<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1996
REGISTRATION STATEMENT NO. 333-1531
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALLIANCE PHARMACEUTICAL CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 14-1644018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
3040 SCIENCE PARK ROAD
SAN DIEGO, CA 92121
(619) 558-4300
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
DUANE J. ROTH
PRESIDENT
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, CA 92121
(619) 558-4300
(Name, address, including zip code, and telephone number,
of agent for service of process)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Melvin Epstein, Esq. Mark Kessel, Esq.
Stroock & Stroock & Lavan Shearman & Sterling
Seven Hanover Square 599 Lexington Avenue
New York, NY 10004-2696 New York, NY 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 27, 1996
PROSPECTUS
2,500,000 SHARES
[LOGO]
COMMON STOCK
------------------
All of the shares of Common Stock offered hereby are being sold by Alliance
Pharmaceutical Corp. ("Alliance" or the "Company"). The Company's Common Stock
is traded on the Nasdaq National Market under the symbol "ALLP." The closing
price of the Common Stock on March 26, 1996 was $18 3/8 per share. See "Price
Range of Common Stock."
------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts Proceeds to
Public and Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share...................... $ $ $
Total(3)....................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $400,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock on the same terms and conditions
as set forth herein solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of certificates for
the shares of Common Stock will be made at the offices of Lehman Brothers Inc.,
New York, New York, on or about , 1996.
------------------------
LEHMAN BROTHERS
COWEN & COMPANY
OPPENHEIMER & CO., INC.
, 1996
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1995, which was filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1995, which was filed with the Commission pursuant
to the Exchange Act on November 13, 1995, the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 1995, which was filed with the
Commission pursuant to the Exchange Act on February 6, 1996, and the information
under the caption "Description of the Company's Securities" contained in the
Company's Registration Statement on Form 8-A, dated October 25, 1984, with
respect to the Company's Common Stock, are incorporated herein by reference and
made a part of this Prospectus as of the date hereof. All reports subsequently
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference into this Prospectus. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
document which is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents which have been incorporated by reference in this
Prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the documents so incorporated.
Requests for such copies should be directed to Lloyd Rowland, Alliance
Pharmaceutical Corp., 3040 Science Park Road, San Diego, California 92121,
telephone (619) 558-4300.
AVAILABLE INFORMATION
This Prospectus is part of a Registration Statement on Form S-3 (together
with all amendments and exhibits thereto, the "Registration Statement") which
the Company has filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the Common Stock, reference is
made to the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's New York Regional Office, Seven World Trade
Center, 13th Floor, New York, New York 10048, and at its Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of such materials can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
listed on the Nasdaq National Market. Reports and other information concerning
the Company may be inspected at the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
OXYGENT-TM-, LIQUIVENT-Registered Trademark-, IMAGENT-Registered Trademark-,
and SAT PAD-REGISTERED TRADEMARK- are all trademarks of the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS CONTAINED IN THIS PROSPECTUS OR PREVIOUSLY FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. UNLESS OTHERWISE NOTED, ALL FINANCIAL INFORMATION,
SHARE AND PER SHARE DATA IN THIS PROSPECTUS ASSUME NO ISSUANCE OF SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION, OUTSTANDING WARRANTS, OPTIONS OR CONVERTIBLE SECURITIES. AS USED IN THIS
PROSPECTUS, THE TERMS "COMPANY" AND "ALLIANCE" REFER TO ALLIANCE PHARMACEUTICAL
CORP. AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
Alliance is a pharmaceutical research and development company that focuses
on developing scientific discoveries into potential drug products and licensing
these products to multinational pharmaceutical companies in exchange for fixed
payments and royalties. To date, the Company has entered into agreements with
researchers for the rights to two innovative products, developed these products
through initial clinical (human) trials, and entered into collaborative
relationships with multinational pharmaceutical companies for the final stages
of development and worldwide marketing. These products are OXYGENT, an
intravascular oxygen carrier designed to reduce the need for donor blood
transfusions during surgery, which is currently in Phase IIb clinical trials and
is licensed to affiliates of Johnson & Johnson, and LIQUIVENT, an intrapulmonary
agent for use in treatment of acute respiratory failure, which is currently in a
pivotal Phase II/III clinical trial and is licensed to Hoechst Marion Roussel,
Inc., an affiliate of Hoechst AG. Alliance intends to enter into a collaborative
agreement for IMAGENT US, an ultrasound contrast agent with respect to which the
Company has just begun a Phase I clinical trial.
The Company's strategy is to identify potential new pharmaceutical products
through scientific collaborations with researchers and clinicians in
universities and medical centers where many of the basic causes of disease and
potential targets for new therapies are discovered. Using its experience in
defining pharmaceutical formulations, designing manufacturing processes,
conducting preclinical pharmacology and toxicology studies, and conducting
early-phase human testing, Alliance endeavors to advance such discoveries into
clinical development. The Company seeks collaborative relationships for the
final stages of drug development, including completing late-phase human testing,
obtaining worldwide regulatory approvals, building large-scale manufacturing
capacities, and marketing.
Alliance's products currently in clinical development -- OXYGENT, LIQUIVENT,
and IMAGENT US -- are based upon perfluorochemical ("PFC") and emulsion
technologies. PFCs are biochemically inert compounds and may be employed in a
variety of therapeutic and diagnostic applications. The Company's primary drug
substance is perflubron, a brominated PFC that has a high solubility for
respiratory gases and can be used to transport these gases safely throughout the
body.
OXYGENT, an emulsion containing perflubron, is an intravascular oxygen
carrier to be used as a temporary "blood substitute" to provide oxygen to
tissues during elective surgeries where substantial blood loss is anticipated.
OXYGENT has several potential advantages compared to allogeneic (donor) blood:
there is no risk of infectious disease transmission, it is compatible with all
blood types, it has a shelf-life in excess of one year, and it can be
sterilized. OXYGENT can be used with autologous blood collection techniques,
including predonation, hemodilution, and salvage, to enhance safety by reducing
the need for allogeneic blood. OXYGENT is currently in Phase IIb clinical trials
with surgical patients at multiple sites in the United States and Europe.
In August 1994, the Company entered into a license agreement (the "Ortho
License Agreement") with Ortho Biotech, Inc. and The R.W. Johnson Pharmaceutical
Research Institute, a division of Ortho Pharmaceutical Corporation, affiliates
of Johnson & Johnson (collectively referred to as "Ortho"), which provides Ortho
with worldwide marketing rights to the Company's injectable PFC emulsions
capable of transporting oxygen for therapeutic use, including OXYGENT. The
product is being developed jointly by Alliance and Ortho, with Ortho responsible
for substantially all of the remaining costs of development and marketing. In
3
<PAGE>
conjunction with the Ortho License Agreement, Johnson & Johnson Development
Corp. ("J&JDC") purchased equity securities of the Company for $15.0 million. In
addition, Ortho paid Alliance an initial license fee and will pay milestone
payments and royalties on product sales.
LIQUIVENT, sterile perflubron, is an intrapulmonary agent to treat acute
respiratory failure, a disorder that can result from many causes, including
serious infection, traumatic shock, severe burns, and inhalation of toxic
substances, and is characterized by impairment of normal lung function. The
Company is conducting a multi-center pivotal Phase II/III clinical trial with
LIQUIVENT in pediatric patients with acute respiratory failure, and separate
multi-center Phase II clinical trials in adults and premature infants are
underway. The U.S. Food and Drug Administration ("FDA") has granted Subpart E
status (expedited review) for the development of LIQUIVENT.
In February 1996, the Company entered into a license agreement (the "HMRI
License Agreement" and, together with the Ortho License Agreement, the "License
Agreements") with Hoechst Marion Roussel, Inc. ("HMRI"), which provides HMRI
with worldwide marketing rights to the intratracheal administration of liquids,
including LIQUIVENT, which perform bronchoalveolar lavage or liquid ventilation.
The product will be developed jointly by Alliance and HMRI, with HMRI
responsible for substantially all of the costs of development and marketing
after March 31, 1996. In conjunction with the HMRI License Agreement, HMRI
purchased equity securities of the Company for $22.0 million. In addition, HMRI
paid Alliance an initial license fee and will pay further license fees,
milestone payments, and royalties on product sales.
IMAGENT US is a PFC-based intravenous ultrasound contrast agent being
developed to aid in the assessment of cardiac function and myocardial perfusion,
as well as the detection of solid organ lesions and blood flow abnormalities
caused by vascular diseases. In preclinical studies, this agent has been found
to enhance the signal from perfused tissues and blood vessels using traditional
gray-scale and color Doppler technologies, as well as the emerging harmonic
ultrasound imaging technique. The Company filed an investigational new drug
application ("IND") with the FDA in February 1996 and began a Phase I clinical
trial in the United States in March 1996.
Alliance is assessing an apoptotic factor for regulation of cancerous cell
death and has ongoing research activities to exploit its expertise in PFC,
emulsion, and surfactant technologies. In addition, the Company is evaluating
its antigenized antibody technology for use in developing a prototype vaccine
for an infectious disease and a prototype tolerogen for an autoimmune disease.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................... 2,500,000 shares
Common Stock to be outstanding after
this offering......................... 27,416,691 shares
Use of proceeds........................ To fund research, preclinical testing, and clinical
trials for the Company's products, to repurchase an
oustanding warrant for approximately $2.6 million,
and for general corporate purposes.
Nasdaq National Market symbol.......... ALLP
</TABLE>
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................................ $ 1,582 $ 1,805 $ 2,370 $ 409 $ 11,816 $ 7,209 $ 4,186
Loss from operations.......................... (18,494) (24,304) (28,802) (38,508) (30,332) (15,724) (14,761)
Dividends on preferred stock.................. -- -- -- -- (594) (219) (375)
Net loss applicable to Common Stock........... (17,702) (21,766) (26,380) (36,946) (29,717) (15,368) (14,706)
Net loss per share of Common Stock............ $ (1.24) $ (1.25) $ (1.39) $ (1.83) $ (1.35) $ (0.72) $ (0.59)
Weighted average number of common shares out-
standing..................................... 14,258 17,344 18,946 20,226 21,959 21,385 24,851
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
AS
ACTUAL ADJUSTED (1)
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...................................... $ 12,722 $ 73,867
Working capital........................................................................ 11,144 72,289
Total assets........................................................................... 44,892 106,037
Long-term debt......................................................................... 1,314 1,314
Accumulated deficit.................................................................... (203,766) (203,766)
Stockholders' equity................................................................... 37,003 98,148
</TABLE>
- ------------------------
(1) Adjusted to give effect to the sale of the 2,500,000 shares of Common Stock
offered hereby, after deducting the underwriting discounts and estimated
offering expenses, the net proceeds from the sale of $22.0 million of
preferred stock to HMRI, and the application of the proceeds of this
offering as described herein. See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. The following factors and cautionary statements should be carefully
considered in evaluating the Company and its business:
LIMITED PRODUCT REVENUES; HISTORY OF OPERATING LOSSES. Substantially all of
the Company's revenues to date have consisted of licensing fees, milestone
payments, and payments to fund research and development activities under joint
development and license agreements. The Company has had net operating losses
since its inception and expects such losses to continue unless and until such
time as revenues are sufficient to fund its continuing operations. As of
December 31, 1995, the Company had an accumulated deficit of $203.8 million, of
which approximately $35.5 million reflects non-cash charges from the Company's
acquisition by merger of Fluoromed Pharmaceutical, Inc. on February 24, 1989.
There can be no assurance that the Company will be able to achieve profitability
at all or on a sustained basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
RELIANCE ON COLLABORATIVE PARTNERS; FUTURE COLLABORATIONS. The Company has
entered into the License Agreements to support the development and
commercialization of OXYGENT and LIQUIVENT and to raise capital. Pursuant to the
License Agreements, the Company has granted significant licensing rights. The
Company's strategy is to seek additional collaborations. However, there can be
no assurance that the Company will be able to negotiate acceptable collaborative
arrangements in the future, or that any current or future arrangements will
ultimately be successful. Under the License Agreements, the Company will depend
on Ortho and HMRI for development, regulatory approval, and marketing of
products. The termination of either of the License Agreements, which can occur
on at least one month's advance notice, or any other future collaborative
arrangement could adversely affect the Company's research, development or,
ultimately, product distribution plans. The Company's revenues from milestone
payments or sales of any product will depend in large part upon the efforts and
abilities of the collaborative partner to perform clinical testing, to obtain
regulatory approvals, and to manufacture and market the product. The amount and
timing of resources devoted to these activities will not be completely within
the Company's control. The collaborative partner will have certain discretion in
deciding whether to commercialize the product. There can be no assurance that
the corporate interests and motivations of the Company's collaborative partners
will remain consistent with those of the Company. See "Business -- Collaborative
Relationships."
GOVERNMENT REGULATION; UNCERTAINTIES RELATED TO CLINICAL TRIAL RESULTS. The
production and marketing of the Company's products and its research and
development activities are subject to regulation for safety and efficacy by
numerous government authorities in the United States and other countries.
Clinical trials and the manufacturing and marketing of the Company's products
are subject to the testing and approval process of the FDA and foreign
regulatory authorities. The FDA and other regulatory authorities require that
the safety and efficacy of a drug be supported by results from adequate and
well-controlled clinical trials before approval for commercial sale. If the
results of the clinical trials of the Company's products do not demonstrate the
safety and efficacy of the products, the Company will not be able to submit a
New Drug Application ("NDA") to the FDA. Even if the Company believes the
clinical trials demonstrate the safety and efficacy of a product, the FDA and
other regulatory authorities may not accept the Company's assessment of the
results. In either case, the Company may have to conduct additional clinical
trials in an effort to demonstrate the safety and efficacy of the product. The
process of obtaining regulatory clearances or approvals is costly and
time-consuming. The Company cannot predict how long preclinical and clinical
trials will take or whether they will be successful, nor can the Company predict
how long the necessary regulatory approvals or clearances will take. Therefore,
there can be no assurance that the necessary clearances or approvals will be
obtained, or obtained on a timely basis. Without acceptable results and
regulatory approval, the Company would not be able to commercialize its
products, which would have a material adverse effect on the Company. There can
be no assurance that the results of any of the Company's clinical trials will be
favorable or that the Company's products will obtain regulatory approval for
commercialization. The effect of governmental regulations which might arise from
future legislative or administrative action cannot be predicted. See "Business
- -- Government Regulation."
6
<PAGE>
UNCERTAINTY OF DEVELOPMENT AND COMMERCIALIZATION EFFORTS. The Company's
products require substantial development efforts. The Company or its
collaborative partners may encounter unforeseen technological or scientific
problems, including side effects, which may force abandonment or substantial
change in the development of a specific product or process, or technological
change or product developments by others, any of which may have a material
adverse effect on the Company. Further, even after successful technical
development and receipt of governmental approval, a product may not achieve
commercial success. To date, the Company has received regulatory approval for
the commercial sale of only one of its drug products, the sales of which were
discontinued due to limited revenue potential.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING. The Company
believes that its existing capital resources, including expected revenues from
the License Agreements and investments, as well as the net proceeds from this
offering and income earned thereon, will be adequate to satisfy its capital
requirements for at least the next 24 months. The Company will need additional
financing to support its long-term product development programs. The Company's
future capital requirements will depend on many factors, including continued
scientific progress in its research and development programs, progress with
preclinical testing and clinical trials, the time and cost involved in obtaining
regulatory approvals, patent costs, competing technological and market
developments, changes in existing collaborative relationships, the Company's
ability to establish development, sales, and marketing arrangements, and the
cost of manufacturing scale-up, if necessary. No assurance can be given that
adequate financing will be available to the Company in the future or on terms
acceptable to the Company.
UNPREDICTABILITY OF PATENT PROTECTION; PROPRIETARY TECHNOLOGY. The Company
believes that its success will depend largely on its ability to obtain and
maintain patent protection for its own inventions and licenses for the use of
patents owned by third parties. The Company has obtained patents covering
certain intermediate and high concentration PFC emulsions, as well as patents
related to liquid ventilation. The Company has filed, and when appropriate will
file, other patent applications with respect to its products and processes in
the United States and in foreign countries. There can be no assurance, however,
that the Company will develop any additional products and processes which may be
patentable or that any additional patents will be issued. It is possible that
patents issued to the Company or any patents licensed to the Company may be
challenged successfully, that the Company may infringe patents of third parties
unintentionally, and that the Company may have to alter its products or
manufacturing processes to take into account the patents of third parties,
causing delays in product development. Litigation, which could result in a
substantial cost to the Company, may be necessary to enforce any patents issued
to the Company and/or to determine the scope and validity of others' proprietary
rights. The Company also attempts to protect its proprietary products and
processes by relying on trade secret laws and non-disclosure and confidentiality
agreements with its employees and certain other persons who have access to its
products or processes. No assurance can be given that others will not develop
such products or processes independently or obtain access to such products or
processes. To the extent that others develop or obtain similar products or
processes, the Company's competitive position may be affected adversely. See
"Business -- Patents."
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE. While the Company believes
that it can produce materials for clinical trials and the initial market launch
for its emulsion products at its existing San Diego facility and for LIQUIVENT
at its Otisville facility, it may need to expand its commercial manufacturing
capabilities for its products in the future. This expansion may occur in stages,
each of which would require regulatory approval, and product demand could at
times exceed supply capacity. The Company has not selected a site or obtained
any regulatory approvals for construction of a commercial production facility
for its products, nor can there be any assurance that it will be able to do so.
The projected location and completion date of any production facility will
depend upon regulatory and development activities and other factors. The Company
cannot predict the amount that it will expend for the construction of such a
production facility, and there can be no assurance as to when or whether the FDA
will determine that such facility complies with Good Manufacturing Practices.
Construction of a facility will depend on regulatory approvals, product
development, and capital resources, among other things. The Ortho License
Agreement provides an option to Ortho to elect to manufacture the emulsion
products referred to therein, or to require the Company to manufacture such
products at a negotiated price. The HMRI License Agreement requires the
7
<PAGE>
Company to manufacture LIQUIVENT at its Otisville facility for a period of time
after market launch and to sell the product to HMRI at a negotiated price. HMRI
will be responsible for establishing production capacity beyond the maximum
capacity of the Otisville facility. See "Business -- Manufacturing."
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT. The Company's ability to
commercialize its products successfully will depend in part on the extent to
which appropriate reimbursement levels for the cost of the products and related
treatment are obtained from government authorities, private health insurers and
other organizations, such as health maintenance organizations ("HMOs").
Third-party payors are increasingly challenging the prices charged for medical
products and services. Also, the trend toward managed healthcare in the United
States, the growth of organizations such as HMOs, and legislative proposals to
reform healthcare and government insurance programs could significantly
influence the purchase of healthcare services and products, resulting in lower
prices and reducing demand for the Company's products. The cost containment
measures that healthcare providers are instituting and any healthcare reform
could affect the Company's ability to sell its products and may have a material
adverse effect on the Company. There can be no assurance that reimbursement in
the United States or foreign countries will be available for any of the
Company's products, that any reimbursement granted will be maintained, or that
limits on reimbursement available from third-party payors will not reduce the
demand for, or negatively affect the price of, the Company's products. The
unavailability or inadequacy of third-party reimbursement for the Company's
products would have a material adverse effect on the Company. The Company is
unable to forecast what additional legislation or regulation relating to the
healthcare industry or third-party coverage and reimbursement may be enacted in
the future, or what effect the legislation or regulation would have on the
Company's business.
DEPENDENCE UPON KEY PERSONNEL. The Company's success in developing
marketable products and achieving a competitive position will depend, in part,
on its ability to attract and retain qualified scientific and management
personnel. Competition for such personnel is intense, and no assurance can be
given that the Company will be able to attract and retain such personnel.
Scientific advisors to the Company are employed by or have consulting
arrangements with third parties which may conflict with their obligations to the
Company. The Company's anticipated growth and expansion will require additional
expertise and are expected to place additional demands on the Company's
management and financial resources.
COMPETITION; RAPID TECHNOLOGICAL CHANGE. Biotechnology and pharmaceutical
companies are highly competitive. There are many pharmaceutical companies,
biotechnology companies, public and private universities, and research
organizations actively engaged in research and development of products that may
be similar to, or seek to attack the same targets as, Alliance's products. Many
of the Company's existing or potential competitors have substantially greater
financial, technical, and human resources than the Company and may be better
equipped to develop, manufacture, and market products. These companies may
develop and introduce products and processes competitive with or superior to
those of the Company. In addition, other technologies or products may be
developed that have an entirely different approach or means of accomplishing the
intended purposes of the Company's products which might render the Company's
technology and products uncompetitive or obsolete. There can be no assurance
that the Company will be able to compete successfully. See "Business --
Competition."
PRODUCT LIABILITY CLAIMS AND UNINSURED RISKS. Products or processes that
may be developed, licensed, or sold by the Company may expose the Company to
potential liability from claims by end-users of such products or of products
manufactured by such processes, or by manufacturers or others selling such
products, either directly or as a component of other products. The Company
currently maintains limited product liability insurance coverage. There can be
no assurance that the Company will be able to maintain such coverage or obtain
additional coverage on acceptable terms, or that such insurance will provide
adequate coverage against all potential claims.
VOLATILITY OF STOCK PRICE; LIQUIDATION PREFERENCE; AND LACK OF
DIVIDENDS. The market prices for securities of biopharmaceutical companies have
historically been highly volatile. Announcements concerning the Company or its
competitors, including the results of testing and clinical trials, technological
innovations, or
8
<PAGE>
commercial products, government regulations, developments concerning proprietary
rights, including patents and litigation matters, a change in status of a
collaborative partner, public concern relating to the commercial value or safety
of the Company's products, and stock market conditions in general may have a
significant impact on the price of the Common Stock. See "Price Range of Common
Stock."
The Company has 1,500,000 shares of Series A Preferred Stock outstanding.
Such preferred stock is entitled to an annual $0.50 per share preferential
dividend, and has a liquidation preference of $10.00 per share, plus all
accumulated but unpaid dividends. The Company also has outstanding 750,000
shares of Series B Preferred Stock entitled to an annual $1.00 per share
preferred dividend, and a liquidation preference of $20.00 per share, plus all
accumulated but unpaid dividends and 200,000 shares of Series C Preferred Stock
entitled to a liquidation preference of $.01 per share.
The Company has not paid dividends on its Common Stock since its inception
and does not intend to pay any such dividends in the foreseeable future.
Further, the Company in general is required to pay cumulative dividends on its
outstanding preferred stock prior to paying any dividends on its Common Stock.
As of December 31, 1995, the Company had recorded as a liability dividends
payable totalling $969,000 on the Series A Preferred Stock. The Company has
incurred losses and, thus, has had a deficiency in preferred stock dividend
coverage. For the years ended June 30, 1991, 1992, 1993, 1994 and 1995 and the
six months ended December 31, 1994 and 1995, the Company has incurred net losses
of $17,702,000, $21,766,000, $26,380,000, $36,946,000, $29,717,000, $15,368,000
and $14,706,000, respectively.
SHARES ELIGIBLE FOR FUTURE SALE. As of December 31, 1995, 3,580,505 shares
of Common Stock (or 13% of the total number of shares outstanding on a fully
diluted basis) were issuable upon the exercise of outstanding options and
warrants (excluding a warrant with respect to 500,000 shares to be repurchased
by the Company). See "Use of Proceeds." Additional shares may be issued upon the
conversion of preferred stock. See "Capitalization." The existence of such
warrants, options and convertible securities, as well as certain registration
rights, may adversely affect the terms on which the Company may obtain
additional equity financing. The holders of the outstanding warrants and options
are likely to exercise their securities at a time when the Company would
otherwise be able to obtain capital on terms more favorable than those provided
by the exercise or conversion prices thereof.
IMMEDIATE AND SUBSTANTIAL DILUTION. Investors in this offering will
experience immediate and substantial dilution in book value per share. See
"Dilution."
THE CAUTIONARY STATEMENTS SET FORTH ABOVE AND ELSEWHERE IN THIS PROSPECTUS
SHOULD BE READ AS ACCOMPANYING FORWARD-LOOKING STATEMENTS INCLUDED UNDER "USE OF
PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND ELSEWHERE HEREIN. THE RISKS DESCRIBED IN SUCH
STATEMENTS COULD CAUSE THE COMPANY'S RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN OR INDICATED BY SUCH FORWARD- LOOKING STATEMENTS.
9
<PAGE>
USE OF PROCEEDS
The net proceeds from this offering are estimated to be $42.8 million,
assuming a public offering price of $18 3/8 per share. Approximately $2.6
million of the proceeds of this offering will be used to repurchase an
outstanding warrant to acquire 500,000 shares of Common Stock (the "Warrant
Repurchase"). The purchase price of the warrant is based upon the offering price
of the Common Stock offered hereby. The Company's agreement with the
warrantholder provides that the warrantholder's obligation to sell the warrant
is subject to its receiving at least $2.0 million in the aggregate. If this
condition is not satisfied and the warrantholder does not sell the warrant to
the Company, the Company will use the proceeds it would have otherwise used to
purchase the warrant for the purposes set forth herein.
The remaining proceeds will be used to fund research, preclinical testing,
and clinical trials for the Company's products, and for general corporate
purposes. In particular, the Company expects to devote an increasingly large
amount of its resources to the clinical development of IMAGENT US, its only
clinical-stage product not presently subject to a collaborative agreement.
Pending such application, the Company intends to deposit such proceeds in
interest-bearing bank accounts or to invest them in short-term, high-grade,
interest-bearing securities. The Company believes it will need additional
financing to support its long-term product development programs. No assurance
can be given that adequate financing will be available to the Company. See "Risk
Factors -- Uncertainty of Development and Commercialization Efforts" and "--
Future Capital Needs; Uncertainty of Additional Financing" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
DILUTION
As of December 31, 1995, the net tangible book value of the Company,
adjusted to include the purchase of equity securities by HMRI in connection with
the HMRI License Agreement, was approximately $42.5 million, or $1.58 per share.
"Net tangible book value per share" represents the amount of total tangible
assets of the Company reduced by the total liabilities and divided by the number
of shares of Common Stock outstanding (after giving effect to the conversion of
the outstanding shares of preferred stock into Common Stock at an assumed
conversion price of $18 3/8 per share). After giving effect to the sale of the
2,500,000 shares of Common Stock offered in this offering at an assumed public
offering price of $18 3/8 per share, the pro forma net tangible book value of
the Common Stock as of December 31, 1995 (after deducting the underwriting
discounts and estimated expenses of this offering and after giving effect to the
Warrant Repurchase) would have been approximately $82.6 million, or $2.82 per
share. This represents an immediate increase in net tangible book value of $1.24
per share to existing shareholders and an immediate dilution of $15.56 per share
to new investors purchasing shares of Common Stock in this offering. "Dilution
per share" represents the difference between the price per share of Common Stock
paid by the new investors in this offering and the net tangible book value per
share at December 31, 1995 as adjusted to give effect to this offering.
The following table illustrates the dilution per share taking into account
estimated expenses of this offering:
<TABLE>
<S> <C> <C>
Public offering price per share.............................. $ 18.38
Net tangible book value per share as of December 31, 1995.... $ 1.58
Increase to present shareholders attributable to this
offering.................................................... 1.24
---------
Pro forma net tangible book value per share after this
offering.................................................... 2.82
---------
Dilution to investors in this offering....................... $ 15.56
---------
---------
</TABLE>
The foregoing calculations take into account the underwriting discounts and
other estimated expenses of this offering and assume no exercise of the
Underwriters' over-allotment option. If the over-allotment option to purchase up
to an additional 375,000 shares of Common Stock is exercised in full, the pro
forma net tangible book value would be approximately $3.00 per share, resulting
in a dilution to investors in this offering of $15.38 per share.
10
<PAGE>
The dilution described above could be substantially greater, depending on
the conversion rates of the series of the Company's preferred stock issued to
Ortho and HMRI. See Notes 4 and 8 of Notes to Consolidated Financial Statements
elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
31, 1995 and as adjusted to give effect to (i) the sale of the Common Stock
offered in this offering, (ii) the net proceeds from the sale of $22.0 million
of preferred stock to HMRI described elsewhere herein, (iii) the Warrant
Repurchase, and (iv) in each case, the application of the net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt...................................................... $ 1,314 $ 1,314
Stockholders' equity:
Preferred stock $.01 par value -- 5,000,000 shares authorized;
1,500,000 shares issued and outstanding as of December 31, 1995;
2,450,000 shares as adjusted..................................... 15 25
Common Stock $.01 par value -- 50,000,000 shares authorized;
24,916,691 issued and outstanding as of December 31, 1995;
27,416,691 shares as adjusted.................................... 249 274
Additional paid-in capital.......................................... 240,505 301,615
Accumulated deficit................................................. (203,766) (203,766)
----------- -----------
Total stockholders' equity...................................... 37,003 98,148
----------- -----------
Total capitalization........................................ $ 38,317 $ 99,462
----------- -----------
----------- -----------
</TABLE>
As of December 31, 1995, there were 3,580,505 shares of Common Stock
reserved for issuance upon the exercise of outstanding options and warrants
(excluding the 500,000 shares underlying the Warrant Repurchase). The Company
has reserved an additional 1,050,000 shares of Common Stock for issuance upon
the conversion or possible mandatory redemption of the preferred stock and
exercise of the warrants issued to HMRI and 750,000 shares of Common Stock for
issuance upon the conversion of the Series A Preferred Stock issued to J&JDC.
For a description of the conversion and mandatory redemption features of the
preferred stock, see Note 4 of Notes to Consolidated Financial Statements
contained herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
11
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq National Market under the symbol
"ALLP." The following table sets forth, for the periods indicated, the high and
low sale prices of the Common Stock as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL 1996
First Quarter ended September 30, 1995................................. $ 12.63 $ 7.88
Second Quarter ended December 31, 1995................................. 14.25 10.50
Third Quarter ending March 31, 1996
(through March 26, 1996).............................................. 19.75 12.63
FISCAL 1995
First Quarter ended September 30, 1994................................. 12.00 8.00
Second Quarter ended December 31, 1994................................. 8.75 5.63
Third Quarter ended March 31, 1995..................................... 7.63 4.25
Fourth Quarter ended June 30, 1995..................................... 8.63 4.75
FISCAL 1994
First Quarter ended September 30, 1993................................. 14.00 8.50
Second Quarter ended December 31, 1993................................. 10.75 7.75
Third Quarter ended March 31, 1994..................................... 10.50 8.00
Fourth Quarter ended June 30, 1994..................................... 12.25 8.25
</TABLE>
On March 26, 1996, the closing price of the Common Stock as reported by the
Nasdaq National Market was $18 3/8 per share. As of March 26, 1996, there were
approximately 1,828 holders of record of the Common Stock.
DIVIDEND POLICY
The Company has never declared or paid dividends on its Common Stock and
does not anticipate paying any cash dividends in the foreseeable future.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data set forth below for the fiscal
years ended June 30, 1993, 1994, and 1995 and the consolidated balance sheet
data at June 30, 1994 and 1995 are derived from, and are qualified by reference
to, the audited consolidated financial statements included elsewhere herein. The
consolidated statement of operations data for the fiscal years ended June 30,
1991 and 1992, and the consolidated balance sheet data at June 30, 1991, 1992,
and 1993 are derived from audited consolidated financial statements previously
filed with the Commission. The consolidated statement of operations data for the
six months ended December 31, 1994 and 1995 and the consolidated balance sheet
data at December 31, 1994 and 1995 are derived from unaudited consolidated
financial statements previously filed with the Commission, which, in the opinion
of management, have been prepared on the same basis as the audited consolidated
financial statements and reflect all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for such periods. Operating results for the six months
ended December 31, 1995 are not necessarily indicative of the results that may
be expected for the entire year ending June 30, 1996. This information is not
necessarily indicative of the Company's future performance.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................................. $ 1,582 $ 1,805 $ 2,370 $ 409 $ 11,816 $ 7,209 $ 4,186
Operating expenses:
Research and development...................... 15,092 20,922 24,767 31,605 35,063 19,129 15,562
General and administrative.................... 4,984 5,187 6,405 7,312 7,085 3,804 3,385
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses.................... 20,076 26,109 31,172 38,917 42,148 22,933 18,947
Loss from operations............................ (18,494) (24,304) (28,802) (38,508) (30,332) (15,724) (14,761)
Investment and other income -- net.............. 792 2,538 2,422 1,562 1,209 575 430
Dividends on preferred stock.................... -- -- -- -- (594) (219) (375)
Net loss applicable to Common Stock............. $ (17,702) $ (21,766) $ (26,380) $ (36,946) $ (29,717) $ (15,368) $ (14,706)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net loss per share of Common Stock.............. $ (1.24) $ (1.25) $ (1.39) $ (1.83) $ (1.35) $ (0.72) $ (0.59)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average number of common shares
outstanding.................................... 14,258 17,344 18,946 20,226 21,959 21,385 24,851
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................... $ 16,812 $ 66,420 $ 39,542 $ 21,056 $ 23,483 $ 20,100 $ 12,722
Working capital................................. 15,643 65,578 39,745 19,446 22,346 20,877 11,144
Total assets.................................... 44,848 97,976 72,537 53,132 56,030 52,864 44,892
Total long-term debt............................ 8,336 223 -- -- -- -- 1,314
Accumulated deficit............................. (74,251) (96,017) (122,397) (159,343) (189,060) (174,492) (203,766)
Stockholders' equity............................ 33,855 94,553 69,144 49,825 50,077 48,615 37,003
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(REFERENCES TO YEARS ARE TO THE COMPANY'S FISCAL YEARS ENDED JUNE 30.)
Alliance has devoted substantial resources to research and development
related to its pharmaceutical products based upon PFC and emulsion technologies.
The Company has been unprofitable since inception and expects to incur operating
losses for at least the next several years due to continued requirements for
research and development, preclinical testing and clinical trials, regulatory
activities, and commercial manufacturing start-up. The amount of net losses and
the time required by the Company to achieve profitability are highly uncertain
due to differences in the timing of revenues earned and expenses incurred. The
Company has entered into collaborative research and development agreements with
pharmaceutical companies that generate revenue to augment the level of its
research and development activities and to offset portions of its research and
development costs. See "Business -- Collaborative Agreements." The timing and
amounts of such revenue, if any, cannot be predicted with certainty and will
likely fluctuate sharply. To date, the Company's revenue from the sale of
products has been immaterial. The majority of the Company's products are in the
development stage and there can be no assurance as to whether or when it will be
able to increase its revenues significantly. There can be no assurance that the
Company will be able to achieve profitability at all or on a sustained basis.
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1995 AS COMPARED WITH SIX MONTHS ENDED DECEMBER
31, 1994
The Company's license and research revenue was $4.1 million for the six
months ended December 31, 1995, compared to $7.1 million for the six months
ended December 31, 1994. The period ended December 31, 1994 included a one-time
license fee of $4.0 million.
Research and development expenses decreased by 19% to $15.6 million for the
six months ended December 31, 1995, compared to $19.1 million for the six months
ended December 31, 1994. The decrease in expenses was primarily the result of a
$3.6 million reduction in purchases of raw materials, a $929,000 net reduction
in acquired research and development expense, and reduced staffing costs. These
reductions were partially offset by $639,000 paid to a supplier under a previous
raw material commitment. The Company also increased payments to universities and
outside consultants. The expenses for the six months ended December 31, 1994
included a one-time $1.7 million charge to research and development expense
which arose when the Company licensed product rights to Ortho. The expenses for
the six months ended December 31, 1995 included a $757,000 charge arising from
the acquisition of certain PFC patents, patent rights, and related documents in
exchange for 50,000 shares of Common Stock and a five-year warrant to purchase
up to an additional 100,000 shares of Common Stock at $10.00 per share.
General and administrative expenses decreased by 11% to $3.4 million for the
six months ended December 31, 1995, compared to $3.8 million for the six months
ended December 31, 1994. The decrease in general and administrative expenses was
primarily due to decreased professional fees.
Investment income and other was $430,000 for the six months ended December
31, 1995, compared to $575,000 for the six months ended December 31, 1994. The
decline was primarily a result of lower average cash balances.
1995 AS COMPARED WITH 1994
The Company's license and research revenue increased to $11.6 million in
1995 compared to $163,000 in 1994. The increase was primarily due to $4.0
million of license revenue and $7.1 million of research revenue derived from the
Ortho License Agreement.
The Company incurred total operating expenses of $42.1 million for 1995.
Operating expenses include $5.0 million for purchases of raw material for
certain products currently being developed, $1.8 million for OXYGENT costs
incurred prior to execution of the Ortho License Agreement, $545,000 for
products no longer promoted or developed by Alliance, and a $1.7 million
non-cash charge related to the license of previously capitalized product rights.
