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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): December 6, 1995
U.S. BIOSCIENCE, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-10392 23-2460100
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(Commission File Number) (I.R.S. Employer Identification No.)
One Tower Bridge
100 Front Street
West Conshohocken, Pennsylvania 19428
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(Address of Principal Executive Offices) (Zip Code)
(610) 832-0570
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
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1. Private Placement
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U.S. Bioscience, Inc. (the "Company") entered into agreements dated as
of November 30, 1995 with three investment funds (the "investors") pursuant to
which in December 1995 the Company (1) sold a total of 1,120,112 shares of its
Common Stock to two of the three investors for an aggregate purchase price of
$3.5 million and (2) issued a total of $16.5 million of convertible notes (the
"notes") to the three investors for an aggregate purchase price of $16.5
million, for a total financing of $20 million. The Company has agreed to file a
Registration Statement on Form S-3 to enable the investors to resell both the
Common Stock they purchased in the financing and the Common Stock which they
will receive if they convert their notes. The notes are payable on December 6,
1998 and bear interest at the rate of 4% per annum. One-third of the $16.5
million principal amount of the notes becomes convertible 15 days after the date
on which the aforesaid Registration Statement becomes effective (the "effective
date"), another one-third of the principal amount becomes convertible 45 days
after such effective date and the final one-third becomes convertible 65 days
after such effective date. The conversion price is 82.5% of the average market
price for the Common Stock for the five consecutive trading days ending one
trading day prior to the date that the conversion notice is received by the
Company. The Company has the right to prepay the notes upon payment of a 21.21%
premium. The Company also has the right to require the investors to convert the
notes, which right the Company can exercise at any time or from time to time
starting 65 days after the effective date. The form Agreements are attached
hereto as Exhibits 1 through 4 and incorporated herein by reference. The
foregoing description is qualified by reference to such exhibits. The net
proceeds of this financing were added to the Company's working capital. Until
the funds are needed for working capital, they will be invested in investment
grade interest bearing instruments, or shares of investment companies that
invest primarily in such instruments.
2. Ethyol(R) (amifostine) Cleared for Marketing by the United States Food
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and Drug.
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On December 8, 1995, the U.S. Food and Drug Administration (FDA)
cleared for marketing the Company's drug Ethyol(R) (amifostine). Ethyol is
indicated to reduce the cumulative renal (kidney) toxicity associated with
repeated administration of cisplatin in patients with advanced ovarian cancer.
3. Distribution and Marketing Collaboration Agreement
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On December 12, 1995, the Company entered into an agreement with ALZA
Corporation for the marketing and distribution of its product Ethyol(R)
(Amifostine) in the United States of America and its possessions and
territories. Under the terms of the Agreement, ALZA has exclusive rights to
market Ethyol in the United States for five years and will be responsible for
sales and marketing; the Company's sales force will co-promote the product with
ALZA. Under the terms of the Agreement, the Company will supply
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product to ALZA for sale in the United States. After the five-year period, which
ALZA has an option to extend for one year, marketing rights to Ethyol will
revert to the Company and ALZA will receive payments from the Company for ten
years based on sales of the product. ALZA will pay the Company an upfront
payment and initial distribution fee totaling $20 million, and will pay $15
million in additional distribution fees during the next few years based on the
Company's clinical activities relating to Ethyol. The Agreement is attached
hereto as Exhibit 5 and incorporated herein by reference. The foregoing
description is qualified by reference to such exhibit.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits.
1. Form of Subscription Agreement for sale of Common Stock by the
Company to investors in December 1995.
2. Form of Note Purchase Agreement for sale of convertible notes by
the Company to investors in December 1995.
3. Form of Convertible Note issued pursuant to Note Purchase
Agreements for sale of convertible notes by the Company to
investors in December 1995.
4. Form of Registration Rights Agreement with purchasers of Common
Stock and convertible notes issued by the Company to investors in
December 1995.
* 5. Ethyol(R) (Amifostine) Distribution and Marketing Collaboration
Agreement between U.S. Bioscience, Inc. and ALZA Corporation
dated December 12, 1995.
* Confidential Treatment Requested
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. BIOSCIENCE, INC.
By: /s/ Robert I. Kriebel
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Name: Robert I. Kriebel
Title: Senior Vice President
December 28, 1995
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EXHIBIT INDEX
Exhibit No. Description Page
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1. Form of Subscription Agreement for sale
of Common Stock by the Company to investors
in December 1995.
2. Form of Note Purchase Agreement for sale
of convertible notes by the Company to investors
in December 1995.
3. Form of Convertible Note issued pursuant to Note
Purchase Agreements for sale of convertible notes
by the Company to investors in December 1995.
4. Form of Registration Rights Agreement with
purchasers of Common Stock and convertible notes issued
by the Company to investors in December 1995.
* 5. Ethyol(R) (Amifostine) Distribution and Marketing
Collaboration Agreement between U.S. Bioscience, Inc.
and ALZA Corporation dated December 12, 1995.
* Confidential Treatment Requested
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Exhibit 1
SUBSCRIPTION AGREEMENT
(ADVANTAGE)
THIS SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set
forth below, by and between U.S. BIOSCIENCE, INC., a Delaware corporation, with
headquarters located at One Tower Bridge, 100 Front Street, West Conshohocken,
Pennsylvania 19428 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
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WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to subscribe for and purchase shares of
Common Stock, $.005 par value (the "Common Stock"), of the Company upon the
terms and subject to the conditions of this Agreement, subject to acceptance of
this Agreement by the Company; and
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Note Purchase
Agreement (the "Note Purchase Agreement"), providing for the purchase and sale,
upon the terms and subject to the conditions provided therein, of a convertible
promissory note of the Company in the principal amount of $7,000,000.00, the
Company and GFL Performance Fund Limited ("Performance") are executing and
delivering a Subscription Agreement (the "Performance Subscription Agreement"),
providing for the purchase and sale, upon the terms and subject to the
conditions provided therein, of shares of Common Stock for an aggregate
subscription price of $1,500,000.00, the Company and Performance are executing
and delivering a Note Purchase Agreement (the "Performance Note Purchase
Agreement"), providing for the purchase and sale, upon the terms and subject to
the conditions provided therein, of a convertible promissory note of the Company
in the principal amount of $3,500,000.00 and the Company and Genesee Fund
Limited-Portfolio B ("GFL-B") are executing and delivering a Note Purchase
Agreement (the "GFL-B Note Purchase Agreement"), providing for the purchase and
sale, upon the terms and subject to the conditions provided therein, of a
convertible promissory note of the Company in the principal amount of
$6,000,000.00;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
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1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
A. SUBSCRIPTION. The undersigned hereby subscribes for and agrees
to purchase the number of shares of Common Stock determined as set forth on the
signature page of this Agreement (the "Shares") at the price per Share
determined as set forth on the signature page of this Agreement. The aggregate
purchase price for the Shares shall be as set forth on the signature page hereto
and shall be payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Shares by delivering same-day or next-day federal funds in United States Dollars
to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as ANNEX I (the "Joint Escrow Instructions"). Such
delivery of funds shall be made against delivery by the Company of a certificate
for the Shares. Promptly, but in no event later than one trading day following
payment by the Buyer to the Escrow Agent of the subscription price for the
Shares, the Company shall deliver a certificate for the Shares to the Escrow
Agent. By signing this Agreement, the Buyer and the Company each agrees to all
of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
C. METHOD OF PAYMENT. Payment of the purchase price for the Shares
shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For Further Credit to A/C#37179446
for credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: GFL/U.S. Bioscience
Not later than 4:00 p.m., New York City time, on the date which is two New York
Stock Exchange trading days after the Company shall have notified the Buyer that
the Shares have been approved for listing subject to official notice of
issuance, by the American Stock Exchange Inc. (the "AMEX") the Buyer shall
deposit with the Escrow Agent the aggregate subscription price for the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. The Buyer is purchasing the Shares for its own account for
investment only and not with a view towards the public sale or distribution
thereof;
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b. The Buyer is an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3);
c. All subsequent offers and sales of the Shares by the Buyer shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration;
d. The Buyer understands that the Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
information furnished by the Company and contained in EXHIBIT A hereto and the
Company's (1) Annual Report on Form 10-K for the fiscal year ended December 31,
1994, (2) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1995, June 30, 1995 and September 30, 1995, (3) Current Report on Form 8-K,
dated May 19, 1995, (4) Amendment No. 1 on Form 8-K/A to Current Report on Form
8-K, dated July 20, 1995, (5) Amendment No. 1 on Form 8-A/A to Registration
Statement on Form 8-A, dated July 20, 1995, (6) Registration Statement on Form
8-A, dated April 11, 1995, (7) Registration Statement on Form 8-A, dated June 7,
1995 and (8) the Company's definitive Proxy Statement for its 1995 Annual
Meeting of Stockholders, in each case as filed with the SEC. The Buyer
understands that its investment in the Shares involves a high degree of risk;
f. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares; and
g. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
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similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES AND THE COMMON STOCK. The Shares, when
issued, delivered and paid for in accordance with this Agreement, will be duly
and validly authorized and issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive rights of any stockholder of the Company, as such, to
acquire the Shares. The Common Stock is listed for trading on the AMEX and no
suspension of trading in the Common Stock is in effect; and the Company has
submitted a preliminary listing application relating to the Shares to the AMEX
and is not aware of any reason why such listing of the Shares, subject to
official notice of issuance, will not be approved by the AMEX.
B. SUBSCRIPTION AGREEMENT; REGISTRATION RIGHTS AGREEMENT. This
Agreement and the Registration Rights Agreement, the form of which is attached
hereto as ANNEX II (the "Registration Rights Agreement"), have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally; for purposes of the Rights
Agreement, dated as of May 19, 1995, by and between the Company and Chemical
Mellon Shareholder Services L.L.C., as Rights Agent, as in effect on the date
hereof (the "Rights Agreement"), this Agreement and the transactions
contemplated hereby are an action or transaction or series of related actions or
transactions approved by the Board of Directors, as a result of which the Buyer
shall not, by reason of this Agreement and the transactions contemplated hereby,
become an Acquiring Person (as defined in the Rights Agreement); and the Rights
Agreement, in the form filed with the SEC as an exhibit to the Company's Current
Report on Form 8-K, dated May 19, 1995, is the Rights Agreement as in effect on
the date hereof.
C. NON-CONTRAVENTION. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation by the
Company of the issuance of the Shares and the other transactions contemplated by
this Agreement and Registration Rights Agreement do not and will not conflict
with or result in a breach by the Company of any of the terms or provisions of,
or constitute a default under, the certificate of incorporation or by-laws of
the Company, or any indenture,
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mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
D. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Shares as contemplated by this
Agreement, other than (1) approval of the listing of the Shares by the AMEX,
which approval shall be obtained on or prior to the Closing Date (as hereinafter
defined) and (2) the requirements of any applicable blue sky laws.
E. INFORMATION PROVIDED. The information provided by or on behalf
of the Company to the Buyer and referred to in Section 2(e) of this Agreement
does not contain any 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 circumstance under which they are made, not misleading.
F. ABSENCE OF CERTAIN CHANGES. Since December 31, 1994, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company, except as disclosed in the documents referred to in
Section 2(e) hereof and except that the Company has losses in the current fiscal
quarter consistent with the Company's losses in earlier fiscal quarters in 1995.
G. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other), results of operations
or prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Shares to be issued to it hereunder have not been and are not being registered
under the provisions of the 1933 Act (except as provided in the Registration
Rights Agreement), and may not be
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transferred unless (A) the Shares are subsequently registered thereunder or (B)
the Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Shares may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Shares made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such Shares
under circumstances in which the seller, or the person through whom the sale is
made, may be deemed to be an underwriter, as that term is used in the 1933 Act,
may require compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (3) neither the Company nor any other
person is under any obligation to register the Shares (other than pursuant to
the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder. Notwithstanding any other
provision of this Agreement, the Buyer may transfer a portion of the Shares only
if the number of Shares to be transferred had an original purchase price
pursuant to this Agreement of at least $2,000,000.00 and the transferee agrees
in writing with the Company to be bound by the provisions of Sections 4(g) and
4(h) hereof with respect to the Shares so transferred.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that,
until such time as the Shares have been registered for resale under the 1933 Act
as contemplated by the Registration Rights Agreement, the certificates for the
Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Shares):
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares have been
acquired for investment and may not be sold, transferred or assigned
in the absence of an effective registration statement for these shares
under the Securities Act of 1933, as amended, or an opinion of
counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration is not required under said Act.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement, in the form attached hereto as ANNEX II,
on or before the Closing Date.
D. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Shares for, or obtain exemption for the
Shares for, sale to the Buyer at the closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the
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United States, and shall provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date.
E. AMEX LISTING; REPORTING STATUS. On or before the Closing Date,
the Company shall file a listing application for the Shares with the AMEX and
shall provide evidence of such filing to the Buyer. For a period of three years
after the Closing Date so long as the Buyer beneficially owns any of the Shares,
the Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the Company shall not, terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
F. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Shares for the Company's internal working capital purposes and shall not,
directly or indirectly, use such proceeds for any loan to or investment in any
other corporation, partnership, enterprise or other person; provided, however,
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that nothing in this Section 4(f) shall restrict the Company from using such
proceeds for (1) temporary liquid investments consistent with the Company's
practices for investing cash and cash equivalents for the period from January 1,
1995 to the date of this Agreement, (2) expenses in connection with arrangements
for marketing the Company's pharmaceutical products, (3) investments in
subsidiaries of the Company engaged in the business of developing and marketing
drugs for treating human diseases and illnesses or (4) acquisitions of business,
product lines, potential products or compounds which are, in the reasonable
judgment of the Company's Board of Directors, directly related to the business
of developing and marketing human pharmaceuticals.
G. LIMITATION ON CERTAIN ADDITIONAL PURCHASES. The Buyer agrees not
to become a Beneficial Owner (as hereinafter defined) of any Voting Stock (as
hereinafter defined) of the Company for the purposes or with the intention of,
as a result of such acquisition, becoming an Acquiring Person (as hereinafter
defined) for purposes of the Rights Agreement. If the Buyer shall have made
good faith efforts to comply with this Section 4(g), but shall nonetheless have
become a Beneficial Owner (as so defined) of any Voting Stock (as so defined) as
a result of which the Buyer shall have become an Acquiring Person (as so
defined), then, so long as for purposes of Section 1(a) of the Rights Agreement
there are at the time in office not less than two Continuing Directors (as
hereinafter defined), the Board of Directors will make such determinations as
contemplated by Section 1(a) of the Rights Agreement as shall permit the Buyer
to cease to be an Acquiring Person (as so defined), if the Buyer divests as
promptly as practicable a sufficient number of shares of Common Stock so that
the Buyer would no longer be an Acquiring Person (as so defined) and the Buyer
hereby agrees to make such divestiture. Capitalized terms used in this Section
4(g) and not otherwise defined in this
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Agreement shall have the respective meanings provided in the Rights Agreement.
H. MARKET STANDOFF. In connection with an underwritten public
offering of shares of Common Stock or securities convertible into shares of
Common Stock for the account of the Company, if the Registration Statement
required by Section 2(a) of the Registration Rights Agreement shall at the time
be effective and shall have been effective for at least 120 consecutive days
since it was first ordered effective by the SEC and the Company shall otherwise
have complied in all material respects with its obligations under this Agreement
and the Registration Rights Agreement, then, on at least 20 days prior written
notice, the Buyer shall enter into such written agreement as shall be reasonably
requested by the underwriter or underwriters for such offering pursuant to which
the Buyer shall agree not to make any public sale of the Shares for such period
of consecutive days (not in excess of 90 days) as other stockholders of the
Company agree to restrict the sale of their shares of Common Stock in connection
with such underwritten offering (the "Lock-up Period"). The provisions of this
Section 4(h) shall be applicable to no more than four such underwritten public
offerings as follows: (1) not more than two such underwritten public offerings
during the 24 months following the date the Registration Statement required by
Section 2(a) of the Registration Rights Agreement is first ordered effective by
the SEC (the "Effective Date"); provided, however, that the second such period
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of up to 90 days pursuant to this clause (1) may not commence earlier than 180
days after the end of the first such period of up to 90 days pursuant to this
clause (1), and (2) not more than two such public offerings during the 12 month
period commencing 25 months and ending 36 months after the Effective Date;
provided, however, that the first such period of up to 90 days pursuant to this
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clause (2) may not commence earlier than 120 days after the end of the then most
recent period of up to 90 days pursuant to the preceding clause (1) and the
second such period of up to 90 days pursuant to this clause (2) may not commence
earlier than 120 days after the end of the first such period pursuant to this
clause (2). If the Company shall have given a notice as contemplated by this
Section 4(h) but the Lock-up Period shall not have commenced and prior to the
commencement of such Lock-up Period the Company shall have withdraw such notice
by notice to the Buyer, then the Company shall continue to have the right
thereafter to invoke this Section 4(h) on one occasion in lieu thereof. The
form of any such agreement by the Buyer shall be substantially the same as that
entered into by other stockholders who enter into such agreements in connection
with such underwritten offering.
I. CERTAIN EXPENSES. Notwithstanding the joint and several
liability of the Company and the Buyer to the Escrow Agent under Section 11 of
the Joint Escrow Instructions, as between the Company and the Buyer any claims,
liabilities, costs or expenses of the Escrow Agent which are payable as provided
in Section 11 of
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the Joint Escrow Instructions shall be paid equally and if either the Company or
the Buyer shall have paid more than its share thereof then the other party shall
reimburse the party who has paid any such excess for the amount thereof on
demand.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate
subscription price for the Shares in accordance with Section 1(c) hereof, the
Company will instruct its transfer agent to issue one or more certificates for
the Shares, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominee and in such denominations to be specified
by the Buyer at least one business day prior to the date of the closing. The
Company warrants that no instruction other than such instructions referred to in
this Section 5 and stop transfer instructions to give effect to Section 4(a)
hereof prior to the registration of the Shares under the 1933 Act will be given
by the Company to the transfer agent with respect to the Shares and that the
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Shares. If the Buyer provides the Company with an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company,
that registration of a resale by the Buyer of any of the Shares in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall permit the transfer of the Shares and promptly
instruct the Company's transfer agent to issue one or more share certificates in
such name or names and in such denominations as specified by the Buyer.
6. STOCK DELIVERY INSTRUCTIONS.
The certificate for the Shares shall be delivered by the Company to
the Escrow Agent pursuant to Section 1(b) hereof on a delivery against payment
basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Shares (the "Closing
Date") shall be 12:00 noon, New York City time, on the date which is one New
York Stock Exchange trading day after the date on which the Buyer has deposited
the aggregate subscription price for the Shares with the Escrow Agent in
accordance with Section 1(c) hereof, or such other mutually agreed to time. The
closing shall occur on the Closing Date at the offices of the Escrow Agent.
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8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Shares
to the Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of the Buyer's
subscription for the Shares as evidenced by execution of this Agreement by the
Company;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the aggregate subscription price for the
Shares in accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
d. The Shares shall have been approved for listing, subject to
official notice of issuance, by the AMEX; and
e. The closings under the Note Purchase Agreement, the Performance
Subscription Agreement, the Performance Note Purchase Agreement and the GFL-B
Note Purchase Agreement shall have occurred unless any failure of such closing
to occur shall have resulted from the failure or refusal by the Company to
proceed with the closing thereunder notwithstanding the satisfaction on the date
of closing specified in such agreement of the conditions precedent to the
obligations of the Company to complete the closings thereunder.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Shares
is conditioned upon:
a. Delivery by the Company to the Escrow Agent of one or more
certificates for the Shares in accordance with this Agreement;
b. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
such Closing Date;
c. The Shares shall have been approved for listing, subject to
official notice of issuance, on the AMEX and the
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Company shall have furnished written evidence thereof to the Buyer;
d. On the Closing Date, the Buyer having received an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX III
attached hereto; and
e. The closings under the Note Purchase Agreement, the Performance
Subscription Agreement, the Performance Note Purchase Agreement and the GFL-B
Note Purchase Agreement shall have occurred, unless any failure of such closing
to occur shall have resulted from the failure or refusal by the Buyer,
Performance or GFL-B, as the case may be, to proceed with the closing thereunder
notwithstanding the satisfaction on the date of closing specified in such
agreement of the conditions precedent to the obligations of the Buyer,
Performance or GFL-B, as the case may be, to complete the closing thereunder.
10. GOVERNING LAW; MISCELLANEOUS. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto (including, without limitation, for purposes of Section 1(c)
hereof). The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally or by courier
and shall be effective five days after being placed in the mail, if mailed, or
upon receipt, if delivered personally or by courier, in each case addressed to a
party at such party's address shown in the introductory paragraph or on the
signature page of this Agreement or such other address as a party shall have
provided by notice to the other party in accordance with this provision.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
AGGREGATE PURCHASE PRICE: $2,000,000.00
PRICE PER SHARE: Mean average of the closing bid price of the Common Stock on
the AMEX for the five trading days ending one trading day prior to the "Closing
Date" as defined in the Note Purchase Agreement, less 17.5%.
NUMBER OF SHARES: The quotient obtained by dividing $2,000,000.00 by the Price
Per Share determined as stated above, rounded up to the next highest whole
number.
NAME OF BUYER: GFL ADVANTAGE FUND LIMITED
SIGNATURE ____________________________
Title: _______________________________
Date: November 30, 1995
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
This Agreement has been accepted and duly executed on behalf of the
Company by one of its officers thereunto duly authorized as of the date set
forth below.
U.S. BIOSCIENCE, INC.
By: ________________________
Title: _____________________
Date: November 30, 1995
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Exhibit 2
NOTE PURCHASE AGREEMENT
(ADVANTAGE)
THIS NOTE PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, by and between U.S. BIOSCIENCE, INC., a Delaware corporation, with
headquarters located at One Tower Bridge, 100 Front Street, West Conshohocken,
Pennsylvania 19428 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, a convertible note of the Company which will
be convertible into shares of Common Stock, $.005 par value (the "Common
Stock"), of the Company upon the terms and subject to the conditions of such
note, subject to acceptance of this Agreement by the Company; and
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Subscription
Agreement (the "Subscription Agreement") providing for the purchase and sale of
shares of Common Stock, the Company and GFL Performance Fund Limited
("Performance") are executing and delivering a Subscription Agreement (the
"Performance Subscription Agreement"), providing for the purchase and sale, upon
the terms and subject to the conditions provided therein, of shares of Common
Stock for an aggregate subscription price of $1,500,000.00, the Company and
Performance are executing and delivering a Note Purchase Agreement (the
"Performance Note Purchase Agreement") providing for the purchase and sale, upon
the terms and subject to the conditions provided therein, of a convertible
promissory note of the Company in the principal amount of $3,500,000.00 and the
Company and GFL-Portfolio B ("GFL-B") are executing and delivering a Note
Purchase Agreement (the "GFL-B Note Purchase Agreement") providing for the
purchase and sale, upon the terms and subject to the conditions provided
therein, of a convertible promissory note of the Company in the principal amount
of $6,000,000.00;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
<PAGE>
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE. The undersigned hereby agrees to purchase from the
Company a convertible promissory note of the Company in the principal amount set
forth on the signature page of this Agreement having the terms and conditions
and in the form attached hereto as ANNEX I (the "Note") at the price set forth
on the signature page of this Agreement. The purchase price for the Note shall
be as set forth on the signature page hereto and shall be payable in United
States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Note by delivering same-day or next-day federal funds in United States Dollars
to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions").
Such delivery of funds shall be made against delivery by the Company of the Note
duly executed on behalf of the Company. Promptly, but in no event later than
one trading day following payment by the Buyer to the Escrow Agent of the
purchase price of the Note, the Company shall deliver the Note, duly executed on
behalf of the Company, to the Escrow Agent. By signing this Agreement, the
Buyer and the Company each agrees to all of the terms and conditions of, and
becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
C. METHOD OF PAYMENT. Payment of the purchase price for the Note
shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For Further Credit to A/C#37179446
for credit to the account of Brian W. Pusch Attorney
Escrow Account
Reference: GFL/U.S. Bioscience
Not later than 4:00 p.m., New York City time, on the date which is three New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and the Subscription Agreement and returned signed counterparts of
this Agreement and the Subscription Agreement to the Buyer, the Buyer shall
deposit with the Escrow Agent the aggregate purchase price for the Note.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
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a. The Buyer is purchasing the Note for its own account for
investment only and not with a view towards the public sale or distribution
thereof;
b. The Buyer is an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3);
c. All subsequent offers and sales of the Note and the shares of
Common Stock issuable upon conversion of, or in lieu of payment of interest on,
the Note (the "Shares" and, together with the Note, the "Securities") by the
Buyer shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration;
d. The Buyer understands that the Note is being offered and sold,
and the Shares are being offered, to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Note and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Note and the offer of the Shares
which have been requested by the Buyer. The Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has had the opportunity to
obtain and to review the information furnished by the Company and contained in
EXHIBIT A hereto and the Company's (1) Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, (2) Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, (3) Current
Report on Form 8-K, dated May 19, 1995, (4) Amendment No. 1 on Form 8-K/A to
Current Report on Form 8-K, dated July 20, 1995, (5) Amendment No. 1 on Form 8-
A/A to Registration Statement on Form 8-A, dated July 20, 1995, (6) Registration
Statement on Form 8-A, dated April 11, 1995, (7) Registration Statement on Form
8-A, dated June 7, 1995 and (8) the Company's definitive Proxy Statement for its
1995 Annual Meeting of Stockholders, in each case as filed with the SEC. The
Buyer understands that its investment in the Securities involves a high degree
of risk;
f. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities; and
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<PAGE>
g. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. The Shares have been duly authorized and,
when issued upon conversion of the Note, will be duly and validly issued, fully
paid and non-assessable and will not subject the holder thereof to personal
liability by reason of being such holder. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Shares. The Common Stock is
listed for trading on the American Stock Exchange, Inc. (the "AMEX") and no
suspension of trading in the Common Stock is in effect; and the Company has
submitted a preliminary listing application relating to the Shares to the AMEX
and is not aware of any reason why such listing of the Shares, subject to
official notice of issuance, will not be approved by the AMEX.
