UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 1-10451
NORTH AMERICAN VACCINE, INC.
(Exact name of registrant as specified in its charter)
CANADA 98-0121241
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12103 INDIAN CREEK COURT, BELTSVILLE, MARYLAND 20705
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 470-6100
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
COMMON STOCK, NO PAR VALUE, OUTSTANDING AS OF NOVEMBER 11, 1996 -- 31,258,833
SHARES
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TABLE OF CONTENTS
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...................................... 3
Consolidated Balance Sheets............................... 4
Consolidated Statements of Operations..................... 5
Consolidated Statement of Shareholders' Equity............ 6
Consolidated Statements of Cash Flows..................... 7
Notes to Condensed Consolidated Financial Statements...... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 12
PART II. OTHER INFORMATION
Item 5. Other Information......................................... 20
Item 6. Exhibits and Reports on Form 8-K.......................... 21
SIGNATURES............................................................ 22
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited, condensed consolidated financial statements of North
American Vaccine, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and, therefore, omit or condense
certain footnotes and other information normally included in financial
statements prepared in accordance with generally accepted accounting principles.
This report should be read in conjunction with the Company's Annual Report on
Form 10-K filed for the year ended December 31, 1995. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial information for the interim
period reported have been made. Results of operations for the three and nine
months ended September 30, 1996, will not necessarily be indicative of the
results for the entire fiscal year ending December 31, 1996.
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<CAPTION>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 81,881 $ 10,443
Accounts receivable - 2,000
Prepaid expenses and other current assets 2,009 1,067
----------- ------------
Total current assets 83,890 13,510
Property, plant and equipment, net 17,769 18,121
Investment in affiliate, at market 2,031 9,065
Other assets 529 553
Deferred financing costs, net 3,309 -
----------- ------------
Total assets $ 107,528 $ 41,249
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,734 $ 3,550
Other current liabilities 6,797 4,296
----------- ------------
Total current liabilities 8,531 7,846
Deferred rent credit, net of current portion 137 205
6.50% Convertible subordinated notes, due May 1, 2003 86,250 -
----------- ------------
Total liabilities 94,918 8,051
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; unlimited shares authorized- Series A,
convertible; issued and outstanding 2,000,000 shares; entitled to Can $2.50
per share in liquidation 6,538 6,538
Common stock, no par value; unlimited shares authorized; issued 30,906,547
shares at September 30, 1996 and 30,186,711 shares at December 31, 1995 63,239 58,474
Unrealized investment holding gain 1,403 7,466
Accumulated deficit (58,570) (39,280)
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Total shareholders' equity 12,610 33,198
----------- ------------
Total liabilities and shareholders' equity $ 107,528 $ 41,249
=========== ============
The accompanying notes are an integral part of these condensed consolidated financial statements.
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<CAPTION>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---------------- -------------------- ------------------ --------------------
<S> <C> <C> <C> <C>
SALES $ - $ - $ 727 $ -
---------------- -------------------- ------------------ --------------------
OPERATING EXPENSES:
Production 4,058 1,376 10,754 3,578
Research and development 2,560 3,269 8,126 7,311
General and administrative 1,599 1,489 4,826 4,096
---------------- -------------------- ------------------ --------------------
Total operating expenses 8,217 6,134 23,706 14,985
---------------- -------------------- ------------------ --------------------
OPERATING LOSS (8,217) (6,134) (22,979) (14,985)
OTHER INCOME:
Gain on sale of investment in affiliate - - 4,228 10,929
Interest and dividend income 1,075 209 1,917 654
Interest expense (1,531) - (2,456) -
---------------- -------------------- ------------------ --------------------
NET LOSS ($8,673) ($5,925) ($19,290) ($3,402)
================ ==================== ================== ====================
NET LOSS PER SHARE ($0.28) ($0.20) ($0.63) ($0.11)
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 30,769 29,811 30,600 29,625
The accompanying notes are an integral part of these condensed consolidated financial statements.
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<CAPTION>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
SERIES A UNREALIZED
CONVERTIBLE INVEST- TOTAL
PREFERRED STOCK COMMON STOCK MENTG ACCUM- SHARE-
----------------------- ----------------------- HOLDING ULATED HOLDERS'
SHARES AMOUNT SHARES AMOUNT GAINS DEFICIT EQUITY
---------- ----------- --------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 2,000 $6,538 30,187 $58,474 $7,466 ($39,280) $33,198
Exercises of stock options - - 711 4,634 - - 4,634
Shares issued under
401(k) plan - - 9 131 - - 131
Realized investment holding gain - - - - (4,228) - (4,228)
Decrease in market value
of investment - - - - (1,835) - (1,835)
Net loss - - - - - (19,290) (19,290)
---------- ----------- --------- ----------- ------------- -------------- -------------
Balance, September 30, 1996 2,000 $6,538 30,907 $63,239 $1,403 ($58,570) $12,610
========== =========== ========= =========== ============= ============== =============
The accompanying notes are an integral part of these condensed consolidated financial statements.
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<CAPTION>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED) NINE MONTHS
ENDED
SEPTEMBER 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($19,290) ($3,402)
Adjustments to reconcile net loss to net cash used
in operating activities:
Gain on sale of investment in affiliate (4,228) (10,929)
(Gain) loss on disposal of equipment (15) 26
Depreciation and amortization 3,697 1,022
Amortization of deferred financing costs 210 -
Contribution of common stock to 401(k) plan 131 94
Decrease (increase) in other assets 24 (194)
Decrease in deferred rent (60) (56)
Cash flows provided by other working capital items 1,735 274
------------------ -------------------
Net cash used in operating activities (17,796) (13,165)
------------------ -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,345) (8,754)
Proceeds from sale of investment in affiliate 5,199 11,502
Proceeds from sale of equipment 15 -
------------------ -------------------
Net cash provided by investing activities 1,869 2,748
------------------ -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debt 86,250 -
Proceeds from exercises of stock options 4,634 1,210
Deferred financing costs (3,519) -
------------------ -------------------
Net cash provided by financing activities 87,365 1,210
------------------ -------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 71,438 (9,207)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,443 20,922
------------------ -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $81,881 $11,715
================== ===================
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
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<CAPTION>
NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS
ENDED
SEPTEMBER 30,
1996 1995
------------------ --------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OTHER WORKING CAPITAL ITEMS:
Decrease (increase) in:
Accounts receivable $ 2,000 $ -
Prepaid expenses and other current assets (943) (643)
Increase (decrease) in:
Accounts payable (1,816) (646)
Other current liabilities 2,494 1,563
------------------ --------------------
Net cash provided by other working capital items $ 1,735 $ 274
================== ====================
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest was $9 and $0 through September 30, 1996 and 1995
respectively.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
The Company is engaged in the research, development and production of vaccines
for the prevention of infectious diseases in children and adults. In the first
quarter of 1996, the Swedish Medical Products Agency granted regulatory approval
of the Company's acellular pertussis vaccine formulated as a DTaP vaccine for
the prevention of diphtheria, tetanus and pertussis (whooping cough). In the
third quarter of 1996, the Danish National Board of Health granted regulatory
approval of a combined DTaP-IPV (polio) vaccine. The Company has not received
approval from the U.S. Food and Drug Administration ("FDA") or any other
regulatory authority to market its DTaP vaccine or any other product in
development.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF ACCOUNTING AND CURRENCY. The accompanying consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") in the United States and are denominated in U.S. dollars,
because the Company conducts the majority of its transactions in this currency.
The application of Canadian GAAP would not result in material adjustments to the
accompanying financial statements except for the impact of the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 115, as discussed in
Note 3. The effect of foreign currency translation has been immaterial.
(B) PERVASIVENESS OF ESTIMATES. The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
(C) PRODUCT SALES. Revenue from product sales is recognized when all significant
risks of ownership have been transferred, the amount of the selling price is
fixed and determinable, all significant related acts of performance have been
completed, and no other significant uncertainties exist. In most cases, these
criteria are met when the goods are shipped.
(D) DEFERRED FINANCING COSTS. Deferred financing costs represent fees and other
costs incurred in connection with the issuance of long-term debt. These costs
are amortized over the term of the related debt using the effective interest
rate method.
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3. INVESTMENTS IN AFFILIATES
In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," equity securities classified as available-for-sale are
reported at fair value, with unrealized gains and losses reported in a separate
component of shareholders' equity.
At December 31, 1995, the Company owned 318,084 shares of IVAX Corporation
("IVAX") common stock. The market values of these securities, as shown on the
accompanying consolidated balance sheets, have been determined based on the
closing prices for registered securities of IVAX as of those dates. In the first
quarter of 1996, the Company sold 193,084 shares of its investment in IVAX
common stock generating approximately $5.2 million in proceeds and a realized
gain of $4.2 million. The market value of the Company's investment in IVAX at
November 11, 1996 was approximately $1.6 million. These investment securities
are volatile and therefore subject to significant fluctuations in value.
4. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following components:
September 30, December 31,
1996 1995
------------- ------------
(in thousands)
Accrued interest payable $ 2,237 $ -
Payroll and fringe benefits 1,486 736
Reserve for contract loss 720 720
Accrued taxes 607 633
Accrued costs of clinical trials 517 574
Accrued consulting and professional fees 423 767
Accrued construction costs 316 310
Deferred rent credit 93 85
Other accrued liabilities 398 471
-------- -------
Total other current liabilities $ 6,797 $4,296
======= ======
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5. LONG-TERM DEBT
In May 1996, the Company completed an offering of 6.50% convertible subordinated
notes in the principal amount of $86.25 million due May 1, 2003. The net
proceeds from this offering were approximately $82.7 million. Interest on the
notes is payable semi-annually on May 1 and November 1 of each year, commencing
November 1, 1996. The notes are convertible into common shares of the Company at
any time after August 5, 1996, at the initial conversion price of approximately
$24.86 per common share. The notes are subordinated to present and future senior
indebtedness of the Company and will not restrict the incurrence of future
senior or other indebtedness by the Company. The notes are redeemable, in whole
or in part, at the option of the Company on or after May 1, 1999 at certain
pre-established redemption prices plus accrued interest. Upon a change in
control, the Company is required to offer to purchase all or part of the notes
then outstanding at a purchase price equal to 100% of the principal amount
thereof, plus interest. The repurchase price is payable in cash or, at the
option of the Company, in common shares.
6. SUBSEQUENT EVENTS
In the fourth quarter, the Company and Abbott Laboratories ("Abbott") signed a
definitive agreement under which Abbott would market CERTIVA(TRADEMARK), the
Company's DTaP vaccine, when approved by the FDA. The marketing agreement also
will allow Abbott to market the Company's DTaP-HIB, DTaP-IPV and DTaP-IPV-HIB
combination vaccines which are under development.
Abbott will market CERTIVA(TRADEMARK) and combination vaccines to private
physicians and managed care markets in the United States for immunization of
infants and children. The Company will market CERTIVA(TRADEMARK) and the
combination vaccines to government purchasers, including state governments and
the Centers for Disease Control and Prevention.
On execution of the agreement, the Company received $13 million of which $6.3
million represented payment for 350,000 shares of the Company's common stock,
and the balance represented a marketing fee and a clinical development payment.
The Company and Abbott will collaborate in the clinical development of the
combination vaccines and Abbott will provide the Company with clinical
development funding. The Company will receive payments upon achievement of
prescribed milestones. The agreement provides for total payments of up to $42
million by Abbott. The first milestone relates to FDA approval of
CERTIVA(TRADEMARK) provided certain other conditions are satisfied. In addition,
the Company will receive revenues from Abbott as it purchases CERTIVA(TRADEMARK)
and the combination vaccine products for resale to the private pediatric market.
In the fourth quarter, the Company acquired a 35,000 square foot manufacturing
facility in Beltsville, Maryland. The acquisition included the purchase and
lease of equipment and leasehold improvements and the assumption of a real
estate lease. The total acquisition cost was approximately $24.9 million, which
included a cash payment of $17.2 million. The balance of $7.7 million is
represented by an equipment lease obligation which expires in 2000. The lease
will be accounted for as a capital lease for financial reporting purposes, with
monthly payments of approximately $179,000. In addition, the Company has assumed
the real estate lease underlying the facility, which is scheduled to expire in
2000, but may be extended through 2010. Under the terms of the equipment lease,
the Company has a buyout option at the end of the third year for a predetermined
amount, and an option at the end of the fourth year at the greater of the fair
market value of the equipment or a predetermined amount. Under the equipment
lease agreement there are financial covenants that obligate the Company to
maintain certain minimum cash and investment balances, a minimum tangible net
worth and certain other financial ratios. The Company would be required to post
an irrevocable letter of credit for predetermined amounts at such time as the
Company is not in compliance with any of these financial covenants.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------
BACKGROUND
The Company is engaged in the research, development and production of
vaccines for the prevention of infectious diseases in children and adults.
In 1995, the Company recognized development revenues pursuant to agreements
with Pasteur-Merieux Serums et Vaccins, a wholly-owned subsidiary of
Rhone-Poulenc, which operates in North America through its subsidiary Connaught
Laboratories ("Pasteur Merieux-Connaught"), under which the Company and Pasteur
Merieux-Connaught will jointly develop the Company's meningococcus B vaccine.
Additional funding may be provided to the Company by Pasteur Merieux-Connaught
under the terms of the clinical development agreement. See "Outlook; Liquidity
and Capital Resources," below.
In February 1996, the Swedish Ministry of Health granted regulatory
approval to market the Company's acellular pertussis vaccine formulated as a
combined DTaP vaccine for the prevention of diphtheria, tetanus, and pertussis
(whooping cough). This marketing authorization was the first regulatory approval
for any of the Company's products. Under a supply agreement, the Company
manufactures the acellular component of the vaccine, and Statens Seruminstitut
("SSI") manufactures the diphtheria and tetanus components and will market and
distribute the DTaP vaccine in Sweden, as well as, upon receipt of any required
regulatory approvals, other countries comprising SSI's territory. In September
1996, the Danish National Board of Health granted regulatory approval of a
combined DTaP-IPV (polio) vaccine for all primary and booster doses for infants
and children in Denmark. This combination vaccine, which includes the Company's
acellular pertussis vaccine, was developed jointly by SSI and the Company. The
Company filed a product license application with the FDA in September 1995 for
approval to market CERTIVA(TRADEMARK), the Company's DTaP vaccine. On October
29, 1996, the FDA's Advisory Committee on Vaccines and Related Biologicals
reviewed the clinical data on CERTIVA(TRADEMARK), which data was submitted in
the application. See "Outlook; Liquidity and Capital Resources," below.
The Company had 196 and 155 full-time employees as of September 30, 1996
and 1995, respectively.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Production expenses were $4.1 million in 1996 compared to $1.4 million in
1995. The increase in these expenses in 1996 is due to increases in
depreciation, materials, and labor, as the Company prepares for regulatory
approval of CERTIVA(TRADEMARK) in the United States. The increase in labor cost
is attributable primarily to an increase in the number of employees. In
addition, facility costs increased in 1996 over 1995 due to the Company's
placing in service its expanded production facility and its adjacent support
facility.
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Research and development expenses decreased to $2.6 million in 1996 from
$3.3 million in 1995. The decrease is attributable primarily to lower clinical
testing and related expenses.
General and administrative expenses were $1.6 million in 1996 as compared
to $1.5 million in 1995. The increase is primarily due to higher labor costs and
supplies due to increased number of employees, offset in part by reduced
marketing and consulting fees.
Interest and dividend income increased to $1.1 million in 1996 from
$209,000 in 1995. This increase is due primarily to higher cash balances as a
result of the placement of $86.25 million convertible subordinated notes in May
1996. See "Outlook; Liquidity and Capital Resources" below.
Interest expense in 1996 was $1.5 million due to the issuance of the
convertible subordinated notes.
The factors cited above resulted in a net loss of $8.7 million or $0.28 per
share in 1996 as compared to a net loss of $5.9 million or $0.20 per share in
1995. The weighted-average number of common and common equivalent shares
outstanding was 30.8 million for 1996 compared to 29.8 million for 1995. The
increase in the number of weighted-average shares outstanding for 1996 as
compared to 1995 is attributable primarily to the exercises of stock options.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
In 1996, the Company recognized $727,000 of revenue from product sales of
its acellular pertussis vaccine.
Production expenses were $10.8 million in 1996 compared to $3.6 million in
1995. The increase in these expenses in 1996 is due to increases in
depreciation, materials, and labor, as the Company produces the acellular
pertussis vaccine for European distribution and prepares for regulatory approval
of CERTIVA(TRADEMARK) in the United States. The increase in labor cost is
attributable primarily to an increase in number of employees. In addition,
facility costs increased in 1996 over 1995 due to the Company's placing in
service its expanded production facility and its adjacent support facility.
Research and development expenses increased to $8.1 million in 1996 from
$7.3 million in 1995. The total year to date increase represents primarily
clinical testing and related expenses as the Company expanded its clinical and
regulatory affairs operations.
General and administrative expenses were $4.8 million in 1996 as compared
to $4.1 million in 1995. The increase is primarily due to a greater number of
employees and related use of supplies.
In 1996 the Company sold 193,084 shares of its investment in affiliate,
which generated proceeds of approximately $5.2 million and a realized gain of
$4.2 million or $0.14 per share. In 1995, the Company sold 695,936 shares of its
investment in an affiliate, which generated proceeds of approximately $11.5
million, and a realized gain of $10.9 million or $0.37 per share.
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Interest and dividend income increased to $1.9 million in 1996 from
$654,000 in 1995. This increase is due primarily to higher cash balances as a
result of the placement of $86.25 million convertible subordinated notes in May
1996. See "Outlook; Liquidity and Capital Resources" below.
Interest expense in 1996 was $2.5 million due to the issuance of the
convertible subordinated notes.
The factors cited above resulted in a net loss of $19.3 million or $0.63
per share in 1996 as compared to net loss of $3.4 million or $0.11 per share in
1995. Without the gains on the sales of investment securities in 1996 and 1995,
the net losses per share for 1996 and 1995 would have been $0.77 and $0.48 per
share, respectively. The weighted-average number of common and common equivalent
shares outstanding was 30.6 million for 1996 compared to 29.6 million for 1995.
The increase in the number of weighted-average shares outstanding for 1996 as
compared to 1995 was attributable primarily to the exercises of stock options.
OUTLOOK; LIQUIDITY AND CAPITAL RESOURCES
THE FOLLOWING PARAGRAPHS IN THIS FORM 10-Q CONTAIN CERTAIN FORWARD LOOKING
STATEMENTS, WHICH ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE
SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD LOOKING STATEMENTS
INCLUDE, WITHOUT LIMITATION, THOSE REGARDING THE PROSPECTS FOR REGULATORY
APPROVAL AND THE NEED FOR FURTHER CLINICAL EVALUATION, THE PROSPECTS FOR
MARKETING AND DISTRIBUTION OF VACCINE PRODUCTS, ASSESSMENTS OF REGULATORY AND
ADVISORY COMMITTEE REVIEWS OF THE COMPANY'S AND COMPETITORS' PRODUCTS, THE
PROSPECTS FOR AND FACTORS AFFECTING FUTURE REVENUES AND PROFITABILITY,
LIKELIHOOD OF ADDITIONAL FUNDING UNDER DISTRIBUTION AND COLLABORATION
AGREEMENTS, CASH REQUIREMENTS FOR FUTURE OPERATIONS, AND PROJECTED CAPITAL
EXPENDITURES. READERS ARE CAUTIONED THAT FORWARD LOOKING STATEMENTS INVOLVE
RISKS, UNCERTAINTIES AND FACTORS WHICH MAY AFFECT THE COMPANY'S BUSINESS AND
PROSPECTS, INCLUDING WITHOUT LIMITATION THOSE DESCRIBED BELOW AS WELL AS THE
RISKS ASSOCIATED WITH: OBTAINING REGULATORY APPROVAL OF PRODUCTS BY THE FDA; THE
PRODUCTION OF VACCINES; THE NATURE OF COMPETITION; EFFECTIVE MARKETING; AND
UNCERTAINTIES RELATING TO CLINICAL TRIALS, ALL AS DISCUSSED IN THE COMPANY'S
PREVIOUS FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION.
In February 1996, the Swedish Medical Products Agency granted regulatory
approval to market the Company's acellular pertussis vaccine formulated as a
combined DTaP vaccine for all primary and booster doses. In September 1996, the
Danish National Board of Health granted regulatory approval of a combined
DTaP-IPV (polio) vaccine for all primary and booster doses for infants and
children in Denmark. This combination vaccine, which includes the Company's
acellular pertussis vaccine, was developed jointly by SSI and the Company. SSI
markets the DTaP vaccine in Sweden, and the DTaP-IPV vaccine in Denmark, and has
indicated that it will file additional applications for the acellular pertussis
vaccine, both alone and in combination with other antigens, in other countries
within its territory. There can be no assurance given that SSI will file such
additional applications or that, if filed, such applications will be approved by
the appropriate regulatory authorities.
Following the regulatory approval described above, the Company has
recognized $727,000 in revenues from sale of its acellular pertussis vaccine.
Additional revenues from such product sales are dependent upon successful
commercialization of the DTaP vaccine in Sweden and the DTaP-IPV vaccine in
Denmark and additional product approvals of acellular pertussis products in
other countries. The Company does not control the marketing and distribution
efforts of SSI in its territory and, therefore, the Company's revenues for
product sales in that territory are dependent upon effective sales, marketing
and distribution efforts of SSI. There are no assurances if or when further
product approvals will be obtained, or that the DTaP and DTaP-IPV vaccines will
be marketed and distributed effectively.
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On October 29, 1996, the Food and Drug Administration's ("FDA") Vaccines
and Related Biological Products Advisory Committee ("Advisory Committee")
reviewed CERTIVA(TRADEMARK), the Company's DTaP vaccine. Representatives from
the FDA, the Company and the clinical investigators presented the clinical data
from several studies of CERTIVA(TRADEMARK). These studies involved over 106,000
doses administered to more than 47,000 infants and children with no serious
adverse events or deaths related to the administration of the vaccine as judged
by the clinical investigators. The incidence of high fever, redness, pain and
swelling were all significantly lower after use of the acellular pertussis
vaccine than after immunization with the whole-cell pertussis vaccine. In data
presented to the Advisory Committee by the co-principal clinical investigator in
Sweden, efficacy of the vaccine in preventing pertussis disease varied from
71-86% depending on the definition of disease, the method of calculation and the
clinical study involved.
Following the presentation of the data, the FDA requested that the Advisory
Committee comment on specific questions presented at the meeting. The following
summarizes the Company's assessment of the views expressed by the various
members of the Advisory Committee at the meeting. The views of the Advisory
Committee are not binding on the FDA, and there are no assurances that the FDA
will agree with the Company's assessment of or accept the views of the Advisory
Committee.
The Advisory Committee concluded that the vaccine is safe and effective for
administration in infants at 2, 4, 6 and 15-18 months of age. In addition, the
Advisory Committee concluded that CERTIVA(TRADEMARK) could be administered
concurrently with the administration of polio, HAEMOPHILUS INFLUENZAE type b,
hepatitis B and measles-mumps-rubella vaccines, which are all recommended for
immunization during the first two years of life. In response to the question
presented by the FDA on whether the data supports use of CERTIVA(TRADEMARK)
following primary immunization using the whole-cell pertussis vaccine, the
Advisory Committee raised no concerns regarding the adequacy of the data
regarding the use of CERTIVA(TRADEMARK) for the booster dose given to children
at 4-6 years of age. The Advisory Committee commented on the adequacy of the
data regarding the use of CERTIVA(TRADEMARK) for the booster dose given to
toddlers at 15-18 months of age following primary immunization using the
whole-cell pertussis vaccine. In response to those comments, the Company may
supplement the data presented at the Advisory Committee meeting with additional
data from ongoing studies or this matter may be addressed in post-marketing
studies. Although the Company has not met with the FDA on the comments and
conclusions of the Advisory Committee, the Company does not believe that any
additional clinical studies will be required in connection with its product
license application, other than standard post-licensure testing and surveillance
for continued monitoring of the vaccine.
