13
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1998
Commission File Number 0-7955
Mentor Corporation
(Exact name of registrant as specified in its charter)
Minnesota 41-0950791
(State of Incorporation) (I.R.S. Employer Identification Number)
5425 Hollister Avenue, Santa Barbara, California 93111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (805) 681-6000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 of 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 No
The number of shares outstanding for each of the Issuer's classes of
common stock as of August 12, 1998 was:
Common stock, $.10 par value 24,788,789 shares
Mentor Corporation
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Financial
Position -- June 30, 1998 and March 31, 1998
Consolidated Statements of Income -- Three Months
Ended June 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flows --
Three Months Ended June 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements--
June 30, 1998
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
11. Statement Regarding Computation of Per Share Earnings
Mentor Corporation
Condensed Consolidated Statements of Financial Position
June 30, 1998 and March 31, 1998
(Unaudited)
June 30, March 31,
(dollars in thousands) 1998 1998
ASSETS
Current assets:
Cash and marketable securities $ 34,732 $ 27,937
Accounts receivable, net 40,853 40,209
Inventories 46,589 44,632
Deferred income taxes 6,619 6,619
Other 4,094 8,144
Total current assets 132,887 127,541
Property, plant and equipment,
net of accumulated depreciation 41,992 39,423
Other assets:
Patents, licenses and trademarks
net of accumulated amortization 5,667 5,530
Goodwill, net of accumulated
amortization 13,501 13,619
Long term marketable securities
and investment 13,575 14,806
Other assets 454
32,743 34,409
Total assets $ 207,622 $ 201,373
See Notes to Condensed Consolidated Financial Statements
Mentor Corporation
Condensed Consolidated Statements of Financial Position
June 30, 1998 and March 31, 1998
(Unaudited)
June 30, March 31,
(dollars in thousands) 1998 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,018 $ 6,903
Accrued compensation 6,097 8,742
Income taxes payable 4,610 1,325
Dividends payable 634 634
Sales returns 5,941 5,961
Self-insured retention 3,619 3,580
Accrued royalties 1,414 1,598
Other accrued liabilities 3,787 3,841
Short-term borrowings and current
portion of long-term debt 50
Total current liabilities 33,120 32,634
Long-term deferred taxes 3,341 4,054
Shareholders' equity:
Common shares, $.10 par value:
Authorized-- 50,000,000 shares
Issued and outstanding:
25,046,790 shares at
June 30,1998
25,020,690 shares at
March 31, 1998 2,504 2,502
Capital in excess of par 35,473 35,189
Cummulative transalation
adjustment (1,333) (1,404)
Unrealized gains on investments 3,900 5,000
Retained earnings 130,617 123,398
171,161 164,685
Total liabilities and shareholders'
equity $ 207,622 $ 201,373
See Notes to Condensed Consolidated Financial Statements
Mentor Corporation
Consolidated Statements of Income
Three Months Ended June 30, 1998 and 1997
(Unaudited)
(in thousands, except per share
data) 1998 1997
Net sales $ 57,018 $ 55,291
Costs and expenses:
Cost of sales 19,165 18,275
Selling, general and
administrative 22,787 20,309
Research and development 3,679 5,109
45,631 43,693
Operating income 11,387 11,598
Interest expense (10) (11)
Interest income 383 324
Other income (expense) (59) (70)
Income before income taxes 11,701 11,841
Income taxes 3,862 4,038
Net income $ 7,839 $ 7,803
Basic earnings per share $ .31 $ .31
Diluted earnings per share $ .30 $ .30
See notes to consolidated financial statements
Mentor Corporation
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 1998 and 1997
(Unaudited)
(in thousands) 1998 1997
Cash flows from operating activities $ 12,240 $ 13,935
Cash flows from investing
activities:
Purchase of property, equipment,
and intangibles (5,112) (3,071)
Investment in Marketing Partner (2,006)
(5,112) (5,077)
Cash flows from financing
activities:
Exercise of stock options 287 890
Dividends paid (620) (624)
Reduction of long-term debt (9)
Repurchase of common stock (1,519)
(333) (1,262)
Increase (decrease) in cash, cash
equivalents, and marketable
securities 6,795 7,596
Cash at beginning of period 27,937 27,808
Cash at end of period $ 34,732 $ 35,404
See notes to consolidated financial statements
Mentor Corporation
Notes to Condensed Consolidated Financial Statements
June 30, 1998
Note A
Inventories at June 30, 1998 and March 31, 1998 consisted of:
June 30 March 31
(In thousands)
Raw materials $ 13,071 $ 12,900
Work in process 7,639 6,682
Finished goods 25,879 25,050
$ 46,589 $ 44,632
Note B
Other assets at June 30, 1998 include the Company's equity investments in
its marketing partners, Intracel Corporation and North American
Scientific, Inc. (NASI). The Intracel Corporation investment is valued
at cost of $6 million. In accordance with Financial Accounting Standards
Board (FASB) statement 115 "Accounting of Certain Equity Investments in
Debt and Equity Securities" the North American Scientific investment is
carried at its fair market value of approximately $7.1 million.
Unrealized gains, net of the related tax effect, are accounted for as a
separate component of shareholders' equity.
Note C
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Statement
128 replaced the previously reported primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all
periods have been restated to conform to Statement 128 requirements.
Note D
The amounts set forth in the accompanying statements are unaudited but,
in the opinion of management, reflect all adjustments (consisting only of
normal accruals) necessary for a fair statement of the results of
operations for the periods presented. Operating results for the three
months period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ended March 31, 1999. It is
suggested that the condensed consolidated financial statements included
herein be read in conjunction with the Company's annual report on form 10-
K for the year ended March 31, 1998.
Note E
The Company's three quarterly interim reporting periods are each
approximately thirteen week periods ending on the Friday nearest the end
of the third calendar month. The fiscal year end remains March 31. To
facilitate ease of presentation, each interim period is shown as if it
ended on the last day of the appropriate calendar month. The actual
dates on which each quarter ended are shown below:
Fiscal 1999 Fiscal 1998
First Quarter June 26, 1998 June 30, 1997
Second Quarter September 25, 1998 September 26, 1997
Third Quarter December 25, 1998 January 2, 1998
Mentor Corporation
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Except for the historical information contained herein, the matters
discussed in this Management's Discussion are forward-looking statements,
the accuracy of which is necessarily subject to risks and uncertainties.
Actual results may differ significantly from the discussion of such
matters in the forward looking statements. Potential risks and
uncertainties include, without limitation, those mentioned in this report
and, in particular, the factors described under "Factors That May Affect
Future Results of Operations" in the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1998.
RESULTS OF OPERATIONS
Sales
Sales for the three months ended June 30, 1998 increased 3% to $57
million, compared to $55.3 million the prior year. Growth was
particularly strong in sales of urology products, increasing 13% compared
to a year ago. Disposable products for the management of urinary
incontinence were up 14%. Adding to urology product sales were two new
products that were introduced in the last year, brachytherapy seeds for
the treatment of prostate cancer, and the Suspend sling for treating
female urinary incontinence. Sales of penile implants declined 22% from
the previous year, due to competition from a new impotence drug, Viagra.
The combination of ease of use, plus a major advertising campaign from
Pfizer, has generated an unprecedented amount of interest in this new
product. The Company continues to believe that this interest in treating
impotence bodes well for the long term prospects of penile implant sales,
as Viagra will not work on all patients. However, we may continue to see
weakness in sales in the next few quarters. Plastic surgery products were
flat compared to a year ago, while Ophthalmic products increased 2%.
Increased sales of the MemoryLens, a foldable intraocular lens, helped
offset continued declines in fixed intraocular lenses.
Sales by Principal Product Line
For the Three Months Ended
June 30,
Percent
1998 1997 Change
Plastic surgery $30,404 $31,799 (4%)
General surgery 1,053 N/A
Urology 16,627 14,762 13%
Ophthalmology 8,934 8,730 2%
$57,018 $55,291 3%
Cost of Sales
Cost of sales was 33.6% for three months ended June 30, 1998 compared to
33.1% for the same period last year. Included in Cost of Sales this
period was approximately $2 million in proceeds from the Company's
insurance claim related to a fire at its Texas facility in 1997. These
funds were used to offset continuing extra expenses resulting from the
fire and for additional costs related to the ongoing re-validation
efforts at the Texas plant.
In 1996, the Food and Drug Administration ("FDA") issued the Texas
facility a warning letter, citing several inadequacies in the Company's
adherence to FDA Good Manufacturing Practices. The FDA was specifically
concerned with the method by which the Company had performed its initial
validation of the manufacturing processes in the Texas facility. The
Company agreed to re-validate the facility, as well as correct the other
items in the warning letter, and in July, 1996, submitted to the FDA a
schedule for completion of these items. In August 1997, the FDA returned
to the Texas facility to perform a comprehensive GMP compliance audit,
which included reviewing the Company's progress in completing the
remaining items contained in the 1996 warning letter. While the Company
had completed a substantial amount of items, the re-validation effort had
not been completed within the time frame outlined in the July 1996
schedule.
In May 1998, the Company entered into a voluntary consent decree with the
FDA in relation to the Texas facility. The agreement requires the
completion of the re-validations of certain of the Company's
manufacturing processes, strengthening of its continuous quality
improvement program, and for the independent audit on overall GMP
compliance under a schedule agreed to by the Company and the FDA. Mentor
has completed to date those activities called for in the agreement.
Specifically, the Company has selected a GMP expert consultant to conduct
the reviews and audits prescribed by the agreement, and has submitted to
the FDA the results of those reviews and audits, along with Company
responses where appropriate, that were to be conducted in the first 60-
day period.
Should the Company fail to complete the milestones in a timely manner,
the consent decree allows the FDA to order the Company to stop
manufacturing or distributing breast implants, order a recall or take
other corrective actions. The Company may also be subject to penalties
of $10,000 per day until the task is completed. While the Company
believes it can continue to meet the milestones set out in the agreement,
which extends through the end of the fiscal year, there can be no
guarantee that such timeframes can actually be met.
Selling, General and Administrative Expenses
Selling, General and Administrative expenses were 40.0% of sales in the
quarter compared to 36.7% in the previous year. The increase relates
primarily to the Company's efforts in launching several new products,
including the Contour Genesis surgical aspiration system, the MemoryLens,
brachytherapy seeds and the Suspend sling. The Company is increasing its
marketing and sales staff to accommodate these new products.
Research and Development
Research and development expenses were 6.5% of sales for the quarter,
compared to 9.2% for the prior year. In the prior year, the Company had
spent funds on the completion of the development of the Contour Genesis,
which was introduced in September 1997. The Company continues to spend
substantial funds on its premarket approval applications ("PMAAs") for
its saline breast implants, silicone gel filled breast implants, and
penile implants. The Company is committed to a variety of clinical and
laboratory studies in connection with these products. The Company
expects to complete the work on its saline filled breast implant PMAAs
and submit the data to the FDA by the end of fiscal 1999. Other major
studies underway include an alternate filler breast implant and extending
the use of the Contour Genesis to include liposuction.
Interest and Other Income and Expense
Net interest income increased from $313 thousand last year to $373
thousand this year, resulting from higher cash balances.
Income Taxes
The effective rate of corporate income taxes was 33.0% for the quarter,
compared to 34.1% in the same period a year ago. The decrease results
from higher expected income from our tax-advantaged facility in Puerto
Rico, which makes the MemoryLens.
Net Income
Diluted earnings per share remained the same at $.30 for the three months
ended June 30, 1998 and 1997, as slightly higher sales were offset by
increased expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company's working capital was $99.8 million
compared to $94.9 million at March 31, 1998. The Company's working
capital needs were provided from operations.
The Company generated $12.2 million of cash from operations during the
three months ended June 30, 1998, compared to $13.9 million the previous
year. Higher net income in the current period was offset by reduced
accrued liabilities when compared to the prior year.
The Company anticipates investing approximately $12 million in facilities
and capital equipment in fiscal 1999. The majority of the expenditures
will be for facility upgrades at the Company's manufacturing facilities
in Texas and Minneapolis, as well as for enhancing the Company's
information technology capabilities.
At the end of fiscal 1998, the Company filed an insurance claim related
to the fire it experienced at its Texas facility. The claim requested
reimbursement for property damage repair, loss of inventory destroyed by
the fire and business interruption. In the first quarter of fiscal 1999,
the Company settled its claim with the insurance carrier for a total of
$6 million, of which $1 million had been prepaid to the Company in fiscal
1998. The Company received the remaining $5 million in the first
quarter.
For the last several years, the Company has paid a quarterly cash
dividend of $.025 per share. At the indicated rate of $.10 per year, the
aggregate annual dividend would equal approximately $2.5 million.
The Company's Board of Directors has authorized an ongoing stock
repurchase program. The objectives of the program, among other items,
are to offset the issuance of stock options, provide liquidity to the
market and to reduce the overall number of shares outstanding.
Repurchases are subject to market conditions and cash availability. In
July 1998, the Board increased the repurchase authorization by 1 million
shares, to a total of 1.8 million, and instructed the Company to increase
its share repurchases. As a result, during the second quarter of fiscal
1999 the Company has repurchased approximately 450 thousand shares for
consideration of $9.1 million.
The Company's principal source of liquidity at June 30, 1998 consisted of
$34.7 million in cash and marketable securities plus $15 million
available under its line of credit.
PART II
Item 1. Legal Proceedings
In regards to the litigation reported in Item 3 of the annual report
on Form 10-K for the fiscal year ended March 31, 1998, there have been no
material changes.
Item 2. Changes in Securities
No changes have been made in any registered securities.
Item 3. Defaults Upon Senior Securities
No event constituting a material default has occurred respecting any
senior security of the Registrant.
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
10(a) Consent Decree of Permanent Injunction, between United
States of America and Mentor Corporation, dated May 6,
1998
10(b) Distribution Agreement, dated June 13, 1997, between
Mentor Corporation and Intracel Corporation
10(c) Stock Purchase Agreement, dated June 16, 1997, between
Mentor Corporation and Intracel Corporation
10(d) Research , Collaboration and Distribution Agreement, dated
December 22, 1997, between Mentor Corporation and Intracel
Corporation
10(e) Stock Purchase Agreement, dated December 22, 1997, between
Mentor Corporation and Intracel Corporation
11 Statement regarding computation of Per Share Earnings
Pursuant to the requirement 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.
MENTOR CORPORATION
(Registrant)
DATE: August 14, 1998 BY: /s/ANTHONY R. GETTE
Anthony R. Gette
President and
Chief Operating Officer
DATE: August 14, 1998 BY: /s/GARY E. MISTLIN
Gary E. Mistlin
Chief Financial Officer
EXHIBIT 11
MENTOR CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
June 30,
1998 1997
Numerator:
Net income $ 7,839 $ 7,803
Numerator for basic
earnings per share -
income available to ________ ________
common stockholders 7,839 7,803
Numerator for diluted
earnings per share -
income available to
common stockholder
after assumed ________ ________
conversions $ 7,839 $ 7,803
Denominator:
Denominator for basic
earnings per share -
weighted-average
shares 25,036 24,782
Effect of dilutive
securities:
Employee stock options 1,252 1,529
Denominator for diluted
earnings per share -
adjusted weighted-
average shares and ________ ________
assumed conversions 26,288 26,311
Basic earnings per share $ .31 $ .31
Diluted earnings per share $ .30 $ .30
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
)
UNITED STATES OF AMERICA, )
)
Plaintiff, )
) Civil No. 3-98CV1105-G
v. )
)
MENTOR CORPORATION, et al., ) CONSENT DECREE OF
) PERMANENT INJUNCTION
Defendants. )
______________________________)
Plaintiff, United States of America, having filed its
Complaint for Injunction alleging violations of the Federal Food,
Drug, and Cosmetic Act ("FDC Act"), 21 U.S.C. 301 et seq.,
against Mentor Corporation ("MC") and Mentor Texas, Inc. ("MTI"),
corporations, and Christopher J. Conway and Anthony R. Gette,
individuals (collectively, "defendants");
Defendants having appeared and having consented to entry of
this Decree, without admitting any of the allegations in the
Complaint, without contest and before any testimony has been
taken; and,
The United States of America having consented to this
Decree;
THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that:
I. This Court has jurisdiction over the subject matter and
over all parties to this action pursuant to 21 U.S.C. 332(a)
and 28 U.S.C. 1331, 1337(a), and 1345.
II. Venue is proper in this District under 28 U.S.C.
55 1391(b) and 1391(c).
III. The Complaint for Injunction states a cause of action
against defendants under the FDC Act.
IV. Following entry of this Decree, defendants shall,
within the time frames set forth below, take the steps necessary
to establish, implement, and continuously maintain adequate
methods, facilities, and controls to ensure that each and every
silicone saline-fill (inflatable) breast prosthesis or silicone
gel-filled breast prosthesis, including any component, part or
accessory of such breast prosthesis, but not including skin or
tissue expanders, or sizers, (hereafter "breast prosthesis") they
manufacture, process, pack, hold, or distribute is in compliance
with 21 U.S.C. 351(h).
Such steps shall include the following:
A. Within 20 calendar days after entry of this Decree,
defendants shall select and retain, at corporate defendants'
expense, one or more person(s) who by reason of education,
training, and experience is (are) qualified to inspect a device
manufacturing facility, conduct investigations, design
appropriate procedures, controls, and standard operating
procedures ("SOPs"), and prepare reports (hereafter, "expert
consultant") as set forth in this Decree, as are necessary to
ensure that the methods used in, and the facilities and controls
used for, defendants' manufacturing, processing, packing,
holding, and distributing of breast prostheses (hereafter,
"methods, facilities, and controls") are in conformity with the
applicable current good manufacturing practice ("CGMP")
requirements under 21 U.S.C. 360j(f)(1) and 21 C.F.R. Part 820
(1997).
B. Within 60 calendar days after entry of this Decree, the
expert consultant shall: (a) review all FDA inspectional
observations issued in connection with inspections of MTI since
July 1, 1995 ("MTI Forms FDA-483"), and defendants' responses
thereto; (b) conduct a comprehensive CGMP inspection and audit of
the methods, facilities, and controls; and (c) submit a detailed,
written report to defendants and to FDA, as to whether, in his or
her opinion, there are any deviations from CGMP, and if so, which
deviations in his or her opinion are significant, and whether
each of the observations listed in each MTI Form FDA-483 has been
fully corrected. Defendants shall establish and meet specific
time frames for correcting each outstanding deficiency noted by
the expert consultant. These time frames shall be submitted in
writing to FDA within 15 calendar days of receipt by defendants
of the expert consultant report and shall be subject to FDA
approval. FDA shall approve, reject, or modify the time frames,
and explain the basis for its decision, in writing within 10
calendar days after receipt by FDA of the time frames from
defendants.
C. Within 60 calendar days after entry of this Decree,
defendants, working with the expert consultant, shall establish
and continuously maintain procedures for corrective and
preventive actions needed to correct and prevent quality problems
("action procedures") identified regarding the methods,
facilities, and controls, and shall establish and continuously
maintain procedures to adequately document any corrective and
preventive actions taken ("action documentation procedures"), as
required by 21 C.F.R. 820.100 (1997). Within 15 calendar days
of completion of defendants' implementation of the action
procedures and action documentation procedures, the expert
consultant shall submit a detailed, written report to defendants
and to FDA, as to whether, in his or her opinion, the action
procedures implemented by defendants will adequately correct and
prevent identified quality problems and whether, in his or her
opinion, the action documentation procedures implemented by
defendants will adequately document any corrective and preventive
actions taken.
D. Within 90 calendar days after entry of this Decree,
defendants, working with the expert consultant, shall establish
and continuously maintain procedures to document the review,
evaluation, and, where appropriate, revalidation of processes
when changes or deviations in such processes occur ("process
documentation procedures") in the methods, facilities, and
controls, as required by 21 C.F.R. 820.75(c) (1997). Within 15
calendar days of completion of defendants' implementation of the
process documentation procedures, the expert consultant shall
submit a detailed, written report to defendants and to FDA, as to
whether, in his or her opinion, the process documentation
procedures implemented by defendants will adequately document the
review, evaluation, and, where appropriate, revalidation of
processes when changes or deviations in such processes occur.
E. Within 90 calendar days after entry of this Decree,
defendants, working with the expert consultant, shall establish
and continuously maintain procedures to ensure that defendants'
device master records ("DMRs") for breast prostheses include, or
refer to the location of, production process specifications
including the appropriate equipment specifications, production
methods, production procedures, and production environmental
specifications ("DMRs procedures"), as required by 21 C.F.R.
820.181(b) (1997). Within 15 calendar days of completion of
the DMRs procedures, the expert consultant shall submit a
detailed, written report to defendants and to FDA, as to whether,
in his or her opinion, the DMRs procedures implemented by
defendants adequately ensure that defendants' DMRs include, or
refer to the location of, production process specifications
described in this paragraph.
F. Within 180 calendar days after entry of this Decree,
defendants, working with the expert consultant, shall complete
validation of all silicone saline-fill (inflatable) breast
prosthesis manufacturing processes, where the results of such
processes cannot be fully verified by subsequent inspection and
testing, as required by 21 C.F.R. 820.75(a) (1997). Beginning
20 calendar days after the date of entry of this Decree, the
expert consultant shall submit written status reports to FDA
every 60 calendar days describing the progress of defendants'
validation efforts pursuant to this paragraph. Within 15
calendar days of completion of defendants' validation efforts
pursuant to this paragraph, the expert consultant shall submit a
detailed, written report to defendants and to FDA, as to whether,
in his or her opinion, defendants have fully and successfully
completed all necessary validation.
G. Within 240 calendar days after entry of this Decree,
defendants, working with the expert consultant, shall complete
validation of all silicone gel-filled breast prosthesis
manufacturing processes, where the results of such processes
cannot be fully verified by subsequent inspection and testing, as
required by 21 C.F.R. 820.75(a) (1997). Beginning 20 calendar
days after the date of entry of this Decree, the expert
consultant shall submit written status reports to FDA every 60
calendar days describing the progress of defendants' validation
efforts pursuant to this paragraph. Within 15 calendar days of
completion of defendants' validation efforts pursuant to this
paragraph, the expert consultant shall submit a detailed, written
report to defendants and to FDA, as to whether, in his or her
opinion, defendants have fully and successfully completed all
necessary validation.
H. Within one year after entry of this Decree, and,
subsequently, no less frequently than once a year for a period of
four years following entry of this Decree, the expert consultant
shall conduct a comprehensive inspection of the methods,
facilities, and controls to ensure that defendants are in
compliance with CGMP. The expert consultant shall prepare a
detailed, written report ("post compliance inspection report") of
each inspection conducted pursuant to this paragraph. In each
post compliance inspection report, the expert consultant shall
express his or her opinion as to whether defendants are in full
compliance with CGMP requirements; the expert consultant shall
submit the post compliance inspection reports simultaneously to
FDA and defendants no later than 20 calendar days after
completion of the inspections referred to in this paragraph.
V. After compliance with the deadlines in paragraph IV,
defendants and each and all of their officers, directors, agents,
employees, representatives, attorneys, successors, assigns, and
any and all persons in active concert or participation with any
of them who receive notice of this Decree are permanently
enjoined pursuant to 21 U.S.C. 332(a) and the inherent equity
powers of this Court from directly or indirectly doing or causing
to be done any of the following acts:
A. Violating 21 U.S.C. 331(a), by introducing or
delivering, or causing to be introduced or delivered into
interstate commerce, any breast prosthesis, including any
component, part or accessory of such breast prosthesis, which is
a device, as defined in 21 U.S.C. 321(h), that is adulterated
within the meaning of 21 U.S.C. 351(h); and
B. Violating 21 U.S.C. 331(k), by causing the
adulteration of any such device, as defined in 21 U.S.C.
321(h), within the meaning of 21 U.S.C. 351(h), while such
device is held for sale after shipment of one or more of its
components in interstate commerce.
VI. Defendants shall, as FDA deems necessary to ensure
continuing compliance with the terms of this Decree, permit duly
authorized FDA representatives to make inspections of all MTI
facilities, including all articles of device therein, pertinent
equipment, finished and unfinished materials, containers,
labeling, and all records (including, but not limited to,
electronic, magnetic, and optical media; all computer hardware
and software; computer printouts; raw data and laboratory data
generated in connection with any expert consultant reports
required by this Decree; and all expert consultant reports
required by this Decree), files, papers, SOPs, and processes and
controls; to take photographs; to collect samples of any of
defendants' products and labeling; to conduct analyses on any
samples of defendants' products that are collected; and to copy
any of the foregoing records. The costs of all such inspections,
record reviews, and sample analyses shall be borne by corporate
defendants at the rates specified in paragraph VII of this
Decree. The inspections described in this Decree shall be
permitted upon presentation of a copy of this Decree and
appropriate credentials. Such inspection authority shall be
apart from, and in addition to, the authority to make inspections
under the FDC Act.
VII. Corporate defendants shall reimburse FDA for the costs
of all FDA inspections, examinations, analytical work, and review
work that FDA deems necessary to evaluate defendants' compliance
with any part of this Decree at the standard rates prevailing at
the time the activities are accomplished. As of the date that
this Decree is signed by the parties, these rates are: $55.06
per hour and any fraction thereof per representative for
inspection work; $65.99 per hour and any fraction thereof per
representative for analytical work and review work; $0.31 per
mile for travel expenses by automobile; government rate or the
equivalent for travel by air; and the published government per
diem rate or the equivalent for the areas in which the
inspections are performed per day per representative for
subsistence expenses, where necessary. In the event that the
standard rates applicable to FDA supervision of court-ordered
compliance are modified, these rates shall be increased or
decreased without further order of the Court.
VIII. Within 10 calendar days of the date of entry of
this Decree, defendants shall provide a copy of this Decree to
all supervisory and managerial employees, agents, and
representatives of MC and MTI who are involved in the
manufacturing, processing, packing, holding, or distributing of
breast prostheses, including, but not limited to, all officers,
directors, and attorneys. Within 30 calendar days after entry of
this Decree, defendants shall ensure that all other employees of
MC and MTI involved in the manufacturing, processing, packaging,
holding, or distributing of breast prostheses are aware of the
terms of this Decree by: (1) either providing them with copies or
posting copies in conspicuous places frequented by and readily
accessible to employees, and (2) explaining the purpose and
content of the Decree and telling them where a copy of the Decree
may be seen or obtained. Within 45 calendar days of the date of
entry of this Decree, defendants shall provide FDA with an
affidavit, sworn to by the Chief Executive Officer and a person
with personal knowledge of the facts, stating the fact and manner
of their compliance with this paragraph and identifying the names
and positions of all persons provided with a copy of the Decree
pursuant to this paragraph. A new affidavit meeting the
requirements of this paragraph shall be provided to FDA every six
months after entry of this Decree to reflect notification of new
officers, directors, or employees who subsequently become
involved in the manufacturing, processing, packing, holding, or
distributing of breast prostheses and who have not previously
been notified pursuant to this paragraph.
IX. Defendants shall notify FDA in writing at least 30
calendar days before any change in ownership, character, or name
of their business, that occurs after entry of this Decree; such
change shall include, but not be limited to, reorganization,
relocation, dissolution, assignment, sale of assets or business,
or any other change that may affect compliance obligations
arising out of this Decree. Defendants shall serve a copy of
this Decree on any prospective successor or assign at least 30
calendar days prior to such sale or assignment, and shall furnish
FDA with an affidavit of compliance with this paragraph within 15
calendar days of such sale or change in business.
X. If, at any time after entry of this Decree, FDA
determines that defendants are not in compliance with the FDC Act
or applicable regulations with respect to the manufacturing,
processing, packing, holding, or distributing of breast
prostheses, or any provision of this Decree, or that any report
or plan prepared or submitted by, or on behalf of, defendants
pursuant to this Decree, or any measure implemented by defendants
to comply with this Decree, is inadequate to bring defendants
into compliance with the FDC Act, applicable regulations,
defendants' SOPs, or the provisions of this Decree, FDA may, as
and when it deems necessary, order in writing that defendants
take appropriate corrective action within specified time frames,
including, one or more of the following actions:
A. revise, modify, or expand any report(s) or plan(s)
prepared pursuant to this Decree;
B. submit additional reports or information to FDA;
C. cease manufacturing, processing, packing, holding,
and/or distributing devices;
D. recall specified devices in accordance with procedures
identified by FDA; or
E. take any other corrective action(s) as FDA, in its
discretion, deems necessary to bring defendants and their devices
into compliance with the FDC Act, applicable regulations, and
this Decree.
XI. Any order issued pursuant to paragraph X shall be
issued by the appropriate District Director, and shall specify
the violations giving rise to the order. Unless a different time
frame is specified by FDA, within 5 business days after receiving
an order pursuant to paragraph X, defendants shall advise FDA in
writing either that: (1) defendants are undertaking or have
undertaken all corrective action(s) requested by FDA, in which
event defendants shall also describe the specific action(s) taken
or to be taken and the time frame(s) in which the action(s) will
be completed; or (2) defendants do not agree with FDA's order.
If defendants notify FDA that they do not agree with FDA's order,
defendants shall explain in writing the complete basis for their
disagreement. FDA will review defendants' response and, in
writing, affirm, modify, or withdraw its order as FDA deems
appropriate. If FDA affirms or withdraws the order, FDA's order
shall take effect as the final order. In the event that FDA
significantly modifies its earlier decision, defendants shall
have 2 business days to submit, in writing, facts and reasons why
they disagree with the modification. FDA will review defendants'
response and shall then issue a final order. Immediately upon
receipt of the final order, defendants shall proceed with
implementation of all corrective action deemed necessary by FDA
as set forth in the final order. Defendants shall continue to
implement FDA's final order, unless and until FDA or the Court
issues an order to the contrary.
During any period after a final order becomes effective,
defendants may request that FDA inspect their facility to
determine whether the deficiencies described in FDA's final order
have been corrected. FDA will not conduct any such inspection
unless and until defendants have obtained and supplied to FDA the
written statement of a person who, by reason of training and
experience, is qualified to make inspections of defendants'
facility and determine whether appropriate corrective action(s)
has been taken, certifying that he or she has inspected
defendants' facility and has concluded that defendants have
corrected each of the deficiencies described in the final order.
