5 Third Party Beneficiaries..............................................47
11.6 Notices................................................................47
11.7 Severability...........................................................48
11.8 Force Majeure..........................................................48
11.9 Publicity..............................................................48
11.10 Expenses...............................................................48
11.11 Headings...............................................................48
11.12 Waivers of Default.....................................................49
11.13 Specific Performance...................................................49
11.14 Amendments.............................................................49
11.15 Interpretation.........................................................49
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<PAGE> 6
LIST OF SCHEDULES
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<S> <C>
Schedule 1.71(a) Technologies Contracts
Schedule 2.2(a)(i) Technologies Fixed Assets
Schedule 2.2(a)(iii) Technologies Accounts Receivable
Schedule 2.2(a)(iv) Technologies Cash and Cash
Equivalents
Schedule 2.2(a)(v) Technologies Equity Investments
Schedule 2.2(a)(viii) Technologies Deferred Taxes
Schedule 2.2(a)(x) Technologies Additional Assets
Schedule 2.2(b)(ii) Collagen Assets
Schedule 2.2(c) Chart of Accounts
Schedule 2.3(a)(i) Technologies Accounts Payable
Schedule 2.3(a)(ii) Technologies Litigation
Schedule 2.3(a)(vi) Technologies Additional Liabilities
Schedule 2.4 Technologies Employees
Schedule 2.5 Transfer Documents
Exhibit A Form of Persistence Development
and License Agreement
</TABLE>
<PAGE> 7
Application for an order granting
confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange
Act of 1934 has been or will be timely
made. Confidential portions of this docu-
ment have been redacted and marked with an
[*] and have been filed with the Securities
and Exchange Commission separately with such
application.
SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION AGREEMENT, effective as of January 1,
1998 (the "Effective Date"), is made by and between COLLAGEN CORPORATION, a
Delaware corporation ("Collagen"), and COHESION TECHNOLOGIES, INC., a Delaware
corporation formerly known as Collagen Technologies, Inc. ("Technologies").
RECITALS
1. The Board of Directors of Collagen has determined that it is in the
best interests of Collagen and its stockholders to separate Collagen's existing
businesses into two independent businesses.
2. In furtherance of the foregoing, it is appropriate and desirable to
transfer the Technologies Assets (as defined below) to Technologies and its
Subsidiaries (as defined below) and to cause Technologies and its Subsidiaries
to assume the Technologies Liabilities (as defined below), all as more fully
described in this Agreement and the Ancillary Agreements (as defined below).
3. Following completion of such transfer of the Technologies Assets and
assumption of the Technologies Liabilities, the Board of Directors of Collagen
may determine that it is appropriate and desirable, on the terms and conditions
contemplated hereby, to distribute to holders of shares of Collagen Common Stock
the outstanding shares of Technologies Common Stock owned directly or indirectly
by Collagen.
4. The Distribution (as defined below), if completed, is intended to
qualify as a tax-free spin-off under Section 355 of the Code (as defined below).
5. It is appropriate and desirable to set forth the principal corporate
transactions required to effect the Separation (as defined below), to permit the
Distribution and to provide for certain other agreements that will govern
certain matters relating to the Separation (as defined below), the Distribution
and the relationship of Collagen and Technologies and their respective
Subsidiaries following the Distribution.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
following meanings:
1.1 "Action" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority (as defined below) or any
arbitration or mediation tribunal.
<PAGE> 8
1.2 "Affiliate" of any Person (as defined below) means a Person that
controls, is controlled by or is under common control with such Person. As used
in this Agreement, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such entity, whether through ownership of voting securities or other interests,
by contract or otherwise.
1.3 "Agent" means the distribution agent to be appointed by Collagen to
distribute to the stockholders of Collagen the shares of Technologies Common
Stock (as defined below) held by Collagen in connection with the Distribution.
1.4 "Agreement" means this Separation and Distribution Agreement,
including all of the Schedules and Exhibits hereto.
1.5 "Ancillary Agreements" means the deeds, lease assignments and
assumptions, leases, subleases and sub-subleases, and the supplemental and other
agreements and instruments related thereto, substantially in the forms attached
as Schedule 2.5, the Collagraft Supply Agreement, the Collagen Supply Agreement,
the License Agreement, the Benefits Agreement, the Services Agreement, the Tax
Allocation Agreement, the Recombinant Agreement, the Vitrogen International
Distribution Agreement and, if and when it is entered into by Collagen and
Technologies, the Persistence Agreement (each as defined below).
1.6 "Applicable Deadline" has the meaning set forth in Section 8.3(b).
1.7 "Arbitration Act" means the United States Arbitration Act, 9 U.S.C.
1-14, as the same may be amended from time to time.
1.8 "Arbitration Demand Date" has the meaning set forth in Section
8.3(a).
1.9 "Arbitration Demand Notice" has the meaning set forth in Section
8.3(a).
1.10 "Assets" means assets, properties and rights (including goodwill),
wherever located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including the following:
(a) all accounting and other books, records and files whether in
paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other
form;
(b) all apparatus, computers and other electronic data processing
equipment, fixtures, machinery, equipment, furniture, office equipment, motor
vehicles and other transportation equipment, special and general tools, test
devices, prototypes and models and other tangible personal property;
(c) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
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<PAGE> 9
(d) all interests in real property of whatever nature, including
easements, whether as owner, mortgagee or holder of a Security Interest (as
defined below) in real property, lessor, sublessor, lessee, sublessee or
otherwise;
(e) all interests in any capital stock or other equity interests
of any Subsidiary or any other Person, all bonds, notes, debentures or other
securities issued by any Subsidiary or any other Person, all loans, advances or
other extensions of credit or capital contributions to any Subsidiary or any
other Person and all other investments in securities of any Person;
(f) all license agreements, leases of personal property, open
purchase orders for raw materials, supplies, parts or services, unfilled orders
for the manufacture and sale of products and other contracts, agreements or
commitments;
(g) all deposits, letters of credit and performance and surety
bonds;
(h) all written technical information, data, specifications,
research and development information, engineering drawings, operating and
maintenance manuals, and materials and analyses prepared by consultants and
other third parties;
(i) all domestic and foreign patents, copyrights, trade names,
trademarks, service marks and registrations and applications for any of the
foregoing, trade secrets, inventions, other proprietary information and licenses
from third Persons granting the right to use any of the foregoing;
(j) all computer applications, programs and other software,
including operating software, network software, firmware, middleware, design
software, design tools, systems documentation and instructions;
(k) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists, customer and
vendor data, correspondence and lists, product literature, artwork, design,
development and manufacturing files, vendor and customer drawings, formulations
and specifications, quality records and reports and other books, records,
studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts and
notes receivables;
(m) all rights under contracts or agreements, all claims or
rights against any Person arising from the ownership of any Asset, all rights in
connection with any bids or offers and all claims, chooses in action or similar
rights, whether accrued or contingent;
(n) all rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution;
(o) all licenses, permits, approvals and authorizations which
have been issued by any Governmental Authority;
-3-
<PAGE> 10
(p) cash or cash equivalents, bank accounts, lock boxes and other
deposit arrangements; and
(q) interest rate, currency, commodity or other swap, collar, cap
or other hedging or similar agreements or arrangements.
1.11 "Benefits Agreement" means the Benefits Agreement, effective as of
the Effective Date, by and between Collagen and Technologies.
1.12 "Change of Control" of any Person means any of the following: (a)
the consummation of a merger, consolidation, or similar business combination
involving such Person, or a sale or other disposition of all or substantially
all of the assets of such Person; (b) the acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(as defined below)) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock of such Person, (ii) the combined voting
power of the then outstanding voting securities of such Person entitled to vote
generally in the election of directors or (c) individuals who, as of the
Distribution Date, constitute the Board of Directors of such Person (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board of Directors; provided, however, that any individual becoming a
director subsequent to the Distribution Date (other than any such individual
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of any
Person other than such Board of Directors) whose election or nomination for
election by the stockholders of such Person was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Collagen Business" means: the development, manufacture, use, sale
and other commercialization or exploitation of (a) human aesthetics products,
technologies and treatments including, without limitation, soft tissue
augmentation products and treatments, and non-surgical aesthetic treatments, (b)
breast implant products and processes, (c) urinary incontinence products and
treatments and (d) ostomy products. The Collagen Business does not include any
other business, including without limitation the development, manufacture, use,
sale and other commercialization or exploitation of products for fecal
incontinence, dental, ophthalmologic or orthopedic applications or drug or cell
delivery.
1.15 "Collagen Common Stock" means the Common Stock, $0.01 par value per
share, of Collagen.
1.16 "Collagen Field" means on a worldwide basis, the fields of: (a)
human aesthetics products, technologies and treatments including, without
limitation, soft tissue augmentation products and treatments and non-surgical
aesthetic treatments; (b) breast implant products and processes; (c) urinary
incontinence products and treatments and (d) ostomy products. The
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<PAGE> 11
Collagen Field shall not include any other field, including without limitation
products for fecal incontinence, dental, ophthalmologic or orthopedic
applications or drug or cell delivery.
1.17 "Collagen Group" means Collagen and each Person (other than any
member of the Technologies Group) that is, will be or becomes, after the
Distribution Date, an Affiliate of Collagen.
1.18 "Collagen Indemnitees" has the meaning set forth in Section 4.2.
1.19 "Collagen Supply Agreement" means the Collagen Supply Agreement,
effective as of the Effective Date, by and between Collagen and Technologies.
1.20 "Collagraft Supply Agreement" means the Collagraft Supply
Agreement, effective as of the Effective Date, by and between Collagen and
Technologies.
1.21 "Commission" means the Securities and Exchange Commission.
1.22 "Consents" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
1.23 "Delayed Transfer Assets" means any Technologies Assets that are
expressly provided in this Agreement or any Ancillary Agreement to be
transferred to Technologies after the Effective Date.
1.24 "Delayed Transfer Liabilities" means any Technologies Liabilities
that are expressly provided in this Agreement or any Ancillary Agreement to be
assumed by Technologies after the Effective Date.
1.25 "Distribution" means the distribution by Collagen on a pro rata
basis to holders of Collagen Common Stock of all of the outstanding shares of
Technologies Common Stock owned by Collagen on the Distribution Date as set
forth in Article III.
1.26 "Distribution Date" means the date determined pursuant to Section
3.1 on which the Distribution occurs.
1.27 "Effective Date" shall have the meaning set forth in the Preamble
of this Agreement.
1.28 "Environmental Law" means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law (including tort and environmental
nuisance law), legal doctrine, order, judgment, decree, injunction, requirement
or agreement with any Governmental Authority, now or hereafter in effect
relating to health, safety, pollution or the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or to emissions,
discharges, releases or threatened releases of any substance currently or at any
time hereafter listed, defined, designated or classified as hazardous, toxic,
waste, radioactive or dangerous, or otherwise regulated, under any of the
foregoing, or otherwise relating to the manufacture, processing, distribution,
use,
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<PAGE> 12
treatment, storage, disposal, transport or handling of any such substances,
including the Comprehensive Environmental Response, Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act and the Resource
Conservation and Recovery Act and comparable provisions in state, local, foreign
or international law.
1.29 "Environmental Liabilities" means all Liabilities (as defined
below) relating to, arising out of or resulting from any Environmental Law or
contract or agreement relating to environmental, health or safety matters
(including all removal, remediation or cleanup costs, investigatory costs,
governmental response costs, natural resources damages, property damages,
personal injury damages, costs of compliance with any settlement, judgment or
other determination of Liability and indemnity, contribution or similar
obligations) and all costs and expenses (including allocated costs of in-house
counsel and other personnel), interest, fines, penalties or other monetary
sanctions in connection therewith.
1.30 "Escalation Notice" has the meaning set forth in Section 8.2.
1.31 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
1.32 "Excluded Assets" has the meaning set forth in Section 2.2(b).
1.33 "Excluded Liabilities" has the meaning set forth in Section 2.3(b).
1.34 "Governmental Approvals" means any notices, reports or other
filings to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
1.35 "Governmental Authority" means any federal, state, local, foreign
or international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental authority.
1.36 "Group" means either the Collagen Group or the Technologies Group,
as the context requires.
1.37 "Improvements" has the meaning set forth in the License Agreement.
1.38 "Indemnifying Party" has the meaning set forth in Section 4.3(a).
1.39 "Indemnitee" has the meaning set forth in Section 4.3(a).
1.40 "Indemnity Payment" has the meaning set forth in Section 4.3(a).
1.41 "Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs
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or other software, marketing plans, customer names, communications by or to
attorneys (including attorney-client privileged communications), memos and other
materials prepared by attorneys or under their direction (including attorney
work product), and other technical, financial, employee or business information
or data.
1.42 "Insurance Policies" means the insurance policies written by
insurance carriers pursuant to which Collagen and Technologies or one or more of
Technologies' Subsidiaries (or their respective officers or directors) will be
insured parties after the Effective Date.
1.43 "Insurance Proceeds" means those monies:
(a) received by an insured from an insurance carrier or
(b) paid by an insurance carrier on behalf of the insured.
1.44 "Intellectual Property Rights" has the meaning set forth in the
License Agreement.
1.45 "Liabilities" means any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, sums of money, accounts, reckonings, bonds, specialties,
indemnities and similar obligations, exonerations, covenants, contracts,
controversies, agreements, promises, doings, omissions, variances, guarantees,
make whole agreements and similar obligations, and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, and including those arising under any law, rule, regulation,
Action, threatened or contemplated Action (including the costs and expenses of
demands, assessments, judgments, settlements and compromises relating thereto
and attorneys' fees and any and all costs and expenses (including allocated
costs of in-house counsel and other personnel), whatsoever reasonably incurred
in investigating, preparing or defending against any such Actions or threatened
or contemplated Actions), order or consent decree of any Governmental Authority
or any award of any arbitrator or mediator of any kind, and those arising under
any contract, commitment or undertaking, including those arising under this
Agreement or any Ancillary Agreement, in each case, whether or not recorded or
reflected or required to be recorded or reflected on the books and records or
financial statements of any Person.
1.46 "License Agreement" means the Assignment and License Agreement,
effective as of the Effective Date, by and between Collagen and Technologies.
1.47 "Licensed Technology" has the meaning set forth in the License
Agreement.
1.48 "Manufactured Product or Material" has the meaning set forth in
Section 4.1(f).
1.49 "Nasdaq National Market" means the National Market of the National
Association of Securities Dealers, Inc.'s Automated Quotation System.
1.50 "Notice of Infringement" has the meaning set forth in Section
5.1(a).
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1.51 "Persistence Technology" means the inventions or discoveries,
whether or not patentable, made, conceived, reduced to practice or otherwise
developed by Technologies, whether before or after the Effective Date, in
furtherance of the development of collagen materials that are more persistent
than collagen-based products marketed by Collagen as of the Effective Date.
1.52 "Persistence Agreement" means the Persistence Development and
License Agreement in substantially the form attached hereto as Exhibit A, which
may be entered into by and between Collagen and Technologies after the Effective
Date.
1.53 "Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
1.54 "Prime Rate" means the rate published in the Wall Street Journal as
the base rate on corporate loans posted by at least 75% of the nation's 30
largest banks, as in effect from time to time.
1.55 "Recombinant Technology" means the inventions or discoveries,
whether or not patentable, made, conceived, reduced to practice, or otherwise
developed by Technologies and Collagen, whether before or after the Effective
Date, in furtherance of the development of recombinant collagen that has
demonstrated bioequivalence with collagen in solution and that can be
manufactured in commercial scale quantities.
1.56 "Recombinant Agreement" means the Recombinant Technology Research
and Development Agreement, effective as of the Effective Date, by and between
Collagen and Technologies.
1.57 "Record Date" means the close of business on the date to be
determined by the Collagen Board of Directors as the record date for determining
stockholders of Collagen entitled to receive shares of Technologies Common Stock
in the Distribution.
1.58 "Research and Development Agreements" means the Recombinant
Agreement and the Persistence Agreement.
1.59 "Retained Receivables" means any and all accounts receivable and
other rights to payment for goods or services sold, leased or otherwise provided
other than those accounts receivable listed or described on Schedule
2.2(a)(iii).
1.60 "Retained Technology" " has the meaning set forth in the License
Agreement.
1.61 "Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
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1.62 "Security Interest" means any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.
1.63 "Separation" means the transfer of the Technologies Assets to
Technologies and its Subsidiaries and the assumption by Technologies and its
Subsidiaries of the Technologies Liabilities, all as more fully described in
this Agreement and the Ancillary Agreements.
1.64 "Services Agreement" means the Services Agreement, effective as of
the Effective Date, by and between Collagen and Technologies.
1.65 "Subsidiary" as to any Person means any corporation or other
organization whether incorporated or unincorporated, of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; provided, however that no Person that is not directly or
indirectly wholly owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person.
1.66 "Tax Allocation Agreement" means the Tax Allocation and Indemnity
Agreement, effective as of the Effective Date, by and between Collagen and
Technologies.
1.67 "Taxes" has the meaning set forth in the Tax Allocation Agreement.
1.68 "Technologies Assets" has the meaning set forth in Section 2.2(a).
1.69 "Technologies Business" " means the business of Collagen prior to
the Effective Date, other than the Collagen Business.
1.70 "Technologies Common Stock" means the Common Stock, $0.001 par
value per share, of Technologies.
1.71 "Technologies Contracts" means the following contracts and
agreements to which Collagen or any of its Affiliates is a party or by which it
or any of its Affiliates or any of their respective Assets is bound, whether or
not in writing, except for any such contract or agreement that is contemplated
to be retained by Collagen or any member of the Collagen Group (as defined
below) pursuant to any provision of this Agreement or any Ancillary Agreement:
(a) those contracts and agreements listed or described on
Schedule 1.71(a);
(b) any contract or agreement entered into in the name of, or
expressly on behalf of, any division, business unit or member of the
Technologies Group (as defined below); and
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(c) any guarantee, indemnity, representation, warranty or other
Liability of any member of the Technologies Group or the Collagen Group in
respect of any other Technologies Contract, any Technologies Liability or the
Technologies Business (including guarantees of financing incurred by customers
or other third parties in connection with purchases of products or services from
the Technologies Business).
1.72 "Technologies Group" means Technologies and each Person (other than
any member of the Collagen Group) that is, will be or becomes, after the
Distribution Date, an Affiliate of Technologies.
1.73 "Technologies Indemnitees" has the meaning set forth in Section
4.1.
1.74 "Technologies Liabilities" has the meaning set forth in Section
2.3(a).
1.75 "Third Party Claim" has the meaning set forth in Section 4.4(a).
1.76 "Transferred Receivables" means the accounts receivable listed on
Schedule 2.2(a)(iii).
1.77 "Transferred Technology" " has the meaning set forth in the License
Agreement.
1.78 "Vitrogen International Distribution Agreement" means the Vitrogen
International Distribution Agreement, effective as of the Effective Date, by and
between Collagen and Technologies.
ARTICLE II
THE SEPARATION
2.1 TRANSFER OF ASSETS, ASSUMPTION OF LIABILITIES AND ISSUANCE OF
TECHNOLOGIES STOCK.
(a) Collagen hereby agrees that, as of the Effective Date, it
will assign, transfer, convey and deliver to Technologies, and Collagen hereby
agrees to cause its applicable Subsidiaries to assign, transfer, convey and
deliver to Technologies, and Technologies agrees to accept, as of the Effective
Date, from each of Collagen and its Subsidiaries, all of Collagen's and its
applicable Subsidiaries' respective right, title and interest in all
Technologies Assets, other than the Delayed Transfer Assets.
(b) Technologies hereby agrees that, as of the Effective Date, it
will assume and Technologies hereby agrees faithfully to perform and fulfill all
the Technologies Liabilities, other than the Delayed Transfer Liabilities, in
accordance with their respective terms. As of the Effective Date, Technologies
will be responsible for all Technologies Liabilities, regardless of when or
where such Technologies Liabilities arose or arise, or whether the facts on
which they are based occurred prior to or subsequent to the Effective Date,
regardless of where or against whom such Liabilities are asserted or determined
(including any Technologies Liabilities arising out of claims made by Collagen's
or Technologies' respective directors, officers, employees,
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agents, Subsidiaries or Affiliates against any member of the Collagen Group or
the Technologies Group) or whether asserted or determined prior to the Effective
Date, and regardless of whether arising from or alleged to arise from
negligence, recklessness, violation of law, fraud or misrepresentation by any
member of the Collagen Group or the Technologies Group or any of their
respective directors, officers, employees, agents, Subsidiaries or Affiliates.
(c) Each of the parties hereto agrees that the Delayed Transfer
Assets will be assigned, transferred, conveyed and delivered, and the Delayed
Transfer Liabilities will be assumed, in accordance with the terms of the
agreements that provide for such assignment, transfer, conveyance and delivery,
or such assumption, as soon as practicable after the Effective Date. Following
such assignment, transfer, conveyance and delivery of any Delayed Transfer
Asset, or the assumption of any Delayed Transfer Liability, the applicable
Delayed Transfer Asset or Delayed Transfer Liability shall be treated for all
purposes of this Agreement and the Ancillary Agreements as a Technologies Asset
or a Technologies Liability, as the case may be.
(d) In the event that at any time or from time to time (whether
prior to or after the Distribution Date), any party hereto (or any member of
such party's respective Group), shall receive or otherwise possess any Asset
that is allocated to any other Person pursuant to this Agreement or any
Ancillary Agreement, such party shall promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset in
trust for any such other Person.
(e) In consideration for the transfer to Technologies of the
Technologies Assets, Technologies has previously issued to Collagen 10 shares of
Technologies Preferred Stock.
2.2 TECHNOLOGIES ASSETS.
(a) For purposes of this Agreement, "Technologies Assets" means:
(i) those fixed assets listed or described on Schedule
2.2(a)(i);
(ii) all finished goods inventory of Collagraft(R) bone
graft matrix, Collagraft(R) bone graft matrix strip, Vitrogen(R), Cell Prime(TM)
and Zygen(TM) as of the Effective Date;
(iii) the accounts receivable listed or described on
Schedule 2.2(a)(iii);
(iv) the cash and cash equivalents listed or described on
Schedule 2.2(a)(iv);
(v) the equity investments and any associated rights
listed or described on Schedule 2.2(a)(v);
(vi) the Transferred Technology;
(vii) the Technologies Contracts;
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(viii) the deferred taxes listed or described on Schedule
2.2(a)(viii);
(ix) any Assets owned by any member of the Technologies
Group on the Effective Date;
(x) such additional assets listed or described on Schedule
2.2(a)(x);
(xi) all Information with respect to the Technologies
Assets as defined in this Section 2.2(a) and any other Information not related
primarily to the Excluded Assets and
(xii) except as contemplated by Section 2.2(b), any and
all Assets owned or held immediately prior to the Effective Date by Collagen or
any of its Subsidiaries that are not used primarily in the Collagen Business.
The intention of this clause (xii) is only to rectify any inadvertent omission
of transfer or conveyance of any Assets that, had the parties given specific
consideration to such Asset as of the Effective Date, would have otherwise been
classified as a Technologies Asset. No Asset shall be deemed to be a
Technologies Asset solely as a result of this clause (xii) if such Asset is
within the category or type of Asset expressly covered by the subject matter of
an Ancillary Agreement. In addition, no Asset shall be deemed a Technologies
Asset solely as a result of this clause (xii) unless a claim with respect
thereto is made by Technologies on or prior to the first to occur of June 30,
1999 or the first anniversary of the Distribution Date.
Notwithstanding the foregoing, the Technologies Assets shall not in any
event include the Excluded Assets referred to in Section 2.2(b) below.
(b) For the purposes of this Agreement, "Excluded Assets" means:
(i) all Assets of Collagen and any other member of the
Collagen Group as of the Effective Date, other than the Technologies Assets;
(ii) the Assets listed or described on Schedule
2.2(b)(ii); and
(iii) any and all Assets that are expressly contemplated
by this Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto) as Assets to be retained by Collagen or any other member of the
Collagen Group, including without limitation the Retained Technology.
(c) The Technologies Assets and the Excluded Assets have been
allocated to Technologies and Collagen, respectively, in accordance with the
chart of accounts set forth on Schedule 2.2(c).
2.3 TECHNOLOGIES LIABILITIES.
(a) For the purposes of this Agreement, "Technologies
Liabilities" means (without duplication):
(i) the accounts payable listed or described on Schedule
2.3(a)(i);
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(ii) the litigation listed or described on Schedule
2.3(a)(ii);
(iii) all Liabilities (other than Taxes based on, or
measured by reference to, net income) primarily relating to, arising out of or
resulting from:
(A) the operation of the Technologies Business, as
conducted at any time prior to, on or after the Effective Date (including,
without limitation, any Liability relating to, arising out of or resulting from
any act or failure to act by any director, officer, employee, agent or
representative of any member of the Technologies Group or, with respect to the
operation of the Technologies Business on or prior to the Effective Date, any
member of the Collagen Group (whether or not such act or failure to act is or
was within such Person's authority));
(B) the operation of any business conducted by any
member of the Technologies Group at any time after the Effective Date
(including, without limitation, any Liability relating to, arising out of or
resulting from any act or failure to act by any director, officer, employee,
agent or representative of any member of the Technologies Group (whether or not
such act or failure to act is or was within such Person's authority)); or
(C) any Technologies Assets (including, without
limitation, any Technologies Contracts and any real property and leasehold
interests); in any such case whether arising before, on or after the Effective
Date;
(iv) all Environmental Liabilities primarily relating to,
arising out of or resulting from:
(A) the facilities located at 2500 Faber Place,
Palo Alto, California and 2450 Faber Place, Palo Alto, California;
(B) the operation of the Technologies Business, as
conducted at any time after the Effective Date (including, without limitation,
any Environmental Liability relating to, arising out of or resulting from any
act or failure to act by any director, officer, employee, agent or
representative of any member of the Technologies Group (whether or not such act
or failure to act is or was within such Person's authority)); or
(C) the operation of any business conducted by any
member of the Technologies Group at any time after the Effective Date
(including, without limitation, any Environmental Liability relating to, arising
out of or resulting from any act or failure to act by any director, officer,
employee, agent or representative of any member of the Technologies Group
(whether or not such act or failure to act is or was within such Person's
authority));
(v) any employee-related Liabilities (A) involving any
employee of Technologies or its Subsidiaries (whether arising before, on or
after the Effective Date and whether such employee is then currently employed by
Technologies or was, at the time such Liability arose, an employee of a member
of the Collagen Group), (B) involving Howard Palefsky or any former employees of
Collagen or its Subsidiaries (who are not employees of
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Collagen or Technologies on the Effective Date) who were primarily engaged in
research and development activities or (C) involving, as an individual
defendant, any employee of Technologies or its Subsidiaries;
(vi) such additional liabilities listed or described on
Schedule 2.3(a)(vi); and
(vii) except as contemplated by Section 2.3(b), any and
all Liabilities of Collagen or its Subsidiaries accrued or otherwise outstanding
immediately prior to the Effective Date that are related primarily to the
Technologies Business. The intention of this clause (vii) is only to rectify any
inadvertent omission or transfer or conveyance of any Liabilities that, had the
parties given specific consideration to such Liability as of the Effective Date,
would have otherwise been assigned to Technologies hereunder. No Liability shall
be assigned to Technologies solely as a result of this clause (vii) if such
Liability is within the category or type of Liability expressly covered by the
subject matter of an Ancillary Agreement. In addition, no Liability shall be
assigned to Technologies solely as a result of this clause (vii) unless a claim
with respect thereto is made by Collagen on or prior to the first to occur of
June 30, 1999 or the first anniversary of the Distribution Date.
(b) For the purposes of this Agreement, "Excluded Liabilities"
means:
(i) all Liabilities of Collagen or any member of the
Collagen Group, other than the Technologies Liabilities; and
(ii) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary Agreement (or the Schedules
hereto or thereto) as Liabilities to be retained or assumed by Collagen or any
other member of the Collagen Group, and all agreements and obligations of any
member of the Collagen Group under this Agreement or any of the Ancillary
Agreements.
2.4 TRANSFER OF EMPLOYEES. Each of the individual employees of Collagen
or its Subsidiaries listed on Schedule 2.4 shall, as of the close of business on
December 31, 1997, be transferred to, and become an employee of, Technologies or
the Technologies Subsidiary identified on Schedule 2.4. From and after the
Effective Date, Technologies, or the Technologies Subsidiary, as the case may
be, shall be responsible for paying all salary, wages, bonus, accrued vacation,
severance and overtime, and applicable employment and payroll taxes, to such
individuals for services performed on or after January 1, 1998. Such employees
shall be entitled to the benefits set forth in the Benefits Agreement.
2.5 DOCUMENTS RELATING TO TRANSFER OF REAL PROPERTY INTERESTS AND
TANGIBLE PROPERTY LOCATED THEREON. In furtherance of the assignment, transfer
and conveyance of Technologies Assets and the assumption of Technologies
Liabilities set forth in Section 2.1(a) and (b), on the Effective Date or as
promptly as practicable thereafter, each of Collagen and Technologies, or their
applicable Subsidiaries, is executing and delivering or will execute and deliver
deeds, lease assignments and assumptions, leases, subleases and sub-subleases
substantially in the forms attached as Schedule 2.5, with such
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changes as may be necessary to conform to any laws, regulations or usage
applicable in the jurisdiction in which the relevant real property is located.
Set forth in, or referenced by, such Schedule 2.5 is, among other things, a
summary of each property or interest therein to be conveyed, assigned, leased,
subleased or sub-subleased, the applicable entities relevant to each property
and their capacities with respect to each property (e.g., as transferor,
transferee, assignor, assignee, lessor, lessee, sublessor, sublessee,
sub-sublessor or sub-sublessee), and any terms applicable to each property that
are not specified in the forms of deed, lease assignment and assumption, lease,
sublease or sub-sublease (e.g., rent and term).
2.6 DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION OF
LIABILITIES. In furtherance of the assignment, transfer and conveyance of
Technologies Assets and the assumption of Technologies Liabilities set forth in
Section 2.1(a) and (b), on the Effective Date or as promptly as practicable
thereafter, (i) Collagen shall execute and deliver, and shall cause its
Subsidiaries to execute and deliver, such bills of sale, stock powers,
certificates of title, assignments of contracts and other instruments of
transfer, conveyance and assignment as and to the extent necessary to evidence
the transfer, conveyance and assignment of all of Collagen's and its
Subsidiaries' right, title and interest in and to the Technologies Assets to
Technologies or the designated Technologies Subsidiary and (ii) Technologies
shall execute and deliver to Collagen and its Subsidiaries such bills of sale,
stock powers, certificates of title, assumptions of contracts and other
instruments of assumption as and to the extent necessary to evidence the valid
and effective assumption of the Technologies Liabilities by Technologies.
2.7 OTHER ANCILLARY AGREEMENTS. Simultaneously with execution and
delivery of this Agreement, each of Collagen and Technologies will execute and
deliver all Ancillary Agreements (other than the Persistence Agreement) to which
it is a party.
2.8 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.
(a) Each of Collagen (on behalf of itself and each member of the
Collagen Group) and Technologies (on behalf of itself and each member of the
Technologies Group) understands and agrees that, except as expressly set forth
in this Agreement or in any Ancillary Agreement, no party to this Agreement, any
Ancillary Agreement or any other agreement or document contemplated by this
Agreement, any Ancillary Agreement or otherwise, is representing or warranting
in any way as to the Assets, businesses or Liabilities transferred or assumed as
contemplated hereby or thereby, as to any consents or approvals required in
connection therewith, as to the value or freedom from any Security Interests of,
or any other matter concerning, any Assets of such party, or as to the absence
of any defenses or right of setoff or freedom from counterclaim with respect to
any claim or other Asset, including any accounts receivable, of any party, or as
to the legal sufficiency of any assignment, document or instrument delivered
hereunder to convey title to any Asset or thing of value upon the Effective
Date. Except as may expressly be set forth in this Agreement or in any Ancillary
Agreement, all such Assets are being transferred on an "as is," "where is" basis
(and, in the case of any real property, by means of a quitclaim or similar form
deed or conveyance) and, except as otherwise provided herein, the respective
transferees shall bear the economic and legal risks that any
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conveyance shall prove to be insufficient to vest in the transferee good and
marketable title, free and clear of any Security Interest.
2.9 GOVERNMENTAL APPROVALS AND CONSENTS.
(a) To the extent that the Separation requires any Consents or
Governmental Approvals, the parties will use their reasonable best efforts to
obtain any such Consents and Governmental Approvals.
(b) If and to the extent that the valid, complete and perfected
transfer or assignment to the Technologies Group of any Technologies Assets
would be a violation of applicable laws or require any Consent or Governmental
Approval in connection with the Separation or the Distribution, then the
transfer or assignment to the Technologies Group of such Technologies Assets
shall be automatically deemed deferred and any such purported transfer or
assignment shall be null and void until such time as all legal impediments are
removed and/or such Consents or Governmental Approvals have been obtained.
Notwithstanding the foregoing, any such Asset shall be deemed a Technologies
Asset for purposes of determining whether any Liability is a Technologies
Liability.
(c) If the transfer or assignment of any Technologies Asset
intended to be transferred or assigned hereunder is not consummated as of the
Effective Date, whether as a result of the provisions of Section 2.9(b) or for
any other reason, then the Person retaining such Technologies Asset shall
thereafter hold such Technologies Asset for the use and benefit, insofar as
reasonably possible, of the Person entitled thereto (at the expense of the
Person entitled thereto). In addition, the Person retaining such Technologies
Asset shall take such other actions as may be reasonably requested by the Person
to whom such Technologies Asset is to be transferred in order to place such
Person, insofar as reasonably possible, in the same position as if such
Technologies Asset had been transferred as contemplated hereby and so that all
the benefits and burdens relating to such Technologies Asset, including
possession, use, risk of loss, potential for gain, and dominion, control and
command over such Technologies Asset, are to inure from and after the Effective
Date to the Technologies Group.
(d) If and when the Consents and/or Governmental Approvals, the
absence of which caused the deferral of transfer of any Technologies Asset
pursuant to Section 2.9(b), are obtained, the transfer of the applicable
Technologies Asset shall be effected in accordance with the terms of this
Agreement and/or the applicable Ancillary Agreement.
(e) The Person retaining a Technologies Asset due to the deferral
of the transfer of such Technologies Asset shall not be obligated, in connection
with the foregoing, to expend any money unless the necessary funds are advanced
by the Person entitled to the Technologies Asset, other than reasonable
out-of-pocket expenses, attorneys' fees and recording or similar fees, all of
which shall be promptly reimbursed by the Person entitled to such Technologies
Asset.
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2.10 NOVATION AND ASSIGNMENT OF ASSUMED TECHNOLOGIES LIABILITIES.
(a) Each of Collagen and Technologies, at the request of the
other, shall use their reasonable best efforts to obtain, or to cause to be
obtained, any consent, substitution, approval or amendment required to novate
and assign all obligations under agreements, leases, licenses and other
obligations or Liabilities of any nature whatsoever that constitute Technologies
Liabilities, or to obtain in writing the unconditional release of all parties to
such arrangements other than any member of the Technologies Group, so that, in
any such case, Technologies and its Subsidiaries will be solely responsible for
such Liabilities; provided, however, that neither Collagen nor Technologies
shall be obligated to pay any consideration therefor to any third party from
whom such consents, approvals, substitutions and amendments are requested.
(b) If Collagen or Technologies is unable to obtain, or to cause
to be obtained, any such required consent, approval, release, substitution or
amendment, the applicable member of the Collagen Group shall continue to be
bound by such agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof, Technologies shall, as agent or
subcontractor for Collagen or such other Person, as the case may be, pay,
perform and discharge fully all the obligations or other Liabilities of Collagen
or such other Person, as the case may be, thereunder from and after the
Effective Date. Collagen shall, without further consideration, pay and remit, or
cause to be paid or remitted, to Technologies promptly all money, rights and
other consideration received by it or any member of its Group in respect of the
performance of such unassigned Liabilities (unless any such consideration is an
Excluded Asset). If and when any such consent, approval, release, substitution
or amendment shall be obtained or such agreement, lease, license or other rights
or obligations shall otherwise become assignable or able to be novated, Collagen
shall thereafter assign, or cause to be assigned, all its rights, obligations
and other Liabilities thereunder or any rights or obligations of any member of
the Collagen Group to Technologies or another member of the Technologies Group
specified by Technologies without payment of further consideration and
Technologies, without the payment of any further consideration, shall, or shall
cause such other member of the Technologies Group to assume such rights and
obligations.
ARTICLE III
THE DISTRIBUTION
3.1 THE DISTRIBUTION.
(a) In the event that the Collagen Board of Directors decides to
proceed with the Distribution, then subject to the conditions specified in
Section 3.3, on or prior to a date determined by such Board of Directors (the
"Distribution Date"), Collagen will deliver to the Agent for the benefit of
holders of record of Collagen Common Stock on the Record Date, a single stock
certificate, endorsed by Collagen in blank, representing all of the outstanding
shares of Technologies Common Stock then owned by Collagen or any member of the
Collagen Group, and shall cause the transfer agent for the shares of Collagen
Common Stock to instruct the Agent
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to distribute on the Distribution Date the appropriate number of such shares of
Technologies Common Stock to each such holder or designated transferee or
transferees of such holder.
(b) Subject to the provisions of Section 3.4, each holder of
Collagen Common Stock on the Record Date (or such holder's designated transferee
or transferees) will be entitled to receive in the Distribution a number of
shares of Technologies Common Stock equal to the number of shares of Collagen
Common Stock held by such holder on the Record Date multiplied by a fraction,
the numerator of which is the number of outstanding shares of Technologies
Common Stock owned by Collagen or any other member of the Collagen Group on the
Record Date and the denominator of which is the number of shares of Collagen
Common Stock outstanding on the Record Date.
(c) Technologies and Collagen, as the case may be, will provide
to the Agent all share certificates and any information required in order to
complete the Distribution on the terms specified in this Section 3.1.