Approval of CERTIVA(TRADEMARK) for commercial introduction requires that
the FDA issue a license for the product and a license for the production
facilities. Production of vaccines is a highly complex, biological process which
involves many steps commencing from seed culture through final production. The
production process could fail at any point resulting in the failure and
inability to meet production requirements. From time to time, the Company
experiences disruptions and production failures and there are no assurances that
the steps taken by the Company to address such failures will be effective or
that such failures will not continue in the future or affect the Company's
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<PAGE>
ability to obtain regulatory approval for its products or the timing of such
approval. Moreover, there are no assurances that the Company will be able to
successfully establish and maintain consistent manufacture and continuous
commercial production of its vaccine products or that it will be capable of
producing a competitively priced product for commercial sale. If the FDA
approves CERTIVA(TRADEMARK) and if the product is successfully launched in the
United States, revenues from operations and the prospects for profitability
could significantly increase. There are no assurances when or if FDA approval
will be obtained, or if obtained the Company will be effective in producing,
marketing and distributing the product. The principal factors affecting the
timetable and approval of CERTIVA(TRADEMARK) are believed to be the adequacy of
the clinical trials conducted on the product, the adequacy of the clinical data
submitted for the product, and the adequacy of the manufacturing facility and
operations for the product, among other things. The factors affecting successful
commercial launch of CERTIVA(TRADEMARK) in the United States include, among
others: establishing the identity and reputation for the Company and its
products; creating an awareness among pediatricians of the safety and efficacy
of CERTIVA(TRADEMARK); distinguishing the Company's product from that of its
competitors; establishing the Company as an effective and reliable supplier of
vaccines; and establishing effective distribution channels. There can be no
assurance that the Company will produce a commercially viable product, produce
product consistently and in quantities sufficient to compete in the marketplace,
attain sufficient market share, establish effective distribution channels, or
distinguish its vaccine product from that of its competitors. Additionally,
while the Advisory Committee on Immunization Practices ("ACIP") has recommended
the preferred use of DTaP vaccine for all five doses, the American Academy of
Pediatrics has not issued a similar recommendation, which may affect the
successful commercialization of DTaP vaccines for preferred use in infants and
children. There can be no assurance such a recommendation will be issued. The
foregoing is only a partial description of the factors affecting the Company's
business prospects and risk factors affecting future operations. Reference is
made to the Company's previous filings with the Securities and Exchange
Commission for a more complete description of the risks and uncertainties
affecting the Company and its business.
In July 1996, one company announced that its DTaP vaccine was approved by
the FDA for administration at two, four, six and 15-18 months of age. This
product had previously been approved by the FDA for administration at 15-18
months of age and immediately prior to grade school entry. In addition, that
company has announced that the FDA has licensed a vaccine that combines by
reconstitution that company's HIB vaccine with its DTaP vaccine for
administration at 15-18 months of age and that it continues to seek FDA approval
for administration at two, four and six months of age. Two other manufacturers'
DTaP vaccine products recently have been reviewed by the Advisory Committee for
administration in infants and children. One of those products is currently
approved by the FDA for administration at 15-18 months of age and immediately
prior to grade school entry. In addition, several competitors' DTaP vaccines and
certain combination vaccines have been licensed for sale outside of the United
States. The Company does not believe that these events will adversely affect the
regulatory review process for CERTIVA(TRADEMARK), although there can be no
assurances in this regard. The Company also is unable to predict the impact that
FDA approvals or Advisory Committee reviews of competing products will have on
the marketing and distribution of CERTIVA(TRADEMARK) should it be approved by
the FDA.
In the fourth quarter, the Company and Abbott Laboratories ("Abbott")
signed a definitive agreement under which Abbott would market CERTIVA(TRADEMARK)
when approved by the FDA. The marketing agreement also will allow Abbott to
market the Company's DTaP-HIB, DTaP-IPV and DTaP-IPV-HIB combination vaccines
which are under development.
Abbott will market CERTIVA(TRADEMARK) and combination vaccines to private
physicians and managed care markets in the United States for immunization of
infants and children. The Company will market CERTIVA(TRADEMARK) and the
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<PAGE>
combination vaccines to government purchasers, including state governments and
the Centers for Disease Control and Prevention.
On execution of the agreement, the Company received $13 million of which
$6.3 million represented payment for 350,000 shares of the Company's common
stock, and the balance represented a marketing fee and a clinical development
payment. The Company and Abbott will collaborate in the clinical development of
the combination vaccines and Abbott will provide the Company with clinical
development funding. The Company will receive payments upon achievement of
prescribed milestones. The agreement provides for total payments of up to $42
million by Abbott. The first milestone relates to FDA approval of
CERTIVA(TRADEMARK) provided certain other conditions are satisfied. In addition,
the Company will receive revenues from Abbott as it purchases CERTIVA(TRADEMARK)
and the combination vaccine products for resale to the private pediatric market.
In addition to the agreement with Abbott, the Company is considering the
advisability of executing other distribution agreements for certain markets
throughout the world. The Company also intends to collaborate in the development
of selected vaccine products and may enter into additional collaborative
development agreements similar in nature to that which was signed with Pasteur
Merieux-Connaught, as described below. These agreements, if executed, would only
impact the Company's operating results in future periods. There are no
assurances that the Company will successfully negotiate and sign any such
agreements or that, if executed, the financial terms for any distribution
agreement or further collaboration agreement will be significant.
In December 1995, the Company signed a clinical development agreement and
license agreement with Pasteur Merieux-Connaught, under which the parties agreed
to jointly develop the Company's new conjugate vaccine against meningococcus B
infection for both adults and pediatric indications. In 1995 the Company
received $3 million from Pasteur Merieux-Connaught, and further fees and funding
would be made upon achievement of development, clinical and regulatory
milestones. Total fees and payments to the Company upon achievement of all
clinical and regulatory milestones would amount to $52 million. Achievement of
the first milestone, which is the satisfactory completion of a pre-clinical
study and ratification of the license agreement by the National Research Council
of Canada, a Canadian federal government agency ("NRC"), would result in further
payments from Pasteur Merieux-Connaught. Additional revenues from this
collaboration will depend upon achievement of the development milestones. The
time it may take to achieve these milestones cannot be predicted accurately and
no assurances can be given that any or all of these milestones will be achieved
during 1996 or at all. Unless the license agreement is ratified by the NRC and
the pre-clinical agreement is successfully completed, either party may terminate
the agreement. In addition, Pasteur Merieux-Connaught may terminate these
agreements in its sole discretion at any time after December 22, 1996.
The Company spent $6.8 million for operations in the third quarter of 1996
and $20.5 million for the nine months ending September 30, 1996. At September
30, 1996, the Company had cash and cash equivalents of approximately $81.9
million and investment securities in an affiliate with a market value of
approximately $2.0 million. The investment securities consisted of 125,000
shares of IVAX common stock. The fair market value of these investment
securities as of November 11, 1996 was $1.6 million. These investment securities
are volatile and therefore subject to significant fluctuations in value.
In the fourth quarter, the Company acquired a 35,000 square foot
manufacturing facility in Beltsville, Maryland. The acquisition included the
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<PAGE>
purchase and lease of equipment and leasehold improvements and the assumption of
a real estate lease. The total acquisition cost was approximately $24.9 million,
which included a cash payment of $17.2 million. The balance of $7.7 million is
represented by an equipment lease obligation which expires in 2000. The lease
will be accounted for as a capital lease for financial reporting purposes, with
monthly payments of approximately $179,000. In addition, the Company has assumed
the real estate lease underlying the facility, which is scheduled to expire in
2000, but may be extended through 2010. Under the terms of the equipment lease,
the Company has a buyout option at the end of the third year for a predetermined
amount, and an option at the end of the fourth year at the greater of the fair
market value of the equipment or a predetermined amount. Under the equipment
lease agreement there are financial covenants that obligate the Company to
maintain certain minimum cash and investment balances, a minimum tangible net
worth and certain other financial ratios. The Company would be required to post
an irrevocable letter of credit for predetermined amounts at such time as the
Company is not in compliance with any of these financial covenants.
Total capital expenditures for the first nine months of 1996 were $3.3
million, primarily for production and computer related equipment. Total other
capital expenditures for the last quarter of 1996 are expected to be
approximately $1 million, exclusive of expenditures associated with the
acquisition and any modifications of the additional manufacturing facility
described above. The projected capital expenditures could fluctuate based upon a
number of factors including unanticipated costs to replace or repair existing
equipment and systems in order to keep the current production facility
operational or to maintain compliance with regulatory requirements, and
adjustments and modifications required for the new facility.
The Company anticipates that cash requirements for operations will be up to
$10 million in the fourth quarter of 1996, as the Company expands production for
commercial sale in Europe and in anticipation of regulatory approval in the
United States and expands its product development program. The cash requirements
are exclusive of payments to be received under any marketing, distribution, and
development agreements. The fourth quarter projection includes interest payments
of approximately $2.7 million on the convertible notes discussed below, and
expenditures associated with the operation of the additional manufacturing
facility described above. Thereafter, cash requirements for operations will
depend upon the level of vaccine production, level of regulatory and marketing
costs, and the level of expenditures for the Company's ongoing research and
development program.
In May 1996, the Company completed an offering of 6.50% convertible
subordinated notes in the principal amount of $86.25 million due May 1, 2003.
The net proceeds from this offering were approximately $82.7 million. Interest
on the notes is payable semiannually on May 1 and November 1 each year,
commencing November 1, 1996. The notes are convertible into common shares of the
Company, at the initial conversion price of approximately $24.86 per common
share, at any time after August 5, 1996. The notes also are subordinated to
present and future senior indebtedness of the Company and will not restrict the
incurrence of future senior or other indebtedness by the Company.
The notes are redeemable, in whole or in part, at the option of the Company
on or after May 1, 1999 at certain pre-established redemption prices, plus
accrued interest. Upon a change in control, the Company is required to offer to
purchase all or part of the notes then outstanding at a purchase price equal to
100% of the principal amount thereof, plus interest. The repurchase price is
payable in cash or, at the option of the Company, in common shares. The Company
is obligated to and has filed a registration statement registering resales of
the notes and the underlying common shares.
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<PAGE>
The Company's operating results for the fourth quarter of 1996, and for the
next several quarters, may fluctuate significantly based upon a number of
factors including, among other things: the magnitude of sales of products for
distribution in Europe; the timing of FDA approval for, and the commercial
introduction of, CERTIVA(TRADEMARK); the costs associated with the newly
acquired manufacturing facility, including significant depreciation expense; the
timing of the payments and the satisfactory completion of milestones under the
agreements with Pasteur Merieux-Connaught and Abbott; the cost associated with
clinical trials; and any additional collaboration agreement or distribution
agreement. There are, however, no assurances that any further regulatory
approvals will be received, or that development milestones will be achieved, or
that if obtained will contribute materially to the quarterly operating results
of the Company. Further, failure or significant delays in receiving additional
regulatory approvals and meeting required milestones would have a significant
adverse effect on the Company's future operating results and future financial
position.
TAX AND OTHER MATTERS
At December 31, 1995, the Company and its subsidiaries had income tax loss
carryforwards of approximately $12 million to offset future Canadian source
income and approximately $45.7 million to offset future United States taxable
income subject to the alternative minimum tax rules in the United States.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
(a) In the fourth quarter, the Company and Abbott signed a
definitive agreement under which Abbott would market
CERTIVA(TRADEMARK), the Company's DTaP vaccine, when approved
by the FDA. The marketing agreement also will allow Abbott to
market the Company's DTaP-HIB, DTaP-IPV and DTaP-IPV-HIB
combination vaccines which are currently under development.
Abbott will market CERTIVA(TRADEMARK) and combination vaccines
to private physicians and managed care markets in the United
States for immunization of infants and children. The Company
will market CERTIVA(TRADEMARK) and the combination vaccines to
government purchasers, including state governments and the
Centers for Disease Control and Prevention.
On execution of the agreement, the Company received $13
million of which $6.3 million represented payment for 350,000
shares of the Company's common stock, and the balance
represented a marketing fee and a clinical development
payment. The Company and Abbott will collaborate in the
clinical development of the combination vaccines and Abbott
will provide the Company with clinical development funding.
The Company will receive payments upon achievement of
prescribed milestones. The agreement provides for total
payments of up to $42 million by Abbott. The first milestone
relates to FDA approval of CERTIVA(TRADEMARK) provided certain
other conditions are satisfied. In addition, the Company will
receive revenues from Abbott as it purchases
CERTIVA(TRADEMARK) and the combination vaccine products for
resale to the private pediatric market.
(b) In the fourth quarter, the Company acquired a 35,000 square
foot manufacturing facility in Beltsville, Maryland. The
acquisition included the purchase and lease of equipment and
leasehold improvements and the assumption of a real estate
lease. The total acquisition cost was approximately $24.9
million, which included a cash payment of $17.2 million. The
balance of $7.7 million is represented by an equipment lease
obligation which expires in 2000. The lease will be accounted
for as a capital lease for financial reporting purposes, with
monthly payments of approximately $179,000. In addition, the
Company has assumed the real estate lease underlying the
facility, which is scheduled to expire in 2000, but may be
extended through 2010. Under the terms of the equipment lease,
the Company has a buyout option at the end of the third year
for a predetermined amount, and an option at the end of the
fourth year at the greater of the fair market value of the
equipment or a predetermined amount. Under the equipment lease
agreement there are financial covenants that obligate the
Company to maintain certain minimum cash and investment
balances, a minimum tangible net worth and certain other
financial ratios. The Company would be required to post an
irrevocable letter of credit for predetermined amounts at such
time as the Company is not in compliance with any of these
financial covenants.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
10.31 Exclusive Distribution Agreement between
Abbott Laboratories ("Abbott") and North
American Vaccine, Inc. ("NORTH AMERICAN
VACCINE") dated October 11, 1996.
(Confidential treatment has been requestsed
for portions of this exhibit.)
10.32 Stock Purchase Agreement dated October 11,
1996, between Abbott and NORTH AMERICAN
VACCINE.
10.33 Assets Purchase Agreement dated October 17,
1996, among NORTH AMERICAN VACCINE, Cephalon
Property Management, Inc. and Cephalon, Inc.
(Confidential treatment has been requested
for portions of this exhibit.)
27 Financial Data Schedule
(b) Reports on Form 8-K
On August 16, 1996, the Company filed with the Securities and
Exchange Commission a Current Report on Form 8-K under Item 5
reporting the agreement in principle between the Company and
Abbott to market the Company's diphtheria, tetanus and
acellular pertussis (DTaP) vaccine.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH AMERICAN VACCINE, INC.
(Registrant)
By: /S/ SHARON MATES
------------------------
Sharon Mates, Ph.D.
President
By: /S/ LAWRENCE J. HINELINE
------------------------
Lawrence J. Hineline
Vice President - Finance
Date: November 14, 1996
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EXCLUSIVE DISTRIBUTION AGREEMENT
BETWEEN
ABBOTT LABORATORIES
AND
NORTH AMERICAN VACCINE, INC.
October 11, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
I. DEFINITIONS...................................................... 1
II. APPOINTMENT...................................................... 8
2.1 Exclusive Appointment.................................. 8
2.2 Distribution Rights.................................... 8
2.3 Diligence.............................................. 8
2.4 Distribution Costs..................................... 8
2.5 Selling Price.......................................... 9
2.6 Competing Products..................................... 9
2.7 Diversionary Sales..................................... 10
2.8 Promotional Materials.................................. 10
2.9 Legends on Products.................................... 10
2.10 Sales Training......................................... 11
2.11 Product Storage and Shipping........................... 11
2.12 Marketing Information.................................. 11
III. CLINICAL DEVELOPMENT............................................. 11
3.1 Clinical Program Scope................................. 11
3.2 Research and Development Committee..................... 11
3.3 Management of the Clinical Program..................... 11
3.4 Annual Reports......................................... 13
3.5 Funding................................................ 13
3.6 Diligence in Conduct of the Clinical Program........... 13
IV. SUPPLY OF PRODUCTS............................................... 14
4.1 Purchase Requirements.................................. 14
4.2 Quality Control and Quality Assurance.................. 14
4.3 Forecasts.............................................. 15
4.4 Firm Orders............................................ 16
4.5 Allocation............................................. 16
4.6 [Intentionally Omitted]................................ 16
4.7 Returns................................................ 16
4.8 Product Recalls........................................ 17
4.9 Adjustments............................................ 17
4.10 Independent Transaction................................ 17
4.11 Delivery Terms......................................... 18
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
V. PRICE AND PAYMENTS................................................. 18
5.1 Price.................................................... 18
5.2 Floor Price.............................................. 19
5.3 Provisional Price........................................ 20
5.4 Sales Reports............................................ 20
5.5 Payment Procedure........................................ 21
5.6 Interest Charges on Account of Late Payment.............. 21
5.7 Application of Payments.................................. 21
5.8 Taxes.................................................... 21
5.9 Books and Records........................................ 21
5.10 Marketing Fees........................................... 23
5.11 Milestone Payments....................................... 23
5.12 Other Reports............................................ 24
VI. INDEMNITY.......................................................... 24
6.1 Acts of Abbott........................................... 24
6.2 Acts of NVX.............................................. 24
6.3 Settlements.............................................. 25
6.4 Limitation of Liability.................................. 25
VII. PACKAGING AND LABELING............................................. 25
VIII. TRADEMARKS AND TRADE NAMES......................................... 26
8.1 Trademark................................................ 26
8.2 Trademark Use............................................ 26
8.3 Trademark Rights Upon Expiration......................... 26
8.4 Trademark Rights Upon Termination........................ 26
8.5 Trade Names.............................................. 27
8.6 Infringement of Third Party Trademark Rights............. 27
8.7 Third Party Infringement................................. 27
8.8 Other Materials.......................................... 28
8.9 Trademark Opposition..................................... 28
IX. CONFIDENTIALITY.................................................... 28
9.1 Confidentiality Obligations.............................. 28
9.2 Press Releases........................................... 29
9.3 Use After Termination.................................... 30
9.4 Return of Confidential Information....................... 30
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
X. TERM AND TERMINATION............................................. 30
10.1 Term................................................... 30
10.2 Abbott Termination Right............................... 30
10.3 Change of Control of Abbott or its Ross
Products Division..................................... 30
10.4 Acquisition of NVX..................................... 30
10.5 Breach................................................. 31
10.6 No Release............................................. 32
10.7 Bankruptcy............................................. 32
10.8 Failure to Make Payments............................... 32
10.9 Obligations After Termination.......................... 33
10.10 Conduct of Business in Anticipation of Termination..... 34
10.11 Alternative Dispute Resolution......................... 34
XI. PATENT MATTERS................................................... 37
11.1 Notice of Infringement................................. 37
11.2 Enforcement and Defense of Patents by NVX.............. 37
11.3 Continuing Payment Obligations......................... 38
11.4 Infringement by Products............................... 38
11.5 Other Intellectual Property Matters.................... 40
XII. MISCELLANEOUS.................................................... 41
12.1 Relationship of the Parties............................ 41
12.2 Applicable Law......................................... 41
12.3 Jurisdiction........................................... 41
12.4 Counterparts........................................... 41
12.5 Notices................................................ 41
12.6 Force Majeure.......................................... 42
12.7 Binding Effect: Assignment............................. 43
12.8 Entire Agreement....................................... 43
12.9 Recitals and Schedules................................. 43
12.10 Amendment.............................................. 43
12.11 Severability........................................... 44
12.12 Headings............................................... 44
12.13 No Waiver of Rights.................................... 44
12.14 Usage.................................................. 44
12.15 No Third Party Rights.................................. 44
12.16 No Licenses............................................ 44
12.17 Interpretation......................................... 44
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
XIII. ADVERSE EVENT REPORTING/CUSTOMER AND TECHNICAL
SUPPORT........................................................... 44
XIV. REPRESENTATIONS AND WARRANTIES.................................... 46
XV. SURVIVAL.......................................................... 46
iv
<PAGE>
EXCLUSIVE DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 11th day of October 1996 (the "Effective
Date") by and between Abbott Laboratories, a corporation organized under the
laws of the State of Illinois having its principal place of business at Abbott
Park, Illinois, through its Ross Products Division ("Abbott"), having offices at
625 Cleveland Avenue, Columbus, Ohio 43215-1724 and North American Vaccine, Inc.
("NVX"), a corporation organized and existing under the laws of Canada having
offices at 12103 Indian Creek Court, Beltsville, Maryland 20705.
WITNESSETH
WHEREAS, NVX is developing certain vaccines with the intention of
obtaining FDA approval for such vaccines for pediatric administration;
WHEREAS, Abbott is willing to provide funding towards the continued
development of such vaccines and to assist NVX in such development;
WHEREAS, Abbott desires to be become the exclusive distributor of such
vaccines in the private pediatric market in the United States; and
WHEREAS, NVX is willing to appoint Abbott as the exclusive distributor
of such vaccines in the United States, and Abbott is willing to accept such
appointment, all in accordance with the terms and conditions hereof.
NOW THEREFORE, for and in consideration of the foregoing, of the mutual
covenants and undertakings contained herein and of other consideration, the
receipt and sufficiency of which are hereby acknowledged, Abbott and NVX,
intending to be legally bound, hereby agree as follows:
I. DEFINITIONS
1. As used in the Agreement, the following capitalized terms shall have
the meanings set forth below. Capitalized terms in this Agreement used in the
plural shall have the same meaning as for the singular and vice-versa.
1.1 "ABBOTT INDEMNITIES" shall have the meaning set forth in Section
6.2.
1.2 "AFFILIATE" means, with respect to any Person, (a) any other
Person of which securities or other ownership interests representing more than
fifty percent (50%) of the voting interests are, at the time such determination
is being made, beneficially owned or Controlled by such Person, or (b) any other
Person which, at the time such determination is being made, is Controlling,
Controlled by or under common Control with such Person. For the purposes hereof,
(i) "Control," whether used as a noun or verb, refers to the possession,
directly or indirectly, of the power to affirmatively
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<PAGE>
direct, or affirmatively cause the direction of, the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise, and (ii) a "beneficial owner" of a security is any Person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares (with the ability to unilaterally
exercise) (x) voting power, which includes the power to vote, or direct the
voting of, such security, or (y) investment power, which includes the power to
dispose, or to direct the disposition of, such security.
1.3 "AVERAGE UNIT NET SELLING PRICE" means, [*]
1.4 "BASE AMOUNT" shall have the meaning set forth in Section
5.1(c).
1.5 "cGMP" shall have the meaning set forth in Section 4.2.
1.6 "CHANGE OF CONTROL TRANSACTION" means any of the following
transactions between a Party and another corporation or other legal entity that
is not an Affiliate of such Party: a statutory merger, consolidation or similar
corporate transaction in which the stockholders or other Persons who
beneficially owned or Controlled the voting interests of the other corporation
or legal entity prior to such merger, consolidation or transaction beneficially
own or Control, after such merger, consolidation or transaction [*] of the
voting interests of the surviving corporation or legal entity; the sale or other
similar disposition in a transaction or series of transactions of all or
substantially all of the assets of the Party; the sale, spin-off or other
disposition by Abbott in a transaction or series of transactions of all or
substantially all of the equity interest in or the assets of the Ross Products
Division; and the sale of voting securities of the Party in a transaction or
series of transactions pursuant to which the acquiring Person(s) beneficially
owns or Controls, directly or indirectly, [*] of the voting securities of the
Party.
1.7 "CLINICAL PROGRAM" means the program of human clinical testing
of the Products described in Section 3.1.
1.8 "COMMITTEE" shall have the meaning as set forth in Section 3.2.
1.9 "COMPETITIVE VACCINE" means [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
1.10 "CONFIDENTIAL INFORMATION" means any and all technical data,
information, materials and other know-how presently owned by or developed by, or
on behalf of, either Party during the term of this Agreement which relates to
the Products, their preparation, marketing, sale or use and any and all
financial data and information relating to the businesses of either of the
Parties and/or of their Affiliates.
1.11 "CONTRACT YEAR" means, with respect to each Product, the
calendar year [*]
1.12 "CUSTOMER(S)" shall mean an authorized wholesaler(s) and/or
distributor(s) of Products and such other customers which Abbott bills directly
and acquires Product from Abbott for resale pursuant to contract with Abbott.
1.13 "DESIGNATED REPRESENTATIVE" shall have the meaning as set forth
in Section 3.2.