Unless public health concerns intervene, FDA shall begin
defendants' requested inspection within 7 working days of receipt
of the expert certification meeting the requirements described in
this paragraph. Within a reasonable time after completing its
inspection, FDA shall notify defendants of its finding whether
defendants have corrected the deficiencies and of its decision to
affirm, modify, or withdraw the order with reasons given in
support thereof. Any inspection conducted pursuant to this
paragraph shall be governed by paragraphs VI and VII of this
Decree.
XII. Until defendants satisfy all of the requirements of
paragraph IV of this Decree, if any defendant materially violates
any provision of this Decree, the corporate defendants shall pay
to the United States an administrative civil penalty in the
amount of $10,000 for each day such violation continues. At any
time after entry of this Decree, and at all times while this
Decree is in effect, if any defendant violates paragraph V of
this Decree, the corporate defendants shall pay to the United
States an administrative civil penalty in the amount of $10,000
for each day that the violation continues. Any order assessing
an administrative civil penalty under this paragraph shall be
issued in accordance with the procedures set forth in paragraph
XI of this Decree. The administrative civil penalties described
in this paragraph are separate from, and payable in addition to,
any fines assessed by the Court in civil or criminal contempt
proceedings. The administrative civil penalties described in
this paragraph shall be due and payable immediately upon issuance
of a final order by FDA pursuant to paragraph XI or, if appealed,
by the Court, of a violation, as described above in this
paragraph. The administrative civil penalties specified in this
paragraph are not punitive in nature and their imposition does
not in any way limit the ability of the United States to seek,
and the Court to impose, criminal or civil penalties based on
conduct that may also be the basis for the payment of the
administrative civil penalties.
XIII. If any defendant violates this Decree and is found
in civil or criminal contempt thereof, defendants shall, in
addition to other remedies, reimburse the United States for
attorney fees, investigational expenses, administrative and court
costs, and any other costs or fees related to such enforcement
proceedings.
XIV. All decisions conferred upon FDA in this Decree shall
be vested in the discretion of FDA. Defendants shall abide by
the decisions of FDA, and FDA's decisions shall be final. If
necessary, FDA's decisions shall be reviewed by this Court under
the arbitrary and capricious standard set forth in 5 U.S.C.
706(2)(A). Any such review of an FDA decision brought before
this Court shall be based exclusively on the record before FDA at
the time FDA made the decision at issue, and no discovery may be
taken by either party.
XV. All notifications, correspondence, communications, and
reports to FDA required by the terms of this Decree shall be
prominently marked "Decree Correspondence" and shall be sent
simultaneously to: (1) FDA District Director, Dallas District
Office, U.S. Food and Drug Administration, 3310 Live Oak Street,
3rd Floor, Dallas, Texas 75204; and (2) U.S. Food and Drug
Administration, General Surgery Devices Branch, HFZ-323, Division
of Enforcement I, Office of Compliance, Center for Devices and
Radiological Health, 2098 Gaither Road, Rockville, Maryland
20850.
XVI. Defendants shall bear their own costs, including
attorney fees, for compliance with this Decree, in addition to
any costs expressly provided herein.
XVII. Defendants' obligations under this Decree do not
modify or absolve defendants from any obligation to comply with
the FDC Act or any other federal statute or regulation.
XVIII. If defendants maintain a state of continuous
compliance with the terms of this Decree for a period of sixty
months from the date defendants satisfy all the requirements of
paragraph IV of this Decree, should defendants petition the Court
to dissolve this Decree, the government will not oppose.
XIX. This Court retains jurisdiction of this action for the
purpose of modifying this Decree and for the purpose of granting
such additional relief as may be necessary or appropriate.
SO ORDERED:
Dated this 6th day of May, 1998.
/S/(Judge Fish)
U.S. DISTRICT JUDGE
We hereby consent to the entry of this Decree and to its
form and contents.
/S/ARTHUR N. LEVINE FRANK W. HUNGER
ARTHUR N. LEVINE Assistant Attorney General
Arnold & Porter Civil Division
Attorney for MENTOR CORPORATION Department of Justice
and MENTOR TEXAS, INC.
/S/DOUGLAS H. ALTSCHULER PAUL E. COGGINS
DOUGLAS H. ALTSCHULER United States Attorney
Chief Counsel
Attorney for MENTOR CORPORATION
and MENTOR TEXAS, INC. KAREN M. VALENTINE
Attorney
/S/CHRISTOPHER J. CONWAY Maryland Bar No.: 01920
CHRISTOPHER J. CONWAY, Office of Consumer Litigation
individually and as Chief Civil Division
Executive Officer and U.S. Department of Justice
Chairman of the Board, P.O. Box 386
MENTOR CORPORATION Washington, D.C. 20044
(202) 514-0514
/S/ANTHONY R. GETTE (202) 514-8742 (fax)
ANTHONY R. GETTE,
individually and as President OF COUNSEL:
and Chief Operating Officer
of MENTOR CORPORATION MARGARET JANE PORTER
Chief Counsel
CHRISTOPHER B. MCHENRY
Associate Chief Counsel
for Enforcement
U.S. Food and Drug
Administration
6
|DC_DOCS\96018.1||
PERIMMUNE HOLDINGS, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
Dated as of December 22, 1997
PERIMMUNE HOLDINGS, INC.
1330 Piccard Drive, Rockville, Maryland 20850
This Amended and Restated Registration Rights Agreement
("Agreement") is made and entered into as of December 22, 1997,
by and among PerImmune Holdings, Inc., a Delaware corporation
(the "Company"), and the stockholder of the Company who is a
signatory hereto (the "Investor").
WHEREAS, the Company and the Investor entered into that
certain Registration Rights Agreement dated as of June 16, 1997
in connection with that certain Stock Purchase Agreement dated as
of June 16, 1997 (the "June Stock Purchase Agreement"), pursuant
to which the Investor purchased 20 shares of Series B Convertible
Preferred Stock, par value $0.01.
WHEREAS, the Company and the Investor have entered into
that certain Stock Purchase Agreement dated as of the date hereof
(the "December Stock Purchase Agreement"), pursuant to which the
Investor purchased 100 shares of Series B Convertible Preferred
Stock, par value $0.01.
WHEREAS, the Company desires to grant the same
registration rights it granted to the Investor in respect of the
shares purchased pursuant to the June Stock Purchase Agreement,
to such Investor in respect of the shares purchased pursuant to
the December Stock Purchase Agreement.
Accordingly, in consideration of the foregoing and of
the mutual promises, covenants and conditions set forth below,
the parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following capitalized
terms shall have the following meanings:
Board of Directors: The Board of Directors of the
Company.
Claim: Any loss, claim, damages, liability or
expense (including the reasonable costs of
investigation and legal fees and expenses).
Common Stock: The common stock, par value $0.01 per
share, of the Company.
Equity Security: Any capital stock of the Company or
any security convertible, with or without consideration,
into any such stock, or any security carrying any warrant or
right to subscribe to or purchase any such stock, or any
such warrant or right.
Exchange Act: The Securities Exchange Act of 1934, as
from time to time amended.
Firm Commitment Underwritten Offering: An offering in
which the underwriters agree to purchase securities for
distribution pursuant to a registration statement under the
Securities Act and in which the obligation of the
underwriters is to purchase all the securities being offered
if any are purchased.
Holder: The beneficial owner of a security. For all
purposes of this Agreement, the Company shall be entitled to
treat the record owner of a security as the beneficial owner
of such security unless the Company has been given written
notice of the existence and identity of a different
beneficial owner.
Indemnified Holder: Any Holder of Registrable
Securities, any officer, director, employee or agent of any
such Holder and any Person who controls any such Holder
within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act.
Misstatement: An untrue statement of a material fact or
an omission to state a material fact required to be stated
in a Registration Statement or Prospectus or necessary to
make the statements in a Registration Statement, Prospectus
or preliminary prospectus not misleading.
Person: A natural person, partnership, corporation,
business trust, association, joint venture or other entity
or a government or agency or political subdivision thereof.
Piggyback Registration: A registration pursuant to
Section 2 hereof.
Preferred Stock: The Series B Convertible Preferred
Stock, par value $0.01 per share, issued and sold pursuant
to the Stock Purchase Agreements (as defined herein).
Prospectus: The prospectus included in any Registration
Statement, as supplemented by any and all prospectus
supplements and as amended by any and all post-effective
amendments and including all material incorporated by
reference in such prospectus.
Qualifying IPO: The first registered, underwritten
public offering of shares of Common Stock by the Company.
Registrable Securities: (a) The shares of Common Stock
held by the Investor, and (b) any securities issued or
issuable with respect to such Common Stock by way of a stock
dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or
reorganization; provided that any such share or other
security shall be deemed to be Registrable Securities only
if and so long as it is a Transfer Restricted Security.
Registration: A Piggyback Registration.
Registration Expenses: The out-of-pocket expenses of a
Registration, including:
(1) all registration and filing fees (including fees with
respect to filings required to be made with the National
Association of Securities Dealers);
(2) fees and expenses of compliance with securities or blue sky
laws (including fees and disbursements of counsel for the
underwriters or selling holders in connection with blue sky
qualifications of the Registrable Securities and determinations
of their eligibility for investment under the laws of such
jurisdictions as the managing underwriters or holders of a
majority of the Registrable Securities being sold may designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company, counsel
for the underwriters and of not more than one firm of attorneys
for the sellers of the Registrable Securities (the attorneys for
such sellers to be determined by a vote of the majority of the
aggregate shares of Registrable Securities requested to be
included in the Registration Statement for such Registration);
(5) fees and disbursements of all independent certified public
accountants of the Company incurred in connection with such
Registration (including the expenses of any special audit and
"cold comfort" letters incident to such registration);
(6) fees and disbursements of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to
the distribution of the Registrable Securities);
(7) premiums and other costs of securities acts liability
insurance if the Company so desires or if the underwriters or
selling holders of Registrable Securities so require; and
(8) fees and expenses of any other Persons retained by the
Company.
Registration Statement: Any registration statement
under the Securities Act on an appropriate form (which form
shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods
of distribution thereof and shall include all financial
statements required by the SEC to be filed therewith) which
covers Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus included in such
registration statement, amendments (including post-effective
amendments) and supplements to such registration statement,
and all exhibits to and all material incorporated by
reference in such registration statement.
Securities Act: The Securities Act of 1933, as from
time to time amended.
SEC: The Securities and Exchange Commission.
Stock Purchase Agreements: The June Stock Purchase
Agreement and the December Stock Purchase Agreement.
Transfer Restricted Security: A security that has not
been sold to or through a broker, dealer or underwriter in a
public distribution or other public securities transaction
or sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under
Rule 144 promulgated thereunder (or any successor rule).
The foregoing notwithstanding, a security shall remain a
Transfer Restricted Security until (i) all stop transfer
instructions or notations and restrictive legends with
respect to such security have been lifted or removed and
(ii) the Holder of such security has received at Company
expense an opinion of counsel to the Company (which counsel
and opinion are reasonably satisfactory to such Holder), to
the effect that such shares in such Holder's hands are
freely transferable in any public or private transaction
without registration under the Securities Act (or such
Holder has waived receipt of such opinion).
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to
an underwriter for distribution to the public.
2. Piggyback Registrations
(a) Participation
Each time the Company decides to file a Registration
Statement under the Securities Act (other than on Forms S-4 or S-
8 or any successor form thereto and other than in connection with
a Qualifying IPO) covering the offer and sale by it or any of its
security holders of any of its securities for money, the Company
shall give written notice thereof to all Holders of outstanding
Registrable Securities, which written notice shall state that the
Company has decided to so file a registration statement and shall
include the approximate date that such registration statement is
expected to be filed with the SEC and the name of any underwriter
(if any) with respect to such offering. The Company shall
include in such registration statement such shares of Registrable
Securities for which it has received written requests to register
such shares within 30 days after such written notice has been
given. If the registration statement is to cover an Underwritten
Offering, such Registrable Securities shall be included in the
underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters.
(b) Underwriter's Cutback
Subject to the requirements of Section 10 hereof, if in
the good faith judgment of the managing underwriter of such
offering the inclusion of all of the shares of Registrable
Securities and any other Common Stock requested to be registered
would interfere with the successful marketing of a smaller number
of such shares, then the number of shares of Registrable
Securities and other Common Stock to be included in the offering
shall be reduced to such smaller number with the participation in
such offering to be in the following order of priority: (1)
first, the shares of Common Stock which the Company proposes to
sell for its own account, (2) second, the shares of Registrable
Securities and any other shares of Common Stock requested to be
included. Any necessary allocation among the Holders of shares
within each of the foregoing groups shall be pro rata among such
Holders requesting such registration based upon the number of
shares of Common Stock and Registrable Securities owned by such
Holders.
(c) Company Control
The Company may decline to file a Registration
Statement after giving notice to any Holder pursuant to Section
3(a) above, or withdraw a Registration Statement after filing and
after such notice, but prior to the effectiveness thereof,
provided that the Company shall promptly notify each Holder in
writing of any such action and provided further that the Company
shall bear all expenses incurred by such Holder or otherwise in
connection with such withdrawn Registration Statement.
3. Hold-Back Agreements
Upon the written request of the managing underwriter of
any Underwritten Offering of the Company's securities, a Holder
of Registrable Securities shall not sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in such
registration) without the prior written consent of such managing
underwriter for a period (not to exceed 30 days before the
effective date and 180 days thereafter) that such managing
underwriter reasonably determines is necessary in order to effect
the underwritten public offering; provided that each of the
officers and directors of the Company shall have entered into
substantially similar holdback agreements with such managing
underwriter covering at least the same period.
4. Registration Procedures
If and whenever the Company is required to register
Registrable Securities in a Piggyback Registration, the Company
will use its best efforts to effect such registration to permit
the sale of such Registrable Securities in accordance with the
intended plan of distribution thereof, and pursuant thereto the
Company will as expeditiously as possible:
a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable
Securities and use its best efforts to cause such Registration
Statement to become effective and remain continuously effective
until the date earlier to occur of (i) the date six months from
the date such Registration Statement was declared effective, and
(ii) the date the last of the Registrable Securities covered by
such Registration Statement have been sold provided that before
filing a Registration Statement or Prospectus or any amendments
or supplements thereto, the Company shall furnish to the Holders
of the Registrable Securities covered by such Registration
Statement and the underwriters, if any, draft copies of all such
documents proposed to be filed, which documents will be subject
to the review of such Holders and underwriters, and the Company
shall not file any Registration Statement or amendment thereto or
any Prospectus or any supplement thereto to which the Holders of
a majority of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall
reasonably object;
b) prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement, and such
supplements to the Prospectus, as may be requested by any Holder
of Registrable Securities or any underwriter of Registrable
Securities or as may be required by the rules, regulations or
instructions applicable to the registration form used by the
Company or by the Securities Act or rules and regulations
thereunder to keep the Registration Statement effective until all
Registrable Securities covered by such Registration Statement are
sold in accordance with the intended plan of distribution set
forth in such Registration Statement or supplement to the
Prospectus;
c) promptly notify the selling Holders of Registrable
Securities and the managing underwriter, if any, and (if
requested by any such Person) confirm such advice in writing,
(1) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has
become effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose,
(4) if at any time the representations and warranties of the
Company contemplated by clause (1) of paragraph (o) below cease
to be accurate in all material respects,
(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
(6) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document
incorporated therein by reference containing a Misstatement;
d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement
at the earliest possible time;
e) if requested by the managing underwriter or a Holder of
Registrable Securities being sold in connection with an
Underwritten Offering, immediately incorporate in a supplement or
post-effective amendment such information as the managing
underwriter and the Holders of a majority of the Registrable
Securities being sold agree should be included therein relating
to the sale of the Registrable Securities, including, without
limitation, information with respect to the number of shares of
Registrable Securities being sold to underwriters, the purchase
price being paid therefor by such underwriters and with respect
to any other terms of the Underwritten Offering of the
Registrable Securities to be sold in such offering; and make all
required filings of such supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such
supplement or post-effective amendment;
f) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the
Prospectus (after initial filing of the Registration Statement)
provide copies of such document to counsel to the selling Holders
of Registrable Securities and to the managing underwriter, if
any, and make the Company's representatives available for
discussion of such document and make such changes in such
document prior to the filing thereof as counsel for such selling
Holders or underwriters may reasonably request;
g) furnish to each selling Holder of Registrable Securities and
the managing underwriter, without charge, at least one signed
copy of the Registration Statement and any post-effective
amendments thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
h) deliver to each selling Holder of Registrable Securities and
the underwriters, if any, without charge, as many copies of each
Prospectus (and each preliminary prospectus) as such Persons may
reasonably request (the Company hereby consenting to the use of
each such Prospectus (or preliminary prospectus) by each of the
selling Holders of Registrable Securities and the underwriters,
if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus (or preliminary
prospectus);
i) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the selling Holders of
Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as
such selling Holders or underwriters may designate in writing and
do anything else necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by
the Registration Statement; provided that the Company shall not
be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process in
any such jurisdiction where it is not then so subject;
j) cooperate with the selling Holders of Registrable Securities
and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any
restrictive legends representing the Registrable Securities to be
sold and cause such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriter may request at least three business days prior to any
sale of Registrable Securities to the underwriters;
k) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such
Registrable Securities;
l) if the Registration Statement or the Prospectus contains a
Misstatement, prepare a supplement or post-effective amendment to
the Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not
contain a Misstatement;
m) cause all Registrable Securities covered by the Registration
Statement to be listed on any national securities exchange or
authorized for quotation on NASDAQ or in the National Market
System on which Common Stock is then listed or is authorized for
quotation, if requested by the Holders of a majority of such
Registrable Securities or the managing underwriter, if any;
n) provide a CUSIP number for all Registrable Securities not
later than the effective date of the Registration Statement;
o) enter into such agreements (including an underwriting
agreement) and do anything else necessary or advisable in order
to expedite or facilitate the disposition of such Registrable
Securities, and in such connection, whether or not the
registration is an Underwritten Registration:
(1) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in
form, substance and scope as are customarily made by issuers to
underwriters in primary Underwritten Offerings;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing
underwriter, if any, and the Holders of a majority of the
Registrable Securities being sold) addressed to each selling
Holder and the underwriter, if any, covering the matters
customarily covered in opinions delivered to underwriters in
primary Underwritten Offerings and such other matters as may be
reasonably requested by such Holders or underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to
the selling Holders of Registrable Securities and the
underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with primary
Underwritten Offerings;
(4) if an underwriting agreement is entered into, cause the same
to include the indemnification and contribution provisions and
procedures of Section 6 hereof with respect to all parties to be
indemnified pursuant to said Section (or, with respect to the
indemnification of such underwriters, such similar
indemnification and contribution provisions as such underwriters
shall customarily require); and
(5) deliver such documents and certificates as may be requested
by the Holders of a majority of the Registrable Securities being
sold and the managing underwriter, if any, to evidence compliance
with clause (1) above and with any customary conditions contained
in the underwriting agreement or other agreement entered into by
the Company.
The above shall be done at each closing under such underwriting
or similar agreement or as and to the extent otherwise reasonably
requested by the Holders of a majority of the Registrable
Securities being sold;
p) make available for inspection by representatives of the
Holders of a majority of the Registrable Securities being sold,
any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained
by the sellers or any such underwriter, all financial and other
records and pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in
connection with the Registration; provided that any records,
information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such
Persons unless disclosure of such records, information or
documents is required by court or administrative order; and
q) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to
its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
45 days after the end of any 12-month period (or 90 days, if such
period is a fiscal year) (x) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters
in an Underwritten Offering, or, if not sold to underwriters in
such an offering, (y) beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statements shall cover
said 12-month periods.
Notwithstanding the foregoing, the Company shall, upon
written notice delivered to the Holders of Registrable
Securities, be entitled to postpone the filing or declaration of
effectiveness of a Registration Statement required or proposed to
be filed hereunder (i) upon the happening of any event of the
kind described in Section 4(c)(6), or (ii) if, in the reasonable
determination of the Company, there exists circumstances not yet
disclosed to the public, which would be required to be disclosed
in such Registration Statement and the disclosure of which would
be materially harmful to the Company. The Company shall use its
best efforts to minimize the length of any postponement or
discontinuance provided that the Company may postpone for a
period of sixty (60) days the disclosure of any circumstances if,
in the reasonable determination of the Company, such disclosure
would be materially harmful to the Company.
5. Registration Expenses
(a) Piggyback Registrations
The Company shall bear all Registration Expenses
incurred in connection with all Piggyback Registrations.
(b) Company Expenses
The Company also will, in any event, pay its internal
expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with any listing of the
securities to be registered on a securities exchange, and the
fees and expenses of any Person, including special experts,
retained by the Company.
6. Indemnification
(a) Indemnification by the Company
The Company agrees to indemnify and hold harmless each
Indemnified Holder from and against all Claims arising out of or
based upon any Misstatement or alleged Misstatement, except
insofar as such Misstatement or alleged Misstatement was based
upon information furnished in writing to the Company by any
Indemnified Holder expressly for use in the document containing
such Misstatement or alleged Misstatement. This indemnity shall
not be exclusive and shall be in addition to any liability which
the Company may otherwise have.
The foregoing notwithstanding, the Company shall not be
liable to the extent that any such Claim arises out of or is
based upon a Misstatement or alleged Misstatement made in any
preliminary prospectus if (i) such Indemnified Holder failed to
send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Registrable
Securities giving rise to such Claim and (ii) the Prospectus
would have corrected such untrue statement or omission.
In addition, the Company shall not be liable to the
extent that any such Claim arises out of or is based upon a
Misstatement or alleged Misstatement in a Prospectus, (x) if such
Misstatement or alleged Misstatement is corrected in an amendment
or supplement to such Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Indemnified Holder
thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale to the person
who purchased a Registrable Security from such Indemnified Holder
and who is asserting such Claim.
The Company shall also indemnify underwriters, selling
brokers, dealer managers and similar securities industry
professionals participating in a distribution covered by a
Registration Statement, their officers and directors and each
Person who controls such Persons (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) to
the same extent as provided above with respect to the
indemnification of the Indemnified Holders of Registrable
Securities.
(b) Indemnification Procedures
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an
Indemnified Holder in respect of which indemnity may be sought
from the Company, such Indemnified Holder shall promptly notify
the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel satisfactory to such
Indemnified Holder and the payment of all expenses.
Such Indemnified Holder shall have the right to employ
separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such separate
counsel shall be the expense of such Indemnified Holder unless
(i) the Company has agreed to pay such fees and expenses, (ii)
the Company shall have failed to assume the defense of such
action or proceeding or has failed to employ counsel satisfactory
to such Indemnified Holder in any such action or proceeding or
(iii) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified
Holder and the Company, and such Indemnified Holder shall have
been advised by counsel that there may be one or more legal
defenses available to such Indemnified Holder that are different
from or additional to those available to the Company.
If such Indemnified Holder notifies the Company in
writing that it elects to employ separate counsel at the expense
of the Company as permitted by the provisions of the preceding
paragraph, the Company shall not have the right to assume the
defense of such action or proceeding on behalf of such
Indemnified Holder. The foregoing notwithstanding, the Company
shall not be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for such
Indemnified Holder and any other Indemnified Holders (which firm
shall be designated in writing by such Indemnified Holders) in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances.
The Company shall not be liable for any settlement of
any such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be
a final judgment for the plaintiff in any such action or
proceeding, the Company agrees to indemnify and hold harmless
such Indemnified Holders from and against any loss or liability
by reason of such settlement or judgment.
(c) Indemnification by Holder of Registrable Securities
Each Holder of Registrable Securities agrees to
indemnify and hold harmless the Company, its directors and
officers and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Holder, but only with respect
to information relating to such Holder furnished in writing by
such Holder expressly for use in any Registration Statement,
Prospectus or preliminary prospectus. In no event, however,
shall the liability hereunder of any selling Holder of
Registrable Securities be greater than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
In case any action or proceeding shall be brought
against the Company or its directors or officers or any such
controlling person, in respect of which indemnity may be sought
against a Holder of Registrable Securities, such Holder shall
have the rights and duties given the Company and the Company or
its directors or officers or such controlling person shall have
the rights and duties given to each Holder by Sections 6(a) and
6(b) above.
The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, to the same extent as provided above with respect
to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration
Statement.
(d) Contribution
If the indemnification provided for in this Section 6
is unavailable to an indemnified party under Section 6(a) or
Section 6(c) above (other than by reason of exceptions provided
in those Sections) in respect of any Claims referred to in such
Sections, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such Claims in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the
Indemnified Holder on the other in connection with the statements
or omissions which resulted in such Claims as well as any other
relevant equitable considerations. The amount paid or payable by
a party as a result of the Claims referred to above shall be
deemed to include, subject to the limitations set forth in
Section 6(b), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or
defending any action or claim.
The relative fault of the Company on the one hand and
of the Indemnified Holder on the other shall be determined by
reference to, among other things, whether the Misstatement or
alleged Misstatement relates to information supplied by the
Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such Misstatement or alleged Misstatement.
The Company and each Holder of Registrable Securities
agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not
take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 6(d), an
Indemnified Holder shall not be required to contribute any amount
in excess of the amount by which (i) the total price at which the
securities that were sold by such Indemnified Holder and
distributed to the public were offered to the public exceeds (ii)
the amount of any damages which such Indemnified Holder has
otherwise been required to pay by reason of such Misstatement.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
7. Exchange Act Reporting Requirements
From and after the effective date of the first
registration statement filed by the Company under the Securities
Act, the Company shall (whether or not it shall then be required
to do so) timely file such information, documents and reports as
the Commission may require or prescribe under Section 13 or 15(d)
(whichever is applicable) of the Exchange Act. In addition, the
Company shall take such other measures and file such other
information, documents and reports, as shall hereafter be
required by the Commission as a condition to the availability of
Rule 144 under the Securities Act (or any successor provision)
and the use of Form S-3.
From and after such date, the Company shall forthwith
upon request furnish any Holder of Registrable Securities (i) a
written statement by the Company that it has complied with such
reporting requirements, (ii) a copy of the most recent annual or
quarterly report of the Company, and (iii) such other reports and
documents filed by the Company with the Commission as such Holder
may reasonably request in availing itself of an exemption for the
sale of Registrable Securities without registration under the
Securities Act.
The purpose of the foregoing requirements are (x) to
enable any such Holder to comply with the current public
information requirements contained in paragraph (c) of Rule 144
under the Securities Act (or any successor provision) and (y) to
qualify the Company for the use of registration statements on
Form S-3.
8. Requirements for Participation in Underwritten Offerings
No Person may participate in any Underwritten Offering
pursuant to a Registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
9. Suspension of Sales
Upon receipt of written notice from the Company that
(i) a Registration Statement or Prospectus contains a
Misstatement, or (ii) in the reasonable determination of the
Company, there exists circumstances not yet disclosed to the
public which would be required to be disclosed in such
Registration Statement and the disclosure of which would be
materially harmful to the Company, each Holder of Registrable
Securities shall forthwith discontinue disposition of Registrable
Securities until such Holder has received copies of the
supplemented or amended Prospectus required by Section 4(1)
hereof, or until such Holder is advised in writing by the Company
that the use of the Prospectus may be resumed, and, if so
directed by the Company, such Holder shall deliver to the Company
(at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of
receipt of such notice. The Company shall use its reasonable
best efforts to minimize the length of such suspension of sales,
provided, that the Company may require the suspension of sales
for a period of sixty (60) days in the event that the disclosure
of any circumstances, in the reasonable determination of the
Company would be materially harmful to the Company.
10. Miscellaneous
(a) Remedies
Each Holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein, in the
Stock Purchase Agreements and granted by law, including recovery
of damages, shall be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements
The Company shall not on or after the date of this
Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof.
Except as otherwise disclosed to the Investor, the
Company has not previously entered into any agreement with
respect to its securities granting any registration rights to any
Person.
(c) Amendments and Waivers
The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or sup
plemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has
obtained the written consent of the Holders of at least a
majority of the outstanding shares of Registrable Securities.
The foregoing notwithstanding, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights
of Holders of shares of Registrable Securities whose shares are
being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders of
shares of Registrable Securities may be given by the Holders of a
majority of the shares of Registrable Securities being sold.
(d) Notices
All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
i) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in accordance
with the provisions hereof, which address initially is, with
respect to each Investor, the address set forth in Section 9.2(a)
of the June Stock Purchase Agreement, with a copy to Reicker,
Clough, Pfau & Pyle LLP, 1421 State Street, Suite B, Santa
Barbara, California 93102-1470, Attention: Dan Reicker, Esq.; and
ii) if to the Company, initially at its address set forth in
Section 9.2(b) of the June Stock Purchase Agreement and
thereafter at such other address, notice of which is given in
accordance with the provisions hereof, with a copy to with a
copy to Latham & Watkins, Latham & Watkins, 1001 Pennsylvania
Avenue, N.W., Suite 1300, Washington, D.C. 20004, Attention:
Bruce E. Rosenblum, Esq.
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier
guaranteeing overnight delivery. The Company shall promptly
provide a list of the most current addresses of the Holders of
Registrable Securities given to it in accordance with the
provisions hereof to any such Holder for the purpose of enabling
such Holder to communicate with other Holders in connection with
this Agreement.
(e) Successors and Assigns
This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties.
(f) Counterparts
This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same
agreement.
(g) Table of Contents and Headings
The table of contents and headings in this Agreement
are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(h) Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
(i) Severability
In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(j) Forms
All references in this Agreement to particular forms of
registration statements are intended to include all successor
forms which are intended to replace, or to apply to similar
transactions as, the forms herein referenced.
(k) Entire Agreement
This Agreement and the Stock Purchase Agreements are
intended by the respective parties to those agreements as the
final expression of their respective agreement and are intended
to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or
referred to herein or therein with respect to the registration
rights granted by the Company with respect to the securities sold
pursuant to the Stock Purchase Agreements. This Agreement and
the Stock Purchase Agreements supersede all prior agreements and
understandings between the parties with respect to such subject
matter.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
COMPANY:
PERIMMUNE HOLDINGS, INC.