3.2 ACTIONS PRIOR TO THE DISTRIBUTION.
(a) Collagen and Technologies shall prepare and mail, prior to
the Distribution Date, to the holders of Collagen Common Stock, such information
concerning Technologies, its business, operations and management, the
Distribution and such other matters as Collagen shall reasonably determine and
as may be required by law. Collagen and Technologies will prepare, and
Technologies will, to the extent required under applicable law, file with the
Commission any such documentation and any requisite no action letters which
Collagen determines are necessary or desirable to effectuate the Distribution,
and Collagen and Technologies shall each use its reasonable best efforts to
obtain all necessary approvals from the Commission with respect thereto as soon
as practicable.
(b) Collagen and Technologies shall take all such action as may
be necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(c) Collagen and Technologies shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section 3.3
(subject to Section 3.3(d)) to be satisfied and to effect the Distribution on
the Distribution Date.
(d) To the extent required, Technologies shall prepare and file,
and shall use its reasonable best efforts to have approved, an application for
the quotation of the Technologies Common Stock to be distributed in the
Distribution on the Nasdaq National Market, subject to official notice of
distribution.
3.3 CONDITIONS TO DISTRIBUTION. In the event that the Collagen Board of
Directors decides to proceed with the Distribution, the parties hereto shall use
their reasonable best efforts to satisfy the following conditions to the
consummation of the Distribution. The obligations of the parties to consummate
the Distribution shall be conditioned on the satisfaction, or waiver by Collagen
of the following conditions:
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(a) A private letter ruling from the Internal Revenue Service
shall have been obtained, and shall continue in effect, to the effect that,
among other things, the Distribution will qualify as a tax-free distribution for
federal income tax purposes under Section 355 of the Code and the transfer to
Technologies of the Technologies Assets and the assumption by Technologies of
the Technologies Liabilities in connection with the Separation will not result
in the recognition of any gain or loss to any member of the Collagen Group, any
member of the Technologies Group or their respective stockholders for federal
income tax purposes, and such ruling shall be in form and substance satisfactory
to Collagen in its sole discretion.
(b) Any material Consents and Governmental Approvals necessary to
consummate the Distribution shall have been obtained and be in full force and
effect.
(c) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be pending or in effect and no other
event outside the control of Collagen shall have occurred or failed to occur
that prevents the consummation of the Distribution.
(d) No other events or developments shall have occurred that, in
the judgment of the Board of Directors of Collagen, would result in the
Distribution having a material adverse effect on Collagen, on any member of the
Collagen Group or on the stockholders of Collagen.
(e) A no-action letter from the Commission shall have been
obtained to the effect that, after giving effect to the Separation and the
Distribution, Technologies is not an "investment company" under the Investment
Company Act of 1940, as amended.
(f) To the extent required, a no-action letter from the
Commission shall have been obtained to the effect that the Distribution is
exempt from registration under the Securities Act.
(g) The stockholders of Collagen shall have approved the
Distribution.
The foregoing conditions are for the sole benefit of Collagen and shall
not give rise to or create any duty on the part of Collagen or the Collagen
Board of Directors to waive or not waive any such condition.
3.4 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, Collagen shall direct the Agent to determine the number of whole shares
and fractional shares of Technologies Common Stock allocable to each holder of
record or beneficial owner of Collagen Common Stock as of the Record Date, to
aggregate all such fractional shares and sell the whole shares obtained thereby
at the direction of Collagen either to Collagen, in open market transactions or
otherwise, in each case at then prevailing trading prices, and to cause to be
distributed to each such holder or for the benefit of each such beneficial owner
to which a fractional share shall be allocable such holder's or owner's ratable
share of the proceeds of such sale, after making appropriate deductions of the
amount required to be withheld for federal income tax purposes and after
deducting an amount equal to all brokerage charges, commissions and transfer
taxes attributed to such sale. Collagen and the Agent shall use their reasonable
best
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efforts to aggregate the shares of Collagen Common Stock that may be held by any
beneficial owner thereof through more than one account in determining the
fractional share allocable to such beneficial owner.
3.5 THE TECHNOLOGIES BOARD OF DIRECTORS. Collagen and Technologies shall
each take all actions which may be required to elect or otherwise appoint as
directors of Technologies, on or prior to the Distribution Date, John Daniels,
Reid Dennis, Frank DeLustro, David Foster, Craig Johnson and any other persons
to be designated by a nominating committee of Technologies' Board of Directors
(which nominating committee shall be comprised of individuals who are at such
time neither officers nor directors of Collagen) as additional or substitute
members of the Board of Directors of Technologies on the Distribution Date.
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY COLLAGEN. Subject to the provisions of Section
4.3, Collagen shall indemnify, defend and hold harmless Technologies, each
member of the Technologies Group and each of their respective directors,
officers and employees, and each of the heirs, executors, successors and assigns
of any of the foregoing (collectively, the "Technologies Indemnitees"), from and
against any and all Liabilities of the Technologies Indemnitees relating to,
arising out of or resulting from any of the following items (without
duplication):
(a) the failure of Collagen or any other member of the Collagen
Group or any other Person (other than Technologies or any member of the
Technologies Group) to pay, perform or otherwise promptly discharge any
Liabilities of the Collagen Group, other than the Technologies Liabilities or
any contract other than the Technologies Contracts, in accordance with their
respective terms, whether prior to or after the Effective Date, other than any
failure or alleged failure resulting from any action or failure to act by
Technologies or any member of the Technologies Group;
(b) the Collagen Business, any Liability of the Collagen Group
(including any Environmental Liability) other than the Technologies Liabilities
or any contract other than the Technologies Contracts, other than any Liability
resulting from any action or failure to act by Technologies or any member of the
Technologies Group;
(c) any breach, by Collagen or any member of the Collagen Group,
of this Agreement or any of the Ancillary Agreements, other than any Liability
resulting from any action or failure to act by Technologies or any member of the
Technologies Group;
(d) any product liability claims, whether existing on the
Effective Date or arising thereafter, related to the Collagen Business; and
(e) any manufacturing defect in any product or material
manufactured by Collagen for Technologies pursuant to the Collagraft Supply
Agreement or the Collagen Supply Agreement (a "Manufactured Product or
Material"); provided, however, that Collagen shall not
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be obligated to indemnify Technologies pursuant to this Section 4.1(e) to the
extent that any Liability is the result of: (i) the use of any Manufactured
Product or Material that has been manufactured in accordance with and materially
conforms to the specifications provided by Technologies and accepted by Collagen
for such Manufactured Product or Material, (ii) the combination by Technologies
of any Manufactured Product or Material with another product or material or the
modification by Technologies of any Manufactured Product or Material where such
Liability would not have occurred but for such combination or modification or
(iii) any statement, representation, misstatement or omission made by
Technologies, any member of the Technologies Group or any customer thereof
regarding a Manufactured Product or Material which are inconsistent with
Collagen's warranties expressly granted under the Collagraft Supply Agreement or
the Collagen Supply Agreement, as applicable.
4.2 INDEMNIFICATION BY TECHNOLOGIES. Subject to the provision of Section
4.3, Technologies shall indemnify, defend and hold harmless Collagen, each
member of the Collagen Group and each of their respective directors, officers
and employees, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "Collagen Indemnitees"), from and against
any and all Liabilities of the Collagen Indemnitees relating to, arising out of
or resulting from any of the following items (without duplication):
(a) the failure of Technologies or any other member of the
Technologies Group or any other Person (other than Collagen or any member of the
Collagen Group) to pay, perform or otherwise promptly discharge any Technologies
Liabilities or Technologies Contracts, in accordance with their respective
terms, whether prior to or after the Effective Date, other than any failure or
alleged failure resulting from any action or failure to act by Collagen or any
member of the Collagen Group;
(b) any Liability arising in connection with any Technologies
Liabilities that were not assigned or novated to Technologies and which
Technologies is obligated to pay, perform and discharge pursuant to Section
2.10(b) of this Agreement or in connection with any assignment that was obtained
without a novation or unconditional release of all parties other than members of
the Technologies Group, other than any Liability resulting from any action or
failure to act by Collagen or any member of the Collagen Group;
(c) the Technologies Business, any Technologies Liability or any
Technologies Contract, other than any Liability resulting from any action or
failure to act by Collagen or any member of the Collagen Group;
(d) any breach by Technologies or any member of the Technologies
Group of this Agreement or any of the Ancillary Agreements, other than any
breach or alleged breach resulting from any action or failure to act by Collagen
or any member of the Collagen Group; and
(e) any product liability claims, whether existing on the
Effective Date or arising thereafter, related to the Technologies Business.
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4.3 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER
AMOUNTS.
(a) The parties intend that any Liability subject to
indemnification or reimbursement pursuant to Articles IV and V will be net of
Insurance Proceeds. Accordingly, the amount which any party (an "Indemnifying
Party") is required to pay to any Person entitled to indemnification hereunder
(an "Indemnitee") will be reduced by any Insurance Proceeds theretofor actually
recovered by or on behalf of the Indemnitee in reduction of the related
Liability. If an Indemnitee receives a payment (an "Indemnity Payment") required
by this Agreement from an Indemnifying Party in respect of any Liability and
subsequently receives Insurance Proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds had been received, realized or recovered before the
Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claim
shall not be relieved of the responsibility with respect thereto or, solely by
virtue of the indemnification provisions hereof, have any subrogation rights
with respect thereto, it being expressly understood and agreed that no insurer
or any other third party shall be entitled to a "windfall" (i.e., a benefit they
would not be entitled to receive in the absence of the indemnification
provisions) by virtue of the indemnification provisions hereof. Nothing
contained in this Agreement or any Ancillary Agreement shall obligate any member
of any Group to seek to collect or recover any Insurance Proceeds.
4.4 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) If an Indemnitee shall receive notice or otherwise learn of
the assertion by a Person (including any Governmental Authority) who is not a
member of the Collagen Group or the Technologies Group of any claim or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 4.1, Section 4.2, Section
5.2 or any other provision of this Agreement or any Ancillary Agreement, such
Indemnitee shall give such Indemnifying Party written notice thereof within 20
days after becoming aware of such Third Party Claim. Any such notice shall
describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the failure of any Indemnitee or other Person to give notice as
provided in this Section 4.4(a) shall not relieve the related Indemnifying Party
of its obligations under Articles IV and V, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 4.4(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee as to whether the Indemnifying Party will
assume responsibility
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for defending such Third Party Claim, which notice shall specify any
reservations or exceptions. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third Party Claim, such
Indemnitee shall have the right to employ separate counsel and to participate in
(but not control) the defense, compromise or settlement thereof, but the fees
and expenses of such counsel shall be the expense of such Indemnitee except as
set forth in the next sentence. In the event that the Indemnifying Party has
elected to assume the defense of the Third Party Claim but has specified, and
continues to assert, any reservations or exceptions in such notice, then, in any
such case, the reasonable fees and expenses of one separate counsel for all
Indemnitees shall be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility
for defending a Third Party Claim, or fails to notify an Indemnitee of its
election as provided in Section 4.4(b), such Indemnitee may defend such Third
Party Claim at the cost and expense (including allocated costs of in-house
counsel and other personnel) of the Indemnifying Party.
(d) No Indemnitee may settle or compromise any Third Party Claim
without the consent of the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment
or enter into any settlement of a Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other non-monetary relief to be entered, directly or
indirectly, against any Indemnitee.
(f) The provisions of Section 4.4 and Section 4.5 shall not apply
to Taxes (which are covered by the Tax Allocation Agreement).
(g) The Indemnitees shall cooperate with the Indemnifying Party
in a reasonable manner in the defense of any Third Party Claim by the
Indemnifying party, and the cost and expense (including costs of in-house
counsel and other personnel) of such cooperation shall be borne by the
Indemnifying Party unless otherwise specified herein.
4.5 ADDITIONAL MATTERS.
(a) Any claim on account of a Liability that does not result from
a Third Party Claim shall be asserted by written notice given by the Indemnitee
to the Indemnifying Party. Such Indemnifying Party shall have a period of 30
days after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make payment.
If such Indemnifying Party does not respond within such 30-day period or rejects
such claim in whole or in part, such Indemnitee shall be free to pursue such
remedies as may be available to such party as contemplated by this Agreement and
the Ancillary Agreements.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have any right, defense or claim relating to such Third
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Party Claim against any claimant or plaintiff asserting such Third Party Claim
or against any other person.
(c) In the event of an Action in which the Indemnifying Party is
not a named defendant, if the Indemnifying Party shall so request, the parties
shall endeavor to substitute the Indemnifying Party for the named defendant. If
such substitution or addition cannot be achieved for any reason or is not
requested, the named defendant shall allow the Indemnifying Party to manage the
Action as set forth in this Section 4.5 and the Indemnifying Party shall fully
indemnify the named defendant against all costs of defending the Action
(including court costs, sanctions imposed by a court, attorneys' fees, experts'
fees and all other external expenses, and the allocated costs of in-house
counsel and other personnel), the costs of any judgment or settlement, and the
cost of any interest or penalties relating to any judgment or settlement.
4.6 REMEDIES CUMULATIVE. The remedies provided in this Article IV shall
be cumulative and, subject to the provisions of Article VIII and Section 5.2(f),
shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
4.7 SURVIVAL OF INDEMNITIES. The rights and obligations of each of
Collagen and Technologies and their respective Indemnitees under Articles IV and
V shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
ARTICLE V
INTELLECTUAL PROPERTY ENFORCEMENT AND INDEMNITY
5.1 ENFORCEMENT.
(a) NOTICE. In the event that Technologies, Collagen or any
member of the Technologies Group or Collagen Group becomes aware of, or has
reason to suspect, that a third party is infringing or misappropriating, or may
be in the position to begin infringing or misappropriating, either directly or
indirectly, the Transferred Technology, the Retained Technology, Persistence
Technology, Recombinant Technology or Improvements, it shall promptly deliver
written notice to the other party of such infringement or misappropriation or
prospective infringement or misappropriation by such third party ("Notice of
Infringement").
(b) INFRINGEMENT IN THE COLLAGEN FIELD.
(i) If the alleged infringement or misappropriation by a
third party is of the Retained Technology or Improvements in the Collagen Field,
then Collagen shall have the right to initiate a legal proceeding against such
third party, together with the right to enforce and collect any judgment
thereon. Collagen shall have sole control and shall bear all costs and expenses
associated with such legal proceeding against such third party. Collagen shall
retain all monetary recoveries or awards resulting from such legal proceeding.
Upon Collagen' request, Technologies shall provide reasonable assistance to
Collagen in any such legal proceeding
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initiated by Collagen, including without limitation providing documentation and
testimony and joining in such legal proceeding if required, provided that all
expenses incurred by Technologies for such assistance shall be reimbursed by
Collagen. If Collagen declines to initiate or fails to initiate within 90 days
after delivery of the Notice of Infringement a legal proceeding against such
third party where such alleged infringement or misappropriation relates to
Improvements owned by Technologies and licensed to Collagen, then Technologies
shall have the right, but not the obligation, to initiate a legal proceeding
against such third party at its expense and retain any monetary recoveries or
awards resulting therefrom. Upon Technologies' request, Collagen shall provide
reasonable assistance to Technologies in any such legal proceeding initiated by
Technologies, including without limitation providing documentation and testimony
and joining in such legal proceeding if required, provided that all expenses
incurred by Collagen for such assistance shall be reimbursed by Technologies.
(ii) If the alleged infringement or misappropriation by a
third party is of Licensed Technology, Persistence Technology (if and to the
extent licensed to Collagen pursuant to the Persistence Agreement) or
Recombinant Technology (if and to the extent licensed to Collagen pursuant to
the Recombinant Agreement) in the Collagen Field, then Collagen shall have the
right to elect to initiate a legal proceeding against such third party, together
with the right to enforce and collect any judgment thereon. Collagen shall have
control of such legal proceeding or settlement thereof; provided, however, that:
(a) Collagen notifies Technologies in writing of such election within 90 days
after the Notice of Infringement has been delivered and (b) Collagen shall not
enter into any settlement of such legal proceeding without the approval of
Technologies, which approval shall not be unreasonably withheld. If Collagen
does not initiate such legal proceeding within 90 days after delivery of the
Notice of Infringement, or notifies Technologies that it declines to initiate
such legal proceeding, then Technologies shall have the right, but not the
obligation, to initiate a legal proceeding against such third party.
Technologies shall have control of such legal proceeding or settlement thereof,
provided that it shall not enter into any settlement of such legal proceeding
without the approval of Collagen, which approval shall not be unreasonably
withheld. Each party shall provide reasonable assistance to the party initiating
the legal proceeding, including without limitation, providing documentation and
testimony and joining in such legal proceeding if required. Without regard to
which party initiates the legal proceeding, all costs and expenses associated
with such legal proceeding, including any costs incurred for assistance, and all
monetary recoveries and awards resulting from such legal proceeding shall be
allocated seventy-five percent (75%) to Collagen and twenty-five percent (25%)
to Technologies.
(c) INFRINGEMENT OUTSIDE THE COLLAGEN FIELD.
If the alleged infringement or misappropriation by a third
party is of Retained Technology, Transferred Technology, Improvements,
Persistence Technology or Recombinant Technology outside of the Collagen Field,
then Technologies shall have the right to initiate a legal proceeding against
such third party, together with the right to enforce and collect any judgment
thereon. Technologies shall have control and shall bear all costs and expenses
associated with such legal proceeding against such third party. Technologies
shall retain all monetary recoveries or awards resulting from such legal
proceeding. Upon Technologies'
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request, Collagen shall provide reasonable assistance to Technologies in any
such legal proceeding initiated by Technologies, including without limitation
providing documentation and testimony and joining in such legal proceeding if
required, provided that all expenses incurred by Collagen for such assistance
shall be reimbursed by Technologies. If Technologies declines to initiate or
fails to initiate within 90 days after delivery of the Notice of Infringement a
legal proceeding against such third party where such alleged infringement or
misappropriation relates to Retained Technology or Improvements owned by
Collagen and licensed to Technologies, then Collagen shall have the right to
initiate a legal proceeding against such third party at its expense and retain
any monetary recoveries or awards resulting therefrom. Upon Collagen's request,
Technologies shall provide reasonable assistance to Collagen in any such legal
proceeding initiated by Collagen, including without limitation providing
documentation and testimony and joining in such legal proceeding if required,
provided that all expenses incurred by Technologies for such assistance shall be
reimbursed by Collagen.
(d) INFRINGEMENT IN AND OUTSIDE THE COLLAGEN FIELD.
If a third party is allegedly infringing or
misappropriating Retained Technology, Transferred Technology, Improvements,
Persistence Technology (if and to the extent licensed to Collagen pursuant to
the Persistence Agreement) or Recombinant Technology (if and to the extent
licensed to Collagen pursuant to the Recombinant Agreement) both in and outside
the Collagen Field, then the parties shall cooperate with each other and
negotiate in good faith an arrangement for enforcing their Intellectual Property
Rights against such third party.
5.2 THIRD PARTY CLAIMS.
(a) COLLAGEN INDEMNIFICATION. In the event that a Third Party
Claim is brought or filed against the Technologies Indemnitees for any alleged
infringement or misappropriation of any third party Intellectual Property Rights
based on or arising out of: (i) Collagen's making, using, selling, offering for
sale, marketing or promoting technology, products or processes incorporating
Retained Technology in the Collagen Field after the Effective Date or (ii) the
combination by Collagen of any technology, product or process incorporating
Persistence Technology or Recombinant Technology with another product or
process, or the modification by Collagen of any technology, product or process
incorporating Persistence Technology or Recombinant Technology, where any
Liability would not have occurred but for such combination or modification, then
Collagen will have the obligation to defend, indemnify and hold harmless the
Technologies Indemnitees against such Third Party Claim. Collagen agrees to pay
any Liabilities entered against such Technologies Indemnitees relating to,
arising out of or resulting from such Third Party Claim.
(b) TECHNOLOGIES INDEMNIFICATION. In the event that a Third Party
Claim is brought or filed against the Collagen Indemnitees for any alleged
infringement or misappropriation of any third party Intellectual Property Rights
based on or arising out of: (i) Collagen's making, using, selling, offering for
sale, marketing or promoting technology, products or processes incorporating
Transferred Technology outside the Collagen Field before the Effective Date,
(ii) Collagen's making, using, selling, offering for sale, marketing or
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promoting products or processes incorporating Persistence Technology or
Recombinant Technology (whether in or outside the Collagen Field) prior to the
Effective Date, (iii) Technologies' making, using, selling, offering for sale,
marketing or promoting products or processes incorporating Transferred
Technology, Persistence Technology and Recombinant Technology outside the
Collagen Field after the Effective Date, or (iv) Collagen's making, using,
selling, offering for sale, marketing or promoting products or processes
incorporating Persistence Technology or Recombinant Technology within the
Collagen Field after the Effective Date, then Technologies will have the
obligation to defend, indemnify and hold harmless the Collagen Indemnitees
against any such Third Party Claims; provided, however, that Technologies shall
not be obligated to indemnify Collagen pursuant to this Section 5.2(b) to the
extent that any Liability is the result of: (i) the combination by Collagen of
any technology, product or process incorporating Persistence Technology or
Recombinant Technology with another product or process, or the modification by
Collagen of any technology, product or process incorporating Persistence
Technology or Recombinant Technology, where such Liability would not have
occurred but for such combination or modification or (ii) any unauthorized use
by Collagen of Persistence Technology or Recombinant Technology, including
without limitation any use of Persistence Technology prior to execution of the
Persistence Agreement. Subject to the limitations herein, Technologies agrees to
pay any Liabilities entered against such Collagen Indemnitees relating to,
arising out of or resulting from such Third Party Claim.
(c) SHARED DEFENSE. In the event that any Third Party Claim is
brought or filed against Collagen, any member of the Collagen Group,
Technologies or any member of the Technologies Group for any infringement or
misappropriation of any third party Intellectual Property Rights based on or
arising out of: (i) Collagen's making, using, selling, offering for sale,
marketing or promoting technology, products or processes incorporating Retained
Technology or Transferred Technology in the Collagen Field prior to the
Effective Date or (ii) Collagen's making, using, selling, offering for sale,
marketing or promoting technology, products or processes incorporating Licensed
Technology in the Collagen Field after the Effective Date, then Collagen will
have the first right to defend against or settle any Third Party Claim;
provided, however, that Technologies: (i) cooperates fully with Collagen in such
defense; and (b) Technologies funds twenty-five percent (25%) of all expenses
associated with such defense, including without limitation attorneys and expert
fees and court or other administrative agency costs. Technologies will have the
right to participate, in a non-controlling manner and at its sole expense in
such defense by Collagen. If Collagen declines to defend such Third Party Claim,
then Technologies shall have the right to defend or settle such Third Party
Claim; provided that Collagen: (x) cooperates fully with Technologies in such
defense and (y) Collagen funds seventy-five percent (75%) of all expenses
associated with such defense, including without limitation attorneys and expert
fees and court or other administrative agency costs. Collagen will have the
right to participate, in a non-controlling manner and at its sole expense in
such defense by Technologies. Without regard to which party controls defense of
such third party claim, suit or proceeding, each party agrees that it will: (k)
share with the other party any Liabilities or monetary recoveries resulting from
such Third Party Claim, with twenty-five (25%) of such amount payable to or by
Technologies, and the remainder of such amount payable to or by Collagen; and
(l) not settle such Third Party Claim prior to receiving approval from the other
party, which approval shall not be unreasonably withheld.
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(d) Neither party shall have any obligation to indemnify or
defend any Third Party Claim brought or filed against the other party or any
member of the other party's group based on or arising out of any Improvements.
(e) The provisions of Sections 4.3, 4.4, 4.5 and 4.7 shall apply
to this Section 5.2 to the extent applicable and not inconsistent with the
provisions of this Section 5.2.
(f) THE REMEDIES IN THIS SECTION 5.2 SHALL STATE THE ENTIRE
LIABILITY AND THE EXCLUSIVE REMEDY OF THE PARTIES AND ANY MEMBERS OF THEIR
RESPECTIVE GROUPS FOR ANY ALLEGED INFRINGEMENT OR MISAPPROPRIATION OF THE
INTELLECTUAL PROPERTY RIGHTS OF A THIRD PARTY RELATING TO THE RETAINED
TECHNOLOGY, TRANSFERRED TECHNOLOGY, LICENSED TECHNOLOGY, IMPROVEMENTS,
RECOMBINANT TECHNOLOGY OR PERSISTENCE TECHNOLOGY.
ARTICLE VI
INTERIM OPERATIONS AND CERTAIN OTHER MATTERS
6.1 INSURANCE MATTERS.
(a) Technologies agrees that it will pay to Collagen the amounts
provided for in the Services Agreement or the Benefits Agreement in respect of
the period from the Effective Date until such time as Technologies and Collagen
determine that it is appropriate for Technologies to obtain its own insurance
coverage (which, in any event, shall be no later than the Distribution Date).
Such amounts shall be subject to adjustment in the event of any change in the
premiums charged to Collagen for the Insurance Policies, which adjustment shall
be equal to: (i) in the case of any premium change that is a result of changes
in the factual criteria for the insured party (e.g., number of employees,
revenue, prior claims history), any increase or decrease in such premiums
attributable to changes at Technologies or the Technologies Group shall result
in a dollar for dollar adjustment to the amounts payable by Technologies to
Collagen pursuant to this Section 6.1(a) or (ii) in the case of any other
premium charge, any increase or decrease in such premiums shall result in a
proportionate adjustment to the amounts payable by Technologies to Collagen
pursuant to this Section 6.1(a). Collagen and Technologies agree to cooperate in
good faith to provide for an orderly transition of insurance coverage from the
Effective Date until such time as Technologies and Collagen determine that it is
appropriate for Technologies to obtain its own insurance coverage (which, in any
event, shall be no later than the Distribution Date), and for the treatment of
any Insurance Policies that will remain in effect following the Effective Date
on a mutually agreeable basis. In no event shall Collagen, any other member of
the Collagen Group or any Collagen Indemnitee have any liability or obligation
whatsoever to any member of the Technologies Group in the event that any
Insurance Policy or other contract or policy of insurance shall be terminated or
otherwise cease to be in effect for any reason (other than failure to pay when
due any premium or other amount due thereunder), shall be unavailable or
inadequate to cover any Liability of any member of the Technologies Group for
any reason whatsoever or shall not be renewed or extended beyond the current
expiration date.
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(b) (i) Except as otherwise provided in any Ancillary Agreement,
the parties intend by this Agreement that Technologies and each other member of
the Technologies Group be successors-in-interest to all rights that any member
of the Technologies Group may have as of the Effective Date as a subsidiary,
affiliate, division or department of Collagen prior to the Effective Date under
any policy of insurance issued to Collagen by any insurance carrier unaffiliated
with Collagen or under any agreements related to such policies executed and
delivered prior to the Effective Date, including any rights such member of the
Technologies Group may have, as an insured or additional named insured,
subsidiary, affiliate, division or department, to avail itself of any such
policy of insurance or any such agreements related to such policies as in effect
prior to the Effective Date. At the request of Technologies, Collagen shall take
all reasonable steps, including the execution and delivery of any instruments,
to effect the foregoing; provided, however, that Collagen shall not be required
to pay any amounts, waive any rights or incur any Liabilities in connection
therewith.
(ii) Except as otherwise contemplated by any Ancillary
Agreement, after the Effective Date, none of Collagen or Technologies or any
member of their respective Groups shall, without the consent of the other,
provide any such insurance carrier with a release, or amend, modify or waive any
rights under any such policy or agreement, if such release, amendment,
modification or waiver would adversely affect any rights or potential rights of
any member of the other Group thereunder; provided however that the foregoing
shall not (A) preclude any member of any Group from presenting any claim or from
exhausting any policy limit, (B) require any member of any Group to pay any
premium or other amount or to incur any Liability or (C) require any member of
any Group to renew, extend or continue any policy in force. Each of Technologies
and Collagen will share such information as is reasonably necessary in order to
permit the other to manage and conduct its insurance matters in an orderly
fashion.
(c) This Agreement shall not be considered as an attempted
assignment of any Insurance Policy or other policy of insurance or as a contract
of insurance and shall not be construed to waive any right or remedy of any
member of the Collagen Group in respect of any Insurance Policy or any other
contract or policy of insurance.
(d) Technologies does hereby, for itself and each other member of
the Technologies Group, agree that no member of the Collagen Group or any
Collagen Indemnitee shall have any Liability whatsoever as a result of the
Insurance Policies and practices of Collagen and its Affiliates as in effect at
any time, including as a result of the level or scope of any such insurance, the
creditworthiness of any insurance carrier, the terms and conditions of any
policy, the adequacy or timeliness of any notice to any insurance carrier with
respect to any claim or potential claim or otherwise.
(e) Nothing in this Agreement shall be deemed to restrict any
member of the Technologies Group from acquiring at its own expense any other
insurance policy in respect of any Liabilities or covering any period.
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6.2 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) Technologies acknowledges on behalf of itself and each other
member of the Technologies Group that it is aware that the Retained Receivables
are Excluded Assets and that certain Persons that are account debtors with
respect to the Transferred Receivables (or that in the future may otherwise
become payable to a member of the Technologies Group) are also account debtors
with respect to the Retained Receivables. Collagen agrees that from and after
the Effective Date and prior to June 30, 1999, unless otherwise specifically
directed by Technologies, Collagen, as agent for Technologies, will take all
commercially reasonable steps consistent with the current practices of the
Collagen Business to service and collect the Transferred Receivables.
Technologies will cooperate to establish as promptly as practicable mutually
acceptable operational procedures. If, in order to collect any Transferred
Receivables, Collagen is required to engage a collection agency or to institute
legal proceedings or any other Action it shall be entitled to be reimbursed for
its reasonable out-of-pocket costs and expenses incurred in connection
therewith. After June 30, 1999, the parties will negotiate in good faith with
respect to the final disposition of any then outstanding Transferred
Receivables.
(b) Each of Collagen and Technologies shall deliver to the other
such schedules and other information with respect to the Retained Receivables
and the Transferred Receivables as each shall reasonably request from time to
time in order to permit such parties to reconcile their respective records and
to monitor the collection of all accounts receivable (whether Transferred
Receivables or Retained Receivables). Each of Technologies and Collagen shall
afford the other reasonable access to its books and records relating to such
accounts receivable. Without limiting the foregoing, Collagen shall at all times
maintain the ability to provide to Technologies promptly upon request a true and
complete schedule of all Transferred Receivables due and owing as of the end of
the prior month.
(c) By the 3rd business day of each month, Collagen hereby
irrevocably agrees to pay over, or cause to be paid over, in immediately
available funds to Technologies, at no cost or charge to Technologies or any of
its Affiliates (other than any member of the Collagen Group), any and all
amounts which were received during the immediately preceding month by any member
of the Collagen Group in respect of the Transferred Receivables. Any such
amounts not paid over to Technologies by the date specified in the first
sentence of this Section 6.2(c) shall bear interest at the Prime Rate plus 2%
per annum.
(d) Nothing in this Agreement or any Ancillary Agreement shall be
construed to grant to any member of the Collagen Group any right, title or
interest in any Transferred Receivable and no member of the Collagen Group shall
have any right or power to, and no member of the Collagen Group shall, grant or
suffer to exist any right of set off, lien or any other Security Interest in any
Transferred Receivables or proceeds thereof. Collagen will not, and it will not
permit any member of the Collagen Group to, extend or otherwise change the
amount or other terms of payment of any Transferred Receivable, unless Collagen
shall have paid to Technologies an amount equal to the full amount of such
Transferred Receivable. Collagen hereby irrevocably and unconditionally agrees
that it shall not assert (and it shall not permit any member of the Collagen
Group to assert) any offsets, claims, counterclaims or defenses in
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respect of the Transferred Receivables or its obligations to pay over any such
Transferred Receivables to Technologies hereunder (whether existing on the
Effective Date or arising thereafter and whether or not relating to the
transactions contemplated by this Agreement, any Ancillary Agreement or
otherwise).
(e) Technologies shall retain the right to collect or seek to
collect in such manner as it may in its sole discretion determine all or any
portion of the Transferred Receivables.
6.3 CERTAIN BUSINESS MATTERS.
(a) Except as set forth in this Agreement or any Ancillary
Agreement, no member of any Group shall have any duty to refrain from (i)
engaging in the same or similar activities or lines of business as any member of
any other Group, (ii) doing business with any potential or actual supplier or
customer of any member of any other Group or (iii) engaging in, or refraining
from, any other activities whatsoever relating to any of the potential or actual
suppliers or customers of any member of any other Group.
(b) Each of Collagen and Technologies is aware that from time to
time certain business opportunities may arise which more than one Group may be
financially able to undertake, and which are, from their nature, in the line of
more than one Group's business and are of practical advantage to more than one
Group. In connection therewith, the parties agree that if prior to (but not
following) the Distribution Date, any member of either the Collagen Group or the
Technologies Group acquires knowledge of an opportunity that meets the foregoing
standard with respect to more than one Group, neither Collagen nor Technologies
shall have any duty to communicate or offer such opportunity to any of the
others and may pursue or acquire such opportunity for itself, or direct such
opportunity to any other Person, unless (i) such opportunity relates primarily
to the Technologies Business, in which case the party that acquires knowledge of
such opportunity shall use its reasonable best efforts to communicate and offer
such opportunity to Technologies, (ii) such opportunity relates primarily to the
Collagen Business, in which case the party that acquires knowledge of such
opportunity shall use its reasonable efforts to communicate and offer such
opportunity to Collagen or (iii) such opportunity relates both to the Collagen
Business and the Technologies Business but not primarily to either one, in which
case the party that acquires such knowledge of opportunity shall use its
reasonable best efforts to communicate such opportunity to the Collagen Board of
Directors and the Collagen Board of Directors shall determine whether such
opportunity shall first be offered to Technologies or to Collagen.
Notwithstanding the foregoing, no party shall be required to so communicate or
offer any such opportunity if it would result in the breach of any contract or
agreement or violate any applicable law, rule or regulation of any Governmental
Authority and no party shall have any obligation to provide financing (or
provide any other assistance whatsoever) to any other party in connection with
any such opportunity. In the event the foregoing clause (i) or (ii) is
applicable, no party, other than the party to whom the opportunity must be
offered in accordance with such clauses, shall pursue or acquire such
opportunity for itself, or direct such opportunity to any other Person, unless
the party to whom
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the opportunity is required to be offered does not within a reasonable period of
time begin to pursue, or does not thereafter continue to pursue, such
opportunity diligently and in good faith.
6.4 LATE PAYMENTS. Except as expressly provided to the contrary in this
Agreement or in any Ancillary Agreement, any amount not paid when due pursuant
to this Agreement or any Ancillary Agreement (and any amounts billed or
otherwise invoiced or demanded and properly payable that are not paid within 30
days of such bill, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus 2%.
ARTICLE VII
EXCHANGE OF INFORMATION; CONFIDENTIALITY
7.1 AGREEMENT FOR EXCHANGE OF INFORMATION; ARCHIVES.
(a) Each of Collagen and Technologies, on behalf of its
respective Group, agrees to provide, or cause to be provided, to the other
Group, at any time before or after the Effective Date, as soon as reasonably
practicable after written request therefor, any Information in the possession or
under the control of such respective Group which the requesting party reasonably
needs (i) to comply with reporting, disclosure, filing or other requirements
imposed on the requesting party (including under applicable securities or tax
laws) by a Governmental Authority having jurisdiction over the requesting party,
(ii) for use in any other judicial, regulatory, administrative, tax or other
proceeding or in order to satisfy audit, accounting, claims, regulatory,
litigation, tax or other similar requirements or (iii) to comply with its
obligations under this Agreement or any Ancillary Agreement; provided, however,
that in the event that any party determines that any such provision of
Information could be commercially detrimental, violate any law or agreement, or
waive any attorney client privilege, the parties shall take all reasonable
measures to permit the compliance with such obligations in a manner that avoids
any such harm or consequence.
(b) After the Effective Date, each of Collagen and Technologies
shall have access during regular business hours (as in effect from time to time)
to the documents, data and objects of historic significance that relate to the
business conducted by such party that are in the possession of the other party.
Each party may obtain from the other party copies (but not originals), in paper
or electronic format, of documents, data or other objects of historic
significance for bona fide business purposes and the party obtaining such
documents, data or other objects of historic significance shall comply with any
rules, procedures or other requirements, and shall be subject to any
restrictions (including prohibitions on removal of specified objects), that are
then applicable to the other party.
(c) After the Effective Date, (i) Collagen shall maintain in
effect at its own cost and expense adequate systems and controls to the extent
necessary to enable the members of the Technologies Group to satisfy their
respective financial reporting, accounting, audit, adverse event reporting and
other obligations and (ii) Collagen shall provide, or cause to be provided, to
Technologies in such form as Technologies shall request, at no charge to
Technologies, all financial and other data and information as Technologies
determines necessary or advisable in order to prepare Technologies financial
statements and reports or filings with any Governmental
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Authority, including, without limitation, the Commission and the United States
Food and Drug Administration.
7.2 OWNERSHIP OF INFORMATION. Any Information owned by one Group that is
provided to a requesting party pursuant to Section 7.1 shall be deemed to remain
the property of the providing party. Unless specifically set forth herein,
nothing contained in this Agreement shall be construed as granting or conferring
rights of license or otherwise in any such Information.
7.3 COMPENSATION FOR PROVIDING INFORMATION. The party requesting such
Information agrees to reimburse the other party for the reasonable out-of-pocket
costs, if any, of creating, gathering and copying such Information, to the
extent that such costs are incurred for the benefit of the requesting party. No
charge shall be required for reasonable personnel time of a party incurred in
providing access to Information in its existing format or documentation,
including, without limitation, in providing access to existing databases. Except
as may be otherwise specifically provided elsewhere in this Agreement or in any
other agreement between the parties, such costs shall be computed in accordance
with the providing party's standard methodology and procedures.
7.4 RECORD RETENTION. To facilitate the possible exchange of Information
pursuant to this Article VII and other provisions of this Agreement after the
Distribution Date, the parties agree to use their reasonable best efforts to
retain all Information in their respective possession or control on the
Distribution Date in accordance with their policies in effect from time to time.
Each party will notify the other party of any material changes in its record
retention policy made after the Effective Date.