B. NOTE PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT AND NOTE.
This Agreement and the Registration Rights Agreement, the form of which is
attached to the Subscription Agreement as ANNEX II (the "Registration Rights
Agreement"), have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered by the Company and this Agreement
is, and the Registration Rights Agreement, when executed and delivered by the
Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium and other similar
laws affecting the enforcement of creditors' rights generally; the Note has been
duly and validly authorized and, when executed and delivered on behalf of the
Company in accordance with this Agreement, will be a valid and binding
obligation of the Company in accordance with its terms, subject to general
principles of equity and to bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors rights generally; for purposes of
the Rights Agreement, dated as of May 19, 1995, by and between the Company and
Chemical Mellon Shareholder Services L.L.C., as Rights Agent, as in effect on
the date hereof (the "Rights Agreement"), this Agreement and the transactions
contemplated hereby are an action or transaction or series of related actions or
transactions approved by the Board of Directors, as a result of which the Buyer
shall not, by reason of this Agreement and the transactions contemplated hereby,
become an Acquiring Person (as defined in the Rights Agreement); and the Rights
Agreement, in the form filed with the SEC as an exhibit to
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the Company's Current Report on Form 8-K, dated May 19, 1995, is the Rights
Agreement as in effect on the date hereof.
C. NON-CONTRAVENTION. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation by the
Company of the issuance of the Securities and the other transactions
contemplated by this Agreement, Registration Rights Agreement and the Note do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the certificate of
incorporation or by-laws of the Company, or any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, or any existing
applicable law, rule or regulation or any applicable decree, judgment or order
of any court, United States federal or state regulatory body, administrative
agency or other governmental body having jurisdiction over the Company or any of
its properties or assets.
D. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities as contemplated by
this Agreement and the Note, other than (1) approval of the listing of the
Shares by the AMEX and (2) the requirements of any applicable blue sky laws.
E. INFORMATION PROVIDED. The information provided by or on behalf
of the Company to the Buyer and referred to in Section 2(e) of this Agreement
does not contain any 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 circumstance under which they are made, not misleading.
F. ABSENCE OF CERTAIN CHANGES. Since December 31, 1994, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company, except as disclosed in the documents referred to in
Section 2(e) hereof and except that the Company has losses in the current fiscal
quarter consistent with the Company's losses in earlier fiscal quarters in 1995.
G. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other), results of operations
or prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or
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<PAGE>
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, this Agreement or
any of such other documents.
H. ABSENCE OF EVENTS OF DEFAULT. No Event of Default, as defined in
the Note, and no event which, with the giving of notice or the passage of time
or both, would become an Event of Default (as so defined), has occurred and is
continuing.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Note
has not been and is not being registered under the provisions of the 1933 Act
and, except as provided in the Registration Rights Agreement, the Shares have
not been and are not being registered under the 1933 Act, and may not be
transferred unless (A) subsequently registered thereunder or (B) the Buyer shall
have delivered to the Company an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
Notwithstanding any other provision of this Agreement, the Buyer may transfer a
portion of the Note only if the principal amount to be transferred is at least
$3 million and the transferee agrees in writing with the Company to be bound by
the provisions of Sections 4(g) and 4(h) hereof with respect to the Shares
issuable upon conversion of the portion of the principal amount of the Note so
transferred.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Note, and, until such time as the Shares have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, the certificates for the
Shares, may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Shares):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement
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<PAGE>
for the securities under the Securities Act of 1933, as amended, or an
opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, that registration is not required under said
Act.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement, in the form attached to the Subscription
Agreement as ANNEX II, on or before the Closing Date.
D. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Shares for, or obtain exemption for the
Shares for, sale to the Buyer at the closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date.
E. AMEX LISTING; REPORTING STATUS. Promptly, but in no event later
than two trading days after the Closing Date, the Company shall file a listing
application for the Shares with the AMEX and shall provide evidence of such
filing to the Buyer; and the Company shall use its best efforts to obtain
approval by the AMEX of the listing of the Shares, subject to official notice of
issuance, as promptly as possible after the Closing Date. The Company shall
inform the Buyer of such approval promptly after the same is given. For a
period of three years after the Closing Date, so long as the Buyer beneficially
owns any of the Securities, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would permit such termination.
F. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Note for the Company's internal working capital purposes and shall not,
directly or indirectly, use such proceeds for any loan to or investment in any
other corporation, partnership, enterprise or other person; provided, however,
-------- -------
that nothing in this Section 4(f) shall restrict the Company from using such
proceeds for (1) temporary liquid investments consistent with the Company's
practices for investing cash and cash equivalents for the period from January 1,
1995 to the date of this Agreement, (2) expenses in connection with arrangements
for marketing the Company's pharmaceutical products, (3) investments in
subsidiaries of the Company engaged in the business of developing and marketing
drugs for treating human diseases and illnesses or (4) acquisitions of business,
product lines, potential products or
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<PAGE>
compounds which are, in the reasonable judgment of the Company's Board of
Directors, directly related to the business of developing and marketing human
pharmaceuticals.
G. LIMITATION ON CERTAIN ADDITIONAL PURCHASES. The Buyer agrees not
to become a Beneficial Owner (as hereinafter defined) of any Voting Stock (as
hereinafter defined) of the Company for the purposes or with the intention of,
as a result of such acquisition, becoming an Acquiring Person (as hereinafter
defined) for purposes of the Rights Agreement. If the Buyer shall have made
good faith efforts to comply with this Section 4(g), but shall nonetheless have
become a Beneficial Owner (as so defined) of any Voting Stock (as so defined) as
a result of which the Buyer shall have become an Acquiring Person (as so
defined), then, so long as for purposes of Section 1(a) of the Rights Agreement
there are at the time in office not less than two Continuing Directors (as
hereinafter defined), the Board of Directors will make such determinations as
contemplated by Section 1(a) of the Rights Agreement as shall permit the Buyer
to cease to be an Acquiring Person (as so defined) if the Buyer divests as
promptly as practicable a sufficient number of shares of Common Stock so that
the Buyer hereby would no longer be an Acquiring Person (as so defined), and the
Buyer hereby agrees to make such divestiture. Capitalized terms used in this
Section 4(g) and not otherwise defined in this Agreement shall have the
respective meanings provided in the Rights Agreement.
H. MARKET STANDOFF. In connection with an underwritten public
offering of shares of Common Stock or securities convertible into shares of
Common Stock for the account of the Company, if the Registration Statement
required by Section 2(a) of the Registration Rights Agreement shall at the time
be effective and shall have been effective for at least 120 consecutive days
since it was first ordered effective by the SEC and the Company shall otherwise
have complied in all material respects with its obligations under this Agreement
and the Registration Rights Agreement, then, on at least 30 days prior written
notice, the Buyer shall enter into such written agreement as shall be reasonably
requested by the underwriter or underwriters for such offering pursuant to which
the Buyer shall agree not to make any public sale of the Shares for such period
of consecutive days (not in excess of 90 days) as other stockholders of the
Company agree to restrict the sale of their shares of Common Stock in connection
with such underwritten offering (the "Lock-up Period"). The provisions of this
Section 4(h) shall be applicable to no more than four such underwritten public
offerings as follows: (1) not more than two such underwritten public offerings
during the 24 months following the date the Registration Statement required by
Section 2(a) of the Registration Rights Agreement is first ordered effective by
the SEC (the "Effective Date"); provided, however, that the second such period
-------- -------
of up to 90 days pursuant to this clause (1) may not commence earlier than 180
days after the end of the first such period of up to 90 days
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<PAGE>
pursuant to this clause (1), and (2) not more than two such public offerings
during the 12 month period commencing 25 months and ending 36 months after the
Effective Date; provided, however, that the first such period of up to 90 days
-------- -------
pursuant to this clause (2) may not commence earlier than 120 days after the end
of the then most recent period of up to 90 days pursuant to the preceding clause
(1) and the second such period of up to 90 days pursuant to this clause (2)
after the end of the first such period pursuant to this clause (2). If the
Company shall have given a notice as contemplated by this Section 4(h) but the
Lock-up Period shall not have commenced and prior to the commencement of such
Lock-up Period the Company shall have withdrawn such notice by notice to the
Buyer, then the Company shall continue to have the right thereafter to invoke
this Section 4(h) on one occasion in lieu thereof. The form of any such
agreement by the Buyer shall be substantially the same as that entered into by
other stockholders who enter into such agreements in connection with such
underwritten offering.
I. CERTAIN EXPENSES. Notwithstanding the joint and several
liability of the Company and the Buyer to the Escrow Agent under Section 11 of
the Joint Escrow Instructions, as between the Company and the Buyer any claims,
liabilities, costs or expenses of the Escrow Agent which are payable as provided
in Section 11 of the Joint Escrow Instructions shall be paid equally and if
either the Company or the Buyer shall have paid more than its share thereof then
the other party shall reimburse the party who has paid any such excess for the
amount thereof on demand.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate purchase
price for the Note in accordance with Section 1(c) hereof, and prior to the
Closing Date, the Company will irrevocably instruct its transfer agent to issue
certificates for the Shares from time to time upon conversion of the Note in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominee and in such denominations to be specified
by the Buyer in connection with each conversion of the Note. The Company
warrants that no instruction other than such instructions referred to in this
Section 5 and stop transfer instructions to give effect to Section 4(a) hereof
prior to registration of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If
the Buyer provides the Company with an opinion of counsel, reasonably
satisfactory in form, scope and
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<PAGE>
substance to the Company, that registration of a resale by the Buyer of any of
the Securities in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall permit the
transfer of the Securities and, in the case of the Shares, promptly instruct the
Company's transfer agent to issue one or more share certificates in such name
and in such denominations as specified by the Buyer.
6. NOTE DELIVERY INSTRUCTIONS.
The Note shall be delivered by the Company to the Escrow Agent
pursuant to Section 1(b) hereof on a delivery against payment basis at the
closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Note (the "Closing
Date") shall be 12:00 noon, New York City time, on the date which is one New
York Stock Exchange trading day after the date on which the Buyer has deposited
the purchase price for the Note with the Escrow Agent in accordance with Section
1(c) hereof, or such other mutually agreed to time. The closing shall occur on
the Closing Date at the offices of the Escrow Agent.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Note
to the Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Note in
accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date; and
d. The closings under the Performance Note Purchase Agreement and
the GFL-B Note Purchase Agreement shall have occurred, unless any failure of
such closing to occur shall have resulted from the failure or refusal by the
Company to proceed with the closing thereunder notwithstanding the satisfaction
on the date of closing specified in any such agreement of the conditions
precedent to the obligations of the Company to complete the closing thereunder.
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<PAGE>
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Note is
conditioned upon:
a. Delivery by the Company to the Escrow Agent of the Note in
accordance with this Agreement;
b. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date;
c. On the Closing Date, the Buyer having received an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX III
attached hereto; and
d. The closings under the Performance Note Purchase Agreement and
the GFL-B Note Purchase Agreement shall have occurred, unless any failure of
such closing to occur shall have resulted from the failure or refusal by the
Buyer, Performance or GFL-B, as the case may be, to proceed with the closing
thereunder notwithstanding the satisfaction on the date of closing specified in
any such agreement of the conditions precedent to the obligations of the Buyer,
Performance or GFL-B, as the case may be, to complete the closing thereunder.
10. GOVERNING LAW; MISCELLANEOUS. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto(including for purposes of Section 1(c) hereof). The headings
of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. Any notices
required or permitted to be given under the terms of this Agreement shall be
sent by mail or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier, in each case addressed to a party at such party's
address shown in the introductory paragraph or on the signature page of this
Agreement or such other address as a party shall have provided by notice to the
other party in accordance with this provision.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
PRINCIPAL AMOUNT OF NOTE: $7,000,000.00
PURCHASE PRICE: $7,000,000.00
NAME OF BUYER: GFL ADVANTAGE FUND LIMITED
SIGNATURE ____________________________
Title: _______________________________
Date: November 30, 1995
Address: c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
This Agreement has been accepted and duly executed on behalf of the
Company by one of its officers thereunto duly authorized as of the date set
forth below.
U.S. BIOSCIENCE, INC.
By: ________________________
Title: _____________________
Date: November 30, 1995
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<PAGE>
Exhibit 3
ANNEX I
TO
NOTE PURCHASE
AGREEMENT
(ADVANTAGE)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL, IN FORM, SCOPE AND SUBSTANCE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.
CONVERTIBLE NOTE
----------------
West Conshohocken, Pennsylvania $7,000,000.00
December 6, 1995
FOR VALUE RECEIVED, U.S. BIOSCIENCE, INC., a Delaware corporation
(hereinafter called the "Borrower"), hereby promises to pay to GFL Advantage
Fund Limited or registered assigns (the "Holder") or order, the sum of Seven
Million Dollars ($7,000,000.00), on December 6, 1998, and to pay interest on the
unpaid principal balance hereof at the rate of four percent (4%) per annum from
the date hereof until the same becomes due and payable, whether at maturity or
upon acceleration or by prepayment or otherwise. Any amount of principal of or
interest on this Note which is not paid when due shall bear interest at the rate
of ten percent (10%) per annum from the due date thereof until the same is paid.
Interest shall commence accruing on the date hereof and shall be payable on the
1st day of each March, June, September and December, commencing March 1, 1996,
and at maturity. All payments of principal shall be made in lawful money of the
United States of America, and all payments of interest shall be made in lawful
money of the United States of America or, at the option of the Borrower and
subject to the provisions of this Note, in whole or in part in fully paid and
nonassessable shares of Common Stock, $.005 par value, of the Borrower as such
stock exists on the date of issuance of this Note, or any shares of capital
stock of Borrower into which such stock shall hereafter be changed or
reclassified (the "Common Stock"). All payments shall be made by wire transfer
of immediately available funds to such account as the Holder shall specify from
time to time to the Borrower by written notice given in accordance with the
provisions of this Note.
The following terms shall apply to this Note:
<PAGE>
ARTICLE I
PREPAYMENT
1.1 PREPAYMENT. So long as no Event of Default (as defined herein)
----------
shall have occurred and be continuing, the Borrower shall have the right,
exercisable on not less than 15 days or more than 20 days written notice to the
Holder, at any time after the date hereof to prepay this Note in whole or in any
part of not less than $500,000 principal amount (or such lesser principal amount
as shall remain unpaid at the time of exercise of such right), in accordance
with this Section 1.1. Any notice of prepayment shall be delivered to the Holder
at its registered address appearing on the records of the Borrower and shall
state (1) that the Borrower is exercising its right to prepay all or a portion
of the principal amount of this Note, (2) the principal amount to be prepaid and
(3) the date of prepayment. On the date fixed for prepayment, the Borrower shall
make payment of the Prepayment Amount (as hereinafter defined), and accrued and
unpaid interest on the principal amount to be prepaid, to or upon the order of
the Holder as specified by the Holder in writing to the Borrower at least one
business day prior to the prepayment date. If the Borrower exercises its right
to prepay all or a portion of this Note, the Borrower shall make payment to the
Holder of an amount equal to the sum of (1) the principal amount of this Note to
be prepaid plus (2) an amount equal to 21.21 percent of the principal amount to
be prepaid (such sum being referred to as the "Prepayment Amount"), plus in each
case accrued and unpaid interest on the principal amount being prepaid to the
prepayment date. Upon the prepayment of less than the entire unpaid principal
amount of this Note, a new Note containing the same date and provisions as this
Note shall be issued by the Borrower to the Holder for the principal balance of
this Note which shall not have been prepaid.
1.2 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If the
-------------------------------------------------
Borrower desires to exercise its option to make a payment of interest on this
Note wholly or partly in shares of Common Stock (hereinafter sometimes called
the "Stock Payment Option"), the issuance of shares of Common Stock upon such
exercise of the Stock Payment Option shall have been authorized by the Board of
Directors of the Company.
(b) The Borrower shall not be permitted to exercise the Stock Payment
Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued
and unreserved for all purposes, or held in the Borrower's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
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<PAGE>
(ii) the issuance or delivery of shares of Common Stock pursuant
to the Stock Payment Option or the public resale of such shares by the
Holder would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained; provided, however, that with respect to
-------- -------
compliance with the securities or blue sky laws of the states of the United
States, the requirements of this clause (ii) shall be deemed satisfied if
at the applicable time the Company is in compliance with Section 3(d) of
the Registration Rights Agreement, dated as of November 30, 1995 (the
"Registration Rights Agreement"), by and between the Borrower and GFL
Advantage Fund Limited, a British Virgin Islands corporation ("Advantage");
(iii) the shares of Common Stock to be issued upon exercise of
the Stock Payment Option have not been authorized for listing, upon
official notice of issuance, on any national or regional securities
exchange on which the Common Stock is then listed; or have not been
approved for quotation if traded in the over-the-counter market;
(iv) the Computed Price is less than the par value of the Common
Stock;
(v) an Event of Default has occurred and is continuing or has
not been waived; or
(vi) the Common Stock is neither (i) listed or admitted for
trading on a national securities exchange nor (ii) quoted in the Nasdaq
National Market.
(c) If the Stock Payment Option is elected, the Borrower shall issue
and dispatch or cause to be dispatched to the Holder one or more certificates
for the aggregate number of whole shares of Common Stock determined by dividing
the per share Computed Price of the Common Stock into the total amount of lawful
money of the United States of America which the Holder would receive if the
aggregate amount of interest on this Note which is being paid in shares of
Common Stock were being paid in such lawful money. No fractional shares will be
issued in payment of interest on this Note. In lieu thereof, the Borrower may
issue a number of shares of Common Stock which reflects a rounding up to the
next whole number or may pay lawful money of the United States of America. The
shares of Common Stock issued or to be issued by the Borrower in payment of
interest on this Note are sometimes referred to hereinafter as the "Payment
Shares."
(d) If the Borrower exercises the Stock Payment Option with respect
to a payment of interest on this Note, the Borrower shall deliver to the Holder,
on or prior to the date on which Payment Shares for such payment of interest on
this Note are to be dispatched to the Holder, an Officers' Certificate setting
forth
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<PAGE>
(i) the total amount of the interest payment to which the Holder is entitled,
(ii) the portion of the interest payment being made in Payment Shares, (iii) the
number of Payment Shares allocable to such payment, as calculated pursuant to
this Section 1.2, (iv) any rounding adjustment to such number or any payment
necessary to be made pursuant to Section 1.2(c), (v) a brief statement of the
facts requiring such adjustment, (vi) the number of Payment Shares issuable with
respect to each $100 of interest on this Note after such adjustment and (vii) a
brief statement that none of the conditions set forth in Section 1.2(b) has
occurred and is existing. Such Officer's Certificate shall be accompanied by the
certificates and instruments, each duly issued in the name of the Holder,
representing the Payment Shares. Such Officers' Certificate shall be conclusive
evidence of the correctness of the calculation of the number of Payment Shares
allocable to the payments to which such Officers' Certificate relates and of any
adjustments to such number made pursuant to this Section 1.2. In addition, on or
before the pertinent payment date, the Borrower shall cause the transfer agent
for the Common Stock to prepare and issue the certificates representing the
Payment Shares in the name of the Holder before being so delivered by the
Borrower.
(e) The Payment Shares, when dispatched pursuant to and in compliance
with this Section 1.2, shall be, and for all purposes shall be deemed to be,
validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
dispatch thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of such Common Stock, will be, and for
all purposes shall be deemed to be, in full discharge and satisfaction of the
Borrower's obligation to pay the interest on this Note to which such Payment
Shares relate.
(f) As used in this Section 1.2 of this Note, the following terms
shall have the meanings provided herein:
(1) "Computed Price" means the price equal to the arithmetic
average of the per share Bid Price of the Common Stock for the five (5)
consecutive trading days ending on the third trading day prior to the
applicable payment date.
(2) "Officer" means the Chairman or Vice Chairman of the Board,
the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary or the Controller of the Company.
(3) "Officers' Certificate" means a certificate signed by the
Chairman or Vice Chairman of the Board, the President or any Vice President
and by any other Officer or an Assistant Treasurer or Assistant Secretary
of the Company.
(4) "Bid Price" means the closing bid price for one share of the
Common Stock, as reported, quoted or determined by the first applicable
among the following: (a)
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<PAGE>
the principal national stock exchange on which the shares of Common Stock
are listed or (b) the Nasdaq National Market.
ARTICLE II
CONVERSION AND PURCHASE RIGHTS
2.1 CONVERSION RIGHT. The Holder shall have the right from and
----------------
after the date of this Note and then at any time on or prior to the day this
Note is paid in full, to convert at any time all or from time to time any part
of the outstanding and unpaid principal amount of this Note of at least $50,000,
or such lesser amount as shall remain unpaid at the time of the conversion, into
fully paid and nonassessable shares of Common Stock at the conversion price
determined as provided herein (the "Conversion Price"); provided, however, that
-------- -------
one-third of the original principal amount of this Note shall first become
convertible on the date which is 15 days after the date on which the
Registration Statement (the "Registration Statement") filed under the Securities
Act of 1933, as amended (the "Act"), contemplated by Section 2(b) of the
Registration Rights Agreement is first ordered effective by the Securities and
Exchange Commission (the "Effective Date"), another one-third of the original
principal amount of this Note shall first become convertible on the date which
is 45 days after the Effective Date and another one-third of the original
principal amount of this Note shall first become convertible on the date which
is 65 days after the Effective Date; and provided further, however, that in no
-------- ------- -------
event shall Advantage be entitled to convert any portion of the principal amount
of this Note in excess of that portion of the principal amount of this Note upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by Advantage, by GFL Performance Fund Limited
("Performance"), by Genesee Fund Limited-Portfolio B ("GFL-B") and by any person
associated with, or serving as an adviser to, any thereof (each a "GFL Person"
and collectively, the "GFL Persons") (other than shares of Common Stock deemed
beneficially owned through the ownership of the unconverted portion of the
principal amount of this Note or the convertible notes of like tenor purchased
by Performance and GFL-B) and (2) the number of shares of Common Stock issuable
upon the conversion of the portion of the principal amount of this Note with
respect to which the determination in this proviso is being made, would result
in beneficial ownership by any GFL Person of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the second proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in clause (1) of the second
proviso to the immediately preceding sentence. Upon the surrender of this Note,
accompanied by a Notice of Conversion of Convertible Note in the form attached
hereto as EXHIBIT A, properly completed and
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<PAGE>
duly executed by the Holder (a "Conversion Notice"), the Borrower shall issue
and, within three business days after such surrender of this Note with the
Conversion Notice, deliver to or upon the order of the Holder (1) that number of
shares of Common Stock for the portion of the Note converted as shall be
determined in accordance herewith, (2) a new Note in the form hereof for the
balance of the principal amount hereof, if any, and (3) payment of the accrued
and unpaid interest on the portion of the principal amount of this Note so
converted (which payment of interest may be made in accordance with Section 1.2
of this Note if the Company satisfies the requirements thereof). The number of
shares of Common Stock to be issued upon each conversion of this Note shall be
determined by dividing that portion of the principal amount of the Note to be
converted by the Conversion Price in effect on the date the Conversion Notice is
delivered to the Borrower by the Holder.
2.2 CONVERSION PRICE. The Conversion Price shall be 82.5% of the
----------------
Average Market Price for the Common Stock for the five (5) consecutive trading
days ending one trading day prior to the date the Conversion Notice is received
by the Borrower, subject to adjustment as provided herein. If the Registration
Statement covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement is not
effective within 90 days after the Closing Date, then the Conversion Price will
be reduced on each Computation Date by an amount equal to one percent (1%) of
the Average Market Price for the Common Stock for the five (5) consecutive
trading days ending one trading day prior to such Computation Date.
As used in this Section 2.2, the following terms shall have the
following meanings:
"Average Market Price" of any security for any period shall be
computed as the arithmetic average of the closing bid prices for such security
for each trading day in such period on the American Stock Exchange, Inc. (the
"AMEX"), or, if the AMEX is not the principal trading market for such security,
on the principal trading market for such security, as reported by AMEX.
"Computation Date" means the date which is 90 days after the Closing
Date and, if the Registration Statement required to be filed by the Company
pursuant to the Registration Rights Agreement has not theretofore been declared
effective by the Securities and Exchange Commission (the "SEC"), each date which
is 30 days after a Computation Date and, if the Registration Statement required
to be filed by the Company pursuant to Section 2(a) of the Registration Rights
Agreement is not declared effective by the SEC within 90 days after the Closing
Date, the date on which such Registration Statement is declared effective.
Notwithstanding any other provision of this Section 2.2, if as a
result of limitations on budgetary authority of the
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<PAGE>
federal government, the operations of the SEC are suspended or although not
suspended, are continued on a materially limited basis for an entire day, after
the date of this Note (an "SEC Shutdown"), then, so long as the Company shall
have filed the Registration Statement required by Section 2(a) of the
Registration Rights Agreement as and when required by that Section, shall have
used its best efforts to cause such Registration Statement to become effective
as soon as possible after such filing and shall have otherwise complied in all
material respects with the Registration Rights Agreement, then for each regular
SEC business day in excess of an aggregate of 20 regular SEC business days
occurring prior to such effectiveness of the Registration Statement during which
an SEC Shutdown has occurred, the period of 90 days provided in this Section 2.2
shall be extended by one day.
2.3 AUTHORIZED SHARES. The Borrower covenants that during the
-----------------
period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the full conversion of this Note. The
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. The Borrower agrees that its issuance of
this Note shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the conversion of this
Note.
