<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1999
-------------
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period from ______________ to _______________
Commission File Number 0-19119
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CEPHALON, INC.
-------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 23-2484489
-------------------------------------------- --------------------------------------
(State Other Jurisdiction of Incorporation or (I.R.S. Employer Identification Number)
Organization)
</TABLE>
145 Brandywine Parkway, West Chester, PA 19380
- ------------------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (610) 344-2000
--------------
Not Applicable
--------------------------------------------------------------------
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 ____
-
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 9, 1999
--------------------------- --------------------------------
Common Stock, par value $.01 30,768,870 Shares
This Report Includes a Total of 30 Pages
<PAGE>
CEPHALON, INC. and SUBSIDIARIES
-------------------------------
INDEX
-----
Page No.
---------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - 3
June 30, 1999 and December 31, 1998
Consolidated Statements of Operations - 4
Three and six months ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows - 5
Six months ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURES 30
2
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------------- --------------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 15,189,000 $ 3,975,000
Short-term investments 70,366,000 63,371,000
Receivables, net 3,794,000 3,887,000
Inventory (Note 2) 3,680,000 38,000
Other 1,311,000 1,323,000
-------------------- --------------------
Total current assets 94,340,000 72,594,000
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $14,376,000 and $13,439,000 19,745,000 20,505,000
OTHER 3,269,000 1,574,000
-------------------- --------------------
$ 117,354,000 $ 94,673,000
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 6,384,000 $ 3,558,000
Accrued expenses (Note 4) 18,318,000 13,298,000
Current portion of long-term debt 1,677,000 1,624,000
-------------------- --------------------
Total current liabilities 26,379,000 18,480,000
LONG-TERM DEBT (Note 3) 38,685,000 15,096,000
OTHER 3,851,000 3,495,000
-------------------- --------------------
Total liabilities 68,915,000 37,071,000
-------------------- --------------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY: (Note 6)
Preferred stock, $.01 par value,
5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value, 100,000,000 shares authorized,
30,201,466 and 28,802,323 shares issued and outstanding 302,000 288,000
Additional paid-in capital 353,372,000 331,107,000
Accumulated deficit (305,235,000) (273,793,000)
-------------------- --------------------
Total stockholders' equity 48,439,000 57,602,000
-------------------- --------------------
$ 117,354,000 $ 94,673,000
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended, Six Months Ended,
June 30, June 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Product sales - PROVIGIL (Note 7) $ 5,522,000 $ 172,000 $ 7,252,000 $ 231,000
Other revenues (Note 7) 5,227,000 3,240,000 7,727,000 6,749,000
---------------- -------------- ---------------- --------------
10,749,000 3,412,000 14,979,000 6,980,000
---------------- -------------- ---------------- --------------
COSTS AND EXPENSES:
Cost of product sales - PROVIGIL (Note 2) 651,000 -- 839,000 --
Research and development (Note 7) 10,180,000 10,353,000 20,152,000 22,327,000
Selling, general and administrative (Note 4) 10,166,000 6,727,000 23,780,000 13,896,000
---------------- -------------- ---------------- --------------
20,997,000 17,080,000 44,771,000 36,223,000
---------------- -------------- ---------------- --------------
LOSS FROM OPERATIONS (10,248,000) (13,668,000) (29,792,000) (29,243,000)
---------------- -------------- ---------------- --------------
OTHER:
Interest income 862,000 1,509,000 1,740,000 2,980,000
Interest expense (Note 3) (2,115,000) (456,000) (3,390,000) (1,011,000)
---------------- -------------- ---------------- --------------
(1,253,000) 1,053,000 (1,650,000) 1,969,000
---------------- -------------- ---------------- --------------
LOSS $ (11,501,000) $ (12,615,000) $ (31,442,000) $ (27,274,000)
================ ============== ================ ==============
BASIC AND DILUTED LOSS PER SHARE $ (0.40) $ (0.44) $ (1.09) $ (0.97)
================ ============== ================ ==============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 28,998,290 28,514,180 28,879,804 28,159,262
================ ============== ================ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1999 1998
-------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss $ (31,442,000) $(27,274,000)
Adjustments to reconcile loss to net cash
used for operating activities:
Depreciation and amortization 2,106,000 1,023,000
Non-cash compensation expense 595,000 936,000
Other 743,000 47,000
(Increase) decrease in operating assets:
Accounts and contracts receivable (135,000) 348,000
Inventory (3,642,000) --
Other current assets 201,000 504,000
Other long-term assets (1,959,000) (55,000)
Increase(decrease) in operating liabilities:
Accounts payable 2,826,000 (654,000)
Accrued expenses 4,573,000 (2,198,000)
Other long-term liabilities 356,000 401,000
-------------- ------------
Net cash used for operating activities (25,778,000) (26,922,000)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (43,000) (504,000)
Sales and maturities (purchases) of investments, net (10,504,000) 37,208,000
-------------- ------------
Net cash (used for) provided by investing activities (10,547,000) 36,704,000
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock and warrants 12,000,000 --
Proceeds from exercises of common stock options and warrants 2,906,000 391,000
Proceeds from issuance of long-term debt 30,000,000 --
Principal payments on long-term debt (876,000) (699,000)
-------------- ------------
Net cash provided by (used for) financing activities 44,030,000 (308,000)
-------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,705,000 9,474,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,484,000 10,271,000
-------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,189,000 $ 19,745,000
============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Cephalon, Inc., headquartered in West Chester, PA, is a biopharmaceutical
company dedicated to the discovery, development and marketing of products to
treat neurological disorders and cancer. We have had negative cash flow from
operations since inception and have funded our operations primarily from the
proceeds of public and private placements of our securities. We initiated sales
of PROVIGIL(R) (modafinil) Tablets [C-IV] in the United Kingdom in March 1998
and in the United States and the Republic of Ireland in February 1999. PROVIGIL
is approved in those countries for use by those suffering from excessive daytime
sleepiness associated with narcolepsy.
Our business is subject to a number of significant risks, including the risks
inherent in pharmaceutical research and development activities. We are highly
dependent upon the successful commercialization of PROVIGIL and there is no
assurance that we will achieve profitability solely on sales of PROVIGIL.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in our annual report on Form 10-K, filed with the Securities and
Exchange Commission, which includes financial statements as of and for each of
the three years in the period ended December 31, 1998. The results of our
operations for any interim period are not necessarily indicative of the results
of our operations for any other interim period or for a full year.
2. INVENTORY
Inventory consists solely of PROVIGIL:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1998
---- ----
<S> <C> <C>
Raw material................................. $3,266,000 $ --
Work-in-process.............................. 274,000 --
Finished goods............................... 140,000 38,000
---------- ---------
$3,680,000 $38,000
========== =========
</TABLE>
Inventory is stated at the lower of cost or market value using the first-in,
first-out method. A significant portion of the PROVIGIL sold in the United
States during the six months ended June 30, 1999 was produced prior to the
December 1998 FDA approval and, in accordance with SFAS No. 2 "Accounting for
Research and Development Costs," the costs were recorded as research and
development expense in those prior periods. As of June 30, 1999, we maintained
approximately $2,509,000 of inventory on hand that was previously charged to
research and development expense. Cost of product sales through June 30, 1999
consisted primarily of royalties due to Laboratoire L. Lafon.
6
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. DEBT
In February 1999, we completed a private placement of $30,000,000 of revenue-
sharing notes. The notes are repayable in cash in February 2002. The notes are
secured by our rights to PROVIGIL in the United States and bear an annual
interest rate of 11%. Holders of the notes also will receive a payment of 6% of
net sales of PROVIGIL in the United States through March 1, 2004, which will be
recorded as interest expense. We have the right to redeem the notes at a premium
prior to maturity, which would reduce the royalty period by one year.
Alternatively, we may also extend the maturity and the royalty period by one
year under certain circumstances. The notes contain a number of covenants
including a requirement to maintain a minimum level of cash, cash equivalents
and investments equal to $40,000,000 during 1999 and $30,000,000 through
February 2002 or as long as the principal remains outstanding. If we fail to
maintain such cash balances or violate the other covenants, the holders of the
notes can declare a default and increase the royalty percentage to 25% of net
PROVIGIL sales in the United States and, if the default is not cured within one
year, can accelerate the due date of the notes and foreclose on the underlying
security. The holders of the notes can also foreclose on the underlying security
if we fail to pay principal and interest when due. We incurred debt issuance
costs related to this offering of approximately $1,918,000 which we recorded in
other assets and will amortize and charge to interest expense over the life of
the notes. (See Note 6).
4. LEGAL PROCEEDINGS
Cephalon, a current director and officer, and a former officer have been named
as defendants in a number of civil actions filed in the U.S. District Court for
the Eastern District of Pennsylvania, which have been consolidated into a single
class action. The plaintiff class is comprised of those persons and entities who
purchased Cephalon common stock, or traded in options to buy or sell Cephalon
common stock, during the period June 12, 1995 through and including June 7,
1996. Plaintiffs seek to hold defendants liable for stock trading losses that
stem from alleged violations of the U.S. securities laws and alleged common law
negligent misrepresentation. More specifically, plaintiffs have alleged that
statements by Cephalon and the named defendants relating to the results of
certain clinical studies of MYOTROPHIN were misleading. We have vigorously
defended this lawsuit and believe that there are valid defenses against the
claims, but the defense of the action is expensive, and the costs of this
defense will reduce the amount of insurance coverage that might otherwise be
available to satisfy claims. Therefore, on June 4, 1999, Cephalon entered into a
Stipulation of Settlement providing that the plaintiffs would receive a total of
$17,000,000 in full settlement of this action, inclusive of attorneys fees and
expenses. Of this amount, $7,500,000 will be paid by our directors' and
officers' liability insurance carriers; the remaining $9,500,000 will be paid by
Cephalon. We have incurred charges to earnings in prior reporting periods
sufficient to cover the costs of the settlement. On July 30, 1999, the Court
entered an order approving the settlement and judgment of dismissal with
prejudice, dismissing all claims against the defendants. This order will become
final on August 30, 1999, unless one or more of the parties files an appeal. In
addition, a further complaint has been filed with the Court alleging that
Cephalon is liable under common law for misrepresentations concerning the
results of the MYOTROPHIN clinical trials, and that Cephalon and certain of its
current and former officers and directors are liable for the actions of persons
who allegedly traded in Cephalon common stock on the basis of material inside
information. We believe that we have valid defenses to all claims raised in this
action and we have filed a motion to dismiss these claims which is pending with
the Court. Moreover, even if there is a judgment against us, we do not believe
it will have a material adverse effect on our financial condition or results of
operations.
Due to our involvement in promoting STADOL NS(R) (butorphanol tartrate) Nasal
Spray, a product of Bristol-Myers Squibb Company, we are a co-defendant in a
product liability action brought against Bristol-Myers. Although we cannot
predict with certainty the outcome of this litigation, we believe that any
expenses or damages that are incurred will be paid by Bristol-Myers under the
indemnification provisions of our co-promotion agreement. As such, we do not
believe that this action will have a negative effect on our financial condition
or results of operations.
7
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. COMMITMENTS AND CONTINGENCIES
Related party
Cephalon Clinical Partners, L.P., or CCP, granted us an exclusive license to
manufacture and market MYOTROPHIN within the United States, Canada and Europe in
return for royalty payments equal to 10.1% of MYOTROPHIN sales and a milestone
payment of approximately $16,000,000 that we must make if MYOTROPHIN receives
regulatory approval in the United States or certain other countries. We have the
option to pay the milestone payment in cash, common stock, or a combination
thereof.
We have a contractual option to purchase all of the limited partnership
interests in CCP in specified circumstances following the initiation of
commercial sales, if any, of MYOTROPHIN. To exercise the purchase option, we are
required to make an advance payment of $40,275,000 in cash or, at our election,
$42,369,000 in shares of our common stock, valued at the market price at the
time we exercise the purchase option, or a combination thereof. In addition to
the advance payment, the exercise of the purchase option requires us to make
royalty payments to the former limited partners for a period of eleven years
after exercise at a royalty rate of 10.1% (subject to reduction under certain
circumstances) of MYOTROPHIN sales in the United States, Canada and Europe. If
we do not exercise the purchase option prior to its expiration date, the license
will terminate and all development and marketing rights to MYOTROPHIN in the
United States, Canada and Europe would revert to CCP, which may commercialize
MYOTROPHIN itself or license or assign its rights to a third party. We would not
receive any benefits from any such commercialization, license or assignment of
rights.
We are performing the development and clinical testing of MYOTROPHIN on behalf
of CCP and our costs incurred to develop MYOTROPHIN in the Territory were
reimbursed by CCP to the extent of its available funds. Late in 1995, CCP
depleted all of its available funding and has not provided any further funding
of MYOTROPHIN development costs. The amount of additional funding required for
further development is determined by CCP's general partner in advance of each
quarter, and each quarter, we have the right, but not the obligation, to
contribute such funds. If we decide to discontinue funding of the MYOTROPHIN
program, the purchase option and license will terminate and commercialization
rights to MYOTROPHIN will revert back to CCP.
The January 1994 collaboration between Cephalon and Chiron is subject to the
rights of CCP. We are solely responsible for making any royalty and milestone
payments owed to CCP and for funding any exercises of the purchase option.
The general partner of CCP is a wholly-owned subsidiary of Cephalon, which
owns 1% of CCP.
6. STOCKHOLDERS' EQUITY
The private placement of the revenue-sharing notes (see Note 3) includes the
issuance of warrants, expiring March 1, 2004, to purchase 1,920,000 shares of
our common stock at an exercise price of $10.08. The investors will forfeit
480,000 warrants if specified aggregate PROVIGIL sales levels are achieved in
the United States through March 1, 2002. In addition, we may, with notice, call
up to 720,000 of the warrants for redemption at a nominal price after November
24, 2001 if the market value of our common stock exceeds certain thresholds.
The investors can choose to exercise the warrants prior to redemption. The
estimated aggregate value of the warrants of $6,236,000 was recorded as a
discount to the notes and is being amortized and charged to interest expense
over the term of the notes.
In connection with the May 1999 collaboration, H. Lundbeck A/S purchased
1,000,000 shares of our common stock at a price of $12.00 per share, which was
the average market price for the five trading days prior to the closing of the
agreement. (See Note 7).
8
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. REVENUE RECOGNITION
Product sales
Product sales are recognized upon shipment of product and are recorded net of
reserves for returns and allowances. The reserve for product returns is derived
by utilizing reports obtained from external, independent sources, NDC Health
Information Services, IMS Health and a sample of wholesalers, which provide
prescription data, wholesaler stocking levels and wholesaler sales to retail
pharmacies. From this data, we estimate retail pharmacy stocking levels. This
data is reviewed to monitor product movement through the supply chain to
identify slow moving product that is more likely to be returned. The reserves
are reviewed at each reporting period and adjusted to reflect data available at
that time. Any changes in the reserve will result in changes in the amount of
revenue recognized in the period (i.e. a decrease in the reserve will result in
an increase in revenue).
Sales of PROVIGIL were initiated in the United Kingdom in March 1998 and the
United States and the Republic of Ireland in February 1999. For the six-months
ended June 30, 1999, shipments to customers were $12,282,000. The return and
allowance balance at June 30, 1999 was $5,030,000, resulting in product sales of
$7,252,000 for the six months ended June 30, 1999.
Our methodology described above has resulted in the recognition of revenue for
only product that we believe was prescribed, including refills. We believe this
approach is appropriate given that: (i) PROVIGIL is a new product and we have
limited sales, product return and collection history; (ii) at this time we are
not able to reasonably estimate market penetration during launch; (iii) to date,
returns have been limited, however, product may be returned for credit for up to
18 months from shipment; (iv) to date, reorders at retail pharmacies have been
modest; and, (v) customers received extended payment terms for their initial
orders. At each reporting period, we intend to continue to monitor inventory
levels at the wholesalers and retail pharmacies, as well as reorder history.
Should this information indicate a steady stream of the product moving through
the supply chain, which would indicate that returns are less likely to occur,
the product reserve balance would be reduced, resulting in the recognition of
additional revenue.
Other revenues
A significant portion of other revenues include revenue recognized under
collaborative research and development agreements as follows:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ----- ----
<S> <C> <C> <C> <C>
Lundbeck........................ $2,750,000 $ -- $2,750,000 $ --
TAP Holdings.................... 1,503,000 1,644,000 3,083,000 3,754,000
</TABLE>
Under the terms of the collaborative agreement with Lundbeck to discover,
develop and market products to treat neurodegenerative diseases, Lundbeck will
compensate us for our research efforts and will share in joint development costs
of our product candidate, CEP-1347, and any other molecules that emerge from the
research program. Lundbeck will obtain Cephalon's commercial rights in Europe
and certain other territories, and will pay us a royalty on sales in those
territories. Cephalon will retain exclusive rights in the United States. The
revenue recognized in the three and six months ended June 30, 1999, represents a
license fee of $2,400,000 and reimbursement of research and development costs of
$350,000.
We have a research and development collaboration with TAP Holdings Inc. to
develop and commercialize certain compounds for the treatment of human cancers
and prostate disorders in the United States. Under the terms of the agreement,
we perform research and preclinical development of these compounds for which we
are compensated quarterly by TAP, based on a contract rate per individual
assigned to the program for that quarter and reimbursement of certain external
costs, all subject to annual budgetary maximums.
9
<PAGE>
CEPHALON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. SUBSEQUENT EVENT
On August 13, 1999, Cephalon, Inc. announced that it had entered into a
purchase agreement providing for the sale, to certain initial purchasers, of
2,000,000 shares of convertible exchangeable preferred stock at $50 per share in
a private offering to certain institutional investors; this transaction is
expected to close August 18, 1999.
We have granted the initial purchasers a 45-day option to purchase up to an
additional 500,000 shares of the preferred stock. Dividends on the preferred
stock will be cumulative at the annual rate of $3.625 per share. The preferred
stock will be convertible into shares of our common stock at a conversion price
of $17.92 per share, subject to adjustment in certain circumstances. The
preferred stock will be exchangeable, at our option, into 7 1/4% convertible
debentures which will also be convertible into shares of our common stock. The
preferred stock and the debentures, if issued, will be redeemable by Cephalon at
declining redemption prices commencing in August 2001.
The securities to be offered will not be registered under the Securities Act
or any state securities laws and, unless so registered, may not be offered or
sold in the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain Risks Related to Cephalon's Business
During the next several years we will be very dependent on the commercial
success of PROVIGIL, and we may be unable to attain profitability on sales of
PROVIGIL.
At our present level of operations, we may not be able to attain profitability
if physicians prescribe PROVIGIL only for those who are diagnosed narcoleptics,
and currently we cannot promote PROVIGIL outside of this approved use. In
December 1998, the FDA approved PROVIGIL for use by those suffering from
excessive daytime sleepiness associated with narcolepsy. The market for use of
PROVIGIL in narcolepsy patients is relatively small; it is limited to
approximately 125,000 persons in the United States, of which we estimate between
30,000 and 45,000 currently are seeking treatment from a physician. We have
initiated clinical studies to examine whether or not PROVIGIL is effective and
safe when used to treat disorders other than narcolepsy, but we do not know
whether these studies will in fact demonstrate safety and efficacy, or if they
do, whether we will succeed in receiving regulatory approval to market PROVIGIL
for additional disorders. If the results of these studies are negative, or if
adverse experiences are reported in these clinical studies or otherwise in
connection with the use of PROVIGIL by patients, this could undermine physician
and patient comfort with the product, could limit the commercial success of the
product and could even impact the acceptance of PROVIGIL in the narcolepsy
market. Even if the results of these studies are positive, the impact on sales
of PROVIGIL may be negligible unless we are able to obtain FDA approval to
expand the authorized use of PROVIGIL to include treatment for conditions other
than excessive daytime sleepiness associated with narcolepsy. FDA regulations
restrict our ability to communicate the results of additional clinical studies
to patients and physicians without first obtaining from the FDA approval to
expand the authorized uses for this product. As a result, it may be several
years before we have significant sales revenue from PROVIGIL beyond that
attributable to prescriptions for diagnosed narcoleptics.
In addition, the following factors could limit the rate and level of market
acceptance of PROVIGIL:
. the effectiveness of our sales and marketing efforts relative to those
of our competitors;
. the availability and level of reimbursement for PROVIGIL by third-
party payors, including federal, state and foreign government
agencies;
. the occurrence of any side effects, adverse reactions or misuse (or
unfavorable publicity relating thereto) stemming from the use of
PROVIGIL.
We have described these and other factors in more detail below.
Our lack of experience selling pharmaceuticals, together with significant
competition, may impact our ability to effectively market and sell PROVIGIL in
the United States.
In the United States and elsewhere, PROVIGIL faces significant competition in
the marketplace since narcolepsy is currently treated with several drugs, all of
which have been available for a number of years and many of which are available
in inexpensive generic forms. Thus, we will need to demonstrate to physicians
and third party payors that the cost of PROVIGIL is reasonable and appropriate
in light of the safety and efficacy of the product, the price of competing
products and the related health care benefits to the patient.
During the past few years, we developed a specialty sales organization focused
on marketing, promoting and detailing the products of other companies to
neurologists. However, we have limited experience in marketing, selling or
distributing our own products in the United States, and we lack the more
substantial experience held by major pharmaceutical companies in developing,
training and managing a sales organization over an extended period of time. More
recently, we established a managed care sales force to market our products to
health maintenance organizations, prescription benefit management firms, and
other third party payors; we also lack substantial experience in this area, and
we cannot be certain that we will be successful in our efforts to market our
products to these groups.
11
<PAGE>
The efforts of government entities and third party payors to contain or
reduce the costs of health care may adversely affect our sales and limit the
commercial success of PROVIGIL.
In certain foreign markets, pricing or profitability of pharmaceutical
products is subject to governmental control. In the United States, there have
been, and we expect there will continue to be, various federal and state
proposals to implement similar government controls. The commercial success of
PROVIGIL could be limited if federal or state governments adopt any such
proposals. In addition, in both the United States and elsewhere, sales of
pharmaceutical products depend in part on the availability of reimbursement to
the consumer from third party payors, such as government and private insurance
plans. Third party payors increasingly challenge the prices charged for
products, and limit reimbursement levels offered to consumers for such products.
If third party payors focus their cost control efforts on PROVIGIL, this could
impair the commercial success of the product.
As PROVIGIL is used commercially, unintended side effects, adverse reactions
or incidents of misuse may appear that could result in additional regulatory
controls and reduce sales of PROVIGIL.
Until recently, the usage of PROVIGIL has been limited to clinical trial
patients under controlled conditions and under the care of expert physicians. We
cannot predict whether the widespread commercial use of PROVIGIL will produce
undesirable or unintended side effects that have not been evident in our
clinical trials to date. As PROVIGIL becomes more widely utilized by significant
numbers of patients who could take multiple medications, adverse drug
interactions could occur that are difficult to predict. Additionally, incidents
of product misuse may occur. These events, among others, could result in
additional regulatory controls, including withdrawal of the product from the
market.
We may not be able to maintain market exclusivity for PROVIGIL, and
therefore potential competitors may develop competing products, which could
result in a decrease in sales and market share, could cause us to reduce
prices to compete successfully, and may prevent PROVIGIL from being a
commercial success.
We hold exclusive license rights to a composition-of-matter patent covering
modafinil as the active drug substance in PROVIGIL; this patent was to have
expired in 1998 in the United States, but we have applied for a patent extension
that, if granted, would run through November 18, 2001. In addition, we own a
U.S. patent covering the particle size of modafinil which issued in 1997.
However, we may not succeed in obtaining any extension for the composition-of-
matter patent, and we cannot guarantee that any of our patents will be found to
be valid if their validity is challenged by a third party, or that these patents
(or any other patent owned or licensed by us) would prevent a potential
competitor from developing competing products or product formulations that avoid
infringement.
In the United States, the Orphan Drug Act provides incentives to drug
manufacturers to develop and manufacture drugs for the treatment of rare
disorders. The FDA has granted orphan drug status to PROVIGIL for its use in the
treatment of excessive daytime sleepiness associated with narcolepsy. The grant
of orphan drug status to PROVIGIL allows us a seven-year period of marketing
exclusivity for the product in that indication. While the marketing exclusivity
provided by the orphan drug law should prevent other sponsors from obtaining
approval of the same compound for the same indication (unless the other sponsor
can demonstrate clinical superiority or Cephalon is unable to provide or obtain
adequate supplies of PROVIGIL), it would not prevent approval of the compound
for other indications that otherwise are non-exclusive, nor approval of other
kinds of compounds for the same indication.
Manufacturing, supply and distribution problems could create supply
disruptions that would damage commercial prospects for PROVIGIL.
We depend upon Laboratoire L. Lafon as our sole supplier of bulk modafinil
compound, the active drug substance contained in PROVIGIL. Moreover, we depend
upon a single manufacturer that is qualified to manufacture finished PROVIGIL
for commercial purposes. We maintain an inventory of modafinil compound to
protect against supply disruptions.
12
<PAGE>
Additionally, a non-active ingredient used in PROVIGIL is no longer
manufactured or commercially available. At anticipated levels of demand, we have
several years supply of such ingredient. We have prepared a new formulation of
PROVIGIL that would not include the now unavailable ingredient, and could enable
us to qualify additional tablet manufacturers with regulatory authorities.
However, the introduction of any such new formulation requires that we establish
that the new formulation is bioequivalent to the current one, and also requires
regulatory approval. If we are unable to develop and obtain approval for a new
formulation, or if demand for the product were to exceed expectations, we could
face supply disruptions that would result in significant costs and delays,
undermine goodwill established with physicians and patients, and damage
commercial prospects for PROVIGIL.
We must comply with all applicable regulatory requirements of the FDA and
foreign authorities, including current Good Manufacturing Practice regulations,
or cGMP. The facilities used to manufacture, store and distribute our products
are subject to inspection by the FDA and other regulatory authorities at any
time to determine compliance with cGMP regulations and other regulatory
requirements. The cGMP regulations are complex, and failure to be in compliance
could lead to remedial action, civil and criminal penalties and delays in
production of material.
We rely on several third parties in the United States to formulate, tablet,
package, distribute, provide customer service activities and accept and process
returns. Although we employ a small number of persons to coordinate and manage
the activities undertaken by these third parties, we have relatively limited
experience in this regard. Any disruption in these activities could impede our
ability to sell PROVIGIL and could reduce sales revenue.
If we are unable to maintain certain cash balances under the terms of our
revenue-sharing notes, holders of our revenue-sharing notes have the right to an
increased royalty percentage, which will increase our royalty expense, and may
have the right to accelerate the notes and foreclose on the security, which will
result in the loss of our rights to PROVIGIL.
The notes contain a number of covenants, including a requirement to maintain
cash, cash equivalent and investment balances of $40,000,000 through December
31, 1999 and $30,000,000 through February 2002 or as long as the principal
remains outstanding. This requirement to maintain cash and investment balances
may limit our flexibility to use our cash resources for other corporate
purposes. The notes are secured by our licenses, patents and FDA rights relating
to PROVIGIL. The notes also require us to pay a royalty of 6% on net United
States PROVIGIL sales for 5 years, which we may reduce to 4 years under certain
circumstances. If we fail to maintain the required cash and investment balances,
the holders of the notes can declare a default and increase the royalty
percentage to 25% of net United States PROVIGIL sales and, if the default is not
cured within one year, can accelerate the due date of the notes and foreclose on
the security. The holders of the notes can also foreclose on the security if we
fail to pay principal and interest when due or violate certain other covenants.
Our sales of PROVIGIL and financial results will fluctuate and these
fluctuations may adversely affect our stock price.
A number of the analysts and investors who follow our stock have developed
models to attempt to forecast future PROVIGIL sales and have established
expectations based upon those models. Forecasting revenue is difficult,
especially when there is little commercial history and when market acceptance of
the product is uncertain. Forecasting is further complicated by the difficulties
in estimating stocking levels at pharmaceutical wholesalers and at retail
pharmacies and in estimating potential product returns. As a result it is likely
that there will be significant fluctuations in quarterly revenues, which may not
meet with market expectations and which may adversely affect our stock price.
Other factors which may cause our quarterly financial results to fluctuate
include the level and timing of PROVIGIL sales to wholesalers and end-users,
product returns, cost of PROVIGIL sales, achievement and timing of research and
development milestones, contract and co-promotion revenues, cost and timing of
clinical trials, marketing and other expenses and manufacturing or supply
disruption.
13
<PAGE>
The results and timing of future clinical trials cannot be predicted and future
setbacks may materially affect our business.
We or our collaborators must demonstrate through preclinical testing and
clinical trials that the product candidate is safe and efficacious. The results
from preclinical testing and early clinical trials may not be predictive of
results obtained in subsequent clinical trials, and we cannot be sure that we or
our collaborators' clinical trials will demonstrate the safety and efficacy
necessary to obtain regulatory approval for any product candidates. A number of
companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials. In addition, certain clinical trials are conducted
with patients having the most advanced stages of disease. During the course of
treatment, these patients often die or suffer other adverse medical effects for
reasons that may not be related to the pharmaceutical agent being tested. Such
events can adversely affect the statistical analysis of clinical trial results.
The completion of clinical trials of our product candidates may be delayed by
many factors. One such factor is the rate of enrollment of patients and neither
we nor our collaborators can control the rate at which patients present
themselves for enrollment, and we cannot be sure that the rate of patient
enrollment will be consistent with our expectations or be sufficient to enable
clinical trials of our product candidates to be completed in a timely manner.
Any significant delays in, or termination of, clinical trials of our product
candidates may have a material adverse effect on our business.
We cannot be sure that we or our collaborators will be permitted by regulatory
authorities to undertake additional clinical trials for any of our product
candidates, or that if such trials are conducted, any of our product candidates
will prove to be safe and efficacious or will receive regulatory approvals. Any
delays in or termination of our or our collaborator's clinical trial efforts may
have a material adverse effect on our business.
We anticipate we will incur continued losses for the next several years.
To date, we have not been profitable. At June 30, 1999, our accumulated
deficit was approximately $305 million. Our losses have resulted principally
from costs incurred in research and development, including clinical trials, and
from selling, general and administrative costs associated with our operations.
We expect to continue to incur significant losses for the next several years.
We cannot be sure that we will ever achieve product revenues from PROVIGIL or
from any of our other product candidates sufficient for us to obtain
profitability. We cannot be sure that we or our collaborators will obtain
required regulatory approvals, or successfully develop, commercialize,
manufacture and market any product candidates.
Our research and development activities may not result in any additional
pharmaceutical products, which may adversely affect our business.
We are highly focused on the research and development of potential
pharmaceutical products. These activities include engaging in discovery research
and process development, conducting preclinical and clinical studies, and
seeking regulatory approval in the United States and abroad. In all of these
areas, we have relatively limited resources and compete against major
multinational pharmaceutical companies. Moreover, even if we undertake these
activities in an effective and efficient manner, regulatory approval for the
sale of new pharmaceutical products remains highly uncertain since, in our
industry, the majority of compounds fail to enter clinical studies and the
majority of therapeutic candidates entering clinical studies fail to be
commercialized.
Our research and development and marketing efforts are highly dependent on
corporate collaborators who may not devote sufficient time, resources and
attention to our programs, which may adversely impact our efforts to develop and
market potential products.
Because we have limited resources, we have entered into a number of agreements
with other pharmaceutical companies. These agreements may call for our partner
to control:
14
<PAGE>
. the supply of bulk or formulated drugs for commercial use or for use
in clinical trials;
. the design and execution of clinical studies;
. the process of obtaining regulatory approval to market the product;
and
. the marketing and selling of any approved product.
In each of these areas, our partners may not support fully our research and
commercial interests since our program may well compete for time, attention and
resources with the internal programs of our corporate collaborators. As such, we
cannot be sure that our corporate collaborators will share our perspectives on
the relative importance of our program, that they will commit sufficient
resources to our program to move it forward effectively, or that the program
will advance as rapidly as it might if we had retained complete control of all
research, development, regulatory and commercialization decisions. For example,
we rely on several of these collaborators for the production of compounds and
the manufacture and supply of pharmaceutical products. One of them, Kyowa Hakko,
has informed us that they will not be able to meet our increased requirements of
the compound used in our signal transduction modulator program beyond the year
2000. We are in discussions with alternative manufacturers and Kyowa Hakko is
working with us to transfer technology to a third party. We cannot be certain
that a new manufacturer will be able to manufacture such compounds or products
in sufficient quantities, at reasonable prices, and in accordance with cGMP
requirements established by the FDA and other regulatory authorities.
We experience intense competition in our fields of interest, which may adversely
affect our business.
Large and small companies, academic institutions, governmental agencies, and
other public and private research organizations will continue to conduct
research, seek patent protection, and establish collaborative arrangements for
product development. Products developed by any of these entities may compete
directly with those we develop or sell. Many of these companies and institutions
have substantially greater capital resources, research and development staffs
and facilities than us, and substantially greater experience in conducting
clinical trials, obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products. These entities represent significant competition for
us. In addition, competitors who are developing products for the treatment of
neurological or oncological disorders might succeed in developing technologies
and products that are more effective than any that we develop or sell or that
would render our technology and products obsolete or noncompetitive. Competition
and innovation from these or other sources potentially could materially
adversely affect any sales of products that might be developed or are currently
being sold by us or make them obsolete. Advances in current treatment methods
may also adversely affect the market for such products. The approval and
introduction of therapeutic products that compete with compounds being developed
by us could also adversely affect our ability to attract and maintain patients
in clinical studies for the same indication or otherwise successfully complete
our clinical studies.
We may not be able to obtain adequate patent protection either in the United
States or abroad, which could impact our ability to compete effectively.
We place considerable importance on obtaining patent and trade secret
protection for new technologies, products and processes. We intend to file
applications for patents covering the composition of matter or uses of our drug
candidates or our proprietary processes. We also rely on trade secrets, know-how
and continuing technological advancements to support our competitive position.
Although we have entered into confidentiality and invention rights agreements
with our employees, consultants, advisors and collaborators, we cannot be sure
that such agreements will be honored or that we will be able to effectively
protect our rights to our unpatented trade secrets and know-how. Moreover, we
cannot be sure that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
our trade secrets and know-how. In addition, many of our scientific and
management personnel have been recruited from other biotechnology and
pharmaceutical companies where they were conducting research in areas similar to
those that we now pursue. As a result, we could be subject to allegations of
trade secret violations and other claims.
15
<PAGE>
In addition, we could incur substantial costs in defending any patent
infringement suits or in asserting any patent rights, including those licensed
to us by third parties, and in defending suits against us or our employees
relating to ownership of or rights to intellectual property. Such disputes could
substantially delay our drug development or commercialization. The U.S. Patent
and Trademark Office or a private party could institute an interference
proceeding involving us in connection with one or more of our patents or patent
applications. Such proceedings could result in an adverse decision as to
priority of invention, in which case we would not be entitled to a patent on the
invention at issue in the interference proceeding. The PTO or a private party
could also institute reexamination proceedings involving us in connection with
one or more of our patents, and such proceedings could result in an adverse
decision as to the validity or scope of the patents.
We are involved in a number of legal proceedings that, if adversely adjudicated
or settled, could materially impact our financial condition.