7.5 LIMITATION OF LIABILITY. No party shall have any liability to any
other party in the event that any Information exchanged or provided pursuant to
this Agreement which is an estimate or forecast, or which is based on an
estimate or forecast, is found to be inaccurate, or incomplete in the absence of
willful misconduct by the party providing such Information. No party shall have
any liability to any other party if any Information is destroyed after
reasonable best efforts by such party to comply with the provisions of Section
7.4.
7.6 OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The rights
and obligations granted under this Article VII are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in any Ancillary Agreement.
7.7 PRODUCTION OF WITNESSES; RECORDS; COOPERATION.
(a) After the Effective Date, except in the case of an
adversarial Action by one party against another party (which shall be governed
by such discovery rules as may be applicable under Article VIII or otherwise),
each party hereto shall use its reasonable best efforts to make available to
each other party, upon written request, the former, current and future
directors, officers, employees, other personnel and agents of the members of its
respective Group as witnesses and any books, records or other documents within
its control or which it otherwise
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has the ability to make available, to the extent that any such person (giving
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with any Action in which the requesting party may from
time to time be involved, regardless of whether such Action is a matter with
respect to which indemnification may be sought under this Agreement. The
requesting party shall bear all costs and expenses (including allocated costs of
in-house counsel and other personnel) in connection therewith.
(b) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the other parties shall make
available to such Indemnifying Party, upon written request, the former, current
and future directors, officers, employees, other personnel and agents of the
members of its respective Group as witnesses and any books, records or other
documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
such defense, settlement or compromise and shall otherwise cooperate in such
defense, settlement or compromise.
(c) Without limiting the foregoing, the parties shall cooperate
and consult to the extent reasonably necessary with respect to any Actions.
(d) Without limiting any provision of this Section 7.7, each of
the parties agrees to cooperate, and to cause each member of its respective
Group to cooperate, with each other in the defense of any infringement or
similar claim with respect any intellectual property and shall not claim to
acknowledge, or permit any member of its respective Group to claim to
acknowledge, the validity or infringing use of any intellectual property of a
third Person in a manner that would hamper or undermine the defense of such
infringement or similar claim.
(e) The obligation of the parties to provide witnesses pursuant
to this Section 7.7 is intended to be interpreted in a manner so as to
facilitate cooperation and shall include the obligation to provide as witnesses
inventors and other officers without regard to whether the witness or the
employer of the witness could assert a possible business conflict (subject to
the exception set forth in the first sentence of Section 7.7(a)).
(f) In connection with any matter contemplated by this Section
7.7, the parties will enter into a mutually acceptable joint defense agreement
so as to maintain to the extent practicable any applicable attorney-client
privilege or work product immunity of any member of any Group.
7.8 CONFIDENTIALITY.
(a) Subject to Section 7.9, each of Collagen and Technologies, on
behalf of itself and each member of its respective Group, agrees to hold, and to
cause its respective directors, officers, employees, agents, accountants,
counsel and other advisors and representatives to hold, in strict confidence,
with at least the same degree of care that applies to Collagen's confidential
and proprietary information pursuant to policies in effect as of the
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Effective Date, all Information concerning each such other Group that is either
in its possession (including Information in its possession prior to the
Effective Date or the Distribution Date) or furnished by any such other Group or
its respective directors, officers, employees, agents, accountants, counsel and
other advisors and representatives at any time pursuant to this Agreement, any
Ancillary Agreement or otherwise, and shall not use any such Information other
than for such purposes as shall be expressly permitted hereunder or thereunder,
except, in each case, to the extent that such Information has been (i) in the
public domain through no fault of such party or any member of such Group or any
of their respective directors, officers, employees, agents, accountants, counsel
and other advisors and representatives, (ii) later lawfully acquired from other
sources by such party (or any member of such party's Group) which sources are
not themselves bound by a confidentiality obligation) or (iii) independently
generated without reference to any proprietary or confidential Information of
the other party.
(b) Each party agrees not to release or disclose, or permit to be
released or disclosed, any such Information to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives who need to know such Information (who shall be advised of
their obligations hereunder with respect to such Information), except in
compliance with Section 7.9. Without limiting the foregoing, when any
Information is no longer needed for the purposes contemplated by this Agreement
or any Ancillary Agreement, each party will promptly after request of the other
party either return to the other party all Information in a tangible form
(including all copies thereof and all notes, extracts or summaries based
thereon) or certify to the other party that it has destroyed such Information
(and such copies thereof and such notes, extracts or summaries based thereon).
7.9 PROTECTIVE ARRANGEMENTS. In the event that any party or any member
of its Group either determines on the advice of its counsel that it is required
to disclose any Information pursuant to applicable law or receives any demand
under lawful process or from any Governmental Authority to disclose or provide
Information of any other party (or any member of any other party's Group) that
is subject to the confidentiality provisions hereof, such party shall notify the
other party prior to disclosing or providing such Information and shall
cooperate at the expense of the requesting party in seeking any reasonable
protective arrangements requested by such other party. Subject to the foregoing,
the Person that received such request may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Governmental Authority.
ARTICLE VIII
ARBITRATION; DISPUTE RESOLUTION
8.1 AGREEMENT TO ARBITRATE. Except as otherwise specifically provided in
any Ancillary Agreement, the procedures for discussion, negotiation and
arbitration set forth in this Article VIII shall apply to all disputes,
controversies or claims (whether contract, tort or otherwise) that may arise out
of or relate to, or arise under or in connection with, this Agreement or any
Ancillary Agreement, or the transactions contemplated hereby or thereby
(including all actions taken in furtherance of the transactions contemplated
hereby or thereby on or prior to the Effective Date), or the commercial or
economic relationship of the parties relating hereto or
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thereto, between or among any member of the Collagen Group and the Technologies
Group. Each party agrees on behalf of itself and each member of its respective
Group that the procedures set forth in this Article VIII shall be the sole and
exclusive remedy in connection with any dispute, controversy or claim relating
to any of the foregoing matters and irrevocably waives any right to commence any
Action in or before any Governmental Authority, except as expressly provided in
Sections 8.7(b) and 8.8 and except to the extent provided under the Arbitration
Act in the case of judicial review of arbitration results or awards. Each party
on behalf of itself and each member of its respective Group irrevocably waives
any right to any trial by jury with respect to any claim, controversy or dispute
set forth in the first sentence of this Section 8.1.
8.2 ESCALATION.
(a) It is the intent of the parties to use their respective
reasonable best efforts to resolve expeditiously any dispute, controversy or
claim between or among them with respect to the matters covered hereby or by any
Ancillary Agreement that may arise from time to time on a mutually acceptable
negotiated basis. In furtherance of the foregoing, any party involved in a
dispute, controversy or claim may deliver a notice (an "Escalation Notice")
demanding an in-person meeting involving representatives of the parties at a
senior level of management (or if the parties agree, of the appropriate
strategic business unit or division within such entity). A copy of any such
Escalation Notice shall be given to the Chief Financial Officer, or like officer
or official, of each party involved in the dispute, controversy or claim (which
copy shall state that it is an Escalation Notice pursuant to this Agreement).
Any agenda, location or procedures for such discussions or negotiations between
the parties may be established by the parties from time to time; provided,
however, that the parties shall use their reasonable best efforts to meet within
30 days of the Escalation Notice.
(b) The parties shall, upon request by either party, retain a
mediator to aid the parties in their discussions and negotiations by informally
providing advice to the parties. Any opinion expressed by the mediator shall be
strictly advisory and shall not be binding on the parties, nor shall any opinion
expressed by the mediator be admissible in any arbitration proceedings. The
mediator may be chosen from a list of mediators previously selected by the
parties or by other agreement of the parties. Costs of the mediation shall be
borne equally by the parties involved in the matter, except that each party
shall be responsible for its own expenses. Mediation shall be a prerequisite to
a demand for arbitration under Section 8.3.
8.3 DEMAND FOR ARBITRATION.
(a) At any time after the first to occur of (i) the date of the
meeting actually held pursuant to the applicable Escalation Notice or (ii) 45
days after the delivery of an Escalation Notice (as applicable, the "Arbitration
Demand Date"), any party involved in the dispute, controversy or claim
(regardless of whether such party delivered the Escalation Notice) may, unless
the Applicable Deadline has occurred, make a written demand (the "Arbitration
Demand Notice") that the dispute be resolved by binding arbitration, which
Arbitration Demand Notice shall be given to the parties to the dispute,
controversy or claim in the manner set forth in Section 11.5. In the event that
any party shall deliver an Arbitration Demand Notice to another
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party, such other party may itself deliver an Arbitration Demand Notice to such
first party with respect to any related dispute, controversy or claim with
respect to which the Applicable Deadline has not passed without the requirement
of delivering an Escalation Notice. No party may assert that the failure to
resolve any matter during any discussions or negotiations, the course of conduct
during the discussions or negotiations or the failure to agree on a mutually
acceptable time, agenda, location or procedures for the meeting, in each case,
as contemplated by Section 8.2, is a prerequisite to a demand for arbitration
under Section 8.3.
(b) Except as may be expressly provided in any Ancillary
Agreement, any Arbitration Demand Notice may be given until one year after the
later of the occurrence of the act or event giving rise to the underlying claim
or the date on which such act or event was, or should have been, in the exercise
of reasonable due diligence, discovered by the party asserting the claim (as
applicable and as it may in a particular case be specifically extended by the
parties in writing, the "Applicable Deadline"). Any discussions, negotiations or
mediations between the parties pursuant to this Agreement or otherwise will not
toll the Applicable Deadline unless expressly agreed in writing by the parties.
Each of the parties agrees on behalf of itself and each member of its Group that
if an Arbitration Demand Notice with respect to a dispute, controversy or claim
is not given prior to the expiration of the Applicable Deadline, as between or
among the parties and the members of their Groups, such dispute, controversy or
claim will be barred. Subject to Sections 8.7(d) and 8.8, upon delivery of an
Arbitration Demand Notice pursuant to Section 8.3(a) prior to the Applicable
Deadline, the dispute, controversy or claim shall be decided by a sole
arbitrator in accordance with the rules set forth in this Article VIII.
8.4 ARBITRATORS.
(a) Within 15 days after a valid Arbitration Demand Notice is
given, the parties involved in the dispute, controversy or claim referenced
therein shall attempt to select a sole arbitrator satisfactory to all such
parties.
(b) In the event that such parties are not able jointly to select
a sole arbitrator within such 15-day period, such parties shall each appoint an
arbitrator within 30 days after delivery of the Arbitration Demand Notice. If
one party appoints an arbitrator within such time period and the other party or
parties fail to appoint an arbitrator within such time period, the arbitrator
appointed by the one party shall be the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected pursuant
to Section 8.4(a) or Section 8.4(b) and, instead, two or three arbitrators are
selected pursuant to paragraph (b) above, the two or three arbitrators will,
within 30 days after the appointment of the later of them to be appointed,
select an additional arbitrator who shall act as the sole arbitrator of the
dispute. After selection of such sole arbitrator, the initial arbitrators shall
have no further role with respect to the dispute. Any arbitrator selected
pursuant to this Section 8.4(c) shall be disinterested with respect to any of
the parties and the matter and shall be reasonably competent in the applicable
subject matter.
(d) The sole arbitrator selected pursuant to Section 8.4(a),
Section 8.4(b) or Section 8.4(c) will set a time for the hearing of the matter
which will commence no later than 90
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days after the date of appointment of the sole arbitrator pursuant to Section
8.4(a), Section 8.4(b) or Section 8.4(c) and which hearing will be no longer
than 30 days (unless in the judgment of the arbitrator the matter is unusually
complex and sophisticated and thereby requires a longer time, in which event
such hearing shall be no longer than 90 days). The final decision of such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be San Francisco,
California, unless otherwise agreed by the parties.
8.5 HEARINGS. Within the time period specified in Section 8.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and verified witness statements, filed simultaneously,
and responses, if necessary in the judgment of the arbitrator or both the
parties. If the arbitrator deems it to be essential to a fair resolution of the
dispute, live cross-examination or direct examination may be permitted, but is
not generally contemplated to be necessary. The arbitrator shall actively manage
the arbitration with a view to achieving a just, speedy and cost-effective
resolution of the dispute, claim or controversy. The arbitrator may, in his or
her discretion, set time and other limits on the presentation of each party's
case, its memoranda or other submissions, and refuse to receive any proffered
evidence, which the arbitrator, in his or her discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature. Except as
otherwise set forth herein, any arbitration hereunder will be conducted in
accordance with the American Arbitration Association then prevailing (except
that the arbitration will not be conducted under the auspices of the American
Arbitration Association and the fee schedule of the American Arbitration
Association will not apply). Except as expressly set forth in Section 8.8(b),
the decision of the arbitrator will be final and binding on the parties, and
judgment thereon may be had and will be enforceable in any court having
jurisdiction over the parties. Arbitration awards will bear interest at an
annual rate of the Prime Rate plus 2% per annum. To the extent that the
provisions of this Agreement and the prevailing rules of the American
Arbitration Association conflict, the provisions of this Agreement shall govern.
8.6 DISCOVERY AND CERTAIN OTHER MATTERS.
(a) Any party involved in the applicable dispute may request
limited document production from the other party or parties of specific and
expressly relevant documents, with the reasonable expenses of the producing
party incurred in such production paid by the requesting party. Any such
discovery (which rights to documents shall be substantially less than document
discovery rights prevailing under the Federal Rules of Civil Procedure) shall be
conducted expeditiously and shall not cause the hearing provided for in Section
8.5 to be adjourned except upon consent of all parties involved in the
applicable dispute or upon an extraordinary showing of cause demonstrating that
such adjournment is necessary to permit discovery essential to a party to the
proceeding. Depositions, interrogatories or other forms of discovery (other than
the document production set forth above) shall not occur except by consent of
the parties involved in the applicable dispute. Disputes concerning the scope of
document production and enforcement of the document production requests will be
determined by written
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agreement of the parties involved in the applicable dispute or, failing such
agreement, will be referred to the arbitrator for resolution. All discovery
requests will be subject to the proprietary rights and rights of privilege of
the parties, and the arbitrator will adopt procedures to protect such rights and
to maintain the confidential treatment of the arbitration proceedings (except as
may be required by law). Subject to the foregoing, the arbitrator shall have the
power to issue subpoenas to compel the production of documents relevant to the
dispute, controversy or claim.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of this Agreement or any Ancillary
Agreement, and will have no authority or power to limit, expand, alter, amend,
modify, revoke or suspend any condition or provision of this Agreement or any
Ancillary Agreement; it being understood, however, that the arbitrator will have
full authority to implement the provisions of this Agreement or any Ancillary
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the arbitrator
shall not have (i) any authority in excess of the authority a court having
jurisdiction over the parties and the controversy or dispute would have absent
the arbitration provisions or (ii) any right or power to award punitive or
treble damages. It is the intention of the parties that in rendering a decision
the arbitrator give effect to the applicable provisions of this Agreement and
the Ancillary Agreements and follow applicable law (it being understood and
agreed that this sentence shall not give rise to a right of judicial review of
the arbitrator's award).
(c) If a party fails or refuses to appear at and participate in
an arbitration hearing after due notice, the arbitrator may hear and determine
the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party
involved in the matter, except that each party will be responsible for its own
attorney's fees and other costs and expenses, including the costs of witnesses
selected by such party.
8.7 CERTAIN ADDITIONAL MATTERS.
(a) Any arbitration award shall be a bare award limited to a
holding for or against a party and shall be without findings as to facts, issues
or conclusions of law (including with respect to any matters relating to the
validity or infringement of patents or patent applications) and shall be without
a statement of the reasoning on which the award rests, but must be in adequate
form so that a judgment of a court may be entered thereupon. Judgment upon any
arbitration award hereunder may be entered in any court having jurisdiction
thereof.
(b) Prior to the time at which an arbitrator is appointed
pursuant to Section 8.4, any party may seek one or more temporary restraining
orders in a court of competent jurisdiction if necessary in order to preserve
and protect the status quo. Neither the request for, or grant or denial of, any
such temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth in this Agreement and the arbitrator may dissolve,
continue or modify any such order. Any such temporary restraining order shall
remain in effect until the first
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to occur of the expiration of the order in accordance with its terms or the
dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and shall
cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Article VII and
except as may be required in order to enforce any award. Each of the parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.
(d) In the event that at any time the sole arbitrator shall fail
to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth in this Agreement for the selection of
the initial arbitrator. The extent, if any, to which testimony previously given
shall be repeated or as to which the replacement arbitrator elects to rely on
the stenographic record (if there is one) of such testimony shall be determined
by the replacement arbitrator.
8.8 LIMITED COURT ACTIONS.
(a) Notwithstanding anything in this Agreement to the contrary,
in the event that any party reasonably determines the amount in controversy in
any dispute, controversy or claim (or any series of related disputes,
controversies or claims) under this Agreement or any Ancillary Agreement is, or
is reasonably likely to be, in excess of $2.5 million and if such party desires
to commence an Action in lieu of complying with the arbitration provisions of
this Article, such party shall so state in its Arbitration Demand Notice. If the
other parties to the arbitration do not agree that the amount in controversy in
such dispute, controversy or claim (or such series of related disputes,
controversies or claims) is, or is reasonably likely to be, in excess of $2.5
million, the arbitrator selected pursuant to Section 8.4 hereof shall decide
whether the amount in controversy in such dispute, controversy or claim (or such
series of related disputes, controversies or claims) is, or is reasonably likely
to be, in excess of $2.5 million. The arbitrator shall set a date that is no
later than ten days after the date of his or her appointment for submissions by
the parties with respect to such issue. There shall not be any discovery in
connection with such issue. The arbitrator shall render his or her decision on
such issue within five days of such date so set by the arbitrator. In the event
that the arbitrator determines that the amount in controversy in such dispute,
controversy or claim (or such series of related disputes, controversies or
claims) is or is reasonably likely to be in excess of $2.5 million, the
provisions of Sections 8.4(d) and (e), 8.5, 8.6, 8.7 and 8.10 hereof shall not
apply and on or before (but, except as expressly set forth in Section 8.8(b),
not after) the tenth business day after the date of such decision, any party to
the arbitration may elect, in lieu of arbitration, to commence an Action with
respect to such dispute, controversy or claim (or such series of related
disputes, controversies or claims) in any court of competent jurisdiction. If
the arbitrator does not so determine, the provisions of this Article VIII
(including with respect to time periods) shall apply as if no determinations
were sought or made pursuant to this Section 8.8(a).
(b) In the event that an arbitration award in excess of $2.5
million is issued in any arbitration proceeding commenced hereunder, any party
may, within 60 days after the date of
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such award, submit the dispute, controversy or claim (or series of related
disputes, controversies or claims) giving rise thereto to a court of competent
jurisdiction, regardless of whether such party or any other party sought to
commence an Action in lieu of proceeding with arbitration in accordance with
Section 8.8(a). In such event, the applicable court may elect to rely on the
record developed in the arbitration or, if it determines that it would be
advisable in connection with the matter, allow the parties to seek additional
discovery or to present additional evidence. Each party shall be entitled to
present arguments to the court with respect to whether any such additional
discovery or evidence shall be permitted and with respect to all other matters
relating to the applicable dispute, controversy or claim (or series of related
disputes, controversies or claims).
8.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article VIII with
respect to all matters not subject to such dispute, controversy or claim.
8.10 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article VIII, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 11.2.
ARTICLE IX
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
9.1 FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for
elsewhere in this Agreement, each of the parties hereto shall use its reasonable
best efforts, on and after the Effective Date, to take, or cause to be taken,
all actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements.
(b) Without limiting the foregoing, on and after the Effective
Date, each party shall cooperate with the other party, and without any further
consideration, but at the expense of the requesting party, to execute and
deliver, or use its reasonable best efforts to cause to be executed and
delivered, all instruments, including instruments of conveyance, assignment and
transfer, and to make all filings with, and to obtain all consents, approvals or
authorizations of, any Governmental Authority or any other Person under any
permit, license, agreement, indenture or other instrument (including any
Consents or Governmental Approvals), and to take all such other actions as such
party may reasonably be requested to take by the other party from time to time,
consistent with the terms of this Agreement and the Ancillary Agreements, in
order to effectuate the provisions and purposes of this Agreement and the
Ancillary Agreements and the transfer of the Technologies Assets and the
assignment and assumption of the Technologies
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Liabilities and the other transactions contemplated hereby and thereby. Without
limiting the foregoing, each party will, at the reasonable request, cost and
expense of the other party, take such other actions as may be reasonably
necessary to vest in such other party good and marketable title to any Assets to
be transferred to such other party, free and clear of any Security Interest, if
and to the extent it is practicable to do so.
(c) On or prior to the Distribution Date, Collagen and
Technologies in their respective capacities as direct and indirect stockholders
of their respective Subsidiaries, shall each ratify any actions which are
reasonably necessary or desirable to be taken by Collagen, Technologies or any
other Subsidiary of Collagen, as the case may be, to effectuate the transactions
contemplated by this Agreement. On or prior to the Distribution Date, Collagen
and Technologies shall take all actions as may be necessary to approve the
stock-based employee benefit plans of Technologies in order to satisfy the
requirements of Rule 16b-3 under the Exchange Act and Section 162(m) of the
Code.
(d) The parties hereto agree to take any reasonable actions
necessary in order for the Distribution to qualify as a tax-free distribution
pursuant to Section 355 of the Code.
(e) Collagen and Technologies, and each of the members of their
respective Groups, waive (and agree not to assert against any of the others) any
claim or demand that any of them may have against any of the others for any
Liabilities or other claims relating to or arising out of: (i) the failure of
Technologies or any member of the Technologies Group, on the one hand, or of
Collagen or any member of the Collagen Group, on the other hand, to provide any
notification or disclosure required under any state Environmental Law in
connection with the Separation or the other transactions contemplated by this
Agreement, including the transfer by any member of any Group to any member of
any other Group of ownership or operational control of any Assets not previously
owned or operated by such transferee or (ii) any inadequate, incorrect or
incomplete notification or disclosure under any such state Environmental Law by
the applicable transferor. To the extent any Liability to any Governmental
Authority or any third Person arises out of any action or inaction described in
clause (i) or (ii) of this Section 9.1(e), the transferee of the applicable
Asset hereby assumes and agrees to pay any such Liability.
(f) Prior to the Distribution Date, if one or more of the parties
identifies any commercial or other service that is needed to assure a smooth and
orderly transition of the businesses in connection with the consummation of the
transactions contemplated hereby, and that is not otherwise governed by the
provisions of this Agreement or any Ancillary Agreement, the parties will
cooperate in determining whether there is a mutually acceptable arm's-length
basis on which one or more of the other parties will provide such service.
(g) After the Effective Date, in the event that either party is a
direct or indirect beneficiary of any Asset (including, without limitation, any
rights under any contract) of the other party, the party owning such Asset will
cooperate with the other party, upon such party's request, to secure, perfect or
enforce any rights or benefits such requesting party has with respect to the
Asset. The parties shall bear the costs incurred pursuant to this Section 9.1(h)
in
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proportion to the benefit each party receives as a result of securing,
perfecting or enforcing such rights or benefits with respect to the asset.
9.2 QUALIFICATION AS TAX-FREE DISTRIBUTION. After the Effective Date,
neither Collagen nor Technologies shall take, or permit any member of its
respective Group to take, any action that could reasonably be expected to
prevent the Distribution from qualifying as a tax-free distribution within the
meaning of Section 355 of the Code or any other transaction contemplated by this
Agreement or any Ancillary Agreement that is intended by the parties to be
tax-free from failing so to qualify. Without limiting the foregoing, after the
Effective Date and on or prior to the Distribution Date, Technologies shall not,
without the prior consent of Collagen, issue or grant, and shall not permit any
member of the Technologies Group to issue or grant, directly or indirectly, any
shares of Technologies Common Stock or any rights, warrants, options or other
securities to purchase or acquire (whether upon conversion, exchange or
otherwise) any shares of Technologies Common Stock (whether or not then
exercisable, convertible or exchangeable) if such issuance or grant would cause
Collagen to own less than 80.1% of the outstanding shares of Technologies Common
Stock. In the event that any such issuance or grant made with the prior consent
of Collagen would cause Collagen to own less than 80.1% of the outstanding
shares of Technologies Common Stock, Technologies shall give Collagen notice not
less than three business days prior to such issuance or grant and Collagen shall
have the right to purchase from Technologies, and Technologies hereby agrees to
sell to Collagen, a sufficient number of shares of Technologies Common Stock, at
a price equal to the fair market value of such shares (as determined by the
Board of Directors of Technologies, which, in the event that the Technologies
Common Stock is listed on the Nasdaq National Market or other exchange, shall be
equal to the average closing price of the Technologies Common Stock as reported
on the Nasdaq National Market or other exchange for the 30 days prior to the
date of sale), to cause Collagen to own not less than 80.1% of the outstanding
shares of Technologies Common Stock, after giving effect to such issuance or
grant and the sale of such shares to Collagen.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated only upon the mutual
consent of Collagen and Technologies and any such termination shall have the
effects mutually agreed upon by Collagen and Technologies.
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ARTICLE XI
MISCELLANEOUS
11.1 COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER.
(a) This Agreement and each Ancillary Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party.
(b) This Agreement, and the Ancillary Agreements and the
Exhibits, Schedules and Appendices hereto and thereto contain the entire
agreement between the parties with respect to the subject matter hereof and
thereto, supersede all previous agreements, negotiations, discussions, writings,
understandings, commitments and conversations with respect to such subject
matter, and there are no agreements or understandings between the parties other
than those set forth or referred to herein or therein.
(c) Collagen represents on behalf of itself and each other member
of the Collagen Group and Technologies represents on behalf of itself and each
other member of the Technologies Group as follows:
(i) each such Person has the requisite corporate or other
power and authority and has taken all corporate or other action necessary in
order to execute and deliver this Agreement and each Ancillary Agreement to
which it is a party and, subject to receipt of approval of the stockholders of
Collagen of the Distribution, to consummate the transactions contemplated hereby
and thereby; and
(ii) this Agreement and each Ancillary Agreement to which
it is a party has been duly executed and delivered by it and constitutes a valid
and binding agreement of it, enforceable in accordance with the terms thereof.
11.2 RIGHT TO OFFSET PAYMENTS. Technologies and Collagen shall, at the
end of each calendar quarter after the Effective Date, net any amounts then owed
by Collagen to Technologies under this Agreement or any Ancillary Agreement
against any amounts then owed by Technologies to Collagen under this Agreement
or any Ancillary Agreement and, after such calculation has been approved by
Collagen and Technologies, the party owing funds shall promptly pay such amount
to the other party. Nothing in this Section 11.2 shall supersede the time at
which payments are due from one party to the other under this Agreement or any
Ancillary Agreement.
11.3 GOVERNING LAW. Except as set forth in Section 8.10, this Agreement
and, unless expressly provided therein, each Ancillary Agreement, shall be
governed by and construed and interpreted in accordance with the laws of the
State of California (other than as to its laws of arbitration which shall be
governed under the Arbitration Act or other applicable federal law pursuant to
Section 8.10), irrespective of the choice of laws principles of the State of
California,
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as to all matters, including matters of validity, construction, effect,
enforceability, performance and remedies.
11.4 ASSIGNABILITY. Except as set forth in any Ancillary Agreement, this
Agreement and each Ancillary Agreement shall be binding upon and inure to the
benefit of the parties hereto and thereto, respectively, and their respective
successors and assigns; provided, however, that no party hereto or thereto may
assign its respective rights or delegate its respective obligations under this
Agreement or any Ancillary Agreement without the express prior written consent
of the other parties hereto or thereto. Notwithstanding the foregoing, each
party may assign its rights and obligations under this Agreement and each
Ancillary Agreement without the prior written consent of the other party in
connection with the transfer by the assigning party of substantially all of its
business by merger, sale of assets, sale of stock or other form of
reorganization.
11.5 THIRD PARTY BENEFICIARIES. Except for the indemnification rights
under this Agreement of any Collagen Indemnitee or Technologies Indemnitee in
their respective capacities as such, (a) the provisions of this Agreement and
each Ancillary Agreement are solely for the benefit of the parties hereto or
thereto and are not intended to confer upon any Person except the parties any
rights or remedies hereunder and (b) there are no third party beneficiaries of
this Agreement or any Ancillary Agreement and neither this Agreement nor any
Ancillary Agreement shall provide any third person with any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement or any Ancillary Agreement. No
party hereto shall have any right, remedy or claim with respect to any provision
of this Agreement or any Ancillary Agreement to the extent such provision
relates solely to the other party hereto or the members of such other party's
Group.
11.6 NOTICES. All notices or other communications under this Agreement
or any Ancillary Agreement shall be in writing and shall be deemed to be duly
given when (a) delivered in person or (b) deposited in the United States mail or
private express mail, postage prepaid, addressed as follows:
If to Technologies, to: Cohesion Technologies, Inc.
2500 Faber Place
Palo Alto, CA 94303
Attn: President
If to Collagen, to: Collagen Corporation
1850 Embarcadero Road
Palo Alto, CA 94303
Attn: President
Any party may, by notice to the other party, change the address to which
such notices are to be given.
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11.7 SEVERABILITY. If any provision of this Agreement or any Ancillary
Agreement or the application thereof to any Person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof or thereof, or the application of such provision to
Persons or circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby or thereby,
as the case may be, is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon such a suitable and equitable provision to effect the original intent
of the parties.
11.8 FORCE MAJEURE. No party shall be deemed in default of this
Agreement or any Ancillary Agreement to the extent that any delay or failure in
the performance of its obligations under this Agreement or any Ancillary
Agreement results from any cause beyond its reasonable control and without its
fault or negligence, such as acts of God, acts of civil or military authority,
embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes,
floods, unusually severe weather conditions, labor problems or unavailability of
materials, or, in the case of computer systems, any failure in electrical or air
conditioning equipment. In the event of any such excused delay, the time for
performance shall be extended for a period equal to the time lost by reason of
the delay.
11.9 PUBLICITY. Prior to the Distribution, each of Technologies and
Collagen shall consult with the other prior to issuing any press releases or
otherwise making public statements with respect to the Distribution or any of
the other transactions contemplated by this Agreement and prior to making any
filings with any Governmental Authority with respect thereto.
11.10 EXPENSES. Except as expressly set forth in this Agreement or in
any Ancillary Agreement, whether or not the Distribution is consummated, all
third party fees, costs and expenses paid or incurred in connection with the
Distribution that are not capitalized by Collagen in accordance with generally
accepted accounting principles will be shared equally by Collagen and
Technologies.
11.11 HEADINGS. The Article, Section and Paragraph headings contained in
this Agreement and in the Ancillary Agreements are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or any Ancillary Agreement.
11.12 WAIVERS OF DEFAULT. Waiver by any party of any default by the
other party of any provision of this Agreement or any Ancillary Agreement shall
not be deemed a waiver by the waiving party of any subsequent or other default,
nor shall it prejudice the rights of the other party.
11.13 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement or any Ancillary Agreement, the party who is or is to be thereby
aggrieved shall have the right to specific performance and injunctive or other
equitable relief of its rights under this Agreement or such Ancillary Agreement,
in addition to any and all other rights and remedies at law or in equity, and
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all such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived. Any
requirements for the securing or posting of any bond with such remedy are
waived.
11.14 AMENDMENTS.
(a) No provisions of this Agreement or any Ancillary Agreement
shall be deemed waived, amended, supplemented or modified by any party, unless
such waiver, amendment, supplement or modification is in writing and signed by
the authorized representative of the party against whom it is sought to enforce
such waiver, amendment, supplement or modification.
(b) Without limiting the foregoing, the parties intend that, as
of the Effective Date, the Schedules to this Agreement will be amended or
supplemented and such amended or supplemented Schedules shall be attached hereto
in lieu of the original Schedules. In addition, the parties anticipate that,
after the Effective Date and prior to the Distribution Date, some or all of the
Schedules to this Agreement may be further amended or supplemented and, in such
event, such amended or supplemented Schedules shall be attached hereto in lieu
of the original or previously amended or supplemented Schedules.
11.15 INTERPRETATION. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement (or the applicable Ancillary Agreement) as a whole
(including all of the Schedules, Exhibits and Appendices hereto and thereto) and
not to any particular provision of this Agreement (or such Ancillary Agreement).
Article, Section, Exhibit, Schedule and Appendix references are to the Articles,
Sections, Exhibits, Schedules and Appendices to this Agreement (or the
applicable Ancillary Agreement) unless otherwise specified. The word "including"
and words of similar import when used in this Agreement (or the applicable
Ancillary Agreement) shall mean "including, without limitation," unless the
context otherwise requires or unless otherwise specified. The word "or" shall
not be exclusive.
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IN WITNESS WHEREOF, the parties have caused this Separation and
Distribution Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
By: /s/ GARY S. PETERSMEYER
---------------------------------------
Name: Gary S. Petersmeyer
-------------------------------------
Title: President and CEO
------------------------------------
COHESION TECHNOLOGIES, INC.
By: /s/ DAVID FOSTER
---------------------------------------
Name: David Foster
-------------------------------------
Title: CEO
------------------------------------
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THE REGISTRANT HEREBY UNDERTAKES TO FURNISH SUPPLEMENTARILY UPON REQUEST
A COPY OF ANY OMITTED SCHEDULES OF THE SECURITIES AND EXCHANGE COMMISSION UPON
REQUEST.
<PAGE> 56
PERSISTENCE DEVELOPMENT AND LICENSE AGREEMENT
This PERSISTENCE DEVELOPMENT AND LICENSE AGREEMENT (the "Agreement"),
effective as of ________ (the "Effective Date"), is made by and between COLLAGEN
CORPORATION, a Delaware corporation ("Technologies"), and COLLAGEN TECHNOLOGIES,
INC., a Delaware corporation ("Technologies").
RECITALS
WHEREAS, Collagen and Technologies have entered into a relationship
whereby certain assets and liabilities are transferred from Collagen to
Technologies, as further described in the Separation and Distribution Agreement,
dated as of the Effective Date, between Technologies and Collagen (the
"Separation Agreement") and in the Ancillary Agreements;
WHEREAS, Technologies is in the business of developing products and
processes utilizing innovative collagen-based technology and novel biomaterials;
WHEREAS, Collagen is in the business of developing, manufacturing and
selling human aesthetic and reconstructive medical technology products;
WHEREAS, Collagen desires for Technologies to perform for Collagen
research and development relating to persistent collagen, and Technologies
desires to perform such research and development for Collagen; and
WHEREAS, the parties desire to commercialize the results of such
research and development relating to such technology.
IN CONSIDERATION OF THE MUTUAL PROMISES, REPRESENTATIONS AND WARRANTIES
CONTAINED HEREIN, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meanings given to them in the Separation Agreement. In addition, for
the purposes of this Agreement, the capitalized terms set forth below shall have
the meanings set forth in this Article 1.
1.1 "Persistence Technology" shall mean the inventions or
discoveries, whether or not patentable, made, conceived, reduced to practice, or
otherwise developed by Technologies in furtherance of the Project.
1.2 "Costs" shall mean the direct and indirect costs to Technologies
related to performing its research and development obligations pursuant to the
Project hereunder as set forth in Exhibit A.
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1.3 "FDA" shall mean the United States Food and Drug Administration
or any successor agency thereof.
1.4 "Intellectual Property Rights" shall mean trade secrets,
patents, copyrights, trademarks, know-how, moral rights and similar rights of
any type under the laws of any governmental authority, domestic or foreign,
including all applications and registrations relating to any of the foregoing.
1.5 "Net Sale Price" shall mean: the gross invoiced price for all
Products sold by Collagen, its Affiliates or sublicensees to: (i) C.R. Bard,
Inc. for incontinence; or (ii) third party end-users in the facial business,
including Affiliates of Collagen that are end-users of the Products, less
deductions made in the normal course of business for: (a) commercially
reasonable quantity, trade and cash discounts or rebates, recalls, credits or
allowance and adjustments separately and actually credited to customers for
rejections and returns of Products; (b) charges for freight, postage,
transportation, import or export taxes, excise taxes and other similar taxes,
insurance and other delivery costs not otherwise charged to the customer and
actually paid by Collagen; and (c) any tax or other government charges (other
than income tax) levied on the use, sale, transportation or delivery of Product
and borne by Collagen and its Affiliates.
1.6 "Performance Specification" shall mean that the Product's
persistence must exceed ZyplastTM persistence by at least two times at all time
points.
1.7 "Product" shall mean any commercial product for use solely
within the Aesthetics Field and which incorporates all or any portion of the
Persistence Technology.
1.8 "Project" shall mean the research and development activities to
be performed by Technologies under this Agreement relating to persistent
collagen as set forth in the "Project Plan" which shall be delivered and
executed by the parties at the time of execution of this Agreement.
ARTICLE II
RESEARCH AND DEVELOPMENT
2.1 PERFORMANCE OF THE PROJECT. The parties shall agree upon the
Project Plan which shall be delivered and executed by the parties at the time of
execution of this Agreement. The Project Plan shall set forth: (i) the scope and
objectives of the Project; and (ii) work plan activities, and time schedules
associated with: (a) filing for expanded IDE in the U.S. for CP-1; (b) filing
dossier for product registration in Europe for CE Mark for CP-1; and (c)
starting expanded U.S. clinical study (collectively "Development Milestones").
Subject to the terms and conditions set forth herein, Technologies shall use its
commercially reasonable efforts to perform the Project in accordance with the
Project Plan. Technologies' obligations to perform the Project shall be
extinguished upon Collagen's confirmation that Technologies has delivered to
Collagen a Product which materially conforms to the Performance Specification,
which confirmation shall not be unreasonably withheld. If the parties decide to
abandon development and commercialization of the CP-1 Product and to instead
pursue development and/or
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commercialization of a new product, then the parties shall negotiate with each
other, in good faith, the terms for developing and commercializing such new
product.
2.2 REPORTING. Technologies shall furnish Collagen with quarterly
written reports summarizing the progress of the Project to date within thirty
(30) days after the end of each quarter during which work on the Project is
performed ("Quarterly Reports"). Technologies will also provide Collagen with
Technologies' summary and conclusions upon completion of the Project (the "Final
Project Report"). Between Quarterly Reports, Technologies shall keep Collagen
advised of the progress of the Project upon Collagen's reasonable request and
shall make available to Collagen, at Collagen's expense, developmental personnel
to share Technologies' information, data, know-how, product plans and relevant
data reduction techniques relating to the Project. Collagen will maintain the
confidentiality of all data provided pursuant to this Section 2.2 in accordance
with Article 6.