2.4 METHOD OF CONVERSION. Except as otherwise provided in this Note
--------------------
or agreed by the Holder, this Note may be converted by the Holder in whole at
any time or in part from time to time by (1) submitting to the Borrower a
Conversion Notice and (ii) surrendering this Note at the principal office of the
Borrower. Upon partial exercise of the conversion rights provided hereby, a new
Note containing the same date and provisions as this Note shall be issued by the
Borrower to the Holder for the principal balance of this Note which shall not
have been converted. This Note has been issued pursuant to a Note Purchase
Agreement, dated as of November 30, 1995, between the Borrower and the original
Holder of this Note (the "Note Purchase Agreement"). By its acceptance of this
Note, each Holder agrees to be bound by the terms of the Note Purchase
Agreement. This Note has been issued by the Borrower pursuant to the exemption
from registration under the Act provided by Regulation D thereunder.
2.5 CONCERNING THE SHARES. The Shares of Common Stock issuable upon
---------------------
conversion of this Note may not be sold or transferred unless either (i) they
first shall have been registered under the Act and applicable state securities
laws or (ii) the Borrower shall have been furnished with an opinion of legal
counsel, in form, scope and substance reasonably satisfactory to the Company, to
the effect that such sale or transfer is exempt from the registration
requirements of the Act
-7-
<PAGE>
and all applicable state securities laws. Each certificate for shares of Common
Stock issuable upon conversion of this Note that have not been so registered and
that have not been sold pursuant to an exemption that permits removal of the
legend, shall bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL, IN FORM SCOPE AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Note, the Borrower shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if, with such request, the Borrower shall
have received either (i) an opinion of counsel, in form, scope and substance
reasonably satisfactory to the Company, to the effect that any such legend may
be removed from such certificate, or (ii) if the present paragraph (k) of Rule
144 or a substantially similar successor rule remains in force and effect,
satisfactory representations from the holder that such holder is not then, and
has not been during the preceding three (3) months, an affiliate of the
Borrower, and that a period of at least three (3) years has elapsed since the
later of the date the securities were acquired (as determined under Rule 144)
from the Borrower or an affiliate of the Borrower.
2.6 CERTAIN PAYMENTS IN LIEU OF CONVERSION. In no event shall the
--------------------------------------
Borrower issue more than 8,142,578 shares of Common Stock, less the aggregate
number of shares of Common Stock issued by the Company issued pursuant to the
Subscription Agreement, dated as of November 30, 1995, by and between the
Borrower and Advantage and the Subscription Agreement, dated as of November 30,
1995, by and between the Borrower and Performance, such difference to be subject
to adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock
occurring after the date hereof (as so adjusted, the "Maximum Share Amount")
upon conversion of this Note, the Convertible Note, dated the date hereof, in
the original principal amount of $3,500,000.00 issued by the Company to
Performance (the "Performance Note") and the Convertible Note, dated the date
hereof, in the original principal amount of $6,000,000.00 issued by the Company
to GFL-B (the "GFL-B Note"). Once the Maximum Share Amount has been issued, the
remaining outstanding principal amount of this Note shall be immediately due and
payable and the Borrower shall pay to the Holder in immediately available funds
an
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<PAGE>
amount equal to the sum of (1) the outstanding principal amount of this Note
plus (2) an amount equal to 14 percent of the outstanding principal amount of
this Note, together with accrued and unpaid interest on such principal amount to
the payment date. As among this Note, the Performance Note and the GFL-B Note,
the Borrower shall give effect to Conversion Notices and notices of conversion
under the Performance Note and the GFL-B Note in the order in which given by the
Holder and the holders of such notes.
2.7 CONVERSION AT OPTION OF BORROWER. So long as no Event of
--------------------------------
Default shall have occurred and be continuing and so long as the Registration
Statement shall be effective, the Borrower shall have the right, exercisable at
any time or from time to time after the date which is 65 days after the
Effective Date by at least ten business days but not more than 15 business days
prior notice (a "Borrower Conversion Notice") to the Holder, to require the
Holder to convert, in accordance with the provisions, and subject to the
limitations, of this Article II, all or any part of the outstanding principal
amount of this Note into shares of Common Stock to the extent the same is at
such time convertible into shares of Common Stock. The Borrower Conversion
Notice shall state (1) the principal amount of this Note which the Borrower
seeks to require to be converted into shares of Common Stock and (2) the
conversion date (which shall not be less than ten business days or more than 15
business days after the date the Borrower Conversion Notice is given). If the
Borrower shall give a Borrower Conversion Notice, then, unless theretofore
converted by the Holder in accordance herewith or repaid by the Borrower or the
same shall have become due and payable (whether at maturity, upon acceleration
or otherwise), and, so long as the Registration Statement shall remain effective
on such conversion date and the Borrower shall be in compliance in all material
respects with its obligations under the Registration Rights Agreement on such
conversion date, on the conversion date properly set forth therein, the lesser
of (A) the principal amount of this Note which the Borrower seeks to require to
be converted, as set forth in such Borrower Conversion Notice or (B) the maximum
principal amount of this Note which on such conversion date is convertible in
accordance with Section 2.1 of this Note, shall be converted into such number of
shares of Common Stock as shall be determined pursuant to Section 2.1 and 2.2 of
this Note as if the conversion of such principal amount of this Note were made
by the Holder in accordance therewith. Upon the surrender of this Note by the
Holder after a Borrower Conversion Notice is given, the Borrower shall issue
and, within three trading days after such surrender of this Note, deliver to or
upon the order of the Holder (1) that number of shares of Common Stock for the
portion of the Note converted as shall be determined in accordance herewith, (2)
a new Note in the form hereof for the balance of the principal amount hereof, if
any, and (3) payment of the accrued and unpaid interest on the portion of the
principal amount of this Note so converted (which payment of interest may be
made in accordance with Section
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<PAGE>
1.2 of this Note if the Company satisfies the requirements thereof).
ARTICLE III
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails (a) to
------------------------------------
pay the principal hereof when due, whether at maturity, upon redemption, upon
acceleration or otherwise or (b) to pay any installment of interest hereon when
due and, in the case of this clause (b) only, such failure continues for a
period of two (2) days after the due date thereof;
3.2 CONVERSION AND THE SHARES. The Borrower fails to issue shares
-------------------------
of Common Stock to the Holder upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this Note, fails to
transfer any certificate for shares of Common Stock issued to the Holder upon
conversion of this Note and when required by this Note or the Registration
Rights Agreement, or fails to remove any restrictive legend on any certificate
or any shares of Common Stock issued to the Holder upon conversion of this Note
as and when required by this Note, the Agreement or the Registration Rights
Agreement;
3.3 BREACH OF COVENANT. The Borrower breaches any material covenant
------------------
or other material term or condition of this Note (other than as specifically
provided in Sections 3.1 and 3.2 hereof), the Note Purchase Agreement or the
Registration Rights Agreement and such breach continues for a period of ten
business (10) days after written notice thereof to the Borrower from the Holder;
3.4 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
----------------------------------------
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Note Purchase Agreement and the Registration
Rights Agreement), shall be false or misleading in any material respect when
made and, in the case of any such false or misleading representation or warranty
as to which the facts or events underlying such falsehood or misleading nature
are reasonably capable of cure without material adverse effect on the Holder,
the same shall not have not have been cured within ten business days;
3.5 BANKRUPTCY, RECEIVERSHIP, ETC. The Borrower, pursuant to or
-----------------------------
within the meaning of Title 11, U.S. Code or any similar federal or state law
for the relief of debtors (each, a "Bankruptcy Law") (a) admits in writing its
inability to pay its
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<PAGE>
debts generally as they become due, (b) commences a voluntary case or
proceeding, (c) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding, (d) consents to the appointment
of a custodian, receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law (each, a "Custodian") of it or for all or
substantially all of its property, (e) consents to the institution of bankruptcy
or insolvency proceedings against it, (f) applies for, consents to or acquiesces
in the appointment of or taking possession by a Custodian of the Company or for
any substantial part of its property, (g) makes a general assignment for the
benefit of its creditors or (h) takes any corporate action in furtherance of any
of the foregoing;
3.6 JUDGMENTS. Any money judgment, writ or similar process shall be
---------
entered or filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $1,000,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;
3.7 CERTAIN ADJUDICATIONS AND APPOINTMENTS. A court of competent
--------------------------------------
jurisdiction enters a judgment, decree or order for relief in respect of the
Company in an involuntary case or proceeding under any Bankruptcy Law which
shall (a) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company, (b) appoint a
Custodian of the Company or for any substantial part of its property or (c)
order the winding-up or liquidation of its affairs; and such judgment, decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or any bankruptcy or insolvency petition or application is filed, or any
bankruptcy or insolvency proceeding is commenced, against the Company and such
petition, application or proceeding is not dismissed within 60 days; or
3.8 CROSS-DEFAULT. An "Event of Default," as defined in the
-------------
Performance Note or the GFL-B Note, shall have occurred and be continuing;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.6 or 3.8, at the option of the Holder
hereof, the Borrower shall, and upon the occurrence of any event of default
specified in Section 3.5 or 3.7, the Borrower shall, pay to the Holder an amount
equal to the sum of (1) the unpaid principal amount of this Note plus (2) an
amount equal to 21.21 percent of the unpaid principal amount of this Note, plus
accrued and unpaid interest on the unpaid principal amount of this Note to the
date of payment and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including,
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<PAGE>
without limitation, legal fees and expenses, of collection, and the Holder shall
be entitled to exercise all other rights and remedies available at law or in
equity. If prior to or after the occurrence of any event which would be an Event
of Default the Holder shall have waived the same in writing, such event shall
not be deemed an Event of Default for any purpose.
ARTICLE IV
MISCELLANEOUS
4.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
--------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2 NOTICES. Any notice herein required or permitted to be given
-------
shall be in writing and may be personally served or delivered by courier or sent
by United States mail and shall be deemed to have been given upon receipt if
personally served or sent by courier or three (3) days after being deposited in
the United States mail, certified, with postage pre-paid and properly addressed,
if sent by mail. For the purposes hereof, the address of the Holder shall be as
shown on the records of the Borrower; and the address of the Borrower shall be
One Tower Bridge, 100 Front Street, West Conshohocken, Pennsylvania 19428,
Attention: President. Both the Holder and the Borrower may change the address
for service by service of written notice to the other as herein provided.
4.3 AMENDMENT PROVISION. The term "Note" and all reference thereto,
-------------------
as used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and
-------------
its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns.
4.5 COST OF COLLECTION. If default is made in the payment of this
------------------
Note, the Borrower shall pay the Holder hereof costs of collection, including
attorneys' fees.
4.6 GOVERNING LAW. This Note shall be governed by the internal laws
-------------
of the State of New York, without regard to the principles of conflict of laws.
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<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer on the day and in the year first above
written.
U.S. BIOSCIENCE, INC.
By_______________________________
Name:
Title:
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<PAGE>
Exhibit A
---------
NOTICE OF CONVERSION
OF CONVERTIBLE NOTE
TO: U.S. BIOSCIENCE, INC.
(1) Pursuant to the terms of the attached Convertible Note (the "Note"),
the undersigned hereby elects to convert $________ principal amount of the Note
into shares of Common Stock of U.S. BIOSCIENCE, INC., a Delaware corporation
(the "Borrower"). Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
(2) Please issue a certificate or certificates for the number of shares of
Common Stock into which such principal amount of the Note is convertible in the
name(s) specified immediately below or, if additional space is necessary, on an
attachment hereto:
_____________________ _____________________
Name Name
_____________________ _____________________
Address Address
_____________________ _____________________
SS or Tax ID Number SS or Tax ID Number
(3) In the event of partial exercise, please reissue an appropriate Note
for the principal balance which shall not have been converted. Capitalized terms
used in this Notice of Conversion and not otherwise defined herein shall have
the respective meanings provided in the Note.
(4) If the shares of Common Stock issuable upon conversion of the Note have
not been registered under the Securities Act of 1933, as amended (the "Act"),
the undersigned represents and warrants that (i) such shares of Common Stock are
being acquired for the account of the undersigned for investment, and not with a
view to, or for resale in connection with, the distribution thereof, and that
the undersigned has no present intention of distributing or reselling such
shares and (ii) the undersigned is an "accredited investor" as defined in
Regulation D under the Act. The undersigned further agrees that (A) such shares
shall not be sold or transferred unless either (i) they first shall have been
registered under the Act and applicable state securities laws or (ii) the
Borrower first shall have been furnished with an opinion of legal counsel, in
form, scope and substance reasonably satisfactory to the Borrower, to the effect
that such sale or transfer is exempt from the registration requirements of the
Act and (B) the Borrower may place a legend on the certificate(s) for
A-1
<PAGE>
the shares to that effect and place a stop-transfer restriction in its records
relating to the shares.
Date _________________________ ______________________________
Signature of Registered Holder
(must be signed exactly as name
appears in the Note. The signature
must be guaranteed by a member firm
of the NYSE or the NASD or by a
commercial bank or trust company
having an office in the U.S.)
A-2
<PAGE>
Exhibit 4
ANNEX II
TO
SUBSCRIPTION
AGREEMENT
(ADVANTAGE)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 30, 1995
(this "Agreement"), is made by and between U.S. BIOSCIENCE, INC., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Subscription Agreement, dated as of
November 30, 1995, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Subscription Agreement, to issue and sell to the Initial
Investor shares (together with any shares of Common Stock which may be issued
by the Company to the Initial Investor pursuant to Section 2(c) of this
Agreement, the "Shares") of Common Stock, $.005 par value (the "Common Stock"),
of the Company upon the terms and subject to the conditions of the Subscription
Agreement;
WHEREAS, in connection with the Note Purchase Agreement, dated as of
November 30, 1995, between the Initial Investor and the Company (the "Note
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Note Purchase Agreement, to issue and sell to the Initial
Investor a convertible note of the Company which will be convertible into shares
of Common Stock and interest on which note may be paid through the issuance of
shares of Common Stock in lieu of cash interest on such note (collectively, the
"Note Shares"), upon the terms and subject to the conditions of such note; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement and the Note Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "Securities Act"), and applicable state securities
laws with respect to the Shares and the Note Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
<PAGE>
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the Shares and the Note Shares.
(iv) "Registration Statement" means a registration statement of
the Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement and
the Note Purchase Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. The Company shall prepare, and on or
prior to the date which is ten days after the date of the closing under the Note
Purchase Agreement (the "Closing Date"), file with the SEC a Registration
Statement on Form S-3 covering at least 8,142,578 shares of Common Stock as
Registrable Securities hereunder and under the Registration Rights Agreements,
dated as of the date hereof, by and between the Company and each of GFL
Performance Fund Limited and Genesee Fund Limited-Portfolio B, and which
Registration Statement shall state that, in accordance with Rule 416 under the
Securities Act, such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Note to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(b) If any offering pursuant to a Registration Statement pursuant to
Section 2(a) hereof involves an underwritten offering, the Investors who hold a
majority in interest of the Registrable Securities subject to such underwritten
offering shall have the
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<PAGE>
right to select one legal counsel and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(C) PAYMENTS BY THE COMPANY. If the Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not effective within 90 days after the Closing Date, then
the Company will make payments to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(c). The amount to
be paid by the Company to the Initial Investor shall be determined as of each
Computation Date, and such amount shall be equal to one percent (1%) of the
Aggregate Market Value on the Closing Date of the number of shares of Common
Stock purchased by the Initial Investor pursuant to the Subscription Agreement
for each Computation Date (the "Periodic Amount"); provided, however, that the
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Company may elect in lieu of payment of any Periodic Amount in cash to deliver
to the Initial Investor not later than the due date of such cash payment shares
of Common Stock having a Computed Value equal to the amount of the Periodic
Amount if, but only if, such shares will be included in the Registration
Statement required to be filed pursuant to this Section 2 (a); and provided
--------
further, however, that in no event shall the Company be obligated to pay
- ------- -------
pursuant to this Section 2(c) an aggregate amount in excess of 17.5 percent
(17.5%) of the aggregate market value on the Closing Date of the number of
shares of Common Stock purchased by the Initial Investor pursuant to the
Subscription Agreement for all Computation Dates. The full Periodic Amount
shall be paid by the Company in immediately available funds within three
business days after each Computation Date.
As used in this Section 2(c), the following terms shall have the
following meanings:
"Average Market Price" of any security for any period shall be
computed as the mean average of the closing bid prices of such security for each
trading day in such period on the principal trading market for such security, as
reported by the American Stock Exchange, Inc. (the "AMEX").
"Computation Date" means the date which is 90 days after the Closing
Date and, if the Registration Statement required to be filed by the Company
pursuant to Section 2(a) has not theretofore
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<PAGE>
been declared effective by the SEC, each date which is 30 days after a
Computation Date and, if the Registration Statement required to be filed by the
Company pursuant to Section 2(a) is not declared effective by the SEC within 90
days after the Closing Date, the date on which such Registration Statement is
declared effective.
"Computed Value" of any shares of Common Stock as of any Computation
Date means the product obtained by multiplying (a) such number of shares of
Common Stock times (b) 82.5% of the Average Market Price of the Common Stock for
the Measurement Period for such Computation Date.
"Measurement Period" means the period of ten consecutive trading days
for the Common Stock ending on (or, if such Computation Date is not a trading
day, on the last trading day preceding) each Computation Date.
Notwithstanding any other provision of this Section 2(c), if as a
result of limitations on budgetary authority of the federal government, the
operations of the SEC are suspended or although not suspended, are continued on
a materially limited basis for an entire day, after the Closing Date (an "SEC
Shutdown"), then, so long as the Company shall have filed the Registration
Statement required by Section 2(a) as and when required by that Section, shall
have used its best efforts to cause such Registration Statement to become
effective as soon as possible after such filing and shall have otherwise
complied in all material respects with this Agreement, then for each regular SEC
business day in excess of an aggregate of 20 regular SEC business days occurring
prior to such effectiveness of the Registration Statement during which an SEC
Shutdown has occurred, the period of 90 days provided in this Section 2(c) shall
be extended by one day.
(D) PIGGY-BACK REGISTRATIONS. If at any time prior to the date which
is three years after the Closing Date the Company shall file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration
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<PAGE>
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
-------- -------
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are entitled to
inclusion of such securities in such Registration Statement by reason of
piggyback registration rights, are not entitled to pro rata exclusion with the
Registrable Securities and are not entitled by right to inclusion of securities
in such Registration Statement; and provided further, however, that, after
-------- ------- -------
giving effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(d) may be waived by Investors
holding a majority in interest of the Registrable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(d) for two registrations; provided,
--------
however, that any Investor who shall have had any Registrable Securities
- -------
excluded from any Registration Statement in accordance with this Section 2(d)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registrable Securities so excluded. If an offering in connection
with which an Investor is entitled to registration under this Section 2(d) is an
underwritten offering, then each investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
(E) ELIGIBILITY FOR FORM S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investor and any Investor of the Registrable Securities and
the Company shall file all reports required to be filed by the Company with the
SEC in a timely manner so as to maintain such eligibility for the use of Form S-
3.
-5-
<PAGE>
(F) SALES UNDER RULE 144. Notwithstanding the registration of
Registrable Securities in accordance with Section 2(a), if at the time of offer
and sale of such Registrable Securities by an Investor such Registrable
Securities could be sold pursuant to Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public without
registration ("Rule 144") in the manner, amount and on such terms as such
Investor wishes to offer and sell such Registrable Securities, such Investor
shall endeavor to offer and sell such Registrable Securities pursuant to Rule
144; provided, however, that such Investor shall not be required to limit the
-------- -------
amount or manner of sale or otherwise modify such offer or sale to use Rule 144;
and provided further, however, that such Investor shall have no liability to the
-------- ------- -------
Company under this Section 2(f) if such Investor shall fail to offer and sell
such Registrable Securities pursuant to Rule 144 notwithstanding the
availability thereof.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than ten days
after the Closing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its best
efforts to cause each Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is three years after the date such Registration Statement is first
ordered effective by the SEC, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any 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, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until such
date as is three years after the date such Registration Statement is first
ordered effective by the SEC, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
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<PAGE>
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto and, in the case of the Registration Statement referred to in Section
2(a), each letter written by or on behalf of the Company to the SEC or the staff
of the SEC, each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions in the United States as the
Investors who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times until three years after the Registration
Statement is ordered effective by the SEC, (iii) take such other actions as may
be necessary to maintain such registrations and qualifications in effect at all
times until the such date as is the earlier of three years after the date such
Registration Statement is first ordered effective by the SEC or is three years
after the Initial Investor acquired the Shares and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that the Company shall not be required
-------- -------
in connection therewith or as a condition thereto to (I) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) subject itself to general taxation in any such
jurisdiction, (III) file a general consent to service of process in any such
jurisdiction, (IV) provide any undertakings that cause more than nominal expense
or burden to the Company or (V) make any change in its charter or by-laws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders;
(e) in the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering select underwriters for the
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
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<PAGE>
indemnification and contribution obligations, with the underwriters of such
offering;
(f) as promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request; provided, however, that if
-------- -------
such event does not relate to a potential untrue statement of a material fact or
omission to state a material fact in such prospectus at any time prior to the
time the Company first notifies Investors of such event, then the Company shall
not be required to disclose to Investors the Specific nature of such event until
the Company first publicly discloses the specific nature of such event.
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any stop order or other suspension of effectiveness of the
Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and shall not file any document in a form to which such
counsel reasonably objects;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(j) at the request of the Investors who hold a majority in interest
of the Registrable Securities being sold, furnish on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent
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<PAGE>
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters; and (ii) an opinion, dated such date, from
counsel representing the Company for purposes of such Registration Statement, in
form and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors;
(k) make available for inspection by (1) any Investor, (2) any
underwriter participating in any disposition pursuant to the Registration
Statement, (3) one firm of attorneys and one firm of accountants or other agents
retained by the Initial Investor, (4) one firm of attorneys and one firm of
accountants or other agents retained by all other Investors and (5) one firm of
attorneys retained by all such underwriters (collectively, the "Inspectors"),
all pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
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shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. The Company shall hold in confidence and
shall not make any disclosure of information concerning an Investor provided to
the Company pursuant to Section 4(e) hereof unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has been
made generally available to the public other
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<PAGE>
than by disclosure in violation of this or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information;
(l) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange or (ii) secure designation of all the Registrable
Securities covered by the Registration Statement as a National Association of
Securities Dealers Automated Quotations System ("NASDAQ") "national market
system security" within the meaning of Rule 11Aa2-1 of the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Securities on the NASDAQ National Market System or,
if, despite the Company's best efforts to satisfy the preceding clause (i) or
(ii), the Company is unsuccessful in satisfying the preceding clause (i) or
(ii), to secure listing on a national securities exchange or NASDAQ
authorization and quotation for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities
being offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates to be in such
denominations or amounts as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2; and
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<PAGE>
(o) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of such Investor's Registrable Securities included in the Registration
Statement. If at least one (1) business day prior to the filing date the Company
has not received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately
-11-
<PAGE>
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
3(f) or 3(g) and, if so directed by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company
and, up to the amount of $2,500.00, the Investors, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and out-of-
-------- -------
pocket expenses of the one legal counsel selected by the Investors pursuant to
Section 2(b) hereof; and provided further, however, that if after the
-------- ------- -------
Registration Statement to be filed by the Company pursuant to Section 2(a) is
first ordered effective by the SEC the Investors determine to make an
underwritten public offering of Registrable Securities pursuant to such
Registration Statement, then any cost of revising and preparing a revised
prospectus and/or Registration Statement for such offering will be borne by the
Investors.
6. INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or
-12-
<PAGE>
the Exchange Act, any underwriter (as defined in the Securities Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Exchange Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
-13-
<PAGE>
pursuant to Section 3(c) hereof; (II) with respect to any preliminary prospectus
shall not inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (III) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company; and (IV) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
-------- -------
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this Section
- -------- ------- -------
6(b) for only that amount of a Claim as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
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<PAGE>
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
--------
however, that an Indemnified Person or Indemnified Party shall have the right to
- -------
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
-------- -------
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the
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<PAGE>
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(e) of
the Subscription Agreement and Section 4(e) of the Note Purchase Agreement, as
the case may be) and the filing of such reports and other documents is required
for the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
having an original purchase price paid by the Initial Investor of $2 Million of
such securities (or all or any portion in the principal amount of $3 million or
more of any note of the Company which is convertible into such securities) of
Registrable Securities only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities
-16-
<PAGE>
by the transferee or assignee is restricted under the Securities Act and
applicable state securities laws, (d) at or before the time the Company received
the written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein, (e) such transfer shall have been made in accordance with the
applicable requirements of Sections 4(a) and 4(b) of the Subscription Agreement
and Sections 4(a) and 4(b) of the Note Purchase Agreement, as the case may be,
and (f) such transferee shall be an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission or other means)
or sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid (i) if to the Company, at U.S. Bioscience, Inc., One
Tower Bridge, 100 Front Street, West Conshohocken, Pennsylvania 19428,
Attention: President, (ii) if to the Initial Investor, at the address set forth
under its name in the Subscription Agreement and (iii) if to any other Investor,
at such address as such Investor shall have provided in writing to the Company,
or at such other address as each such party furnishes by notice given in
accordance with this Section 11(b), and shall be effective, when personally
delivered, upon receipt and, when so sent by certified mail, four days after
deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
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<PAGE>
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
U.S. BIOSCIENCE, INC.