Cephalon, a current director and officer, and a former officer, have been
named as defendants in a number of civil actions filed in the U.S. District
Court for the Eastern District of Pennsylvania, all of which have been
consolidated into a single class action. The plaintiff class is comprised of
those persons and entities who purchased Cephalon common stock, or traded in
options to buy or sell Cephalon common stock, during the period June 12, 1995
through and including June 7, 1996. Plaintiffs seek to hold defendants liable
for stock trading losses that stem from alleged violations of the U.S.
securities laws and alleged common law negligent misrepresentation. More
specifically, plaintiffs have alleged that statements made by Cephalon and the
named defendants relating to the results of certain clinical studies of
MYOTROPHIN were misleading. We have vigorously defended this lawsuit and believe
that there are valid defenses against the claims, but the defense of the action
is expensive, and the costs of this defense will reduce the amount of insurance
coverage that might otherwise be available to satisfy claims. Therefore, on June
4, 1999, Cephalon entered into a Stipulation of Settlement providing that the
plaintiffs would receive a total of $17,000,000 in full settlement of this
action, inclusive of attorneys fees and expenses. Of this amount, $7,500,000
will be paid by our directors' and officers' liability insurance carriers; the
remaining $9,500,000 will be paid by Cephalon. We have incurred charges to
earnings in prior reporting periods sufficient to cover the costs of the
proposed settlement. On July 30, 1999, the Court entered an order approving the
settlement and a judgment of dismissal with prejudice, dismissing all claims
against the defendants. This order will become final on August 30, 1999, unless
one or more of the parties files an appeal. In addition, a further complaint has
been filed with the Court alleging that Cephalon is liable under common law for
misrepresentations concerning the results of the MYOTROPHIN clinical trials, and
that Cephalon and certain of its current and former officers and directors are
liable for the actions of persons who allegedly traded in Cephalon common stock
on the basis of material inside information. We believe that we have valid
defenses to all claims raised in this action and we have filed a motion to
dismiss these claims which is pending with the Court. Moreover, even if there is
a judgment against us, we do not believe it will have a material adverse effect
on our financial condition or results of operations.
Due to our involvement in co-promoting STADOL NS, a product of Bristol-Myers,
we are a co-defendant in a product liability action brought against Bristol-
Myers. Although we cannot predict with certainty the outcome of this litigation,
we believe that any expenses or damages that we may incur will be paid by
Bristol-Myers under the indemnification provisions of our co-promotion
agreement. As such, we do not believe that this action will have a material
effect on our financial condition or results of operations.
We face significant product liability risks, which may result in claims being
filed against us or otherwise may have a negative effect on our financial
performance.
The administration of drugs to humans, whether in clinical trials or
commercially, can result in product liability claims even if our drugs or a
collaborator's drugs are not actually at fault for causing an injury.
Furthermore, our products may cause, or may appear to have caused, adverse side
effects or potentially dangerous drug interactions that we may not learn about
or understand fully until the drug is actually manufactured and sold for some
time. Product liability claims can be expensive to defend and may result in
large judgments or settlements against us, which could have a negative effect on
our financial performance. We maintain product liability
16
<PAGE>
insurance at a relatively limited level, and as such, claims could exceed our
coverage. Furthermore, we cannot be certain that we will always be able to
purchase sufficient insurance at an affordable price. Even if a product
liability claim is not successful, the adverse publicity and time and expense of
defending such a claim may interfere with our business.
We may never obtain approval to market MYOTROPHIN, it may not be cost-effective
to pursue MYOTROPHIN for other indications, and therefore we may never derive
revenue from MYOTROPHIN.
Cephalon and Chiron have withdrawn the joint marketing authorization
application for MYOTROPHIN in Europe for the treatment of ALS. We made this
decision because of comments we received from the European reviewer of the
application concerning the results of our two pivotal ALS studies. These
comments led us to believe that the reviewer would not approve our application.
The withdrawal of our marketing authorization application for MYOTROPHIN in
Europe may negatively affect the FDA approval process for MYOTROPHIN in the
United States.
In May 1998, the FDA issued a letter stating that the NDA application
submitted jointly by Cephalon and Chiron to market MYOTROPHIN in the United
States for the treatment of ALS was "potentially approvable," contingent,
however, upon the submission of additional information from ongoing clinical
studies that demonstrates to the satisfaction of the FDA that MYOTROPHIN is
effective in the treatment of ALS. Cephalon and Chiron have had discussions with
the FDA regarding safety and efficacy data and have submitted information from
the ongoing Treatment Investigational New Drug program. The T-IND program is a
compassionate use program that is neither placebo-controlled nor blinded, and
therefore is not designed to produce evidence of efficacy. We are not planning
to submit additional data to the FDA at this time. The study of MYOTROPHIN in
ALS patients being conducted by Kyowa Hakko in Japan is not under our control.
Results from that study may be available in late 1999 but may not satisfy the
FDA's request for additional information. The prospects for regulatory approval
of MYOTROPHIN continue to be very uncertain in the United States. We will
continue to evaluate the prospects of receiving regulatory approval and, based
on communications with the FDA, may determine to withdraw the new drug
application.
If the information submitted to the FDA to date does not prove to be
sufficient for approval, a new study would be necessary, which would be
expensive and would take years to complete. We are not sure whether the
potential profits from sales of MYOTROPHIN would make an additional study cost-
effective to conduct. Even if an additional study were conducted, the results of
a new study may not be sufficient to obtain regulatory approval. If MYOTROPHIN
were not approved for ALS, we are not sure it would be cost-effective to pursue
MYOTROPHIN for any other indication.
The value of our common stock may fluctuate significantly due to the volatility
of its market price and trading volume and exercise of outstanding warrants.
The market price and trading volume of shares of our common stock are
volatile, and we expect it to continue to be volatile for the foreseeable
future. For example, during the 52 weeks prior to August 9, 1999, our common
stock traded at a high price of $19.44 and a low price of $3.88. Negative
announcements (such as adverse regulatory decisions, disputes concerning patent
or other proprietary rights, or operating results that fall below the market's
expectations) could trigger significant declines in the price of our common
stock. In addition, news concerning certain external events, such as that
concerning our competitors or changes in government regulations that may impact
the biotechnology or pharmaceutical industries, also could affect the price of
our common stock.
In addition, as of June 30, 1999, warrants to purchase 2,022,690 shares of
common stock were held by investors in Cephalon Clinical Partners, L.P. These
warrants expire on August 31, 1999 and have an exercise price ranging from
$11.77 to $13.82 per share. To the extent these warrants are exercised, it may
cause increased volatility in the price of our common stock, which may have an
adverse effect on the price of our common stock.
17
<PAGE>
Our dependence on key executives and scientists could impact the development and
management of our business.
The nature of our business is such that we are highly dependent upon our
ability to attract and retain qualified scientific, technical and managerial
personnel. There is intense competition for qualified personnel in the
pharmaceutical and biotechnology industries, and we cannot be sure that we will
be able to continue to attract and retain qualified personnel necessary for the
development and management of our business. Our research and development
programs and our business might be harmed by the loss of the services of
existing personnel, as well as the failure to recruit additional key scientific,
technical and managerial personnel in a timely manner. Much of the know-how we
have developed resides in our scientific and technical personnel and is not
readily transferable to other personnel. We do not maintain "key man" life
insurance on any of our employees.
We may be required to incur significant costs to comply with environmental laws
and regulations and our compliance may limit any future profitability.
Our research and development activities involve the controlled use of
hazardous, infectious and radioactive materials that could be hazardous to human
health, safety or the environment. We store these materials and various wastes
resulting from their use at our facility pending ultimate use and disposal. We
are subject to a variety of federal, state and local laws and regulations
governing the use, generation, manufacture, storage, handling and disposal of
these materials and wastes resulting from their use, and we may be required to
incur significant costs to comply with both existing and future environmental
laws and regulations.
We believe that although our safety procedures for handling and disposing of
these materials comply with federal, state and local laws and regulations, the
risk of accidental injury or contamination from these materials cannot be
entirely eliminated. In the event of an accident, we could be held liable for
any resulting damages.
The Year 2000 issue may cause compliance failure and service interruptions in
our business or operations if certain of our suppliers or vendors are unable to
become Year 2000 compliant which may cause us to incur additional expense.
The "Year 2000 Issue" is typically the result of software and firmware being
written using two digits rather than four to define the applicable year. If our
software and firmware with date-sensitive functions are not Year 2000 compliant,
these systems may recognize a date using "00" as the year 1900 rather than the
year 2000.
We have completed minor modifications to our computer systems and at this time
we do not expect the Year 2000 Issue to pose a significant internal operational
problem. However, we cannot be sure that the systems of other companies on which
we rely will be compliant on or before January 1, 2000 and will not have an
adverse effect on our operations. We have initiated formal communication with
significant suppliers and third party vendors to determine the extent to which
our operations are vulnerable to those third parties' failure to remediate their
own Year 2000 hardware and software issues. Significant suppliers or third party
vendors that are unable to become Year 2000 compliant could adversely affect our
business or operations. We are also vulnerable to external forces that might
generally affect industry and commerce, such as utility or transportation
company Year 2000 compliance failures and related service interruptions. We have
not yet fully developed a comprehensive contingency plan addressing situations
that may result if we are unable to achieve Year 2000 readiness of our critical
operations.
Anti-takeover provisions may deter a third party from acquiring Cephalon,
limiting our stockholders' ability to profit from such a transaction.
We are subject to the anti-takeover provisions of Section 203 of the Delaware
Corporation Law, which prohibits us from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person becomes an interested stockholder, unless
the business
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<PAGE>
combination is approved in a prescribed manner. The application of Section 203
could have the effect of delaying or preventing a change of control of Cephalon.
We also have adopted a "poison pill" rights plan that will dilute the stock
ownership of an acquiror of our stock upon the occurrence of certain events.
Section 203, the rights plan, and the provisions of our certificate of
incorporation, our bylaws and Delaware corporate law, may have the effect of
deterring hostile takeovers or delaying or preventing changes in control of our
management, including transactions in which stockholders might otherwise receive
a premium for their shares over then current market prices.
You should not expect to receive dividends on our common stock.
We have not paid cash dividends on our common stock and we do not expect to do
so in the foreseeable future.
In addition to historical facts or statements of current condition, this
report contains forward-looking statements. Forward-looking statements provide
our current expectations or forecasts of future events. These may include
statements regarding anticipated scientific progress in our research programs,
development of potential pharmaceutical products, prospects for regulatory
approval, manufacturing capabilities, market prospects for our products, sales
and earnings projections, and other statements regarding matters that are not
historical facts. Some of these forward-looking statements may be identified by
the use of words in the statements such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe" or other words and terms of similar
meaning. Our performance and financial results could differ materially from
those reflected in these forward-looking statements due to general financial,
economic, regulatory and political conditions affecting the biotechnology and
pharmaceutical industries as well as more specific risks and uncertainties such
as those set forth above and in our reports to the SEC on forms 8-K and 10-K.
Given these risks and uncertainties, any or all of these forward-looking
statements may prove to be incorrect. Therefore, you are cautioned not to place
too much reliance on any such forward-looking statements. Furthermore, we do
not intend (and we are not obligated) to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
This discussion is permitted by the Private Securities Litigation Reform Act of
1995.
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Liquidity and Capital Resources
Cash, cash equivalents, and investments at June 30, 1999 were $85,555,000,
representing 73% of total assets, and at December 31, 1998 were $67,346,000,
representing 71% of total assets. Cash equivalents and investments consisted
primarily of short to intermediate-term corporate obligations, overnight
investments that are backed by collateral in the form of government securities
with a value equal to at least 102% of such investments and short to
intermediate-term obligations of the United States government.
The following is a summary of selected cash flow information for each of the
six months ended June 30:
<TABLE>
<CAPTION>
1999 1998
---- -----
<S> <C> <C>
Net cash used for operating activities..................... $(25,778,000) $(26,922,000)
Net cash (used for) provided by investing activities....... (12,334,000) 36,704,000
Net cash provided by (used for) financing activities....... 44,030,000 (308,000)
</TABLE>
Net Cash Used for Operating Activities
--Operating Cash Inflows
The following is a summary of the major sources of cash receipts reflected in
net cash used for operating activities:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
1999 1998
---- ----
<S> <C> <C>
PROVIGIL sales..................................... $9,002,000 $ --
TAP Holdings....................................... 3,727,000 4,584,000
Lundbeck........................................... 2,400,000 --
Bristol-Myers Squibb............................... 683,000 503,000
Chiron............................................. -- 1,962,000
Medtronic.......................................... 543,000 958,000
Interest........................................... 1,998,000 3,279,000
</TABLE>
Sales of PROVIGIL commenced in the United Kingdom in March 1998 and in the
United States and the Republic of Ireland in February 1999.
We have a research and development collaboration with TAP Holdings Inc. to
develop and commercialize certain compounds for the treatment of human cancers
and prostate disorders in the United States. Under the terms of the agreement,
we perform research and preclinical development of these compounds for which we
are compensated quarterly by TAP, based on a contract rate per individual
assigned to the program for that quarter and reimbursement of certain external
costs, all subject to annual budgetary maximums. At June 30, 1999, $1,534,000
was receivable from TAP.
In May 1999, we entered into a collaborative agreement with H. Lundbeck A/S to
discover, develop and market products to treat neurodegenerative diseases, such
as Parkinson's disease and Alzheimer's disease. Initially, the program will seek
to advance our product candidate, CEP-1347, into clinical development for the
treatment of Parkinson's disease. Lundbeck will compensate us for our research
efforts and will share in joint development costs of CEP-1347 and any other
molecules that emerge from the research program. Lundbeck will obtain Cephalon's
commercial rights in Europe and certain other territories, and will pay us a
royalty on sales in those territories. Cephalon will retain exclusive rights in
the United States. The payment received from Lundbeck in the six months ended
June 30, 1999 represents a license fee. At June 30, 1999, $1,413,000 was
receivable from Lundbeck for our research and development efforts.
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We market STADOL NS(R) (butorphanol tartrate) Nasal Spray for Bristol-Myers
Squibb to neurologists in the United States. Pursuant to our agreement, we
receive quarterly payments equal to a percentage of total STADOL NS sales
attributed to prescriptions written by neurologists which exceeds a
predetermined base amount. The payment received from BMS in the six months ended
June 30, 1999, represents payment earned for fourth quarter 1998 co-promotion
activity while the payment in the six months ended June 30, 1998 represents
payment earned for first quarter 1998 co-promotion activity. At June 30, 1999,
$1,000,000 was receivable from BMS.
Cephalon has been developing MYOTROPHIN in collaboration with Chiron
Corporation for the treatment of ALS and other neurological disorders. The
amounts we received in 1998 generally represented reimbursement from Chiron for
MYOTROPHIN program costs incurred in excess of our fifty percent share of
program costs. Since June 30, 1998, the companies have been bearing their own
MYOTROPHIN costs and we have not received reimbursement of MYOTROPHIN
expenditures since that time.
Under an April 1997 agreement with Medtronic, Inc., we were co-promoting
Intrathecal Baclofen Therapy (ITB(TM)) to neurologists and physiatrists in the
United States for the treatment of intractable spasticity. The agreement with
Medtronic terminated pursuant to its terms on April 29, 1999. At June 30, 1999,
$470,000 was receivable from Medtronic.
The decrease in interest received in 1999 compared to 1998 was primarily due
to lower average investment balances.
Operating Cash Outflows
Cash used in operating activities in the six months ended June 30, 1999
increased as a result of increased expenditures associated with the commercial
launch of PROVIGIL in the United States, clinical studies of PROVIGIL and the
purchase of PROVIGIL inventory.
--Cash and Funding Requirements Outlook
As of June 30, 1999, we believe that our cash and investment balance will be
adequate to fund the then-current level of operations for at least twelve
months. We expect cash flow from operating activities to continue to be negative
for the next several years.
Although we initiated sales of PROVIGIL in the United States in February 1999,
it may be at least several years, if ever, before sales from PROVIGIL will
provide enough funds to generate cash inflows in excess of the present level of
cash outflows from operations. In addition to the uncertainty surrounding the
degree of market acceptance for a recently introduced product, factors such as
competition, the effectiveness of our sales and marketing efforts and our
ability to demonstrate the utility of PROVIGIL in disorders other than
narcolepsy will all have a significant impact on PROVIGIL sales. These factors
are not predictable at this point in time.
Cash inflows also include receipts from our collaborative research and
development agreements and from co-promotion agreements. The continuation of
funding under the agreement with TAP is subject to the achievement of certain
development milestones and periodic review by TAP and may be terminated without
cause with prior notice. In May 1999, we entered into a collaborative agreement
with H. Lundbeck A/S to discover, develop and market products to treat
neurodegenerative diseases. Under this agreement, Lundbeck will compensate us
for our research efforts and will share in joint development costs. The level of
potential payments to be received from Bristol-Myers is subject to a number of
uncertainties related to product sales, including competition from new and
existing products. After we receive payment for our outstanding receivable with
Medtronic at June 30, 1999, we will not receive any further payments due to the
termination of this agreement in April 1999. Under our June 1999 marketing and
development agreement with Abbott Laboratories, we are to receive quarterly
payments based on a percentage of sales achieved in the United States of
Gabitril(R) (tiagabine hydrochloride) which exceeds contractually established
thresholds.
21
<PAGE>
We expect our cash requirements for PROVIGIL to increase for the next several
years due to efforts associated with the commercial launch of PROVIGIL in the
United States, including building PROVIGIL inventory and conducting clinical
studies of PROVIGIL in disorders other than narcolepsy. Additionally, we
expect to continue to expend substantial funds on research and development
activities for our other products in development. We may seek sources of funding
for these research programs through collaborative arrangements with third
parties. If additional funds are unavailable, we may have to reduce our present
level of spending which may involve curtailing or restructuring some of our
programs. Under our collaboration with Abbott, we are obligated to fund
marketing and clinical trial activities for GABITRIL. Additionally, in
connection with the settlement of our securities litigation, we expect to pay
the plaintiffs $9,500,000 in September 1999.
We will require additional funds to continue our operations at their current
level, continue to meet all of our minimum cash balance requirements pursuant to
our debt agreements and pay the revenue-sharing notes at maturity. On August 13,
1999, we announced that we had entered into a purchase agreement providing for
the sale, to certain initial purchasers, of 2,000,000 share of convertible
exchangeable preferred stock at $50 per share in a private offering to certain
institutional investors. If the transaction closes as expected on August 18,
1999, we believe that we will have sufficient funds to support our operations
for at least the next several years. However, we may still obtain additional
funding through debt and/or equity financings, collaborative arrangements or
through other financing vehicles.
Net Cash (Used for) Provided by Investing Activities
The following is a summary of net cash (used for) provided by investing
activities:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
1999 1998
---- ----
<S> <C> <C>
Purchases of property and equipment....................... $ (43,000) $ (504,000)
Sales and maturities (purchases) of investments, net...... (12,291,000) 37,208,000
------------ -----------
Net cash (used for) provided by investing activities.... $(12,334,000) $36,704,000
============ ===========
</TABLE>
Sales and maturities of investments represent the liquidation of investments.
Purchases of investments represent the accumulation of investments.
Net Cash Provided by (Used for) Financing Activities
The following is a summary of net cash provided by (used for) financing
activities:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Proceeds from sales of common stock and warrants................ $12,000,000 $ --
Proceeds from exercises of common stock options and warrants.... 2,906,000 391,000
Proceeds from issuance of long-term debt........................ 30,000,000 --
Principal payments on long-term debt............................ (876,000) (699,000)
----------- ---------
Net cash provided by (used for) financing activities.......... $44,030,000 $(308,000)
=========== =========
</TABLE>
In connection with the May 1999 collaborative agreement, Lundbeck purchased
1,000,000 shares of Cephalon's common stock at a price of $12.00 per share,
which was the average market price for the five trading days prior to the
closing of the agreement.
The extent and timing of future warrant and option exercises, if any, are
primarily dependent upon the market price of Cephalon's common stock and general
financial market conditions, as well as the exercise prices and expiration dates
of the warrants and options. At June 30, 1999, investors associated with
Cephalon Clinical Partners, L.P. held warrants to purchase 2,022,690 shares of
common stock. These warrants expire on August 31, 1999 and have an exercise
price ranging from $11.77 to $13.82 per share.
22
<PAGE>
Proceeds from the issuance of long-term debt in the six months ended June 30,
1999 consists of a private placement of $30,000,000 of revenue-sharing notes.
For all periods presented, principal payments on long-term debt include
payments on mortgage loans and payments on capital lease obligations.
Commitments and Contingencies
--Related Party
Cephalon Clinical Partners, L.P., or CCP, granted us an exclusive license to
manufacture and market MYOTROPHIN within the United States, Canada and Europe in
return for royalty payments equal to 10.1% of MYOTROPHIN sales and a milestone
payment of approximately $16,000,000 that we must make if MYOTROPHIN receives
regulatory approval in the United States or certain other countries. We have the
option to pay the milestone payment in cash, common stock, or a combination
thereof.
We have a contractual option to purchase all of the limited partnership
interests in CCP in specified circumstances following the initiation of
commercial sales, if any, of MYOTROPHIN. To exercise the purchase option, we are
required to make an advance payment of $40,275,000 in cash or, at our election,
$42,369,000 in shares of our common stock, valued at the market price at the
time we exercise the purchase option, or a combination thereof. In addition to
the advance payment, the exercise of the purchase option requires us to make
royalty payments to the former limited partners for a period of eleven years
after exercise at a royalty rate of 10.1% (subject to reduction under certain
circumstances) of MYOTROPHIN sales in the United States, Canada and Europe. If
we do not exercise the purchase option prior to its expiration date, the license
will terminate and all development and marketing rights to MYOTROPHIN in the
United States, Canada and Europe would revert to CCP, which may commercialize
MYOTROPHIN itself or license or assign its rights to a third party. We would not
receive any benefits from any such commercialization, license or assignment of
rights.
We are performing the development and clinical testing of MYOTROPHIN on behalf
of CCP and our costs incurred to develop MYOTROPHIN in the Territory were
reimbursed by CCP to the extent of its available funds. Late in 1995, CCP
depleted all of its available funding and has not provided any further funding
of MYOTROPHIN development costs. The amount of additional funding required for
further development is determined by CCP's general partner in advance of each
quarter, and each quarter, we have the right, but not the obligation, to
contribute such funds. If we decide to discontinue funding of the MYOTROPHIN
program, the purchase option and license will terminate and commercialization
rights to MYOTROPHIN will revert back to CCP.
The January 1994 collaboration between Cephalon and Chiron is subject to the
rights of the CCP. We are solely responsible for making any royalty and
milestone payments owed to CCP and for funding any exercises of the purchase
option.
The general partner of CCP is a wholly-owned subsidiary of Cephalon, which
owns 1% of CCP.
--Legal Proceedings
On June 4, 1999, Cephalon entered into an agreement to settle an action
stemming from allegations that statements made about the results of certain
clinical studies of MYOTROPHIN were misleading; a further complaint has been
filed with the Court alleging liability under common law for misrepresentations
relating to these same studies and for failing to prevent certain non-employees
from trading in Cephalon common stock on the basis of material inside
information. In a separate matter, due to our involvement in promoting STADOL
NS, a product of Bristol-Myers Squibb Company, we are a co-defendant in a
product liability action brought against BMS. See "Certain Risks Related to
Cephalon's Business."
23
<PAGE>
Results of Operations
This section should be read in conjunction with the more detailed
discussion under "Liquidity and Capital Resources."
The following is a summary of revenues and expenses:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
% %
- -
1999 1998 change 1999 1998 change
------------ ----------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Product sales - PROVIGIL......................... $ 5,522,000 $ 172,000 3110% $ 7,252,000 $ 231,000 3039%
Other revenues................................... 5,227,000 3,240,000 61 7,727,000 6,749,000 14
Cost of product sales - PROVIGIL................. 651,000 -- -- 839,000 -- --
Research and development expenses................ 10,180,000 10,353,000 (2) 20,152,000 22,327,000 (10)
Selling, general and administrative expenses..... 10,166,000 6,727,000 51 23,780,000 13,896,000 71
Interest (expense) income, net................... (1,253,000) 1,053,000 (219) (1,650,000) 1,969,000 (184)
</TABLE>
Sales of PROVIGIL were initiated in the United Kingdom in March 1998 and
the United States and Republic of Ireland in February 1999. Product sales are
recognized upon shipment of product and are recorded net of reserves for returns
and allowances. The reserve for product returns is derived by utilizing reports
obtained from external, independent sources, NDC Health Information, IMS Health
and a sample of wholesalers, which provide prescription data, wholesaler
stocking levels and wholesaler sales to retail pharmacies. From this data, we
estimate retail pharmacy stocking levels. This data is reviewed to monitor
product movement through the supply chain to identify slow moving product that
is more likely to be returned. The reserves are reviewed at each reporting
period and adjusted to reflect data available at that time. Any changes in the
reserve will result in changes in the amount of revenue recognized in the period
(i.e. a decrease in the reserve will result in an increase in revenue).
Our methodology described above has resulted in the recognition of revenue
for only product that we believe was prescribed, including refills. We believe
this approach is appropriate given that: (i) PROVIGIL is a new product and we
have limited sales, product return and collection history; (ii) at this time we
are not able to reasonably estimate market penetration during launch; (iii) to
date, returns have been limited, however, product may be returned for credit for
up to 18 months from shipment; (iv) to date, reorders at retail pharmacies have
been modest; and, (v) customers received extended payment terms for their
initial orders. At each reporting period, we intend to continue to monitor
inventory levels at the wholesalers and retail pharmacies, as well as reorder
history. Should this information indicate a steady stream of the product moving
through the supply chain, which would indicate that returns are less likely to
occur, the product reserve balance would be reduced, resulting in the
recognition of additional revenue.
For the three and six months ended June 30, 1999, cost of product sales was
12% of sales and consisted primarily of royalties due to Lafon. This is not
indicative of future expectations. Prior to FDA approval of PROVIGIL in
December 1998, we recorded the costs of producing PROVIGIL as research and
development expense in accordance with Statement of Financial Accounting
Standards No. 2 "Accounting for Research and Development Costs." For the six
months ended June 30, 1999, approximately $1,463,000 of inventory costs were
excluded from sales. As of June 30, 1999, Cephalon maintained approximately
$2,509,000 of inventory on hand that was previously charged to research and
development expense. Once this inventory has been sold, we expect cost of
product sales to be between 21% and 26% of sales.
24
<PAGE>
Three months ended June 30, 1999 compared to the three months ended June 30,
1998
For the three months ended June 30, 1999, shipments of PROVIGIL to
customers were $6,494,000. The return and allowance balance at June 30, 1999
increased by $972,000, resulting in product sales of $5,522,000 for the three
months ended June 30, 1999.
Other revenues increased in the three months ended June 30, 1999 from the
1998 period due primarily to $2,750,000 in revenue recognized under the
initiation of a collaborative agreement with Lundbeck A/S in May 1999 and from
an increase in revenue recognized from Kyowa Hakko due to the reimbursement of
clinical supplies produced for the MYOTROPHIN clinical studies being conducted
by Kyowa Hakko in Japan. These increases were partially offset by decreases in
revenue from Chiron and Medtronic.
For the three months ended June 30, 1999, research and development expenses
decreased slightly from the same 1998 period due primarily to the recording in
1998 of certain license fees and from a decrease in efforts associated with the
MYOTROPHIN program. These reductions were partially offset by an increase in
clinical trial expenditures in 1999 associated with the PROVIGIL program.
The increase in the selling, general and administrative area for the three
months ended June 30, 1999 as compared to the corresponding 1998 period was due
primarily to marketing expenses associated with the commercial launch of
PROVIGIL and an increase in the size of our sales force to fully support both
PROVIGIL and our collaboration with Abbott to market and further develop
GABITRIL.
The decrease in net interest income is primarily due to lower average
investment balances and the recognition of interest expense related to the
revenue-sharing notes, consisting of 11% of the principal of the notes, 6% of
net PROVIGIL sales in the United States payable to the holders of the notes and
amortization of warrant valuation and debt issuance costs.
Six months ended June 30, 1999 compared to six months ended June 30, 1998
For the six months ended June 30, 1999, shipments to customers were
$12,282,000. The return and allowance balance at June 30, 1999 was $5,030,000,
resulting in product sales of $7,252,000 for the six months ended June 30, 1999.
Other revenues increased in the 1999 period from the 1998 period due
primarily to $2,750,000 in revenue recognized under the initiation of a
collaborative agreement with Lundbeck A/S in May 1999 and from an increase in
revenue recognized from Kyowa Hakko due to the reimbursement of clinical
supplies produced for the MYOTROPHIN clinical studies being conducted by Kyowa
Hakko in Japan. These increases were partially offset by decreases in revenue
from TAP, Chiron and Medtronic.
For the six months ended June 30, 1999, research and development expenses
decreased from the same 1998 period because 1998 includes expenses for PROVIGIL
license fees and the purchase of bulk modafinil, the active drug substance in
PROVIGIL. These decreases were partially offset by increased PROVIGIL clinical
trial expenditures in 1999.
The increase in the selling, general and administrative area for the six
months ended June 30, 1999 as compared to the corresponding 1998 period was due
principally to marketing expenses associated with the commercial launch of
PROVIGIL, an increase in the size of our sales force to fully support both
PROVIGIL and our collaboration with Abbott to market and further develop
GABITRIL and the recording of a $4,300,000 provision related to our securities
litigation.
The decrease in net interest income is primarily due to lower average
investment balances and the recognition of interest expense related to the
revenue-sharing notes.
25
<PAGE>
Results of operations outlook
We expect to continue to incur operating losses unless and until product
sales exceed operating expenses. We expect that sales of PROVIGIL may be limited
since we can only market the product to treat excessive daytime sleepiness
associated with narcolepsy. We may never be able to achieve profitability solely
through sales of PROVIGIL.
Other revenues include revenue recognized under collaborative research and
development agreements and co-promotion agreements. The continuation of any of
these agreements is subject to the achievement of certain milestones and to
periodic review by the parties involved. We will not record any revenue from
Chiron in 1999 because Chiron and the Company have agreed to fund their own
MYOTROPHIN related expenses. The level of revenue to be recognized from Bristol-
Myers is subject to a number of uncertainties related to product sales,
including competition from new and existing products. We will not record any
further revenue from Medtronic due to the termination of this agreement in April
1999. Under our May 1999 collaborative agreement with Lundbeck to discover,
develop and market products to treat neurodegenerative diseases, Lundbeck will
compensate us for our research efforts and will share in joint development
costs. Under our June 1999 marketing and development agreement with Abbott, we
are to receive quarterly payments from Abbott based on a percentage of sales
achieved in the United States of GABITRIL which exceed contractually established
thresholds.
We expect to continue to incur significant expenditures associated with
marketing PROVIGIL and conducting clinical studies of PROVIGIL in disorders
other than narcolepsy. Under the agreement with Abbott, we are obligated to fund
marketing and clinical trial activities for GABITRIL. Additionally, we expect to
continue to incur substantial expenses on research and development activities
for our other products in development. We may seek sources of funding for these
research and development programs through collaborative arrangements with third
parties. We also expect interest expense to be higher in 1999 due to the
revenue-sharing notes issued in February 1999. As of June 30, 1999, Cephalon had
product returns and allowances of $5,030,000, which would result in $301,800 of
additional interest expense associated with the revenue-sharing notes if such
revenues are ultimately recognized.
We expect to have significant fluctuations in quarterly results based
primarily on the level and timing of:
. PROVIGIL sales;
. cost of PROVIGIL sales;
. contract and co-promotion revenues;
. and the occurrence of expenses.
We do not believe that inflation has had a material impact on the results
of our operations since our inception.
Subsequent Event
On August 13, 1999, Cephalon, Inc. announced that it had entered into a
purchase agreement providing for the sale, to certain initial purchasers, of
2,000,000 shares of convertible exchangeable preferred stock at $50 per share in
a private offering to certain institutional investors; this transaction is
expected to close August 18, 1999.
We have granted the initial purchasers a 45-day option to purchase up to an
additional 500,000 shares of the preferred stock. Dividends on the preferred
stock will be cumulative at the annual rate of $3.625 per share. The preferred
stock will be convertible into shares of our common stock at a conversion price
of $17.92 per share, subject to adjustment in certain circumstances. The
preferred stock will be exchangeable, at our option, into 7 1/4% convertible
debentures which will also be convertible into shares of our common stock. The
preferred stock and the debentures, if issued, will be redeemable by Cephalon at
declining redemption prices commencing in August 2001.
26
<PAGE>
We intend to use the proceeds of the offering to fund the further
development and marketing of PROVIGIL, preclinical and clinical development and
other research and development activities, the settlement of legal proceedings,
working capital, and other corporate purposes. We may also use a portion for
acquisitions, although no such acquisitions are currently contemplated, or to
prepay our revenue sharing-notes.
The securities to be offered will not be registered under the Securities
Act or any state securities laws and, unless so registered, may not be offered
or sold in the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws.
27
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 4. Submission of Matters to a Vote of Security-Holders:
The following was voted upon at the annual meeting of stockholders of
Cephalon, Inc. held in Frazer, Pennsylvania on May 21, 1999:
I. On the election of the following persons as directors:
NUMBER OF VOTES
-----------------------------------
FOR WITHHELD
--- --------
Dr. Frank Baldino, Jr. 26,757,934 460,076
William P. Egan 26,759,966 458,044
Dr. Robert J. Feeney 26,755,666 462,344
Martyn D. Greenacre 26,757,218 460,792
Kevin E. Moley 26,755,866 462,144
Bruce A. Peacock 26,758,870 459,140
Dr. Horst Witzel 26,756,966 461,044
II. To approve the amendment of the Company's Equity Compensation Program
to increase the number of shares of common stock subject to the annual
grants awarded under the plan from 3,500,000 to 4,700,000:
NUMBER OF VOTES
-----------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
20,101,629 6,937,922 178,187
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
-------
No. Description of Exhibit
--- ----------------------
*10.5(a) Supply Agreement, dated January 20, 1993, between
Cephalon, Inc. and Laboratoire L. Lafon (Exhibit
10.1)(1).
*10.5(b) License Agreement, dated January 20, 1993, between
Cephalon, Inc. and Laboratoire L. Lafon (Exhibit
10.2)(1).
*10.5(c) Trademark Agreement, dated January 20, 1993, between
Cephalon, Inc. and Genelco S.A. (Exhibit 10.3)(1).
*10.5(d) Amendment to License Agreement and Supply Agreement,
dated July 21, 1993, between Cephalon, Inc. and
Laboratoire L. Lafon (Exhibit 10.1)(2)(3).
*10.5(e) Amendment to Trademark Agreement, dated July 21, 1993,
between Cephalon, Inc. and Genelco S.A. (Exhibit
10.2)(3).
*10.5(g) Amendment No. 4 to License Agreement and Supply
Agreement dated August 23, 1995, between Cephalon, Inc.
and Laboratoire L. Lafon (Exhibit 10.5(g))(4).
28
<PAGE>
Exhibit
-------
No. Description of Exhibit
--- ----------------------
*10.13 Marketing and Development Collaboration Agreement
between Cephalon, Inc. and Abbott Laboratories Inc.,
dated June 10, 1999 (5).
*10.14 Joint Research, Development and License Agreement
between Cephalon, Inc. and H. Lundbeck A/S, dated May
28 1999 (5).
*10.15 Amended and Restated Copromotion Agreement between
Bristol-Meyers Squibb Company and Cephalon, Inc., dated
January 1, 1999 (5).