By: /s/MICHAEL G. HANNA
Name:
Michael G. Hanna
Title:
President
INVESTOR:
MENTOR CORPORATION
By: /s/CHRISTOPHER J. CONWAY
Name:
Christopher J. Conway
Title:
Chairman, CEO
1. DEFINITIONS 1
2. PIGGYBACK REGISTRATIONS 5
(A) PARTICIPATION 5
(B) UNDERWRITER'S CUTBACK 5
(C) COMPANY CONTROL 6
3. HOLD-BACK AGREEMENTS 6
4. REGISTRATION PROCEDURES 6
5. REGISTRATION EXPENSES 11
(A) PIGGYBACK REGISTRATIONS 11
(B) COMPANY EXPENSES 11
6. INDEMNIFICATION 12
(A) INDEMNIFICATION BY COMPANY 12
(B) INDEMNIFICATION PROCEDURES 13
(C) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES 13
(D) CONTRIBUTION 14
7. EXCHANGE ACT REPORTING REQUIREMENTS 15
8. REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS 16
9. SUSPENSION OF SALES 16
10. MISCELLANEOUS 16
(A) REMEDIES 16
(B) NO INCONSISTENT AGREEMENTS 17
(C) AMENDMENTS AND WAIVERS 17
(D) NOTICES 17
(E) SUCCESSORS AND ASSIGNS 18
(F) COUNTERPARTS 18
(G) TABLE OF CONTENTS AND HEADINGS 18
(H) GOVERNING LAW 18
(I) SEVERABILITY 18
(J) FORMS 19
(K) ENTIRE AGREEMENT 19
6
DC_DOCS\84421.8
RESEARCH, COLLABORATION
AND
DISTRIBUTION AGREEMENT
This Agreement is made and entered into the 22nd day of
December, 1997, by and between PerImmune, Inc., a Delaware
corporation ("PERIMMUNE"), maintaining an office at 1330 Piccard
Drive, Rockville, Maryland 20850-4396 and Mentor Corporation, a
Minnesota corporation ("MENTOR") maintaining an office at 5425
Hollister Avenue, Santa Barbara, CA 93111.
RECITALS
WHEREAS, PERIMMUNE has developed and refined a method
of treating urological diseases and cancer with a keyhole limpet
hemocyanin composition and is the owner of all rights to
proprietary technical information and the U.S. Patent (as defined
herein) related thereto;
WHEREAS, PERIMMUNE has advised MENTOR that PERIMMUNE
believes that it can, within a period of three (3) years at a
cost of approximately Three Million Dollars ($3,000,000): (a)
implement and complete a Phase III clinical testing program for
the use of the Product (as defined herein) to treat refractory
bladder cancer, as clinically defined in the PERIMMUNE Phase I/II
protocol and clinical results previously provided to MENTOR
("Refractory Bladder Cancer"), and (b) submit an application for
the use of such Product to the United States Food and Drug
Administration (the "FDA") for the treatment of Refractory
Bladder Cancer;
WHEREAS, PERIMMUNE and MENTOR desire to enter into an
arrangement pursuant to which MENTOR will fund the costs of
implementing and carrying out the program described in the
preceding recital, and pay certain fees to PERIMMUNE as agreed
milestones in such program are attained, and PERIMMUNE will grant
to MENTOR on the terms and conditions set forth in this agreement
the exclusive worldwide right to market, sell and distribute the
Product for the Indicated Uses (as defined herein);
WHEREAS, PERIMMUNE and MENTOR agree that, despite the
diligent efforts of PERIMMUNE and MENTOR, there can be no
assurance that the objectives of the Project Development
Activities or the Project Objective (each as defined herein) will
be attained or that the Project Development Activities will
result in commercial use of the Product for any one or more
Indicated Uses.
NOW, THEREFORE, for and in consideration of the
foregoing and the mutual covenants and agreements contained
herein, and certain other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE
DEFINITIONS
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling or controlled by,
or under common control with, such specified Person.
"Approvals" means, with respect to any governmental
authority or agency, any or all approvals, clearances,
registrations, licenses, authorizations, visas or permits
required by such governmental authority or agency in order to
import, export, offer for sale, sell, market, manufacture, have
made or use the Product.
"Competitive Product" means any product constituted
from KLH (as defined herein) that is used in the Indicated Uses.
"Effective Date" means the date of this Agreement as
set forth above.
"Indicated Uses" means the use of the Product in all
uro-genital applications, including but not limited to use as an
injectable bio-pharmaceutical to treat cancer of the bladder and
prostate gland and interstitial cystitis.
"Improvements" means all modifications, variations and
revisions and new models or versions of the Product developed by
the parties hereto which relates or has consequence with respect
to the Product in any of the following ways: (1) improves the
Product's performance; (2) reduces the cost of materials or
components for the Product; (3) reduces production, manufacturing
or associated costs of the Product; (4) increases the life,
durability or continuous performance characteristics of the
Product; (5) expands the applications to which the Product may be
put; (6) increases or enhances the marketability or commercial
aspect of the Product; or (7) would, if implemented, replace or
displace the Product in one or more material commercial markets
for the Product. Improvements may be patentable or unpatentable,
and if patentable, need not be patented.
"Net Sales" means the gross invoiced price for the sale
of Product to purchasers by MENTOR, its agents or Affiliates less
(a) any credits and allowances granted by MENTOR to purchasers
with respect to the Product, including, without limitation,
credits and allowances on account of price adjustments, returns,
discounts and chargebacks, (b) any sales, excise, value-added,
turnover or similar taxes, and (c) transportation, insurance and
handling expenses if separately invoiced and directly chargeable
to such sales.
"Person" means any individual, corporation,
partnership, association, trust, estate or other entity or
organization, including any governmental entity or authority.
"Product" means the keyhole limpet hemocyanin
composition ("KLH"), as more particularly described in the
PERIMMUNE Phase I/II protocol and the U.S. Patent (as defined
herein), and any Improvements thereto.
"Product Patents" means any and all United States
patents and patent applications, all divisionals, continuations,
continuations-in-part, re-issues, extensions or foreign
counterparts thereof, now or hereafter owned or controlled
("controlled" being used in the sense of having the right to
grant licenses thereunder) by PERIMMUNE, covering the
manufacture, use, sale, offer for sale and/or importation of the
Product, including but not limited to, the U.S. Patent No.
5,407,912 attached hereto as Exhibit B.
"Project Budget" means the budget attached as Exhibit A
to this Agreement, setting forth the estimated costs of carrying
out the Project Development Activities.
"Project Development Activities" means the program
implemented pursuant to the provisions of this Agreement in order
to accomplish the following objectives in the following order of
priority: (a) the implementation and completion of Phase III
clinical testing of the Product for use in the treatment of
Refractory Bladder Cancer; (b) the preparation and filing of an
application with the FDA on or before June 30, 2000, for the
approval by the FDA of the use of the Product for the treatment
of Refractory Bladder Cancer; (c) obtaining FDA approval for the
use of the Product for the treatment of Refractory Bladder
Cancer; and (d) identifying and establishing contractual
relationships with sources of supply for raw materials required
to manufacture the Product.
"Project Objective" means the issuance of an approval
by the FDA for the use of the Product in the treatment of
Refractory Bladder Cancer.
"Product Information" means, individually and
collectively, all manufacturing, analytical and marketing
information and technical know-how, trade secrets and inventions
owned, controlled, conceived and/or reduced to practice and/or
acquired (i) by PERIMMUNE before the date this Agreement, or (ii)
by PERIMMUNE or MENTOR or jointly by the parties during the
Research and Development Period, and directed to the Product,
(whether or not relating to any Indicated Use), including, but
not limited to, specifications for ingredients and formulations,
information relating to regulatory and clinical work, testing or
studies, manufacturing methods and procedures.
"Project Plan" means the research and development plan
attached hereto as Exhibit A, including the budget, time-lines
and milestones reflected in such Exhibit for carrying out the
Project Development Activities.
"Quality Specifications" means the quality
specifications for the Product agreed upon by the Joint
Committee, as such quality specifications shall be modified from
time to time by mutual agreement of the parties hereto.
"Research and Development Period" means the period
commencing on the Effective Date and continuing until the first
to occur of either of the following events: (a) the attainment of
the Project Objective or (b) a joint determination by the parties
hereto that the Project should be discontinued.
"Target Period" means a period of thirty-six (36)
months, measured from the Effective Date.
"Vial" means a vial containing the quantity of the
product that is the standard dosage for a single treatment, which
the parties hereto believe is likely to be an quantity between
two (2) and ten (10) mg.
"U.S. Patent" means United States Patent No. 5,407,912
attached hereto as Exhibit B.
ARTICLE
RESEARCH AND DEVELOPMENT
Joint Committee. Promptly upon execution of the
Agreement, PERIMMUNE and MENTOR shall form a Joint Research and
Development Committee (the "Joint Committee") comprising six (6)
members for the purposes of implementing and revising the Project
Plan and coordinating the Project Development Activities to be
conducted by the Project Teams. Three members of the Joint
Committee (and their successors or replacements, if any) shall be
appointed by PERIMMUNE and three members (and their successors or
replacements, if any) shall be approved by MENTOR. All actions
of the Joint Committee shall be by a majority vote of all
members.
Project Teams. In order to carry out its respective
obligations relating to the Project Development Activities, each
of PERIMMUNE and MENTOR shall assign a defined team of employees
to perform the Project Development Activities (each such team, a
"Project Team" and, together, the "Project Teams"). The initial
PERIMMUNE Project Team shall comprise the individuals listed on
Exhibit C attached hereto and the research technicians under each
of their direction and control. The initial MENTOR Project Team
shall comprise the individuals listed on Exhibit D attached
hereto and the research technicians under each of their direction
and control. PERIMMUNE and MENTOR each agree to notify the other
party of any change in the personnel comprising such party's
Project Team, which changes shall remain in the sole discretion
of such party.
Project Development. PERIMMUNE will exercise due
diligence in carrying out the Project Development Activities at
the time and in the manner contemplated by the Project Plan, and
endeavoring to achieve the Project Objective. Each party shall
furnish to the other materials, data, software, specification,
formulas or other information as may, in the sole judgment of the
Joint Committee, be reasonably necessary for the recipient of
such information to perform its Project Development Activities or
other duties hereunder. Towards this end, the PERIMMUNE Project
Team shall periodically (which, in any event, shall be at least
once every calendar quarter) during the Research and Development
Period, provide to the MENTOR Project Team a written progress
report in form and substance established by the Joint Committee
concerning the Project Development Activities being conducted by
the PERIMMUNE Project Team, which report shall include a summary
of the progress of the Project Development Activities in relation
to the then current Project Budget that has been approved by the
Joint Committee. Information relating to the Product provided to
a party hereunder shall be governed by Section 10.1. The parties
agree that, despite the diligent efforts of the parties, there
can be no assurance that the objectives of the Project
Development Activities or the Project Objective will be attained
or that the Project Development Activities will result in
commercial use of the Product for any one or more Indicated Uses.
Compliance with Regulations. All activities, studies
or other efforts in furtherance of the Project Development
Activities shall be carried out pursuant to the Project Plan in
strict compliance with any applicable United States Federal,
state or local laws, regulations or guidelines governing the
conduct of such activities, studies or efforts.
Project Development Costs. The costs and expense of the
Project Development Activities shall be borne and paid by the
parties as follows:
2.5.1. Costs Payable by MENTOR. MENTOR shall
pay (a) all reasonable costs associated with the
Project Development Activities as reflected in the
Project Budget, to the extent that such costs do not
exceed the sum of $3,000,000, plus (b) the costs of any
additional work requested by MENTOR that is not within
the scope of the Project Development Activities (e.g.,
preparing applications for Approvals of the Product for
additional Indicated Uses or for jurisdictions other
than the United States) and (c) the costs of carrying
out additional clinical testing or other work required
by the FDA after the submission of the application for
Approval for the use of the Product to treat Refractory
Bladder Cancer, to the extent that such additional
testing or other work was not reasonably within the
scope of or contemplated by the Project Development
Activities described in the Project Plan.
2.5.2. Costs Payable by PERIMMUNE. Subject to
the obligations of MENTOR set forth in Section 2.5.1,
above, PERIMMUNE shall be responsible for and shall pay
all costs of the Project Development Activities to the
extent such costs exceed $3,000,000, including the
costs that would customarily be incurred by a
manufacturer in the ordinary course of business for the
purpose of submitting an application for pre-marketing
approval to the FDA and prosecuting such application to
completion and the issuance of the Approval applied
for.
2.5.3. Time and Manner of Payment. All amounts
payable by MENTOR to PERIMMUNE pursuant to this Section
2.5 shall be payable in advance by wire transfer of
same day funds on a quarterly basis. MENTOR shall pay
the estimated costs of the Project Development
Activities for the period beginning on the Effective
Date of this Agreement and ending on March 31, 1998
concurrently with its execution of this Agreement.
Thereafter, MENTOR shall pay the estimated costs of the
Project Development Activities for the next calendar
quarter within ten (10) days after the start of such
calendar quarter unless MENTOR is entitled to delay or
suspend the next quarterly payment as provided by
Section 2.5.6 of this Agreement. Amounts not expended
during any quarter or year shall be carried forward to
succeeding periods, it being intended that (a) MENTOR
shall be obligated to expend $3,000,000 during the
Target Period or until the Project Objective is
attained, whichever occurs first, and (b) any amounts
up to $3,000,000 remaining unexpended after the
attainment of the Project Objective, shall be paid to
PERIMMUNE as an additional fee.
2.5.4. Limitation on Obligation. Except as
expressly provided by Section 2.5.1, above, MENTOR
shall not be obligated to pay more than $3,000,000 of
the costs of the Project Development Activities, and
PERIMMUNE shall pay all costs and expenses in excess of
such amount.
2.5.5. Use of Funds. PERIMMUNE shall use the
funds paid by MENTOR pursuant to Section 2.5.3, above,
only for the payment of the costs and expenses of the
Project Development Activities. No portion of any such
funds shall be used (a) for the payment of PERIMMUNE's
overhead or general and administrative expenses, except
to the extent that such expenses have been properly
allocated to the Project Development Activities at the
same rate at which such expenses are allocated to all
other projects and corporate activities of PERIMMUNE,
or (b) for the acquisition of capital equipment or
other tangible personal property having a useful life
in excess of three (3) years.
2.5.6 Right of MENTOR to Suspend Payment.
PERIMMUNE shall provide to MENTOR from time to time
such information as MENTOR may reasonably request for
the purpose of demonstrating that there are sufficient
funds remaining in the Project Budget and available to
PERIMMUNE to complete the Project Development
Activities. MENTOR shall be entitled to suspend
payment of costs associated with the Project
Development Activities if (a) PERIMMUNE fails to submit
the quarterly report called for by Section 2.3 of this
Agreement, or (b) any such report evidences that
(i) PERIMMUNE is not carrying out the Project
Development Activities in accordance with the terms and
within the period of time established by the Project
Plan, or (ii) in MENTOR's reasonable judgment, there
will be insufficient funds available in the Project
Budget to attain the Project Objective within the
Target Period. Should MENTOR become entitled to
suspend payments to PERIMMUNE hereunder, then MENTOR
shall not be required to resume payments until
PERIMMUNE has taken the corrective action necessary to
eliminate the cause of such suspension in payments.
ARTICLE
DEVELOPMENT FEES PAYABLE TO PERIMMUNE
Payment Schedule. In addition to funding the cost of
the Project Development Activities provided in Section 2.5,
MENTOR shall pay to PERIMMUNE as a research and development fee,
an aggregate amount equal to Three Million Dollars ($3,000,000),
payable upon the occurrence of the following events (each, a
"Milestone Event" and the payment in respect of each Milestone
Event, a "Milestone Payment"): (i) One Million Dollars
($1,000,000)
upon the enrollment of the first patient in Phase III
clinical trials under protocols accepted by the United States
Food and Drug Administration ("FDA") for use of the Product for
an Indicated Use, (ii) One Million Dollars ($1,000,000) upon the
enrollment of the last patient in such Phase III clinical trials,
and (iii) One Million Dollars ($1,000,000) upon obtaining FDA
approval to market and sell the Product for an Indicated Use.
Manner of Payment. PERIMMUNE shall provide to MENTOR
written notice of the satisfaction of each Milestone Event.
Promptly upon receipt of such written notice, and, in any event
within five (5) days, thereafter, MENTOR shall pay to PERIMMUNE,
by wire transfer of same day funds, the Milestone Payment in
respect of such Milestone Event.
ARTICLE
OWNERSHIP OF INVENTIONS AND PATENTS
Ownership of Information. All Product Information is,
or shall be, owned solely by PERIMMUNE. Other than as may be set
forth herein, MENTOR shall have no rights in or to any Project
Information.
License. PERIMMUNE hereby grants MENTOR a world-wide,
royalty-free, perpetual, non-exclusive license in the Product
Information, the Product Patents and the Approvals to make, use
and sell the Product for use in the Indicated Uses without any
further duty or obligation to PERIMMUNE. MENTOR covenants that
it shall not exercise such license except upon the occurrence of
one or more of the circumstances set forth in Section 7.4(i),
7.4(ii), 7.4(iii) or 7.4(iv).
Ownership of Product Patents and Improvements.
PERIMMUNE shall have sole and exclusive ownership of the Product
Patents and of any Improvements (whether patentable or
unpatentable) made or discovered by PERIMMUNE or MENTOR
separately or by the parties jointly. PERIMMUNE shall be
responsible for the preparation, filing and prosecution of
Product Patents as well as all costs and fees associated
therewith. PERIMMUNE shall apply for, seek prompt issuance of
and maintain during the terms of this Agreement the Product
Patents in all jurisdictions where patent protection is available
and where, in PERIMMUNE's judgment, such patent protection is
necessary or advisable given plans for marketing the Product for
one or more of the Indicated Uses. The preparation, prosecution
and maintenance of all Product Patents shall be the primary
responsibility of PERIMMUNE; provided however, that MENTOR shall
be afforded reasonable opportunities to advise PERIMMUNE and
shall cooperate with PERIMMUNE in such preparation, prosecution
and maintenance. PERIMMUNE shall promptly advise MENTOR of the
grant, lapse, revocation, surrender, or any threatened
invalidation or of its intention to abandon any such patent,
application or foreign counterpart.
Infringement of Product Patents. PERIMMUNE and MENTOR
shall each promptly notify the other of any infringement of any
Product Patent in any jurisdiction which may come to its
attention. PERIMMUNE shall promptly undertake reasonable efforts
to obtain a discontinuance of the aforesaid infringement or
unauthorized use. Any suit to obtain such discontinuance shall
be brought by PERIMMUNE in its name unless the law of the
relevant forum requires otherwise.
ARTICLE
REGULATORY AFFAIRS
Approvals. PERIMMUNE shall hold the biological license
application ("BLA") and all other Approvals for the Product.
Assistance in Gaining Approvals. PERIMMUNE shall
exercise due diligence in attempting to obtain and in maintaining
in full force and effect the Approval for the marketing and sale
of the Product in the United States for the treatment of
Refractory Bladder Cancer. At MENTOR's request, PERIMMUNE shall
exercise due diligence in attempting to obtain and in maintaining
in full force and effect the Approvals for the marketing and sale
of the Product (i) for Indicated Uses other than Refractory
Bladder Cancer in the United States and (ii) for Indicated Uses
in Canada, the member states of the European Community, and in
each other jurisdiction in which MENTOR desires to market and
sell the Product for the Indicated Uses, provided that, in each
case, MENTOR shall bear all costs, fees and other expenses
required to be paid to regulatory authorities for the purpose of
applying for, obtaining or preserving such Approvals, provided
further that, in each case, if any application or submission
required to gain such Approvals requires additional clinical
tests or data beyond the clinical tests and data that are
produced during the clinical tests required to gain Approval for
the marketing and sale of the Product in the United States,
MENTOR shall bear all costs of conducting additional clinical
tests and obtaining such additional clinical data, and provided
further that, in each case, MENTOR shall, at no charge to
PERIMMUNE, provide reasonable assistance to PERIMMUNE in making
such applications, submissions or filings as may be required or
advisable to obtain such Approvals. Notwithstanding anything
else herein to the contrary, PERIMMUNE shall not be required to
attempt to obtain any Approval for the marketing or sale of the
Product for Indicated Uses in any jurisdiction if, in the
reasonable judgment of PERIMMUNE, such efforts separably or in
the aggregate would affect PERIMMUNE's ability to attain the
Project Objective.
Notice of Reports to Government Authorities. Each
party shall promptly notify the other party of any information
coming to its attention concerning experience with any Product
for which records and reports are filed with any governmental
authority, but shall not be liable for any intentional failure to
do so.
ARTICLE
DISTRIBUTION
Appointment and Acceptance. PERIMMUNE hereby appoints
MENTOR as its exclusive worldwide distributor of the Product for
the Indicated Uses during the term of this Agreement and MENTOR
agrees to act in this capacity, all subject to the terms and
conditions of this Agreement. During the term of this Agreement,
(a) neither PERIMMUNE nor any of its Affiliates shall market or
distribute the Product for use in the Indicated Uses, (b)
PERIMMUNE shall not license any other Person to market or
distribute the Product for use in the Indicated Uses, (c)
PERIMMUNE shall not supply to any person other than MENTOR and
its Affiliates Product that indicates on its label or in any
product information sheet or other packaging accompanying the
Product that the Product is suitable for use in the Indicated
Uses, and (d) PERIMMUNE shall not knowingly sell the Product to
persons whom PERIMMUNE knows or has reason to know will use the
Product in the Indicated Uses or will distribute or re-sell the
Product for such uses.
Terms of Sale.
MENTOR shall purchase its requirements for the
Product during the term of this Agreement solely from PERIMMUNE
for a purchase price to be calculated as set forth herein and
PERIMMUNE shall use all reasonable best efforts to supply all
such requirements.
Within thirty (30) days from the date of invoice
for any Product sold to MENTOR, MENTOR shall pay to PERIMMUNE an
amount equal to Thirty Dollars ($30) per Vial of the Product
(such amount, the "Advance"). Additionally, within thirty (30)
days of the close of each calendar quarter in which MENTOR has
purchased Product from PERIMMUNE pursuant hereto, MENTOR shall
pay to PERIMMUNE an amount equal to (i) thirty percent (30%) of
MENTOR's aggregate Net Sales (as defined herein) from the Product
during the calendar quarter (the "Percentage Sales Amount") less
(ii) the aggregate amount equal to (A) the number of Vials sold
during such calendar quarter for which MENTOR has paid to
PERIMMUNE an Advance, multiplied by, (B) the Advance amount (such
aggregate amount, the "Quarterly Advance Amount"). In the event
that the Quarterly Advance Amount in respect of any calendar
quarter shall exceed the Percentage Sales Amount for such
calendar quarter, then the amount payable to PERIMMUNE pursuant
to the preceding sentence shall be zero. Unless MENTOR and
PERIMMUNE otherwise agree in a writing signed by both of them,
the payment and other provisions set forth in this Agreement
shall supersede those of any subsequent purchase order, sales
confirmation form or other document hereafter sent by either
party hereto to the other.
Within thirty (30) days after the end of each
calendar quarter in which MENTOR has purchased any Product from
PERIMMUNE, MENTOR shall submit a report to PERIMMUNE certified by
a financial officer of MENTOR and setting forth, with respect to
such calendar quarter, (i) the aggregate number of Vials of
Product purchased from PERIMMUNE, (ii) the aggregate number of
Vials of Product sold by MENTOR, (iii) 30% of MENTOR's aggregate
Net Sales from the Product and (iv) the aggregate Advances paid
by MENTOR to PERIMMUNE with respect to the Vials of the Product
sold by MENTOR. Upon thirty (30) days notice to MENTOR,
PERIMMUNE shall have the right to examine the applicable books
and records of MENTOR in order to verify the payments made to
PERIMMUNE pursuant to Section 6.2(b) above. In the event that
any such examination reveals that the amount of such payments
owed to PERIMMUNE for any calendar quarter shall be different
than the amount certified to PERIMMUNE with respect to such
calendar quarter and paid to PERIMMUNE pursuant to Section
6.2(b), then, any shortfall shall promptly be paid to PERIMMUNE
and, alternatively, any overpayment shall promptly be re-paid to
MENTOR, in each case, without interest on such payment. For
purposes of this Section 6.2(c), MENTOR shall maintain such books
and records for not less than three years after the relevant
date.
Title and risk of loss with respect to the Product
sold by PERIMMUNE to MENTOR shall pass to MENTOR upon release of
Product for shipment by PERIMMUNE to the designated carrier.
MENTOR shall specify the method of shipment and insurance and all
freight and applicable insurance charges shall be the
responsibility of MENTOR. PERIMMUNE will be responsible for
contracting freight services specified by MENTOR, for which
MENTOR will be billed on a shipment-by-shipment basis. The
Product is subject to inspection and acceptance by MENTOR upon
receipt. MENTOR shall be deemed to have accepted each shipment
of the Product unless rejected for non-conformity with the
Quality Specifications (as defined herein) in accordance with
Section 6.5 of this Agreement, within twenty (20) working days
after receipt of shipments from PERIMMUNE.
Unless approved by MENTOR in writing, PERIMMUNE
will not sell any Product to MENTOR that has a shelf-life from
the date of shipment by PERIMMUNE that is less than the greater
of (a) twelve (12) months or (b) such longer period for which
PERIMMUNE has obtained stability approval from the FDA.
MENTOR's Duties. MENTOR shall:
use best commercial efforts to advertise and
promote the sale of the Product in a manner calculated by MENTOR
to yield benefit to the parties hereto. MENTOR agrees that
during the term of this Agreement, it will not market any
Competitive Product.
submit its purchase orders to PERIMMUNE in writing
or via facsimile, signed by an authorized representative of
MENTOR.
pay all PERIMMUNE invoices in United States
currency by company check or by electronic wire transfer to an
account designated by PERIMMUNE.
submit to PERIMMUNE a twelve (12) month forecast
of purchases of Product from PERIMMUNE and delivery dates for
such Product, which forecast shall not constitute a firm purchase
commitment, in a format to be mutually determined by the parties.
Said forecast shall be submitted by MENTOR to PERIMMUNE within
thirty (30) days after gaining FDA approval for use in the
Indicated Uses, and quarterly thereafter. MENTOR shall place
firm orders from time to time for the purchase of the Product at
least ninety (90) days in advance of required delivery.
obtain advance written authorization and a
Returned Material Authorization ("RMA") prior to returning any of
the Product.
maintain a properly trained sales force of
adequate size to represent and promote the sale of the Product
and provide instructions to customers in the use of the Product.
MENTOR shall be responsible for developing its own marketing plan
and system for dispensing the Product.
carry in stock an inventory of the Product
sufficient to promptly fill the orders of MENTOR's customers.
pay any import duty or like charge on the entry of
the Product into any jurisdiction and any local or other
applicable taxes.
maintain separate and detailed accurate and
complete records of all transactions in respect of the Product,
including, but not limited to, such records as identify all
customer purchases by Product and serial and/or lot number, and
possess the capability to notify all purchasers in the event of a
Product recall or corrective action.
defray all expenses of and incidental to the
distribution and sale of the Product hereunder incurred by
MENTOR.
make no contracts or commitments on behalf of
PERIMMUNE or make any promises or representations or give any
warranties or guarantees with respect to the Product except as
herein expressly permitted or otherwise incur any liability on
behalf of PERIMMUNE without PERIMMUNE's prior written consent,
nor represent itself as agent or partner of PERIMMUNE.
comply with all laws and regulations and
requirements applicable to a seller of bio-pharmaceutical
products, and with all laws and regulations and requirements of
governmental agencies in any jurisdiction in which it markets,
distributes or sells the Product.
except as authorized in writing by PERIMMUNE,
refrain absolutely from using the trademark or trade name and
logo of PERIMMUNE in connection with the marketing, distribution
and sale of any Product.
PERIMMUNE's Duties. PERIMMUNE shall:
make reasonable best efforts, in good faith, to
deliver MENTOR's firm orders for the Product within ninety (90)
days from date of order receipt, provided that if PERIMMUNE is
unable to deliver such firm orders within such ninety (90) day
period, PERIMMUNE will give priority to the delivery of the
Product to MENTOR to deliver such firm order, over the delivery
of the Product to any other purchaser or distributor, until such
firm orders are filled. MENTOR shall specify the method of
shipment and insurance and PERIMMUNE shall make reasonable best
efforts, in good faith, to comply with such specifications. If
no such specification is made, or if the specification cannot be
reasonably complied with after notice to MENTOR and an
opportunity to resolve the issues surrounding PERIMMUNE's alleged
inability to comply, PERIMMUNE may select a reasonable manner of
shipment and insurance, the cost of which shall be the
responsibility of MENTOR as provided in Section 6.2(d).
afford all purchase orders for the Product
received from MENTOR equal priority with PERIMMUNE's own supply
requirements for (a) products that PERIMMUNE distributes for its
own account and (b) orders from distributors of other products
manufactured by or for PERIMMUNE. PERIMMUNE will ship all orders
for the Product and for other products manufactured by or for
PERIMMUNE in the priority in which such orders were received.
provide such amount of Product as MENTOR
reasonably requests for use by MENTOR for promotional purposes,
to MENTOR, at PERIMMUNE's cost plus shipping charges.
comply with all laws and regulations and
requirements applicable to PERIMMUNE as a manufacturer of bio-
pharmaceutical products.
except as authorized in writing by MENTOR, refrain
absolutely from using the trademark or trade name and logo of
MENTOR in connection with the marketing, distribution and sale of
any Product.
supply the Product to MENTOR in Vials, pre-labeled
with labels of a design provided by MENTOR. MENTOR shall supply
PERIMMUNE with camera-ready artwork for such labels.
provide reasonable technical assistance to
MENTOR's personnel necessary for the marketing of the Product.
at PERIMMUNE's expense, provide MENTOR with
written product inserts relating to the Product's use, and with
such amendments thereto as subsequently become available.
provide necessary documentation to assist MENTOR
in meeting requirements to register the Product in any
jurisdiction where MENTOR reasonably expects to market the
product for sale, and, where possible, allow MENTOR to utilize
prior registrations by PERIMMUNE.
provide MENTOR with copies of the BLA pre-market
notifications submitted for the Product, copies of current
package inserts for the Product, copies of documents describing
specifications for the Product, and copies of all current and
future correspondence with the FDA pertaining to the Product for
any Indicated Use. PERIMMUNE will comply with the FDA's current
good manufacturing practices and regulations ("GMP") in the
manufacture of the Product. If needed to comply with any change
in the law or FDA's GMP regulations or policies, or to enable
MENTOR to market and distribute the Product in any jurisdiction
MENTOR shall have the right to inspect PERIMMUNE's manufacturing
facilities and GMP records pertaining to the manufacture of the
Product. If any action should be taken by the FDA to restrict or
prevent the distribution of the Product for any Indicated Use for
more than thirty (30) days, and such restriction is not due to
the negligence of MENTOR, then upon notice to PERIMMUNE, MENTOR
shall have the right to terminate this Agreement as to such use
or uses of the Product. PERIMMUNE shall replace any affected
inventory of Product under this section or refund to MENTOR the
purchase price it paid to PERIMMUNE for such inventory if
PERIMMUNE is unable to replace the Product with comparable
inventory. PERIMMUNE shall replace or repurchase any affected
inventory of Product which MENTOR replaces or repurchases from
MENTOR's customers, at the price MENTOR paid PERIMMUNE for such
inventory. IN NO CASE SHALL PERIMMUNE BE LIABLE FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES.
comply with the United States Food, Drug and
Cosmetic Act. The Product comprising each shipment or other
delivery hereafter made by PERIMMUNE to, or on the order of,
MENTOR, as of the date of such shipment or delivery, shall not,
on such date be, adulterated or misbranded within the meaning of
the United States Food, Drug, and Cosmetic Act.
use raw materials that comply with any applicable
raw material specification guidance documents promulgated by the
FDA.
use manufacturing procedures that comply with all
applicable GMP standards.
provide MENTOR with Product that is suitable for
use for its intended purpose.
issue an RMA to MENTOR promptly upon its receipt
of a request therefor, unless a reasonable basis exists for
denying such request, it being understood by the parties hereto
that, the failure of MENTOR to reject a Product within twenty
(20) working days of receipt of the Product shall not constitute
a reasonable basis for denying such request.