The $5.0 million charge for the purchase of raw materials arises from a December
14
<PAGE>
1993 agreement the Company entered into with a supplier. In 1996, charges under
the agreement will be substantially less than in 1995. In January 1994, the
Company regained from Boehringer Ingelheim International GmbH ("BII") all
marketing and manufacturing rights to certain IMAGENT products, diagnostic
imaging agents, and OXYGENT products outside of North America. In conjunction
with the acquisition of the marketing and manufacturing rights from BII, the
Company recorded product rights of $1.8 million, based on the value of warrants
issued to acquire the rights. The unamortized portion ($1.7 million) of these
product rights was charged to research and development expense when the Company
licensed these product rights to Ortho.
Research and development expenses increased by 11% to $35.1 million for 1995
compared to $31.6 million for 1994. The growth in expenses is primarily a result
of increased raw material costs and the product rights charge discussed above
and increased salary costs. These expenses were partially offset by a reduction
in payments to universities and outside consultants.
General and administrative expenses decreased by 3% to $7.1 million for 1995
compared to $7.3 million for 1994. During the fourth quarter of 1995, the
Company was successful in recovering $1.6 million from its insurance carrier to
offset professional fees incurred in connection with the defense of its lawsuit.
Investment and other income was $1.2 million for 1995 compared to $1.6
million for 1994. The decline in investment revenue was primarily a result of
lower average cash balances.
1994 AS COMPARED WITH 1993
The Company had net product revenue of $246,000 for 1994 compared to $50,000
for 1993. In August 1993, the Company received FDA approval to market IMAGENT
GI, a magnetic resonance ("MR") imaging contrast agent. The increase in net
product revenue from 1993 to 1994 was primarily attributable to sales of IMAGENT
GI and SAT PAD, an MR imaging accessory. Sales of IMAGENT GI and SAT PAD were
not expected to provide significant revenue to the Company. In September 1994,
the Company discontinued promotional activities for IMAGENT GI due to limited
revenue potential.
License and research revenue decreased to $163,000 for 1994 compared to $2.3
million for 1993. The Company's 1993 license and research revenue was primarily
derived from the BII agreements. In July 1993, the BII agreements were modified,
which resulted in BII discontinuing all contract payments.
Research and development expenses increased by 28% to $31.6 million for 1994
compared to $24.8 million for 1993. The growth in expenses reflects increases in
staffing, costs of preclinical testing and clinical trials, and additional
laboratory supplies and equipment associated with the growth of the Company's
research and development efforts. Due to the discontinuance of IMAGENT GI
promotional activities, the Company reduced its perflubron inventories to the
estimated net realizable value from sales of IMAGENT GI, resulting in a charge
of $2.1 million.
General and administrative expenses increased by 14% to $7.3 million for
1994 compared to $6.4 million for 1993. The increases were principally due to
increases in staffing to support the growth of product research and development
efforts, and professional fees incurred in connection with the defense of the
lawsuit.
Investment and other income was $1.6 million for 1994 compared to $2.4
million for 1993. The decline in investment revenue was primarily a result of
lower average cash and short-term investment balances.
LIQUIDITY AND CAPITAL RESOURCES
Through December 1995, the Company financed its activities primarily from
public and private sales of equity and funding from collaborations with
corporate partners. In February 1996, the Company entered into the HMRI License
Agreement, which provides HMRI with worldwide marketing rights to the
intratracheal administration of liquids, including LIQUIVENT, which perform
bronchoalveolar lavage or liquid ventilation. The product will be developed
jointly by Alliance and HMRI, with HMRI responsible for substantially all of the
costs of development and marketing after March 31, 1996. In conjunction with the
15
<PAGE>
HMRI License Agreement, HMRI purchased shares of Series B and Series C Preferred
Stock for $22.0 million. In addition, HMRI paid Alliance an initial license fee
and will pay further license fees, milestone payments, and royalties on product
sales. HMRI also received a five-year warrant to acquire 300,000 shares of
Common Stock at $20.00 per share.
In August 1995, the Company entered into a loan and security agreement under
which the Company received $2.2 million. Amounts borrowed under the agreement
are secured by fixed assets, and will be repaid over three years commencing in
September 1995. If certain financial covenants are not satisfied, the debt may
become due and payable. The Company has financed substantially all of its office
and research facilities and related leasehold improvements under operating lease
arrangements.
In April 1995, the Company completed offerings of 3.2 million shares of
newly issued Common Stock, resulting in net proceeds to the Company of
approximately $14.3 million.
In August 1994, the Company entered into the Ortho License Agreement for
injectable PFC emulsions capable of transporting oxygen for therapeutic use,
including OXYGENT. Under the Ortho License Agreement, Ortho paid to Alliance an
initial fee of $4.0 million and will make other payments upon the achievement of
certain milestones. Ortho is responsible for substantially all the remaining
costs of developing and marketing the products and will pay Alliance a royalty
based upon sales of products after commercialization. From August 1994 through
December 31, 1995, the Company had received research revenue payments of $9.1
million from Ortho, and as of December 31, 1995, had recorded a receivable of
$2.0 million, which was received subsequently. In conjunction with the Ortho
License Agreement, J&JDC purchased 1.5 million shares of Series A Preferred
Stock for $15.0 million and obtained a three-year warrant to purchase 300,000
shares of Common Stock at $15.00 per share.
The Company had net working capital of $11.1 million at December 31, 1995
compared to $22.3 million at June 30, 1995. The Company's cash, cash
equivalents, and short-term investments decreased to $12.7 million at December
31, 1995 from $23.5 million at June 30, 1995. The decrease resulted primarily
from net cash used in operations of $12.1 million, and property, plant, and
equipment additions of $1.4 million related to the expansion of facilities used
for research, development, and pilot manufacturing. These decreases were
partially offset by $2.2 million received under the August 1995 loan and
security agreement, and $675,000 from the issuance of Common Stock upon exercise
of options. Capital expenditures for 1996 are expected to increase compared to
1995. The Company's operations to date have consumed substantial amounts of
cash, and are expected to continue to do so for the foreseeable future.
In December 1993, in order to obtain a commitment for a long-term supply of
raw material for both clinical trials and anticipated future production
requirements, the Company entered into an agreement with a supplier under which
the Company was obligated to make payments to the supplier through May 1997
based, in part, upon the achievement of certain milestones. Based upon the
supplier's intent to negotiate directly with the Company's existing and future
collaborative partners, that agreement was modified in July 1995 to terminate
certain commitments by both parties. Some or all of the Company's payment
obligations that remain may be reimbursed to the Company by existing and future
collaborative partners.
The Company continually reviews its product development activities in an
effort to allocate its resources to those product candidates that the Company
believes have the greatest commercial potential. Factors considered by the
Company in determining the products to pursue include projected markets and
need, potential for regulatory approval and reimbursement under the existing
healthcare system, status of its proprietary rights, technical feasibility,
expected and known product attributes, and estimated costs to bring the product
to market. Based on these and other factors, the Company may from time to time
reallocate its resources among its product development activities. Additions to
products under development or changes in products being pursued can
substantially and rapidly change the Company's funding requirements.
The Company expects to incur substantial additional expenditures associated
with product development. The Company will seek additional collaborative
research and development relationships with suitable corporate partners for its
non-licensed products. There can be no assurance that such relationships, if
any, will successfully reduce the Company's funding requirements. Additional
equity or debt financing may be
16
<PAGE>
required, and there can be no assurance that funds from these sources will be
available on reasonable terms, if at all. If adequate funds are not available,
the Company may be required to delay, scale back, or eliminate one or more of
its product development programs, or obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates, or products that the
Company would not otherwise relinquish.
Alliance anticipates that its existing capital resources, including expected
revenues from the License Agreements and investments, as well as the net
proceeds from this offering and income earned thereon, will be adequate to
satisfy its capital requirements for at least the next 24 months. The Company's
future capital requirements will depend on many factors, including continued
scientific progress in its research and development programs, progress with
preclinical testing and clinical trials, the time and cost involved in obtaining
regulatory approvals, patent costs, competing technological and market
developments, changes in existing collaborative relationships, the ability of
the Company to establish additional collaborative relationships, and the cost of
manufacturing scale-up.
During September 1992, the Company and certain of its officers and directors
were named as defendants in several lawsuits filed in the U.S. District Court
for the Southern District of California by certain shareholders. The actions
were consolidated into one class action lawsuit titled "In re Alliance
Pharmaceutical Securities Litigation." The complaint claimed, among other
things, that the defendants failed to disclose certain problems with two of the
Company's products under development, which conduct is alleged to have portrayed
falsely the Company's financial condition. On May 25, 1995, summary judgment was
granted in favor of the Company and its officers and directors. Attorneys for
the plaintiffs have appealed the decision. A hearing on the appeal has not yet
been scheduled. The Company believes the eventual outcome of the litigation will
not have a material adverse effect on the Company's financial condition.
The Company's business is subject to significant risks that could cause the
Company's results to differ materially from those expressed in any
forward-looking statements made in this Prospectus. These risks include the
matters set forth above under this caption, under "Risk Factors," and elsewhere
herein.
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BUSINESS
OVERVIEW
Alliance is a pharmaceutical research and development company that focuses
on developing scientific discoveries into potential drug products and licensing
these products to multinational pharmaceutical companies in exchange for fixed
payments and royalties. To date, the Company has entered into agreements with
researchers for the rights to two innovative products, developed these products
through initial clinical (human) trials, and entered into collaborative
relationships with multinational pharmaceutical companies for the final stages
of development and worldwide marketing. These products are OXYGENT, an
intravascular oxygen carrier designed to reduce the need for donor blood
transfusions during surgery, which is currently in Phase IIb clinical trials and
is licensed to affiliates of Johnson & Johnson, and LIQUIVENT, an intrapulmonary
agent for use in treatment of acute respiratory failure, which is currently in a
pivotal Phase II/III clinical trial and is licensed to Hoechst Marion Roussel,
Inc., an affiliate of Hoechst AG. Alliance intends to enter into a collaborative
agreement for IMAGENT US, an ultrasound contrast agent with respect to which the
Company has just begun a Phase I clinical trial.
The Company's strategy is to identify potential new pharmaceutical products
through scientific collaborations with researchers and clinicians in
universities and medical centers where many of the basic causes of disease and
potential targets for new therapies are discovered. Using its experience in
defining pharmaceutical formulations, designing manufacturing processes,
conducting preclinical pharmacology and toxicology studies, and conducting
early-phase human testing, Alliance endeavors to advance such discoveries into
clinical development. The Company seeks collaborative relationships for the
final stages of drug development, including completing late-phase human testing,
obtaining worldwide regulatory approvals, building large-scale manufacturing
capacities, and marketing.
The Company's headquarters are located at 3040 Science Park Road, San Diego,
California 92121, and its telephone number is (619) 558-4300.
PRODUCTS IN CLINICAL DEVELOPMENT
Alliance's products currently in clinical development -- OXYGENT, LIQUIVENT,
and IMAGENT US -- are based upon PFC and emulsion technologies. PFCs are
biochemically inert compounds and may be employed in a variety of therapeutic
and diagnostic applications. The Company's primary drug substance is perflubron,
a brominated PFC that has a high solubility for respiratory gases and can be
used to transport these gases safely throughout the body.
OXYGENT. OXYGENT, an emulsion containing perflubron, is an intravascular
oxygen carrier to be used as a temporary "blood substitute" to provide oxygen to
tissues during elective surgeries where substantial blood loss is anticipated.
It is estimated that in excess of three million patients annually in the United
States may receive one or more units of blood during elective surgeries,
including, for example, cardiovascular, orthopedic, and general surgical
procedures. An oxygen carrier could be used instead of blood for a portion of
these patients. The OXYGENT dose for surgical applications is expected to
provide the equivalent oxygen delivery of at least two units of red blood cells.
OXYGENT has several potential advantages over the use of allogeneic (donor)
blood: there is no risk of infectious disease transmission; it is compatible
with all blood types; it has a shelf-life in excess of one year; and it can be
sterilized. According to the 1994 estimates of The National Institutes of
Health, the risks per unit of blood transfused in the United States are 1:2,500
for bacterial infections, 1:3,000 for hepatitis, 1:100,000 for fatal hemolytic
reactions, primarily due to clerical error, and 1:225,000 for HIV infection
(AIDS). To minimize the use of allogeneic blood and to avoid these risks,
certain techniques can be employed that allow use of the patient's own
(autologous) blood during surgery. These techniques include (i) predonation, in
which patients donate several units of their blood in the six weeks preceding
surgery, (ii) perioperative hemodilution, in which several units of the
patient's blood are removed just prior to surgery and are replaced with a plasma
expander, and (iii) salvage, wherein a device (cell saver) is used to collect
blood lost during the surgical procedure. OXYGENT can be used with any of these
autologous blood collection techniques to enhance safety, by reducing the need
for allogeneic blood. When a blood transfusion
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is indicated during surgery, one or more doses of OXYGENT would be used in place
of allogeneic blood to maintain an adequate level of oxygen delivery despite a
lower red blood cell concentration. This use of OXYGENT delays or reduces the
need for the transfusion of donor blood, thereby avoiding its associated risks.
In October 1995, the Company and Ortho commenced a Phase IIb randomized,
controlled, efficacy trial involving surgical patients at multiple sites in the
United States. A similar Phase IIb clinical study was commenced in Europe in
January 1996. In February 1996, the Company and Ortho commenced a Phase II study
in the United States in cardiopulmonary bypass patients.
In August 1994, the Company entered into the Ortho License Agreement, which
provides Ortho with worldwide marketing rights to the Company's injectable PFC
emulsions capable of transporting oxygen for therapeutic use, including OXYGENT.
The product is being developed jointly by Alliance and Ortho, with Ortho being
responsible for substantially all of the remaining costs of development and
marketing.
LIQUIVENT. LIQUIVENT, sterile perflubron, is an intrapulmonary agent for
treatment of acute respiratory failure, a disorder that can result from many
causes, including serious infections, traumatic shock, severe burns, or
inhalation of toxic substances. Acute respiratory failure is generally
characterized by an excessive inflammatory response, which leads to blockage of
the small airways and collapse of alveoli, resulting in inadequate gas exchange
and impairment of normal lung function. Each year, approximately 235,000
patients in the United States are placed on mechanical gas ventilators for at
least four days for treatment of lung dysfunction due to acute injuries. The
most urgent need for these patients is to improve their blood oxygenation.
However, the prolonged use of high ventilatory pressures or high continuous
concentrations of inspired oxygen can damage the patient's lungs. Some of these
patients may benefit from treatment with LIQUIVENT.
LIQUIVENT is intended to be used in a technique called partial liquid
ventilation ("PLV"). In this procedure, the drug is administered through an
endotracheal tube into the lungs of a patient being supported by a mechanical
ventilator. The initial goal of LIQUIVENT/PLV therapy is to open collapsed
alveoli to improve gas exchange. Once this has been accomplished, ventilator
pressure and oxygen concentration may be lowered to minimize ventilator-induced
lung trauma. In clinical studies, LIQUIVENT has also been observed to promote
the migration of mucus and alveolar debris to the central airways, where
suctioning is easier. The ability to remove such debris may significantly reduce
the excessive inflammatory response associated with acute respiratory failure
and enhance the effectiveness of other therapeutic interventions, all serving
potentially to reduce patient recovery time. Published results from initial
clinical trials have indicated that LIQUIVENT improved lung oxygenation, without
clinically significant side effects. In addition, preclinical studies indicate
LIQUIVENT may mitigate inflammation, ventilator-induced trauma, and oxygen
toxicity.
In January 1996, the Company began a multi-center pivotal Phase II/III
clinical trial with LIQUIVENT in pediatric patients with acute respiratory
failure, and separate multi-center Phase II clinical trials in adults and
premature infants are underway. The FDA has granted Subpart E status (expedited
review) for the product.
In February 1996, the Company entered into the HMRI License Agreement, which
provides HMRI with worldwide marketing and manufacturing rights to the
intratracheal administration of liquids, including LIQUIVENT, which perform
bronchoalveolar lavage or liquid ventilation. The product will be developed
jointly by Alliance and HMRI, with HMRI responsible for substantially all of the
costs of development and marketing after March 31, 1996.
IMAGENT US. IMAGENT US is an ultrasound contrast agent being developed to
aid in the assessment of cardiac function and myocardial perfusion, as well as
the detection of solid organ lesions and blood flow abnormalities. More than 30
million scans of the heart, vasculature, and abdominal organs are performed
annually in the United States, some of which may potentially benefit from a
cost-effective contrast agent. To be successful in the marketplace, ultrasound
contrast agents should provide enhanced diagnostic images during several minutes
of scanning, be easy to use, be stable during transportation, and have a long
shelf-life. IMAGENT US is being developed to meet these requirements.
IMAGENT US is a powder comprising hollow microspheres containing a PFC-based
gaseous mixture and water-soluble components that are known to be acceptable for
parenteral use. Prior to use, IMAGENT US is
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reconstituted with sterile water to form microbubbles that are then injected
into the patient. The gas bubbles are highly echogenic and, when delivered
intravenously, reflect signals that enhance ultrasonic images. In preclinical
studies, IMAGENT US has been found to enhance the ultrasound signal from
perfused tissues and blood vessels using traditional gray-scale and color
Doppler technologies, as well as the emerging harmonic ultrasound imaging
technique. The Company filed an IND with the FDA in February 1996 and began a
Phase I clinical trial in the United States in March 1996.
OTHER PRODUCTS
Alliance is supporting internal research efforts to expand the applicability
of its core technologies. The Company has patented fluorinated surfactants that
are potentially useful in the preparation of therapeutic or diagnostic emulsions
and other formulations. Certain of these surfactants have been licensed to Glaxo
Group Limited ("Glaxo") to be used as a component of its metered dose inhaler
delivery system for respiratory drugs.
Alliance is investigating the use of PFC-containing reverse emulsions,
microemulsions, gels, foams, and other compositions as drug delivery agents.
These compositions are either aqueous or oil-based, and may be administered via
oral, intravenous, intrapulmonary, or topical routes to distribute antibiotics,
chemotherapy agents, gene therapies, or other medicaments systemically or to
selected areas of the body. Alliance is also conducting preclinical studies of a
PFC emulsion that could be beneficial for warm temperature preservation of
kidneys or other organs which may extend the time the organ is viable for
transplantation.
The Company has initiated a pilot clinical study in Europe to assess
OXYFLOW, an apparatus designed to be a combined cardiovascular and oxygenation
monitor that acquires data by minimally invasive means. This device is intended
to provide on-line information pertaining to oxygen status and other
physiological parameters, which could assist physicians in their decisions
regarding transfusions and other interventions.
The Company has certain agreements with research institutions to develop
discoveries that the Company believes may be the basis of new products.
Antigenized antibodies that could potentially stimulate or down-regulate
antibody production are being developed in conjunction with Mt. Sinai Medical
Center in New York City. A prototype vaccine for infectious disease and a
prototype tolerogen for an autoimmune disease are also under development with
Mt. Sinai. In addition, Alliance is working with researchers at Temple
University to develop an apoptotic factor for regulating the death of certain
cancer cells.
The Company has developed and is marketing SAT PAD, a re-usable MR imaging
accessory that improves the quality of images obtained by certain MR imaging
techniques. SAT PAD is distributed by dealers specializing in radiology
products. Sales of SAT PAD were approximately $176,000 for fiscal 1995. The
Company expects that the sales volume of SAT PAD will be limited and does not
anticipate significant revenue from the product.
The Company intends to consider other technologies that may be available for
licensing and research agreements with other institutions or inventors. Alliance
intends, where appropriate, to seek outside sources of funding. If new license
and research agreements are added and the Company is not able to obtain outside
sources of funding, the Company's research and development expenses are expected
to increase significantly.
There can be no assurance that any of these products will be successfully
commercialized.
COLLABORATIVE RELATIONSHIPS
HOECHST MARION ROUSSEL, INC. In February 1996, the Company entered into the
HMRI License Agreement, which provides HMRI with worldwide marketing rights to
the intratracheal administration of liquids, including LIQUIVENT, which perform
bronchoalveolar lavage or liquid ventilation. The product will be developed
jointly by Alliance and HMRI, with HMRI responsible for substantially all of the
cost of development and marketing after March 31, 1996. In conjunction with the
HMRI License Agreement, HMRI purchased 750,000 shares of the Company's Series B
Preferred Stock and 200,000 shares of its Series C Preferred Stock for an
aggregate of $22.0 million. In addition, HMRI paid Alliance an initial license
fee and will pay further license fees, milestones payments, and royalties on
product sales. HMRI also received a five-year warrant to acquire 300,000 shares
of Common Stock at $20.00 per share. The Series B Preferred Stock is convertible
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into shares of Common Stock upon the earliest of: (i) the Common Stock closing
at a price per share of at least $20.00 for twenty consecutive days; (ii)
termination of the HMRI License Agreement; or (iii) February 28, 2001. Each
share of Series B Preferred Stock will be converted into a number of shares of
Common Stock based upon the lower of the average closing price of the Common
Stock over the twenty trading days preceding the time of conversion or $20.00
per share. The Series C Preferred Stock converts automatically on June 30, 1997
into a number of shares of Common Stock obtained by dividing the average closing
price of the Common Stock over the twenty trading days preceding January 14,
1997 into $5.0 million. Prior to June 29, 1997, HMRI may, if the HMRI License
Agreement is terminated, redeem the Series C Preferred Stock for $15.0 million,
payable in cash or Common Stock at Alliance's election, any time on or before
the expiration of five years following the redemption date. Prior to conversion,
each share of Series B Preferred Stock is entitled to one vote on matters on
which shareholders are entitled to vote. The Series B Preferred Stock carries a
cumulative annual dividend of $1.00 per share. The Series C Preferred Stock does
not have dividend or voting rights.
ORTHO BIOTECH, INC. In August 1994, the Company entered into the Ortho
License Agreement for injectable PFC emulsions capable of transporting oxygen
for therapeutic use, including OXYGENT. Under the Ortho License Agreement, Ortho
paid to Alliance an initial fee of $4.0 million and will make other payments
upon the achievement of certain milestones. Ortho is responsible for
substantially all the remaining costs of developing and marketing the products
and will pay Alliance a royalty based upon sales of products after
commercialization. In conjunction with the Ortho License Agreement, J&JDC
purchased 1.5 million shares of Series A Preferred Stock for $15.0 million. On
or before June 30, 1998, each share of the Series A Preferred Stock will be
converted into shares of Common Stock based upon the lower of the average price
of Common Stock at the time of conversion or $20.00 per share. Prior to
conversion, each share of Series A Preferred Stock is entitled to one-half vote
on matters on which shareholders are entitled to vote. The Series A Preferred
Stock carries a cumulative annual cash dividend of $0.50 per share. Ortho also
obtained a three-year warrant to purchase 300,000 shares of Common Stock at
$15.00 per share.
The Company intends to enter into a collaborative relationship for IMAGENT
US, an ultrasound contrast agent with respect to which the Company has just
begun a Phase I clinical trial.
The Company entered into a license agreement with Glaxo for the use of
certain of the Company's fluorinated surfactants in metered dose inhalers that
deliver Glaxo's respiratory drug formulations. Glaxo is responsible for the
development and marketing of metered dose inhaler products incorporating the
Company's surfactants. The agreement provides for an initial license fee and
milestone payments to Alliance, which are not expected to exceed $2.5 million in
the aggregate, with royalties, if any, to Alliance following commercialization.
There can be no assurances that the Company will be able to enter into
future collaborative relationships on acceptable terms. The termination of any
collaborative relationship or failure to enter into such relationships may limit
the ability of the Company to develop its technology and may have a material
adverse effect on the Company's business.
MARKETING
Under the terms of the Ortho License Agreement, Ortho has exclusive
worldwide marketing rights to OXYGENT and any other injectable PFC emulsion
products capable of transporting oxygen for therapeutic use. Under the terms of
the HMRI License Agreement, HMRI has exclusive worldwide marketing rights to the
intratracheal administration of liquids, including LIQUIVENT, which perform
bronchoalveolar lavage or liquid ventilation. The Company has not yet selected
its marketing partner for IMAGENT US. The Company's only commercialized product,
SAT PAD, is currently distributed through certain distributors of MR imaging
equipment and imaging products.
MANUFACTURING
The Company manufactures all of its products for preclinical testing and
clinical trials. OXYGENT is produced in Alliance's San Diego facility, which
includes both a pilot plant and a production-scale manufacturing facility. The
Company believes that this production facility will provide sufficient capacity
for future
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clinical trials and market launch of OXYGENT, if and when approved by the FDA.
However, a larger commercial-scale facility will be required in the future.
Under the terms of the Ortho License Agreement, Ortho has the right to elect to
manufacture OXYGENT itself or have the Company continue to do so, which election
must be made at or prior to the filing of an NDA. If Alliance manufactures
OXYGENT for Ortho, the transfer price, which will not be less than Alliance's
fully burdened cost, will be determined by Ortho's net sales price for the
product. The Company has not selected a commercial-scale site or obtained any
regulatory approvals. Construction of such a facility will depend upon Ortho's
decision regarding manufacturing, product development, capital resources, and
regulatory approvals, among other things.
LIQUIVENT is manufactured for clinical trials at the Company's Otisville,
New York facility. LIQUIVENT is the same drug substance as IMAGENT GI, for which
Alliance obtained FDA approval in August 1993 as an oral contrast agent for MR
imaging. As a result, certain chemistry, manufacturing, and control requirements
have been accepted by the FDA, which may benefit the Company in the regulatory
review process. The HMRI License Agreement requires the Company to manufacture
LIQUIVENT at its Otisville facility for a period of time after market launch at
a negotiated price. HMRI will be responsible for establishing production
capacity beyond the maximum capacity of the Otisville facility.
IMAGENT US is manufactured for clinical studies at the San Diego facility,
using a proprietary process to form dry, PFC vapor-containing spheres which are
reconstituted with sterile water to form microbubbles just prior to use. The
facility is expected to provide sufficient capacity for clinical trials and
market launch.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company has obtained perflubron, the principal raw material utilized in
OXYGENT and LIQUIVENT, from several large chemical suppliers, and believes that
it has sufficient inventory of the drug substance for clinical trials. HMRI and
Ortho have indicated an intent to secure a long-term supply of perflubron from
manufacturers. The Company believes it has a sufficient supply of raw materials
for IMAGENT US for clinical trials. The Company's business could be materially
and adversely affected if it or its collaborative partners were unable to obtain
necessary raw materials on a timely basis and at a cost-effective price.
PATENTS
The Company seeks proprietary protection for its products, processes,
technologies, and ongoing improvements. The Company is pursuing patent
protection in the United States and in foreign countries that it regards as
important for future endeavors. Numerous patent applications have been filed in
the European Patent Office, Australia, Canada, Ireland, Israel, Japan, Norway,
and South Africa, and patents have been granted in some of these countries.
The Company has seven issued U.S. patents related to or covering PFC
emulsions. Such emulsions are the basis of the Company's OXYGENT products. The
issued patents and other pending patent applications cover specific details of
emulsified PFCs, and include product-by-process claims, method claims describing
their manufacture and use, and some composition claims. These broadly cover high
concentration PFC emulsions, typically 40-125% weight per volume (although some
are limited to 75-125% weight per volume), and manufacturing methods.
In September 1994, Alliance received a U.S. patent for its preferred method
of using blood substitutes to facilitate oxygen delivery. A related U.S. patent
was issued in September 1995. Corresponding patents are pending in Europe,
Japan, and other countries. The issued claims cover methods for facilitating
autologous blood use in conjunction with administering oxygen-enriched gas and
oxygen carriers that contain fluorochemicals, as well as those derived from
human, animal, plant, or recombinant hemoglobin, in order to reduce or eliminate
the need for allogeneic blood transfusions during surgery.
The Company has filed U.S. and foreign patent applications on its method of
using oxygen-carrying PFCs to enhance respiratory gas exchange utilizing
conventional gas ventilators. In August 1995, a U.S. patent licensed to the
Company issued. The patent covers a method of administering liquids, including
LIQUIVENT, to patients. Another U.S. patent, covering other methods of
administration of liquids, including LIQUIVENT, to patients, was issued in
February 1996. The Company has patent applications pending which seek to cover
the use of PFCs to deliver drugs to the lungs and to wash debris from, and open,
collapsed
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lungs. In November 1995, the Company received a U.S. patent covering the use of
fluorochemicals to treat localized and systemic inflammation. The Company also
has patent applications pending that cover apparati for liquid ventilation using
PFCs.
The Company has filed eight U.S. patent applications related to IMAGENT US
concerning the composition, manufacture, and use of novel stabilized microbubble
compositions, which include applications based on its discovery that PFC gases,
in combination with appropriate surfactants, can stabilize microbubbles for use
in ultrasonic imaging. International applications directed to the same subject
matter have also been filed.
The Company has patents that have issued in the United States and abroad,
and additional pending patents, covering its novel fluorinated surfactants.
These compounds may be useful in oxygen-carrying or drug-transport compositions,
and in liposomal formulations that have therapeutic and diagnostic applications.
Additional fluorinated compounds disclosed in pending applications may be
employed in cosmetics, protective creams, and lubricating agents. Compositions
that can be structured as emulsions, microemulsions, and gels may be useful as
contrast enhancement agents for radiography and scintigraphy. The Company also
has pending applications relating to microstructures (tubules, helixes, fibers)
that may have uses in the fields of medicine, biomolecular engineering,
microelectronics, and electro-optics.
Aside from the issued patents and allowed applications referred to above,
however, no assurance can be given that any of these applications will result in
issued U.S. or foreign patents. Although patents are issued with a presumption
of validity and require a challenge with a high degree of proof to establish
invalidity, no assurance can be given that any issued patents would survive such
a challenge and would be valid and enforceable.
The Company also attempts to protect its proprietary products, processes,
and other information by relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees, consultants, and certain other
persons who have access to such products, processes, and information. The
agreements affirm that all inventions conceived by employees are the exclusive
property of the Company, with the exception of inventions unrelated to the
Company's business and developed entirely on the employee's own time.
Nevertheless, there can be no assurance that these agreements will afford
significant protection against or adequate compensation for misappropriation or
unauthorized disclosure of the Company's trade secrets.
COMPETITION
Biotechnology and pharmaceutical companies are highly competitive. There are
many pharmaceutical companies, biotechnology companies, public and private
universities, and research organizations actively engaged in research and
development of products that may be similar to Alliance's products. Many of the
Company's existing or potential competitors have substantially greater
financial, technical, and human resources than the Company and may be better
equipped to develop, manufacture, and market products. These companies may
develop and introduce products and processes competitive with or superior to
those of the Company. In addition, other technologies or products may be
developed that have an entirely different approach or means of accomplishing the
intended purposes of the Company's products, which might render the Company's
technology and products uncompetitive or obsolete. There can be no assurance
that the Company will be able to compete successfully.
Well-publicized side effects associated with the transfusion of human donor
blood have spurred efforts to develop a blood substitute. Two primary approaches
have shown promise as temporary oxygen carriers: PFC emulsions and hemoglobin
solutions. Hemoglobin development efforts include chemically modified,
stroma-free hemoglobin from human or bovine red blood cells, and the use of
genetic engineering to produce recombinant hemoglobin. There are several
companies working on hemoglobin solutions as a blood substitute, three of which
have entered Phase II clinical trials. One major U.S. pharmaceutical company is
collaborating with a company developing a recombinant hemoglobin-based blood
substitute. Alliance is aware of two other companies developing PFC-based
temporary oxygen carriers, one of which has entered Phase I clinical trials. The
Company believes that the relatively low cost and ease of production of OXYGENT
provide advantages over hemoglobin-based products.
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Although liquid ventilation therapy has been in the research phase for the
last two decades, the Company is unaware of any potential competitor that has
reached the clinical trial stage. However, other companies may be evaluating
compounds with the possibility of entering this field. If major manufacturers of
PFCs entered the field, the Company could face competition from companies with
substantially greater resources. The Company believes that its patent position
and stage of research and development give it an advantage over these potential
competitors. Alliance is aware of other companies that are attempting to develop
alternative types of therapies for treatment of acute respiratory failure.
Competition in the development of ultrasound imaging contrast agents is
intense and is expected to increase. There is currently only one commercially
available ultrasound imaging contrast agent for certain cardiology applications.
The Company believes that other companies are in advanced clinical trials with
ultrasound contrast agents. The Company expects that competition in the
ultrasound contrast imaging agent field will be based primarily on the product's
safety profile, efficacy, stability, ease of administration, breadth of approved
indications, and physician, healthcare payor, and patient acceptance. Although
the Company believes that if and when IMAGENT US is approved for commercial sale
it will be well positioned to compete successfully, there can be no assurance
that the Company will be able to do so.
PRODUCT LIABILITY CLAIMS AND UNINSURED RISKS
The sale or use of the Company's present products and any other products or
processes that may be developed or sold by the Company may expose the Company to
potential liability from claims by end-users of such products or by
manufacturers or others selling such products, either directly or as a component
of other products. While the Company has product liability insurance, there can
be no assurance that the Company will continue to maintain such insurance or
that it will provide adequate coverage. If the Company is held responsible for
damages in a product liability suit, the Company's financial condition could be
materially and adversely affected.
GOVERNMENT REGULATION
The Company's products require governmental approval before production and
marketing can commence. The regulatory approval process is administered by the
FDA in the United States and by similar agencies in foreign countries. The
process of obtaining regulatory clearances or approvals is costly and time
consuming. The Company cannot predict how long the necessary clearances or
approvals will take or whether it will be successful in obtaining them.
Generally, all potential pharmaceutical products must successfully complete
two major stages of development (preclinical and clinical testing) prior to
receiving marketing approval by the governing regulatory agency. In preclinical
testing, potential compounds are tested both IN VITRO and in animals to gain
safety information prior to administration in humans. Knowledge is obtained
regarding the effects of the compound on bodily functions as well as its
absorption, distribution, metabolism, and elimination.
Clinical trials are typically conducted in three sequential phases, although
the phases may overlap. In Phase I, which frequently begins with the initial
introduction of the drug into healthy human subjects prior to introduction into
patients, the compound will be tested for safety and dosage tolerance. Phase II
typically involves studies in a somewhat larger patient population to identify
possible adverse effects and safety risks, to begin gathering preliminary
efficacy data, and to investigate potential dose sizes and schedules. Phase III
trials are undertaken to further evaluate clinical efficacy and to further test
for safety within an expanded patient population. Each trial is conducted in
accordance with certain standards under protocols that detail the objectives of
the study, the parameters to be used to monitor safety, and the efficacy
criteria to be evaluated. Each protocol must be submitted to the FDA as part of
the IND. Further, each clinical study must be evaluated by an independent review
board at the institution at which the study will be conducted. The review board
will consider, among other things, ethical factors, the safety of human
subjects, and the possible liability of the institution.
Following completion of these studies, a new drug application must be
submitted to and approved by the FDA in order to market the product in the
United States. Similar applications are required in foreign
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countries. There can be no assurance that, upon completion of the foregoing
trials, the results will be considered adequate for government approval. If and
when approval is obtained to market a product, the FDA's (or applicable foreign
agency's) regulations will govern manufacturing and marketing activities.
The FDA has established a designation to speed the availability of new
therapies for life-threatening or severely debilitating diseases. This
designation, defined in Subpart E of the FDA's investigational new drug
regulations, may expedite clinical evaluation and regulatory review of some new
drugs, such as LIQUIVENT, which has been so designated.
Perflubron is an eight-carbon halogenated fluorocarbon liquid. Certain
halogenated fluorocarbons (primarily the gaseous chlorofluorocarbons) have been
implicated in stratospheric ozone depletion. The FDA issued a Finding of No
Significant Impact under the National Environmental Protection Act in connection
with the approval for marketing IMAGENT GI. See "Business -- Manufacturing."
However, all materials contained in the Company's products remain subject to
regulation by governmental agencies.
In addition to FDA regulation, the Company is subject to regulation by
various governmental agencies including, without limitation, the Drug
Enforcement Administration, the U.S. Department of Agriculture, the
Environmental Protection Agency, the Occupational Safety and Health
Administration, and the California State Department of Health Services, Food and
Drug Branch. Such regulation, by governmental authorities in the United States
and other countries, may impede or limit the Company's ability to develop and
market its products.