* Filed herewith.
(1) Originally filed as an Exhibit to the Registration Statement on Form S-
3 (Registration No. 33-58006) filed on February 8, 1993.
(2) Originally filed as an Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.
(3) Originally filed as an Exhibit to the Registration Statement on Form S-
3 (Registration No. 33-73896) filed on January 10, 1994.
(4) Orignally filed as an Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
(5) Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
(b) Reports on Form 8-K:
During the quarter ended June 30, 1999, the Registrant filed
a Current Report on Form 8-K on June 14, 1999 for the following
events:
(i) On June 1, 1999, Cephalon, Inc. announced that it has entered
into a collaborative agreement with H. Lundbeck A/S to
discover, develop and market products to treat
neurodegenerative diseases.
(ii) On June 7, 1999, Cephalon, Inc. announced that it has agreed to
the terms of a proposed settlement of securities litigation
filed in 1996 following the announcements of results of
clinical studies of MYOTROPHIN(R) (mecasermin) Injection for
the treatment of amyotrophic lateral sclerosis.
(iii) On June 10, 1999, Cephalon, Inc. announced that it has entered
into a collaborative agreement with Abbott Laboratories to
market and further develop GABITRIL(R) (tiagabine
hydrochloride), one of Abbott's anti-epileptic drugs, in the
United States.
(iv) On June 11, 1999, Cephalon, Inc. announced that Bruce A.
Peacock, executive vice president and chief operating officer
will leave the Company to become president and chief operating
officer of Orthovita Inc. in Malvern, PA.
29
<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.
CEPHALON, INC.
(Registrant)
August 16, 1999 By /s/ Frank Baldino, Jr., Ph.D.
---------------------------------
Frank Baldino, Jr., Ph.D.
President, Chief Executive Officer and
Director
(Principal executive officer)
By /s/ J. Kevin Buchi
-----------------------
J. Kevin Buchi
Senior Vice President, Finance and Chief
Financial Officer
(Principal financial and accounting officer)
30
<PAGE>
Exhibit 10.5a
LABORATOIRE L. LAFON - CEPHALON
SUPPLY AGREEMENT
BETWEEN:
CEPHALON, INC., a Delaware corporation, with its head office and principal place
of business at 145 Brandywine Parkway, West Chester, PA 19380, U.S.A.
(hereinafter called CEPHALON),
AND
LABORATOIRE L. LAFON, with registered office at 19, avenue du Professeur-Cadiot,
F-94701 Maisons-Alfort, France, (hereinafter called LAFON),
WHEREAS, LAFON and CEPHALON intend to enter into a License Agreement by which
CEPHALON is to receive a license to make, have made, market and otherwise sell
pharmaceutical products containing the compound modafinil, which is protected by
patents and certain other intellectual property rights owned by LAFON
(hereinafter called the "License Agreement"); and
WHEREAS, LAFON is prepared and has the right to sell modafinil, a
pharmaceutically active compound (hereinafter called the Compound) and CEPHALON
wishes to purchase the Compound from LAFON.
THE PARTIES AGREE AS FOLLOWS:
1. Definitions.
All capitalized terms not otherwise defined herein shall be used as defined in
the License Agreement. In addition, for purposes of this Agreement, the
following terms shall have the meanings set forth below.
a) "Compound" means modafinil and/or any other similar compound, isomer
or salt thereof, and manufactured in accordance with the
Specifications.
b) "Specifications" means the specifications for manufacturing the
Compound set forth in Schedule A attached hereto and made part hereof,
with such modifications thereof as the parties may mutually agree upon
in writing.
c) "FDA Standards" means the facility license requirements and the Good
Manufacturing Practice regulations of the
-1-
<PAGE>
U.S. FDA applicable to the Compound or the Manufacturing Facility.
d) "Manufacturing Facility" means the manufacturing facility of LAFON,
currently in Maisons-Alfort, France.
e) "Cephalon" shall mean Cephalon, Inc. and any entity controlled by
Cephalon, including any subsidiary or other entity as to which
Cephalon owns at least 50% of the voting stock or the right to receive
at least 50% of the profits.
2. Product Supply.
LAFON will manufacture Compound in accordance with Schedule A and will furnish
CEPHALON with its requirements of the Compound and will sell such Compound to
CEPHALON, directly or through a designated seller, and CEPHALON will purchase
from LAFON (or such designated seller) all such quantities of the Compound as
CEPHALON (and its sublicensees) may require in order to make or have made the
Licensed Products during the term of this Agreement. LAFON shall not supply
Compound to any person (other than CEPHALON or its sublicensees) to develop,
make, have made or sell any product in the Territory under the License
Agreement.
3. Pricing.
The Compound shall be supplied to CEPHALON EXW LAFON's Manufacturing Facility in
Maisons - Alfort, France, at the following prices:
a) All quantities of Compound and matching placebo necessary to CEPHALON
for carrying clinical tests in calendar year 1993 and thereafter up to
the date of the first FDA approval in the U.S.A. of a Licensed Product
including the Compound as an active ingredient, shall be supplied free
of charge. The specifications for the Compound and matching placebo in
finished tablet form shall be agreed to by the parties in writing.
b) All quantities of the Compound other than those mentioned under (a)
above shall be supplied at a price equal to eleven percent (11%) of
CEPHALON's Net Sales of Licensed Products in the Territory, provided
that if CEPHALON's finishing costs (including formulation, tabletting
and packaging costs), exceed 3% of Net Sales, CEPHALON and LAFON shall
meet to determine whether an adjustment in the price of the Compound
under this Agreement is appropriate.
To that effect, the parties shall agree on a provisional price for
each calendar year, that will be
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<PAGE>
fixed not later than October 1 of the preceding calendar year. This
price will be compared with actual results within two months from the
end of the calendar year concerned and the difference shall be added
or subtracted from the next payment due by CEPHALON to LAFON for
delivery of the Compound.
CEPHALON shall inform immediately LAFON of any variation of its
selling price, so that the parties may agree on a new provisional
price.
c) LAFON acknowledges that CEPHALON has the sole right to set prices for
the Licensed Products, and that nothing in this Agreement is intended
to give LAFON any right to affect those prices.
4. Estimates.
During the month preceding each calendar quarter, CEPHALON will provide LAFON
with a written estimate of the quantity of the Compound which CEPHALON desires
to purchase during that calendar quarter. CEPHALON will place firm orders for
the quantities to be purchased at least forty five (45) days prior to the
requested delivery date. The parties shall agree on the delivery date of
nonforecasted quantities.
5. Invoices.
LAFON shall invoice CEPHALON for the Compound when shipped. Payment for each
shipment shall be made in U.S. Dollars within thirty (30) days from the date of
invoice.
6. Shipping.
LAFON will choose a commercially reasonable method of air shipment and carrier
for each shipment of the Compound, unless CEPHALON has specified a particular
carrier or method of shipment in its purchase order. Title and risk of loss,
delay or damage in transit shall pass to CEPHALON upon delivery by LAFON of the
Compound to a common carrier at the Manufacturing Facility.
7. Warranties and Covenants.
a) LAFON warrants that each shipment of the Compound shall be
manufactured, stored, packaged, labelled, and controlled by LAFON in
accordance with the Specifications and applicable FDA Standards. LAFON
will provide to CEPHALON concurrently with each shipment of Compound a
Certificate of Analysis stating that the Compound conforms to the
Specifications and any applicable FDA Standards. LAFON shall retain
samples of the Compound in amounts to be mutually
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<PAGE>
agreed to by the parties. LAFON shall store such samples for a period
ending one (1) year beyond the expiry date of the Compound. Specific
quality standards and release test methods will be agreed to by the
parties after the execution of this Agreement and appended as Schedule
B hereto at such time.
b) In the event LAFON determines to make any changes or modifications to
the manufacturing process of the Compound, LAFON agrees to notify
CEPHALON at least six months prior to implementing such changes or
modifications and will submit promptly to the U.S. FDA any necessary
modifications to its Drug Master File in order that CEPHALON can
obtain any necessary approval for such change or modification from the
U.S. FDA. LAFON agrees that it will not implement any such change or
modification until receipt of such FDA approval, if prior FDA approval
is required. In the event government approval is required, LAFON will
continue to supply CEPHALON with Compound in conformity with then
existing conditions of Compound process, manufacturing, formulation or
specifications until CEPHALON notifies LAFON that governmental
approval has been received.
c) In the event LAFON intends to utilize a third party to manufacture the
Compound, LAFON shall notify CEPHALON of such intention, and shall
comply with paragraph 7(b) prior to utilizing any third party to
manufacture the Compound. LAFON shall be responsible for all acts or
omissions of any such third party under this Agreement.
d) LAFON shall notify CEPHALON of any complaints received regarding the
manufacture or quality of Compound and any action taken in regard
thereto.
8. Right of Rejection.
If, within thirty (30) days of CEPHALON's receipt of any quantity of the
Compound, CEPHALON does not notify LAFON that the relevant quantity does not
comply with the Specifications or FDA Standards therefor and submit a sample
thereof, that quantity shall be deemed to comply in all respects with the
Specifications and FDA Standards therefor and CEPHALON shall have no further
right to reject the same.
If CEPHALON does notify LAFON within such thirty (30) day period that the
Compound does not comply with the Specifications or FDA Standards and does
submit a sample thereof, LAFON shall check the conformity to the Specifications
and FDA Standards of such sample. In case LAFON confirms that the sample does
not conform, then CEPHALON shall have properly rejected such shipment of the
Compound and CEPHALON shall receive a credit for any amounts
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<PAGE>
already paid to LAFON for the rejected Compound against the amount due for the
next shipment of the Compound accepted by CEPHALON, or shall be reimbursed for
such payment with interest at the prevailing prime rate per annum, at the option
of CEPHALON. At the request of LAFON, CEPHALON shall either return or destroy
the rejected Compound, at the cost and expense of LAFON. In case the opinions of
CEPHALON and LAFON may differ on the conformity or nonconformity of the product
to Specifications or FDA Standards, the parties shall meet in order to settle
the difference amicably. If the difference cannot be settled amicably, it will
be submitted to an independent expert to be designated by both parties and whose
opinion shall be final. The cost of the expert shall be borne by the losing
party.
9. Compliance with Laws
a) LAFON will maintain the manufacturing, production and control records
for the Compound for the periods required by applicable FDA Standards.
b) LAFON hereby agrees that the manufacture, packaging, labelling and
shipment of the Compound into the Territory shall be in compliance
with all applicable laws, rules and regulations, and agrees to so
certify on its invoices if so directed by CEPHALON. In order to
ascertain on a preliminary basis the degree of LAFON's compliance with
FDA standards, CEPHALON and LAFON shall agree on a consultant who will
conduct an audit of the Manufacturing Facility to ensure its
compliance with Good Manufacturing Practices and other applicable FDA
Standards. The report of the consultant shall be furnished in writing
to CEPHALON and LAFON, but it is understood that in no event shall
CEPHALON be entitled to receive any confidential information of LAFON,
including any such information related to LAFON's manufacturing
process. CEPHALON and LAFON shall share the fees and expenses of the
consultant equally. The audit shall be conducted prior to the initial
production of Compound for clinical purposes, and also shall be
conducted following any change in LAFON's manufacturing process
permitted by paragraph 7(b) and at such other times as the parties may
agree to (but not more than once each year).
c) LAFON shall obtain and maintain any establishment license, facility
license or other license, authorization or approval required by the
FDA or any other applicable governmental authority for the manufacture
of the Compound as contemplated hereunder. The Manufacturing Facility
will be qualified as a Good Manufacturing Practice Facility under the
FDA Standards
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<PAGE>
at the time of the first production of Compound under this Agreement
for clinical purposes.
d) LAFON shall prepare, file and maintain a Drug Master File with the FDA
with respect to the Compound. At CEPHALON's request, LAFON will
authorize the FDA to incorporate by reference the Drug Master File for
use in connection with any product approval sought by CEPHALON which
relates to the Compound.
10. Force Majeure.
LAFON shall not be liable to CEPHALON for failure or delay in supply of the
Compound hereunder, and CEPHALON shall not be liable for failure or delay in
taking supply of material hereunder, if such failure or delay is due to force
majeure. Force majeure includes, but is not limited to, strikes, labor disputes,
riots, war, acts of God, invasion, fire, explosion, floods, delay of carrier,
shortage or failure the supply of material, acts of government or government
agencies or instrumentalities, and any other similar circumstances beyond the
control of the party concerned.
11. Compound Reserves.
CEPHALON shall at any moment, have in its possession a stock of Compound
covering its requirements of at least [three (3) months.]
If or to the extent LAFON cannot supply the demand of CEPHALON for the Compound
and if CEPHALON's stock is not sufficient to cover the requirements during the
incapacity of LAFON to supply, LAFON shall grant to CEPHALON, on its request, a
right to make the Compound or to purchase the Compound from third parties,
subject to the prior approval by LAFON of the quality of such Compound
manufactured by CEPHALON or such third parties, to be notified in writing.
12. Term.
This Agreement shall take effect on the date of its complete execution and shall
remain, subject to the provisions of Paragraph 13 hereof, in full force and
effect until the expiration or earlier termination of the License Agreement.
In the event of expiration of this Agreement and the License Agreement at their
stated term, LAFON shall, upon request of CEPHALON, promptly enter in bona-fide
negotiations with the aim to conclude a contract which secures the supply of the
Compound to CEPHALON under conditions giving due regard to the circumstances
then prevailing.
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<PAGE>
13. Termination.
Either party to this Agreement shall have the right to terminate this Agreement
before its stated term, by giving written notice of termination, such
termination effective upon the giving of such notice, in the event that the
other party shall commit a breach of any of the substantial terms of this
Agreement and shall not have cured such breach within two (2) months after
receipt of a written notice by the aggrieved party,
In addition, CEPHALON may terminate this Agreement, at its option, for any
reason not specified above, upon thirty (30) days written notice to LAFON.
If this Agreement is terminated by CEPHALON in accordance with paragraph 13
following a breach of this Agreement by LAFON, then CEPHALON's license under the
License Agreement shall automatically be expanded, for no additional
compensation, to include the exclusive license in the Territory under LAFON's
patents and know-how to make and have made the Compound for purposes of the
License Agreement.
The right of either party to terminate this Agreement as herein provided shall
not be affected in any way by its waiver of, or failure to take action with
respect to any previous default.
14. Indemnification.
a) LAFON will indemnify and hold harmless CEPHALON and its affiliates,
and their respective employees, officers, directors, and agents (a
"CEPHALON Indemnified Party") from and against any and all liability,
loss, damages, costs or expenses (including reasonable attorneys'
fees) which the CEPHALON Indemnified Party may incur, suffer or be
required to pay that results from or arises in connection with (i) any
breach by LAFON of any representation, warranty or covenant hereunder,
including without limitation any breach of LAFON's warranties
contained in paragraph 7 above, (ii) the contamination or adulteration
of the Compound prior to its shipment to CEPHALON, or (iii) the
enforcement by a CEPHALON Indemnified Party of any of the foregoing.
b) CEPHALON will indemnify and hold harmless LAFON and its affiliates and
their respective employees, officers, directors, and agents (a "LAFON
Indemnified Party") from and against any and all liability, loss,
damages, costs, or expenses (including reasonable attorneys' fees)
which the LAFON Indemnified Party may incur, suffer or be required to
pay resulting from or arising in connection with any breach by
CEPHALON of its obligations hereunder.
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<PAGE>
c) The obligations of the indemnifying party under paragraphs a) and b)
above are conditioned upon the prompt notification to the indemnifying
party of any of the aforementioned suits or claims in writing within
thirty (30) days after receipt by the party's general counsel's office
of notice by the indemnified party of such suit or claim. The
indemnifying party shall have the right and obligation to defend any
such suit or claim. The indemnified party may participate in the
defense of such suit or claim at its sole cost and expense. This
provision for indemnification shall be void and there shall be no
liability against a party as to any suit or claim for which settlement
or compromise or an offer of settlement or compromise is made without
the prior consent of the indemnifying party.
15. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the parties hereto. This Agreement cannot be assigned by any of
the parties hereto without the prior approval of the other party in writing;
provided, however, that either party may, without such consent, assign this
Agreement in connection with the transfer or sale of all or substantially all of
its business or in the event of its merger or consolidation with another
company. Any purported assignment in violation of the preceding sentence shall
be void. Any permitted assignee shall assume all obligations of its assignor
under this Agreement. No assignment shall relieve either party of responsibility
for the performance of any accrued obligation which such party then has
hereunder.
Notwithstanding the foregoing, if prior to FDA approval of the initial Licensed
Product, CEPHALON (i) sells 60% or more of its tangible assets, or (ii)
participates in or becomes subject to a merger in which it is not the surviving
entity, the transaction may proceed without the consent of LAFON but, within
ninety (90) days after such event, the parties (in the case of CEPHALON, any
successor to CEPHALON) shall meet to review the development and
commercialization plans for the Licensed Product of the successor entity. If the
successor to CEPHALON does not wish to continue aggressively the development and
commercialization plans for the Licensed Products on the same schedule as
CEPHALON, it shall, upon request of LAFON, sublicense its rights under this
Agreement (subject to the approval of LAFON in accordance with Article II), for
a sublicense fee of no more than l.5X CEPHALON's investment in the development
of Licensed Products to the date of such sublicensing in addition to any amounts
due to LAFON hereunder.
In case CEPHALON would grant sublicenses of its rights under the License
Agreement, CEPHALON agrees that it will obtain the prior agreement of such
sublicensees to abide with the provisions of
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<PAGE>
this Supply Agreement. In this case the parties will agree within a separate
Agreement on the supply of the Compound to such sublicensees on the same terms
as this Agreement.
16. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
France.
17. Modification or waiver
No modification or waiver of any of the provisions of this Agreement shall be
valid unless in writing signed by the parties hereto or signed by the party
against whom enforcement of such modification or waiver is sought.
18. Notices
Notice hereunder shall be deemed sufficient if given by registered air mail,
postage prepaid, and addressed to the party to receive such notice at the
address given above, or at such other address as may hereafter be designated by
notice in writing.
19. Counterparts
This Agreement shall become binding when any one or more counterparts hereof,
individually or taken together, shall bear the signatures of LAFON and CEPHALON.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original as against any party whose signature appears thereon, but
all of which together shall constitute one and the same instrument.
20. Entire Agreement
This Agreement contains all of the covenants, terms and undertakings of the
parties with respect to the particular subject matter hereof and all prior
agreements among the parties relating to the subject matter hereof, whether
written or oral, are merged herein and shall be of no force and effect. This
Agreement cannot be changed, modified or discharged except by an instrument in
writing signed by both parties hereto.
21. Severability.
In case an individual clause of this Agreement would be or would become legally
invalid, such defect shall not affect the validity of the total Agreement or of
other clauses contained therein, except if such a defect makes the contract more
burdensome than contemplated for any of the parties; in such a case, they would
consult in order to find an equitable solution.
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<PAGE>
22. Dispute Resolution.
Any difference between the parties hereto concerning the interpretation or
application of this Agreement which could not be resolved amicably shall be
finally settled in accordance with the Rules of Conciliation and Arbitration of
the International Chamber of Commerce by three arbitrators designated in
accordance with said Rules. This Agreement shall be construed, and the rights of
the parties determined, in accordance with the French laws. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof. The
place of arbitration will be Geneva.
LABORATOIRE L. LAFON CEPHALON, INC.
By: /s/ F.C. Lafon By: /s/ Frank Baldino
------------------------------- -------------------------
Name: F.C. Lafon Name: Dr. Frank Baldino, Jr.
Title: Chief Executive Officer Title: President
Date: 1/20/93 Date: 1/20/93
ATTEST: ATTEST:
By: /s/ William R. Matthew By: /s/ Jack Lief
------------------------------- -------------------------
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SCHEDULE A
SPECIFICATIONS AND ROUTINE TESTS
MODAFINIL
CHARACTERISTICS
- ---------------
Solubilities : White crystalline powder
: Very slightly soluble in water
Slightly soluble in alcohol R
Soluble in methanol R
IDENTIFICATION
- --------------
A - Infra-red spectrum : Positive
B - T.L.C. : Positive
C - H.P.L.C. : Positive
D - Coloured reaction : Positive
TESTS
- -----
- - Aspect of the S solution : Limpid and colourless
- - Related substances : 0.5 per cent max. per individual
impurity
- - Research of organic impurities : 1.0 per cent max.
- - Heavy metals : 20 ppm max.
- - Water content : 0.5 per cent max.
- - Sulphuric ashes : 0.2 per cent max.
ASSAY
- -----
By bromine 0, lN : 98.0 to 101.5 per cent
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Exhibit 10.5b
LABORATOIRE L. LAFON - CEPHALON
LICENSE AGREEMENT - OUTLINE
Parties
Background
ARTICLE I - Definitions
1. Territory
2. Patents - Appendix A
3. Licensed Product
4. Combination Product
5. Improvements
6. Net Sales
7. Technical Information
8. Exclusive License
9. Compound
ARTICLE II - Grant of License
ARTICLE III - Registration of Licensed Product
1. Technical Information Furnished by Lafon
2.a Reports on Licensed Product
2.b Notification concerning adverse reactions
2.c Notification concerning governmental actions
2.d Recalls and withdrawals
3.a Lafon Assistance on Applications for Approval to Market
CEPHALON to carry on local trials and regulatory filings at
its expenses
3.b Estimated Time Frame for CEPHALON to obtain Market Approval
3.c Lafon Right to terminate if Market Approval Not Obtained
Within Estimated Time Frame or on Failure to File IND
3.d Termination on failure to Market Within Reasonable Time
after Receiving Approval
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ARTICLE IV - Confidentiality
1. Confidential Technical Information
2. Reasonable Security Measures
3. Lafon Obligation to Hold CEPHALON Reports Confidential
4. Technical Information Identified as Confidential
ARTICLE V - Fees, Royalties and Royalty Payment Terms
l.a License Fee
l.b Royalty Rate on Net Sales of Licensed Product
2. Royalty Payable on Net Sales of Licensed Product for
________ from Marketing in Territory
3. Combination Product Royalty
4. Royalty Payment and Statement
5. No Multiple Royalties
6. No Royalties on Sales Between CEPHALON and sublicensees
7. Taxes on Royalty Payments
8. Sublicensee Payment on Behalf of CEPHALON
9. Records and Audit
ARTICLE VI - Duration and Termination
1. Duration
2. Termination for Breach
3. Survival of Obligations
4. Return of Confidential Information
ARTICLE VII - Patents and Improvements
1. LAFON Obligation to Maintain and Prosecute Patents
2. Third Party Infringement of Licensed Patents
3. Defense of Patent Infringement Claims
4. Unlicensed Competition - Royalty Relief
5. Infringement of Third Party Patents - Royalty Credit
6. Improvements
7. Patent term extensions
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* The confidential material contained herein has been
- omitted and has been separately filed with the Commission.-
<PAGE>
ARTICLE VIII - Representations, Warranties and Indemnification
1. LAFON Representations and Warranties
2. CEPHALON Representations and Warranties
3.a LAFON Indemnification
3.b CEPHALON Indemnification
3.c Conditions to Indemnification
ARTICLE IX - Miscellaneous Provisions
1. Successors and Assigns
2. Governing Law
3. Modification or waiver
4. Notices
5. Supply of Compound
6. Force Majeure
7. Counterparts
8. Entire Agreement
9. Severability
ARTICLE X - Arbitration
Execution
APPENDIX A - PATENTS
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<PAGE>
LICENSE AGREEMENT
AGREEMENT made this _____ day of January, 1993, by and between LABORATOIRE L.
LAFON, a French corporation (hereinafter called "LAFON") - 19, avenue du
Professeur-Cadiot - 94701 Maisons-Alfort - France and CEPHALON, INC., a
Delaware corporation (hereinafter called "CEPHALON"), 145 Brandywine Parkway,
West Chester, PA 19380, U.S.A.
WITNESSETH:
WHEREAS, LAFON has discovered and developed an original compound, modafinil
(INN) for which it owns patent rights in the U.S.A., such compound being useful
in the field of the central nervous system; and
WHEREAS, CEPHALON is interested in acquiring a license from LAFON in order to
develop, promote and market in the U.S.A. and Mexico products containing
modafinil as an active ingredient; and
WHEREAS, LAFON is agreeable to grant CEPHALON a license under terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties, in consideration of their respective covenants
contained herein, agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement the following words and phrases shall have the
following meanings:
1. "Territory" shall mean the territory of U.S.A., its territories and
possessions, and Mexico.
2. "Patents" shall mean (i) patents and patent applications now or hereafter
owned or controlled by LAFON in the Territory, including but not limited to
those patents listed on Appendix A attached hereto, which cover the
Compound or a Licensed Product, or its method of manufacture or use, and
(ii) any continuation, continuation in part, divisional or reissue patent
application or patent of addition, or patent filed thereon and any
extension thereof and any patents issuing therefrom.
3. "Licensed Product" shall mean any pharmaceutical specialty (whether sold by
prescription, over-the-counter, or otherwise) containing the Compound.
4. "Combination Product" shall mean any Licensed Product containing the
Compound and one or more other pharmacologically active ingredients.
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5. "Improvements" shall mean compositions and processes pertaining directly to
the Licensed Product, and new techniques of using, applying or
administering the Licensed Product.
6. "Net Sales" shall mean the gross sales proceeds derived by CEPHALON and/or
its sublicensees from the sale of the Licensed Product in the Territory
while this Agreement is in effect, after deducting normal and customary
cash and trade discounts, returns, allowances, transportation and insurance
charges or allowances, if shown on the invoice for the sale, and sales,
excise, turnover or similar taxes, if any, paid or allowed by CEPHALON,
and/or its sublicensees directly in respect of such sales.
7. "Technical Information" shall mean all information, inventions, or
Improvements relating to the Licensed Product now or hereafter owned or
controlled by LAFON, including but not limited to, chemical, biological,
physical, pharmacological and toxicological data, animal and clinical
studies, data and know-how concerning the manufacturing of Licensed
Product from the Compound including but not limited to manufacturing
processes and procedures.
8. "Exclusive License" shall mean that the right to develop, make, have made
for it, use and sell the Licensed Product from the Compound in the
Territory is granted to CEPHALON solely and exclusively (even as to LAFON
and its affiliates).
9. "Compound" shall mean modafinil and/or any other similar compound, isomer
or salt thereof.
10. "Cephalon" shall mean Cephalon, Inc. and any entity controlled by Cephalon,
including any subsidiary or other entity as to which Cephalon owns at least
50% of the voting stock or the right to receive at least 50% of the
profits.
ARTICLE II - GRANT OF LICENSE
LAFON hereby grants to CEPHALON an Exclusive License, including the exclusive
right to practice under Patents and Technical Information, to make or have made
for it the Licensed Products and/or Combination Products from the Compound, and
to use and sell Licensed Products throughout the Territory. The license granted
hereunder does not include the right to make or have made the Compound, except
that the license hereunder shall automatically be expanded to include such right
to the extent provided in paragraphs 11 or 13 of the Supply Agreement.
CEPHALON shall have the right to grant sublicenses as long as CEPHALON is
licensed hereunder, subject to the prior approval of
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<PAGE>
LAFON, which shall not be unreasonably withheld. CEPHALON shall require its
sublicensees to abide by CEPHALON's obligations under this Agreement, and shall
be liable to LAFON for the thorough application by its sublicensees of such
obligations. CEPHALON shall forward to LAFON a copy of each such sublicense
within thirty (30) days after execution thereof.
ARTICLE III - REGISTRATION OF LICENSED PRODUCT
1. Upon execution of this Agreement and on a continuing basis, LAFON shall
promptly furnish to CEPHALON all available Technical Information. LAFON
will ensure that any new preclinical or clinical data included in the
Technical Information received or generated after execution of this
Agreement is provided to CEPHALON promptly in order that it may be
included, if necessary, in the Investigational New Drug Exemption (IND) or
New Drug Approval (NDA) application. LAFON agrees to execute such documents
as CEPHALON may reasonably request in connection with such IND or NDA
applications.
2.a. During the term of this Agreement LAFON and CEPHALON also shall transmit
to each other reports regarding the development of the Licensed Product, at
least semi-annually.
2.b. During the term of this Agreement LAFON and CEPHALON agree to notify the
other party immediately, in English, of any information known to it
concerning any serious or unexpected side effect, injury, toxicity, or
sensitivity reaction, or any unexpected incidents, and the severity
thereof, associated with the clinical uses, studies, investigations, tests
and marketing of a Licensed Product or any product of LAFON or a licensee
of LAFON that contains the Compound, whether or not determined to be
attributable to the Compound. "Serious", as used in this paragraph, refers
to an experience which is life-threatening or results in death, permanent
or substantial disability, inpatient hospitalization, or prolongation of
hospitalization, or produces a congenital anomaly or cancer, or is the
result of an overdose. "Unexpected", is one that is not listed in the
current labeling for the Licensed Product and includes an event that may be
symptomatically and pathophysiologically related to an event listed in the
labeling but differs from the event because of increased frequency, greater
severity or specificity. Each party shall cooperate with the other to
resolve complaints received by the other party with respect to any Licensed
Products.
2.c. During the term of this Agreement, each party further agrees to immediately
notify the other party, in English, about any information such party
received (including information received from a licensee or a sublicensee
that is known to
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<PAGE>
such party) regarding any threatened or pending action by a governmental
agency which may affect the safety and efficacy claims of a Licensed
Product or the continued testing or marketing of the Licensed Product. Upon
receipt of any such information, LAFON shall consult with CEPHALON in an
effort to arrive at a mutually acceptable procedure for taking appropriate
action; provided, however, that nothing contained herein shall be construed
as restricting either party's right to make a timely report of such matter
to any government agency or take other action that it deems to be
appropriate or required by applicable law or regulation.
2.d. In the event (i) any governmental or regulatory authority issues a request,
directive, or order that any Licensed Product be recalled or withdrawn from
the Territory, or (ii) a court of competent jurisdiction in a final,
nonappealable judgment orders a recall or withdrawal of any Licensed
Product from the Territory, or (iii) LAFON and CEPHALON agree that a
Licensed Product should be recalled or withdrawn from the Territory, the
parties shall take all appropriate corrective actions to effect the recall
or withdrawal. The costs and expenses of notification and destruction or
return of the recalled or withdrawn Product shall be borne by LAFON in the
Territory, if the recall or withdrawal resulted from a failure by LAFON to
comply with the manufacturing specifications or other breach by LAFON
under this Agreement or the Supply Agreement. In all other cases, CEPHALON
shall pay the costs of recall or withdrawal of the Licensed Product in the
Territory.
3.a. LAFON shall cooperate with CEPHALON and render assistance in connection
with the filing of applications with any governmental authority or agency
in the Territory which may be required for CEPHALON to obtain approval to
market the Licensed Product in the Territory. Further, LAFON agrees to
deliver a letter of authorization or other documentation to any
governmental authority or agency in the Territory to enable CEPHALON to
file, refer to or incorporate by reference all of LAFON's Technical
Information including data on file with any such agency or authority
concerning the Licensed Product in a Drug Master File or otherwise. In the
event LAFON supplements or modifies any such Drug Master File, LAFON agrees
to notify CEPHALON promptly that supplements or modifications have been
made.
3.b. CEPHALON shall use all reasonable efforts, consistent with full and
complete laboratory and clinical evaluations and standards for new drug
product development, applicable in the Territory, to obtain all approvals
which may be required to permit the sale of the Licensed Product in the
Territory. To that end, CEPHALON shall conduct, at its own expense, all
necessary trials in the Territory and proceed to regulatory
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<PAGE>
filings for all current and future indications of the Licensed Products.
CEPHALON will endeavor to obtain such approvals in the Territory as
expeditiously as possible. Within six (6) months from the date of this
Agreement, CEPHALON will endeavor to file an application for
Investigational New Drug Application ("IND") with the U.S. Food and Drug
Administration (the "FDA") with respect to a Licensed Product. In addition,
CEPHALON will endeavor to file a New Drug Application ("NDA") with the FDA
within two (2) years from the date CEPHALON files the IND for such Licensed
Product, provided that CEPHALON shall not be deemed to be in breach of
these obligations if the FDA requires CEPHALON to submit any additional
preclinical data other than the data furnished by LAFON to CEPHALON
immediately following the execution of this Agreement, or for any other
reason outside of CEPHALON's control.
CEPHALON and LAFON shall negotiate in good faith to determine the structure
of any multi-country trials to be initiated in connection with future
indications of a Licensed Product, as well as the appropriate share of
costs to be funded by CEPHALON, taking into account the relative benefits
of the indication to each party.
3.c. If CEPHALON fails to make all reasonable efforts to file an IND or NDA for
a Licensed Product within the time periods specified and as provided in
paragraph 3.b above, then LAFON may as its sole remedy terminate this
Agreement in accordance with Article VI, paragraph 2. The time periods
specified in paragraph 2 of Article VI may be extended upon the mutual
consent of the parties.
3.d. If CEPHALON fails to market the Licensed Product within three (3) months of
the effective date of approval of an application including price
reimbursement approval (and assuming receipt from LAFON of Compound under
the Supply Agreement), to permit such sale, upon sixty (60) days notice,
LAFON may as its sole remedy, terminate CEPHALON's Exclusive License in the
Territory, and upon LAFON's request (and to the extent permitted by law),
CEPHALON will thereupon transfer its rights and approvals concerning the
Licensed Product in the Territory to LAFON or its designated assignee.
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ARTICLE IV - CONFIDENTIALITY
1. During the term that this Agreement is in effect and after its termination
or expiration, CEPHALON shall keep the Technical Information it receives
from LAFON concerning the Licensed Product confidential and shall not use
or disclose it to others except:
(i) for carrying out the purpose of this Agreement; or
(ii) for furnishing data to governmental agencies as required; or
(iii) except to the extent that such information is:
(a) in the literature or generally known to the public prior to the
date of disclosure by LAFON to CEPHALON or becomes a part of the
literature or generally known to the public after the disclosure
through no fault of CEPHALON;
(b) known to CEPHALON prior to the date of disclosure by LAFON;
(c) disclosed to CEPHALON by a third party legally entitled to
disclose such information to CEPHALON; or
(d) disclosed to third party consultants or agents who are necessary
or desirable for evaluation, registration and marketing of the
Licensed Product, if such third parties agree to keep the
information confidential to the same extent required by this
Agreement.
In addition, LAFON and CEPHALON agree that they will not disclose to any
third party the content, terms and conditions of this Agreement, except as
may be required by the U.S. securities and other applicable laws and except
as set forth above in this paragraph l(iii)(a).
2. LAFON and CEPHALON shall take all reasonable steps to eliminate the risk of
disclosure of each other's confidential information, including, without
limitation, ensuring that only employees with a need to know the
confidential information have access thereto and that such employees shall
sign or shall have signed confidentiality agreements to treat the
information confidentially.
3. During the term of this Agreement LAFON agrees to be reciprocally bound by
the above confidentiality as to any reports, data or other information
furnished to it by
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CEPHALON under this Agreement, provided LAFON and its licensees may use any
information contained in such reports as required to secure regulatory
approval to market the Licensed Product in any country not included in the
Territory. After the expiration or termination of this Agreement LAFON
agrees to be reciprocally bound by the above confidentiality obligations
with respect to any business or financial information of CEPHALON furnished
by CEPHALON.