2.3 DEVELOPMENT FEES. In consideration for Technologies' performance
of the Project, commencing upon the Effective Date through June 30, 1998,
Collagen shall pay to Technologies the Costs associated with the Project, based
on the methodology used by Technologies in the fiscal year 1998 budget. After
June 30, 1998, the development fees shall be [*] Technologies shall bill
Collagen for Costs on a monthly basis, and payment shall be due and payable by
Collagen to Technologies within thirty (30) days of receipt of such bill.
Technologies agrees to provide to Collagen within two (2) weeks after the close
of each calendar quarter: (i) a written estimate of the Costs for the third
month of such calendar quarter; and (ii) the actual amounts of the Costs for the
first and second months of such calendar quarter (if not previously billed). In
the event that Collagen fails to pay the Costs to Technologies as set forth
herein, Technologies may terminate this Agreement pursuant to Section 5.2. Upon
reasonable notice to Technologies, Collagen shall have the right to have an
independent certified public accountant, selected by Collagen and reasonably
acceptable to Technologies, audit Technologies' records, during normal business
hours, to verify Technologies' Costs associated with the Project; provided,
however, that such audit shall not take place more frequently than once a year
and shall not cover such records for more than the preceding two (2) years. The
accountant shall only report to Collagen as to the accuracy of Technologies'
Costs, and in the event of any inaccuracy, the correct amount of such Costs.
Technologies shall promptly refund to Collagen the amount of any overpayment
determined in such audit, and Collagen shall promptly pay to Technologies the
amount of any underpayment determined in such audit. Such audit shall be at
Collagen's expense unless the audit identifies an overpayment based on
Technologies' invoices, of greater than five percent (5%), in which case such
audit shall be at Technologies' expense. Technologies shall preserve and
maintain all such records and accounts required for audit for a period of two
(2) years after the calendar quarter for which the records apply.
2.4 DEVELOPMENT MILESTONES. Technologies shall use commercially
reasonable efforts to meet the Development Milestones by their "Finish Dates"
specified in the Project Plan. For the purpose of this Section 2.4, meeting a
Development Milestone shall mean both completing the Development Milestone
within: (i) ninety (90) days of its corresponding Finish Date; and (ii) one
hundred and twenty percent (120%) of the budget amount associated
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with that Development Milestone. In the event Technologies fails to so meet any
Development Milestone, Collagen may terminate this Agreement pursuant to Section
5.2.
2.5 OWNERSHIP OF PERSISTENCE TECHNOLOGY. The parties agree that
Persistence Technology, including works-in-progress, the Product and any and all
Intellectual Property Rights thereto and therein shall be owned by and be the
sole property of Technologies.
ARTICLE III
LICENSE GRANT TO AESTHETICS
3.1 LICENSE. Technologies hereby grants to Collagen a worldwide,
exclusive license, with the right to sublicense, to Persistence Technology
solely within the Aesthetics Field, including the right to develop, have
developed, make, have made, sell, offer to sell, have sold, import, export, have
imported and exported, distribute, and have distributed Products.
3.2 ROYALTIES. Collagen shall pay to Technologies a royalty of [*]
of the Net Sale Price of the Product.
3.3 PAYMENT AND AUDIT. Collagen shall make royalty payments to
Technologies pursuant to Section 3.2 on a quarterly basis within thirty (30)
days after the end of each quarter. Sales made in foreign currency will be
determined in the foreign funds for the country in which the Product are sold,
and then converted into equivalent United States dollars at the rate of exchange
for selling funds as published by the Wall Street Journal (U.S., Western
Edition) for the last business day of each quarter. Upon reasonable notice to
Collagen, Technologies shall have the right to have an independent certified
public accountant, selected by Technologies and reasonably acceptable to
Collagen, audit Collagen's records, during normal business hours, to verify the
royalties payable by Collagen to Technologies; provided, however, that such
audit shall not take place more frequently than once a year and shall not cover
such records for more than the preceding two (2) years. The accountant shall
only report to Technologies as to the accuracy of the payments paid by Collagen
to Technologies, and in the event of any inaccuracy, the correct amount of such
payment. Collagen shall promptly pay to Technologies the amount of any
underpayment determined in such audit. Such audit shall be at Technologies'
expense unless the audit identifies greater than five percent (5%) error, in
which case such audit shall be at Collagen's expense. Collagen shall preserve
and maintain all such records and accounts required for audit for a period of
two (2) years after the calendar quarter for which the record applies.
3.4 REGULATORY MATERIALS. So long as the license granted in Section
3.1 is in effect, Technologies grants to Collagen a royalty free, non-exclusive,
fully paid-up right and license to all United States and foreign regulatory
registrations, licenses, and applications ("Regulatory Materials") relating to
the Persistence Technology, solely as such relates to the Aesthetics Field.
Technologies expressly reserves the right to reference any and all such
Regulatory Materials, solely to the extent necessary for Technologies to
exercise its rights in the Persistence Technology not granted to Collagen
hereunder.
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ARTICLE IV
COMMERCIALIZATION
4.1 COMMERCIALIZATION PLANS. Collagen shall keep Technologies
generally informed of Collagen's commercialization plans for Products, including
Collagen's planned timing for Product launch dates. All dates and other
information provided by Collagen in such plan shall be used for planning
purposes only, and shall be subject to modification by Collagen. All information
provided pursuant to this Section 4.1 shall be kept confidential pursuant to
Article 6.
4.2 GOVERNMENTAL APPROVALS. Collagen shall be responsible for
obtaining all necessary governmental approvals, including FDA approvals, for the
development, testing, production, distribution, sale and use of any Product in
the Aesthetics Field. Technologies agrees to provide Collagen, at Collagen's
expense, with any assistance reasonably requested by Collagen, in obtaining such
governmental approvals, including, without limitation, the furnishing of all
relevant technical information and know-how presently or hereafter available to
Technologies, but excluding any documentation or data which Technologies is
bound by obligations to third parties to keep confidential. Collagen shall
promptly notify Technologies of FDA and corresponding foreign regulatory
approvals received by Collagen for any Product.
ARTICLE V
TERM AND TERMINATION
5.1 TERM. The term of this Agreement shall commence on the Effective
Date and continue in full force and effect until the termination by either party
pursuant to Sections 5.2 or 5.3.
5.2 TERMINATION FOR CAUSE. Either Technologies or Collagen may
terminate this Agreement by written notice stating such party's intent to
terminate in the event the other shall have breached or defaulted in the
performance of any of its material obligations hereunder, and the failure of the
breaching party to cure such default or breach within thirty (30) days after
written notice thereof was provided to the breaching party by the non-breaching
party. Such breach shall include but shall not be limited to: (i) Collagen's
failure to pay Costs pursuant to Section 2.3; and (ii) Technologies' failure to
meet the Development Milestones. If Collagen terminates this Agreement for cause
under this Section 5.2, then Collagen shall be granted the license set forth in
Section 3.1. If Technologies terminates this Agreement for cause under this
Section 5.2 then all Collagen's rights under Section 3.1 to Persistence
Technology and Products shall terminate and revert back to Technologies.
5.3 ADDITIONAL TERMINATION RIGHTS. Subject to the terms and
conditions, herein, either party may terminate this Agreement upon thirty (30)
day written notice to the other party; provided, however, in the event that
Collagen terminates this Agreement pursuant to this Section 5.3, then all
Collagen's rights under Section 3.1 to Persistence Technology and Products shall
terminate and revert back to Technologies. If Technologies terminates this
Agreement
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pursuant to this Section 5.3, prior to Technologies' delivery to Collagen of a
Product in conformity with the Performance Specifications, then Collagen shall
be granted the License set forth in Section 3.1.
5.4 EFFECT OF TERMINATION. Expiration or termination of this
Agreement pursuant to the terms and conditions set forth in this Agreement shall
not relieve the parties of any payment obligations, accruing prior to or upon
such expiration or termination.
5.5 SURVIVAL OF CERTAIN TERMS. The provisions of Sections 2.3, 2.5,
3.3, 3.4 5.3 and 5.4 and Article 6 shall survive the expiration or termination
of this Agreement for any reason. All other rights and obligations of the
parties shall cease upon expiration or termination of this Agreement.
ARTICLE VI
CONFIDENTIALITY
The parties agree that Information that is proprietary or confidential
to (i) Technologies prior to the Effective Date; or (ii) to one party and
provided to the other party pursuant to or in furtherance of this Agreement
after the Effective Date shall be subject to and treated in accordance with
Article VIII of the Separation Agreement.
ARTICLE VII
MISCELLANEOUS
This Agreement shall be subject to and incorporate the terms and
provisions contained in Article XI of the Separation Agreement to the extent
applicable.
IN WITNESS WHEREOF, the parties have caused this Persistence Development
and License Agreement to be executed by their duly authorized representatives.
COLLAGEN TECHNOLOGIES, INC. COLLAGEN CORPORATION
By:_________________________________ By:_________________________________
(Signature) (Signature)
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:______________________________
Date:_______________________________ Date:_______________________________
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<PAGE> 62
Address: Address:
2500 Faber Place 1850 Embarcadero Road
Palo Alto, CA 94303 Palo Alto, CA 94303
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<PAGE> 63
EXHIBIT A
Costs
Direct Costs include:
[*]
Indirect Costs allocable percentage of the following costs:
[*]
<PAGE> 64
PERSISTENCE PROJECT PLAN
Attached hereto is the Project Plan as defined in the Persistence
Development and License Agreement effective as of _________ by and between
Collagen Technologies, Inc. and Collagen Corporation.
COLLAGEN CORPORATION COLLAGEN AESTHETICS, INC.
By:_________________________________ By:_________________________________
(Signature) (Signature)
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:______________________________
Date:_______________________________ Date:_______________________________
Address: Address:
2500 Faber Place 1850 Embarcadero Road
Palo Alto, CA 94303 Palo Alto, CA 94303
<PAGE> 65
MILESTONES
Milestone Date
(a) File for expanded IDE in U.S.
(b) File dossier with TUV
(c) Start expanded U.S. clinical study
<PAGE> 1
EXHIBIT 10.97
Application for an order granting
confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange
Act of 1934 has been made. Confidential
portions of this document have been
redacted and marked with an [*] and have
been filed with the Securities and Exchange
Commission separately with such application.
COLLAGEN SUPPLY AGREEMENT
This COLLAGEN SUPPLY AGREEMENT (the "Agreement"), effective as of
January 1, 1998 (the "Effective Date"), is made by and between COLLAGEN
CORPORATION, a Delaware corporation ("Collagen"), and COHESION TECHNOLOGIES,
INC., a Delaware corporation formerly known as Collagen Technologies, Inc.
("Technologies").
RECITALS
1. Technologies and Collagen have entered into a relationship whereby
certain assets and liabilities are being transferred from Collagen to
Technologies as further described in the Separation and Distribution Agreement
effective as of January 1, 1998 between Collagen and Technologies (the
"Separation Agreement") and in the Ancillary Agreements.
2. Collagen is in the business of developing, manufacturing and selling
human aesthetic and reconstructive medical technology products and processes.
3. Technologies is in the business of developing, manufacturing and
selling products and processes utilizing innovative collagen-based technology
and novel biomaterials.
4. Technologies wishes to purchase from Collagen its requirements for
certain collagen based materials and products, and Collagen wishes to supply
such requirements to Technologies.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meanings given to them in the Separation Agreement. In addition, for
the purposes of this Agreement, the capitalized terms set forth below shall have
the meanings set forth in this Article I.
1.1 "Collagen Material" shall mean any collagen based product,
intermediate or finished material other than a Product, Specified Material or
products and materials provided by Collagen to Technologies pursuant to the
Collagraft Supply Agreement dated as of the Effective Date.
<PAGE> 2
1.2 "CoStasis" shall mean the bovine collagen based finished product
currently known as CoStasisTM.
1.3 "Direct Costs" shall mean the direct cost to Collagen related to
manufacturing the Product, Collagen Material or Specified Material as set forth
in Exhibit A attached hereto.
1.4 "FDA" shall mean the United States Food and Drug Administration or
any successor agency thereof.
1.5 "Intellectual Property Rights" shall mean trade secrets, patents,
copyrights, trademarks, know-how, moral rights and similar rights of any type
under the laws of any governmental authority, domestic or foreign, including all
applications and registrations relating to any of the foregoing.
1.6 "Product" shall mean a finished product or intermediate
incorporating human placental collagen or Persistent Technology.
1.7 "Specifications" shall mean the technical specifications for a
product or material that Collagen is obliged to supply to Technologies under
this Agreement.
1.8 "Specified Material" shall mean (A) any Third Party Product and (B)
any collagen based product, intermediate, or finished material (including
collagen components of the products of Cohesion Corporation) other than
recombinant human collagen based products and materials (i) manufactured
(commercially or by the Investigational Formulation Department) by Collagen
prior to January 1, 1999 or (ii) for which Technologies initially submits a
purchase order based upon Specifications mutually agreed to by the parties prior
to January 1, 1999.
1.9 "Third Party Product" shall mean any collagen-based product,
intermediate or finished material other than recombinant human collagen based
products and materials that Technologies is obligated to supply to a third party
prior to March 15, 2004 pursuant to a written agreement first entered into: (i)
by Collagen prior to the Effective Date (the "Existing Third Party Products"), a
list of such agreements is set forth on the Schedule of Material Supply
Agreements delivered and executed by the parties at the time of execution of
this Agreement; or (ii) by Technologies on or after the Effective Date and prior
to January 1, 1999 (the "Additional Third Party Products").
ARTICLE II
SUPPLY
2.1 SPECIFIED MATERIALS. Subject to the terms and conditions hereto,
Collagen shall manufacture for and supply to Technologies all Technologies'
requirements for any Specified Material commencing upon the Effective Date until
the later of: (i) March 15, 2004; (ii) after eighteen (18) months written notice
of termination of the Agreement (as a whole or on a product-by-product basis) by
either party to the other; or (iii) solely with respect to Existing Third Party
Products, the date of termination of Technologies' obligation to supply such
Existing Third Party Products. Notwithstanding the foregoing and solely with
respect to CoStasis, subject
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<PAGE> 3
to the terms and conditions herein, Collagen shall manufacture and supply
CoStasis to Technologies until January 1, 2000, provided that Technologies'
requirements for CoStasis are no more than [*] syringes ([*] ccs per syringe)
per batch. Collagen shall have no obligation to supply CoStasis to Technologies
hereunder when Technologies' requirements for CoStasis exceed [*] syringes ([*]
ccs per syringe) per batch.
2.2 PRODUCTS. Subject to terms and conditions herein, Collagen shall
manufacture for and supply to Technologies all Technologies' requirements for
any Product; provided, however, that Technologies has received regulatory
approval anywhere in the world for such Product based on manufacturing by
Collagen prior to January 1, 2002. Collagen's obligations under this Section 2.2
to supply Products to Technologies shall terminate the later of: (i) March 15,
2004; or (ii) after eighteen (18) months written notice of termination of the
Agreement by either party to the other (as a whole or on a product-by-product
basis).
2.3 COLLAGEN MATERIALS. Subject to terms and conditions herein, upon
Technologies' request, Collagen shall manufacture for and supply to Technologies
any Collagen Material upon such terms as shall be mutually agreed to by the
parties in good faith commencing from the Effective Date until the later of: (i)
March 15, 2004; or (ii) after eighteen (18) months written notice of termination
of this Agreement by either party to the other (as a whole or on a
product-by-product basis).
2.4 CONDITIONS TO SUPPLY. Notwithstanding anything herein to the
contrary, Collagen shall not be obligated to supply to Technologies bovine
collagen based Products, Specified Materials or Collagen Materials once Collagen
has discontinued making bovine collagen based products or materials for its own
requirements or for supply to third parties. In addition, the quantity, in the
aggregate, of Specified Materials and Products that Collagen is obligated to
supply to Technologies annually pursuant to Sections 2.1 and 2.2 shall not
exceed the greater of: (i) [*] percent ([*]%) of Collagen's total annual (actual
and not theoretical) cc manufacturing facility capacity; or (ii) [*] cc of
Zyderm ITM equivalent ("Supply Obligation"). Collagen shall have sole discretion
whether to supply any Specified Materials and/or Products in excess of the
Supply Obligation.
2.5 TECHNOLOGIES PURCHASE OBLIGATION. Subject to the terms and
conditions herein, Technologies shall purchase from Collagen all its
requirements for any Specified Material or Product that Collagen is obligated to
supply to Technologies pursuant to Sections 2.1 and 2.2 hereof until the
termination of this Agreement or the termination of Collagen's supply obligation
for such Specified Material or Product; provided that Technologies shall be
released from any further obligation to purchase its requirements for CoStasis
from Collagen once its requirements for CoStasis exceeds [*] syringes ([*] ccs
per syringe) per batch, in which event Technologies may terminate the supply of
CoStasis by Collagen hereunder upon ninety (90) days prior written notice to
Collagen.
[*] Application for an order granting confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
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<PAGE> 4
2.6 RELEASE FROM REQUIREMENTS OBLIGATION. Technologies shall have no
obligation pursuant to Section 2.5 to purchase its requirements for Specified
Materials and Products from Collagen in the event that: (i) Collagen shall fail
to deliver any such Specified Materials or Products within ninety (90) days of
Collagen's receipt of a firm purchase order issued by Technologies and
acknowledged by Collagen (unless the scheduled delivery date set forth in such
purchase order is more than ninety (90) days from Collagen's receipt thereof) or
shall fail on two (2) consecutive occasions or three (3) occasions in any one
hundred eighty (180) day period to deliver such Specified Materials or Products
within fifteen (15) days of the scheduled delivery date therefor as set forth in
a firm purchase order issued by Technologies and acknowledged by Collagen; (ii)
Collagen shall have manufactured any Specified Materials and/or Products not in
conformance with Section 4.3, except as otherwise requested by Technologies; or
(iii) the quantity in the aggregate, of Specified Materials and Products shall
exceed the Supply Obligation, and Collagen shall not agree to supply any such
excess Specified Materials or Products.
2.7 SERVICES. Collagen shall, at Technologies' reasonable request,
provide to Technologies support to manufacture clinical materials including
without limitation proposed Products for regulatory approval ("Investigational
Formulation Services") until the earlier of: (i) January 1, 2002 or (ii) the
termination of the Agreement by either party. For providing Investigational
Formulation Services, Technologies shall pay Collagen $[*] per person hour,
which shall cover routine testing, but shall not cover costs incurred by
Collagen in procuring raw materials from third parties or non-standard
production materials to perform such Investigational Formulation Services for
Technologies, the latter costs which shall be reimbursed by Technologies to
Collagen.
2.8 CLOSED HERDS. During the Term and after the termination or
expiration of this Agreement, Collagen shall allow Technologies access to any
closed herd animals that are not being used by Collagen; provided, however,
Collagen shall have sole control and discretion over all practices and
procedures relating to the health, husbandry, maintenance and slaughter of the
closed herd animals and access thereto.
ARTICLE III
TERMS OF PURCHASE
3.1 ORDER AND ACCEPTANCE. Technologies shall from time to time submit to
Collagen firm purchase orders for Specified Materials and Products. All orders
shall be by means of signed written purchase orders by Technologies to Collagen,
sent to Collagen at Collagen's address for notice hereunder specifying the
Product, Specified Material or Collagen Material and required quantity. Orders
may initially be placed by telephone or telecopy; provided, however, that a
signed confirming purchase order is received in writing (which may
[*] Application for an order granting confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
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<PAGE> 5
include telecopy transmission) by Collagen. Upon receipt, Collagen shall
promptly accept such purchase order (except to the extent that Collagen is not
required to supply Products or Specified Materials pursuant to Section 2.4) and
return a signed acceptance thereof to Technologies. Notwithstanding anything
herein to the contrary, no order shall be binding upon Collagen until accepted
by Collagen in writing. Each party may cancel or reschedule purchase orders for
Product only with prior written approval of the other party.
3.2 FORECASTING. Technologies shall provide Collagen with a non-binding
six (6) month rolling forecast prepared in good faith setting forth its
projected requirements for Products and Specified Materials.
3.3 PURCHASE PRICE. The purchase price to Technologies for Products,
Specified Materials and Collagen Materials shall be equal to [*]. The list price
shall equal: (i) Collagen's [*] for manufacturing such products or materials
plus [*] percent ([*]%) during the period commencing on the Effective Date and
terminating on June 30, 1999, and (ii) Collagen's [*] for manufacturing such
products or materials plus [*] percent ([*]%) during the period from July 1,
1999 until the termination or expiration of the Agreement. The list price for
VitrogenTM and Cell PrimeTM shall be equal to the greater of: (i) [*] percent
([*]%) of the end market selling price of Technologies to third parties for such
products; or (ii) Collagen's [*] for manufacturing such products, plus [*]
percent ([*]%). The parties agree that to the extent that the purchase prices
hereunder are based on Collagen's [*], Collagen may not increase its [*] by more
than [*] percent ([*]%) from one fiscal year to the next. Collagen shall provide
Technologies with an updated price list upon execution of this Agreement for the
fiscal year ending June 30, 1998 and at the beginning of each fiscal year, i.e.,
July 1, which shall be effective for such fiscal year. Collagen will review such
updated price list with Technologies and shall provide supporting documentation
therefor similar to those provided for the fiscal year 1998 price list. Payment
by Technologies to Collagen of the purchase prices pursuant to this Section 3.3
shall constitute payment in full for the Products, Specified Materials and
Collagen Materials, including without limitation, payment for manufacturing,
distribution, order entry and accounts receivables services performed in
connection therewith. Collagen shall use reasonable commercial efforts to
efficiently manufacture the Products, Specified Materials and Collagen Materials
and pursue manufacturing cost reductions without compromising the quality or
function of the Products, Specified Materials and Collagen Materials.
3.4 INVOICING. Collagen shall submit an invoice, packing list and airway
bill to Technologies upon each shipment of Product, Specified Material or
Collagen Material ordered by Technologies. All invoices and other shipping
documents shall be sent via first class mail or by fax, followed by business
mail to Technologies' address for notices hereunder, without regard to the
actual shipping address. Each such invoice shall state the aggregate and unit
invoice price for Product, Specified Material or Collagen Material in a given
shipment. Solely with respect to VitrogenTM and Cell PrimeTM, Collagen shall
invoice Technologies for such products based on the
[*] Application for an order granting confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
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<PAGE> 6
end market selling price of Technologies to third parties in effect at the end
of the previous fiscal year. Within sixty (60) days of the close of the fiscal
year, Collagen will submit to Technologies an accounting of any discrepancy
between the invoiced prices and the prices pursuant to Section 3.3, and
Technologies agrees to promptly, upon Collagen's request, provide Collagen with
any information, including but not limited to end user pricing information, of
which Technologies has knowledge or control for Collagen to prepare such
accounting. Within thirty (30) days after such accounting is delivered by
Collagen to Technologies: (i) Technologies shall pay any balance owed to
Collagen; or (ii) Collagen shall pay to Technologies any overpayment based on
such accounting.
3.5 DELIVERY. Collagen shall ship Products, Specified Materials and
Collagen Materials to the address set forth in the applicable purchase order for
delivery on the scheduled delivery date specified in the applicable purchase
order; provided, however, that such scheduled delivery date shall not be less
than sixty (60) days from the date of receipt by Collagen of such purchase order
with respect to any Product, Specified Material or Collagen Material. All
Products, Specified Materials and Collagen Materials supplied to Technologies by
Collagen shall be delivered to Technologies within thirty (30) days from the
date their manufacture is completed. All shipments shall be F.O.B. Collagen's
manufacturing facilities in Fremont, and Technologies shall bear the risk of
loss and cost of transportation of the products and materials upon delivery by
Collagen to the carrier identified by Technologies. Collagen shall suitably pack
the products and materials for delivery by surface or air, at Technologies'
discretion, in Collagen's standard shipping cartons. Collagen shall ship the
products and materials using the carrier specified in Technologies' purchase
order; provided, however, that if Technologies does not provide instructions
with respect to the carrier to be used, Collagen shall select the carrier. All
freight and insurance shall be paid by Technologies. Product, Specified
Materials or Collagen Materials shall be deemed delivered by Collagen and
accepted by Technologies upon: (i) the receipt by Technologies of a Certificate
of Analysis based on the Specifications; and (ii) the review and approval by
Technologies of the information contained in the alert notices and deviation
reports.
3.6 PAYMENT AND AUDIT. Technologies shall make payment within thirty
(30) days of receipt of Collagen's invoice. Upon reasonable notice to Collagen,
Technologies shall have the right to have an independent certified public
accountant, selected by Technologies and reasonably acceptable to Collagen,
audit Collagen's records during normal business hours to verify the amount
payable by Technologies for Products, Specified Materials and Collagen
Materials, and charges for providing Investigational Formulation Services;
provided, however, that such audit shall not take place more frequently than
once a year and shall not cover such records for more than the preceding two (2)
years. The accountant shall only report to Technologies as to the accuracy of
the amounts charged by Collagen to Technologies for Products, Specified
Materials and Collagen Materials and the charges for Investigational Formulation
Services, and in the event of any inaccuracy, the correct amounts thereof.
Collagen shall promptly refund to Technologies the amount of any overpayment
determined in such audit, and Technologies shall promptly pay to Collagen the
amount of any underpayment. Such audit shall be at Technologies' expense unless
such audit indicates greater than five percent (5%) overpayment or underpayment
by Technologies based on invoices submitted by Collagen, in
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<PAGE> 7
which case such audit shall be at Collagen's expense. Collagen shall preserve
and maintain all such records and accounts required for audit for a period of
two (2) years after the calendar quarter for which the record applies.
3.7 PRODUCT PACKAGING AND LABELING. Collagen shall package and label
Products, Specified Materials and Collagen Materials as directed by
Technologies. Technologies shall be responsible for designing and determining
the form and format of packaging labels.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY BOTH PARTIES. Technologies (on behalf of itself and each member
of the Technologies Group) and Collagen (on behalf of itself and each member of
the Collagen Group), represents and warrants to the other that: (i) it has full
power and authority to execute, deliver and perform this Agreement; and (ii) the
execution, delivery and performance by such party of this Agreement does not
contravene any law, regulation, rules or order binding on such party and do not
contravene the provisions of or constitute a default under any contract or other
agreement binding on such party.
4.2 REGULATORY APPROVALS. Technologies warrants to Collagen that any and
all required government approvals, including any approvals under applicable
health and safety laws and regulations, to import, register, market, distribute
and sell the Products, Specified Materials and Collagen Materials pursuant to a
purchase order issued by Technologies shall have been secured for every
jurisdiction into which such products and materials shall be shipped or sold in
accordance with such purchase order. The parties agree to cooperate with each
other and perform all necessary actions to obtain and maintain CE marks and ISO
certification for Products, Specified Materials and Collagen Material, as
applicable.
4.3 GMP. Except as otherwise requested by Technologies in writing,
Collagen shall manufacture the Products, Specified Materials and Collagen
Materials in accordance with: (i) then current GMP, as required by the United
States Food and Drug and Cosmetic Act (the "Act"); (ii) all pertinent rules and
regulations of the FDA; (iii) the laws of the United States of America and all
local laws; and (iv) all other laws, regulations and guidelines, including
without limitation regulations of the European Union and any jurisdiction
therein, to the extent the same are applicable; provided, however, that nothing
contained in this Agreement is intended to render applicable any laws other than
the Act, FDA regulations and United States law. Collagen represents and warrants
that no products and materials delivered by Collagen under this Agreement will
be adulterated or misbranded by Collagen within the meaning of the Act, or
within the meaning of any other applicable law in which the definitions of
adulteration or misbranding are substantially the same as those contained in the
Act, as such laws are constituted and effective at the time of such shipment or
delivery, or as an article which may not, under the provisions of Section 404 or
505 of the Act, be introduced into interstate commerce.
4.4 LIMITED WARRANTY. Collagen represents and warrants that the products
and materials supplied by it to Technologies under this Agreement shall conform
to their Specifications, if any, and shall be free from defects in material and
workmanship for the shelf
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life of the products and materials as set forth in the applicable
Specifications. Technologies' exclusive remedy and sole liability for breach of
the foregoing warranty shall be the remedy as set forth in this Section 4.4.
4.4.1 RETURN OF DEFECTIVE PRODUCT. In the event that any Product,
Specified Material or Collagen Material purchased by Technologies from Collagen
fails to conform to the warranty set forth in this Article 4.4, Collagen's sole
and exclusive liability and Technologies' exclusive remedy shall be to replace
the product or material, or if, at Collagen's sole determination, replacement is
not practicable, refund Technologies for the amount actually paid by
Technologies for any such product or material; provided, however, that: (i)
Technologies promptly notifies Collagen in writing that such product or material
failed to conform, furnishes a detailed explanation of any alleged
nonconformity, and requests a return material authorization number; and (ii)
such product or material is returned to Collagen by Technologies F.O.B.
Collagen's shipping location in Fremont, California, during the warranty period,
with the return material authorization number affixed prominently to the outside
packaging. If such product or material fails to so conform, Collagen will
reimburse Technologies for shipment charges for return of the nonconforming
product or material.
4.4.2 RECALL; MDR; FIELD CORRECTION. Should any defect in the
Product, Specified Material, or Collagen Material, or any governmental action
require: (i) the recall, destruction or withholding from market ("Recall"); (ii)
issuance of a Medical Device Report within the meaning of the Act ("MDR"); or
(iii) institution of a field correction ("Field Correction") for the Product,
Specified Material or Collagen Material, Collagen shall bear the costs and
expenses of such Recall, MDR or Field Correction to the extent such Recall, MDR
or Field Correction is the result of any non-conformance to Specifications due
to a fault or omission attributable to Collagen, and Technologies shall bear the
costs and expenses of such Recall, MDR or Field Correction to the extent such
Recall, MDR or Field Correction is the result of any fault or omission
attributable to Technologies. Should such Recall, MDR or Field Correction result
from the fault of both parties, the parties shall share such costs and expenses
in accordance with their proportionate fault.
ARTICLE V
TERM AND TERMINATION
5.1 TERM. The term of this Agreement shall commence on the Effective
Date and continue in full force and effect until the expiration of Collagen's
supply obligations set forth in Sections 2.1, 2.2 and 2.3 or expiration or
termination of the Agreement ("Term").
5.2 TERMINATION FOR CAUSE. Either party shall have the right to
terminate this Agreement following any material breach or default in performance
under this Agreement by the other party upon sixty (60) days prior written
notice to the breaching party specifying the nature of the breach or default.
Unless the breaching party has cured the breach or default prior to the
expiration of the sixty (60) day period, the non-breaching party, at its sole
option, may terminate this Agreement upon written notice to the breaching party.
Termination of this Agreement shall become effective upon receipt of such second
notice by the breaching party.
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<PAGE> 9
5.3 EFFECT OF TERMINATION. Upon expiration under Section 5.1 or
termination under Section 5.2, Collagen: (i) hereby grants to Technologies a
non-exclusive, non-transferable, royalty-free, perpetual, irrevocable,
world-wide, right and license (with the right to sublicense) to any
Manufacturing Improvements; and (ii) shall deliver to Technologies a copy of any
written materials embodying such Manufacturing Improvements as reasonably
necessary for Technologies to manufacture or have manufactured such Specified
Material or Product. For purposes of this Agreement, the term "Manufacturing
Improvements" shall mean any modifications, improvements, enhancements, and
other revisions to the manufacturing materials or processes, solely as related
to the Specified Material or Product that is the subject of this Section 5.3,
made by Collagen during the Term of this Agreement. Expiration or termination of
this Agreement pursuant to the terms and conditions set forth in this Agreement
shall not relieve Technologies of any payment obligations to Collagen, accruing
prior to or upon such expiration or termination.
5.4 LIMITATION OF LIABILITY UPON TERMINATION. A PARTY SHALL NOT BE
LIABLE TO THE OTHER PARTY, OR ANY OF ITS EMPLOYEES, AGENTS, OR CUSTOMERS, FOR
DAMAGES OF ANY KIND, INCLUDING DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OR EXPIRATION OF THIS
AGREEMENT IN ACCORDANCE WITH THIS ARTICLE 5. EACH PARTY HEREBY WAIVES ANY RIGHTS
IT MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION OR
EXPIRATION OF THIS AGREEMENT UNDER LAW OTHER THAN AS EXPRESSLY PROVIDED HEREIN.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY ON ACCOUNT OF TERMINATION OR
EXPIRATION OF THIS AGREEMENT FOR REIMBURSEMENT OR DAMAGES FOR THE LOSS OF
GOODWILL, PROSPECTIVE PROFITS OR ANTICIPATED INCOME, OR ON ACCOUNT OF ANY
EXPENDITURES, INVESTMENTS, LEASES OR COMMITMENTS MADE BY THE OTHER PARTY OR FOR
ANY OTHER REASON WHATSOEVER. EACH PARTY ACKNOWLEDGES THAT IT HAS NO EXPECTATIONS
AND HAS RECEIVED NO ASSURANCES FROM THE OTHER PARTY THAT ANY INVESTMENT BY IT IN
THE DISTRIBUTION, PROMOTION, OR SALE OF THE PRODUCTS, SPECIFIED MATERIALS AND
COLLAGEN MATERIALS WILL BE RECOVERED OR RECOUPED OR THAT IT WILL OBTAIN ANY
ANTICIPATED AMOUNT OF PROFITS BY VIRTUE OF THIS AGREEMENT. THE PARTIES
ACKNOWLEDGE THAT THIS SECTION HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR
THEM TO ENTER INTO THIS AGREEMENT AND THAT THEY WOULD NOT HAVE ENTERED INTO THIS
AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.
5.5 SURVIVAL OF CERTAIN TERMS. The provisions of Sections 2.8, 3.6, 4.4,
5.3, 5.4, and 5.5, and Articles VI and VII shall survive the expiration or
termination of this Agreement for any reason. All other rights and obligations
of the parties shall cease upon expiration or termination of this Agreement.
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<PAGE> 10
ARTICLE VI
CONFIDENTIALITY
The parties agree that Information that is proprietary or confidential
to: (i) Collagen prior to the Effective Date or (ii) to one party and provided
to the other party pursuant to or in furtherance of this Agreement after the
Effective Date shall be subject to and treated in accordance with Article VII of
the Separation Agreement.
ARTICLE VII
MISCELLANEOUS
This Agreement shall be subject to the terms and provisions of Article
XI of the Separation Agreement, which are hereby incorporated into this
Agreement to the extent applicable.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Collagen Supply
Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
Dated: March 5, 1998 By: /s/ Gary S. Petersmeyer
------------- -----------------------
Name: Gary S. Petersmeyer
Title: President and CEO
COHESION TECHNOLOGIES, INC.
Dated: March 5, 1998 By: /s/ David Foster
------------- ----------------
Name: David Foster
Title: CEO
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<PAGE> 12
EXHIBIT A
Direct Costs
Direct Costs shall include the following expense types incurred by the cost
centers directly involved in manufacturing the products or materials.
Type of expenses or costs:
[*]
Cost centers:
[*]
Direct Costs shall specifically exclude the following types of costs
and expenses:
[*]
<PAGE> 13
SCHEDULE OF MATERIAL SUPPLY AGREEMENTS
Attached hereto is a list of the supply agreements for Existing Third
Party Products, as defined in the Collagen Supply Agreement effective as of
January 1, 1998 by and between Collagen Corporation and Collagen Technologies,
Inc.
COLLAGEN CORPORATION COHESION TECHNOLOGIES, INC.
By: /s/ Gary S. Petersmeyer By: /s/ David Foster
------------------------------ -------------------------------
(Signature) (Signature)
Name: Gary S. Petersmeyer Name: David Foster
Title: President and CEO Title: CEO
Date: March 5, 1998 Date: March 5, 1998
------------- -------------
Address: Address:
1850 Embarcadero Road 2500 Faber Place
Palo Alto, CA 94303 Palo Alto, CA 94303
<PAGE> 1
EXHIBIT 10.98
Application for an order granting
confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange
Act of 1934 has been made. Confidential
portions of this document have been
redacted and marked with an [*] and have
been filed with the Securities and Exchange
Commission separately with such application.
RECOMBINANT TECHNOLOGY
DEVELOPMENT AND LICENSE AGREEMENT
This RECOMBINANT TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT (the
"Agreement"), effective as of January 1, 1998 (the "Effective Date"), is made by
and between COLLAGEN CORPORATION, a Delaware corporation ("Collagen"), and
COHESION TECHNOLOGIES, INC., a Delaware corporation formerly known as Collagen
Technologies, Inc. ("Technologies").
RECITALS
1. Collagen and Technologies have entered into a relationship whereby
certain assets and liabilities are transferred from Collagen to Technologies, as
further described in the Separation and Distribution Agreement, effective as of
January 1, 1998 between Technologies and Collagen (the "Separation Agreement")
and in the Ancillary Agreements.
2. Technologies is in the business of developing products and processes
utilizing innovative collagen-based technology and novel biomaterials.
3. Collagen is in the business of developing, manufacturing and selling
human aesthetic and reconstructive medical technology products.
4. The parties desire to collaborate with each other to develop and
commercialize recombinant human collagen-based materials and products.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meanings given to them in the Separation Agreement. In addition, for
the purposes of this Agreement, the capitalized terms set forth below shall have
the meanings set forth in this Article 1.
1.1 "Bioequivalence Milestone" shall mean that certain development stage
during the performance of an Approach when the parties shall have attained the
ability to: (i) produce a recombinant human collagen material that has
demonstrated bioequivalence with the material
<PAGE> 2
currently known as homogenate; and (ii) manufacture such material in commercial
scale quantities. The specifications of the Bioequivalence Milestone shall be
mutually agreed to in writing by the Parties no later than thirty (30) days
after the execution of this Agreement.
1.2 "Costs" shall mean the [*] to either Technologies or Collagen for
performing its obligations pursuant to the Project hereunder as set forth in
Exhibit A; provided, however, the [*] and [*] of [*] (defined below) and [*] in
the Costs of such party for performing the Project.