LEGAL PROCEEDINGS
During September 1992, the Company and certain of its officers and directors
were named as defendants in several lawsuits filed in the U.S. District Court
for the Southern District of California by certain shareholders. The actions
were consolidated into one class action lawsuit titled "In re Alliance
Pharmaceutical Securities Litigation." The complaint claimed, among other
things, that the defendants failed to disclose certain problems with two of the
Company's products under development, which conduct is alleged to have portrayed
falsely the Company's financial condition. On May 25, 1995, summary judgment was
granted in favor of the Company and its officers and directors. Attorneys for
the plaintiffs have appealed the decision. A hearing on the appeal has not yet
been scheduled. The Company believes the eventual outcome of the litigation will
not have a material adverse effect on the Company's financial condition.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME POSITION
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Duane J. Roth Chairman of the Board of Directors, President, Chief
Executive Officer
Harold W. DeLong Executive Vice President -- Business Development
Theodore D. Roth Executive Vice President, Chief Financial Officer,
Secretary
B. Jack DeFranco Vice President -- Market Planning
N. Simon Faithfull, M.D., Ph.D. Vice President -- Medical Research
Henry A. Graham, Ph.D. Vice President -- Operations
Ronald M. Hopkins, Ph.D. Vice President -- Research and Development
Gordon L. Schooley, Ph.D. Vice President -- Clinical Research and Regulatory
Affairs
Elias Lazarides, Ph.D. President and Chief Operating Officer of Astral, Inc.
Carroll O. Johnson Director
Stephen M. McGrath Director
Donald E. O'Neill Director
Helen M. Ranney, M.D. Director
Jean G. Riess, Ph.D. Director
Thomas F. Zuck, M.D. Director
</TABLE>
DUANE J. ROTH. Mr. Roth, who is 46, has been President and Chief Executive
Officer since 1985 and Chairman since October 1989. Prior to joining Alliance,
Mr. Roth served as President of Analytab Products, Inc., an American Home
Products company involved in manufacturing and marketing medical diagnostics,
pharmaceuticals and devices. For the previous ten years, he was employed in
various sales, marketing, and general management capacities by Ortho Diagnostic
Systems, Inc., a Johnson & Johnson company, which is a manufacturer of
diagnostic and pharmaceutical products. Mr. Roth's brother, Theodore D. Roth, is
an Executive Vice President of the Company.
HAROLD W. DELONG. Mr. DeLong, who is 47, has been Executive Vice President
- -- Business Development for the Company since February 1989. Mr. DeLong has been
employed for more than 20 years in the medical diagnostics and pharmaceutical
industry in various sales, marketing, and management positions. Prior to joining
Alliance, Mr. DeLong was Vice President, Sales and Marketing for Murex
Corporation, a company participating in the infectious disease diagnostics
market. He previously served as Director, Sales and Marketing for Becton
Dickinson's Immunocytometry Systems division. Mr. DeLong was also previously
employed by Ortho Diagnostic Systems, Inc., for over ten years, where his last
position was Director of the Hemostasis and Chemistry Products business units.
THEODORE D. ROTH. Mr. Roth, who is 45, has been Executive Vice President
and Chief Financial Officer of the Company since November 1987 and Secretary
since 1990. For more than ten years prior to joining the Company, he was General
Counsel of SAI Corporation, a company in the business of operating manufacturing
concerns, and General Manager of Holland Industries, Inc., a manufacturing
company. Mr. Roth received his J.D. from Washburn University and an LL.M. in
Corporate and Commercial Law from the University of Missouri in Kansas City. He
is the brother of Duane J. Roth, the Chairman of the Company.
26
<PAGE>
B. JACK DEFRANCO. Mr. DeFranco, who is 50, has been Vice President --
Market Planning for Alliance since January 1991. He has more than 20 years
experience in sales and marketing in the medical products industry. He was
President of Orthoconcept Inc., a private firm marketing orthopedic and
urological devices from 1986 through 1990. Prior to 1986, he was Director of
Marketing and New Business Development for Smith and Nephew Inc., which markets
orthopedic and general wound-care products and he served in various sales and
marketing positions with Ortho Diagnostic Systems, Inc. Mr. DeFranco received an
M.B.A. from Fairleigh Dickinson University.
N. SIMON FAITHFULL, M.D., PH.D. Dr. Faithfull, who is 55, has been Vice
President -- Medical Research for the Company since September 1990. Dr.
Faithfull joined Alliance after serving as Director of Medical Research for
Delta Biotechnology Ltd. from 1989 to 1990. He has also served as Senior
Lecturer in Anesthesia at the University of Manchester (UK), and has held
various academic appointments and clinical anesthesia positions at Erasmus
University (Netherlands), Tulane University and the University of Alabama
(Birmingham) for more than 15 years. He has served as Secretary of the
International Society on Oxygen Transport to Tissue. He received his Ph.D. from
Erasmus University, Rotterdam and his M.D. from London University.
HENRY A. GRAHAM, PH.D. Dr. Graham, who is 52, has been Vice President --
Operations since January 1990. In his more than 20 years in industrial research,
he has directed groups involved in the development of biological and
immunodiagnostic products. Prior to joining Alliance, he worked for Johnson &
Johnson for 17 years on a broad range of projects including injectable human
biologicals, immunohematology reagents, immunoassay reagents and instrument
systems. Dr. Graham was Director of Product Development for Ortho Diagnostic
Systems, Inc. for at least five years prior to 1990. During his tenure at
Johnson & Johnson, he was the recipient of several awards, including the
Corporate Medal for Outstanding Research. Dr. Graham received a Ph.D. in
immunology from Rutgers University.
RONALD M. HOPKINS, PH.D. Dr. Hopkins, who is 54, has been Vice President --
Research and Development since May 1990. Prior to joining Alliance, Dr. Hopkins
spent 20 years with Mallinckrodt Medical, Inc. As Vice President at Mallinckrodt
his responsibilities primarily involved identification and development of
various diagnostic x-ray, magnetic resonance, ultrasound and radiopharmaceutical
imaging agents as well as angiographic catheters. In addition to product and
business development experience, Dr. Hopkins has an extensive background in
cardiovascular pharmacology and toxicology research, as well as sterile
pharmaceutical formulation and production. Dr. Hopkins received a Ph.D. in
pharmacology from the University of Maryland.
GORDON L. SCHOOLEY, PH.D. Dr. Schooley, who is 49, has been Vice President
- -- Clinical Research and Regulatory Affairs since January 1989. Dr. Schooley has
been employed for over 20 years in research and development in the
pharmaceutical industry. Prior to joining Alliance in 1989, Dr. Schooley was
Vice President of Clinical Research and Regulatory Affairs for Newport
Pharmaceuticals, a company developing antiviral drugs. For the previous eight
years, he was Director of Clinical Research and Biostatistics for Allergan
Pharmaceuticals, a division of SmithKline Beecham, developing ophthalmologic and
dermatologic drugs and devices. He was also employed by McGaw Laboratories as
Manager of Biostatistics for parenteral products and by The Upjohn Company as a
senior biostatistician for analgesic and CNS drugs. Dr. Schooley received a
Ph.D. from the University of Michigan School of Public Health.
ELIAS LAZARIDES, PH.D. President & COO, Astral, Inc. ("Astral"). Dr.
Lazarides, who is 46, joined Astral in November 1994. Prior to joining Astral,
Dr. Lazarides was Executive Director of Pharmacology at Merck Research
Laboratories, where he managed a very broad range of drug discovery programs in
cardiovascular and ocular pharmacology. Dr. Lazarides joined the Division of
Biology at the California Institute of Technology in 1977, where he was promoted
to Professor in 1985. He has been the recipient of numerous awards and academic
honors, including an NIH Career Development Award, a Camille and Henry Dreyfus
Foundation Teacher-Scholar Award, the Achievement Award of the Tokyo Society of
Medical Sciences. Dr. Lazarides received his B.S. from Wesleyan University in
Connecticut and a Ph.D. from Harvard University.
27
<PAGE>
CARROLL O. JOHNSON. Mr. Johnson is 62 and has served as a director of the
Company since 1989. He has been President of Research Management, Inc. since
1985, an independent contract research organization which provides services to
the pharmaceutical industry in the implementation of clinical trials.
Previously, he served for 25 years in various research, sales and marketing
positions with several pharmaceutical companies, including Pharmacia
Laboratories, Inc., where he created a national sales force which introduced
three major products.
STEPHEN M. MCGRATH. Mr. McGrath is 60 and has served as a director of the
Company since 1989. He is an Executive Vice President of Oppenheimer & Co., Inc.
and serves as the Director of its Corporate Finance Department. For the eleven
years prior to his employment by Oppenheimer & Co., Inc. in 1983, he held
various executive positions with Warner-Lambert Company. Before joining
Warner-Lambert Company, Mr. McGrath was Controller and Assistant Treasurer of
Sterling Drug, Inc. and a certified public accountant for Price Waterhouse & Co.
He is a director of PetroCorp, Inc.
DONALD E. O'NEILL. Mr. O'Neill is 70 and has served as a director of the
Company since 1991. He retired from Warner-Lambert Company in 1991 after 20
years of service. During his tenure, he held various managerial positions,
including President of the Parke-Davis Group, President of the Health
Technologies Group and President -- International Operations. At the time of his
retirement from Warner-Lambert Company, he held the offices of Executive Vice
President of the corporation and President and Chairman of its International
Operations. He is a director of New Jersey Resources Corporation, Targeted
Genetics Corp., Scios-Nova, Inc., MDL Information Systems, Inc., Immunogen,
Inc., Fuisz Technologies Ltd. and Cytogen Corp.
HELEN M. RANNEY, M.D. Dr. Ranney is 75 and has served as a director of the
Company since 1991. She is Professor EMERITA, Department of Medicine, University
of California at San Diego, having served as Chairman of the Department from
1973 through 1986. From 1986 through 1991, she was Distinguished Physician of
the U.S. Department of Veterans Affairs. She formerly was Professor of Medicine
at Albert Einstein College of Medicine (New York) and at the State University of
New York, Buffalo. Dr. Ranney is a member of many professional societies,
including the National Academy of Sciences, the Institute of Medicine, the
Association of American Physicians (past President) and the American Society of
Hematology (past President). She has more than 150 publications, primarily
relating to blood and blood disorders. Dr. Ranney served on the Board of
Directors of Squibb Corp. prior to its merger with Bristol-Myers. She received
her M.D. from the College of Physicians and Surgeons, Columbia University.
JEAN G. RIESS, PH.D. Professor Riess is 59 and has served as a director of
the Company since 1989. He has been the Director of Laboratoire de Chimie
Moleculaire at the University of Nice for over 20 years. He has been an active
researcher since receiving a Ph.D. from the University of Strasbourg, with
numerous patents and over 300 publications. For more than 20 years Dr. Riess has
focused on chemistry related to perfluorochemical emulsions for medical
application. In this field, his research group has been active in synthesis of
tailored perfluorochemicals, in emulsion technology, in synthesis of fluorinated
surfactants, in the physical chemistry of emulsion stabilization and in
surfactant self-aggregation. Dr. Riess is responsible for the Corporation's
research efforts at its affiliated company, Applications et Transferts de
Technologies Avancees in Nice, France.
THOMAS F. ZUCK, M.D. Dr. Zuck is 62 and has served as a director of the
Company since 1990. He is Professor of Transfusion Medicine and Director of
Hoxworth Blood Center at the University of Cincinnati Medical Center and is
President of Ohio Enterprises International, Inc., a consulting company. Dr.
Zuck was formerly director of the Division of Blood and Blood Products at the
Office of Biologics Research & Review within the U.S. Food and Drug
Administration. He has served in numerous scientific professional societies,
including as President of the American Association of Blood Banks and the
Council of Community Blood Centers. He was Editor-in-Chief of the journal
TRANSFUSION and has more than 100 publications to his credit. Dr. Zuck is a
retired U.S. Army Colonel, where he was a Commander of the Letterman Army
Institute of Research and, for many years, involved with the Army's blood
substitute development program. Dr. Zuck received his LL.B. from Yale Law School
and his M.D. from Hahnemann Medical College.
28
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between
the Company and Lehman Brothers Inc., Cowen & Company and Oppenheimer & Co.,
Inc., as the Representatives, the Underwriters named below have severally agreed
to purchase from the Company, and the Company has agreed to sell to the
Underwriters, the respective numbers of shares of Common Stock set forth
opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------------ ------------
<S> <C>
Lehman Brothers Inc.......................................................................
Cowen & Company...........................................................................
Oppenheimer & Co., Inc....................................................................
------------
Total................................................................................. 2,500,000
------------
------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of $[ ] per
share of Common Stock to certain dealers who are members of the National
Association of Securities Dealers, Inc. The Underwriters may allow, and such
dealers may re-allow, discounts not in excess of $[ ] per share of Common
Stock to certain other dealers. After this offering to the public, the offering
price and selling terms may be changed by the Representatives.
The Underwriters have been granted a 30-day over-allotment option to
purchase up to an aggregate of 375,000 additional shares of Common Stock,
exercisable at the public offering price less the underwriting discount. If the
Underwriters exercise such over-allotment option, then each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage thereof as the number of shares of Common
Stock to be purchased by it as shown in the above table bears to the 2,500,000
shares of Common Stock offered hereby. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the shares of
Common Stock offered hereby.
Certain of the Underwriters and selling group members (if any) that
currently act as market makers for the Common Stock may engage in "passive
market making" in the Common Stock on Nasdaq in accordance with Rule 10b-6A
under the Exchange Act. Rule 10b-6A permits, upon the satisfaction of certain
conditions, underwriters and selling group members participating in a
distribution that are also Nasdaq market makers in the security being
distributed to engage in limited market making transactions during the period
when Rule 10b-6 under the Exchange Act would otherwise prohibit such activity.
Rule 10b-6A prohibits underwriters and selling group members engaged in passive
market making generally from entering a bid or effecting a purchase at a price
that exceeds the highest bid for those securities reported on Nasdaq by a market
maker that is not participating in the distribution. Under Rule 10b-6A, each
underwriter or selling group member engaged in passive market making is subject
to a daily net purchase limitation equal to 30% of such entity's average daily
trading volume during the two full consecutive calendar months immediately
preceding the date of the filing of the registration statement under the
Securities Act pertaining to the security to be distributed.
29
<PAGE>
The foregoing shall not prohibit any participants in the distribution from
making any purchases of securities otherwise permitted by Rule 10b-6 under the
Exchange Act. Such exemptive relief also requires that such firms not engage in
transactions for the purpose of creating actual or apparent active trading.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act, and to
contribute in respect thereof.
Stephen M. McGrath, a Director of the Company, is an Executive Vice
President of Oppenheimer & Co., Inc. and serves as Director of its Corporate
Finance Department. Oppenheimer & Co., Inc. is currently assisting the Company
in its search for a strategic partner to develop and market IMAGENT US on a
worldwide basis. Oppenheimer & Co., Inc. and certain related parties currently
hold warrants to acquire approximately 174,000 shares of Common Stock. See
"Business -- Marketing."
Lehman Brothers Inc. assisted the Company in obtaining the License
Agreements and has earned fees payable by the Company in connection with such
transactions.
The Company and certain of its officers and directors have agreed that they
will not, directly or indirectly, offer, sell or otherwise dispose of any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for, or any rights to purchase or acquire, Common Stock for a period
of 90 days after the date of this Prospectus, without the prior written consent
of Lehman Brothers Inc.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Stroock & Stroock & Lavan and for the
Underwriters by Shearman & Sterling. The information under "Risk Factors" and
"Business -- Patents" with respect to patents and patent laws has been passed
upon by Knobbe, Martens, Olson & Bear.
EXPERTS
The consolidated financial statements of Alliance Pharmaceutical Corp. at
June 30, 1994 and 1995, and for each of the two years in the period then ended,
appearing and incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein and incorporated herein
by reference, and are included and incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of Alliance Pharmaceutical Corp. for
the year ended June 30, 1993, appearing and incorporated by reference in this
Prospectus and Registration Statement from the Company's Annual Report on Form
10-K for the year ended June 30, 1995, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is also included and
incorporated herein by reference. Such financial statements have been so
included and incorporated by reference in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
30
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2
Report of Deloitte & Touche LLP, Independent Auditors...................................................... F-3
Consolidated Balance Sheets at June 30, 1994 and 1995 and December 31, 1995 (unaudited).................... F-4
Consolidated Statements of Operations for each of the three years in the period ended June 30, 1995 and for
the six months ended December 31, 1994 and 1995 (unaudited)............................................... F-5
Consolidated Statements of Stockholders' Equity for each of the three years in the period ended June 30,
1995 and the six months ended December 31, 1995 (unaudited)............................................... F-6
Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 1995 and the
six months ended December 31, 1994 and 1995 (unaudited)................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Alliance Pharmaceutical Corp.
We have audited the accompanying consolidated balance sheets of Alliance
Pharmaceutical Corp. and subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended June 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements of Alliance Pharmaceutical
Corp. and subsidiaries for the year ended June 30, 1993, were audited by other
auditors whose report, dated July 27, 1993, expressed an unqualified opinion on
those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1995 and 1994 financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Alliance Pharmaceutical Corp. and subsidiaries at June 30, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
July 26, 1995
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Alliance Pharmaceutical Corp.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Alliance Pharmaceutical Corp. and
Subsidiaries (the "Company") for the year ended June 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of the Company's operations and its cash
flows for the year ended June 30, 1993, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
July 27, 1993
F-3
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
--------------------------------
1994 1995
--------------- --------------- DECEMBER 31,
1995
---------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 1,902,000 $ 12,519,000 $ 4,763,000
Short-term investments (Note 3)............................ 19,154,000 10,964,000 7,959,000
Research revenue receivable (Note 5)....................... -- 2,060,000 2,020,000
Inventories and other current assets (Note 2).............. 1,349,000 1,913,000 1,778,000
--------------- --------------- ---------------
Total current assets..................................... 22,405,000 27,456,000 16,520,000
Property, plant and equipment -- net (Note 2)................ 10,165,000 9,946,000 10,542,000
Purchased technology -- net (Note 1)......................... 19,385,000 17,371,000 16,725,000
Other assets -- net.......................................... 1,177,000 1,257,000 1,105,000
--------------- --------------- ---------------
$ 53,132,000 $ 56,030,000 $ 44,892,000
--------------- --------------- ---------------
--------------- --------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 1,074,000 $ 2,509,000 $ 1,821,000
Accrued expenses (Note 2).................................. 1,885,000 2,601,000 2,873,000
Current portion of long-term debt.......................... -- -- 682,000
--------------- --------------- ---------------
Total current liabilities................................ 2,959,000 5,110,000 5,376,000
Long-term debt (Note 7)...................................... -- -- 1,314,000
Other........................................................ 348,000 843,000 1,199,000
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 4 and 5):
Preferred stock -- $.01 par value; 5,000,000 shares
authorized; 1,500,000 issued and outstanding at June 30,
1995 and December 31, 1995, respectively.................. -- 15,000 15,000
Common stock -- $.01 par value; 50,000,000 shares
authorized; 21,372,054, 24,759,150 and 24,916,691 shares
issued and outstanding at June 30, 1994 and 1995 and
December 31, 1995, respectively........................... 214,000 248,000 249,000
Additional paid-in capital................................. 208,954,000 238,874,000 240,505,000
Accumulated deficit........................................ (159,343,000) (189,060,000) (203,766,000)
--------------- --------------- ---------------
Total stockholders' equity............................... 49,825,000 50,077,000 37,003,000
--------------- --------------- ---------------
$ 53,132,000 $ 56,030,000 $ 44,892,000
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
---------------------------------------------- ------------------------------
1993 1994 1995 1994 1995
-------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License and research revenue (Note
5)................................ $ 2,320,000 $ 163,000 $ 11,640,000 $ 7,100,000 $ 4,110,000
Product revenue -- net............. 50,000 246,000 176,000 109,000 76,000
-------------- -------------- -------------- -------------- --------------
2,370,000 409,000 11,816,000 7,209,000 4,186,000
Operating expenses:
Research and development........... 24,767,000 31,605,000 35,063,000 19,129,000 15,562,000
General and administrative......... 6,405,000 7,312,000 7,085,000 3,804,000 3,385,000
-------------- -------------- -------------- -------------- --------------
31,172,000 38,917,000 42,148,000 22,933,000 18,947,000
-------------- -------------- -------------- -------------- --------------
Loss from operations................. (28,802,000) (38,508,000) (30,332,000) (15,724,000) (14,761,000)
Investment and other income -- net... 2,422,000 1,562,000 1,209,000 575,000 430,000
-------------- -------------- -------------- -------------- --------------
Net loss............................. (26,380,000) (36,946,000) (29,123,000) (15,149,000) (14,331,000)
Dividends on preferred stock......... -- -- (594,000) (219,000) (375,000)
-------------- -------------- -------------- -------------- --------------
Net loss applicable to common
shares.............................. $ (26,380,000) $ (36,946,000) $ (29,717,000) $ (15,368,000) $ (14,706,000)
-------------- -------------- -------------- -------------- --------------
Net loss per common share............ $ (1.39) $ (1.83) $ (1.35) $ (0.72) $ (0.59)
-------------- -------------- -------------- -------------- --------------
Weighted average number of common
shares outstanding.................. 18,946,000 20,226,000 21,959,000 21,385,000 24,851,000
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
CONVERTIBLE ARISING FROM
PREFERRED STOCK COMMON STOCK ADDITIONAL ACQUISITION
---------------------- -------------------- PAID-IN OF ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL SUBSIDIARY DEFICIT
--------- ----------- --------- --------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1992................ 18,817,000 $ 188,000 $188,838,000 $ 1,544,000 $(96,017,000)
Exercise of stock options and warrants... 109,000 1,000 449,000
Installment payment related to
acquisition of BioPulmonics, Inc........ 69,000 1,000 876,000 (744,000)
Issuance of stock in satisfaction of
employer matching contribution to 401(k)
savings plan............................ 5,000 61,000
Amortization of deferred compensation.... 327,000
Net loss................................. (26,380,000)
--------- ----------- --------- --------- ----------- ------------- ------------
Balances at June 30, 1993................ 19,000,000 190,000 190,551,000 800,000 (122,397,000)
Sale of common stock..................... 2,180,000 22,000 15,228,000
Exercise of stock options and warrants... 75,000 1,000 199,000
Installment payment related to
acquisition of BioPulmonics, Inc........ 105,000 1,000 921,000 (800,000)
Issuance of warrants in connection with
acquisition of product rights........... 1,840,000
Issuance of stock in satisfaction of
employer matching contribution to 401(k)
savings plan............................ 12,000 95,000
Amortization of deferred compensation.... 120,000
Net loss................................. (36,946,000)
--------- ----------- --------- --------- ----------- ------------- ------------
Balances at June 30, 1994................ 21,372,000 214,000 208,954,000 (159,343,000)
Sale of convertible preferred stock...... 1,500,000 $ 15,000 14,618,000
Sale of common stock..................... 3,175,000 32,000 14,262,000
Exercise of stock options and warrants... 56,000 1,000 36,000
Installment payment related to
acquisition of BioPulmonics, Inc........ 131,000 1,000 999,000
Issuance of stock in satisfaction of
employer matching contribution to 401(k)
savings plan............................ 25,000 150,000
Net unrealized loss on available-for-sale
securities.............................. (145,000)
Dividends on preferred stock............. (594,000)
Net loss................................. (29,123,000)
--------- ----------- --------- --------- ----------- ------------- ------------
Balances at June 30, 1995................ 1,500,000 15,000 24,759,000 248,000 238,874,000 (189,060,000)
Exercise of stock options and warrants
(unaudited)............................. 108,000 1,000 843,000
Issuance of stock in connection with
purchased technology (unaudited)........ 50,000 750,000
Net unrealized gain on available-for-sale
securities (unaudited).................. 38,000
Dividends on preferred stock
(unaudited)............................. (375,000)
Net loss (unaudited)..................... (14,331,000)
--------- ----------- --------- --------- ----------- ------------- ------------
Balances at December 31, 1995
(unaudited)............................. 1,500,000 $ 15,000 24,917,000 $ 249,000 $240,505,000 $(203,766,000)
--------- ----------- --------- --------- ----------- ------------- ------------
--------- ----------- --------- --------- ----------- ------------- ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------- ------------------------
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss.................................... $(26,380,000) $(36,946,000) $(29,123,000) $(15,149,000) $(14,331,000)
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............. 2,633,000 3,073,000 2,859,000 1,458,000 1,520,000
Non-cash compensation -- net.............. 388,000 215,000 150,000 163,000
Acquired research and development......... 1,686,000 1,686,000 757,000
Changes in operating assets and
liabilities:
Research revenue receivable............. (3,100,000) 40,000
Inventories and other................... (1,628,000) 1,331,000 (2,728,000) (281,000) 172,000
Accounts payable and accrued expenses
and other.............................. 330,000 285,000 1,459,000 722,000 (434,000)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities......... (24,657,000) (32,042,000) (25,697,000) (14,664,000) (12,113,000)
----------- ----------- ----------- ----------- -----------
Financing activities:
Issuance of common and preferred stock and
warrants................................... 450,000 15,450,000 29,557,000 14,859,000 675,000
Proceeds from long-term debt................ 2,208,000
Payments on long-term debt.................. (149,000) (3,000) (212,000)
Restricted cash............................. 17,000
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities..... 318,000 15,447,000 29,557,000 14,859,000 2,671,000
----------- ----------- ----------- ----------- -----------
Investing activities:
Short-term investments...................... 16,727,000 15,072,000 8,045,000 4,300,000 3,042,000
Property, plant and equipment (2,539,000) (1,891,000) (1,288,000) (451,000) (1,356,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by investing activities..... 14,188,000 13,181,000 6,757,000 3,849,000 1,686,000
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents.................................. (10,151,000) (3,414,000) 10,617,000 4,044,000 (7,756,000)
Cash and cash equivalents at beginning of
period....................................... 15,467,000 5,316,000 1,902,000 1,902,000 12,519,000
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period.... $ 5,316,000 $ 1,902,000 $12,519,000 $ 5,946,000 $ 4,763,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental disclosure of non-cash investing
and financing activities:
Preferred stock dividend.................... $ 594,000 $ 219,000 $ 375,000
Common stock issued for BioPulmonics, Inc.
installment payment........................ $ 877,000 $ 922,000 $ 1,000,000
Issuance of warrants in connection with
acquisition of product rights.............. $ 1,840,000
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Alliance Pharmaceutical Corp. ("Alliance") and its subsidiaries
(collectively, the "Company") are engaged in identifying, designing, and
developing novel medical and pharmaceutical products.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Alliance, its
wholly owned subsidiaries, BioPulmonics, Inc. ("BioPulmonics") and Rosanin
Corporation, and its majority-owned subsidiaries, Astral, Inc., Talco
Pharmaceutical, Inc., and Applications et Transferts de Technologies Avancees.
All significant intercompany accounts and transactions have been eliminated.
Certain amounts in 1993, 1994, and 1995 have been reclassified to conform to the
current period's presentation.
CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Effective July 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("FAS No. 115"), ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES. Cash, cash equivalents, and short-term
investments consist of highly liquid debt instruments. The Company considers
instruments purchased with an original maturity of three months or less to be
cash equivalents. Management has classified the Company's cash equivalents and
short-term investments as available-for-sale securities in the accompanying
financial statements. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a component of
stockholders' equity.
INVENTORIES
Inventories, which consist primarily of raw materials, are stated at the
lower of cost (first-in, first-out basis) or market.
CONCENTRATION OF CREDIT RISK
Cash, cash equivalents, and short-term investments are financial instruments
which potentially subject the Company to concentration of credit risk. The
Company invests its excess cash primarily in U.S. government securities and
marketable debt securities of financial institutions and corporations with
strong credit ratings. The Company has established guidelines relative to
diversification and maturities to maintain safety and liquidity. These
guidelines are reviewed periodically and modified to take advantage of trends in
yields and interest rates. The Company has not experienced any material losses
on its investments.
PROPERTY, PLANT, EQUIPMENT, AND OTHER ASSETS
Buildings, furniture, and equipment are stated at cost and depreciation is
computed using the straight-line method over the estimated useful lives of 4 to
25 years. Leasehold improvements are amortized using the straight-line method
over the shorter of the estimated useful lives of the assets or the lease term.
Technology and patent rights are amortized using the straight-line method over 5
to 20 years.
PURCHASED TECHNOLOGY
The purchased technology was primarily acquired by virtue of the merger of
Fluoromed Pharmaceutical, Inc. into a subsidiary of the Company in fiscal 1989.
The technology acquired is the Company's core perfluorochemical ("PFC")
technology and it was valued based on an analysis of the present value of future
earnings anticipated from this technology at that time. The Company identified
alternative future uses for the PFC technology, including the OXYGENT-TM-
(temporary blood substitute) and LIQUIVENT-REGISTERED TRADEMARK- (intrapulmonary
oxygen carrier) products. Purchased technology also includes $2.0 million for
technology capitalized as a result of the acquisition of BioPulmonics in
December 1991. Since the acquisition, an alternative future use
F-8
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the acquired technology has been pursued by the Company. An intrapulmonary
drug delivery system using the PFC-based liquid as a carrier (or dispersing
agent) is being developed by Alliance from the liquid ventilation technology.
The PFC technology is the basis for the Company's main drug development
programs and is being amortized over a 20-year life. Amortization of purchased
technology is included in research and development expense. Accumulated
amortization was $6,193,000, $7,355,000, and $7,936,000 at June 30, 1994 and
1995 and December 31, 1995, respectively. The technology acquired from
BioPulmonics is being amortized over five to seven years, and accumulated
amortization was $357,000, $500,000, and $671,000 at June 30, 1994 and 1995 and
December 31, 1995, respectively.
The carrying value of purchased technology is reviewed periodically based on
the projected cash flows to be received from license fees, milestone payments,
royalties and other product revenues. If such cash flows are less than the
carrying value of the purchased technology, the difference will be charged to
expense.
OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenditures are charged to expense as incurred.
NET LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of common
shares outstanding during the respective periods and does not include common
stock equivalents since their effect on the net loss per common share would be
anti-dilutive.
2. FINANCIAL STATEMENT DETAILS
PROPERTY, PLANT, AND EQUIPMENT -- NET
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------- DECEMBER 31,
1994 1995 1995
------------- ------------- -------------
<S> <C> <C> <C>
Land...................................................... $ 225,000 $ 225,000 $ 225,000
Buildings................................................. 300,000 300,000 300,000
Building improvements..................................... 1,561,000 1,574,000 1,574,000
Furniture, fixtures, and equipment........................ 9,467,000 10,419,000 10,741,000
Leasehold improvements 3,356,000 3,678,000 4,713,000
------------- ------------- -------------
14,909,000 16,196,000 17,553,000
Less accumulated depreciation and amortization............ (4,744,000) (6,250,000) (7,011,000)
------------- ------------- -------------
$ 10,165,000 $ 9,946,000 $ 10,542,000
------------- ------------- -------------
</TABLE>
F-9
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
2. FINANCIAL STATEMENT DETAILS (CONTINUED)
INVENTORIES AND OTHER CURRENT ASSETS
Inventories and other current assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------- DECEMBER 31,
1994 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Inventories.................................................. $ 384,000 $ 1,323,000 $1,289,000
Loan receivable.............................................. 197,000 127,000 247,000
Interest receivable.......................................... 362,000 231,000 187,000
Deferred financing costs..................................... 126,000 -- --
Other........................................................ 280,000 232,000 55,000
------------ ------------ ------------
$ 1,349,000 $ 1,913,000 $1,778,000
------------ ------------ ------------
</TABLE>
Inventories include amounts related to certain raw materials reimbursable
under a license agreement.
ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------- DECEMBER 31,
1994 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Payroll and related expenses................................. $ 1,398,000 $ 1,736,000 $2,135,000
Rent and related operating expenses.......................... 323,000 206,000 206,000
Other........................................................ 164,000 659,000 532,000
------------ ------------ ------------
$ 1,885,000 $ 2,601,000 $2,873,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
3. INVESTMENTS
The following is a summary of available-for-sale securities at June 30,
1995:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Government Securities...................... $ 5,049,000 $ 1,000 $ (108,000) $ 4,942,000
Corporate Securities............................ 8,029,000 6,000 (44,000) 7,991,000
------------- ----------- ----------- -------------
$ 13,078,000 $ 7,000 $ (152,000) $ 12,933,000
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The gross realized losses on sales of available-for-sale securities totaled
$104,000 in 1995. The net unrealized losses of $145,000 in 1995 are recorded as
a component of additional paid-in capital. The unrealized losses had no cash
effect and therefore are not reflected in the consolidated statement of cash
flows.
F-10
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
3. INVESTMENTS (CONTINUED)
The amortized cost and estimated fair value of available-for-sale debt
securities at June 30, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers of the
securities may have the right to prepay obligations.
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
------------- -------------
<S> <C> <C>
Due in one year or less.................................................. $ 7,565,000 $ 7,539,000
Due in one year through three years...................................... 5,513,000 5,394,000
------------- -------------
$ 13,078,000 $ 12,933,000
------------- -------------
------------- -------------
</TABLE>
As of June 30, 1995, $1,969,000 of the available-for-sale securities were
classified as cash equivalents.
The following is a summary of available-for-sale securities at December 31,
1995:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Government Securities...................... $ 5,592,000 $ 2,000 $ (77,000) $ 5,517,000
Corporate Securities............................ 5,386,000 (32,000) 5,354,000
------------- ----------- ----------- -------------
$ 10,978,000 $ 2,000 $ (109,000) $ 10,871,000
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
There were no realized losses on sales of available-for-sale securities for
the six months ended December 31, 1995. The net unrealized losses of $107,000 at
December 31, 1995 are recorded as a component of additional paid-in capital. The
unrealized losses had no cash effect and therefore are not reflected in the
consolidated statement of cash flows.
The amortized cost and estimated fair value of available-for-sale debt
securities at December 31, 1995, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations.
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
------------- -------------
<S> <C> <C>
Due in one year or less.................................................. $ 6,099,000 $ 6,088,000
Due in one year through three years...................................... 4,879,000 4,783,000
------------- -------------
$ 10,978,000 $ 10,871,000
------------- -------------
------------- -------------
</TABLE>
As of December 31, 1995, $2,912,000 of the available-for-sale securities
were classified as cash equivalents.
4. STOCKHOLDERS' EQUITY
In April 1995, the Company completed offerings of 3.2 million shares of
newly issued common stock. Net proceeds to the Company from such offerings were
approximately $14.3 million.
STOCK OPTION PLANS
The Company has a 1983 Incentive Stock Option Plan (the "1983 Plan"), a 1983
Non-Qualified Stock Option Program (the "1983 Program"), and a 1991 Stock Option
Plan which provides for both incentive and non-qualified stock options (the
"1991 Plan"). These plans provide for the granting of options to purchase shares
of the Company's common stock (up to an aggregate of 500,000, 2,500,000, and
3,200,000 shares
F-11
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
4. STOCKHOLDERS' EQUITY (CONTINUED)
under the 1983 Plan, 1983 Program, and 1991 Plan, as amended and approved in
November 1995, respectively) to directors, officers, employees, and consultants.
The optionees, date of grant, option price (which cannot be less than 100% and
80% of the fair market value of the common stock on the date of grant for
incentive stock options and non-qualified stock options, respectively), vesting
schedule, and term of options, which cannot exceed ten years (five years under
the 1983 Plan), are determined by the Stock Option Committee of the Board of
Directors. The 1983 Plan has expired and no additional options may be granted
under such plan.
The following table summarizes stock option activity through December 31,
1995:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE PRICE
---------- -------------
<S> <C> <C>
Balance at June 30, 1992..................................................... 1,548,974 $ 9.87
Granted.................................................................... 408,210 $ 12.04
Exercised.................................................................. (102,941) $ 5.50
Terminated/Expired......................................................... (44,340) $ 22.77
----------
Balance at June 30, 1993..................................................... 1,809,903 $ 10.43
Granted.................................................................... 564,550 $ 9.42
Exercised.................................................................. (74,666) $ 2.81
Terminated/Expired......................................................... (51,215) $ 11.57
----------
Balance at June 30, 1994..................................................... 2,248,572 $ 10.42
Granted.................................................................... 967,050 $ 5.50
Exercised.................................................................. (56,103) $ 3.98
Terminated/Expired......................................................... (115,531) $ 11.14
----------
Balance at June 30, 1995..................................................... 3,043,988 $ 9.02
Granted.................................................................... 161,900 $ 10.94
Exercised.................................................................. (132,220) $ 6.38
Terminated/Expired......................................................... (75,452) $ 13.99
----------
Balance at December 31, 1995................................................. 2,998,216 $ 9.12
----------
Available for future grant under the 1983 Program............................ 26,260
----------
Available for future grant under the 1991 Plan............................... 1,156,125
----------
</TABLE>
As of December 31, 1995, the Company had recorded as a liability dividends
payable totalling $969,000 on the Series A Preferred Stock.
At June 30, 1995, 1,773,902 options were vested and exercisable.
At December 31, 1995, 1,781,460 options were vested and exercisable.