1.14 "DOSE" means, for each Product, the quantity of vaccine used
for a single administration of the Product to a patient.
1.15 "DTP VACCINE" means [*]
1.16 "DTP-HIB VACCINE" means [*]
1.17 "DTP-IPV VACCINE" means [*]
1.18 "DTP-IPV-HIB VACCINE" means [*]
1.19 "EFFECTIVE DATE" means the date first set forth above.
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
1.20 "FDA" means the United States Food and Drug Administration, or
any successor to it responsibilities with respect to pharmaceutical products
such as the Products.
1.21 "FULLY-ABSORBED MANUFACTURING COST" means with respect to each
Product: [*]
1.22 "HMO" shall have the meaning as set forth in Section 1.37.
1.23 "LOSSES" means losses, liabilities, costs, expenses (including
reasonable attorneys' fees), claims, penalties, judgments and/or damages
(including personal injury or property damages or consequential damages).
1.24 "LRP" shall have the meaning as set forth in Section 10.4.
1.25 "NET SALES" of a Product means the total of the gross amount
billed or invoiced on the first sale or other disposition of the Product by
Abbott to Third Parties, plus any amounts due to or received by Abbott from such
Third Party in consideration of the sale of such Product, whether based on the
sale or resale of such Product, less:
a) Rebates granted and allowances, chargebacks and trade,
quantity or cash discounts actually allowed and taken, except rebates,
chargebacks or discounts granted wholly or partially in consideration of a Third
Party's agreement to purchase any service or any product other than a Product
(other than where such rebates or discounts are "across-the-board" rebates or
discounts applied uniformly to the Product and other products or services as
part of an overall program of rebates or discounts established by Abbott
covering a broad range of its products);
b) Retroactive price reductions imposed by government
authorities;
[*] Confidential information has been omitted and filed separately with the
Commission.
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c) Fees, commissions or rebates lawfully paid pursuant to
contracts with group purchasing organizations to the extent specifically related
to and based on the number of units of Products sold to members of the group;
d) Amounts actually repaid a Third Party by reason of
rejection, recall or return of Product as evidenced by written records, except
where such rejection, recall or return is due to expiration of Product dating or
is a cost or expense of Abbott under Section 4.8(b);
e) Actual freight and insurance costs in transporting such
Product to such Third Parties and paid by the Third Party, as evidenced by
written records; and
f) Sales, use, excise, value-added and other direct taxes,
customs duties and other government charges incurred and paid by the Third
Party, as evidenced by written records.
The "gross amount billed or invoiced" for calculating Net Sales of any Product
shall mean:
(i) If the Product is sold to a Third Party other than a
Special Party, Abbott's actual billing or invoice amount for such Product;
(ii) If the Product is sold to an Affiliate for subsequent
resale by or for such Affiliate, the greater of Abbott's actual billing or
invoice amount or the Affiliate's actual billing or invoice amount for such
Product; or
(iii) If the Product is sold to a Special Party for use by such
Special Party, the billing or invoice amount that would have resulted by
multiplying the number of Vials sold to such Special Party by the Average Unit
Net Selling Price for Product [*] or
(iv) If the Product is otherwise provided to a Third Party,
the billing or invoice amount that would have resulted by multiplying the number
of Vials provided to such Third Party by the Average Unit Net Selling Price for
Product [*]
In the event that Abbott receives any fixed payment, fee or other consideration
from a Third Party in consideration of any discount, credit or similar allowance
granted to such Third Party in connection with the sale of any Product or
Products, the dollar amount equal to such consideration shall be added to the
gross amount billed or invoiced for such sale for purposes of calculating Net
Sales.
[*] Confidential information has been omitted and filed separately with the
Commission.
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1.26 "NVX INDEMNITEES" shall have the meaning as set forth in
Section 6.1.
1.27 "NVX VACCINES" means collectively the DTP Vaccine, DTP-IPV
Vaccine, DTP-Hib Vaccine and DTP-IPV-Hib Vaccine.
1.28 "PARTY" means NVX or Abbott, and "PARTIES" means NVX and
Abbott.
1.29 "PATENTS" means:
a) The existing patents designated on Exhibit A attached
hereto; b) Any patents issued jointly to the Parties and patent applications
filed by or assigned jointly to the Parties that cover a Product and are in
existence prior to the date of first commercial sale of such Product in the
Territory; and c) Any reissues, reexaminations, renewals, extensions,
divisionals, continuations and continuations-in-part of the foregoing.
1.30 "PEDIATRIC ADMINISTRATION" means administration to any person
under seven (7) years of age.
1.31 "PERSON" means a natural person, a corporation, a partnership,
a trust, a joint venture, any governmental authority or any other entity or
organization.
1.32 "PHASE I CLINICAL TRIAL" means a clinical study of a Product
involving human subjects and designed primarily to assess the safety of the
Product under investigation.
1.33 "PHASE I/II CLINICAL TRIAL" means a clinical study of a Product
involving human subjects and designed primarily to assess the safety,
immunogenicity and optimal dosage of the Product under investigation.
1.34 "PHASE III CLINICAL TRIAL" means a clinical study of a Product
involving human subjects and designed primarily to assess the safety and
efficacy of the Product under investigation.
1.35 "PHASE IV CLINICAL TRIAL" means a clinical study of a Product
involving human subjects and conducted to maintain the marketing authorization
of the Product under investigation.
1.36 "PLA" means a Product License Application submitted to the FDA.
1.37 "PRIVATE PEDIATRIC MARKET" means private pediatricians, staff
and group model health maintenance organizations ("HMOs") and other Third
Parties that dispense vaccines for Pediatric Administration, but shall exclude
only U.S. (including
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Puerto Rico and all other territories and possessions) Federal, state, local and
other government entities including, without limitation, the U.S. Centers for
Disease Control.
1.38 "PRODUCT APPROVAL" means, with respect to a Product, one or
more licenses issued by the FDA for manufacturing, marketing and sale.
1.39 "PRODUCT" means any one of the NVX Vaccines and "PRODUCTS"
means the NVX Vaccines.
1.40 "PROJECT LEADER" shall have the meaning as set forth in Section
3.3.
1.41 "PURCHASE PRICE" shall have the meaning as set forth in Section
5.1(e).
1.42 "REQUIREMENTS" shall have the meaning as set forth in Section
4.1.
1.43 "SPECIAL PARTY" means an Affiliate of Abbott or any other
Person enjoying a special course of dealing with Abbott, or any of its
Affiliates, except for Customers operating in the normal course of business. A
"special course of dealing" shall mean co-marketing or other arrangements
between a Third Party and Abbott or one of its Affiliates wherein the Third
Party sells a Product and Abbott or its Affiliate receives additional
compensation based on the ultimate sale of the Product, or barter arrangements
in which Abbott or its Affiliate exchanges a Product with a Third Party for
another product or other products in-kind.
1.44 "SPECIFICATIONS" shall have the meaning as set forth in Section
4.2.
1.45 "TERRITORY" means the United States of America, its territories
and possessions, and Puerto Rico.
1.46 "THIRD PARTY" means any Person that is not a Party to this
Agreement.
1.47 "TRADEMARKS" means a trademark or trademarks to be co-owned by
Abbott and NVX during the term of this Agreement and agreed upon in writing by
the Parties for use by Abbott and NVX with the Products in the Territory in
accordance with the terms of this Agreement.
1.48 "VALID CLAIM" means a claim of an issued and unexpired patent
included in the Patents that has not been (a) held revoked, unenforceable or
invalid by a decision of a court or governmental agency of competent
jurisdiction over such claim, which decision is unappealable or unappealed
within the time allowed for appeal or (b) admitted by the holder to be invalid
or unenforceable through disclaimers, consent decrees or otherwise.
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1.49 "VIAL" means, with respect to each Product, a finally-packaged
form of the Product for sale to the customer. Each Vial may contain one or more
Doses of the Product.
II. APPOINTMENT
2.1 EXCLUSIVE APPOINTMENT. From the Effective Date and for the term of
this Agreement, subject to all of the provisions of this Agreement, NVX hereby
appoints Abbott as its exclusive distributor of Products solely for Pediatric
Administration to the Private Pediatric Market in the Territory, and Abbott
accepts such appointment as exclusive distributor.
2.2 DISTRIBUTION RIGHTS. Subject to the terms hereof, Abbott shall have
the exclusive rights to distribute, market, promote and sell Products solely for
Pediatric Administration to the Private Pediatric Market in the Territory. NVX
agrees not to voluntarily license any Third Party under any of the Patents to
distribute, market, promote or sell any of the Products for Pediatric
Administration to the Private Pediatric Market in the Territory.
2.3 DILIGENCE. Abbott shall use reasonable commercial efforts in
carrying out the commercialization of each of the Products for Pediatric
Administration in the Private Pediatric Market in the Territory. Pursuant to the
foregoing, Abbott, at its own expense, shall:
a) promptly introduce each of the Products for Pediatric
Administration to the Private Pediatric Market in the Territory as soon as
practicable after Product Approval is received by NVX, subject to NVX's ability
to supply adequate inventories of Product for Product introduction;
b) use reasonable, diligent commercial efforts to detail,
market, distribute and sell the Products to maximize the market potential of
each of the Products;
c) maintain an adequate inventory of each of the Products to
supply anticipated demand therefor, subject to NVX's ability to supply the same;
and
d) otherwise act in good faith to commercialize each of the
Products for Pediatric Administration in the Private Pediatric Market in the
Territory in a manner which, in Abbott's good faith exercise of its business
judgment, maximizes the commercial benefits of the Products.
2.4 DISTRIBUTION COSTS. Abbott shall be solely responsible for all
costs associated with the following relating to the sale of the Products to the
Private Pediatric Market in the Territory: transportation charges; quantity or
cash discounts; service allowances; commissions; credits or allowances given on
account of price adjustments, bad debts, returns, rebates or chargebacks;
returns or rejections other than Product
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recalls; and all taxes, surcharges, assessments or governmental charges imposed
upon Abbott measured by the sale, transportation or delivery of the Products by
Abbott. The Parties acknowledge that certain of the foregoing costs are
appropriate deductions from gross sales for the purpose of determining Net Sales
as defined in Section 1.25.
2.5 SELLING PRICE. The final sales price of each of the Products sold
by Abbott shall be determined by Abbott in its sole and absolute discretion.
2.6 COMPETING PRODUCTS. During the term of this Agreement, and subject
to Section 11.4(e):
a) Neither Party, nor any of its Affiliates, shall make, use
or sell in the Territory any Competitive Vaccine, [*]
b) [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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c) [*]
2.7 DIVERSIONARY SALES. Abbott covenants not to sell the Products
outside of the Private Pediatric Market in the Territory and anywhere outside of
the Territory and not knowingly to sell the Products to any Third Party for
diversion for sale outside of the Private Pediatric Market in the Territory or
anywhere outside of the Territory. NVX covenants not to sell the Products in the
Private Pediatric Market within the Territory and not knowingly to sell the
Products to any Third Party for diversion for sale in the Private Pediatric
Market in the Territory.
2.8 PROMOTIONAL MATERIALS. Abbott shall be solely responsible for all
costs associated with the development, production and distribution of
promotional materials associated with the Products for Pediatric Administration
in the Private Pediatric Market in the Territory. All matters regarding
promotion and advertising of the Products in the Private Pediatric Market in the
Territory shall be decided by Abbott with input from NVX, [*] consistent with
all statutory and regulatory requirements, including without limitation, FDA
rules and regulations governing the packaging and labeling of the Products. NVX
and Abbott shall keep each other informed of their respective on-going
promotional and advertising programs in the Territory.
2.9 LEGENDS ON PRODUCTS. NVX shall mark all Products supplied to Abbott
hereunder with an appropriate notice that such Products are patented. The form
of such notice shall conform to the requirements of 35 U.S.C. ss. 287(a) and
shall comply with any other notice or legend requirement of applicable law or
regulation.
[*] Confidential information has been omitted and filed separately with the
Commission.
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2.10 SALES TRAINING. Abbott shall be solely responsible for all costs
associated with training and updating its sales force in the Territory.
2.11 PRODUCT STORAGE AND SHIPPING. Abbott shall store and ship the
Products to customers in the Territory in accordance with all applicable laws
and regulations and labeling for the Products which are designed to provide that
the Products continue to meet Specifications, and take all reasonable efforts to
provide that its Customers adhere to the same standards. Abbott shall be
responsible, and NVX shall not be liable, for any Losses due to the failure of
Abbott's Customers to comply with the foregoing standards or for the failure of
Abbott or its Customers to resell or use the Products prior to the expiration of
the Products' respective dating periods.
2.12 MARKETING INFORMATION. NVX shall have the right at reasonable
intervals, [*] to request information regarding Abbott's marketing and
promotional activities undertaken with respect to the Products. Abbott shall
provide such information, in its sole discretion, to the extent it is available
in its ordinary course of business without any special effort or expense.
III. CLINICAL DEVELOPMENT
3.1 CLINICAL PROGRAM SCOPE. The Parties shall collaboratively undertake
a program of human clinical testing of the Products, commencing on the Effective
Date and continuing for each Product through all Phase I Clinical Trials, Phase
I/II Clinical Trials, Phase III Clinical Trials and any necessary or warranted
Phase IV Clinical Trials to maximize the commercial potential for each Product
for Pediatric Administration in the Private Pediatric Market. The program for
such development of the Products shall be conducted in accordance with the
provisions of this Article III.
3.2 RESEARCH AND DEVELOPMENT COMMITTEE. Each party shall designate two
representatives ("Designated Representatives") to serve on a Research and
Development Committee ("Committee") to determine and monitor the priorities,
goals, budgets, resource allocations and milestones for the ongoing clinical
development of the Products.
3.3 MANAGEMENT OF THE CLINICAL PROGRAM.
a) The Clinical Program shall be managed by the Committee. The
Committee may seek the input and advice of employees of the Parties of
sufficient qualifications such that the Committee will be in a position to
discuss the Clinical Program knowledgeably, evaluate the results thereof, and
make recommendations to the Parties regarding the priorities therefor. Such
people may be invited by a Party's Designated Representative to attend meetings
of the Committee, as appropriate. The Committee may also seek advice from Third
Parties relating to the Clinical Program, subject to appropriate confidentiality
requirements and the mutual agreement of the Parties. One of each Party's
Designated Representatives to the Committee shall be a "Project Leader," who is
responsible for coordinating that Party's part of the Clinical
[*] Confidential information has been omitted and filed separately with the
Commission.
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Program. The Project Leaders shall be the primary contacts between the Parties
with respect to the Clinical Program. Each Party initially shall designate its
Project Leader and its other representatives to the Committee by written notice
to the other Party within thirty (30) days after the Effective Date. Each Party
thereafter may change its Project Leader or its other Designated Representative
to the Committee upon delivering written notice to the other party.
b) The Committee shall hold an organizational meeting promptly
after designation of each Party's Designated Representatives, [*] Thereafter,
the Committee shall meet from time to time when reasonably requested by either
Project Leader as necessary to manage the conduct of the Clinical Program, [*]
All meetings of the Committee shall be at specific times and places agreed upon
by the two Project Leaders. Members of the Committee may attend meetings in
person or by telephone or video conferencing, provided that members attending by
telephone or video conferencing can hear and be heard. Each Party shall bear any
expenses incurred by its Designated Representatives and its employees and other
representatives of the Party in attending meetings of the Committee.
c) Each Party shall ensure that at least one of its Designated
Representatives is in attendance at each meeting of the Committee. All decisions
of the Committee shall [*] The Parties shall use all reasonable good faith
efforts to resolve any issues as to which the Committee cannot agree in order to
maximize the commercial potential for each Product in the Private Pediatric
Market in the Territory. In the event that a dispute cannot be resolved and
continues [*] each Party shall have the right to submit the matter to the
Parties' Presidents (the President of Ross Products Division in the case of
Abbott) for resolution. [*]
d) [*] following each Committee meeting, the Project Leaders
shall prepare, and distribute to each Party, a reasonably detailed written
summary report [*]
e) The Committee may establish working groups of scientists and
others to carry out specific aspects of the Clinical Program.
[*] Confidential information has been omitted and filed separately with the
Commission.
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3.4 ANNUAL REPORTS. To keep each other apprised of its progress under
this Article 3, each Party shall submit annual progress reports as to its
Product development, approval and marketing activities, [*]
3.5 FUNDING. Subject to Section 10.4, Abbott shall provide funding [*]
in support of the Clinical Program during the term of this Agreement. The
payments shall be made as follows: [*] Such funding shall be used first to
support out-of-pocket expenses of Phase I, II, III and IV Clinical Trials
(including a Phase IV Clinical Trial for the DTP Vaccine), and thereafter to
support NVX's labor and other internal costs related to the Clinical Program.
[*]
3.6 DILIGENCE IN CONDUCT OF THE CLINICAL PROGRAM. NVX shall use
reasonable commercial efforts in the conduct of its activities pursuant to the
Clinical Program in furtherance of obtaining marketing approvals for the
Products that maximize the commercial potential for the Products. Subject to
Section 3.5 and consistent with a reasonable allocation of NVX's internal
resources among its clinical programs, NVX shall accord a priority to the
Clinical Program as high as its other clinical programs for products of similar
market potential and expeditiously file with the FDA to obtain Product Approvals
for the Products. [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*] Abbott shall cooperate with NVX in support of NVX's activities undertaken in
conducting the Clinical Program in accordance with the foregoing.
IV. SUPPLY OF PRODUCTS
4.1 PURCHASE REQUIREMENTS.
During the term and in accordance with the provisions of this
Agreement, Abbott shall purchase exclusively from NVX all of its Requirements of
the Products, and NVX shall sell such quantities of Products to Abbott, subject
to the provisions hereof, including without limitation the provisions of Section
4.4. [*]
4.2 QUALITY CONTROL AND QUALITY ASSURANCE.
a) Each of the Products supplied by NVX to Abbott hereunder
shall conform to the release specifications for the Product as approved by the
FDA as set forth in the Product Approval for such Product ("Specifications") and
shall be manufactured in accordance with then-current Good Manufacturing
Practices ("cGMPs") as set forth in 21 C.F.R. Parts 211 and 600 through 680, and
any successor thereof.
b) NVX shall maintain a quality control program consistent with
cGMPS, as required by all applicable laws and regulations and all subsequent
additions and revisions thereto.
c) All Product received by Abbott shall be deemed accepted,
unless Abbott shall give written notice to NVX [*] specifying the manner in
which the Product does not conform to the Specifications. Such notice shall be
accompanied by written reports of any testing performed by Abbott on the
Product. Acceptance of a Product shall not be deemed to supersede, alter or
limit any warranty, obligation or liability NVX may have under this Agreement.
d) Upon receipt of such notice, NVX may request Abbott to
return the non-accepted Product, or samples thereof, for testing by NVX.
[*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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e) If as finally determined above a shipment of a Product does
not conform to the Specifications, or if the Product is not sellable and must be
recalled because of NVX's non-compliance with cGMPs with respect to the Product,
NVX will give full credit for such Product at the price invoiced by NVX or paid
by Abbott and, at Abbott's request, shall replace such shipment with conforming
Product at the original invoice price per Vial of Product being replaced. All
transportation, shipping and insurance cost, and other fees incident to the
shipping of such replacement Product (to the extent previously paid by Abbott
for the non-conforming Product) will be paid by NVX or if Abbott has not
requested a replacement shipment, such costs and fees shall be credited to
Abbott's account. At NVX's expense, the non-conforming shipment shall be
returned to NVX. EXCEPT AS PROVIDED IN SECTION 6.2, THE FOREGOING SHALL BE NVX'S
SOLE LIABILITY FOR, AND ABBOTT'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO, THE
SUPPLY OF ANY SHIPMENT OF A PRODUCT THAT DOES NOT CONFORM TO THE SPECIFICATIONS
OR WAS NOT MANUFACTURED IN ACCORDANCE WITH CGMPS.
f) Abbott shall have the right during normal business hours and
with reasonable advance notice to visit NVX's facility for the purpose of
observing the manufacturing, packaging, testing, and warehousing of the
Products.
g) EXCEPT AS SET FORTH IN SECTION 4.2(a) ABOVE, NVX DISCLAIMS
ANY WARRANTIES, EXPRESS OR IMPLIED, TO ABBOTT WITH REGARD TO THE PRODUCTS
SUPPLIED BY NVX HEREUNDER, INCLUDING WARRANTIES WITH REGARD TO MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
h) The Parties hereto agree that the sale and supply of
Products by NVX and the purchase of Products by Abbott hereunder shall be
subject to and governed by the terms and conditions hereof. None of the terms
and conditions set forth on any purchase or order form, invoice, acknowledgement
or the like shall change or modify the provisions of this Agreement unless it is
signed and delivered by authorized representatives of both of the Parties hereto
and it clearly indicates by specific reference to this Agreement that the
Parties intended to vary the provisions hereof.
4.3 FORECASTS.
Abbott shall provide NVX with a written forecast (by Product and
month) of the quantity of Products that Abbott expects to order [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*]
4.4 FIRM ORDERS.
a) Abbott shall specify by firm written purchase order its
requirements for each of the Products for each calendar quarter [*] NVX shall
use reasonable commercial efforts to supply the Products to Abbott in accordance
with its orders.
b) [*]
4.5 ALLOCATION. In the event that NVX is unable to fill Abbott's firm
purchase orders for the Products, NVX shall allocate the available Products
among its customers (including Abbott) in accordance with [*]
4.6 [INTENTIONALLY OMITTED]
4.7 RETURNS. Except in the case of Section 4.8 where NVX is responsible
for the costs and expenses of a Recall, Abbott shall not be permitted to return
for refund or credit any Products meeting Specifications therefor that Abbott
has ordered and NVX has supplied hereunder, without the prior written consent of
NVX.
[*] Confidential information has been omitted and filed separately with the
Commission.
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4.8 PRODUCT RECALLS.
a) Each Party shall promptly notify the other Party in
writing of any facts relating to a possible advisability of a recall or the
destruction or withholding from the market in the Territory of any Product
(collectively "Recall"). If at any time (i) any governmental or regulatory
authority in the Territory issues a request, directive or order for a Recall of
a Product from the market in the Territory, (ii) a court of competent
jurisdiction orders a Recall of such Product from the market in the Territory,
or (iii) either Party determines, after consultation with the other Party, that
a Recall of such Product from the market in the Territory is necessary or
advisable, Abbott shall take all appropriate corrective action to effect the
Recall in the Private Pediatric Market in the Territory and NVX shall take all
appropriate corrective action to effect the Recall outside of the Private
Pediatric Market in the Territory. Each Party shall provide the other Party with
such cooperation in connection with the Recall as the other Party may reasonably
request. NVX shall give prior notice to Abbott if NVX is instituting a Recall of
Product outside of the Territory.
b) [*]
4.9 ADJUSTMENTS. If Abbott's reasonably forecasted needs exceed NVX's
capabilities, NVX, in consultation with Abbott, shall determine the best means
of resolving such capacity constraints, [*]
4.10 INDEPENDENT TRANSACTION. Each shipment of Product hereunder shall
constitute a separate and independent transaction and NVX shall be entitled to
payment for each such shipment without reference to any other. Notwithstanding
the foregoing, the Parties shall be entitled to reflect in the invoices any
appropriate credits or similar adjustments thereto.
[*] Confidential information has been omitted and filed separately with the
Commission.
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4.11 DELIVERY TERMS. All Products shall be sold and be delivered
F.O.B., NVX's manufacturing facility. Title and risk of loss shall pass to
Abbott upon delivery by NVX to the carrier specified by Abbott. Each shipment of
Product shall be accompanied or followed by an invoice and a statement in
compliance with 21 USC ss. 303(c)(2) or any successor thereto. NVX may ship
Product in accordance with Abbott's instructions via the carrier specified by
Abbott directly to Customers of Abbott. However, nothing in this Agreement shall
be construed as an obligation of NVX to inventory the Product or act or serve as
a wholesaler or distributor of Abbott pursuant to which NVX would deliver
Products to end-users or final customers.