1.3 "Net Revenue" shall mean the [*] payments, in whatever form,
received by Collagen or a Collagen Affiliate from a third party on account of
the grant of a sublicense to the Recombinant Technology or option therefor by
Collagen or its Affiliate to such third party, other than amounts included in
Net Sales, including but not limited to [*] payments, [*] and the like, [*]: (i)
any [*] or other [*] charge (other than [*]) to the extent borne by Collagen or
its Affiliate; and (ii) in the case of [*] received by Collagen or its
Affiliate, the extent to which such payments constitute reimbursement of [*]
costs incurred by Collagen or its Affiliate (including but not limited to
expenses for [*].
1.4 "Net Sales" shall mean the [*] amounts invoiced by Collagen, its
Affiliates or sublicensees thereof that acquire Product other than from Collagen
or its Affiliates (each a "Seller") for all Products sold or otherwise
transferred to: (i) third parties; or (ii) Affiliates of Collagen that are
end-users of the Products, [*] made in the normal course of business for: (a)
[*]; (b) charges for [*]; and (c) any [*] or other [*] charges (other than [*])
[*]. In the event that Products are sold or otherwise transferred as a
combination product, i.e., bundled with or in combination with one or more other
components, then the Net Sales for such Products shall be computed based on: (A)
the [*] at which such Product would be [*] after [*] to the [*] to which other
components in such combination product are subject; or (B) if [*] exists for
such Product, the [*] thereof.
1.5 "FDA" shall mean the United States Food and Drug Administration or
any successor agency thereof.
1.6 "Intellectual Property Rights" shall mean trade secrets, patents,
copyrights, know-how and similar rights of any type under the laws of any
governmental authority, domestic or foreign, including all applications and
registrations relating to any of the foregoing.
1.7 "Product" shall mean a commercial product or process which
incorporates all or any portion of Recombinant Technology.
1.8 "Project" shall mean the research, development, and manufacturing
process development activities to be performed by the parties under this
Agreement for the purpose of developing human recombinant collagen-based
products and materials.
[*] Application for an order granting confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
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<PAGE> 3
1.9 "Recombinant Technology" shall mean the inventions, discoveries and
know-how relating to human recombinant collagen-based materials and products,
whether or not patentable, made or developed by the parties pursuant to the
Project and any and all Intellectual Property Rights therein and thereto.
ARTICLE II
RESEARCH AND DEVELOPMENT
2.1 PERFORMANCE OF THE PROJECT. At present, the parties contemplate that
the Project will be conducted using two separate developmental approaches, one
in the yeast system and one in the bovine system (each an "Approach"). The
parties shall agree upon the development plan for the Project ("Project Plan")
in writing no later than thirty (30) days after the execution of this Agreement.
The Project Plan shall set forth for both Approaches: (i) the parties'
strategies, plans, activities and schedules with regard to research,
development, pre-clinical, pre-regulatory, scale-up and manufacturing
development; and (ii) the parties' respective responsibilities for performing
the Project. The Project Plan shall be reviewed at least once per calendar
quarter by the management of each party and at least once every six (6) months
by the Board of Directors of each party and may be amended from time to time
during the Term (as defined herein) by mutual agreement of the parties. Subject
to the terms and conditions of this Agreement, each party shall use its
commercially reasonable efforts to perform the Project in accordance with the
Project Plan. The parties' respective obligations to perform each Approach shall
terminate when the Bioequivalence Milestone has been reached for such Approach
unless the parties agree to terminate the Project or such Approach at an earlier
date; provided, however, in the event that the parties mutually agree to
terminate an Approach, Collagen shall, subject to Article III, be granted the
license set forth in Section 3.1 to any Recombinant Technology developed by such
Approach prior to and up to the termination of such Approach. Notwithstanding
anything herein to the contrary, upon mutually agreeable terms, Collagen and
Technologies may agree to: (i) expand their collaboration beyond the Project so
as to include research, development, pre-clinical, pre-regulatory, scale-up or
manufacturing development relating to designer collagen materials or
technologies other than Recombinant Technology; and/or (ii) continue their
collaboration with respect to Recombinant Technology after the Bioequivalence
Milestone has been reached in either one or both Approaches.
2.2 MANAGEMENT.
2.2.1 CO-CHAIRS. Each party shall appoint one highly qualified
and experienced representative as a co-chair of the Project, who together with
the other party's co-chair, shall be responsible for managing the Project and
relationship between the parties pursuant to this Agreement ("Co-chairs").
Unless the parties agree otherwise, each party will inform the other party in
writing of its appointed Co-chair no later than thirty (30) days from the
execution of this Agreement. Each party shall have the right to replace its
Co-chair from time to time, provided that it promptly notifies the other party
thereof in writing. The Co-chairs together shall: (i) provide overall direction
to the Project and manage information exchange between the parties; (ii) decide
key strategies and issues with respect to research, development, pre-clinical,
pre-regulatory, scale-up and manufacturing development; (iii) monitor the
progress of the Project; and (iv) investigate new opportunities and/or solve
problems and issues that arise relating to the
-3-
<PAGE> 4
Project and/or Recombinant Technology. In addition, the Co-chair of a party
shall be responsible for ensuring that such party performs and fulfills the
duties and obligations of such party as set forth in Project Plan (or otherwise
mutually agreed upon by the parties) and managing the employees and/or
subcontractors of such party working on the Project.
2.2.2 GOVERNANCE. In general, the Co-chairs shall strive to reach
agreement on all matters relating to the Project. In the event the Co-chairs are
unable to reach a decision on any conflict within ten (10) business days after
the conflict is identified, the matter shall be submitted to the Chief Executive
Officers of Collagen and Technologies for resolution. In the event the Chief
Executive Officers of the parties are unable to resolve such conflict within ten
(10) business days after having such conflict submitted to them for resolution,
then each party shall each designate two Directors from its Board of Directors
(neither of whom is the CEO of such party), which Directors, together with the
other two Directors selected by the other party, shall attempt to resolve such
matter or dispute. If the four Directors are unable to resolve the conflict,
then the parties shall submit such conflict to a single, appropriately
qualified, mediator mutually agreeable to the parties who shall work with the
parties to resolve the conflict.
2.3 OBLIGATIONS AFTER BIOEQUIVALENCE MILESTONE. After the Bioequivalence
Milestone is reached in an Approach, each party shall bear all responsibility
and costs for development of its own Products utilizing the Recombinant
Technology developed from such Approach; provided, however, after the
Bioequivalence Milestone is reached in such Approach, subject to Section 2.5,
each party will be obligated to provide on-going information and reasonable
assistance for the other party's Product development and regulatory approval
efforts, as requested by the other party, including but not limited to
furnishing all relevant technical information and know-how presently or
hereafter available relating to the Recombinant Technology and developed from
such Approach, but excluding any information which the party is bound by
obligations to third parties to keep confidential ("Requested Assistance"). By
way of illustration and not limitation, if requested by Collagen, Technologies
shall provide to Collagen any existing data needed by Collagen to generate
pre-clinical data to support a regulatory filing related to a Collagen Product.
The party that desires such Requested Assistance shall pay to the other party
such other party's standard rates for such Requested Assistance.
2.4 DEVELOPMENT FEES. Commencing from the Effective Date until both
Approaches have been either: (i) completed as a result of the attainment of the
Bioequivalence Milestone for such Approach; or (ii) terminated pursuant to the
terms and conditions herein, all Costs of the Project shall be divided equally
between Collagen and Technologies. No later than
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<PAGE> 5
thirty (30) days after the last day of a calendar quarter, each party shall
submit to the other party an invoice setting forth the Costs, if any, incurred
by such party during such quarter. The party with the lesser Costs for such
quarter shall pay the other party [*] percent ([*]%) of the difference between
the Costs incurred by the parties within sixty (60) days after the last day of
such quarter. The Senior Financial Officers of the parties may agree upon
alternate methods for accounting, invoicing and payment of Costs associated with
the Project.
2.5 OWNERSHIP OF INVENTIONS. The parties agree that Recombinant
Technology, including works-in-progress, and any Intellectual Property Rights
therein and thereto shall be owned by Technologies. Except as otherwise agreed
to by both parties, any improvement to the Recombinant Technology developed from
an Approach made by either party after: (i) the Bioequivalence Milestone has
been reached for such Approach or (ii) such Approach is terminated pursuant to
the terms and conditions herein, will be owned by the party that made such
improvement, and the other party shall have no automatic right to such
improvement.
ARTICLE III
LICENSE AND COMMERCIALIZATION
3.1 LICENSE. Subject to the terms and conditions of this Agreement,
Technologies hereby grants to Collagen a worldwide, exclusive, perpetual right
and license, with the right to sublicense, solely within the Collagen Field, to
develop, have developed, make, have made, sell, have sold, offer to sell,
import, export, have imported and exported, distribute, and have distributed
Products in the Collagen Field.
3.2 ROYALTIES. In consideration for the license granted herein, Collagen
shall pay Technologies a license fee ("License Fees") equal to: (i) [*] percent
([*]%) of the Net Sales of Product; and (ii) [*] percent ([*]%) of the Net
Revenue, provided, Collagen's obligation to pay the License Fees to Technologies
hereunder shall terminate once the cumulative License Fees paid by Collagen to
Technologies reach $[*] Million U.S. Dollars. In addition, Collagen shall have
the option, exercisable by Collagen at any time, to pay Technologies a lump sum
equal to $[*] Million U.S. Dollars in lieu of any and all further License Fees
to Technologies that shall accrue after the receipt by Technologies of such lump
sum payment. Subject to Technologies' prior written approval, Collagen may have
an Affiliate or sublicensee pay any royalties due on the Net Sales of such
Seller's Products directly to Technologies.
3.3 REPORTING AND PAYMENT. Collagen (or, to the extent approved by
Technologies, its Affiliate or sublicensee) shall pay to Technologies, within
thirty (30) days after the last day of each calendar quarter: (a) the amounts
due Technologies under Section 3.2 during such quarter; and (b) any amounts
payable to third parties for the manufacture, sale and/or use of such Seller's
Products pursuant to the Pre-existing Third Party Agreements (defined below) to
the extent such amounts have not been paid by Collagen directly to such third
parties and shall concurrently provide Technologies with a written report
("Sales Report") setting forth:
[*] Application for an order granting confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
-5-
<PAGE> 6
(i) by Seller, the quantity and type of Product sold or
otherwise transferred in such quarter and the Net
Sales therefore;
(ii) by sublicensee, the Net Revenues received by
Collagen and its Affiliates in such quarter; and
(iii) a calculation of the amounts payable to
Technologies pursuant to Section 3.2 for such
quarter (including the conversion rate used to
convert such amounts into dollars).
Collagen shall require each Affiliate and/or sublicensee to provide to Collagen
a written report containing the information required to be contained in the
Sales Report. Sales made in foreign currency will be determined in the foreign
funds for the country in which the Product are sold, and then converted into
equivalent United States dollars at the exchange rate as published by the Wall
Street Journal (U.S., Western Edition) for the last business day of each
quarter. Collagen shall remain liable for any amounts payable to Technologies
hereunder by a Seller to the extent not satisfied by the Seller.
3.4 AUDIT. Each party shall maintain detailed and accurate written
records and books of account in such manner and detail as to permit the
verification of Costs, and Collagen shall, and shall require each Seller to,
maintain detailed and accurate written records and books of account in such
manner and detail as to permit the verification of the amounts payable to
Technologies pursuant to Section 3.2. Upon reasonable notice to the other party
("Audited Party"), a party ("Auditing Party") shall have the right to have an
independent certified public accountant, selected by the Auditing Party and
reasonably acceptable to the Audited Party audit the Audited Party's records,
during normal business hours, to verify the Audited Party's Costs. In addition,
Technologies shall have the right to have an independent certified public
accountant audit the records of each Seller to verify the amounts payable to
Technologies pursuant to Section 3.2. Any such audit of Technologies or Collagen
or a Seller shall not take place more frequently than once a year and shall not
cover such records for more than the preceding two (2) years. The accountant
shall only report as to the accuracy of Technologies or Collagen's Costs or the
amounts payable to Technologies pursuant to Section 3.2, and in the event of any
inaccuracy, the correct amounts thereof. The Audited Party shall promptly refund
any overpayment of Costs made by the Auditing Party, and the Auditing Party
shall promptly pay any underpayment of Costs. In addition, a Seller shall
promptly pay to Technologies any underpayment revealed in such audit, and
Technologies shall promptly refund any overpayment made by Seller. Such audit
shall be at the expense of the Auditing Party unless the audit identifies an
overpayment by the Auditing Party or an underpayment by the Audited Party or
Seller of greater than five percent (5%), in which case such audit shall be at
the Audited Party's or Seller's expense. The parties and Sellers shall preserve
and maintain all such records and accounts required for audit for a period of
two (2) years after the calendar quarter for which the records apply.
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<PAGE> 7
3.5 THIRD PARTY RIGHTS AND OBLIGATIONS.
3.5.1 OBLIGATIONS. The parties acknowledge that the parties may
incur financial obligations to third parties for the manufacture, use and/or
sale of Product, including without limitation license fees, royalties or other
payments pursuant to agreements entered into by Collagen prior to the Effective
Date, including but not limited to (i) the Intellectual Property and Production
Agreement for the Production of Collagens Using a Yeast Expression System
between Collagen and Genotypes, Inc., with an effective date of August 15, 1996
("Genotypes Agreement"); and (ii) the Amended and Restated Research, License and
Supply Agreement between Collagen and Pharming B.V., with an effective date of
February 20, 1996 ("Pre-existing Third Party Agreements"). In addition, after
the Effective Date, each party may, if necessary or desirable, enter into
agreements with third parties which may require that license fees, royalties or
other payments be paid to such third parties for the manufacture, sale and/or
use of such party's Products. The parties agree that each party shall be solely
responsible for any and all license fees, royalties or other payments to third
parties accruing from the manufacture, use and/or sale of its own Products,
whether pursuant to Pre-existing Third Party Agreements or to agreements entered
into by such party after the Effective Date; provided, however, with respect to
any license fees, royalties or other payments to third parties that accrue
pursuant to Pre-existing Third Party Agreements which are assigned to
Technologies pursuant to the Separation Agreement, Collagen shall, at
Technologies' option, make such payments therefore directly to such third
parties if permitted by such third parties. In addition, during the Term, each
party will, with reasonable promptness and detail, notify the other party in
writing of any third party rights of which it becomes aware that may be required
for the other party's manufacture, use and/or sale of its Products. In addition,
Collagen shall abide by the terms and conditions in such Pre-existing Third
Party Agreements and shall not perform any act or fail to act for which
Technologies shall be exposed to liability thereunder.
3.5.2 RIGHTS. Pursuant to Section 3 (b) of the Genotypes
Agreement which shall be assigned to Technologies as of the Effective Date,
Technologies has a first right of refusal for an exclusive license to an
Invention (as that term is defined therein) made under the terms of the
Genotypes Agreement, which Invention is not competitive with an existing product
line of Collagen prior to the Effective Date, prior to the licensing of such
Invention by Genotypes to a third party. Technologies agrees that after the
Effective Date, it shall forward to Collagen any and all notices that it
receives from Genotypes regarding any potential licensing of Inventions to third
parties no later than ten (10) days after receipt of such notice from Genotypes.
After receipt of such forwarded notice from Technologies, Collagen shall notify
Technologies within thirty (30) days as to whether Collagen desires to license
such Invention. If Collagen notifies Technologies that it desires to license
such Invention, then Technologies shall be obligated to timely exercise its
first right of refusal to license such Invention. If both Technologies and
Collagen desire rights under the license to the Invention, then Technologies
shall grant to Collagen an exclusive sublicense to the Invention in the Collagen
Field and retain all other rights to the Invention. If Technologies does not
desire rights to the Invention, then Technologies shall sublicense to Collagen
all rights under the license to the Invention, and Collagen shall be entitled to
exercise all rights under such license consistent with Section 9.1 (Non-Compete
provision) of the License Agreement.
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<PAGE> 8
3.6 GOVERNMENTAL APPROVALS. Subject to Section 2.3, each party shall
solely be responsible for obtaining all necessary governmental approvals,
including FDA approvals, for the development, testing, production, distribution,
sale and use of any of their own Products, including without limitation,
performing all required clinical trials therefore. So long as Collagen has a
license to Recombinant Technology hereunder, Collagen grants to Technologies a
non-exclusive, transferable, fully-paid-up right to reference any and all
applicable United States and foreign regulatory registrations, licenses and
applications relating to the Recombinant Technology ("Regulatory Materials") in
the possession or control of Collagen and solely as such Regulatory Materials
relate to Technologies' Products outside the Collagen Field. So long as Collagen
has a license to Recombinant Technology hereunder, Technologies grants to
Collagen a non-exclusive, transferable, fully-paid-up right to reference any and
all Regulatory Materials in the possession or control of Technologies and solely
as such Regulatory Materials relate to Collagen's Products in the Collagen
Field. The reference rights set forth in this Section 3.6 shall be in addition
to the reference rights of the parties set forth in Article V of the License
Agreement.
ARTICLE IV
TERM AND TERMINATION
4.1 TERM. The term of this Agreement shall commence on the Effective
Date and continue in full force and effect until the termination by either party
pursuant to Sections 4.2 or 4.3 ("Term").
4.2 TERMINATION FOR CAUSE.
4.2.1 TERMINATION DURING PROJECT. Prior to the attainment of the
Bioequivalence Milestone and/or termination pursuant to Section 2.1 for each
Approach, either Technologies or Collagen may terminate an Approach in the event
the other party shall have breached or defaulted in the performance of any of
its material obligations under such Approach as set forth in this Agreement and
the Project Plan, provided that the non-breaching party delivers written notice
to the defaulting party specifying in reasonable detail the nature of such
default or breach and stating its intent to terminate such Approach if such
default or breach is not cured. Termination of such Approach shall be effective
thirty (30) days after the receipt by the defaulting party of such written
notice thereof unless such default or breach is cured by the breaching party
prior to the expiration of such thirty (30) day period. If Technologies
terminates an Approach pursuant to this Section 4.2.1, Collagen shall not be
entitled to the license set forth in Section 3.1 to Recombinant Technology
developed from such Approach. If Collagen terminates an Approach pursuant to
this Section 4.2.1, then Collagen shall have the license set forth in Section
3.1 to any Recombinant Technology developed from such Approach prior to and up
to the date that such termination becomes effective without any royalty
obligations (other than Pre-existing Third Party obligations) to Technologies.
4.2.2 TERMINATION AFTER PROJECT. After the attainment of the
Bioequivalence Milestone and/or termination of both Approaches pursuant to
Section 2.1, either Technologies or Collagen may terminate this Agreement in the
event the other party shall have breached or defaulted in the performance of any
of its material obligations under this Agreement,
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<PAGE> 9
provided that the non-breaching party delivers written notice to the defaulting
party specifying in reasonable detail the nature of such default or breach and
stating its intent to terminate the Agreement if such default or breach is not
cured. Termination of this Agreement shall be effective thirty (30) days after
the receipt by the defaulting party of such written notice thereof unless such
default or breach is cured by the defaulting party prior to the expiration of
such thirty (30) day period. If Technologies terminates this Agreement pursuant
to this Section 4.2.2, Collagen shall not be entitled to the license set forth
in Section 3.1, and if Collagen terminates this Agreement pursuant to this
Section 4.2.2, then Collagen shall be entitled to the license set forth in
Section 3.1, subject to the provisions of Article III.
4.3 TERMINATION FOR CONVENIENCE. After March 31, 2000, either party may
terminate this Agreement by delivery of nine (9) months written notice thereof
to the other party; provided, however, in the event of such termination pursuant
to this Section 4.3, then Collagen shall be entitled to the license set forth in
Section 3.1 to any Recombinant Technology developed prior to and up to the date
that such termination becomes effective, subject to the provision of Article
III.
4.4 EFFECT OF TERMINATION. Expiration or termination of this Agreement
pursuant to the terms and conditions set forth in this Agreement shall not
relieve the parties of any obligations, accruing prior to or upon such
expiration or termination.
4.5 SURVIVAL OF CERTAIN TERMS. The provisions of Sections 2.1 (solely
with respect to the license rights granted to Collagen upon the termination of
an Approach in accordance with Section 2.1), 2.5, 4.2, 4.3, 4.4 and 4.5 and
Articles III (so long as any license to Recombinant Technology to Collagen
hereunder is in effect), V and VI shall survive the expiration or termination of
this Agreement for any reason. All other rights and obligations of the parties
shall cease upon expiration or termination of this Agreement.
ARTICLE V
CONFIDENTIALITY
The parties agree that Information that is proprietary or confidential
to: (i) Collagen prior to the Effective Date; or (ii) to one party and provided
to the other party pursuant to or in furtherance of this Agreement after the
Effective Date shall be subject to and treated in accordance with Article VIII
of the Separation Agreement.
ARTICLE VI
MISCELLANEOUS
This Agreement shall be subject to Article XI of the Separation
Agreement, which is hereby incorporated into this Agreement to the extent
applicable.
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IN WITNESS WHEREOF, the parties have caused this Recombinant Technology
Development and License Agreement to be executed by their duly authorized
representatives.
COLLAGEN CORPORATION
Dated: March 5, 1998 By: /s/ Gary S. Petersmeyer
------------- ---------------------------------
Name: Gary S. Petersmeyer
Title: President and CEO
COLLAGEN TECHNOLOGIES, INC.
Dated: March 5, 1998 By: /s/ David Foster
------------- ---------------------------------
Name: David Foster
Title: CEO
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EXHIBIT A
Costs
Direct Costs include:
[*]
Indirect Costs allocable percentage of the following costs:
[*]
[*] Application for an order granting confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
<PAGE> 1
EXHIBIT 10.99
TAX ALLOCATION AND INDEMNITY AGREEMENT
This TAX ALLOCATION AND INDEMNITY AGREEMENT, effective as of January 1,
1998 (the "Effective Date"), is made by and between COLLAGEN CORPORATION, a
Delaware corporation ("Collagen"), and COHESION TECHNOLOGIES, INC., a Delaware
corporation formerly known as Collagen Technologies, Inc. ("Technologies").
RECITALS
1. Collagen is the common parent of the Collagen Affiliated Group, and
Collagen and various of its direct and indirect subsidiaries are members of the
Collagen Unitary Group (as those terms are defined below);
2. As of January 1, 1998, Collagen will contribute assets constituting
its Technologies operating group to Technologies in exchange for all of
Technologies' capital stock and Technologies thereby will become a member of the
Collagen Affiliated Group and Collagen Unitary Group;
3. Collagen intends to distribute its Technologies stock to its
stockholders in a transaction intended to qualify for nonrecognition of gain
under Section 355 of the Code, at which time Technologies would no longer be a
member of the Collagen Affiliated Group and the Collagen Unitary Group; and
4. Collagen, on behalf of itself and the members of the Collagen
Subgroup, and Technologies, on behalf of itself and the members of the
Technologies Subgroup (as those terms are defined below), intend in this
Agreement to provide for the allocation among themselves of Tax liabilities
during the period that Technologies and the other members of the Technologies
Subgroup are members of the Collagen Affiliated Group and the Collagen Unitary
Group; reimbursement for payment of Tax liabilities and use of Tax benefits
arising during that period; indemnification and procedures for audits and
contests with respect to subsequent adjustments of such Tax liabilities; and
cooperation in filing of returns and other matters relating to Taxes;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meaning set forth in the Separation and Distribution Agreement dated as
of January 1, 1998, between Collagen and Technologies (the "Separation
Agreement"). In addition, for the purposes of this Agreement, the capitalized
terms set forth below shall have the meanings set forth in this Article I:
1.1 "Affiliated Period" means the period during which Technologies or
any other member of the Technologies Subgroup is a member of the Collagen
Affiliated Group and/or the Collagen Unitary Group.
<PAGE> 2
1.2 "Agreement" means this Tax Allocation and Indemnity Agreement, as
amended from time to time.
1.3 "Collagen Affiliated Group" means the affiliated group of
corporations (within the meaning of Section 1504 of the Code) of which Collagen
is the common parent.
1.4 "Collagen Subgroup" means Collagen and all other corporations
included in the Collagen Affiliated Group and/or the Collagen Unitary Group
other than Technologies and other corporations included in the Technologies
Subgroup.
1.5 "Collagen Unitary Group" means any group of corporations including
Collagen filing or required to file any Combined Return.
1.6 "Combined Return" means any state, local or, if applicable, foreign
income, franchise or similar tax return which has been or will be filed by any
Collagen Subgroup member or Technologies Subgroup member on a basis which
reports Taxes for two or more members of such subgroup using combined,
consolidated or unitary business tax reporting principles.
1.7 "Consolidated Return" means a consolidated U.S. federal income tax
return filed by or on behalf of an affiliated group of corporations within the
meaning of Section 1504 of the Code.
1.8 "Final Determination" means, with respect to any liability for Taxes
for any period, (a) a final, unappealable decision by a court of competent
jurisdiction, (b) the expiration of applicable statutes of limitations on
assessment of Taxes or filing of claims for refund, (c) the execution of a
closing agreement under section 7121 of the Code or the acceptance by the IRS of
an offer in compromise pursuant to section 7122 of the Code (or similar
agreements with tax authorities entered into under applicable state, local or
foreign tax law), (d) a binding agreement without reservation on IRS Form 870-AD
or a comparable agreement form under the laws of any other taxing jurisdiction
or (e) any other final, irrevocable and unappealable determination of Taxes for
such period.
1.9 "IRS" means the United States Internal Revenue Service or any
successor thereto.
1.10 "Ruling Request" means a request submitted to the IRS for a ruling
that the Distribution meets the requirements for nonrecognition of gain or loss
under Section 355 of the Code.
1.11 "Tax" or "Taxes" means any or all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including but not limited to, federal,
state and foreign income taxes), payroll and employee withholding taxes,
unemployment insurance contributions, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes,
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<PAGE> 3
environmental taxes, transfer taxes, and other governmental charges or
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
1.12 "Technologies Subgroup" means Technologies and all of its direct
and indirect subsidiaries, whether currently or hereafter existing, which would
be included in an affiliated group of corporations (within the meaning of
section 1504 (a) of the Code) and/or combined, consolidated or unitary state or
other tax filing groups of corporations of which Technologies would be the
ultimate parent corporation if Technologies were not a member of the Collagen
Affiliated Group or Collagen Unitary Group, respectively.
ARTICLE II
FILING OF RETURNS
2.1 Consolidated Returns and Combined Returns.
(a) Collagen shall have exclusive authority and responsibility to
prepare and file Consolidated Returns and Combined Returns on behalf of the
Collagen Affiliated Group and Collagen Unitary Group, respectively (as well as
any other documents, statements or elections required to be filed or included
with such Consolidated Returns or Combined Returns), for all taxable years (or
portions thereof) included in the Affiliated Period. Collagen shall have sole
authority and discretion to determine (i) the manner in which such Consolidated
Returns and Combined Returns (and related documents) shall be prepared and
filed, including without limitation the manner in which any item of income,
gain, loss, deduction or credit included in such returns shall be reported and
the corporations appropriately included in the Collagen Unitary Group filing a
Combined Return, (ii) whether any extensions of time to file a Consolidated
Return or Combined Return shall be requested, and (iii) the elections that will
be made in such returns on behalf of the Collagen Affiliated Group, the Collagen
Unitary Group or any members thereof (including members of the Technologies
Subgroup).
(b) Technologies and each member of the Technologies Subgroup
hereby irrevocably appoint Collagen as their agent and attorney-in-fact to take
such actions (including the execution of documents on behalf of Technologies or
any other member of the Technologies Subgroup) as may be appropriate to
effectuate the filing of such Consolidated Returns and Combined Returns.
Technologies and each Technologies Subgroup member agree to file such consents,
elections and other documents, provide information as requested by Collagen and
otherwise cooperate with Collagen as necessary to carry out the purpose of this
section.
(c) Collagen shall be liable, and shall indemnify Technologies
and each other member of the Technologies Subgroup, for any penalties or other
damages attributable to the failure of Collagen to make timely filings of
Consolidated Returns or Combined Returns for the Affiliated Period or full and
timely payment of all amounts shown to be due thereon, provided that
Technologies and the Technologies Subgroup members have complied with their
obligations to make Tax payments to, provide information to, and otherwise
cooperate on a timely basis with Collagen as provided under the provisions of
this Agreement.
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<PAGE> 4
2.2 Other Returns.
(a) Except as otherwise provided herein or as the parties hereto
may otherwise agree, Technologies shall have exclusive authority and
responsibility to prepare and file all tax returns by or on behalf of it and any
member of the Technologies Subgroup, other than Consolidated Returns and
Combined Returns subject to the provisions of Section 2.1. Collagen shall
provide (and shall cause each Collagen Subgroup member and their representatives
to provide) reasonable access to books, records, returns and other information
to the extent necessary to permit Technologies timely to prepare and file such
tax returns and shall otherwise cooperate as reasonably requested by
Technologies in connection with the preparation and filing of such returns.
(b) Technologies shall be liable, and shall indemnify Collagen
and each other member of the Collagen Subgroup, for any penalties or other
damages attributable to the failure of Technologies to make timely filings of
tax returns for which it is responsible under this Section 2.2 or full and
timely payment of amounts shown to be due thereon, provided that Collagen and
the Collagen Subgroup members have complied with their obligations to provide
information and otherwise cooperate as provided hereunder.
ARTICLE III
ALLOCATION OF LIABILITIES FOR TAXES
3.1 Federal Income Taxes for Periods Commencing on and after the
Effective Date.
(a) For each taxable period commencing on or after the Effective
Date in which Technologies and any other members of the Technologies Subgroup
are included in the Collagen Affiliated Group, the Technologies Subgroup shall
be allocated and Technologies shall pay to Collagen the Technologies Subgroup's
federal income Tax liability, if any (including any alternative minimum tax or
environmental tax), as determined under this Section 3.1. Such federal Tax
liability shall equal the hypothetical separate return tax liability of such
subgroup, as determined in accordance with the provisions of Treasury
Regulations Section 1.1552-1(a)(2)(ii) (treating references to a "member"
therein as references to the Technologies Subgroup, and including the
adjustments under clauses (a) - (i) thereof) as if the Technologies Subgroup had
filed a separate consolidated federal income tax return. If the Technologies
Subgroup's federal Tax liability as so determined is zero, then Collagen shall
pay to Technologies the excess, if any, of the Collagen Subgroup's federal
income Tax liability, determined as if the Collagen Subgroup had filed a
separate consolidated federal income tax return for such taxable period or
portion thereof (and any taxable year of the Collagen Subgroup to which a net
operating loss or other tax item of the Technologies Subgroup is carried) under
the same principles as set forth in the preceding sentence, over the actual
federal income Tax liability of the Collagen Affiliated Group for such taxable
period or portion thereof (or such year to which such item is carried).
(b) For purposes of determining allocation of Tax liabilities and
payment obligations for tax periods commencing on or after the Effective Date,
(i) except as provided in subsection (c) below, any Taxes attributable to the
formation and capitalization of Technologies or the Distribution being treated
as taxable events to Collagen shall be allocated to the Collagen
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<PAGE> 5
Subgroup, (ii) any Taxes attributable to the restoration of an excess loss
account or intercompany gain in connection with the Distribution or other event
causing termination of membership by Technologies and other members of the
Technologies Subgroup in the Collagen Affiliated Group shall be allocated to
whichever subgroup includes the corporation required to restore such item under
applicable Treasury Regulations pursuant to Section 1502 of the Code, (iii) the
benefit of the graduated Tax rates provided under Section 11 of the Code and any
alternative minimum tax exemption amount under Section 55 of the Code shall be
allocated to the Technologies Subgroup in proportion to the ratio of the
Technologies Subgroup's federal Tax liability to the total federal Tax liability
of the Collagen Affiliated Group (computed without regard to such benefit), and
(iv) items not otherwise specifically addressed hereunder shall be allocated
between the Technologies Subgroup and the Collagen Subgroup in such manner that
reasonably reflects the provisions and purposes of this Agreement.
(c) Notwithstanding subsection (b)(ii) above, Technologies shall
be allocated, and shall indemnify and hold harmless Collagen and each member of
the Collagen Subgroup from, any Taxes attributable to the Distribution being
treated as a taxable event to Collagen if and to the extent that such Taxes
result from any of the following: (i) within two years after the date of the
Distribution (or within any period of time following the Distribution if a plan
to do any of the following existed at or before the time of the Distribution),
(A) capital stock representing a 50 percent or greater interest of Technologies
or any member of the Technologies Subgroup is acquired in a transaction
described in Section 355(e)(2) of the Code, (B) Technologies has voluntarily
ceased to engage in the active conduct of a trade or business within the meaning
of Section 355(b)(2) of the Code, (C) Technologies or any member of the
Technologies Subgroup makes a material sale, exchange, distribution or other
disposition of assets or capital stock to a transferee that is not a member of
the Technologies Subgroup (other than transfers or distributions in the ordinary
course of business, issuances by Technologies of its own stock following the
Distribution in aggregate amounts less than 50% of Technologies' outstanding
capital stock immediately following the Distribution, or transactions disclosed
in the Ruling Request), and (D) Technologies makes any repurchases of its
capital stock (other than repurchases in connection with employee benefit plans
permitted under Revenue Procedure 91-63), unless Technologies obtains a
supplemental ruling from the IRS (or opinion of counsel reasonable satisfactory
to Collagen in lieu of such supplemental ruling) that any transaction described
in (A), (B), (C) or (D) would not cause the Distribution to fail to qualify for
nonrecognition of gain under Section 355 of the Code; (ii) a failure by
Technologies or any member of the Technologies Subgroup to comply in all
material respects with each written representation and statement regarding
Technologies or a member of the Technologies Subgroup made in the Ruling Request
or in a certificate to counsel in connection with such counsel's issuance of an
opinion that the Distribution will qualify for nonrecognition of gain under
Section 355 of the Code, or (iii) any untrue or misleading statement of a
material fact contained in the Ruling Request (or certificate provided to
counsel) regarding Technologies or a member of the Technologies Subgroup,
provided in the case of clauses (ii) and (iii) that an authorized representative
of Technologies reviewed and approved inclusion of the statement or
representation in the Ruling Request (or certificate).
(d) The Technologies Subgroup's federal Tax liability for the
taxable year during or with which the Affiliated Period ends shall be determined
in accordance with the
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<PAGE> 6
provisions of Treasury Regulations Section 1.1502-76(b)(2) by closing the books
of Technologies and the Technologies Subgroup members as of the end of the last
day of the Affiliated Period and taking into account only items accruing during
the portion of the taxable year ending on such date in computing such liability.
Items shall not be pro-rated in accordance with clauses (ii) or (iii) of such
section of the treasury regulations except to the extent Collagen in its
discretion determines that it is impracticable to allocate particular items in
accordance with the preceding sentence.
(e) The parties acknowledge that the allocation of federal Tax
liability provided for by this Section 3.1 is for purposes of determining the
parties' actual payment obligations to each other with respect to Taxes of the
Collagen Affiliated Group for the Affiliated Period and not for purposes of
computing earnings and profits pursuant to Section 1552 of the Code and
recognize that such allocation may differ from the allocation provided by
Section 1552 for earnings and profits purposes.
3.2 State Income and Franchise Taxes for Periods Commencing on or after
the Effective Date.
(a) For each taxable period commencing on or after the Effective
Date for which Technologies and/or any other members of the Technologies
Subgroup are included in any Combined Return filed by the Collagen Unitary
Group, the Technologies Subgroup shall be allocated and Technologies shall pay
to Collagen the state income Tax liability of Technologies and/or such other
Technologies Subgroup members that are so included, as determined under this
Section 3.2. Such state income Tax liability shall equal the hypothetical state
income tax liability of the Technologies Subgroup members so included, computed
as if they filed a Combined Return (or if only one such member is so included, a
separate state income or franchise tax return) including only such included
member(s). To the extent that the same or analogous federal consolidated
reporting principles as are referred to in Section 3.1 apply for purposes of
filing such Combined Returns, then such principles shall also apply for purposes
of determining the Technologies Subgroup's state Tax liability in respect of any
Combined Return of the Collagen Unitary Group. If the state income Tax liability
of the Technologies Subgroup as so determined is zero, then Collagen shall pay
to Technologies the excess, if any, of the Collagen Subgroup's state income Tax
liability, determined as if the Collagen Subgroup had filed a separate Combined
Return not including any Technologies Subgroup members, over the actual state
income Tax liability of the Collagen Unitary Group. Collagen shall have the
discretion to make determinations of each subgroup's liability for Taxes under
this Section 3.2(a) in any manner that is reasonable in light of the applicable
state and local Tax reporting principles and the purposes of this Agreement.
(b) Technologies shall be responsible for payment of any state
Taxes due from it or any members of the Technologies Subgroup, and Collagen
shall be responsible for payment of any state Taxes due from Collagen or any
members of the Collagen Subgroup, in connection with state income or franchise
tax returns that are not Combined Returns.
3.3 Other Taxes for Periods Commencing on or after the Effective Date.
Any Taxes for taxable periods commencing on or after the Effective Date, other
than Taxes allocated under Sections 3.1 and 3.2, shall be the responsibility of
the party incurring such Tax under applicable
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law. Notwithstanding the foregoing, in the event that the applicable law of any
foreign taxing jurisdiction provides for filing of Combined Returns including
one or more members of each of the Technologies Subgroup and the Collagen
Subgroup, then principles similar to those set forth above in Section 3.2(a)
shall be applied for purposes of determining an appropriate allocation of Taxes
required to be reported with such Combined Returns.
3.4 Deficiencies for Collagen Taxes Arising before the Effective Date.
Any deficiencies for Taxes of Collagen or any member of the Collagen Affiliated
Group or Collagen Unitary Group attributable to transactions or events arising
before the Effective Date shall be allocated 100% to Collagen, and Collagen
shall indemnify and hold harmless Technologies and the members of the
Technologies Subgroup for any such deficiencies.