4. All documents containing Technical Information and furnished by LAFON to
CEPHALON shall be identified prominently as "CONFIDENTIAL".
ARTICLE V - FEE, ROYALTIES AND PAYMENT TERMS
1. For and in consideration of the license granted herein CEPHALON shall pay
to LAFON the following license fees and royalties:
a. CEPHALON shall pay to LAFON the following license fees:
- one million US dollars (USD 1.0 million) upon signature of this
Agreement,
- one million US dollars (USD 1.0 million) - First Anniversary of
the date of this Agreement,
- one million US dollars (USD 1.0 million) - Second Anniversary,
- One million US dollars (USD 1.0 million) - Third Anniversary,
- Two million US dollars (USD 2.0 million) - upon the first U.S.
FDA approval of a Licensed Product.
b. In addition, CEPHALON shall pay to LAFON a royalty on Net Sales of
Licensed Products by CEPHALON and/or its sublicensees, calculated at
the rate of five per cent (5%) during the first three years from the
date of first commercial sale of the first Licensed Product in the
Territory, and seven per cent (7%) thereafter.
2. Royalties shall be payable on Net Sales of Licensed Product in the
Territory for a period of fifteen (15) years from the date of the first
commercial sale of the first Licensed Product in the Territory. Thereafter,
CEPHALON's license
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granted under Article II hereof shall be fully paid-up and irrevocable as
to all Licensed Products.
3. Net Sales for each Combination Product shall be determined by multiplying
the Net Sales of such Combination Product by a fraction; the numerator of
the fraction shall be the cost to CEPHALON of the active substance supplied
by LAFON, and the denominator shall be the total cost to CEPHALON of all
active ingredients contained in such Combination Product but in no event
shall the royalty be decreased to less than one-half (1/2) of the amount
obtained in applying the royalty rate under l.b above to the Net Sales of
the Combination Product. Costs shall be determined according to CEPHALON's
accounting methods for determining the cost of its pharmaceutical products.
4. Royalty payments shall be made in US Dollars within sixty (60) days after
the last day of June and December for royalties accruing on sales during
the six (6) preceding calendar months. Each royalty payment shall be
accompanied by a statement which shall set forth the gross sales, the
detail of deductions according to article 1.b, Net Sales, the royalty rate
and royalties payable in US Dollars. If CEPHALON receives Net Sales in a
currency other than US Dollars, royalties shall be calculated by using the
rate for converting such currency into US Dollars quoted as the New York
foreign exchange selling rate on the last business day of the royalty
period.
5. Only one royalty shall be payable for a Licensed Product, regardless of the
number of Patents that may apply to the Licensed Product or its
manufacture, use or sale.
6. No royalties shall be payable on sales between CEPHALON and its
sublicensees.
7. All taxes assessed, imposed on or required to be withheld from royalty
payments due LAFON, will be deducted from the sums due, as far as such
amounts can be deducted from LAFON's taxes in France. Tax receipts will be
received by CEPHALON evidencing such payments which receipts will be
forwarded to LAFON.
8. Any sublicensee of CEPHALON may, at CEPHALON's sole discretion pay in US
Dollars on behalf of CEPHALON any obligation of CEPHALON under this
Agreement and such payment shall be received by LAFON in lieu of payment by
CEPHALON with the same effect as if payment had been tendered by CEPHALON
in satisfaction of such obligation under this Agreement.
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9. CEPHALON shall, and shall require its sublicensees to, keep and maintain
records of sales made pursuant to the license and/or sublicenses granted
hereunder. Such records shall be open to inspection at any reasonable time
and upon reasonable notice (but not more than once each calendar year)
within three (3) years after the royalty period to which such records
relate, by an independent certified public accountant selected by LAFON,
retained at LAFON's expense and approved by CEPHALON, such approval not to
be unreasonably withheld. Such accountant shall have the right to examine
the records kept pursuant to this Agreement only to verify the royalty
payments to be made by CEPHALON to LAFON hereunder. Such accountant shall
keep confidential all information it receives in the course of such
inspection and may report the findings of said examination of records to
LAFON and to CEPHALON only insofar as it is necessary to evidence any
mistake or impropriety on the part of CEPHALON and/or its sublicensees.
ARTICLE VI - DURATION AND TERMINATION
1. Unless sooner terminated under paragraph 2 below, this Agreement shall
expire fifteen (15) years after the first commercial sale of the first
Licensed Product in the Territory, or upon the expiration of the
last-to-expire Patent licensed hereunder, whichever is later. CEPHALON's
fully paid-up and irrevocable license to Technical Information shall
survive such expiration in accordance with Article V, paragraph 2.
2. CEPHALON may terminate this Agreement at any time upon thirty (30) days
notice in writing to LAFON, and LAFON may terminate this Agreement pursuant
to Article III, paragraphs 3.c. and 3.d. In addition, if either party
hereto shall fail to comply in any material respect with any of its
obligations under this Agreement and shall fail to remedy any such breach
within ninety (90) days after receipt of written notice thereof from the
other party, the party not in default shall have the right to terminate
this Agreement by giving written notice of termination. Notwithstanding the
foregoing, if CEPHALON shall have breached an obligation under Article 3
only in respect of one jurisdiction within the Territory, LAFON may
terminate this Agreement only with respect to such jurisdiction. In such
event, the definition of "Territory" shall automatically be amended to
delete such jurisdiction from and after such termination date.
3. The expiration or termination of this Agreement or any license granted
hereunder for any reason by either party shall not relieve the parties of
any obligation accruing prior to such expiration or termination.
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4. Upon termination of this Agreement under paragraph 2, CEPHALON shall (i)
stop using Technical Information and return to LAFON all documents in its
possession containing same, except to the extent retention of clinical data
or other Technical Information is required by applicable law, (ii) as soon
as practicable sell any remaining inventory of Licensed Products (subject
to its obligation to pay LAFON a royalty thereon), and (iii) if requested
by LAFON, transfer to LAFON or any company designated by LAFON the product
registrations for Licensed Products in the Territory, to the extent
permitted by applicable law and at LAFON's expense. LAFON shall likewise
cease using any business or financial information related to CEPHALON and
shall return to CEPHALON all documents in its possession containing same.
5. The provisions of Article IV will survive the expiration or termination of
this Agreement, in accordance with their terms.
ARTICLE VII - PATENTS
1. LAFON shall maintain the Patents in the Territory and will prosecute any
patent applications included in the Patents. LAFON will keep CEPHALON fully
advised of the status of all Patents, will take all reasonable efforts to
send CEPHALON in advance drafts of any filing in the Territory related to
the Patents as well as copies of the filewrapper, and will consider the
suggestions of CEPHALON and its patent counsel with respect to the
prosecution and maintenance of the Patents. If LAFON fails to prosecute the
patent application or to maintain the Patents as required by this
Agreement, CEPHALON shall have the right to take over and prosecute any
such application or maintain any such Patents in LAFON's name.
2. In the event any of the licensed Patents are infringed in the Territory,
LAFON agrees to immediately commence appropriate legal action to stop such
infringement at its sole expense, and CEPHALON shall assist it to do so, at
CEPHALON's expense. If LAFON fails to initiate such action within ninety
(90) days after being notified by CEPHALON of the infringement, CEPHALON
shall have the right to begin such action at its own expense at CEPHALON's
option, in the name of LAFON, and the latter agrees to give CEPHALON its
complete cooperation, at LAFON's expense. Any damages or awards resulting
from the prosecution of such claim shall be applied first, to reimburse the
prosecuting party for its costs and expenses and any balance shall be
shared by the parties in proportion to their economic losses from such
infringement.
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3. Each party shall promptly notify the other party of any claim asserting
that the use of Compound in connection with a Licensed Product infringes
the proprietary rights of another person. LAFON shall defend any such claim
unless it determines, in its sole discretion, that it is not in its
interests to do so. If LAFON elects to defend a claim, the defense shall be
at LAFON's costs and expense, but CEPHALON may be represented by counsel in
an advisory capacity, at CEPHALON's expense. If LAFON does not elect to
defend such claim within 120 days after receiving notice (from CEPHALON or
otherwise) of such claim, CEPHALON may, but is not required to, defend such
claim. Any such defense shall be at the expense of CEPHALON (including
attorneys' fees), but CEPHALON shall keep LAFON informed of the status of
any such defense, and any damages or awards that are awarded to CEPHALON
resulting from the defense of such claim shall be the sole property of
CEPHALON. Either party assuming the defense of such claim may join the
other party as a defendant if necessary to defend such claim, but shall
indemnify and hold harmless the party so joined against attorneys' fees,
court costs or damages resulting from the use of such party's name in the
action.
4. If Licensed Product is sold by a third party or parties (whether unlicensed
or under a compulsory license) on a substantial commercial basis in a
country in the Territory during the period in which such sales continue,
the royalty payable on Net Sales in such country in the Territory during
the period in which such sales continue, the royalty payable on Net Sales
in the Territory shall be reduced to 2.5%. For purposes of this provision
"substantial commercial basis" shall mean forty per cent (40%) of unit
sales of Licensed Product in such country in the Territory for the
immediately preceding six calendar months.
5. In the event that CEPHALON or its affiliates are required during the term
of this Agreement to pay royalties to a third party for patents, or patent
applications owned or controlled by said third party covering the Licensed
Product, its method of use or production, such royalties shall be
creditable against any earned royalties payable under this Agreement in the
applicable country in the Territory but in no event shall the royalties due
LAFON be reduced to less than one-half (1/2) of the royalties otherwise
payable to LAFON under the terms of this Agreement in such country in the
Territory.
6. CEPHALON and LAFON will advise each other periodically of any Improvements
made by either party patentable or not, and CEPHALON and LAFON agree to
grant the other party authorization to use such Improvements at no cost on
a nonexclusive basis. The licensees or sublicensees of a
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party shall be authorized to use an Improvement of the other party in their
respective territory or territories (but not in the territory of the party
who made the Improvement) if the licensee or sublicensee has agreed (as of
the date of this Agreement) to reciprocity with respect to its own
improvements related to Licensed Products, including the Compound.
7. CEPHALON and LAFON will cooperate to the extent required to obtain an
extension of the term of the Patents under the U.S. Drug Price Competition
and Patent Term Restoration Act.
ARTICLE VIII - REPRESENTATIONS & WARRANTIES; INDEMNIFICATION
1. LAFON represents and warrants to CEPHALON that: (a) the manufacture,
marketing, sale and use of the Licensed Products in the Territory do not,
to LAFON's knowledge, conflict with or infringe any intellectual property
rights of another and there is no pending or threatened claim or litigation
against LAFON with respect to the Patents or their use in connection with a
Licensed Product; (b) all of the Patents and Technical Information are
owned by LAFON, free and clear of all liens or encumbrances, and no
interest in any of the Patents or Technical Information has been granted or
licensed to any third party in the Territory; (c) this Agreement, when
executed and delivered by LAFON, will be the legal, valid and binding
obligation of LAFON, enforceable against LAFON in accordance with its
terms; (d) LAFON has the authority to grant in the Territory the licenses
granted to CEPHALON of the scope set forth herein.
2. CEPHALON represents and warrants to LAFON that: (a) it is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; (b) CEPHALON has full right and authority to enter into
this Agreement as herein described and is not a party to any agreement,
indenture or other instrument and has no by-law or charter provision and
knows of no law or regulation which would prohibit it from entering into
this Agreement; and (c) this Agreement has been duly authorized and when
executed and delivered will become a valid and binding contract of CEPHALON
enforceable against CEPHALON in accordance with its terms.
3.a. LAFON will indemnify and hold harmless CEPHALON and its affiliates,
employees, officers, directors, and agents (a "CEPHALON Indemnified Party")
from and against any and all liability, loss, damages, costs or expenses
(including reasonable attorneys' fees) which the CEPHALON Indemnified Party
may incur, suffer or be required to pay that results from the breach by
LAFON of its obligations hereunder or any
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of its representations or warranties contained in this Agreement.
3.b. CEPHALON will indemnify and hold harmless LAFON and its affiliates,
employees, officers, directors, and agents (an "LAFON Indemnified Party")
from and against any and all liability, loss, damages, costs, or expenses
(including reasonable attorneys' fees) which the LAFON Indemnified Party
may incur, suffer or be required to pay resulting from or arising in
connection with any breach by CEPHALON of its obligations hereunder or any
of its representations or warranties contained in this Agreement.
3.c. The obligations of the indemnifying party under paragraphs 3.a. and 3.b.
above are conditioned upon the prompt notification to the indemnifying
party of any of the aforementioned suits or claims in writing within thirty
(30) days after receipt by the party's general counsel's office of notice
by the indemnified party of such suit or claim. The indemnifying party
shall have the right and obligation to defend any such suit or claim. The
indemnified party may participate in the defense of such suit or claim at
its sole cost and expense. This provision for indemnification shall be void
and there shall be no liability against a party as to any suit or claim for
which settlement or compromise or an offer of settlement or compromise is
made without the prior consent of the indemnifying party.
ARTICLE IX - MISCELLANEOUS PROVISIONS
1. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto. This Agreement cannot be
assigned by any of the parties hereto without the prior approval of the
other party in writing; provided, however, that either party may, without
such consent, assign this Agreement in connection with the transfer or sale
of all or substantially all of its business or in the event of its merger
or consolidation with another company. Any purported assignment in
violation of the preceding sentence shall be void. Any permitted assignee
shall assume all obligations of its assignor under this Agreement. No
assignment shall relieve either party of responsibility for the performance
of any accrued obligation which such party then has hereunder.
Notwithstanding the foregoing, if prior to FDA approval of the initial
Licensed Product, CEPHALON (i) sells 60% or more of its tangible assets, or
(ii) participates in or becomes subject to a merger in which it is not the
surviving entity, the transaction may proceed without the consent of LAFON
but, within ninety (90) days after such event, the parties
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(in the case of CEPHALON, any successor to CEPHALON) shall meet to review
the development and commercialization plans for the Licensed Product of the
successor entity. If the successor to CEPHALON does not wish to continue
aggressively the development and commercialization plans for the Licensed
Products on the same schedule as CEPHALON, it shall, upon request of LAFON,
sublicense its rights under this Agreement (subject to the approval of
LAFON in accordance with Article II), for a sublicense fee of no more than
l.5X CEPHALON's investment in the development of Licensed Products to the
date of such sublicensing in addition to any amounts due to LAFON
hereunder.
2. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of France.
3. Modification or Waiver
No modification or waiver of any of the provisions of this Agreement shall
be valid unless in writing signed by the parties hereto or signed by the
party against whom enforcement of such modification or waiver is sought.
4. Notices
Notice hereunder shall be deemed sufficient if given by registered air
mail, postage prepaid, and addressed to the party to receive such notice at
the address given above, or at such other address as may hereafter be
designated by notice in writing.
5. Supply of Compound for Clinical Purposes
To enable CEPHALON to carry out its pharmacological, toxicological and
clinical experimentation for the Licensed Product, LAFON shall furnish
CEPHALON with reasonable quantities of the Compound used in the Licensed
Product. The terms and conditions of the supply and purchase of such
Compound are set forth in the Supply Agreement of even date herewith
between LAFON and CEPHALON, except that the Compound shall be provided free
of charge to CEPHALON.
6. Force Majeure
Neither party shall be liable to the other party for any delay in
performance or nonperformance of any of its obligations hereunder caused by
any act of God, explosion, fire, war, labor disputes, order or decree of
any court or governmental authority, or other unforeseeable cause wholly
beyond the control and without the negligence of such party provided the
party so affected promptly notifies the other party and uses its best
efforts to remove such cause as soon as reasonably practical. CEPHALON's
Exclusive License in the Territory shall not be subject to termination by
LAFON
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where CEPHALON's failure to perform is due to any of the foregoing causes.
7. Counterparts; Effectiveness
This Agreement shall become binding when any one or more counterparts
hereof, individually or taken together, shall bear the signatures of LAFON
and CEPHALON. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original as against any party whose
signature appears thereon, but all of which together shall constitute one
and the same instrument.
8. Entire Agreement
This Agreement, together with the Supply Agreement and the Trademark
Agreement, contain all of the covenants, terms and undertakings of the
parties with respect to the particular subject matter hereof and all prior
agreements among the parties relating to the subject matter hereof, whether
written or oral, are merged herein and shall be of no force and effect.
This Agreement cannot be changed, modified or discharged except by an
instrument in writing signed by both parties hereto.
9. Severability
If any provision of this Agreement or application thereof to anyone or
under any circumstances is adjudicated to be invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions or
applications of this Agreement which can be given effect without the
invalid or unenforceable provision or application.
ARTICLE X - ARBITRATION
Any difference between the parties hereto concerning the interpretation or
application of this Agreement which could not be resolved amicably shall be
finally settled in accordance with the Rules of Conciliation and Arbitration of
the International Chamber of Commerce by three arbitrators designated in
accordance with said Rules. This Agreement shall be construed, and the rights of
the parties determined, in accordance with the French laws. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof. The
place of arbitration will be Geneva.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the day and year first written above.
LABORATOIRE L. LAFON CEPHALON, INC.
By: /s/ F.C.Lafon By: /s/ Frank Baldino, Jr.
--------------------------- ---------------------------
Name: F.C.Lafon Name: Frank Baldino, Jr.
Title: Chief Executive Officer Title: President & CEO
Date: 1/20/93 Date: Jan 20th 1993
ATTEST ATTEST
By: [ILLEGIBLE] By: /s/ Jack Lief
--------------------------- ----------------------------
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Exhibit 10.5(c)
TRADEMARK AGREEMENT OUTLINE
Parties
Background
ARTICLE I - Definitions
1. Licensed Trademark
2. Licensed Product - Appendix A patents
3. Combination Product
4. Territory
5. Net Sales
6. Exclusive License
ARTICLE II - Grant of Exclusive License
1. Exclusive License Grant to Use Licensed Trademark
2. Promote and Sell Licensed Product Employing Licensed
Trademark
3. Use of Licensed Trademark on Combination Product
ARTICLE III - Royalties and Royalty Payment Terms
1. Royalty Rate on Net Sales
2. Royalty Payment and Statement
3. No Multiple Royalties
4. Taxes on Royalty Payments
5. Sublicensees Payment on Behalf of License
6. Records and Audit
ARTICLE IV - Licensor's Obligations
1. Trademark Registration
2. Third Party Infringement of Licensed Trademark
ARTICLE V - Licensee's Obligations
1. Products Bearing Licensed Trademark - Standard of
Quality
2. Licensed Trademark Sole Property of Licensor
3. Licensee Not to Contest Validity of Licensed Trademark
ARTICLE VI - Duration and Termination
1. Duration
2. Termination for Breach
3. Survival of Obligations
ARTICLE VII - Representations and Warranties
1. Licensor's Representations and Warranties
2. Licensee's Representations and Warranties
<PAGE>
ARTICLE VIII - Indemnification
1. Intellectual Property Indemnification
2. Licensor Indemnification
3. Licensee Indemnification
ARTICLE IX - Miscellaneous Provisions
1. Successors and Assigns
2. Governing Law
3. Modification or Waiver
4. Notices
5. Force majeure
6. Counterparts
7. Entire Agreement
8. Severability
ARTICLE X - Arbitration
Execution
<PAGE>
TRADEMARK AGREEMENT
AGREEMENT made this ________ day of January, 1993, by and between
________________________, a _______________ corporation (hereinafter called
"Licensor") ________________________________ and CEPHALON INC., a Delaware
corporation (hereinafter called "Licensee"), 145 Brandywine Parkway, West
Chester, PA 19380, U.S.A.
WITNESSETH:
WHEREAS, Licensee and Laboratoire Lafon ("LAFON") entered into an agreement
dated this day (hereinafter called the "License Agreement") in which Licensee
was granted an Exclusive License to make, have made, use and sell Licensed
Products (as defined herein) in the Territory (as defined herein); and
WHEREAS, Licensor warrants and represents that it is the sole owner of and has
the full right, title and interest in and to the Licensed Trademark (as defined
herein) in the Territory; and
WHEREAS, Licensor is interested in granting and Licensee is interested in
receiving an Exclusive License to use the Licensed Trademark in connection with
the sale of Licensed Product in the Territory.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties mutually agree as follows:
ARTICLE I - DEFINITIONS
Capitalized terms not otherwise defined herein shall have the same meaning
assigned to them in the License Agreement. For purposes of this Agreement the
following words and phrases shall have the following meanings:
1. "Licensed Trademark" shall mean the word "___________" (to be completed
later by the parties) or such other word or name as shall be agreed upon by
the parties in writing which word or name is to be registered as a
trademark in the Territory and owned by Licensor.
2. "Licensed Product" shall mean any pharmaceutical specialty (whether sold by
prescription, over-the-counter, or otherwise) containing the Compound.
3. "Combination Product" shall mean any Licensed Product containing the
Compound and one or more other pharmacologically active ingredients.
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4. "Compound" shall mean Modafinil and/or other compounds, isomers or salts
thereof.
5. "Territory" shall mean the territory of U.S.A., its territories and
possessions, and Mexico.
6. "Net Sales" shall mean the gross proceeds derived by Licensee and/or its
sublicensees from the sale of Licensed Product bearing the Licensed
Trademark in the Territory while this Agreement is in effect, after
deducting normal and customary cash and trade discounts, returns,
allowances, transportation and insurance charges or allowances, if shown on
the invoice for the sale, and sales, excise, turnover or similar taxes, if
any paid or allowed by Licensee, or its sublicensees directly in respect of
such sales. Net Sales for Combination Products shall be determined by
multiplying the Net Sales of such Combination Product by a fraction; the
numerator of the fraction shall be the cost to Licensee of the active
substance supplied by Licensor, and the denominator shall be the total cost
to Licensee of all active ingredients contained in such Combination Product
but in no event shall the royalty be decreased to less than one-half (1/2)
of the amount obtained in applying the royalty rate under Article III,
Paragraph 1 below to the Net Sales of the Combination Product. Costs shall
be determined according to Licensee's accounting methods for determining
the cost of its pharmaceutical products.
7. "Exclusive License" shall mean a license whereby Licensee's rights shall be
sole and entire and shall operate to exclude all others including Licensor.
8. "Licensee" shall mean Cephalon, Inc. and any entity controlled by Cephalon,
including any subsidiary or other entity as to which Cephalon owns at least
50% of the voting stock or the right to receive at least 50% of the
profits.
ARTICLE II - GRANT OF LICENSE
1. Licensor hereby grants to Licensee an Exclusive License to use the Licensed
Trademark as a trademark for the Licensed Product in the Territory,
including the right to grant sublicenses, subject to the terms and
conditions of this Agreement. Licensee shall be liable to Licensor for the
thorough application by its sublicensees of the obligations of its
sublicensees hereunder.
2. During the term of the License Agreement, Licensee agrees to promote and
sell Licensed Product employing the Licensed Trademark, in the Territory;
provided, however, Licensee may promote and sell Licensed Product solely by
its generic drug designation without employing the Licensed Trademark when
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<PAGE>
such action is necessary in order to sell Licensed Product in compliance
with governmental regulations or restrictions.
3. Licensee shall to the extent reasonably possible use the Licensed Trademark
on Combination Products giving consideration to the amount of Licensed
Product in such Combination Product and other relevant business factors. In
the event Licensee is unable to use the Licensed Trademark for a
Combination Product, Licensee will under the terms of this Agreement sell
such Combination Product using a registered trademark owned by Licensor in
the Territory, provided that Licensor shall have granted to Licensee all
rights necessary to so use such registered trademark.
ARTICLE III - ROYALTIES
1. For and in consideration of the Exclusive License to use the Licensed
Trademark granted herein, Licensee shall pay Licensor a royalty as follows:
a) during the first fifteen (15) years of the term of this Agreement,
four percent (4%) of Net Sales; and
b) during the next succeeding five (5) years of the term of this
Agreement, two percent (2%) of Net Sales.
Thereafter, Licensee's license under Article II to use the Licensed
Trademark shall be fully paid-up and irrevocable.
2. Royalty payments shall be made in U.S. Dollars within sixty (60) days after
the last day of June and December for royalties accruing on sales during
the six (6) preceding calendar months. Each royalty payment shall be
accompanied by a statement which shall set forth the gross sales, the
detail of the deductions made according to Article I, Paragraph 5 above,
and the Net Sales figure. If Licensee receives Net Sales in a currency
other than US Dollars, royalties shall be calculated by using the rate for
converting such currency into US Dollars quoted as the New York foreign
exchange selling rate on the last business day of the royalty period.
3. No royalties shall be payable on sales between Licensee and its
sublicensees.
4. All taxes assessed, imposed on or required to be withheld from royalty
payments due Licensor, will be deducted from the sums due. Tax receipts
will be received by Licensee evidencing such payments which receipts will
be forwarded to Licensor.
-3-
<PAGE>
5. Any sublicensee of the Licensee may pay on behalf of Licensee any
obligation of Licensee under this Agreement and such payment shall be
received by Licensor in lieu of payment by Licensee with the same effect as
if payment had been tendered by Licensee in satisfaction of such obligation
under this Agreement.
6. Licensee shall, and shall require its sublicensees to, keep and maintain
records of sales made pursuant to the license and/or sublicenses granted
hereunder. Such records shall be open to inspection at any reasonable time
and upon reasonable notice (but not more than once each calendar year)
within three (3) years after the royalty period to which such records
relate, by an independent certified public accountant selected by Licensor,
retained at Licensor's expense and approved by Licensee, such approval not
to be unreasonably withheld. Such accountant shall have the right to
examine the records kept pursuant to this Agreement only to verify the
royalty payments to be made by Licensee to Licensor hereunder. Such
accountant shall keep confidential all information it receives in the
course of such inspection and may report the findings of said examination
of records to Licensor and to Licensee only insofar as it is necessary to
evidence any mistake or impropriety on the part of Licensee and/or its
sublicensees.
ARTICLE IV - LICENSOR'S OBLIGATIONS
1. Licensor agrees that it will file and diligently prosecute an application
to register the Licensed Trademark in the Territory. Licensor, at its
expense, will maintain such registration in the Territory for so long as
Licensee shall market Licensed Product bearing the Licensed Trademark in
the Territory.
Upon the request of Licensor from time to time, Licensee will execute all
instruments or papers and render such other assistance as Licensor may
reasonably request in order to effect the registration and/or the recording
of Licensee as the registered user of the Licensed Trademark.
2. In the event the Licensed Trademark is infringed in any country of the
Territory, Licensor agrees to immediately commence appropriate legal action
to stop such infringement at its sole expense, and Licensee shall assist it
to do so, at Licensee's expense. If Licensor fails to initiate such action
within ninety (90) days after being notified by Licensee of the
infringement, Licensee shall have the right to bring such action at its own
expense, in the name of Licensor, and the latter agrees to give Licensee
its complete cooperation, at Licensor's expense.
-4-
<PAGE>
ARTICLE V - LICENSEE'S OBLIGATIONS
1. Licensee agrees that the Licensed Products sold by Licensee bearing the
Licensed Trademark will be of such a standard of quality so as not to
jeopardize the Licensed Trademark. The standard of quality shall meet the
requirements of the appropriate administrative agency in the Territory in
connection with such Licensed Product. Licensee will periodically forward
to Licensor, upon Licensor's written request, samples of the Licensed
Products as may reasonably be required to determine that the above
standards are being met.
2. Nothing contained in this Agreement will grant to Licensee any right, title
or interest in the Licensed Trademark. The Licensed Trademark is the sole
property of the Licensor and any and all uses by Licensee of the Licensed
Trademark in the Territory will inure to the benefit of the Licensor.
3. Licensee will not raise or cause to be raised any questions concerning, or
objections to, the validity of the Licensed Trademark or to the right of
the Licensor thereto, on any grounds whatsoever.
ARTICLE VI - DURATION AND TERMINATION
1. Unless sooner terminated as provided herein, this Agreement shall terminate
at the date upon which Licensee and its sublicensees shall cease to market
and sell the Licensed Product in the Territory.
2. If either party hereto shall fail to comply with any of its obligations
under this Agreement, and shall fail to remedy any such breach within
ninety (90) days, after receipt of written notice thereof from the other
party, the party not in default shall have the right to terminate this
Agreement by giving written notice of termination.
3. Termination of this Agreement or any license granted hereunder for any
reason by either party shall not relieve the parties of any obligation
accruing prior to such termination.
ARTICLE VII - REPRESENTATIONS AND WARRANTIES
1. The Licensor hereby represents and warrants to the Licensee as follows:
a) This Agreement has been duly executed and delivered by the Licensor
and constitutes the legal, valid and binding obligation of the
Licensor enforceable against the Licensor in accordance with its
terms.
-5-
<PAGE>
b) The execution, delivery and performance of this Agreement by the
Licensor, and any acts contemplated to be performed by the Licensor
hereby, will not violate, be in conflict with or result in the breach
(with or without the giving of notice or lapse of time, or both) of
any term, condition or provision of, or require the consent of any
other party to, any agreement, contract, commitment or other
instrument, document or understanding, oral or written, to which the
Licensor is a party or by which the Licensor is otherwise bound.
c) The Licensor is the sole owner of the entire right title and interest
in and to the Licensed Trademark free and clear of all liens,
encumbrances and claims of others. The Licensor has received no notice
of any claims for infringement, unfair competition, appropriation of
trade secret or the like relating to the Licensed Trademarks.
2. The Licensee hereby represents and warrants to the Licensor as follows:
a) This Agreement has been duly executed and delivered by the Licensee
and constitutes the legal, valid and binding obligation of the
Licensee enforceable against the Licensee in accordance with its
terms.
b) The execution, delivery and performance of this Agreement by the
Licensee, and any acts contemplated to be performed by the Licensee
hereby, will not violate, be in conflict with or result in the breach
(with or without the giving of notice or lapse of time, or both) of
any term, condition or provision of, or require the consent of any
other party to, any agreement, contract, commitment or other
instrument, document or understanding, oral or written, to which the
Licensee is a party or by which the Licensee is otherwise bound.
ARTICLE VIII - INDEMNIFICATION
1. The Licensor will reimburse, indemnify and hold harmless the Licensee from
and against (i) breach by the Licensor of its representations, warranties
or covenants hereunder; (ii) any and all actions, claims or demands of
third parties arising out of any action or omission of the Licensor
hereunder and (iii) all actions, proceedings, claims, damages, costs,
expenses (including, without limitation, costs of defense and fees and
expenses of legal counsel) and demands by third parties of every kind and
nature arising from the licenses and assignments granted hereunder,
including any demands by third parties with respect to the infringement or
alleged infringement of any trademark or other proprietary rights
-6-
<PAGE>
belonging to such third parties resulting from the Licensee's use of the
Licensed Trademarks in connection with this Agreement.
2. The Licensee will reimburse, indemnify and hold harmless the Licensor from
and against (i) breach by the Licensee of its representations, warranties
or covenants hereunder and (ii) any and all actions, claims or demands of
third parties arising out of any action or omission of the Licensee
hereunder.
ARTICLE IX - MISCELLANEOUS PROVISIONS
1. Successors and Assigns - This Agreement shall be binding upon and inure to
----------------------
the benefit of the successors and assigns of the parties hereto. This
Agreement cannot be assigned by any of the parties hereto without the prior
approval of the other party in writing; provided, however, that either
party may, without such consent, assign this Agreement in connection with
the transfer or sale of all or substantially all of its business or in the
event of its merger or consolidation with another company. Any purported
assignment in violation of the preceding sentence shall be void. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement. No assignment shall relieve either party of responsibility for
the performance of any accrued obligation which such party then has
hereunder.
Notwithstanding the foregoing, if prior to FDA approval of the initial
Licensed Product, Licensee (i) sells 60% or more of its tangible assets, or
(ii) participates in or becomes subject to a merger in which it is not the
surviving entity, the transaction may proceed without the consent of
Licensor but, within ninety (90) days after such event, the parties (in the
case of Licensee, any successor to Licensee) shall meet to review the
development and commercialization plans for the Licensed Product of the
successor entity. If the successor to Licensee does not wish to continue
aggressively the development and commercialization plans for the Licensed
Products on the same schedule as CEPHALON, it shall, upon request of
Licensor, sublicense its right under this Agreement (subject to the
approval of Licensor in accordance with Article II), for a sublicense fee
of no more than 1.5X Licensee's investment in the development of Licensed
Products to the date of such sublicensing in addition to any amounts due to
Licensor hereunder.
2. Governing Law - This Agreement shall be governed by and construed in
-------------
accordance with the laws of France, except that the scope and validity of
the Licensed Trademarks shall be governed by the laws of the applicable
jurisdiction.
-7-
<PAGE>
3. Modification or Waiver - No modification or waiver of any of the provisions
of this Agreement shall be valid unless in writing signed by the parties
hereto or signed by the party against whom enforcement of such modification
or waiver is sought.
4. Notices - Notice hereunder shall be deemed sufficient if given by
registered air mail, postage prepaid, and addressed to the party to receive
such notice at the address given above, or at such other address as may
hereafter be designated by notice in writing.
5. Force Majeure - Neither party shall be liable to the other party for any
delay in performance or nonperformance of any of its obligations hereunder
caused by any act of God, explosion, fire, war, labor disputes, order or
decree of any court or governmental authority, or other unforeseeable cause
wholly beyond the control and without the negligence of such party provided
the party so affected promptly notifies the other party and uses its best
efforts to remove such cause as soon as reasonably practical.
6. Counterparts - This Agreement shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the
signatures of Licensor and Licensee. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, but all of which together shall
constitute one and the same instrument.
7. Entire Agreement - This Agreement contains all of the covenants, terms and
undertakings of the parties with respect to the particular subject matter
hereof and all prior agreements among the parties relating to the subject
matter hereof, whether written or oral, are merged herein and shall be of
no force and effect. This Agreement cannot be changed, modified or
discharged except by an instrument in writing signed by both parties
hereto.
8. Severability - If any provision of this Agreement or application thereof to
anyone or under any circumstances is adjudicated to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
ARTICLE X - ARBITRATION
Any difference between the parties hereto concerning the interpretation or
application of this Agreement which could not be resolved amicably shall be
finally settled in accordance with
-8-
<PAGE>
the Rules of Conciliation and Arbitration of the International Chamber of
Commerce by three arbitrators designated in accordance with said Rules. This
Agreement shall be construed, and the rights of the parties determined, in
accordance with the French laws. Judgment upon the award rendered may be entered
in any court having jurisdiction thereof. The place of arbitration will be
Geneva.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the day and year first written above.
CEPHALON, INC. [Genelco]
------------------------------------
By /s/ Frank Baldino, Jr. By /s/ [ILLEGIBLE]
------------------------------- ---------------------------------
Frank Baldino, Jr.
President
ATTEST ATTEST
By /s/ Jack Lief By /s/ [ILLEGIBLE]
------------------------------- ---------------------------------
Jack Lief
Secretary
-9-
<PAGE>
Exhibit 10.5(d)
[GRAPHIC OMITTED]
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380
(215) 344-0200
Fax (215) 344-0065
July 21, 1993
Laboratoire L. Lafon
19 Avenue du Professeur-Cadiot
94701 Maisons
Alfort
France
Re: Amendment to License Agreement and Supply Agreement
---------------------------------------------------
Gentlemen:
This letter agreement shall serve as an amendment to (a) the License
Agreement dated January 20, 1993 ("License Agreement") between Cephalon, Inc.