(i) consult with MENTOR regarding proposed changes
to the Product and/or the adaptation of the Product for addition
applications within the Indicated Uses, (ii) make such
Improvements to the Product as may be reasonably necessary to
meet the needs of the market and to keep the Product current and
commercially acceptable, and (iii) make reasonable efforts
consistent with its available resources and its other contractual
commitments and business objectives to incorporate into the
Product any features or Improvements that are recommended by
MENTOR as the result of its clinical studies and its marketing
and customer support activities, to the extent that such
Improvements are technically and economically feasible. MENTOR
shall pay a reasonable consulting fee and reasonable costs
incurred by PERIMMUNE, in each case, in an amount mutually
agreeable to the parties, in connection with any research or
development activities that PERIMMUNE undertakes at the request
of MENTOR pursuant to this Section 6.4(p).
if MENTOR exercises its right to terminate this
Agreement pursuant to Section 7.2.1, take reasonable steps,
consistent with the orderly termination of the Project, to reduce
or eliminate as soon as reasonably practicable the costs for
which MENTOR will continue to be responsible under Section 7.2 of
this Agreement, to the extent that PERIMMUNE can do so without
breaching existing contractual obligations or otherwise incurring
liability for wrongful conduct.
Performance Standards.
Quality Specifications and Characteristics.
PERIMMUNE shall deliver to MENTOR Product having the Quality
Specifications.
Certificate of Analysis. Concurrent with
shipment, PERIMMUNE shall fax to MENTOR a Certificate of
Analysis, in the form set forth in Exhibit E hereto, of each lot
of Product sold to MENTOR, confirming that the Product meets the
Quality Specifications.
Product Acceptance. Within twenty (20) working
days of receipt of Product, MENTOR shall take and conduct
analysis of sample of the Product delivered by PERIMMUNE. Should
the result of an analysis of such sample deviate from the Quality
Specifications, MENTOR shall notify PERIMMUNE in accordance with
Section 10.2 hereof and immediately thereafter provide PERIMMUNE
with samples of the Product tested. If, following a review of
the test result and after conducting its own tests of the sample,
PERIMMUNE agrees that such sample does not conform to the Quality
Specifications, PERIMMUNE shall provide to MENTOR, free of any
additional charge, new deliveries of the same quantity of the
Product as the one from which the sample was taken, or in
PERIMMUNE's discretion and at its cost, PERIMMUNE may promptly
reprocess the nonconforming Product to meet the Quality
Specifications. In either event, MENTOR shall return, at
PERIMMUNE's expense, the particular lot or shipment of the
Product which does not comply with the Quality Specifications if
requested to do so by PERIMMUNE.
Product Recall.
Either party shall immediately notify the other
party in writing should it become aware of any defect or
condition that renders any lot(s) of Product supplied by
PERIMMUNE to MENTOR in violation of the United States Food, Drug
and Cosmetic Act, or of a similar law of any jurisdiction or
country where the Product is sold. Should either party
experience any quality problem involving field correction or
recall of any specific lot(s) of Product supplied to MENTOR by
PERIMMUNE, such party shall notify the other in writing by
facsimile within twenty-four (24) hours of the initiation of the
field correction or recall. Each party will test retained
samples of lots in question and report its findings to the other
within ten (10) working days.
Each party shall keep the other informed of any
formal action relating to any specific lot of Product sold to
MENTOR hereunder by a regulatory agency of any state, national
government, or government agency having jurisdiction.
Should any governmental action or other
circumstances require the recall or field corrections or
withholding from market of Product sold by PERIMMUNE to MENTOR,
each party retains the right and obligation to correct field
problems arising out of its fault or omission as it deems
appropriate, with or without the concurrence of the other. All
information about complaints concerning the Product shall be
considered "Confidential Information" under the terms of this
Agreement. MENTOR shall bear all costs of complying or effecting
any recall or field correction, including the cost of the Product
and the actual costs of replacing the Product, that is the result
of any fault or omission attributable to MENTOR. PERIMMUNE shall
bear all costs of complying or effecting any recall or field
correction, including the cost of the Product and the actual
costs of replacing the Product, that (i) is the result of any
fault or omission attributable to PERIMMUNE or (ii) results from
the fault of neither party. Should such recall or field
correction result from the fault of both parties, the parties
shall share all costs of complying or effecting any recall or
field correction, including the costs of the Product and the
actual cost of replacing the Product, in proportion to their
respective degree of fault.
Product Complaints.
PERIMMUNE shall maintain an appropriate record of
all claims made or to be made regarding the Product's
performance. The parties shall share with each other all data on
confirmed lot-specific Product complaints including, but not
limited to, complaints or information regarding performance
and/or allegations or reports of any negative effect from the use
or misuse of such affected lot of Product as soon as such data is
available. Each party will provide reasonable assistance to the
other in resolving customer complaints to the extent the
complaint arises out of any fault or omission of the party whose
assistance is requested. However, MENTOR shall have sole
responsibility and authority to interact directly with MENTOR's
customers in the resolution of such complaints and PERIMMUNE
agrees that it will only interact with MENTOR in such matters.
PERIMMUNE shall evaluate and investigate all
customer complaints in connection with the Product which may be
brought to its attention, in writing, by MENTOR, provided that
such complaints (i) have been confirmed by MENTOR's QA/QC or
technical service personnel using the same standards for
confirmation which MENTOR uses for products other than the
Product and (ii) are believed in good faith by MENTOR to arise
out of a fault or omission attributable to PERIMMUNE. Within
twenty (20) calendar days following receipt from MENTOR of the
original notification of each such complaint, PERIMMUNE agrees to
provide MENTOR with a written interim or final complaint
investigation report. All such Product complaints reported to
PERIMMUNE by MENTOR shall be reviewed monthly by PERIMMUNE until
closure, and a summary report thereof will be provided by
PERIMMUNE to MENTOR.
PERIMMUNE will report to MENTOR all data and/or
information pertaining to adverse reports on any lot of Product
supplied by PERIMMUNE for distribution by MENTOR which would have
a adverse impact on performance of the Product.
Should there be a difference of opinion between
PERIMMUNE and MENTOR regarding whether a field notification or
recall is necessary, MENTOR will exercise the right to notify its
customers without delay.
Packaging and Intellectual Property. MENTOR shall be
responsible for repackaging the Product in such form as is
suitable and in compliance with all applicable laws for resale in
each jurisdiction in which the Product is sold. MENTOR will
distribute the Product only with all appropriate labeling,
packaging and Product literature and only under MENTOR's
applicable trademarks and trade names. MENTOR recognizes
PERIMMUNE's right, title and interest in its patents (including
all Product Patents), trademarks, trade names and copyrights,
trade secrets and proprietary information in connection with the
Product and MENTOR shall not claim any ownership right thereto
inconsistent with this Agreement, or dispute the validity
thereof. In the event any third party shall contest PERIMMUNE's
rights to its patents, trademarks, trade names or copyrights,
trade secrets or proprietary rights, MENTOR shall, at PERIMMUNE's
sole expense, render reasonable assistance to PERIMMUNE in
defending such claims.
Product Modifications. PERIMMUNE reserves the right,
from time to time, to modify the Product or to make any
Improvement, and shall give MENTOR at least three (3) months
prior written notice before making any Improvement or change to
its manufacturing process for the Product that would have an
impact on any of PERIMMUNE's product verifications or
validations, or changes in raw materials that would alter the use
of the Product for any Indicated Use or other change or
Improvement that could impact product labeling or promotional
literature; provided, however, that PERIMMUNE shall be required
to provide MENTOR with only reasonable advance notice where such
modification or Improvement is required to comply with any
applicable legal or regulatory requirement or the unanticipated
modification or unavailability of raw material.
Appointment of Sub-Distributors. MENTOR may assign,
sublicense, delegate, or otherwise transfer the performance of
the rights and obligations hereunder to qualified and reputable
sub-distributors, provided, however, that: (i) MENTOR shall be
liable to PERIMMUNE for the errors, negligent acts and omissions
of its sub-distributors as if such errors, negligent acts and
omissions were its own, including any breach of any provision of
this Agreement by the sub-distributors; (ii) MENTOR shall have
and retain full control of any sub-distributor utilized, and
shall be responsible for the performance by any sub-distributor;
and (iii) MENTOR shall not be relieved of the responsibility for
the proper performance and completion of the sub-distributed
portions of its obligations hereunder.
ARTICLE
TERM AND TERMINATION
Term. This Agreement shall be in full force and effect
in each applicable jurisdiction, and for each applicable
Indication Use, for a period commencing on the Effective Date and
continuing for a period equal to ten (10) years following the
obtaining of the first Approval of the Product for such Indicated
Use in such jurisdiction, provided that, MENTOR shall have the
right to terminate this agreement with respect to any such
Indicated Use in any such jurisdiction at the expiration of five
(5) years from the date of such Approval in such jurisdiction by
giving not less than one-hundred and eighty (180) days written
notice to PERIMMUNE of its intention to so terminate.
Termination.
Termination by MENTOR Without Cause. MENTOR shall
be entitled to terminate this Agreement without cause at any time
prior to attainment of the Project Objective by giving PERIMMUNE
not less than one-hundred and eighty (180) days prior written
notice of intention to terminate, specifying the effective date
of termination, if MENTOR reasonably concludes that the Project
Objective cannot be attained within the Target Period, for a
reason other than excusable delay and events of force majeure, at
a cost that does not exceed the Project Budget as adjusted by the
parties as described herein. Should MENTOR exercise the
termination right conferred by this Section 7.1, then:
MENTOR shall remain liable for the
payment of any costs or expenses that PERIMMUNE
reasonably incurs in the winding down and terminating
of the Project Development Activities, including
amounts payable pursuant to contracts and agreements
entered into by PERIMMUNE prior to receiving notice of
intention to terminate, provided that nothing in this
Section 7.2.1(i) shall cause MENTOR to be liable for
obligations of PERIMMUNE under contracts with
institutions acting as investigators in the clinical
trials conducted pursuant to this Agreement, which
obligations are inconsistent with current industry
practice in the conduct of clinical trials.
MENTOR shall not have the right to the
return of any funds previously expended by it pursuant
to this Agreement; and
MENTOR shall have no rights in the
Product or the Project Information and PERIMMUNE shall
be free to license the right to manufacture, market and
sell the Product to any other persons as PERIMMUNE may
select without further duty or obligation to MENTOR.
Termination by MENTOR With Cause. MENTOR shall be
entitled to terminate this Agreement for cause by giving
PERIMMUNE written notice of intention to terminate, specifying
the effective date of termination not less than ninety (90) days
prior to the effective date of termination, upon the occurrence
of any of the following events:
PERIMMUNE commits a material breach of
its obligations under this Agreement and such material
breach remains uncured for a period of ninety (90) days
after written notice of such default, specifying the
nature thereof, has been given to PERIMMUNE, unless,
prior to the expiration of such ninety (90) day period,
PERIMMUNE has commenced, and thereafter pursues with
diligence to completion, those actions necessary to
cure such default within a reasonable period of time.
PERIMMUNE becomes insolvent or has a
receiver, liquidator, trustee or assignee in bankruptcy
or insolvency appointed, in each case whether by the
voluntary act or otherwise, and, in the case of any
such proceeding that is involuntary, if such proceeding
is not terminated within thirty (30) days thereafter.
An order is made or a resolution is
passed for the winding up or liquidation of PERIMMUNE.
Termination by PERIMMUNE With Cause. PERIMMUNE
shall be entitled to terminate this Agreement for cause by giving
MENTOR written notice of intention to terminate, specifying the
effective date of termination not less than ninety (90) days
prior to the effective date of termination, upon the occurrence
of any of the following events:
MENTOR commits a material breach of its
obligations under this Agreement and such material
breach remains uncured for a period of ninety (90) days
after written notice of such default, specifying the
nature thereof, has been given to MENTOR, unless, prior
to the expiration of such ninety (90) day period,
MENTOR has commenced, and thereafter pursues with
diligence to completion, those actions necessary to
cure such default within a reasonable period of time.
MENTOR becomes insolvent or has a
receiver, liquidator, trustee or assignee in bankruptcy
or insolvency appointed, in each case whether by the
voluntary act or otherwise, and, in the case of any
such proceeding that is involuntary, if such proceeding
is not terminated within thirty (30) days thereafter.
An order is made or a resolution is
passed for the winding up or liquidation of MENTOR.
Procedures on Termination. Upon termination of this
Agreement:
each party shall return to the other party all
Confidential Information (as defined herein) which such other
party shall have supplied to the party and which is in the
party's possession.
the rights and duties of each party under this
Agreement in respect of performance prior to termination shall
survive and be enforceable in accordance with the terms of this
Agreement.
within thirty (30) days of receipt of PERIMMUNE's
invoice therefor, MENTOR will pay PERIMMUNE for all remaining
inventory of the Product for which MENTOR has issued purchase
orders to PERIMMUNE. Upon payment, PERIMMUNE will ship such
inventory to MENTOR at MENTOR's expense, and MENTOR shall be
entitled to continue to market and sell the Product until
MENTOR's inventory of the Product has been disposed of.
If this Agreement has been terminated by reason of
a material breach by PERIMMUNE, adjudicated as provided by
Section 7.4(iv), PERIMMUNE shall continue to be bound by the
provisions of Section 6.1 of this Agreement for the same period
of time during which PERIMMUNE would have been bound had such
termination not occurred.
Procedures on PERIMMUNE's Discontinuance of
Manufacture. MENTOR shall have the right to exercise the license
granted pursuant to Section 4.2, above, if PERIMMUNE (i) abandons
the Project Development Activities without the concurrence of
MENTOR; (ii) discontinues manufacturing the product for valid
business reasons that cannot be remedied within a reasonable
period of time; (iii) is otherwise unable to supply the
requirements of MENTOR for the Product on forecasted delivery
dates, as such requirements and delivery dates are set forth in
the twelve (12) month forecast of purchases submitted by MENTOR
to PERIMMUNE pursuant to Section 6.3(d) of this Agreement for a
period of two successive quarters; or (iv) is in material breach
of this Agreement, which material breach has been determined by a
court of law, which determination has become final and not
subject to further appeal. Upon the occurrence of any such
event, PERIMMUNE shall transfer to MENTOR any necessary
technology, knowledge, know-how, and the rights to the Approvals
for the Product for use in the Indicated Uses, to the extent
necessary or appropriate to enable MENTOR or its alternate
supplier to exercise the license granted under Section 4.2.
MENTOR shall reimburse PERIMMUNE the reasonable out-of-pocket
costs PERIMMUNE incurs in doing so (including salary benefits for
time expended by PERIMMUNE employees) immediately upon receipt of
an invoice therefor. If any such event occurs before the
issuance of an Approval for an Indicated Use, then PERIMMUNE
shall transfer to MENTOR all Project Information relating to such
Indicated Use.
ARTICLE
WARRANTIES
Representations and Warranties of MENTOR. MENTOR
hereby makes the following representations and warranties to
PERIMMUNE, which representations and warranties are true and
correct on the date hereof:
MENTOR is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Minnesota and has all requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated
herein, will (a) violate or conflict with any provision of the
Certificate of Incorporation or By-laws of MENTOR, each as in
effect on the Effective Date; (b) with or without the giving of
notice of the lapse of time or both (i) result in a breach of, or
violate, or be in conflict with or constitute a default under, or
result in the termination or cancellation of, or accelerate the
performance required under, any security instrument, mortgage,
note, debenture, indenture, loan, lease contract, agreement or
other instrument, to which MENTOR is a party or by which it or
any of its properties or assets may be bound or affected, or (ii)
result in the loss or adverse modification of any lease,
franchise, license or other contractual right or other
authorization granted to or otherwise held by MENTOR; (c) require
the consent of any party to any such agreement or commitment to
which MENTOR is a party or by which any of its properties or
assets are bound; (d) result in the creation or imposition of any
lien, claim or encumbrance upon any property or assets of MENTOR;
or (e) require any consent, approval, authorization, order,
filing, registration or qualification of or with any court or
governmental authority or arbitrator to which MENTOR is subject
or by which any of its properties or assets may be bound or
affected, other than Approvals of the Product for the Indicated
Uses, as contemplated herein.
All action to authorize the execution and delivery
of this Agreement and the consummation of the transactions
contemplated herein have been duly taken, and this Agreement
constitutes the valid and binding obligation of MENTOR
enforceable in accordance with its terms.
There are no claims relating to patent
infringement or any other matters, actions, suits, proceedings,
arbitrations or investigations pending or, to the best of
MENTOR's knowledge, threatened, against MENTOR which if adversely
determined would adversely affect MENTOR's ability to sell the
Product for any Indicated Use, or MENTOR's ability to conduct
Product Development or to enter into or carry out this Agreement.
Representations and Warranties of PERIMMUNE. PERIMMUNE
hereby makes the following representations and warranties to
MENTOR, which representations and warranties are true and correct
on the date hereof.
PERIMMUNE is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Delaware and has the power and authority to enter into this
Agreement and perform its obligations hereunder.
Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated
herein, will (a) violate or conflict with any provision of the
Certificate of Incorporation or By-laws of PERIMMUNE, each as in
effect on the Effective Date; (b) with or without the giving of
notice of the lapse of time or both (i) result in a breach of, or
violate, or be in conflict with or constitute a default under, or
result in the termination or cancellation of, or accelerate the
performance required under, any security instrument, mortgage,
note, debenture, indenture, loan, lease contract, agreement or
other instrument, to which PERIMMUNE is a party or by which it or
any of its properties or assets may be bound or affected, or (ii)
result in the loss or adverse modification of any lease,
franchise, license or other contractual right or other
authorization granted to or otherwise held by PERIMMUNE; (c)
require the consent of any party to any such agreement or
commitment to which PERIMMUNE is a party or by which any of its
properties or assets are bound; (d) result in the creation or
imposition of any lien, claim or encumbrance upon any property or
assets of PERIMMUNE; or (e) require any consent, approval,
authorization, order, filing, registration or qualification of or
with any court or governmental authority or arbitrator to which
PERIMMUNE is subject or by which any of its properties or assets
may be bound or affected, other than Approvals of the Product for
the Indicated Uses, as contemplated herein.
All action to authorize the execution and delivery
of this Agreement and the consummation of the transactions
contemplated herein have been duly taken, and this Agreement
constitutes the valid and binding obligation of PERIMMUNE
enforceable in accordance with its terms.
There are no claims relating to patent
infringement or any other matters, actions, suits, proceedings,
arbitrations or investigations pending or, to the best of
PERIMMUNE's knowledge, threatened, against PERIMMUNE which if
adversely determined would adversely affect the use of the
Product for any Indicated Use, or PERIMMUNE's ability to enter
into or carry out this Agreement.
PERIMMUNE, after having made a reasonable
investigation and obtaining the advice of its counsel, (i) has no
knowledge that the manufacture, use, importation or sale of the
Product for the Indicated Uses under this Agreement, either alone
or in combination, infringes any patent or other industrial
property right of a third party; and (ii) has not received any
notification from any third party alleging or suggesting that the
manufacture, use, importation or sale of the Product does or
would infringe any patent or other industrial property.
PERIMMUNE shall disclose to MENTOR any information regarding
adverse patent rights of which it is, or becomes, aware relating
to the Product.
ARTICLE
INDEMNIFICATION
PERIMMUNE Indemnification. PERIMMUNE shall defend,
indemnify and hold harmless MENTOR and its directors, employees,
representatives and agents from and against all suits, claims,
liabilities, damages, demands and costs (including, but not
limited to, reasonable legal expenses) ("Claims") incurred as a
result of:
any claims of or on behalf of third parties for
death or personal injury resulting from the Product; provided,
however, that this indemnity shall not apply to, and PERIMMUNE
shall not be liable for, any such claim caused by or arising
from:
any act or failure on the part of
MENTOR, its Affiliates, or their respective employees,
representatives, agents or subsidiaries (the "MENTOR
Parties") in packaging, handling, storing or otherwise
distributing the Product;
any representation or warranty
concerning the Product made by or on behalf of MENTOR
or any MENTOR Party and not specifically authorized by
PERIMMUNE;
any claim resulting from the use of the
Product by any customer that was not in accordance with
the use presented by PERIMMUNE;
MENTOR's failure to disseminate to
purchasers or end-users any Product information which
PERIMMUNE has made available to MENTOR;
any claim where PERIMMUNE has not been
notified in writing within forty five (45) days of
MENTOR's first notice of this claim;
any claim where MENTOR fails to furnish
evidence in its possession or fails to fully cooperate
with PERIMMUNE in preparing the defense;
any claim that the Product or any activities
hereunder infringe the patent or other intellectual property
rights of any third party provided MENTOR gives PERIMMUNE notice
within forty-five (45) days of MENTOR's first notice of the
claim; provided, however, that the claim is not based on (i) the
sale or use of the Product in combination with any other product
which is not specifically authorized by PERIMMUNE in writing; and
PERIMMUNE's material breach of the terms of this
Agreement.
MENTOR Indemnification. MENTOR shall defend, indemnify
and hold harmless PERIMMUNE and its directors, employees,
representatives and agents from and against all Claims incurred
as a result of:
MENTOR's material breach of the terms of this
Agreement.
Indemnification Proceedings.
Notice of Claims: Assumption of Defense. The
party to be indemnified ("the Indemnified Party") shall give
prompt notice to the other party ("the Indemnifying Party") of
the assertion of any Claim in respect of which indemnity may be
sought hereunder (and in any event within fifteen (15) calendar
days after the service of the citation or summons). It is
understood, however, that the Indemnified Party shall be
authorized and expected to take any such prompt action as may be
reasonably necessary in the circumstances of any proceedings
seeking an injunction or similar equitable relief against it.
The Indemnifying Party may, at its own expense (i) participate in
the defense of any Claim for which it is obligated to indemnify
the Indemnified Party hereunder and (ii) upon notice to the
Indemnified Party at any time during the course of any such
Claim, assume the defense thereof; provided, however, that
(i) the Indemnifying Party's counsel is reasonably satisfactory
to the Indemnified Party and (ii) the Indemnifying Party shall,
upon reasonable request, thereafter consult with the Indemnified
Party from time to time with respect to such Claim. If the
Indemnifying Party assumes such defense, the Indemnified Party
shall have the right (but not the duty) to participate in the
defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party.
Whether or not the Indemnifying Party chooses to defend or
prosecute any such Claim, both parties hereto shall cooperate in
the defense or prosecution thereof.
Settlement or Compromise. Any settlement or
compromise made or caused to be made by the Indemnified Party or
the Indemnifying Party (as the case may be) of any Claim shall be
binding upon the Indemnifying Party or the Indemnified Party (as
the case may be) in the same manner as if a final judgment or
decree has been entered by a court of competent jurisdiction in
the amount of such settlement or compromise; provided however,
that no obligation, restriction or loss shall be imposed on an
Indemnified Party as a result of such settlement without its
prior written consent which consent shall not be unreasonably be
withheld, and such settlement shall include an unconditional
release of the Indemnified Party; and provided further, that the
Indemnified Party shall not make or cause to be made any such
settlement or compromise without the prior written consent of the
Indemnifying Party, which consent shall not unreasonably be
withheld. The Indemnified Party will give the Indemnifying Party
at least thirty (30) days' prior written notice of any proposed
settlement or compromise of any Claim it itself is defending,
during which time the Indemnifying Party may assume the defense
of, and responsibility for, such Claim and, if it does so, the
proposed settlement or compromise may not be made.
Failure of Indemnifying Party to Act. In the
event that the Indemnifying Party does not elect to assume the
defense of any claim or to cause the same to be done, then any
failure of the Indemnified Party to defend or participate in the
defense of any such claim or to cause the same to be done, shall
not relieve the Indemnifying Party of its obligations hereunder;
provided however, that the Indemnified Party shall have given the
Indemnifying Party at least thirty (30) days' notice of its
proposed failure to defend or participate and afford the
Indemnifying Party the opportunity to assume defense thereof
prior to the end of such period.
Procedure for Indemnification. Upon becoming
aware of any claim for indemnification, the Indemnified Party
shall promptly give notice of such claim (a "Claim Notice") to
the Indemnifying Party and will provide, to the extent possible
and without prejudice to the rights of the Indemnified Party
hereunder, a good faith estimate of the amount the Indemnified
Party reasonably anticipates that it will be entitled to on
account of indemnification by the Indemnifying Party. If the
Indemnifying Party does not object to such indemnification claim
within forty-five (45) days of receiving notice thereof, the
Indemnified Party shall be entitled to recover promptly the
amount of such claim (but such recovery shall not limit the
amount of any additional indemnification or other rights to which
the Indemnified Party may be entitled pursuant to this Article
IX). If, however, the Indemnifying Party advises the Indemnified
Party that it disagrees with the Indemnified Party's claim, the
parties shall, for a period of forty five (45) days after the
Indemnifying Party advises the Indemnified Party of such
disagreement, attempt to resolve the difference. If the parties
are unable to reach agreement within such forty five (45) days,
the disagreement shall be resolved pursuant to Section 10.8
hereof.
Limitations. No claim for indemnification shall
be valid unless first made in writing within forty-five (45) days
of the Indemnified Party's first notice of such claim.
ARTICLE
MISCELLANEOUS
Confidentiality.
Confidentiality Defined. For the purposes of this
Agreement, the term "Confidential Information" shall be any
information embodying concepts, ideas, techniques, proprietary
information, know-how, formulations, market data, customer lists,
product specifications and accounting data which:
is disclosed by one party hereto to the
other;
is claimed by the disclosing party to be
secret, confidential and proprietary to the disclosing
party; and
if disclosed in writing, is marked by
the disclosing party to indicate its confidential
nature or, if disclosed orally as confidential, is
confirmed in writing by the disclosing party to be
confidential within ten (10) days following disclosure.
Non-Disclosure. During the period that this
Agreement remains in effect and for a period of three (3) years
following termination hereof, each party (except as is explicitly
otherwise required hereby) shall keep confidential, shall not use
for itself or for the benefit of others and shall not copy or
allow to be copied in whole or in part any Confidential
Information disclosed to such party by the other. The obligation
of confidentiality imposed upon the parties by the foregoing
paragraph shall not apply with respect to any alleged
Confidential Information which:
is known to the recipient thereof, as
evidenced by said recipient's written records, prior to
receipt thereof from the other party hereto;
is disclosed to said recipient after the
date hereof by the third party who has the right to
make such disclosures and who does not violate any
confidentiality agreement with the affected party
hereto;
is or becomes a part of the public
domain through no fault of the said recipient; or
is required by law or judicial or
administrative process to be disclosed.
Non-Disclosure of Relationship. PERIMMUNE and
MENTOR shall agree to keep confidential and not disclose to third
parties, the supply and working relationship under this
Agreement.
Limited Use of Confidential Information. Each
party agrees to limit access to Confidential Information to
employees and agents having a need to know and to protect
Confidential Information to the same extent as it protects its
own trade secrets.
Notices. Any notices or report or other communication
permitted or required under this Agreement shall be in writing
and sent by certified mail, express mail; Federal Express,
postage paid, return receipt requested, addressed to the party to
whom the notice is to be given. All notices, reports or other
communications made hereunder shall be deemed to have been made
on the date postmarked. Changes in address shall be accomplished
by a notice in compliance with this Section 10.2. The current
address for each party is as follows:
PERIMMUNE MENTOR Corporation
1330 Piccard Drive 5425 Hollister Avenue
Rockville, Maryland 20850- Santa Barbara, California
4396 93111
Attn: Dr. Bryan Butman Attn: Mr. Anthony Gette
Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of each of the parties and their
respective heirs, successors, assigns and legal representatives.
Either party may freely assign this Agreement to any Affiliate,
and either party shall have the right to assign its rights and
licenses and to delegate its duties under this Agreement to any
third party who (a) purchases all or substantially all of the
business assets of the assignor or who succeeds to the business
of the assignor by reason of a merger or consolidation and (b)
agrees to assume the duties and obligations of the assignor
hereunder. Except as expressly provided herein, no party hereto
shall have the right to transfer or assign its interest in this
Agreement without the prior written consent of the other party
hereto, which consent may not be unreasonably withheld. The
assignment by either party of any rights under this Agreement
shall not relieve the assigning party from any of its obligations
under this Agreement.