WARRANTS
In December 1993, the Company issued a warrant to purchase 500,000 shares of
the Company's common stock through December 2000 at $12 per share. The warrant
was issued to a former corporate partner in exchange for certain marketing and
manufacturing rights which were re-acquired by the Company. In August 1994, the
Company issued a warrant to purchase 300,000 shares of common stock through
August 1997 at an exercise price of $15 per share. The warrant was issued in
conjunction with the license agreement discussed in Note 5. In July 1995, the
Company issued a warrant to purchase 100,000 shares of
F-12
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
4. STOCKHOLDERS' EQUITY (CONTINUED)
common stock through June 2000 at an exercise price of $10.00 per share. The
warrant was issued in exchange for certain patents, patent rights, and related
documents. At December 31, 1995, the Company had warrants outstanding to
purchase 1,082,289 shares of common stock at prices ranging from $6.95 to $15.96
per share. The warrants expire on various dates from August 1997 through
December 2000.
PREFERRED STOCK
In fiscal 1995, in conjunction with a license agreement (see Note 5),
Johnson & Johnson Development Corp. purchased 1.5 million shares of Alliance
convertible preferred stock for $15.0 million. On or before June 30, 1998, each
share of the preferred stock will be converted into a number of common shares
based upon the lower of the average price of Alliance common stock at the time
of conversion or $20 per share. Prior to conversion, each share of preferred
stock is entitled to one-half vote on matters on which shareholders are entitled
to vote. The preferred stock carries a cumulative annual cash dividend of $0.50
per share. As of December 31, 1995, the Company had recorded as a liability
dividends payable totalling $969,000 on the Series A Preferred Stock.
ACQUISITION OF BIOPULMONICS, INC.
In December 1991, the Company purchased all the outstanding stock of
BioPulmonics in a transaction recorded using the purchase method of accounting.
The total purchase price was $3,055,000, payable in four installments.
In June 1995, the Company made the final $1,000,000 payment to the former
BioPulmonics' stockholders to complete the acquisition, substantially all of
which was made in the Company's common stock. Since the acquisition of
BioPulmonics, an alternative future use of the acquired technology has been
pursued by the Company. An intrapulmonary drug delivery system using the
PFC-based liquid as a carrier (or dispersing agent) is being developed by
Alliance from the liquid ventilation technology. Accordingly, the Company has
capitalized purchased technology of $1,000,000.
5. LICENSE AGREEMENT
In August 1994, the Company executed a license agreement with Ortho Biotech,
Inc. and The R.W. Johnson Pharmaceutical Research Institute, a division of Ortho
Pharmaceutical Corporation (collectively referred to as "Ortho"), which provides
Ortho with worldwide marketing and, at its election, manufacturing rights to the
Company's injectable perfluorochemical emulsions capable of transporting oxygen
for therapeutic use. Ortho will pay to Alliance a royalty based upon its sales
of the products after commercialization. In addition, Ortho paid to Alliance an
initial license fee of $4.0 million and will make other payments based on the
achievement of certain milestones. Ortho will also be responsible for
substantially all the remaining costs of developing the products. Through
December 31, 1995, the Company earned research revenue of $11.1 million from
Ortho, of which $2.0 million was included in accounts receivable. In conjunction
with the license agreement, Johnson & Johnson Development Corp. purchased 1.5
million shares of Alliance convertible preferred stock for $15.0 million and
obtained a three-year warrant to purchase 300,000 shares of Alliance common
stock at $15 per share.
F-13
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
6. INCOME TAXES
Significant components of the Company's deferred tax assets as of June 30,
1994, and 1995 are shown below. A valuation allowance of $70,601,000 has been
recognized to offset the deferred tax assets as of June 30, 1995 as realization
of such assets is uncertain.
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................................... $ 48,686,000 $ 56,752,000
Research and development credits...................................... 6,236,000 8,133,000
Capitalized research expense.......................................... 3,372,000 5,470,000
Other -- net.......................................................... (121,000) 246,000
-------------- --------------
Total deferred tax assets............................................. 58,173,000 70,601,000
Valuation allowance for deferred tax assets........................... (58,173,000) (70,601,000)
-------------- --------------
Net deferred tax assets............................................... $ 0 $ 0
-------------- --------------
</TABLE>
Approximately $1,740,000 of the valuation allowance for deferred tax assets
relates to stock option deductions for 1995 which, when recognized, will be
allocated to contributed capital.
At June 30, 1995, the Company had federal and various state net operating
loss carryforwards of approximately $156,000,000 and $33,517,000, respectively.
The difference between the federal and state tax loss carryforwards is primarily
attributable to the capitalization of research and development expenses for
California tax purposes and the fifty percent limitation on California loss
carryforwards. The federal and various state tax loss carryforwards will begin
expiring in fiscal 1998 and 1996, respectively, unless previously utilized. The
Company also has federal and state research and development tax credit
carryforwards of $6,996,000 and $1,748,000, respectively, for 1995, which will
begin expiring in fiscal 1998 unless previously utilized.
Federal and California tax laws limit the utilization of income tax net
operating loss and credit carryforwards that arise prior to a change of control
of the Company. However, the Company believes that such limitations will not
have an impact on the utilization of the carryforwards.
7. COMMITMENTS AND CONTINGENCIES
The Company leases certain office and research facilities in San Diego and
certain equipment under operating leases. Provisions of the facilities lease
provide for abatement of rent during certain periods and escalating rent
payments during the lease terms based on changes in the Consumer Price Index.
Rent expense is recognized on a straight-line basis over the term of the leases.
Minimum annual commitments related to operating lease payments at June 30,
1995 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30,
- ---------------------------------------------------------------------
<S> <C>
1996................................................................. $ 1,837,000
1997................................................................. 1,863,000
1998................................................................. 1,908,000
1999................................................................. 1,962,000
2000................................................................. 948,000
Thereafter........................................................... 1,523,000
-------------
Total.............................................................. $ 10,041,000
-------------
-------------
</TABLE>
F-14
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO JUNE 30, 1995, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1995, IS UNAUDITED.)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rent expense for fiscal 1995, 1994, 1993, and the six months ended December
31, 1994 and 1995 was $2,043,000, $2,286,000, $1,886,000, $978,000, and
$1,044,000, respectively.
The Company entered into a loan and security agreement in August 1995 under
which the Company received $2.2 million. Amounts borrowed under the agreement
are secured by fixed assets and will be repaid over three years commencing in
September 1995. If certain financial covenants are not satisfied, the note may
become due and payable.
In December 1993, in order to obtain a commitment for a long-term supply of
raw material for both clinical trials and anticipated future commercial
production requirements, the Company entered into an agreement with a supplier
under which the Company was obligated to make payments to the vendor through May
1997 based, in part, upon the achievement of certain milestones. The Company's
total minimum future commitment at June 30, 1995 and December 31, 1995 was
approximately $3.0 and $2.2 million, respectively, some or all of which may be
reimbursed to the Company by existing and future collaborative partners.
During September 1992, the Company and certain of its officers and directors
were named as defendants in several lawsuits filed by certain shareholders. The
actions were consolidated into one class action lawsuit. The complaint claims,
among other things, that the defendants failed to disclose certain problems with
two of the Company's products under development, which conduct is alleged to
have falsely portrayed the Company's financial condition. In May 1995, the U.S.
District Court for the Southern District of California granted summary judgment
in favor of the Company, dismissing the lawsuit in its entirety. The plaintiffs
have filed a notice of intent to appeal the dismissal. The Company believes the
eventual outcome of the litigation will not have a material adverse effect on
the Company's financial condition.
8. SUBSEQUENT EVENT (UNAUDITED)
In February 1996, the Company entered into a license agreement (the "HMRI
License Agreement") with Hoechst Marion Roussel, Inc. ("HMRI"), which provides
HMRI with worldwide marketing rights to LIQUIVENT. The product will be jointly
developed by Alliance and HMRI with HMRI responsible for substantially all of
the remaining costs of development after March 31, 1996. HMRI will pay Alliance
royalties based on sales of the product after commercialization. In conjunction
with the HMRI License Agreement, HMRI purchased 750,000 shares of the Company's
Series B Preferred Stock and 200,000 shares of its Series C Preferred Stock for
an aggregate of $22.0 million. HMRI also received a five-year warrant to acquire
300,000 shares of the Company's common stock at $20.00 per share. The Series B
Preferred Stock is convertible into shares of the Company's common stock upon
the earliest of: (i) the Company's common stock closing at a price per share of
at least $20.00 for twenty consecutive days; (ii) termination of the HMRI
License Agreement; or (iii) February 28, 2001. Each share of Series B Preferred
Stock will be converted into a number of shares of the Company's common stock
based upon the lower of the average closing price of the Company's common stock
over the twenty trading days preceding the time of conversion or $20.00 per
share. The Series C Preferred Stock converts automatically on June 30, 1997 into
a number of shares of the Company's common stock obtained by dividing the
average closing price of the Company's common stock over the twenty trading days
preceding January 14, 1997 into $5.0 million. Prior to June 29, 1997, HMRI may,
if the HMRI License Agreement is terminated, redeem the Series C Preferred Stock
for $15.0 million, payable in cash or the Company's common stock at Alliance's
election, any time on or before the expiration of five years following the
redemption date. In addition, HMRI paid Alliance an initial license fee and will
make other payments upon the achievement of certain milestones.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Incorporation of Certain Documents by Reference......................... 2
Available Information................................................... 2
Prospectus Summary...................................................... 3
Risk Factors............................................................ 6
Use of Proceeds......................................................... 10
Dilution................................................................ 10
Capitalization.......................................................... 11
Price Range of Common Stock............................................. 12
Dividend Policy......................................................... 12
Selected Consolidated Financial Data.................................... 13
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 14
Business................................................................ 18
Management.............................................................. 26
Underwriting............................................................ 29
Legal Matters........................................................... 30
Experts................................................................. 30
Index to Consolidated Financial Statements.............................. F-1
</TABLE>
2,500,000 SHARES
[LOGO]
COMMON STOCK
----------------
PROSPECTUS
, 1996
---------------------
LEHMAN BROTHERS
COWEN & COMPANY
OPPENHEIMER & CO., INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered, all of which will be borne by the Registrant,
are as follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 17,101
Printing and engraving expenses................................... 100,000
NASD fees......................................................... 8,316
Nasdaq National Market notification fees.......................... 17,500
Legal fees and expenses........................................... 120,000
Blue Sky fees and expenses........................................ 25,000
Accounting fees and expenses...................................... 75,000
Miscellaneous..................................................... 37,083
---------
Total........................................................... $ 400,000
---------
---------
</TABLE>
- ------------------------
*To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Article VI of the By-Laws of the Company (filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989) and to Sections 721-727 of the New York Business
Corporation Law, which, among other things and subject to certain conditions,
authorize the Company to indemnify each of its officers and directors against
certain liabilities and expenses incurred by such persons in connection with
claims made by reason of their being such officers or directors. Reference is
further made to the Company's 1984 underwriting agreement (filed as Exhibit 1(a)
to the Registration Statement on Form S-1 (No. 2-88597) as filed on February 17,
1984), to the Company's 1987 underwriting agreement filed as Exhibit 1(a) to the
Registration Statement on Form S-1 (No. 33-12679) as filed on March 17, 1987),
to the Company's 1989 underwriting agreement (filed as Exhibit 1 to the
Registration Statement on Form S-2 (No. 33-28259) as filed on April 19, 1989
(the "1989 S-2")), to the Company's 1991 underwriting agreement (filed as
Exhibit 1 to the Registration Statement on Form S-3 (No. 33-42551)) and to the
Indemnification Agreement (filed as Exhibit 10(www) to the 1989 S-2), each of
which contains provisions for the indemnification of directors, officers and
controlling persons of the Company under certain circumstances.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1. Form of Underwriting Agreement.
3. Certificate of Amendment to the Certificate of Incorporation
of the Company filed on March 25, 1996.
4. Warrant Repurchase Agreement between the Company and
Boehringer Ingelheim International GmbH.
5. Opinion of Stroock & Stroock & Lavan, counsel for the
Company.
10(a)** License Agreement between the Company and Hoechst Marion
Roussel, Inc. dated February 28, 1996.
10(b)* Stock and Warrant Purchase Agreement between the Company and
Hoechst Marion Roussel, Inc. dated February 28, 1996.
10(c)** Supply and Technology Transfer Agreement between the Company
and Hoechst Marion Roussel, Inc. dated February 28, 1996.
23(a) Consent of Stroock & Stroock & Lavan (included in Exhibit 5
hereof).
(b)* Consent of Knobbe, Martens, Olson & Bear.
(c) Consent of Deloitte & Touche LLP.
(d) Consent of Ernst & Young LLP.
24.* Power of Attorney.
</TABLE>
- ------------------------
*Previously filed.
**Confidential treatment being requested.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on March 27,
1996.
ALLIANCE PHARMACEUTICAL CORP.
(Registrant)
By /s/ DUANE J. ROTH
Date: March 27, 1996
--------------------------------------
Duane J. Roth
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ DUANE J. ROTH President, Chief Executive
- ------------------------------------------- Officer and a Director (Chief March 27, 1996
Duane J. Roth Executive Officer)
/s/ THEODORE D. ROTH Executive Vice President and
- ------------------------------------------- Chief Financial Officer March 27, 1996
Theodore D. Roth (Chief Financial Officer)
/s/ TIM T. HART
- ------------------------------------------- Controller (Chief Accounting March 27, 1996
Tim T. Hart Officer)
*
- ------------------------------------------- Director March 27, 1996
Carroll O. Johnson
*
- ------------------------------------------- Director March 27, 1996
Stephen M. McGrath
*
- ------------------------------------------- Director March 27, 1996
Donald E. O'Neill
*
- ------------------------------------------- Director March 27, 1996
Dr. Helen M. Ranney
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
*
- ------------------------------------------- Director March 27, 1996
Dr. Jean G. Riess
*
- ------------------------------------------- Director March 27, 1996
Dr. Thomas F. Zuck
</TABLE>
*By: /s/ THEODORE D. ROTH
-----------------------------------------------
Theodore D. Roth
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DOCUMENT NO.
- -------- ---------------------------------------------------------------------- ----
<C> <S> <C>
1. Form of Underwriting Agreement........................................
3. Certificate of Amendment to the Certificate of Incorporation of the
Company filed on March 25, 1996. ....................................
4. Warrant Repurchase Agreement between the Company and Boehringer
Ingelheim International GmbH. .......................................
5. Opinion of Stroock & Stroock & Lavan, counsel for the Company. .......
10(a)** License Agreement between the Company and Hoechst Marion Roussel, Inc.
dated February 28, 1996..............................................
10(b)* Stock and Warrant Purchase Agreement between the Company and Hoechst
Marion Roussel, Inc. dated February 28, 1996.........................
10(c)** Supply and Technology Transfer Agreement between the Company and
Hoechst Marion Roussel, Inc. dated February 28, 1996.................
23(a) Consent of Stroock & Stroock & Lavan (included in Exhibit 5 hereof).
23(b)* Consent of Knobbe, Martens, Olson & Bear..............................
23(c) Consent of Deloitte & Touche LLP......................................
23(d) Consent of Ernst & Young LLP..........................................
24.* Power of Attorney.....................................................
</TABLE>
- ------------------------
*Previously filed.
**Confidential treatment being requested.
<PAGE>
S&S Draft
3/27/96
2,500,000
ALLIANCE PHARMACEUTICAL CORP.
COMMON STOCK
UNDERWRITING AGREEMENT
_____ __, 199_
LEHMAN BROTHERS INC.
COWEN & COMPANY
OPPENHEIMER & CO., INC.
As Representatives of the several
Underwriters named in Schedule 1
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Alliance Pharmaceutical Corp., a New York corporation (the "Company"),
proposes to sell 2,500,000 shares (the "Firm Stock") of the Company's Common
Stock, par value $.01 per share (the "Common Stock"). In addition, the Company
proposes to grant to the Underwriters named in Schedule 1 hereto (the
"Underwriters") an option to purchase up to an additional 375,000 shares of the
Common Stock on the terms and for the purposes set forth in Sections 2 and 3
(the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are
hereinafter collectively called the "Stock." This is to confirm the agreement
concerning the purchase of the Stock from the Company by the Underwriters.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3, including an amendment[s]
thereto, with respect to the Stock has (i) been prepared by the Company in
conformity
<PAGE>
2
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rule and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act
and (iii) become effective under the Securities Act. Copies of such
registration statement and the amendment[s] thereto have been delivered by
the Company to you as the representatives (the "Representatives") of the
Underwriters. As used in this Agreement, "Effective Time" means the date
and the time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereto, before it became effective
under the Securities Act and any prospectus filed with the Commission by
the Company with the consent of the Representatives pursuant to Rule 424(a)
of the Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including any
documents incorporated by reference therein at such time and all
information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in accordance with
Section 5(a) hereof and deemed to be a part of the registration statement
as of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means such final prospectus, as
first filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. Reference made herein to any
Preliminary Prospectus or to the Prospectus shall be deemed to refer to and
include any documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the Securities Act, as of the date of such Preliminary
Prospectus or the Prospectus, as the case may be, and any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any document filed under the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
after the date of such Preliminary Prospectus or the Prospectus, as the
case may be, and incorporated by reference in such Preliminary Prospectus
or the Prospectus, as the case may be; and any reference to any amendment
to the Registration Statement shall be deemed to include any annual report
of the Company filed with the Commission pursuant to Section 13(a) or 15(d)
of the Exchange Act after the Effective Time that is incorporated by
reference in the Registration Statement. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the requirements
of the Securities Act and the Rules and Regulations and do not and will
not, as of the applicable effective date (as to the
<PAGE>
3
Registration Statement and any amendment thereto) and as of the applicable
filing date (as to the Prospectus and any amendment or supplement thereto)
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED that no representation or warranty is made
as to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or on
behalf of any Underwriter specifically for inclusion therein.
(c) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents are filed with Commission,
will conform in all material respects to the requirements of the Exchange
Act, and the rules and regulations of the Commission thereunder and will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) The Company and each of its subsidiaries (as defined in Section
15) have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing
as foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged; and none of the subsidiaries of the
Company is a "significant subsidiary," as such term is defined in Rule 405
of the Rules and Regulations.
(e) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and non-
assessable and conform to the description thereof contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable and (except for directors' qualifying
shares and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims.
<PAGE>
4
(f) The unissued shares of the Stock to be issued and sold by the
Company to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided herein,
will be duly and validly issued, fully paid and non-assessable; and the
Stock will conform to the description thereof contained in the Prospectus.
(g) This Agreement has been duly authorized, executed and delivered
by the Company.
(h) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of the
Company or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets; and except for the registration of the Stock under the Securities
Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable
state securities laws in connection with the purchase and distribution of
the Stock by the Underwriters, no consent, approval, authorization or order
of, or filing or registration with, any such court or governmental agency
or body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby.
(i) There are no contracts, agreements or understandings between the
Company and any person granting such person the right (other than
outstanding convertible preferred stock of the Company and other than
rights that have been waived or satisfied or that relate to fewer than
25,000 shares of Common Stock) to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Securities Act.
(j) The Company has obtained from each officer and director of the
Company listed on Schedule 2 hereto a letter or letters, in form and
substance satisfactory to counsel for the Underwriters, pursuant to which
each such person shall have agreed not to, directly or indirectly, offer
for sale, sell or otherwise dispose of
<PAGE>
5
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the
future of) any shares of Common Stock for a period of 90 days from the date
of the Prospectus, without the prior written consent of Lehman Brothers
Inc.
(k) The Company has not sold or issued any shares of Common Stock
during the six-month period preceding the date of the Prospectus, including
any sales pursuant to Rule 144A under, or Regulations D or S of, the
Securities Act, other than shares issued pursuant to employee benefit
plans, qualified stock options plans or other employee compensation plans
or pursuant to outstanding options, rights or warrants.
(l) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since such date, there has not been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus.
(m) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included or incorporated by reference in the Prospectus present fairly the
financial condition and results of operations of the entities purported to
be shown thereby, at the dates and for the periods indicated, and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
(n) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who
have delivered the initial letter referred to in Section 7(i) hereof, are
independent public accountants as required by the Securities Act and the
Rules and Regulations and were independent accountants as required by the
Securities Act and the Rules and Regulations during the periods covered by
the financial statements on which they reported contained in the
Prospectus.
(p) The Company and each of its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of all
liens, encumbrances and
<PAGE>
6
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and all real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries.
(q) To the best of the Company's knowledge, the Company and each of
its subsidiaries carry, or are covered by, insurance in such amounts and
covering such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is customary
for companies engaged in similar businesses in similar industries.
(r) The Company and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of their
respective businesses and have no reason to believe that the conduct of
their respective businesses will conflict with, and have not received any
notice of any claim of conflict with, any such rights of others.
(s) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, might have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(t) The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
(u) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described in the Prospectus or filed as exhibits to the
Registration Statement or incorporated therein by reference as permitted by
the Rules and Regulations.
(v) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders,
customers or
<PAGE>
7
suppliers of the Company on the other hand, which is required to be
described in the Prospectus which is not so described.
(w) No labor disturbance by the employees of the Company exists or,
to the knowledge of the Company, is imminent which might be expected to
have a material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of the
Company and its subsidiaries.
(x) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(y) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof and has
paid all taxes due thereon, and no tax deficiency has been determined
adversely to the Company or any of its subsidiaries which has had (nor does
the Company have any knowledge of any tax deficiency which, if determined
adversely to the Company or any of its subsidiaries, might have a material
adverse effect on the consolidated financial position, stockholders'
equity, results of operations, business or prospects of the Company and its
subsidiaries.
(z) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities, (ii)
incurred any liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the ordinary course of
business, (iii) entered into any transaction not in the ordinary course of
business or (iv) declared or paid any dividend on its capital stock.
(aa) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B)
<PAGE>
8
transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(ab) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any material
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any material indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject or (iii) is in violation in any material
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject or has failed
to obtain any material license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of its
property or to the conduct of its business.
(ac) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries, has used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
(ad) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or its subsidiaries in violation
of any applicable law, ordinance, rule, regulation, order, judgment, decree
or permit or which would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except for
any violation or remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such
property of any toxic wastes, medical wastes, solid wastes, hazardous
wastes or hazardous substances due to or caused by the Company or any of
<PAGE>
9
its subsidiaries or with respect to which the Company or any of its
subsidiaries have knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not have or
would not be reasonably likely to have, singularly or in the aggregate with
all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a material adverse effect on the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and the terms "hazardous
wastes", "toxic wastes", "hazardous substances" and "medical wastes" shall
have the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection.
(ae) Neither the Company nor any subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940
and the rules and regulations of the Commission thereunder.
2. PURCHASE OF THE STOCK BY THE UNDERWRITERS. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 2,500,000 shares of
the Firm Stock to the several Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase the number of shares of the Firm
Stock set opposite that Underwriter's name in Schedule 1 hereto.
In addition, the Company grants to the Underwriters an option to
purchase up to 375,000 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 4 hereof. Shares of Option Stock shall be
purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set opposite the name of such Underwriters in
Schedule 1 hereto. The respective purchase obligations of each Underwriter with
respect to the Option Stock shall be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Stock other than in 100 share
amounts. The price of both the Firm Stock and any Option Stock shall be $_____
per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein.
3. OFFERING OF STOCK BY THE UNDERWRITERS. Upon authorization by the
Representatives of the release of the Firm Stock, the several Underwriters
propose to offer the Firm Stock for sale upon the terms and conditions set forth
in the Prospectus.
<PAGE>
10
4. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of and payment
for the Firm Stock shall be made at the office of Shearman & Sterling, 599
Lexington Avenue, New York, New York 10022, at 10:00 a.m., New York City time,
on the [fourth] full business day following the date of this Agreement or at
such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to
as the "First Delivery Date." On the First Delivery Date, the Company shall
deliver or cause to be delivered certificates representing the Firm Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by same-day funds wire transfer.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in
such names and in such denominations as the Representatives shall request in
writing not less than two full business days prior to the First Delivery Date.
For the purpose of expediting the checking and packaging of the certificates for
the Firm Stock, the Company shall make the certificates representing the Firm
Stock available for inspection by the Representatives in New York, New York, not
later than 2:00 p.m., New York City time, on the business day prior to the First
Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; PROVIDED, HOWEVER, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been exercised.
The date and time the shares of Option Stock are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date".
Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 a.m., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by same-day funds wire transfer.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder. Upon delivery, the Option Stock shall be registered in
such names and in such denominations as the Representatives shall request in the
aforesaid written notice. For the purpose of expediting
<PAGE>
11
the checking and packaging of the certificates for the Option Stock, the Company
shall make the certificates representing the Option Stock available for
inspection by the Representatives in New York, New York, not later than 2:00
p.m., New York City time, on the business day prior to the Second Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than Commission's close of business on the
second business day following the execution and delivery of this Agreement
or, if applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Securities Act; to make no further amendment or any supplement to
the Registration Statement or to the Prospectus prior to the last Delivery
Date except as permitted herein; to advise the Representatives, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Representatives with copies thereof; to file promptly all
reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required in connection
with the offering or sale of the Stock; to advise the Representatives,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus, of the suspension of
the qualification of the Stock for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits
other than this Agreement and the
<PAGE>
12
computation of per share earnings), (ii) each Preliminary Prospectus, the
Prospectus and any amended or supplemented Prospectus and (iii) any
document incorporated by reference in the Prospectus (excluding exhibits
thereto); and, if the delivery of a prospectus is required at any time
after the Effective Time in connection with the offering or sale of the
Stock or any other securities relating thereto and if at such time any
events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary to amend or supplement the Prospectus or
to file under the Exchange Act any document to be incorporated by reference
in the Prospectus in order to comply with the Securities Act or the
Exchange Act, to notify the Representatives and, upon their request, to
file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended or
supplemented Prospectus which will correct such statement or omission or
effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Representatives,
be required by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus, any document to be
incorporated by reference in the Prospectus or any Prospectus pursuant to
Rule 424 of the Rules and Regulations, to furnish a copy thereof to the
Representatives and counsel for the Underwriters and obtain the consent of
the Representatives to the filing;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Securities
Act and the Rules and Regulations (including, at the option of the Company,
Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange upon which the Common Stock may be listed pursuant to
requirements of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder;
<PAGE>
13
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock;
PROVIDED that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(i) For a period of 90 days from the date of the Prospectus, except
as disclosed in or contemplated by the Prospectus, not to, directly or
indirectly, offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result
in the disposition by any person at any time in the future of) any shares
of Common Stock (other than the Stock and shares issued pursuant to
employee benefit plans, qualified stock option plans or other employee
compensation plans existing on the date hereof), or sell or grant options,
rights or warrants with respect to any shares of Common Stock (other than
the grant of options pursuant to option plans existing on the date hereof),
without the prior written consent of Lehman Brothers Inc., which consent
will not be unreasonably withheld;
(j) Prior to the Effective Date, to apply for the inclusion of the
Stock on the National Market System and to use its best efforts to complete
that listing, subject only to official notice of issuance, prior to the
First Delivery Date;
(k) To apply the net proceeds from the sale of the Stock being sold
by the Company as set forth in the Prospectus; and
(l) To take such steps as shall be necessary to ensure that neither
the Company nor any subsidiary shall become an "investment company" within
the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder.
6. EXPENSES. The Company agrees to pay: (a) the costs incident to
the authorization, issuance, sale and delivery of the Stock and any taxes
payable in that connection; (b) the costs incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus or
any document incorporated by reference therein, all as provided in this
Agreement; (d) the costs of producing and distributing this Agreement and any
other related documents in connection with the offering, purchase, sale and
delivery of the Stock; (e) the filing fees incident to
<PAGE>
14
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of sale of the Stock; (f) any applicable listing or other
fees; (g) the fees and expenses of qualifying the Stock under the securities
laws of the several jurisdictions as provided in Section 5(h) and of preparing,
printing and distributing a Blue Sky Memorandum; (including related fees and
expenses of counsel to the Underwriters); and (h) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement; PROVIDED that, except as provided in this Section 6 and in Section
11, the Underwriters shall pay their own costs and expenses, including the costs
and expenses of their counsel, any transfer taxes on the Stock which they may
sell and the expenses of advertising any offering of the Stock made by the
Underwriters.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 5(a); no stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or threatened
by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to such Delivery Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Shearman & Sterling, counsel
for the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall
be reasonably satisfactory in all material respects to counsel for the
Underwriters, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters.
(d) Stroock & Stroock & Lavan shall have furnished to the
Representatives their written opinion, as counsel to the Company, addressed
to the Underwriters and
<PAGE>
15
dated such Delivery Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of New York, is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which its ownership
or lease of property or the conduct of its business requires such
qualification and has all power and authority necessary to own or hold
its properties and conduct the business in which it is engaged;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the shares of Stock being delivered on such
Delivery Date) have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid, non-assessable and (except
for directors' qualifying shares and except as set forth in the
Prospectus) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(iii) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or transfer
of, any shares of the Stock pursuant to the Company's charter or
by-laws or any agreement or other instrument known to such counsel;
(iv) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property or assets of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, might have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(v) The Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph
of Rule 424(b) of the Rules and Regulations specified in such opinion
on the date specified
<PAGE>
16
therein and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge of such
counsel, no proceeding for that purpose is pending or threatened by
the Commission;
(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
such Delivery Date (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of
the Securities Act and the Rules and Regulations; and the documents
incorporated by reference in the Prospectus and any further amendment
or supplement to any such incorporated document made by the Company
prior to such Delivery Date (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion), when they were filed with the Commission, complied as to
form in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission thereunder;
(vii) The statements in the Prospectus under the caption
"Business - Collaborative Relationships" insofar as such statements
constitute a summary of documents referred to therein or matters of
law, are fair summaries of the material provisions thereof and
accurately present in all material respects the information required
with respect to such documents and matters. There are no contracts or
other documents which are required to be described in the Prospectus
or filed as exhibits to the Registration Statement by the Securities
Act or by the Rules and Regulations which have not been described or
filed as exhibits to the Registration Statement or incorporated
therein by reference as permitted by the Rules and Regulations;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company;
(ix) The issue and sale of the shares of Stock being delivered on
such Delivery Date by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries
<PAGE>
17
or any statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties or
assets; and, except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state securities laws, or by the National
Association of Securities Dealers, Inc., in connection with the
purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated
hereby; and
(x) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right (other than outstanding
convertible preferred stock of the Company and other than rights that
have been waived or satisfied or that relate to fewer than 25,000
shares of Common Stock) to require the Company to file a registration
statement under the Securities Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Securities Act.
In rendering such opinion, such counsel may state that their opinion is
limited to matters governed by the Federal laws of the United States of
America and the laws of the State of New York. Such counsel shall also
have furnished to the Representatives a written statement, addressed to the
Underwriters and dated such Delivery Date, in form and substance
satisfactory to the Representatives, to the effect that (x) such counsel
has participated in conferences and telephonic communications with
representatives of the Underwriters, with officers and representatives of
the Company, and with the independent certified public accountants for the
Company, at which conferences the contents of the Registration Statement
and the Prospectus and related matters were discussed; and such counsel has
also participated in the preparation of the Registration Statement and the
Prospectus, and has considered the matters required to be stated in the
Registration Statement and the Prospectus and the statements contained
therein and (y) based on the foregoing, no facts have come to the attention
of such counsel which lead them to believe (i) that the Registration
Statement (except for the financial statements and other financial and
statistical data included therein, as to which such counsel makes no
statement), at the time of the effectiveness of the Registration Statement
and at the date hereof, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
<PAGE>
18
necessary to make the statements therein not misleading, (ii) that the
Prospectus (except for the financial statements and other financial and
statistical data included therein, as to which such counsel makes no
statement), as amended or supplemented, at its issue date and at the date
hereof, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading
or (iii) any document incorporated by reference in the Prospectus, when
filed with the Commission, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The foregoing opinion and statement may be qualified
by a statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus.
(e) The Representatives shall have received on such Delivery Date
from Patton, Boggs, L.L.P., special counsel for the Company, an opinion,
addressed to the Representatives and dated such Delivery Date, and
concluding in effect that the statements in the Prospectus under "Business
- Manufacturing," "Business - Government Regulation" and "Risk Factors"
with respect to the status of U.S. government approval and in the
description of each of the Company's products under the caption "Business,"
insofar as they purport to summarize the provisions of statutes and
regulations administered by the Food and Drug Administration (the "FDA")
and related documents therein described have been prepared by or reviewed
by such counsel and reflect accurately the provisions purported to be
summarized and are correct in all material respects.
(f) The Representatives shall have received on such Delivery Date
from Knobbe, Martens, Olson & Bear, patent counsel for the Company, an
opinion addressed to the Representatives and dated such Delivery Date, and
stating in effect that:
(i) The Company owns or possesses adequate and enforceable
rights to use the Patents and all other intangibles necessary for the
conduct of its business as now being conducted and as described in the
Registration Statement and Prospectus. To the best of such counsel's
knowledge, neither the Company nor any of its subsidiaries has
infringed, is infringing or has received any notice of infringement of
or conflict with any intangibles of any other person that will have a
material adverse effect on the conduct of its business as now being
conducted and as described in the Registration Statement and
Prospectus.
<PAGE>
19
(ii) Except for processing and examination of patent and
trademark applications before governmental bodies, there is no
litigation or governmental or other proceeding relating to the Patents
or any intangibles necessary for the conduct of the Company's business
as now being conducted and as described in the Registration Statement
and Prospectus before any court or before or by any public body or
board pending to which the Company or any of its Subsidiaries is a
party or threatened against the Company or any of the Subsidiaries;
neither the Company nor any of its subsidiaries has given notice to
any third party of any claim of infringement of its patents or any
intangibles.
(iii) The statements in the Prospectus under
"Business - Patents" and "Risk Factors - Unpredictability of Patent
Protection; Proprietary Technology" insofar as they purport to
summarize the provisions of statutes, regulations, contracts,
agreements, patents, patent applications or other documents therein
described, have been prepared or reviewed by such counsel and
accurately reflect the provisions purported to be summarized and are
correct in all material respects.
In addition, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads them to
believe that (x) the information set forth in the Registration Statement
under the captions referred to above, or in any amendment thereto, as of
the time the Registration Statement became effective under the Act or as of
such Delivery Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and (y) the information set
forth in the Prospectus under the captions referred to above, or in any
supplement thereto, as of its issue date or as of such Delivery Date,
contained an untrue statement of a material fact or omitted to state a
material fact, necessary in order to make the statements therein, in the
light of the circumstances under which it is made, not misleading.
(g) The Representatives shall have received on such Delivery Date
from Lloyd Rowland, general counsel of the Company, an opinion addressed to
the Representatives and dated such Delivery Date, and stating in effect
that:
(i) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification and have all
<PAGE>
20
power and authority necessary to own or hold their respective
properties and conduct the businesses in which they are engaged;
(ii) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property owned by them, in
each case free and clear of all liens, encumbrances and defects except
such as are described in the Prospectus or such as do not materially
affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company
and its subsidiaries; and all real property and buildings held under
lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries;
(iii) The Company has no subsidiaries other than Astral, Inc.,
Talco, Inc., Rosanin Corporation and Applications et Transfers
de Technologies Advances S.A., and does not control, directly or
indirectly, any corporation, partnership, joint venture, association
or other business organization.
(iv) No default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a default, in the
due performance and observance of any term, covenant or condition, by
the Company or any of its subsidiaries, of any indenture, mortgage,
deed of trust, note or any other agreement or instrument to which the
Company or any of such subsidiaries is a party or by which it or any
of their assets or properties or businesses may be bound or affected,
where the consequences of such default would have a material and
adverse effect on the assets, properties, business, results of
operations, prospects or condition (financial or otherwise) of the
Company and its subsidiaries, taken as a whole.
(v) Neither the Company nor any of its subsidiaries is in
violation of any term or provision of its charter or by-laws or any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation would have a
material and adverse effect on the assets, properties, business,
results of operations, prospects or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole.
(h) The Representatives shall have received from Shearman & Sterling,
counsel for the Underwriters, such opinion or opinions, dated such Delivery
Date, with respect to the issuance and sale of the Stock, the Registration
Statement, the Prospectus and other related matters as the Representatives
may reasonably require,
<PAGE>
21
and the Company shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(i) At the time of execution of this Agreement, the Representatives
shall have received from Ernst & Young LLP a letter, in form and substance
satisfactory to the Representatives, addressed to the Underwriters and
dated the date hereof (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission and (ii)
stating, as of the date hereof (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more
than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters
ordinarily covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
(j) With respect to the letter of Ernst & Young LLP referred to in
paragraph (i) above and delivered to the Representatives concurrently with
the execution of this Agreement (the "initial letter"), the Company shall
have furnished to the Representatives a letter (the "bring-down letter") of
such accountants, addressed to the Underwriters and dated such Delivery
Date (i) confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01
of Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five
days prior to the date of the bring-down letter), the conclusions and
findings of such firm with respect to the financial information and other
matters covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(k) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board, its
President or a Vice President and its chief financial officer stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all its agreements contained herein; and
the conditions set forth in Sections 7(a) and 7(l) have been
fulfilled; and
<PAGE>
22
(ii) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.