("Cephalon") and Laboratoire L. Lafon ("Lafon") and (b) the Supply Agreement
dated January 20, 1993 ("Supply Agreement") between Cephalon and Lafon. All
capitalized terms not otherwise defined herein shall be used as defined in the
License Agreement.
1. The term "Territory," for all purposes under the License Agreement and
the Supply Agreement, is hereby expanded to include the Republic of Ireland and
the United Kingdom of England, Scotland, Northern Ireland and Wales
(collectively, the "U.K. Territory").
2. Appendix A to the License Agreement is hereby amended to add the
following patents and patent applications filed in the U.K. Territory as of the
date hereof:
U.K. Number 1 584 462 (filed March 31, 1977)
IR Number 46 566 (filed March 2, 1978)
European Patent 91 401 563.1
European Patent 92 403 381.4
3. In consideration of the expansion of the Territory, Cephalon shall pay
to Lafon, in addition to the license fees and roya1ties to be paid by Cephalon
pursuant to Section 1 of Article V of the License Agreement, the following
license fees totalling Eight Hundred Thousand US Dollars (USD 800,000):
a. One Hundred Thirty-Three Thousand US Dollars (USD 133,000),
payable upon Lafon's signature of this letter agreement;
<PAGE>
Laboratoire L. Lafon
Page 2
b. One Hundred Thirty-Three Thousand US Dollars (USD 133,000)
payable on each of the first through third anniversaries of the
date of this letter agreement; and
c. Two Hundred Sixty-Eight Thousand US Dollars (USD 268,000),
payable upon the initial regulatory approval of a Licensed
Product by the Medicines Division of the U.K. Ministry of Health.
4. The first sentence of Section 1 of Article VI of the License Agreement
shall apply to the U.K. Territory, except that the fifteen (15) year period
shall be calculated on a country-by-country basis within the U.K. Territory.
5. Section 1 of Article III of the License Agreement is hereby amended by
(a) inserting the phrase "or any other comparable regulatory applications and
filings to be made by Cephalon in the Territory" at the end of the second
sentence thereof, and (b) inserting the phrase "or other regulatory applications
and filings" at the end of the third sentence thereof.
6. Sections 3.b and 3.c of the License Agreement shall not apply to the
U.K. Territory. Instead, the following provisions shall apply to product
registration activities in the U.K. Territory:
3.b. CEPHALON and LAFON shall promptly agree on a mutually acceptable
strategy for obtaining regulatory approvals of the Licensed Product in
the U.K. Territory to ensure that the approval process within the U.K.
Territory proceeds expeditiously, consistent with full and complete
laboratory and clinical evaluations and standards for new drug product
development applicable within the U.K. Territory. It is agreed that
all product registrations within the U.K. Territory are to be in
CEPHALON's name (or the name of a CEPHALON Affiliate). CEPHALON shall
have the right to meet with the appropriate regulatory authorities,
but shall keep LAFON informed of all such meetings and shall provide
LAFON with copies of all relevant correspondence with such
authorities.
If LAFON, after consultation with CEPHALON, elects to file under the
multi-state procedure of the Committee for Proprietary Medicinal
Products ("CPMP") of the
<PAGE>
Laboratoire L. Lafon
Page 3
European Communities, the parties will discuss the desirability of
keeping the approval process in the U.K. Territory separate from the
CPMP process, but it is understood that the final decision in this
regard shall be made by LAFON. If the U.K. Territory remains part of
the CPMP process, LAFON will provide CEPHALON with adequate
opportunity to provide input to any filings LAFON proposes to make
with the CPMP.
LAFON shall take such actions as may be required to identify CEPHALON
(or its designated Affiliate) as the holder of the product license in
all member states within the U.K. Territory, and, upon request, shall
sign any instruments required by applicable law to confirm Cephalon's
authorization under this Agreement to apply for any other
authorizations required to market the Licensed Product in the
Territory, and/or join in any such application by Cephalon, if
required."
3.c. CEPHALON shall conduct, at its own expense, all necessary trials for
purposes of obtaining regulatory approvals of the Licensed Product in
the U.K. Territory.
7. Section 3.d. of Article III of the License Agreement is hereby amended
and restated in its entirety as follows:
"If in any country within the Territory CEPHALON fails to market the
Licensed Product within three (3) months of the effective date of approval
of any application in such country, including price reimbursement approval
(and assuming receipt from LAFON of Compound under the Supply Agreement),
to permit such sale in such country, upon sixty (60) days notice, LAFON may
as its sole remedy, terminate CEPHALON's Exclusive License in such country,
and upon LAFON's request (and to the extent permitted by law), CEPHALON
will thereupon transfer its rights and approvals concerning the Licensed
Product in such country to LAFON or its designated assignee."
8. Section 1.b. of Article V of the License Agreement is hereby amended and
restated in its entirety as follows:
"In addition, CEPHALON shall pay to LAFON a royalty on Net Sales of
Licensed Products by CEPHALON and/or its sublicensees, calculated at the
rate of five per cent (5%) during the first three years from the date of
first
<PAGE>
Laboratoire L. Lafon
Page 4
commercial sale of the first Licensed Product in any country within the
Territory, and seven per cent (7%) thereafter."
9. Section 2 of Article V of the License Agreement is hereby amended and
restated in its entirety as follows:
"Royalties shall be payable on Net Sales of Licensed Product in any country
within the Territory for a period of fifteen (15) years from the date of
the first commercial sale of the first Licensed Product in such country in
the Territory. Thereafter, CEPHALON's license granted under Article II
hereof shall be fully paid-up and irrevocable as to all Licensed Products
in such country in the Territory."
10. Lafon and Cephalon shall cooperate to take all actions that are
reasonably available under applicable laws to extend the term of each of the
Patents including, without limitation, applying for a "Supplementary Protection
Certificate" pursuant to Council Regulation (EEC) No. 1768/92 of 18 June, 1992
of The Council of the European Communities. The out-of-pocket costs and expenses
associated with such actions shall be shared equally by the parties.
11. The term "FDA Standards" as used in the Supply Agreement is hereby
deleted and the term "Regulatory Standards" is hereby substituted in its place.
For purposes of the Supply Agreement, "Regulatory Standards" shall be defined as
follows: "the facility license requirements and the Good Manufacturing Practice
regulations of the U.S. FDA applicable to the Compound or the Manufacturing
Facility (as such terms are defined in the Supply Agreement) and all other laws,
rules and regulations applicable to the manufacture, packaging, labelling and
shipment of the Compound into the Territory."
12. Section 13 of the Supply Agreement is hereby amended so that the second
paragraph states in its entirety as follows:
"In addition, CEPHALON may terminate this Agreement, at its option, at any
time following termination of the License Agreement, upon thirty (30) days
written notice to LAFON."
<PAGE>
Laboratoire L. Lafon
Page 5
13. Each of Cephalon and Lafon hereby restates its respective
representations and warranties made in the License Agreement and the Supply
Agreement, as each such agreement has been amended pursuant to this letter
agreement.
Except as modified by this letter agreement, all provisions of each of the
License Agreement and the Supply Agreement are confirmed to be and shall remain
in full force and effect.
If the foregoing is acceptable, please indicate your agreement in the space
provided below.
CEPHALON, INC.
By: /s/ Frank Baldino
------------------------------
Frank Baldino, Jr., Ph.D.
President
Accepted and agreed to this
_____ day of July, 1993.
LABORATOIRE L. LAFON
By: /s/ F.C. Lafon
------------------------------
F. C. Lafon
Chief Executive Officer
<PAGE>
Exhibit 10.5(e)
[GRAPHIC OMITTED]
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380
(215) 344-0200
Fax (215) 344-0065
July 21, 1993
Genelco S.A.
8, Route de Beaumont
1701 Fribourg
Switzerland
Re: Amendment to Trademark Agreement
--------------------------------
Gentlemen:
This letter agreement shall serve as an amendment to the Trademark
Agreement dated January 20, 1993 ("Trademark Agreement") between Cephalon, Inc.
("Cephalon") and Genelco S.A. ("Licensee"). All capitalized terms not otherwise
defined herein shall be used as defined in the Trademark Agreement.
1. The term "Territory," for all purposes under the Trademark Agreement is
hereby expanded to include Ireland and the United Kingdom of England, Scotland,
Northern Ireland and Wales (collectively, the "U.K. Territory").
2. Article III(1) of the Trademark Agreement is hereby amended and restated
in its entirety as follows:
"For and in consideration of the Exclusive License to use the Licensed
Trademark granted herein, Licensee shall pay Licensor a royalty as follows:
a) four percent (4%) of Net Sales by CEPHALON and/or its sublicensees in a
country within the Territory, during the first fifteen (15) years from the
date of first commercial sale of the first Licensed Product in such
country; and
b) two percent (2%) of Net Sales by CEPHALON and/or its sublicensees in a
country within the Territory during the next succeeding five (5) years of
the term of this Agreement.
3. Except as modified by this letter agreement, all provisions of the
Trademark Agreement are confirmed to be and shall remain in full force and
effect.
<PAGE>
Genelco S.A.
Page 2
If the foregoing is acceptable, please indicate your agreement in the space
provided below.
CEPHALON, INC.
By: /s/ Frank Baldino
----------------------------
Frank Baldino, Jr., Ph.D.
President
Accepted and agreed to this
_____ day of July, 1993.
Genelco S.A.
By: /s/ ILLEGIBLE
----------------------------
<PAGE>
Exhibit 10.5(g)
[GRAPHIC OMITTED]
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19830-4245
August 23, 1995 (610) 344-0200
Fax (610) 344-0065
Laboratoire L. Lafon
19 Avenue du Professeur-Cadiot
94701 Maisons-Alfort
France
Re: Amendment No. 4 to License Agreement and Supply Agreement
---------------------------------------------------------
Gentlemen:
This letter agreement shall serve as an amendment to (i) the License
Agreement dated January 20, 1993, as amended prior to the date hereof (the
"License Agreement") between Cephalon, Inc. ("Cephalon") and Laboratoire L.
Lafon ("Lafon") and (ii) the Supply Agreement dated January 20, 1993, as amended
prior to the date hereof (the "Supply Agreement") between Cephalon and Lafon.
1. All capitalized terms not otherwise defined herein shall be used as
defined in the License Agreement.
2. The term "Territory," for all purposes under the License Agreement and
the Supply Agreement is hereby expanded to include Japan.
3. Appendix A to the License Agreement is hereby amended to add the
following patents and patent applications related to Licensed Products
and/or the Compound, as filed in Japan as of the date hereof (each of
which shall be included in the definition of "Patents"):
<TABLE>
<CAPTION>
Application Date Application Number Date of Issuance Patent Number
- ---------------- ------------------ ---------------- -------------
<S> <C> <C> <C>
29/03/78 35.406 28/09/87 1.400.453
14/06/91 3.143.267 [neuroprotector; Parkinson's]
14/12/92 4.332.897 [anti-ischemic agent]
</TABLE>
4. In consideration of the expansion of the Territory, Cephalon shall pay
to Lafon, the following non-refundable license fees totalling Two
Million, Five Hundred Thousand US Dollars (USD 2,500,000)
a. Five hundred thousand US dollars (USD 500,000), payable upon
Lafon's signature of this letter agreement;
<PAGE>
Laboratoire L. Lafon
Amendment No. 4
August 23, 1995
Page 2
b. Five hundred thousand US dollars (USD 500,000), payable on the
first anniversary of the date of this letter agreement;
c. One million US dollars (USD 1,000,000), payable upon the initial
marketing approval of an NDA equivalent in Japan for a Licensed
Product, including any related pricing approvals needed to market
the Licensed Product; and
d. Five hundred thousand US dollars (USD 500,000), payable upon the
first commercial sale of a Licensed Product in Japan.
5. Lafon agrees and acknowledges that Cephalon is authorized to enter
into an agreement with a company in Japan as Cephalon's sublicensee to
develop and commercialize Licensed Product in Japan, subject to the
prior approval of Lafon, which shall not be unreasonably withheld, and
subject to the other sublicensing provisions of Article II of the
License Agreement. Cephalon agrees and acknowledges that Cephalon's
rights to develop and commercialize Licensed Product in Japan under
this Amendment No. 4 are subject to termination by Lafon, upon 30 days
notice in writing, if Cephalon has failed to make such an arrangement
in Japan by the second anniversary of the execution of this Amendment
No. 4. In the event of such termination, Japan shall automatically be
deleted from the definition of "Territory," and the Patents and Patent
Applications referred to in paragraph 3 shall be deleted from Annex A.
In its discussions with a potential Japanese sublicensee, Cephalon
shall use its best efforts to have the candidate identify possible
product opportunities for Lafon in France. Cephalon will advise Lafon
of any such opportunities and Lafon and Cephalon will determine an
appropriate way to handle the negotiations for the product opportunity
separate from the sublicensing discussions and in a manner that does
not impair the modafinil sublicensing discussions. However, Lafon
acknowledges that there can be no assurance that a Japanese company
will have a product opportunity suitable for Lafon in France, and that
the availability of such an opportunity is not a condition to
Cephalon's right to sublicense its rights in Japan.
6. In case a sublicensing agreement is signed by Cephalon with a company
in Japan, the rate of royalty applicable to Japan according to Article
V(2) of the License Agreement and the price applicable under Article
3(b) of the Supply Agreement to the supply of Compound by Lafon for
use in Japan shall be established by Lafon and Cephalon in a separate
written amendment, in accordance with the relevant
<PAGE>
Laboratoire L. Lafon
Amendment No. 4
August 23, 1995
Page 3
laws and regulations of the countries concerned, with the purpose of
minimizing withholding taxes and other tax liabilities of the parties.
However, the total compensation payable by Cephalon to Lafon as a
royalty under the License Agreement on Net Sales in Japan and for the
purchase of Compound from Lafon for use in Japan shall be established
based on the amount of compensation received by Cephalon from the
sublicensee, according to the following table:
% of Net Sales in % of Net Sales in
Japan paid by Japan by
Sublicensee to Sublicensee to
Cephalon Lafon
-------- -----
25 12.0
26 12.2
27 12.4
28 12.6
29 12.8
30 12.0
31 13.5
32 14.0
33 14.6
34 15.0
35 15.5
If Cephalon is unable to obtain compensation from a sublicensee of at
least 25% of Net Sales of Licensed Product in Japan, Cephalon and
Lafon shall negotiate in good faith to determine a fair allocation
between Cephalon and Lafon of the compensation from the Japanese
company. However, Lafon shall not be obligated to accept less than
12.0% of Net Sales in Japan, nor shall Cephalon be obligated to accept
compensation from the sublicensee of less than 25% of Net Sales.
The second paragraph of Article III, Section 3.b and Article III,
Section 3.c of the License Agreement shall not apply to this Amendment
No. 4. Instead, Cephalon will consult with and will keep Lafon advised
about the appropriate schedule for regulatory filings in Japan with
respect to a Licensed Product, to ensure prompt commercialization of
Licensed Products in a commercially reasonable manner, taking into
account the possible therapeutic indications and related regulatory
requirements in Japan applicable to preclinical and clinical trials.
<PAGE>
Laboratoire L. Lafon
Amendment No. 4
August 23, 1995
Page 4
7. (a) Concerning U.S. Patent Application Serial No. 08/319,124 (the
"Cephalon Application"), Cephalon is hereby authorized to file
counterparts of such Application in all countries within its
Territory; in addition, Cephalon may file such Application in
other countries outside the Territory, at its own cost and
expense.
(b) Cephalon hereby grants to Lafon a non-exclusive, fully-paid
license, with the right to sublicense, to any and all
applications and patents resulting therefrom which are
counterparts of the Cephalon Application, and which are filed in
countries outside Cephalon's Territory to make, have made, use
and sell Compounds and Licensed Products in all countries outside
of Cephalon's Territory. Lafon's license hereunder shall survive
the expiration of the License Agreement by its terms and any
proper termination of the License Agreement by either party.
(c) Article VII, paragraph 6, is hereby amended to read in its
entirety as follows:
"CEPHALON and LAFON will advise each other periodically of any
Improvements made by either party patentable or not, and CEPHALON
and LAFON agree to grant the other party authorization to use
such Improvements at no cost on a nonexclusive basis. The
licensees or sublicensees of a party shall be authorized to use
an Improvement of the other party in their respective territory
or territories (but not in the territory of the party who made
the Improvement) if the licensee or sublicensee has agreed to
reciprocity with respect to its own Improvements. Notwithstanding
the foregoing, the term "Improvements" shall not include
preclinical and clinical study data related to the Compound,
which shall be governed by the separate provisions of this
Agreement related to such data.
8. A difference has appeared between the parties concerning the
construction of the License Agreement regarding communication of the
reports on Cephalon's studies, Cephalon considering that it has no
obligation to communicate to Lafon such reports and Lafon considering
that communication of such reports is required by Cephalon under the
License Agreement. Both parties standing on their positions, the
following compromise is hereby agreed and accepted by both parties:
(a) Each party shall supply the other party, from time to time and at
least semiannually, with interim progress reports concerning
any program or study
<PAGE>
Laboratoire L. Lafon
Amendment No. 4
August 23, 1995
Page 5
which is performed by such party (or its licensees or
sublicensees) relating to the Licensed Product, including but not
limited to, chemical, biological, physical, pharmacological and
toxicological studies, animal and clinical studies, data and
know-how concerning the manufacture of Licensed Products. The
corresponding detailed final reports and, if requested by a
party, the corresponding raw data will be supplied to the
requesting party, promptly upon completion. Each party shall
submit to the other, before initiating a study after the date of
this Amendment No. 4, a copy of the protocol of each clinical
study to be performed. Lafon shall have the right to review and
approve a protocol of Cephalon to determine that in its
reasonable opinion it is not detrimental to the commercialization
of the Compound, but Lafon shall not unreasonably withhold its
approval of such protocol. Each party is hereby authorized to
freely use such information and reports supplied by the other
party, either directly or through its licensees or sublicensees,
in its respective jurisdictions, subject to the confidentiality
provisions of the License Agreement and except as provided in
clause (d) below.
(b) Without prejudice to the generality of the foregoing, Cephalon
will deliver to Lafon final reports of the studies designated
C103 and C107 by September 30, 1995 (or such later time
designated by Lafon as shall be sufficient for Lafon to include
such reports in a response to the CPMP), excluding any delays
caused by events outside of Cephalon's control. Cephalon also
shall provide the final reports of the studies designated C201
and C109 is soon as commercially practicable after September 30,
1995 (currently the delivery date for both studies is estimated
to be in mid-October 1995) as well as the final reports for the
studies designated C301 and C302 (currently the delivery date for
C301 is estimated to be in the 1st quarter of 1996). Cephalon
also will furnish Lafon with copies of all protocols related to
clinical studies conducted by Cephalon prior to the date hereof.
(c) The same provisions as are included in paragraph (a) above shall
apply to all programs and studies that are performed by any
sublicensee of Cephalon or Lafon, including any sublicensee of
Cephalon in Japan.
(d) Concerning all clinical programs and studies concerning
indications of any Licensed Product (other than the treatment of
narcolepsy and idiopathic hypersomnia) initiated after the date
of this Amendment No. 4. Cephalon will notify Lafon as promptly
as practicable of any such clinical study or
<PAGE>
Exhibit 10.13
MARKETING AND DEVELOPMENT COLLABORATION AGREEMENT
THIS MARKETING AND DEVELOPMENT COLLABORATION AGREEMENT (this "Agreement")
is dated this 10th day of June, 1999, between CEPHALON, INC., a company
organized and existing under the laws of the State of Delaware, having offices
at 145 Brandywine Parkway, West Chester, Pennsylvania 19380-4245 (hereinafter
referred to as "Cephalon") and ABBOTT LABORATORIES INC., a company organized and
existing under the laws of the State of Delaware, having offices at 100 Abbott
Park Road, Abbott Park, Illinois 60064 (hereinafter referred to as "Abbott").
WITNESSETH:
WHEREAS, Abbott licenses, manufactures and markets the pharmaceutical
product N-(4,4-di(3-methyl-2-thienyl)but-3-en-1-yl)nipecotic acid, which is
more commonly known in the United States as Gabitril(R) (the "Product");
WHEREAS, Abbott desires to collaborate with another company on marketing
and clinical development activities in the Field (as defined in Section 1.15)
related to the Product; and
WHEREAS, Abbott and Cephalon wish to enter into such an agreement for the
Product throughout the Territory (as defined in Section 1.33).
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, both parties to this Agreement agree as follows:
ARTICLE 1- DEFINITIONS
1.1 "Abbott Detail," "Abbott Details" or "Abbott Detailing" means or refers to
a sales presentation in the Territory by an Abbott Representative during
which the Abbott Representative promotes the Product to an individual,
anti-epileptic prescribing physician identified on the target list approved
by the Collaboration Committee, which sales presentation must be performed
in accordance with the terms and conditions specified herein.
1.2 "Abbott Representative" means an individual:
(i) who is regularly employed by Abbott on a full-time basis as a member
of its sales force; and
(ii) who is qualified and has been trained by Abbott to make sales
presentations for Abbott's pharmaceutical products to physicians and
who is qualified and has been trained by Abbott, in particular, to
make sales presentations for the Product (as contemplated by Section
4.4(a)).
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1.3 "Affiliate" means, with respect to each party, any legal entity during the
term of this Agreement:
(i) at least fifty percent (50%) of whose issued voting securities or
assets are owned or controlled, directly or indirectly, by said party;
(ii) which owns or controls, directly or indirectly, at least fifty percent
(50%) of the issued voting securities or assets of said party; or
(iii) which is owned or controlled, directly or indirectly, by any of the
entities described in (i) or (ii) above, where such ownership or
control is defined as owning or controlling at least fifty percent
(50%) or more of the issued voting securities or assets of such
entity.
Notwithstanding the foregoing, for purposes of this Agreement, TAP Holdings
Inc. and its subsidiary companies shall not be deemed an "Affiliate" of
Abbott.
1.4 "Cephalon Detail," "Cephalon Details" or "Cephalon Detailing" means or
refers to a sales presentation in the Territory by a Cephalon
Representative during which the Cephalon Representative promotes the
Product to an individual, anti-epileptic prescribing physician identified
on the target list primarily made up of neurologists and approved by the
Collaboration Committee, which sales presentation must be performed in
accordance with the terms and conditions specified herein.
1.5 "Cephalon Detail Launch Date" means the date of the commencement of the
Cephalon Detailing effort as described in Section 3.1.
1.6 "Cephalon Promotional Launch Date" means the date of the commencement of
Cephalon's marketing and promotional duties under this Agreement, i.e., on
or before July 1, 1999.
1.7 "Cephalon Representative" means an individual:
(i) who is regularly employed by Cephalon on a full-time basis as a member
of its sales force; and
(ii) who is qualified and has been trained by Cephalon to make sales
presentations for Cephalon's pharmaceutical products to physicians and
who is qualified and has been trained by Cephalon, in particular, to
make sales presentations for the Product (as contemplated by Section
3.1).
1.8 "Clinical Study Plan" shall mean that part of the Collaboration Plan
developed by the Collaboration Committee for the conduct of clinical
studies by the parties hereunder.
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1.9 [* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
1.10 "Collaboration Committee" means the committee established by Cephalon and
Abbott to oversee and manage the co-promotion, marketing and further
development of the Product.
1.11 "Collaboration Period" means the period which is the shorter of: (i) the
first through tenth Sales Years; or (ii) the actual duration of this
Agreement.
1.12 "Collaboration Plan" shall have the meaning set forth in Section 3.12.
1.13 "Expiration Date" means April 23, 2008, the date the patent for the Product
(U.S. 5,010,090) expires, as such date may be extended pursuant to the
terms of Section 10.1(b) hereof
1.14 "FDA" means the Food and Drug Administration or any successor entity
thereto.
1.15 [* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
1.16 "Net Sales" means gross sales of the Product (as set forth on the invoice
for such Product) in the Territory for use in the Territory in a given
Sales Year ("Annual Net Sales"), Sales Quarter ("Quarterly Net Sales") or
such other time period by Abbott, any Abbott Affiliate or any Abbott
licensee, to unrelated third parties, in arm's length transactions,
including but not limited to, pharmaceutical wholesalers, pharmacies,
hospitals or dispensing physicians, less any of the following charges or
expenses that are incurred in connection with gross sales of the Product
during the Term:
(i) discounts, including cash discounts, customary wade allowances or
rebates actually taken or allowed, governmental rebates, charge-backs,
and group purchasing management fees for formulary access;
(ii) credits or allowances given or made for rejection, recall or return
(including return reserves) of previously sold Product actually taken
or allowed;
(iii) any tax or government charge (including any tax such as a value added
or similar tax or government charge) to the extent it appears on
Product invoices (other than an income tax levied on the sale,
transportation or delivery of Product); and
(iv) freight, insurance and duties on shipments of Product.
The parties agree that the only discounts, allowances or rebates permitted
to be charged against "Net Sales" hereunder shall be those that are
extended by Abbott in good faith and consistent with discounts, allowances
or rebates extended by Abbott on other Abbott
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products in the ordinary course of business. Abbott agrees that it will not sell
the Product in a bundle arrangement with other Abbott products without the prior
written approval of the Collaboration Committee.
For purposes of determining the amount of sales of Gabitril(R) outside of the
Field for a given period,
(i) the number of prescriptions as measured by IMS data for Gabitril(R)
written outside the Field for such period shall be divided by the
total number of prescriptions for Gabitril(R) written for such period
inside and outside the Field,
(ii) the quotient thereof shall be multiplied by gross sales of Gabitril(R)
minus charges and expenses permitted to be deducted from gross sales
under this Section 1.16; and
(iii) the product thereof shall be the sales of Gabitril(R) outside the
Field for the given period.
In the event the invoice includes products other than the Product, then, if
possible, such charges and expenses shall be allocated directly to the product
or products to which they relate, including the Product. In the event any
charges or expenses cannot be attributed to a specific product, including the
Product, then such charges and expenses shall be allocated on a pro-rata basis,
based on the dollar value of such products, including the Product. Any sales
among: (a) Abbott, (b) Abbott Affiliates, or (c) Abbott licensees, shall not be
included in the definition of "Net Sales."
Sales of new dosage strengths of Product shall not be included in "Net Sales"
for the ninety (90) day period following the first day of commercial shipment of
such new dosage strengths of Product by Abbott, but such sales of new dosage
strengths of Product shall be added in proportionally equal amounts to "Net
Sales" in the four (4) Sales Quarters following the end of the ninety (90) day
period, with any returns of such new dosage strengths of Product deducted from
gross sales (i) as and when received; or (ii) after the end of the ninety (90)
day period, whichever is later.
Moreover, "Net Sales" for the first Sales Year shall not include sales of
Product in the first Sales Year due to inventory loading by customers in
anticipation of the change in century ("Y2K Excess Inventory"), but the amount
of such sales shall be added to gross sales for the first Sales Quarter of the
second Sales Year. Y2K Excess Inventory shall be measured by comparing IMS
pipeline audit data related to average monthly wholesaler/chain warehouse
inventories for July, August and September, 1999, to the inventory for December
1999. This comparison shall be calculated as follows:
Y2K Excess Inventory = Actual December 1999 Month of Supply (MOS) minus
Derived Non-Y2K Excess Inventory.
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Derived Non-Y2K Excess
Inventory= Actual December 1999 MOS times
(Average MOS for July, August and
September 1999 divided by Actual
December 1999 MOS)
For example, Y2K Excess Inventory would be calculated as follows, assuming
Actual December 1999 MOS of $1,500,000 and Average MOS for July, August and
September, 1999 of $1,000,000:
Y2K Excess Inventory = $1,500,000 minus ($1,500,000 times [$1,000,000 divided by
$1,500,000] = $500,000.
As set forth in this example, Y2K Excess Inventory of $500,000 would be deducted
from the calculation of "Net Sales" for the first Sales Year and such amount
would then be added to "Net Sales" for the first Sales Quarter of the second
Sales Year.
1.17 "Patent" means United States Patent Number 5,010,090 as it relates to
N-(4,4-di(3-methyl-2-thienyl)but-3-en-1-yl)nipecotic acid licensed to
Abbott Laboratories and issued on April 23, 1991, the expiration date of
which is, as of the date hereof, April 23, 2008, subject to Section 10.1(b)
hereof.
1.18 "PhRMA Code" means the Pharmaceutical Manufacturers Association's Code of
Pharmaceutical Marketing Practices, as amended from time to time.
1.19 "Primary Detail" means:
(a) a Cephalon Detail in which:
(i) the Product is the first product presented during a sales
presentation; and
(ii) more than fifty percent (50%) of the time spent during such sales
presentation is spent on the Product.
1.20 "Product" means, from the date hereof up until such time as the FDA
approves indications in addition to epilepsy, additional dosage forms or
formulations (including any extended release formulations), any
pharmaceutical product or products:
(i) for human use only;
(ii) containing N-(4,4-di(3-methyl-2-thienyl)but-3-en-l-yl)nipecotic acid
as the sole therapeutically active ingredient;
(iii) only in the oral dosage form(s) of tablets; and
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(iv) prescribed in the Field.
In the event the FDA approves indications in addition to epilepsy,
additional dosage forms or formulations (including any extended release
formulations) of the Product in the Field for human use, such indications,
dosage forms or formulations shall be included in the definition of
"Product" only if (A) they were the subject of the collaborative clinical
activities set forth in Section 3.14 hereof that were the subject of a
Supplemental New Drug Application filed with FDA for indications within the
Field; or (B) the parties have negotiated an amendment to this Agreement as
provided in Section 3.15 hereof providing for such additional
indication(s), dosage form(s) or formulation(s) to be included in the
definition of "Product" and setting forth such additional financial and
other terms that may apply to the collaborative marketing and clinical
development of such additional indication(s), dosage form(s) or
formulation(s). If neither (A) nor (B) above is applicable, the additional
indication(s), dosage form(s) or formulation(s) shall be excluded from the
definition of "Product."
1.21 "Promotional Budget" means the budget prepared by each party and submitted
to the Collaboration Committee annually setting forth in sufficient detail
the proposed allocation of such party's share of the Promotional Expenses
required to be expended by such party pursuant to Section 3.12.
1.22 "Promotional Expenses" means those types of expenses described on Exhibit
1.22 that are related to the promotion and marketing efforts of a party
with regard to the Product and which are allowed to be charged against a
party's Promotional Budget.
1.23 "Promotional Materials" means all written, printed or graphic materials,
brochures, sales training materials, sales aids, detail aids and other
promotional items related to the Product, including electronic or internet
applications thereof.
1.24 "Reasonable Commercial Efforts" means efforts which are consistent with
those utilized by a party for its own internally developed or in-licensed
pharmaceutical products with similar market potential.
1.25 "Reminder Detail" means an Abbott Detail in which the Product is emphasized
after the primary detail by the Abbott Representative either as the second
or third emphasized product during the sales presentation.
1.26 "Residual Periods" mean the two 12-month periods following the expiration
or termination of the Collaboration Period.
1.27 "Sales Quarter" means a period of three (3) consecutive calendar months
during the Term, commencing on July 1, 1999, with all subsequent Sales
Quarters occurring each successive three (3) month period thereafter.
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1.28 "Sales Year" means (i) with respect to the first Sales Year, the period
January 1, 1999 - December 31, 1999; (ii) with respect to the second
through ninth Sales Years (2000-2007), a period of twelve (12) consecutive
calendar months commencing January 1st of each calendar year; (iii) with
respect to the tenth Sales Year, the period January 1, 2008 - April 23,
2008; and (iv) each of the two - twelve (12) consecutive calendar month
periods which comprise the Residual Periods.
1.29 "Sample Pack" means a package of Product used for sampling to physicians,
as further described in Section 3.6.
1.30 "Sampling Act" means the Prescription Drug Marketing Act of 1987, as
amended from time to time, and any regulations promulgated thereunder.
1.31 "Secondary Detail" means:
(a) a Cephalon Detail sales presentation in which:
(i) the Product is the second product presented; and
(ii) the second most amount of time spent during such sales
presentation is spent on the Product.
1.32 "Term" means the Collaboration Period and the Residual Periods.
1.33 "Territory" means the fifty (50) states of the United States of America and
the District of Columbia.
1.34 "Trademarks" means the trademark for the Product, Gabitril(R), and the
trademark for Filmtab(R), registered to Abbott in the Territory, and any
new trademark applied for by, or registered to Abbott in the Territory for
the Product.
ARTICLE 2- COLLABORATION
2.1 (a) Abbott and Cephalon wish to structure and implement a marketing and
clinical development collaboration that will capitalize on the
respective strengths of their organizations and effectively drive the
commercial success of the Product in the Territory. Each party shall
exercise Reasonable Commercial Efforts and operate in good faith to
undertake all matters within the scope of that party's responsibility
in support of the Product and, more specifically, to maximize its
commercial potential during the Collaboration Period. In this regard,
and without limiting the foregoing, Abbott shall be responsible for
all matters relating to manufacturing, supply, storage, distribution,
customer service, medical and regulatory affairs, except that nothing
contained in this Section 2.1(a) shall obligate Abbott with respect to
Sample Packs, the obligations for which are described in Section 3.6
hereof. In considering matters, whether in its capacity as a member of
the
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Collaboration Committee or otherwise, representatives of the parties
shall act in good faith and deal fairly and equitably with each other,
and further shall render decisions and take actions that in each case
represent their best judgment as to how to best maximize the
commercial potential and the underlying asset value of the Product.
Notwithstanding the foregoing, Abbott shall be entitled to expend such
efforts and funds that it deems necessary with regard to Depakote(R)
and any other Abbott products in order to maximize the commercial
potential of Depakote(R) and such other Abbott products.
(b) Appointment. As set forth in this Agreement, Abbott hereby appoints
Cephalon for the Collaboration Period to co-promote, market and
provide clinical development support for the Product with Abbott in
the Field in the Territory. Abbott shall not appoint any third party
to co-promote, market or provide clinical development support (except
for clinical research organizations conducting such clinical
activities) for the Product in the Field in the Territory other than
Cephalon. Cephalon's duties as a collaborator in the marketing and
clinical development of the Product are more specifically described
herein.
ARTICLE 3
3.1 Cephalon Detailing Effort.
(a) General. During the Collaboration Period, Cephalon, by and through the
Cephalon Representatives, shall perform Cephalon Details of the
Product in accordance with the terms of this Agreement, including
adherence to the Collaboration Plan. Cephalon shall perform Cephalon
Details of the Product only in strict accordance with: (i) the PhRMA
Code; (ii) the approved Product labeling; and (iii) the applicable
Federal, state and local laws and regulations of the Territory,
including, but not limited to, the Sampling Act. Cephalon shall only
perform Cephalon Details to individual, anti-epileptic prescribing
physicians in the Field identified on the target list primarily made
up of neurologists and approved by the Collaboration Committee, unless
agreed otherwise with Abbott by written amendment to the Collaboration
Plan.
(b) Number of Details. Commencing on September 15, 1999, Cephalon, by and
through the Cephalon Representatives, shall perform the following
numbers of Primary and Secondary Details of the Product within the
Territory:
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[* The confidential material contained herein has been omitted and has
been separately filed with the Commission].
(c) Physician Observations. Cephalon shall advise Abbott from time to time
of the Cephalon Representatives' observations of physicians' reactions
to the format of Cephalon Details. This shall be accomplished through
the use of Cephalon Representative and Abbott Representative focus
groups, surveys or as otherwise mutually agreed by the parties.