By__________________________
Name:
Title:
INITIAL INVESTOR:
NAME: GFL ADVANTAGE FUND
LIMITED
By__________________________
Name:
Title:
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<PAGE>
EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to transfer or re-register the certificates for the shares of Common
Stock, $.005 par value (the "Common Stock"), of U.S. Bioscience, Inc., a
Delaware corporation (the "Company"), represented by certificate numbers _______
and _______ for an aggregate of _______ shares (the "Outstanding Shares") of
Common Stock presently registered in the name of [Name of Investor] upon
surrender of such certificate to you, notwithstanding the legend appearing on
such certificates, and (2) to issue shares (the "Conversion Shares") of Common
Stock to or upon the order of the registered holder from time to time of the
Convertible Note, dated December __, 1995, of the Company in the original
principal amount of $____________ upon surrender to you for conversion of a
properly completed and duly executed Conversion Notice in the form enclosed
herewith. The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares. Certificates for the Conversion
Shares should not bear any restrictive legend and should not be subject to any
stop-transfer restriction.
Contemporaneous with the delivery of this letter, the Company is
delivering to you an opinion of ____________________ as to registration of the
Outstanding Shares and the Conversion Shares under the Securities Act of 1933,
as amended.
1-1
<PAGE>
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
U.S. BIOSCIENCE, INC.
By: _______________________________
Name:
Title:
Enclosures
cc: [Name of Investor]
1-2
<PAGE>
EXHIBIT 2
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
U.S. BIOSCIENCE, INC.
SHARES OF COMMON STOCK
----------------------
Ladies and Gentlemen:
We are counsel to U.S. Bioscience, Inc., a Delaware corporation (the
"Company"), and we understand that [Name of Investor] (the "Holder") has
purchased from the Company (1) an aggregate of __________ shares (the "Shares")
of the Company's Common Stock, $.005 par value (the "Common Stock"), represented
by Certificate No. __________ and (2) a convertible note in the principal amount
of $____________ (the "Note") of the Company. The Shares were purchased by the
Holder pursuant to a Subscription Agreement, dated as of November 30, 1995,
between the Holder and the Company (the "Subscription Agreement"). The Note was
purchased by the Holder pursuant to a Note Purchase Agreement, dated as of
November 30, 1995, between the Holder and the Company (the "Note Purchase
Agreement"). Pursuant to a Registration Rights Agreement, dated as of November
30, 1995, between the Company and the Holder (the "Registration Rights
Agreement") entered into in connection with the purchase by the Holder of the
Shares and the Note, the Company agreed with the Holder, among other things, to
register the Shares and shares of Common Stock issuable upon the conversion of
the Note (the "Conversion Shares") under the Securities Act of 1933, as amended
(the "Securities Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the exercise by the Holder of its registration
rights under the Registration Rights Agreement, on __________, the Company filed
a Registration Statement on Form S-__ (File No. 33-__________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Shares and the Conversion Shares, which names the Holder
as a selling stockholder thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Shares and the
Conversion Shares have been registered under the Securities Act.
2-1
<PAGE>
[Other appropriate language to be included.]
Very truly yours,
cc: [Name of Investor]
2-2
<PAGE>
EXHIBIT 5
<PAGE>
ETHYOL(R) (AMIFOSTINE)
DISTRIBUTION AND MARKETING COLLABORATION AGREEMENT
BETWEEN
US BIOSCIENCE, INC.
AND
ALZA CORPORATION
DECEMBER 12,1995
* The Confidential material contained herein has been
omitted and has been separately filed with the Commission.
<PAGE>
TABLE OF CONTENTS
ARTICLE - I................................................................. 1
DEFINITIONS................................................................. 1
1.1 "AFFILIATE"............................................. 1
1.2 "ALZA".................................................. 2
1.3 "COLLABORATION COMMITTEE"............................... 2
1.4 "COMMERCIAL KNOW-HOW"................................... 2
1.6 "COPROMOTION PERIOD".................................... 2
1.7 "DEVELOPMENT COSTS"..................................... 2
1.8 "EFFECTIVE DATE"........................................ 2
1.9 "EXTENSION PERIOD"...................................... 2
1.10 "FDA"................................................... 2
1.11 "LAUNCH DATE"........................................... 3
1.12 "MANAGED CARE SETTING".................................. 3
1.13 "MARKETING PLAN"........................................ 3
1.15 "NET SALES"............................................. 3
1.16 "PATENTS"............................................... 4
1.17 "PRODUCT"............................................... 4
1.18 "REGULATORY APPROVAL"................................... 4
1.19 "RESEARCH AND DEVELOPMENT".............................. 4
1.20 "RESIDUAL PERIOD"....................................... 4
1.21 "SALES CALL"............................................ 4
1.22 "SCIENTIFIC KNOW-HOW"................................... 5
1.23 "SPECIFICATIONS"........................................ 5
1.24 "TERRITORY"............................................. 5
1.25 "THIRD PARTY"........................................... 5
1.26 "TRADEMARK"............................................. 5
1.27 "USB"................................................... 5
1.28 "VIAL".................................................. 5
ARTICLE II.................................................................. 6
2.1 Collaboration Committee................................. 6
2.2 Meetings................................................ 6
2.3 Specific Responsibilities of the COLLABORATION
COMMITTEE............................................... 6
2.4 Quorum; Voting.......................................... 7
ARTICLE III................................................................. 8
3.1 Appointment of ALZA as Exclusive Distributor;
Use of TRADEMARKS....................................... 8
3.2 Acceptance of Appointment............................... 9
3.3 No Rights by Implication; USB Retained Rights........... 9
3.4 No Sales outside the TERRITORY.......................... 10
3.5 No Competitive Products................................. 10
3.6 Extension of COPROMOTION PERIOD......................... 11
ARTICLE IV.................................................................. 14
4.1 Advertising and Promotional Materials................... 14
4.2 Marketing Plan.......................................... 16
4.3 Party Names; Packaging and Labelling.................... 16
4.4 Advertising and Promotional Expenses.................... 17
i
<PAGE>
4.5 ALZA Sales Efforts and Sales Force...................... 18
4.6 Medical Inquiries....................................... 20
4.7 Customer Complaints..................................... 20
4.8 USB Sales Efforts and Sales Force....................... 21
4.9 Training................................................ 22
4.10 SALES CALL Reports...................................... 22
ARTICLE V................................................................... 23
5.1 Oversight............................................... 23
5.2 Responsibilities of the Parties......................... 23
5.3 Compliance with Law..................................... 25
5.4 DEVELOPMENT COSTS....................................... 25
ARTICLE VI.................................................................. 25
6.1 Purchase Orders......................................... 25
6.2 Supply of PRODUCT....................................... 25
6.3 Purchase Volumes........................................ 26
6.4 Rolling Twelve Month Forecasts.......................... 26
6.5 Introduction and Supply of
Nonrefrigerated PRODUCT................................. 26
6.6 Purchase Price Per VIAL for PRODUCT..................... 27
6.7 USB Shipment............................................ 29
6.8 Title to PRODUCT........................................ 29
6.9 Payment for PRODUCT..................................... 30
6.10 PRODUCT Warranty........................................ 30
6.11 Quality Assurance; Defective PRODUCTS................... 30
6.12 SPECIFICATIONS.......................................... 32
6.13 Alternate Manufacture................................... 32
6.14 Bankruptcy.............................................. 33
ARTICLE VII................................................................. 34
7.1 Upfront Payments and Distribution Fees.................. 34
7.2 [ * ]................................................... 35
ARTICLE VIII................................................................ 35
8.1 Reverse PRODUCT Payment................................. 35
8.2 Reverse PRODUCT Payment Terms........................... 37
8.3 USB Diligence........................................... 37
ARTICLE IX.................................................................. 37
9.1 Licenses, Filings, Registrations,
Permits and REGULATORY APPROVALS........................ 37
9.2 Communication With Agencies............................. 37
9.3 Governmental Inspections................................ 38
9.4 Adverse Reactions, etc.................................. 38
9.5 PRODUCT Recalls, etc.................................... 39
ARTICLE X................................................................... 40
10.1 Ownership of SCIENTIFIC KNOW-HOW and COMMERCIAL
KNOW-HOW; Disclosure.................................... 40
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10.2 Confidential Information................................ 42
10.3 AFFILIATES and Sublicensees............................. 43
10.4 Ownership............................................... 44
10.5 Legal Proceedings....................................... 44
10.6 Public Announcements.................................... 44
10.7 Publications............................................ 45
ARTICLE XI.................................................................. 45
11.1 THIRD PARTY Patent or Trademark Litigation.............. 45
11.2 Infringement............................................ 45
11.3 Control of Litigation, Assistance and Settlement........ 46
11.4 Expenses and Awards..................................... 46
11.5 Obligation to Inform.................................... 46
ARTICLE XII................................................................. 46
12.1 Term.................................................... 47
12.2 Termination by Either Party............................. 47
12.3 Termination by ALZA..................................... 47
12.4 Termination by USB...................................... 48
ARTICLE XIII................................................................ 48
13.1 Monies Paid or Due...................................... 48
13.2 Termination of Distribution Rights...................... 49
13.3 Remaining PRODUCT....................................... 50
13.4 Transfer of Information................................. 50
13.5 Transfer of Reimbursement Approvals and
Purchase Contracts...................................... 50
13.6 Survival of Rights...................................... 50
13.7 Rights Not Exclusive.................................... 51
13.8 Safety Events........................................... 51
ARTICLE XIV................................................................. 51
14.1 Records................................................. 51
14.2 Place of Payment; Interest.............................. 52
14.3 No Set-offs, etc........................................ 52
14.4 Taxes................................................... 52
ARTICLE XV.................................................................. 53
15.1 Mutual Authority........................................ 53
15.2 Compliance with Applicable Laws......................... 53
15.3 Debarment............................................... 53
ARTICLE XVI................................................................. 53
16.1 Indemnification by ALZA................................. 53
16.2 Indemnification by USB.................................. 54
16.3 Conditions to Indemnification........................... 54
16.4 Settlements, etc........................................ 54
16.5 Limitation of Liability................................. 54
16.6 Insurance............................................... 55
iii
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ARTICLE XVII................................................................ 55
17.1 Force Majeure........................................... 55
17.2 Governing Law........................................... 55
17.3 Injunctive Relief....................................... 55
17.4 Dispute Resolution...................................... 56
17.5 Severability............................................ 56
17.6 Entire AGREEMENT........................................ 57
17.7 Amendment............................................... 57
17.8 Notices................................................. 57
17.9 Assignment and Binding Effect........................... 58
17.10 Headings and References................................. 59
17.11 No Agency............................................... 59
17.12 No Strict Construction.................................. 59
17.13 Counterparts............................................ 59
LIST OF APPENDICES
Appendix A - DEVELOPMENT COSTS.............................................. 61
iv
<PAGE>
THIS DISTRIBUTION AND MARKETING COLLABORATION AGREEMENT (hereinafter
"AGREEMENT") is made this 12th day of December, 1995, between US Bioscience,
Inc., a Delaware corporation ("USB"), and ALZA Corporation, a Delaware
corporation ("ALZA").
WITNESSETH THAT:
WHEREAS, USB is developing Ethyol(R) (amifostine) for use in reducing
toxicities of certain chemotherapeutic agents and as a radioprotective agent.
WHEREAS, ALZA is in the business of developing and commercializing
pharmaceutical products and USB desires to obtain the expertise of ALZA as USB's
exclusive distributor for Ethyol in the United States.
WHEREAS, USB and ALZA desire that USB copromote Ethyol with ALZA in the
United States.
WHEREAS, USB and ALZA desire to enter into an agreement to conduct further
clinical tests, promote, market, sell and distribute PRODUCT in the TERRITORY
(as such terms are hereinafter defined) on the terms set forth in this
AGREEMENT.
NOW, THEREFORE, in consideration of the covenants and obligations expressed
herein, and intending to be legally bound, the parties agree as follows:
ARTICLE - I
DEFINITIONS
1.1 "AFFILIATE" shall mean any corporation, firm, partnership or other
---------
entity, whether de jure or de facto, which, at the time in question, is directly
or indirectly owned by or controlled by, or under common control with, ALZA or
USB, as the case may be. For the purposes of this definition, "control" shall
mean the ownership, directly or indirectly, of more than 50% (fifty percent) of
the voting stock or shareholders' equity of a corporation or, in the case of a
non-corporate entity, the right to receive more than 50% (fifty percent) of
either the profits or the assets upon dissolution.
1
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1.2 "ALZA" shall mean ALZA Corporation and its AFFILIATES.
----
1.3 "COLLABORATION COMMITTEE" shall mean the committee described in
-----------------------
Article II.
1.4 "COMMERCIAL KNOW-HOW" shall mean all commercial trade secret
--------------------
information relating to commercialization of the PRODUCT, and shall include
without limitation, customer lists, MARKETING PLANS, surveys, SALES CALL lists,
market research, customer information, service information, marketing strategy,
training materials, sales and marketing materials prepared by or on behalf of
ALZA or USB, and other information in the possession of a party or its agents
relating to advertising, marketing, promotion or commercial sale of PRODUCT.
1.5 "CONTRACT YEAR" shall mean the period beginning the first day of the
--------------
first full calendar quarter following the LAUNCH DATE and ending on the first
anniversary thereof, and each consecutive twelve-month period thereafter during
the COPROMOTION PERIOD.
1.6 "COPROMOTION PERIOD" shall mean the period beginning on the date
------------------
hereof and continuing until the end of the fifth CONTRACT YEAR, unless
terminated earlier in accordance with the provisions of Article XII hereof.
1.7 "DEVELOPMENT COSTS" shall mean all costs incurred and appropriately
-----------------
documented by a party in connection with RESEARCH AND DEVELOPMENT, plus the
costs of attainment and maintenance of necessary regulatory approvals for
PRODUCT as such costs are determined in accordance with Appendix A hereto.
1.8 "EFFECTIVE DATE" shall mean the date as of which this AGREEMENT is
--------------
effective and shall be the date of this AGREEMENT as first written above.
1.9 "EXTENSION PERIOD" shall mean the period, if any, during which the
-----------------
COPROMOTION PERIOD is extended by ALZA in accordance with the provisions of
Section 3.6 hereof.
1.10 "FDA" shall mean the United States Food and Drug Administration.
---
2
<PAGE>
1.11 "LAUNCH DATE" shall mean the date of first commercial sale of
-----------
PRODUCT in the TERRITORY by ALZA.
1.12 "MANAGED CARE SETTING" shall mean an HMO, IPO, PPO, PBM, VA or
--------------------
military hospital and/or state medicaid organization or other similar
organization for delivery of health care or prescription benefits in a managed
care setting. A sales call in a MANAGED CARE SETTING is one in which a face-to-
face meeting takes place between the appropriate managed care representative
with decision-making authority and a professional representative of the
applicable party, in which meeting a presentation is made with the goal of
obtaining formulary listing for PRODUCT, reimbursement approval for PRODUCT or a
government contract for the purchase of PRODUCT.
1.13 "MARKETING PLAN" shall have the meaning ascribed to it in Section
--------------
4.2 of this AGREEMENT.
1.14 "NDA" shall mean USB's New Drug Application for PRODUCT (No. 20,221)
---
filed in accordance with the requirements of the FDA.
1.15 "NET SALES" means the total invoiced price of PRODUCT charged to an
---------
unaffiliated THIRD PARTY (whether an end-user, wholesaler, distributor or
otherwise) in the TERRITORY, net of returns and rejections, and after deducting,
to the extent charged or credited to the purchaser and identified on the invoice
or other documentation related to the sale, any sales or similar taxes,
packaging charges, freight, insurance, trade and quantity discounts, chargebacks
and allowances and rebates (including government-mandated rebates) and, with
respect to portions of the TERRITORY which are U.S. territories or possessions
(and not states or the District of Columbia), commissions paid to THIRD PARTY
distributors who act as sales agents for the PRODUCT in such territories or
possessions. For purposes of calculating NET SALES under this AGREEMENT, all
sales of PRODUCT hereunder made for other than cash, shall be deemed to be made
for cash, at the average NET SALES price of PRODUCT in the TERRITORY for the
relevant quarter. There will be only one NET SALE per VIAL. NET SALES shall
not include sales between a party and any of its AFFILIATES intended for resale;
in such cases, the resale shall be the sale as to which NET SALES are determined
hereunder. For sales pursuant to a relationship with a distributor, the sale to
the distributor (and not any sale by the distributor, except as may be provided
in Section 8.1 of this AGREEMENT) shall be
3
<PAGE>
the sale as to which NET SALES are determined hereunder.
1.16 "PATENTS" shall mean all patents and patent applications in the
-------
TERRITORY which are owned or controlled, in whole or in part, by either party or
jointly by the parties, and in which either party has now the right to grant
licenses, which generically or specifically claim (i) PRODUCT, (ii) process for
manufacturing PRODUCT, (iii) intermediate used in such manufacturing process,
(iv) method to formulate or deliver PRODUCT, (v) use of PRODUCT, (vi)
improvement of PRODUCT or intermediate or any manufacturing process required or
useful for the production of PRODUCT, or (vii) any item of SCIENTIFIC KNOW-HOW
which is otherwise necessary or useful to make, use or sell PRODUCT. The scope
of the term PATENTS includes without limitation all continuations,
continuations-in-part, divisions, patents of addition, reissues, renewals or
extensions of any PATENTS. Prior to the EFFECTIVE DATE, USB has provided ALZA
with a list of all issued PATENTS. As additional PATENTS issue, USB will
promptly notify ALZA in writing of the PATENT number and date of issuance.
1.17 "PRODUCT" shall mean any product containing amifostine (Ethyol(R))
-------
as an active ingredient and any improvements thereto, including without
limitation any other dosage strengths and the nonrefrigerated formulation of
PRODUCT.
1.18 "REGULATORY APPROVAL" shall mean the FDA approval for the PRODUCT
-------------------
(including any prerequisite manufacturing approval or authorization related
thereto) that is required for commercial sale of the PRODUCT in the TERRITORY,
and shall not include any THIRD PARTY reimbursement approvals.
1.19 "RESEARCH AND DEVELOPMENT" shall mean preclinical and clinical
------------------------
research and development of the PRODUCT.
1.20 "RESIDUAL PERIOD" shall mean the period during which reverse
----------------
PRODUCT payments are due to ALZA under this AGREEMENT.
1.21 "SALES CALL" shall mean a face-to-face meeting, in an individual or
----------
group practice setting, between a health care professional with prescribing
authority and a professional
4
<PAGE>
representative of the applicable party during which a Major Presentation of
PRODUCT is made to such health care professional. When used as a verb, "SALES
CALL" shall mean to engage in a SALES CALL. The term "Major Presentation" as
used in this section shall mean a PRODUCT presentation during which key PRODUCT
attributes are verbally presented.
1.22 "SCIENTIFIC KNOW-HOW" shall mean all information and expertise that
-------------------
relates to PRODUCT, other than COMMERCIAL KNOW-HOW, and shall include without
limitation all chemical, pharmacological, toxicological, clinical,
pharmacoeconomic data, assay, quality control and manufacturing data and any
other scientific information and reagents relating to PRODUCT and useful or
required for the RESEARCH AND DEVELOPMENT of PRODUCT that is known as of the
EFFECTIVE DATE of this AGREEMENT or developed after the date of this AGREEMENT,
to the extent that the party with knowledge thereof has the right to disclose it
to the other party in accordance with this AGREEMENT. In addition, the scope of
the term "SCIENTIFIC KNOW-HOW" shall include all data, information and results
that relate to PRODUCT obtained from the RESEARCH AND DEVELOPMENT of USB and/or
ALZA of the PRODUCT contemplated by this AGREEMENT, other than COMMERCIAL KNOW-
HOW.
1.23 "SPECIFICATIONS" shall have the meaning ascribed to it in Section
--------------
6.12.
1.24 "TERRITORY" shall mean the United States of America and its
---------
possessions and territories.
1.25 "THIRD PARTY" shall mean any person other than a party (including
-----------
its AFFILIATES) to this AGREEMENT.
1.26 "TRADEMARK" means a trademark such as Ethyol(R) and any variation
---------
thereof or substitute mark proposed by USB and approved by ALZA, including
approval of its trademark counsel (such approval not to be unreasonably
withheld) for use with PRODUCT in the TERRITORY, whether such mark is pending,
allowed or registered. The TRADEMARK or TRADEMARKS approved by the parties for
the PRODUCT will be owned by USB and designated in writing by USB, and shall be
registered and maintained by USB at its sole expense.
5
<PAGE>
1.27 "USB" shall mean U.S. Bioscience, Inc. and its AFFILIATES.
---
1.28 "VIAL" shall mean with respect to the PRODUCT a vial containing 500
----
mg. amifostine.
ARTICLE II
COLLABORATION COMMITTEE
-----------------------
2.1 Collaboration Committee. To facilitate the collaboration, promptly
-----------------------
after the EFFECTIVE DATE, the parties shall set up a committee containing senior
marketing/sales, clinical research, regulatory and business development members
from both parties (hereinafter the "COLLABORATION COMMITTEE"), and such
COLLABORATION COMMITTEE shall, in good faith, (i) determine the overall strategy
for this collaboration, (ii) coordinate the parties' activities hereunder and
(iii) approve plans for the collaboration. The COLLABORATION COMMITTEE shall
consist of eight members, four of whom shall be appointed by ALZA and four of
whom shall be appointed by USB. Each party shall designate its members to the
COLLABORATION COMMITTEE and shall notify in writing the other party if it
substitutes any of its members of the COLLABORATION COMMITTEE. In addition, if
one or more members of the COLLABORATION COMMITTEE is unavailable for any
meeting, such member may designate a substitute to participate in lieu of the
absent member.
2.2 Meetings. The COLLABORATION COMMITTEE shall meet at such times and
--------
places as it may select but, in any event, it shall meet at least four (4) times
per CONTRACT YEAR after the EFFECTIVE DATE, and in addition shall meet within
thirty (30) days after the EFFECTIVE DATE and shall determine the number of
meetings to be held between the EFFECTIVE DATE and the LAUNCH DATE. If the
COLLABORATION COMMITTEE does not determine to meet elsewhere, its meetings shall
alternate locations between the parties with the first meeting to be held at
USB's offices located in West Conshohocken, Pennsylvania and the next meeting to
be held at ALZA's offices located in Palo Alto, California. The COLLABORATION
COMMITTEE may meet in person or by telephone or video conference, and individual
members may participate in any of the foregoing ways. All cost of
participation by each member in the activities of the COLLABORATION COMMITTEE
shall be borne by the party appointing such member.
2.3 Specific Responsibilities of the COLLABORATION COMMITTEE. In
--------------------------------------------------------
addition to its
6
<PAGE>
overall responsibility for the collaboration established by this AGREEMENT, the
COLLABORATION COMMITTEE shall, in particular, with respect to the PRODUCT be
responsible for:
(a) establishing overall strategy for commercialization in the TERRITORY;
(b) review and approve MARKETING PLANS, review and comment on the
marketing budget, and sales and marketing strategies, including the launch plan,
positioning statement and detailing message for the PRODUCT;
(c) review and comment on sales training, advertising and promotional
materials;
(d) planning of publications;
(e) review and comment on the marketing, selling and promotional efforts
geographically and among market segments;
(f) coordination of the deployment of sales forces of ALZA and USB;
(g) determination of presence at major conferences and meetings in
oncology in addition to those set forth in Section 4.5 (e) below;
(h) review and comment on the RESEARCH AND DEVELOPMENT plans of each
party, including proposed protocols for new studies;
(i) establishing procedures for coordination of activities of the parties
to assure regulatory compliance with respect to the PRODUCT; and
(j) performing such other functions as appropriate to further the
commercial success of the PRODUCT in the TERRITORY and the purposes of this
AGREEMENT as determined by the parties, including the periodic evaluation of
performance against goals.
The COLLABORATION COMMITTEE shall not be responsible for determining PRODUCT
pricing,
7
<PAGE>
discounts, reimbursement approvals, managed care contracts or other price-
related matters, which shall be the sole responsibility of ALZA.
2.4 Quorum; Voting. The presence of at least four (4) members, two (2) of
--------------
whom shall have been selected by each party, shall constitute a quorum for
purposes of consideration and action by the COLLABORATION COMMITTEE. Each member
shall have one vote on all matters, and whenever action is to be taken by vote
of the COLLABORATION COMMITTEE, it shall be authorized by a majority of the
votes cast, provided that such majority shall include at least one (1) vote cast
by a member selected by USB and one (1) vote cast by a member selected by ALZA.
For matters as to which the COLLABORATION COMMITTEE is to review and provide
comment (rather than take action or make a determination), or matters as to
which the COLLABORATION COMMITTEE is deadlocked, USB shall have the tie-breaking
vote with respect to USB clinical and medical, safety and regulatory compliance
issues, and ALZA shall have the tie-breaking vote with respect to sales,
marketing, ALZA Phase IV clinical, and all promotional issues. If the
COLLABORATION COMMITTEE is unable to obtain the vote required to approve, or
take other action on, any matter, or if four members of the COLLABORATION
COMMITTEE wish to contest a deadlock-breaking vote by one party's members, then
the matter may be approved or settled in accordance with Section 17.4, and any
requirement for approval by the COLLABORATION COMMITTEE under this AGREEMENT
shall be satisfied by action in accordance with Section 17.4. The COLLABORATION
COMMITTEE shall have a secretary whose task it shall be to keep minutes of the
meetings of the COLLABORATION COMMITTEE. The secretary shall be selected on a
rotating basis each year by USB and ALZA (initially to be selected by ALZA).
Meetings may be adjourned and reconvened if a quorum is not present.