Force Majeure. Neither party shall be liable in
damages for, nor shall this Agreement be terminable or cancelable
by reason of any delay or default in such party's performance
hereunder if such default or delay is caused by events beyond
such party's reasonable control including, but not limited to,
acts of God, regulation or law or other action of any government
or agency thereof, war or insurrection, civil commotion,
destruction or production facilities or materials by earthquakes,
fire, flood or storm, labor disturbances, epidemic, or failure of
supplies, public utilities or common carriers. Each party shall
endeavor to resume its performance hereunder if such performance
is delayed or interrupted by reason of force majeure. Each party
shall notify the other, in writing, not less often than monthly,
of the nature of progress of such endeavors.
Insurance. Each party shall keep in force during the
term of this Agreement, and for a period of three (3) years
following its termination, product liability insurance in such
amounts as may be customary for like-sized businesses undertaking
like responsibilities to those contemplated by this Agreement.
Each party shall submit a certificate of insurance to the other
evidencing such coverage upon written request therefor.
Severability. Should any part of this Agreement be
held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable
part or provision shall be replaced with a provision which
accomplishes, to the extent possible, the original business
purpose of such part or provision in a valid and enforceable
manner, and the remainder of this Agreement shall remain binding
upon the parties.
Waiver. Waiver by either party of a default or breach
or a succession of defaults or breaches, or any failure to
enforce any right hereunder shall not be deemed to constitute a
waiver of any subsequent default or breach with respect to the
same or any other provision hereof, and shall not deprive such
party of any right to terminate this Agreement arising by reason
of any subsequent default or breach.
Mediation. Unless the relief sought requires the
exercise of the equity powers of a court of competent
jurisdiction, neither party shall commence any action or
proceeding to construe or enforce the terms and conditions of
this Agreement unless such party has first given written notice
of its intention to do so and submitted such matter to non-
binding mediation if the other party desires to have the
controversy mediated. Any party who receives from the other
party (a) a notice of default under this Agreement, or a notice
that such other party intends to submit a controversy or dispute
for adjudication, shall have a period of fifteen (15) days after
its receipt of such notice to request that the dispute or
controversy be submitted to mediation, and the failure of the
recipient of any such notice to make a written request for
mediation within such fifteen (15) day period shall be deemed to
have waived its right to require that such matter be submitted to
mediation. The period during which any such matter is being
mediated shall not toll the period during which any party who is
in default in the performance of its obligations under this
Agreement is obligated to remedy or cure such default.
Venue and Jurisdiction. The parties hereto (a)
mutually consent and stipulate that any action or proceeding
commenced to interpret or enforce this Agreement or the rights
and duties of the parties hereunder shall be commenced and
conducted in a state or federal court of competent jurisdiction
situated in the county or judicial district in which the
defendant in such action or proceeding has its corporate
headquarters, (b) each waive any claim that any such state or
federal court is an inconvenient forum, and (c) each irrevocable
agree that any and all actions or proceedings arising out of or
relative to this Agreement or from transactions contemplated
herein shall be exclusively heard only in such state or federal
court.
Governing Law. This Agreement, the construction and
enforcement of its terms, and the interpretation of the rights
and duties of the parties hereunder shall be governed by and
interpreted in accordance with the laws of the State of Maryland
without regard to the choice of law rules utilized in that
jurisdiction.
Costs of Enforcement. Should any action or proceeding
be necessary to construe or enforce this Agreement, then the
party prevailing in any such action or proceeding shall be
entitled to recover all court costs and reasonable attorneys'
fees, to be fixed by the court and taxed as part of any judgment
entered therein, and the costs and fees incurred in enforcing or
collecting any such judgment.
Entire Agreement. This Agreement represents the entire
understanding between the parties as of the Effective Date with
respect to the subject matter hereof, and supersedes all prior
agreements, negotiations, understandings, representations,
statements, and writings, between the parties relating thereto.
No modification, alteration, waiver or change in any of the terms
of this Agreement shall be valid or binding upon the parties
hereto unless made in writing and specifically referring to this
Agreement and duly executed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their duly authorized
representatives as of the day and year first written above.
PERIMMUNE, INC. MENTOR CORPORATION
By: /s/MICHAEL G. HANNA By: /s/CHRISTOPHER CONWAY
Name: Michael G. Hanna Name: Christopher Conway
Title: President Title: Chairman, CEO
MGH/wmh:6/5/97
PerImmune.wp6
MGH/wmh:6/5/97
PerImmune.wp6
DISTRIBUTION AGREEMENT BETWEEN PERIMMUNE, INC.,
AND MENTOR CORP.
This Exclusive Distribution Agreement (hereinafter the
"Agreement") is made in Rockville, Maryland, by and between
PerImmune, Inc. (hereinafter "PERIMMUNE"), a corporation existing
under the laws of Delaware, and MENTOR Corp. (hereinafter
"MENTOR"), a corporation existing under the laws of Minnesota.
WHEREAS, PERIMMUNE desires to sell and/or market its AuraTek-
FDP Bladder Cancer Diagnostic product and MENTOR desires to
purchase PERIMMUNE's product for resale to customers bearing a
trademark or trade name and logo owned by MENTOR; and
WHEREAS, the parties desire to enter into an agreement
setting forth the terms of their relationship,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as
follows:
1. Product. The product of PERIMMUNE covered by this Agreement
is set forth on Exhibit A attached hereto (hereinafter the
"Product") and any future modifications or improvements
thereto. PERIMMUNE reserves the right to modify the Product
from time to time, and shall give MENTOR at least six (6)
months prior written notice before making changes to its
manufacturing process that would have an impact on any of
PERIMMUNE's product verifications or validations, or changes
in raw materials that would alter the operating principle of
the Product or other changes that could impact product
labeling or promotional literature; provided, however, that
PERIMMUNE shall be required to provide MENTOR with only
reasonable advance notice where such modification is
required to comply with any applicable legal or regulatory
requirement or the unanticipated modification or
unavailability of raw material.
2. Appointment and Acceptance. PERIMMUNE hereby grants MENTOR
the exclusive right to distribute the Products in the United
States, and outside the United States (the "Territory").
3. Term and Renewal. The term of this Agreement shall be for a
period of five (5) years, commencing on the Effective Date
(the "Initial Term"). "Effective Date" means the date on
which this Agreement is executed. This Agreement shall
automatically renew for additional and successive terms of
one (1) year unless either party provides written notice on
non-renewal at least six (6) months prior to the close of
the initial Term or any anniversary date thereafter.
4. Terms of Sale.
(a) MENTOR shall fix the price of the individual Product
sold hereunder. On a monthly basis, MENTOR shall pay to
Perimmune, in United States Dollars, fifty percent
(50%) of the Net Sales, as defined below, received by
MENTOR from the sale of the Product, less the Advances,
as hereinafter defined, paid by MENTOR to PerImmune
during such month. For purposes herein, "Advances" shaD
mean an amount equal to 25% of the list price, per kit,
paid by MENTOR to PerImmune within 30 days of MENTOR's
receipt of kits ordered by it. Unless MENTOR and
PerImmune otherwise agree in a writing signed by both
of them, the payment and other provisions set forth in
this Agreement shall supersede those of any subsequent
purchase order, sales confirmation form or other
document hereinafter sent by either party hereto to the
other. For purposes hereof, Net Sales shall mean the
gross invoiced price for the sales of the Products to
Purchasers by MENTOR, its agents or affiliates ("Gross
Sales") less (a) any credits and allowances granted by
MENTOR to purchasers with respect to the Product,
including, without limitation, credits and allowances
on account of price adjustments, returns, discounts,
and chargebacks, (b) any sales, excise, value added,
turnover or similar taxes, and (c) transportation,
insurance and handling expenses if separately invoiced
and directly chargeable to such sales.
(b) Within thirty (30) days after the end of each month
MENTOR shall submit a report to PERIMMUNE setting forth
the (i) cumulative number of kits purchased from
PERIMMUNE through the end of the preceding month (ii)
50% of net sales price for each such kit sold through
the end of the preceding month, (iii) the advances
previously paid for such kits. Each such report shall
be accompanied by payment of the difference between
(ii) and (iii).
(c) Title and risk of loss shall pass to MENTOR upon
release of Product for shipment by PERIMMUNE to the
designated carrier. All freight and applicable
insurance charges shall be the responsibility of MENTOR
PERIMMUNE will be responsible for contracting freight
services, in accordance with Section 8(a) of this
Agreement, for which MENTOR will be billed on a
shipment by shipment basis. Product is subject to
inspection and acceptance by MENTOR upon receipt.
MENTOR shall be deemed to have accepted all shipments
of Product unless rejected for non-conformity with the
Quality Specifications, as hereinafter defined, in
accordance with Article 9 of this Agreement, within
twenty (20) working days after receipt of shipments
from PERIMMUNE.
(d) Unless approved by MENTOR in writing, PERIMMUNE will
not sell any Product to MENTOR as of the effective date
hereof that has less than eighteen (18) months shelf-
life from date of shipment by PERIMMUNE.
5. Termination. Should any of the following events occur, the
affected party may terminate this Agreement by giving
notice, in writing to be effective on the date specified in
the notice, namely,
(a) failure of either party to observe any of the
terms hereof to a material extent and to remedy the
same (where it is capable to being remedied) after
having received reasonable notice from the aggrieved
party and a reasonable opportunity to cure;
(b) either party becoming insolvent or having a receiver
appointed of its assets, or execution or distress
levied upon its assets;
(c) an order being made or a resolution being passed for
the winding up or liquidation of either party;
(d) if PERIMMUNE discontinues manufacturing the product for
va]id business reasons that cannot be remedied during
the term of this Agreement then (i) at the request of
MENTOR, PERIMMUNE shall assist MENTOR in establishing
an alternative source of supply and shall transfer any
necessary technology or knowledge to MENTOR or its
alterative supplier provided that MENTOR reimburses
PERIMMUNE the out-of-pocket costs of doing so
(including salary and benefits for time expended by
PERIMMUNE employees, (ii) or if the discontinuation
occurs during the first three years MENTOR can receive
the return of its investment at its election. Nothing
herein is intended to permit PERIMMUNE to breach its
obligation under the agreement.
6. Procedures on Termination. Upon termination or non-renewal of
this Agreement:
(a) MENTOR shall return to PERIMMUNE all literature which
PERIMMUNE shall have supplied to MENTOR and which is in
its possession.
(b) the rights and duties of each party under this
Agreement in respect of performance prior to
termination or non-renewal shall survive and be
enforceable in accordance with the terms of this
Agreement.
(c) within thirty (30) days of receipt of PERIMMUNE's
invoice therefor, MENTOR will pay PERIMMUNE for all
remaining inventory of Product for which MENTOR has
issued purchase orders to PERIMMUNE. Upon payment,
PERIMMUNE will ship such inventory to MENTOR at
MENTOR's expense.
7. MENTOR's Duties. MENTOR shall:
(a) use best commercial efforts to advertise and promote the
sale of the Product in a manner calculated by MENTOR to
yield benefit to the parties hereto in light of the
prevailing circumstances and to the extent to which any
products are at the relevant time competitive with other
products. MENTOR agrees that during the term of this
Agreement, it will not market any product using the same
technology which detects the same analyte and thereby
directly competes with a Product.
(b) submit its purchase orders to PERIMMUNE in writing or
via facsimile, signed by an authorized representative
of MENTOR.
(c) pay an PERIMMUNE invoices in United States currency by
company check.
(d) submit to PERIMMUNE a twelve (12) month forecast of
purchases delivery dates from PERIMMUNE for the Product
in a format to be mutually determined by the parties.
Said forecast shaD be submitted by MENTOR to PERIMMUNE
within thirty (30) days of commencement of the term of
this Agreement, and quarterly thereafter.
(e) obtain advance written authorization and a Returned
Material Authorization ("RMA") prior to resuming any of
the Product.
(f) maintain a properly framed sales force of adequate size
to represent and promote the sale of the Product and
provide instructions to customers in the use of the
Product. MENTOR shall be responsible for developing its
own marketing plan and system for dispensing the
Product.
(g) carry in stock an inventory of Product sufficient to
promptly fill the orders of MENTOR's customers in the
Territory.
(h) apply for and obtain an necessary licenses, permits and
other authorizations required by local law or
regulation in relation to the promotion, marketing,
distribution and supply of the Product in any
jurisdiction or country in which MENTOR sells the
Product.
(i) pay any import duty or like charge on the entry of the
Product into the Territory and any local or other
applicable taxes.
(j) maintain separate and detailed accurate and complete
records of all transactions in respect of the Product,
including, but not limited to, such records as identify
all customer purchases by Product and serial and/or lot
number, and possess the capability to notify all
purchasers in the event of a Product recall or
corrective action.
(k) defray all expenses of and incidental to the
distribution and sale of Product hereunder incurred by
MENTOR
(l) make no contracts or commitments on behalf of PERIMMUNE
or make any promises or representations or give any
warranties or guarantees with respect to the Product
except as herein expressly permitted or otherwise incur
any liability on behalf of PERIMMUNE without
PERIMMUNE's prior written consent, nor represent itself
as agent or partner of PERIMMUNE.
(m) comply with all laws and regulations and requirements
applicable to a seller of invitro diagnostics products,
and with all laws and regulations and requirements of
governmental agencies having jurisdiction with the
Territory.
(n) except as authorized in writing by PERIMMUNE, refrain
absolutely from using the trademark or trade name and
logo of PERIMMUNE in connection with the marketing,
distribution and sale of any Product.
8. PERIMMUNE's Duties. PERIMMUNE shall:
(a) make reasonable best efforts, in good faith, to ship
MENTOR's orders for Product within thirty (30) days
from date of order receipt. MENTOR shall specify the
method of shipment and insurance and PERIMMUNE shall
make reasonable best efforts, in good faith, to comply
with such specifications. If no such specification is
made, or if the specification cannot be reasonably
complied with after notice to MENTOR and an opportunity
to resolve the issues surrounding PERIMMUNE's alleged
inability to comply, PERIMMUNE may select a reasonable
manner of shipment and insurance.
(b) at the time of shipment, the product will have a
remaining shelflife of not less than 16 months.
(c) will provide up to 12,000 units per year of product at
PERIMMUNE's cost plus shipping charges to be used by
MENTOR for promotional purposes at no reimbursement to
MENTOR.
(d) comply with all laws and regulations and requirements
applicable to PERIMMUNE as a manufacturer of in-vitro
diagnostic products.
(e) except as authorized in writing by MENTOR, refrain
absolutely from using the trademark or trade name and
logo of MENTOR in connection with the marketing,
distribution and sale of any Product.
(f) provide reasonable technical assistance to MENTOR's
personnel necessary for the marketing of the Product.
(g) at PERIMMUNE's expense, provide MENTOR with written
product inserts relating to the Product's use, and with
such amendments thereto as subsequently become
available.
(h) provide necessary documentation to assist MENTOR in
meeting requirements to register Products in the
Territory, and where possible, allow MENTOR to utilize
prior registrations by PERIMMUNE.
(i) provide MENTOR with copies of the 510(k) premarket
notifications submitted for the Product, copies of
current package insert for the Product, copies of
documents describing specifications for the Product,
and copies of all current and future correspondence
with the FDA pertaining to the Product. PERIMMUNE will
comply with the FDA's current GMP regulations in the
manufacture of the Product, if those regulations are
modified to include components of finished devices. If
needed to comply with any change in the law or FDA's
GMP regulations or policies, MENTOR shall be given the
right to inspect PERIMMUNE's manufacturing facilities
and GMP records pertaining to the manufacture of the
Product. If any action should be taken by the FDA to
restrict or prevent the distribution of any of the
Product for more than thirty (30) days, and such
restriction is not due to the negligence of MENTOR,
then upon notice to PERIMMUNE, MENTOR shall have the
right to terminate this Agreement as to such Product.
PERIMMUNE shall replace any affected inventory of
Product under this section or refund to MENTOR the
purchase price it paid to PERIMMUNE for such inventory
if PERIMMUNE is unable to replace the Product with
comparable inventory. PERIMMUNE shall replace or
repurchase any affected inventory of Product which
MENTOR replaces or repurchases from MENTOR's customers,
at the price MENTOR paid PERIMMUNE for such inventory.
IN NO CASE SHALL PERIMMUNE BE LIABLE FOR CONSEQUENTIAL
OR INCIDENTAL DAMAGES.
(i) comply with the Federal Food, Drug, and cosmetic Act.
The Product comprising each shipment or other delivery
hereafter made by PERIMMUNE to, or on the order of,
MENTOR, as of the date of such shipment or delivery,
shall be, on such date, not adulterated or misbranded
within the meaning of the Federal Food, Drug, and
Cosmetic Act.
9. Performance Standards.
(a) Quality Specifications and Characteristics. PERIMMUNE
shall deliver to MENTOR Product having the quality
specifications agreed upon by the parties as set forth
in Exhibit B (the "Quality Specifications").
(b) Certificate of Analysis. Concurrent with shipment,
PERIMMUNE shall fax to MENTOR a Certificate of
Analysis, in the form set forth in Exhibit B, for each
lot of Product sold to MENTOR, confirming that the
Product meets the Quality Specifications.
(c) Product Acceptance. Within twenty (20) working
days of receipt of Product, MENTOR shall take and
conduct analysis of samples of Product delivered by
PERIMMUNE. Should the result of an analysis of such
sample deviate from the Quality Specifications, MENTOR
shall notify PERIMMUNE in accordance with Article 4(c)
hereof and immediately thereafter provide PERIMMUNE
with samples of the Product tested. If following a
review of the test results and after conducting its own
tests of the sample, PERIMMUNE agrees that such sample
does not conform to the Quality Specifications,
PERIMMUNE shall provide MENTOR, free of any additional
charge, with new deliveries of the same quantity of the
Product as the one from which the sample was taken, or,
in PERIMMUNE's discretion and at its cost, PERIMMUNE
may promptly reprocess the nonconforming Product to
meet the Quality Specifications. In either event,
MENTOR shall return, at PERIMMUNE's expense, the
particular lot or shipment of the Product which does
not comply with the Quality Specifications if requested
to do so by PERIMMUNE.
10. Product Recall.
(a) PERIMMUNE shall maintain an appropriate record of all
claims made or to be made regarding the Products
performance.
(b) Each party shall keep the other informed of any formal
action relating to any specific lot of Product sold to
MENTOR hereunder by an regulatory agency of any state,
national government, or government agency having
jurisdiction.
(c) Should any governmental or corporate action require the
recall or field corrections or withholding from market
of Product sold by PERIMMUNE to MENTOR, MENTOR shall
bear the reasonable, direct costs and expenses of
recall or field correction if such recall or field
correction is the result of any fault or omission
attributable to MENTOR and PER~E shall bear the cost of
products and the actual costs of replacing the Product
if such recall or field correction is the result of any
fault or omission attributable to PERIMMUNE. Should
such recall or field correction result from the fault
of both parties, the parties shall share the costs of
Products and the actual cost of replacing the Products
in proportion to their respective degree of fault.
11. Product Complaints.
(a) Should either party experience any quality problem
involving field correction or recall of any specific
lot(s) of Product supplied to MENTOR by PERIMMUNE, such
party will notify the other in writing by facsimile
within twenty-four (24) hours of the initiation of the
field correction or recall. Both parties will test
retained samples of lots in question and report its
findings to the other within ten (10) working days.
Each party retains the right to correct field problems
arising out of its fault or omission as it deems
appropriate, with or without the concurrence of the
other. All information about Product complaints shall
be considered "Confidential Information" under the
terms of the Agreement.
(b) Either party shall immediately notify the other party
in writing should it become aware of any defect or
condition that renders any lot(s) of Product supplied
by PERIMMUNE to MENTOR in violation of the United
States Food, Drug and Cosmetic Act, or of a similar law
of any jurisdiction or country where the Product is
sold. The parties shall share with each other all data
on confirmed lot specific Product complaints including,
but not limited to, complaints or information regarding
performance and/or allegations or reports of any
negative effect from the use or misuse of such affected
lot of Product as soon as such data is available. Each
party will provide reasonable assistance to the other
in resolving customer complaints to the extent the
complaint arises out of any fault or omission of the
party whose assistance is requested. However, MENTOR
shall have sole responsibility and authority to
interact directly with MENTOR's customers in the
resolution of such complaints and PERIMMUNE agrees that
it will only interact with MENTOR in such matters.
(c) PERIMMUNE shall evaluate and investigate all customer
complaints in connection with the Product which may be
brought to its attention, in writing, by MENTOR;
provided such complaints have been confirmed by MENTOR
QA/QC or technical service personnel using the same
standards for confirmation which MENTOR's uses for
products other than the PER~ Product and which are
believe in good faith by MENTOR to arise out of a fault
or omission attributable to PERIMMUNE. Within twenty
(20) calendar days following receipt from MENTOR of the
original notification of each such complaint, PER~E
agrees to provide MENTOR with a written interim or
final complaint investigation report, using the same
standards for evaluation and investigation that P~ uses
for products other than the Product. All such Product
complaints reported to PERIMMUNE by MENTOR shall be
reviewed monthly by PERIMMUNE until closure, and a
summary report thereof will be provided by PERIMMUNE to
MENTOR.
(d) PERIMMUNE will report to MENTOR all data and/or
information pertaining to adverse reports on any lot of
Product supplied by PER~ for distribution by MENTOR
which would have a materially adverse impact on
performance of the Product.
(e) Recalls or field notifications with respect to the
Product, or any of them, shall be the responsibility of
the party whose fault or omission necessitated such
action, as described in Article 10(c).
(f) Should there be a difference of opinion between
PERIMMUNE and MENTOR regarding a field notification or
recall, MENTOR will exercise the right to notify its
customers without delay.
12. Warranties.
(a) PERIMMUNE warrants that the Product which is or will be
the subject of FDA cleared 510(k) premarket
notifications have not been changed or modified in
design, components, method of manufacture or intended
use from the Product as described in those 510(k)
premarket notifications, and will notify MENTOR in
advance of any changes in accordance with Article 1.
(b) PerImmune warrants that the Product manufactured and
supplied under this Agreement shall at the time of
shipment meet the Quality Control Specifications of
PERIMMUNE which are attached to this Agreement as
Exhibit B. No claim under this warranty may be made
with respect to a unit of the Product if shipped or
used after the expiration of the shelf-life of the
Product as determined by PERIMMUNE. PERIMMUNE further
warrants that prior to shipment to MENTOR, all of its
standard tests and quality control procedures have been
carried out in relation to each lot of the Product with
satisfactory results. The limited warranty to MENTOR
set forth in this Agreement shall control over any
warranty provisions which may be set forth in MENTOR's
Product literature and MENTOR shall hold PERIMMUNE
harmless from any and all damages and expenses which
PERIMMUNE may incur as a result of unauthorized MENTOR
warranties or representations. PERIMMUNE MAKES NO
WARRANTIES EXPRESSED OR IMPLIED WITH RESPECT TO THE
PRODUCTS BEYOND THAT WHICH IS SET FORTH IN THIS
AGREEMENT INCLUDING THE WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR ANY PARTICULAR PURPOSE. Any warranty
made by MENTOR to its customers with respect to the
Product shall not obligate PERIMMUNE in any way.
(c) Upon its verification of any claim of defect or
nonconformity of any unit of the Product arising out of
a fault or omission attributable to PERIMMUNE, during
the term of this Agreement, PERIMMUNE will provide
MENTOR with a replacement unit to the extent necessary
to honor PERIMMUNE's warranties contained in Section
12(a) hereof, or make good any shortages or non-
completed deliveries and shall pay all associated
freight and insurance associated therewith.
(d) PERIMMUNE's liability under any legal or equitable
theory to any person with respect to the Product and/or
the relationship described in this Agreement shall be
limited to the replacement of the unit, or if
impractical, return of the purchase price paid by
MENTOR for such unit. PERIMMUNE shall in no event be
liable to MENTOR or any other person for any incidental
or consequential damages, lost profits, cost of
procurement of substitute goods or any indirect,
special, or consequential damages even if PER~E has
been informed of the possibility thereof.
(e) As of the date hereof, PERIMMUNE warrants that it has
no knowledge that the manufacture, use or sale of all
or any of the Product under this Agreement, nor any
method of using such Product infringes on any patent or
other industrial property right of a third party, and
PERIMMUNE has not received any notification from any
third party alleging that the manufacture, use or sale
of any such Product does or would infringe any patent
or other industrial property. PERIMMUNE shall further
disclose all information relating to the art of the
Product of which it is, or becomes, aware relating to
intellectual property, when PERIMMUNE recognizes
necessary to do so.
13. Packaging and Intellectual Property. MENTOR shall be
responsible for packaging and labeling the Product. MENTOR
will distribute the Product only with all appropriate
labeling, packaging, and Product literature and only under
MENTOR's applicable trademarks and trade names. MENTOR
recognizes PERIMMUNE's right, title and interest in its
patents, trademarks, trade names and copyrights, trade
secrets and proprietary information in connection with the
Product, and MENTOR shall not claim any ownership right
thereto inconsistent with this Agreement, or dispute the
validity thereof. In the event any third party shall contest
PERIMMUNE's rights to its patents, trademarks, trade names
or copyrights, trade secrets or propriety rights, MENTOR
shaD, at PERIMMUNE's sole expense, render reasonable
assistance to PER~ in defending such claims.
14. Compliance with other Agreements. Each party represents and
warrants that the execution and delivery by it of this
Agreement and the performance by it of its obligations
hereunder will not, with or without the giving of notice or
the passage of time, violate any judgement, writ, injunction
or order of any court, arbitration or governmental agency or
conflict with, result in the breach of any provisions of, or
the termination of, or constitute a default under, any
agreement to which PERIMMUNE or MENTOR is a party or by
which it is or may be bound.
15. Indemnity.
(a) Except as limited by the remainder of this paragraph,
PERIMMUNE hereby agrees to indemnify MENTOR against
claims of third parties for injuries to their persons
arising from the use of Product supplied by PERIMMUNE
to MENTOR hereunder. This indemnity shall not apply to,
and PERIMMUNE shall not be liable for, claims for
injuries caused by or arising from:
1) any act or failure to act on the part of MENTOR
its employees, representatives, agents, or
subsidiaries in packaging, handling, storing or
otherwise distributing such Product; or
2) any representation or warranty concerning the
Product made by or on behalf of MENTOR and not
specifically authorized by PERIMMUNE; or
3) claims where the use of the Product by any
customer was not in accordance with the use
prescribed by PERIMMUNE; or
4) MENTOR's failure to disseminate to purchasers or
end-users any Product Information which PERIMMUNE
has made available to MENTOR; or
5) claims where PERIMMUNE has not been notified in
writing within forty five (45) days of MENTOR's
first notice of the claim; or
6) claims where MENTOR fails to furnish evidence in
its possession or fails to fully cooperate with
PERIMMUNE in preparing the defense; or
7) claims where PERIMMUNE is not given the option to
assume the sole defense of the claim at
PERIMMUNE's expense; or
(b) PERIMMUNE shall indemnify MENTOR from any claims of
patent infringement relating to a Product subject to
this Agreement provided MENTOR gives PERIMMUNE notice
within forty-five (45) days of MENTOR's first notice of
the claim, and permits PERIMMUNE to assume the sole
defense of the claim at PERIMMUNE's expense; provided,
however, that the claim is not based on (i) the sale or
use of any Product in combination with any other
product which is not specifically authorized by
PERIMMUNE in writing; (ii) the application of any
Product in any manner not specifically authorized by
PERIMMUNE in writing.
(c) MENTOR shall indemnify and hold PERIMMUNE harmless from
and against any third party action brought against
PERIMMUNE and any loss therefrom arising or related to
this Agreement, except as may be caused by the
negligent or willful act of PERIMMUNE.
(d) Not withstanding anything above to the contrary, in the
event of a third party claim arising out of this
Agreement, in which neither PERIMMUNE or MENTOR is in
breach of this Agreement or is negligent, each party
shall pay its respective legal expenses and damages
caused by such claims
16. Fees. MENTOR acknowledges that it will pay $500,000
(USD) to PERIMMUNE in connection with this Agreement,
unless MENTOR elects to take an equity position in
PERIMMUNE.
17. Force Majeure. Neither party shall be responsible for any
failure to perform due to causes beyond its control. These
causes shall include, but not be limited to, fire, storm,
flood, earthquake, explosion, wars, riots, civil disorder,
sabotage, quarantine restrictions, labor disputes, labor
shortages, transportation embargoes, or failure or delays or
disruption in manufacturing process, curtailment of or
failure in obtaining fuel or electrical power, or the acts
of any governmental authority, or instrumentalities, orders
of any court or tribunal whether foreign or domestic,
exchange restrictions, acts of God, acts of the Federal
Government or any agency thereof, acts of any state or local
government or agency thereof, or shortage of materials or
any similar or dissimilar occurrence beyond the reasonable
control of the party which is prevented, interrupted or
delayed in the performance of its obligations hereunder. In
no event shall PER~E be under any obligations to purchase
Products or similar products from any third party in order
to supply same to MENTOR hereunder. Any force majeure event
shall not excuse performance by the party but shall delay
performance, unless such force majeure continues for a
period in excess of ninety (90) days. In such event, the
party seeking performance, as its sole and exclusive remedy,
may cancel its obligations under this Agreement.
18. Insurance. Each party shall keep in force during the term of
this Agreement product liability insurance in such amounts
as may be customary for like sized businesses undertaking
like responsibilities to those contemplated by this
Agreement. Each party shall submit a certificate of
insurance to the other evidencing such coverage upon written
request therefor.
19. Confidentiality.
(a) Confidentiality Defined. For the purposes of this
Agreement, the term "Confidential Information" shall be
any information embodying concepts, ideas, techniques,
proprietary information, know-how, formulations, market
data, customer lists, product specifications and
accounting data which:
1) is disclosed by one party hereto to the other;
2) is claimed by the disclosing party to be secret,
confidential and proprietary to the disclosing
party; and
3) if disclosed in writing, is marked by the
disclosing party to indicate its confidential
nature or if disclosed orally as confidential, is
confirmed in writing by the disclosing party to be
confidential within ten ( 10) days following
disclosure.