V. PRICE AND PAYMENTS
5.1 PRICE. The invoice price for each Product sold by NVX to Abbott
pursuant to and during the term of this Agreement shall be determined in
accordance with Section 5.3. Adjustments in the amounts paid to NVX on account
of the sale of the Products to Abbott in each calendar year shall be made as
follows:
a) [*]
b) [*]
c) [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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d) [*]
e) [*]
f) [*]
5.2 FLOOR PRICE. [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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5.3 PROVISIONAL PRICE. [*]
5.4 SALES REPORTS. On or before [*] of each year following the first
sale of a Product, Abbott shall deliver to NVX a true and accurate written
report showing the following as they apply to the calendar quarter immediately
preceding the date of such report:
a) For each Product and differently-sized Vial, the total
quantity of Vials of each Product billed, invoiced or otherwise provided to a
Third Party during the immediately preceding calendar quarter; and
b) The computation of the Net Sales of each such Product,
including a detailed accounting of: [*]
[*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*] The correctness and completeness of each such report shall be certified in
writing by an authorized representative of Abbott. On or before the date [*]
after the end of the calendar quarter in which this Agreement expires or is
terminated, Abbott shall provide to NVX a written report that complies in all
respects with this Section 5.4.
5.5 PAYMENT PROCEDURE. All payments payable by Abbott hereunder shall
be paid to NVX in U.S. Dollars by wire transfer, or by such other method
mutually agreed upon by the Parties, for value [*] to such bank account or
accounts as NVX shall designate in writing, within a reasonable period of time
prior to such due date. Abbott shall provide NVX with [*] advance notice of each
such wire transfer.
5.6 INTEREST CHARGES ON ACCOUNT OF LATE PAYMENT. If Abbott fails to pay
any payment required under this Agreement [*] Abbott shall pay interest on such
amount at [*] which interest shall accrue from the date the payment not timely
made became due until the date such payment is paid in full. If such rate
exceeds the rate allowed by applicable law, then the highest rate allowed by law
shall apply.
5.7 APPLICATION OF PAYMENTS. Any payments received by NVX shall be
applied first to the satisfaction of any unpaid, accrued interest and then to
the satisfaction of any unpaid principal.
5.8 TAXES. If any law or regulation requires the withholding of any
taxes levied on the payment of any amounts payable to NVX under this Agreement,
such taxes shall be deducted by Abbott from the amount otherwise payable to NVX
and paid by Abbott to the proper taxing authority. Abbott shall secure proof of
any such tax payment, and send such proof to NVX as evidence of such payment
together with such other documents as NVX may reasonably require in order to
secure a refund of or credit for the amount of such payment. Except for the
foregoing, each Party shall be responsible for any taxes that are levied on it
in connection with its obligations under this Agreement. Abbott shall provide
NVX with a copy of its resale certificate in order to enable NVX to claim a
sales tax exemption for all sales of Product by NVX to Abbott. NVX shall be
entitled to include and separately state on each invoice for Product the excise
tax imposed on the sales of Products to Abbott, and Abbott shall pay such
amounts to NVX at the time Abbott pays the invoice price for such Product. NVX
shall be responsible for remitting the excise tax to the appropriate
governmental entity.
5.9 BOOKS AND RECORDS.
a) Abbott shall keep full, true and accurate books of account
containing all particulars and reasonable supporting documentation which may be
necessary for the purpose of determining [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*] and Abbott's compliance in other respects with its financial
obligations under this Agreement. The books of account and reasonable supporting
documentation shall be kept at Abbott's and/or its Ross Products Division's
principal place of business and shall be open during normal business hours for
confidential inspection no more frequently than once each calendar year for [*]
following the end of the calendar year to which they pertain by any of the "big
six" independent certified public accounting firms retained by NVX for the
purpose of verifying Abbott's reports and/or Abbott's compliance in other
respects with its financial obligations under this Agreement. [*] If such
records are insufficient for the foregoing purposes or any such inspection
discloses an underpayment of [*] of the amount actually due, then, in addition
to any other rights and remedies available to NVX under this Agreement, Abbott
shall promptly pay the reasonable cost of such inspection after Abbott's receipt
of the bill or invoice for such inspection. Abbott shall be provided a copy of
the audit report and shall have the right to have its own audit conducted by a
"big six" independent certified public accounting firm with respect to the
subject matter of the audit report. In the case of any discrepancy and the
Parties are unable to agree on a resolution thereof, an independent auditor
mutually agreed to by the Parties shall be retained to conduct a final audit,
the results of which shall be binding on the Parties.
b) NVX shall keep full, true and accurate books of account
containing all particulars and reasonable supporting documentation [*] and NVX's
compliance in other respects with its financial obligations under this
Agreement. The books of account and reasonable supporting documentation shall be
kept at NVX's principal place of business and shall be open during normal
business hours for confidential inspection no more frequently than once each
calendar year [*] following the end of the calendar year to which they pertain
by any of the "big six" independent certified public accounting firms retained
by Abbott for the purpose of verifying NVX's records and/or NVX's compliance in
other respects with its financial obligations under this Agreement. In no event
shall the auditor disclose to Abbott any [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*] If such records are insufficient for the foregoing purposes or any such
inspection discloses a discrepancy resulting in an overpayment by Abbott of [*]
of the amount actually due, then, in addition to any other rights and remedies
available to Abbott under this Agreement, NVX shall promptly pay the reasonable
cost of such inspection after NVX's receipt of the bill or invoice for such
inspection. NVX shall be provided a copy of the audit report and shall have the
right to have its own audit conducted by a "big six" independent certified
public accounting firm with respect to the subject matter of the audit report.
In the case of any discrepancy and the Parties are unable to agree on a
resolution thereof, an independent auditor mutually agreed to by the Parties
shall be retained to conduct a final audit, the results of which shall be
binding on the Parties.
5.10 MARKETING FEES. In addition to any other amounts paid by Abbott to
NVX, subject to Section 10.4, Abbott shall pay NVX non-refundable marketing
fees, during the term of the Agreement, as follows:
[*]
5.11 MILESTONE PAYMENTS. In addition to the foregoing payments, subject
to Section 10.4, Abbott shall pay NVX a milestone payment of [*] Abbott shall
provide written notice to NVX of achievement of each milestone event within
thirty (30) days thereof and shall make the required payment to NVX no later
than the end of the thirty
[*] Confidential information has been omitted and filed separately with the
Commission.
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(30) day notice period. The foregoing milestone payments shall be added to the
Purchase Price pursuant to and for the purpose stated in Section 5.2.
5.12 OTHER REPORTS. With respect to each Product, NVX shall provided
quarterly, written reports within thirty (30) days of the end of each quarter to
Abbott of any significant variation of [*] the reasons for such variation and,
if appropriate, the steps that NVX is taking to control or correct such
variation.
VI. INDEMNITY
6.1 ACTS OF ABBOTT.
a) Abbott shall indemnify and hold harmless NVX, NVX's
Affiliates and their respective directors, officers, employees and agents,
(collectively, the "NVX Indemnitees") from and against, any Losses incurred by
NVX Indemnitees arising out of or resulting from any Third Party claim based
upon: (i) the breach by Abbott, or any Affiliate, of any covenant,
representation or warranty contained in this Agreement, or (ii) all decisions
made by Abbott or any Affiliate pursuant to Section 2.8 or (iii) any negligent
act or omission or willful misconduct of Abbott, any Affiliate, or any Customer
of Abbott in the handling, storage, promotion, marketing, distribution or sale
of Products by Abbott, any of Abbott's Affiliates of its Customers, or any other
activity conducted by Abbott, any Affiliate under this Agreement which is the
proximate cause of injury, death or property damage to a Third Party, except to
the extent such Losses arise out of or result from the breach of this Agreement
by, or the negligence or willful misconduct of, NVX or any Affiliate.
b) If any claim or cause of action alleging any of the
foregoing is asserted by a Third Party against any of the NVX Indemnitees, then:
(i) NVX shall notify Abbott promptly in writing of such claim or cause of
action; (ii) Abbott shall assume, at its cost and expense, the sole defense of
such claim or cause of action through counsel selected by Abbott and reasonably
acceptable to NVX, except that in the case of a conflict of interest between
Abbott and NVX, Abbott shall, at Abbott's cost and expense, provide separate
counsel for NVX selected by NVX; (iii) Abbott shall maintain control of such
defense, including any decision as to settlement; (iv) NVX may, at its option
and expense, participate in such defense, and if NVX so participates, the
Parties shall cooperate with one another in such defense; and (v) Abbott shall
bear the total costs of any court award or settlement of such claim or cause of
action and all other costs, fees and expenses related to the resolution thereof.
6.2 ACTS OF NVX.
a) NVX shall indemnify and hold harmless Abbott, Abbott's
Affiliates and their respective directors, officers, employees and agents
(collectively, the "Abbott Indemnitees") from and against, any Losses incurred
by the Abbott Indemnitees arising out of or resulting from any Third Party claim
based upon: (i) the breach by
[*] Confidential information has been omitted and filed separately with the
Commission.
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NVX or any Affiliate of any covenant, representation or warranty contained in
this Agreement, or (ii) any injury, death or property damage to a Third Party
resulting from the manufacture, use or sale of any Product, except to the extent
such Losses arise out of or result from the breach of this Agreement by, or the
negligence or willful misconduct of, Abbott, or any Affiliate or Customer of
Abbott, or any end-user, or arise out of or result from decisions made by Abbott
or any Affiliate pursuant to Section 2.8, or (iii) any negligent act or omission
or willful misconduct of NVX, or any Affiliate, in the manufacture, promotion,
marketing, distribution or sale of Products by NVX or any of NVX's Affiliates or
any other activity conducted by NVX or any Affiliate under this Agreement which
is the proximate cause of injury, death or property damage to a Third Party,
except to the extent such Losses arise out of or result from the breach of this
Agreement by, or the negligence or willful misconduct of, Abbott or any
Affiliate.
b) If any claim or cause of action alleging any of the
foregoing is asserted by a Third Party against any of the Abbott Indemnitees,
then: (i) Abbott shall notify NVX promptly in writing, of such claim or cause of
action; (ii) NVX shall assume, at its cost and expense, the sole defense of such
claim or cause of action through counsel selected by NVX and reasonably
acceptable to Abbott, except that in the case of a conflict of interest between
NVX and Abbott, NVX shall, at NVX's cost and expense, provide separate counsel
for Abbott selected by Abbott; (iii) NVX shall maintain control of such defense,
including any decision as to settlement; (iv) Abbott may, at its option and
expense, participate in such defense, and if Abbott so participates, the Parties
shall cooperate with one another in such defense; and (v) NVX shall bear the
total costs of any court award or settlement of such claim or cause of action
and all other costs, fees and expenses related to the resolution thereof.
6.3 SETTLEMENTS. The indemnifying Party shall not settle a claim or
action related to any Losses without the consent of the indemnified Party, if
such settlement would impose any monetary or other material obligation or burden
on the indemnified Party or require the indemnified Party to submit to a
temporary restraining order or an injunction or otherwise limit the indemnified
Party's rights under this Agreement. Any payment made by the indemnifying Party
to settle any such claim or action shall be at its own cost and expense.
6.4 LIMITATION OF LIABILITY. Except with respect to obligations of
indemnification under Section 6.1 and 6.2, with respect to any claim by one
Party against the other arising out of any breach under this Agreement, the
Parties expressly agree that the liability of the breaching Party to the
non-breaching 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 for, indirect, incidental, punitive, exemplary or consequential
damages.
VII. PACKAGING AND LABELING
NVX shall be solely responsible for all manufacturing, final fill,
labeling and packaging activities relating to the Products, which shall be
conducted in accordance with
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all applicable statutory and regulatory requirements. The Parties shall jointly
be responsible for the content of the labeling and packaging materials, with all
final decisions to be made by NVX in its sole business judgment consistent with
all applicable statutory and regulatory requirements, including, without
limitation, FDA rules and regulations governing the packaging and labeling of
Products.
VIII. TRADEMARKS AND TRADE NAMES
8.1 TRADEMARK. The Parties shall explore and agree upon the Trademarks
to be used in connection with the Products in the Territory. [*]
8.2 TRADEMARK USE. During the term of the Agreement, each Party and its
Affiliates shall have [*] such Trademarks solely for
the purpose of promoting, advertising, marketing, offering to sell and selling
the Products in its designated market in the Territory and for no other purpose.
Neither Party shall use or permit the use of the Trademarks outside the
Territory without the prior written consent of the other Party.
8.3 TRADEMARK RIGHTS UPON EXPIRATION. Upon expiration of the Agreement,
the Trademarks shall be the property of Abbott, provided that NVX shall have a
royalty-free license to use such Trademarks solely with regard to continuing
promoting, advertising, marketing, offering to sell and selling of the Products
to governmental agencies in the Territory.
8.4 TRADEMARK RIGHTS UPON TERMINATION.
a) [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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b) [*]
8.5 TRADE NAMES. During the term of this Agreement and unless
prohibited by the responsible regulatory agency, the Parties shall not use any
trademark other than the Trademarks and shall use the trade name of Abbott or
Ross and the NVX trade name on all Products and all product labelling,
advertising and promotional material pertaining thereto in the Territory. A
legend to the effect that the Product has been manufactured by NVX and is being
sold and distributed under rights granted by NVX will be printed on the package
and product labelling for each Product. All such use of the NVX trade name, and
the Abbott and Ross tradenames, in accordance with this Agreement and applicable
law shall inure to the benefit of NVX, and Abbott and Ross, respectively.
8.6 INFRINGEMENT OF THIRD PARTY TRADEMARK RIGHTS. Each Party shall
promptly notify the other Party of any claim of infringement by a Third Party
resulting from a Party's use of any Trademark hereunder, immediately upon such
claim of infringement becoming known, directly or indirectly. In the event of
any such Third Party notice, Abbott and NVX shall meet in good faith to address
such claim of infringement, which may include defending against such claim,
seeking a license from such Third Party or selecting a new Trademark acceptable
to both Parties to be used with the Product. If one Party in its reasonable
judgment objects to using the Trademark in question, and the other Party desires
to continue to sell Product using the Trademark in question over the objections
of the other Party, the Party continuing to use the Trademark shall indemnify
and hold the other Party harmless from any such claim of infringement with
respect to future Product sales by such Party.
8.7 THIRD PARTY INFRINGEMENT. The Parties shall notify each other of
any apparent infringement by any Third Party of any Trademark [*] after becoming
aware thereof. In the event of an infringement of a Trademark, NVX and Abbott
shall meet to discuss possible joint prosecution and sharing of costs therefor
and any award resulting therefrom. If the Parties are unable to agree on a joint
course of action, Abbott shall have the right to enforce an action against a
Third Party infringer at its sole expense. Any judgment or award resulting from
such action undertaken by Abbott shall be retained by Abbott. In the event that
Abbott does not
[*] Confidential information has been omitted and filed separately with the
Commission.
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exercise its right to undertake an action against the Third Party infringer,
then NVX shall have the right to enforce an action at its expense against the
Third Party infringer and any judgment or award resulting from such action shall
be retained by NVX. The Parties shall cooperate in any action reasonably
necessary or desirable to protect or defend any Trademark used or proposed to be
used hereunder.
8.8 OTHER MATERIALS. Each Product and all labeling, advertising and
promotional material shall feature the applicable Trademark and the Abbott
and/or Ross and NVX trade names and logos. Unless the Parties otherwise agree,
all labeling shall include the Abbott and NVX tradenames and logos, which shall
be displayed with comparable size and prominence.
8.9 TRADEMARK OPPOSITION. Each Party, on behalf of itself and its
Affiliates, hereby consents to use of the Trademarks with respect to the Product
throughout the Territory as contemplated by this Agreement and agrees to waive,
and does hereby waive, any challenge that it or any Affiliate may have to the
use of the Trademarks by the other Party and its Affiliates with respect to the
Products in the Territory as contemplated by this Agreement.
IX. CONFIDENTIALITY
9.1 CONFIDENTIALITY OBLIGATIONS. Any Confidential Information of a
Party disclosed to the other Party shall, during the term of this Agreement and
for the period ending [*] be held in confidence by the receiving Party, used
only for the purposes contemplated herein and disclosed to its directors,
officers, employees and agents on a need-to-know basis only. A receiving Party
may also disclose the disclosing Party's Confidential Information to directors,
officers and employees of its Affiliates and agents, on a need-to-know basis,
provided such directors, officers, employees or consultants, as the case may be,
are bound by secrecy obligations with respect to such disclosures substantially
equivalent to those contained in this Agreement. The foregoing confidentiality
obligations shall not apply to Confidential Information which the receiving
Party can reasonably document:
(a) was already known by the receiving Party or is subsequently
obtained by the receiving Party without confidentiality obligation to the
disclosing Party or any Third Party,
(b) is independently developed by the receiving Party without
the aid, application or use of disclosures of Confidential Information of the
disclosing Party, or
(c) is or becomes public knowledge through no fault of the
receiving Party.
If a receiving Party is required by law or rules or
regulations of any governmental agency or authority or any stock exchange to
disclose Confidential
[*] Confidential information has been omitted and filed separately with the
Commission.
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Information of the disclosing Party, the receiving Party shall, prior to making
any such disclosure, give the disclosing Party sufficient advance written notice
to permit the disclosing Party to seek a protective order or other similar order
with respect to such information and thereafter shall disclose only the minimum
information which, in the opinion or its counsel, is required to be disclosed in
order to comply with such law, rule or regulation, whether or not a protective
order or other similar order is obtained, and to the extent possible only under
conditions of confidentiality. [*]
9.2 PRESS RELEASES.
a) Either Party shall be permitted to the extent in the opinion
of its counsel it is required by law or rules or policies of any governmental
agency or authority or any stock exchange, to issue a press release describing
the arrangements set forth in this Agreement. The Party issuing a press release
shall provide an advance copy of such press release to the other Party
twenty-four (24) hours in advance of its issuance.
b) Except for any press release issued subject to Section
9.2(a) above, NVX shall provide Abbott with a copy of any press release
describing the arrangements set forth in this Agreement at least twenty-four
(24) hours prior to its issuance for comment and approval by Abbott. If Abbott
fails to comment within the twenty-four (24) hour period, then the press release
shall be deemed approved.
c) Except for any press release issued subject to Section
9.2(a) above, Abbott shall provide NVX with a courtesy copy of any press release
describing the arrangements set forth in this Agreement at least twenty-four
(24) hours prior to its issuance.
[*] Confidential information has been omitted and filed separately with the
Commission.
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9.3 USE AFTER TERMINATION. Neither Party shall use any Confidential
Information of the other Party after the termination or expiration of this
Agreement with respect to any or all Products for so long as such Confidential
Information must be maintained confidential pursuant to Section 9.1.
9.4 RETURN OF CONFIDENTIAL INFORMATION. Upon expiration or termination
of this Agreement, at the request of the disclosing Party, the receiving Party
shall promptly deliver to the disclosing Party or its nominee all Confidential
Information furnished by the disclosing Party to the receiving Party pursuant to
this Agreement and relating to the Products and all copies thereof in its or its
Affiliates' possession, except for one copy that shall be retained in its
corporate legal department so that continuing obligations may be determined, and
the receiving Party shall not thereafter make any use thereof as long as
disclosure of same would have been prohibited under Article IX hereof.
X. TERM AND TERMINATION
10.1 TERM. Unless sooner terminated as provided for herein, this
Agreement shall remain in full force and effect for a period commencing on the
Effective Date and expiring on the last-to-expire Valid Claim of the Patents;
provided, however, that each Party's rights and obligations, except as such
rights and obligations shall expressly survive expiration or termination as set
forth herein, with respect to each Product shall expire on the last-to-expire
Valid Claim of the Patents covering such Product, its manufacture use or sale.
10.2 ABBOTT TERMINATION RIGHT. [*]
10.3 CHANGE OF CONTROL OF ABBOTT OR ITS ROSS PRODUCTS DIVISION. [*]
10.4 ACQUISITION OF NVX.
[*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*]
10.5 BREACH.
a) Subject to Section 10.11 and in addition to other
termination rights set forth in this Agreement, NVX shall have the right to
terminate this Agreement in the event Abbott fails to meet diligence standards
for a Product as set forth in Section 2.3, upon giving [*] prior
written notice to Abbott, provided that such failure is not cured within the
[*] notice period.
b) Subject to Sections 10.8 and 10.11(a), either Party shall
have the right to terminate this Agreement upon [*] prior written
notice if the
[*] Confidential information has been omitted and filed separately with the
Commission.
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other party commits a material breach of this Agreement and does not cure such
default within the [*] period. Termination shall be effective upon
expiration of the [*] notice period if the default is not cured.
c) As long as NVX is using reasonable commercial efforts to
supply products to Abbott in accordance with its orders, NVX shall not be a
material breach of this Agreement and NVX shall not be in default of this
Agreement solely because NVX fails to supply Abbott's Requirements of Products
pursuant to Section 4.1 or if NVX discontinues supply of Product(s) to Abbott
pursuant to Section 11.4(d).
d) [*]
10.6 NO RELEASE. Termination of this Agreement shall not operate to
release any party from any obligation or liability incurred under the terms of
this Agreement prior to or upon termination hereof.
10.7 BANKRUPTCY. If a Party is adjudged bankrupt, files or has filed
against it any petition under any bankruptcy, insolvency or similar law, which
petition is not dismissed within sixty (60) days, has a receiver appointed for
its business or property, or makes a general assignment for the benefit of its
creditors. This Agreement may be terminated upon written notice at the option of
the other Party. Such termination shall be made effective the date notice of
termination is given.
10.8 FAILURE TO MAKE PAYMENTS.
a) Subject to Section 10.11(a), NVX shall also have the right
to terminate this Agreement if Abbott fails to make (i) any payment pursuant to
Sections 3.5, 5.10 and 5.11 at the times provided therefor or (ii) any payment
pursuant to Sections 5.1(a), 5.1(c) and 5.1(d), Section 5.2, Section 5.3 and
Section 5.6 at the times provided therefor (and after completion of the final
audit pursuant to Section 5.9(a)) and continues in default for [*] after
receiving written notice from NVX that such payment had not been made within the
time provided therefor. Termination shall be immediately effective [*]
b) Subject to Section 10.11(a), NVX shall have the right to
terminate this Agreement if Abbott is in default of any of its financial
obligations under this Agreement [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*]
10.9 OBLIGATIONS AFTER TERMINATION.
a) Upon termination of this Agreement by NVX pursuant to [*]
NVX shall have the right to repurchase Abbott's inventory of Product at a price
to be agreed by the Parties, [*] If the Parties are unable to reach agreement
[*] to continue selling Product in order to dispose of Abbott's inventory of
Products. During such period, Abbott shall sell the Products consistent with its
past practices. Abbott shall not take any action or fail to take any action that
would materially, detrimentally affect continued marketing, sale or distribution
of the Products by NVX or on NVX's behalf by Third Parties; [*] After the
expiration of such period, Abbott shall not sell any of Abbott's remaining
inventory of Product. After the expiration of such period, NVX shall have the
right, but not the obligation, to repurchase all or part of such inventory from
Abbott. [*]
b) The provisions of Sections 10.9(b)(i), 10.9(b)(ii) and
10.9(b)(iii) shall apply in the event of termination of this Agreement by NVX
pursuant to [*]
(i) Abbott shall promptly deliver to NVX or its nominee all
Confidential Information furnished by NVX to Abbott pursuant to this Agreement
and relating to the Products and all copies thereof in its or its Affiliates'
possession, except
[*] Confidential information has been omitted and filed separately with the
Commission.
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for one copy that shall be retained in its corporate legal department so that
continuing obligations may be determined, and Abbott shall not thereafter make
any use thereof as long as disclosure of same would have been prohibited under
Article IX hereof.
(ii) Abbott shall thereafter have no further rights to market,
distribute or sell the Products, except as may be expressly provided in this
Section 10.9.
(iii) To the extent that NVX has failed to fill a firm purchase
order of Abbott for which delivery was due prior to termination and Abbott has a
customer order that arose prior to termination to provide Product to a Third
Party that Abbott is not able to supply from its inventory, then NVX shall
supply the amount of Product to Abbott to meet its customer order.
c) [*]
10.10 CONDUCT OF BUSINESS IN ANTICIPATION OF TERMINATION. After
receiving notice of termination of this Agreement by NVX and until such time as
termination is effective, Abbott shall continue to conduct its business with
respect to the Products in compliance with all the terms and conditions of this
Agreement.