ARTICLE III
DISTRIBUTION
3.1 Appointment of ALZA as Exclusive Distributor; Use of TRADEMARKS. USB
---------------------------------------------------------------
hereby appoints ALZA as its exclusive distributor during the COPROMOTION PERIOD
(and any EXTENSION PERIOD) to sell and distribute PRODUCT in the TERRITORY,
which right shall be exclusive even as to USB, subject to USB's rights to
copromote PRODUCT in the TERRITORY as provided herein and to sell PRODUCT to
THIRD PARTIES for resale outside the TERRITORY. USB hereby grants a
nonexclusive license to ALZA to use the TRADEMARKS in the TERRITORY solely to
the extent
8
<PAGE>
necessary or useful and incidental to the activities of ALZA contemplated under
this AGREEMENT, including without limitation, the marketing, promotion, sale and
distribution of PRODUCT during the term of this AGREEMENT. USB hereby grants
ALZA a nonexclusive license to USB's U.S. PATENT No. 5,424,471 "Crystalline
Amifostine Compositions and Methods of the Preparation and use of Same" in the
TERRITORY for use solely in connection with having the PRODUCT made pursuant
------
to Section 6.13 of this AGREEMENT. ALZA's distribution rights during the
COPROMOTION PERIOD and any EXTENSION PERIOD shall also include the right to
distribute, on the same terms, the nonrefrigerated version of the PRODUCT
currently under development by USB, and all other PRODUCTS developed or licensed
in by USB (or as to which USB otherwise obtains rights in the TERRITORY) during
the COPROMOTION PERIOD or any EXTENSION PERIOD. Promptly after USB, in USB's
judgment, has sufficient data supporting a chemistry and manufacturing
supplement to the NDA for a nonrefrigerated formulation of the PRODUCT,
including stability data, USB shall diligently file and pursue FDA approval of
such a supplement to the NDA for the PRODUCT. The costs of such filing shall be
borne by USB and shall not be included in RESEARCH AND DEVELOPMENT.
3.2 Acceptance of Appointment. ALZA hereby agrees to serve as USB's
-------------------------
exclusive distributor of PRODUCT in the TERRITORY during the COPROMOTION PERIOD
(and any EXTENSION PERIOD) and to use its reasonable commercial efforts to
diligently promote, market, sell and distribute PRODUCT throughout the TERRITORY
in conjunction with the TRADEMARKS in accordance with the terms of this
AGREEMENT. With respect to any portion of the TERRITORY which is a territory or
possession (and not a state or the District of Columbia) if ALZA has not
commenced, in any such territory or possession, marketing the PRODUCT by the end
of the second CONTRACT YEAR, then upon 90 days prior written notice by USB to
ALZA, such territory or possession shall no longer be considered as in the
TERRITORY and shall no longer be subject in any respect to this AGREEMENT,
unless ALZA has commenced marketing the PRODUCT in such territory or possession
within such 90-day period.
3.3 No Rights by Implication; USB Retained Rights.
---------------------------------------------
(a) Except as specifically provided in this AGREEMENT, no rights or
licenses with respect to a party's patents, trademarks, know-how, technical
information, or other proprietary rights
9
<PAGE>
are granted or deemed granted to the other party hereunder or in connection
herewith.
(b) During the COPROMOTION PERIOD (and any EXTENSION PERIOD), USB shall
retain all rights to PRODUCT in the TERRITORY that are explicitly reserved to it
under this AGREEMENT. In addition, USB retains both during and after the
COPROMOTION PERIOD (and any EXTENSION PERIOD), all rights in the TERRITORY for
products owned or controlled by it other than PRODUCT (and improvements to the
PRODUCT), including without limitation, the right to promote, market, sell and
distribute any such product other than PRODUCT in the TERRITORY.
3.4 No Sales outside the TERRITORY. ALZA expressly agrees not to make
-------------------------------
sales of PRODUCT outside the TERRITORY. To the extent permitted by applicable
law, during the COPROMOTION PERIOD (and any EXTENSION PERIOD), ALZA shall not
sell PRODUCT to a THIRD PARTY who it knows is actively soliciting resale of the
PRODUCT outside the TERRITORY. In the event that a USB licensee or distributor
for a territory outside the TERRITORY is selling directly PRODUCT in the
TERRITORY, USB shall use reasonable commercial efforts, consistent with
applicable law, to stop such licensee or distributor from selling directly
PRODUCT into the TERRITORY. To the extent USB has contractual obligations from
its licensees or distributors for PRODUCT which prohibit the sale of PRODUCT to
a THIRD PARTY whom such licensee or distributor knows is actively soliciting
resale of the PRODUCT outside the respective territory of such licensee or
distributor, and such licensee or distributor is selling PRODUCT to a THIRD
PARTY that is actively reselling PRODUCT in the TERRITORY, USB shall use
reasonable commercial efforts, consistent with applicable law, to enforce such
contractual obligations against such licensees or distributors.
3.5 No Competitive Products.
------------------------
(a) Unless otherwise agreed by the parties in writing, or contemplated by
his AGREEMENT, [ *
]
(b) Unless otherwise agreed by the parties in writing, or contemplated by
this
10
<PAGE>
AGREEMENT, [ *
]
(c) Notwithstanding termination of this AGREEMENT prior to the end of its
stated term, ALZA agrees that its commitments set forth in Section 3.5 (a) shall
remain in place a minimum of [ * ]
Notwithstanding termination of this AGREEMENT prior to the end of its
stated term, but subject to Section 3.5 (f) of this AGREEMENT
ALZA agrees that its commitments set forth in Section 3.5 (b) shall remain in
place a minimum of [ * ]
(d) ALZA expressly acknowledges that ALZA shall not have the right to use
any SCIENTIFIC KNOW-HOW in making, using, developing, promoting, marketing,
distributing or selling any product [ * ]
except in connection with ALZA's activities under this AGREEMENT, except
pursuant to the exceptions to the confidentiality provisions relating to
SCIENTIFIC KNOW-HOW set forth in Section 10.1(a) of this AGREEMENT.
(e) During the period from the EFFECTIVE DATE up to the expiration or
termination of this AGREEMENT, if ALZA determines to [
*
] Notwithstanding termination of this AGREEMENT prior to the end of
its stated term, ALZA agrees that its commitments otherwise set forth in this
Section 3.5(e) shall remain in place a minimum of [ * ]
11
<PAGE>
(f) The provisions of Section 3.5(a), 3.5(b), 3.5(c), and 3.5(e) shall
terminate as of [ *
]
3.6 Extension of COPROMOTION PERIOD.
-------------------------------
(a) Notwithstanding any other provision of this AGREEMENT, the COPROMOTION
PERIOD shall be automatically extended if [
*
] such extension to be for a
period (or periods) of time equal to any period of time during which [ *
]
(b) ALZA shall have the option to extend the COPROMOTION PERIOD for an
additional 12-month period by giving USB written notice of ALZA's election to
extend, such notice to be given no later than 12 months prior to the expiration
of the COPROMOTION PERIOD (as it may have been extended pursuant to paragraph
3.6(a)).
(c) Except as otherwise provided in this AGREEMENT, during any EXTENSION
PERIOD, the terms and conditions of this AGREEMENT relating to the COPROMOTION
PERIOD shall remain in full force and effect.
(d) If ALZA extends the COPROMOTION PERIOD as provided in paragraph 3.6(b)
above, the following shall apply:
(i) ALZA shall pay to USB an amount equal to [ * ]
for the final twelve (12) month period of the COPROMOTION PERIOD (the "FINAL
COPROMOTION YEAR"), such amount to be paid in two installments. The first
installment shall be [ * ] for the first six month period
of the FINAL COPROMOTION YEAR, which shall be paid within 30 days after the end
of the first six months of the FINAL COPROMOTION YEAR. The second installment
shall be [ *
12
<PAGE>
] for the final six-month period of the FINAL COPROMOTION YEAR which
shall be paid within 30 days after the end of the FINAL COPROMOTION YEAR;
(ii) For PRODUCT sold by USB to ALZA during the EXTENSION PERIOD, ALZA
shall pay to USB a purchase price per VIAL which shall be [ * ]
than the purchase price per VIAL calculated under Section 6.6 (a) of this
AGREEMENT, for example, if, pursuant to Section 6.6 (a) the purchase price per
VIAL during any quarter were equal to [ * ] of average per VIAL NET
SALES price of PRODUCT for the immediately preceding quarter, during the
EXTENSION PERIOD, the purchase price per VIAL would be [ * ] of average
per VIAL NET SALES price of PRODUCT for the immediately preceding quarter; and
(iii) The RESIDUAL PERIOD will begin at the end of the EXTENSION PERIOD
and USB's reverse PRODUCT payments (in lieu of reverse PRODUCT payments set
forth in Section 8.1 of this AGREEMENT) as a percent of NET SALES during the
RESIDUAL PERIOD shall be as set forth in the following table:
[
*
]
13
<PAGE>
ARTICLE IV
PROMOTION AND MARKETING
4.1 Advertising and Promotional Materials. All marketing and
-------------------------------------
promotional materials related to PRODUCT shall be prepared by ALZA, subject to
review by USB in accordance with the procedures adopted by the COLLABORATION
COMMITTEE. With respect to written and visual promotional or educational
materials, to the extent such materials identify or otherwise make reference to
either of the parties, USB and ALZA shall both be presented and described with
equal prominence and emphasis as having joined and participated in the
development and joint commercialization of PRODUCT, as permitted by applicable
laws and regulations. All documentary information, promotional material and oral
presentations (where practical) regarding the detailing and promoting of PRODUCT
shall display the names and logos of USB and ALZA with equal prominence. ALZA
shall provide USB with all promotional material for timely filing with the FDA
in accordance with the then current FDA requirements, (e.g. launch materials
must be submitted to the FDA prior to launch, and other promotional material
must be submitted at first use). Promptly after the EFFECTIVE DATE, USB shall
designate ALZA to the FDA as the contact for review and discussion of all
promotional material, after which time ALZA will so timely file with the FDA all
promotional materials. In the event that USB determines that, in USB's
reasonable judgment, any advertising or promotional materials prepared by ALZA
are in violation of the law, rules, regulations or FDA guidelines or guidance,
USB shall have the right to so advise ALZA in writing (the "USB Notice") and if
ALZA is in disagreement, the parties shall review the matter with the
COLLABORATION COMMITTEE to see if a resolution can be quickly achieved. In the
event that resolution is not achieved in the COLLABORATION COMMITTEE, the
parties shall submit such advertising or promotional materials to an independent
regulatory expert mutually acceptable to the parties. The parties shall
expeditiously select such an expert and shall request expedited review. The
parties shall meet with such expert within 10 days of selection of the expert to
review such advertising and promotion and resolve the underlying dispute. From
the date of the USB Notice, ALZA shall refrain from using such material and both
parties shall fully comply with the final resolution of the dispute resolution
process. USB shall have the right to reproduce, distribute and otherwise use all
PRODUCT-related advertising and promotional materials prepared by ALZA during
the COPROMOTION PERIOD and any EXTENSION PERIOD and after the expiration or
termination of such period (but without the use of ALZA's name). USB shall have
the right to provide
14
<PAGE>
such materials to THIRD PARTIES for use in developing their own similar
materials (but without the use of ALZA's name) for use outside the TERRITORY
during and after the term of this AGREEMENT and within the TERRITORY after
expiration or termination of the COPROMOTION PERIOD and any EXTENSION PERIOD
only for use in marketing the PRODUCT. USB shall, to the extent permitted by its
agreements with THIRD PARTIES, allow ALZA to use such THIRD PARTY'S PRODUCT-
related promotional materials in the TERRITORY during the COPROMOTION PERIOD and
any EXTENSION PERIOD. To the extent that USB enters into new agreements for
commercialization of PRODUCT outside the TERRITORY, USB shall use reasonable
efforts to obtain such right. Nothing contained in this Section 4.1 is intended
to prevent either party from using any COMMERCIAL KNOW-HOW, such as a similar
design, format, medium, etc., as used in or with the promotional materials for
the PRODUCT, with its other products.
4.2 Marketing Plan. ALZA shall submit a detailed marketing plan (the
---------------
"MARKETING PLAN") to the COLLABORATION COMMITTEE no later than 60 days prior to
the beginning of each calendar year during the COPROMOTION PERIOD and any
EXTENSION PERIOD. The first MARKETING PLAN shall be provided within 60 days of
the EFFECTIVE DATE and shall provide the launch plans for PRODUCT. The
MARKETING PLAN shall be designed to optimize commercialization of the PRODUCT in
the TERRITORY and shall set forth NET SALES objectives for sales of the PRODUCT.
Subject to Section 4.8, the MARKETING PLAN shall assign [ * ].
The MARKETING PLAN shall assign 100% of the marketing effort and expense
(except for USB's internal marketing personnel expenses) to ALZA [ * ]
The selling effort required by USB shall be designed to utilize USB sales
personnel in their present locations with commercially reasonable selling effort
and territory coverage assignments.
4.3 Party Names; Packaging and Labelling.
------------------------------------
(a) The packaging and labelling (including promotional materials) of
PRODUCT shall be reviewed by the COLLABORATION COMMITTEE and shall identify USB
and ALZA (including each logo) with equal prominence. It is the intention of the
parties to develop and use a single trade dress for the PRODUCT for use by the
parties throughout the COPROMOTION PERIOD and any EXTENSION PERIOD and for use
by USB (if USB so chooses) after the COPROMOTION PERIOD without reference to the
ALZA name. ALZA acknowledges that USB may wish to use a uniform
15
<PAGE>
tradedress worldwide, to the extent practicable. While ALZA does not object to a
uniform tradedress, USB agrees that during the COPROMOTION PERIOD and any
EXTENSION PERIOD to the extent such PRODUCT tradedress is under USB's control,
all such PRODUCT tradedress for PRODUCT for sale outside the TERRITORY will be
easily distinguishable, at quick glance, from PRODUCT intended for sale in the
TERRITORY, both in the external and internal packaging. In the event that USB
enters into new agreements for the PRODUCT outside the TERRITORY during the
COPROMOTION PERIOD and any EXTENSION PERIOD, USB shall require that the
tradedress used to commercialize the PRODUCT under such agreements, during the
term of the COPROMOTION PERIOD and any EXTENSION PERIOD, be easily
distinguishable at a quick glance from the PRODUCT tradedress used by the
parties. To the extent that USB enters into new agreements for commercialization
of PRODUCT outside the TERRITORY, USB shall require that PRODUCT packaging be
distinguishable at a quick glance from PRODUCT packaging in the TERRITORY. The
parties agree that a different company logo and company name on the PRODUCT
packaging will be considered to be sufficient to distinguish the PRODUCT at a
quick glance.
(b) Nothing in this AGREEMENT shall be construed as a grant of rights, by
license or otherwise, to either party, to use the name of the other party or any
of its AFFILIATES for any purpose whatsoever except as otherwise expressly
provided in this AGREEMENT.
4.4 Advertising and Promotional Expenses. ALZA shall bear financial
------------------------------------
responsibility for all advertising and promotional expenses for the PRODUCT in
the TERRITORY from the EFFECTIVE DATE through the COPROMOTION PERIOD and any
EXTENSION PERIOD, except as otherwise provided in this Section 4.4. Up through
the first CONTRACT YEAR, USB shall bear financial responsibility for
[ * ] for PRODUCT in the TERRITORY. For the
purposes of this Section 4.4 direct advertising and promotional expenses of a
party shall be the out-of-pocket expenses of such party. ALZA agrees that the
expenses of USB incurred or to be incurred in connection with the "University of
Arizona Ethyol Research Workshop" [ * ] in direct
advertising and promotion expenses for PRODUCT set forth in this Section 4.4. Up
through the first CONTRACT YEAR, ALZA shall bear financial responsibility for
and spend a minimum of [ * ] in direct advertising and promotion expenses for
the PRODUCT. Thereafter, ALZA shall spend a minimum of the following [ *
16
<PAGE>
]
17
<PAGE>
[
*
]
The parties acknowledge that the direct advertising and promotion expenses will
be based on estimates of NET SALES for the relevant period and to the extent
ALZA spends less than the required amount in any CONTRACT YEAR, ALZA shall be
required to spend the amount of such deficiency in the next CONTRACT YEAR. To
the extent that ALZA spends in excess of the required amount on such advertising
and promotion in any CONTRACT YEAR, ALZA shall be entitled to credit such excess
amount to the advertising and promotion expense required in the next CONTRACT
YEAR. Notwithstanding the foregoing, ALZA, shall not be required to spend in
excess of $4 million on direct advertising and promotion expenses in any
CONTRACT YEAR. To the extent that ALZA provides discretionary spending to sales
representatives for advertising and promotion of the PRODUCT in the TERRITORY,
ALZA shall provide such discretionary spending to USB sales representatives on a
proportionally equivalent basis for advertising and promotion of the PRODUCT.
4.5 ALZA Sales Efforts and Sales Force.
----------------------------------
(a) During the COPROMOTION PERIOD and any EXTENSION PERIOD, ALZA, at
its expense, shall use its reasonable commercial efforts to diligently promote
sales of PRODUCT throughout the TERRITORY, subject to the provisions of Section
3.2. Without limiting the generality of the foregoing, ALZA shall promote sales
of PRODUCT in accordance with the MARKETING PLANS. ALZA shall diligently make
SALES CALLS for PRODUCT in the TERRITORY in each CONTRACT YEAR during the
COPROMOTION PERIOD and any EXTENSION PERIOD sufficient to carry out the
MARKETING PLAN approved by the COLLABORATION COMMITTEE. ALZA, at its expense,
shall use its reasonable commercial efforts to diligently promote sales of
PRODUCT in the TERRITORY in the MANAGED CARE SETTING. Without limiting the
generality of the foregoing, ALZA shall promote the PRODUCT in the MANAGED CARE
SETTING in accordance with the MARKETING PLANS approved by the COLLABORATION
COMMITTEE. The parties anticipate that USB will require 90 days from the date
final labelling (containing the USB and ALZA names) is submitted to and approved
by the FDA for
18
<PAGE>
USB to be in a position to supply launch quantities of PRODUCT to ALZA. ALZA
agrees to launch the PRODUCT hereunder no later than the date that is six months
after the date of the FDA approval letter for the PRODUCT, subject to the
following exceptions: (i) adequate launch quantities of PRODUCT are not
available; (ii) in the event the parties mutually agree that launch of the
PRODUCT should be postponed; (iii) a THIRD PARTY lawsuit is filed seeking to
enjoin launch of the PRODUCT; (iv) subsequent to the EFFECTIVE DATE of this
AGREEMENT in the event that there is a material change in the frequency or
severity of serious adverse PRODUCT-related events, which events require
additional or modified contraindications or warnings in the PRODUCT labelling
and as a result sales of the PRODUCT would be significantly and adversely
affected so as to preclude a successful launch as contemplated by the MARKETING
PLAN; (v) in the event that the FDA prohibits commercial sale of the PRODUCT or
otherwise requires withdrawal of the NDA. The parties will cooperate in good
faith in any of the foregoing events to attempt to resolve any such issue which
has led to a delay in the launch of the PRODUCT.
(b) To fulfill its obligations under this Section 4.5, ALZA shall
establish and maintain a sales force for the promotion and selling of PRODUCT in
the TERRITORY sufficient to carry out its responsibility to diligently promote
and sell PRODUCT in the TERRITORY and to carry out its responsibility under the
MARKETING PLANS approved by the COLLABORATION COMMITTEE. ALZA shall bear all
costs associated with the establishment and maintenance of its sales force. The
members of the ALZA sales force shall be ALZA employees or consultants or agents
(or otherwise ALZA's responsibility as between ALZA and USB), and ALZA shall be
solely responsible for the hiring, compensation, management and evaluation of
such individuals. Without the prior written consent of USB, ALZA employees shall
not represent less than 90% of the ALZA sales force detailing the PRODUCT.
(c) If USB believes that ALZA is not adequately promoting the PRODUCT
in accordance with the MARKETING PLANS approved by the COLLABORATION COMMITTEE
or the terms of this AGREEMENT, USB shall bring such concerns to the
COLLABORATION COMMITTEE, and any disputes with respect to ALZA's efforts shall
be resolved by the COLLABORATION COMMITTEE, and, if not resolved to the
satisfaction of USB in that forum, in accordance with Section 17.4 hereof.
(d) During the COPROMOTION PERIOD and any EXTENSION PERIOD ALZA, at
its
19
<PAGE>
expense, shall purchase from a reputable THIRD PARTY (such as Walsh or IMS) and
make available to USB in ALZA's format, market research and sales data from such
source which shall identify the sales of PRODUCT in the TERRITORY by month, zip
code and outlet; provided however, that USB shall bear the additional out-of-
pocket expense, if any, of providing such information to USB. ALZA shall use
reasonable efforts to avoid or minimize such additional out-of-pocket expense.
(e) ALZA, at its expense, shall have a material presence for the PRODUCT at
(i) the annual meeting for American Society Clinical Oncology (ASCO), (ii) the
annual meeting of the Oncology Nursing Society (ONS) and at such other major
conferences and meetings in the field of oncology which are held in the United
States as determined by the COLLABORATION COMMITTEE. ALZA shall diligently
pursue submissions of abstracts for both poster and oral presentation at major
national oncology conferences and meetings as are determined by the
COLLABORATION COMMITTEE. At no cost to ALZA, USB shall provide reasonable
assistance to ALZA in providing data available to USB which USB has the right to
provide for preparation of such abstracts and oral presentations.
4.6 Medical Inquiries. During the COPROMOTION PERIOD and any EXTENSION
------------------
PERIOD, ALZA shall have initial responsibility for all correspondence with
physicians in the TERRITORY relating to marketed PRODUCT and for providing
information to physicians. ALZA shall have 24 hour a day physician services
available for physician inquiries relating to PRODUCT. ALZA will keep such
records as shall be necessary to document such inquiries in compliance with
applicable regulatory requirements. Except in the case of medical emergency, USB
will refer all questions relating to the marketed PRODUCT raised by such
physicians to ALZA for its response. The parties will work together to develop
an appropriate standard operating procedure to handle medical inquiries and
adverse experience reports in a manner so as to address medical questions and
meet all regulatory requirements. In the case of medical emergency questions
handled by USB, USB shall provide ALZA with a report identifying the individual
making the inquiry and containing the question(s) asked and the information
provided in response. USB shall make available to ALZA, on a 24 hour a day
access basis and at USB's expense, the services of a physician appointed by USB
to respond to emergency questions. At the request of ALZA, USB shall cooperate
with ALZA to jointly develop form response letters which contain information
responding to the most frequent or routine questions received regarding the
marketed PRODUCT. ALZA shall have the right to refer medical inquiries to USB if
ALZA
20
<PAGE>
does not have the requisite PRODUCT-related medical expertise to respond to such
inquiries. In such event, USB physicians shall have direct access to the
inquiring physicians. USB acknowledges that ALZA may contract with a THIRD
PARTY, such THIRD PARTY to be subject to the reasonable approval of USB, to
fulfill a portion of ALZA's obligations under this Section 4.6.
4.7 Customer Complaints. As soon as practicable after execution of this
--------------------
AGREEMENT, the parties shall develop mutually agreed upon standard operating
procedures applicable to customer complaints and inquiries. Such procedures
shall provide that the appropriate party shall complete its investigation and
report its results to the other party within 30 days after the complaint is
received. The parties acknowledge that USB shall be responsible for filing the
NDA Annual Report with the FDA and that in order to file an accurate report USB
is required to have certain information regarding all PRODUCT complaints which
is in ALZA's possession. ALZA shall provide USB with all information which is in
ALZA's possession or to which ALZA has access which is reasonably requested by
USB to meet USB's reporting obligations to the FDA and other regulatory
agencies. The parties intend that customer complaints shall be initially
received by ALZA who shall log the complaint and determine whether a response by
ALZA or USB is appropriate. All complaints reasonably expected to relate to
manufacturing processes shall be referred to USB for investigation. ALZA shall
make commercially reasonable efforts to reclaim the PRODUCT which is the subject
of the customer complaint.
4.8 USB Sales Efforts and Sales Force.
---------------------------------
(a) During the COPROMOTION PERIOD and any EXTENSION PERIOD, USB shall,
at its expense, use its commercially reasonable efforts to diligently promote
sales of PRODUCT in the TERRITORY. Without limiting the generality of the
foregoing, USB shall promote sales of PRODUCT in accordance with the MARKETING
PLANS. USB shall diligently make SALES CALLS for PRODUCT in the TERRITORY in
each CONTRACT YEAR during the COPROMOTION PERIOD and any EXTENSION PERIOD in
accordance with the MARKETING PLANS approved by the COLLABORATION COMMITTEE.
ALZA, at its expense, shall promptly provide USB with reasonable quantities of
all advertising and promotional material prepared for use in advertising and
promotion of the PRODUCT in the TERRITORY. Unless otherwise agreed by the
parties, such materials shall be shipped to the USB address set forth in Section
17.9 of this AGREEMENT, Attention: Vice President Sales. Unless otherwise agreed
in writing by USB, USB shall have no obligation during the COPROMOTION PERIOD
21
<PAGE>
and any EXTENSION PERIOD, as a result of the MARKETING PLAN or otherwise under
this AGREEMENT to maintain a sales force greater than [ * ] and the
MARKETING PLANS shall not provide for USB efforts in excess of reasonably
commercial efforts relating to [ * ]
(b) To fulfill its obligations under this Section 4.8, subject to
Section 4.8 (a), USB shall establish and maintain a sales force for the
promotion and selling of PRODUCT in the TERRITORY sufficient to carry out USB's
responsibilities under the MARKETING PLANS approved by the COLLABORATION
COMMITTEE. USB shall bear all costs associated with the establishment and
maintenance of its sales force; provided, however, that ALZA shall be
responsible for the costs and expenses of training the members of the USB sales
force as provided in Section 4.9. The members of the USB sales force shall be
USB employees or consultants or agents (or otherwise USB's responsibility as
between USB and ALZA), and USB shall be solely responsible for the hiring,
compensation, management and evaluation of such individuals.
(c) If ALZA believes that USB is not adequately promoting the PRODUCT
in accordance with the MARKETING PLANS approved by the COLLABORATION COMMITTEE
or the terms of this AGREEMENT, ALZA shall bring such concerns to the
COLLABORATION COMMITTEE, and any disputes with respect to USB's efforts shall be
resolved by the COLLABORATION COMMITTEE, and, if not resolved to the
satisfaction of ALZA in that forum, in accordance with Section 17.4 hereof.