3.2 Variance In Details Per Sales Year/Quarter.
(a) Cephalon shall perform the required number of annual Cephalon Details
in a proportionate manner so that beginning in the second Sales Year,
the number of Cephalon Primary and Secondary Details performed in each
Sales Quarter is [* The confidential material contained herein has
been omitted and has been separately filed with the Commission.]
respectively, with a permitted variance per Sales Quarter of minus ten
percent (- 10%) (except for the 1999 Cephalon Detailing Period and the
first Sales Quarter of the second Sales Year, where the permitted
variance shall be based on [* The confidential material contained
herein has been omitted and has been separately filed with the
Commission.] Primary Details and [* The confidential material
contained herein has been omitted and has been separately filed with
the Commission.] Secondary Details). Except as set forth in Section
3.2(b) below, the permitted variance per Sales Quarter shall not
affect Cephalon's overall obligation to perform the minimum number of
Cephalon Details per Sales Year as required under Section 3.1(b)
above.
(b) In the event Cephalon fails to perform the required number of Cephalon
Details in a given Sales Year by a variance of minus ten percent(-10%)
or less (the "Detail Variance"), then Cephalon shall be entitled
to make up the Detail Variance by performing all of the Detail
Variance in the first Sales Quarter of the subsequent Sales Year, in
addition to the Cephalon Details that Cephalon is required to perform
in that Sales Quarter pursuant to Section 3.1(b). If Cephalon performs
all of the Detail Variance in the subsequent first Sales Quarter (it
being agreed that the number of Cephalon Details performed in such
first Sales Quarter shall be counted first toward the required number
of Cephalon Details for that Sales Quarter, and second toward the
Detail Variance, then Abbott shall pay to Cephalon within forty-five
(45) days of the end of such first Sales Quarter the amount of
compensation withheld by Abbott for the prior Sales Year pursuant to
the provisions of Section 4.1. In the event Cephalon fails to perform
all of the
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Detail Variance as aforesaid, then the reduction in Cephalon's
compensation pursuant to the provisions of Section 4.1 shall stand, no
payment for any of such Detail Variance shall be due to Cephalon, and
Cephalon shall have no further obligation to make up such Detail
Variance. For purposes of clarification and explanation, Cephalon
shall not be entitled to any variance in the number of Cephalon
Details in the first Sales Quarter of a Sales Year when it is
attempting to make up a Detail Variance for the previous Sales Year.
Furthermore, this provision entitling Cephalon to make up a Detail
Variance may only be invoked once by Cephalon in any consecutive
period of four (4) Sales Years. For example, if Cephalon invokes its
right in the third Sales Year to make up a Detail Variance that
occurred in the second Sales Year, Cephalon shall not be permitted to
invoke this right again until at least the seventh Sales Year or
thereafter, in order to make up the Detail Variance for the preceding
Sales Year.
3.3 Cephalon Representative Training. Cephalon shall, on an on-going basis, and
at Cephalon's expense, train and supervise the Cephalon Representatives in
the Cephalon Detailing of the Product, which training shall include adverse
event reporting in a manner reasonably acceptable to Abbott. Cephalon
agrees that the composition of the Cephalon Representative sales force is
an important and material element of its promotional effort hereunder, and
that, beginning in the second Sales Year, Cephalon shall ensure that at
least fifty percent (50%) of Cephalon Representatives promoting the Product
are Cephalon's longest-tenured Cephalon Representatives. At the beginning
of the Collaboration Period, Abbott shall provide to Cephalon, at no cost
to Cephalon, Abbott's existing sales force training materials for use by
Cephalon in its initial sales training activities. In the event that such
training materials need to be reprinted, Abbott agrees to reprint such
materials and to sell them to Cephalon, at Abbott's cost of reproduction,
as an allowable expense against Cephalon's Promotional Budget. Abbott shall
consult with Cephalon regarding the appropriate levels of sales force
training materials. During the first and second Sales Years, Abbott agrees
to provide Cephalon with reasonable access to Abbott's sales trainers,
sales force personnel and in-house personnel, such as scientists and
product managers, as their schedules may permit, to consult with Cephalon
on its sales training activities. Cephalon agrees that the Cephalon
Representatives shall not negatively position Depakote(R) or any other
current or future Abbott epilepsy product in any oral presentation or
written sales force training materials relating to the Product.
3.4 Cephalon Representatives' Incentive Compensation. For the Collaboration
Period, Cephalon, at its expense, shall award incentive compensation,
bonuses or prizes to Cephalon Representatives for achieving goals for
volume of sales generated for the Product in the sales territory of such
Cephalon Representative. [*The confidential material herein has been
omitted and has been separately filed with the Commission.]
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Pursuant to Section 3.7(c), throughout the Collaboration Period, Cephalon
shall keep Abbott informed with respect to Cephalon's current incentive
compensation plan for the Product. Pursuant to Section 4.5(b), Abbott shall
supply certain sales information to aid Cephalon in the determination of
incentive compensation due to Cephalon Representatives and related to the
Product.
3.5 Promotional Materials and Promotional Practices.
(a) Development. Throughout the Collaboration Period, Abbott and Cephalon
shall collaborate by means of the Collaboration Committee on the
development of all Promotional Materials and promotional practices.
Any new Promotional Materials and promotional practices developed
hereunder must be approved in writing through the Abbott Medical
Regulatory Review Process in accordance with Section 3.5(e) hereof.
Cephalon shall be responsible for ensuring that all final Promotional
Materials distributed in the Territory are exactly the same as the
Promotional Materials approved by Abbott in accordance with Section
3.5(e) hereof. All such Promotional Materials shall be sold to Abbott,
at Cephalon's cost of reproduction, for use by Abbott Representatives
who perform Abbott Detailing, to be expensed against Abbott's
Promotional Budget. Cephalon shall be solely responsible for the cost
of developing such Promotional Materials, which cost shall be
considered a Promotional Expense to be expensed against Cephalon's
Promotional Budget. Cephalon agrees that all Promotional Materials and
promotional practices developed by it shall not conflict with the
PhRMA Code, with any law or regulation of the Territory, nor with
Abbott's Operating Guidelines for Program Funding, a copy of which has
been provided to and reviewed by Cephalon. Cephalon further agrees
that its Promotional Materials and promotional practices shall not
negatively position Depakote(R) or any other current or future Abbott
epilepsy product in any oral presentation or Promotional Materials.
(b) Development Services. Cephalon agrees to consider contracting with
Abbott for the creative development of all Promotional Materials to be
developed by Cephalon hereunder, provided that any such decision
remains in Cephalon's sole discretion. In return for Cephalon's
consideration of Abbott, Abbott agrees that any bid submitted by it
for the creative development of such Promotional
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Materials shall be based on Abbott's cost, as if Abbott was providing
the development service to one of its internal divisions.
(c) Distribution. Cephalon Representatives shall distribute Promotional
Materials to anti-epileptic prescribing physicians in connection with
Cephalon Detailing. The parties shall consult with each other with
respect to the distribution of the Promotional Materials. Cephalon
Representatives shall not use any Promotional Materials other than the
Promotional Materials supplied by Abbott or such other Promotional
Materials developed by Cephalon and approved in writing by the
Collaboration Committee or designees of the Collaboration Committee
and by Abbott pursuant to Section 3.5(e) hereof.
(d) Electronic Programs. All Cephalon Promotional Materials that are
electronic or internet-based programs and that focus on the Product
must also be approved in writing by the Collaboration Committee and
approved in writing by Abbott through the Abbott Medical Regulatory
Review Process described in Section 3.5(e) hereof Examples of such
programs include the promotional content of Cephalon's web site
related to Product and associated links to chat rooms, e-mail or
related medical sites.
(e) Abbott's Medical Regulatory Review Process. Abbott shall use
Reasonable Commercial Efforts to review the Promotional Materials in a
timeframe consistent with other Abbott products, but with the
understanding that Abbott's Medical Regulatory Review Process may take
approximately two (2) weeks from submission of Promotional Materials
and promotional practices to rendering of approval/disapproval of such
Promotional Materials and promotional practices by Abbott's Medical
Regulatory Review Process. In the event approval/disapproval is not
given within such two (2) week period, the parties agree to discuss
the reason for such delay. Notwithstanding anything herein to the
contrary, the only basis for disapproval of new Promotional Materials
or promotional practices shall be
(i) a good faith belief by Abbott that such Promotional Materials or
practices may violate any applicable law, regulation or guidance,
including but not limited to, those promulgated by the FDA;
and/or
(ii) a good faith belief by Abbott that the Promotional Materials are
not medically accurate. For any Promotional Materials or
practices which Abbott disapproves hereunder, Abbott shall
provide Cephalon with sufficient detailed information and/or
comments about the noted violation(s) of law, regulation,
guidance or medical accuracy, and the parties shall thereafter
engage in constructive discussions to enable Cephalon to make
corrections to the Promotional Materials or practices so that
they may be promptly resubmitted to Abbott for approval.
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(f) Submittal of Promotional Materials to FDA. Once Promotional Materials
have been approved in accordance with the foregoing provisions of this
Section 3.5, Cephalon shall supply Abbott with copies of such
Promotional Materials within forty-eight (48) hours of the time they
are submitted to Cephalon Representatives, to enable Abbott to submit
such Promotional Materials to the FDA.
(g) Physician Observations. Cephalon shall advise Abbott from time to time
of the Cephalon Representatives' observations of physicians' reactions
to Promotional Materials. This shall be accomplished through the use
of Cephalon Representative and Abbott Representative focus groups,
surveys or as otherwise mutually agreed by the parties.
(h) Cost. Where it is provided in this Agreement that an item will be
provided by one party to another at the providing party's cost, (i) in
the case of an item produced internally by a party, the parties agree
to set a specific transfer price for such item prior to placement of
the first order by the receiving party intended to cover all of the
providing party's internal costs, which transfer price shall be
subject to annual adjustment based upon changes to the relevant
Consumer Price Index applicable to such item, or based upon changes in
the cost to manufacture such item if the design or configuration of
the item is materially changed, in which case the transfer price shall
be re-set based upon the direction of the Collaboration Committee; and
(ii) in the case of an item procured by the providing party from a
third party vendor, the cost shall be a direct pass-through of the
amount paid by the providing party to the third party vendor, which
cost shall be evidenced by the invoice of the third party vendor.
3.6 Sample Packs.
(a) Supply and Distribution of Sample Packs. Commencing on August 25, 1999
and continuing thereafter during the Collaboration Period, Abbott will
sell to Cephalon, at Abbott's cost, Sample Packs for distribution to
Cephalon Representatives in accordance with the promotional program
approved by the Collaboration Committee and the procedures set forth
in Section 3.6(b) below. The cost of the Sample Packs as of the date
hereof is set forth in Exhibit 3.6 and is based upon Abbott's current
packaging of cases containing forty (40) cartons, with each carton
containing a 40 ct. bottle of 4 mg. tablets. The parties understand
that such cost is subject to change on an annual basis thereafter to
reflect changes in costs to Abbott to produce such Sample Packs,
whether by change in the cost of Abbott's standard development process
to produce Product, change in configuration of the Sample Packs, or
otherwise. Any change in the design or configuration of Sample Packs
during the Collaboration Period shall be subject to the approval of
the Collaboration Committee. All Sample Packs shall be delivered to
Cephalon F.O.B. Abbott facility, and the costs for them shall be
considered Promotional Expenses to be expensed against Cephalon's
Promotional Budget. Cephalon shall cause the Cephalon Representatives
to distribute Sample
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Packs in connection with the Cephalon Detailing of the Product and in
accordance with: (i) the PhRMA Code; and (ii) all applicable Federal,
state and local laws and regulations of the Territory, including, but
not limited to, the Sampling Act. No later than thirty (30) days after
the effective date of this Agreement, Abbott shall have been apprised
by Cephalon of Cephalon's detailed procedures for handling of Sample
Packs by Cephalon employees, which will include tracking of Sample
Packs delivered to and distributed by Cephalon Representatives, and
Abbott shall have the right to approve/disapprove of such procedures,
in Abbott's reasonable discretion. After accepting delivery from
Abbott, Cephalon shall be solely responsible for such storage,
tracking, accounting, distribution and handling of Sample Packs and
shall perform such activities in strict accordance with the PhRMA Code
and all applicable Federal, state and local laws and regulations of
the Territory, including, but not limited to, the Sampling Act. if
Cephalon is responsible for any declared violation of the Sampling
Act, or if in good faith Abbott reasonably believes that Cephalon has
violated the Sampling Act, Abbott shall have the right to cease
providing Sample Packs to Cephalon.
(b) Orders and Forecasts.
(i) Within thirty (30) days after the date of this Agreement,
Cephalon shall notify Abbott in writing of its delivery
requirements for Sample Packs and provide firm purchase orders
for a six (6) month period commencing August 25, 1999. Cephalon
shall also provide a forecast of its estimated delivery
requirements for an additional twelve (12) month period following
the initial six (6) month period. The twelve (12) month forecast
shall represent Cephalon's reasonable estimates, not firm orders,
to facilitate Abbott's capacity planning.
(ii) Thereafter, on or before the tenth (10th) day of each month
during the Collaboration Period, Cephalon shall provide Abbott
with an additional one (1) month firm purchase order to
supplement the existing five (5) month firm order period, thereby
establishing a new six (6) month firm order delivery requirements
period, and shall provide an updated forecast estimate for the
twelve (12) months succeeding such new six (6) month firm order
requirements period.
(iii) Abbott shall have the opportunity to comment upon each such
twelve (12) month forecast and shall advise Cephalon within three
(3) weeks of Abbott's receipt of any such Product forecast if
such forecast for a specified period exceeds Abbott's capacity
planning. Abbott shall use reasonable commercial efforts to
adjust its production capacity to accommodate such forecast, but
shall have no obligation to incur expense in the expansion or
purchase of production facilities or equipment in order to meet
such forecast.
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(iv) Abbott operates its plants and schedules production in monthly
delivery buckets. Therefore, Cephalon's delivery date shall
indicate only the desired month and year of delivery. Abbott
shall use Reasonable Commercial Efforts to supply Cephalon with
Sample Packs in accordance with Cephalon's purchase orders
provided in accordance with this Section 3.6(b). Abbott agrees
to notify Cephalon as soon as reasonably practicable whenever
purchase order delivery dates cannot be met.
(v) Cephalon shall send purchase orders to:
Abbott Laboratories
PPD Materials Management Dept. 507,
Building J23 1675 Lakeside Drive
Waukegan, IL 60085
(c) Sample Pack Logos and Company Names. Until Abbott's existing stock of
Sample Packs is depleted, the labeling of the Sample Packs shall
contain only the Abbott company name and logo. As soon as reasonably
practicable thereafter, Abbott shall use Reasonable Commercial Efforts
to add the Cephalon company name and logo on the labeling of the
Sample Packs, the design for which shall be approved in advance by the
Collaboration Committee. Cephalon, or its designee reasonably
acceptable to Abbott, shall have the sole responsibility for storing
and distributing Sample Packs purchased by Cephalon for Cephalon
Representatives.
3.7 Cephalon Reports and Abbott Audit Rights.
(a) Details.
(i) Cephalon Report. Not later than thirty (30) days after the end of
each Sales Quarter, Cephalon shall supply Abbott with a report
containing:
(A) the actual number of Cephalon Details of the Product
performed during such Sales Quarter;
(B) a breakdown of the Cephalon sales territories (including
territory number) where such Cephalon Details were
performed;
(C) the Cephalon Representative number and territory alignment;
(D) types and names of physicians to whom Cephalon Details were
made, including ME number for each physician;
(E) percentage of Cephalon Details where Sample Packs were
distributed to physicians;
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(F) type of Cephalon Detail (i.e., Primary Detail or Secondary
Detail); and
(G) type and quantity of Sample Packs distributed to each
physician.
(ii) Audit Right. If Abbott determines, in its reasonable judgment,
that an audit is necessary to determine Cephalon's compliance
with the stated requirements of Sections 3.1 and 3.7, then Abbott
or its designee, provided such designee is an independent
certified public accountant reasonably acceptable to Cephalon and
bound by an obligation of confidentiality to Cephalon, shall have
the right to perform, at Abbott's expense, on at least fifteen
(15) days advance notice, an audit of Cephalon's relevant books
and records not more than once in any twelve (12) month period,
to determine Cephalon's compliance with Sections 3.1 and 3.7;
provided, however, Abbott must notify Cephalon of its intent to
exercise this audit right within six (6) months of receipt of
Cephalon's final report of Cephalon's Details for a Sales Year.
If Abbott has not notified Cephalon within such six (6) month
period, Abbott's audit right for such Sales Year shall terminate.
Notwithstanding the foregoing, if an audit discloses an
overstatement of five percent (5%) or more in the number of
Cephalon Details actually performed, then the cost for such audit
shall be paid by Cephalon and Abbott's twelve (12) month audit
right shall become a quarterly audit right, at Cephalon's
expense, for the succeeding three (3) Sales Quarters. Thereafter,
Abbott shall have a twelve (12) month audit right in accordance
with the first sentence of this paragraph, subject to such right
again reverting to a quarterly audit right in accordance with the
second sentence of this paragraph.
(b) Sales Force Report. In conjunction with the Cephalon Detail report
provided to Abbott pursuant to Section 3.7(a)(i), Cephalon shall
provide a statement of the number of Cephalon Representatives
performing Cephalon Details during such Sales Quarter.
(c) Incentive Compensation Plan.
(i) Report. Within thirty (30) days after preparation of its
incentive compensation plan for the Product and at least once
during the first Sales Quarter of each Sales Year of the
Collaboration Period, Cephalon shall provide Abbott with a copy
of Cephalon's current incentive compensation plan for the Product
for the Cephalon Sales Force. Cephalon shall consider any
comments to such incentive compensation plan made by Abbott,
provided that the design and content of the incentive
compensation plan shall be in Cephalon's sole discretion, subject
to Section 3.4. In addition, if Cephalon amends its incentive
compensation plan for the Product at any time during the
Collaboration Period, Cephalon
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shall notify Abbott of the proposed amendment at least thirty
(30) days prior to its proposed effective date in order to give
Abbott a reasonable time for comment prior to Cephalon's
implementation of such amendment.
(ii) Audit Right. Abbott's designee, provided it is bound by an
obligation of confidentiality to Cephalon and is an independent
certified public accountant reasonably acceptable to Cephalon,
shall have the right to audit, not more than once in any twelve
(12) month period and on at least fifteen (15) days advance
written notice, at Abbott's expense, Cephalon's relevant books
and records relating to Cephalon's incentive compensation plan
for the Product for the Cephalon Representatives, as well as
Cephalon's incentive compensation plans for other products for
which the Cephalon Representatives make sales presentations, if
Abbott determines, in its reasonable judgment, such audit is
necessary to ensure compliance with the stated requirements of
Section 3.4. Such audit shall report to the parties whether
Cephalon is in compliance with its obligations under Section 3.4,
and if non-compliance is found, it shall report to the parties
the particulars of such non-compliance by Cephalon. Except for
the foregoing, the independent certified public accountant shall
not disclose to Abbott any other particulars of Cephalon's
incentive compensation plan for products other than the Product.
if the audit reports non-compliance, the cost of the audit shall
be paid by Cephalon.
(d) Sampling Activities.
(i) Quarterly Reports. Cephalon shall supply Abbott with quarterly
reports of Cephalon Representatives' sampling activity with
respect to Product no later than thirty (30) days after the end
of each Sales Quarter to which it relates. To the extent required
by applicable laws and regulations of the Territory, Cephalon
shall also make available to Abbott such original documentation
of Cephalon Representatives' sampling activities as Abbott may
need to comply with the requirements of such laws and
regulations, including, but not limited to, the Sampling Act.
Cephalon shall maintain all records required pursuant to the
Sampling Act, including, without limitation, maintenance of
actual business reply cards and delivery receipts for any Sample
Packs delivered to its sales force.
(ii) Sampling Act Compliance. Abbott, or its designee, provided such
designee is an independent certified public accountant reasonably
acceptable to Cephalon and under an obligation of confidentiality
to Cephalon, shall have the right to audit, within ninety (90)
days of the execution date of this Agreement, and once per Sales
Year thereafter on at least fifteen (15) days advance written
notice, at Abbott's expense, Cephalon's relevant books and
records relating to Cephalon's Sample Pack management and Sample
Pack accountability records if Abbott
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determines, in its reasonable judgment, that such an audit is
necessary to ensure compliance with Section 3.6 and to ensure
Cephalon's compliance with the Sampling Act.
(e) Format of Reports. The parties shall appoint primary liaison(s) to
communicate with each other with regard to information required
pursuant to this Article 3 and Sections 4.1(g) and 4.5. Not later than
thirty (30) days after the date of this Agreement, the primary
liaisons shall agree upon the format of any information to be provided
in all reports required pursuant to this Article 3 and Sections 4.1(g)
and 4.5, which format and details shall be reasonably acceptable to
Abbott. Either party may change its primary liaison(s) upon notice to
the other party.
3.8 Collaboration Committee.
(a) The Collaboration Committee shall be charged with responsibility for
overseeing and managing the collaboration, marketing and further
development of the Product in accordance with the terms of this
Agreement, including the establishment and approval of an annual
Collaboration Plan, Clinical Study Plan and Promotional Budget. The
Collaboration Committee shall be comprised of an equal number of
representatives from each party representing the sales, marketing and
clinical functions of each party, including the personnel identified
on Exhibit 3.8 attached hereto. The Collaboration Committee shall be
co-chaired by representatives from Abbott and Cephalon throughout the
Collaboration Period. The chair shall be responsible for preparing and
distributing the agenda to members in advance of each meeting and for
the preparation of minutes for each meeting. In addition to the
representatives identified on Exhibit 3.8, it is understood that from
time to time additional personnel having specialized experience and
training may be requested to assist the Collaboration Committee,
including, but not limited to, regulatory, finance, legal, and medical
personnel, et. al. Furthermore, upon mutual agreement of the parties,
membership on the Collaboration Committee may be expanded or reduced
in equal measure from time to time to include additional (or fewer)
personnel from each party. The Collaboration Committee shall have the
right to establish subcommittees containing any of such members and
having such charter(s) as the Collaboration Committee may designate
from time to time. The Collaboration Committee shall also have the
right to delegate duties to individual designees of each party (i.e.,
product managers, clinical development managers, et. al.), with the
authority to make decisions relevant to their delegated duties, so
long as such designees regularly apprise the Collaboration Committee
of their activities. The Collaboration Committee shall also have the
right to rescind the delegation of any such duties to designees. All
matters relating to the responsibilities of the Collaboration
Committee (or such duties delegated to designees of the Collaboration
Committee) that cannot be resolved shall be referred by any member of
the Collaboration Committee to Abbott's Vice President, Pharmaceutical
Commercial Operations, and Cephalon's Chief Operating Officer
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for resolution. If such dispute cannot be resolved as aforesaid, the
matter shall be submitted to alternative dispute resolution in
accordance with Section 18.7 hereof.
(b) In accordance with their respective promotional obligations under this
Agreement, Abbott and Cephalon shall work together to promote the
Product in the Territory and shall present their views on the
marketing and promotion of the Product by means of the Collaboration
Committee. The Collaboration Committee, by itself or through its
designees, shall develop strategies for the promotion of the Product
and undertake the activities necessary to implement those strategies,
which may include coordinating the parties' detailing messages,
methodologies, and their physician and trade targeting and call
programs, approving the target list of physicians for detailing
efforts, and reviewing Promotional Materials. The parties also agree
to share freely with each other all market research data pertaining to
the Product that currently exists or that may be generated for a party
during the Collaboration Period, subject, however, to the receiving
party's obligation to treat such data as Confidential Information
pursuant to Article 14.
(c) The parties agree that Abbott shall have sole discretion with respect
to pricing decisions for the Product, but that the only price
increases, price decreases, discounts, allowances or rebates offered
by Abbott regarding the Product shall be those that are extended by
Abbott in good faith and consistent with price increases, price
decreases, discounts, allowances or rebates extended by Abbott on
other Abbott products in the ordinary course of business. Abbott
agrees that it will not sell the Product in a bundle arrangement with
other Abbott products without the prior written approval of the
Collaboration Committee.
(d) Both parties acknowledge that the minimum level and specifics of each
party's detailing obligations shall be as set forth in Sections 3.1(b)
and 4.4(a).
(e) The parties shall take all necessary steps to ensure that all
activities of the Collaboration Committee are performed in compliance
with applicable Federal, state and local laws and regulations of the
Territory.
(f) Within sixty (60) days after the date of this Agreement,
representatives of the parties' Quality Assurance departments shall
meet to develop and approve a Quality Manual outlining
responsibilities and key contacts for quality and compliance related
issues. Items to be included in the Quality Manual include, but are
not limited to recalls, annual product reviews, returned goods,
regulatory audits, compliance with FDA current Good Manufacturing
Practices, compliance with PDMA and such other quality related
concerns deemed appropriate.
(g) In addition, the Collaboration Committee shall review the pricing of
Sample Packs on an annual basis in accordance with Section 3.6(a).
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3.9 Replacement of Personnel. Each party shall have the right, at any time, to
designate by written notice to the other party a replacement for any of
such party's members on the Collaboration Committee, provided that such
replacement has a functionally equivalent position (regardless of title) to
the person being replaced.
3.10 Meetings. The Collaboration Committee shall meet as necessary, with the
initial expectation that it will meet four (4) times each Sales Year,
alternating locations of the meetings between Abbott Park, Illinois and
West Chester, Pennsylvania, or any other mutually agreed location. The
frequency of such meetings may fluctuate in accordance with the desires of
the Collaboration Committee, and such meetings may be held by
teleconference, if the parties so elect. A minimum of four (4)
representatives must be present at each meeting to constitute a quorum (or
such other number equal in proportion to the total membership of the
Collaboration Committee if such membership is reduced or increased as
provided in Section 3.8(a) above). Assuming a quorum, an equal number of
representatives from each party must participate in any voting of the
Collaboration Committee and a majority of those voting participants must
concur in order for a measure to be approved. A member of the Collaboration
Committee may, from time to time, designate in writing to the other members
a substitute to attend meetings of the Collaboration Committee and, if so
designated in writing, to cast votes on behalf of such member.
3.11 Expenses. Each party shall bear all its own costs, including travel costs,
for personnel serving on the Collaboration Committee.
3.12 Collaboration Plan.
(a) In addition to such other responsibilities as may be agreed to by the
parties from time to time, the Collaboration Committee shall develop,
propose and oversee the implementation of an annual plan for the
clinical development, marketing and promotion of the Product (the
"Collaboration Plan"), including approval of each party's Promotional
Budget for each Sales Year, a sampling program, sales targets, Product
positioning, sales and marketing strategies, indications, and thought
leader development.
(b) The Collaboration Committee shall meet within thirty (30) days after
the execution date hereof to develop a Collaboration Plan for the
remainder of the first Sales Year. The Collaboration Committee shall
finalize the Collaboration Plan for the second Sales Year by October
1, 1999. For each subsequent Sales Year, the Collaboration Plan for
the subsequent Sales Year shall be finalized by October 1 of the
current Sales Year. The parties agree that the Collaboration Plan for
the ninth and tenth Sales Years shall be one and the same
Collaboration Plan, which shall be finalized by October 1, 2006. Each
Collaboration Plan, including the Promotional Budgets and clinical
development expenses of each party, shall be subject to final review
and acceptance by the Collaboration Committee, whose approval with
regard to allocations set forth in such Promotional Budgets shall not
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be unreasonably withheld or delayed; provided, however, that each
Collaboration Plan shall provide that neither party shall be required
to expend Promotional Expenses exceeding the amounts set forth in
Section 3.13, nor clinical development expenses exceeding the amounts
set forth in Section 3.14. Any disputes between the parties concerning
a Collaboration Plan which cannot be resolved by the Collaboration
Committee shall be submitted by any representative of the
Collaboration Committee to Abbott's Vice President, Pharmaceutical
Commercial Operations, and to Cephalon's Chief Operating Officer for
resolution. If such dispute cannot be resolved as aforesaid, the
matter shall be submitted to alternative dispute resolution in
accordance with Section 18.7 hereof.
(c) The Collaboration Plan shall be reviewed by the Collaboration
Committee at each quarterly meeting. Any changes to the Collaboration
Plan proposed by the parties are subject to the prior approval of the
Collaboration Committee.
3.13 Promotional Expenses
(a) Per Sales Year. During the Collaboration Period, Cephalon and Abbott
agree to share the annual cost of Promotional Expenses for the Product
in the Field and to expend the amounts required in the Promotional
Budget so that Cephalon is responsible for [* The confidential
material contained herein has been omitted and has been separately
filed with the Commission.] of such expenses and Abbott is responsible
for [* The confidential material contained herein has been omitted and
has been separately filed with the Commission.] of such expenses in
any given Sales Year (except in the first Sales Year where Abbott's
share is greater than [* The confidential material contained herein
has been omitted and has been separately filed with the Commission.],
subject to the requirement that neither party shall be required to
expend Promotional Expenses in any given Sales Year in excess of the
amounts set forth on the following chart:
[* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
Notwithstanding the foregoing, if the sales of the Product warrant a
change in the amount of Promotional Expenses required from the parties
as set forth above, the parties agree to discuss such changes in good
faith and to negotiate revisions to this Agreement as they may deem
appropriate under the circumstances. Cephalon
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agrees that the Cephalon Promotional Launch Date shall occur on or
before July 1, 1999.
(b) Annual Review -- Prospective. During the last meeting of the
Collaboration Committee for a Sales Year, the Collaboration Committee
shall review each party's proposed allocation of Promotional Expenses
under such party's Promotional Budget for the upcoming Sales Year for
purposes of determining if expenses to be charged to the Promotional
Budget are the types of expenses allowed to be so charged. For
clarification purposes, the types of Promotional Expenses allowed to
be charged to the Promotional Budget are set forth in Exhibit 1.22. In
the event that the Collaboration Committee decides that expenses are
improperly charged against a party's Promotional Budget, the amount of
such improperly charged expenses shall be re-allocated to the party's
Promotional Budget in a manner acceptable to the Collaboration
Committee.
(c) Annual Review--Retrospective. During the first meeting of the
Collaboration Committee for a new Sales Year, the Collaboration
Committee shall review each party's actual allocation of Promotional
Expenses under such party's Promotional Budget for the preceding Sales
Year for purposes of determining if expenses charged to the
Promotional Budget are the types of expenses allowed to be so charged.
In the event that the Collaboration Committee decides that such
expenses were improperly charged against a party's Promotional Budget,
the amount of such improperly charged expenses shall be added to the
party's Promotional Budget and share of Promotional Expenses for the
new Sales Year in a manner acceptable to the Collaboration Committee.
In addition, for any Sales Year, any amount of a party's share of
Promotional Expenses set forth in the Promotional Budget that was not
expended by such party in such Sales Year shall be added to the amount
of Promotional Expenses required to be expended by such party in the
subsequent Sales Year, in a manner approved by the Collaboration
Committee.
(d) In the event that the Collaboration Committee is undecided as to the
proper charges against a party's Promotional Budget, then the matter
shall be referred to Abbott's Vice President, Pharmaceutical
Commercial Operations, and Cephalon's Chief Operating Officer for
resolution. if such dispute cannot be resolved as aforesaid, the
matter shall be submitted to alternative dispute resolution in
accordance with Section 18.7 hereof.
3.14 Clinical Activities.
(a) Clinical Studies. During the [*The confidential material herein has
been omitted and has been separately filed with the Commission.] Sales
Years, Cephalon and Abbott agree to conduct clinical studies on
Product in the Field, as directed by the Collaboration Committee.
Abbott agrees to pay a cumulative total amount not to exceed [*The
confidential material herein has been omitted and has been separately
filed with the Commission.] to conduct such study or studies as may be
directed by the Collaboration Committee, which
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amount shall include the expense to Abbott of obtaining all regulatory
approvals to conduct clinical research activities. Cephalon agrees to
pay a cumulative total amount not to exceed [*The confidential
material herein has been omitted and has been separately filed with
the Commission.] to conduct such study or studies as may be directed
by the Collaboration Committee. The parties agree that the
Collaboration Committee shall have discretionary authority to allocate
each party's funds to such study or studies as it deems beneficial to
the clinical development of the Product.
(b) Clinical Study Plan. Within ninety (90) days following the date of
this Agreement, the Collaboration Committee shall develop the Clinical
Study Plan and related budget, for the conduct of clinical studies
relating to the Product, including review and approval of outlines for
the studies to be conducted by each party. Thereafter, the
Collaboration Committee shall oversee the implementation of such
Clinical Study Plan. On an annual basis (or more often as decided by
the Collaboration Committee), the Collaboration Committee shall review
the current Clinical Study Plan and the progress and results of all
clinical studies performed thereunder. The Collaboration Committee
shall have the authority to revise the current Clinical Study Plan as
and when it deems necessary or desirable.
(c) Ownership of Results. The results of all clinical studies conducted
hereunder, as well as all reports and underlying data used or
generated in connection therewith, as and when such results, reports
and data become available to Cephalon, shall be turned over to Abbott
and become the property of Abbott, subject to the right of Cephalon to
utilize such studies for its promotional efforts hereunder if so
directed by the Collaboration Committee. The format of all such
results, reports and data shall be in a manner approved in advance by
the Collaboration Committee.
(d) Future Clinical Studies. If the Collaboration Committee determines
that the results of the clinical studies show promise for future
development of the Product (i.e., additional indications), the parties
agree to discuss in good faith the implementation of additional
clinical studies by the parties and the allocation of the costs for
such additional studies between the parties.
3.15 Additional Clinical Studies. Upon Abbott's initiation of any
Investigational New Drug Application related to any new indication, dosage
form or formulation of the Product, the parties shall meet to discuss such
Investigational New Drug Application and the projected expenses involved in
conducting a program for a Supplemental New Drug Application to the FDA,
including required expenditures for new clinical development programs. If
Cephalon is interested in pursuing a collaboration for such new indication,
dosage form, or formulation, Cephalon shall notify Abbott within thirty
(30) days of their meeting and the parties shall thereafter negotiate in
good faith during the succeeding three (3) month period a sharing of the
clinical development expenditures necessary to file a Supplemental New Drug
Application, the allocation of marketing responsibilities, as well as a
sharing of the revenues related to the sale of drug under such Supplemental
New
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Drug Application. The sharing of such expenditures, responsibilities and
revenues shall reflect the parties' good faith determination of the extent
to which the percentage of the market for the new indication, dosage form
or formulation is in the Field. If the parties are unable to agree on such
sharing arrangements, the matter shall be referred to Abbott's Vice
President, Pharmaceutical Commercial Operations, and Cephalon's Chief
Operating Officer for resolution. If such dispute cannot be resolved as
aforesaid, the matter shall be submitted to alternative dispute resolution
in accordance with Section 18.7 hereof. If Cephalon is not interested in
pursuing such a collaboration, or if the parties are unable to agree on the
terms of such a collaboration within three (3) months following good faith
negotiations and the dispute is not submitted to alternative dispute
resolution in accordance with Section 18.7, then Abbott shall have the
right to develop and market, either by itself or with other collaboration
partners, the new indication, dosage form, or formulation that is the
subject of the Supplemental New Drug Application. If Abbott markets such
new indication, dosage form, or formulation in the Territory during the
Collaboration Period, the parties further agree to examine in good faith an
appropriate methodology, if necessary, to distinguish sales of the new
indication, dosage form, or formulation from "Net Sales" of the Product so
that neither party is prejudiced hereunder by the sale of such new
indication, dosage form, or formulation in the Territory.