ARTICLE IV
PAYMENT AND INDEMNIFICATION OF TAXES
4.1 Estimated Tax Payments. Collagen shall have the right to assess
Technologies for the Technologies Subgroup's share of any estimated Tax payment
liability incurred by the Collagen Affiliated Group or the Collagen Unitary
Group for any taxable year (or portion thereof) included in the Affiliated
Period, as determined by Collagen in its reasonable discretion applying the
principles of Sections 3.1 and 3.2. For this purpose, Technologies' share of
each such estimated Tax payment liability shall not exceed the Collagen
Affiliated Group's or Collagen Unitary Group's actual estimated Tax payment
liability for the relevant period and Collagen shall have no obligation to make
any payment to Technologies. Collagen shall provide Technologies with notice of
its estimated Tax payment obligation hereunder at least five days prior to the
due date thereof as specified in such notice, together with a summary of the
basis for the calculation of such obligation, and Technologies shall pay the
amount owed no later than such due date. Any payments made by Technologies under
this Section 4.1 shall be credited against the final Tax payment obligations due
for the entire taxable year (or portion thereof) under Section 4.2.
4.2 Final Tax Payments. As soon as practicable after the end of each
taxable year (or portion thereof) included in the Affiliated Period, but in no
event later than 30 days prior to the due date (including extensions) for filing
the applicable Consolidated Return or Combined Return therefor, Collagen shall
prepare and submit to Technologies a statement setting forth the final amount
determined by Collagen to be due from Technologies or Collagen, as the case may
be, in accordance with the provisions of Sections 3.1 and 3.2, taking into
account any amounts credited to Technologies under Section 4.1. Such statement
shall include sufficient supporting information to show the basis for the amount
determined. Unless Technologies objects to the amount determined, such amount
shall be paid no later than five days thereafter. In the event of a dispute,
such dispute shall be resolved by a nationally recognized independent accounting
firm selected by Collagen and approved by Technologies, which approval shall not
be unreasonably withheld.
4.3 Indemnification. Provided that Technologies has made the payments to
Collagen required under this Agreement, Collagen shall be responsible for, shall
protect, indemnify and hold harmless Technologies and each Technologies Subgroup
member from, and shall be entitled to any refunds of (i) any Taxes imposed on
the Collagen Affiliated Group or the Collagen Unitary
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<PAGE> 8
Group (or any member thereof), including without limitation any obligation to
contribute to the payment of any such Taxes (other than as provided in this
Agreement) and any liability arising from the several liability for Taxes of an
affiliated group under Treasury Regulations Section 1.1502-6 or any analogous
provisions of other applicable law, and (ii) any other Taxes imposed on Collagen
or any member of the Collagen Subgroup arising before, during or after the
Affiliated Period. Except as provided in the preceding sentence, Technologies
shall be responsible for, shall protect, indemnify and hold harmless Collagen
and each Collagen Subgroup member from, and shall be entitled to any refunds of,
Taxes imposed on the Technologies Subgroup or any member thereof.
ARTICLE V
SUBSEQUENT ADJUSTMENTS
5.1 Subsequent Adjustments. In the event that a Final Determination
adjusts any items of income, gain, loss, deduction or credit of the Collagen
Affiliated Group, the Collagen Unitary Group or any member thereof for any
taxable year (or portion thereof) included in the Affiliated Period, then the
payment obligations under Article III of this Agreement shall be redetermined to
reflect such adjustments and Collagen shall pay Technologies or Technologies
shall pay Collagen, as the case may be, the difference between the amounts owed
under such section as so adjusted and the amounts owed as originally determined,
together with an appropriate share of any interest actually due or received in
respect of such adjustment. Any payment required pursuant to this Article V
shall be made promptly after the occurrence of such Final Determination.
ARTICLE VI
CONTROVERSIES
6.1 Taxes of Collagen Affiliated Group or Unitary Group. Subject to the
remaining provisions of this Section 6.1, Collagen shall have authority to
represent Technologies and each Technologies Subgroup member in any audit,
examination or other controversy before the IRS or any other governmental
authority or court regarding the Taxes of the Collagen Affiliated Group or
Collagen Unitary Group for all taxable years or portions thereof included in or
prior to the Affiliated Period. Technologies shall be permitted, on behalf of
itself any the members of the Technologies Subgroup, to consult with Collagen
and participate in the conduct of such controversies to the extent the
controversies relate to items of the Technologies Subgroup or items for which
Technologies is or may be obligated to indemnify Collagen or a member of the
Collagen Subgroup hereunder, and Collagen shall not enter into any settlement of
such items without the prior written consent of Technologies. Collagen shall
timely notify Technologies of any controversy relating to Tax items of
Technologies or any other member of the Technologies Subgroup (or items for
which Technologies may otherwise be required to indemnify Collagen or a Collagen
Subgroup members hereunder) and promptly provide Technologies with copies of all
correspondence relating to such controversy.
6.2 Other Taxes. Except as the parties may otherwise agree, each of
Collagen and Technologies shall have exclusive authority to represent itself and
its respective subgroup
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<PAGE> 9
members in any controversies relating to Taxes of its respective subgroup (or
any members thereof), other than Taxes referred to in Section 6.1.
6.3 Cooperation. Collagen and Technologies shall cooperate with each
other, and shall cause their respective subgroup members and representatives
also to cooperate, in the conduct of any controversy relating to Taxes. Such
cooperation shall include, without limitation, (a) execution of powers of
attorney or other documents, making elections, filing claims for refund, and
receiving funds, and (b) making available to the other party, during normal
business hours and on reasonable terms, all books, records (including, but not
limited to, workpapers and schedules), information and employees reasonably
requested and necessary or useful in connection with such controversy.
6.4 Records. Collagen and Technologies agree that all records, including
but not limited to, tax returns, supporting schedules, workpapers,
correspondence and other documents within their possession or the possession of
the members of their respective subgroups and relating to Taxes arising during
the Affiliated Period, shall be retained for as long as such records may be
material to the determination of liabilities or refunds of such Taxes and shall
be made reasonably available to the other party upon request during normal
business hours for inspection and copying. Prior to destroying any such records,
the party in possession thereof shall notify the other of such intent and shall
offer to deliver such records to the other.
ARTICLE VII
CARRYBACKS
7.1 Carrybacks. If any deduction, loss, or credit of Technologies or any
other member of the Technologies Subgroup arising in a period after the
Affiliated Period is carried back to a Consolidated Return or Combined Return of
the Collagen Affiliated Group or Collagen Combined Group for a taxable year (or
portion thereof) occurring during the Affiliated Period, Collagen shall pay
Technologies the amount of any reduction of Taxes actually realized by the
Collagen Affiliated Group or Collagen Combined Group (or any member thereof) as
a result of such carryback, as determined by Collagen in its sole discretion.
Technologies shall be entitled to determine whether or not to waive the right to
carry back such item.
ARTICLE VIII
MISCELLANEOUS
This Agreement shall be subject to and incorporate the terms and
provisions contained in Article X of the Separation Agreement to the extent
applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Tax Allocation
Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
By: /s/ GARY S. PETERSMEYER
----------------------------------------
Name: Gary S. Petersmeyer
--------------------------------------
Title: President and CEO
-------------------------------------
COHESION TECHNOLOGIES, INC.
By: /s/ DAVID FOSTER
----------------------------------------
Name: David Foster
--------------------------------------
Title: CEO
-------------------------------------
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<PAGE> 1
EXHIBIT 10.100
SERVICES AGREEMENT
This SERVICES AGREEMENT (the "Agreement"), effective as of January 1,
1998 (the "Effective Date"), is made by and between COLLAGEN CORPORATION, a
Delaware corporation ("Collagen"), and COHESION TECHNOLOGIES, INC., a Delaware
corporation formerly known as Collagen Technologies, Inc. ("Technologies").
RECITALS
1. Technologies is a wholly-owned subsidiary of Collagen.
2. Collagen intends (subject to certain conditions) to distribute pro
rata to its stockholders as a dividend its shares of stock of Technologies by
means of a tax-free distribution (the "Distribution").
3. In connection with the Distribution, Collagen and Technologies wish
to provide for certain covenants and agreements relating to services to be
provided by Collagen to Technologies and by Technologies to Collagen, in each
case on the terms set forth below.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
PROVISION OF SERVICES
1.1 SERVICES TO BE PROVIDED BY TECHNOLOGIES. During the term of this
Agreement or for such shorter period as is specified on Exhibit A hereto,
Technologies shall provide or cause to be provided to Collagen (and, upon
request of Collagen, to any member of the Collagen Group, as defined in the
Separation and Distribution Agreement effective as of January 1, 1998 between
Collagen and Technologies (the "Separation Agreement")), if, when and to the
extent requested by Collagen, the services described in Exhibit A hereto (the
"Technologies Services"); provided, however, that (a) Collagen provides
reasonable advance notice of its requirements for such Technologies Services,
(b) Technologies shall have the right to designate and select its employees and
facilities which will be used to provide such Technologies Services, (c)
Technologies will not be obligated to assign employees or facilities to perform
such Technologies Services if such assignment would unreasonably interfere with
the obligations or business of Technologies and (d) Technologies will be
obligated to provide, and Collagen will be obligated to accept and pay for,
investor relations services hereunder representing 50% of the investor relations
services capacity of Technologies.
1.2 SERVICES TO BE PROVIDED BY COLLAGEN. During the term of this
Agreement or for such shorter period as is specified on Exhibit B hereto,
Collagen shall provide or cause to be provided to Technologies (and, upon
request of Technologies, to any member of the Technologies Group, as defined in
the Separation Agreement), if, when and to the extent requested by Technologies,
the services described in Exhibit B hereto (the "Collagen Services," and
collectively with the Technologies Services, the "Services"); provided, however,
that (a) Technologies provides reasonable advance notice of its requirements for
such Collagen
<PAGE> 2
Services, (b) Collagen shall have the right to designate and select its
employees and facilities which will be used to provide such Collagen Services,
(c) Collagen will not be obligated to assign employees or facilities to perform
such Collagen Services if such assignment would unreasonably interfere with the
operations or business of Collagen, (d) Collagen will not be obligated to
provide any legal services hereunder if there is a current or potential conflict
of interest (as determined by the General Counsel of Collagen) between Collagen
and Technologies with respect to such services, (e) Collagen will not be
obligated to provide legal services hereunder representing more than 20% of the
legal services capacity of Collagen and (f) Collagen will not be obligated to
provide regulatory services hereunder representing more than 20% of the
regulatory services capacity of Collagen.
1.3 CHARGES FOR TECHNOLOGIES SERVICES. Up to and including the last day
of the calendar quarter in which the Distribution Date (as defined in the
Separation Agreement) occurs (the "Pricing Date") (i) for all costs and
expenses, including third-party charges, incurred by Technologies in providing
Technologies Services to Collagen or any member of the Collagen Group that are
separately identifiable, Collagen shall pay to Technologies the actual cost
thereof and (ii) for all costs and expenses, including third-party charges,
incurred by Technologies in providing Technologies Services to Collagen or any
member of the Collagen Group that are not separately identifiable, Collagen
shall pay to Technologies that portion of such actual costs and expenses
reasonably attributable to Collagen or any member of the Collagen Group, based
on such methodology (consistent with generally accepted accounting principles)
as Technologies determines to be appropriate (subject to the approval of
Collagen, which approval shall not be unreasonably withheld). Subsequent to the
Pricing Date, (i) for all salary and related costs (including benefits but
excluding bonuses and other incentive payments) incurred by Technologies for
personnel time spent in providing Technologies Services to Collagen or any
member of the Collagen Group that are separately identifiable, Collagen shall
pay to Technologies 120% of the actual cost thereof, (ii) for all salary and
related costs (including benefits but excluding bonuses and other incentive
payments) incurred by Technologies for personnel time spent in providing
Technologies Services to Collagen or any member of the Collagen Group that are
not separately identifiable, Collagen shall pay to Technologies 120% of that
portion of such actual salary and related costs (including benefits but
excluding bonuses and other incentive payments) reasonably attributable to
Collagen or any member of the Collagen Group, based on such methodology
(consistent with generally accepted accounting principles) as Technologies
determines to be appropriate (subject to the approval of Collagen, which
approval shall not be unreasonably withheld), (iii) for all other costs and
expenses, including third-party charges, incurred by Technologies in providing
Technologies Services to Collagen or any member of the Collagen Group that are
separately identifiable, Collagen shall pay to Technologies the actual cost
thereof and (iv) for all other costs and expenses, including third-party
charges, incurred by Technologies in providing Technologies Services to Collagen
or any member of the Collagen Group that are not separately identifiable,
Collagen shall pay to Technologies 100% of that portion of such actual costs and
expenses reasonably attributable to Collagen or any member of the Collagen
Group, based on such methodology (consistent with generally accepted accounting
principles) as Technologies determines to be appropriate (subject to the
approval of Collagen, which approval shall not be
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<PAGE> 3
unreasonably withheld). Charges for services will be determined in accordance
with the methodology set forth on Exhibit C hereto.
1.4 CHARGES FOR COLLAGEN SERVICES. Up to and including the Pricing Date,
(i) for all costs and expenses, including third-party charges, incurred by
Collagen in providing Collagen Services to Technologies or any member of the
Technologies Group that are separately identifiable, Technologies shall pay to
Collagen the actual cost thereof and (ii) for all costs and expenses, including
third-party charges, incurred by Collagen in providing Collagen Services to
Technologies or any member of the Technologies Group that are not separately
identifiable, Technologies shall pay to Collagen that portion of such actual
costs and expenses reasonably attributable to Technologies or any member of the
Technologies Group, based on such methodology (consistent with generally
accepted accounting principles) as Collagen determines to be appropriate
(subject to the approval of Technologies, which approval shall not be
unreasonably withheld). Subsequent to Pricing Date, (i) for all salary and
related costs (including benefits but excluding bonuses and other incentive
payments), incurred by Collagen for personnel time spent in providing Collagen
Services to Technologies or any member of the Technologies Group that are
separately identifiable, Technologies shall pay to Collagen 120% of the actual
cost thereof, (ii) for all salary and related costs (including benefits but
excluding bonuses and other incentive payments), incurred by Collagen for
personnel time spent in providing Collagen Services to Technologies or any
member of the Technologies Group that are not separately identifiable,
Technologies shall pay to Collagen 120% of that portion of such actual salary
and related costs (including benefits but excluding bonuses and other incentive
payments), reasonably attributable to Technologies or any member of the
Technologies Group, based on such methodology (consistent with generally
accepted accounting principles) as Collagen determines to be appropriate
(subject to the approval of Technologies, which approval shall not be
unreasonably withheld), (iii) for all other costs and expenses, including
third-party charges, incurred by Collagen in providing Collagen Services to
Technologies or any member of the Technologies Group that are separately
identifiable, Technologies shall pay to Collagen the actual cost thereof and
(iv) for all other costs and expenses, including third-party charges, incurred
by Collagen in providing Collagen Services to Technologies or any member of the
Technologies Group that are not separately identifiable, Technologies shall pay
to Collagen 100% of that portion of such actual costs and expenses reasonably
attributable to Technologies or any member of the Technologies Group, based on
such methodology (consistent with generally accepted accounting principles) as
Collagen determines to be appropriate (subject to the approval of Technologies,
which approval shall not be unreasonably withheld). Charges for services will be
determined in accordance with the methodology set forth on Exhibit C hereto.
1.5 INDEPENDENT CONTRACTORS. Each of Collagen and Technologies will
provide Services to the other party under this Agreement as an independent
contractor and not as the other party's agent or employee. Employees of
Technologies providing Technologies Services shall at all times remain employees
of Technologies. Employees of Collagen providing Collagen Services shall at all
times remain employees of Collagen. Technologies shall have the exclusive right
to determine and shall be solely responsible for the salaries, wages and
benefits of its employees providing Technologies Services under this Agreement.
Collagen shall have the
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<PAGE> 4
exclusive right to determine and shall be solely responsible for the salaries,
wages and benefits of its employees providing Collagen Services under this
Agreement.
ARTICLE II
PAYMENTS
2.1 INVOICES AND PAYMENT. Each party shall submit to the other (i) by
the 15th day of the first month of each calendar quarter an invoice for all
charges associated with Services for the preceding quarter and any adjustments
for prior quarters and (ii) from time to time upon receipt by such party of an
invoice relating to third-party charges payable by such party on account of the
other party, an invoice for such third-party charges. All invoices shall
describe in reasonable detail (a) the Services provided during the preceding
quarter and the charges (including third-party charges) associated therewith and
(b) any prior quarter adjustments. Except as provided in Section 2.2 hereof,
each party shall remit payment to the other in full within 30 days after the
date on which the invoice is received.
2.2 DISPUTED AMOUNTS. In the event of a dispute as to an invoiced
amount, the invoiced party shall promptly pay all undisputed amounts, but shall
be entitled to withhold amounts in dispute. Each party shall promptly notify the
other party of any such dispute. Each party will provide the other sufficient
records and information to resolve any such dispute and, without limiting the
rights and remedies of the parties hereunder, will negotiate in good faith a
resolution thereto.
2.3 METHOD OF PAYMENT. Transfer of funds pursuant to this Agreement
shall be made in U.S. dollars by wire transfer of immediately available funds to
an account or accounts specified by the party receiving such payment.
2.4 RECORDS. Each party shall keep complete and accurate books, records
and accounts of all transactions pertaining to Services provided to such party
pursuant to this Agreement, including the identity of employees providing
Services, the amount of time devoted by such employees to such Services,
directly assignable expenses incurred in providing such Services and other
matters reasonably necessary to calculate amounts to be paid for such Services
pursuant to this Agreement. Each party shall make such books, records and
accounts available to the other for its inspection upon reasonable notice and
shall answer questions concerning such books, records and accounts. Such books,
records and accounts shall be retained by a party in accordance with the
document retention policies of such party in effect from time to time.
ARTICLE III
PERFORMANCE OF SERVICES
3.1 DEGREE OF CARE. Each party shall perform the Services with the same
degree of care, skill and prudence customarily exercised by it in respect of its
own business, operations and affairs.
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<PAGE> 5
3.2 CERTAIN INFORMATION. Each party shall provide any information needed
by the other party to perform the Services pursuant hereto. If the failure to
provide such information renders the performance of any requested Service
impossible or unreasonably difficult, the performing party may, upon reasonable
notice to the other party, refuse to provide such Services.
3.3 ACCESS TO FACILITIES AND EMPLOYEES. Each party and its
representatives shall have reasonable access to facilities and employees of the
other party in connection with Services provided pursuant to this Agreement.
Each party will cooperate with the other party in maintaining and making
available necessary records, facilities and personnel required by such party in
obtaining Food and Drug Administration and other regulatory approvals for its
products.
ARTICLE IV
LIMITATIONS ON LIABILITY
4.1 LIMITATIONS ON LIABILITY. Nothing in this Agreement shall be
construed as a guaranty or warranty of any type on the part of Collagen or
Technologies with respect to the adequacy of any Services or the skill or
fitness of personnel performing Services under this Agreement for any particular
job. Neither party shall have any liability under this Agreement (including any
liability for its own negligence) for damages, losses or expenses suffered by
the other party or its subsidiaries as a result of the performance or
non-performance of such party's obligations hereunder, unless such damages,
losses or expenses are caused by or arise out of the willful misconduct or gross
negligence of such party or a breach by such party of any of the express
provisions hereof. In no event shall either party have any liability to the
other party for indirect, incidental or consequential damages that such other
party or its subsidiaries or any third party may incur or experience on account
of the performance or non-performance of such party's obligations hereunder.
Furthermore, neither party shall be liable to the other party or to any third
party with respect to obligations or liabilities incurred by either party in
connection with their separate businesses unrelated to the matters related to
this Agreement.
ARTICLE V
TERM AND TERMINATION
5.1 TERM OF AGREEMENT. This Agreement shall become effective on the
Effective Date and shall terminate on June 30, 1999; provided, however, that the
term of this Agreement may be extended with respect to one or more Services with
the mutual written agreement of the parties. In addition, either party may
terminate the purchase of any Service or Services from the other party upon six
months' prior written notice, or such shorter period as agreed upon by the
parties.
5.2 TERMINATION FOR DEFAULT. Either party may terminate this Agreement
and its obligations hereunder if the other party has failed to perform a
material obligation under this Agreement and has not corrected such failure
within 30 days after receipt of written notice from the non-defaulting party
describing such failure.
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5.3 TERMINATION FOR BANKRUPTCY. Either party may terminate this
Agreement upon written notice to the other party if the other party becomes
involved in any voluntary or involuntary bankruptcy or other insolvency
proceeding (including an assignment for the benefit of creditors) and such
proceeding is not dismissed within 60 days following its commencement.
5.4 TERMINATION UPON CHANGE OF OWNERSHIP. This Agreement shall
automatically terminate if, prior to the Distribution, a person or organization
(other than Collagen) or series of related persons or organizations acquires
more than 20% of the voting securities of Technologies without the consent of
the Board of Directors of Collagen.
5.5 EFFECT OF TERMINATION. Any termination of this Agreement shall not
affect or discharge the obligation of any party to pay amounts owed to the other
party prior to such termination. Nothing in this Agreement shall limit any
remedies which either party may have concerning the default of the other, except
in no event shall either party be liable to the other for any incidental or
consequential damages or lost profits with respect to any failure to perform
obligations pursuant to this Agreement.
5.6 SURVIVAL OR PROVISIONS. The rights and obligations of the parties
pursuant to Article IV shall survive termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
This Agreement shall be subject to the terms and provisions of Article
XI of the Separation Agreement, which are hereby incorporated into this
Agreement to the extent applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Services
Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
By: /s/ Gary S. Petersmeyer
-------------------------------
Name: Gary S. Petersmeyer
Title: President and CEO
COHESION TECHNOLOGIES, INC.
By: /s/ David Foster
-------------------------------
Name: David Foster
Title: CEO
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<PAGE> 8
EXHIBIT A
Technologies Services
1. Facilities (for 1850 Embarcadero Road, Palo Alto, California facility
only):
(a) Maintenance and repair of buildings and leasehold improvements,
intra-building moves and security system (alarm and card key).
(b) Environmental health and safety, including employee training and
monitoring, obtaining and maintaining permits and government plan
compliance.
(c) For so long as Collagen occupies the facility located at 1850
Embarcadero Road, Palo Alto, California or any other facility
owned or leased by Technologies, provision of property and
casualty insurance coverage, including listing Collagen as a
named insured, claims processing, premium administration and
contract negotiation and renewal.
2. Administrative:
(a) Provision of library services, including data-base maintenance
and literature search services.
(b) Provision of investor relations services, including drafting and
issuing of press releases and other corporate communications,
organizing and participating in conferences and general investor
communications activities.
3. Equipment:
(a) For so long as Collagen occupies the facility located at 1850
Embarcadero Road, Palo Alto, California or any other facility
owned or leased by Technologies, telephone-related services,
including maintenance and repair, usage monitoring and
allocation.
4. Research and Development, Clinical and Regulatory:
(a) Provision of research and development services, including animal
studies, histology, serology, analytical chemistry, formulation
and process improvement activities, to the extent that such
services are not provided for by a separate development
agreement.
(b) Provision of clinical and regulatory services related to the
human placental collagen and collagen polymer programs and other
matters upon request of Collagen management and agreement of
Technologies management.
<PAGE> 9
EXHIBIT B
Collagen Services
1. Financial and Tax:
(a) Payroll administration.
(b) Preparation and filing of all consolidated tax and combined
income returns.
(c) Assistance with state and local property tax and sales tax
compliance.
(d) Assistance with financial accounting for taxes.
(e) Supervision of all federal, state and local tax audits,
protests, administrative proceedings and litigation.
(f) Preparation and submission of all tax ruling requests.
(g) Rendering and obtaining all tax opinions.
(h) Provision of general financial reporting and accounting
services, including collection of accounts receivable, billing,
payables and fixed asset administration, preparation of monthly
financial statements and assistance in preparation of SEC
reports and filings.
2. Human Resources:
(a) Health and welfare benefits (including medical, dental,
disability, life and other insurance available to employees of
Technologies) administration, including enrollment, claims
administration and withdrawals.
(b) New employee orientation.
(c) Administration of the Collagen Corporation 401(k) Savings Plan,
including loan approval and administration, monthly
reconciliation, enrollment, withdrawals and rollovers, fund
oversight and customer service monitoring, for so long as
employees of Technologies or any member of the Technologies
Group are eligible to, and do, participate in such plan.
3. Legal Services:
(a) Relating to:
(i) Collagen Corporation v. Matrix Pharmaceuticals, Inc.,
Case No. CV746197, settled on May 23, 1997; and
<PAGE> 10
(ii) Collagenesis v. Charles Williams, Cohesion Corporation
and Collagen Corporation, Case No. 97-582A, pending in
the Superior Court, Commonwealth of Massachusetts.
(iii) Environmental claim regarding the Ramp Industries site.
(b) Employment-related matters.
(c) Other matters, upon request of Technologies management.
4. Administrative:
(a) Receptionist services, mail service and maintenance of office
equipment.
(b) Purchasing services.
(c) Prior to the Distribution (or for such shorter period of time as
is mutually agreed upon by Collagen and Technologies), provision
of director and officer liability, comprehensive general
liability, product liability and employer liability insurance
coverage and other insurance coverage maintained by Collagen as
of the Effective Date and not otherwise specifically addressed
in this Agreement, the Separation Agreement or the other
Ancillary Agreements, (as defined in the Separation Agreement),
including listing Technologies as a named insured, claims
processing, premium administration and contract negotiation and
renewal.
5. Regulatory Services:
(a) Preparation, filing and maintenance of regulatory filings with
the United States Food and Drug Administration and state and
international regulatory agencies or bodies with respect to
Collagraft(R) bone anchor products, recombinant collagen and
related products, Persistent Collagen (as defined in the
Separation Agreement) and related products, osteoarthritis
products, ophthalmologic products and other matters upon request
of Technologies management.
6. Quality Assurance Services:
(a) Provision of services with respect to obtaining and maintaining
ISO 9000 certification of Technologies.
(b) Other matters upon request of Technologies management and
agreement of Collagen management.
7. Medical Affairs:
(a) Receive questions or complaints concerning Collagraft(R) bone
graft matrix implant and Collagraft(R) bone graft matrix strip
(collectively, "Collagraft bone graft products"), conduct
follow-up inquiries and investigations, maintain the
<PAGE> 11
product complaint database and prepare all required reports to
state, federal and international regulatory agencies with
respect to product complaints and adverse events concerning the
Collagraft bone graft products.
8. Manufacturing and Related Services:
(a) Upon request of Technologies management and agreement of
Collagen management, manufacturing and related services with
respect to production/manufacturing, quality control,
distribution/logistics and inventory control, validation,
process development and packaging development, but only to the
extent that such services are not provided for in the Collagen
Supply Agreement by and between Collagen and Technologies or the
Collagraft Supply Agreement by and between Collagen and
Technologies.
<PAGE> 12
EXHIBIT C
Definition Of Cost
Service costs, including all general and administrative expenses, will be
invoiced from Aesthetics to Collagen or Collagen to Aesthetics, for the
following:
1. All identifiable out-of-pocket costs solely related to the other entity
will be invoiced to the entity that solely benefits.
2. Identifiable costs that benefit both entities will be billed based upon
the estimated percentage of benefit.
Examples of costs that benefit both entities could include the following
types of expenditures: audit fees, tax fees, consultants, temporary
help, office supplies and travel and entertainment expenses. Specific
costs are to be agreed upon by the service provider and each entity
prior to the beginning of each fiscal year or prior to the service being
provided.
3. Salaries and related costs for time spent on performing services for the
other entity, plus, after the Pricing Date, 20%. Such costs will be
allocated based on a department by department estimate of time spent
performing services related to the other entity, as opposed to
vouchering time via payroll timecards.
Note: Costs related to buildings/facilities and utilities will not be billed to
the other entity.
<PAGE> 1
EXHBIT 10.101
BENEFITS AGREEMENT
This BENEFITS AGREEMENT (this "Agreement"), effective as of January 1,
1998 (the "Effective Date), is made by and between COLLAGEN CORPORATION, a
Delaware corporation ("Collagen"), and COHESION TECHNOLOGIES, INC., a Delaware
corporation formerly known as Collagen Technologies, Inc. ("Technologies").
RECITALS
1. Collagen is currently the owner of all outstanding shares of common
stock of Technologies.
2. Collagen intends to transfer the assets and liabilities, including
employees, of certain product lines to Technologies, as more fully described in
the Separation and Distribution Agreement, effective as of January 1, 1998,
between Collagen and Technologies (the "Separation Agreement").
3. Collagen and Technologies intend that certain employee benefits be
provided to certain employees of Collagen and Technologies under certain
employee benefit plans or programs following the Effective Date; and
4. Collagen and Technologies intend to cause certain of their respective
plans to transfer accrued liabilities and assets relating to such liabilities
between such plans.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meanings given to them in the Separation Agreement. In addition, for
the purposes of this Agreement, the capitalized terms set forth below shall have
the meanings set forth in this Article I:
1.1 "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and any applicable state law requiring continuation coverage
under a medical plan.
1.2 "Collagen 401(k) Plan" means the Collagen Corporation 401(k) Savings
Plan.
1.3 "Collagen ESPP" means the Collagen Corporation 1985 Employee Stock
Purchase Plan.
1.4 "Collagen Plan" means any employee benefit plan or program
maintained by Collagen.
<PAGE> 2
1.5 "Collagen Stock Options" means options to purchase shares of
Collagen Common Stock granted prior to the Distribution Date pursuant to the
Collagen Corporation 1984 Incentive Stock Option Plan, as amended, the Collagen
Corporation 1990 Directors' Stock Option Plan, as amended or the Collagen
Corporation 1994 Stock Option Plan, as amended.
1.6 "Collagen Welfare Plans" means the Collagen medical plan, dental
benefit plan, vision plan, Employee Assistance Program, life insurance plan,
AD&D insurance plan, long term disability insurance plan, supplemental life
insurance plan, personal time program, medical reimbursement plan and dependent
care reimbursement plan.
1.7 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.8 "Fair Market Value" means, as of any date, the fair market value of
a share of Common Stock of Collagen or Technologies, as applicable, determined
as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board of Directors of the issuing company.
1.9 "Technologies 401(k) Plan" means the Cohesion Technologies, Inc.
401(k) Savings Plan to be adopted by Technologies after the Effective Date.
1.10 "Technologies Medical Plans" means the medical, dental and vision
plans established by Technologies which provide benefits which are comparable to
the benefits provided under the medical, dental and vision plans that are
Collagen Welfare Plans.
1.11 "Technologies Plan" means any employee benefit plan or program
maintained by Technologies.
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<PAGE> 3
1.12 "Technologies Welfare Plans" means the welfare benefit plans
established by Technologies which correspond to benefits provided under the
Collagen Welfare Plans.
1.13 "Transferred Technologies Employee" means any person whose
relationship with Collagen or a member of the Collagen Group, prior to the
Effective Date, under common law is that of an employee and who, as of the
Effective Date, is transferred to, and becomes an employee of, Technologies or a
Technologies Subsidiary as set forth on Schedule 2.4 of the Separation
Agreement.
1.14 "Unvested Collagen Stock Options" means Collagen Stock Options
that, as of the applicable date, are not exercisable to purchase shares of
Collagen Common Stock.
1.15 "Vested Collagen Stock Options" means Collagen Stock Options that,
as of the applicable date, are exercisable to purchase shares of Collagen Common
Stock
ARTICLE II
EMPLOYEE BENEFITS
2.1 PROVISION OF EMPLOYEE BENEFITS. The employee benefits described in
Articles IV, V and VI of this Agreement shall be provided by Collagen for the
time periods provided in such Articles to any person who is a Transferred
Technologies Employee or who, on or after the Effective Date is or becomes an
employee of Technologies or a member of the Technologies Group, subject to such
employee's satisfaction of each Collagen Plan's eligibility requirements, the
terms and conditions of each such plan and the terms and conditions of such
Articles. The stock option benefits described in Article III shall be provided
by Collagen and Technologies, as applicable, subject to each optionee's
satisfaction of applicable eligibility requirements and the other terms and
conditions of the relevant option plan, the provisions of applicable laws and
regulations and the terms and conditions of Article III.
2.2 CORPORATE ACTION. Collagen and Technologies shall each take all
action necessary, pursuant to the terms of the Collagen Plans or otherwise, to
cause Technologies and any member of the Technologies Group to continue as a
participating employer in the Collagen Plans, and permit the participation by
employees of Technologies and members of the Technologies Group in such plans,
to the extent described in this Agreement.
2.3. LEGAL REQUIREMENTS. Notwithstanding any other provision of this
Agreement to the contrary, Collagen may restrict any employee of Technologies or
any member of the Technologies Group from participating in or may limit such
employee's benefits under any Collagen Plan if Collagen determines in good faith
(and without disadvantaging employees of Technologies in favor of employees of
Collagen) that such restriction or limitation is reasonably necessary to
preserve the tax-favored status of such plan or to maintain such plan's
compliance with ERISA or any other applicable legal requirement (including any
non-discrimination requirement). Collagen shall promptly notify Technologies if
Collagen is considering any such action.
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2.4 COLLAGEN'S RIGHT TO AMEND PLANS. Except to the extent limited by
law, nothing contained in this Agreement shall preclude Collagen from amending
any Collagen Plan; provided, however, that Collagen may not amend any Collagen
Plan in order to avoid its obligations under this Agreement. Prior to adopting
any amendment to any Collagen Plan, representatives of Collagen will consult
with representatives from Technologies with respect to such amendment, but if
the representatives of Collagen and Technologies do not agree with respect to
such amendment, the decision of the representatives of Collagen shall prevail
and Collagen shall have the right to effect such amendment, provided that the
conditions set forth in the first sentence of this Section 2.4 are satisfied.
Collagen shall provide notice to Technologies if Collagen adopts any material
amendment to any Collagen Plan during the period in which Technologies or any
member of the Technologies Group is a participating employer in such plan and
where such amendment applies to employees of Technologies or any member of the
Technologies Group.
ARTICLE III
STOCK OPTIONS
3.1 EMPLOYEES AND CONSULTANTS.
(a) Each employee (including officers) and consultant of Collagen
or any Subsidiary of Collagen who, immediately prior to the Distribution Date,
holds a Vested Collagen Stock Option will, in connection with the Distribution,
receive two new options in replacement of the original Vested Collagen Stock
Option, one to acquire shares of Collagen Common Stock and the other to acquire
shares of Technologies Common Stock. The number of shares subject to each new
option will be determined pursuant to a formula agreed upon by the Boards of
Directors (or any committee thereof) of Collagen and Technologies, after
consultation with legal and accounting advisors. The exercise prices of each of
the new options will be determined using a formula intended to preserve any
spread between the exercise price of the Vested Collagen Stock Option and the
Fair Market Value of Collagen Common Stock prior to the Distribution. All other
terms of the new options will be substantially identical to those of the Vested
Collagen Stock Option; provided, however, that each of the new options will
terminate within a specified number of days (as set forth in the original Vested
Collagen Stock Option) following termination of the optionee's employment or
consulting relationship with the entity (Collagen or Technologies) by which such
optionee shall be employed or retained as a consultant following the
Distribution. At the option of the respective Board of Directors (or any
committee thereof), out-of-the-money options may be treated differently.
(b) Each employee (including officers) and consultant of Collagen or any
Subsidiary of Collagen who, immediately prior to the Distribution Date, holds an
Unvested Collagen Stock Option will, in connection with the Distribution,
receive a new option in replacement of the Unvested Collagen Stock Option to
acquire shares of Common Stock of the entity (Collagen or Technologies) by which
such optionee shall be employed or retained as a consultant following the
Distribution. The number of shares subject to the new option will be determined
pursuant to a formula agreed upon by the Boards of Directors (or any committee
thereof) of Collagen and Technologies, after consultation with legal and
accounting advisors. The exercise price of the
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new option will be determined using a formula intended to preserve that portion
of any spread between the exercise price of the Unvested Collagen Stock Option
and the Fair Market Value of Collagen Common Stock prior to the Distribution
that is attributable to the entity issuing the new option. All other terms of
the new option, including vesting, will be substantially identical to those of
the Unvested Collagen Stock Option; provided, however, that the new option will
terminate within a specified number of days (as set forth in the original
Unvested Collagen Stock Option) following termination of the optionee's
employment or consulting relationship with the entity (Collagen or Technologies)
by which such optionee shall be employed or retained as a consultant following
the Distribution. At the option of the respective Board of Directors (or any
committee thereof), out-of-the-money options may be treated differently.
(c) The exercise price of each new option received by employees and
consultants pursuant to Sections 3.1(a) and 3.1(b) will generally be determined
based on a percentage of the post-Distribution Fair Market Value of either a
Collagen or Technologies share of Common Stock, as applicable, equal to a pro
rata percentage of the exercise price of the original option compared to the
Fair Market Value of a share of Collagen Common Stock prior to the Distribution
(i.e. a pro rata adjustment to the exercise price based on the relationship
between the Fair Market Value of the underlying stock immediately before and
after the Distribution).
(d) Following the Distribution, the Boards of Directors (or any
committee thereof) of Collagen and Technologies may, at their discretion, grant
additional options to their respective employees (including officers) and
consultants at such time or times and having such terms as are determined by the
respective Board of Directors (or any committee thereof).
3.2 NON-EMPLOYEE DIRECTORS.
(a) Each non-employee director of Collagen who, immediately prior
to the Distribution Date, holds a Vested Collagen Stock Option will, in
connection with the Distribution, receive two new options in replacement of the
original Vested Collagen Stock Option, one to acquire shares of Collagen Common
Stock and the other to acquire shares of Technologies Common Stock. The number
of shares subject to each new option will be determined pursuant to a formula
agreed upon by the Boards of Directors (or any committee thereof) of Collagen
and Technologies, after consultation with legal and accounting advisors. The
exercise prices of each of the new options will be determined using a formula
intended to preserve any spread between the exercise price of the Vested
Collagen Stock Option and the Fair Market Value of Collagen Common Stock prior
to the Distribution. All other terms of the new options will be substantially
identical to those of the Vested Collagen Stock Option; provided, however, that
each of the new options will terminate within a specified number of days (as set
forth in the original Vested Collagen Stock Option) following termination of the
optionee's service as a director of the entity (Collagen or Technologies) for
which such optionee shall serve as a director following the Distribution. At the
option of the respective Board of Directors (or any committee thereof),
out-of-the-money options may be treated differently.