10.11 ALTERNATIVE DISPUTE RESOLUTION.
a) The Parties recognize that a bona fide dispute as to certain
matters may arise from time to time during the term of this Agreement which
relates to either Party's rights and/or obligations. Accordingly, the Parties
agree that, prior to sending written notice of termination as provided under
Sections 10.5 or 10.8(b), a Party first will send written notice of the dispute
to the other Party for attempted resolution by good faith negotiations between
the Presidents of NVX and Abbott's Ross Products Division within [*] after such
notice is received. Any negotiations regarding a dispute shall be treated as
settlement negotiations for the purposes of the Federal Rules of Evidence and
any similar state rules of evidence. Such negotiations shall not be admissible
in any subsequent proceeding, whether alternative dispute resolution or
litigation. If the matter has not been resolved within [*] of the notice of the
dispute, or if the Parties fail to meet within such [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*] except as provided in Section 10.11(b) below, the Party providing
notice shall be free to send notice of termination as provided in Sections 10.5
and 10.8(b).
b) Any dispute regarding NVX's right to terminate this
Agreement pursuant to Section 10.5 or any dispute arising under Section 10.8(b),
after Abbott has timely paid [*] of the amount claimed as owing under Section
10.8(b), if not resolved in accordance with Section 10.11(a), shall be resolved
in accordance with the following alternative dispute resolution ("ADR")
procedure:
Any negotiations regarding a dispute shall be treated as settlement
negotiations for purposes of the Federal Rules of Evidence and any similar state
rules of evidence. Such negotiations shall not be admissible in any ADR hearing.
The Federal Rules of Civil Procedure and the Federal Rules of Evidence
shall apply. Each Party shall have the right to take as much discovery,
including, without limitation, depositions, interrogatories, requests for
admissions or production of documents, as relevant discovery statutes and rules
permit and the neutral, as described below, shall be empowered to enforce the
discovery rights to the fullest extent possible, including the imposition of
sanctions. The Parties shall have the right to be represented by counsel in the
ADR proceeding.
1. To begin an ADR proceeding, the Party commencing the proceeding
shall provide written notice to the other Party of the issues to be resolved by
ADR.
2. [*] following receipt of the original ADR notice, the Parties shall
select a mutually acceptable neutral to preside in the resolution of any
disputes in this ADR proceeding. The neutral shall be an individual who shall
preside over and resolve any disputes between the Parties. The neutral selected
shall be a former judge of a state or federal court and shall not be an
employee, director or shareholder of either Party or its respective Affiliates,
and shall not otherwise be in a position which, as a judge, would have
disqualifed the neutral under the provisions of 28 U.S.C. ss. 455. If the
Parties are unable to agree on a mutually acceptable neutral within such period,
the neutral shall be selected by the Center of Public Resources, New York, New
York, consistent with the foregoing sentence.
3. [*] the neutral shall hold a hearing to resolve each of the issues
identified by the Parties. The ADR proceeding shall take place in Washington,
D.C. Each Party agrees to produce its and its Affiliate's, officers, employees
and/or agents to give depositions, and to appear at the hearing and give
testimony. The hearing shall be conducted in accordance with the Federal Rules
of Civil Procedure and the Federal Rules of Evidence.
4. [*] each Party shall submit the following to the other Party and the
neutral:
[*] Confidential information has been omitted and filed separately with the
Commission.
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(a) [*]
(b) [*]
(c) [*]
(d) [*]
5. The hearing shall be governed by the following rules:
(a) [*]
(b) [*]
(c) [*]
6. [*] each Party may submit to the other Party and the neutral a
post-hearing brief in support of its proposed rulings and remedies, provided
that such brief shall not contain or discuss any new evidence [*] This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
7. The neutral shall rule on each disputed issue [*] Such ruling shall
adopt in its entirety the proposed ruling and remedy of one of the Parties on
each disputed issue. The neutral shall not issue any written opinion or
otherwise explain the basis of the ruling.
[*] Confidential information has been omitted and filed separately with the
Commission.
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8. The neutral shall be paid a reasonable fee plus expenses. Each Party
shall be responsible for its own costs and expenses in such ADR procedure and
the cost of the neutral and any common administrative expenses shall be shared
equally.
9. The rulings of the neutral, including sanction awards, shall be
binding, non-reviewable, and non-appealable, and may be entered as a final
judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and briefs), and
the rulings shall be deemed Confidential Information. The neutral shall have the
authority to impose sanctions for unauthorized disclosure of Confidential
Information.
11. For the purposes of this Section 10.11(b), the Parties acknowledge
their diversity and agree to accept the jurisdiction of the Federal District
Court in the States of Maryland and Illinois for the purposes of enforcing
awards entered pursuant to this Section 10.11(b).
12. If Abbott sues NVX relating to any matter for which NVX has a claim
for which it would have been or is obligated to utilize ADR pursuant to this
Section 10.8(b) to resolve, then NVX shall have the option to (i) counterclaim
in the action filed by Abbott, and Abbott shall not assert any objection to the
counterclaim on the basis that NVX's claim is or would have been the subject of
this Section 10.8(b), or (ii) to file its claim in ADR pursuant to the
provisions hereof. If such NVX claim is pending in an ADR at the time Abbott
files its action, then at NVX's option, the ADR shall be suspended in order to
enable NVX's claim to be asserted in the action filed by Abbott, or the pending
ADR shall be continued. NVX's joinder of its claim in any action filed by
Abbott, unless such claim is heard and adjudicated, shall not constitute a
waiver of NVX's right to reinstate the ADR or initiate an ADR with respect to
such claim.
XI. PATENT MATTERS
11.1 NOTICE OF INFRINGEMENT. Each Party shall act in good faith to
inform the other Party of any infringement of which it becomes aware by any
Third Party of any of the Patents relating to the Products.
11.2 ENFORCEMENT AND DEFENSE OF PATENTS BY NVX.
a) NVX may, but shall not be required to, take legal action to
enforce the Patents against infringement by Third Parties and defend the Patents
against challenges by Third Parties. If NVX brings an action against a Third
Party, Abbott shall be permitted to participate in such action, and Abbott shall
share the expenses thereof upon mutually agreed terms. [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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[*]
b) Abbott shall notify NVX immediately of sales of a
Competitive Vaccine by a Third Party in the Private Pediatric Market in the
Territory which Abbott believes infringes any of the Patents. [*]
c) If it is agreed or otherwise determined that a Third Party is infringing
any of the Patents, and such infringement is having or is likely to have a
material adverse effect on the sales by Abbott of Product(s) in the Private
Pediatric Market in the Territory, and NVX does not enforce the Patent(s) in
question [*]
11.3 CONTINUING PAYMENT OBLIGATIONS. Abbott's obligation to make any
payments required under this Agreement shall remain in effect notwithstanding
any alleged infringement of any of the Patents.
11.4 INFRINGEMENT BY PRODUCTS.
[*] Confidential information has been omitted and filed separately with the
Commission.
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a) If any Third Party takes or threatens to take any legal
action to enforce any of its patent or other proprietary rights against alleged
infringement by a Party as a result of the manufacture, use, importation, offer
for sale or sale of a Product, then such Party shall notify the other Party
promptly in writing of such legal action. The Parties shall cooperate in the
defense of any such legal action.
b) [*]
c) [*]
d) [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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e) [*]
11.5 OTHER INTELLECTUAL PROPERTY MATTERS.
a) [*]
b) [*]
(i) [*]
(ii) [*]
(iii) [*]
(iv) [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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(v) [*]
(vi) [*]
(c) [*]
(d) [*]
XII. MISCELLANEOUS
12.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement is intended
or shall be deemed to constitute a partnership, agency or joint venture
relationship between the Parties hereto.
12.2 APPLICABLE LAW. This Agreement shall be governed by the laws of
the State of New York (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including but not limited to
matters of validity, arbitrability, construction, effect and performance.
12.3 JURISDICTION. Each Party hereby submits to venue in and to the
non-exclusive personal jurisdiction of any federal or state court of competent
subject matter jurisdiction located within the State of New York in respect of
the interpretation and enforcement of the provisions of this Agreement. Each
Party waives and agrees not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement of this Agreement, that it is
not subject to such jurisdiction; that such action, suit or proceeding may not
be brought or is not maintainable in said court; that this Agreement may not be
enforced in or by said court; that its property is exempt or immune from
execution; that such suit, action or proceeding is brought in an inconvenient
forum; or that the venue of such suit, action or proceeding is improper.
12.4 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts and may be executed by facsimile. All counterparts shall
collectively constitute one and the same Agreement.
12.5 NOTICES. In any case where any notice or other communication is
required or permitted to be given hereunder, such notice or communication shall
be in writing and deemed to have been duly given and delivered, (a) if delivered
in person, on the date of such delivery, (b) if sent by confirmed facsimile
transmission (with answer back received), on the date of such facsimile
transmission, or (c) if sent by overnight express
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
or registered or certified mail (with return receipt requested), on the date of
receipt of such mail, and shall be sent to the following address (or such other
address as a Party may designate from time to time in writing):
If to NVX:
North American Vaccine, Inc.
12103 Indian Creek Court
Beltsville, Maryland 20705
Telephone: (301) 470-6100
Telefax: (301) 419-0167
Attention: Senior Vice President - Legal Affairs and
General Counsel
If to Abbott:
Abbott Laboratories
Ross Products Division
625 Cleveland Avenue
Columbus, Ohio 43215-1724
Telephone: (614) 624-3760
Telefax: (614) 624-7313
Attention: Director, Licensing
with a copy to:
Abbott Laboratories
Ross Products Division
625 Cleveland Avenue
Columbus, Ohio 43215-1724
Telephone: (614) 624-7222
Telefax: (614) 624-3074
Attention: Senior Counsel
12.6 FORCE MAJEURE. Except with respect to Abbott's obligation to make
payments to NVX on a timely basis, if any circumstance beyond the reasonable
control of either Party occurs which delays or renders impossible the
performance of that Party's obligations under this Agreement on the dates herein
provided, such obligation shall be postponed for such time as such performance
necessarily has had to be suspended or delayed on account thereof, provided such
Party shall notify the other Party in writing as
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<PAGE>
soon as practicable, but in no event more than thirty (30) days after the
occurrence of such force majeure. In either such event, the Parties shall meet
promptly to determine an equitable solution to the effects of any such event,
provided that either Party who fails because of force majeure to perform its
obligations hereunder will upon the cessation of the force majeure take all
reasonable steps within its power to resume with the least possible delay
compliance with its obligations. Events of force majeure shall include, without
limitation, war, revolution, invasion, insurrection, riots, mob violence,
sabotage or other civil disorders, acts of God, and newly enacted, modified,
promulgated or issued acts, laws, regulations or rules of any government or
governmental agency. It shall be considered an event of force majeure hereunder
that NVX is unable to supply Products to Abbott if NVX's suppliers fail to
provide timely or adequate supplies to NVX.
12.7 BINDING EFFECT: ASSIGNMENT.
(a) This Agreement shall be binding upon and inure to the
benefit of each of the Parties hereto and its successors, subject to Section
10.3, and permitted assigns.
(b) NVX shall have the right to assign to any Third Party NVX's
rights to receive payment under this Agreement.
(c) Either Party shall have the right to assign this Agreement,
in whole or in part, without the prior written consent of the other Party, to an
Affiliate, provided that the assigning Party guarantees the performance of such
Affiliate. Otherwise, neither Party shall have the right to assign this
Agreement, in whole or in part, without the prior written consent of the other
Party.
12.8 ENTIRE AGREEMENT. The terms and conditions herein contained,
together with the terms and conditions of the other documents attached as
Schedules hereto, constitute the entire agreement between the Parties relating
to the subject matter of this Agreement and shall supersede all previous
communications between the Parties with respect to the subject matter of this
Agreement, [*] Neither Party has entered into this Agreement in
reliance upon any representation, warranty, covenant or undertaking of the other
Party that is not set out or referred to in this Agreement.
12.9 RECITALS AND SCHEDULES. The Recitals set forth at the start of
this Agreement along with the Schedules attached to this Agreement shall be
deemed integral parts of this Agreement and all references in this Agreement to
this Agreement shall encompass such Recitals and Schedules.
12.10 AMENDMENT. This Agreement may be varied, amended or extended only
by the written agreement of the Parties through their duly authorized officers
or representatives, specifically referring to this Agreement.
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
12.11 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable in a final, unappealable order or judgment of
a court of competent jurisdiction, then such provision shall be severed from
this Agreement and shall be rendered inoperative and replaced with a provision
which accomplishes, to the extent possible, the original business purpose of
such provision in a valid and enforceable manner; and the remaining provisions
of this Agreement shall remain binding on the Parties hereto.
12.12 HEADINGS. The descriptive headings of the several articles and
sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12.13 NO WAIVER OF RIGHTS. No failure or delay on the part of either
Party in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or of any other right or power. The waiver by
either Party of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any other or subsequent breach hereunder.
12.14 USAGE. Wherever any provision of this Agreement uses the term
"including" (or "includes"), such term shall be deemed to mean "including
without limitation" and "including but not limited to" (or "includes without
limitation" and "includes but is not limited to") regardless of whether the
words "without limitation" or "but not limited to" actually follow the term
including" (or "includes").
12.15 NO THIRD PARTY RIGHTS. This Agreement shall not be deemed or
construed in any way to result in the creation of any rights or obligations in
any Third Party.
12.16 NO LICENSES. No rights or licenses with respect to any of NVX's
patents, trademarks, know-how, technical information, or other proprietary
rights are granted or deemed granted to Abbott hereunder or in connection
herewith.
12.17 INTERPRETATION. This Agreement shall be interpreted and construed
as a binding agreement separate of and independent from any other agreement
between the Parties.
XIII. ADVERSE EVENT REPORTING/CUSTOMER AND TECHNICAL
SUPPORT
(a) The Parties shall establish procedures for handling
complaints and adverse event reporting to ensure compliance in all respects with
applicable statutes and regulations, including but not limited to, applicable
FDA regulations contained in 21 C.F.R. Chapter 1, Subchapter F, Subpart D (21
C.F.R. ss. 600.80(a) - 600.90) and any successor thereto. Such procedures shall
be modified as appropriate to ensure compliance with any changes or
modifications in applicable statutes or regulations. For the purposes of this
Article XIII, the terms "Adverse Experience" and "Serious" shall
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<PAGE>
have the meanings ascribed to them in 21 C.F.R. ss. 600.80(a) and any successor
thereto. A "Non-Serious Adverse Experience" shall mean any Adverse Experience
that does not meet the criteria for a Serious Adverse Experience. Abbott shall
notify NVX promptly in writing of any Serious Adverse Experiences concerning the
Products or any Non- Serious Adverse Experiences or complaints concerning the
Products which come to its attention which may suggest significant hazards,
contraindications, side effects or precautions pertinent to the safety of the
Products or any therapeutic failure of a Product. Any Serious Adverse Experience
and all information relating thereto concerning a Product shall be immediately
notified to NVX by Abbott as soon as possible, but not later than twenty-four
(24) hours after an Abbott safety officer has become aware of such event, by
facsimile and by confirmatory telephone communication to the responsible safety
officer or a designated alternate, if such safety officer is unavailable, of
NVX. Upon signing of this Agreement, each Party shall immediately notify the
other Party in writing of its respective safety officer and alternates to whom
communications regarding adverse event reporting shall be sent.
(b) With respect to any Non-Serious Adverse Experience, customer
complaint or therapeutic failure concerning a Product, Abbott shall as soon as
reasonably practicable and in any event within ten (10) calendar days of
becoming aware notify NVX of the occurrence and substance thereof.
(c) NVX shall be responsible for submitting required reports to
the FDA in accordance with all applicable regulations and Abbott shall cooperate
in all respects with NVX, including but not limited to providing to NVX on a
timely basis all relevant information in Abbott's possession or control, to
permit NVX to meet such requirements.
(d) Abbott shall provide NVX any and all information in Abbott's
possession or control that may be required by the FDA under 21 C.F.R. ss. 600.81
to allow NVX to prepare and timely file distribution reports, as such term is
defined therein, complying in all aspects with such subsection.
(e) [*]
(f) Abbott, at its own expense, shall be responsible for
establishing a program to provide for and coordinate customer support for each
of the Products in the Private Pediatric Market at a level reasonably calculated
to assure customer satisfaction, including establishing and implementing a
"customer-by-product" and "product-by-customer" tracking system.
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
XIV. REPRESENTATIONS AND WARRANTIES
14.1 Each party represents and warrants to the other that:
a) It is a corporation duly organized and validly existing under
the laws of the state or other jurisdiction of incorporation or formation;
b) The execution, delivery and performance of this Agreement by it
has been duly authorized by all requisite corporate action;
c) It has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
d) This Agreement has been duly authorized, executed and delivered
and constitutes such party's legal, valid and binding obligation enforceable
against it in accordance with its terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to the availability of particular
remedies under general equity principles;
e) It shall comply with all applicable laws and regulations
relating to its activities under this Agreement.
XV. SURVIVAL
15.1 The provisions of Sections 5.4, 5.6, 5.9, 8.3, 8.4, 12.2, 12.3,
and 12.5 and Articles VI, IX, X, XIV, XV and XVI shall survive the termination
or expiration of this Agreement (as the case may be) and shall remain in full
force and effect.
15.2 The provisions of this Agreement which do not survive termination
or expiration hereof (as the case may be) shall, nonetheless, be used in
construing and interpreting the rights and obligations of the parties hereto
with regard to any dispute, controversy or claim which may arise under this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the authorized
representatives of the parties.
ABBOTT LABORATORIES NORTH AMERICAN VACCINE, INC.
By: /s/ Thomas M. McNally By: /s/ Sharon Mates
------------------------------- ---------------------------
Title: Thomas M. McNally Title: Sharon Mates, Ph.D.
Senior Vice President President
Abbott Laboratories
Date: October 11, 1996 Date: October 11, 1996
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated as of October 11, 1996,
between North American Vaccine, Inc., a company organized under the laws of
Canada ("Company"), and Abbott Laboratories, an Illinois corporation
("Acquiror").
This Agreement sets forth the terms and conditions upon which the
Company is selling to Acquiror, and Acquiror is purchasing from the Company,
350,000 common shares, no par value, of the Company ("Shares").
In consideration of the mutual agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE SHARES
1.1 PURCHASE AND SALE OF THE SHARES. Subject to the terms and
conditions of this Agreement, the Company hereby sells and delivers to Acquiror,
and Acquiror hereby purchases and accepts from the Company, the Shares free and
clear of all mortgages, liens, pledges, security interests, encumbrances,
pre-emptive rights or other third party interests of any nature whatsoever.
1.2 CONSIDERATION. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties and agreements of the
Company contained herein, and in consideration of the delivery of the stock
certificates representing the Shares, the Acquiror hereby pays to the Company
$6,343,750 in immediately available funds, as full payment and consideration for
the purchase of the Shares.
1.3 CLOSING. The Closing of the transactions contemplated by this
Agreement will occur at the offices of the Company located at Beltsville,
Maryland on the date hereof ("Closing Date").
1.3.1 At the Closing, the Company will deliver to the Acquiror
a stock certificate or certificates representing the Shares with a
restricted stock legend set forth thereon; and an opinion of counsel to
the effect that the Shares have been duly and validly issued and are
fully paid and non-assessable. The restricted stock legend shall read
substantially as follows:
The shares evidenced by this certificate may not be offered or
sold, transferred, pledged, hypothecated or otherwise disposed
of except: (i) pursuant to an effective registration statement
under the Securities Act of 1933, as amended, (ii) to the
extent applicable, Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of
<PAGE>
securities), or (iii) if, in the opinion of counsel to the
corporation, an exemption from registration under such Act is
available.
1.3.2 At the Closing, Acquiror will deliver by check or wire
transfer, at the election of the Company, $6,343,750 in immediately
available funds.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror as follows:
2.1 CORPORATE STATUS; AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all requisite power and authority to
execute, deliver and perform this Agreement, to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company.
2.2 BINDING AGREEMENT. This Agreement constitutes the valid and binding
agreement of the Company, enforceable in accordance with its terms (subject, as
to the enforcement of remedies, to general equitable principles and to
bankruptcy, insolvency and similar laws affecting creditors' rights generally).
2.3 NON-CONTRAVENTION; CONSENTS. The execution, delivery and
performance of this Agreement by the Company, does not, and the consummation by
the Company of the transactions contemplated hereby does not and will not,
constitute or result in (with or without the giving of notice or the lapse of
time or both) (A) a breach or violation of any provision of the articles of
incorporation, as amended to date, or by-laws, as amended to date, of the
Company, or (B) a breach or violation of, or a conflict with, or a default
under, or termination of, or an event permitting any other person to terminate,
or the acceleration of, or the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance on any properties or assets of
the Company pursuant to (i) any provision of any contract, license or other
agreement binding upon the Company, or (ii) any law, rule, writ, injunction,
decree, regulation, treaty, ordinance or order, award or governmental permit or
license applicable to the Company, which violation, breach, default, termination
or acceleration would, individually or in the aggregate, have a material adverse
effect on the business, financial condition, results of operations, or business
prospects of the Company.
- 2 -
<PAGE>
2.4 REPORTS.
(i) As of their respective dates, neither the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, nor any
other document filed subsequent to December 31, 1995 (including, without
limitation, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996) under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, with the Securities and Exchange
Commission (the "SEC"), (collectively the "Reports"), contained any untrue
statement of a material fact or omitted to state a material fact required to b
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each of the balance
sheets contained or incorporated by reference in the Reports (including in each
case any related notes and schedules) fairly presented, the financial position
of the entity or entities to which it relates as of its date and each of the
statements of operation, statements of cash flows and statements of
stockholders' equity, contained or incorporated by reference in the Reports
(including in each case any related notes and schedules), fairly presented, the
results of operations, stockholders' equity and cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
(ii) The Company has timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since December 31, 1995 with
the SEC.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Company's Reports, since December 31, 1995, there has not been any:
(a) change in the financial condition, assets, liabilities, properties,
business or results of operations of the Company which, individually or in the
aggregate, has resulted or could result in a materially adverse effect;
(b) event or condition of any type that has resulted or could result in
a materially adverse effect on the financial condition, assets, liabilities,
properties, business or results of operations of the Company.
2.6 COMPLIANCE. Except as disclosed in the Company's Reports, the
Company is not in violation of its Certificate of Incorporation, Bylaws or any
laws, ordinances and regulations or other governmental restrictions, orders,
judgments or decrees, where any such violation (a) would impair or restrict the
Company's power or authority to issue and deliver the Shares as required by this
Agreement, (b) of such Certificate of Incorporation or Bylaws has or would have
a material adverse effect on the financial condition, assets, liabilities,
properties, business, or results of operations of the Company, or (c) is based
upon facts of which the Company is aware and where such violation has or would
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<PAGE>
have a material adverse effect on the financial condition, assets, liabilities,
properties, business or results of operations of the Company.
2.7 LITIGATION. Except as disclosed in the Company's Reports, there is
no action, suit, proceeding or investigation pending or currently threatened
against the Company, which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely affect the
financial condition, assets, liabilities, properties, business, or results of
operations of the Company.
2.8 DELIVERY OF SHARES. The Shares are duly authorized, validly issued,
fully paid and non assessable. The sale of such Shares has not been registered
under the Securities Act of 1933, as amended ("1933 Act"). Such Shares have been
listed for trading on the American Stock Exchange, subject to official notice of
issuance.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company as follows:
3.1 CORPORATE STATUS; AUTHORITY. The Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all requisite power and authority to
execute, deliver and perform this Agreement, to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Acquiror.
3.2 BINDING AGREEMENT. This Agreement constitutes the valid and binding
agreement of the Acquiror, enforceable in accordance with its terms (subject, as
to the enforcement of remedies, to general equitable principles and to
bankruptcy, insolvency and similar laws affecting creditors' rights generally).