ARTICLE 4- ABBOTT'S RESPONSIBILITIES
4.1 Compensation.
(a) Commission. In consideration of Cephalon's performance hereunder,
Abbott shall pay Cephalon a commission on Annual Net Sales (exclusive
of return reserves) in accordance with this Article 4.
[* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
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[* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
(b) Payment. Abbott shall pay the commission due Cephalon on the total
Annual Net Sales generated through the end of each Sales Quarter
within forty-five (45) days after the end of each such Sales Quarter
(except for the first and tenth Sales Years, in which case the
commission shall be payable within forty-five (45) days after the end
of the applicable Sales Year), provided Abbott has received Cephalon's
Detail reports required under Section 3.7(a)(i). Abbott shall make
such payment in U.S. Dollars by wire transfer to such bank and account
number as Cephalon may identify to Abbott from time to time. Payment
of the commission shall be as follows:
[* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
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[*The confidential material herein has been omitted and has been
separately filed with the Commission.]
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[*The confidential material herein has been omitted and has been
separately filed with the Commission.]
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[*The confidential material herein has been omitted and has been
separately filed with the Commission.]
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[*The confidential material herein has been omitted and has been
separately filed with the Commission.]
(d) Credit.
(i) General. In the event an adjustment to the commission due
Cephalon pursuant to Section 4.1(c) is required, then Abbott
shall take a credit against the payment due Cephalon for the
Sales Year in which Cephalon failed to achieve the Primary and
Secondary Detail requirements set forth in Section 3.1(b). if any
credit is due Abbott due to the application of Section 4.1(c),
then:
(A) Abbott shall notify Cephalon of the reduced compensation
payment and the method of calculation used to determine such
amount; and
(B) Abbott shall subtract from the commission installment
otherwise due for the fourth Sales Quarter, the amount of
the credit due Abbott so that the sum total of all
commission installments paid for the applicable Sales Year
equals the amount due Cephalon under Section 4.1(c) above.
(ii) Detail Variance. In the event Cephalon performs all of the
required Detail Variance during the first Sales Quarter of a
Sales Year in accordance with Section 3.2(b) hereof, such Detail
Variance shall be added to the number of Cephalon Details
performed for the previous Sales Year and the commission that
would have been due Cephalon for performing all of the required
Cephalon Details shall be paid to Cephalon in accordance with
Section 3.2(b).
(e) Residual Payments. Subject to the provisions of Section 11.6, in
consideration of Cephalon's efforts in developing Product goodwill,
Abbott shall pay the following commissions to Cephalon during each
Residual Period following the expiration or termination of the
Collaboration Period. The commission payments due for the Residual
Periods shall be made within forty-five (45) days following the end of
each Residual Period:
[* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
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[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
(f) Recalculation of Net Sales. For up to two (2) years following the date
of each Sales Year commission payment, Abbott may recalculate the
commission due for such Sales Year as a result of any other
adjustments due to Net Sales for such Sales Year of which Abbott
becomes aware or for which Abbott becomes entitled. if, as a result of
such recalculation,
(i) Abbott has overpaid commission to Cephalon relating to such Sales
Year, Abbott shall credit such amount against Cephalon's next due
commission payment; or
(ii) Abbott has underpaid commission to Cephalon relating to such
Sales Year, Abbott shall pay such amount to Cephalon with its
next due commission payment.
(g) Net Sales Report and Audit.
(i) Net Sales Report. On a quarterly basis, Abbott shall provide
Cephalon with a report showing: (A) gross sales of the Product in
the Territory for use in the Territory and the supporting
calculation of sales of Gabitril(R) outside the Field, so long as
the data is available from IMS within the stated time period, and
if not, as soon as reasonably practicable thereafter; (B) a
calculation demonstrating the adjustments to gross sales in order
to arrive at Quarterly Net Sales or Annual Net Sales, as
applicable; (C) Quarterly Net Sales and, if applicable, Annual
Net Sales of the Product; and (D) the calculation of the
commission payable, including any adjustments to the commission
payable. Abbott shall deliver such report to Cephalon within
forty-five (45) days of the end of each Sales Quarter.
(ii) Audit of Net Sales Report. If Cephalon, in its reasonable
judgment, determines that an audit of Abbott's relevant books and
records is necessary to verify the information supplied by Abbott
pursuant to Section 4. 1(g)(i), then Cephalon's designee, under
duty of confidentiality to Abbott and Cephalon, and provided such
designee is an independent certified
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public accountant reasonably acceptable to Abbott, shall have the
right, on fifteen (15) days' advance written notice, at
Cephalon's expense, to perform an audit of the relevant books and
records of Abbott not more than once in any twelve (12) month
period to verify the information supplied by Abbott pursuant to
Section 4.l(g)(i); provided however, Cephalon must notify Abbott
of its intent to exercise this audit right within six (6) months
of receipt of Abbott's Annual Net Sales report. If Cephalon has
not notified Abbott within such six (6) month period, Cephalon's
audit right for such Sales Year shall terminate. Notwithstanding
the foregoing, if an audit reveals that there has been a variance
of two percent (2%) or more in the determination of the
applicable Annual Net Sales, then the cost for such audit shall
be paid by Abbott, and Cephalon's designee, under duty of
confidentiality to Abbott and Cephalon, and provided such
designee is an independent certified public accountant reasonably
acceptable to Abbott, shall have the right, on at least fifteen
(15) days' advance written notice, to audit Abbott's relevant
books and records, as set forth above, at Abbott's expense, for
each of the succeeding three (3) Sales Quarters. Thereafter,
Cephalon shall have a twelve (12) month audit right in accordance
with the first sentence of this paragraph, subject to such right
again reverting to a quarterly audit right in accordance with the
third sentence of this paragraph. In addition, Cephalon shall be
entitled to one additional right of audit, at Cephalon's expense,
as set forth in this Section 4. 1(g)(ii) for each occasion of
Abbott's recalculation of the commission payable for any Sales
Year pursuant to Section 4.1(f). Cephalon must notify Abbott of
its intent to exercise such additional right within sixty (60)
days of Abbott's notice to Cephalon of payment due.
4.2 Identification of Cephalon on Promotional Materials. For the Collaboration
Period and subject to the provisions of Section 3.5(a), and except for
currently existing Promotional Materials provided by Abbott to Cephalon,
the Cephalon and Abbott company identifications (or names) and/or logos, as
set forth in Exhibit 4.2 attached hereto, shall be jointly presented in
equal size and prominence on advertising directed to the physicians and on
Promotional Materials directed to the physicians, unless such joint
presentation is prohibited by law in the Territory. Cephalon hereby grants
to Abbott, without additional consideration, such non-exclusive rights with
respect to Cephalon's company identifications (or names) and/or logos as
Abbott may require solely for the purposes of developing, producing and
distributing the Promotional Materials for the Product and advertisements
for the Product during the Term and in accordance with the terms of this
Agreement. Abbott hereby grants to Cephalon, without additional
consideration, such non-exclusive rights with respect to Abbott's company
identifications (or names), the Trademarks and/or logos as Cephalon may
require solely for the purposes of developing, producing and distributing
the Promotional Materials for the Product and advertisements for the
Product during the Term and in accordance with the terms of this Agreement.
Cephalon shall use only camera-ready and/or computer accessible
illustrations of the Abbott logo and the Trademarks provided by Abbott.
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4.3 Product Supply and Pricing. Cephalon acknowledges that Abbott shall have
the sole responsibility for the manufacture, distribution, supply,
shipping, warehousing, invoicing, billing and for collection of receivables
resulting from Product sales, at Abbott's cost and expense. At all times
during the Collaboration Period, Abbott shall undertake all Reasonable
Commercial Efforts to make available and sell sufficient quantities of the
Product to meet the requirements of its customers, taking into account the
actual demand for the Product and the marketing strategy for the Product.
Cephalon recognizes and accepts that the final decision for the allocation
of Product in the event of a shortage rests with Abbott. Abbott may take
into consideration the global market Abbott is obligated to supply in
determining such allocation. In accordance with Section 3.8(c), Cephalon
recognizes and accepts that the final decision for the pricing of Product
rests with Abbott.
4.4 Other Abbott Responsibilities.
(a) Detailing Effort. During the first Sales Year, Abbott shall perform
such number of Reminder Details so that the total number of Reminder
Details performed by Abbott in calendar year 1999 is equal to [*The
confidential material herein has been omitted and has been separately
filed with the Commission.] During the second through ninth Sales
Years, Abbott shall perform [* The confidential material contained
herein has been omitted and has been separately filed with the
Commission.] Reminder Details per Sales Year. During the tenth Sales
Year, Abbott shall perform [* The confidential material contained
herein has been omitted and has been separately filed with the
Commission.] Reminder Details. All of the Abbott Details shall be
Reminder Details. In the event Abbott fails to perform the required
number of Abbott Details in a given Sales Year by a variance of minus
ten percent (-10%) or less, then Abbott shall be entitled to make up
such variance by performing all of the variance in the first Sales
Quarter of the subsequent Sales Year, in addition to the Abbott
Details that Abbott is required to perform in that Sales Quarter.
Abbott may hire contract representatives to perform Abbott Details
required of Abbott Representatives hereunder with the prior written
consent of the Collaboration Committee, which consent shall not be
unreasonably withheld.
(b) Sample Packs. Abbott shall provide the Abbott Representatives with
Sample Packs in accordance with the promotional program approved by
the Collaboration Committee. Abbott shall be entitled to include as a
Promotional Expense, its cost of manufacturing and packaging the
Sample Packs for the Abbott Representatives. Abbott shall cause the
Abbott Representatives to distribute Sample Packs in connection with
the Abbott Detailing of the Product and in strict accordance with the
PhRMA Code and all applicable Federal, state and local laws and
regulations of the Territory, including, but not limited to, the
Sampling Act. Abbott shall maintain all records required pursuant to
the Sampling Act, including, without limitation, maintenance of actual
business reply cards and delivery receipts for any Sample Packs
delivered to its sales force. Abbott shall have the sole
responsibility for storing and distributing Sample Packs purchased for
Abbott Representatives.
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(c) Customer Relationships. Abbott shall have sole responsibility for all
managed care account responsibilities and shall use Reasonable
Commercial Efforts with respect to contracting with and managing the
trade relationships with managed care, retail pharmacy and wholesaler
organizations, including GPOs, HMOs, PPOs, PBMs, Federal accounts and
long-term care, and will use Reasonable Commercial Efforts to manage
these relationships to maximize the commercial potential of the
Product. These responsibilities shall include, without limitation,
disseminating adequate notification of price changes, assuring
adequate pharmacy and wholesaler stocking, disseminating any Product
recall or withdrawal announcements and other material Product
announcements. Abbott agrees to use its reasonable efforts to keep
Cephalon apprised of significant developments with its managed care,
retail pharmacy and wholesaler business that concern the Product.
4.5 Abbott Reports and Cephalon Audit Rights.
(a) Internal Abbott Report and Cephalon Audit Right.
(i) Abbott Report. Not later than sixty (60) days after the end of
each Sales Year of the Collaboration Period, Abbott shall supply
Cephalon with a report containing the actual number of Abbott
Details performed during such Sales Year, along with a breakdown
of the Abbott sales territories where such Abbott Details were
performed, types of physicians to whom Abbott Details were made,
and Product indications emphasized.
(ii) Audit Right. If Cephalon determines, in its reasonable judgment,
that an audit is necessary to determine Abbott's compliance with
the stated requirements of Section 4.5(a)(i), then Cephalon or
its designee, provided such designee is an independent certified
public accountant reasonably acceptable to Abbott and under a
duty of confidentiality to Abbott, shall have a right to perform,
at Cephalon's expense, not more than once in any twelve (12)
month period and on at least fifteen (15) days advance written
notice, an audit of Abbott's relevant books and records to
determine Abbott's compliance with Section 4.5(a)(i); provided,
however, Cephalon must notify Abbott of its intent to exercise
this audit right within six (6) months of receipt of Abbott's
final report of Abbott Details for a Sales Year. If Cephalon has
not notified Abbott within such six (6) month period, Abbott's
audit right for such Sales Year shall terminate. Notwithstanding
the foregoing, if an audit discloses a variance of five percent
(5%) or more in the number of Reminder Details actually performed
by Abbott Representatives, then the cost for such audit shall be
paid by Abbott and Cephalon's twelve (12) month audit right shall
become a quarterly audit right, at Abbott's expense, for the
succeeding three (3) Sales Quarters. Thereafter, Cephalon shall
have a twelve (12) month audit right in accordance with the first
sentence of this paragraph, subject to
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such right again reverting to a quarterly audit right in
accordance with the second sentence of this paragraph.
(b) Sales Data for Purposes of Calculation of Cephalon Representative
Incentive Compensation. For each Sales Year of the Collaboration
Period, in order to aid Cephalon in accurately crediting Cephalon
Representatives for volume of sales generated, Abbott shall provide to
Cephalon, within thirty (30) days after the last day of each Sales
Quarter, Abbott internal sales data and such sales data concerning the
Product as Abbott obtains from third parties to the extent Abbott's
agreements with the suppliers of such data permit Abbott to do so. if
Abbott cannot supply all sales data needed by Cephalon to calculate
properly the Cephalon Representative incentive compensation on a
Cephalon Representative sales territory basis, Cephalon shall approach
Drug Distribution Data or another third party external audit source
which both Abbott and Cephalon deem to be reliable, in order to obtain
such information on a Cephalon Representative sales territory basis.
ARTICLE 5- ADVERSE EVENTS, RECALLS AND OTHER REGULATORY MATTERS
5.1 Adverse Reaction Reporting. Cephalon shall keep Abbott informed of
information in or coming into its possession or control concerning side
effects, injury, toxicity or sensitivity reaction and incidents of severity
thereof associated with commercial and clinical uses, studies,
investigations or tests of the Product (in humans), within or outside the
Territory, whether or not determined to be attributable to the Product.
During the term of this Agreement, Cephalon shall notify the Abbott Medical
Affairs Department within twenty-four (24) hours, by facsimile or telephone
only, and after a responsible employee of Cephalon first becomes aware of
any adverse drug experience involving the Product.
5.2 Product Information Requests. Information concerning any complaints,
inquiries and/or drug information requests from consumers, physicians, or
other third parties regarding the Product shall be forwarded to the Abbott
Medical Affairs Department within twenty-four (24) hours of Cephalon's
receipt of the information and/or inquiry. The Abbott Medical Affairs
Department shall respond to such complaints and inquiries, if necessary, in
accordance with its usual and customary procedures. Abbott shall supply
Cephalon, for Cephalon's information purposes only, with copies of its
standard response information for the Product as well as any updates
thereto.
5.3 Governmental Reports. Abbott shall be responsible for filing with the FDA
any adverse reaction reports that it receives directly from third parties
and any adverse reaction reports that it receives from Cephalon.
5.4 Product Recall. In the event that either party determines that an event,
incident or circumstance has occurred which may result in the need for a
recall or other removal of any Product, or any lot or lots thereof, from
the market, such party shall promptly advise the other and the parties
shall consult with respect thereto. Abbott shall have the sole
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authority to decide whether a recall or other removal of such Product shall
be made. Except as provided below, if Abbott recalls or otherwise removes
such Product or any lot or lots thereof from the market, Abbott shall bear
all costs and expenses of such recall or removal, including, without
limitation, expenses and other costs or obligations to third parties, the
cost and expense of notifying customers and the costs and expenses
associated with shipment of the recalled Product and the cost and expense
of destroying the Product removed from the market, if necessary. Any such
recall or removal costs, expenses or obligations shall be borne by Cephalon
only to the extent that the recall or removal results from Cephalon's:
(i) improper distribution, storage, or shipment of Sample Packs;
(ii) improper sampling practices or mishandling of Sample Packs;
(iii) co-promotion of the Product in a manner inconsistent with the
Product's labeling or other Promotional Materials provided by
Abbott; or
(iv) violation of this Agreement.
In the event of a recall, the parties shall promptly meet and discuss in
good faith whether the parties' obligations under this Agreement should be
ended or reduced.
5.5 Procedures. Within thirty (30) days after the date of this Agreement,
representatives from the drug surveillance and medical information
departments of each party shall meet to establish procedures to accomplish
the obligations set forth in this Article 5.
5.6 Governmental Contact Reporting. Each party shall notify the other within
twenty four (24) hours in writing upon being contacted by the FDA or any
other Federal, state, or local governmental agency for any regulatory
purpose pertaining to this Agreement or to the Product, including any audit
regarding safety or surveillance. Cephalon shall not respond to the FDA or
such governmental agency before consulting with Abbott's Vice President,
Corporate Quality Assurance and Regulatory Affairs and Abbott's Medical
Services Director, unless, under the circumstances pursuant to which FDA or
such other Federal, state, or local governmental agency contacts Cephalon,
it is not practical or lawful for Cephalon to give Abbott advance notice,
in which event Cephalon shall inform Abbott of such contact as soon as
practical and lawful. Abbott shall provide Cephalon with prompt written
notice of any inquiries from, or positions taken by, the FDA or any other
Federal, state, or local governmental agencies which may affect the
co-promotion, sale or distribution of the Product. In addition, Abbott
shall keep Cephalon advised with respect to information concerning the
safety or efficacy of the Products. Abbott shall supply detailed
information regarding such safety, efficacy, and medical information
issues, and shall provide copies of safety reports as and when filed with
the FDA.
5.7 Clinical Trial Adverse Events, if clinical trials are to be conducted by
Cephalon, all adverse events shall be reported to Abbott and all adverse
event reporting shall be the
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responsibility of the Abbott Medical Affairs Department. The terms of
adverse event collection and processing must be agreed upon before the
trial initiation. All clinical trial protocols must be reviewed and
accepted by the Abbott Medical Affairs Department and its appropriate
Cephalon counterpart.
5.8 Product Labeling. Abbott represents that the Product is properly labeled in
accordance with applicable laws and the parties agree that Abbott shall
have sole responsibility for decisions regarding labeling changes which may
be required from time to time for safety issues. Abbott shall promptly
notify Cephalon of any such changes.
5.9 Annual Report. Cephalon will report to Abbott in a timely manner all
information necessary to complete annual safety reports or other reports
requiring clinical safety information.
5.10 Quality Assurance. Abbott shall provide FDA-483 observations and responses
associated with the manufacture of the Product to Cephalon.
ARTICLE 6 - PRODUCT REGISTRATION AND LAUNCH
6.1 Product Registration. During the Term and subject to the provisions of
Section 10.2(c) with respect to the withdrawal of the Product, Abbott
shall, at its own expense, obtain and thereafter maintain all regulatory
approvals necessary for the marketing of the Product in the Territory.
Abbott shall provide Cephalon with prompt notice of any change in
regulatory approvals. Abbott represents that it has obtained all regulatory
approvals necessary for the marketing of the Product in the Territory.
6.2 Launch Dates. The Cephalon Promotional Launch Date shall be no later than
July 1 1999. The Cephalon Detail Launch Date shall be no later than
September 15, 1999. [* The confidential material contained herein has been
omitted and has been separately filed with the Commission.]
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[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES
7.1 Cephalon Representations and Warranties. Cephalon hereby represents and
warrants that:
(a) Cephalon is duly authorized to enter into this Agreement.
(b) No other consents or approvals are necessary for Cephalon to enter
into this Agreement and perform its obligations hereunder.
(c) This Agreement does not conflict with any other Cephalon contractual
obligation.
(d) Cephalon shall perform its obligations hereunder in accordance with
the PhRMA Code and all applicable Federal, state and local laws and
regulations of the Territory, including, but not limited to, the
Sampling Act; provided however, Cephalon shall not be in default of
the terms of this Agreement if Cephalon violates the PhRMA Code or any
applicable Federal, state or local laws or regulations of the
Territory as a direct result of Cephalon's use of or reliance on
Abbott-provided Promotional Materials, Product labeling, or Abbott's
license to the Patent or its ownership of the Trademarks or the use of
Abbott's company identification (or name) and/or logos.
(e) Cephalon is a corporation duly organized under the laws of the State
of Delaware, and is in good standing in such state.
7.2 Abbott Representations and Warranties. Abbott hereby represents and
warrants that:
(a) Abbott is duly authorized to enter into this Agreement.
(b) No other consents or approvals are necessary for Abbott to enter into
this Agreement and perform its obligations hereunder.
(c) This Agreement does not conflict with any other Abbott contractual
obligation.
(d) Abbott shall perform its obligations hereunder in accordance with the
PhRMA Code and all applicable Federal, state and local laws and
regulations of the Territory, including, but not limited to, the
Sampling Act; provided however, Abbott shall not be in default of the
terms of this Agreement if Abbott violates the PHRMA Code or any
applicable Federal, state or local laws or regulations of the
Territory as a direct result of Abbott's use of Cephalon's company
identification (or name) and/or logos.
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(e) As of the date hereof, Abbott is the exclusive licensee of the Patent
in the Territory, and is the owner of the Trademarks in the Territory.
(f) As of the date hereof, there are no patents or trademarks owned by
others of which Abbott is aware which would be infringed by the
promoting or selling of the Product under the Trademarks in the
Territory.
(g) As of the date hereof, there are no suits, claims or proceedings
pending against Abbott or any of its Affiliates in any court or by or
before any governmental body or agency with respect to the Product or
the Patent or the Trademarks or Abbott's exclusive license to the
Patent in the Territory, and to the best of Abbott's knowledge, no
such actions, suits or claims have been threatened against it in the
Territory.
(h) Incentive compensation paid to Abbott Representatives performing
Reminder Details of the Product will not be reduced during the
Collaboration Period to a level below that currently paid to Abbott
Representatives performing Reminder Details of the Product.
(i) The number of annual Reminder Details performed by Abbott
Representatives since January 1, 1999 until the date hereof is
proportionally no less than the [* The confidential material contained
herein has been omitted and has been separately filed with the
Commission.] Reminder Details required to be performed annually by
Abbott hereunder.
(j) Abbott shall manufacture, package, label, store, ship and handle the
Product in compliance with GMPs.
(k) To the best of Abbott's knowledge, Abbott has provided Cephalon with
copies of its files relating to Product recalls, adverse events and
warning letters received by Abbott and relating to the Product in the
Territory.
(l) As of the date hereof, Abbott is not aware of any contract, agreement
or intellectual property matters that might adversely impact Abbott's
ability to perform its obligations under this Agreement.
(m) To the best of Abbott's knowledge, as of the date hereof, Abbott is
not aware of any legal challenge relating to the validity of the
Patent.
(n) As of the date hereof, Abbott's exclusive license for the Product is
in full force and effect and Abbott agrees to maintain said exclusive
license in full force and effect for the Term, or obtain such other
rights to the Product as will allow Abbott and Cephalon to perform
their respective obligations as contemplated under this Agreement.
(o) As of the date hereof, Abbott is not engaged in any discussions with
FDA, nor, to the best of Abbott's knowledge, are there any actions
pending with FDA that
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would materially change the labeling of the Product or materially
change Abbott's ability to market, promote or sell the Product.
7.3 NO OTHER WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, EACH PARTY MAKES NO OTHER WARRANTIES OR REPRESENTATIONS,
INCLUDING FITNESS FOR PURPOSE AND MERCHANTABILITY, WHETHER EXPRESS OR
IMPLIED.
ARTICLE 8 - NON-COMPETITION
8.1 (a) [* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
(b) Abbott agrees that it shall not negatively position the Product in any
of its marketing efforts during the Term.
[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
8.3 New Forms. In addition, if pursuant to Section 1.20 and 3.15, Cephalon
co-promotes any new indication(s), dosage form(s) or formulation(s) of the
Product, then the restriction of
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this Article 8 shall be automatically expanded to include such new
indication(s), dosage form(s) or formulation(s).
ARTICLE 9 - RELATIONSHIP
The parties agree that they are independent contractors. Neither party nor any
employee of such party is an employee, officer, agent, partner, business
representative of, or legal representative of, or joint venturer with the other
party. Neither party has authority to assume any obligation on behalf of the
other party and shall not hold out to third parties that it has any authority to
do so unless otherwise specified herein. Neither party shall take any action
that might mislead or confuse third parties in this regard. Unless otherwise
provided herein, each party shall be responsible for its own expenses and shall
not incur expenses for the other party's account unless expressly authorized in
writing to do so by the other party.
ARTICLE 10 - TERM AND TERMINATION
10.1 (a) Term. This Agreement shall become effective on July 1, 1999 and shall,
unless sooner terminated as otherwise provided, be in full force and
effect until April 23, 2010, unless extended pursuant to Section
10.1(b) below.
(b) Patent Extension. In the event that the term of the Patent is extended
from its current expiration date of April 23, 2008, whether through an
extension under 35 U.S.C.ss.155 or otherwise, then the Collaboration
Period may be extended as follows: Abbott shall notify Cephalon that
an extension of the term of the Patent has been granted, and Cephalon
shall then have a first right of negotiation to extend the
Collaboration Period for a term commensurate with the extended term of
the Patent. If Cephalon desires to exercise its right of first
negotiation, Cephalon shall so inform Abbott within thirty (30) days
of its receipt of notice from Abbott, and the parties shall, in good
faith, proceed within a reasonable period of time thereafter to
negotiate the terms of their relationship during the extended
Collaboration Period. If the parties are unable to reach agreement on
the terms of such extension within six (6) months thereafter, Abbott
shall have the right to promote the Product on its own for the
extended term of the Patent, or to collaborate with, co-promote with
and/or license rights to, third parties for such extended term of the
Patent.
10.2 Early Termination. This Agreement may be terminated prior to the expiration
of the Term upon the occurrence of any of the following events:
(a) Material Breach. Termination pursuant to the application of this
Section 10.2(a) shall be deemed termination due to a material breach
of this Agreement.
(i) Either party's giving ninety (90) days' prior notice to the other
party of a material breach of any of the terms or conditions of
this Agreement by such other party and the other party fails to
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(A) cure its breach, provided such breach is capable of cure,
within the ninety (90) days' notice period; or
(B) commence and diligently pursue efforts to cure such breach
if such breach is not capable of cure within the ninety (90)
day notice period, provided such cure is completed no later
than one hundred eighty (180) days following receipt of
initial notice.
(ii) Abbott's notice to Cephalon with respect to breach of any of
the following provisions, as such provisions are material
breaches not capable of cure: Section 6.2 Cephalon Detail
Launch Date and Cephalon Promotional Launch Date), Article 8
(non-competition) and Section l0.2(a)(iii) (failure to
perform Cephalon Details).
(iii) Abbott giving ninety (90) days' prior notice to Cephalon if
Cephalon fails to perform a minimum of [* The confidential
material contained herein has been omitted and has been
separately filed with the Commission.]
(iv) Cephalon giving ninety (90) days' prior notice to Abbott if
Abbott fails to perform a minimum of [* The confidential
material contained herein has been omitted and has been
separately filed with the Commission.]
(b) Withdrawal of Product. Either party giving ninety (90) days' prior
notice to the other if Abbott permanently withdraws the Product from
the market in the Territory upon request of FDA. Termination pursuant
to the application of this Section 10.2(b) shall not be deemed
termination due to a material breach of this Agreement by either
party.
(c) Patents. Either party giving ninety (90) days' prior notice to the
other if
(i) the Patent no longer provides the Product with exclusivity in the
Territory; or
(ii) the manufacture, importation, sale or use of the Product is
adjudicated by a court of competent jurisdiction to infringe the
patent rights of any third party.
Notwithstanding the foregoing, in the case of (i) and (ii) above,
either party's right to terminate shall not become effective until
such time as Abbott has (i) exhausted all possible appeals; or (ii)
after utilizing Reasonable Commercial Efforts, failed to secure a
license from the third party claiming infringement to allow the
Product to maintain its exclusivity in the Territory; provided that
during the pendency of any such appeals or the securing of a license
the Patent retains its exclusivity.
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Termination pursuant to the application of this Section 10.2(c) shall
not be deemed termination due to a material breach of this Agreement
by either party.
(d) Force Majeure. Either party giving ninety (90) days' prior notice to
the other party if an event of Force Majeure as described in Article
17 continues for more than six (6) months. Termination pursuant to the
application of this Section 10.2(d) shall not be deemed termination
due to a material breach of this Agreement by either party.
(e) Bankruptcy. Immediately, upon either party giving notice to the other
party in the case of any adjudication of bankruptcy or insolvency,
appointment of a receiver by a court of competent jurisdiction,
assignment for the benefit of creditors, or institution of liquidation
proceedings by or against the other party. Termination pursuant to the
application of this Section 10.2(e) shall not be deemed termination
due to a material breach of this Agreement by either party.
[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
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[* The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
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[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
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[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
(g) Sales. Either party giving at least three (3) months notice during the
first Sales Quarter of the fifth Sales Year if Net Sales of the
Product in the fourth Sales Year were not at least seventy-five
percent (75%) of [* The confidential material contained herein has
been omitted and has been separately filed with the Commission.] and
neither party is making a profit from its activities under this
Agreement, with no substantial likelihood to achieve profitability, as
reasonably determined based upon projected sales forecasts of the
Collaboration Committee. Termination pursuant to the application of
this Section 10.2(g) shall not be deemed termination due to a material
breach of this Agreement.
ARTICLE 11 - CONSEQUENCES OF TERMINATION
11.1 Confidential Information. In the event of termination of this Agreement for
any reason, both parties shall stop using all Confidential Information, as
defined in Section 14.1, supplied by the other party. Upon either party's
request, the other shall return to its owner all written and/or tangible
Confidential Information. Both parties and their Affiliates shall continue
to be bound by the provisions of Article 14 for a period of five (5) years
after the termination of this Agreement or ten (10) years after the
execution of this Agreement, whichever is later; provided however, both
parties shall bind their employees with respect to Confidential Information
for at least five (5) years after termination of such employee's employment
or for as long as such party binds its employees with respect to its own
Confidential Information, whichever is longer; provided however, in no
event shall any employee be bound for a period of time longer than that set
forth herein. Furthermore, Cephalon shall not use any Confidential
Information which is related to the safety or efficacy of the Product
(including adverse drug experience information) and Abbott shall not use
any Confidential Information which is related to the safety or efficacy of
Provigil(R) (Modafinil) until the later of: (i) such time as the Patent for
the Product or the patent for Provigil(R) (Modafinil), as the case may be,
has expired or been declared invalid by a court of competent jurisdiction;
(ii) a period of five (5) years after termination of this Agreement; or
(iii) a period of ten (10) years after the execution of this Agreement.
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11.2 Accrued Obligations. Termination of this Agreement shall not relieve the
parties hereto of any liability which accrued hereunder prior to the
effective date of such termination nor prejudice either party's right to
obtain performance of any obligation provided for in this Agreement which
expressly survives termination.
11.3 Return of Materials. Upon termination or expiration of this Agreement,
Cephalon shall, at Abbott's election, either destroy or return to Abbott or
its designee all Promotional Materials relating to the Product and all
Sample Packs then in Cephalon's possession.
11.4 Commission Rates.
(a) Material Breach by Cephalon. If this Agreement is terminated due to a
Cephalon material breach or due to an acquisition or change of
ownership under Section 10.2(f) (change of ownership resulting in
breach of Article 8), then the applicable commission rate on the Net
Sales of the Product for the Sales Year in which such termination
occurred shall be the rate which would be applicable if the Net Sales
accrued at the time of termination were the entire Annual Net Sales
for such Sales Year.
(b) Material Breach by Abbott. In the event the Agreement is terminated
due to an Abbott material breach under Section 10.2(a), the applicable
commission rate for the Net Sales then accrued for the Sales Year in
which such termination occurred shall be the pro-rated amount which
would be applicable if the Net Sales were annualized for the entire
Sales Year. [* The confidential material contained herein has been
omitted and has been separately filed with the Commission.]
(c) Termination for Purpose other than Abbott Material Breach or Cephalon
Material Breach. If this Agreement is terminated for any cause other
than those identified in Section 11.4(a) and (b) above, then the
applicable commission rate on the Net Sales of the Product for the
Sales Year in which such termination occurred shall be determined by
calculating the commission payment due as if Section 11.4(a) were
applicable, and the commission payment due as if Section 11.4(b) were
applicable, and taking the average of the results of such
calculations.
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[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
11.6 Residual Payment. Pursuant to Section 4.1(e), Abbott shall pay Cephalon
residual payments for the Residual Periods in accordance with Section
4.1(e), except as set forth in this Section 11.6. if this Agreement
terminates due to: (i) a Cephalon material breach; or (ii) termination
pursuant to Section 10.2(f), then Abbott shall not pay any residual payment
to Cephalon, except as specifically provided in Section l0.2(f)(ii). If
this Agreement terminates due to an Abbott material breach, then Abbott
shall pay the residual payment due Cephalon pursuant to Section 4.1(e). In
the event such termination by Cephalon is due to an Abbott material breach,
the amount of the residual payment due Cephalon shall not be construed as a
penalty or as damages, but rather as compensation, and as such, it shall be
included for purposes of calculating compensatory damages in the event
Cephalon exercises any remedies available to it pursuant to Section 11.7 as
a result of Abbott's material breach. If the Agreement terminates for any
other reason, such residual payment shall be paid with respect to Net Sales
accrued during the two - twelve (12) month periods immediately following
the termination date and the residual commission rate shall be determined
as follows: the residual payment commission rate as set forth in Section
4.1(e) shall be multiplied by a fraction, the numerator of which is the
number of months completed under this Agreement and the denominator of
which is one hundred four (104) months, the number of months in the full
Collaboration Period. The newly-calculated commission rate shall be the
commission rate used to calculate commissions due to Cephalon for the two -
twelve (12) month periods immediately following the termination date.
Abbott shall pay Cephalon the amounts payable pursuant to this Section 11.6
within forty-five (45) days of the end of each such twelve (12) month
period. Abbott shall make such payment by wire transfer to such bank and
account number as Cephalon may identify to Abbott from time to time.
11.7 Remedies. The fact that either party exercises any right of termination for
material breach that it may have under this Agreement shall not prevent
such party from seeking any other remedy it may be entitled to in law or
equity for material breach, except as set forth in Section 6.2 and Section
11.10. If this Agreement terminates for any reason, except as set forth in
Section 10.2(a) and Section 10.2(f)(i), (iii) and (iv), the parties shall
have no
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further recourse against each other in law or equity, except for any
obligations accrued prior to such termination. Any provision under this
Agreement which provides a remedy to a party for the other party's
non-performance shall be deemed to be an exclusive remedy. The parties
agree to seek any such remedies in law or equity solely through the
mechanism set forth in Section 18.7 hereof.
11.8 Survival. The provisions of Section 6.2, with respect to liquidated
damages, Article 11, Article 12, Article 13, Article 14, and Sections
16.3,16.4 and 16.5 and Sections 18.7 and 18.9, shall survive the
termination of this Agreement; provided however, with respect to Section
16.6, for those matters which arose during the term of this Agreement,
each party shall continue to provide assistance to the other in order to
restrain such infringement as set forth in Section 16.6.
11.9 Intellectual Property. Upon termination of this Agreement for any reason,
all use by Cephalon of Abbott's company identification (or name), Abbott's
logo and the Trademarks shall cease. All use by Abbott of Cephalon's
company identification (or name) and Cephalon's logo shall cease.