(l) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus or (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus, the effect of which, in any such case described in
clause (i) or (ii), is, in the judgment of the Representatives, so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Stock being delivered on such
Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(m) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or
in the over-the-counter market, or trading in any securities of the Company
on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment
of a majority in interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the Stock
being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
<PAGE>
23
(n) The National Market System shall have approved the Stock for
inclusion, subject only to official notice of issuance.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Underwriter,
its officers and employees and each person, if any, who controls any
Underwriter within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Stock), to which
that Underwriter, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained
(A) in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (B) in any blue sky
application or other document prepared or executed by the Company (or based
upon any written information furnished by the Company) specifically for the
purpose of qualifying any or all of the Stock under the securities laws of
any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application") or (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be
stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Underwriter and each such officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, officer, employee or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses
are incurred; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any such
amendment or supplement, or in any Blue Sky Application, in reliance upon
and in conformity with written information concerning such Underwriter
furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein. The foregoing indemnity
agreement is in addition to any liability which the Company may otherwise
have to
<PAGE>
24
any Underwriter or to any officer, employee or controlling person of that
Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its
directors, and each person, if any, who controls the Company within the
meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained
(A) in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or (B) in any Blue
Sky Application or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in
any amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company through
the Representatives by or on behalf of that Underwriter specifically for
inclusion therein, and shall reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person
in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses
are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company or any
such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 8 except to the extent
it has been materially prejudiced by such failure and, PROVIDED FURTHER,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have to an indemnified party otherwise than
under this Section 8. If any such claim or action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory
<PAGE>
25
to the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 8 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; PROVIDED, HOWEVER, that the
Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other Underwriters and their respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Underwriters against the Company under this Section 8 if, in the reasonable
judgment of the Representatives, it is advisable for the Representatives
and those Underwriters, officers, employees and controlling persons to be
jointly represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Company. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the
consent of the indemnifying party or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify
and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company on the one hand
and the Underwriters on the other from the offering of the Stock or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Underwriters on
<PAGE>
26
the other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
with respect to such offering shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Stock purchased under
this Agreement (before deducting expenses) received by the Company, on the
one hand, and the total underwriting discounts and commissions received by
the Underwriters with respect to the shares of the Stock purchased under
this Agreement, on the other hand, bear to the total gross proceeds from
the offering of the shares of the Stock under this Agreement, in each case
as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section were to be
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above
in this Section shall be deemed to include, for purposes of this Section
8(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 8(d), no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Stock underwritten by it and distributed to
the public was offered to the public exceeds the amount of any damages
which such Underwriter has otherwise paid or become liable to pay by reason
of any untrue or alleged untrue statement or omission or alleged omission.
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. The
Underwriters' obligations to contribute as provided in this Section 8(d)
are several in proportion to their respective underwriting obligations and
not joint.
(e) The Underwriters severally confirm and the Company acknowledges
that the statements with respect to the public offering of the Stock by the
Underwriters set forth on the cover page of, the legends concerning over-
allotments and passive market-making on the inside front cover page of and
the concession and reallowance figures appearing under the caption
"Underwriting" in, the Prospectus are correct and constitute the only
information concerning such Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for inclusion in
the Registration Statement and the Prospectus.
<PAGE>
27
9. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting Underwriters shall be obligated to purchase the
Stock which the defaulting Underwriter agreed but failed to purchase on such
Delivery Date in the respective proportions which the number of shares of the
Firm Stock set opposite the name of each remaining non-defaulting Underwriter in
Schedule 1 hereto bears to the total number of shares of the Firm Stock set
opposite the names of all the remaining non-defaulting Underwriters in Schedule
1 hereto; PROVIDED, HOWEVER, that the remaining non-defaulting Underwriters
shall not be obligated to purchase any of the Stock on such Delivery Date if the
total number of shares of the Stock which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such date exceeds 9.09% of the
total number of shares of the Stock to be purchased on such Delivery Date, and
any remaining non-defaulting Underwriter shall not be obligated to purchase more
than 110% of the number of shares of the Stock which it agreed to purchase on
such Delivery Date pursuant to the terms of Section 3. If the foregoing
maximums are exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Stock to be purchased on such Delivery Date. If
the remaining Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such Delivery Date,
this Agreement (or, with respect to the Second Delivery Date, the obligation of
the Underwriters to purchase, and of the Company to sell, the Option Stock)
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Sections 6 and 11. As used in
this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Stock which a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. TERMINATION. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Section 7(m) or 7(n) shall have occurred or
if the Underwriters shall decline to purchase the Stock for any reason permitted
under this Agreement.
<PAGE>
28
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) the Company
shall fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, the Company will reimburse the Underwriters for all reasonable
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
the Underwriters in connection with this Agreement and the proposed purchase of
the Stock, and upon demand the Company shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 9 by
reason of the default of one or more Underwriters, the Company shall not be
obligated to reimburse any defaulting Underwriter on account of those expenses.
12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, Attention: Syndicate Department (Fax:
212-526-6588), with a copy, in the case of any notice pursuant to Section
8(c), to the Director of Litigation, Office of the General Counsel, Lehman
Brothers Inc., 3 World Financial Center, 10th Floor, New York, NY 10285;
and
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Duane Roth (Fax: (619) 558-5306);
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Underwriters by Lehman Brothers Inc. on behalf of the
Representatives.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control any Underwriter within the meaning of Section 15 of
the Securities Act and (B) the indemnity agreement of the Underwriters contained
in Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors
<PAGE>
29
of the Company, officers of the Company who have signed the Registration
Statement and any person controlling the Company within the meaning of
Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 13, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Stock and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
15. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. COUNTERPARTS. This Agreement may be executed in counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the
Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
ALLIANCE PHARMACEUTICAL CORP.
By
--------------------------------
TITLE:
<PAGE>
30
Accepted:
LEHMAN BROTHERS INC.
COWEN & COMPANY
OPPENHEIMER & CO., INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
---------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
SCHEDULE 1
Number of
Underwriters Shares
- ------------ ---------
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . . .
Cowen & Company. . . . . . . . . . . . . . . . . . . . . . . . . . .
Oppenheimer & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000
---------
---------
<PAGE>
SCHEDULE 2
NAME AND ADDRESS OF OFFICER OR DIRECTOR
Duane Roth
Theodore Roth
[remainder to be completed by Alliance]
<PAGE>
EXHIBIT 3
CERTIFICATE OF AMENDMENT
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALLIANCE PHARMACEUTICAL CORP.
Under Section 805 of the Business Corporation Law
We, the undersigned, Duane Roth and Theodore Roth, being respectively the
President and the Secretary of Alliance Pharmaceutical Corp., hereby certify:
1. The name of the corporation is Alliance Pharmaceutical Corp.
(hereinafter called the "Corporation"). The name under which the Corporation
was formed is Otisville Biologics, Inc.
2. The Certificate of Incorporation was filed in the office of the
Secretary of State on the 23rd day of February, 1983.
3. The Certificate of Incorporation of the Corporation was first
restated and the Restated Certificate was filed on November 10, 1993.
4. The Certificate of Incorporation of the Company, as amended
heretofore, is further amended by the addition of the following provisions
that designate the relative rights, preferences, and limitations
of 950,000 shares of the authorized 5,000,000 shares of preferred stock, $.01
par value, which provisions establish two additional series of preferred stock
of the Company designated as "Series B Preferred Stock" and "Series C Preferred
Stock."
5. A new Section (d) is added to Article 4 thereof, which Section (d)
reads in its entirety as follows:
(d) Seven Hundred Fifty Thousand (750,000) shares of the Corporation's
preferred stock, par value $.01 per share, are designated "Series B Preferred
Stock" (hereinafter referred to as the "Series B Preferred Stock") and two
hundred thousand (200,000) shares of the Corporation's preferred stock, par
value $.01 per share, are designated "Series C Preferred Stock" (hereinafter
referred to as the "Series C Preferred Stock"), and such Series B preferred
Stock and such Series C Preferred Stock shall have the respective voting
powers, designations, preferences and relative, participating, optional or
other rights, and the qualifications, limitations or restrictions as follows:
1. SECTION REFERENCES AND DEFINITIONS. References to section numbers
contained in this Article 4(d) shall refer only to sections within this Article
4(d) unless otherwise specified. Capitalized terms in this Article 4(d) shall
have the following meanings:
<PAGE>
2
1.1. "Common Stock" shall mean the shares of the Common Stock of the
Corporation, par value $.01 per share, and any stock into which such Common
Stock may hereafter be changed.
1.2. "B Conversion Date" shall mean the date on which the Series B
Preferred Stock converts to Common Stock pursuant to Section 5.1.1.
1.3. "B Conversion Rate" shall mean the rate at which shares of
Common Stock are to be received upon conversion of one share of the Series B
Preferred Stock which is determined by dividing the B Current Market Price per
share of Common Stock into $20.00; provided that (i) in the event of a
conversion pursuant to Section 5.1.1(b), the B Current Market Price per share
shall never be deemed to be less than $10.00, and (ii) in the event of a
conversion pursuant to Section 5.1.1(c) the B Current Market Price shall be
deemed to be $20.00. The B Conversion Rate, and the amounts specified in
clauses (i) and (ii) in the previous sentence shall be subject to adjustment
pursuant to Section 5.
1.4. "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Common Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event.
1.5. "B Current Market Price" per share of Common Stock at any date
herein specified shall mean the average of the daily market prices for the
twenty (20) consecutive Trading Days ending one (1) day prior to such date. The
market price for each such Trading Day shall be the last reported sales price
on the principal exchange on which the Common Stock is listed, or, if it is not
so listed, the Nasdaq National Market or, if it is not so listed, on the over-
the-counter market.
1.6. "B Division Amounts" shall mean the $10.00 amount referred to in
clause (i) of the proviso in Section 1.3 and the $20.00 amount referred to in
clause (ii) of such proviso.
1.7. "B Junior Stock" shall mean the Common Stock and any other class
or series of capital stock of the Corporation which at the time of issuance is
not declared to be senior to or on a parity with the Series B Preferred Stock
as to rights upon liquidation or dividends.
1.8. "B License Agreement" shall mean that certain License Agreement
dated as of February 28, 1996 by and among the Corporation and Hoechst
Marion Roussel, Inc..
1.9. "C Conversion Rate" shall mean the rate at which shares of
Common Stock are to be received upon conversion of one share of the Series C
Preferred Stock which is determined by dividing the C Current Market Price per
share of Common Stock into $25.00.
1.10. "C Current Market Price" per share of Common Stock shall
mean the average of the daily market prices for the twenty (20) consecutive
Trading Days ending January 14, 1997. The market price for each such Trading
Day shall be the last reported sales price on the principal exchange on which
the Common Stock is listed, or, if it is not so listed, the Nasdaq National
Market or, if it is not so listed, on the over-the-counter market.
<PAGE>
3
1.11. "Person" shall mean any individual, corporation,
association, company, business trust, partnership, joint venture, joint-stock
company, trust, unincorporated organization or association or government or any
agency or political subdivision thereof.
1.12. "Series A Preferred Stock" shall mean the outstanding
Series A Preferred Stock of the Corporation.
1.13. "Trading Day" shall mean any day on which trading takes
place (a) if the Common Stock is then listed or admitted to trading on a
national securities exchange, on the principal national securities exchange on
which the Common Stock is then listed or admitted to trading; or (b) if not, in
the over-the-counter-market and prices reflecting such trading are published by
the National Association of Securities Dealers Automated Quotation System.
2. DIVIDENDS.
2.1 SERIES B PREFERRED STOCK. Before any dividends (other than
dividends payable in B Junior Stock) on any B Junior Stock shall be declared or
paid or set apart for payment, the holders of shares of Series B Preferred
Stock shall be entitled to receive cash dividends, when and as declared by the
Board of Directors, at the annual rate of one dollar ($1.00) per share, and no
more, payable annually on the first day of June in each year, to holders of
record on such date, not exceeding thirty (30) days preceding such dividend
payment date, as may be determined by the Board of Directors in advance of the
payment of each particular dividend. The Series B Preferred Stock shall rank
on a parity with the Series A Preferred Stock as to dividends. Such dividends
will be cumulative.
Whenever, at any time, the full dividend as aforesaid for the current
dividend period shall have been paid or declared and set apart for payment on
the then outstanding Series B Preferred Stock, the Board of Directors may
declare dividends on any B Junior Stock, subject to the respective terms and
provisions (if any) applying thereto, and the Series B Preferred Stock shall
not be entitled to share therein.
2.2 SERIES C PREFERRED STOCK. Series C Preferred Stock shall not be
entitled to receive any dividends (other than dividends payable in B Junior
Stock or distributions pursuant to Section 5.6).
3. LIQUIDATION OR DISSOLUTION.
3.1. RANK. The Series B Preferred Stock and Series C Preferred
Stock of the Corporation shall rank on a parity with the Series A Preferred
Stock as to distributions upon a liquidation, dissolution or winding up of the
Corporation.
3.2. PREFERENCE. Subject to the prior rights of the Corporation's
creditors and holders of securities senior to the Series B Preferred Stock and
Series C Preferred Stock in respect of distributions upon liquidation,
dissolution or winding-up of the Corporation, in the event of the voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, (i) the
holders of Series B Preferred Stock shall be entitled to receive twenty dollars
($20.00) per share, plus an amount equal to any accumulated dividends through
the date of such liquidation,
<PAGE>
4
dissolution or winding-up and (ii) the holders of Series C Preferred Stock
shall be entitled to receive one cent ($.01) per share. The amount of
dividends "accumulated" on any share of Series B Preferred Stock as at any
annual dividend date shall be deemed to be the amount of any unpaid dividends
accumulated thereon to and including such annual dividend date, whether or not
earned or declared, and the amount of dividends "accumulated" on any share of
Series B Preferred Stock as at any date other than an annual dividend date
shall be calculated as the amount of any unpaid dividends accumulated thereon,
whether or not earned or declared, at the rate of $.25 per share for each full
three-month period preceding such date and ending on September 1, December 1,
March 1 or June 1. If, upon any such liquidation, dissolution or winding-up of
the Corporation, the assets distributable among the holders of Series B
Preferred Stock and Series C Preferred Stock (and any series of preferred stock
ranking in parity with the Series B Preferred Stock and Series C Preferred
Stock in respect of distributions upon liquidation, dissolution or winding-up
of the Corporation) shall be insufficient to permit the payment in full to such
holders of the preferential amount payable to such holders determined as
aforesaid, then the holders of Series B Preferred Stock and Series C Preferred
Stock (and any such series) will share ratably in any distribution of the
Corporation's assets in proportion to the respective preferential amounts that
would have been payable if such assets were sufficient to permit payment in
full of all such amounts. After payment of the full amount of the liquidating
distribution to which the holders of Series B Preferred Stock and Series C
Preferred Stock are entitled, holders of B Junior Stock (other than Common
Stock) shall be paid any preferential amounts payable to such holders.
Thereafter, the holders of Series C Preferred Stock will not be entitled to any
further distributions and the holders of Series B Preferred Stock will share
PRO RATA with the holders of Common Stock (and the holders of Series A
Preferred Stock and any other preferred stock or B Junior Stock entitled to
share PRO RATA with Common Stock in liquidating distributions), based on the
number of shares of Common Stock into which the Series B Preferred Stock is
then convertible, in any further distribution of assets by the Corporation.
Under this Section 3, a distribution of assets in any dissolution, winding-up
or liquidation shall not include (a) any consolidation or merger of the
Corporation with or into any other corporation, (b) any dissolution,
liquidation or winding-up of the Corporation immediately followed by
reincorporation of a successor corporation or (c) a sale or other disposition
of all or substantially all of the Corporation's assets in consideration for
the issuance of equity securities of another corporation, provided that the
consolidation, merger, dissolution, liquidation, winding-up, sale or other
disposition (i) does not amend, alter, or change the preferences or rights of
the Series B Preferred Stock or Series C Preferred Stock or the qualifications,
limitations or restrictions thereof in a manner that adversely affects the
Series B Preferred Stock or Series C Preferred Stock and (ii) is done in
accordance with Sections 5.5, 5.6 or 5.7 hereof.
4. VOTING RIGHTS.
4.1 Series B Preferred Stock. The holders of Series B Preferred
Stock shall have the right to vote, together with the holders of all the
outstanding shares of Common Stock (and the holders of every other class or
series entitled to vote together with such holders) and not by class, except as
otherwise required by New York law, on all matters on which holders of Common
Stock shall have the right to vote. Each holder of Series B Preferred Stock
shall have the right to cast one (1.0) vote for each share of Series B
Preferred Stock held by such holder.
<PAGE>
5
4.2 Series C Preferred Stock. The holders of Series C Preferred
Stock shall not be entitled to any voting rights except as otherwise required
by law.
5. CONVERSION RIGHTS.
5.1. CONVERSION OF SERIES B PREFERRED STOCK. The Series B Preferred
Stock shall convert into fully paid and non-assessable shares of Common Stock
on the B Conversion Date at the B Conversion Rate as follows:
5.1.1. The Series B Preferred Stock shall convert into Common
Stock on the earlier of the following:
(a) February 28, 2001;
(b) Termination of the B License Agreement (unless
termination of the B License Agreement is as a result of the liquidation of the
Corporation, the appointment of a receiver or trustee for substantially all of
the property or assets of the Corporation, or the Corporation makes an
assignment for the benefit of creditors, in each case, in accordance with the B
License Agreement); or
(c) At such time as the B Current Market Price per share
of Common Stock is equal to or greater than $20.00, subject to adjustment
pursuant to Section 5.5.
5.1.2. Upon conversion pursuant to Section 5.1.1(a) or (c),
the holders of Series B Preferred Stock shall receive accumulated dividends
paid in cash or, at the election of the Corporation, in Common Stock at the B
Current Market Price used to determine the B Conversion Rate upon conversion.
In the event of a conversion pursuant to Section 5.1.1(b), no accumulated
dividends shall be paid to the holders of Series B Preferred Stock.
5.2. CONVERSION OF SERIES C PREFERRED STOCK. The Series C Preferred
Stock shall convert into fully paid and non-assessable shares of Common Stock
at the C Conversion Rate on June 30, 1997, if notice of redemption pursuant to
Section 7.1 has not previously been given to the Corporation.
5.3. CONVERSION NOTICE AND PROCEDURE. Upon conversion of the Series
B Preferred Stock or Series C Preferred Stock, the Corporation shall send
written notice to the holders of Series B Preferred Stock or Series C Preferred
Stock, as the case may be. Any notice of conversion to a holder of Series B
Preferred Stock shall contain the B Conversion Date, the B Conversion Rate and
the number of shares into which the holder's Series B Preferred Stock is
converted. Any notice of conversion to a holder of the Series C Preferred
Stock shall contain the C Conversion Rate and the number of shares into which
the holder's Series C Preferred Stock is converted. Upon conversion of Series
B Preferred Stock or Series C Preferred Stock, the shares so converted shall
have the status of authorized and unissued preferred stock, and the number of
shares of preferred stock which the Corporation shall have authority to issue
shall include the number of shares of Series B Preferred Stock or Series C
Preferred Stock so converted, as the case may be. Upon any conversion,
certificates representing the Series B Preferred Stock or Series C Preferred
Stock shall thereafter be deemed to represent the appropriate number of shares
<PAGE>
6
of Common Stock into which such stock is converted. After conversion the
holder of any shares of Series B Preferred Stock or Series C Preferred Stock so
converted shall deliver to the Corporation during regular business hours, at
such place as may be designated by the Corporation, the certificate or
certificates for the shares to be converted, duly endorsed or assigned in
blank, or to the Corporation (if required by it), accompanied by written notice
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued.
5.4. FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series B Preferred Stock or
Series C Preferred Stock. If more than one share of Series B Preferred Stock
or Series C Preferred Stock shall be surrendered for conversion at any one time
by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares so surrendered. Instead of any fractional shares of Common Stock which
would otherwise be issuable upon any such conversion, the Corporation shall pay
a cash adjustment in respect of such fractional interest in an amount
determined on the basis of the then current fair market value of a share of
Common Stock as determined by the Board of Directors of the Corporation, in
good faith. Fractional interests shall not be entitled to dividends, and the
holders thereof shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interests.
5.5. ADJUSTMENTS FOR SUBDIVISIONS, STOCK DIVIDENDS, COMBINATIONS, OR
CONSOLIDATIONS OF COMMON STOCK.
5.5.1. In the event the outstanding shares of Common Stock
shall be increased by way of stock issued as a dividend for no consideration or
subdivided (by stock split, or otherwise) into a greater number of shares of
Common Stock, the B Division Amounts then in effect shall, concurrently with
the effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the B Division Amounts then in effect shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
5.5.2. In the event the outstanding shares of Common Stock
shall be increased by way of stock issued as a dividend for no consideration or
subdivided (by stock split, or otherwise) into a greater number of shares of
Common Stock after January 14, 1997 and prior to the conversion of the Series C
Preferred Stock, the C Current Market Price then in effect shall, concurrently
with the effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock after January 14, 1997 and prior to the
conversion of the Series C Preferred Stock, the C Current Market Price then in
effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
5.6. OTHER DISTRIBUTIONS.
<PAGE>
7
5.6.1. If for any reason, including without limitation a
merger or sale of assets transaction, the Corporation shall declare a
distribution payable in securities of the Corporation other than shares of B
Junior Stock, or in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, or assets (excluding cash
dividends) then, in each such case for the purpose of this Section 5.6.1, the
holders of the Series B Preferred Stock shall be entitled to a proportionate
share of such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of Series B
Preferred Stock would be convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
5.6.2. If for any reason, including without limitation a
merger or sale of assets transaction, the Corporation shall after January 14,
1997 and prior to conversion of the Series C Preferred Stock declare a
distribution payable in securities of the Corporation other than shares of B
Junior Stock, or in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, or assets (excluding cash
dividends) then, in each such case for the purpose of this Section 5.6.2, the
holders of the Series C Preferred Stock shall be entitled upon conversion, if
any, to a proportionate share of such distribution (or, at the election of the
Board of Directors, to a cash payment equal to the fair market value on the
date of such distribution, as determined by the Board of Directors in their
reasonable discretion, of a proportionate share of such distribution) as though
they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Series C Preferred Stock would be
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
5.7. REORGANIZATIONS AND RECAPITALIZATIONS. If at any time or from
time to time there shall be a reorganization or recapitalization of the Common
Stock (other than a subdivision, combination or merger or sale of assets
transaction provided for in Section 5.5 or Section 5.6 above), then, as a
condition of such reorganization or recapitalization, provision shall be made
so that the holders of the Series B Preferred Stock or Series C Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series B
Preferred Stock or Series C Preferred Stock, as the case may be, the number of
shares of stock or other securities or property of the Corporation or otherwise
to which a holder of Common Stock deliverable upon conversion would have been
entitled on such reorganization or recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of the Series B
Preferred Stock or Series C Preferred Stock after the reorganization or
recapitalization to the end that the provisions of this Section 5 (including
adjustment of the B Conversion Rate or C Conversion Rate and the B Division
Amounts then in effect and the number of shares receivable upon conversion of
the Series B Preferred Stock or Series C Preferred Stock) shall be applicable
after that event in as nearly an equivalent manner as may be practicable.
5.8. RESERVATION OF SHARES. The Corporation agrees that, so
long as any share of Series B Preferred Stock or Series C Preferred Stock shall
remain outstanding, the Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized capital stock,
for the purpose of issue upon conversion of the Series B Preferred Stock or
Series C Preferred Stock, as the case may be, the full number of shares of
Common Stock then
<PAGE>
8
issuable upon conversion of all outstanding shares of Series B Preferred Stock
or Series C Preferred Stock, as the case may be. If the Common Stock shall be
listed on any national securities exchange, the Corporation at its expense
shall include in a listing application all of the shares of Common Stock
reserved for issuance upon conversion of the Series B Preferred Stock or Series
C Preferred Stock, as the case may be, (subject to issuance or notice of
issuance to the exchange) and will similarly apply for and use its best efforts
to procure the listing of any further Common Stock reserved for issuance upon
conversion of the Series B Preferred Stock or Series C Preferred Stock, as the
case may be, at any subsequent time as a result of adjustments in the B
Conversion Rate or the C Conversion Rate or otherwise.
5.96. VALIDITY OF SHARES. The Corporation agrees that it will
from time to time take all such actions as may be requisite to assure that all
shares of Common Stock which may be issued upon conversion of any share of the
Series B Preferred Stock or Series C Preferred Stock will, upon issuance, be
legally and validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.
5.10. TAXES. The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery
(but not transfer) of shares of Common Stock upon conversion of the Series B
Preferred Stock or Series C Preferred Stock.
5.11. ABANDONMENT OF ACTION. If the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution requiring an adjustment pursuant to Section
5 and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment to the holders of Series B Preferred Stock or Series C
Preferred Stock shall be required by reason of the taking of such record and
any such adjustment previously made in respect thereof shall be rescinded and
annulled.
5.12. NOTICE PROVISIONS.
5.12.1. Whenever an adjustment is required pursuant to Section
5 hereof, the Corporation shall forthwith deliver to the holders of Series B
Preferred Stock or Series C Preferred Stock, as the case may be, a certificate
signed by an officer of the Corporation, setting forth, in reasonable detail,
the event requiring the adjustment, the method by which such adjustment was
calculated and the adjustments made.
5.12.2. In case the Corporation shall propose (a) to pay any
dividend payable in stock of any class to the holders of B Junior Stock or to
make any other distribution to the holders of its Common Stock, (b) to offer to
the holders of its Common Stock rights to subscribe for or to purchase any
Convertible Securities, Common Stock or shares of stock of any class or any
other securities, rights or options, (c) to effect any reclassification of its
Common Stock (other than a reclassification involving only the subdivision or
combination of outstanding shares of Common Stock), (d) to effect any capital
reorganization, (e) to effect any consolidation, merger or sale, transfer or
other distribution of all or substantially all its property, assets or
business, or (f) to effect the liquidation, dissolution or winding-up of the
Corporation, then, in each such case, the Corporation shall give to each holder
of Series B Preferred Stock or Series C
<PAGE>
9
Preferred Stock a notice of such proposed action, which shall specify the date
on which a record is to be taken for the purposes of such stock dividend,
distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding-up is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed, and shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Common Stock
and the B Conversion Rate, C Conversion Rate, and the B Division Amounts after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by (a)
or (b) above at least ten (10) days prior to the record date for determining
holders of the Common Stock for purposes of such action and, in the case of any
other such action, at least ten (10) days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of
Common Stock, whichever shall be the earlier.
6. NO PRE-EMPTIVE RIGHTS. No holder of Series B Preferred Stock or
Series C Preferred Stock shall have any pre-emptive or preferential right of
subscription to any shares of stock of the Corporation, or to options, warrants
or other interests therein or therefor, or to any obligations convertible into
stock of the Corporation, issued or sold, or any right of subscription to any
thereof other than such, if any, as the Board of Directors, in its discretion,
from time to time may determine and at such price or prices as the Board of
Directors from time to time may fix pursuant to the authority conferred by the
Corporation's Certificate of Incorporation.
7. Redemption of Series C Preferred Stock.
7.1 Redemption at the Option of the Holders of Series C Preferred
Stock. Beginning October 1, 1996 and ending on June 29, 1997, upon the request
of the holders of one hundred percent (100%) of the Series C Preferred Stock,
the Corporation shall redeem all, but not less than all, of the outstanding
Series C Preferred Stock; provided that such election may only be given within
the five (5) day period following the effective date of termination of the B
License Agreement. Notice of such election signed by the holders of one
hundred percent (100%) of the Series C Preferred Stock shall be delivered to
the Corporation one (1) day in advance of the day designated for such
redemption (herein called the "redemption date"). The amount payable to
holders of Series C Preferred Stock as of the redemption date shall be $75.00
per share.
7.2. Within forty-five (45) days of the redemption date, the
Corporation shall pay to the holders of Series C Preferred Stock at their
respective addresses as the same shall appear on the books of the Corporation,
the amount due to such holders on such redemption. Such amount shall be
payable, in the Corporation's discretion, in cash or by an unsecured promissory
note. The promissory note shall accrue interest at a fluctuating rate equal to
the prime rate from time to time in effect, as quoted in the Eastern edition of
THE WALL STREET JOURNAL, and all principal and interest shall be due and
payable on June 30, 2002. The Corporation may at any time pay all outstanding
amounts owed under the promissory note in cash or Common Stock. If Common
Stock is issued in payment of principal of or interest on such promissory note
it shall be valued at a price equal to the average closing price of Common
Stock on the Nasdaq National Market (or such other principal exchange on which
the Common Stock may trade or, if not so listed on an exchange, in the over-the-
counter market) over twenty (20) trading days beginning
<PAGE>
10
twenty-two (22) trading days prior to the date of notice of payment by the
Corporation. Payment of the promissory note shall be made within forty-five
(45) days following notice of payment by the Corporation by check or, if
payment is in Common Stock, by delivery of certificates representing the Common
Stock, to the holders of such promissory notes at their respective addresses as
the same appear on the books of the Corporation.
7.3 Share Status on Redemption. Shares of Series C Preferred Stock
which have been redeemed or acquired by the Corporation shall, upon compliance
with any applicable provisions of the Business Corporation Law of New York,
have the status of authorized and unissued shares of preferred stock, but shall
be reissued only as part of a new series of preferred stock to be created by
resolution or resolutions of the Board of Directors or as part of any other
series of preferred stock.
8. COVENANTS.
8.1 SERIES B PREFERRED STOCK. In addition to any other rights
provided by law, so long as any shares of Series B Preferred Stock are
outstanding, this Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than sixty-six
and two-thirds percent (66-2/3%) of the Series B Preferred Stock:
(a) Amend or repeal any provisions of the Corporation's Certificate
of Incorporation which action would adversely affect the rights, preferences,
or privileges of the Series B Preferred Stock;
(b) Alter or change the designations, powers, rights, preferences or
privileges, or the qualification, limitations or restrictions of the Series B
Preferred Stock; or
(c) Increase the authorized number of shares of Series B Preferred
Stock or other preferred stock of the Corporation; or
(d) Authorize, create, or issue any Series A Preferred Stock, or any
new class or series of stock or any other securities convertible into equity
securities of the Corporation having a preference over, or being on a parity
with, the Series B Preferred Stock with respect to dividends, redemptions or
upon liquidation or dissolution of the Corporation; or
(e) Reclassify the shares of Common Stock or any other B Junior
Stock into shares of any class or series of capital stock (i) ranking either as
to payment of dividends, distribution of assets or redemptions, prior to or on
parity with the Series B Preferred Stock, or (ii) which in any manner adversely
affects the holders of Series B Preferred Stock.
8.2 Series C Preferred Stock. In addition to any other rights
provided by law, so long as any shares of Series C Preferred Stock are
outstanding, this Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than sixty-six
and two-thirds percent (66-2/3%) of the Series C Preferred Stock:
<PAGE>
11
(a) Amend or repeal any provisions of the Corporation's Certificate
of Incorporation which action would adversely affect the rights, preferences,
or privileges of the Series C Preferred Stock;
(b) Alter or change the designations, powers, rights, preferences or
privileges, or the qualification, limitations or restrictions of the Series C
Preferred Stock; or
(c) Increase the authorized number of shares of Series C Preferred
Stock or other preferred stock of the Corporation; or
(d) Authorize, create, or issue any Series A Preferred Stock or any
new class or series of stock or any other securities convertible into equity
securities of the Corporation having a preference over, or being on a parity
with, the Series C Preferred Stock with respect to redemptions or upon
liquidation or dissolution of the Corporation; or
(e) Reclassify the shares of Common Stock or any other B Junior
Stock into shares of any class or series of capital stock (i) ranking either as
to payment of dividends, distribution of assets or redemptions, prior to or on
parity with the Series C Preferred Stock, or (ii) which in any manner adversely
affects the holders of Series C Preferred Stock.
6. The manner in which the foregoing Amendment of the Certificate of
Incorporation was authorized is as follows: The Board of Directors of the
Corporation authorized the Amendment under the authority vested in said Board
under the provisions of the Certificate of Incorporation and of Section 502 of
the Business Corporation Law.
IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite each of our names below and do hereby affirm, under the penalties of
perjury, that the statements contained therein have been examined by us and are
true and correct.
Date: March 12, 1996
/s/ Duane J. Roth
_______________________________________
Name: Duane J. Roth
Title: President
/s/ Theodore D. Roth
_______________________________________
Name: Theodore D. Roth
Title: Secretary
<PAGE>
[LOGO] [ALLIANCE PHARMACEUTICAL LETTERHEAD]
March 6, 1996
Boehringer Ingelheim International GmbH
D-6507 Ingelheim
Germany
Dear Sirs:
This will confirm our agreement with respect to the purchase by Alliance
Pharmaceutical Corp. ("Alliance") from your company ("BII") of the warrant dated
December 30, 1993 (the "Warrant") held by BII and exercisable to purchase
500,000 shares of Alliance Common Stock at $12 per share, as follows:
1. Subject to and immediately after the consummation (the "Closing") of
Alliance's contemplated public offering of Alliance Common Stock (the "Publicly
Offered Shares") through an underwriting syndicate managed by Lehman Brothers
Inc., Cowen & Company and Oppenheimer & Co., Inc., Alliance will purchase from
BII, and BII will sell to Alliance, the Warrant, free and clear of any liens,
claims, security interests and encumbrances. Alliance will advise BII of the
date, time and place of the Closing.
2. The purchase price (the "Purchase Price") for the Warrant will be an amount
equal to the product of (i) 500,000 and (ii) an amount equal to the difference
between (a) the price per share paid to Alliance for the Publicly Offered
Shares (that is, the public offering price less the underwriters' discount), and
(b) $12. Payment of the Purchase Price will be made at the place of and
immediately after the Closing by delivery to BII of a certified or official bank
check in the amount thereof, or by wire transfer of such amount to an account
designated by BII, against delivery to Alliance of the Warrant, endorsed in
blank.
3. The obligation of BII hereunder is subject, at BII's option, to the
Purchase Price being at least $1,520,000.
4. Alliance will use their business judgment to determine the public offering
price as well as the underwriters' discount which shall not exceed 6% of it.
5. This agreement becomes valid upon signature and will expire 60 days
thereafter, it can be extended by mutual consent in writing.
Very truly yours,
ALLIANCE PHARMACEUTICAL CORP.
By: /s/ Theodore D. Roth
--------------------
Confirmed and Agreed:
BOEHRINGER INGELHEIM INTERNATIONAL GmbH
pps
/s/ Dr. Fechner /s/ Dr. Hanke
- -------------------- --------------------
Dr. Fechner Dr. Hanke
March 22nd, 1996
<PAGE>
EXHIBIT 5
[LETTERHEAD]
March 27, 1996
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, CA 92121
RE: Alliance Pharmaceutical Corp.
Registration Statement on Form S-3 (No. 333-1531)
-------------------------------------------------
Gentlemen:
We have acted as counsel to you (the "Corporation") in connection with the
preparation and filing of the above-captioned Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended, covering 2,875,000 shares of the Corporation's Common Stock, $.01
par value per share (the "Shares"), to be sold by the Corporation. The Shares
will be sold to Lehman Brothers Inc., Oppenheimer & Co., Inc. and Cowen &
Company, the representatives of the underwriters (the "Representatives")
pursuant to an Underwriting Agreement to be entered into by the
Representatives and the Corporation (the "Underwriting Agreement").
We have examined copies of the Certificate of Incorporation and By-laws of
the Corporation, each as amended to date, the minutes of various meetings of
the Board of Directors of the Corporation, and the original, photostat or
certified copies of all such records of the Corporation, and all such
agreements, certificates of public officials, certificates of officers and
representatives of the Corporation or others, and such other documents,
papers, statutes and authorities as we have deemed necessary to form the
basis of the opinions hereinafter expressed. In such examination, we have
assumed the genuineness of signatures and the conformity to original
documents of the documents supplied to us as copies. As to various questions
of fact material to such opinions, we have relied upon statements and
certificates of officers of the Corporation and others.