4.9 Training. ALZA, at its cost and expense, shall develop and provide,
--------
from time to time as reviewed by the COLLABORATION COMMITTEE, general sales
training, oncology training and PRODUCT specific training for the sales forces
of each party. USB shall provide ALZA such reasonable assistance, at USB's
expense, as requested by ALZA in development of such training materials and
participating in the training session(s), except that the out-of-pocket expense
of providing a USB physician to train at such session(s) shall be borne by ALZA.
All such training materials shall be provided by ALZA to USB for review and
comment prior to use, and USB shall provide its comments in writing within 10
working days after USB receives such materials. ALZA and USB shall each absorb
the costs of transporting, housing and maintaining its own sale representatives
for such training. All costs associated with the training facilities shall be
borne by ALZA. All training
22
<PAGE>
materials will be prepared and supplied by ALZA. ALZA shall conduct the initial
and subsequent training sessions at times and locations mutually acceptable to
the parties. USB shall assist in such training by providing appropriate medical,
clinical and scientific information in order to permit ALZA to fulfill its
obligations under this Section 4.9. USB shall have the right to use all such
training materials prepared by ALZA during and after the term of this AGREEMENT.
USB shall have the right to provide such materials to THIRD PARTIES for use in
developing their own similar materials (but without the use of ALZA's name) for
use outside the TERRITORY during and after the term of this AGREEMENT and within
the TERRITORY after expiration or termination of the COPROMOTION PERIOD and any
EXTENSION PERIOD. USB shall, to the extent permitted by THIRD PARTIES, allow
ALZA to use such THIRD PARTY'S PRODUCT-related training materials in the
TERRITORY during the COPROMOTION PERIOD and any EXTENSION PERIOD.
4.10 SALES CALL Reports. Each party shall submit to the COLLABORATION
------------------
COMMITTEE, within 45 days after the end of each calendar quarter during each
CONTRACT YEAR, a written report containing an accounting of the number of SALES
CALLS, (including SALES CALLS in a MANAGED CARE SETTING), made by its sales
force in the TERRITORY, as well as any other information the COLLABORATION
COMMITTEE deems necessary regarding such calls held during the preceding
quarter.
ARTICLE V
RESEARCH AND DEVELOPMENT
5.1 Oversight. RESEARCH AND DEVELOPMENT of PRODUCT will be reviewed and
---------
monitored by the COLLABORATION COMMITTEE as described in Article II.
5.2 Responsibilities of the Parties
-------------------------------
(a) USB shall have responsibility to conduct the Phase III clinical
trials program of RESEARCH AND DEVELOPMENT of the PRODUCT in pursuit of FDA
approval for new indications for the PRODUCT in accordance with the program
description agreed upon in writing by the parties simultaneously with the
execution of this AGREEMENT, as revised by USB from time to time with review and
comment by the COLLABORATION COMMITTEE. USB has commenced or shall promptly
23
<PAGE>
commence and diligently conduct such program. USB shall have discretion to
revise such program; however, all material revisions to such program shall be
reported to and reviewed by the COLLABORATION COMMITTEE. USB shall expend no
less than the following amounts in DEVELOPMENT COSTS on such RESEARCH AND
DEVELOPMENT program during the COPROMOTION PERIOD without the agreement of the
COLLABORATION COMMITTEE:
24
<PAGE>
[
*
]
The parties acknowledge that USB shall have the right to conduct any and
all additional studies, including clinical studies, relating to the PRODUCT that
USB desires to conduct. USB shall advise ALZA in writing of its intent to
initiate any new clinical study involving ten (10) or more patients in the
TERRITORY during the COPROMOTION PERIOD and any EXTENSION PERIOD, and shall
provide to ALZA the protocols therefor, for comment by ALZA, in advance of the
commencement thereof. ALZA shall have ten (10) working days in which to provide
its comments to USB with respect to any such protocol. Promptly after
completion or early termination of any such study, USB shall provide ALZA with a
detailed report of the results thereof.
(b) ALZA shall have responsibility to conduct clinical trials to support
the commercial development of the PRODUCT in the TERRITORY, such clinical
program of RESEARCH AND DEVELOPMENT for the PRODUCT to be in accordance with the
program description agreed upon in writing by the parties simultaneously with
the execution of this AGREEMENT, as revised by ALZA from time to time with
review and comment by the COLLABORATION COMMITTEE. ALZA shall promptly commence
and diligently conduct such program. ALZA shall have discretion to revise such
program; however, all material revisions to such program shall be reported to
and reviewed by the COLLABORATION COMMITTEE. ALZA shall expend no less than the
following amounts in DEVELOPMENT COSTS on such RESEARCH AND DEVELOPMENT program
during the COPROMOTION PERIOD without the agreement of the COLLABORATION
COMMITTEE:
[
*
25
<PAGE>
]
(c) Each of the parties shall allocate sufficient resources to its
respective responsibilities in conduct of its required RESEARCH AND DEVELOPMENT
program as described in paragraphs (a) and (b) above so as to diligently carry
out such programs. Nevertheless, it is understood that the parties require and
shall have reasonable flexibility.
(d) The parties shall cooperate and render reasonable research assistance
to each other, including making their respective personnel available upon
reasonable request and at reasonable times (each at its own expense), to
expedite the conduct of the RESEARCH AND DEVELOPMENT programs, with due
consideration given to carrying out the RESEARCH AND DEVELOPMENT programs
efficiently and avoiding unwarranted duplication of effort.
5.3 Compliance with Law. All work done in connection with the RESEARCH
-------------------
AND DEVELOPMENT shall be carried out in compliance with federal, state and local
laws, regulations and guidelines governing the conduct of the RESEARCH AND
DEVELOPMENT.
5.4 DEVELOPMENT COSTS
-----------------
(a) USB shall be responsible for all DEVELOPMENT COSTS related to the USB
RESEARCH AND DEVELOPMENT program as described in Section 5.2 (a) above.
(b) ALZA shall be responsible for all DEVELOPMENT COSTS related to the ALZA
RESEARCH AND DEVELOPMENT program as described in Section 5.2 (b) above.
ARTICLE VI
MANUFACTURING, PURCHASE AND SHIPMENT
6.1 Purchase Orders. ALZA shall submit binding purchase orders to the
---------------
designated representative of USB at least ninety (90) days prior to the
designated shipment dates for PRODUCT; provided, however, that the parties will
work closely together, and USB shall provide the most flexibility as commercial
reasonableness permits, to have manufactured launch quantities of PRODUCT. In
no
26
<PAGE>
event will the use of any form of a purchase order be effective to vary,
alter or modify the terms and provisions of this AGREEMENT.
6.2 Supply of PRODUCT. ALZA shall purchase PRODUCT only from USB and USB
-----------------
shall supply all of ALZA's requirements of PRODUCT (subject to Sections 6.3 and
6.13 of this AGREEMENT). If at any time USB experiences a shortage of PRODUCT
supply and the available supplies are not sufficient to satisfy all of ALZA's
requirements for PRODUCT in the TERRITORY, USB shall allocate its available
worldwide supplies equitably among its own requirements and those of its
licensees, distributors and other purchasers.
6.3 Purchase Volumes. Each year under this AGREEMENT, ALZA shall provide
----------------
USB with a twelve (12) month forecast which forecasts ALZA's requirements for
PRODUCT for the subsequent calendar year (the "ANNUAL FORECAST"). The ANNUAL
FORECAST shall be provided by ALZA no later than September 1 each year for the
subsequent calendar year. ALZA shall give USB three (3) months advance notice
if ALZA reasonably anticipates that the annual unit volume of PRODUCT ordered in
a given calendar year will exceed [ * ] of the ANNUAL
FORECAST provided for such year. USB shall not be obligated to satisfy orders
for PRODUCT quantities in the given calendar year in excess of [ *
] of the ANNUAL FORECAST for such year, but USB shall use its reasonable
commercial efforts to do so. The first ANNUAL FORECAST is being provided by
ALZA simultaneously with the execution of this AGREEMENT and is forecasting
ALZA's requirements for PRODUCT for the period beginning the date of this
AGREEMENT through the calendar year 1996. The parties acknowledge that it will
be extremely difficult to predict the required quantities for the first two
CONTRACT YEARS, and they will work closely together to attempt to assure that
required quantities of PRODUCT are made available in the TERRITORY as quickly
and efficiently as possible.
6.4 Rolling Twelve Month Forecasts. ALZA shall provide USB with a rolling
------------------------------
twelve-month forecast (the "ROLLING TWELVE MONTH FORECAST") updated monthly
which updates the ANNUAL FORECAST. The ROLLING TWELVE MONTH FORECAST shall not
be construed to increase USB's obligation to supply PRODUCT set forth in Section
6.3 of this AGREEMENT.
27
<PAGE>
6.5 Introduction and Supply of Nonrefrigerated PRODUCT. The parties shall
---------------------------------------------------
work together toward an orderly introduction of a nonrefrigerated PRODUCT if and
when approved by the FDA. The parties shall develop a written plan for such
PRODUCT introduction which shall be presented to the COLLABORATION COMMITTEE for
review and comment. The plan shall be reviewed reasonably in
advance of the planned nonrefrigerated PRODUCT introduction. The plan shall be
designed to minimize the cost (subject to any FDA requirements) of the
introduction of the nonrefrigerated PRODUCT to both parties, including without
limitation planning inventory utilization such that minimum inventory will be
required to be replaced with nonrefrigerated PRODUCT. For the nonrefrigerated
PRODUCT introduction period, not to exceed six months, USB agrees to provide to
ALZA nonrefrigerated PRODUCT at a purchase price of [ * ] (i) as
replacement PRODUCT for refrigerated PRODUCT returned by wholesalers and
distributors to ALZA; and (ii) as replacement PRODUCT for ALZA inventory of
refrigerated PRODUCT (not to exceed three (3) months ALZA inventory for the
three months immediately prior to implementation of the plan). USB shall
instruct ALZA with respect to disposition of refrigerated PRODUCT (cost of
transportation to be borne by ALZA and cost of disposition to be borne by USB)
which is replaced pursuant to this Section 6.5. In the event that FDA requires
a recall of the refrigerated PRODUCT prior to introduction of a nonrefrigerated
PRODUCT, ALZA shall conduct the recall, and the expenses of the recall (as such
expenses are defined in Section 9.5, except for replacement PRODUCT which ALZA
will purchase in accordance with this Section 6.5) shall be shared equally by
the parties.
6.6 Purchase Price Per VIAL for PRODUCT.
-----------------------------------
(a) The purchase price per VIAL for PRODUCT supplied to ALZA hereunder
during any quarter shall be calculated as follows:
28
<PAGE>
[
*
]
(b) The purchase price for shipments of commercial PRODUCT to ALZA under
this AGREEMENT up through the end of the first quarter in which commercial
PRODUCT is shipped to ALZA hereunder shall be estimated at [ * ]
Within 30 days after the end of the first quarter in which commercial sales of
PRODUCT are made, ALZA shall provide USB with a report of NET SALES for such
quarter and the purchase price for such quarter shall be determined in
accordance with this ARTICLE VI. If any amounts in addition to those invoiced
by USB are determined under this Section 6.6 and are shown on such report to be
due to USB, ALZA will pay such amounts with such report. If such report shows
an overpayment, the amount of the overpayment, subject to Section 6.6(e) below,
will be credited against USB's next invoice to ALZA. Subsequent shipments of
PRODUCT shall be at the purchase price calculated in accordance with Section 6.6
(a) as described more particularly in Section 6.6 (d) and subject to Section
6.6(e) of this AGREEMENT.
(c) Within 10 business days after the end of each quarter during the
COPROMOTION PERIOD and any EXTENSION PERIOD, ALZA shall supply USB with a report
of NET SALES and the
29
<PAGE>
corresponding number of VIALS sold, net of returns, for the
preceding quarter. At the same time
ALZA shall also provide USB with a report of NET SALES for each of the
immediately preceding four consecutive quarters with a determination of [
*
] pursuant to
Section 6.6(a) of this AGREEMENT for the then current quarter.
(d) Together with such report, ALZA shall calculate the [ *
] during the immediately preceding quarter according to the following formula:
*
[ ]
The purchase price per VIAL for PRODUCT shipped after the close of the
immediately preceding quarter, but before the price for the new quarter has been
determined, shall be estimated as the [ * ] calculated at the
close of the immediately preceding quarter times the applicable percentage from
Section 6.6 (a) of this AGREEMENT. If any amounts in addition to those invoiced
by USB are determined under this Section 6.6 and are shown on such report to be
due to USB, ALZA will pay such amounts with such report. If such report shows an
overpayment, the amount of the overpayment, subject to Section 6.6(e) below,
will be credited against USB's next invoice to ALZA. The purchase price per VIAL
for PRODUCT shall be subject to adjustment at the close of each quarter of the
COPROMOTION PERIOD and any EXTENSION PERIOD as set forth in Section 6.6 (a), (c)
and (d).
(e) Except as set forth in this Section 6.6 (e), and notwithstanding
anything herein to the contrary, the purchase price per VIAL of PRODUCT supplied
to ALZA by USB for commercial sale shall not be less [ * ] USB
shall supply PRODUCT to ALZA at a price [ * ] for PRODUCT sold
hereunder to ALZA for use in ALZA's program(s) for the indigent; provided
however, that VIALS of PRODUCT to be provided at the
[ * ] USB shall provide clinical supplies of
PRODUCT to ALZA for use in the ALZA RESEARCH AND DEVELOPMENT program as
described in Section 5.2(b) of this AGREEMENT at a
30
<PAGE>
price of [ * ] but only for studies where PRODUCT
will be provided free of charge to investigators. USB, at ALZA's request, shall
also supply a reasonable quantity of PRODUCT (not to
exceed [ * ] commercially sold by ALZA per CONTRACT YEAR) for use as
samples at a price to ALZA of [ * ] In the event that the average
per VIAL NET SALES price of PRODUCT for commercial sale by ALZA into the market
falls below [
*
]
6.7 USB Shipment. All shipments of PRODUCT from USB to ALZA hereunder
------------
shall be made F.O.B. point of shipment (which shall be within the U.S.A.).
USB shall ship PRODUCT to such destinations (not to exceed 5 different
locations) within the U.S.A. in accordance with ALZA's written delivery
instructions by carrier mutually acceptable to the parties. ALZA may change the
shipment destinations to different locations within the United States by written
notice to USB. Each shipment shall be accompanied by a Certificate of
Analysis.
6.8 Title to PRODUCT. Subject to Sections 6.10 and 6.11 hereof, title to
----------------
PRODUCT sold hereunder, and risk of loss with respect to such PRODUCT, shall
pass to ALZA upon delivery of PRODUCT to the carrier pursuant to the terms of
Section 6.7. Upon the passage of title, USB's liability for risk of loss shall
cease, and ALZA shall be the owner of such PRODUCT for all purposes, subject to
Sections 6.10 and 6.11 hereof. Except as otherwise provided in this AGREEMENT,
PRODUCT sold to ALZA under this AGREEMENT is nonreturnable.
6.9 Payment for PRODUCT. USB shall invoice ALZA for the purchase price
--------------------
per VIAL of PRODUCT in accordance with Section 6.6 no sooner than the time of
shipment. The invoice shall include actual freight and insurance charges, which
shall be prepaid by USB. Payment of invoice is due within thirty (30) days of
date of USB invoice, except with respect to disputed invoices.
6.10 PRODUCT Warranty. USB will manufacture or have manufactured PRODUCT
----------------
in accordance with the SPECIFICATIONS and at NDA approved site(s) meeting the
current Good Manufacturing Practices ("cGMP") requirements of the FDA. For
each lot of PRODUCT sold to ALZA
31
<PAGE>
by USB hereunder, USB shall provide to ALZA a Certificate of Analysis in a form
agreed to by the parties prior to the first shipment. USB warrants that all
PRODUCT shipped hereunder at the time of shipment, and for the shelf life of the
PRODUCT when stored and handled in accordance with labelled conditions,: (i)
shall meet all SPECIFICATIONS for the shelf life of such PRODUCT, (ii) shall be
manufactured in accordance with cGMPs and all applicable laws and regulations,
in each case in effect at the time of manufacture, and (iii) shall not be
adulterated or misbranded as a result of acts or omissions by USB or USB's
manufacturer, USB's suppliers, or USB's testing agents. USB also warrants that
all PRODUCT shipped hereunder shall be properly packaged to avoid breakage and
in accordance with USB's packaging specifications reasonably approved by ALZA.
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO SUPPLY OF
PRODUCT HEREUNDER TO ALZA.
6.11 Quality Assurance; Defective PRODUCT(S).
---------------------------------------
(a) As soon as practicable after execution of this AGREEMENT, the parties
shall develop a mutually agreed upon manual of standard operating procedures
applicable to quality assurance, cGMPs, and similar activities. In addition,
the parties shall execute a GMP Agreement prior to the first shipment of PRODUCT
hereunder.
(b) ALZA shall have the right, on reasonable notice and during normal
business hours to periodically (typically once per year) inspect the facilities
used by or on behalf of USB and/or USB's supplier(s) of finished PRODUCT, and
USB's records relating to manufacture, adverse events and complaint
investigations with respect to PRODUCT to be supplied hereunder, in order that
ALZA may audit USB's compliance with cGMPs and the provisions of this AGREEMENT
with respect thereto. USB will use its reasonable efforts to include ALZA in
audits of supporting vendors and will supply ALZA with copies of all audit
reports and the vendors' responses.
(c) USB shall conduct all ongoing stability studies of PRODUCT as required
by cGMPs at its own expense. USB shall, on a quarterly basis, provide ALZA with
a report on the results
32
<PAGE>
of such studies, including the data obtained. All PRODUCT with expiration dating
of less than 24 months shall, when shipped to ALZA, have dating of at least the
expiration date less three months. All PRODUCT with expiration dating of 24
months or greater shall, when shipped to ALZA have dating of at least the
expiration date less six months. USB will use its diligent efforts to extend the
dating of the PRODUCT beyond 15 months.
(d) Any claim by ALZA that PRODUCT when shipped did not meet SPECIFICATIONS
for all or any portion of PRODUCT so shipped, or for shortages, must be made
with full particulars thereof, in writing, dispatched to USB within 30 days of
receipt of shipment by ALZA if such defect is reasonably discoverable by ALZA
within such period, or otherwise, as promptly as practicable after such defect
is discovered by ALZA. ALZA shall have the right to perform analytical testing,
but typically not microbiological testing (such as sterility and endotoxin) on
the PRODUCT following cross-over testing of methods and procedures. Promptly
after execution of this AGREEMENT, the parties will work together to develop a
standard operating procedure for ALZA sampling and testing of PRODUCT to be
shipped hereunder. PRODUCT failing testing under such procedure shall be
returned by ALZA to USB at USB's expense, and USB shall replace such PRODUCT
with PRODUCT meeting the SPECIFICATIONS and USB's warranties under Section 6.10.
Except as described above, no shipment or portion of a shipment of any quantity
of PRODUCT shall be returned to USB for replacement without USB's prior written
consent. In the event that ALZA makes such a claim which relates specifically
to the failure of PRODUCT to meet SPECIFICATIONS and USB disagrees with ALZA's
findings, at USB's request, ALZA shall submit a sample of the contested batch
sealed by ALZA and USB shall submit a retained sample from the same batch to an
unrelated and independent laboratory, reasonably acceptable to USB and ALZA, and
the check assays of such laboratory shall be accepted by the two parties as
final and binding. The cost of such analysis made by the laboratory and the
cost of disposal of PRODUCT shall be borne by the party whose position is not
substantiated. If no such claim is made by ALZA in accordance with this Section
6.11, ALZA shall be deemed to have accepted PRODUCT. Except as otherwise
specifically provided in this AGREEMENT, including Section 6.5 and this Section
6.11, ALZA's sole remedy, with respect to PRODUCT not yet in distribution by
ALZA, for failure of USB to supply PRODUCT conforming to the requirements set
forth in Section 6.10 of this AGREEMENT shall be replacement of PRODUCT by USB.
33
<PAGE>
6.12 SPECIFICATIONS. The SPECIFICATIONS for PRODUCT approved by the FDA
--------------
at approval of the NDA (the "SPECIFICATIONS") will be delivered to ALZA promptly
after the EFFECTIVE DATE of this AGREEMENT. The SPECIFICATIONS will comply with
the current NDA with respect to PRODUCT. ALZA shall not be obligated to accept
delivery of any lot or batch of PRODUCT unless the lot or batch meets the
SPECIFICATIONS applicable to such PRODUCT. In the event of a proposed
change in the formulation or manufacturing process of PRODUCT, USB shall
promptly notify ALZA thereof, provide ALZA with documentation of such proposed
change and a period of 10 working days in which to review and comment on such
proposed change. USB and ALZA shall cooperate in good faith to design a plan to
resolve any PRODUCT supply issues that may result from changes in
SPECIFICATIONS. USB shall obtain all necessary and appropriate regulatory
approvals prior to making any such change. USB shall provide ALZA with
necessary revisions to the SPECIFICATIONS of PRODUCT as so changed. Any change
in SPECIFICATIONS which would materially adversely affect the marketing of the
PRODUCT (in ALZA's reasonable judgement, and if USB disagrees then the issue
will be resolved by the COLLABORATION COMMITTEE or, if necessary, pursuant to
Section 17.4) (except changes due to court order or unilateral regulatory
action) will require ALZA's prior written review and consent, not to be
unreasonably withheld. Notwithstanding Sections 6.8 and 6.11, ALZA shall be
entitled to return to USB any PRODUCT which the parties reasonably agree cannot
or should not be sold due to a change in SPECIFICATIONS.
6.13 Alternate Manufacture. Promptly after the EFFECTIVE DATE of this
---------------------
AGREEMENT, USB shall file with the FDA, and shall diligently pursue FDA approval
of, a supplement to the PRODUCT NDA to qualify USB's manufacturing facility
located in Nijmegen, The Netherlands, as an alternate site of manufacture of
PRODUCT. If, at any time during the COPROMOTION PERIOD or any EXTENSION
PERIOD, USB is unable to supply at least [ * ] of PRODUCT duly
ordered by ALZA in accordance with the provisions of this AGREEMENT, including
without limitation, the provisions of ARTICLE VI, whether due to force majeure,
lack of manufacturing facilities or capacity, refusal or inability to supply or
otherwise, for a period of three consecutive months or more, USB hereby consents
to ALZA's rights to purchase PRODUCT directly from USB's THIRD PARTY
manufacturers, Ben Venue Laboratories and Sipsy S.A. or any successor suppliers
during the period USB is unable to so supply and for such period thereafter as
the term required by such THIRD PARTY supplier. ALZA may not and shall not
purchase directly from USB's THIRD PARTY suppliers, Ben Venue Laboratories and
Sipsy S.A. or any successor suppliers, unless and until USB has failed to so
34
<PAGE>
supply at least [ * ] of PRODUCT duly ordered by ALZA in
accordance with the provisions of this AGREEMENT, including without limitation,
the limitations of ARTICLE VI, hereunder for a period of three consecutive
months. ALZA's right to exercise its rights to purchase directly from USB's
THIRD PARTY suppliers granted hereunder shall continue for so long as USB is
unable to supply [ * ] and for such period
thereafter as is required by such THIRD PARTY suppliers in order to agree to
manufacture the PRODUCT. With respect to any PRODUCT purchased directly from
USB's THIRD PARTY suppliers pursuant to this Section 6.13, ALZA shall pay USB's
THIRD PARTY suppliers directly for PRODUCT and, in lieu of the payments provided
for in Section 6.6, ALZA shall pay USB [ * ] of such PRODUCT. Promptly after
execution of this AGREEMENT, at ALZA's request, USB will assist ALZA in making
appropriate arrangements directly with USB's suppliers, Ben Venue Laboratories,
and USB's supplier of bulk drug substance for PRODUCT, Sipsy S.A. to provide for
such direct supply of PRODUCT. It is the intention of the parties that ALZA's
rights under this AGREEMENT, including this Section 6.13, shall remain in place
in the event of USB's bankruptcy, insolvency, or if voluntary or involuntary
proceedings are instituted by or against USB, or a receiver or custodian is
appointed for USB's business, or a substantial portion of USB's business is
subject to attachment or similar process, or USB is unable to satisfy its
financial obligations as they become due, USB enters into any composition or
arrangement with its creditors or enters into liquidation (each a "USB
BANKRUPTCY EVENT").
6.14 Bankruptcy. It is the intent of the parties that ALZA remain the
-----------
exclusive distributor of PRODUCT in the TERRITORY during the COPROMOTION PERIOD
and any EXTENSION PERIOD, even in the event of a USB BANKRUPTCY EVENT. To that
end, USB agrees that ALZA may make direct arrangements (with which USB will
assist ALZA) with USB's THIRD PARTY suppliers of PRODUCT for drug substance and
drug product and testing services, and USB intends that ALZA have the right to
continue distributing the PRODUCT, under the TRADEMARKS, for the COPROMOTION
PERIOD and any EXTENSION PERIOD, even in the event of any such USB BANKRUPTCY
EVENT.
ARTICLE VII
AMOUNTS PAYABLE TO USB DURING THE COPROMOTION PERIOD
7.1 Upfront Payments and Distribution Fees. In consideration of the
--------------------------------------
exclusive distribution
35
<PAGE>
rights in the TERRITORY granted to ALZA hereunder, ALZA
shall pay USB upfront fees and distribution fees, in the following
installments:
(a) upfront fees and distribution fees totalling $20,000,000 as follows:
[ *
]
[ * ]
(b) a $10,000,000 distribution fee within ten (10) business days after the
first to occur on or after [
*
] and
(c) a $5,000,000 distribution fee within ten (10) business days after the
occurrence, on or after [
*
]
(d) All the payments provided for pursuant to this Section 7.1 shall be
nonrefundable and noncreditable.