3.3 NON-CONTRAVENTION; CONSENTS. The execution, delivery and
performance of this Agreement by the Acquiror, does not, and the consummation by
the Acquiror of the transactions contemplated hereby does not and will not,
constitute or result in (with or without the giving of notice or the lapse of
time or both) (A) a breach or violation of any provision of the articles of
incorporation, as amended to date, or by-laws, as amended to date, of the
Acquiror, or (B) a breach or violation of, or a conflict with, or a default
under, or termination of, or an event permitting any other person to terminate,
or the acceleration of, or the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance on any properties or assets of
the Acquiror pursuant to (i) any provision of any contract, license or other
agreement binding upon the Acquiror, or (ii) any law, rule, writ, injunction,
decree, regulation, treaty, ordinance or order, award or governmental permit or
license applicable to the Acquiror, which violation, breach, default,
termination or acceleration would, individually or in the aggregate, have a
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<PAGE>
material adverse effect on the business, financial condition, results of
operations, or business prospects of the Acquiror.
3.4 SECURITIES REPRESENTATIONS. Acquiror has received and reviewed a
copy of the Reports. Acquiror understands that the sale of the Shares has not
been registered under the 1933 Act. Acquiror further represents that it (a) has
such knowledge, sophistication and experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in the
Shares, (b) is acquiring the Shares for investment and fully understands the
nature, scope and duration of the limitations on transfer imposed by the
securities laws and (c) can bear the economic risk of investment in the Shares
and can afford a complete loss of such investment. Acquiror has had an adequate
opportunity to ask questions and receive answers (and has asked such questions
and received answers to its satisfaction) from the officers of the Company
concerning the business, operations and financial condition of the Company.
Acquiror has no contract, undertaking, agreement or arrangement, written or
oral, with any other person to transfer or grant participations in any Shares.
Acquiror acknowledges and agrees that the Company has no obligation to register
the resale of the Shares under the securities laws.
ARTICLE IV.
GENERAL PROVISIONS
The Company and Acquiror further covenant and agree as follows:
4.1 WAIVER OF TERMS. Any of the terms or conditions of this Agreement
may be waived at any time by the party or parties entitled to the benefit
thereof but only by a written instrument signed by the party or parties waiving
such terms or conditions.
4.2 AMENDMENT OF AGREEMENT. This Agreement may be amended, supplemented
or interpreted at any time only by written instrument duly executed by each
party hereto.
4.3 PAYMENT OF EXPENSES. The Company shall pay all expenses incurred by
or on its behalf, and Acquiror shall pay all expenses incurred by or on its
behalf in connection with the preparation, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
(including without limitation, the reasonable fees, disbursements and expenses
of their attorneys, accountants and advisors).
4.4 CONTENTS OF AGREEMENT; BINDING NATURE. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties regarding
such subject matter are superseded by this Agreement. All representations,
warranties, covenants, terms and conditions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto.
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<PAGE>
4.5 NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be by hand-delivery, certified
or registered mail, return receipt requested; telecopier, or air courier to the
parties set forth below. Such notices shall be deemed given at the time
personally delivered, if delivered by hand or by courier; at the time received
if sent certified or registered mail; and when receipt acknowledged by receiving
telecopy equipment if telecopied.
If to Company: North American Vaccine, Inc.
12103 Indian Creek Court
Beltsville, MD 20705
If to Acquiror: Abbott Laboratories
Ross Products Division
625 Cleveland Avenue
Columbus, OH 43215
4.6 COMMISSIONS AND FINDER'S FEES. Each party represents and warrants
that none of them has retained or used the services of any individual, firm or
corporation in such manner as to entitle such individual, firm or corporation to
any compensation for brokers' or finders' fees with respect to the transactions
contemplated by this Agreement for which the other may be liable.
4.7 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
4.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.9 GOVERNING LAW; JURISDICTION. This Agreement shall be governed,
construed and enforced in accordance with the internal laws of the State of
Delaware, excluding any choice of law rules that may direct the application of
the laws of another jurisdiction. Each party hereto hereby irrevocably consents
and submits to the jurisdiction of and the service of process from courts
sitting in Delaware for any and all actions arising out of or related to this
Agreement.
4.10 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended nor shall it be construed to give any person, firm, corporation or
other entity, other than the parties hereto and their respective successors and
assigns, any right, remedy or claim under or in respect of this Agreement or any
provisions hereof.
4.11 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Acquiror contained in this Agreement shall survive
the execution and delivery of this Agreement and the Closing for a period of two
years and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Acquiror or the Company.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
NORTH AMERICAN VACCINE, INC.
By: /S/ SHARON MATES
-------------------------
Name: Sharon Mates, Ph.D.
Title: President
ABBOTT LABORATORIES
By: /S/ THOMAS M. MCNALLY
----------------------------
Name: Thomas M. McNally
Title: Senior Vice President
Ross Products Division
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- -------------------------------------------------------------------------------
ASSETS PURCHASE AGREEMENT
DATED AS OF OCTOBER 17, 1996,
AMONG
CEPHALON PROPERTY MANAGEMENT, INC.
AND
CEPHALON, INC.
AND
NORTH AMERICAN VACCINE, INC.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PAGE
ARTICLE 1 - PURCHASE AND SALE..........................................................................1
1.1 Agreement to Sell......................................................................1
1.2 Agreement to Purchase..................................................................3
1.3 The Purchase Price.....................................................................3
(a) Purchase Price................................................................3
(b) Payment of Purchase Price. ..................................................3
(c) Adjustments to Purchase Price.................................................3
(d) Adjustment for Pre-Closing Inspection.........................................4
(e) Injunctive Relief; Specific Performance.......................................4
1.4 Assumption of Liabilities..............................................................4
ARTICLE 2 - CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS,
CHANGE IN NAME AND FURTHER ASSURANCES...........................................................5
2.1 Closing................................................................................5
2.2 Items to be Delivered at Closing.......................................................5
2.3 Third Party Consents...................................................................7
2.4 Further Assurances.....................................................................7
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES.............................................................8
3.1 Representations and Warranties of the Seller...........................................8
(a) Corporate Existence...........................................................8
(b) Corporate Power; Authorization; Enforceable Obligations.......................8
(c) Validity of Contemplated Transactions, etc....................................8
(d) All Tangible Purchased Assets.................................................9
(e) Title to Purchased Assets.....................................................9
(f) Compliance with Law; Authorizations...........................................9
(g) Litigation....................................................................9
(h) Contracts and Commitments.....................................................9
(i) Intellectual Property, Violations, etc.......................................11
(j) Purchased Assets.............................................................11
(k) Tax Returns..................................................................11
(l) Insurance....................................................................11
(m) Condition of Assets..........................................................11
(n) FDA Matters..................................................................11
(o) WARN ACT.....................................................................12
(p) Environmental Matters........................................................12
(q) No Other Warranties..........................................................13
(r) Facilities Leases and Equipment Leases.......................................14
(s) "Knowledge of the Seller and Cephalon".......................................14
3.2 Representations and Warranties of the Purchaser.......................................14
(a) Corporate Existence..........................................................14
(b) Corporate Power and Authorization............................................14
(c) Validity of Contemplated Transactions, etc...................................14
(d) Investigation and Evaluation.................................................15
3.3 Survival of Representations and Warranties................................................15
<PAGE>
ARTICLE 4 - AGREEMENTS PENDING CLOSING..................................................................15
4.1 Agreements of the Seller Pending the Closing..........................................15
4.2 Agreements of the Purchaser Pending the Closing.......................................17
4.3 Access................................................................................17
4.4 Press Releases........................................................................17
ARTICLE 5 - CONDITIONS PRECEDENT TO THE CLOSING.......................................................18
5.1 Conditions Precedent to the Purchaser's Obligations...................................18
(a) Representations, Warranties and Covenants of the Seller......................18
(b) Injunctions, etc.............................................................18
(c) Consents and Approvals.......................................................18
(d) Destruction of the Purchased Assets..........................................18
5.2 Conditions Precedent to the Seller's and Cephalon's Obligations......................19
(a) Representations, Warranties and Covenants of the Purchaser...................19
(b) Injunctions, etc.............................................................19
(c) Consents and Approvals.......................................................19
ARTICLE 6 - POST-CLOSING MATTERS......................................................................19
6.1 Employee Arrangements.................................................................19
6.2 Discharge of Certain Liabilities......................................................19
6.3 Maintenance of Books and Records......................................................20
6.4 Restriction on Use of Name............................................................20
6.5 Sublicense............................................................................20
ARTICLE 7 - INDEMNIFICATION...........................................................................20
7.1 Indemnification Obligations...........................................................20
7.2 Method of Asserting Claims, Etc.......................................................21
7.3 Payment...............................................................................22
ARTICLE 8 - MISCELLANEOUS.............................................................................23
8.1 Termination...........................................................................23
8.2 Compliance with Bulk Sales Laws.......................................................23
8.3 Brokerage; Expenses; Etc..............................................................24
8.4 Contents of Agreement; Amendment; Parties in Interest, Assignment, Etc................24
8.5 Confidentiality.......................................................................24
8.6 Notices...............................................................................25
8.7 Maryland Law to Govern................................................................26
8.8 No Benefit to Others..................................................................26
8.9 Headings, Gender and "Person..........................................................26
8.10 Schedules and Exhibits................................................................26
8.11 Severability..........................................................................26
8.12 Counterparts..........................................................................26
</TABLE>
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<PAGE>
INDEX OF DEFINED TERMS
Assets................................................. 1
Assumed Liabilities......................................4
Authorization............................................9
Beltsville Assets........................................1
Cephalon.................................................1
CGMP....................................................11
Claim Notice............................................22
Closing..................................................5
Closing Date.............................................5
Code.....................................................6
Environmental Laws......................................13
Equipment Leases.........................................2
Excluded Assets..........................................2
Facilities Leases........................................1
FDA.....................................................11
Hazardous Substances....................................13
HSR......................................................9
Leased Assets............................................2
Notice Period...........................................22
Purchased Assets.........................................1
Purchase Price...........................................3
Purchaser's Documents...................................14
Seller...................................................1
Seller's Documents.......................................8
Tax.....................................................11
Taxes...................................................11
WARN Act................................................12
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<PAGE>
ASSETS PURCHASE AGREEMENT
This ASSETS PURCHASE AGREEMENT is made and entered into as of October
17, 1996, by and among CEPHALON PROPERTY MANAGEMENT, INC., a Delaware
corporation (the "SELLER"), CEPHALON, INC., a Delaware corporation ("CEPHALON")
and NORTH AMERICAN VACCINE, INC., a Canadian corporation (the "PURCHASER"), with
reference to the following Preamble:
The Seller leases certain facilities at 9000 Virginia Manor Road,
Suites 260, 270, 280 and 290, Beltsville, Maryland 20705 (the
"FACILITIES") and the Seller and Cephalon have acquired certain
equipment, materials and other assets for the production of biological
pharmaceutical compounds at the Facilities (the "BELTSVILLE ASSETS").
The Purchaser desires to purchase and the Seller and Cephalon desire to
sell the Purchased Assets (hereinafter defined) in exchange for the
payment by the Purchaser of the Purchase Price (hereinafter defined)
and the assumption by the Purchaser of the Assumed Liabilities
(hereinafter defined), all on the terms and conditions described in
this Agreement.
NOW, THEREFORE, in consideration of the Preamble and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1 - PURCHASE AND SALE
1.1 AGREEMENT TO SELL.
(a) At the Closing hereunder (as defined in SECTION 2.1
hereof) and except as otherwise provided in this SECTION 1.1, the Seller and
Cephalon, as applicable, shall grant, sell, convey, assign, transfer and deliver
to the Purchaser, upon and subject to the terms and conditions of this
Agreement, all right, title and interest of the Seller and Cephalon, as
applicable, in and to all assets, properties and rights of the Seller and
Cephalon, as applicable, described below (which assets, properties and rights
are herein sometimes called the "PURCHASED ASSETS"):
(i) all of the Seller's rights under the leases for the
Facilities dated March 20, 1992, November 12, 1991 and December 28,
1990, as each such Lease was assumed by the Seller on December 14, 1992
and amended on such date, copies of which are as attached hereto as
EXHIBIT A (collectively, the "FACILITIES LEASES") including security
deposits and all credits or refunds payable thereunder;
(ii) all equipment, machinery, furniture, office
furnishings, leasehold improvements, fixtures, computer hardware and
systems (exclusive of data and software) and other tangible personal
property located at the Facilities, including without limitation those
items specified in SCHEDULE 1.1(A)(II) hereto, except for those items
leased pursuant to the Equipment Leases (defined below) by Cephalon;
<PAGE>
(iii) all of Cephalon's right, title and interest in and
to the Master Lease Agreement dated as of February 1, 1994, as amended
by and between Cephalon and General Electric Credit Corporation, copies
of which are attached hereto as EXHIBIT B (the "EQUIPMENT LEASES") to
the extent such Equipment Leases relate to the assets listed on
SCHEDULE 1.1(A)(III) (the "Leased Assets");
(iv) all rights of the Seller and Cephalon under the
contracts, agreements, leases, or arrangements specified in SCHEDULE
1.1(A)(IV);
(v) all prepaid expenses, refunds, causes of action,
rights of setoff and recoupment arising from or relating to the other
Purchased Assets or the Leased Assets;
(vi) all of the Seller's and Cephalon's right, title and
interest in and to all facility and construction drawings, engineering
reports and drawings, facility licenses and permits, guaranties and
warranties relating to the other Purchased Assets or the Leased Assets
and all other documentation and records associated with the operation
of the other Purchased Assets or the Leased Assets; and
(viii)all office and other supplies and a copy of all
validation protocols, validation records and other operating
information in the possession of the Seller or Cephalon and related to
the use and maintenance of the Purchased Assets or the Leased Assets.
(b) Notwithstanding the foregoing, the Purchased Assets shall
not include any of the following (the "EXCLUDED ASSETS"):
(i) all lease agreements for real and personal property
(other than the Facilities Leases and the Equipment Leases) and all
service agreements or executory contracts related to the Facilities or
the Beltsville Assets, other than those agreements specified in
SCHEDULE 1.1(A)(IV);
(ii) all cash on hand or in bank accounts;
(iii) the corporate seals, certificates of incorporation,
minute books, stock books, tax returns, books of account or other
records having to do with corporate organization of the Seller;
(iv) the rights which accrue or will accrue to the Seller
under this Agreement;
(v) the rights to the Seller's claims for any federal,
state, local, or foreign tax refunds or any tax attributes of the
Seller, including without limitation any net operating loss forwards;
(vi) all raw materials, work-in-progress, supplies and
other inventories located at the Facilities;
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<PAGE>
(vii) all right, title and interest in and to the name
"Cephalon"; and
(viii)any batch records or other regulatory files or
notebooks specifically related to the products manufactured by the
Seller.
(c) The assets shall be sold, transferred, assigned, conveyed
and delivered to the Purchaser free and clear of all liens, claims, charges,
options, pledges and encumbrances of any kind.
1.2 AGREEMENT TO PURCHASE. At the Closing hereunder, the
Purchaser shall purchase the Purchased Assets from the Seller and Cephalon, upon
and subject to the terms and conditions of this Agreement and in reliance on the
representations, warranties and covenants of the Seller and Cephalon contained
herein, in exchange for the Purchase Price (defined in SECTION 1.3 hereof). In
addition, the Purchaser shall assume at the Closing and agree to pay, discharge
or perform, as appropriate, certain liabilities and obligations of the Seller
and Cephalon to the extent and as provided in SECTION 1.4 of this Agreement.
Except as specifically provided in this Agreement, the Purchaser shall not
assume or be responsible for any liabilities or obligations of the Seller or
Cephalon.
1.3 THE PURCHASE PRICE.
(a) PURCHASE PRICE. The "PURCHASE PRICE" shall be payable in
United States dollars and shall be an amount equal to $24,863,973 less the
agreed value of the liabilities assumed by the Purchaser under the Equipment
Leases as set forth on Schedule 1.3(a) hereto.
(b) PAYMENT OF PURCHASE PRICE. On the Closing Date, the
Purchaser shall pay to the Seller the Purchase Price, as adjusted pursuant to
SECTIONS 1.3(C) and 1.3(D) hereof, payable by wire transfer of immediately
available funds to such account as the Seller shall designate.
(c) ADJUSTMENTS TO PURCHASE PRICE. [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
(d) ADJUSTMENT OF PURCHASE PRICE. If, prior to the Closing,
the Purchaser and the Seller determine that the representations set forth in
SECTION 3.1(D) or SECTION 3.1(E) hereof are not true and correct, the Purchase
Price shall be reduced by an amount equal to the Seller's historical cost, as
set forth in SCHEDULES 1.1(A)(II) and 1.1(A)(III) hereto, of the Purchased
Assets that do not satisfy either of such representations.
(e) [*]
1.4 ASSUMPTION OF LIABILITIES. At the Closing hereunder and except as
otherwise specifically provided in this SECTION 1.4, the Purchaser shall assume
and agree to pay, discharge or perform, as appropriate, the following
liabilities and obligations of the Seller and Cephalon (the "ASSUMED
LIABILITIES"):
(a) all obligations of the Seller or Cephalon, as applicable, under
the contracts, agreements, leases or arrangements specified in Schedule
1.1(a)(iv) to be performed at or after the Closing Date;
(b) all obligations of the Seller, if any, accruing at or after the
Closing Date under the Facilities Leases;
(c) all obligations of Cephalon, if any, accruing at or after the
Closing Date under the Equipment Leases to the extent the Purchaser has assumed
such Equipment Leases; and
(d) sales and use tax liability resulting from the sale or arising
after the sale of the Purchased Assets regardless of which party hereto may be
deemed by law to bear responsibility for payment of such taxes.
In no event, however, shall the Purchaser assume or incur any liability or
obligation under this SECTION 1.4 or otherwise in respect of any of the
following:
[*] Confidential information has been omitted and filed separately with the
Commission.
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<PAGE>
(i) any federal, state or local income taxes charged,
assessed or payable by the Seller (or any member of any affiliated
group of which the Seller is a member), including without limitation
such income taxes incident to or arising as a consequence of the
negotiation or consummation by the Seller (or any member of any
affiliated group of which the Seller is a member) of this Agreement and
the transactions contemplated hereby;
(ii) any sales, use, excise, franchise, personal or real
property taxes or any similar taxes, fees or governmental charges
attributable to events or periods prior to the Closing Date;
(iii) any liability or obligation arising from or related to
the Excluded Assets or any events, acts or omissions by the Seller
prior to the Closing Date (other than the Assumed Liabilities),
including without limitation, any liability or obligation arising from
or related to the environmental condition of the Facilities prior to
the Closing Date; or
(iv) any liability or obligation related to any employees of
the Seller, or under any benefit arrangement of the Seller with respect
thereto, including without limitation, all liabilities for pay, wages,
salaries, unemployment compensation and insurance, employee benefits,
and contributions to employee benefit plans, however classified.
ARTICLE 2 - CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY
CONSENTS, CHANGE IN NAME AND FURTHER ASSURANCES
2.1 CLOSING. The consummation of the transactions contemplated hereby
(the "CLOSING") shall take place at 10:00 A.M., local time, on November 1, 1996
or the second business day following the satisfaction or waiver of all of the
conditions precedent of each of the parties hereto required to be satisfied on
or prior to the Closing or on such other date as may be mutually agreed upon in
writing by the Purchaser and the Seller. The date on which the transactions
contemplated herein are consummated is sometimes herein referred to as the
"CLOSING DATE." The Closing shall take place at the offices of Arnold & Porter,
Thurman Arnold Building, 555 12th Street, N.W., Washington, D.C. 20004.
2.2 ITEMS TO BE DELIVERED AT CLOSING. At the Closing and subject to
the terms and conditions herein contained:
(a) The Seller and Cephalon, as applicable, shall deliver to the
Purchaser:
(i) such bills of sale, assignments, endorsements, and other
good and sufficient instruments and documents of conveyance and
transfer as shall be necessary or appropriate to transfer and assign to
the Purchaser all of the Seller's and Cephalon's right, title and
interest in and to the Purchased Assets in form reasonably satisfactory
to the Purchaser and its counsel;
-5-
<PAGE>
(ii) an assignment of the Facilities Leases;
(iii) an assignment of the Equipment Leases to the extent
provided in SECTION 1.1(A)(III);
(iv) certificates of good standing of the Seller from the
Maryland Department of Assessments and Taxation and of the Seller and
Cephalon from the Delaware Secretary of State, in each case dated not
more than 30 days prior to the Closing;
(v) an affidavit of the Seller certifying, under penalties of
perjury, that the Seller is not a "foreign person" within the meaning
of section 1445 of the Internal Revenue Code of 1986, as amended (the
"CODE");
(vi) certificates of the President of each of the Seller and
Cephalon and the Chief Financial Officer of Cephalon certifying the
matters set forth in SECTION 5.1(A) hereof;
(vii) a legal opinion of the Seller's and Cephalon's counsel
regarding the matters set forth in SCHEDULE 2.2(A)(VII), in form and
substance reasonably satisfactory to the Purchaser; and
(viii) such other certificates, instruments and documents as
are required to be delivered pursuant to this Agreement or as the
Purchaser may reasonably require.
(b) The Purchaser shall deliver to the Seller the following:
(i) the Purchase Price as adjusted in accordance with SECTION
1.3 hereof;
(ii) an undertaking whereby the Purchaser will assume and agree
to pay, discharge or perform, as appropriate, the Seller's liabilities
and obligations to the extent and as provided in SECTION 1.4 hereof in
form reasonably satisfactory to the Seller and its counsel;
(iii) an assumption of the Facilities Leases;
(iv) an assumption of the Equipment Leases to the extent
provided in SECTION 1.1(C)(III);
(v) a certificate of the President and the Chief Financial
Officer of the Purchaser certifying the matters set forth in SECTION
5.2(A) hereof; and
(vi) such other certificates, instruments and documents as are
required to be delivered pursuant to this Agreement or as the Seller
may reasonably require.
-6-
<PAGE>
(c) At or prior to the Closing, the parties hereto shall also
deliver to each other the agreements, certificates and other documents and
instruments referred to in ARTICLE 5 hereof.
2.3 THIRD PARTY CONSENTS. To the extent that the Seller's or Cephalon's
rights under any agreement, contract, commitment, lease, Authorization (as
defined in SECTION 3.1(F) hereof) or other Purchased Asset to be assigned to the
Purchaser hereunder may not be assigned without the consent of another person
which has not been obtained, this Agreement shall not constitute an agreement to
assign the same if an attempted assignment would constitute a breach thereof or
be unlawful. The Seller and Cephalon each shall use commercially reasonable
efforts to obtain such consents on or before the Closing Date. If any such
required consent shall not be obtained or if any attempted assignment would be
ineffective or would impair the Purchaser's rights under the Purchased Asset in
question so that the Purchaser would not in effect acquire the benefit of all
such rights, the Purchaser, at its sole and exclusive option, may require the
Seller or Cephalon, to the maximum extent permitted by law and by the terms of
such Purchased Asset, to act after the Closing as the Purchaser's agent in order
to obtain for the Purchaser the benefits thereunder and the Seller and Cephalon
shall cooperate, to the maximum extent permitted by law and the Purchased Asset,
with the Purchaser in any other reasonable arrangement designed to provide such
benefits to the Purchaser. The Purchaser will reimburse the Seller and Cephalon
for all reasonable out-of-pocket expenses incurred after the Closing Date in so
acting in the capacity of the Purchaser's agent.
2.4 FURTHER ASSURANCES. The Seller and Cephalon from time to time after
the Closing, at the Purchaser's request, will execute, acknowledge and deliver
to the Purchaser such other instruments of conveyance and transfer and will take
such other actions and execute and deliver such other documents, certifications
and further assurances as the Purchaser may reasonably require in order (i) to
vest more effectively in the Purchaser any of the Purchased Assets, or (ii) to
put the Purchaser more fully in possession of any of the Purchased Assets, or
(iii) to better enable the Purchaser to complete, perform or discharge any of
the liabilities or obligations assumed by the Purchaser at the Closing pursuant
to SECTION 1.4 hereof, subject to payment by the Purchaser of all reasonable
out-of-pocket expenses of the Seller and Cephalon in connection with this clause
(iii). Each of the parties hereto will cooperate with the other and execute and
deliver to the other parties hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
2.5 POSSESSION AND RISK OF LOSS. Until the Closing, the Seller and
Cephalon shall bear all risk of loss of the Purchased Assets to be conveyed
hereunder. From and after the Closing, the Purchased Assets shall be at the risk
of the Purchaser. At the Closing, the Seller and Cephalon shall put the
Purchaser in full, complete and quiet possession and enjoyment of all of the
Purchased Assets and the Leased Assets.