(b) Non-Disclosure. During the period that this Agreement
remains in effect and for a period of three (3) years
following termination thereof, each party (except as is
explicitly otherwise required hereby) shall keep
confidential, shall not use for itself or for the
benefit of others and shall not copy or allow to be
copied in whole or in part any Confidential ~formation
disclosed to such party by the other. The obligation of
confidentiality imposed upon the parties by the
foregoing paragraph shall not apply with respect to any
alleged Confidential information which:
(1) is known to the recipient thereof, as
evidenced by said recipient's written
records, prior to receipt thereof from the
other party hereto;
(2) is disclosed to said recipient after the date
hereof by the third party who has the right
to make such disclosures and who does not
violate any confidentiality agreement with
the affected party hereto;
(3) is or becomes a part of the public domain
through no fault of the said recipient; or
(4) is required by law or judicial or
administrative process to be disclosed.
(c) PERIMMUNE and MENTOR shall agree to keep confidential
and not disclose to third parties, the supply and
working relationship under this Agreement.
(d) Each party agrees to limit access to Confidential
~formation to employees and agents having a need to
know and to protect Confidential ~formation to the same
extent as it protects its own trade secrets.
20. Appointment of Sub-Distributors. MENTOR may assign,
sublicense, delegate, or otherwise transfer the performance
of the rights and obligations hereunder to qualified and
reputable sub-distributors, provided, however, that: (i)
MENTOR shall be liable to PERIMMUNE for the errors,
negligent acts and omissions of its sub-distributor's as if
such errors, negligent acts and omissions were its own,
including any breach of any provision of this Agreement by
the sub-distributors; (ii) MENTOR shall have and retain full
control of any sub-distributors utilized, and shall be
responsible for the performance by any sub-distributor; and
(iii) MENTOR shall not be relieved of the responsibility for
the proper performance and completion of the sub-distributed
portions of its obligations hereunder.
21. Successors. This agreement shall be binding upon the
successors of PERIMMUNE and MENTOR, including successors who
acquire the business assets of PERIMMUNE and MENTOR In the
event the Principal(s) of PERIMMUNE shall sell all or a
majority of the outstanding stock of PERIMMUNE, or in the
event PERIMMUNE sells the business relating to the
manufacture and sale for the Product, then the term of this
Agreement may be extended unilaterally by MENTOR for three
(3) successive terms of one (1) year each from the date of
the transfer of the control of PERIMMUNE, or sale of the
Product business, or the date for termination under the
Agreement, whichever is the later, upon the terms of this
Agreement. MENTOR shall give PERIMMUNE written notice of its
intent to extend the term of this Agreement within thirty
(30) days after PERIMMUNE advises MENTOR of the sale of
PERIMMUNE's Product business and at least ninety (90) days
before the end of each one (1) year term.
22. Resolution of Disputes. In the event of any controversy or
claim arising under or in relation to this Agreement,
including any issue about payment of amounts due, the
parties shall, in good faith, attempt to resolve the
controversy or claim by negotiation. If the controversy or
claim cannot be resolved within sixty (60) days, then either
party shall be entitled to initiate litigation to resolve
the dispute unless the parties have mutually agreed to
arbitrate the dispute.
23. Notices. Any notice or other communication required or
that shall be given pursuant to this Agreement shall be
deemed sufficient if delivered personally, sent by
facsimile, telegraph, or sent by certified, registered or
express mail, postage prepaid to the address or facsimile
number set forth below:
To PERIMMUNE:
PERIMMUNE, INC.
1330 Piccard Drive
Rockville, MD 20850-4396
Facsimile No: 301/840-2161
ATTN: President and CEO
MENTOR CORPORATION
5425 Hollister Avenue
Santa Barbara, CA 93111
Facsimile No: 805/967-3362
ATTN: Chairman of the Board, CEO
Either party may change the address to which notice to it is to
be given, as provided herein.
24. Entire Agreement. This Agreement and the exhibits referred
to herein constitute the entire Agreement between the
parties and supersede all prior proposals, communications,
representations and agreements, whether written or oral,
with respect to the subject matter hereof. No change to the
written terms of this Agreement shall be made except by
written instrumentation executed by the parties hereto.
25. No Waiver. The failure of either party to enforce at any
time any of the provisions of this Agreement shall not be
construed to be a waiver of those provisions or of the right
of that party thereafter to enforce those provisions.
26. Severability. If any provision of this Agreement is or
becomes or is deemed invalid, illegal or unenforceable in
any jurisdiction in which the Agreement is sought to be
enforced, (a) such provision shall be deemed and amended to
conform to applicable laws of such jurisdiction so as to be
valid and enforceable or, if it cannot be so amended without
materially altering the intention of the parties, it shall
be stricken; (b) the validity, legality and enforceability
of such provision will not in any way be affected or
impaired thereby in any other jurisdiction; and (c) the
remainder of this Agreement shall remain in full force and
effect.
27. Headings. The headings of this Agreement are included only
for ease of reference and shall not affect the
interpretation of this Agreement in any manner.
28. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION
ENFORCEABLE BY EITHER PARTY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duty authorized officers or authorized
representatives.
PERIMMUNE, INC.
By: /s/MICHAEL G. HANNA
Title: President
Date: June 13, 1997
MENTOR CORPORATION
By: /s/CHRISTOPHER CONWAY
Title: Chairman, CEO
Date: June 13, 1997
10
|DC_DOCS\61191.3||
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and
entered into this 16th day of June, 1997, between PERIMMUNE
HOLDINGS, INC., a Delaware corporation ("Holdings"), and MENTOR
CORPORATION, a Minnesota Corporation ("Purchaser").
WHEREAS, Holdings has authorized the issuance of up to
20 shares of its Series B Convertible Preferred Stock, par value
$0.01 per share having the rights, designations and preferences
set forth in the Certificate of Designation (as defined herein)
(the "Preferred Stock"), with an aggregate liquidation preference
of One Million Dollars ($1,000,000);
WHEREAS, subject to, and in accordance with, the terms
hereof, Holdings desires to issue and sell to Purchaser, and
Purchaser desires to purchase and acquire from Holdings, 20
shares of the Preferred Stock (the "Preferred Shares"); and
WHEREAS, Holdings holds all of the issued and
outstanding shares of capital stock of PERIMMUNE, INC., a
Delaware corporation.
Accordingly, in consideration of the foregoing and of
the mutual promises, covenants, and conditions set forth below,
the parties hereby agree as follows:
1. DEFINITIONS. As used herein, the terms below shall
have the following meanings:
"Affiliate" shall mean any entity controlling,
controlled by or under common control with a Person. For the
purposes of this definition, "control" shall have the meaning
presently specified for that word in Rule 405 promulgated by the
SEC under the Securities Act.
"Agreement" shall mean this Stock Purchase Agreement,
together with all schedules and exhibits referenced herein.
"Applicable Law" means any statute, law, rule, or
regulation or any judgment, order, writ, injunction or decree of
any Governmental Entity to which a specified person or property
is subject.
"Certificate of Designations" means the Certificate of
Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof, of Series B Convertible
Preferred Stock of PerImmune Holdings, Inc., substantially in the
form attached hereto as Exhibit A.
"Claim" has the meaning set forth in Section 8.6 of the
Agreement.
"Claim Notice" has the meaning set forth in Section 8.6
of the Agreement.
"Closing" has the meaning set forth in Section 5.1 of
the Agreement.
"Closing Date" has the meaning set forth in Section 5.1
of the Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code or to the regulations
promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto.
"Common Stock" has the meaning set forth in Section 3.3
of the Agreement.
"Encumbrance" means any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance or
other rights of third parties, and, with respect to any
securities, any agreements, understandings or restrictions
affecting the voting rights or other incidents of record or
beneficial ownership pertaining to such securities.
"Governmental Entity" means any court or tribunal in
any jurisdiction (domestic or foreign) or any public,
governmental, or regulatory body, agency, department, commission,
board, bureau, or other authority or instrumentality (domestic or
foreign).
"Holdings Indemnified Parties" has the meaning set
forth in Section 8.3 of the Agreement.
"Indemnified Parties" means Holdings Indemnified
Parties and Purchaser Indemnified Parties.
"Losses" has the meaning set forth in Section 8.2 of
the Agreement.
"Material Adverse Effect" with respect to any person or
entity shall mean an event, occurrence or condition that has had
or reasonably would be expected to have a material adverse effect
on the business, condition (financial or otherwise), assets,
liabilities, working capital or operations of such person or
entity and its Subsidiaries (if any), taken as a whole.
"Material Agreement" means, with respect to Holdings or
PerImmune:
(a) any contract which involves performance of services or
delivery of goods and/or materials, by or to Holdings or
PerImmune of an amount or value in excess of $500,000;
(b) any note, debenture, other evidence of indebtedness,
guarantee, loan, letter of credit, surety-bond or financing
agreement or instrument or other contract for money
borrowed, including any agreement or commitment for future
loans, credit or financing;
(c) any lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
contract affecting the ownership of, leasing of, title to,
use of, or any leasehold or other interest in, any real
property;
(d) any material licensing agreement or other contract with
respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or
former employees, consultants or contractors regarding the
exploitation, appropriation or the nondisclosure of
Intellectual Property;
(e) any employment agreement, collective bargaining agreement or
other contract to or with any employee or any labor union or
other employee representative of a group of employees
relating to wages, hours, and other conditions of
employment;
(f) any bonus, pension, profit sharing, retirement, stock
purchase, stock option, deferred compensation, medical,
hospitalization or life insurance plan, contract,
understanding with respect to any or all of the employees of
Holdings or PerImmune;
(g) any joint venture contract, partnership agreement, limited
liability company or other contract (however named);
(h) any agreement granting any preemptive right, right of first
refusal or similar right to any Person;
(i) any covenant not to compete or other restriction on the
ability of Holdings or PerImmune to conduct its business or
engage in any other activity;
(j) any agreement not made in the ordinary course of business
that is material to Holdings or PerImmune; and
(k) any amendment, supplement, and modification (whether written
or oral) in respect of any of the foregoing.
"Permits" shall mean all licenses, permits, orders,
consents, approvals, registrations, authorizations,
qualifications and filings required by any federal, state, local
or foreign laws or governmental or regulatory bodies and all
industry or other non-governmental self-regulatory organizations.
"Permitted Encumbrances" means (i) any mechanic's or
materialmen's lien or similar Encumbrances with respect to
amounts not yet due and payable or which are being contested in
good faith by appropriate proceedings and for which appropriate
reserves have been established, (ii) Encumbrances for Taxes not
yet due and payable or which are being contested in good faith by
appropriate proceeding, for which appropriate reserves have been
established, or (iii) easements, licenses, covenants, rights of
way and similar Encumbrances which, individually or in the
aggregate, would not materially and adversely affect the
marketability or value of the property encumbered thereby or
materially interfere with the operations of Holdings or
PerImmune, as applicable.
"Person" means any individual, copartner, association,
partnership, joint venture, limited liability company, trust,
estate or other entity or organization.
"Preferred Shares" has the meaning set forth in the
Recital hereto.
"Preferred Stock" has the meaning set forth in the
Recital hereto.
"Proprietary Right" has the meaning set forth in
Section 3.15 of the Agreement.
"Purchase Price" has the meaning set forth in Section 2
of the Agreement.
"Purchaser Indemnified Party" has the meaning set forth
in Section 8.2 of the Agreement.
"Registration Rights Agreement" means the Registration
Rights Agreement by and among Holdings and Purchaser
substantially in the form attached hereto as Exhibit B.
"Return" or "Returns" means all returns, declarations,
reports, statements, and other documents required to be filed in
respect of Taxes.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which at least a majority in interest of the
outstanding voting stock (having by the terms thereof voting
power under ordinary circumstances to elect a majority of the
directors of such corporation, irrespective of whether or not at
the time stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening
of any contingency) is at the time, directly or indirectly, owned
or controlled by such Person, by one or more Subsidiaries of such
Person, or by such Person and one or more of its Subsidiaries, or
(b) any corporate or non-corporate entity in which such Person,
one or more Subsidiaries of such Person, or such Person and one
or more Subsidiaries of such Person, directly or indirectly, at
the date of determination thereof, has an ownership interest and
100% of the revenue of which is included in the consolidated
financial reports of such Person consistent with generally
accepted accounting principles.
"Tax" or "Taxes" means any federal, state, local,
foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or
charges of any kind whatever, together with any interest and any
penalties, additions to tax, or additional amounts with respect
thereto.
"Third Party Notice" has the meaning set forth in
Section 8.6 of the Agreement.
2. ISSUANCE AND SALE OF THE PREFERRED SHARES. At the
Closing, Holdings will issue and sell to Purchaser, and Purchaser
will purchase and acquire from Holdings, the Preferred Shares for
an aggregate purchase price of One Million Dollars ($1,000,000)
(the "Purchase Price"). The Preferred Shares will have the
respective rights, preferences and privileges set forth in
Holdings' Certificate of Incorporation as amended by the
Certificate of Designations.
3. REPRESENTATIONS AND WARRANTIES OF HOLDINGS. Holdings
makes the following representations and warranties to Purchaser:
3.1. Organization. Holdings is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Delaware and has full power and authority to
conduct its business as currently conducted and to enter into and
perform this Agreement.
3.2. Authorization. The execution, delivery and performance
of this Agreement and the filing of the Certificate of
Designations by Holdings have been duly authorized by all
necessary corporate action on the part of Holdings. This
Agreement has been duly executed by Holdings and delivered to
Purchaser and constitutes the legal, valid and binding obligation
of Holdings, enforceable in accordance with its terms except as
its enforceability may be limited by bankruptcy, insolvency, or
other laws affecting creditors' rights generally and the exercise
of judicial discretion in accordance with general equitable
principles and as provisions for indemnification, contribution or
waiver of statutory or other rights or remedies may be limited by
public policy considerations.
3.3. Authorization of Issuance. Upon issuance by Holdings
as contemplated herein and payment by Purchaser of the
consideration therefor described herein, the Preferred Shares
will be duly authorized, validly issued, fully paid and
nonassessable. Upon completion of the transaction contemplated
hereunder, the shares of common stock, par value $0.01 per share
of Holdings (the "Common Stock") will be duly authorized and
reserved for issuance and, upon conversion in accordance with the
terms of the Preferred Stock, will be validly issued, fully paid
and nonassessable and will not be subject to any preemptive or
similar rights, except as set forth on Schedule 3.3.
3.4. No Breach. None of (i) the execution, delivery and
performance of this Agreement by Holdings, (ii) the consummation
of this Agreement and all other documents or instruments related
thereto or executed in connection therewith or in contemplation
of the transaction hereunder, or (iii) Holdings' compliance with
the terms and conditions hereof will, with or without the giving
of notice or the lapse of time or both, conflict with, breach the
terms and conditions of, constitute a default under, or violate
Holdings' Certificate of Incorporation or Bylaws or any judgment,
decree, order or Material Agreement to which Holdings is a party
or by which Holdings is legally bound, or any law, rule or
regulation applicable to Holdings.
3.5. Capitalization.
(a) The authorized capital stock of Holdings consists of 3,000
shares of Common Stock and 1,000 shares of preferred stock, of
which 100 shares have been designated Series A Convertible
Preferred Stock and 20 shares have been designated Preferred
Stock. As of the date hereof, 593.5 shares of Common Stock are
outstanding and 100 shares of preferred stock (which have been
designated Series A Convertible Preferred Stock) are outstanding.
As of the date hereof, 255 shares of Common Stock are reserved
for issuance upon exercise of outstanding options to purchase
shares of Common Stock and 100 shares of Common Stock are
reserved for issuance upon the conversion of the 100 shares of
outstanding Series A Convertible Preferred Stock. Except as set
forth on Schedule 3.5 hereto, Holdings does not have outstanding
any other stock or securities convertible or exchangeable for any
shares of its capital stock or containing any profit
participation features, nor does it have outstanding any rights,
options or warrants to subscribe for or to purchase its capital
stock or any stock or securities convertible into or exchangeable
for its capital stock or any stock appreciation rights or phantom
stock plans, nor has it reserved any shares of capital stock for
issuance upon exercise or conversion of any rights, options or
warrants to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its
capital stock. Holdings is not a party to any agreement which
requires Holdings to repurchase or otherwise acquire or retire
any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except as set forth on the
Schedule 3.5.
(b) Except as set forth on Schedule 3.5, there are no statutory
or contractual stockholders' preemptive rights or rights of
refusal with respect to the issuance of capital stock of
Holdings. Except as set forth on Schedule 3.5, there are no
agreements to which Holdings or any holders of the capital stock
of Holdings is a party with respect to the voting or transfer of
the capital stock of Holdings.
(c) All of the outstanding shares of Holdings' capital stock are
duly authorized, validly issued, fully paid and nonassessable
with the rights specified in Holdings' Certificate of
Incorporation, and free of liens or restrictions other than as
stated herein.
3.6. Consents and Approvals. Except as set forth on
Schedule 3.6, no consent, approval, order, authorization of, or
declaration, filing, or registration with, any Governmental
Entity is required to be obtained or made by Holdings in
connection with the execution and delivery by Holdings of this
Agreement or the consummation of the transaction contemplated
hereby, other than any such consent, approval, order,
authorization, declaration, filing or registration , the failure
of which to seek or maintain does not individually or in the
aggregate, have a Material Adverse Effect on Holdings. No
consent or approval of any person other than any Governmental
Entity is required to be obtained or made by Holdings in
connection with the execution and delivery by Holdings of this
Agreement or the consummation of the transaction contemplated
hereby.
3.7. Subsidiaries.
(a) Other than PerImmune, Inc., Holdings does not own, directly
or indirectly, capital stock or other securities of any
corporation or partnership or have any direct or indirect equity
ownership interest in any other Person.
(b) PerImmune, Inc. is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware and has full power and authority to conduct its business
as currently conducted.
(c) The authorized capital stock of PerImmune, Inc. consists of
100,000 shares of Common Stock. As of the date hereof, 1,000
shares of Common Stock are outstanding. Except as set forth on
Schedule 3.7, PerImmune, Inc. does not have outstanding any other
stock or securities convertible or exchangeable for any shares of
its capital stock or containing any profit participation
features, nor does it have outstanding any rights, options or
warrants to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom stock
plans, nor has it reserved any shares of capital stock for
issuance upon exercise or conversion of any rights, options or
warrants to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its
capital stock. PerImmune, Inc. is not a party to any agreement
which requires it to repurchase or otherwise acquire or retire
any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock.
3.8. Private Offering. No form of general solicitation or
general advertising was used by Holdings or its representatives
in connection with the offer or sale of the Preferred Shares.
Assuming the accuracy of the representations and warranties of
Purchaser in Section 4.5 hereof, no registration of the Preferred
Shares pursuant to the provisions of the Securities Act or any
state securities or "blue sky" laws will be required by the
offer, sale or issuance of the Preferred Shares pursuant to this
Agreement.
3.9. Liabilities. Except as set forth on Schedule 3.9,
Holdings has no material liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise and whether
matured or unmatured) relating to its business that are of a
nature required to be set forth on a balance sheet in accordance
with GAAP, except (i) liabilities or obligations reflected and
reserved for on the balance sheet dated December 31, 1996, (ii)
liabilities or obligations incurred since December 31, 1996 in
the ordinary course of business, (iii) liabilities which have
been disclosed herein or in the schedules hereto, or (iv)
liabilities arising under or contemplated by this Agreement.
3.10. Compliance With Laws. Except as set forth on
Schedule 3.10, (i) each of Holdings and PerImmune is in
compliance with all Applicable Laws other than violations which
do not, and will not, individually or in the aggregate, have a
Material Adverse Effect on Holdings or PerImmune, as the case may
be; (ii) each of Holdings and PerImmune has obtained and holds
all material permits, licenses, variances, exemptions, orders,
franchises, approvals and authorizations of all Governmental
Entities necessary for the lawful conduct of its business or the
lawful ownership, use and operation of its assets, except when
the failure to do so does not and will not, individually or in
the aggregate, have a Material Adverse Effect on Holdings or
PerImmune, as the case may be; and (iii) neither Holdings nor
PerImmune has received any written notice of violation of any
Applicable Law, which has not been dismissed or otherwise
disposed of, that Holdings or PerImmune (as applicable) has not
so complied other than with respect to violations of Applicable
Law which do not, and will not, individually or in the aggregate,
have a Material Adverse Effect on Holdings or PerImmune, as the
case may be.
3.11. Litigation. Except as set forth on Schedule 3.11,
(i) neither Holdings or PerImmune nor any of their respective
assets is a party or subject to any filed litigation or
arbitration proceeding; and (ii) neither Holdings nor PerImmune
has received written notice of any governmental investigation or
proceeding involving Holdings, PerImmune or any of their
respective assets, nor to their knowledge is any litigation
threatened.
3.12. Tax Matters. Except as otherwise set forth on
Schedule 3.12,
(a) There have been properly completed and filed on a timely
basis and in correct form all Returns required to be filed on or
prior to the date hereof, except for any Returns, the failure of
which to file, would not have a Material Adverse Effect on
Holdings or PerImmune, as applicable. As of the time of filing,
the foregoing Returns correctly reflected the facts regarding the
income, business, assets, operations, activities, status, or
other matters of Holdings or PerImmune, as applicable, or any
other information required to be shown thereon.
(b) With respect to all amounts in respect of Taxes imposed on
Holdings or PerImmune or for which Holdings or PerImmune is or
could be liable, whether to taxing authorities (as, for example,
under law) or to other persons or entities (as, for example,
under tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before the date
hereof, all applicable tax laws and agreements have been fully
complied with, and all such amounts required to be paid by
Holdings or PerImmune, as applicable, to taxing authorities or
others on or before the date hereof have been paid, except for
such laws and agreements, the failure with which to comply, and
such amounts the failure of which to pay, would not have a
Material Adverse Effect on Holdings or PerImmune, as applicable.
3.13. Title to Assets, Etc. Except for Permitted
Encumbrances, each of Holdings and PerImmune has good and
marketable title to or valid and subsisting leasehold interests
in all assets material to their businesses as currently
conducted and, except as set forth on Schedule 3.13, none of the
material assets is subject to any Encumbrance, except for
Encumbrances which, individually or in the aggregate, are not
substantial in amount and do not materially detract from the
value of the property or assets of Holdings or PerImmune (as
applicable) or interfere with the present use of such property or
assets (taken as a whole) and have not arisen other than in the
ordinary course of business. Each of Holdings and PerImmune has
in all material respects performed all the obligations required
to be performed by it with respect to all material assets leased
by it through the date hereof, except where the failure to
perform would not have a Material Adverse Effect on Holdings or
PerImmune (as applicable). All such leases are valid, binding
and enforceable with respect to Holdings or PerImmune (as
applicable) in accordance with their terms and are in full force
and effect; no event of default has occurred which constitutes a
default thereunder on the part of Holdings or PerImmune (as
applicable) and neither Holdings nor PerImmune has knowledge of
the occurrence of any event of default which constitutes a
default thereunder by any other party which defaults are
reasonably likely to have a Material Adverse Effect on it.
3.14. Contracts; No Defaults.
(a) Schedule 3.14 contains a listing of each Material Agreement.
True, correct and complete copies of each Material Agreement have
been delivered to or made available to Purchaser and its agents
and representatives.
(b) Except as set forth on Schedule 3.14, all of the Material
Agreements of Holdings and PerImmune are (i) in full force and
effect, (ii) represent the legal, valid and binding obligations
of Holdings or PerImmune, as applicable, and are enforceable
against Holdings or PerImmune, as applicable, in accordance with
their terms and (iii) to the best knowledge of Holdings or
PerImmune, as applicable, represent the legal, valid and binding
obligations of the other parties thereto and are enforceable
against such parties in accordance with their terms. Except as
set forth on Schedule 3.14, no condition exists or event has
occurred which, with notice or lapse of time or both, would
constitute a material default or a basis for force majeure or the
claim of excusable delay or nonperformance under such Material
Agreements.
3.15. Intellectual Property.
(a) Each of Holdings and PerImmune either owns or has valid
licenses or other rights to use all patents, copyrights,
trademarks, software, databases, data, other technical
information used in their businesses as presently conducted
("Proprietary Rights"), subject to the limitations contained in
the agreements governing the use of the same, with such
exceptions as would not result in a Material Adverse Effect on
Holdings. There are no limitations contained in the agreements of
the type described in the immediately preceding sentence which,
upon consummation of the transaction contemplated hereunder, will
alter or impair any such rights, breach any such agreement with
any third party vendor, or require payments of additional sums
thereunder, except any such limitations that would not have a
Material Adverse Effect on Holdings or PerImmune, as applicable.
Each of Holdings and PerImmune is in compliance in all material
respects with such licenses and agreements and, except as set
forth on Schedule 3.15, there are no pending or, to the best
knowledge of Holdings, threatened proceedings challenging or
questioning the validity or effectiveness of any license or
agreement relating to such property or the right of Holdings or
PerImmune to use, copy, modify or distribute the same.
(b) No person has a right, other than those set forth on
Schedule 3.15 to receive a royalty or similar payment in respect
of any material Proprietary Rights whether or not pursuant to any
contractual arrangements entered into by Holdings or PerImmune.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
makes the following representations and warranties to Holdings:
4.1. Organization. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Minnesota, and has full power and authority to
conduct its business as currently conducted and to enter into and
perform this Agreement.
4.2. Authorization. The execution, delivery and performance
of this Agreement by Purchaser have been duly authorized by all
necessary corporate action on the part of Purchaser. This
Agreement has been duly executed by Purchaser and delivered to
Holdings and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms except as
its enforceability may be limited by bankruptcy, insolvency or
other laws affecting creditors' rights generally and the exercise
of judicial discretion in accordance with general equitable
principles.
4.3. No Breach. None of (i) the execution, delivery and
performance of this Agreement by Purchaser, (ii) the consummation
of this Agreement and all other documents or instruments related
thereto or executed in connection therewith or in contemplation
of the transaction hereunder, or (iii) Purchaser's compliance
with the terms and conditions hereof will, with or without the
giving of notice or the lapse of time or both, conflict with,
breach the terms and conditions of, constitute a default under,
or violate Purchaser's charter or Bylaws, or any judgment,
decree, order or material agreement to which Purchaser is a party
or by which Purchaser is legally bound, or any law, rule or
regulation applicable to Purchaser.
4.4. Consents and Appeals. Except as set forth on Schedule
4.4, no consent, approval, order or authorization of, or
declaration, filing or registration with, any Government Entity
is required to be obtained or made by Purchaser in connection
with the execution and delivery by Purchaser of this Agreement or
the consummation of the transaction contemplated hereby. No
consent or approval of any person other than any Governmental
Entity is required to be obtained or made by Purchaser in
connection with the execution and delivery by Purchaser of this
Agreement or the consummation of the transaction contemplated
hereby.
4.5. Sophistication, Purchase for Own Account.
(a) Sophistication, etc. Purchaser is knowledgeable,
sophisticated and experienced in business and financial matters;
is able to bear the economic risks of its investment in the
Preferred Shares and is presently able to afford the complete
loss of such investment; and has been afforded access to
information about Holdings and its financial condition, results
of operations, business, property, management and prospects
sufficient to enable it to evaluate its investment in Holdings.
Purchaser represents that it is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act").
(b) Purchase for Own Account. The Preferred Shares, and the
shares of Common Stock to be issued upon conversion of the
Preferred Shares, are being or will be acquired by Purchaser (as
applicable) for its own account and with no intention of
distributing or reselling such securities or any part thereof in
any transaction that would be in violation of the Securities Act
or the securities laws of any state, without prejudice, however,
to the rights of Purchaser at all times to sell or otherwise
dispose of all or any part of the Preferred Shares or the shares
of Common Stock issuable upon conversion of the Preferred Shares
under an effective registration statement under the Securities
Act or pursuant to an exemption from such registration available
under the Securities Act, and subject, nevertheless, to the
disposition of such Purchaser's property being at all times
within its control. If Purchaser should in the future decide to
dispose of any of the Preferred Shares or the shares of Common
Stock issuable upon conversion of the Preferred Shares, Purchaser
understands and agrees that it may do so only in compliance with
the Securities Act and applicable state securities laws, as then
in effect. Such Purchaser agrees to the imprinting, so long as
required by law, of a legend on certificates representing all of
the Preferred Shares or the shares of Common Stock to be issued
upon conversion of the Preferred Shares to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS.
5. CLOSING.
5.1. Closing Date. The consummation of the purchase of the
Preferred Shares contemplated hereby (the "Closing") shall take
place within thirty days of the date hereof (the "Closing Date").
The Closing shall take place at the offices of PerImmune
Holdings, Inc. at 1330 Piccard Drive, Rockville, Maryland, and
shall be effective as of 12:01 a.m. on the Closing Date.
5.2. Performance at Closing. The following deliveries shall
be made at Closing:
5.2.1. By Purchaser. Purchaser shall deliver to
Holdings:
(a) To an account designated by Holdings, the Purchase
Price by wire transfer of immediately available funds; and
(b) Such other documents as may be reasonably requested by
Holdings' counsel.
5.2.2. By Holdings. Holdings shall deliver to Purchaser:
(a) A certificate evidencing the Preferred Shares, which
shall be registered in Purchaser's name; and
(b) Such other documents as may be reasonably requested by
Purchaser's counsel.
5.3. Other Documents and Acts.
(a) The parties will execute such other documents and perform
such other acts, after the Closing Date, as may be necessary for
the complete implementation and consummation of this Agreement.
(b) At Closing, Holdings and the Purchaser will execute and
deliver the Registration Rights Agreement.
5.4. Certificates; Opinions. At Closing, the Purchaser and
Holdings will deliver the certificates and opinion of counsel
specified in Sections 6.1(c) and 6.2(c)-(d), respectively, in
form and substance reasonably satisfactory to the parties'
respective counsel.
6. CONDITIONS TO CLOSING.
6.1. Conditions to Holdings' Obligations. The obligations
of Holdings to consummate the transaction contemplated hereby on
the Closing Date is subject to the satisfaction or waiver on or
prior to the Closing Date, of each of the following conditions:
(a) Consents. All Permits and waivers from Governmental
Entities and all consents, approvals, permits and waivers from
other parties necessary to permit Purchaser and Holdings to
consummate the transaction contemplated hereby, shall have been
obtained, unless the failure to obtain any such Permit or waiver
from a Governmental Entity or any other consent, approval, permit
or waiver would not have a Material Adverse Effect upon Holdings.