Based upon the foregoing, we are of the opinion that all of the Shares
covered by the Registration Statement have been duly authorized and, when
issued and purchased in accordance with the terms of the Underwriting
Agreement, will be validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Prospectus. We further consent to your filing a copy of this
opinion as an exhibit to the Registration Statement. In giving such consent,
we do not admit hereby that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Stroock & Stroock & Lavan
STROOCK & STROOCK & LAVAN
<PAGE>
LICENSE AGREEMENT
Executed this 28TH day of February, 1996, by and between ALLIANCE
PHARMACEUTICAL CORP., a New York corporation (hereinafter referred to as
"ALLIANCE") having its principal office at 3040 Science Park Road, San Diego,
California 92121 and Hoechst Marion Roussel, Inc., a Delaware corporation
having its principal office at 10236 Marion Park Drive, Kansas City, Missouri
64137-1405 (hereinafter referred to as "HMRI"). The effective date of this
Agreement shall be the date of the Closing as such term is defined in the Stock
Purchase Agreement of even date herewith between HMRI and ALLIANCE (hereinafter
referred to as the "Effective Date").
WITNESSETH THAT:
WHEREAS, ALLIANCE is developing through its research and development
activities certain technology for use in respiratory medicine, and has the
right to grant rights and licenses and/or sublicenses under the Patents
(hereinafter defined) and Know-How (hereinafter defined);
WHEREAS, HMRI has had the opportunity to evaluate said Patents and Know-
How under a confidentiality agreement dated March 14, 1995 between ALLIANCE and
HMRI;
WHEREAS, HMRI has, based on its evaluation, expressed to ALLIANCE its
interest in obtaining from ALLIANCE certain rights and licenses to the Patents
and Know-How; and
WHEREAS, ALLIANCE is willing to grant such rights and licenses to HMRI
under the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreement hereinafter set forth, both parties to this Agreement (hereinafter
defined) mutually agree as follows:
ARTICLE 1 - DEFINITIONS
The following terms as used in this Agreement shall, unless the context
clearly indicates to the contrary, have the meanings set forth in this Article:
1.1 "AFFILIATE" shall mean any entity which directly or indirectly controls,
or is controlled by, or is under common control with another entity. For
purposes of this Agreement, an entity is deemed to be in control of another
entity if the former owns directly or indirectly more than fifty percent (50%)
of the outstanding voting equity or owns directly or indirectly an interest in
more than fifty percent (50%) of the assets of the latter.
1.2 "AGREEMENT" shall mean this License Agreement.
1.3 "BRONCHOALVEOLAR LAVAGE" shall mean the installation and active removal of
Products in the lungs for diagnostic or therapeutic purposes.
** INDICATES CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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1.4 "CLINICAL WORK" shall mean any work related to human trials to assess the
dosing, safety and efficacy of a Product and to assess a dose and treatment
plan employing such Product(s).
1.5 "DIRECTLY COMPETITIVE PRODUCT" shall mean **
1.6 "FDA" shall mean the United States Food & Drug Administration and, when
appropriate, shall also mean any corresponding regulatory agency in any country
in the Territory.
1.7 "FIELD OF USE" shall mean the intratracheal administration of liquids
including in nebulized or aerosol form, either used with other drugs or
administered alone, which (a) perform Bronchoalveolar Lavage or Liquid
Ventilation, or (b) provide Therapeutic Effects. The Field of Use shall not
include proprietary formulations of ALLIANCE such as reverse emulsions, micro-
suspensions, molecular solutions and the like.
1.8 "FTE" shall mean the equivalent of one (1) full-time employee for one (1)
year.
1.9 "GLOBAL SALES DATE" shall mean **
1.10 "IND" shall mean an Investigational New Drug Application filed pursuant to
the requirements of the FDA as more fully defined in 21 C.F.R. Section 312 as
well as equivalent submissions to the appropriate health authorities in other
countries in the Territory.
1.11 "KNOW-HOW" shall mean any and all information, processes, techniques,
data, methods, materials, compositions, and trade secrets with respect to or
relating to the Patents in the Field of Use and/or the manufacture or use of
Products, including but not limited to the toxicological, pharmacological,
clinical and chemical data, specifications, regulatory submissions, medical
uses, adverse reactions, formulations and quality control methods which are in
the possession of ALLIANCE or HMRI and its Affiliates or are acquired or
developed by ALLIANCE or HMRI and its Affiliates during the term of this
Agreement.
1.12 "LIQUID VENTILATION" shall mean the administration in the pulmonary
airways of liquids (e.g., perfluorochemicals) which exchange physiological
gases (O2 and CO2) in therapeutically effective amounts (i) in conjunction with
a mechanical gas ventilator, wherein gas exchange takes place in the lungs,
(ii) in conjunction with a Liquid Ventilator, or (iii) without a mechanical gas
ventilator or Liquid Ventilator.
1.13 "LIQUID VENTILATOR" shall mean a device which pumps liquid into and
removes liquid from the lungs and performs and controls exchange of
physiological gases in a liquid medium EX-VIVO.
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1.14 "MAJOR EUROPEAN COUNTRY" shall mean each of France, Germany, Italy and the
United Kingdom.
1.15 "NDA" shall mean a New Drug Application and all supplements filed pursuant
to the requirements of the FDA, including all documents, data and other
information concerning a Product which are necessary for or included in, FDA
approval to market a Product, as more fully defined in 21 C.F.R.
Section Section 314.3 et seq. as well as equivalent submissions to the
appropriate authorities in other countries in the Territory.
1.16 "NET SALES" shall mean the gross invoice price of Product sold by HMRI and
its Affiliates or where applicable, their sublicensees and distributors, to
Third Party customers (other than sublicensees or distributors) in arms length
transactions, less the following reasonable and customary deductions to the
extent applicable to such invoiced amounts: (i) quantity or cash discounts;
(ii) customs duties and taxes (excluding income taxes) if any related to the
sale; (iii) amounts repaid or credited by reason of rejections; (iv) returned
goods; (v) retroactive price reductions specifically related to Product; (vi)
Third Party rebates and chargebacks; (vii) governmental mandated rebate
programs; (viii) packaging, handling fees, and prepaid freight; and (ix) any
other specifically identifiable amounts included in Products gross sales that
will ultimately be credited and are substantially similar to those listed
above. Net Sales will be accounted for in accordance with generally accepted
accounting principles consistently applied.
1.17 "PATENTS" shall mean:
a) any patent listed in Appendix A or added thereto by written agreement
of the parties hereto during the term of this Agreement;
b) any patent application listed in Appendix A or added thereto by
written agreement of the parties during the term of this Agreement, and any
division, continuation, or continuation-in-part of any such application; and
any patent which shall issue based on such application, division, continuation
or continuation-in-part;
c) any patent which is a reissue or extension of any patent described in
(a) or (b) above;
d) any foreign counterpart patent application or patent corresponding to
any patent application or patent identified in (a), (b), or (c), above which is
filed or issued in any country in the Territory; and
e) any patent or patent application related to or based on any Know-How
related to Products or the manufacture thereof developed or acquired by
ALLIANCE prior to or during the term of this Agreement and which is necessary
for the use, development, manufacture, market, sale or distribution of any
marketed Products and any division, continuation or continuation-in-part of any
such patent or patent application; and any patent which shall issue based on
such application, division, continuation or continuation-in-part; and any
patent which is a reissue or extension of any such patent.
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It shall be understood that the term "Patents" shall also include any
Supplementary Certificate of Protection of a Member State of the European
Community and other similar protective rights in any other country of the
Territory.
1.18 "PLAN COSTS" shall mean all out-of-pocket, direct and allocated expenses
ordinary and necessary to the execution of a PMT-approved R&D Work Plan,
Preclinical Work Plan, Clinical Work Plan, Production Work Plan or Regulatory
Work Plan as more fully set forth in Section 4.4.
1.19 "PLANS" shall mean R&D Work Plan, Preclinical Work Plan, Clinical Work
Plan, Production Work Plan and Regulatory Work Plan.
1.20 "PMT" shall mean the Project Management Team.
1.21 "PRECLINICAL WORK" shall mean any nonclinical IN VIVO and IN VITRO
biological work to assess the safety and efficacy of a Product.
1.22 "PRODUCTION WORK" shall mean any work to investigate methods to
manufacture on a commercial scale a Product, to validate reproducibility,
safety, cost effectiveness, and potential for scale-up of a method to
manufacture on a commercial scale a Product, or to transfer Know-How related to
manufacturing to HMRI.
1.23 "PRODUCTS" shall mean drug compounds, drug compositions and medical
devices and systems which, in the absence of this Agreement, the use,
development, manufacture, marketing, sale or distribution of which would result
in the infringement of one or more claims in a Patent, or which utilize the
Know-How of ALLIANCE.
1.24 "R&D WORK" shall mean any work to identify and develop liquids (e.g.,
perfluorochemicals) or medical devices or systems for administration or control
of Liquid Ventilation or Bronchoalveolar Lavage or recovery or re-use of
liquids, to characterize and qualify the properties or parameters of a
Product, to investigate methods to use a Product, or to modify or improve an
existing Product.
1.25 "REGULATORY WORK" shall mean any work related to obtaining regulatory
approval, including post regulatory approval work, in any country of the
Territory for the sale of a Product.
1.26 "STEERING COMMITTEE" shall mean the committee described hereinafter in
Article 3.
1.27 "SUPPLY AGREEMENT" shall mean the Supply and Technology Transfer Agreement
of even date herewith between ALLIANCE and HMRI.
1.28 "TERRITORY" shall mean all countries of the world.
1.29 "THERAPEUTIC EFFECTS" shall mean a biological response resulting from the
administration of a liquid in the lungs either used with other drugs or alone.
1.30 "THIRD PARTY" shall mean any person, corporation or unincorporated body
other than HMRI and ALLIANCE and their Affiliates.
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ARTICLE 2 - LICENSE GRANT
2.1 ALLIANCE grants to HMRI on a worldwide exclusive basis the rights and
licenses under the Patents and ALLIANCE's Know-How solely to use, develop,
manufacture, have manufactured, market, sell, and distribute Products in the
Territory for the Field of Use.
2.2 The rights and licenses granted hereunder may be sublicensed by HMRI to a
Third Party in any country in the Territory. HMRI may sell Products through
its Affiliates in any country in the Territory or grant sublicenses to its
Affiliates in any country of the Territory. At the request of HMRI, ALLIANCE
will extend the rights and licenses granted herein to an Affiliate of HMRI on a
direct basis in any country of the Territory. Notwithstanding the granting of
a sublicense to a Third Party or an Affiliate or a direct license to an
Affiliate, HMRI shall remain responsible to ALLIANCE for all obligations of
HMRI, its Affiliates and any sublicensee Third Party. Nothing herein shall
preclude HMRI and/or its Affiliates from utilizing a distributor to promote and
distribute the Products in any country of the Territory.
2.3 For ** receipt of which is hereby acknowledged, ALLIANCE hereby
grants to HMRI for the term of this Agreement, an option to obtain an
assignment of ALLIANCE's right, title, and interest in and to the NDA for
IMAGENT-Registered Trademark- GI, an oral contrast agent for use in magnetic
resonance imaging. Such option may be exercised upon the payment of **
to ALLIANCE. Such assignment will be valid for the term of this Agreement.
2.4 Neither ALLIANCE, HMRI nor any of their Affiliates shall use, develop,
manufacture, have manufactured, market, sell, or distribute any Directly
Competitive Product in the United States, Japan or a Major European Country. If
HMRI or any of its Affiliates makes, uses or sells a Directly Competitive
Product and, after written notice of breach from ALLIANCE, HMRI or any of its
Affiliates fails to cease such making, using or selling, HMRI's rights under
this Agreement for such country shall, at ALLIANCE's election, become non-
exclusive. If ALLIANCE or any of its Affiliates makes, uses, or sells a
Directly Competitive Product, and after written notice of breach from HMRI,
ALLIANCE or its Affiliates fails to cease such making, using, or selling, HMRI
shall not be obligated to pay royalties on the sale of such Product in such
country. At such time as the royalty obligations of Article 5 expire on a
country-by-country basis, this Section 2.4 shall have no further effect in such
country.
2.5 HMRI agrees to use its reasonable best efforts to develop and
commercialize the Products in each of the United States, Japan and each Major
European Country and will abide by and be subject to the terms of the
agreements listed on Schedule 2.5 attached hereto between ALLIANCE or its
Affiliates and Third Parties pertaining to the Patents and the Know-How;
provided that ALLIANCE shall remain responsible for complying with any monetary
obligations to such Third Parties.
ARTICLE 3 - PROJECT MANAGEMENT
3.1 ALLIANCE and HMRI shall create, within sixty (60) days after the Effective
Date of this Agreement, a four member Steering Committee. The activities of
the parties under this
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Agreement shall be supervised by the Steering Committee only to the extent set
forth herein. The Steering Committee shall perform the following functions:
a) coordinate and direct the R&D Work, Preclinical Work, Clinical Work,
Production Work and Regulatory Work as well as related activities of the
parties to develop Products hereunder;
b) establish a subordinate governance structure to carry out the
provisions of this Agreement including establishing and organizing the PMT and
appointing a chairperson therefor or other subordinate committees or structures
to implement this Agreement, with the proviso that if the PMT is not
constituted or continued, any reference to such committee in this Agreement
shall be deemed to be a reference to the Steering Committee or to such other
committees or structures to which the Steering Committee may delegate
responsibility;
c) settle disputes or disagreements that are unresolved by the PMT or
other committees established by the Steering Committee unless otherwise
indicated in this Agreement;
d) review and approve the Plans submitted to it by the PMT and approve
funding of the Plans by HMRI or ALLIANCE; and
e) perform such other functions as appropriate to further the purposes
of this Agreement as agreed to by the parties.
3.2 The Steering Committee:
a) shall hold general meetings at such times as shall be determined by
the unanimous consent of the Steering Committee but in no event shall such
meetings be held less frequently than once every six (6) months (unless
otherwise agreed); notice of any such meeting shall be provided to each member
of the Steering Committee no later than thirty (30) days prior to the scheduled
date of such meeting (unless such notice is waived), which notice shall contain
the date, time and place of such meeting and describe the proposed agenda of
items to be discussed at such meeting. Responsibility for arranging meetings
will alternate between the parties on a semi-annual basis, with ALLIANCE having
responsibility for the six (6) month period commencing in January of each year
and HMRI having responsibility for meetings during the six (6) month period
beginning in July of each year;
b) shall hold special meetings on ten (10) days prior notice by either
party (unless such notice is waived), which notice shall contain the date,
time, and place of such meeting and describe the proposed agenda, to resolve
issues that have not been resolved by the PMT within a reasonable time period;
c) may conduct meetings in person or by telephone conference, provided
that any material decision made during a meeting is evidenced by a conformed
writing signed by at least one of the members of such committee from each of
the parties;
d) shall keep minutes reflecting actions taken at meetings;
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e) may act without a meeting if prior to such action a written consent
thereto is signed by all members of the Steering Committee; and
f) may amend or expand upon the foregoing procedures for its internal
operation by unanimous written consent.
Either party may include such other representatives as they reasonably
deem appropriate at any meetings.
3.3 Two members of the Steering Committee shall be selected by ALLIANCE from
ALLIANCE and two members of the Steering Committee shall be selected by HMRI
from HMRI or its Affiliates. Members of the Steering Committee shall be senior
officers and/or directors of their respective companies or Affiliates. Members
of the Steering Committee shall serve in such capacity, on such terms and
conditions, and for such duration as shall be determined by the party selecting
such person for membership on the Steering Committee. An alternate member
designated by a party may serve temporarily in the absence of a permanent
member designated by such party.
3.4 Actions to be taken by the Steering Committee pursuant to the terms of
this Agreement shall be taken following the unanimous vote of the members of
the Steering Committee (HMRI and ALLIANCE each having one (1) vote). If the
Steering Committee fails to reach unanimous agreement, then HMRI shall have the
final decision subject to its obligations described in Section 2.5; provided
that prior to implementation of such decision the Chief Executive Officer of
ALLIANCE shall be entitled to meet and consult with the head of the Hoechst
Marion Roussel Pharmaceutical Group of Hoechst AG in a timely manner.
3.5 ALLIANCE and HMRI shall provide the Steering Committee, its members and
its authorized representatives with reasonable access during regular business
hours to all records and documents relating to this Agreement which it may
reasonably require in order to perform its obligations hereunder; provided that
if such documents are under a bona fide obligation of confidentiality to a
Third Party, ALLIANCE or HMRI, as the case may be, may withhold access thereto
to the extent necessary to satisfy such obligation (such as ALLIANCE's
confidentiality obligations with Ortho Biotech, Inc. arising out of the license
agreement dated August 16, 1994).
3.6 For each committee subordinate to the Steering Committee constituted in
this Agreement, including the PMT, each of ALLIANCE and HMRI shall appoint and
replace its own representatives on the committee. Each committee, including
the PMT, shall be comprised of representatives of each party, with the size of
each committee to be agreed upon from time to time. Any party may designate an
alternate member for each committee to participate in the event one of the
party's regular committee members is unable to be present at a meeting.
Meetings of any committee may be called by either party with not less than ten
(10) working days notice to the other unless such notice is waived, and
meetings shall be held at the office of the party not calling the meeting,
unless otherwise agreed. Any meeting may be conducted in person or by telephone
conference, provided that any material decision made during a meeting shall be
evidenced by a conformed writing signed by at least one of the members of such
committee from each of the parties. Each party will disclose to the other
proposed agenda items reasonably in advance of
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each meeting of the applicable committee. Each committee shall also be free to
consider any matters related to this Agreement which are within the scope of
its responsibilities. Either party may include such other representatives as
they reasonably deem appropriate at any meetings.
3.7 Each party shall designate a single project coordinator whose primary
duties (until such time as the Steering Committee decides otherwise) will be to
oversee matters arising under the provisions of this Agreement. Such project
coordinator will be responsible for the day-to-day worldwide coordination of
R&D Work, Preclinical Work, Clinical Work, Production Work and Regulatory Work
conducted under this Agreement and will serve to facilitate communication
between the parties relating to such work.
3.8 HMRI shall have the right to use an independent certified public
accountant reasonably acceptable to and approved by ALLIANCE, or HMRI's own
internal accountants, who shall have access to ALLIANCE's records during
reasonable business hours for the purpose of auditing R&D Work, Preclinical
Work, Clinical Work, Production Work and Regulatory Work expenditures under
this Agreement. The audit under this Section may extend up to the three (3)
preceding years but this right may not be exercised more than once in any
calendar year and once a calendar year is audited it may not be reaudited. The
results of the audit shall be disclosed to both parties, provided that the
independent accountant shall disclose to HMRI only information relating solely
to the accuracy and nature of expenditures made according to this Agreement.
For any overpayments greater than two (2) percent by HMRI found under this
Section, ALLIANCE shall pay HMRI the amount of overpayment, interest from the
time the amount was due at the then current prime rate as quoted in the Eastern
edition of THE WALL STREET JOURNAL, and HMRI's out-of-pocket expenses. For
any overpayments less than two (2) percent by HMRI found under this Section,
ALLIANCE shall pay HMRI the amount of overpayment. The parties agree that no
costs or interest shall be awarded for any correction resulting from excess
estimated payments made from time to time by HMRI to ALLIANCE.
3.9 Subject to Section 4.4 herein, ALLIANCE shall remain responsible to Third
Parties for all financial payments payable for R&D Work, Preclinical Work,
Clinical Work, Production Work and Regulatory Work before April 1, 1996. Any
such work contracted before the Effective Date but unpaid as of April 1, 1996
falls within the scope of this Agreement so long as such work was previously
disclosed in writing to HMRI per the notice provisions of this Agreement and
labeled as such.
ARTICLE 4 - PRODUCT DEVELOPMENT
4.1 The PMT shall be responsible for managing R&D Work, Preclinical Work,
Clinical Work, Production Work and Regulatory Work as well as related
activities performed under the provisions of this Agreement. The chairperson
of the PMT shall be chosen by HMRI. Beginning within sixty (60) days after the
Effective Date of this Agreement and continuing through the term of this
Agreement, the PMT will, unless otherwise agreed by the parties:
a) assume responsibility for the Plans as established in Section 4.3;
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b) establish, update yearly and seek approval from the Steering
Committee for the Plans so long as appropriate which will specify a reasonable
level of detail by which ALLIANCE and HMRI will conduct R&D Work, Preclinical
Work, Clinical Work, Production Work and Regulatory Work;
c) meet and review progress of R&D Work, Preclinical Work, Clinical
Work, Production Work and Regulatory Work at least quarterly unless ALLIANCE
and HMRI otherwise agree, and direct changes or modifications to the Plans as
well as budgets therefor;
d) establish a budget for each of the Plans and determine projected
additional costs or savings associated with any changes or modifications
thereto;
e) present a report with a reasonable level of detail at least every six
(6) months to the Steering Committee on all activities of the PMT, including a
budget update, progress by the parties under the current Plans and progress by
the PMT on developing Plans for the next year and associated budgets;
f) approve any material agreements with any Third Party to be made by
either or both parties hereto related to the performance of their obligations
under this Agreement, except where the selection of such a Third Party is the
unilateral right of either party hereunder; and
g) determine when the regulatory submissions for the United States and
Canada are to be transferred to HMRI from ALLIANCE.
4.2 Actions taken by the PMT pursuant to this Agreement as specified in
Section 4.1 shall be taken only following unanimous agreement of the parties
(HMRI and ALLIANCE each having one (1) vote) or at the direction of the
Steering Committee.
4.3 Subject to the provisions of this Agreement and approval by the Steering
Committee, ALLIANCE agrees to use its reasonable best efforts to execute and
complete the Plans as assigned, described and budgeted as set forth in Appendix
B and any future Plans authorized pursuant to this Agreement. Subject to the
provisions of this Agreement, HMRI agrees to use its reasonable best efforts to
execute and complete the Plans as assigned, described and budgeted as set forth
in Appendix C and any future Plans authorized pursuant to this Agreement. The
PMT and the Steering Committee will exercise the same oversight and control of
the Plans of Appendix B and Appendix C as if these Plans had been approved by
the Steering Committee hereunder, and said oversight and control will
specifically include directing changes and modifications to the Plans. Subject
to Section 13.1, HMRI agrees to provide funding to ALLIANCE through June 30,
1997 of at least the amount set forth on Appendix B to develop the Products in
the United States and Canada and to make the estimated quarterly payments to
ALLIANCE set forth therein, which amounts will be solely applied to Plan Costs
and are not refundable. ALLIANCE agrees to utilize the funds for the
development of Products in the United States and Canada, and, in the event
notice of termination of this Agreement is not given prior to June 30, 1997,
any amount of such quarterly payments not previously applied to Plan Costs
shall be applied to ALLIANCE's worldwide Plan Costs incurred after June 30,
1997. The parties agree that the Plans may change from time to time but the
HMRI financial commitment reflected in Appendix B shall not decrease.
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If there are any proposed changes of whatever nature to Appendix B (other than
the level of financial commitment), and the PMT, or the Steering Committee fail
to reach unanimous agreement on said changes in accordance with the procedures
set forth herein, then HMRI will have the final decision with respect to said
changes.
Either party may deliver to the PMT a list of proposed R&D Work,
Preclinical Work, Clinical Work, Production Work and Regulatory Work Plans for
the following calendar years, a description of each project and an estimated
budget for each project. The proposed project description shall include a
detailed plan, an itemized estimate of costs and time required, the name of the
project leader, where the project will be carried out and the expected benefit.
The PMT will review the list of proposed Plans, revise the proposed projects as
it sees fit, and devise a R&D Work Plan, Preclinical Work Plan, Clinical Work
Plan, Production Work Plan and Regulatory Work Plan from the proposed projects
or from projects proposed by the PMT itself. The PMT will establish a budget
for each of the Plans. Such Plans and budgets therefor shall be submitted by
the PMT to the Steering Committee for approval.
4.4 HMRI shall pay all Plan Costs, and shall reimburse ALLIANCE for all of its
Plan Costs incurred after March 31, 1996. Plan Costs include all out-of-
pocket, direct, and indirect expenses ordinary and necessary to the execution
of an approved Plan. Out-of-pocket costs, which include payments to third
parties for supplies, materials, clinical travel, contracted outside services,
etc., shall be documented by records reasonably acceptable to HMRI. Direct and
indirect expenses of research and/or development personnel (including, without
limitation, scientists, lab technicians, regulatory personnel, clinical support
personnel, and the like) shall be expressed in terms of the full-time
equivalent ("FTE") rate then in effect for ALLIANCE during the relevant time
period. The FTE rate shall be calculated by determining the payroll cost for
ALLIANCE's scientific and technical personnel who allocate time among various
projects in ALLIANCE's ordinary course of business (including costs for fringe
benefits and payroll taxes) and an overhead rate, which includes all costs
other than out-of-pocket expenses for ALLIANCE's projects, including
LIQUIVENT-Registered Trademark-. During the term of this Agreement, ALLIANCE
shall use its standard project costing and accounting system then in effect
in computing and tracking its direct and indirect costs. The objective of
reimbursing costs in the manner set forth herein is to reimburse Alliance
for its actual expenses in carrying out the Plan.
a) **
b) By October 1 of each year, the PMT will establish an overall project
budget for the upcoming calendar year broken down by major work areas/teams and
establish FTE labor and
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overhead rates to be used as benchmarks to measure performance and
accountability. At 6-month intervals, the PMT will add an additional 6-month
budget, thus maintaining a rolling 12-month budget.
4.5 Any sums due to ALLIANCE by HMRI pursuant to Articles 4, 8 or 9 shall be
billed by ALLIANCE each calendar quarter, substantiated by ALLIANCE with
suitable invoices and other reasonable documentation, including documentation
based on the actual FTE spending rates for labor and overhead, and paid by HMRI
within forty-five (45) days of receipt of such invoices.
4.6 The parties agree to promptly provide each other with copies of records,
reports, and regulatory filings showing a reasonable level of detail related to
their respective work in the United States, Japan, and each Major European
Country conducted under the terms of this Agreement, subject to the
confidentiality obligations described in Section 3.5.
4.7 **
ARTICLE 5 - PAYMENTS AND ROYALTIES
5.1 In consideration of the rights and licenses granted to HMRI under Article
2 of this Agreement, HMRI shall pay to ALLIANCE the following payments:
a) the sum of **________________________payable upon the Effective Date;
b) the sum of **_______________________________ payable on June 30,
1997, **______________________________________________________________;
c) the sum of **_______________________________upon filing of a United
States NDA, **_____________________________________________________________;
d) the sum of **_______________________________payable within thirty (30)
days following the approval of an NDA permitting marketing of a Product in the
United States **______________________________________________________________;
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_____________________________________________________________________
__________________________________;
e) the sum of **______________________________________________payable
within thirty (30) days following the first commercial sale of a Product in
a Major European Country;
f) the sum of **______________________________________________payable
within thirty (30) days following the first commercial sale of a Product in
a second Major European Country; and
g) the sum of **_______________________________payable within thirty
(30) days following the first commercial sale of a Product in Japan.
h) the sum of **_____________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________.
5.2 The payments specified under Section 5.1 (a) through (g) shall be
allocated among the Patents as the parties reasonably agree as soon as
reasonably possible, and such payments shall not be creditable against
royalties or refundable.
5.3 In further consideration of the rights and licenses granted to HMRI under
Article 2 of this Agreement, HMRI shall pay to ALLIANCE the following royalties
based on the Net Sales of Products in the Territory:
a)**
b)**
c)**
**
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Upon the expiration of the royalty obligations of this Section 5.3 other
than as a result of termination of the Agreement **
on a country-by-country basis, HMRI shall have a fully paid,
worldwide nonexclusive license solely to use, develop, manufacture, have
manufactured, market, sell, and distribute Products for the Field of Use and a
fully paid worldwide exclusive license to the trademark "LIQUIVENT".
5.4 Subject to the rights of ALLIANCE pursuant to this Agreement, including
but not limited to Sections 2.5 and 5.5, HMRI shall have the final decision
with respect to all aspects of commercialization or non-commercialization of
Products in any country in the Territory including but not limited to sales,
pre-marketing, marketing and distribution.
5.5 HMRI agrees that, during the term of this Agreement, it shall use its
reasonable best efforts to market Products throughout the Territory.
Reasonable best efforts shall mean that on a country-by-country basis HMRI
shall expend at least a similar level of corporate resources, including
employee time and money, as it would on an internally developed HMRI product,
taking into account the market potential of such products, the competitiveness
of the marketplace, the proprietary position of the Product and other relevant
factors.
5.6 In the event that a combination product is sold in a form containing a
Product and another product (which is not a Product) of HMRI, its Affiliates,
sublicensees or distributors, the Net Sales shall be calculated by multiplying
the sales price of the combination product by the fraction A/(A+B), where A is
the invoice price or, if none, then the fair market value of the Product, and B
is the invoice price or, if none, then the fair market value of the other
product. For example, if the sales price of the combination product is $100
and the invoice prices (or fair market values, if applicable) of the Product
and the other product are $90 and $30, respectively, the Net Sales shall be $75
($100 x [$90/$120]). Fair market value means the cash consideration which HMRI
or its Affiliates, sublicensees or distributors would realize from an
unaffiliated, unrelated buyer in an arm's length sale of an identical item sold
in the same quantity and at the same time and place of the transaction. The
parties further agree to negotiate in good faith for an equitable determination
of Net Sales of Products in the event that HMRI sells Products in such a manner
that the Net Sales of same are not readily identifiable.
ARTICLE 6 - REPORTS AND RECORDS
6.1 HMRI shall keep and shall cause its Affiliates, sublicensees and
distributors to keep true and accurate records of sales of Products and Net
Sales and the royalties payable to ALLIANCE under Article 5 hereof and shall
deliver to ALLIANCE a written statement thereof on or before the sixtieth (60)
day following the end of each HMRI accounting quarter (or any part thereof in
the first or last calendar quarter of this Agreement) for such HMRI accounting
quarter. Said
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written statements shall set forth Net Sales and the calculation thereof on a
country by country basis for each Product and the royalties due thereon.
6.2 All royalty payments by HMRI to ALLIANCE with respect to Net Sales in any
currency other than U.S. Dollars shall be converted into U.S. Dollars at the
rate of exchange of such currency for U.S. Dollars for the calendar quarter for
which royalty payments are being remitted according to HMRI's normal procedures
for calculating same and, at or no later than the time the written statement
with respect to such royalty payment or is required to be given to ALLIANCE
pursuant to Section 6.1, shall be made by wire transfer to the ALLIANCE account
designated below, or such other account as ALLIANCE may designate from time to
time. If the transfer or the conversion into U.S. Dollars in any such instance
is not lawful or possible, the payment of such part of the royalties due as is
necessary, shall be made by the deposit thereof, in such currency, to the
credit and account of ALLIANCE in any commercial bank or trust company of
ALLIANCE's choice located in that country. Prompt notice of said deposit shall
be given by HMRI to ALLIANCE.
6.3 Any income or other taxes which HMRI or any of its Affiliates is required
to pay or withhold on behalf of ALLIANCE with respect to royalties and any
other monies payable to ALLIANCE under this Agreement shall be deducted from
the amount of such royalties and monies due. HMRI or its Affiliate shall
furnish ALLIANCE with proof of such payments. Any such tax required to be paid
or withheld shall be an expense of and borne solely by ALLIANCE.
6.4 ALLIANCE shall have the right to use an independent certified public
accountant reasonably acceptable to and approved by HMRI or its own internal
accountants who shall have access to HMRI and its Affiliates' and sublicensees
and distributors records during reasonable business hours for the purpose of
verifying the royalties payable as provided in this Agreement for the three (3)
preceding years, but this right may not be exercised more than once in any
calendar year, and once a calendar year is audited it may not be reaudited, and
said accountant shall disclose to ALLIANCE and HMRI only information relating
solely to the accuracy and nature of the royalty report and the royalty
payments made according to this Agreement. For any underpayments greater than
two (2) percent by HMRI found under this Section, HMRI shall pay ALLIANCE the
amount of underpayment, interest from the time the amount was due at the then
current prime rate as quoted in the Eastern edition of THE WALL STREET
JOURNAL, and ALLIANCE's out-of-pocket expenses. For any underpayments less
than two (2) percent by HMRI found under this Section, HMRI shall pay ALLIANCE
the amount of underpayment. Any overpayments by HMRI will be refunded to HMRI
or credited to future royalties, at HMRI's election.
6.5 All payments due hereunder shall be made to the designated bank account of
ALLIANCE as follows:
**
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ARTICLE 7 - CONFIDENTIALITY
7.1 All confidential information transmitted by either party to the other
including all confidential information developed pursuant to this Agreement,
shall be identified as confidential and the receiving party shall, while this
Agreement is in effect and for five (5) years after termination thereof, make
no use of this information other than in furtherance of this Agreement and
shall use the same efforts to keep secret and prevent the disclosure of such
information to parties other than its Affiliates, sublicensees, agents,
officers, employees and representatives authorized to receive such information
as it would for its own confidential information except for such confidential
information that,
a) was known to the receiving party or its Affiliates or sublicensees at
the time of its disclosure and not previously subject to any obligation of
confidentiality at the time of its disclosure;
b) was generally available to the public or was otherwise part of the
public domain at the time of its disclosure;
c) became generally available to the public or became otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party or its Affiliates or sublicensees in breach of
this Agreement, or
d) became known to the receiving party or its Affiliates or sublicensees
after its disclosure (a) from a source other than the disclosing party
(including from independent development by the receiving party), (b) other than
from a Third Party who had an obligation to the disclosing party not to
disclose such information to others, and (c) other than under an obligation of
confidentiality, or
e) is disclosed by the receiving party pursuant to oral questions,
interrogatories, requests for information or documents, subpoena, or civil
investigative demand issued by a court or governmental agency; provided that
the receiving party notifies the other party immediately on receipt thereof and
that the disclosing party furnishes only that portion of the confidential
information that counsel advises is legally required.
7.2 Each receiving party or its Affiliates or sublicensees may disclose any of
the Know-How and confidential information to the extent such disclosure is
necessary to comply with applicable laws or regulations, or to make and use a
Product in accordance with the terms of this Agreement.
7.3 Each party recognizes the mutual interest in obtaining valid patent
protection. Consequently, either party and its employees or consultants or any
other Third Party wishing to make a publication (including any oral disclosure
made without obligation of confidentiality) relating to work performed by such
party as part of the work performed under this Agreement (the "Publishing
Party") shall transmit to the other party (the "Reviewing Party") a copy of the
proposed written publication at least forty-five (45) days prior to submission
for publication, or an abstract of such oral disclosure at least fifteen (15)
days prior to submission of the abstract of the
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oral disclosure, whichever is earlier. The Reviewing Party shall have the
right (a) to propose modifications to the publication for patent reasons, (b)
to request a delay in publication of presentation in order to protect
patentable information, or (c) to request that the information be maintained as
a trade secret and, in such case, the Publishing Party shall not make such
publication. Each party shall designate an individual to whom proposed
publications shall be directed and such individual shall be responsible for
obtaining the necessary internal approvals of the Reviewing Party.
7.4 If the Reviewing Party requests a delay as described in subsection 7.3(b)
the Publishing Party shall delay submission or presentation of the publication
for a period of up to ninety (90) days to enable patent applications protecting
each party's rights in such information to be filed.
7.5 Upon the receipt of written approval of the Reviewing Party or the
expiration of the applicable waiting period without comment, the Publishing
Party may proceed with the written publication or the oral presentation.
7.6 The parties hereto understand and agree that remedies at law may be
inadequate to protect against any breach of any of the provisions of this
Article 7 by either party or their employees, agents, officers or directors or
any other person acting in concert with it or on its behalf. Accordingly, each
party shall be entitle to the granting of injunctive relief by a court of
competent jurisdiction against any action that constitutes any such breach of
this Article 7. It is understood that such injunctive relief is intended
solely as provisional relief pending the dispute resolution procedures
described in Article 18 hereof.
7.7 Notwithstanding the foregoing, the right of any party to withhold or delay
consent to publish or delay publication shall be subject to any contractual
publication rights of Third Parties involved in research or clinical trials for
the Products. The parties will use reasonable efforts to obtain the voluntary
consent of any Third Party with publication rights agreed to prior to the
Effective Date, to comply with the notice and timing requests in this Article 7
and will promptly review any publications delivered for review.
ARTICLE 8 - INVENTIONS AND PATENT PROSECUTION
8.1 All right, title and interest in all writings, inventions, discoveries,
improvements and other technology, whether or not patentable or copyrightable,
and any patent applications, patents or copyrights based thereon (collectively,
the "Inventions") that are discovered, made or conceived during and as a
result of the work performed under this Agreement solely by employees of
ALLIANCE or others acting on behalf of ALLIANCE ("Alliance Inventions") shall
be owned by ALLIANCE. All rights, title and interest in all Inventions that are
discovered, made or conceived during and as a result of the work performed
under this Agreement solely by employees of HMRI or others acting on behalf of
HMRI ("HMRI Inventions") shall be owned by HMRI. All right, tittle and
interest in all Inventions that are discovered, made or conceived during and as
a result of the work performed under this Agreement jointly by employees of
ALLIANCE and HMRI or others acting on their behalf (the "Joint Inventions")
shall be jointly owned by HMRI and ALLIANCE. Each party shall promptly
disclose to the other party the making, conception or reduction to practice of
Inventions by employees or others acting on behalf of such party.