7.2 [
36
<PAGE>
*
] For purposes of this Section 7.2, a "change of control"
means (i) a merger, consolidation or combination in which a party to this
AGREEMENT is not the surviving corporation, or (ii) any "person" (within the
meaning of Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of
1934) is or becomes the beneficial owner, directly or indirectly, of securities
of the party representing 50% or more of the combined voting power of the
party's then-outstanding securities.
ARTICLE VIII
REVERSE PRODUCT PAYMENTS
8.1 Reverse PRODUCT Payments. Except as provided in Sections 3.6(d), and
------------------------
13.1, following expiration or termination of the COPROMOTION PERIOD and any
EXTENSION PERIOD, and for a period of [ * ] after the expiration or
termination of the COPROMOTION PERIOD, USB shall pay to ALZA a reverse PRODUCT
payment in respect of USB NET SALES of PRODUCT in the TERRITORY as set forth
below. The reverse PRODUCT payments payable by USB to ALZA pursuant to this
Article shall be as follows:
37
<PAGE>
[
*
]
In the event USB commercializes PRODUCT through license, or exclusive
distribution, copromotion arrangements or other similar arrangement with a THIRD
PARTY where such THIRD PARTY is selling PRODUCT in the TERRITORY during the
RESIDUAL PERIOD, ALZA shall be paid reverse PRODUCT payments on NET SALES of
PRODUCT in the TERRITORY in the percentages set forth above. For determining
the NET SALES of PRODUCT to calculate reverse PRODUCT payments hereunder, the
sale into the market, and not the sale to any commercial partner or partners,
shall be the relevant sale.
38
<PAGE>
8.2 Reverse PRODUCT Payment Terms. During the RESIDUAL PERIOD, within 60
-----------------------------
days after the end of each calendar quarter, USB shall deliver to ALZA a true
accounting of: (i) NET SALES of PRODUCT in such quarter in the TERRITORY as to
which payments are due under either Section 3.6(d)(iii) or 8.1 (a) above; and
(ii) a calculation of reverse PRODUCT payments due with respect thereto.
Simultaneously with delivery of such accounting to ALZA, USB shall pay the
reverse PRODUCT payments then due.
8.3 USB Diligence. During the RESIDUAL PERIOD, USB will use its
-------------
reasonable commercial efforts to diligently market or have marketed PRODUCT
throughout the TERRITORY. In the event any of the conditions set forth in
Section 12.3(b) occurs, USB's diligence obligations shall be suspended until
such time, if ever, as promotion and sale of PRODUCT by or on behalf of USB
resume.
ARTICLE IX
REGULATORY MATTERS; ADVERSE REACTIONS; MARKET RECALLS; INSPECTION
9.1 Licenses, Filings, Registrations, Permits and REGULATORY APPROVALS.
------------------------------------------------------------------
USB shall be responsible for seeking, obtaining and maintaining REGULATORY
APPROVAL for the PRODUCT. ALZA shall be responsible for seeking, obtaining and
maintaining those licenses, registrations and permits required to be obtained by
ALZA to enable ALZA to act as the exclusive distributor of PRODUCT pursuant to
this AGREEMENT. Each of the parties shall cooperate with the other in making
and maintaining all regulatory filings that may be necessary or desirable in
connection with the execution, delivery and performance of this AGREEMENT and
each party shall use its reasonable efforts to obtain any regulatory approvals
relating thereto. ALZA shall be responsible for obtaining all reimbursement
approvals reasonably necessary to commercialize the PRODUCT in the TERRITORY
during the COPROMOTION PERIOD and any EXTENSION PERIOD.
9.2 Communication With Agencies. USB shall have responsibility for
---------------------------
communications with the FDA which relate to the NDA for the PRODUCT; and ALZA
shall have responsibility for communications with the FDA concerning marketing
and advertising materials. Except as set forth above, the COLLABORATION
COMMITTEE shall determine from time to time which party shall have
responsibility for communications with various other government agencies and
shall divide those responsibilities as it sees fit, provided that each party
shall have responsibility for such
39
<PAGE>
communications as are required of such party by virtue of its ownership of
PRODUCT licenses or permits. During the term of this AGREEMENT, each party shall
promptly provide the other with copies of any communications it sends to or
receives from, and any significant communications (which are known to the party
to exist and which the party can obtain copies of) with, any governmental agency
in the TERRITORY concerning PRODUCT. In the event a party cannot obtain a copy
of any such significant communication, such party shall inform the other party
of what such party believes to be the content of any such communication.
9.3 Governmental Inspections. During the COPROMOTION PERIOD and any
------------------------
EXTENSION PERIOD, each party shall advise the other party of any governmental
visits to, or written or oral inquires about, any facilities or procedures for
the manufacture, storage, handling of PRODUCT, or the marketing, selling,
promotion or distribution of the PRODUCT promptly (but in no event later than
two (2) business days) after notice of such visit or inquiry. Each party shall
furnish to the other party, within three (3) business days, any report or
correspondence issued by or provided to the governmental authority in connection
with such visit or inquiry, purged only of trade secrets of such party that are
unrelated to the other party's activities under this AGREEMENT and any
information that is unrelated to PRODUCT. Each party shall designate a
representative to receive such notice and documentation. Each party shall
permit the relevant governmental authorities to inspect its facilities in
connection with the activities contemplated by this AGREEMENT.
9.4 Adverse Reactions, etc.
-----------------------
(a) For PRODUCT, USB shall have the responsibility for reporting of adverse
experience information to meet the current requirements for Adverse Drug
Reaction ("ADR") reporting to the FDA. If at any time during this AGREEMENT
ALZA receives notice of an adverse drug event that is a serious adverse drug
event ("SADE"); or OTHER INFORMATION (as defined hereinafter), ALZA shall notify
USB in a timely manner (but not later than 48 hours) by telephone, confirmed in
writing, to the person designated as USB's contact from time to time. USB shall
have responsibility to determine whether such information must be reported to
the FDA. USB shall make an initial determination as to reportability and shall
communicate such information to ALZA within an additional 48 hours. USB shall
report to ALZA any marketed product SADE or OTHER INFORMATION within 48 hours
after USB receives it. USB will provide ALZA with copies of all 15 Day Alert
Reports submitted
40
<PAGE>
to the FDA within 48 hours of submission. USB will also
provide ALZA with copies of the NDA Periodic Report together with a summary of
worldwide spontaneous adverse event information and a trending analysis of these
events within 30 days of the designated NDA quarterly reporting period. The
parties shall promptly meet after the execution of this AGREEMENT, to develop
mutually acceptable written guidelines and procedures to govern the sharing of
adverse experience information and the assessment and submission of adverse
experience reports to the FDA.
(b) For purposes of this AGREEMENT, "OTHER INFORMATION" consists of the
following:
(i) information on disapproval or cancellation of the REGULATORY
APPROVAL of PRODUCT;
(ii) information on modifications required to be made in the
contents of the REGULATORY APPROVAL of PRODUCT in order to prevent, or
to warn against risks of, death or bodily harm;
(iii) information on withdrawal of PRODUCT from the
marketplace in the TERRITORY;
(iv) information on important revisions of precautions in the
usage of PRODUCT as set forth in the labelling pursuant to the
REGULATORY APPROVAL and;
(v) any information which could adversely impact the marketing of
PRODUCT.
(c) Disclosure of information by either party to the other hereunder
shall continue as long as ALZA continues to distribute or clinically test
PRODUCT or at the request of a party such longer period is reasonably necessary
in connection with this AGREEMENT. All such reports and disclosures shall be
made to the regulatory representative of each party designated in writing to the
other party from time to time.
9.5 PRODUCT Recalls, etc. ALZA shall prepare and maintain a written
---------------------
Standard
41
<PAGE>
Operating Procedure ("SOP"), subject to the approval of USB, to handle
any recalls of PRODUCT in the TERRITORY. In the event that (i) any governmental
agency or authority issues a request or directive or orders that PRODUCT be
recalled or retrieved; (ii) a court of competent jurisdiction orders that
PRODUCT be recalled or retrieved; or (iii) USB and ALZA reasonably determine,
after mutual consultation, that PRODUCT should be recalled, retrieved or a dear
doctor letter is required relating to restrictions on use of the PRODUCT, ALZA
shall conduct such activity and the parties shall take all appropriate
corrective actions and shall execute the steps detailed in the SOP. In the event
such action results from the breach of USB's representations and warranties
under this AGREEMENT, or USB negligence, or willful misconduct, USB shall be
responsible for the expenses thereof. In the event such action results from a
breach of any of ALZA's representations and warranties under this AGREEMENT or
ALZA's negligence or willful misconduct, ALZA shall be responsible for the
expenses thereof. For purposes of this AGREEMENT, the expenses of the action
shall be the expenses of notification and return or destruction (if authorized
by USB) of the PRODUCT, the cost of replacement PRODUCT and any costs directly
associated with the distribution of replacement PRODUCT. Otherwise, the parties
shall be responsible for the expenses of the action in the proportion of [ * ]
ALZA and USB shall cooperate fully with one another in conducting any such
action. ALZA shall destroy lawfully reclaimed PRODUCT only upon USB (or
governmental authority) written instruction to destroy such PRODUCT. Otherwise,
ALZA may return such PRODUCT to USB within 30 days after completion of the
action. For the purposes of determining USB's contribution to the expenses of
the action, USB's supply of replacement PRODUCT shall be valued at [ * ]
ARTICLE X
KNOW-HOW; CONFIDENTIAL INFORMATION
10.1 Ownership of SCIENTIFIC KNOW-HOW and COMMERCIAL KNOW-HOW; Disclosure.
--------------------------------------------------------------------
(a) It is the intention of the parties that USB shall be the owner of all
right, title and interest in and to all SCIENTIFIC KNOW-HOW, whether generated
by USB, ALZA or others under agreement with USB or ALZA, as a result of the
activities contemplated by this AGREEMENT. ALZA shall use its reasonable
commercial efforts to obtain for USB the rights to all SCIENTIFIC KNOW-HOW
generated under clinical study agreements with THIRD PARTIES. To the extent
that ALZA gives
42
<PAGE>
THIRD PARTIES unrestricted grants to conduct clinical studies
with PRODUCT, ALZA shall use its reasonable commercial efforts to obtain from
such THIRD PARTIES the rights to the SCIENTIFIC KNOW-HOW generated by such THIRD
PARTIES. To the extent ALZA is unable to obtain such rights from THIRD PARTIES,
ALZA and USB shall mutually agree on whether to proceed with studies with
any such THIRD PARTIES and on what terms. In the event that USB requires that
ALZA not enter into arrangements for a material number of clinical studies due
to the foregoing, ALZA shall not be deemed to be in breach of its obligations
pursuant to Section 5.2 (b) of this AGREEMENT and the parties shall mutually
agree on terms under which ALZA's RESEARCH AND DEVELOPMENT program for the
PRODUCT should proceed. USB shall provide ALZA with the SCIENTIFIC KNOW-HOW,
subject to this Section 10.1 of this AGREEMENT and, to the extent necessary in
connection with ARTICLE VI hereof, chemistry and manufacturing SCIENTIFIC KNOW-
HOW shall be provided to ALZA for use by ALZA in performance of its activities
under this AGREEMENT. USB shall be the owner of all right, title and interest
in and to any and all SCIENTIFIC KNOW-HOW developed or conceived by ALZA, or
others under agreement with ALZA, as well as any patent rights which may be
obtained thereon, including such rights which relate to the manufacture, use or
sale of PRODUCT, or are a result of using USB's SCIENTIFIC KNOW-HOW or
CONFIDENTIAL INFORMATION, whether as a result of the ALZA RESEARCH AND
DEVELOPMENT program or its other activities hereunder. ALZA will, at USB's
request and USB's expense, execute all applications, assignments or other
documents and provide such assistance as USB shall deem necessary or useful in
order to apply for and obtain copyrights, patents and other intellectual
property protection for such inventions and discoveries. ALZA shall disclose
all such proprietary information to USB in a timely manner such that USB may
obtain such intellectual property protection. SCIENTIFIC KNOW-
43
<PAGE>
HOW shall include all SCIENTIFIC KNOW-HOW disclosed by USB to ALZA under the
EXISTING CONFIDENTIALITY AGREEMENTS (as defined in Section 17.7 below). ALZA
will hold in strict confidence the SCIENTIFIC KNOW-HOW and will take all
reasonable steps to prevent disclosure or use of the SCIENTIFIC KNOW-HOW except
as permitted by this AGREEMENT or as is necessary to carry out the activities
contemplated hereby. Without the prior written consent of USB, ALZA shall not
use the SCIENTIFIC KNOW-HOW for any purpose other than performing its
obligations or exercising its rights under this AGREEMENT. ALZA shall have the
right to disclose the SCIENTIFIC KNOW-HOW only to its directors, employees,
consultants and clinicians under written agreements of confidentiality at least
as restrictive as those set forth in this AGREEMENT who have a need to know such
information in connection with such party performing its obligations as
contemplated by this AGREEMENT. The obligations of ALZA with respect to the
SCIENTIFIC KNOW-HOW shall not apply to SCIENTIFIC KNOW-HOW: (i) which ALZA can
demonstrate by its written records was known by ALZA prior to the disclosure
thereof by the disclosing party not obtained directly or indirectly through the
parties to this AGREEMENT or the activities undertaken under this AGREEMENT;
(ii) which is disclosed to ALZA without restriction by a THIRD PARTY who has the
right to make such disclosures who did not obtain the SCIENTIFIC KNOW-HOW
directly or indirectly through the parties to this AGREEMENT or the activities
undertaken under this AGREEMENT; or (iii) which falls within the exceptions set
forth in Section 10.2 (b) (iii) and (iv) below. No provision of this AGREEMENT
shall be construed so as to preclude such disclosure of SCIENTIFIC KNOW-HOW as
may be inherent in or reasonably necessary to the securing from any governmental
agency of any necessary approval or license, or to the obtaining of patents by
USB. Upon the termination, expiration, cancellation or abandonment of this
AGREEMENT, ALZA shall promptly return to USB all copies and embodiments of the
SCIENTIFIC KNOW-HOW, except that ALZA shall be permitted to retain one copy of
any such material to monitor ALZA's continuing obligations hereunder.
(b) It is the intention of the parties that ALZA and USB shall be joint
owners of all right, title and interest in and to all COMMERCIAL KNOW-HOW,
whether generated by USB, ALZA or others under agreement with USB or ALZA. Each
party shall have full rights to use the COMMERCIAL KNOW-HOW during and after the
term of this AGREEMENT.
10.2 Confidential Information.
------------------------
(a) Each party has and may hereafter, from time to time in the course
of the performance of this AGREEMENT, disclose CONFIDENTIAL INFORMATION (as
defined below) to the other party. Each party will hold in strict confidence
the CONFIDENTIAL INFORMATION of the other party and will take all reasonable
steps to prevent disclosure to, or use of the CONFIDENTIAL INFORMATION of the
other party by, any THIRD PARTY, except as permitted under this AGREEMENT or as
necessary to carry out the activities contemplated hereby. Further, neither
party shall, without the prior written consent of the other party, use the
CONFIDENTIAL INFORMATION of the other party for any purpose other than
performing its obligations or exercising its rights under this AGREEMENT. Each
party will disclose the CONFIDENTIAL INFORMATION of the other party only to its
directors, employees, consultants, vendors and clinicians under written
agreements of confidentiality at least as restrictive as those set forth in this
AGREEMENT who have a need to know such information in
44
<PAGE>
connection with such party performing its obligations or exercising its rights
under this AGREEMENT. No provision of this AGREEMENT shall be construed so as to
preclude such disclosure of CONFIDENTIAL INFORMATION as may be inherent in or
reasonably necessary to the securing from any governmental agency of any
necessary approval or license, or to the obtaining of patents by the parties.
Upon the termination, expiration, cancellation or abandonment of this AGREEMENT,
each party shall promptly return to the other party all copies and embodiments
of the CONFIDENTIAL INFORMATION of such other party, subject to the retention of
one (1) complete copy for archival purposes. The obligations of the parties
relating to CONFIDENTIAL INFORMATION shall expire ten years after the date of
the termination, expiration, cancellation or abandonment of this AGREEMENT.
(b) "CONFIDENTIAL INFORMATION" shall mean all trade secret and
proprietary information and data, (but shall not include SCIENTIFIC KNOW-HOW or
COMMERCIAL KNOW-HOW) provided by a party to the other party pursuant to this
AGREEMENT or the EXISTING CONFIDENTIALITY AGREEMENTS (as defined in Section 17.6
below) or generated pursuant to this AGREEMENT except any portion thereof which:
(i) the recipient can demonstrate by its written records was
known by the recipient prior to the disclosure thereof by the
disclosing party;
(ii) is disclosed to the recipient without restriction after
disclosure thereof by the disclosing party by a THIRD PARTY who has
the right to make such disclosure;
(iii) is or becomes part of the public domain through no breach
of this AGREEMENT by the recipient; or
(iv) the recipient can demonstrate by its written records was
independently developed by or for the recipient without reference to
the information or date disclosed by the disclosing party and by
individuals or entities who have not had access to such information or
data disclosed.
(c) This Section 10.2 shall not be construed to grant any rights to ALZA
in or to any SCIENTIFIC KNOW-HOW.
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10.3 AFFILIATES and Sublicensees. Nothing herein shall be construed as
---------------------------
preventing either party (each, a "Receiving Party") from disclosing any
information received from the other party to an AFFILIATE, sublicensee or
distributor of the Receiving Party, provided such AFFILIATE, sublicensee or
distributor has agreed with the Receiving Party, in writing, to maintain the
confidentiality of such information to the same extent as the Receiving Party is
bound under this AGREEMENT, and subject to the other provisions of this
AGREEMENT.
10.4 Ownership. CONFIDENTIAL INFORMATION furnished hereunder by USB to
---------
ALZA shall remain the sole property of USB. Nothing contained herein shall be
construed as giving ALZA any rights in or with respect to any such CONFIDENTIAL
INFORMATION, except the right to use such CONFIDENTIAL INFORMATION in connection
with performance under this AGREEMENT. CONFIDENTIAL INFORMATION furnished
hereunder by ALZA to USB which is unrelated to the PRODUCT shall remain the sole
property of ALZA and nothing contained herein shall be construed as giving USB
any rights in or with respect to any such CONFIDENTIAL INFORMATION, except the
right to use such CONFIDENTIAL INFORMATION in connection with performance under
this AGREEMENT.
10.5 Legal Proceedings. Subject in all cases to the provisions of ARTICLE
------------------
X, all CONFIDENTIAL INFORMATION disclosed by one party to the other shall remain
the intellectual property of the disclosing party. In the event that a court or
other legal or administrative tribunal, directly or through an appointed master,
trustee or receiver, assumes partial or complete control over the assets of a
party to this AGREEMENT based on the insolvency or bankruptcy of such party, the
bankrupt or insolvent party shall promptly notify the court or other tribunal
(a) that CONFIDENTIAL INFORMATION received from the other party under this
AGREEMENT remains the property of the other party, (b) of the confidentiality
obligations under this AGREEMENT and (c) of the provisions of Section 6.13. In
addition, the bankrupt or insolvent party shall, to the extent permitted by law,
take all steps necessary or desirable to maintain the confidentiality of the
other party's CONFIDENTIAL INFORMATION and to ensure that the court, other
tribunal or appointee maintains such information in confidence in accordance
with the terms of this AGREEMENT.
10.6 Public Announcements.
--------------------
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(a) The parties shall agree on the form of initial press release
announcing this transaction to be issued by each party or jointly, as the
parties may agree.
(b) A party may disclose the terms and conditions of this AGREEMENT to
the extent that such disclosure is required by law, including without limitation
the securities laws of the United States. The parties acknowledge and agree
that the determination that a disclosure is required by law shall be made in the
sole, but reasonably exercised, discretion of the party making such disclosure.
To the extent a party determines that a disclosure is necessary under this
paragraph 10.6(b), the parties will work together in good faith to attempt to
agree upon the content of the disclosure.
(c) The parties may also disclose the existence or terms of this
AGREEMENT to bankers and other business associates if such persons have agreed
in writing to keep the information confidential.
10.7 Publications. Neither party shall submit for written or oral
------------
publication any manuscript, abstract or the like which includes data or other
information related to the PRODUCT without providing in advance a copy of such
submission to the other party for review and comment. With respect to a
manuscript, the manuscript shall be provided a minimum of thirty (30) days in
advance and with respect to an abstract, the abstract shall be provided fourteen
(14) days in advance.
ARTICLE XI
PATENT AND TRADEMARK LITIGATION
11.1 THIRD PARTY Patent or Trademark Litigation. In the event of the
------------------------------------------
institution of any suit by a THIRD PARTY against USB or ALZA for patent or
trademark infringement involving the manufacture, use, sale, distribution or
marketing of PRODUCT anywhere in the TERRITORY, the party sued shall promptly
notify the other party in writing. USB shall have the first right, but not the
obligation, to defend such suit at its expense. If USB does not commence a
defense of such suit within 60 days after it receives written notice thereof,
ALZA, after so notifying USB in writing, shall be entitled to defend the suit at
ALZA's expense. USB shall indemnify and hold harmless ALZA and its officers,
directors, stockholders, employees, successors and assigns from any loss, damage
or liability
47
<PAGE>
(including reasonable attorneys' fees) in any such patent or trademark
infringement action arising from the manufacture or use of the PRODUCT in the
TERRITORY or the sale, distribution or marketing of the PRODUCT in the TERRITORY
in accordance with the PRODUCT labelling.
11.2 Infringement. In the event that USB or ALZA becomes aware of actual
------------
or threatened infringement of a PATENT or TRADEMARK related to PRODUCT anywhere
in the TERRITORY, that party shall promptly so notify the other party in
writing. USB shall have the first right, but not the obligation, to bring, at
its own expense, an infringement action or file any other appropriate action or
claim related to infringement of the PATENT or the TRADEMARK, wherein such
infringement relates to PRODUCT, against any THIRD PARTY. If USB does not
commence a particular infringement action within 90 days after it receives
written notice of such infringement, ALZA, after so notifying USB in writing,
shall be entitled to bring such infringement action or any other appropriate
action or claim at ALZA's expense. In any action pursuant to this section, the
party bringing the action shall have the right to use the name of the other
party in connection therewith, or to join the other party to the extent
necessary provided that the party bringing the action indemnifies and holds
harmless the other party, its officers, directors, shareholders, employees,
successors and assigns from any loss, damage or liability, including reasonable
attorneys' fees, resulting from such naming or joining.
11.3 Control of Litigation, Assistance and Settlement. The party
------------------------------------------------
conducting any action pursuant to this Article shall be entitled to bring and
control the action through counsel of its choice, and, upon request, the other
party shall cooperate and provide reasonable assistance in any such action at
the expense of the requesting party. No settlement or consent judgment or other
voluntary final disposition of any suit defended or action brought by one party
pursuant to this Article may be entered into without the consent of the other
party if such settlement would require the non-settling party to be subject to
an injunction or to make a monetary payment in excess of the percentages set
forth in Section 11.4, or would adversely affect the non-settling party's rights
under this AGREEMENT.
11.4 Expenses and Awards. The costs and expenses of the party bringing an
-------------------
action under Section 11.2 shall be reimbursed first out of any damages or other
monetary awards recovered, and any remaining recovery shall then be applied to
reimburse the expenses incurred by the other party in connection therewith. Any
excess recovery remaining after the expenses of both parties have been
reimbursed shall be split (i) [ * ] during the COPROMOTION
PERIOD (and any
48
<PAGE>
EXTENSION PERIOD) and (ii) [ * ] during the
RESIDUAL PERIOD. The party bringing such action shall request that the court
make a determination regarding the period of time, including allocation between
the COPROMOTION PERIOD and any EXTENSION PERIOD, if any, and the RESIDUAL
PERIOD, for which such damages are being awarded.
11.5 Obligation to Inform. The parties shall keep one another informed of
--------------------
the status of, and their respective activities regarding, any litigation
concerning PRODUCT.
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ARTICLE XII
TERM AND TERMINATION
12.1 Term. Unless otherwise earlier terminated pursuant to this Article,
----
this AGREEMENT shall expire ten years after the end of the COPROMOTION PERIOD,
or if extended by ALZA pursuant to Section 3.6(b), nine years after the end of
the EXTENSION PERIOD. In the event that this AGREEMENT shall be terminated
prior to the expiration of the COPROMOTION PERIOD, the COPROMOTION PERIOD shall
be deemed to be terminated as of the effective termination date of this
AGREEMENT.
12.2 Termination by Either Party. This AGREEMENT may be terminated
---------------------------
unilaterally by any party hereto upon written notice to the other party in the
event of any of the following:
(a) nonpayment of any properly due and payable amount that is
continuing for twenty (20) business days after the defaulting party has received
notice from the nondefaulting party of such nonpayment;
(b) material breach by the other party of any provision herein (other
than as specified in subsection (a) above) that is continuing forty-five (45)
days after the non-breaching party gives the breaching party notice of such
breach specifying in reasonable detail the particulars of the alleged breach (or
if such breach cannot be cured within 45 days, no steps have been taken by the
breaching party during such 45 day period to cure such breach); or
(c) the other party becomes insolvent, or voluntary or involuntary
proceedings are instituted by or against the other party, or a receiver or
custodian is appointed for such party's business, or a substantial portion of
such party's business is subject to attachment or similar process, or the other
party is unable to satisfy its financial obligations as they become due, enters
into any composition or arrangement with its creditors or enters into
liquidation.
12.3 Termination by ALZA. ALZA may terminate this AGREEMENT as follows:
-------------------
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(a) for any reason upon 12 months prior written notice delivered to
USB by ALZA after completion of the First CONTRACT YEAR such termination to be
effective after such 12-month notice period.