(b) Each non-employee director of Collagen who, immediately prior to the
Distribution Date, holds an Unvested Collagen Stock Option will, in connection
with the
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Distribution, receive a new option in replacement of the Unvested Collagen Stock
Option to acquire shares of Common Stock of the entity (Collagen or
Technologies) for which such optionee shall serve as a director following the
Distribution. The number of shares subject to the new option will be determined
pursuant to a formula agreed upon by the Boards of Directors (or any committee
thereof) of Collagen and Technologies, after consultation with legal and
accounting advisors. The exercise price of the new option will be determined
using a formula intended to preserve that portion of any spread between the
exercise price of the Unvested Collagen Stock Option and the Fair Market Value
of Collagen Common Stock prior to the Distribution that is attributable to the
entity issuing the new option. All other terms of the new option, including
vesting, will be substantially identical to those of the Unvested Collagen Stock
Option; provided, however, that the new option will terminate within a specified
number of days (as set forth in the original Unvested Collagen Stock Option)
following termination of the optionee's service as a director of the entity
(Collagen or Technologies) for which such optionee shall serve as a director
following the Distribution. At the option of the respective Board of Directors
(or any committee thereof), out-of-the-money options may be treated differently.
(c) The exercise price of each new option received by non-employee
directors pursuant to Sections 3.2(a) and 3.2(b) will generally be determined
based on a percentage of the post-Distribution Fair Market Value of either a
Collagen or Technologies share of Common Stock, as applicable, equal to a pro
rata percentage of the exercise price of the original option compared to the
Fair Market Value of a share of Collagen Common Stock prior to the Distribution
(i.e. a pro rata adjustment to the exercise price based on the relationship
between the Fair Market Value of the underlying stock immediately before and
after the Distribution).
(d) Either or both of the 1998 Director Stock Option Plans adopted by
Collagen and Technologies may provide for additional automatic grants to
non-employee directors at the time of the Distribution. Following the
Distribution, each non-employee director of Collagen and Technologies will be
eligible to participate in the 1998 Director Stock Option Plan adopted by the
company for which he or she serves as a director and to receive automatic annual
option grants pursuant to such plan.
3.3 REGISTRATION OF SHARES. Collagen will use its best efforts to
register under the Securities Exchange Act of 1934, as amended, and applicable
state securities laws the shares of Collagen Common Stock issuable upon exercise
of the options issued pursuant to Sections 3.1 and 3.2. Technologies will use
its best efforts to register under the Securities Exchange Act of 1934, as
amended, and applicable state securities laws the shares of Technologies Common
Stock issuable upon exercise of the options issued pursuant to Sections 3.1 and
3.2
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ARTICLE IV
401(k) PLAN
4.1 PARTICIPATION IN COLLAGEN 401(k) PLAN. For the period beginning on
the Effective Date and ending on the earlier of (a) the date on which
Technologies adopts the Technologies 401(k) Plan or (b) the date on which
Technologies and each member of the Technologies Group no longer qualify as
participating employers in the Collagen 401(k) Plan, Technologies and each
member of the Technologies Group shall be participating employers in the
Collagen 401(k) Plan. Upon agreement by Collagen and Technologies, Technologies
shall take all action necessary to establish the Technologies 401(k) Plan
(including, but not limited to, all action necessary to enable Technologies to
administer such plan and to obtain a favorable determination letter from the
Internal Revenue Service with respect to such plan) as soon as administratively
practicable. Upon the effective date of the Technologies 401(k) Plan,
Technologies and members of the Technologies Group shall no longer be
participating employers in the Collagen 401(k) Plan and shall take all action
necessary to effectuate their withdrawal as participating employers under the
terms of the Collagen 401(k) Plan and to have the accounts, including
outstanding loan balances, of all individual participants who are employees of
Technologies or a member of the Technologies Group transferred to the
Technologies 401(k) Plan. During the period when Technologies or any member of
the Technologies Group is a participating employer in the Collagen 401(k) Plan,
the Board of Directors of Technologies will determine the timing and extent of
any matching contribution to be made on behalf of employees of Technologies or
any member of the Technologies Group participating in the Collagen 401(k) Plan
and Technologies shall bear all costs of making any such matching contribution
(including, without limitation, the amount of any such matching contribution).
ARTICLE V
WELFARE BENEFITS
5.1 WELFARE BENEFITS PROVIDED UNDER COLLAGEN PLANS. During the period
beginning on the Effective Date and ending on the earlier of (a) the date on
which Technologies adopts a plan or program similar to the applicable Collagen
Welfare Plan or (b) the date on which Technologies and each member of the
Technologies Group no longer qualify as participating employers in the
applicable Collagen Welfare Plan, Technologies and each member of the
Technologies Group shall continue to be participating employers in each Collagen
Welfare Plan. Technologies and each member of the Technologies Group shall take
all action necessary to terminate its participation in and to withdraw as a
participating employer under a Collagen Welfare Plan as of the earlier of (a)
the date on which Technologies adopts a plan or program similar to the
applicable Collagen Welfare Plan or (b) the date on which Technologies and each
member of the Technologies Group no longer qualify as participating employers in
the applicable Collagen Welfare Plan.
Effective at such time after the Effective Date as is determined
by the Board of Directors of Technologies, Technologies shall establish the
Technologies Medical Plans. Any Technologies employee who is covered under the
Collagen medical plan, the Collagen dental
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plan or the Collagen vision plan on the date of establishment of the applicable
Technologies Medical Plan, shall not be excluded from coverage under any
Technologies Medical Plan due to a preexisting condition limitation under such
Technologies Medical Plan to the extent such limitation would entitle such
employee to elect COBRA coverage under the Collagen medical plan, the Collagen
dental plan or the Collagen vision plan, as applicable.
5.2 PAYMENT OF WELFARE PLAN COSTS.
(a) With respect to each Transferred Technologies Employee and
each employee of Technologies or any member of the Technologies Group who
participates in the Collagen Welfare Plans, Technologies shall pay Collagen the
costs described in Section 7.3 of this Agreement. Technologies shall pay all
costs associated with the provision after the Effective Date of long-term
disability benefits to any Transferred Technologies Employee and any employee of
Technologies or any member of the Technologies Group. Technologies shall not pay
Collagen any amount with respect to the provision of benefits under its or
Collagen's personal time program, but instead shall pay directly the costs of
providing such benefits.
Technologies shall pay all costs associated with the
provision of benefits to any dependent of any Transferred Technologies Employee
or any employee of Technologies or any member of the Technologies Group to the
extent Technologies or any member of the Technologies Group is required to pay
costs as an employer associated with the provision of welfare benefits to such
Transferred Technologies Employee or employee of Technologies or any member of
the Technologies Group. Any amounts paid by a Transferred Technologies Employee
or an employee of Technologies or any member of the Technologies Group for
dependent coverage shall, to the extent not paid directly to Technologies or the
applicable member of the Technologies Group, be transferred or credited to
Technologies or the applicable member of the Technologies Group. Collagen shall
pay all costs as an employer associated with the provision of benefits to any
dependent of any employee or former employee to the extent Collagen is required
to pay costs as an employer associated with the provision of welfare benefits to
such employee or former employee.
(b) Notwithstanding the foregoing:
(i) Collagen shall pay all costs under the Collagen
medical plan, the Collagen dental plan and the Collagen vision plan which as of
the Effective Date have been incurred but not reported relating to any
Transferred Technologies Employee and any employee of Technologies or any member
of the Technologies Group, but only if claims for such costs are submitted in
written form to Collagen within 365 days after the Effective Date.
(ii) Collagen shall pay all costs associated with the
provision of long-term disability benefits through the Effective Date to any
Transferred Technologies Employee and any employee of Technologies or any member
of the Technologies Group who as of the Effective Date is receiving long-term
disability benefits under any Collagen Welfare Plan.
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5.3 TERMS OF COLLAGEN WELFARE PLANS. For so long as Technologies or any
member of the Technologies Group is a participating employer in any Collagen
Welfare Plan, a representative of Collagen and a representative of Technologies
shall together negotiate the terms, including, without limitation, premiums,
extent of coverage and available options, of any Collagen Welfare Plan that is
subject to renewal, or that such representatives agree should be renegotiated.
If the representatives of Collagen and Technologies do not agree with respect to
any terms subject to negotiation, the decision of the representative of Collagen
shall prevail.
5.4 TERMS OF TECHNOLOGIES WELFARE PLANS. For so long as the Collagen or
any member of the Collagen Group is a participating employer in any Technologies
Welfare Plan, a representative of Technologies and a representative of Collagen
shall together negotiate the terms, including, without limitation, premiums,
extent of coverage and available options, of any Technologies Welfare Plan that
is subject to renewal, or that such representatives agree should be
renegotiated. If the representatives of Collagen and Technologies do not agree
with respect to any terms subject to negotiation, the decision of the
representative of Technologies shall prevail.
ARTICLE VI
MISCELLANEOUS PLANS AND AGREEMENTS
6.1 COLLAGEN EMPLOYEE STOCK PURCHASE PLAN. The Board of Directors of
Collagen has designated Technologies and each Technologies Subsidiary as a
"designated subsidiary" under the Collagen ESPP as of the Effective Date. The
Collagen ESPP and the offering period that commenced on January 1, 1998 under
the Collagen ESPP will terminate one week prior to the record date for the
Distribution and all employee contributions through such date will be used to
purchase shares of Collagen Common Stock. Each of Collagen and Technologies will
adopt a new 1998 Employee Stock Purchase Plan, having such terms as are approved
by the respective Board of Directors, and the initial offering periods under
each such plan shall commence on or shortly after the Distribution Date.
6.2 WORKERS' COMPENSATION.
(a) Collagen shall retain the responsibility for all costs
relating to Technologies employees and former Technologies employees relating to
incidents occurring up to and including the Effective Date (including, but not
limited to, workers' compensation claims which are filed after the Effective
Date but which relate to incidents occurring on or prior to the Effective Date).
Any amount by which actual expenses vary from the reserve established by
Collagen for such expenses for periods prior to the Effective Date shall be
retained by Collagen.
(b) Technologies shall assume responsibility for all workers'
compensation claims relating to Transferred Technologies Employees, Technologies
employees and former employees relating to incidents beginning after the
Effective Date. Technologies shall take all action necessary to effect timely
return to work for all Transferred Technologies Employees, Technologies
employees and former Technologies employees who are on a leave of absence from
employment during which they were entitled to receive workers' compensation
(including,
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but not limited to, persons with respect to whom Collagen has the liability to
pay workers' compensation claims).
6.3 PERSONAL TIME PROGRAM. After the Effective Date, it is expected that
Technologies shall maintain for its employees a personal time program. After the
Effective Date, Technologies shall be responsible for costs incurred to provide
personal time to Transferred Technologies Employees whether accrued before, on
or after the Effective Date.
ARTICLE VII
ADMINISTRATION OF PLANS
7.1 PLAN ADMINISTRATION. Technologies and each member of the
Technologies Group shall provide Collagen and its consultants and advisors
whatever information or assistance is reasonably requested by Collagen from an
employer participating in the Collagen Plans.
7.2 INFORMATION TO BE PROVIDED TO COLLAGEN. To the extent not contrary
to law, Technologies shall provide any information which Collagen may request,
including but not limited to information relating to dates of termination of
employment, in order to provide benefits to any eligible employee of
Technologies or any member of the Technologies Group under the terms and
conditions described in this Agreement and under the applicable Collagen Plans.
Any such information relating to an employee's termination of employment shall
be provided by Technologies to Collagen as soon as available to Technologies.
Notwithstanding anything in this Agreement to the contrary, Collagen shall not
be responsible for the payment of benefits to the extent Technologies does not
disclose any information needed by Collagen to provide such benefits until
Collagen receives such information.
7.3 EXPENSES. Technologies shall pay the amounts necessary to cover (a)
all ordinary claims costs that Collagen incurs in providing benefits after the
Effective Date under any Collagen Plan for the Transferred Technologies
Employees or any employees of Technologies or any member of the Technologies
Group and (b) Technologies' pro rata share of ordinary administration and plan
asset management expenses incurred in the operation of all Collagen Plans with
respect to the period after the Effective Date in which Technologies or any
member of the Technologies Group is a participating employer in such plans.
Collagen and Technologies shall share equally any extraordinary costs, expenses
or liabilities incurred by Collagen and relating to events occurring prior to
the Distribution Date in connection with administration of the Collagen Plans on
behalf of Technologies or any member of the Technologies Group, including, but
not limited to, costs of amending plans to reflect coverage of the employees of
Technologies or any member of the Technologies Group, costs of any conversion of
any Collagen Plan to multiple employer plan status and costs of preparing any
extraordinary communications to Transferred Technologies Employees or any
employees or Technologies or any member of the Technologies Group concerning
their employee benefits. Technologies shall pay any such extraordinary costs
incurred by Collagen and relating to events occurring on or after the
Distribution Date. Collagen shall obtain Technologies' written approval prior to
incurring any such extraordinary costs, expenses or liabilities which are
discretionary.
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7.4 PAYMENT TERMS. Technologies shall pay the amounts owed to Collagen
pursuant to Section 7.3 on a quarterly basis, within 30 days after receipt by
Technologies of a detailed invoice for such expenses.
ARTICLE VIII
SERVICE CREDIT; NO RIGHTS TO EMPLOYMENT
8.1 SERVICE CREDIT. Each Transferred Technologies Employee shall receive
credit for service provided as an employee of Collagen or any Affiliate of
Collagen prior to the Effective Date for purposes of all Collagen Plans and
Technologies Plans described in this Agreement.
8.2 NO RIGHTS. This Agreement shall not give any employee or any person
any right to continued employment or to any employee benefits. This Agreement
shall not give any person other than a party any rights, including in particular
any third-party beneficiary or other right, to enforce any provision of this
Agreement or to receive damages for a breach of any such provision. Nothing in
this Agreement shall obligate Collagen, Technologies or any of their respective
direct or indirect Subsidiaries to assist any Technologies employee to enforce
any rights such employee may have with respect to any of the employee benefits
described in this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MISCELLANEOUS PROVISIONS. This Agreement shall be subject to the
terms and provisions set forth in Article XI of the Separation Agreement, which
are hereby incorporated into this Agreement to the extent applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Benefits
Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
By: /s/ Gary S. Petersmeyer
-------------------------------
Name: Gary S. Petersmeyer
Title: President and CEO
COHESION TECHNOLOGIES, INC.
By: /s/ David Foster
-------------------------------
Name: David Foster
Title: CEO
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EXHIBIT 10.102
VITROGEN INTERNATIONAL DISTRIBUTION AGREEMENT
This VITROGEN INTERNATIONAL DISTRIBUTION AGREEMENT ("Agreement"),
effective as of January 1, 1998 (the "Effective Date"), is made by and between
COLLAGEN INTERNATIONAL, INC., a Delaware corporation ("CII"), and COHESION
TECHNOLOGIES, INC., a Delaware corporation formerly known as Collagen
Technologies, Inc. ("Technologies").
RECITALS
1. CII is a wholly owned subsidiary of Collagen Corporation
("Collagen").
2. Technologies and Collagen have entered into a relationship
whereby certain assets and liabilities are being transferred from Collagen to
Technologies as further described in the Separation and Distribution Agreement
effective as of January 1, 1998 between Collagen and Technologies (the
"Separation Agreement") and in the Ancillary Agreements.
3. Technologies wishes to appoint CII as a non-exclusive
distributor in the Territory for certain products defined herein, and CII wishes
to accept such appointment;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meanings given to them in the Separation Agreement. In addition, for
the purposes of this Agreement, the capitalized terms set forth below shall have
the meanings set forth in this Article I.
1.1 "Product" shall mean the product currently known as
Vitrogen(TM), the specifications which are attached hereto as Exhibit A
("Specifications").
1.2 "Net Sale Price" shall mean the gross invoiced price for
Products received by CII and/or its Affiliates for the sale of Product in the
Territory less deductions made in the normal course of business for: (a)
commercially reasonable quantity, trade and cash discounts or rebates, recalls,
credits or allowance and adjustments separately and actually credited to
customers for rejections and returns of Product; (b) charges for freight,
postage, transportation, insurance, third party distribution costs and other
distribution or delivery costs not otherwise charged to the customer and
actually paid by CII and/or its Affiliates; and (c) any export, import, sales,
use, withholding or excise tax, VAT, duties, tariffs, federal, state or local
tax, or any other taxes or other government charges levied on the use, sale,
transportation or delivery of Product and borne by CII and/or its Affiliates
except any tax based on the net income of CII or its Affiliates.
1.3 "Territory" shall mean Germany.
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ARTICLE II
DISTRIBUTION
2.1 APPOINTMENT. Subject to the terms and conditions in this
Agreement, Technologies hereby appoints CII as a non-exclusive distributor and
reseller for the Product in the Territory, and CII hereby accepts such
appointment; provided, however, that the parties specifically agree that CII
shall have no duty to advertise, market or promote the Product in the Territory
so as to increase or maintain Product sales in the Territory.
2.2 ORDER AND ACCEPTANCE. No later than ninety (90) days prior to
the beginning of each calendar quarter, representatives from each party shall
meet, or communicate via telephone conference, to agree upon a forecast, of the
projected sales for the Product in the Territory for such quarter ("Forecast").
Based on such Forecast, CII shall deliver to Technologies a written purchase
order for Product no later than sixty (60) days prior to the beginning of such
quarter specifying Product quantity and delivery date for such quarter. Purchase
orders may initially be placed by telephone or telecopy; provided, however, that
a signed confirming purchase order is received in writing (which may include
telecopy transmission) by Technologies. Upon receipt, Technologies shall
promptly accept such purchase order and return a signed acceptance thereof to
CII. Notwithstanding anything herein to the contrary, no order shall be binding
upon either party until accepted by Technologies in writing. Once accepted, each
party may cancel or reschedule purchase orders for Product only with prior
written approval of the other party.
2.3 DELIVERY. Technologies shall ship (or shall direct Collagen to
ship) Product to the address specified in the applicable purchase order
submitted by CII by the scheduled delivery date specified therein; provided that
Technologies shall have no liability for any delay in shipment that is due to
Collagen's actions or failures to act. Technologies shall deliver Product to CII
packaged and labeled in such form as to be ready for direct shipment to end
users. All shipments shall be F.O.B. CII's receiving facilities in Munich,
Germany, and Technologies shall bear the risk of loss and cost of transportation
of the Product to CII's receiving facilities. All shipping, freight and
insurance shall be paid by Technologies.
2.4 PURCHASE PRICE. CII and/or its Affiliates shall pay to
Technologies the Net Sale Price actually received by CII and/or its Affiliates
for Product sold by CII and/or its Affiliates in the Territory.
2.5 INVOICING AND REPORTING.
2.5.1 Technologies shall invoice CII for each shipment of
Product based on the Technologies' direct cost of procuring the Product ("Cost
of Goods") contained in such shipment. All invoices shall be sent via first
class mail or by telecopy to CII's address for notices hereunder.
2.5.2 Within sixty (60) days after the last day of each
calendar quarter, CII shall provide Technologies with a written report ("Sales
Report") setting forth:
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(i) the quantity of Product sold by CII and/or its
Affiliates in such quarter; and
(ii) the gross invoiced sales price and corresponding
Net Sales Price received by CII and/or its
Affiliates therefore in the currency in which
such sale was made.
2.6 PAYMENT AND AUDIT. CII shall pay Technologies for all invoiced
amounts for Cost of Goods within thirty (30) days of receipt of Technologies'
invoice. In addition, on the same day as the Sales Report is delivered for a
quarter, CII shall pay Technologies an amount equal to the Net Sales Price less
the Cost of Goods paid by CII for all Product sold during such quarter. All
payments shall be made to Technologies in U.S. Dollars. The exchange rate to be
used for all currency conversions shall be the rate as reported in the Wall
Street Journal (Western Edition) on the last business day of the quarter for
which such payment is due. Upon reasonable notice to CII, Technologies shall
have the right to have an independent certified public accountant, selected by
Technologies and reasonably acceptable to CII, audit CII's records during normal
business hours to verify CII's calculation of the Net Sales Price for Product;
provided, however, that such audit shall not take place more frequently than
once a year and shall not cover such records for more than the preceding two (2)
years. The accountant shall only report to Technologies to the accuracy of the
amounts payable by CII to Technologies for Product, and in the event of any
inaccuracy, the correct amounts thereof. Technologies shall promptly refund to
CII the amount of any overpayment determined in such audit, and CII shall
promptly pay to Technologies the amount of any underpayment. Such audit shall be
at Technologies' expense unless such audit indicates greater than five percent
(5%) underpayment by CII, in which case such audit shall be at CII's expense.
CII shall preserve and maintain all such records and accounts required for audit
for a period of two (2) years after the calendar quarter for which the record
pertains.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 BY BOTH PARTIES. Each party represents and warrants to the other
that: (i) it has full power and authority to execute, deliver and perform this
Agreement; and (ii) the execution, delivery and performance by such party of
this Agreement does not contravene any law, regulation, rule or order binding on
such party and do not contravene the provisions of or constitute a default under
any contract or other agreement binding on such party.
3.2 REGULATORY APPROVALS. Technologies warrants to CII that any and
all required government approvals, including any approvals under applicable
health and safety laws and regulations, to import, register, market, distribute
and sell the Product in the Territory, have been secured as of the Effective
Date and shall be maintained during the Term of this Agreement, and Technologies
shall indemnify CII for any liabilities and damages to CII arising from any
breach of the foregoing warranty.
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ARTICLE IV
TERM AND TERMINATION
4.1 TERM. The term of this Agreement ("Term") shall commence on the
Effective Date and continue in full force and effect until June 30, 1999.
4.2 TERMINATION FOR CAUSE. Either party shall have the right to
terminate this Agreement following any material breach or default in performance
under this Agreement by the other party upon sixty (60) days prior written
notice to the breaching party specifying the nature of the breach or default.
Unless the breaching party has cured the breach or default prior to the
expiration of the sixty (60) day period, the non-breaching party, at its sole
option, may terminate this Agreement upon written notice to the breaching party.
Termination of this Agreement shall become effective upon receipt of such second
notice by the breaching party.
4.3 EFFECT OF TERMINATION. Expiration or termination of this
Agreement shall not relieve the parties of any right or obligation, including
but not limited to any payment obligations, accruing prior to or upon such
expiration or termination. The provisions of Sections 2.5, 2.6, 3.2 and 4.3 and
Articles V and VI shall survive the expiration or termination of this Agreement
for any reason. All other rights and obligations of the parties shall cease upon
expiration or termination of this Agreement.
ARTICLE V
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY OR
ANY OTHER THIRD PARTY FOR ANY LOST OPPORTUNITY OR PROFITS, COSTS OF PROCUREMENT
OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL,
PUNITIVE OR SPECIAL DAMAGES ARISING OUT OF THIS AGREEMENT, UNDER ANY CAUSE OF
ACTION OR THEORY OF LIABILITY (INCLUDING NEGLIGENCE), AND WHETHER OR NOT SUCH
PARTY TO THIS AGREEMENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF THE ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.
ARTICLE VI
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed, controlled,
interpreted and defined by and under the laws of the State of California and the
United States without regard to that body of law known as conflicts of law. The
parties specifically disclaim application of the Convention on Contracts for the
International Sale of Goods to this Agreement.
6.2 SECTION HEADINGS. The article and section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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6.3 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be sent by prepaid registered or certified mall,
return receipt requested, internationally recognized courier or personal
delivery, addressed to the other party at the address below or at such other
address for which such party gives notice hereunder.
Collagen International, Inc.
Attn: _________________________
_______________________________
Fax number: ___________________
Collagen Technologies, Inc.
Attn: _________________________
2500 Faber Place
Palo Alto, CA 94303
Fax number: ___________________
Such notice shall be deemed to have been given when delivered or, if delivery is
not accomplished by some fault of the addressee, when tendered.
6.4 FORCE MAJEURE. Neither party shall be considered in default of
performance of its obligations under this Agreement to the extent that
performance of such obligations is delayed by force majeure or contingencies or
causes beyond the reasonable control of such party or its suppliers, including
but not limited to strike, fire, flood, earthquake, windstorm, governmental acts
or orders or restrictions, failure of suppliers, or any other reason to the
extent that the failure to perform is beyond the reasonable control and not
caused by the negligence or willful misconduct of the nonperforming party.
6.5 NONASSIGNABILITY AND BINDING EFFECT. Each party agrees that its
rights and obligations under this Agreement may not be transferred or assigned
directly or indirectly without the prior written consent of the other party,
which consent shall not be unreasonably withheld, except in connection with the
sale of all or substantially all of the assigning party's related business.
Subject to the foregoing sentence, this Agreement shall be binding upon and
inure to, the benefit of the parties hereto, their successors and assigns.
6.6 PARTIAL INVALIDITY. If any provision of this Agreement is held
to be invalid by a court of competent jurisdiction, then the remaining
provisions shall remain, nevertheless, in full force and effect. The parties
agree to renegotiate in good faith any term held invalid and to be bound by the
mutually agreed substitute provision in order to give the most approximate
effect intended by the parties.
6.7 NO WAIVER. No waiver of any term or condition of this Agreement
shall be valid or binding on either party unless agreed in writing by the party
to be charged. The failure of either party to enforce at any time any of the
provisions of the Agreement, or the failure to require at any time performance
by the other party of any of the provisions of this Agreement,
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shall in no way be construed to be a present or future waiver of such
provisions, nor in any way affect the validity of either party to enforce each
and every such provision thereafter.
6.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
6.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits
attached hereto, constitutes the entire agreement of the parties with respect to
the subject matter hereof, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between CII and
Technologies with respect to such subject matter. No amendment or modification
hereof shall be valid or binding upon the parties unless made in writing and
signed by the duly authorized representatives of both parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Vitrogen
International Distribution Agreement to be executed by their duly authorized
representatives.
COLLAGEN INTERNATIONAL, INC.
Dated: March 5, 1998 By: /s/ Gary S. Petersmeyer
------------- --------------------------------
Name: Gary S. Petersmeyer
------------------------------
Title: President and CEO
------------------------------
COHESION TECHNOLOGIES, INC.
Dated: March 5, 1998 By: /s/ David Foster
------------- --------------------------------
Name: David Foster
------------------------------
Title: CEO
------------------------------
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EXHIBIT A
SPECIFICATIONS
Vitrogen(TM) Collagen Corporation Part No. 07010702
<PAGE> 1
EXHIBIT 10.103
ASSIGNMENT AND LICENSE AGREEMENT
This ASSIGNMENT AND LICENSE AGREEMENT (the "Agreement"), effective as of
January 1, 1998 ("Effective Date"), is made by and between COLLAGEN CORPORATION
("Collagen"), a Delaware corporation and COHESION TECHNOLOGIES, INC., a Delaware
corporation formerly known as Collagen Technologies, Inc. ("Technologies").
RECITALS
1. Collagen and Technologies have entered into a relationship
whereby certain assets and liabilities are transferred from Collagen to
Technologies, as further described in the Separation and Distribution Agreement
effective as of January 1, 1998 between Technologies and Collagen (the
"Separation Agreement") and in the Ancillary Agreements.
2. Technologies desires to obtain from Collagen, and Collagen is
willing to assign to Technologies, all intellectual property rights owned by
Collagen as of the Effective Date, other than breast implant technology and
intellectual property rights pertaining thereto, the ownership of which shall be
retained by Collagen.
3. Collagen desires to license from Technologies, on a worldwide
basis, all intellectual property rights owned or controlled by Technologies,
relating to the fields of human aesthetics products, technologies, and
treatments.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the meanings given to them in the Separation Agreement. In addition, for
the purposes of this Agreement, the capitalized terms set forth below shall have
the meanings set forth in this Article I.
1.1 "Assigned Copyrights" shall mean those United States and foreign
copyrights, including any and all registrations, applications for registration,
common law rights, restoration rights, and all other rights related thereto,
other than the Retained Copyrights, that are owned by Collagen or the Collagen
Group as of the Effective Date, or which Collagen or any member of the Collagen
Group has the right to assign to Technologies hereunder.
1.2 "Assigned Patents" shall mean all Patents, other than the
Retained Patents, that are owned by Collagen or the Collagen Group as of the
Effective Date, or which Collagen or any member of the Collagen Group has the
right to assign to Technologies hereunder. A list of the Assigned Patents is set
forth on the Schedule of Assigned Patents delivered and executed by the parties
at the time of execution of this Agreement, as such may be amended and updated
by the parties upon mutual agreement.
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1.3 "Assigned Trademarks" shall mean all United States and foreign
trademarks, trade names, logos, service marks, and trade dress rights, including
any and all registrations, applications for registration, common law rights,
renewal rights that are set forth on the Schedule of Assigned Trademarks
delivered and executed by the parties at the time of execution of this Agreement
(as such may be amended and updated by mutual agreement of the parties) and any
and all goodwill of Collagen's business connected with the use of and symbolized
by such marks, that are owned by Collagen or the Collagen Group as of the
Effective Date or which Collagen has the right to assign to Technologies
hereunder.
1.4 "Improvements" shall mean any and all inventions, discoveries,
derivatives, know-how, improvements, technology, works of authorship and
expressions (excluding Recombinant Technology and Persistence Technology as
defined in the Separation Agreement, irrespective of whether the Recombinant
Agreement and Persistence Agreement are executed by the parties) made by
Collagen, Technologies, or their Affiliates after the Effective Date.
1.5 "Improvement Period" shall mean the period from the Effective
Date of this Agreement up to January 1, 1999.
1.6 "Intellectual Property Rights" shall mean trade secrets,
Patents, copyrights, trademarks, know-how, moral rights and similar rights of
any type under the laws of any governmental authority, domestic or foreign,
including all applications and registrations relating to any of the foregoing.
1.7 "Know-how" shall mean any and all secret, proprietary or
confidential information, experience, trade secrets, formulas, designs,
techniques, applications, processes, ideas, or concepts, whether or not reduced
to practice, whether or not reduced to writing and whether or not patentable,
owned or controlled by Collagen or the Collagen Group as of the Effective Date,
or to which Collagen or any member of the Collagen Group has the rights to
license or assign, as applicable, hereunder.
1.8 "Licensed Technology" shall mean the Assigned Patents and related
Know-how, the Assigned Trademarks and Assigned Copyrights licensed by
Technologies to Collagen hereunder.
1.9 "Non-Compete Period" shall mean the period extending from the
Effective Date of this Agreement up to March 15, 2004.
1.10 "Patents" shall mean all United States and foreign patents and
patent applications, substitutions, extensions, reissues, reexaminations,
renewals, divisions, utility models, continuations, or continuations-in-part
anywhere in the world.
1.11 "Retained Copyrights" shall mean those United States and foreign
copyrights, including any and all registrations, applications for registration,
common law rights, restoration rights, and all other rights related thereto in
and to any promotional, marketing, labeling, and other printed or other
materials relating solely to the use, marketing, sale, or distribution of
Technology in the Collagen Field.
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1.12 "Retained Patents" shall mean those Patents set forth on the
Schedule of Retained Patents delivered and executed by the parties at the time
of execution of this Agreement, as such may be amended and updated by mutual
agreement of the parties.
1.13 "Retained Trademarks" shall mean those United States and foreign
trademarks, trade names, logos, service marks, and trade dress rights, including
any and all registrations, applications for registration, common law rights and
renewal rights that are owned by Collagen or the Collagen Group as of the
Effective Date other than the Assigned Trademarks and any and all goodwill of
the Collagen Business connected with the use of and symbolized by such marks.
1.14 "Retained Technology" shall mean all Retained Patents, any
Know-how not assigned to Technologies pursuant to Section 2.1, Retained
Trademarks, and Retained Copyrights.
1.15 "Technology" shall mean any: (i) product, device, formulation,
composition, or component thereof; or (ii) any process, method or treatment,
that in either event, is currently in existence, under development, or which
comes into existence in the future, including, without limitation, those
products set forth in Exhibit A attached hereto, which embodies all or a portion
of Transferred Technology or Retained Technology.
1.16 "Transferred Technology" shall mean all Assigned Patents, the
Know-how assigned to Technologies pursuant to Section 2.1 hereof, the Assigned
Copyrights and the Assigned Trademarks.
ARTICLE II
PATENT AND KNOW-HOW ASSIGNMENT AND LICENSE GRANT
AND IMPROVEMENT LICENSE GRANT
2.1 ASSIGNMENT. Collagen hereby sells, transfers, assigns, and
irrevocably sets over to Technologies, and Technologies hereby purchases and
accepts assignment of, Collagen's entire right, title, and interest in and to:
(i) the Assigned Patents; (ii) any and all Know-how, other than Know-how solely
relating to the Retained Patents; and (iii) all rights and standing to sue for
past, present, and future infringement of such Assigned Patents and
misappropriation of such Know-how.
2.2 LICENSE GRANT. Subject to the terms and conditions hereof,
Technologies hereby grants to Collagen, to the extent that Technologies has the
right to grant such rights and licenses hereunder, a worldwide, irrevocable,
transferable, perpetual, fully paid-up, right and license, solely in the
Collagen Field, including the right to grant sublicenses in the Collagen Field,
under the Assigned Patents and related Know-how, to use, manufacture, have
manufactured, sell, have sold, distribute, have distributed, market and promote,
have marketed and promoted, import and export, and have imported and exported,
Technology solely in the Collagen Field. The licenses granted pursuant to this
Section 2.2 are exclusive with respect to the Assigned Patents and non-exclusive
with respect to the related Know-how.
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2.3 IMPROVEMENTS BY TECHNOLOGIES. Technologies hereby grants to
Collagen, to the extent that Technologies has the right to grant such rights and
licenses hereunder, a worldwide, exclusive, irrevocable, transferable,
perpetual, royalty-free, right and license, including the right to grant
sublicenses in the Collagen Field, under all Intellectual Property Rights
thereto, solely in the Collagen Field, to use, modify, have modified,
manufacture, have manufactured, sell, have sold, distribute, have distributed,
market and promote, have marketed and promoted, import and export, and have
imported and exported, the Improvements conceived, developed, or reduced to
practice by Technologies or its Affiliates during the Improvement Period.
2.4 IMPROVEMENTS BY COLLAGEN. Collagen hereby grants to
Technologies, to the extent that Collagen has the right to grant such rights and
licenses hereunder, a worldwide, exclusive, irrevocable, transferable,
perpetual, royalty-free, right and license, including the right to grant
sublicenses outside the Collagen Field, under all Intellectual Property Rights
thereto, solely outside the Collagen Field, to use, modify, have modified,
manufacture, have manufactured, sell, have sold, distribute, have distributed,
market and promote, have marketed and promoted, import and export, and have
imported and exported, the Improvements conceived, developed, or reduced to
practice by Collagen or its Affiliates during the Improvement Period.
2.5 ALL NECESSARY ACTIONS. In furtherance of the sale, transfer,
assignment, and setting over of the Assigned Patents and Know-how pursuant to
Section 2.1 hereto, Collagen shall execute and deliver to Technologies on the
Effective Date an executed assignment in the form attached hereto as Exhibit B.
Collagen further agrees to promptly review, execute, and deliver any and all
additional documents as Technologies may deem reasonably necessary or desirable
to effectuate the sale, transfer, assignment and setting over of the Assigned
Patents and related Know-how.
2.6 LICENSE TO TECHNOLOGIES. Subject to the terms and conditions
hereof, Collagen hereby grants to Technologies, a world-wide, irrevocable,
non-exclusive, royalty free, perpetual right and license, with the right to
grant sublicenses, under any Retained Technology (and notwithstanding any
exclusive rights or licenses granted by Technologies to Collagen hereunder), to
use, modify, have modified, manufacture, have manufactured, sell, have sold,
distribute, have distributed, market and promote, have marketed and promoted,
import and export, and have imported and exported any: (i) Technology outside
the Collagen Field; and (ii) Technology within the Collagen Field as provided in
Article 2 of the Collagen Supply Agreement, Article 2 of the Collagraft Supply
Agreement, or in connection with performing Technologies' obligations under the
Persistence Agreement or Recombinant Agreement if such agreements are entered
into by the parties.
ARTICLE III
TRADEMARK ASSIGNMENT AND LICENSE GRANT
3.1 ASSIGNED MARKS. Collagen hereby sells, transfers, assigns, and
irrevocably sets over to Technologies, and Technologies hereby purchases and
accepts, as a successor to the portion of Collagen's business to which such
Assigned Trademarks pertain, the assignment of
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Collagen's entire right, title, and interest, including all associated goodwill
to the extent applicable, in and to the Assigned Trademarks, and including all
rights and standing to sue for past, present, and future infringement of such
Assigned Trademarks.
3.2 LICENSE GRANT. Subject to the terms and conditions hereof,
Technologies hereby grants to Collagen a worldwide, exclusive, transferable,
fully paid-up, right and license, including the right to grant sublicenses in
the Collagen Field, to use, reproduce, and have reproduced, solely in
conjunction with the sale, marketing, and distribution of Technology, and
Improvements thereto in the Collagen Field, those Assigned Trademarks that as of
the Effective Date, were: (i) used in connection with Technology in the Collagen
Field, and (ii) used by Collagen in connection with Technology outside the
Collagen Field.
3.3 COLLAGEN HELIX LOGO. Subject to the terms and conditions hereof,
Collagen hereby grants to Technologies a worldwide, exclusive, non-transferable,
irrevocable, perpetual, fully paid-up, right and license, including the right to
grant sublicenses outside the Collagen Field, to use, reproduce, and have
reproduced the Collagen helix logo mark, as set forth in the Schedule of
Trademarks, solely in conjunction with the sale, marketing, and distribution of
Technology and Improvements, outside the Collagen Field.
3.4 ALL NECESSARY ACTIONS. In furtherance of the sale, transfer,
assignment, and setting over of the Assigned Trademarks pursuant to Section 3.1
hereto, Collagen shall execute and deliver to Technologies on the Effective Date
an executed assignment in the form attached hereto as Exhibit C. Collagen
further agrees to promptly review, execute, and deliver any and all additional
documents as Technologies may deem reasonably necessary or desirable to
effectuate the sale, transfer, assignment, setting over, prosecution, and
maintenance of the Assigned Trademarks, including any power of attorney by
Collagen to Technologies or any designated agent of Technologies relating to the
prosecution or maintenance of such Assigned Trademarks.