2.6 PRE-CLOSING INSPECTION. Not less than one week prior to the date
set for the Closing, the Purchaser shall have the opportunity to inspect the
Facilities, the Purchased Assets and the Leased Assets for the purpose of
confirming the validity of the representations contained in SECTION 3.1(D)
hereof and determining that the condition of the Purchased Assets and the Leased
Assets satisfy the representations contained in the first sentence of SECTION
3.1(M) hereof
-7-
<PAGE>
except for any latent defects or defects that are not reasonably detectable upon
inspection prior to the Closing Date.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. Cephalon and the
Seller, jointly and severally hereby represent and warrant to the Purchaser as
of the date hereof as follows:
(a) CORPORATE EXISTENCE. Each of the Seller and Cephalon is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Cephalon and the Seller has the corporate
power and authority to conduct its business as now being conducted and to own,
lease and operate the properties and assets now owned, leased and being operated
by it. The Seller is duly qualified or licensed to do business and is in good
standing as a foreign corporation in Maryland. No action has been taken or
authorized by the Seller or Cephalon to liquidate or dissolve or to transfer any
assets in a manner inconsistent with the Seller's or Cephalon's obligations
under this Agreement. The Seller is a wholly-owned subsidiary of Cephalon.
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
of the Seller and Cephalon has the corporate power, authority and legal right to
execute, deliver and perform this Agreement and all other agreements, documents
and instruments contemplated hereunder. The execution, delivery and performance
of this Agreement by each of the Seller and Cephalon have been duly authorized
by all necessary corporate and shareholder action. This Agreement has been, and
the other agreements, documents and instruments required to be delivered by
either the Seller or Cephalon in accordance with the provisions hereof (the
"SELLER'S DOCUMENTS") will be, duly executed and delivered on behalf of the
Seller and Cephalon, as applicable and this Agreement constitutes, and the
Seller's Documents when executed and delivered will constitute, the legal, valid
and binding obligations of the Seller and Cephalon, respectively, enforceable
against such party in accordance with their respective terms, except as may be
limited by bankruptcy laws and other similar laws affecting the rights of
creditors generally and principles of equity.
(c) VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. The execution,
delivery and performance of this Agreement by the Seller and Cephalon does not
and will not violate or result in the breach of any term, condition or provision
of, or require the consent of any other person which has not been obtained
under, (i) any law, ordinance, or governmental rule or regulation to which
either the Seller or Cephalon is subject, (ii) any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to either the Seller
or Cephalon, (iii) the Certificate of Incorporation or bylaws of the Seller or
Cephalon, (iv) any mortgage, indenture, agreement, lease, plan or Authorization,
to which the Seller or Cephalon is a party, by which the Seller or Cephalon may
have rights or by which any of the Purchased Assets may be bound or (v) will
result in the creation or imposition of any lien, claim, charge, restriction or
encumbrance of any kind in or with respect to the Purchased Assets, except (A)
as described on SCHEDULE 3.1(C) hereto, (B) the filing of premerger notification
and the expiration or early termination of the waiting period required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"), and (C) the
delivery and recording
-8-
<PAGE>
of title transfer documentation with various regulatory authorities with respect
to the transfer of title to the vehicle to be conveyed to the Purchaser.
(d) ALL TANGIBLE PURCHASED ASSETS. Each of SCHEDULE 1.1(A)(II) and
SCHEDULE 1.1(A)(III) hereto sets forth an accurate list and summary description
of all tangible Purchased Assets and Leased Assets where the net book value of
an individual item exceeds $5,000. All of the Purchased Assets and the Leased
Assets are located at the Facilities other than the Purchased Assets listed on
SCHEDULE 3.1(D), which are within the control of the Purchaser.
(e) TITLE TO PURCHASED ASSETS. The Seller has good and valid legal
title to all of its assets included in the Purchased Assets, free and clear of
all mortgages, liens, pledges, security interests, charges, claims, restrictions
and other encumbrances and defects of title except for liens, imperfections of
title, easements and encumbrances that are (i) for current taxes not yet due and
payable or (ii) disclosed in any of the Schedules hereto.
(f) COMPLIANCE WITH LAW; AUTHORIZATIONS. To the best of the
Seller's and Cephalon's knowledge, the Seller and Cephalon have complied in all
respects with each, and are not in violation of any, law, ordinance, or
governmental or regulatory rule or regulation (including without limitation
environmental laws), whether federal, state, local or foreign, to which the
Seller's or Cephalon's business, operations, assets or properties used at the
Facilities or included in the Purchased Assets or the Leased Assets are subject.
The Seller or Cephalon owns, holds, possesses or lawfully uses in the operation
of the Facilities and use of the Purchased Assets and the Leased Assets all
material franchises, licenses, permits, easements, rights, applications,
filings, registrations and other authorizations (each, an "AUTHORIZATION") which
are necessary for it to operate the Facilities and use the Purchased Assets and
the Leased Assets. To the best of the Seller's and Cephalon's knowledge, neither
the Seller nor Cephalon is in violation of or default in, nor has the Seller or
Cephalon received any notice of any claim of default or violation with respect
to, any such Authorization.
(g) LITIGATION. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
best knowledge of the Seller and Cephalon, threatened against the Seller or
Cephalon or which relates to the Purchased Assets or the Leased Assets which
would have a material adverse effect on the Facilities, the Purchased Assets or
the Leased Assets.
(h) CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULE
3.1(H) hereto, neither the Seller nor Cephalon is a party to any written or
oral:
(i) agreement, contract or commitment for the employment of
any person, including any consultant, employed at the Facilities in
connection with the conduct of the Seller's business;
(ii) agreement, contract, commitment or arrangement with any
labor union or other representative of employees relating to the
Facilities or the Purchased Assets;
-9-
<PAGE>
(iii) loan agreements and other debt instruments that in any
manner encumber any of the Purchased Assets;
(iv) agreement, contract or commitment relating to the
Facilities or the Purchased Assets not otherwise required to be listed
on SCHEDULE 3.1(H) hereto or not required to be listed by virtue of
another provision of this SECTION 3.1(H), and continuing over a period
of more than six months from the date hereof or exceeding with respect
to the Facilities or the Purchased Assets, $10,000 in value;
(v) conditional sale agreement or lease under which the
Seller is either purchaser, lessor or lessee relating to the Purchased
Assets or any property at which Purchased Assets are located;
(vi) commitment or agreement for any capital expenditure or
leasehold improvement in excess of $25,000 relating to the Facilities
or the Purchased Assets;
(vii) agreement, contract or commitment relating to the
Facilities or the Purchased Assets limiting or restraining the Seller
or Cephalon or any successor thereto, to the best of the Seller's and
Cephalon's knowledge, from using or operating the Purchased Assets in
any legal manner, nor, to the Seller's or Cephalon's knowledge, is any
employee of the Seller engaged in the use of the Purchased Assets
subject to any such agreement, contract or commitment; and
(viii) license, franchise or distributorship agreement
relating to the Facilities or the Purchased Assets.
Except as may be disclosed on SCHEDULE 3.1(H), each of the agreements,
contracts, commitments, leases, plans and other instruments, documents and
undertakings listed on SCHEDULE 3.1(H) under which the Purchaser is to acquire
rights or obligations hereunder is valid and enforceable in accordance with its
terms, except as may be limited by bankruptcy laws and other similar laws
affecting the rights of creditors generally and principles of equity; the Seller
and Cephalon are in compliance with the provisions thereof; neither the Seller
nor Cephalon is, and to the Seller's or Cephalon's knowledge no other party
thereto is, in default in the performance, observance or fulfillment of any
material obligation, covenant or condition contained therein, and no event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute a default thereunder. Except as set forth on SCHEDULE 3.1(H),
no written or oral agreement, contract or commitment described in SCHEDULE
3.1(H), requires the consent of any party to its assignment in connection with
the transactions contemplated hereby.
(i) INTELLECTUAL PROPERTY, VIOLATIONS, ETC. Subject to Section 2.3
above, the Purchased Assets include all licenses from manufacturers of the
Purchased Assets necessary for the use of the Purchased Assets within their
respective functional specifications. No patent, trademark, tradename,
servicemark, copyright or trade secret is necessary for the configuration of the
Purchased Assets or the Leased Assets as currently configured. To the best
knowledge of the Seller, the Purchased Assets and the Leased Assets as
configured by the Seller do not infringe
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upon or unlawfully or wrongfully use any patent, trademark, tradename, service
mark, copyright or trade secret owned or claimed by another.
(j) PURCHASED ASSETS. Except as set forth in SCHEDULE 3.1(J) and
except for the Excluded Assets, the Purchased Assets include all material
property owned by the Seller or to which Seller has rights necessary to possess
and utilize the Purchased Assets by the Purchaser in the manner presently
configured by the Seller.
(k) TAX RETURNS. All material federal, state, local, foreign or
other governmental income, profit and franchise, gross receipts, sales, use,
intangibles, inventory, capital stock, ad valorem, transfer, employment,
payroll, withholding, occupation, property, license, stamp and excise taxes,
customs duties or other taxes, fees, assessments or charges whatsoever, together
with any interest and any penalties, additions to tax or additional amounts with
respect thereto (collectively, "TAXES" or a "TAX") due with respect to the
Seller or Cephalon which could result in any lien or encumbrance on the
Purchased Assets have been fully paid by the Seller or Cephalon.
(l) INSURANCE. SCHEDULE 3.1(L) hereto lists all policies of
insurance covering any casualty to the Facilities or the Purchased Assets in
force on the date of this Agreement.
(m) CONDITION OF ASSETS. Except as set forth in SCHEDULE 3.1(M)
hereto, all of the Purchased Assets, taken as a whole, are, and each of the
Purchased Assets listed on SCHEDULE 1.1(A)(II) or included within the Equipment
Leases that has a net book value greater than $5,000 is, in good operating
condition and repair, subject to normal wear and tear, and are usable in the
regular and ordinary course of the business of the Seller and fit for their
intended purposes. No regular, ordinary or required maintenance has been
deferred with respect to any of the Purchased Assets or the Leased Assets,
except for annual maintenance on the Purchased Assets that would normally have
been performed in August 1996, which the Purchaser acknowledges has not been
performed by the Seller for the mutual convenience of the Purchaser and the
Seller.
(n) FDA MATTERS. The Seller operates and uses the Purchased Assets
and the Leased Assets in accordance with 21 U.S.C. Section 351(a)(2)(B) and the
regulations promulgated thereunder by the Food and Drug Administration (the
"FDA")(such law and regulations being collectively referred to herein as "CGMP")
and will continue to do so through the Closing Date. SCHEDULE 3.1(N) also
includes a listing of all written inspection reports or observations,
establishment inspection reports, complaints, warning letters or any other
similar documentation issued to the Seller or Cephalon by the FDA or any
comparable foreign regulatory authority that relates in any way to the
Facilities or the Purchased Assets, including without limitation, all Form 483s
and EIRs (collectively, "Inspection Reports"), as well as all responses thereto
and resolutions thereof by the Seller or Cephalon. The Seller previously
provided to the Purchaser a true and complete copy of each of the items listed
on SCHEDULE 3.1(N) hereto, and to the Seller's and Cephalon's knowledge there
are no outstanding or unresolved issues under any such Inspection Report.
Neither the Seller nor Cephalon makes any representation or warranty that the
Facilities will meet CGMP standards for the Purchaser's intended process.
(o) WARN ACT. At all times from 90 days prior to the date of this
Agreement through the Closing, the Seller has employed fewer than 50 people,
including those employees
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experiencing an "employment loss" under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 ET SEQ. ("WARN ACT"), within such time
period. The Seller is in full compliance with the WARN Act and its obligations
thereunder.
(p) ENVIRONMENTAL MATTERS.
(i) CONDITION OF FACILITIES. Except as set forth on SCHEDULE
3.1(P), or as expressly authorized by an effective permit or by
applicable law, there have been no releases, discharges or emissions of
any Hazardous Substances into, onto, under or from the Facilities
during the Seller's occupancy thereof or to the Seller's or Cephalon's
knowledge at any other time; and no Hazardous Substances have at any
time been disposed of in any amount on, at or under the Facilities
during the Seller's occupancy thereof or to the Seller's or Cephalon's
knowledge at any other time.
(ii) USE OF FACILITIES. Except as set forth on SCHEDULE 3.1(P)
attached hereto or as expressly authorized by an effective permit or by
applicable law, neither the Seller nor Cephalon has conducted, engaged
in or permitted others to conduct or engage in any business, operation
or activity on or at the Facilities involving the use, manufacture,
treatment, storage or disposal of any Hazardous Substances.
(iii) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Seller and
Cephalon are in material compliance with all Environmental Laws
applicable to the Facilities or the Purchased Assets or the Leased
Assets. Without limiting the foregoing, the Seller and Cephalon are in
material compliance with all laws, rules, ordinances and regulations
applicable to the Facilities or the Purchased Assets or the Leased
Assets relating to (A) the release, discharge, emission or disposal of
Hazardous Substances or other wastes to air, water, land or
groundwater; (B) the use, manufacture, importing, handling, generation,
treatment, storage, transportation, disposal or other management of
Hazardous Substances or other wastes; (C) the exposure of persons to
toxic, hazardous, harmful or other controlled, prohibited or regulated
substances; and (D) judicial and administrative orders, injunctions,
judgments, declarations, directives, notices or demands with respect to
the foregoing matters.
(iv) ENVIRONMENTAL AUTHORIZATIONS. SCHEDULE 3.1(O) sets forth a
true and complete list of all environmental permits, authorizations and
licenses under all applicable United States federal, state and local
laws, rules, ordinances and regulations necessary for the operation of
the Facilities and the Purchased Assets or the Leased Assets, and such
permits, authorizations and licenses are in full force and effect.
(v) NO LITIGATION. To the best knowledge of the Seller and
Cephalon, there is no pending legal action, claim, proceeding,
investigation or controversy against the Seller or Cephalon relating to
the Facilities or the Purchased Assets or the Leased Assets by any
third party (including any
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government or governmental agency or body) arising under or relating to
any matters cognizable under Environmental Laws nor does any valid
basis for such a legal action, claim, proceeding, investigation or
controversy exist.
(vi) NOTICES OF ENVIRONMENTAL PROBLEMS. Except as set forth on
SCHEDULE 3.1(P), neither the Seller nor Cephalon has received nor does
the Seller or Cephalon reasonably expect to receive any notice, letter,
citation, order, warning, complaint, inquiry, claim or demand alleging
or asserting that: (a) the Seller or Cephalon has violated, or is about
to violate, any Environmental Laws applicable to the Facilities or the
Purchased Assets or the Leased Assets; (b) there has been a release or
there is a threat of a release of any Hazardous Substance at, from or
onto any of the Facilities; (c) the Seller or Cephalon may be or is
liable, in whole or in part, for the costs of cleaning up, remediating,
removing or responding to a release or threat of a release of Hazardous
Substances at, from or onto any of the Facilities or, as a result of
its operating of such Facilities, at, from or onto any other property
wherever located; or (d) the Facilities are subject to a lien in favor
of any governmental entity for any liability, costs or damages, under
Environmental Laws, arising from costs incurred by such governmental
entity.
For purposes of this SECTION 3.1(P), "ENVIRONMENTAL LAWS" shall mean
all United States federal, state and local laws, regulations, standards, rules,
ordinances, policies and other binding governmental requirements, judicial or
administrative orders and common law legal obligations pertaining to
environmental concerns, or to employee and occupational health and safety, or to
public health, including without limitation the federal Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601
ET SEQ., the federal Resource Conservation and Recovery Act, 42 U.S.C. Sections
6901 ET SEQ., the federal Clean Water Act, 33 U.S.C. Sections 1251 ET SEQ., the
federal Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ. and analogous state and
local laws and "HAZARDOUS SUBSTANCES" shall mean petroleum products and wastes,
asbestos, radon, PCBs, and those materials designated or defined as hazardous
substances, pollutants, toxic pollutants, toxic substances, hazardous
pollutants, hazardous wastes, regulated substances or other similar terms in any
Environmental Laws, or any other substance which by law or regulation requires
special handling in its collection, storage, treatment, disposal or
transportation.
(q) NO OTHER WARRANTIES. In connection with the transactions
contemplated hereby and the Facilities and the Purchased Assets, except as
expressly set forth in this SECTION 3.1, THE SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR STATUTORY, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE.
(r) FACILITIES LEASES AND EQUIPMENT LEASES. All of the documents
comprising the Equipment Leases and the Facilities Leases are listed in SCHEDULE
3.1(R) hereto, and the Seller has previously delivered to the Purchaser true and
complete copies thereof. The Equipment Leases and the Facilities Leases are in
full force and effect and the Seller and Cephalon, as applicable, are in
compliance with their respective obligations under the provisions thereof.
Neither the Seller nor Cephalon is in default, and to the Seller's and
Cephalon's knowledge, no other party is in material default, in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any of the Equipment Leases or the Facilities Leases, and no
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event has occurred which, with or without the giving of notice or lapse of time
or both, would constitute a default thereunder.
(s) "KNOWLEDGE OF THE SELLER AND CEPHALON". For purposes of this
SECTION 3.1, "to the Seller's knowledge," "to Cephalon's knowledge," "best
knowledge of the Seller and Cephalon" or words of similar import shall be
conclusively deemed to be only that knowledge actually possessed by those
persons identified in SCHEDULE 3.1(S), who are employees of the Seller or
Cephalon and who have oversight responsibility at the Facilities. The Seller
shall not be deemed to have actual or constructive knowledge of any fact,
circumstance or occurrence known to any person other than as set forth in the
preceding sentence.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Seller as follows:
(a) CORPORATE EXISTENCE. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Canada. The
Purchaser has the corporate power and authority to conduct its business as now
being conducted and to own, lease and operate the properties and assets now
owned, leased and being operated by it. The Purchaser is duly qualified or
licensed to do business and is in good standing as a foreign corporation in
Maryland. No action has been taken or authorized by the Purchaser to liquidate
or dissolve or to transfer any assets in a manner inconsistent with this
Agreement.
(b) CORPORATE POWER AND AUTHORIZATION. The Purchaser has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by the
Purchaser have been duly authorized by all necessary corporate and shareholder
action. This Agreement has been, and the other agreements, documents and
instruments required to be delivered by the Purchaser in accordance with the
provisions hereof (the "PURCHASER'S DOCUMENTS") will be, duly executed and
delivered on behalf of the Purchaser and this Agreement constitutes, and the
Purchaser's Documents when executed and delivered will constitute, the legal,
valid and binding obligations of the Purchaser enforceable against the Purchaser
in accordance with their respective terms, except as may be limited by
bankruptcy laws and other similar laws affecting the rights of creditors
generally and principles of equity.
(c) VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. The execution,
delivery and performance of this Agreement by the Purchaser does not and will
not violate or result in the breach of any material term, condition or provision
of, or require the consent of any other person which has not been obtained
under, (i) any material law, ordinance, or governmental rule or regulation to
which the Purchaser is subject, (ii) any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority which is applicable to the Purchaser, (iii) the charter
documents of the Purchaser, or (iv) any material mortgage, indenture, agreement,
lease, plan or Authorization, to which the Purchaser is a party or by which the
Purchaser is otherwise bound, except for the filing of premerger notification
and the expiration or early termination of the waiting period required by HSR.
(d) INVESTIGATION AND EVALUATION. The Purchaser acknowledges that
(i) the Purchaser and its directors, officers, attorneys, accountants and
advisors have been given or will
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be given prior to the Closing the opportunity to examine all books, records and
other information with respect to the Seller, the Facilities, the Purchased
Assets, and the Assumed Liabilities made available to the Purchaser under
SECTION 4.3 hereof, (ii) the Purchaser has taken full responsibility for
determining the scope of its investigations of the Seller, the Facilities, the
Purchased Assets, and the Assumed Liabilities, and for the manner in which such
investigations have been conducted, (iii) the Purchaser is fully capable of
evaluating the adequacy and accuracy of the information and material obtained by
the Purchaser in the course of such investigations, (iv) the Purchaser has not
relied on the Seller with respect to any matter in connection with the
Purchaser's evaluation of the Seller, the Facilities, the Purchased Assets, and
the Assumed Liabilities, other than the representations and warranties of the
Seller specifically set forth in SECTION 3.1 and other agreements of the Seller
set forth herein, and (v) the Seller is making no representations or warranties,
express or implied, of any nature whatever with respect to the Seller, the
Purchased Assets, and the Assumed Liabilities, other than the representations
and warranties specifically set forth in SECTION 3.1 and elsewhere herein.
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by each party in this ARTICLE 3 or in any attachment, Exhibit,
Schedule, certificate, document or list delivered by any such party pursuant
hereto or in connection with the transactions contemplated hereby shall survive
the Closing.
ARTICLE 4 - AGREEMENTS PENDING CLOSING.
4.1 AGREEMENTS OF THE SELLER PENDING THE CLOSING. The Seller and
Cephalon, jointly and severally, covenant and agree that, pending the Closing
and except as otherwise agreed to in writing by the Purchaser:
(a) other than the Seller's reduction and termination of its
production activities at the Facilities in contemplation of SECTION 2.6 hereof,
the business of the Seller shall be conducted only in, and the Seller and
Cephalon shall not take any action with respect to the Facilities or the
Purchased Assets or the Leased Assets except in, the ordinary course of business
and substantially in the same manner as carried on as of the date of this
Agreement, but in all events Seller shall operate the Facilities and use the
Purchased Assets and the Leased Assets in accordance with CGMP;
(b) the Seller and Cephalon will promptly advise the Purchaser in
writing of any known threat of or the commencement of any dispute, claim,
action, suit, proceeding, arbitration or investigation against or involving the
Purchased Assets or the Facilities, when the amount claimed is $10,000 or more
in the aggregate or if such proceeding or investigation is initiated by the FDA
or other regulatory agency or of the occurrence of any development known to the
Seller or Cephalon (exclusive of general economic factors affecting business in
general) of a nature that is or may be materially adverse to the business,
operations, properties, assets or prospects of the Seller or Cephalon;
(c) the Seller and Cephalon will use their reasonable efforts to
conduct their business in such a manner that on the Closing Date the
representations and warranties of the Seller and Cephalon contained in this
Agreement shall be true, except as specifically
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contemplated by this ARTICLE 4, as though such representations and warranties
were made on and as of such date. Furthermore, the Seller and Cephalon will use
their reasonable efforts to cause all of the conditions to the obligations of
the Purchaser, the Seller and Cephalon under this Agreement to be satisfied on
or prior to the Closing Date and shall make such filings, take such actions and
cooperate fully, at its expense, with the Purchaser in securing the expiration
or termination of the waiting period required under HSR as promptly as
practicable;
(d) the Seller and Cephalon shall use their reasonable efforts, to
the extent not prohibited by the foregoing provisions of this SECTION 4.1, to
maintain their relationships with those suppliers and vendors subject to
agreements included in Schedule 1.1(a)(iv);
(e) the Seller and Cephalon will maintain themselves at all times
as corporations duly incorporated, validly existing and in good standing, as
applicable, under the laws of the State of Delaware and the Seller shall
maintain itself at all times in good standing under the laws of the
jurisdictions under which it is doing business as a foreign corporation;
(f) the Seller and Cephalon will continue to carry and maintain
all of its existing insurance relating to the Facilities and the Purchased
Assets and the Leased Assets;
(g) the Seller and Cephalon will maintain the Purchased Assets and
the Leased Assets in good operating condition and repair, usable in the regular
and ordinary course, fit for the purposes intended, other than as provided in
SECTION 3.1(M) hereof;
(h) Neither the Seller nor Cephalon shall cause or permit any
amendment to, or any modification, cancellation, or renewal or extension of, any
of the Facilities Leases or the Equipment Leases without the prior written
consent of the Purchaser; and
(i) the Seller shall promptly deliver to the Purchaser written
notice of any event or development that would (i) render any statement,
representation or warranty of the Seller or Cephalon in this Agreement
(including exceptions set forth in the schedules attached hereto) inaccurate or
incomplete in any material respect, or (ii) constitute or result in a breach by
the Seller or Cephalon of, or a failure by the Seller or Cephalon to comply
with, any agreement or covenant in this Agreement applicable to the Seller or
Cephalon.