(b) Upon thirty (30) days written notice to USB subsequent to the
LAUNCH DATE in the event that there is a material change in the frequency or
severity of serious adverse PRODUCT-related events, which events require
additional or modified contraindications or warnings in the PRODUCT labelling
and as a result NET SALES of the PRODUCT are significantly and adversely
affected during each of three consecutive calendar months.
12.4 Termination by USB. USB may terminate this AGREEMENT as follows:
-------------------
(a) upon written notice to ALZA in the event that the launch of the
PRODUCT has not occurred on or before the first anniversary of the date of the
FDA approval letter for the PRODUCT, except if such failure to launch is a
result of an event specified in Section 4.5(iv) of this AGREEMENT.
ARTICLE XIII
RIGHTS AND DUTIES UPON TERMINATION OR EXPIRATION
13.1 Monies Paid or Due.
------------------
(a) Upon the termination of this AGREEMENT prior to its expiration
under Article XII, USB shall have the right to retain all payments received from
ALZA pursuant to Articles VI and VII, ALZA shall have the right to retain all
payments received from USB pursuant to Article VIII and each party shall pay to
the other all sums accrued hereunder which are then due.
(b) The termination of this AGREEMENT under Section 12.2 during the
COPROMOTION PERIOD or any EXTENSION PERIOD shall terminate the nondefaulting
party's obligation to make any remaining payments required by Articles III, VII
or VIII from the first to occur of the giving of notice of default or the
effective date of the termination.
(c) If ALZA terminates this AGREEMENT under Section 12.2 above, for
USB
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<PAGE>
breach, then the RESIDUAL PERIOD shall be a period equal to two years for each
CONTRACT YEAR (plus a proration for partial years) until the date of termination
at one hundred percent (100%) of the relevant percentages from the table set
forth in Section 8.1.
(d) If ALZA terminates this AGREEMENT under paragraph 12.3(a) above,
ALZA shall pay USB all sums accrued or due hereunder up through the effective
date of termination, including, if earned, payments pursuant to Section 7.1 of
this AGREEMENT and, with respect to reverse PRODUCT payments under this
AGREEMENT, the following shall apply:
(i) If the period from the LAUNCH DATE to the effective date of
the termination (the "MARKETED PERIOD") is less than three (3)
years, then such termination shall terminate USB's obligation to
make reverse PRODUCT payments pursuant to this AGREEMENT;
(ii) If the MARKETED PERIOD is greater than or equal to three
(3) years but less than four (4) years, with respect to reverse
PRODUCT payments, USB shall be obligated to pay [ *
] of the relevant percentages from the table set forth in Section
8.1 for a period equal to [ *
]
(ii) If the MARKETED PERIOD is greater than or equal to four (4)
years but less than five (5) years, with respect to reverse
PRODUCT payments, USB shall be obligated to pay [
* ] of the relevant percentages from the table set
forth in Section 8.1 for a period equal to [
* ]
(e) If ALZA terminates this AGREEMENT under paragraph 12.3(b) above,
ALZA shall pay USB all sums accrued or due hereunder up through the effective
date of termination, including, if earned, payments pursuant to Section 7.1 of
this AGREEMENT and, with respect to reverse PRODUCT payments under this
AGREEMENT, and, in the event USB continues to market PRODUCT, USB shall be
obligated to pay [ * ] of the relevant percentages from the table
set forth in Section 8.1 for a period equal to [ * ]
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<PAGE>
(f) If USB terminates this AGREEMENT under paragraph 12.4(a) above
such termination shall terminate each party's obligation to make any remaining
payments required by Articles III, VII or VIII from the effective date of
termination.
13.2 Termination of Distribution Rights. Upon expiration or termination of
----------------------------------
the COPROMOTION PERIOD and any EXTENSION PERIOD, ALZA's rights to market and
sell PRODUCT in the TERRITORY shall terminate, and all rights to market and sell
PRODUCT shall revert to USB. Upon such expiration or termination, all
promotional materials related to PRODUCT that contain ALZA's name shall no
longer be used to promote, market and sell the PRODUCT.
13.3 Remaining PRODUCT. Upon expiration or termination of the COPROMOTION
-----------------
PERIOD and any EXTENSION PERIOD, ALZA shall notify USB of the amounts of PRODUCT
that ALZA then has on hand, and USB, in its sole discretion, with respect to all
or any specified portion of such amounts, may elect (i) to permit ALZA and its
distributors to sell the remaining amounts of PRODUCT for a period following the
expiration or termination of the COPROMOTION PERIOD and any EXTENSION PERIOD not
to exceed six (6) months; or (ii) repurchase such PRODUCT from ALZA at the
actual purchase price paid by ALZA for such PRODUCT provided however in the
event of termination by ALZA for USB breach pursuant to Section 12.2, the
foregoing election shall be made by ALZA. In the event that either party elects
the option set forth in Section 13.3 (i), USB and ALZA shall cooperate to
achieve a smooth transition with respect to the PRODUCT marketing and USB shall
have no obligation to accept from ALZA the amounts of PRODUCT that ALZA has on
hand at the end of the COPROMOTION PERIOD and any EXTENSION PERIOD.
13.4 Transfer of Information. Promptly following the expiration or
-----------------------
termination of the COPROMOTION PERIOD and any EXTENSION PERIOD, each party shall
provide to the other copies of all COMMERCIAL KNOW-HOW in such party's
possession which is not in the other party's possession.
13.5 Transfer of Reimbursement Approvals and Purchase Contracts. By the
----------------------------------------------------------
end of the COPROMOTION PERIOD (or any EXTENSION PERIOD), ALZA shall take such
reasonable steps as shall be required to attempt to cause the transfer to USB
(or USB's designated AFFILIATE) of any reimbursement approvals and purchase
contracts related to PRODUCT in the TERRITORY that remain
53
<PAGE>
in the name of ALZA or an ALZA AFFILIATE, to the extent permitted by applicable
law and to the extent they are transferrable pursuant to the terms thereof. Any
out-of-pocket fees and similar expenses incurred by ALZA to effect such transfer
shall be borne by USB.
13.6 Survival of Rights. Articles I, IX, X, XI, XIII, XIV, XVI, XVII and
------------------
Sections 3.5, 4.7, 6.10, 6.11, 6.12, 6.13, 6.14, and any other provision which
by its terms is to stated to survive this AGREEMENT, shall survive the
termination or expiration of this AGREEMENT. In addition, any other provision
required to interpret and enforce the parties' rights and obligations under this
AGREEMENT also shall survive to the extent required for the full observation and
performance of this AGREEMENT by the parties hereto.
13.7 Rights Not Exclusive. All rights to terminate, and rights upon
--------------------
termination, provided for either party in this AGREEMENT are in addition to
other remedies in law or equity which may be available to either party.
13.8 Safety Events. In the event that ALZA does not terminate this
--------------
AGREEMENT and there has occurred a safety-related event as described in Section
12.3(b) ("SAFETY EVENT"), the parties expressly acknowledge that USB shall have
the right to require that the PRODUCT not be sold under this AGREEMENT pending
satisfactory resolution of any such event, the AGREEMENT shall remain in place,
and if sales and marketing of PRODUCT are resumed, the AGREEMENT shall be
extended for the period of suspension of marketing of PRODUCT as a result of any
such SAFETY EVENT. In the event that PRODUCT is not launched hereunder as a
result of a SAFETY EVENT within fifteen (15) years of the date of such SAFETY
EVENT, this AGREEMENT shall terminate. Post-launch, in the event that PRODUCT
sales or marketing are not resumed by or through USB within fifteen (15) years
of such SAFETY EVENT, this AGREEMENT shall terminate.
ARTICLE XIV
PAYMENT TERMS GENERALLY; RECORDS
14.1 Records. Each party shall maintain at a location in the United States
-------
true and complete books and records in accordance with generally accepted
accounting principles, in sufficient detail to enable NET SALES of PRODUCT in
the TERRITORY and the calculation of amounts payable
54
<PAGE>
to the other party hereunder, or expended by such party in accordance with this
AGREEMENT, to be verified and to enable verification of all other quantifiable
obligations hereunder. All such relevant records (wherever located) shall be
maintained for at least three years after the submission of each report required
to be provided under this AGREEMENT. Within 90 days after the end of each
party's fiscal year, such party shall deliver to the other party a letter from
the independent auditors of such party confirming the correctness of all
payments made and amounts expended hereunder during the preceding twelve month
period. Each party shall have the right, through its independent auditors to
conduct an annual audit, during normal business hours and following reasonable
prior notice to the other party, to examine the books and records of the other
party for the purpose of verifying the payments or expenditures of such party
hereunder. The parties agree that information furnished as a result of any such
examination shall be limited to a written statement by such accountants to the
effect that they have reviewed the books of account of the party being audited
and either (i) the amounts of the payments due or expenditures made under this
AGREEMENT are in conformity with such books of account and the applicable
provisions of this AGREEMENT or (ii) setting forth any required adjustments. The
fees and expenses of the accountants performing such verification shall be borne
by the party requesting the audit. If any such audit shows any underpayment or
overcharge, a correcting payment or refund shall be made within 30 days after
receipt of the written statement described above. Notwithstanding the foregoing,
if any such audit results in any underpayment or overcharge with respect to any
twelve month period more than the greater of (i) $10,000 or (ii) 5% of the
payment actually due then the party being audited shall bear all costs of the
audit. Such access shall be available not more than once in each calendar year
and for eighteen (18) months after the expiration or termination of this
AGREEMENT, but absent a finding of gross negligence or bad faith or a payment
discrepancy of 15% or more, in no event shall a party be entitled to review or
audit a matter occurring more than three years before the requested date of the
review or audit.
14.2 Place of Payment; Interest. All payments to be made under this
--------------------------
AGREEMENT shall be paid in U.S. dollars by wire transfer in immediately
available funds, to such account as the receiving party shall have designated
from time to time in writing to the other party. Any such payment shall be
deemed to have been paid when recorded in the proper account. Any payment that
is not paid when due shall bear interest from the due date until payment in
full, at a rate equal to one percent per month (or at the maximum per annum rate
allowed by applicable law, if less).
55
<PAGE>
14.3 No Set-offs, etc. No part of any amount properly due and payable to
-----------------
either party hereunder may be reduced due to any counterclaim, set-off,
adjustment or other right which the other party may have.
14.4 Taxes. The party receiving any payments pursuant to this AGREEMENT
------
shall pay any and all taxes levied on such payments. If laws or regulations
require that taxes be withheld on any payment, the remitting party will (i)
deduct those taxes from the payment, (ii) pay the taxes to the proper taxing
authority and (iii) send evidence of the obligation together with proof of
payment to the other party within sixty days following that payment.
ARTICLE XV
REPRESENTATIONS AND WARRANTIES; COVENANTS
15.1 Mutual Authority. USB and ALZA each represents and warrants to the
----------------
other that (i) it has the authority and right to enter into and perform this
AGREEMENT and (ii) its execution, delivery and performance of this AGREEMENT
will not conflict in any material fashion with the terms of any other agreement
to which it is or becomes a party or by which it is or becomes bound.
15.2 Compliance with Applicable Laws. ALZA and USB each covenants to the
-------------------------------
other that it will comply fully with all laws applicable to it and its
activities under this AGREEMENT.
15.3 Debarment. Each party represents that neither it nor any of its
---------
employees or consultants have been debarred or the subject of debarment
proceedings by the FDA.
ARTICLE XVI
INDEMNIFICATION; INSURANCE
16.1 Indemnification by ALZA. ALZA shall indemnify, defend and hold
-----------------------
harmless USB and its affiliates, employees, officers and directors, and its
successors and assigns, (each, a "USB INDEMNIFIED PARTY") from and against any
and all liability, loss, damage, cost, and expense (including reasonable
attorneys' fees), subject to the limitations in Section 16.5 (collectively, a
"LIABILITY"), which the USB INDEMNIFIED PARTY may incur, suffer or be required
to pay resulting
56
<PAGE>
from or arising in connection with (i) the breach by ALZA of any covenant,
representation or warranty contained in this AGREEMENT, (ii) any negligent act
or omission of ALZA, in the promotion, marketing, distribution and sale of
PRODUCT or any other activity conducted by ALZA under this AGREEMENT which is
the proximate cause of injury, death or property damage to a THIRD PARTY, (iii)
promotion and advertising of the PRODUCT, interactions and communications with
governmental authorities in connection with such promotion and advertising,
including any FDA requirements or recommendations with respect to such promotion
and advertising, including without limit corrective advertising and dear doctor
letters, and any charge by FDA that PRODUCT is misbranded as a result of any
PRODUCT advertising or promotion; or (iv) the successful enforcement by a USB
INDEMNIFIED PARTY of any of the foregoing.
16.2 Indemnification by USB. USB shall indemnify, defend and hold harmless
----------------------
ALZA and its affiliates, employees, officers and directors and its successors
and assigns (each, an "ALZA INDEMNIFIED PARTY") from and against any LIABILITY
(subject to the limitations in Section 16.5), which the ALZA INDEMNIFIED PARTY
may incur, suffer or be required to pay resulting from or arising in connection
with (i) the breach by USB of any covenant, representation or warranty contained
in this AGREEMENT, (ii) any negligent act or omission of USB in the
manufacture, promotion or marketing of PRODUCT or any other activity conducted
by USB under this AGREEMENT which is the proximate cause of injury, death or
property damage to a THIRD PARTY, or (iii) the successful enforcement by an ALZA
INDEMNIFIED PARTY of any of the foregoing.
16.3 Conditions to Indemnification. The obligations of the indemnifying
-----------------------------
party under paragraphs 16.1 and 16.2 are conditioned upon the delivery of
written notice to the indemnifying party of any potential LIABILITY promptly
after the indemnified party becomes aware of such potential LIABILITY. The
indemnifying party shall have the right to assume the defense of any suit or
claim related to the LIABILITY if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of the indemnified
party, such suit or claim involves an issue or matter which could have a
materially adverse effect on the business, operations or assets of the
indemnified party, the indemnified party may waive its rights to indemnity under
this AGREEMENT and control the defense or settlement thereof, but in no event
shall any such waiver be construed as a waiver of any indemnification rights
such indemnified party may have at law or in equity. If the indemnifying party
defends the suit or claim, the indemnified party may participate in (but not
control) the defense thereof
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<PAGE>
at its sole cost and expense.
16.4 Settlements, etc. Neither party may settle a claim or action related
-----------------
to a LIABILITY without the consent of the other party, if such settlement would
impose any monetary obligation on the other party or require the other party to
submit to an injunction or otherwise limit the other party's rights under this
AGREEMENT. Any payment made by a party to settle any such claim or action shall
be at its own cost and expense.
16.5 Limitation of Liability. With respect to any claim by one party
-----------------------
against the other arising out of the performance or failure of performance of
the other party under this AGREEMENT, the parties expressly agree that the
liability of such party to the other party for such breach shall be limited
under this AGREEMENT or otherwise at law or equity to direct damages only and in
no event shall a party be liable to the other party for indirect, incidental,
special or consequential damages, including without limitation, lost profits.
16.6 Insurance. Each party shall, during the term of this AGREEMENT,
---------
maintain commercially reasonable amounts of insurance from a reputable insurance
carrier for liability insurance, including products liability and contractual
liability insurance, in an amount not less than $5,000,000. Each party shall
provide the other party with evidence of such insurance upon request. Promptly
after the EFFECTIVE DATE, each party shall name the other party an "additional
insured" on such party's relevant insurance policies.
ARTICLE XVII
MISCELLANEOUS
17.1 Force Majeure. Subject to Section 6.13, if the performance of any
-------------
part of this AGREEMENT by either party, including the performance of the
RESEARCH AND DEVELOPMENT, or of any obligation under this AGREEMENT, is
prevented, restricted, interfered with or delayed by reason of any cause beyond
the reasonable control of the party liable to perform, unless conclusive
evidence to the contrary is provided, the party so affected shall, upon giving
written notice to the other party, be excused from such performance to the
extent of such prevention, restriction, interference or
58
<PAGE>
delay, provided that the affected party shall use its reasonable efforts to
avoid or remove such causes of non-performance and shall continue performance
with the utmost dispatch whenever such causes are removed. When such
circumstances arise, the parties shall discuss what, if any, modification of the
terms of this AGREEMENT may be required in order to arrive at an equitable
solution.
17.2 Governing Law. This AGREEMENT shall be deemed to have been made in
-------------
the State of Delaware and its form, execution, validity, construction and effect
shall be determined in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
17.3 Injunctive Relief. The parties hereby acknowledge that damages at
-----------------
law may be an inadequate remedy for the breach of any of the agreements
contained in Article X, and, accordingly, either party shall be entitled,
without the need of establishing actual damages, to such injunctive relief as
may be necessary to prevent, or to enjoin the continuation of, any such breach.
17.4 Dispute Resolution.
------------------
(a) Any matter that cannot be resolved by the required vote of the
COLLABORATION COMMITTEE having jurisdiction thereof under this AGREEMENT and any
other dispute, controversy or claim arising out of or relating to this
AGREEMENT, or the breach, termination, or invalidity of this AGREEMENT, shall be
submitted in the first instance to the Chief Executive Officer of USB and the
Chief Executive Officer of ALZA.
(b) If the matter or dispute cannot be resolved by the individuals
designated in Section 17.4 (a) within 30 days after such submission, it shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, except as modified by this section. The
number of arbitrators shall be three, one of whom is selected by ALZA, one of
whom is selected by USB and one of whom is selected by USB and ALZA (or by the
other two arbitrators if the parties cannot agree). The arbitration proceeding
shall be conducted in the English language. Any arbitration proceeding
instituted by ALZA shall be brought in Philadelphia, Pennsylvania, and any
arbitration proceeding instituted by USB shall be brought in Palo Alto,
California, unless the parties
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<PAGE>
agree in writing to conduct the arbitration in another location.
(c) The arbitration decision shall be binding and not be appealable to
any court in any jurisdiction. The prevailing party may enter such decision in
any court having competent jurisdiction.
(d) Each party shall pay its own expenses of arbitration and the
expenses of the arbitrators shall be equally shared except that if, in the
opinion of the arbitrators, any claim by a party hereto or any defense or
objection thereto by the other party was unreasonable, the arbitrators may in
their discretion assess as part of the award all or any part of the arbitration
expenses of the other party (including reasonable attorneys' fees) and expenses
of the arbitrators against the party raising such unreasonable claim, defense
or objection.
17.5 Severability.
------------
(a) If any provision of this AGREEMENT is held by a court of competent
jurisdiction to be invalid or unenforceable, it shall be modified, if possible,
to the minimum extent necessary to make it valid and enforceable or, if such
modification is not possible, it shall be stricken and the remaining provisions
shall remain in full force and effect; provided, however, that if a provision is
stricken so as to significantly alter the economic arrangements of this
AGREEMENT, the party adversely affected may terminate this AGREEMENT upon 60
days' prior written notice to the other party.
(b) If any of the terms or provisions of this AGREEMENT is in conflict
with any applicable statute or rule of law in any jurisdiction, then such term
or provision shall be deemed inoperative in such jurisdiction to the extent of
such conflict and the parties will renegotiate the affected terms and conditions
of this AGREEMENT to resolve any inequities.
17.6 Entire AGREEMENT. This AGREEMENT constitutes the entire agreement
----------------
between the parties relating to the subject matter hereof and supersedes all
previous writings and understandings, whether oral or written, including without
limitation the Confidentiality Agreements between the parties dated August 25,
1995 and dated November 10, 1995 (the "EXISTING CONFIDENTIALITY
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<PAGE>
AGREEMENTS"), relating to the subject matter of this AGREEMENT. In the event of
any inconsistency between this AGREEMENT and any schedule, appendix, standard
operating procedure or other ancillary agreement or document contemplated by
this AGREEMENT, the terms of this AGREEMENT shall govern.
17.7 Amendment. This AGREEMENT may not be amended, supplemented or
---------
otherwise modified except by an instrument in writing signed by both parties
that specifically refers to this AGREEMENT.
17.8 Notices. Any notice required or permitted under this AGREEMENT shall
-------
be sent by certified mail or courier service, charges pre-paid, or by facsimile
transmission, to the address or facsimile number specified below:
If to USB:
One Tower Bridge
100 Front Street
West Conshohocken, Pennsylvania 19428
Fax No: 610-832-4595
Attention: Chief Executive Officer
With a copy to:
General Counsel
Fax No: 610-832-4595
If to ALZA:
950 Page Mill Road
P.O. Box 10950
Palo Alto, California 94303
Fax No.: (415) 496-8048
Attention: Vice President and General Counsel
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or to such other address or facsimile number as the person may specify in a
notice duly given to the sender as provided herein. A notice will be deemed to
have been given as of the date that is five days after it is deposited in the
United States mail or the date it is delivered by a courier service or, in the
case of facsimile transmission, when received.
17.9 Assignment and Binding Effect. This AGREEMENT shall be binding upon
-----------------------------
and inure to the benefit of the successors and assigns of the parties hereto.
Neither party may assign any of its rights, or delegate any of its obligations,
under this AGREEMENT without the written consent of the other party, except that
either party may assign this AGREEMENT or any PATENT owned by it to any
AFFILIATE or to any corporation with which it may merge or consolidate, or to
which it may transfer all or substantially all of its assets to which this
AGREEMENT relates, and ALZA may appoint distributors in the TERRITORY in
possessions or territories, but not states or the District of Columbia, without
obtaining the consent of USB. Such consent will not be unreasonably withheld if
the proposed assignee has capabilities at least comparable to those of the
assigning party to carry out its obligations hereunder.
17.10 Headings and References. All section headings contained in this
-----------------------
AGREEMENT are for convenience of reference only and shall not affect the meaning
or interpretation of this AGREEMENT. Unless the context requires otherwise, all
references in this AGREEMENT to any article, section, schedule or appendix shall
be deemed and construed as references to an article or section of, or an
schedule or appendix to, this AGREEMENT, and any such schedules and appendices
are incorporated in this AGREEMENT by such reference.
17.11 No Agency. It is understood and agreed that each party shall have
---------
the status of an independent contractor under this AGREEMENT and that nothing in
this AGREEMENT shall be construed as authorization for either party to act as
agent for the other. Members of the COLLABORATION COMMITTEE shall remain
employees of ALZA or USB, as the case may be, and neither party shall incur any
liability for any act or failure to act by employees of the other party,
including members of any of the foregoing committees who are employees of the
other party.
17.12 No Strict Construction. This AGREEMENT has been prepared jointly
----------------------
and shall not be strictly construed against either party.
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<PAGE>
17.13 Counterparts. This AGREEMENT shall become binding as of the
------------
EFFECTIVE DATE when any one or more counterparts hereof, individually or taken
together, shall bear the authorized signatures of each of the parties hereto.
This AGREEMENT may be executed in any number of counterparts, each of which
shall be an original as against any party whose signature appears thereon but
all of which together shall constitute but one and the same instrument. A
facsimile transmission of the signed AGREEMENT shall be legal and binding on all
parties.
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<PAGE>
IN WITNESS WHEREOF, the parties, through their authorized officers, have duly
executed this AGREEMENT as of the date first written above.
U.S. BIOSCIENCE, INC.
BY:________________________________________
Title: Chairman and Chief Executive Officer
ALZA CORPORATION
BY:________________________________________
Title: Vice President, Sales and Marketing
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<PAGE>
LIST OF APPENDICES
Appendix A - DEVELOPMENT COSTS
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<PAGE>
EXHIBIT A
DEVELOPMENT COSTS
Development Costs are equal to the sum of (i) Research Expenses, (ii) General
and Administrative Expenses and (iii) Capital Asset Expenditures.
(i) Research Expenses include both Direct Expenses and Indirect
Expenses related to PRODUCT, with the cost elements outlined on
Exhibit A-1.
(a) Direct Expenses include Direct Salaries, Clinical Expenses,
Supplies and other expenses incurred specifically in
connection with the PRODUCT.
(b) Indirect Expenses include Research Management and support
costs of the organization. Indirect Expenses are allocated to
the PRODUCT at a fixed rate of [ * ]
(ii) General and Administrative Expenses include cost elements
outlined on Exhibit A-2. General and Administrative Expenses are
allocated to the PRODUCT at a fixed rate of [ *
]
(iii) Capital Asset Expenditures are the actual costs of new assets
acquired specifically for the PRODUCT to use in RESEARCH AND
DEVELOPMENT.
The DEVELOPMENT COSTS described in this Exhibit A are intended to cover only
activities pursuant to the parties' RESEARCH AND DEVELOPMENT of the PRODUCT
under this AGREEMENT, which will consist largely of clinical activities and
related activities.
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EXHIBIT A-1
Research Expenses
-----------------
Direct Expenses
- ---------------
Direct Research Salaries*
Product Clinical Expenses and Outside Services
Product Specific Supplies
Product Travel and Related Expenses
Clinical Investigator Meeting Expenses
Miscellaneous Product Expenses
Regulatory and Filing Fees and Maintenance Payments
Indirect Expenses
- -----------------
Research Management and Indirect Salaries*
General Research Supplies and Materials
General Research Consulting and Outside Services
Facilities Expenses
Telephone and Communications
Equipment Depreciation, Rent, Maintenance and Services
Clinical Research Travel and Related Expenses
Patent and Trademark Expenses
Miscellaneous Indirect Research Expenses
*Salaries include Benefits
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<PAGE>
EXHIBIT A-2
General and Administrative Expenses
-----------------------------------
Corporate Management, Administrative, and Indirect Salaries*
Telephone and Communications
Equipment Depreciation, Rent, Maintenance and Services
Board of Directors and Corporate Consulting
Annual Audit, Accounting and Legal Expenses
Facilities Expenses
Information Services (data processing) Expenses
Miscellaneous General and Administrative Expenses
69