3.5 COMPLIANCE WITH GUIDELINES. Collagen's use of the Assigned
Trademarks licensed under Section 3.2 hereof, shall comply with the existing
guidelines observed by Collagen on the Effective Date and any additional
guidelines set forth in writing from time to time by Technologies with respect
to the style, appearance, and manner of use of such Assigned Trademarks. One
copy of any and all materials, including promotional, marketing, labeling,
packaging, and other marking for Technology and any Improvements licensed to
Collagen hereunder shall be provided by Technologies to Collagen promptly,
without charge, upon request by Collagen. Technologies' use of the Collagen
helix logo mark licensed under Section 3.3 hereto shall comply with the existing
guidelines observed by Collagen on the Effective Date and any additional
guidelines set forth in writing from time to time by Collagen with respect to
the style, appearance, and manner of use of the Collagen helix logo mark.
ARTICLE IV
COPYRIGHTS ASSIGNMENT AND LICENSE GRANT
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4.1 ASSIGNED COPYRIGHTS. Collagen hereby sells, transfers, assigns,
and irrevocably sets over to Technologies, and Technologies hereby purchases and
accepts, the assignment of Collagen's entire right, title, and interest, in and
to the Assigned Copyrights, and including all rights and standing to sue for
past, present, and future infringement of such Assigned Copyrights.
4.2 LICENSE GRANT. Subject to the terms and conditions hereof,
Technologies hereby grants to Collagen, to the extent that Technologies has the
right to grant such rights and licenses hereunder, a worldwide, exclusive,
transferable, fully paid-up, right and license, including the right to grant
sublicenses in the Collagen Field, to use, reproduce, have reproduced, and
create derivative works, solely in conjunction with the sale, marketing, and
distribution of Technology in the Collagen Field, those Assigned Copyrights in
and to any promotional, marketing, labeling, and other printed or other
materials as of the Effective Date relating to both: (i) the use, marketing,
sale, or distribution of Technology in the Collagen Field; and (ii) the use,
marketing, sale, or distribution by Collagen of Technology outside the Collagen
Field.
4.3 ALL NECESSARY ACTIONS. Collagen agrees to promptly review,
execute, and deliver any and all documents as Technologies may deem reasonably
necessary or desirable to effectuate the sale, transfer, assignment, setting
over, prosecution, and maintenance of the Assigned Copyrights, including any
power of attorney by Collagen to Technologies or any designated agent of
Technologies relating to the prosecution or maintenance of such Assigned
Copyrights.
4.4 COPYRIGHT DELIVERABLES. After the Effective Date of this
Agreement, each party shall, upon the request of the other party, promptly
provide the requesting party with all materials relating to the Assigned
Copyrights as necessary for the parties to exercise fully their respective
rights in the Assigned Copyrights granted under this Article 4.0.
ARTICLE V
OWNERSHIP; REGULATORY
5.1 OWNERSHIP OF IMPROVEMENTS. During and after the expiration of
the Improvement Period, each party shall own all rights, title, and interest in
and to all Improvements made by such party. Neither party hereto has any
accounting, reporting, or licensing obligations to the other party with respect
to improvements, modifications, derivative works, inventions, know-how, or
technology made after expiration of the Improvement Period.
5.2 PATENTABILITY OF IMPROVEMENTS. The following terms are intended
to avoid inventions covered by Assigned Patents or Retained Patents from being
prior art under 35 U.S.C. Sections 102(e), (f) or (g) to Improvements, which
would otherwise be patentable under 35 U.S.C. Section 103 over inventions
covered by Assigned Patents or Retained Patents. Technologies and Collagen agree
that, to the extent possible, such Improvements will be combined with existing
patent applications within Assigned Patents or Retained Patents and filed as a
continuation-in-part application, and that such existing patent applications
will be abandoned in favor of said continuation-in-part applications. Further,
Technologies and Collagen agree that
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any such Improvements shall, at the time they are made, be commonly owned by the
owner of the application to which the Improvement pertains, and be assigned to
such owner, provided, however, that the ownership of any Improvements that would
be patentable under 35 U.S.C. Section 103 over such application in the absence
of common ownership between the Improvement and the application shall be owned
in accordance with Section 5.1.
5.3 REGULATORY MATERIALS. After the Effective Date, the ownership of
the United States and foreign regulatory registrations, licenses, and
applications in existence and owned by Collagen prior to the Effective Date
("Regulatory Materials") shall be as set forth in the Separation Agreement.
Collagen hereby grants to Technologies a non-exclusive, perpetual, irrevocable,
transferable, fully-paid-up right to reference any and all Regulatory Materials
owned by Collagen, solely as such relates outside the Collagen Field.
Technologies hereby grants to Collagen a non-exclusive, perpetual, irrevocable,
transferable, fully-paid-up right to reference any and all Regulatory Materials
owned by Technologies solely as such relates to the Collagen Field. To the
extent that any Regulatory Materials owned by a party pertain to Improvements
made by the other party, the party who owns such Regulatory Materials shall, on
behalf and upon the other party's request and expense, make such Regulatory
Material available solely to the appropriate regulatory authorities and not to
the other party.
ARTICLE VI
MAINTENANCE OF LICENSED TECHNOLOGY
After the Effective Date, Technologies has the right to file, prosecute
and maintain, at its expense, the Transferred Technology in any and all
countries and at Technologies' sole discretion; provided, however, that except
as otherwise provided in this Article VI, Technologies shall use its
commercially reasonable efforts to file, prosecute, and maintain Assigned
Patents licensed to Collagen hereunder in such countries and territories as
reasonably requested by Collagen, and to maintain all Intellectual Property
Rights in and to the Licensed Technology as reasonably requested by Collagen. In
filing and prosecuting Assigned Patents, Technologies shall in good faith
prosecute the Assigned Patents licensed to Collagen hereunder with the same
degree of care and diligence that it accords to prosecution of patents that
Technologies commercially exploits for itself. Collagen will cooperate fully
with Technologies in connection with all filings, prosecution and maintenance of
the Licensed Technology. Upon Collagen's request, Technologies will make
available to Collagen any relevant and non-privileged correspondence with patent
agencies relating to such filing, prosecution and maintenance of all Licensed
Technology which Collagen shall keep confidential in accordance with Article VII
hereto. Technologies will also provide to Collagen a copy of the updated docket
sheet in the form of the Schedule of Assigned Patents with respect to all issued
or pending patents and all pending patent applications at least once each
calendar quarter during the Term of this Agreement. In addition, commencing from
the Effective Date through the Improvement Period, Collagen shall be entitled to
have a representative on Technologies' patent review committee. Technologies
will solely be responsible for filing, prosecuting and maintaining the Licensed
Technology; provided, however, that with respect to the Assigned Patents
licensed by Technologies to Collagen hereunder, Technologies shall provide
Collagen with at least ninety (90) days prior notice in accordance with the
Separation Agreement before the applicable
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deadline if Technologies should elect not to file, prosecute or maintain any
such Assigned Patent in any territory in the world. If Technologies makes such
election as to any territory in the world, then Collagen may elect to file,
prosecute, or maintain such Assigned Patent in such territory, at Collagen's own
expense, and Technologies will cooperate with Collagen's filing, prosecution
and/or maintenance, as applicable, and shall assign, subject to its ability to
do so, all of Technologies' rights, title, and interest in and to such Assigned
Patent in such territory to Collagen at no additional fee. As to any such
Assigned Patent for any territory that is assigned to Collagen pursuant to this
Article VI, Technologies shall be entitled to thereafter exercise those license
rights set forth in Section 2.6 hereof with respect to such Assigned Patent as
if it were Retained Technology. Collagen will solely be responsible for filing,
prosecuting and maintaining the Collagen helix logo; provided, however, that
with respect to the Collagen helix logo licensed by Collagen to Technologies
hereunder, Collagen shall provide Technologies with at least ninety (90) days
prior notice in accordance with the Separation Agreement before the applicable
deadline if Collagen should elect not to file, prosecute or maintain such
Collagen helix logo in any territory in the world. If Collagen makes such
election as to any territory in the world, then Technologies may elect to file,
prosecute, or maintain such Collagen helix logo in such territory, at
Technologies' own expense, and Collagen will cooperate with Technologies'
filing, prosecution and/or maintenance, as applicable, and shall assign, subject
to its ability to do so, all of Collagen's rights, title, and interest in and to
such Collagen helix logo in such territory to Technologies at no additional fee.
As to the rights to the Collagen helix logo for any territory that is assigned
to Technologies pursuant to this Article VI, Collagen shall be entitled to
thereafter exercise those license rights set forth in Section 3.2 hereof with
respect to such Collagen helix logo as if it were an Assigned Trademark.
ARTICLE VII
CONFIDENTIALITY
The parties agree that Information that is proprietary or confidential
to: (i) Collagen prior to the Effective Date; or (ii) to one party and provided
to the other party pursuant to or in furtherance of this Agreement after the
Effective Date shall be subject to and treated in accordance with Article VIII
of the Separation Agreement.
ARTICLE VIII
TERMINATION
8.1 TERM. This Agreement will become effective on the Effective Date
and will continue until terminated as provided in Section 8.2 herein (the
"Term").
8.2 TERMINATION FOR CAUSE. Either party shall have the right to
terminate this Agreement following any material breach or default in performance
under this Agreement by the other party upon sixty (60) days prior written
notice to the breaching party specifying the nature of the breach or default.
Unless the breaching party has cured the breach or default prior to the
expiration of the sixty (60) day period, the non-breaching party, at its sole
option, may terminate this Agreement upon written notice to the breaching party.
Termination of this Agreement shall become effective upon receipt of such second
notice by the breaching party.
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8.3 EFFECT OF TERMINATION. Upon termination of this Agreement each
party shall return to the other party all copies of any and all Confidential
Information, received by the other party during the term of this Agreement.
8.4 SURVIVAL OF CERTAIN TERMS. The following provisions will survive
any expiration or termination of the AGREEMENT: (i) Sections 2.2, 2.3, 2.4, 2.6,
3.2, 3.3, 3.5 and 4.2 to the extent any license pursuant to any such section was
in effect as of the date of such termination; and (ii) Sections 2.1, 3.1, 4.1,
8.3 and 9.1 and Articles 1, 5, 6 and 7.
ARTICLE IX
ADDITIONAL OBLIGATIONS OF THE PARTIES
9.1 NON-COMPETE. During the Non-Compete Period, Technologies agrees
that it will not market, sell, or distribute, either directly or indirectly, any
Technology, or any products or processes for use in the Collagen Field. During
the Non-Compete Period, Collagen agrees that it will not market, sell, or
distribute, either directly or indirectly, any Technology, products or processes
for use outside the Collagen Field. In addition, during the Improvement Period,
each party agrees to refrain from soliciting for the purposes of obtaining
services from any then-current employee of the other party, or for a period of
ninety (90) days after termination of employment any former employee of the
other party, without the other party's prior written consent.
9.2 RIGHT OF FIRST DISCUSSION. Subject to the terms and conditions
herein, Collagen may exercise a right of first negotiation for a license
agreement with Technologies with respect to any Improvements in the Collagen
Field and made by Technologies during the period beginning on January 1, 1999,
and ending on March 15, 2004, and Technologies may exercise a right of first
negotiation for a license agreement with Collagen with respect to any
Improvements outside the Collagen Field and made by Collagen during the period
beginning on January 1, 1999, and ending on March 15, 2004. Each party shall
promptly notify the other party of any such Improvements, and the other party
shall have thirty (30) days to deliver a "Written Notice of Exercise." The
parties shall negotiate diligently and in good faith the terms of any license
agreement for a period of no more than ninety (90) days following a party's
delivery of a Written Notice of Exercise ("Negotiation Period"). If the parties
fail to execute a license agreement to such Improvements prior to the end of the
Negotiation Period, or the end of any mutually agreed to written extension
thereof, then the party holding the rights to such Improvements shall be
entitled, subject to Section 9.1, to enter into agreements with third parties
with respect to the subject matter of such negotiations.
9.3 PERSISTENCE TECHNOLOGY. The parties agree that the collagen
persistence project known as the collagen polymer or CP1/2 program ("CP1/2
Program") performed by Collagen before the Effective Date does not appear viable
and should no longer be pursued after the Effective Date. Commencing from the
execution of this Agreement until January 1, 2002, a designated representative
from each party shall meet with the other party's designated representative
(initially the representatives shall be the Co-chairs of the Recombinant
Technology Project as defined in the Recombinant Agreement) semi-annually to
discuss the
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feasibility of developing a persistent collagen product for use in the Collagen
Field, whether based on novel ideas or improvements to the CP1/2 Program. If
prior to January 1, 2002, such representatives identify an approach to
developing a persistent collagen product for use in the Collagen Field that has
a reasonable chance of success, the representatives shall notify the parties in
writing, and Technologies shall, within thirty (30) days of such notice, submit
to Collagen a proposed development plan for the development of persistent
collagen from such identified approach ("Proposal"). Collagen shall have 180
days from the receipt of such Proposal from Technologies to enter into a
definitive agreement with Technologies for the development and commercialization
of a persistent collagen product in accordance with such Proposal in
substantially the same form as the draft Persistence Agreement attached as
Exhibit A to the Separation Agreement.
ARTICLE X
MISCELLANEOUS
This Agreement shall be subject to the terms and provisions of Article
XI of the Separation Agreement, which are hereby incorporated into this
Agreement to the extent applicable.
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IN WITNESS WHEREOF, the parties have caused this Assignment and License
Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
Dated: March 5, 1998 By: /s/ Gary S. Petersmeyer
------------- --------------------------------
Name: Gary S. Petersmeyer
------------------------------
Title: President and CEO
------------------------------
COHESION TECHNOLOGIES, INC.
Dated: March 5, 1998 By: /s/ David Foster
------------- --------------------------------
Name: David Foster
------------------------------
Title: CEO
------------------------------
<PAGE> 12
EXHIBIT A
PRODUCTS
Zyderm(R) I implant
Zyderm(R) II implant
Zyplast(R) implant
Trilucent(R) breast implant
Contigen(R) Bard Collagen implant
Refinity(TM)
SoftForm(R) facial implant
<PAGE> 13
EXHIBIT B
PATENT ASSIGNMENT DOCUMENT
[SEE ATTACHED DOCUMENT.]
<PAGE> 14
PATENT ASSIGNMENT
This PATENT ASSIGNMENT (the "Assignment") is made from Collagen
Corporation a Delaware corporation (the "Assignor"), to Collagen Technologies,
Inc., a Delaware corporation (the "Assignee").
Assignor desires to assign to Assignee all of Assignor's right, title
and interest in and to the patents and/or inventions (the "Patents") set forth
on Exhibit A attached hereto.
In consideration for entering into the Assignment and License Agreement,
effective as of January 1, 1998, by and between Assignor and Assignee, and for
other good and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, Assignor has sold, assigned, transferred, and set over, and
by these presents does hereby sell, assign, transfer and set over, to Assignee,
its successors, legal representatives and assigns, the entire right, title and
interest in and to the Patents, and any and all applications, including
provisional applications, therefor, in the United States of America and all
foreign countries which may be granted therefor and thereon, and in and to any
and all divisions, continuations, and continuations-in-part of said application,
and reissues and extensions of said Patents, and all rights under the
International Convention for the Protection of Industrial Property, the same to
be held and enjoyed by said Assignee, for its own use and behalf and the use and
behalf of its successors, legal representatives and assigns, to the full end of
the term or terms for which Patents may be granted, as fully and entirely as the
same would have been held and enjoyed by the Assignor, had this sale and
assignment not been made.
AND said Assignor hereby requests the Commissioner of Patents to issue
said Patents of the United States to said Assignee as the Assignee of said
inventions and the Patents to be issued thereon for the sole use and behalf of
said Assignee, its successors, legal representatives and assigns.
Dated:__________________________ COLLAGEN CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE> 15
EXHIBIT A
(to Patent Assignment)
See Schedule of Assigned Patents
<PAGE> 16
EXHIBIT C
TRADEMARK ASSIGNMENT DOCUMENT
[SEE ATTACHED DOCUMENT.]
<PAGE> 17
TRADEMARK ASSIGNMENT
This Trademark Assignment (the "Assignment") is made from Collagen
Corporation, a Delaware corporation (the "Assignor"), to Collagen Technologies,
Inc., a Delaware corporation (the "Assignee").
Assignor desires to assign to Assignee all of Assignor's right, title
and interest in and to the trademarks and/or service marks (the "Marks") set
forth on Exhibit A attached hereto, together with the goodwill of the business
pertaining thereto.
In consideration for entering into the Assignment and License Agreement,
effective as of January 1, 1998 by and between Assignor and Assignee, and for
other good and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, Assignor does hereby assign, transfer, grant, sell and
otherwise convey to Assignee all of Assignor right, title and interest in and to
the Marks, including all common law rights therein, applications to register
therefor, together with the goodwill of the business symbolized by the Marks and
all claims for damages by reason of past infringements of the Marks with the
right to sue for and collect the same for its own use and benefit, and for the
use and on behalf of its successors, assigns and other legal representatives.
Dated: ____________ COLLAGEN CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE> 18
EXHIBIT A
(to Trademark Assignment)
See Schedule of Trademarks
<PAGE> 1
EXHIBIT 10.104
Application for an order granting
confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange
Act of 1934 has been or be timely made.
Confidential portions of this document
have been redacted and marked with an [*]
and have been filed with the Securities and
Exchange Commission separately with such
application.
COLLAGRAFT SUPPLY AGREEMENT
This SUPPLY AGREEMENT (the "Agreement"), effective as of January 1, 1998
(the "Effective Date"), is made by and between COLLAGEN CORPORATION, a Delaware
corporation ("Collagen"), and COHESION TECHNOLOGIES, INC., a Delaware
corporation formerly known as Collagen Technologies, Inc. ("Technologies").
RECITALS
1. Technologies and Collagen have entered into a relationship whereby
certain assets and liabilities are being transferred from Collagen to
Technologies, as further described in the Separation and Distribution Agreement
effective as of January 1, 1998 between Collagen and Technologies (the
"Separation Agreement") and in the Ancillary Agreements.
2. Technologies is in the business of developing products and processes
utilizing innovative collagen-based technology and novel biomaterials.
3. Collagen is in the business of developing, manufacturing and selling
human aesthetic and reconstructive medical technology products.
4. Collagen has entered into agreements with Zimmer, Inc. ("Zimmer") to
supply Zimmer's requirements for a hydroxylapatite-collagen product, which
agreements have been or will be assigned to Technologies.
5. Technologies wishes to purchase from Collagen its requirements for
such hydroxylapatite-collagen product to fulfill its supply obligations to
Zimmer, and Collagen wishes to supply Technologies' requirements.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein
shall have the meanings given to them in the Separation Agreement. In addition,
for the purposes of this Agreement, the capitalized terms set forth below shall
have the meanings set forth in this Article I.
1.1 "Direct Costs" shall mean the direct costs to Collagen related to
manufacturing the Product, as defined in Exhibit A hereto.
<PAGE> 2
1.2 "FDA" shall mean the United States Food and Drug Administration or
any successor agency thereof.
1.3 "Intellectual Property Rights" shall mean trade secrets, patents,
copyrights, trademarks, know-how, moral rights and similar rights of any type
under the laws of any governmental authority, domestic or foreign, including all
applications and registrations relating to any of the foregoing.
1.4 "Product" shall mean the product described in Exhibit B attached
hereto.
1.5 "Requirements" shall mean the quantity of Product required for
Technologies to meet its obligations to supply Product to Zimmer pursuant to the
Zimmer Agreement;
1.6 "Specifications" shall mean the intermediate and finished goods
specifications for the following product codes: [*]
1.7 "Zimmer Agreement" shall mean the Supply Agreement between
Technologies and Zimmer, with an effective date of January 18, 1985, and which
is in full force and effect as of the Effective Date of this Agreement.
ARTICLE II
SUPPLY
2.1 COLLAGEN SUPPLY OBLIGATION. Subject to the terms and conditions
herein, Collagen shall manufacture for and supply to Technologies all
Technologies' Requirements for the Product. Technologies shall be responsible
for procuring for Collagen at its sole expense any and all licenses and rights
to any Intellectual Property Rights, third party or otherwise, necessary for
Collagen to perform under the Agreement.
2.2 TECHNOLOGIES PURCHASE OBLIGATION. Subject to the terms and
conditions herein, Technologies shall purchase all Requirements for the Product
from Collagen.
2.3 RELEASE FROM REQUIREMENTS OBLIGATION. Technologies shall have no
obligation pursuant to Section 2.2 to purchase its requirements for Product from
Collagen in the event that: (i) Collagen shall fail to deliver Product within
ninety (90) days of Collagen's receipt of a firm purchase order issued by
Technologies and acknowledged by Collagen (unless the scheduled delivery date
set forth in such purchase order is more than ninety (90) days from Collagen's
receipt thereof) or shall fail on two (2) consecutive occasions or three (3)
occasions in any one hundred eighty (180) day period to deliver Product within
fifteen (15) days of the scheduled delivery date therefor as set forth in a firm
purchase order issued by Technologies and acknowledged by Collagen; (ii)
Collagen shall have manufactured any Product not in conformance with Section
4.3, except as otherwise requested by Technologies; or (iii) the quantity of
Product supplied by Collagen is not sufficient to meet Technologies'
Requirements.
[*] Application for an order granting confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
-2-
<PAGE> 3
ARTICLE III
TERMS OF PURCHASE
3.1 ORDER AND ACCEPTANCE. As soon as practicable, Technologies shall
pass to Collagen all purchase orders for Product received by Technologies from
Zimmer pursuant to the Zimmer Agreement. Upon receipt thereof, Collagen shall
promptly accept such purchase order and return a signed acceptance thereof to
Technologies. Notwithstanding anything herein to the contrary, no order shall be
binding upon Collagen until accepted by Collagen in writing. Each party may
cancel or reschedule purchase orders for Product only with prior written
approval of the other party.
3.2 FORECASTING. Technologies shall send to Collagen, a copy of all
Product forecasts received by Technologies from Zimmer pursuant to the Zimmer
Agreement promptly upon receipt thereof by Technologies.
3.3 PURCHASE PRICE. The purchase price to Technologies for the Product
shall be equal to [*]. The list price shall equal the greater of: (i) [*]
percent ([*]%) of Zimmer's U.S. Net Selling Price for the Product as defined in
the Zimmer Agreement ("U.S. Net Selling Price"); or (ii) Collagen's Direct Costs
for manufacturing the Product plus [*] percent ([*]%). The parties agree that to
the extent that the purchase prices hereunder are based on Collagen's Direct
Costs, Collagen may not increase its Direct Costs by more than [*] percent
([*]%) from one fiscal year to the next. Collagen shall provide Technologies
with an updated price list upon execution of this Agreement for the fiscal year
ending June 30, 1998 and at the beginning of each fiscal year, i.e., July 1,
which shall be effective for such fiscal year. Collagen will review such updated
price list with Technologies and shall provide supporting documentation therefor
similar to those provided for the fiscal year 1998 price list. Payment by
Technologies to Collagen of the purchase prices pursuant to this Section 3.3
shall constitute payment in full for the Product, including without limitation,
payment for manufacturing, distribution, order entry and accounts receivables
services performed in connection therewith. Collagen shall use reasonable
commercial efforts to efficiently manufacture the Product and pursue
manufacturing cost reductions without compromising the quality or function of
the Product.
3.4 INVOICING. Collagen shall submit an invoice to Technologies upon
each shipment of Product ordered by Technologies based on Zimmer's most recent
U.S. Net Selling Price for the Product. Technologies agrees to promptly provide
Collagen with information regarding Zimmer's actual U.S. Net Selling Price for
such shipment of Product when such information is received by Technologies.
Within sixty (60) days of the receipt of information regarding Zimmer's actual
U.S. Net Selling Price, Collagen will submit to Technologies an accounting of
any discrepancy between the invoiced prices and the prices pursuant to Section
3.3. Within thirty (30) days after such accounting is delivered by Collagen to
Technologies: (i) Technologies shall pay any balance owed to Collagen; or (ii)
Collagen shall pay to Technologies any overpayment based on such accounting. All
invoices and other
[*] Application for an order granting confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
-3-
<PAGE> 4
shipping documents shall be sent by first class mail or fax to Technologies'
address for notices hereunder,
[*] Application for an order granting confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
-4-
<PAGE> 5
without regard to the actual shipping address. Each such invoice shall state the
aggregate and unit invoice price for Product in a given shipment. In addition,
if Zimmer should request that Collagen procure Product packaging materials
directly, the parties agree that Collagen may submit invoices for such Product
packaging costs directly to Zimmer.
3.5 DELIVERY. Collagen shall ship Product to the address set forth in
the applicable purchase order for delivery on the scheduled delivery date
specified in the applicable purchase order; provided, however, that such
scheduled delivery date shall not be less than ninety (90) days from the date of
receipt by Collagen of such purchase order. All shipments shall be F.O.B.
Collagen's manufacturing facilities in Fremont, and Technologies shall bear the
risk of loss and cost of transportation of the Product upon delivery by Collagen
to the carrier identified by Technologies. Collagen shall suitably pack the
Product for delivery by surface or air, at Technologies' discretion, in
Collagen's standard shipping cartons. Collagen shall ship the Product using the
carrier specified in Technologies' purchase order; provided, however, that if
Technologies does not provide instructions with respect to the carrier to be
used, Collagen shall select the carrier. Collagen shall use commercially
reasonable efforts to ship Product with a shelf life no shorter than the shelf
life for such Product (as set forth in the Specifications therefor) less thirty
(30) days, unless otherwise agreed to in writing by the parties. Product shall
be deemed delivered by Collagen and accepted by Technologies upon: (i) the
receipt by Technologies of a Certificate of Analysis based on the
Specifications; and (ii) the review and approval by Technologies of the
information contained in the alert notices and deviation reports.
3.6 PAYMENT AND AUDIT. Technologies shall make payment to Collagen for
each shipment of Product within ten (10) days of receipt by Technologies of
payment from Zimmer. If payment is sent by Zimmer to Collagen, then Collagen
shall forward the amount net of the purchase price pursuant to Section 3.3 to
Technologies within ten (10) days of receipt by Collagen of payment from Zimmer.
To the extent the purchase price for Product is based upon Collagen's Direct
Costs, upon reasonable notice to Collagen, Technologies shall have the right to
have an independent certified public accountant, selected by Technologies and
reasonably acceptable to Collagen, audit Collagen's records pertaining to the
calculation of Collagen's Direct Costs during normal business hours to verify
Collagen's Direct Costs; provided, however, that such audit shall not take place
more frequently than once a year and shall not cover such records for more than
the preceding two (2) years. The accountant shall only report to Technologies as
to the accuracy of Collagen's Direct Costs, and in the event of any inaccuracy,
the correct amounts thereof. Collagen shall promptly refund to Technologies the
amount of any overpayment, and Technologies shall promptly pay to Collagen the
amount of any underpayment determined in such audit. Such audit shall be at
Technologies' expense unless such audit indicates greater than five percent (5%)
overpayment by Technologies based on invoices submitted by Collagen, in which
case such audit shall be at Collagen's expense. Collagen shall preserve and
maintain all such records and accounts required for audit for a period of two
(2) years after the calendar quarter for which the record applies.
3.7 PRODUCT PACKAGING AND LABELING. Collagen shall package and label the
Product as directed by Technologies. Technologies shall be responsible for
designing and determining the form and format of Product and packaging labels.
-5-
<PAGE> 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY BOTH PARTIES. Technologies (on behalf of itself and each member
of the Technologies Group) and Collagen (on behalf of itself and each member of
the Collagen Group), represents and warrants to the other that: (i) it has full
power and authority to execute, deliver and perform this Agreement; and (ii) the
execution, delivery and performance by such party of this Agreement does not
contravene any law, regulation, rules or order binding on such party and do not
contravene the provisions of or constitute a default under any contract or other
agreement binding on such party.
4.2 REGULATORY APPROVALS. Technologies represents and warrants to
Collagen that any and all required government approvals, including any approvals
under applicable health and safety laws and regulations, to import, register,
market, distribute and sell the Product pursuant to a purchase order issued by
Technologies shall have been secured for every jurisdiction into which the
Product is shipped or sold in accordance with such purchase order. The parties
agree to cooperate with each other and perform all necessary actions to obtain
and maintain any CE mark and ISO certification for the Product.
4.3 GMP. Except as otherwise requested by Technologies in writing,
Collagen shall manufacture the Product in accordance with: (i) GMP, as required
by the United States Food and Drug and Cosmetic Act (the "Act"); (ii) all
pertinent rules and regulations of the FDA; (iii) the laws of the United States
of America and all local laws; and (iv) all other laws, regulations and
guidelines including without limitation regulations of the European Union and
any jurisdiction herein to the extent the same are applicable; provided,
however, that nothing contained in this Agreement is intended to render
applicable any laws other than the Act, FDA regulations and United States law.
Collagen represents and warrants that no Product delivered by Collagen under
this Agreement will be adulterated or misbranded by Collagen within the meaning
of the Act, or within the meaning of any other applicable law in which the
definitions of adulteration or misbranding are substantially the same as those
contained in the Act, as such laws are constituted and effective at the time of
such shipment or delivery, or as an article which may not, under the provisions
of Section 404 or 505 of the Act, be introduced into interstate commerce.
4.4 LIMITED WARRANTY. Collagen represents and warrants that the Product
supplied by it to Technologies under this Agreement shall conform to the
Specifications and shall be free from defects in material and workmanship for
the shelf life of the Product as set forth in the Specifications of the Product
("Warranty Period"). Technologies' exclusive remedy and sole liability for
breach of the foregoing warranty shall be the remedy as set forth in this
Section 4.4.
4.4.1 RETURN OF DEFECTIVE PRODUCT. In the event that any Product
purchased by Technologies from Collagen fails to conform to the warranty set
forth in this Article 4.4, Collagen's sole and exclusive liability and
Technologies' exclusive remedy shall be to replace the Product, or if, at
Collagen's sole determination, replacement is not practicable, refund
Technologies for the amount actually paid by Technologies for any such Product;
-6-
<PAGE> 7
provided, however, that: (i) Technologies promptly notifies Collagen in writing
that such Product failed to conform, furnishes a detailed explanation of any
alleged nonconformity, and requests a return material authorization number; and
(ii) such Product is returned to Collagen by Technologies F.O.B. Collagen's
shipping location in Fremont, California, during the Warranty Period, with the
return material authorization number affixed prominently to the outside
packaging. If such Product fails to so conform, Collagen will reimburse
Technologies for shipment charges for return of the nonconforming Product.
4.4.2 RECALL; MDR; FIELD CORRECTION. Should any defect in the
Product or any governmental action require: (i) the recall, destruction or
withholding from market ("Recall"); (ii) issuance of a Medical Device Report
within the meaning of the Act ("MDR"); or (iii) institution of a field
correction ("Field Correction") for the Product, Collagen shall bear the costs
and expenses of such Recall, MDR or Field Correction to the extent such Recall,
MDR or Field Correction is the result of any non-conformance to Specifications
due to a fault or omission attributable to Collagen, and Technologies shall bear
the costs and expenses of such Recall, MDR or Field Correction to the extent
such Recall, MDR or Field Correction is the result of any fault or omission
attributable to Technologies. Should such Recall, MDR or Field Correction result
from the fault of both parties, the parties shall share such costs and expenses
in accordance with their proportionate fault. Collagen shall provide adverse
event response support for the Product consistent with its obligations under the
Services Agreement dated as of the Effective Date.
ARTICLE V
COOPERATION
Collagen shall otherwise reasonably cooperate with Technologies to
fulfill Technologies' obligations under the Zimmer Agreement.
ARTICLE VI
TERM AND TERMINATION
6.1 TERM. The Term shall commence on the Effective Date and continue in
full force and effect until the expiration or termination of the Zimmer
Agreement ("Term").
6.2 TERMINATION FOR CAUSE. Technologies may terminate this Agreement
upon a material breach or default in performance under this Agreement by
Collagen, and Collagen may terminate this Agreement upon the failure by
Technologies to make payments to Collagen in accordance with this Agreement. The
non-breaching party shall give written notice to the breaching party of such
breach or default, and unless the breaching party shall have cured the breach or
default within sixty (60) days, the non-breaching party, at its sole option, may
terminate this Agreement upon written notice to the breaching party. Termination
of this Agreement shall become effective upon receipt of such second notice by
the breaching party.
-7-
<PAGE> 8
6.3 TERMINATION BY TECHNOLOGIES. Technologies may terminate its
obligations under this Agreement with respect to the Product, by delivering to
Collagen twelve (12) month notice thereof.
6.4 EFFECT OF TERMINATION. Upon expiration under Section 6.1 or
termination under Sections 6.2 or 6.3, Collagen: (i) hereby grants to
Technologies a non-exclusive, non-transferable, royalty-free, perpetual,
irrevocable, world-wide, right and license (with the right to sublicense) to any
Manufacturing Improvements; and (ii) shall deliver to Technologies a copy of any
written materials embodying such Manufacturing Improvements as reasonably
necessary for Technologies to manufacture or have manufactured the Product. For
purposes of this Agreement, the term "Manufacturing Improvements" shall mean any
modifications, improvements, enhancements, and other revisions to manufacturing
processes or materials, solely as related to the Product, that are made by
Collagen during the Term of this Agreement. Expiration or termination of this
Agreement pursuant to the terms and conditions set forth in this Agreement shall
not relieve Technologies of any payment obligations to Collagen, accruing prior
to or upon such expiration or termination.
6.5 LIMITATION OF LIABILITY UPON TERMINATION. A PARTY SHALL NOT BE
LIABLE TO THE OTHER PARTY, OR ANY OF ITS EMPLOYEES, AGENTS, OR CUSTOMERS, FOR
DAMAGES OF ANY KIND, INCLUDING DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OR EXPIRATION OF THIS
AGREEMENT IN ACCORDANCE WITH THIS ARTICLE VI. EACH PARTY HEREBY WAIVES ANY
RIGHTS IT MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION OR
EXPIRATION OF THIS AGREEMENT UNDER LAW OTHER THAN AS EXPRESSLY PROVIDED HEREIN.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY ON ACCOUNT OF TERMINATION OR
EXPIRATION OF THIS AGREEMENT FOR REIMBURSEMENT OR DAMAGES FOR THE LOSS OF
GOODWILL, PROSPECTIVE PROFITS OR ANTICIPATED INCOME, OR ON ACCOUNT OF ANY
EXPENDITURES, INVESTMENTS, LEASES OR COMMITMENTS MADE BY THE OTHER PARTY OR FOR
ANY OTHER REASON WHATSOEVER. EACH PARTY ACKNOWLEDGES THAT IT HAS NO EXPECTATIONS
AND HAS RECEIVED NO ASSURANCES FROM THE OTHER PARTY THAT ANY INVESTMENT BY IT IN
THE DISTRIBUTION, PROMOTION, OR SALE OF THE PRODUCTS WILL BE RECOVERED OR
RECOUPED OR THAT IT WILL OBTAIN ANY ANTICIPATED AMOUNT OF PROFITS BY VIRTUE OF
THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THIS SECTION HAS BEEN INCLUDED AS A
MATERIAL INDUCEMENT FOR THEM TO ENTER INTO THIS AGREEMENT AND THAT THEY WOULD
NOT HAVE ENTERED INTO THIS AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY AS SET
FORTH HEREIN.
6.6 SURVIVAL OF CERTAIN TERMS. The provisions of Section 3.6, 4.4, 6.4,
6.5, and 6.6 and Articles VII and VIII shall survive the expiration or
termination of this Agreement for any reason. All other rights and obligations
of the parties shall cease upon expiration or termination of this Agreement.
-8-
<PAGE> 9
ARTICLE VII
CONFIDENTIALITY
The parties agree that Information that is proprietary or confidential
to (i) Collagen prior to the Effective Date; or (ii) to one party and provided
to the other party pursuant to or in furtherance of this Agreement after the
Effective Date shall be subject to and treated in accordance with Article VII of
the Separation Agreement.
ARTICLE VIII
MISCELLANEOUS
This Agreement shall be subject to the terms and provisions of Article
XI of the Separation Agreement, which are hereby incorporated into this
Agreement to the extent applicable.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Collagraft
Supply Agreement to be executed by their duly authorized representatives.
COLLAGEN CORPORATION
Dated: March 5, 1998 By: /s/ Gary S. Petersmeyer
------------- ---------------------------------
Name: Gary S. Petersmeyer
Title: President and CEO
COHESION TECHNOLOGIES, INC.
Dated: March 5, 1998 By: /s/ David Foster
------------- ---------------------------------
Name: David Foster
Title: CEO
-10-
<PAGE> 11
EXHIBIT A
Direct Costs
Direct Costs shall include the following expense types incurred by the cost
centers directly involved in manufacturing the Product.
Type of expenses or costs:
[*]
Cost centers:
[*]
Direct Costs shall specifically exclude the following types of costs and
expenses:
[*]
[*] Application for an order granting confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act of 1934 has been made. Confidential
portions of this document have been redacted and marked with an [*] and have
been filed with the Securities and Exchange Commission separately with such
application.
<PAGE> 12
EXHIBIT B
Product
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 15,755
<SECURITIES> 0
<RECEIVABLES> 11,515
<ALLOWANCES> 0
<INVENTORY> 13,612
<CURRENT-ASSETS> 51,426
<PP&E> 15,418
<DEPRECIATION> 0
<TOTAL-ASSETS> 169,874
<CURRENT-LIABILITIES> 25,938
<BONDS> 0
0
0
<COMMON> 110
<OTHER-SE> 109,822
<TOTAL-LIABILITY-AND-EQUITY> 169,874
<SALES> 63,067
<TOTAL-REVENUES> 63,067
<CGS> 20,922
<TOTAL-COSTS> 20,922
<OTHER-EXPENSES> 61,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (50)
<INCOME-PRETAX> (4,856)
<INCOME-TAX> 651
<INCOME-CONTINUING> (5,469)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,469)
<EPS-PRIMARY> (.61)
<EPS-DILUTED> (.61)
</TABLE>