4.2 AGREEMENTS OF THE PURCHASER PENDING THE CLOSING. The Purchaser
covenants and agrees that, pending the Closing and except as otherwise agreed to
in writing by the Seller:
(a) the Purchaser will not take any action that would result in a
breach of any of its representations and warranties hereunder. Furthermore, the
Purchaser shall cooperate with the Seller and use reasonable efforts to cause
all of the conditions to the obligations of the Purchaser and the Seller under
this Agreement to be satisfied on or prior to the Closing Date and shall make
such filings and take such actions as shall be reasonably necessary to obtain
expiration or early termination of the waiting period required by the HSR as
promptly as practicable;
(b) the Purchaser will maintain itself at all times as a
corporation duly incorporated, validly existing and in good standing, as
applicable, under the laws of the jurisdictions under which it is incorporated
and doing business as a foreign corporation; and
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(c) the Purchaser shall promptly deliver to the Seller written
notice of any event or development that would (i) render any statement,
representation or warranty of the Purchaser in this Agreement (including
exceptions set forth in the schedules attached hereto) inaccurate or incomplete
in any material respect, or (ii) constitute or result in a breach by the
Purchaser of, or a failure by the Purchaser to comply with, any agreement or
covenant in this Agreement applicable to the Purchaser.
4.3 ACCESS. Upon reasonable prior notice, the Seller and Cephalon shall
give to the Purchaser's officers, employees, counsel, accountants and other
representatives access to and the right to inspect, during normal business
hours, the premises, properties, assets, records, contracts and other documents
of the Seller and Cephalon relating to the Facilities and the Purchased Assets
and shall permit them to consult with the officers, employees, accountants,
counsel and agents of the Seller for the purpose of making such investigation of
the Facilities and the Purchased Assets, as the Purchaser shall reasonably
desire to make, provided that at any time prior to October 25, 1996 such
investigation shall not unreasonably interfere with the Seller's business
operations. At all times after October 25, 1996 until the Closing Date, such
access shall be unrestricted access to inspect the Facilities, the Purchased
Assets and the Leased Assets. Furthermore, the Seller and Cephalon shall furnish
to the Purchaser such documents and copies of documents and records and
information with respect to the Facilities and the Purchased Assets (including
without limitation all files and records concerning regulatory compliance) and
copies of any working papers relating thereto as the Purchaser shall from time
to time reasonably request and shall permit the Purchaser and its agents to make
such physical inventories and inspections of the Purchased Assets as the
Purchaser may reasonably request from time to time.
4.4 PRESS RELEASES. Except as required by applicable law or stock
exchange rule, neither the Seller nor the Purchaser shall make any public
statement or releases concerning this Agreement or the transactions contemplated
hereby except for such information as shall have been approved in writing by the
other party hereto, which approval shall not be unreasonably withheld.
ARTICLE 5 - CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS. All
obligations of the Purchaser under this Agreement are subject to the fulfillment
or satisfaction, prior to or at the Closing, of each of the following conditions
precedent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER. The
representations and warranties of the Seller and Cephalon herein contained shall
have been true and correct in all material respects at the date of execution of
this Agreement and at the Closing; the Seller and Cephalon shall have performed
in all material respects all obligations and complied in all material respects
with all agreements, undertakings, covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date; and the Seller and Cephalon shall have delivered to the Purchaser a
certificate dated the Closing Date and signed by the Presidents of the Seller
and Cephalon and by the Chief Financial Officer of Cephalon to such effect.
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(b) INJUNCTIONS, ETC. There shall not be any judgment, decree,
injunction, ruling or order of any court, governmental department, commission,
agency or instrumentality outstanding against the Seller, Cephalon or the
Purchaser that prohibits or materially restricts or delays consummation of the
Closing.
(c) CONSENTS AND APPROVALS. The Seller and Cephalon shall have
obtained the consents required by the terms of the contracts, commitments,
agreements or Authorizations listed in SCHEDULE 5.1(C) to the extent that such
consent is required or necessary under the pertinent debt, lease, contract,
commitment or agreement or other document or instrument or under applicable
orders, laws, rules or regulations, for the consummation of the transactions
contemplated hereby in the manner herein provided. The required statutory
waiting period under HSR shall have terminated.
(d) DESTRUCTION OF THE PURCHASED ASSETS. There shall have occurred
no material damage to or destruction or loss of (whether or not covered by
insurance) of any of the Purchased Assets or the Leased Assets. In the event of
any damage, destruction or loss of any of the Purchased Assets or the Leased
Assets in a single occurrence with an aggregate net book value in excess of
$25,000, the Seller shall promptly notify the Purchaser of such casualty. The
Purchaser shall thereupon be entitled to, at its sole option and in its absolute
discretion, (i) proceed to closing hereunder with no reduction in the Purchase
Price, in which event any and all proceeds of such casualty, if any, shall be
delivered to or assigned to the Purchaser at the Closing, (ii) proceed to
closing hereunder with a reduction in the Purchase Price at the Seller's
historic cost of the damaged, destroyed or lost Purchased Assets (but not Leased
Assets or Purchased Assets damaged, destroyed or lost by the Purchaser) (in
which event the Seller shall retain all rights to the proceeds of such
casualty). Notwithstanding the foregoing, if the casualty is of a magnitude that
renders the Facilities "untenantable" for the purposes intended by the
Purchaser, the Purchaser shall be entitled, at its sole option and in its
absolute discretion, to terminate this Agreement, in which event all parties
shall be relieved from any further liabilities or obligations hereunder (except
for those liabilities and obligations that expressly survive a termination of
this Agreement). As used in this subparagraph, "untenantable" shall refer to (x)
destruction of greater than 10% of the premises leased in the Facilities Leases
or (y) destruction of any portion of the Purchased Assets or the Leased Assets
utilized for manufacturing and related support functions which renders the
Purchased Assets or the Leased Assets unfit for use to manufacture in accordance
with CGMP regulations.
5.2 CONDITIONS PRECEDENT TO THE SELLER'S AND CEPHALON'S OBLIGATIONS.
All obligations of the Seller and Cephalon under this Agreement are subject to
the fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The
representations and warranties of the Purchaser herein contained shall have been
true and correct in all material respects at the date of execution of this
Agreement; the Purchaser shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; and the
Purchaser shall have delivered to the Seller a certificate dated the Closing
Date and signed by the President and the Chief Financial Officer of the
Purchaser to such effect.
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(b) INJUNCTIONS, ETC. There shall not be any judgment, decree,
injunction, ruling or order of any court, governmental department, commission,
agency or instrumentality outstanding against the Seller or the Purchaser that
prohibits or materially restricts or delays consummation of the Closing.
(c) CONSENTS AND APPROVALS. The required statutory waiting period
under HSR shall have terminated.
ARTICLE 6 - POST-CLOSING MATTERS
6.1 EMPLOYEE ARRANGEMENTS. The Seller acknowledges that the Purchaser
is not obligated to hire any employee of the Seller. From and after the Closing
Date, the Purchaser may elect, in its sole and absolute discretion, to hire
employees of the Seller on such terms and conditions as it desires. The
Purchaser shall notify the Seller of the identity of employees of the Seller, if
any, who accept an offer of employment with the Purchaser within six months
after the Closing, and the Seller will furnish to all of its other former
employees any notices and other information required by the Comprehensive
Omnibus Budget Reconciliation Act of 1985, as amended. The Seller shall fully
comply with the requirements of Part 6 of Title I of ERISA and Section 4980B of
the Code with respect to all of its employees and former employees.
6.2 DISCHARGE OF CERTAIN LIABILITIES. From and after the Closing Date,
the Purchaser shall pay and discharge all Assumed Liabilities in accordance with
their respective terms and the Purchaser shall indemnify and hold harmless the
Seller and the Seller's successors, assigns and affiliates from and against any
and all damages, losses, deficiencies, liabilities, costs and expenses incurred
or suffered by any such person that result from, relate to or arise out of any
and all Assumed Liabilities.
6.3 MAINTENANCE OF BOOKS AND RECORDS. Each of the Seller, Cephalon and
the Purchaser shall preserve until the fifth anniversary of the Closing Date all
records possessed or to be possessed by such party relating to the Facilities or
the Purchased Assets prior to the Closing Date. After the Closing Date, where
there is a legitimate purpose, such party shall provide the other parties with
access, upon prior reasonable written request specifying the need therefor,
during regular business hours, to (a) the officers and employees of such party
and (b) the books of account and records of such party, but, in each case, only
to the extent relating to the Facilities or the Purchased Assets prior to the
Closing Date, and the other parties and their representatives shall have the
right to make copies of such books and records; provided, however, that the
foregoing right of access shall not be exercisable in such a manner as to
interfere unreasonably with the normal operations and business of such party;
and further, provided, that, as to so much of such information as constitutes
trade secrets or confidential business information of such party, the requesting
party and its officers, directors and representatives will use due care to not
disclose such information except (x) as required by law, (y) with the prior
written consent of such party, which consent shall not be unreasonably withheld,
or (z) where such information becomes available to the public generally, or
becomes generally known to competitors of such party, through sources other than
the requesting party, its affiliates or its officers, directors or
representatives. Such records may nevertheless be destroyed by a party if such
party sends to the other parties written notice of its intent to destroy
records, specifying with particularity the
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contents of the records to be destroyed. Such records may then be destroyed
after the 30th day after such notice is given unless another party objects to
the destruction in which case the party seeking to destroy the records shall
deliver such records to the objecting party.
6.4 RESTRICTION ON USE OF NAME. In no event shall the Purchaser use the
name "Cephalon" or any variant thereof from and after the Closing Date;
provided, however, that this restriction shall not prevent any disclosure of the
transactions with Cephalon and the Seller contemplated hereby to the extent such
disclosure is permitted by SECTION 4.4 or 8.5 hereof.
6.5 SUBLICENSE. Subject to and upon consummation of the purchase and
sale contemplated by this Agreement, the Purchaser hereby grants to the Seller a
non-exclusive, non-transferable, royalty-free, perpetual license to use the
validation protocols and copies of any records included in the Purchased Assets
retained by the Seller hereunder solely for purposes of establishing regulatory
compliance and securing regulatory approval. Title to all copies of the licensed
documentation shall remain with the Purchaser.
ARTICLE 7 - INDEMNIFICATION
7.1 INDEMNIFICATION OBLIGATIONS.
(a) Cephalon and the Seller (each, an "indemnifying party") shall
jointly and severally indemnify and hold harmless the Purchaser, and the
Purchaser (another "indemnifying party") shall indemnify and hold harmless the
Seller, from, against and in respect of any and all damages, losses,
deficiencies, liabilities, costs and expenses (including attorneys' fees)
resulting from, relating to or arising out of any (i) representation or warranty
which was not true, complete and correct when made by or on behalf of the
indemnifying party in this Agreement or in any certificate delivered by one
party to the other pursuant hereto, or (ii) breach of any agreement or covenant
on the part of such indemnifying party or parties hereunder. Claims relating to
the representations contained in the first sentence of Section 3.1(m) shall be
limited to latent defects or defects that are not reasonably detectable upon
inspection. Cephalon and the Seller shall not be liable under Section 7.1(a)(i)
above for any misrepresentation or breach of warranty as to which the Puchaser
had actual knowledge on the date such representation or warranty was made. For
purposes of the foregoing sentence, "knowledge" of the Purchaser shall be deemed
to mean the actual knowledge of the persons listed on Schedule 7.1(b) hereto.
(b) An indemnified party shall make no claim against an
indemnifying party for indemnification under SECTION 7.1(A) with respect to a
misrepresentation or breach of warranty unless and until the aggregate amount of
all such claims against an indemnifying party exceeds [*]
[*] Confidential information has been omitted and filed separately with the
Commission.
-20-
<PAGE>
(c) Cephalon and the Seller shall further indemnify and hold
harmless the Purchaser from any and all damages, costs and expenses resulting
from, relating to or arising out of liabilities of the Seller that are not
Assumed Liabilities. Such indemnification under this clause (c) shall not be
subject to the limits of clause (b) as to aggregate amount of claims or the time
limitation for making such claims.
(d) Each indemnifying party or parties hereto will indemnify and
hold harmless the indemnified party or parties hereto from, against and in
respect of any and all actions, suits, proceedings, demands, assessments,
judgments, costs (including attorneys' fees) and legal and other expenses
incident to the enforcement of this ARTICLE 7.
(e) Other than the rights of the parties to obtain specific
performance and injunctive relief relating to SECTIONS 1.3(E), 2.3, 2.4, 6.3 and
8.5 hereof, the remedy provided by this ARTICLE 7, subject to the limitations
set forth herein shall be the parties' exclusive remedy for the recovery of any
damages, losses, deficiencies, liabilities, costs and expenses resulting from,
relating to or arising out of any (i) misrepresentation or breach of warranty
made by or on behalf of the indemnifying party in this Agreement or in any
certificate delivered by one party to the other pursuant hereto, or (ii) breach
of any agreement or covenant on the part of such indemnifying party or parties
hereunder. Notwithstanding the foregoing, nothing in this Agreement shall
restrict the Purchaser's rights or remedies for fraud or intentional
misrepresentation in this Agreement by the Seller or Cephalon.
7.2 METHOD OF ASSERTING CLAIMS, ETC. All claims for indemnification
under this ARTICLE 7 shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which the Seller
would be liable to the Purchaser hereunder is asserted against or sought to be
collected by a third party, the Purchaser shall promptly notify the Seller in
writing of such claim or demand, specifying the nature of such claim or demand
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such claim or
demand) (the "CLAIM NOTICE"). The Seller shall have 30 days from its receipt of
the Claim Notice (the "NOTICE PERIOD") to notify the Purchaser (i) whether or
not the Seller disputes its liability to the Purchaser hereunder with respect to
such claim or demand, and (ii) if the Seller does not dispute such liability,
whether or not it desires, at its sole cost and expense, to defend the Purchaser
against such claim or demand. In the event that the Seller notifies the
Purchaser within the Notice Period that the Seller does not dispute such
liability and desires to defend against such claim or demand, then the Seller
shall have the right to defend the claim. If the Purchaser desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense. If the Seller disputes its liability with respect to
such claim or demand or elects not to defend against such claim or demand,
whether by not giving timely notice as provided above or otherwise, then the
Purchaser shall have the right to defend against such claim or demand (but the
Purchaser shall not have any obligation to contest any such claim or demand),
and that portion thereof as to which such defense is unsuccessful, shall be
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<PAGE>
conclusively deemed to be a liability of the Seller hereunder (subject, if the
Seller has timely disputed liability, to a determination that the disputed
liability is covered by these indemnification provisions).
(b) In the event that the Purchaser should have a claim against the
Seller hereunder that does not involve a claim or demand being asserted against
or sought to be collected from it by a third party, the Purchaser shall promptly
send a Claim Notice with respect to such claim to the Seller. If the Seller does
not notify the Purchaser within the Notice Period that its disputes such claim,
the amount of such claim shall be conclusively deemed a liability of the Seller
hereunder.
(c) All claims for indemnification made by the Seller under this
Agreement shall be asserted and resolved under the procedures set forth above in
this SECTION 7.2 by substituting, as appropriate, "Purchaser" for "Seller" and
"Seller" for "Purchaser."
7.3 PAYMENT. In the event that any party is required to make any
payment under this ARTICLE 7, such party shall promptly pay the indemnified
party the amount so determined in cash. If there should be a dispute as to the
amount or manner of determination of any indemnity obligation owed under this
ARTICLE 7, the party from which indemnification is due shall nevertheless pay
when due such portion, if any, of the obligation as shall not be subject to
dispute. Upon the payment in full of any claim the party or entity making
payment shall be subrogated to the rights of the indemnified party against any
person, firm, corporation or other entity with respect to the subject matter of
such claim.
ARTICLE 8 - MISCELLANEOUS
8.1 TERMINATION.
(a) Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated by written notice of termination at any time
before the Closing Date only as follows:
(i) by mutual consent of the Seller and the Purchaser;
(ii) by the Purchaser, (A) at any time if the representations
and warranties of the Seller contained in SECTION 3.1 hereof were
incorrect in any material respect when made or at any time thereafter,
or (B) upon written notice to the Seller given at any time after
November 30, 1996 (or such later date as shall have been specified in a
writing authorized on behalf of the Seller and the Purchaser) if all of
the conditions precedent set forth in SECTION 5.1 hereof have not been
met; or
(iii) by the Seller, (A) at any time if the representations and
warranties of the Purchaser contained in SECTION 3.2 hereof were
incorrect in any material respect when made or at any time thereafter,
or (B) upon written notice to the Purchaser given at any time after
November 30, 1996 (or such later date as
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<PAGE>
shall have been specified in a writing authorized on behalf of the
Seller and the Purchaser) if all of the conditions precedent set forth
in SECTION 5.2 hereof have not been met.
(b) In the event of the termination and abandonment hereof pursuant
to the provisions of this SECTION 8.1, this Agreement (except for the
obligations of the confidentiality provisions of set forth in SECTION 8.5
hereof, which shall continue) shall become void and have no effect, without any
liability on the part of any of the parties or their directors or officers or
shareholders in respect of this Agreement, except that the termination shall not
relieve a breaching party from liability incurred for breach of any
representation, warranty, covenant or agreement giving rise to such termination.
8.2 COMPLIANCE WITH BULK SALES LAWS. The Purchaser, the Seller and
Cephalon hereby waive compliance by the Purchaser, the Seller and Cephalon with
the bulk sales law and any other similar laws in any applicable jurisdiction in
respect of the transactions contemplated by this Agreement. The Seller and
Cephalon shall indemnify the Purchaser from, and hold it harmless against, any
liabilities, losses, damages, costs and expenses (including attorneys' fees)
resulting from or arising out of (i) the parties' failure to comply with any of
such laws in respect of the transactions contemplated by this Agreement, or (ii)
any action brought or levy made as a result thereof, other than the Assumed
Liabilities, on such terms as are expressly assumed by the Purchaser pursuant to
this Agreement.
8.3 BROKERAGE; EXPENSES; ETC.
(a) The parties hereto represent and warrant that all negotiations
relative to this Agreement have been carried on by them directly without the
intervention of any person, firm or corporation. Each party will indemnify the
other and hold such other party harmless against and in respect of any claim for
brokerage, finder's or other commissions or fees relative to this Agreement or
the transactions contemplated hereby made by any person, firm or corporation
claiming through it.
(b) Except as otherwise expressly provided herein, each party
hereto shall pay its own expenses, including without limitation, the reasonable
fees and expenses of its counsel, incurred in connection with this Agreement and
the transactions contemplated hereby.
(c) The Purchaser shall pay all federal, state and local sales,
documentary and other transfer taxes, if any, due as a result of the purchase,
sale or transfer of the Purchased Assets (excluding any income, profit or gains
taxes payable by the Seller) in accordance herewith whether imposed by law on
the Seller or the Purchaser, and the Purchaser shall indemnify, reimburse and
hold harmless the Seller in respect of the liability for payment of or failure
to pay any such taxes or the filing of or failure to file any reports required
in connection therewith.
8.4 CONTENTS OF AGREEMENT; AMENDMENT; PARTIES IN INTEREST, ASSIGNMENT,
ETC. This Agreement sets forth the entire understanding of the parties hereto
with respect to the subject matter hereof. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. This Agreement may be amended,
modified or supplemented only by written instrument duly executed by each of the
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<PAGE>
parties hereto. All representations, warranties, covenants, terms and conditions
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto, provided that no party hereto shall
assign this Agreement or any right, benefit or obligation hereunder, other than
to an affiliated entity. Any term or provision of this Agreement may be waived
at any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
8.5 CONFIDENTIALITY. Each party will hold in strict confidence all
confidential information obtained from the other party in connection with the
transactions contemplated by this Agreement and will not disclose such
confidential information to any party (other than their respective employees,
consultants and advisors), nor use or permit such information to be used for any
purpose other than in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, confidential information shall not include any
information which (i) is in its possession prior to disclosure by the other
party hereto, (ii) was or becomes part of the public domain, except by breach of
the disclosing party's confidentiality obligations hereunder, (iii) is
independently developed by the disclosing party without use of confidential
information, or (iv) is lawfully received by the disclosing party from a third
party having a right to disclose such information to the disclosing party. Each
party shall be authorized to disclose confidential information of the other
where disclosure is made pursuant to a court rule or order, or governmental law
or regulation, provided that the disclosing party gives the other party hereto
an opportunity to limit such disclosure. If the transaction contemplated hereby
is not consummated, each party will, promptly upon the other party's request,
deliver to such party all confidential information in its possession and will
use all reasonable efforts to cause all copies and summaries or synopses thereof
to be returned or destroyed. Such destruction shall be confirmed in writing to
the other party. Information regarding the Purchased Assets shall, at all times
prior to the Closing Date, be deemed to be confidential information of the
Seller, and shall, at all times after the Closing Date, be deemed to be
confidential information of the Purchaser. This Section 8.5 shall survive for a
period of two years following the date hereof.
8.6 NOTICES. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, delivery charges
prepaid, or three business days after being sent by registered or certified mail
(return receipt requested), postage prepaid, or one business day after being
sent by a nationally recognized express courier service, postage or delivery
charges prepaid, to the parties at their respective addresses stated below.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. Any party
may change its address for notice and the address to which copies must be sent
by giving notice of the new address to the other parties in accordance with this
SECTION 8.6.
If to the Purchaser, to:
North American Vaccine, Inc.
12103 Indian Creek Street
Beltsville, MD 20705
Attention: Senior Vice President -
Legal Affairs and General Counsel
FAX: (301) 419-0167
-24-
<PAGE>
With a required copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, DC 20004-1202
Attention: Althea L. Harlin, Esq.
FAX: (202) 942-5999
If to the Seller, to:
Cephalon Property Management, Inc.
145 Brandywine Parkway
West Chester, Pennsylvania 19380
Attention: General Counsel
FAX: (610) 344-0065
With a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: Michael J. Pedrick, Esq.
FAX: (215) 963-5299
8.7 MARYLAND LAW TO GOVERN. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Maryland,
without giving effect to conflicts of law principles.
8.8 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective successors and assigns, and they shall not
be construed as conferring any rights on any other persons.
8.9 HEADINGS, GENDER AND "PERSON." All section headings contained in
this Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
8.10 SCHEDULES AND EXHIBITS. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
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<PAGE>
8.11 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and in lieu of any such invalid or
unenforceable provision there shall be added a provision or provisions as
similar in terms to such invalid or unenforceable part as may be possible and be
valid, legal or enforceable and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
ATTEST: CEPHALON PROPERTY MANAGEMENT, INC.
By /s/ Barbara Schilberg By /s/ J. Kevin Buchi
--------------------- --------------------------
As its Secretary As its Vice President
ATTEST: CEPHALON, INC.
By /s/ Barbara Schilberg By /s/ J. Kevin Buchi
--------------------- --------------------------
As its Secretary As its Senior Vice President and
Chief Financial Officer
ATTEST: NORTH AMERICAN VACCINE, INC.
/s/ Daniel J. Abdun-Nabi By /s/ Sharon Mates
- ------------------------- ---------------------------
As its Daniel J. Abdun-Nabi As its Sharon Mates, Ph.D.
Secretary President
- 26 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 81,881
<SECURITIES> 2,031
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,890
<PP&E> 31,341
<DEPRECIATION> 13,572
<TOTAL-ASSETS> 107,528
<CURRENT-LIABILITIES> 8,531
<BONDS> 86,250
0
6,538
<COMMON> 63,239
<OTHER-SE> (57,167)
<TOTAL-LIABILITY-AND-EQUITY> 107,528
<SALES> 727
<TOTAL-REVENUES> 727
<CGS> 0
<TOTAL-COSTS> 23,706
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,456
<INCOME-PRETAX> (19,290)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,290)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,290)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