(b) No Governmental or Other Proceedings or Litigation. There
shall be no injunction or court order restraining consummation of
the transaction contemplated hereunder and there shall be no
pending or threatened action or proceeding by or before a court
or governmental body brought by or on behalf of any Governmental
Entity seeking to restrain or invalidate all or any portion of
the transactions contemplated hereunder, and there shall not have
been adopted any law or regulation making all or any portion of
the transaction contemplated hereunder illegal.
(c) Certificates. Purchaser will furnish Holdings with such
certificates, in form and substance satisfactory to Holdings, of
the Chief Executive Officer and the Secretary of Purchaser and
others to evidence compliance with the conditions set forth in
this Article 6.
6.2. Conditions to Purchaser's Obligations. The obligation
of Purchaser to consummate the transaction contemplated hereby on
the Closing Date is subject to the satisfaction or waiver on or
prior to the Closing Date of each of the following conditions:
(a) Consents. All Permits and waivers from Governmental
Entities and all consents, approvals, permits and waivers from
other parties necessary to permit Purchaser and Holdings to
consummate the transaction contemplated hereby, shall have been
obtained, unless the failure to obtain any such Permit or waiver
from a Governmental Entity or any other consent, approval, permit
or waiver would not have a Material Adverse Effect upon Holdings
or Purchaser.
(b) No Governmental or Other Proceedings or Litigation. There
shall be no injunction or court order restraining consummation of
the transaction contemplated hereunder and there shall be no
pending or threatened action or proceeding by or before a court
or governmental body brought by or on behalf of any Governmental
Entity seeking to restrain or invalidate all or any portion of
the transactions contemplated hereunder, and there shall not have
been adopted any law or regulation making all or any portion of
the transaction contemplated hereunder illegal.
(c) Opinion of Counsel. Holdings shall have delivered to
Purchaser the opinion of Latham & Watkins, counsel to Holdings,
with respect to the matters set forth on Exhibit C hereto.
(d) Certificates. Holdings shall furnish Purchaser with such
certificates, in form and substance satisfactory to Purchaser, of
the Chief Executive Officer and the Secretary of Holdings and
others to evidence compliance with the conditions set forth in
this Article 6.
(e) Certificate of Designations. Holdings shall have adopted
the Certificate of Designations, the Certificate of Designations
shall have been appropriately filed with the Secretary of State
of Delaware and Holdings shall have provided the Purchaser with
evidence of such adoption and filing.
7. ADDITIONAL AGREEMENTS OF PURCHASER AND HOLDINGS.
7.1. Prohibition on Sale; Right of First Offer.
(a) Purchaser hereby covenants and agrees that it will not sell,
transfer, convey, assign, pledge, hypothecate or otherwise
dispose of the Preferred Shares (or any interest therein) without
the prior written consent of Holdings (which consent will not be
unreasonably withheld).
(b) Notwithstanding Section 7.1(a) above, in the event that a
Qualifying IPO (as defined in the Certificate of Designations),
does not occur within nine months after the date hereof,
Purchaser may at any time thereafter offer to sell or otherwise
dispose of all or any portion of the Preferred Shares to any
Person other than Holdings in accordance with the provisions
below. If Purchaser finds a buyer ("Buyer") for the Preferred
Shares, Purchaser shall notify Holdings of its intent to sell or
otherwise dispose of the Preferred Shares to Buyer. Purchaser
shall set forth in the notice to Holdings the name of Buyer and
the terms and conditions of the proposed sale or other
disposition, and Holdings shall thereafter have fifteen days
after delivery of such notice to notify Purchaser whether or not
it will purchase the Preferred Shares on the same terms and
conditions set forth in the notice. If Holdings accepts the
offer, then Holdings shall purchase the Preferred Shares under
the same terms and conditions offered to Buyer, except that
Holdings must make the payment for the Preferred Shares within
thirty days after accepting the offer to purchase the Preferred
Shares. If Holdings declines to accept the offer or if it
accepts the offer but fails to purchase the Preferred Shares
within the requisite time frame, then Purchaser may sell the
Preferred Shares to Buyer or any other buyer at any time
thereafter so long as the terms and conditions of such sale or
other disposition are no more favorable to Buyer or other buyer
as set forth in the notice to Holdings. In the event that the
proposed purchase price to Buyer or other buyer is later adjusted
to a price lower than the price originally set forth in the
written notice to Holdings, Purchaser must provide a second
written notice to Holdings setting forth the lower price and
giving Holdings another opportunity to purchase the Offered
Shares for the lower price; if Holdings accepts the new offer to
purchase the Preferred Shares at the lower price it must pay the
purchase price within ten days after receipt of the second notice
from Purchaser.
7.2. Lock-Up Agreement; Sale After Lock-Up Period.
(a) Purchase hereby covenants and agrees that it will sign any
reasonable "lock-up" letter with terms and conditions
substantially the same as any lock-up letter that certain
officers, directors or other significant stockholders are
requested to sign restricting Purchaser's ability to sell,
transfer, convey, assign, pledge, hypothecate, or otherwise
dispose of securities of Holdings for a period of up to 180 days
after a Qualifying IPO (the "Lock-Up Period"), as may be
requested by underwriters in connection with such Qualifying IPO.
(b) After the Lock-Up Period, if any, Purchaser may sell or
otherwise dispose of Common Stock of Holdings at any time without
restriction (other than under applicable law) so long as: (i)
the net proceeds of any such sale or sales do not exceed the
Purchase Price, (ii) Purchaser provides ten days' prior written
notice to Holdings prior to any such sale, and (iii) Holdings is
given the opportunity to purchase the subject securities from
Purchaser at the prevailing market price during such ten-day
period.
(c) After the Lock-Up Period and so long as the distribution
agreement, dated June 16, 1997, between Holdings and Purchaser
remains in effect, Purchaser may also sell or otherwise dispose
of additional securities of Holdings (beyond the number of shares
allowed under Section 7.2(b)) at the prevailing market price so
long as: (i) Purchaser provides Holdings with three business
days' prior notice each time it intends to sell any additional
securities, (ii) Holdings is given the opportunity to purchase
such additional securities during said three business day period,
and (iii) following any such sale, Purchaser continues to hold at
least fifty percent (50%) of the shares of Common Stock initially
held by Purchaser upon conversion of the Preferred Stock in
connection with the Qualifying IPO. Upon termination or
expiration of said distribution agreement or in the event that
Holdings is in material default thereunder and the default is not
cured within 30 days, Purchaser may at any time sell any
additional securities of Holdings in its possession without the
restrictions set forth above.
(d) For the purpose of this Section 7.2, the term "market price"
shall mean (i) the average of the closing price of a share of
common stock on the principal exchange on which shares of common
stock are then trading, if any, during such ten-day period, or
(ii) if such common stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, (1) the
average, during such ten day period, of the last sales price (if
the common stock is then listed as a National Market Issue under
the Nasdaq National Market System) or (2) the average of the mean
between the closing representative bid and asked prices for each
day during such ten-day period (in all other cases) for common
stock as reported by Nasdaq or such successor quotation system,
or (iii) if the common stock is not publicly traded on an
exchange and not quoted on Nasdaq or a successor quotation
system, the average of the mean between the closing bid and asked
prices for the common stock for each day during the ten day
period.
7.3. Reservation of Shares. Until all Preferred Shares are
no longer outstanding due to conversion or otherwise, Holdings
shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issue or
delivery upon conversion of the Preferred Shares as provided in
the Certificate of Designations, the maximum number of shares of
Common Stock that may be issuable or deliverable upon such
conversion. Such shares of Common Stock shall, when issued or
delivered in accordance with the provisions of the Certificate of
Designations, be duly authorized, validly issued and fully paid
and non-assessable. Holdings shall issue such Common Stock in
accordance with the provisions of the Certificate of Designations
and shall otherwise comply with the terms thereof.
7.4. Registration Rights Agreement. On the Closing Date,
Holdings and Purchaser shall enter into the Registration Rights
Agreement.
8. INDEMNIFICATION.
8.1. Survival of Representations, Etc. The representations,
warranties, covenants and agreements of the parties hereto
contained herein, shall survive the Closing, but, other than
those contained in Section 3.1, 3.3, 3.5 and 7.1 through 7.4,
shall terminate on the date twelve months from the Closing Date;
provided, however, that there shall be no such termination with
respect to any representation or warranty as to which a bona fide
claim has been asserted prior to such date.
8.2. Indemnification by Holdings. Holdings shall indemnify
and hold harmless Purchaser and its Affiliates, directors,
officers, advisors, agents and employees (the "Purchaser
Indemnified Parties") to the fullest extent lawful, from and
against any and all demands, losses, damages, penalties, claims,
liabilities, obligations, actions, causes of action, and
reasonable expenses (including without limitation, costs of
investigating, preparing or defending any such claim or action
and reasonable legal fees and expenses) (collectively, "Losses"),
arising by reason of or resulting from any breach of any
warranty, representation, covenant or agreement of Holdings
contained in this Agreement or in any certificate delivered
pursuant thereto; provided, however, that no Purchaser
Indemnified Party shall be entitled to indemnification by
Holdings hereunder with respect to any Losses arising solely from
the bad faith or gross negligence (as finally determined by a
court of competent jurisdiction) of such Purchaser Indemnified
Party or any Affiliate, director, officer, agent, or employee of
such Purchaser Indemnified Party.
8.3. Indemnification by Purchaser. Purchaser shall
indemnify and hold harmless Holdings and its Affiliates,
directors, officers, advisors, agents and employees (the
"Holdings Indemnified Parties") to the fullest extent lawful,
from and against any and all Losses arising by reason of or
resulting from any breach of any warranty, representation,
covenant or agreement of such Purchaser contained in this
Agreement or in any certificate delivered pursuant thereto,
provided, however, that no Holdings Indemnified Party shall be
entitled to indemnification by Purchaser hereunder with respect
to any Losses arising solely from the bad faith or gross
negligence (as finally determined by a court of competent
jurisdiction) of such Holdings Indemnified Party, or any
Affiliate, director, officer, agent or employee of such Holdings
Indemnified Party.
8.4. Losses. The term "Losses" as used in this Section 8 is
not limited to matters asserted by third parties, but includes
Losses incurred or sustained by an Indemnified Party in the
absence of third party claims. Payments by an Indemnified Party
of amounts for which such Indemnified Party is indemnified
hereunder shall not necessarily be a condition precedent to
recovery.
8.5. Defense of Claims. If a claim for Losses (a "Claim")
is to be made by an Indemnified Party, such Indemnified Party
shall give written notice (a "Claim Notice") to the indemnifying
party as soon as practicable after such Indemnified Party becomes
aware of any fact, condition or event which may give rise to
Losses for which indemnification may be sought under this Section
8. If any lawsuit or enforcement action is filed against any
Indemnified Party hereunder, notice thereof (a "Third Party
Notice") shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) calendar days
after the service of the citation or summons). The failure of
any Indemnified Party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent
that the indemnifying party demonstrates actual damage caused by
such failure. After receipt of a Third Party Notice, if the
indemnifying party shall acknowledge in writing to the
Indemnified Party that the indemnifying party shall be obligated
under the terms of its indemnity hereunder in connection with
such lawsuit or action, then the indemnifying party shall be
entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice to handle and defend the same,
at the indemnifying party's cost, risk and expense unless the
named parties to such action or proceeding include both the
indemnifying party and the Indemnified Party and the Indemnified
Party has been advised in writing by counsel that there may be
one or more legal defenses available to such Indemnified Party
that are different from or additional to those available to the
indemnifying party, and (iii) to compromise or settle such claim,
which compromise or settlement shall be made only with the
written consent of the Indemnified Party, such consent not to be
unreasonably withheld. The Indemnified Party shall cooperate in
all reasonable respects with the indemnifying party and such
attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; and the Indemnified
Party may, at its own cost, participate in the investigation,
trial and defense of such lawsuit or action and any appeal
arising therefrom and appoint its own counsel therefor, at its
own cost. The parties shall also cooperate with each other in
any notifications to insurers. If the indemnifying party fails
to assume the defense of such claim within fifteen (15) calendar
days after receipt of the Third Party Notice, the Indemnified
Party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have
the right to undertake the defense, compromise or settlement of
such claim and the indemnifying party shall have the right to
participate therein at its own cost; provided, however, that such
claim shall not be compromised or settled without the written
consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the Indemnified Party
assumes the defense of the claim the Indemnified Party will keep
the indemnifying party reasonably informed of the progress of any
such defense, compromise or settlement. Notwithstanding the
foregoing, the indemnifying party shall not be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys at any time for any and all Indemnified Parties (which
firm shall be designated in writing by such Indemnified Party or
Parties) in connection with any one such action or proceeding
arising out of the same general allegations or circumstances.
8.6. Tax Treatment of Indemnity. The parties agree that any
indemnification payments made pursuant to this Agreement shall be
treated for Tax purposes as an adjustment to the consideration
for the purchase of the Preferred Shares, unless otherwise
required by applicable law, in which event indemnification
payments shall be made in an amount sufficient to indemnify the
party on a net after-Tax basis.
9. GENERAL PROVISIONS.
9.1. Expenses. Except as otherwise provided herein, all
expenses involved in the preparation and consummation of this
Agreement shall be borne by the party incurring the same whether
or not the transaction contemplated hereby is consummated.
9.2. Notices. All notices, requests, demands, and other
communications pertaining to this Agreement shall be in writing
and shall be deemed duly given when delivered personally (which
shall include delivery by Federal Express or other nationally
recognized, reputable overnight courier service that issues a
receipt or other confirmation of delivery) to the party for whom
such communication is intended, or three (3) business days after
the date mailed by certified or registered U.S. mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to Purchaser:
Mentor Corporation
5425 Hollister Avenue
Santa Barbara, CA 93111
Attn: General Counsel
(b) If to Holdings:
PerImmune, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attn: Michael G. Hanna, Jr., Ph.D.
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attn: Bruce E. Rosenblum
Any party may change its address for notices by notice to the
other given pursuant to this Section 9.
9.3. Brokers. Each party represents and warrants to the
other that no agent, broker, investment banker, or other person
or firm acting on behalf of such party or any of its affiliates
or under the authority of any of them is or will be entitled to
any broker's or finder's fee or any other commission or similar
fee in connection with the transaction contemplated hereby, other
than Craigie Incorporated, whose fees will be solely the
responsibility of Holdings.
9.4. Waiver. Unless otherwise specifically agreed in
writing to the contrary: (i) the failure of either party at any
time to require performance by the other of any provision of this
Agreement shall not affect such party's right thereafter to
enforce the same; (ii) no waiver by either party of any default
by any other shall be valid unless in writing and acknowledged by
an authorized representative of the non-defaulting party, and no
such waiver shall be taken or held to be a waiver by such party
of any other preceding or subsequent default; and (iii) no
extension of time granted by either party for the performance of
any obligation or act by any other party shall be deemed to be an
extension of time for the performance of any other obligation or
act hereunder.
9.5. Entire Agreement. This Agreement, the exhibits and
schedules hereto (which are incorporated by reference herein)
constitute the entire agreement between the parties with respect
to the subject matter hereof and referenced herein, supersede and
terminate any prior agreements between the parties (written or
oral). This Agreement may not be altered or amended except by an
instrument in writing signed by the party against whom
enforcement of any such change is sought.
9.6. Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures
on each such counterpart were on the same instrument.
9.7. Construction. The Section headings of this Agreement
are for convenience only and in no way modify, interpret or
construe the meaning of specific provisions of the Agreement.
9.8. Severability. If any one or more of the provisions
contained in this Agreement should be found invalid, illegal or
unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. Any illegal or
unenforceable term shall be deemed to be void and of no force and
effect only to the minimum extent necessary to bring such term
within the provisions of applicable law and such term, as so
modified, and the remaining provisions of this Agreement shall
then be fully enforceable.
9.9. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland
without regard to the choice of law rules utilized in that
jurisdiction.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed by a respective duly authorized officer
as of the date first written above.
PERIMMUNE HOLDINGS, INC.
By: /s/MICHAEL G. HANNA
Michael G. Hanna, President
MENTOR CORPORATION
By: /s/CHRISTOPHER CONWAY
Name: Christopher Conway
Title: Chairman, CEO
SCHEDULES AND EXHIBITS
The Registrant will make the following schedules and
exhibits available upon request:
Schedule 3.3 Pre-emptive Rights
Schedule 3.5 Capitalization
Schedule 3.6 Consent and Approvals
Schedule 3.7 Subsidiaries
Schedule 3.9 Liabilities
Schedule 3.10 Non-compliance with Laws
Schedule 3.11 Litigation
Schedule 3.12 Tax Matters
Schedule 3.13 Title to Assets
Schedule 3.14 Contracts
Schedule 3.15 Intellectual Property
Exhibit A Form of Certificate of
Designations, Preferences and
Relative, Participating
Optional and other Special
Rights and Qualifications,
Limitations and Restrictions
Thereof of Series B
Convertible Preferred Stock of
Perimmune Holdings, Inc.
Exhibit B Form of Registration Rights
Agreement.
DC_DOCS\84553.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and
entered into this 22nd day of December, 1997, between PERIMMUNE
HOLDINGS, INC., a Delaware corporation ("Holdings"), and MENTOR
CORPORATION, a Minnesota Corporation ("Purchaser").
WHEREAS, Purchaser currently holds 20 shares of Series
B Convertible Preferred Stock, par value $0.01 per share of
Holdings which have certain rights, designations and preferences
set forth in the Certificate of Designations (as defined herein)
(the "Preferred Stock");
WHEREAS, subject to, and in accordance with, the terms
hereof, Holdings desires to issue and sell to Purchaser, and
Purchaser desires to purchase and acquire from Holdings, 100
shares of the Preferred Stock with an aggregate liquidation
preference of Five Million Dollars ($5,000,000) (the "Preferred
Shares"); and
WHEREAS, Holdings holds all of the issued and
outstanding shares of capital stock of PERIMMUNE, INC., a
Delaware corporation.
Accordingly, in consideration of the foregoing and of
the mutual promises, covenants, and conditions set forth below,
the parties hereby agree as follows:
I.
DEFINITIONS
As used herein, the terms below shall have the
following meanings:
"Affiliate" shall mean any entity controlling,
controlled by or under common control with a Person. For the
purposes of this definition, "control" shall have the meaning
presently specified for that word in Rule 405 promulgated by the
SEC under the Securities Act.
"Agreement" shall mean this Stock Purchase Agreement,
together with all schedules and exhibits referenced herein.
"Amended and Restated Registration Rights Agreement"
means the Amended and Restated Registration Rights Agreement by
and among Holdings and Purchaser substantially in the form
attached hereto as Exhibit A.
"Applicable Law" means any statute, law, rule, or
regulation or any judgment, order, writ, injunction or decree of
any Governmental Entity to which a specified person or property
is subject.
"Certificate of Amendment" means the Certificate of
Amendment to the Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions
Thereof, of Series B Convertible Preferred Stock of PerImmune
Holdings, Inc., increasing the number of authorized shares of
Preferred Stock (as defined herein), substantially in the form
attached hereto as Exhibit B.
"Certificate of Designations" means the Certificate of
Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof, of Series B Convertible
Preferred Stock of PerImmune Holdings, Inc., constituting a
portion of the Certificate of Incorporation.
"Certificate of Incorporation" means the Certificate of
Incorporation of Holdings as amended from time to time and as in
effect on the date hereof.
"Claim" has the meaning set forth in Section 8.6 of the
Agreement.
"Claim Notice" has the meaning set forth in Section 8.6
of the Agreement.
"Closing" has the meaning set forth in Section 5.1 of
the Agreement.
"Closing Date" has the meaning set forth in Section 5.1
of the Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code or to the regulations
promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto.
"Common Stock" has the meaning set forth in Section 3.3
of the Agreement.
"Encumbrance" means any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance or
other rights of third parties, and, with respect to any
securities, any agreements, understandings or restrictions
affecting the voting rights or other incidents of record or
beneficial ownership pertaining to such securities.
"Governmental Entity" means any court or tribunal in
any jurisdiction (domestic or foreign) or any public,
governmental, or regulatory body, agency, department, commission,
board, bureau, or other authority or instrumentality (domestic or
foreign).
"Holdings Indemnified Parties" has the meaning set
forth in Section 8.3 of the Agreement.
"Indemnified Parties" means Holdings Indemnified
Parties and Purchaser Indemnified Parties.
"Losses" has the meaning set forth in Section 8.2 of
the Agreement.
"Material Adverse Effect" with respect to any person or
entity shall mean an event, occurrence or condition that has had
or reasonably would be expected to have a material adverse effect
on the business, condition (financial or otherwise), assets,
liabilities, working capital or operations of such person or
entity and its Subsidiaries (if any), taken as a whole.
"Material Agreement" means, with respect to Holdings or
PerImmune:
(a) any contract which involves performance of
services or delivery of goods and/or materials, by or to
Holdings or PerImmune of an amount or value in excess of
$500,000;
(b) any note, debenture, other evidence of
indebtedness, guarantee, loan, letter of credit, surety-bond
or financing agreement or instrument or other contract for
money borrowed, including any agreement or commitment for
future loans, credit or financing;
(c) any lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and
other contract affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real
property;
(d) any material licensing agreement or other
contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with
current or former employees, consultants or contractors
regarding the exploitation, appropriation or the
nondisclosure of Intellectual Property;
(e) any employment agreement, collective
bargaining agreement or other contract to or with any
employee or any labor union or other employee representative
of a group of employees relating to wages, hours, and other
conditions of employment;
(f) any bonus, pension, profit sharing,
retirement, stock purchase, stock option, deferred
compensation, medical, hospitalization or life insurance
plan, contract, understanding with respect to any or all of
the employees of Holdings or PerImmune;
(g) any joint venture contract, partnership
agreement, limited liability company or other contract
(however named);
(h) any agreement granting any preemptive right,
right of first refusal or similar right to any Person;
(i) any covenant not to compete or other
restriction on the ability of Holdings or PerImmune to
conduct its business or engage in any other activity;
(j) any agreement not made in the ordinary course
of business that is material to Holdings or PerImmune; and
(k) any amendment, supplement, and modification
(whether written or oral) in respect of any of the
foregoing.
"Permits" shall mean all licenses, permits, orders,
consents, approvals, registrations, authorizations,
qualifications and filings required by any federal, state, local
or foreign laws or governmental or regulatory bodies and all
industry or other non-governmental self-regulatory organizations.
"Permitted Encumbrances" means (i) any mechanic's or
materialmen's lien or similar Encumbrances with respect to
amounts not yet due and payable or which are being contested in
good faith by appropriate proceedings and for which appropriate
reserves have been established, (ii) Encumbrances for Taxes not
yet due and payable or which are being contested in good faith by
appropriate proceeding, for which appropriate reserves have been
established, or (iii) easements, licenses, covenants, rights of
way and similar Encumbrances which, individually or in the
aggregate, would not materially and adversely affect the
marketability or value of the property encumbered thereby or
materially interfere with the operations of Holdings or
PerImmune, as applicable.
"Person" means any individual, copartner, association,
partnership, joint venture, limited liability company, trust,
estate or other entity or organization.
"Preferred Shares" has the meaning set forth in the
Recital hereto.
"Preferred Stock" has the meaning set forth in the
Recital hereto.
"Proprietary Right" has the meaning set forth in
Section 3.15 of the Agreement.
"Purchase Price" has the meaning set forth in Section 2
of the Agreement.
"Purchaser Indemnified Party" has the meaning set forth
in Section 8.2 of the Agreement.
"Return" or "Returns" means all returns, declarations,
reports, statements, and other documents required to be filed in
respect of Taxes.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which at least a majority in interest of the
outstanding voting stock (having by the terms thereof voting
power under ordinary circumstances to elect a majority of the
directors of such corporation, irrespective of whether or not at
the time stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening
of any contingency) is at the time, directly or indirectly, owned
or controlled by such Person, by one or more Subsidiaries of such
Person, or by such Person and one or more of its Subsidiaries, or
(b) any corporate or non-corporate entity in which such Person,
one or more Subsidiaries of such Person, or such Person and one
or more Subsidiaries of such Person, directly or indirectly, at
the date of determination thereof, has an ownership interest and
100% of the revenue of which is included in the consolidated
financial reports of such Person consistent with generally
accepted accounting principles.
"Tax" or "Taxes" means any federal, state, local,
foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or
charges of any kind whatever, together with any interest and any
penalties, additions to tax, or additional amounts with respect
thereto.
"Third Party Notice" has the meaning set forth in
Section 8.5 of the Agreement.
II.
ISSUANCE AND SALE OF THE PREFERRED SHARES
At the Closing, Holdings will issue and sell to
Purchaser, and Purchaser will purchase and acquire from Holdings,
the Preferred Shares for an aggregate purchase price of Five
Million Dollars ($5,000,000) (the "Purchase Price"). The
Preferred Shares will have the respective rights, preferences and
privileges set forth in the Certificate of Incorporation as
amended by the Certificate of Designations and the Supplemental
Certificate of Designations.
III.
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings makes the following representations and
warranties to Purchaser:
3.1. Organization. Holdings is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Delaware and has full power and authority to
conduct its business as currently conducted and to enter into and
perform this Agreement.
3.2. Authorization. The execution, delivery and performance
of this Agreement and the filing of the Supplemental Certificate
of Designations by Holdings have been duly authorized by all
necessary corporate action on the part of Holdings. This
Agreement has been duly executed by Holdings and delivered to
Purchaser and constitutes the legal, valid and binding obligation
of Holdings, enforceable in accordance with its terms except as
its enforceability may be limited by bankruptcy, insolvency, or
other laws affecting creditors' rights generally and the exercise
of judicial discretion in accordance with general equitable
principles and as provisions for indemnification, contribution or
waiver of statutory or other rights or remedies may be limited by
public policy considerations.
3.3. Authorization of Issuance. Upon issuance by Holdings
as contemplated herein and payment by Purchaser of the
consideration therefor described herein, the Preferred Shares
will be duly authorized, validly issued, fully paid and
nonassessable. Upon completion of the transaction contemplated
hereunder, the shares of common stock to be issued upon
conversion of the Preferred Shares, par value $0.01 per share of
Holdings (the "Common Stock") will be duly authorized and
reserved for issuance and, upon conversion in accordance with the
terms of the Preferred Stock, will be validly issued, fully paid
and nonassessable and will not be subject to any preemptive or
similar rights, except as set forth on Schedule 3.3.
3.4. No Breach. Except as set forth on Schedule 3.4, none
of (i) the execution, delivery and performance of this Agreement
by Holdings, (ii) the consummation of this Agreement and all
other documents or instruments related thereto or executed in
connection therewith or in contemplation of the transaction
hereunder, or (iii) Holdings' compliance with the terms and
conditions hereof will, with or without the giving of notice or
the lapse of time or both, conflict with, breach the terms and
conditions of, constitute a default under, or violate Holdings'
Certificate of Incorporation or Bylaws or any judgment, decree,
order or Material Agreement to which Holdings is a party or by
which Holdings is legally bound, or any law, rule or regulation
applicable to Holdings.
3.5. Capitalization.
(a) The authorized capital stock of Holdings
consists of 3,000 shares of Common Stock and 1,000 shares of
preferred stock, of which 100 shares have been designated
Series A Convertible Preferred Stock and 20 shares have been
designated Preferred Stock. As of the date hereof, 601.5
shares of Common Stock are outstanding and 120 shares of
preferred stock (of which 100 shares have been designated
Series A Convertible Preferred Stock and 20 have been
designated Preferred Stock) are outstanding. As of the date
hereof, 257 shares of Common Stock are reserved for issuance
upon exercise of outstanding options to purchase shares of
Common Stock, 100 shares of Common Stock are reserved for
issuance upon the conversion of the 100 shares of
outstanding Series A Convertible Preferred Stock and 20
shares of Common Stock are reserved for issuance upon the
conversion of the 20 shares of outstanding Preferred Stock.
Except as set forth on Schedule 3.5 hereto, Holdings does
not have outstanding any other stock or securities
convertible or exchangeable for any shares of its capital
stock or containing any profit participation features, nor
does it have outstanding any rights, options or warrants to
subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom
stock plans, nor has it reserved any shares of capital stock
for issuance upon exercise or conversion of any rights,
options or warrants to subscribe for or to purchase its
capital stock or any stock or securities convertible into or
exchangeable for its capital stock. Holdings is not a party
to any agreement which requires Holdings to repurchase or
otherwise acquire or retire any shares of its capital stock
or any warrants, options or other rights to acquire its
capital stock, except as set forth on the Schedule 3.5.
(b) Except as set forth on Schedule 3.5, there
are no statutory or contractual stockholders' preemptive
rights or rights of refusal with respect to the issuance of
capital stock of Holdings. Except as set forth on Schedule
3.5, there are no agreements to which Holdings or any
holders of the capital stock of Holdings is a party with
respect to the voting or transfer of the capital stock of
Holdings.
(c) All of the outstanding shares of Holdings'
capital stock are duly authorized, validly issued, fully
paid and nonassessable with the rights specified in
Holdings' Certificate of Incorporation, and free of liens or
restrictions other than as stated herein.
3.6. Consents and Approvals. Except as set forth on
Schedule 3.6, no consent, approval, order, authorization of, or
declaration, filing, or registration with, any Governmental
Entity is required to be obtained or made by Holdings in
connection with the execution and delivery by Holdings of this
Agreement or the consummation of the transaction contemplated
hereby, other than any such consent, approval, order,
authorization, declaration, filing or registration, the failure
of which to seek or maintain does not individually or in the
aggregate, have a Material Adverse Effect on Holdings. No
consent or approval of any person other than any Governmental
Entity is required to be obtained or made by Holdings in
connection with the execution and delivery by Holdings of this
Agreement or the consummation of the transaction contemplated
hereby.
3.7. Subsidiaries.
(a) Other than PerImmune, Inc., Holdings does not
own, directly or indirectly, capital stock or other
securities of any corporation or partnership or have any
direct or indirect equity ownership interest in any other
Person.
(b) PerImmune, Inc. is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power and
authority to conduct its business as currently conducted.