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The parties acknowledge that the ownership rights set forth above are subject
to the license grants set forth in Article 2 and that any patent applications
or patents related to ALLIANCE Inventions or Joint Inventions shall become
Patents.
8.2 Each party represents and agrees that its employees and consultants shall
be obligated under a binding written agreement to assign to such party, or as
such party shall direct, all Inventions made or conceived during and as a
result of work performed under this Agreement by such employee or consultant.
In the case of non-employees working for other companies or institutions on
behalf of ALLIANCE or HMRI, ALLIANCE and HMRI, as applicable, shall use
reasonable efforts to obtain the right to license all Inventions made by such
non-employees on behalf of ALLIANCE or HMRI, as applicable, in accordance with
the policies of the company or institution employing such non-employee.
ALLIANCE and HMRI agree to undertake to enforce such agreements with employees
or others or such rights pertaining to non-employees (including, where
appropriate, by legal action) considering, among other things, the commercial
value of such Inventions.
8.3 ALLIANCE shall be responsible for the filing, prosecution (including
oppositions) and maintenance of the Patents. For so long as any of the license
grants set forth in Article 2 remain in effect, ALLIANCE agrees to file and
prosecute and maintain the Patents in the countries in the Territory as listed
in Schedule 8.3; provided that the foregoing is subject to ALLIANCE's
reasonable business judgment. ALLIANCE shall consult with HMRI and keep HMRI
fully informed of important issues relating to the preparation, filing,
prosecution and maintenance of such patent applications and patents, including
patent strategy with respect to both existing and future patent applications,
patents and patent extensions, and shall furnish to HMRI copies of documents
relevant to such preparation, filing, prosecution and maintenance sufficiently
prior to filing such document or making any payment due thereunder to allow for
review and comment by HMRI, and ALLIANCE shall seriously consider all such
comments. ALLIANCE and HMRI shall mutually determine procedures for carrying
out the filing, prosecution (including oppositions) and maintenance, as
applicable, of patent applications and patents for all Joint Inventions and
shall each bear half of the cost thereof, and both parties shall be kept fully
informed of and consult and cooperate with respect to all actions taken with
respect thereto; provided that, if either party elects to not bear half the
cost of such activity with respect to a particular Joint Invention in a
particular country, then the other party may, at its sole expense and
discretion, undertake the filing, prosecution (including oppositions) and
maintenance of such patent or patent application in such country, and the party
not participating in such expenses shall assign its interest in such patent or
patent application in such country to the other party, including the rights to
receive and collect from third parties any royalties and damages for future or
past infringement, but reserving a perpetual royalty-free non-exclusive license
in such country (without the right to sublicense and subject to any limitations
imposed by this Agreement) to use such Joint Invention to make, have made, use,
distribute for sale and sell any products covered by such patent covering such
Joint Invention. The non-participating party will cooperate with the other
party, at the other party's expense, as necessary to enable the other party to
establish and protect its rights under this Section 8.3.
If ALLIANCE elects not to continue to seek or maintain patent protection
on any Patent in any country in the Territory, HMRI shall have the right, at
its option, but in the name of
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ALLIANCE and at HMRI's expense, to file, prosecute (including oppositions) and
maintain such patent applications and patents as ALLIANCE shall have previously
filed in at least one country, provided, however, that the rights of the
parties with respect to any such Patent shall in all other respects be as
described in this Agreement. ALLIANCE will advise HMRI of all decisions taken
with respect to any such election in a timely manner in order to allow HMRI to
protect its rights under this Section 8.3.
8.4 Each party shall make available to the other party (or to the other
party's authorized attorneys, agents or representatives), its employees,
agents, subcontractors or consultants to the extent reasonably necessary or
appropriate to enable the appropriate party to file, prosecute and maintain
patent applications and resulting patents with respect to Inventions owned by a
party and for periods of time reasonably sufficient for such party to obtain
the assistance it needs from such personnel. Where appropriate, each party
shall sign or cause to have signed all documents relating to said patent
applications or patents at no charge to the other party.
8.5 ALLIANCE shall notify HMRI of (i) the issuance of each Patent giving the
date of issue and patent number for each such patent, and (ii) each notice
pertaining to any Patent which it receives as patent owner pursuant to the Drug
Price Competition and Patent Term Restoration Act of 1984 (hereinafter called
the "Act"), or other similar laws now or hereafter in effect, or pursuant to
comparable laws or regulations in other countries in the Territory. The
parties shall cooperate with each other in applying for patent term extensions
(including Supplementary Protection Certificate in European Community
Countries) where applicable in any country of the Territory. ALLIANCE shall
also notify HMRI of each application filed for patent term extension, any
allegations of failure to show due diligence and all awards of patent term
extensions with respect to the Patents. Such notices shall be given promptly,
but in any event within twenty (20) business day after receipt of each such
notice pursuant to the Act (or comparable laws or regulations in other
countries in the Territory). ALLIANCE shall notify HMRI of each filing for
patent term restoration under the Act (or comparable laws or regulations in
other countries in the Territory), any allegations of failure to show due
diligence and all awards of patent term restoration (extensions) with respect
to the Patents.
8.6 Except as otherwise expressly provided in this Agreement, under no
circumstances shall a party hereto, as a result of this Agreement obtain any
ownership interest in or other right to any technology, know-how, patents,
pending patent applications, products, or biological material of the other
party, including items owned, controlled or developed by the other party, or
transferred by the other party to said party, at any time pursuant to this
Agreement. It is understood and agreed that this Agreement does not grant HMRI
any license or other right in the Patents licensed for use, other than the use,
development, manufacture, marketing, sale and distribution of Products in the
Field of Use covered by the Patents.
ARTICLE 9 - INFRINGEMENT
9.1 ALLIANCE and HMRI shall each promptly, but in any event no later than ten
(10) business days after receipt of notice of such action, notify the other in
writing of any patent nullity actions, any declaratory judgment actions or any
alleged or threatened infringement of patents or patent applications or
misappropriation of intellectual property comprising the Patents or if either
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party, or any of their respective Affiliates, shall be individually named as a
defendant in a legal proceeding by a Third Party alleging infringement of a
patent or other intellectual property right as a result of the manufacture,
production, use, development, manufacturing, marketing, selling or distribution
of Products, or of any other information or notification regarding the Patents.
9.2 HMRI shall have the first right to respond to, defend or prosecute any
actions, challenges, infringements, misappropriations or proceeding by a Third
Party alleging infringement described in Section 9.1. In the event HMRI elects
to do so, ALLIANCE will cooperate with HMRI and its legal counsel, join in such
suits as may be brought by HMRI, and be available at HMRI's reasonable request
to be an expert witness or otherwise to assist in such proceedings. HMRI will
cooperate with ALLIANCE and its legal counsel and keep ALLIANCE and its counsel
reasonable informed at all times as to the status of HMRI's response or
defense.
9.3 HMRI will not settle any suit or claim involving the Patents in a manner
that would compromise any rights of ALLIANCE without obtaining the prior
written consent of ALLIANCE.
9.4 In the event that HMRI elects to respond to, defend or prosecute any
actions, challenges, infringements, misappropriations or proceeding by a Third
Party alleging infringement described in Section 9.1, then: (i) legal fees and
other costs and expenses of HMRI associated with such response or defense shall
be paid by HMRI; (ii) legal fees and other costs and expenses associated with
such response or defense incurred by ALLIANCE at HMRI's request, shall be paid
by ALLIANCE; (iii) costs of acquiring Third Party patents or licenses and any
settlement, court award, judgment or other damages will be **__________________;
and (iv) amounts recovered from Third Parties in connection with such
response or defense shall first be applied, **__________________________________
________________________________________________________________________________
_______________________________________________________________________________.
HMRI shall advance all costs required to be paid by ALLIANCE pursuant to
clauses (ii) and (iii) of this subsection 9.4 and shall recover such advanced
costs through credits against up to ** of the royalties otherwise payable by
HMRI to ALLIANCE hereunder, until the amount so advanced by HMRI is fully
recovered. ALLIANCE shall have no obligation to repay HMRI any amounts
previously paid by HMRI to ALLIANCE hereunder to cover such costs. **______
____________________________________________________________________________
____________________________________________________________________________
9.5 In the event that HMRI elects not to respond to, defend or prosecute any
actions, challenges, infringements, misappropriations or proceeding by a Third
Party alleging infringement described in Section 9.1 within sixty (60) days of
becoming aware of or being notified of such actions, challenges, infringements,
misappropriations or proceedings or abandons such response, then, in such
event, ALLIANCE shall have the option to do so at ALLIANCE's sole cost,
provided that HMRI shall cooperate with and provide assistance to ALLIANCE at
HMRI's expense. All amounts so recovered from any Third Party shall be
retained by ALLIANCE,
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subject to reimbursement of both parties for expenses and ALLIANCE shall have
no further obligations to HMRI with respect to the response or defense thereof;
provided further that the royalty rate payable by HMRI shall not be adjusted
downward due to an adverse judgment.
9.6 In the event that ALLIANCE and HMRI determine that it is necessary or
desirable for HMRI to acquire any Third Party patent or license in connection
with the development or manufacture of Products covered by the Patents in the
Territory, **_______________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
ARTICLE 10 - TRADEMARKS
10.1 All trademarks to be utilized by HMRI and/or its Affiliates on Products
under this Agreement shall be chosen by HMRI and/or its Affiliates and, except
for trademarks owned by ALLIANCE, shall be owned by HMRI and/or its Affiliates.
ALLIANCE hereby grants to HMRI a worldwide exclusive royalty-free license to
the "LIQUIVENT" trademark in connection with the sale of Products in the
Territory for the term of this Agreement, and thereafter unless this Agreement
is terminated in its entirety pursuant to Article 13. Schedule 10.1 sets forth
the countries in which trademark applications were filed and the status of such
applications as of the Effective Date.
ARTICLE 11 - MANUFACTURE AND SUPPLY
The parties agree that ALLIANCE will manufacture and supply bulk labeled
Product in finished packaged form to HMR for all Clinical Work and initial
Product marketing on a worldwide basis to the extent available from ALLIANCE's
existing facility in Otisville, New York as provided in the Supply Agreement.
ARTICLE 12 - DURATION
12.1 This Agreement shall become effective from the Effective Date and shall,
unless sooner terminated pursuant to any other provision of this Agreement
continue in full force for as long as HMRI or its Affiliates is obligated to
pay royalties hereunder.
12.2 Notwithstanding the expiration of this Agreement pursuant to Section 12.1
or the early termination of this Agreement pursuant to Article 13, the
financial obligations incurred prior to such expiration or termination and the
obligations of 7.1, 8.2, 10.1, 13.4, 13.6, 14.1, 14.2, and 18.1 shall remain in
full force and effect.
ARTICLE 13 - TERMINATION
13.1 Notwithstanding any other provision herein, HMRI can, prior to NDA
approval, terminate this Agreement on a country by country basis in its
entirety upon one (1) month written notice to ALLIANCE. After NDA approval of
a Product and prior to first marketing of said Product, HMRI can terminate this
Agreement on a country by country basis upon two (2) months written
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notice to ALLIANCE. After the sale of a Product, HMRI can terminate this
Agreement on a country by country basis upon three (3) months written notice to
ALLIANCE.
13.2 Failure by HMRI or ALLIANCE to comply with any of the respective material
obligations and conditions contained in this Agreement shall entitle the other
party to give the party in default notice requiring it to cure such default.
If such default is not cured within ninety (90) days (thirty (30) days in case
of a monetary payment default) after receipt of such notice, the notifying
party shall be entitled (without prejudice to any of its other rights conferred
on it by this Agreement) to terminate this Agreement or in the event of an
uncured material breach by ALLIANCE, effect the rights of HMRI set forth in
Section 13.5 by giving a notice to take effect immediately. Notwithstanding
the foregoing, in the event of a non-monetary default, if the default is not
reasonably capable of being cured within the ninety (90) day cure period by the
defaulting party and such defaulting party is making a good faith effort to
cure such default, the notifying party may not terminate this Agreement,
provided however, that the notifying party may terminate this Agreement if such
default is not cured within one hundred eighty (180) days of such original
notice of default. The right of either party to terminate this Agreement as
hereinabove provided shall not be affected in any way by its waiver of, or
failure to take action with respect to any previous default.
13.3 In the event that one of the parties hereto shall go into liquidation, a
receiver or a trustee be appointed for the property or estate of that party and
said receiver or trustee is not removed within sixty (60) days, or the party
makes an assignment for the benefit of creditors (collectively, a "Bankruptcy
Event"), and whether any of the aforesaid Bankruptcy Events be the outcome of
the voluntary act of that party, or otherwise, the other party shall be
entitled to terminate this Agreement (or in the event ALLIANCE suffers such a
Bankruptcy Event, HMRI may effect its rights described in Section 13.5
forthwith by giving a written notice to the first party.
13.4 In the event that this Agreement is terminated in its entirety HMRI will:
a) deliver to ALLIANCE the Know-How and assign to ALLIANCE its rights in
said Know-How or Patents, if any, and any rights to ALLIANCE's trademarks,
excluding any Know-How or patents related to the manufacture of raw materials,
including, but not limited to, perfluorochemicals;
b) not use the Know-How as long as it has to be kept confidential
pursuant to Article 7 hereof, excluding any Know-How related to the manufacture
of raw materials, including, but not limited to, perfluorochemicals;
c) not infringe any of the Patents, excluding patents related to the
manufacture of raw materials, including, but not limited to,
perfluorochemicals;
d) grant to ALLIANCE a non-exclusive worldwide royalty free license to
any patents or Know-How owned or controlled by HMRI or its Affiliates which is
necessary to make, use, develop, manufacture, have manufactured, sell or
distribute Products intended for the Field of Use, excluding any Know-How or
patents related to the manufacture of raw materials, including, but not limited
to, perfluorochemicals;
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e) make all payments accrued under this Agreement prior to the effective
termination date;
f) transfer all regulatory filings and approvals related to Products to
ALLIANCE upon ALLIANCE's written request for same; and
g) transfer to ALLIANCE responsibility for and control of ongoing work
of HMRI, Affiliates and Third Parties in an expeditious and orderly manner with
the costs for such work assumed by ALLIANCE as of the date of notice.
13.5 In the event of a Bankruptcy Event or a material default described in
Section 13.2 by ALLIANCE (which default is not cured as provided therein), HMRI
may elect in lieu of terminating this Agreement to declare the license granted
pursuant to this Agreement to be irrevocable. From the date of receipt of
notice of such election, ALLIANCE shall have no further rights or obligations
under this Agreement, except that ALLIANCE may enforce any financial
obligations of HMRI, including those arising under Articles 4 and 5 herein
before or after such election; provided that if such election occurs prior to
commercial sales of Products, any additional reasonable costs incurred by HMRI
to commercialize the Products as a result of such election, shall be credited
against amounts payable by HMRI to ALLIANCE.
13.6 Upon termination of this Agreement in its entirety, ALLIANCE shall have
ninety (90) days to exercise an option to purchase all or any portion of the
inventory of Products owned by HMRI or its Affiliates upon such termination at
a price equal to HMRI's or its Affiliates' costs for such inventory. Such
option shall be exercised by ALLIANCE in writing. Within thirty (30) days of
such exercise, HMRI shall ship at ALLIANCE's cost and direction such inventory
to ALLIANCE. ALLIANCE shall have forty-five (45) days to determine whether the
inventory complies with the Specifications (as defined in the Supply
Agreement). If the inventory complies with the Specifications, ALLIANCE shall
pay for such inventory within forty-five (45) days of approval. If such
inventory does not comply with the Specifications, it shall be returned to HMRI
at its expense. Procedures for handling and determining whether Product
complies with the Specifications shall be as set forth in the Supply Agreement.
13.7 In the event that this Agreement is terminated by HMRI in one or more
countries (but not terminated in its entirety), HMRI will with respect to such
country:
a) deliver to ALLIANCE the Know-How and assign to ALLIANCE its rights in
said Know-How or Patents if any, excluding any Know-How or patents related to
the manufacture of raw materials, including, but not limited to,
perfluorochemicals;
b) not use the Know-How as long as it has to be kept confidential
pursuant to Article 7 hereof in such country, excluding any Know-How related to
the manufacture of raw materials, including, but not limited to,
perfluorochemicals;
c) not infringe any of the Patents in such country, excluding patents
related to the manufacture of raw materials, including but not limited to,
perfluorochemicals;
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d) grant to ALLIANCE a non-exclusive, royalty free license to any
patents or Know-How owned or controlled by HMRI or its Affiliates which is
necessary to make, use, develop, manufacture, have manufactured, sell or
distribute Products intended for the Field of Use, excluding any Know-How or
patents related to the manufacture of raw materials, including, but not limited
to, perfluorochemicals;
e) make all payments accrued under this Agreement with respect to such
country prior to the effective termination date;
f) transfer all regulatory filings and approvals related to Products in
such country to ALLIANCE upon ALLIANCE's written request for same;
g) transfer to ALLIANCE responsibility for and control of ongoing work
of HMRI, Affiliates and Third Parties in an expeditious and orderly manner with
the cost of such work assumed by ALLIANCE as of the date of notice; and
h) sell to ALLIANCE, at any time within ninety (90) days of such
termination, at ALLIANCE's election, all or any portion of the inventory of
Products owned by HMRI or its Affiliates which are intended for sale in such
country at a price equal to HMRI's or its Affiliate's cost for such inventory.
Such election shall be made by ALLIANCE in writing and within thirty (30) days
of such election, HMRI shall ship at ALLIANCE's cost and direction such
inventory to ALLIANCE. ALLIANCE shall have forty-five (45) days to determine
whether the inventory complies with the Specifications. If the inventory
complies with the Specifications, ALLIANCE shall pay for such inventory within
forty-five (45) days of approval. If such inventory does not comply with the
Specifications, it shall be returned to HMRI at its expense.
ARTICLE 14 INDEMNITY
14.1 HMRI agrees to defend, indemnify and hold harmless ALLIANCE and its
officers, directors, agents and employees (collectively, the "Indemnified
Parties"), from and against any and all liability, loss, damage, action, claim
or expense suffered or incurred by the Indemnified Parties (including
reasonable attorney's fees, whether incurred by reason of actions or claims
between the parties or by Third Parties) which results from or arises out of
the development, use, manufacture, promotion, sale or other disposition of
Products and all technology licensed under this Agreement, including without
limitation, any product liability claim.
14.2 HMRI's indemnification under Section 14.1 shall not apply to any
liability, loss, damage, action, claim or expense to the extent that it is
directly attributable to the negligent activities, reckless misconduct or
intentional misconduct of ALLIANCE.
ARTICLE 15 - INTERPRETATION
15.1 The construction, validity and performance of this Agreement shall be
governed in all respects by the laws of the State of New York, without giving
effect to principles of conflict of laws.
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ARTICLE 16 - EXPORTS
16.1 The parties acknowledge that the export of technical data, materials, or
products is subject to the exporting party receiving any necessary export
licenses and that the parties cannot be responsible for any delays attributable
to export controls which are beyond the reasonable control of the exporting
party. ALLIANCE and HMRI agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples, or equipment received or generated under this Agreement in violation
of any statutes or governmental regulations which may be applicable, including,
but not limited to, the Export Administration Act of 1979, as amended, its
rules and regulations, including, but not limited to, Part 779 of the United
States Export Control Regulations, published by the United States Department of
Commerce, and other applicable export laws. ALLIANCE and HMRI agree to use
reasonable efforts to obtain similar covenants from their licensees,
sublicensees, and contractors with respect to the subject matter of this
article.
ARTICLE 17 - FORCE MAJEURE
17.1 No failure or omission by the parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement or
create any liability if the same shall arise from any cause or causes beyond
the reasonable control of the parties, including but not limited to the
following which, for the purposes of this Agreement, shall be regarded as
beyond the control of the party in question: acts of God, acts or omissions of
any government or any rules, regulations or orders of any governmental
authority or any officer, department, agency or instrument thereof; fire,
storm, flood, earthquake, accident, acts of the public enemy, war, rebellion,
insurrection, riot, invasion, strikes, or lockouts.
ARTICLE 18 - ARBITRATION
18.1 In case any dispute arises out of this Agreement, the parties will
endeavor to settle such dispute amicably between themselves. In the event that
the parties fail to agree, any such dispute shall be finally settled by
arbitration administered by and according to the Rules of Commercial
Arbitration of the American Arbitration Association. The arbitration shall
take place in New York, New York. The arbitration panel shall consist of one
(1) arbitrator chosen by mutual consent of the parties and the decision shall
be final and binding on the parties and their legal successors. Should the
parties fail to agree on the selection on an arbitrator, each party shall
appoint one (1) arbitrator and the two arbitrators shall agree upon a neutral
third arbitrator to serve as the sole arbitrator. The arbitrator may, at his
discretion, provide for discovery by the parties during a period not to exceed
four (4) months from the date of filing of the notice of arbitration and the
arbitrator shall render his decision within thirty (30) days of the completion
of the hearing and may, at his discretion award costs and expenses. The
arbitrated award shall be final and binding on the parties. Judgment on the
award may be entered in any court of competent jurisdiction.
It is not intended by the parties that disputes arising out of issues
before the Steering Committee or PMT shall be subject to arbitration. The time
period for cure recited in Section 13.2 shall be suspended upon institution of
arbitration until completion of such arbitration.
24
<PAGE>
ARTICLE 19 - NOTICES
19.1 Any notice required or permitted to be given under this Agreement shall be
mailed by registered or certified air mail, return receipt requested, postage
prepaid, addressed to the party to be notified at its address stated below, or
at such other address as may hereafter be furnished in writing to the notifying
party or by telefax (with the telefax followed by sending the same by
registered or certified mail) to the numbers set forth below or to such changed
telefax numbers as may thereafter be furnished.
If to ALLIANCE:
President
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, CA 92121
Telefax No.: (6l9) 558-5161
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004
Attention: Melvin Epstein, Esq.
Telefax No.: (212) 806-6006
If to HMRI:
Hoechst Marion Roussel, Inc.
10236 Marion Park Drive
Kansas City, MO 64137-1406
Attn: General Counsel
Telefax No: (816) 966-3805
with a copy to:
Hoechst Marion Roussel, Inc.
2110 East Galbraith Road
Cincinnati, OH 45215
Attn: General Patent Counsel
Telefax No: (513) 948-7961
Any such notice shall be deemed to have been received when it has been
delivered or received by telefax (with the telefax followed by sending the same
by registered or certified mail).
25
<PAGE>
ARTICLE 20 - WAIVER
20.1 The failure on the part of ALLIANCE or HMRI to exercise or enforce any
rights conferred upon it hereunder shall not be deemed to be a waiver of any
such rights nor operate to bar the exercise or enforcement thereof at any time
or times thereafter.
ARTICLE 21 - LEGALITY
21.1 In the event that any term of this Agreement shall contravene the laws
and/or regulations in any country of the Territory, the parties shall
immediately meet in order to agree on any necessary amendments, provided that
any clauses thereby rendered unenforceable shall in no way affect the validity
of this Agreement.
ARTICLE 22 - ASSIGNMENT
22.1 This Agreement, and all rights and obligations hereunder, are personal as
between the parties and shall not be assigned in whole or in part by any of the
parties to any other person or company without the prior written consent of the
other party, except with respect to either party, in the event of a merger,
acquisition or transfer of substantially all of its assets.
ARTICLE 23 - TITLES
23.1 It is agreed that the headings appearing at the beginning of the numbered
Articles hereof have been inserted for convenience only and do not constitute
any part of this Agreement.
ARTICLE 24 - PUBLICITY
24.1 Neither party shall originate any publicity, news release or public
announcements, written or oral, whether to the public or press, stockholders or
otherwise, relating to this Agreement, including its existence, the subject
matter to which it relates, performance under it or any of its terms, to any
amendment hereto or performances hereunder without the prior written consent of
the other party, provided however, that this Section 24.1 shall not be
applicable where either party hereto is legally required to make public a
summary or details of this Agreement, in any country. If a party believes that
it has a legal requirement to make public the existence of or any details of or
any events related in any way to this Agreement, it shall provide a copy of any
such announcement to the other party for review and approval at least three (3)
business days prior to making said announcement.
ARTICLE 25 - UNENFORCEABLE PROVISIONS
25.1 Any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
26
<PAGE>
ARTICLE 26 - OTHERS
26.1 As used in this Agreement, singular includes the plural and plural
includes the singular, wherever so required by fact or context.
ARTICLE 27 - EXECUTION
27.1 This Agreement may be executed in counterparts each of which shall for all
purposes be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or representatives as of
the day and year first above written.
ALLIANCE PHARMACEUTICAL CORP.
WITNESS_________________________ By:___________________________
Duane J. Roth
Title: President
Date: FEBRUARY 28, 1996
_________________________
HOECHST MARION ROUSSEL, INC.
WITNESS_________________________ By:___________________________
Title:________________________
Date:_________________________
27
<PAGE>
APPENDIX A
TO
LICENSE AGREEMENT
Issued Patents
--------------
**
Pending Applications
--------------------
**
<PAGE>
Appendix B
to
License Agreement
Plan for Development in the United States and Canada
**
<PAGE>
Appendix C
to
License Agreement
Plan for Development in the Territory,
except for the United States and Canada
**
<PAGE>
SCHEDULE 2.5
TO
LICENSE AGREEMENT
**
<PAGE>
SCHEDULE 8.3
TO
LICENSE AGREEMENT
**
<PAGE>
SCHEDULE 10.1
TO
LICENSE AGREEMENT
LiquiVent Trademarks
--------------------
**
<PAGE>
SUPPLY AND TECHNOLOGY TRANSFER AGREEMENT
BETWEEN
HOECHST MARION ROUSSEL, INC.
AND
ALLIANCE PHARMACEUTICAL CORP.
dated as of
February 28, 1996
** INDICATES CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MATERIAL MANUFACTURE; SUPPLY; TERMS. . . . . . . . . . . . . . . . . . . . . 3
2.1 Supply of Material . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Forecasts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Rejected Goods/Shortages . . . . . . . . . . . . . . . . . . . . . 6
2.6 Back-Up Inventory. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Failure to Supply; Capacity Allocation . . . . . . . . . . . . . . 7
2.8 Capacity Expansion . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Manufacturing Changes. . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Price, Price Adjustments and Payment . . . . . . . . . . . . . . . 8
2.11 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Temporary Idling . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.13 Packaging Information. . . . . . . . . . . . . . . . . . . . . . . 10
2.14 Supply of Material to Affiliates . . . . . . . . . . . . . . . . . 10
2.15 Exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Early Termination. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Consequences of Termination & Survival . . . . . . . . . . . . . . 12
ARTICLE IV
CERTIFICATES AND ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Certificates of Analysis . . . . . . . . . . . . . . . . . . . . . 12
4.2 Certificate of Manufacturing Compliance. . . . . . . . . . . . . . 12
4.3 Supplier Certification . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Access to Facilities . . . . . . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
ARTICLE V
COMPLAINTS AND MATERIAL RECALLS. . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Material Recalls . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Conformity with the Specifications . . . . . . . . . . . . . . . . 13
6.2 Conformity with CGMP . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Compliance with the Federal Food, Drug and Cosmetic Act. . . . . . 14
ARTICLE VII
CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Nondisclosure Obligations. . . . . . . . . . . . . . . . . . . . . 14
7.2 Disclosure of Confidential Information . . . . . . . . . . . . . . 15
7.3 Review of Publications . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Delay of Publications. . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Approval of Publications . . . . . . . . . . . . . . . . . . . . . 15
7.6 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Contractual Publication Rights of Third Parties. . . . . . . . . . 16
ARTICLE VIII
INDEMNIFICATION AND INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 By Alliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 By HMRI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3 Conditions of Indemnification. . . . . . . . . . . . . . . . . . . 16
8.4 Product Liability Insurance. . . . . . . . . . . . . . . . . . . . 17
8.5 Manufacturer's Insurance.. . . . . . . . . . . . . . . . . . . . . 17
8.6 Product Liability Claims.. . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IX
MANUFACTURE OF MATERIAL BY HMRI. . . . . . . . . . . . . . . . . . . . . . . 18
9.1 Transfer of Technology . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Transfer of Supply Relationships . . . . . . . . . . . . . . . . . 18
9.3 Right of First Refusal to Purchase . . . . . . . . . . . . . . . . 18
9.4 Agreement to Purchase Raw Materials. . . . . . . . . . . . . . . . 19
ARTICLE X
ALTERNATIVE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . 19
ii
<PAGE>
ARTICLE XI
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.2 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . 20
11.3 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.4 Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . 20
11.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.8 Headings, Interpretation . . . . . . . . . . . . . . . . . . . . . 21
11.9 Attachments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.10 . . . . . . . . . . . . . . . . . .Independent Parties. . . . . . 21
11.11 . . . . . . . . . . . . . . . . . . . . . . .Execution. . . . . . 21
11.12 . . . . . . . . . . . . . . . . . . . . .Governing Law. . . . . . 21
EXHIBIT 1
SHORT TERM (12 MONTH) FORECAST . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 9.1
TRANSFER OF TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
iii
<PAGE>
SUPPLY AND TECHNOLOGY TRANSFER AGREEMENT
SUPPLY AND TECHNOLOGY TRANSFER AGREEMENT dated as of February 28,
1996, by and between HOECHST MARION ROUSSEL, INC., a Delaware corporation
("HMRI"), and ALLIANCE PHARMACEUTICAL CORP., a New York corporation
("Alliance"). The effective date of this Agreement shall be the date of the
Closing as such term is defined in the Stock Purchase Agreement of even date
herewith between HMRI and ALLIANCE (hereinafter referred to as the "Effective
Date").
WHEREAS, Alliance and HMRI have entered into a License Agreement (the
"License Agreement") of even date herewith, pursuant to which Alliance has
granted rights and licenses to HMRI under certain Patents and Know-How (both as
defined in the License Agreement) necessary or useful to use, develop,
manufacture, market, sell and distribute Material (as defined herein);
WHEREAS, Alliance desires to sell to HMRI and HMRI desires to purchase
from Alliance, Material for clinical and regulatory work and commercial sale by
HMRI in the Territory (as defined in the License Agreement) under the terms and
conditions herein;
WHEREAS, HMRI intends to manufacture Material, but currently does not
have the capability or requisite regulatory approvals to manufacture Material;
and
WHEREAS, the parties desire further to provide for the transfer by
Alliance to HMRI of batch records, specifications, analytical methods and other
manufacturing information and Know-How necessary or useful for the manufacture
of Material and for other assistance by Alliance in setting up manufacturing
operations by HMRI to manufacture Material.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Affiliate" shall mean any entity which, directly or indirectly,
controls, is controlled by, or is under common control with another entity. An
entity shall be deemed to be in control of another entity if the former owns
directly or indirectly more than 50% of the outstanding voting equity or owns
directly or indirectly an interest in more than 50% of the assets of the latter.
1
<PAGE>
1.2 "Agreement" means this Supply and Technology Transfer Agreement,
including all attachments to this Agreement.
1.3 "Contract Year" means, for the first Contract Year, the period
commencing on the date of the first long term forecast for quantities of
Material under Section 2.2(a) hereof and ending on the last day of that calendar
year, and for subsequent Contract Years, the successive calendar years
thereafter.
1.4 "Cost Accounting System" means an accounting system which tracks
and records the Manufacturing Costs and calculates the cost per Unit of
Material.
1.5 "CGMP" means Current Good Manufacturing Practices as promulgated
under the United States Federal Food Drug and Cosmetic Act at 21 CFR (chapters
210 and 211) and, when appropriate, any corresponding regulations in any other
country in the Territory as the same may be amended or re-enacted from time to
time. CGMP documentation for use in the manufacture and marketing of Material
will be developed by the parties in accordance with the License Agreement.
1.6 "FDA" means the United States Food and Drug Administration, and,
when appropriate, any corresponding regulatory agency in any other country in
the Territory.
1.7 "IND" shall mean an Investigational New Drug Application filed
pursuant to the requirements of the FDA as more fully defined in 21 C.F.R.
Section 312 as well as equivalent submissions to the appropriate health
authorities in other countries in the Territory.
1.8 "Manufacturing Costs" means **
1.9 "Manufacturing Variances" means the result obtained when actual
Manufacturing Costs are compared to the budgeted and/or Standard Manufacturing
Costs resulting in differences that reconcile the Standard Manufacturing Costs
to actual Manufacturing Costs.
1.10 "Material" shall mean liquids, including in nebulized or aerosol
form, which perform Bronchoalveolar Lavage or Liquid Ventilation or provide
Therapeutic Effects (all
2
<PAGE>
as defined in the License Agreement), together with the infusion set necessary
for the intratracheal administration of such liquids.
1.11 "NDA" shall mean a New Drug Application and all supplements filed
pursuant to the requirements of the FDA, including all documents, data and other
information concerning Material which are necessary for or included in, FDA
approval to market Material, as more fully defined in 21 C.F.R.
Section Section 314.35 et seq., as well as any other submissions required by the
FDA to market Material and equivalent submissions to the appropriate health
authorities in other countries in the Territory.
1.12 "Specifications" means the written specifications for Material
which shall be agreed upon by the parties hereto, provided that such
specifications for Material intended for Clinical Work (as defined in the
License Agreement) shall at all times conform with the approval received with
the IND and for Material intended for commercial sale shall at all times conform
with the approval received with the NDA and shall in all other respects comply
with the relevant regulations of the FDA or other regulatory agency in the
country in which the Clinical Work is being performed or Material is being sold,
as the case may be. Such specifications may be amended from time to time by the
written agreement of the parties. Copies of such specifications shall be
maintained by both parties, and shall become a part of this Agreement as if
incorporated herein.
1.13 "Standard Manufacturing Costs" means the accumulation of budgeted
Manufacturing Costs to derive an average expected cost per Unit manufactured.
1.14 "Third Party" shall mean any person, corporation or
unincorporated body other than HMRI and Alliance and their Affiliates.
1.15 "Unit" means an individual package of Material intended for use
with an individual person.
All other capitalized terms used and not defined herein shall have the
meaning given them in the License Agreement.
ARTICLE II
MATERIAL MANUFACTURE; SUPPLY; TERMS
2.1 SUPPLY OF MATERIAL.
(a) CLINICAL SUPPLY. Subject to the terms and conditions of
this Agreement, and at HMRI's request in accordance with the terms hereof,
Alliance shall manufacture, as a sole or joint source, and supply Material in
finished packaged form to HMRI
3
<PAGE>
for all Clinical Work in the Territory. Alliance shall use commercially
reasonable efforts to meet HMRI's demand for Material ordered in accordance with
the terms hereof. Alliance shall provide Material in packaged form as
reasonably requested by HMRI and as agreed upon by Alliance.
(b) COMMERCIAL SALES. Subject to the terms and conditions of
this Agreement, and at HMRI's request in accordance with the terms hereof,
Alliance shall manufacture, as a sole or joint source, and supply to HMRI
Material in finished packaged form for commercial sale up to the capacity of
Alliance's existing manufacturing facility in Otisville, New York (the
"Otisville Facility"). Alliance shall use commercially reasonable efforts to
meet HMRI's demand for Material ordered in accordance with the terms hereof.
Alliance shall provide Material in packaged form as reasonably requested by HMRI
and as agreed upon by Alliance. Except as provided in Section 2.2, Alliance's
commitment to supply Material to HMRI under the terms of this Agreement shall
not imply any long-term commitment by HMRI to purchase Material from Alliance.
(c) SUBLICENSE TO MANUFACTURE. Pursuant to its right under the
License Agreement to grant sublicenses to the Patents and Know-How, HMRI hereby
grants Alliance the non-exclusive right to use the Patents and Know-How in the
Field of Use (as defined in the License Agreement) for the purposes of this
Agreement and the License Agreement. Alliance hereby undertakes not to use or
exploit the Patents or the Know-How (or any part thereof) in the Field of Use
for any purpose other than as set forth in this Agreement and the License
Agreement. The rights and licenses granted herein may not be sublicensed by
Alliance except upon the prior written consent of HMRI. Except as herein
provided, no license or other right is granted by HMRI to Alliance or any other
party by implication or otherwise with respect to any proprietary right of HMRI
by virtue of this Agreement.