(c) The authorized capital stock of PerImmune,
Inc. consists of 100,000 shares of Common Stock. As of the
date hereof, 1,000 shares of Common Stock are outstanding.
Except as set forth on Schedule 3.7, PerImmune, Inc. does
not have outstanding any other stock or securities
convertible or exchangeable for any shares of its capital
stock or containing any profit participation features, nor
does it have outstanding any rights, options or warrants to
subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom
stock plans, nor has it reserved any shares of capital stock
for issuance upon exercise or conversion of any rights,
options or warrants to subscribe for or to purchase its
capital stock or any stock or securities convertible into or
exchangeable for its capital stock. PerImmune, Inc. is not
a party to any agreement which requires it to repurchase or
otherwise acquire or retire any shares of its capital stock
or any warrants, options or other rights to acquire its
capital stock.
3.8. Private Offering. No form of general solicitation or
general advertising was used by Holdings or its representatives
in connection with the offer or sale of the Preferred Shares.
Assuming the accuracy of the representations and warranties of
Purchaser in Section 4.5 hereof, no registration of the Preferred
Shares pursuant to the provisions of the Securities Act or any
state securities or "blue sky" laws will be required by the
offer, sale or issuance of the Preferred Shares pursuant to this
Agreement.
3.9. Liabilities. Except as set forth on Schedule 3.9,
Holdings has no material liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise and whether
matured or unmatured) relating to its business that are of a
nature required to be set forth on a balance sheet in accordance
with GAAP, except (i) liabilities or obligations reflected and
reserved for on the balance sheet dated December 31, 1996, (ii)
liabilities or obligations incurred since December 31, 1996 in
the ordinary course of business, (iii) liabilities which have
been disclosed herein or in the schedules hereto, or (iv)
liabilities arising under or contemplated by this Agreement.
3.10. Compliance With Laws. Except as set forth on
Schedule 3.10, (i) each of Holdings and PerImmune is in
compliance with all Applicable Laws other than violations which
do not, and will not, individually or in the aggregate, have a
Material Adverse Effect on Holdings or PerImmune, as the case may
be; (ii) each of Holdings and PerImmune has obtained and holds
all material permits, licenses, variances, exemptions, orders,
franchises, approvals and authorizations of all Governmental
Entities necessary for the lawful conduct of its business or the
lawful ownership, use and operation of its assets, except when
the failure to do so does not and will not, individually or in
the aggregate, have a Material Adverse Effect on Holdings or
PerImmune, as the case may be; and (iii) neither Holdings nor
PerImmune has received any written notice of violation of any
Applicable Law, which has not been dismissed or otherwise
disposed of, that Holdings or PerImmune (as applicable) has not
so complied other than with respect to violations of Applicable
Law which do not, and will not, individually or in the aggregate,
have a Material Adverse Effect on Holdings or PerImmune, as the
case may be.
3.11. Litigation. Except as set forth on Schedule 3.11,
(i) neither Holdings nor PerImmune nor any of their respective
assets is a party or subject to any filed litigation or
arbitration proceeding; and (ii) neither Holdings nor PerImmune
has received written notice of any governmental investigation or
proceeding involving Holdings, PerImmune or any of their
respective assets, nor to their knowledge is any litigation
threatened.
3.12. Tax Matters. Except as otherwise set forth on
Schedule 3.12,
(a) There have been properly completed and filed
on a timely basis and in correct form all Returns required
to be filed on or prior to the date hereof, except for any
Returns, the failure of which to file, would not have a
Material Adverse Effect on Holdings or PerImmune, as
applicable. As of the time of filing, the foregoing Returns
correctly reflected the facts regarding the income,
business, assets, operations, activities, status, or other
matters of Holdings or PerImmune, as applicable, or any
other information required to be shown thereon.
(b) With respect to all amounts in respect of
Taxes imposed on Holdings or PerImmune or for which Holdings
or PerImmune is or could be liable, whether to taxing
authorities (as, for example, under law) or to other persons
or entities (as, for example, under tax allocation
agreements), with respect to all taxable periods or portions
of periods ending on or before the date hereof, all
applicable tax laws and agreements have been fully complied
with, and all such amounts required to be paid by Holdings
or PerImmune, as applicable, to taxing authorities or others
on or before the date hereof have been paid, except for such
laws and agreements, the failure with which to comply, and
such amounts the failure of which to pay, would not have a
Material Adverse Effect on Holdings or PerImmune, as
applicable.
3.13. Title to Assets, Etc. Except for Permitted
Encumbrances, each of Holdings and PerImmune has good and
marketable title to or valid and subsisting leasehold interests
in all assets material to their businesses as currently conducted
and, except as set forth on Schedule 3.13, none of the material
assets is subject to any Encumbrance, except for Encumbrances
which, individually or in the aggregate, are not substantial in
amount and do not materially detract from the value of the
property or assets of Holdings or PerImmune (as applicable) or
interfere with the present use of such property or assets (taken
as a whole) and have not arisen other than in the ordinary course
of business. Each of Holdings and PerImmune has in all material
respects performed all the obligations required to be performed
by it with respect to all material assets leased by it through
the date hereof, except where the failure to perform would not
have a Material Adverse Effect on Holdings or PerImmune (as
applicable). All such leases are valid, binding and enforceable
with respect to Holdings or PerImmune (as applicable) in
accordance with their terms and are in full force and effect; no
event of default has occurred which constitutes a default
thereunder on the part of Holdings or PerImmune (as applicable)
and neither Holdings nor PerImmune has knowledge of the
occurrence of any event of default which constitutes a default
thereunder by any other party which defaults are reasonably
likely to have a Material Adverse Effect on it.
3.14. Contracts; No Defaults.
(a) Schedule 3.14 contains a listing of each
Material Agreement. True, correct and complete copies of
each Material Agreement have been delivered to or made
available to Purchaser and its agents and representatives.
(b) Except as set forth on Schedule 3.14, all of
the Material Agreements of Holdings and PerImmune are (i) in
full force and effect, (ii) represent the legal, valid and
binding obligations of Holdings or PerImmune, as applicable,
and are enforceable against Holdings or PerImmune, as
applicable, in accordance with their terms and (iii) to the
best knowledge of Holdings or PerImmune, as applicable,
represent the legal, valid and binding obligations of the
other parties thereto and are enforceable against such
parties in accordance with their terms. Except as set forth
on Schedule 3.14, no condition exists or event has occurred
which, with notice or lapse of time or both, would
constitute a material default or a basis for force majeure
or the claim of excusable delay or nonperformance under such
Material Agreements.
3.15. Intellectual Property.
(a) Each of Holdings and PerImmune either owns or
has valid licenses or other rights to use all patents,
copyrights, trademarks, software, databases, data, other
technical information used in their businesses as presently
conducted ("Proprietary Rights"), subject to the limitations
contained in the agreements governing the use of the same,
with such exceptions as would not result in a Material
Adverse Effect on Holdings. There are no limitations
contained in the agreements of the type described in the
immediately preceding sentence which, upon consummation of
the transaction contemplated hereunder, will alter or impair
any such rights, breach any such agreement with any third
party vendor, or require payments of additional sums
thereunder, except any such limitations that would not have
a Material Adverse Effect on Holdings or PerImmune, as
applicable. Each of Holdings and PerImmune is in compliance
in all material respects with such licenses and agreements
and, except as set forth on Schedule 3.15, there are no
pending or, to the best knowledge of Holdings, threatened
proceedings challenging or questioning the validity or
effectiveness of any license or agreement relating to such
property or the right of Holdings or PerImmune to use, copy,
modify or distribute the same.
(b) No person has a right, other than those set
forth on Schedule 3.15 to receive a royalty or similar
payment in respect of any material Proprietary Rights
whether or not pursuant to any contractual arrangements
entered into by Holdings or PerImmune.
IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser makes the following representations and
warranties to Holdings:
4.1. Organization. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Minnesota, and has full power and authority to
conduct its business as currently conducted and to enter into and
perform this Agreement.
4.2. Authorization. The execution, delivery and performance
of this Agreement by Purchaser have been duly authorized by all
necessary corporate action on the part of Purchaser. This
Agreement has been duly executed by Purchaser and delivered to
Holdings and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms except as
its enforceability may be limited by bankruptcy, insolvency or
other laws affecting creditors' rights generally and the exercise
of judicial discretion in accordance with general equitable
principles.
4.3. No Breach. None of (i) the execution, delivery and
performance of this Agreement by Purchaser, (ii) the consummation
of this Agreement and all other documents or instruments related
thereto or executed in connection therewith or in contemplation
of the transaction hereunder, or (iii) Purchaser's compliance
with the terms and conditions hereof will, with or without the
giving of notice or the lapse of time or both, conflict with,
breach the terms and conditions of, constitute a default under,
or violate Purchaser's charter or Bylaws, or any judgment,
decree, order or material agreement to which Purchaser is a party
or by which Purchaser is legally bound, or any law, rule or
regulation applicable to Purchaser.
4.4. Consents and Appeals. Except as set forth on Schedule
4.4, no consent, approval, order or authorization of, or
declaration, filing or registration with, any Government Entity
is required to be obtained or made by Purchaser in connection
with the execution and delivery by Purchaser of this Agreement or
the consummation of the transaction contemplated hereby. No
consent or approval of any person other than any Governmental
Entity is required to be obtained or made by Purchaser in
connection with the execution and delivery by Purchaser of this
Agreement or the consummation of the transaction contemplated
hereby.
4.5. Sophistication, Purchase for Own Account.
(a) Sophistication, etc. Purchaser is
knowledgeable, sophisticated and experienced in business and
financial matters; is able to bear the economic risks of its
investment in the Preferred Shares and is presently able to
afford the complete loss of such investment; and has been
afforded access to information about Holdings and its
financial condition, results of operations, business,
property, management and prospects sufficient to enable it
to evaluate its investment in Holdings. Purchaser
represents that it is an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act").
(b) Purchase for Own Account. The Preferred
Shares, and the shares of Common Stock to be issued upon
conversion of the Preferred Shares, are being or will be
acquired by Purchaser (as applicable) for its own account
and with no intention of distributing or reselling such
securities or any part thereof in any transaction that would
be in violation of the Securities Act or the securities laws
of any state, without prejudice, however, to the rights of
Purchaser at all times to sell or otherwise dispose of all
or any part of the Preferred Shares or the shares of Common
Stock issuable upon conversion of the Preferred Shares under
an effective registration statement under the Securities Act
or pursuant to an exemption from such registration available
under the Securities Act, and subject, nevertheless, to the
disposition of such Purchaser's property being at all times
within its control. If Purchaser should in the future
decide to dispose of any of the Preferred Shares or the
shares of Common Stock issuable upon conversion of the
Preferred Shares, Purchaser understands and agrees that it
may do so only in compliance with the Securities Act and
applicable state securities laws, as then in effect. Such
Purchaser agrees to the imprinting, so long as required by
law, of a legend on certificates representing all of the
Preferred Shares or the shares of Common Stock to be issued
upon conversion of the Preferred Shares to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS.
V.
CLOSING
5.1. Closing Date. The consummation of the purchase of the
Preferred Shares contemplated hereby (the "Closing") shall take
place within thirty days of the date hereof (the "Closing Date").
The Closing shall take place at the offices of PerImmune
Holdings, Inc. at 1330 Piccard Drive, Rockville, Maryland, and
shall be effective as of 12:01 a.m. on the Closing Date.
5.2. Performance at Closing. The following deliveries shall
be made at Closing:
5.2.1. By Purchaser. Purchaser shall deliver to
Holdings:
(a) To an account designated by Holdings, the
Purchase Price by wire transfer of immediately available
funds; and
(b) Such other documents as may be reasonably
requested by Holdings' counsel.
5.2.2. By Holdings. Holdings shall deliver to
Purchaser:
(a) A certificate evidencing the Preferred
Shares, which shall be registered in Purchaser's name; and
(b) Such other documents as may be reasonably
requested by Purchaser's counsel.
5.3. Other Documents and Acts.
(a) The parties will execute such other documents
and perform such other acts, after the Closing Date, as may
be necessary for the complete implementation and
consummation of this Agreement.
(b) At Closing, Holdings and the Purchaser will
execute and deliver the Amended and Restated Registration
Rights Agreement.
5.4. Certificates; Opinions. At Closing, the Purchaser and
Holdings will deliver the certificates and opinion of counsel
specified in Sections 6.1(c) and 6.2(c)-(d), respectively, in
form and substance reasonably satisfactory to the parties'
respective counsel.
VI.
CONDITIONS TO CLOSING
6.1. Conditions to Holdings' Obligations. The obligations
of Holdings to consummate the transaction contemplated hereby on
the Closing Date is subject to the satisfaction or waiver on or
prior to the Closing Date, of each of the following conditions:
(a) Consents. All Permits and waivers from
Governmental Entities and all consents, approvals, permits
and waivers from other parties necessary to permit Purchaser
and Holdings to consummate the transaction contemplated
hereby, shall have been obtained, unless the failure to
obtain any such Permit or waiver from a Governmental Entity
or any other consent, approval, permit or waiver would not
have a Material Adverse Effect upon Holdings.
(b) No Governmental or Other Proceedings or
Litigation. There shall be no injunction or court order
restraining consummation of the transaction contemplated
hereunder and there shall be no pending or threatened action
or proceeding by or before a court or governmental body
brought by or on behalf of any Governmental Entity seeking
to restrain or invalidate all or any portion of the
transactions contemplated hereunder, and there shall not
have been adopted any law or regulation making all or any
portion of the transaction contemplated hereunder illegal.
(c) Certificates. Purchaser will furnish
Holdings with such certificates, in form and substance
satisfactory to Holdings, of the Chief Executive Officer and
the Secretary of Purchaser and others to evidence compliance
with the conditions set forth in this Article 6.
6.2. Conditions to Purchaser's Obligations. The obligation
of Purchaser to consummate the transaction contemplated hereby on
the Closing Date is subject to the satisfaction or waiver on or
prior to the Closing Date of each of the following conditions:
(a) Consents. All Permits and waivers from
Governmental Entities and all consents, approvals, permits
and waivers from other parties necessary to permit Purchaser
and Holdings to consummate the transaction contemplated
hereby, shall have been obtained, unless the failure to
obtain any such Permit or waiver from a Governmental Entity
or any other consent, approval, permit or waiver would not
have a Material Adverse Effect upon Holdings or Purchaser.
(b) No Governmental or Other Proceedings or
Litigation. There shall be no injunction or court order
restraining consummation of the transaction contemplated
hereunder and there shall be no pending or threatened action
or proceeding by or before a court or governmental body
brought by or on behalf of any Governmental Entity seeking
to restrain or invalidate all or any portion of the
transactions contemplated hereunder, and there shall not
have been adopted any law or regulation making all or any
portion of the transaction contemplated hereunder illegal.
(c) Opinion of Counsel. Holdings shall have
delivered to Purchaser the opinion of Latham & Watkins,
counsel to Holdings, with respect to the matters set forth
on Exhibit C hereto.
(d) Certificates. Holdings shall furnish
Purchaser with such certificates, in form and substance
satisfactory to Purchaser, of the Chief Executive Officer
and the Secretary of Holdings and others to evidence
compliance with the conditions set forth in this Article 6.
(e) Certificate of Designations. Holdings shall
have adopted the Certificate of Amendment, the Certificate
of Amendment shall have been appropriately filed with the
office of the Secretary of State of the State of Delaware
and shall have become effective under the Delaware General
Corporation Law. Holdings shall have provided the Purchaser
with evidence of such adoption and filing.
VII.
ADDITIONAL AGREEMENTS OF PURCHASER AND HOLDINGS
7.1. Prohibition on Sale; Right of First Offer.
(a) Purchaser hereby covenants and agrees that it
will not sell, transfer, convey, assign, pledge, hypothecate
or otherwise dispose of the Preferred Shares (or any
interest therein) without the prior written consent of
Holdings (which consent will not be unreasonably withheld).
(b) Notwithstanding Section 7.1(a) above, in the
event that a Qualifying IPO (as defined in the Certificate
of Designations), does not occur within nine months after
the date hereof, Purchaser may at any time thereafter offer
to sell or otherwise dispose of all or any portion of the
Preferred Shares to any Person other than Holdings in
accordance with the provisions below. If Purchaser finds a
buyer ("Buyer") for the Preferred Shares, Purchaser shall
notify Holdings of its intent to sell or otherwise dispose
of the Preferred Shares to Buyer. Purchaser shall set forth
in the notice to Holdings the name of Buyer and the terms
and conditions of the proposed sale or other disposition,
and Holdings shall thereafter have fifteen days after
delivery of such notice to notify Purchaser whether or not
it will purchase the Preferred Shares on the same terms and
conditions set forth in the notice. If Holdings accepts the
offer, then Holdings shall purchase the Preferred Shares
under the same terms and conditions offered to Buyer, except
that Holdings must make the payment for the Preferred Shares
within thirty days after accepting the offer to purchase the
Preferred Shares. If Holdings declines to accept the offer
or if it accepts the offer but fails to purchase the
Preferred Shares within the requisite time frame, then
Purchaser may sell the Preferred Shares to Buyer or any
other buyer at any time thereafter so long as the terms and
conditions of such sale or other disposition are no more
favorable to Buyer or other buyer as set forth in the notice
to Holdings. In the event that the proposed purchase price
to Buyer or other buyer is later adjusted to a price lower
than the price originally set forth in the written notice to
Holdings, Purchaser must provide a second written notice to
Holdings setting forth the lower price and giving Holdings
another opportunity to purchase the Offered Shares for the
lower price; if Holdings accepts the new offer to purchase
the Preferred Shares at the lower price it must pay the
purchase price within ten days after receipt of the second
notice from Purchaser.
7.2. Lock-Up Agreement; Sale After Lock-Up Period.
(a) Purchase hereby covenants and agrees that it
will sign any reasonable "lock-up" letter with terms and
conditions substantially the same as any lock-up letter that
certain officers, directors or other significant
stockholders are requested to sign restricting Purchaser's
ability to sell, transfer, convey, assign, pledge,
hypothecate, or otherwise dispose of securities of Holdings
for a period of up to 180 days after a Qualifying IPO (the
"Lock-Up Period"), as may be requested by underwriters in
connection with such Qualifying IPO.
(b) After the Lock-Up Period, if any, Purchaser
may sell or otherwise dispose of Common Stock of Holdings at
any time without restriction (other than under applicable
law) so long as: (i) the net proceeds of any such sale or
sales do not exceed the Purchase Price, (ii) Purchaser
provides ten days' prior written notice to Holdings prior to
any such sale, and (iii) Holdings is given the opportunity
to purchase the subject securities from Purchaser at the
prevailing market price during such ten-day period.
(c) After the Lock-Up Period and so long as the
Research, Collaboration and Distribution Agreement, dated
December __, 1997 (the "Research Agreement"), between
Holdings and Purchaser remains in effect, Purchaser may also
sell or otherwise dispose of additional securities of
Holdings (beyond the number of shares allowed under Section
7.2(b)) at the prevailing market price so long as: (i)
Purchaser provides Holdings with three business days' prior
notice each time it intends to sell any additional
securities, (ii) Holdings is given the opportunity to
purchase such additional securities during said three
business day period, and (iii) following any such sale,
Purchaser continues to hold at least fifty percent (50%) of
the shares of Common Stock initially held by Purchaser upon
conversion of the Preferred Stock in connection with the
Qualifying IPO. Upon termination or expiration of the
Research Agreement or in the event that Holdings is in
material default thereunder and the default is not cured
within 30 days of receipt of notice from Purchaser by
Holdings of such default, Purchaser may at any time sell any
additional securities of Holdings in its possession without
the restrictions set forth above.
(d) For the purpose of this Section 7.2, the term
"market price" shall mean (i) the average of the closing
price of a share of common stock on the principal exchange
on which shares of common stock are then trading, if any,
during such ten-day period, or (ii) if such common stock is
not traded on an exchange but is quoted on Nasdaq or a
successor quotation system, (1) the average, during such ten
day period, of the last sales price (if the common stock is
then listed as a National Market Issue under the Nasdaq
National Market System) or (2) the average of the mean
between the closing representative bid and asked prices for
each day during such ten-day period (in all other cases) for
common stock as reported by Nasdaq or such successor
quotation system, or (iii) if the common stock is not
publicly traded on an exchange and not quoted on Nasdaq or a
successor quotation system, the average of the mean between
the closing bid and asked prices for the common stock for
each day during the ten day period.
7.3. Reservation of Shares. Until all Preferred Shares are
no longer outstanding due to conversion or otherwise, Holdings
shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issue or
delivery upon conversion of the Preferred Shares as provided in
the Certificate of Designations, the maximum number of shares of
Common Stock that may be issuable or deliverable upon such
conversion. Such shares of Common Stock shall, when issued or
delivered in accordance with the provisions of the Certificate of
Designations, be duly authorized, validly issued and fully paid
and non-assessable. Holdings shall issue such Common Stock in
accordance with the provisions of the Certificate of Designations
and shall otherwise comply with the terms thereof.
7.4. Registration Rights Agreement. On the Closing Date,
Holdings and Purchaser shall enter into the Amended and Restated
Registration Rights Agreement.
VIII.
INDEMNIFICATION
8.1. Survival of Representations, Etc. The representations,
warranties, covenants and agreements of the parties hereto
contained herein, shall survive the Closing, but, other than
those contained in Section 3.1, 3.3, 3.5 and 7.1 through 7.4,
shall terminate on the date twelve months from the Closing Date;
provided, however, that there shall be no such termination with
respect to any representation or warranty as to which a bona fide
claim has been asserted prior to such date.
8.2. Indemnification by Holdings. Holdings shall indemnify
and hold harmless Purchaser and its Affiliates, directors,
officers, advisors, agents and employees (the "Purchaser
Indemnified Parties") to the fullest extent lawful, from and
against any and all demands, losses, damages, penalties, claims,
liabilities, obligations, actions, causes of action, and
reasonable expenses (including without limitation, costs of
investigating, preparing or defending any such claim or action
and reasonable legal fees and expenses) (collectively, "Losses"),
arising by reason of or resulting from any breach of any
warranty, representation, covenant or agreement of Holdings
contained in this Agreement or in any certificate delivered
pursuant thereto; provided, however, that no Purchaser
Indemnified Party shall be entitled to indemnification by
Holdings hereunder with respect to any Losses arising solely from
the bad faith or gross negligence (as finally determined by a
court of competent jurisdiction) of such Purchaser Indemnified
Party or any Affiliate, director, officer, agent, or employee of
such Purchaser Indemnified Party.
8.3. Indemnification by Purchaser. Purchaser shall
indemnify and hold harmless Holdings and its Affiliates,
directors, officers, advisors, agents and employees (the
"Holdings Indemnified Parties") to the fullest extent lawful,
from and against any and all Losses arising by reason of or
resulting from any breach of any warranty, representation,
covenant or agreement of such Purchaser contained in this
Agreement or in any certificate delivered pursuant thereto,
provided, however, that no Holdings Indemnified Party shall be
entitled to indemnification by Purchaser hereunder with respect
to any Losses arising solely from the bad faith or gross
negligence (as finally determined by a court of competent
jurisdiction) of such Holdings Indemnified Party, or any
Affiliate, director, officer, agent or employee of such Holdings
Indemnified Party.
8.4. Losses. The term "Losses" as used in this Section 8 is
not limited to matters asserted by third parties, but includes
Losses incurred or sustained by an Indemnified Party in the
absence of third party claims. Payments by an Indemnified Party
of amounts for which such Indemnified Party is indemnified
hereunder shall not necessarily be a condition precedent to
recovery.
8.5. Defense of Claims. If a claim for Losses (a "Claim")
is to be made by an Indemnified Party, such Indemnified Party
shall give written notice (a "Claim Notice") to the indemnifying
party as soon as practicable after such Indemnified Party becomes
aware of any fact, condition or event which may give rise to
Losses for which indemnification may be sought under this Section
8. If any lawsuit or enforcement action is filed against any
Indemnified Party hereunder, notice thereof (a "Third Party
Notice") shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) calendar days
after the service of the citation or summons). The failure of
any Indemnified Party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent
that the indemnifying party demonstrates actual damage caused by
such failure. After receipt of a Third Party Notice, if the
indemnifying party shall acknowledge in writing to the
Indemnified Party that the indemnifying party shall be obligated
under the terms of its indemnity hereunder in connection with
such lawsuit or action, then the indemnifying party shall be
entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice to handle and defend the same,
at the indemnifying party's cost, risk and expense unless the
named parties to such action or proceeding include both the
indemnifying party and the Indemnified Party and the Indemnified
Party has been advised in writing by counsel that there may be
one or more legal defenses available to such Indemnified Party
that are different from or additional to those available to the
indemnifying party, and (iii) to compromise or settle such claim,
which compromise or settlement shall be made only with the
written consent of the Indemnified Party, such consent not to be
unreasonably withheld. The Indemnified Party shall cooperate in
all reasonable respects with the indemnifying party and such
attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; and the Indemnified
Party may, at its own cost, participate in the investigation,
trial and defense of such lawsuit or action and any appeal
arising therefrom and appoint its own counsel therefor, at its
own cost. The parties shall also cooperate with each other in
any notifications to insurers. If the indemnifying party fails
to assume the defense of such claim within fifteen (15) calendar
days after receipt of the Third Party Notice, the Indemnified
Party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have
the right to undertake the defense, compromise or settlement of
such claim and the indemnifying party shall have the right to
participate therein at its own cost; provided, however, that such
claim shall not be compromised or settled without the written
consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the Indemnified Party
assumes the defense of the claim the Indemnified Party will keep
the indemnifying party reasonably informed of the progress of any
such defense, compromise or settlement. Notwithstanding the
foregoing, the indemnifying party shall not be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys at any time for any and all Indemnified Parties (which
firm shall be designated in writing by such Indemnified Party or
Parties) in connection with any one such action or proceeding
arising out of the same general allegations or circumstances.
8.6. Tax Treatment of Indemnity. The parties agree that any
indemnification payments made pursuant to this Agreement shall be
treated for Tax purposes as an adjustment to the consideration
for the purchase of the Preferred Shares, unless otherwise
required by applicable law, in which event indemnification
payments shall be made in an amount sufficient to indemnify the
party on a net after-Tax basis.
IX.
GENERAL PROVISIONS
9.1. Expenses. Except as otherwise provided herein, all
expenses involved in the preparation and consummation of this
Agreement shall be borne by the party incurring the same whether
or not the transaction contemplated hereby is consummated.
9.2. Notices. All notices, requests, demands, and other
communications pertaining to this Agreement shall be in writing
and shall be deemed duly given when delivered personally (which
shall include delivery by Federal Express or other nationally
recognized, reputable overnight courier service that issues a
receipt or other confirmation of delivery) to the party for whom
such communication is intended, or three (3) business days after
the date mailed by certified or registered U.S. mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to Purchaser:
Mentor Corporation
5425 Hollister Avenue
Santa Barbara, CA 93111
Attn: General Counsel
(b) If to Holdings:
PerImmune, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attn: Michael G. Hanna, Jr., Ph.D.
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attn: Bruce E. Rosenblum
Any party may change its address for notices by notice to the
other given pursuant to this Section 9.
9.3. Brokers. Each party represents and warrants to the
other that no agent, broker, investment banker, or other person
or firm acting on behalf of such party or any of its affiliates
or under the authority of any of them is or will be entitled to
any broker's or finder's fee or any other commission or similar
fee in connection with the transaction contemplated hereby, other
than Vector Securities, whose fees will be solely the
responsibility of Holdings.
9.4. Waiver. Unless otherwise specifically agreed in
writing to the contrary: (i) the failure of either party at any
time to require performance by the other of any provision of this
Agreement shall not affect such party's right thereafter to
enforce the same; (ii) no waiver by either party of any default
by any other shall be valid unless in writing and acknowledged by
an authorized representative of the non-defaulting party, and no
such waiver shall be taken or held to be a waiver by such party
of any other preceding or subsequent default; and (iii) no
extension of time granted by either party for the performance of
any obligation or act by any other party shall be deemed to be an
extension of time for the performance of any other obligation or
act hereunder.
9.5. Entire Agreement. This Agreement, the exhibits and
schedules hereto (which are incorporated by reference herein)
constitute the entire agreement between the parties with respect
to the subject matter hereof and referenced herein, supersede and
terminate any prior agreements between the parties (written or
oral). This Agreement may not be altered or amended except by an
instrument in writing signed by the party against whom
enforcement of any such change is sought.
9.6. Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures
on each such counterpart were on the same instrument.
9.7. Construction. The Section headings of this Agreement
are for convenience only and in no way modify, interpret or
construe the meaning of specific provisions of the Agreement.
9.8. Severability. If any one or more of the provisions
contained in this Agreement should be found invalid, illegal or
unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. Any illegal or
unenforceable term shall be deemed to be void and of no force and
effect only to the minimum extent necessary to bring such term
within the provisions of applicable law and such term, as so
modified, and the remaining provisions of this Agreement shall
then be fully enforceable.
9.9. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland
without regard to the choice of law rules utilized in that
jurisdiction.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed by a respective duly authorized officer
as of the date first written above.
PERIMMUNE HOLDINGS, INC.
By: /s/MICHAEL G. HANNA
Name: Michael G. Hanna
Title: President
MENTOR CORPORATION
By: /s/CHRISTOPHER CONWAY
Name: Christopher Conway
Title: Chairman, CEO
SCHEDULES AND EXHIBITS
The Registrant will make the following schedules and
exhibits available upon request:
Schedule 3.3 Pre-emptive Rights
Schedule 3.5 Capitalization
Schedule 3.6 Consent and Approvals
Schedule 3.7 Subsidiaries
Schedule 3.9 Liabilities
Schedule 3.10 Non-compliance with Laws
Schedule 3.11 Litigation
Schedule 3.12 Tax Matters
Schedule 3.13 Title to Assets
Schedule 3.14 Contracts
Schedule 3.15 Intellectual Property
Exhibit A Form of Certificate of
Designations, Preferences and
Relative, Participating
Optional and other Special
Rights and Qualifications,
Limitations and Restrictions
Thereof of Series B
Convertible Preferred Stock of
Perimmune Holdings, Inc.
Exhibit B Form of Amended and Restated
Registration Rights Agreement