2.2 FORECASTS.
(a) LONG-RANGE FORECASTS. Within 90 days from the execution of
this Agreement, and at least 90 days prior to the beginning of each calendar
year thereafter commencing with the second Contract Year, HMRI shall furnish
Alliance with a rolling forecast of the quantities of Material for Clinical Work
and commercial sale that HMRI intends to order during the following three year
period commencing with that calendar year. Such forecasts shall represent most
current estimates for planning purposes, not purchase commitments.
(b) SHORT TERM FORECASTS. At the time that HMRI first
reasonably expects that it will require Material for Clinical Work or commercial
sale within the ensuing 12 month period, and thereafter, at least 30 days prior
to the first day of each succeeding calendar quarter, HMRI shall furnish
Alliance with a rolling forecast of the quantities of Material that HMRI intends
to order by month, for the first six months, and by quarter, for the last six
4
<PAGE>
months, during the 12 month period commencing with that calendar quarter. Such
forecasts shall constitute binding commitments of HMRI to purchase the
percentages of Material set forth below. An example of form for the short-term
forecast is set out in Exhibit 1 (forecasts 1 and 2). The binding commitment of
HMRI to purchase the forecasted quantities for the first three months of the
forecast shall be further evidenced by purchase orders to be issued to Alliance
in accordance with Section 2.3. HMRI shall be required to purchase that
percentage of the quantity of Material specified in the forecast for successive
quarters as follows:
Percentage of Material
Period indicated in Forecast that
of the Forecast HMRI is Required to Purchase
----------------- ----------------------------
**
2.3 ORDERS. HMRI shall place each purchase order with Alliance for
Material to be delivered hereunder at least 90 days prior to the delivery date
specified in each respective order. Such orders shall be in full lots and shall
specify for each three month period an aggregate quantity of Material which is
at least as great as the amount of Material required to be purchased by HMRI
pursuant to Section 2.2. Alliance shall confirm in writing each such purchase
order within ten business days of receipt thereof. Alliance shall deliver
against each such order in accordance with Section 2.4. HMRI shall be obligated
to purchase all such Material ordered and delivered by the delivery date
specified in HMRI's purchase order, provided that such Material meet the
Specifications. Alliance shall use reasonable efforts to meet any order for a
quantity of Material in excess of the amounts forecasted under Section 2.2(b)
for such period. Any purchase orders, purchase order releases, confirmations,
acceptances, advices and similar documents submitted by either party in
conducting the activities contemplated under this Agreement are for
administration purposes only and shall not add to or modify the terms of the
Agreement. To the extent of any conflict or inconsistency between this
Agreement and any such document, the terms and conditions of this Agreement
shall control as to a particular order unless otherwise agreed to in writing by
the parties.
2.4 DELIVERY. Delivery terms shall be F.O.B. the Otisville Facility
or such other facility mutually agreed to by the parties. Alliance shall ship
Material on a carrier or carriers specified by HMRI in accordance with HMRI's
purchase order form or as otherwise directed by HMRI in writing. Title to any
Material purchased by HMRI shall pass to HMRI upon the earlier of (i) a common
carrier accepting possession or control of such Material or (ii) the passage of
such Material from the loading dock of Alliance's facility to HMRI or any
employee, agent or contractor thereof.
5
<PAGE>
2.5 REJECTED GOODS/SHORTAGES.
(a) HMRI shall notify Alliance in writing of any claim relating
to Material that fail to meet the Specifications, arising from defective
manufacture, storage or handling of such Material by Alliance prior to shipment
or any shortage in quantity of any shipment of Material within 45 days of
receipt of such Material. In the event of such rejection or shortage, Alliance
shall replace the rejected Material or make up the shortage within ten business
days if replacement stock is available, and in any case as soon as reasonably
possible after receiving such notice, at no additional cost to HMRI, and
Alliance shall make arrangements with HMRI for the return of any rejected
Material, such return shipping charges to be paid by Alliance for Material
determined after inspection and testing by Alliance to fail to meet the
Specifications. In the event that only a limited supply of Material is
available at the time of such rejection or shortage, then Alliance shall ship to
HMRI such quantities of Material as are available and HMRI will be promptly
reimbursed or credited against future orders, at HMRI's option, for amounts paid
for the remaining quantity of rejected Material.
(b) In the event of a disagreement regarding the Material which
fail to meet the Specifications which HMRI and Alliance are unable to resolve, a
sample of such Material shall be submitted by Alliance to an independent
laboratory reasonably acceptable to both parties for testing against the
Specifications and the test results obtained by such laboratory shall be final
and controlling. The fees and expenses of such laboratory testing shall be
borne entirely by the party against whom such laboratory's findings are made.
In the event the test results indicate that the Material in question do not
conform to the Specifications, Alliance shall replace such Material at no
additional cost to HMRI within seven business days after receipt of such results
if replacement stock is available, and in any case as soon as reasonably
possible after receipt of such results. In the event the test results indicate
that the Material in question does conform to the Specifications, HMRI shall pay
all additional shipping and transportation costs incurred as a result of the
disagreement.
2.6 BACK-UP INVENTORY. Subject to terms of this Agreement, Alliance
shall maintain an adequate back-up inventory of Material to meet HMRI's purchase
orders, to replace rejected Material and other similar situations. Such
inventory level shall be mutually agreed upon by the parties. Alliance will
notify HMRI promptly if such back-up inventory falls below such agreed upon
level and include the reason for the lower level. The parties will discuss and
agree upon a course of action to solve the problem, provided however, that such
agreement shall act in no way as a waiver of HMRI's rights or remedies herein if
Alliance fails to deliver Material under the provisions of this Agreement.
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2.7 FAILURE TO SUPPLY; CAPACITY ALLOCATION.
(a) In the event that Alliance, upon receiving a forecast under
Section 2.2 or a firm order under Section 2.3, is, or anticipates that it will
be, unable to meet such forecast or firm order, either in whole or in part, and
whether due to circumstances arising under Section 11.3 or otherwise, Alliance
shall give written notice of such inability to HMRI within ten days of receipt
of such forecast or firm order. If such inability is partial, Alliance shall
deliver against firm orders such quantities of Material as are available.
(b) Alliance and HMRI shall meet within 15 days of such written
notice to consider and, if appropriate, pursue alternative arrangements for
meeting HMRI's requirements for Material. Such arrangements may include
transferring equipment and/or technology necessary for the production of
Material to an alternative site or to a Third Party, manufacturing Material at
HMRI's own facilities, or, if HMRI is already manufacturing quantities of
Material, increasing HMRI's production of Material, PROVIDED that any such
alternative pursued shall be subject to all required regulatory approvals. Any
alternative arrangements entered into pursuant to this Section 2.7 shall act in
no way as a waiver of any other rights or remedies which HMRI may have under
this Agreement or otherwise.
(c) In the event that Alliance's inability to meet firm orders or
forecasts is due to a shortage of production capacity at Alliance's facilities,
in addition to the requirements on Section 2.7(a) and Section 2.7(b) above,
Alliance shall promptly notify HMRI of such shortage of production capacity,
and, if possible, the date such shortage of production capacity is expected to
end. In such event, Alliance shall allocate its available production capacity
to the production of Material in such proportion as the production capacity
actually utilized to meet orders for Material over the previous 12 month period
bears to Alliance's total production capacity over that same period.
(d) Alliance shall notify HMRI as soon as possible of the date
upon which such shortage of production capacity will cease. Within 30 days of
such notification, HMRI shall resume obtaining its requirements for Material in
such proportions as HMRI ordered from Alliance prior to the shortage of
production to the extent such resumption is consistent with the contractual
arrangements entered into as provided in Section 2.7(b).
2.8 Capacity Expansion.**
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2.9 MANUFACTURING CHANGES. Alliance shall not change the specified raw
materials, analytical methods, components, equipment, packaging materials,
suppliers or processes used in the manufacture of Material without the prior
written consent of HWRI, which consent shall not be unreasonably withheld. Such
changes shall be reflected in related documentation and must receive all
required regulatory approvals.
2.10 PRICE, PRICE ADJUSTMENTS AND PAYMENT.
(a) Until such time as Alliance shall have converted to a Cost
Accounting System, pricing for Material manufactured by Alliance and required to
be purchased by HMRI for Clinical Work shall be calculated using the research
project costing method set forth in Section 4.4 of the License Agreement.
Alliance shall establish a Cost Accounting System as soon as reasonably
possible, but in no event later than such time as is required to price the first
quantities of Material manufactured by Alliance and required to be purchased by
HMRI for commercial sales on a per Unit basis. As soon as possible after
Alliance establishes a Cost Accounting System, pricing for Material manufactured
by Alliance and required to be purchased by HMRI for Clinical Work or for
commercial sales shall be on a per Unit basis, pursuant to which HMRI shall pay
a price equal to the Standard Manufacturing Costs of a Unit of Material for each
Unit purchased, adjusted quarterly for Manufacturing Variances as set forth in
Section 2.10(d) below.
(b) Alliance shall determine its Standard Manufacturing Costs
per Unit for the first Contract Year and submit such data to HMRI 90 days prior
to the beginning of such Contract Year. HMRI will review the Standard
Manufacturing Costs data as well as the derived standard costs with Alliance for
acceptance by HMRI within that 90 day period. During the Contract Year,
Alliance shall invoice HMRI for each shipment of Material at a price calculated
by multiplying the Units shipped by the agreed upon Standard Manufacturing Costs
for a Unit of Material. HMRI shall pay such invoice within 45 days of the
date of the invoice and in U.S. dollars. Alliance's estimate of the per Unit
price for Material for commercial sale in packaged and labelled form based on a
** and using information currently available to Alliance is **. Such estimate
is for planning purposes only and is not binding on Alliance or HMRI.
(c) Upon the third anniversary of the first commercial sale of
Material, in addition to the price specified in Section 2.10(b) above,
(i) if HMRI or an Affiliate has used, and is continuing to
use, its reasonable best efforts to establish a facility to manufacture Material
as set forth in Section 9.1, HMRI shall pay an additional price per Unit for
Material manufactured from that time forward by Alliance and required to be
purchased by HMRI for commercial sales equal to ** of the Manufacturing Costs
per Unit; and
(ii) if HMRI or an Affiliate has not used, or is not
continuing to use, its reasonable best efforts to establish a facility to
manufacture Material as set forth in Section 9.1, instead of the additional
price specified in Section 2.10(b)(i), HMRI shall pay an additional price per
Unit for Material manufactured from that time forward by Alliance and required
to be purchased by HMRI for commercial sales equal to ** of the Manufacturing
Costs per Unit.
(d) Within 30 days following the end of each calendar quarter,
Alliance shall prepare and deliver to HMRI a report listing the quantity of
Units purchased by HMRI and detailing and analyzing specific quarterly and year-
to-date Manufacturing Variances in the actual Manufacturing Costs, including
by way of example and not of limitation, variances in volume/capacity, spending,
purchase price for materials, yield and inventory, from the Standard
Manufacturing Costs for a Unit, with written explanation of the deviations
from the Standard Manufacturing Costs. Alliance and HMRI shall agree upon a
report format that allows HMRI adequate review of the data and calculations
detailing such Manufacture Variances. If such report shows that a refund is
due to HMRI for the prior calendar quarter, then the report shall be
accompanied or followed within 45 days by such refund; if such report shows
that an additional payment is owed to Alliance hereunder, then the report shall
be accompanied by an invoice for such additional amount and HMRI shall pay such
additional amount within 45 days. For Contract Years after the first Contract
Year, Alliance and HMRI will annually review the Standard Manufacturing Costs
60 days prior to the next Contract Year. The agreed upon Standard Manufacturing
Costs shall become the basis for determining the expected pricing for Material
during the next Contract Year.
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2.11 AUDITS. HMRI shall have the right to nominate an independent
certified public accountant reasonably acceptable to and approved by Alliance or
HMRI's own internal accountant who shall have access, during regular business
hours and upon reasonable notice, to audit those records and supporting
documentation of Alliance, to the extent necessary to verify the Manufacturing
Costs, but this right may not be exercised more than once in any calendar year,
and once a calendar year is audited it may not be reaudited, and said accountant
shall disclose to HMRI only information relating solely to the accuracy and
nature of the Manufacturing Costs and the payments made according to this
Agreement. Alliance shall maintain such records and supporting documentation
for a period of three years from the date HMRI receives the invoice which is
based upon such records and supporting documentation. If, pursuant to such
review, such accountant determines the actual Manufacturing Costs for a
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particular year are less than the Standard Manufacturing Costs, then in addition
to paying the amounts as set forth in Section 2.10(d) above, Alliance shall pay
the costs of such investigation. For any refund owed by Alliance to HMRI under
this Section 2.11 greater than two percent, Alliance shall pay, in addition to
the amount due, interest on such amount from the time the amount was due at the
then current prime rate as quoted in the Eastern edition of THE WALL STREET
JOURNAL.
2.12 TEMPORARY IDLING. **
2.13 PACKAGING INFORMATION. All packaging and labelling information
and designs, including without limitation all art work and pharmacological
information, usage instructions and warnings to be applied to Material shall be
developed by the PMT (as defined in the License Agreement), subject to all
regulatory approvals, and provided to Alliance a sufficient period of time in
advance of any requirements that Material be delivered in packaged form to
enable Alliance to supply the necessary materials and meet such delivery
requirements.
2.14 SUPPLY OF MATERIAL TO AFFILIATES. HMRI shall have the right to
designate any of its Affiliates who are sublicensees under the License Agreement
in any country of the Territory as a direct purchaser (a "Direct Purchaser") of
Material under this Agreement. Alliance shall manufacture, sell and deliver,
and such Direct Purchaser shall purchase, Material for the same price and with
such other rights, obligations and conditions under this Agreement to which HMRI
is entitled, or by which HMRI is bound, as HMRI deems necessary or appropriate
to enable such Direct Purchaser to perform Clinical Work and to market, sell and
distribute Material, PROVIDED, that HMRI shall remain responsible to Alliance
for all obligations of HMRI and such Direct Purchasers.
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2.15 EXPORTS. The parties acknowledge that the export of technical
data, materials, or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of the exporting party. Alliance and HMRI agree not to export or re-export,
directly or indirectly, any information, technical data, the direct product of
such data, samples, or equipment received or generated under this Agreement in
violation of any statutes or governmental regulations which may be applicable,
including, but not limited to, the Export Administration Act of 1979, as
amended, its rules and regulations, including, but not limited to, Part 779 of
the United States Export Control Regulations, published by the United States
Department of Commerce, and other applicable export laws. Alliance and HMRI
agree to use reasonable best efforts to obtain similar covenants from their
licensees, sublicensees, and contractors with respect to the subject matter of
this Section.
2.16 TAXES. Subject to the provisions of this Section 2.13, HMRI or
its Affiliates, as the case may be, shall reimburse Alliance for all tariffs,
duties and excise, sales or use, value added or other taxes or levies
(collectively, "Taxes") that may be paid by Alliance with respect to the
manufacture and sale to HMRI or its Affiliates, as the case may be, of Material.
Notwithstanding the foregoing, HMRI shall have no reimbursement obligations
under this Section 2.13 to the extent that (i) such Taxes are based on
Alliance's net income or (ii) such Taxes are recoverable or offset by Alliance,
in whole or in part, as a credit, rebate, deduction or otherwise.
ARTICLE III
TERM AND TERMINATION
3.1 TERM. **
3.2 EARLY TERMINATION.
(a) This Agreement shall terminate upon the early termination of
the License Agreement pursuant to Section 13.1 or 13.3 of the License Agreement
or Section 13.2 of the License Agreement upon the failure of HMRI to cure a
default thereunder.
(b) This Agreement may be terminated by either party upon 90
days written notice to the other party if any provision hereof is materially
breached, unless such breach is corrected or reasonable efforts are being made
to correct such breach within the 90-day notice period.
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3.3 CONSEQUENCES OF TERMINATION & SURVIVAL. Termination of this
Agreement shall not relieve either party of its obligations incurred prior to
termination. The obligations under Articles 5, Complaints and Product Recalls;
6, Warranties; 7, Nondisclosure and Confidentiality; and 8, Indemnification and
Insurance, shall survive expiration or termination of this Agreement or of any
extensions thereof.
ARTICLE IV
CERTIFICATES AND ACCESS
4.1 CERTIFICATES OF ANALYSIS. Alliance shall perform, or cause to be
performed, sample tests on each lot of Material purchased pursuant to this
Agreement before delivery to HMRI. Each test report shall set forth the items
tested, specifications and test results in a certificate of analysis, containing
the types of information which shall have been approved by mutual agreement of
the parties, for each lot delivered. Alliance shall send, or cause to be sent,
such certificates to HMRI prior to delivery of each lot.
4.2 CERTIFICATE OF MANUFACTURING COMPLIANCE. Alliance shall provide,
or cause to be provided, for Material purchased a certificate of manufacturing
compliance, containing the types of information which shall have been approved
by mutual agreement of the parties, which will certify that the lots of Material
are manufactured in accordance with the Specifications, CGMP and in compliance
with the regulatory requirements described in the IND or NDA, as applicable.
Alliance shall advise HMRI before release of a lot of Material of any deviation
in the manufacture of such Material. In case of failure to meet Specifications
in the manufacture of a lot of Material, Alliance shall inform HMRI of the
rejected lot, and shall provide a written summary of the investigation of the
causes by Alliance's quality organization. Alliance shall advise HMRI
immediately if an authorized agent of the FDA or other governmental regulatory
agency visits any of Alliance's manufacturing facilities concerning Material.
Alliance shall furnish to HMRI the report by such agency of such visit, to the
extent that such report relates to Material, and the application of such report
to Material delivered to HMRI, if any, within ten business days of Alliance's
receipt of such report. The parties agree to review and cooperate fully on any
written response to the FDA or other governmental regulatory agency regarding
these matters.
4.3 SUPPLIER CERTIFICATION. Alliance shall make all reasonable
efforts, with HMRI's assistance, and to the extent possible under regulatory
requirements, to become certified under HMRI's Certification Program.
4.4 ACCESS TO FACILITIES. HMRI shall have the right to inspect and
visit from time to time upon at least 24 hours prior notice and during normal
business hours those portions of the manufacturing facilities of Alliance where
Material is being manufactured, stored or tested, to ascertain compliance with
this Agreement and with CGMP and any time Alliance
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proposes to change the process for manufacturing Material or any other change
and HMRI agrees to such change. If the FDA or other applicable governmental
regulatory agency asserts any notice to the effect that Alliance has failed to
comply with any law or regulation in connection with the manufacture, storage or
handling of Material, or if Alliance delivers nonconforming Material, then HMRI
shall have the right to inspect such portions of the manufacturing facilities of
Alliance that relate to the manufacture of Material upon reasonable notice and
during normal business hours as often as is reasonably necessary to ascertain
that Alliance is correcting such failure in an expedient manner.
ARTICLE V
COMPLAINTS AND MATERIAL RECALLS
5.1 COMPLAINTS. In the event that either Alliance or HMRI shall
receive any communications from third parties alleging adverse reactions due to
use of Material or other complaints involving Material, the parties shall
cooperate in addressing such complaints and shall take all appropriate
corrective actions.
5.2 MATERIAL RECALLS. In the event (a) any government authority
issues a request, directive or order that any Material be recalled, or (b) a
court of competent jurisdiction orders such a recall, or (c) Alliance or HMRI
shall reasonably determine that Material should be recalled, the parties shall
take all appropriate corrective actions, and shall cooperate in the
investigations surrounding the recall. In the event that such recall results
from any cause or event arising from defective manufacture, storage or handling
of such Material by Alliance, Alliance shall be responsible for all expenses of
the recall, and shall promptly replace such Material at no additional cost to
HMRI consistent with directions received from the appropriate governmental
authority. For the purposes of this Agreement, the expenses of recall shall
include, without limitation, the expenses of notification and destruction or
return of the recalled Material and all other costs incurred in connection with
such recall, but shall not include lost profits of either party.
ARTICLE VI
WARRANTIES
6.1 CONFORMITY WITH THE SPECIFICATIONS. Alliance warrants that all
Material sold and delivered pursuant to this Agreement will conform to the
Specifications.
6.2 CONFORMITY WITH CGMP. Alliance warrants that it shall
manufacture, store and ship all Material in compliance with all applicable
Federal, state and local laws and governmental regulations, including without
limitation, CGMP.
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6.3 COMPLIANCE WITH THE FEDERAL FOOD, DRUG AND COSMETIC ACT.
Alliance warrants that all Material delivered to HMRI pursuant to this Agreement
will, at the time of such delivery, not be adulterated within the meaning of the
Federal Food, Drug and Cosmetic Act, as amended (the "Act"), or within the
meaning of any applicable state or municipal law as the Act and such laws are
constituted and effective at the time of delivery, and will not be an article
which may not, under the provisions of the Act, be introduced into interstate
commerce. Notwithstanding anything to the contrary in this Section 6.3,
Alliance's warranty hereunder does not extend to any packaging or labeling
provided by, or at the direction of, HMRI.
ARTICLE VII
CONFIDENTIALITY
7.1 NONDISCLOSURE OBLIGATIONS. All confidential information
transmitted by either party to the other, including all confidential information
developed pursuant to this Agreement or the License Agreement, shall be
identified as confidential and the receiving party shall, while this Agreement
is in effect and for five years after termination thereof, make no use of this
information other than in furtherance of this Agreement or the License Agreement
and shall use the same efforts to keep secret and prevent the disclosure of such
information to parties other than its Affiliates, sublicensees, agents,
officers, employees and representatives authorized to receive such information
as it would for its own confidential information except for such confidential
information that,
(a) was known to the receiving party or its Affiliates or
sublicensees at the time of its disclosure and not previously subject to any
obligation of confidentiality at the time of its disclosure;
(b) was generally available to the public or was otherwise part
of the public domain at the time of its disclosure;
(c) became generally available to the public or became otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving party or its Affiliates or sublicensees in breach of
this Agreement or the License Agreement; or
(d) became known to the receiving party or its Affiliates or
sublicensees after its disclosure (i) from a source other than the disclosing
party (including from dependent development by the receiving party), (ii) other
than from a Third Party who had an obligation to the disclosing party not to
disclose such information to others, and (iii) other than under an obligation of
confidentiality; or
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(e) is disclosed by the receiving party pursuant to oral
questions, interrogatories, requests for information or documents, subpoena or
civil investigative demand issued by a court or governmental agency; PROVIDED,
that the receiving party notifies the other party immediately on receipt thereof
and the disclosing party furnishes only that portion of the confidential
information that counsel advises is legally required.
7.2 DISCLOSURE OF CONFIDENTIAL INFORMATION. Each receiving party or
its Affiliates or sublicensees may disclose any of the Know-How and confidential
information to the extent such disclosure is necessary to comply with applicable
laws or regulations, or to make and use Products (as defined in the License
Agreement) or Material in accordance with the terms of this Agreement and/or the
License Agreement.
7.3 REVIEW OF PUBLICATIONS. Each party recognizes the mutual
interest in obtaining valid patent protection. Consequently, either party and
its employees or consultants or any other Third Party wishing to make a
publication (including any oral disclosure made without obligation of
confidentiality) relating to work performed by such party as part of the work
performed under this Agreement or the License Agreement (the "Publishing Party")
shall transmit to the other party (the "Reviewing Party") a copy of the proposed
written publication at least 45 days prior to submission for publication, or an
abstract of such oral disclosure at least 15 days prior to submission of the
abstract of the oral disclosure, whichever is earlier. The Reviewing Party
shall have the right (a) to propose modifications to the publication for patent
reasons, (b) to request a delay in publication of presentation in order to
protect patentable information, or (c) to request that the information be
maintained as a trade secret and, in such case, the Publishing Party shall not
make such publication. Each party shall designate an individual to whom
proposed publications shall be directed and such individual shall be responsible
for obtaining the necessary internal approvals of the Reviewing Party.
7.4 DELAY OF PUBLICATIONS. If the Reviewing Party requests a delay
as prescribed in subsection 7.3(b) the Publishing Party shall delay submission
or presentation of the publication for a period of up to 90 days to enable
patent applications protecting each party's rights in such information to be
filed.
7.5 APPROVAL OF PUBLICATIONS. Upon the receipt of written approval
of the Reviewing Party or the expiration of the applicable waiting period
without comment, the Publishing Party may proceed with the written publication
or the oral presentation.
7.6 INJUNCTIVE RELIEF. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 7 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such
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breach of this Article 7. It is understood that such injunctive relief is
intended solely as provisional relief pending the dispute resolution procedures
described in Article 10 herein.
7.7 CONTRACTUAL PUBLICATION RIGHTS OF THIRD PARTIES. Notwithstanding
the foregoing, the right of any party to withhold or delay consent to publish or
delay publication shall be subject to any contractual publication rights of
Third Parties involved in research or clinical trials for the Products or
Material, as the case may be. The parties will use reasonable efforts to obtain
the voluntary consent of any Third Party with publication rights agreed to prior
to the Effective Date, to comply with the notice and timing requests in this
Article 7 and will promptly review any publications delivered for review.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE
8.1 BY ALLIANCE. Notwithstanding Alliance's right to indemnification
in the License Agreement, Alliance will indemnify and hold HMRI harmless against
any and all liability, damages, losses, costs or expenses ("Liability")
resulting from any Third Party claims made or suits brought against HMRI to the
extent such Liability arises from Alliance's failure to comply with the
Specifications, Alliance's gross negligence or willful misconduct in the
manufacture, storage, handling or shipping of Material or Alliance's breach of
any express warranty set forth in Article 6 hereof.
8.2 BY HMRI. Without limiting Alliance's right to indemnification in
the License Agreement, HMRI will indemnify and hold Alliance harmless against
any and all Liability resulting from (i) any packaging or labeling of any
Material to the extent that such packaging or labeling has been supplied by or
at the direction of HMRI and applied in accordance with instructions from HMRI
or (ii) any Third Party claims made or suits brought against Alliance to the
extent such Liability arises from HMRI's gross negligence or willful misconduct
in the storage, handling, shipping, use, marketing, distribution or sale of
Material.
8.3 CONDITIONS OF INDEMNIFICATION. A party or any of its Affiliates
or other respective employees or agents (the "Indemnitee") that intends to claim
indemnification under this Article 8 shall promptly notify the other party (the
"Indemnitor") of any Liability in respect of which the Indemnitee intends to
claim such indemnification reasonably promptly after the Indemnitee is aware
thereof, and the Indemnitor shall assume the defense of any related Third Party
action, suit or proceeding with counsel mutually satisfactory to the parties;
PROVIDED, HOWEVER, that an Indemnitee shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity agreement in this Article 8 shall not apply to
amounts paid in settlement of any
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claim, loss, damage or expense if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably.
The Indemnitee under this Article 8 and its employees and agents shall cooperate
fully with the Indemnitor and its legal representatives in the investigation of
any matter covered by this indemnification. The Indemnitor shall additionally
be liable to pay the reasonable legal costs and attorneys' fees incurred by the
Indemnitee in establishing a successful claim for indemnity hereunder.
8.4 PRODUCT LIABILITY INSURANCE. HMRI shall obtain and maintain in
effect for the term of this Agreement, if such policies are occurrence based, or
for ten years after the term of this Agreement, if such policies are claims
made, product liability insurance or indemnity policies which name Alliance as a
coinsured, with respect to the manufacture, sale and use of Material, which
policies may be worldwide, blanket policies. Such policies shall insure against
liability on the part of HMRI and any of its Affiliates, as their interests may
appear, due to injury, disability or death of any person or persons, or injury
to property, arising from the manufacture, sale or use of Material. HMRI shall
provide to Alliance a certificate of insurance indicating that the terms of
HMRI's insurance policy are in accordance with this Section 8.4. Such
certificate of insurance shall be provided within ten days of the commencement
date of the first Contract Year.
8.5 MANUFACTURER'S INSURANCE. Alliance shall obtain and maintain in
effect for the term of this Agreement, if such policies are occurrence based, or
for ten years after the term of this Agreement, if such policies are claims
made, such appropriate insurance policies which name HMRI as a coinsured, with
respect to the manufacture of Material according to the Specifications. Such
policies shall insure against liability on the part of Alliance and any of its
Affiliates, as their interests may appear, due to injury, disability or death of
any person or persons, or injury to property, arising from the failure to
manufacture Material according to the Specifications. Alliance shall provide to
HMRI a certificate of insurance indicating that the terms of Alliance's
insurance policy are in accordance with this Section 8.5. Such certificate of
insurance shall be provided within ten days of the commencement date of the
first Contract Year.
8.6 PRODUCT LIABILITY CLAIMS. Each party will give the other prompt
written notice of any injury alleged to have occurred as a result of the use or
application of a Material to the extent such party has knowledge thereof,
specifying the time, place and circumstances thereof and the names and addresses
of the persons involved. Each party will also furnish promptly to the other
copies of all papers received in respect of any claim, action or suit arising
out of such alleged injury.
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ARTICLE IX
MANUFACTURE OF MATERIAL BY HMRI
9.1 TRANSFER OF TECHNOLOGY. HMRI intends to make appropriate
submissions for regulatory approval in order that HMRI may manufacture Material
at its own facilities by **_________________________________________________.
To enable HMRI to obtain any relevant approvals and to begin manufacturing
Material, Alliance shall, as requested by HMRI, provide to HMRI all of its
regulatory submission files, batch records, analytical methods, cleaning
procedures and other manufacturing and test procedure information relating to
the manufacture of Material and shall provide all other reasonable assistance,
including but not limited to the information and assistance set forth on
Schedule 9.1 attached hereto. Alliance agrees upon request by HMRI to make its
employees available to HMRI to assist in the transfer of manufacturing. HMRI
agrees to pay all out-of-pocket travel expenses if these employees must visit
HMRI facilities.
9.2 TRANSFER OF SUPPLY RELATIONSHIPS. **
9.3 RIGHT OF FIRST REFUSAL TO PURCHASE.
(a) During the term of this Agreement and any extensions thereof,
Alliance shall offer HMRI the right of first refusal on the sale of the
Otisville Facility and/or any sale of any of the equipment ("Equipment") used by
Alliance in the manufacture of Material. Upon receiving a bona fide offer (an
"Offer") by a Third Party to purchase the Otisville Facility or any Equipment,
Alliance shall provide HMRI a notice specifying the proposed item or items to be
sold and the terms of the Offer. Upon receipt of such notice, HMRI shall have
90 days to exercise the right of first refusal upon the same terms as contained
in the Offer.
(b) If HMRI desires to exercise the right of first refusal on
terms that differ from those provided in the Offer, then Alliance and HMRI shall
negotiate in good faith to agree on the terms pursuant to which the right of
first refusal shall be exercised.
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9.4 AGREEMENT TO PURCHASE RAW MATERIALS.**
ARTICLE X
ALTERNATIVE DISPUTE RESOLUTION
In case any dispute arises out of this Agreement, the parties will
endeavor to settle such dispute amicably between themselves. If necessary, the
dispute shall be presented to the Chief Executive Officer of Alliance and the
head of the Hoechst Marion Roussel Pharmaceutical Group of Hoechst AG for their
timely consideration and resolution. If the Chief Executive Officer of Alliance
and the head of the Hoechst Marion Roussel Pharmaceutical Group of Hoechst AG or
their designees cannot reach a resolution of the dispute, then such dispute
shall be resolved by binding arbitration in the manner described below.
In the event that the parties fail to agree, any such dispute shall be
finally settled by arbitration administered by and according to the Rules of
Commercial Arbitration of the American Arbitration Association. The arbitration
shall take place in New York, New York. The arbitration panel shall consist of
one arbitrator chosen by mutual consent of the parties and the decision shall be
final and binding on the parties and their legal successors. Should the parties
fail to agree on the appointment of an arbitrator, each party shall appoint one
arbitrator and the two arbitrators shall agree upon a neutral third arbitrator
to serve as the sole arbitrator. The arbitrator may, at his discretion, provide
for discovery by the parties during a period not to exceed four months from the
date of filing of the notice of arbitration and the arbitrator shall render his
decision within 30 days of the completion of the hearing and may, at his
discretion, award costs and expenses. The arbitrated award shall be final and
binding on the parties. The time period for cure recited in Section 3.2(b)
shall be suspended upon initiation of arbitration until completion of such
arbitration. Judgment on the award may be entered in any court of competent
jurisdiction.
ARTICLE XI
GENERAL PROVISIONS
11.1 NOTICES. Any notice required or permitted to be given under
this Agreement shall be mailed by registered or certified air mail, return
receipt requested, postage
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prepaid, addressed to the party to be notified at its address stated below, or
at such other address as may hereafter be furnished in writing to the notifying
party or by telefax (with the telefax followed by sending the same by registered
or certified mail) to the numbers set forth below or to such changed telefax
numbers as may thereafter be furnished.
If to ALLIANCE: Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, California 92121
Attention: President
Telefax: (619) 558-5161
If to HMRI: Hoechst Marion Roussel, Inc.
10236 Marion Park Drive
Kansas City, Missouri 64134-1406
Attention: General Counsel
Telefax: (816) 966-3805
Any such notice shall be deemed to have been received when it has been
delivered or received by telefax (with the telefax followed by sending the same
by registered or certified mail).
11.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between the parties. No
modification of any of the terms of this Agreement shall be deemed to be valid
unless it is in writing and signed by the party against whom enforcement is
sought. No course of dealing between the parties, industry custom or usage of
trade shall be used to modify the terms and conditions herein.
11.3 FORCE MAJEURE. No failure or omission by the parties hereto in
the performance of any obligation of this Agreement shall be deemed a breach of
this Agreement or create any liability if the same shall arise from any cause or
causes beyond the reasonable control of the parties, including but not limited
to the following which, for the purposes of this Agreement, shall be regarded as
beyond the control of the party in question: acts of God, acts or omissions of
any government or any rules, regulations or orders of any governmental authority
or any office, department, agency or instrument thereof; fire, storm, flood,
earthquake, accident, acts of the public enemy, war, rebellion, insurrection,
riot, invasion, strikes, lockouts or shortages of raw materials beyond the
party's reasonable control.
11.4 CONSEQUENTIAL DAMAGES. Neither party shall be liable to the
other for consequential, incidental, indirect or punitive damages arising from
the performance or nonperformance of such party under this Agreement.
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11.5 WAIVER. No waiver by either party of any default, right or
remedy shall be effective unless in writing, nor shall any such waiver operate
as a waiver of any other or of the same default, right or remedy, respectively,
on a future occasion.
11.6 ASSIGNMENT. This Agreement may be assigned to a subsidiary of
HMRI in which HMRI owns, directly or indirectly, more than 50% of the voting
stock or other ownership interest of the subsidiary without the consent of
Alliance. This Agreement may not otherwise be assigned or transferred by either
party without the consent of the other party, such consent not to be withheld
unreasonably, except with respect to either party, in the event of a merger,
acquisition or transfer of substantially all of its assets. Any purported
assignment in violation of the preceding sentence shall be void. Any permitted
assignee shall assume all obligations of its assignor under this Agreement.
11.7 SEVERABILITY. In the event that any term or provision of this
Agreement shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, or is otherwise prohibited or unenforceable,
such provision shall be ineffective to the extent of such violation without
invalidating any other provision hereof.
11.8 HEADINGS, INTERPRETATION. The headings used in this Agreement
are for convenience only and are not a part of this Agreement.
11.9 ATTACHMENTS. All Attachments referenced herein are hereby made
a part of this Agreement.
11.10 INDEPENDENT PARTIES. This Agreement shall not be deemed to
create any partnership, joint venture, or agency relationship between the
parties. Each party shall act hereunder as an independent contractor.
11.11 EXECUTION. This Agreement may be executed in two counterparts
each of which shall for all purposes be deemed an original.
11.12 GOVERNING LAW. The construction, validity and performance of
this Agreement shall be governed in all respects by the laws of the State of New
York, excluding its conflict of laws principles.
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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed as of the date first above written.
HOECHST MARION ROUSSEL, INC.
By: ____________________________
Name:
Title:
ALLIANCE PHARMACEUTICAL CORP.
By: ____________________________
Name:
Title:
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EXHIBIT 1
SHORT TERM (12 MONTH) FORECAST
**
<PAGE>
SCHEDULE 9.1
TRANSFER OF TECHNOLOGY
**
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-1531 of Alliance Pharmaceutical Corp. of our report dated July 27,
1993, appearing and incorporated by reference in the Prospectus, which is part
of this Amendment to the Registration Statement. We also consent to the
reference to us under the heading 'Experts' in such Prospectus.
DELOITTE & TOUCHE LLP
March 27, 1996
San Diego, California
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3) and related
Prospectus of Alliance Pharmaceutical Corp. for the registration of shares of
its common stock and to the use and incorporation by reference therein of our
report dated July 26, 1995, with respect to the consolidated financial
statements of Alliance Pharmaceutical Corp. included in its Annual Report
(Form 10-K) for the year ended June 30, 1995, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
March 27, 1996