11.10 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL LOSSES ARISING OUT OF OR RELATING TO
THIS AGREEMENT; PROVIDED, HOWEVER, THIS LIMITATION SHALL NOT APPLY TO
LOSSES FOR WHICH A PARTY IS INDEMNIFIED UNDER THE TERMS OF THIS AGREEMENT.
ARTICLE 12 - RIGHTS TO PROVIGIL(R) (MODAFINIL)
12.1 Right of First Negotiation. Cephalon hereby grants to Abbott, and Abbott
hereby accepts a first right of negotiation to obtain from Cephalon,
co-marketing, co-development and/or license rights to Provigil(R)
(Modafinil) in the Territory.
[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
12.2 Additional Points of Understanding
12.2.1 Cephalon shall not grant any third party any rights that conflict
with Abbott's right of first negotiation unless Abbott has waived
its right to exercise its right of first negotiation to co-market,
co-develop and/or license with respect to Provigil(R)
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(Modafinil). [* The confidential material contained herein has been omitted and
has been separately filed with the Commission.]
12.2.2 Any information provided with respect to Provigil(R) (Modafinil)
shall be subject to the confidentiality and non-disclosure
obligations set forth in Article 14.
[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
ARTICLE 13 - INDEMNIFICATION
13.1 Abbott Indemnification. Abbott shall defend, indemnify and hold Cephalon
and all of its officers, directors, employees and representatives harmless
from and against all suits, claims, liabilities, costs, damages, judgments
and other expenses (including, but not limited to, reasonable legal
expenses and court costs) to the extent that such claims stem from claims
brought by third parties and are attributable, in whole or in part, to:
(i) Abbott's breach of this Agreement;
(ii) an infringement claim arising from Cephalon's authorized use or
promotion of the Product or use of the Abbott company name, logo,
trade dress, service mark or the Trademarks in connection with the
Product;
(iii) the Product (including claims relating to the manufacture of the
Product) or Abbott's promotion of the Product, (including, but not
limited to, claims made with respect to Abbott advertising or
Abbott-provided Promotional Materials, and claims made with respect
to advertising or Promotional Materials approved by Abbott's Medical
Review Process pursuant to Section 3.5(e) herein, provided and to
the extent such claims are based upon the negligent review and
approval provided by Abbott's Medical Review Process) including, but
not limited to, death or personal injury;
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(iv) Abbott's violation of applicable law, including, without limitation,
the Sampling Act, in the performance of this Agreement; or
(v) the negligence, recklessness or willful misconduct on the part of
Abbott, its officers, directors, Abbott Representatives and other
employees or representatives with respect to the Product or in the
performance of the Agreement, including, but not limited to, product
liability claims arising from out-of-label promotions made by Abbott
or Abbott Representatives with respect to the Product;
provided that Abbott shall not be required to indemnify Cephalon to the
extent any such claim is attributable to the negligence or willful
misconduct of Cephalon or the Cephalon Representatives in the
performance of their obligations hereunder, including, but not limited
to, out-of-label promotion of the Product and/or any breach by Cephalon
of this Agreement. For purposes of Section 13.1(v) above only, Abbott
shall not be considered negligent, reckless or willful if such claim
arises in connection with Abbott's performance under this Agreement, so
long as such performance was in accordance with the terms of this
Agreement; nor shall Abbott be considered negligent, reckless or
willful for purposes of Section 13.1(v) only, if such claim arises with
respect to content of the Promotional Materials, advertising or other
materials provided to Abbott by Cephalon as long as Abbott has
distributed or employed such advertising, Promotional Materials or
other such materials in accordance with the terms of this Agreement,
except if such claim arises with respect to the negligent review and
approval of Cephalon advertising or Promotional Materials approved by
Abbott pursuant to Section 3.5(e) hereof.
13.2 Cephalon Indemnification. Cephalon shall defend, indemnify and hold
Abbott and all of its officers, directors, employees and
representatives harmless from and against all suits, claims,
liabilities, costs, damages, judgments and other expenses (including
but not limited to, reasonable legal expenses and court costs) to the
extent that such claims stem from claims brought by third parties and
are attributable, in whole or in part, to:
(i) Cephalon's breach of this Agreement;
(ii) a trademark infringement claim arising from Abbott's
authorized use of the Cephalon company name and/or logo in
connection with the Product;
(iii) Cephalon advertising or Cephalon-provided Promotional
Materials (except to the extent such claim is based on such
advertising or Promotional Materials having been negligently
reviewed and approved by Abbott's Medical Review Process
pursuant to Section 3.5(e) herein), including, but not limited
to, death or personal injury;
(iv) Cephalon's violation of applicable law, including, without
limitation, the Sampling Act, in the performance of this
Agreement; or
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(v) the negligence, recklessness or willful misconduct on the part
of Cephalon, its officers, directors, Cephalon
Representatives, and other employees or representatives with
respect to the Product or in the performance of this
Agreement, including, but not limited to, product liability
claims arising from out-of-label promotions made by Cephalon
or Cephalon Representatives with respect to the Product;
provided that Cephalon shall not be required to indemnify Abbott to
the extent any such claim is attributable to the negligence or
willful misconduct of Abbott or the Abbott Representatives in the
performance of their obligations hereunder, including, but not
limited to, out-of-label promotion of the Product and/or any breach
by Abbott of this Agreement. For purposes of Section 13.2(v) above
only, Cephalon shall not be considered negligent, reckless or
willful if such claim arises in connection with Cephalon's
performance under this Agreement, so long as such performance was in
accordance with the terms of this Agreement; nor shall Cephalon be
considered negligent, reckless or willful for purposes of Section
13.2(v) only, if such claim arises with respect to the content of
the Promotional Materials, Product labeling, advertising or other
materials provided to Cephalon by Abbott so long as Cephalon has
distributed or employed such Promotional Materials, Product
labeling, advertising or such other materials in accordance with
the terms of this Agreement.
13.3 Indemnification Procedures. Upon obtaining knowledge of the institution of
any action, proceeding, or other event which could give rise to a claim of
indemnity hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify in writing the other party thereof (the
"Indemnifying Party"). The Indemnifying Party shall have the right, at its
expense, to employ counsel to defend such claim or demand and the
Indemnified Party shall have the right, but not the obligation, at its
expense to participate in the defense of any such claim or demand. So long
as the Indemnifying Party is defending such claim or demand in good faith,
the Indemnified Party shall not settle such claim or demand without the
Indemnifying Party's consent. The Indemnified Party shall make available
to the Indemnifying Party all records and other material reasonably
required by it in contesting a claim or demand against the Indemnified
Party and shall cooperate in the defense thereof.
ARTICLE 14 - CONFIDENTIALITY
14.1 Non-Disclosure. Neither party shall disclose any information received from
the other party or an Affiliate of such other party pursuant to this
Agreement or to any previous agreements between the parties or their
Affiliates relating to this Agreement (including Product,
Provigil(R)(Modafinil) and Depakote(R) and information received by
Cephalon pursuant to Article 5 with respect to adverse drug experience
data) (the "Confidential Information") without the other party's written
consent; provided however, either party may disclose Confidential
Information as reasonably necessary to its Affiliates in order to perform
its obligations hereunder. Each party shall ensure that any Affiliate
receiving Confidential Information pursuant to this Article 14 shall not
disclose such information
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and such Affiliate shall conduct itself as if it were bound by the
provisions of this Agreement with respect to Confidential Information.
Confidential Information shall not include:
(a) information which is or was known to the receiving party or its
Affiliates at the time of its disclosure as evidenced by such
party's or its Affiliates' written records, provided such
information was not already subject to a confidentiality obligation;
(b) information disclosed to the receiving party by a third party (other
than its Affiliates) having the right to disclose such information;
(c) information which becomes patented, published or otherwise part of
the public domain as a result of acts of the disclosing party or of
a third party (other than the disclosing party's Affiliates)
obtaining such information and having the right to disclose the
same;
(d) information which is developed by or for a party or its Affiliates
independently of: (i) the information provided under this Agreement;
and independently of (ii) information provided under any
co-promotion, collaboration or co-marketing agreement entered into
by Cephalon or its Affiliates with Abbott or its Affiliates; as
evidenced by such party's or Affiliate's written records; or
(e) information which is required to be disclosed by law, provided that
in such case the receiving party shall immediately inform the
disclosing party and allow the disclosing party to obtain such
protection of the Confidential Information as may be legally
permissible prior to disclosure.
14.2 Non-Use. Each party agrees that it shall not use Confidential Information
obtained as set forth in Section 14.1 above for any purpose other than
that indicated in this Agreement without the prior written approval of the
other party.
14.3 Disclosure of Confidential Information to Third Parties.
(a) Auditors. If either party appoints a designee to perform an audit of
the books and records of the other party pursuant to the terms of
any of the audit provisions provided for hereunder, then such
auditor shall execute a written confidentiality agreement with the
party to be audited, which confidentiality agreement shall be at
least as stringent as that provided herein. The scope of such
designee's report to the hiring party shall be strictly limited to
the scope of the audit permitted pursuant to the terms of this
Agreement and a copy of such report shall be delivered to both
parties.
(b) Other Parties. If either party appoints any consultant to advise it
in connection with its performance of this Agreement, then such
party shall execute a written confidentiality agreement with such
consultant, which confidentiality agreement
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shall be at least as stringent as that provided herein. Prior to the
disclosure of any confidential information to such consultant, the
consent of the other party shall be obtained, which consent shall
not be unreasonably withheld.
ARTICLE 15 - PUBLIC ANNOUNCEMENTS
Each party agrees that, except as may be required by law, it shall not disclose
the existence, substance or details of this Agreement (or any other publicity
related thereto) without the prior written consent of the other party; provided,
however, nothing contained herein shall be deemed to prohibit Abbott from
issuing any publicity, press release or announcement relating to the Product
which does not mention Cephalon or refer to this Agreement; and provided further
that a party shall not be required to obtain consent of the other to
subsequently disclose the contents of any previously approved publicity, press
release or announcement. Cephalon shall only disclose details of this Agreement
to those Cephalon employees, including Cephalon Representatives, on a need to
know basis. In cases in which disclosure may be required by law, the disclosing
party, prior to such disclosure, shall notify the non-disclosing party of the
contents of the proposed disclosure. Consistent with applicable law, the
non-disclosing party shall have the right to make reasonable changes to the
disclosure to protect its interests. The disclosing party shall not unreasonably
refuse to include such changes in its disclosure.
ARTICLE 16 - TRADEMARKS
16.1 Promotion. Cephalon shall promote the Product in the Territory only under
the Trademarks and using company names, service marks and devices approved
by Abbott and only using Promotional Materials approved by Abbott pursuant
to Section 3.5.
16.2 Compliance with Laws. Cephalon shall, when referring to Abbott's
trademarks and the Trademarks, company names, trade dress, service marks
or devices, diligently comply with all laws pertaining to trademarks,
service marks, trade dress or other intellectual property rights at any
time in force in the Territory. Abbott shall, when referring to Cephalon's
company name and/or logo, diligently comply with all laws pertaining to
company names and/or logos at any time in force in the Territory.
16.3 No Assertion of Right. Cephalon shall not have, assert or acquire any
right, title or interest in or to the Trademarks or any part of any label,
company name, trade dress, service mark or device applied by Abbott,
except those which are owned by Cephalon as set forth in Exhibit 16.3
attached hereto. Except as provided herein, Abbott shall not have, assert
or acquire any right, title or interest in or to Cephalon's company name
and/or logo.
16.4 Validity. Cephalon acknowledges the validity of Abbott's right, title and
interest in and to the Trademarks or any labels, company names, trade
dress, service marks, logos and devices as set forth in Exhibit 4.2.
Cephalon shall not take or fail to take any action which may impair any
such right, title or interest in the Trademarks, other than as provided
for herein; nor shall Cephalon take any action which may create any right,
title,
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or interest in the name "Abbott" or the Trademarks adverse to Abbott or
any Abbott Affiliate. Abbott acknowledges the validity of Cephalon's
right, title and interest in and to its company name and/or logo as set
forth in Exhibit 4.2. Abbott shall not take or fail to take any action
which may impair any such right, title or interest in Cephalon's company
name and/or logo, other than as provided for herein; nor shall Abbott take
any action which may create any right, title, or interest in the name
"Cephalon" adverse to Cephalon or any Cephalon Affiliate.
16.5 Non-Use. Cephalon shall not use the Trademarks (or any trademark
confusingly similar thereto), label, company name, trade dress, service
mark, logo or device which is applied to the Product, on any other goods
or products, notwithstanding that such goods or products are dissimilar to
the Product or have a different use. Abbott shall not use Cephalon's
company name and/or logo which is applied to the Product, on any other
goods or products, notwithstanding that such goods or products are
dissimilar to the Product or have a different use.
16.6 Notice of Infringement. Cephalon shall give Abbott prompt notice of any
infringement or threatened infringement of the Trademarks, label, company
name, trade dress, service mark, logo or device used in connection with
the Product and shall, upon Abbott's request and at Abbott's sole expense
if Abbott elects, in its sole discretion, to prosecute such infringement
action, use its best efforts to assist Abbott to restrain the infringement
or threatened infringement. Abbott shall give Cephalon prompt notice of
any infringement or threatened infringement of Cephalon's company name
and/or logo used in connection with the Product and shall, upon Cephalon's
request and at Cephalon's sole expense if Cephalon elects, in its sole
discretion, to prosecute such infringement action, use its best efforts to
assist Cephalon to restrain the infringement or threatened infringement.
16.7 License Agreement. if Abbott determines that it is necessary or
appropriate to reflect the parties' agreement with respect to the use of
the Trademarks in a separate agreement, Cephalon agrees that it will
execute such agreement. Such agreement shall reflect the terms hereof with
respect to the use of the Trademarks.
ARTICLE 17 - FORCE MAJEURE
Failure of either party to perform its obligations under this Agreement (except
for the payment of monies due and owing) shall not subject such party to any
liability to the other if such failure is caused or occasioned by act of God, or
the public enemy, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes, or other labor trouble, failure in whole or in part, of Abbott's
suppliers to deliver on schedule materials, equipment or machinery to Abbott,
interruption of or delay in transportation, compliance with any order,
regulation or request of any government of competent jurisdiction or any
officer, department, agency or committee thereof, including requisition or
allocation or establishment of priority, or by compliance with a request
authorized by such governmental authority of any manufacturer for material to be
used by it, or by any other event or circumstance of like or different character
to the foregoing beyond the reasonable control of the party so failing. The
party suffering an event of Force Majeure shall immediately
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notify the other party and shall use all reasonable efforts to minimize the
damages suffered by both parties. Both parties shall cooperate in good faith in
order to minimize such damages and, subject to the provisions of Section
10.2(d), reach an agreement as to how to proceed.
ARTICLE 18 - GENERAL
18.1 Property Interest. Abbott shall retain all property interests in the
Product until the point of sale and shall retain such property interest in
all Sample Packs and Promotional Materials until their delivery to
Cephalon. Cephalon shall neither have nor represent that it has any
control or property interest in the Product. Nothing contained herein
shall be deemed to grant, either expressly or impliedly, a license or
other right or interest in any patent, trademark, including the
Trademarks, or other similar intellectual property of Abbott except as may
be necessary for Cephalon to perform its obligations as provided in this
Agreement.
18.2 Assignment. Neither party may assign its interest under this Agreement
without the prior consent of the other party [* The confidential material
contained herein has been omitted and has been separately filed with the
Commission.]
18.3 Headings. All headings are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
18.4 Notices. All notices, consents, approvals, orders, acceptances and
requests shall be in writing addressed to the parties at the following
addresses, respectively.
If to Cephalon: President
Cephalon, Inc.
145 Brandywine Parkway
West Chester, Pennsylvania 19380-4245
Fax: (610) 344-7563
With a copy to: Senior Vice President, Secretary and
General Counsel
Cephalon, Inc.
145 Brandywine Parkway
West Chester, Pennsylvania 193804245
Fax: (610)738-6590
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If to Abbott: Vice President,
Pharmaceutical Commercial Operations
Abbott Laboratories
200 Abbott Park Road
Dept. 533; Bldg. AP30
Abbott Park, Illinois 60064-3537
Fax: (847) 938-4877
With a copy to: Senior Vice President, Secretary and
General Counsel
Abbott Laboratories
100 Abbott Park Road
Dept. 32L; Bldg. AP6D
Abbott Park, Illinois 60064-6049
Fax: (847)938-1206
Notices, consents and approvals shall be effective when delivered
personally or sent by telex, facsimile or other telegraphic mode or when
sent by registered or certified mail, postage prepaid, so addressed. By
written notice, a party may change its address for future communications.
18.5 Waiver. No failure on the part of either party to exercise, and no delay
in exercising any right or remedy shall operate as a waiver of such right
or remedy, nor shall any single or partial exercise of any right or remedy
preclude any further or other exercise of such right or remedy. All rights
and remedies under this Agreement are cumulative and shall not be deemed
exclusive of any other rights or remedies provided by law except as
otherwise provided herein.
18.6 Severance. If any Article or part thereof contained in this Agreement is
declared invalid by any court of competent jurisdiction or a government
agency having jurisdiction, such declaration shall not affect the
remainder of the Article or the other Articles and each shall remain in
full force and effect. To the extent possible, the parties shall reform
such invalidated Article or part thereof in a manner that will render such
provision valid without impairing the parties' original intent.
18.7 Dispute Resolution.
(a) General. The parties recognize that a bonafide dispute as to certain
matters may arise from time to time during the term of this
Agreement which may relate to either party's rights and/or
obligations hereunder. The parties agree that they shall use all
reasonable efforts to resolve any dispute which may arise in an
amicable manner.
(b) Management Resolution. If the parties are unable to resolve such a
dispute within thirty (30) days, either party may, by notice to the
other party, have such dispute
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referred to the respective officers of the parties designated below.
Such officers shall attempt to resolve the referred dispute by good
faith negotiations within thirty (30) days after such notice is
received. The said designated officers are as follows:
For Abbott: Senior Vice President,
Pharmaceutical Operations
For Cephalon: President
(c) Mediation and Alternative Dispute Resolution. if the designated
officers are not able to resolve such dispute within such thirty
(30) day period, then either party may initiate the alternative
dispute resolution procedure set forth in Exhibit 18.7.
18.8 Year 2000 Compliance. Both parties hereby certify to the other that their
respective internal computer systems are Year 2000 compliant and that
neither party will experience difficulties or changes in service levels
related to the change in century as a result of the other party's internal
computer systems not being able to process the century date change. Each
party hereby represents and warrants to the other that all computer
hardware and software used by each of them in performing their obligations
under this Agreement will (i) have no lesser functionality with respect to
records containing dates before or after January 1, 2000, than previously
with respect to dates prior to January 1, 2000; and (ii) be interoperable
with other software used by the other party which may deliver records to,
receive records from, or otherwise interact with software in the course of
data processing.
18.9 Governing Law. The laws of the State of New York, United States of
America, excluding conflicts of law principles, shall govern the
interpretation, performance and enforcement of this Agreement.
18.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which, when taken
together, shall constitute the Agreement.
18.11 Non-Solicitation. During the Collaboration Period and for one (1) year
thereafter, neither party shall target or recruit the other party's
employees without the other party's prior written consent. The parties
agree that this provision shall not apply to situations where a party's
employee is hired by the other party as a result of such employee
responding to an advertisement to the general public that was placed by
the hiring party.
18.12 Entire Agreement. This Agreement, including the Exhibits, contains the
entire understanding between the parties hereto with respect to the
subject matter hereof. This Agreement cannot be amended, except by a
writing signed by the parties.
-57-
<PAGE>
IN WITNESS WHEREOF, each of the parties has by its duly authorized
representative signed this Agreement as of the day and year first above written.
ABBOTT LABORATORIES INC. CEPHALON, INC.
By: /s/ Edward J. Fiorentino By /s/ Frank Baldino, Jr.
------------------------------------ ---------------------------
Edward J. Fiorentino Frank Baldino, Jr., PhD
Vice President, President and
Pharmaceutical Commercial Operations Chief Executive Officer
-58-
<PAGE>
Exhibit 1.22
Promotional Expense Definitions
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Category Definition
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Product Samples Production and shipping cost of samples
- ------------------------------------------------------------------------------------------------------------------------------------
Discretionary Funds Funds allocated to sales reps to use to promote products, speaker programs, reminder items,
special events
- ------------------------------------------------------------------------------------------------------------------------------------
Continuing Education Programs Costs to provide development programs for sales representatives
- ------------------------------------------------------------------------------------------------------------------------------------
Grants/Contributions Funds given to institutions or third parties to support product research and foster general
company goodwill
- ------------------------------------------------------------------------------------------------------------------------------------
Reminder Items/Giveaways Tangible goods to be distributed by reps to doctors including items such as mugs, golf
balls, pens
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Aids/Detail Aids Printed reference materials for reps. Usually, a glossy multi-page booklet highlighting a
product's key attributes and used in a product detail
- ------------------------------------------------------------------------------------------------------------------------------------
MD/Pharmacist/Nurse Kits Brochures, pamphlets, and other information distributed to clinicians, excluding reprints
- ------------------------------------------------------------------------------------------------------------------------------------
Incentives Any cash bonuses, gift certificates, tangible items to be distributed to sales reps to
motivate them
- ------------------------------------------------------------------------------------------------------------------------------------
Product and Sales Training Any sales rep training cost including: materials at the training classes along with the
meeting itself
- ------------------------------------------------------------------------------------------------------------------------------------
Speaker Program Cost of staging speaker programs including: materials at the training classes along with the
meeting itself
- ------------------------------------------------------------------------------------------------------------------------------------
Convention - Exhibition Costs of exhibiting at major conventions, including booth displays (not construction)
- ------------------------------------------------------------------------------------------------------------------------------------
Convention - Symposia Costs of satellite symposia/meetings conducted at major conventions for MD's and ancillary
health professionals
- ------------------------------------------------------------------------------------------------------------------------------------
Fellowships - Tutorials All costs to support doctors/other third part participation in fellowships, tutorials, and
preceptorships, and general medical education
- ------------------------------------------------------------------------------------------------------------------------------------
Journal Ads Costs to run journal ads
- ------------------------------------------------------------------------------------------------------------------------------------
Public Relations Services provided by a public relations firm including: monthly fees, out-of-pocket, and
other fees
- ------------------------------------------------------------------------------------------------------------------------------------
Ad Agency Fees Services provided by an ad agency including: monthly fees, out-of-pocket expenses, and other
fees
- ------------------------------------------------------------------------------------------------------------------------------------
Market Research/Statistics/Reports Costs of syndicated reports, databases, and other reports, as well as primary research
- ------------------------------------------------------------------------------------------------------------------------------------
Market Related Clinical Studies Phase IIIB/IV studies which support the growth of products through data creation
- ------------------------------------------------------------------------------------------------------------------------------------
Indigent Care Programs Operation costs, management and drug, to support uninsured low-income segment for limited
duration
- ------------------------------------------------------------------------------------------------------------------------------------
Expanded Access Programs (Small Phase IV studies supporting academic center research of the Product including drug
and operating costs)
- ------------------------------------------------------------------------------------------------------------------------------------
Advisory Panels/Thought Leader Panels Cost of running advisory panels with physicians to obtain information on current therapies
and future trends
- ------------------------------------------------------------------------------------------------------------------------------------
Reprints Costs of production and distribution of reprints from key journals related to the product
- ------------------------------------------------------------------------------------------------------------------------------------
Internet Programs Internet based programs that focus on the Product, provide medical and promotional
information, and target multiple audiences. Examples include a Cephalon web site with
promotional content and links to chat rooms, e-mail or related medical sites.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 3.6
Cost of Sample Packs
<TABLE>
<CAPTION>
1999
<S> <C>
SIZE PRICE
---- -----
1 CASE* [* The confidential material contained herein has been omitted
and has been separately filed with the Commission.]
</TABLE>
* 40 cartons, each containing a 40 count bottle of 4 mg.
Delivery F.O.B. Abbott facility
<PAGE>
EXHIBIT 3.8
Members of Collaboration Committee
ABBOTT
[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
CEPHALON
[* The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
<PAGE>
EXHIBIT 4.2
Cephalon and Abbott Company Identifications (Names) and/or Logos
ABBOTT
ABBOTT LABORATORIES
ABBOTT LABORATORIES INC.
ABBOTT
GABITRIL(R)
FILMTAB(R)
[LOGO]
[LOGO] Cephalon
<PAGE>
EXHIBIT 16.3
Cephalon Trademarks. Company Identifications (Names) and Logos
[LOGO] Cephalon
<PAGE>
EXHIBIT 18.7
Alternative Dispute Resolution
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. To have such a dispute resolved by this
Alternative Dispute Resolution (ADR) provision, a party must send written notice
of the dispute to the other party for attempted resolution by good faith
negotiations between their respective presidents (or their equivalents) of the
affected subsidiaries, divisions, or business units within twenty-eight (28)
days after such notice is received (all references to "days" in this ADR
provision are to calendar days). If the matter has not been resolved within
twenty-eight (28) days of the notice of the dispute, or if the parties fail to
meet within such twenty-eight (28) days, either party may initiate an ADR
proceeding as provided herein. The parties shall have the right to be
represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to the other
party of the issues to be resolved by ADR. Within fourteen (14) days after
receipt of such notice, the other party may, by written notice to the party
initiating the ADR, add additional issues to be resolved within the same ADR.
2. Within twenty-one (21) days 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. If the parties are unable to agree on a
mutually acceptable neutral within such period, either party may request the
President of the CPR Institute for Dispute Resolution (CPR), 366 Madison Avenue,
14th Floor, New York, New York 10017, to select a neutral pursuant to the
following procedures:
(a) The CPR shall submit to the parties a list of not less than five (5)
candidates within fourteen (14) days after receipt of the request, along with a
Curriculum Vitae for each candidate. No candidate shall be an employee,
director, or shareholder of either party or any of their subsidiaries or
affiliates.
(b) Such list shall include a statement of disclosure by each candidate of
any circumstance likely to affect his or her impartiality.
(c) Each party shall number the candidates in order of preference (with the
number one (1) signifying the greatest preference) and shall deliver the list to
the CPR within seven (7) days following receipt of the list of candidates. If a
party believes a conflict of interest exists regarding any of the candidates,
the party shall provide a written explanation of the conflict to the CPR along
with its list showing its order of preference for the candidates. Any party
failing to return a list of preferences on time shall be deemed to have no order
of preference.
(d) If the parties collectively have identified fewer than three (3)
candidates deemed to have conflicts, the CPR shall designate as neutral the
candidate for whom the parties collectively have indicated the greatest
preference. If a tie shall result between two candidates, the CPR may designate
either candidate. If the parties collectively have identified three (3) or more
candidates deemed to have conflicts, the CPR shall review the explanations
regarding conflicts, and, in its sole discretion, may either (i) immediately
designate as the neutral the candidate for whom the parties collectively have
indicated the greatest preference, or (ii) issue a new list of not less than
five (5) candidates, in which case the procedures set forth in subparagraphs
2(a) - 2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six (56) days
after the selection, the neutral shall hold a hearing to resolve each of the
issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
<PAGE>
shall designate a location other than the principle place of business of either
party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall submit the
following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to rely in any oral
or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the hearing, and
a short summary of the anticipated testimony of each witness;
(c) a proposed ruling on each issue to be resolved, together with a request
for a specific damage award or other remedy for each issue. The proposed rulings
and remedies shall not contain any recitation of the facts or any legal
arguments and shall not exceed one (1) page per issue.
(d) a brief in support of each party's proposed rulings and remedies
provided that the brief shall not exceed twenty (20) pages. This page limitation
shall apply regardless of the number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery shall
be required or permitted by any means, including depositions, interrogatories,
requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing time to
present its case. The neutral shall determine whether each party has had the
five (5) hours to which it is entitled.
(b) Each party shall be entitled, but not required, to make an opening
statement, to present regular and rebuttal testimony, documents or other
evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross examination shall be charged against the party conducting
the cross-examination.
(c) The party initiating the ADR shall begin the hearing and, if it chooses
to make an opening statement, shall address not only issues it raised but also
any issues raised by the responding party. The responding party, if it chooses
to make an opening statement, also shall address all issues raised in the ADR.
Thereafter, the presentation of regular and rebuttal testimony and documents,
other evidence, and closing arguments shall proceed in the same sequence.
(d) Except when testifying, witnesses shall be excluded from the hearing
until closing arguments.
(e) Settlement negotiations, including any statements made therein, shall
not be admissible under any circumstances. Affidavits prepared for purposes of
the ADR hearing also shall not be admissible. As to all other matters, the
neutral shall have sole discretion regarding the admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, 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 and shall not exceed ten (10) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
-2-
<PAGE>
7. The neutral shall rule on each disputed issue within fourteen (14) days
following completion of the hearing. Such ruling shall adopt in its entirety the
proposed ruling and remedy of one of the parties on each disputed issue but may
adopt one parties proposed rulings and remedies on some issues and the other
party's proposed rulings and remedies on other issues. The neutral shall not
issue any written opinion or otherwise explain the basis of the ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the prevailing
party (including all expert witness fees and expenses), the fees and expenses of
a court recorder, and any expenses for a hearing room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all disputed issues in
the ADR, the losing party shall pay 100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some issues, and the
other party on other issues, the neutral shall issue with the rulings a written
determination as to how such fees and expenses shall be allocated between the
parties. The neutral shall allocate the fees and expenses in a way that bears a
reasonable relationship to the outcome of the ADR, with the party prevailing on
more issues, or on issues of greater value or gravity, recovering a relatively
larger share of its legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and expenses 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.
-3-
<PAGE>
Exhibit 10.14
JOINT RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT
This Joint Research, Development and License Agreement (the "Agreement") is
made and shall be effective as of May 28, 1999 by and between Cephalon, Inc., a
Delaware corporation with its principal place of business located at 145
Brandywine Parkway, West Chester, Pennsylvania 19380-4245, U.S.A. ("Cephalon")
and H. Lundbeck A/S, a Danish corporation with its principal place of business
located at 9 Ottiliavej, DK-2500 Valby, Copenhagen, Denmark ("Lundbeck").
WITNESSETH:
WHEREAS, Kyowa Hakko Kogyo, Co. Ltd. ("Kyowa") granted to Cephalon the
right to develop, use and sell pharmaceutical products containing the Substance,
KT7515 (a derivative of K252a), under the terms and conditions of a license
agreement ("Kyowa License") dated May 15, 1992, as amended; said right,
including the right to sublicense, being exclusive in the United States of
America ("U.S.") and semi-exclusive in the rest of the world;
WHEREAS, Cephalon wishes to grant, and Lundbeck wishes to accept, an
exclusive sublicense under the Kyowa License, in that certain territory to be
defined herein, to a product developed by Cephalon that is based on KT7515 and
shall be known hereinafter as CEP-1347;
WHEREAS, the Parties intend to enter into discussions with Kyowa with the
objective of restructuring certain existing territorial marketing rights
covering CEP-1347 so that, pending the outcome of such discussions, Cephalon
would hold exclusive marketing rights in North America and Lundbeck would hold
exclusive marketing rights in Europe;
WHEREAS, Cephalon, independent of Kyowa, has developed a chemical platform
of fused pyrrolocarbazole compounds ("FP" or "FPs") believed to have potential
efficacy in treating diseases of the nervous system;
WHEREAS, Cephalon wishes to grant, and Lundbeck wishes to accept, an
exclusive license in that certain territory to be defined herein to such class
of FPs including, without limitation, those FPs known as CEP-5229, CEP-5732,
CEP-6107, CEP-6141, CEP-5283, CEP-5398, CEP-5567 and CEP-5280 for use as
provided herein;
WHEREAS, Cephalon and Lundbeck desire to enter into a research and
development collaboration to identify, develop and commercialize compounds for
uses related to diseases of the nervous system; and
WHEREAS, Cephalon and Lundbeck desire to establish commercial licensing and
supply arrangements under which Cephalon Licensed Products and Kyowa Licensed
Products (as defined below) will be marketed and sold exclusively by Lundbeck in
the Territory (as defined
1
<PAGE>
below), and Lundbeck Licensed Products (as defined below) will be marketed and
sold exclusively by Cephalon outside the Territory.
NOW, THEREFORE, for good and valuable consideration, the adequacy of which
is hereby affirmed, the parties hereby agree as follows.
Article 1. Definitions. Terms that are capitalized as defined terms in this
Agreement shall have the meanings set forth below, and defined terms may be used
in their singular and plural sense:
1.1 "Affiliate" shall mean any individual or entity directly or indirectly
controlling, controlled by or under common control with, a Party to this
Agreement. Without limiting the foregoing, the direct or indirect ownership of
fifty percent (50%) or more of the outstanding voting securities of an entity,
or the right to receive fifty percent (50%) or more of the profits or earnings
of an entity, or the right to control the policy decisions of a person or
entity, shall be deemed to constitute control.
1.2 "At Cost" shall mean all direct and indirect costs incurred in the
manufacturing, testing and storage of Development Compounds and Licensed
Products, as such terms are defined herein (allocated to the production of such
Development Compounds and Licensed Products, as the case may be, in a fair and
equitable manner in conformance with generally accepted accounting principles,
consistently applied with those established with respect to other products),
with such costs including, but not limited to:
(a) direct variable costs (e.g., excipients, packing material, wages);
(b) allocated semi-variable costs (e.g., wages and salaries of supervisors,
laboratory technicians and service personnel, other personnel costs, repair and
maintenance of machinery, stock material used internally, stationary and
acquisitions);
(c) fixed costs (e.g., wages and salaries of Director of Production, staff,
head of departments, supervisors and laboratory technicians, and other personnel
costs); and
(d) distributed costs (e.g., rent, energy);
(e) an allocation for overhead in an amount equal to forty percent (40%) of
the aforementioned Costs as herein defined;
provided, however, that if a Party engages a toll manufacturer or otherwise
incurs costs due to the payment of an invoice submitted by a third party in
connection with services rendered in connection with this Agreement, then "At
Cost" with respect to such services shall mean the amount(s) set forth on said
invoice(s) and paid by the applicable Party, all provided that the third party
has been engaged on competitive terms.
2
<PAGE>
1.3 "Backup Compounds" shall mean each set of Compounds, as such term is
defined herein, that fulfill those same criteria set forth by the Joint
Management Team (or "JMT," as defined herein) that enable a Compound to qualify
as a Development Compound, whether or not such Backup Compounds actually are
selected by the JMT for preclinical, clinical and commercial development. The
precise number of Backup Compounds in a set, as well as their respective
selection criteria, shall be determined by the JMT. It is the intention of the
Parties that such Backup Compounds initially shall be held in reserve and
subsequently may be designated and developed as Development Compounds.
1.4 "CEP-1347" shall mean a certain indolocarbazole compound for which
development and commercialization rights have been granted to Cephalon pursuant
to the Kyowa License. The chemical formula of CEP-1347 is as set forth on
Exhibit B.
1.5 "Cephalon Compounds" shall mean Compounds (as defined herein) other than
Joint Compounds and Lundbeck Compounds.
1.6 "Cephalon Know-How" shall mean Know-How that is proprietary to Cephalon.
1.7 "Cephalon Licensed Products" shall mean pharmaceutical products that
contain Cephalon Compounds.
1.8 "Cephalon Patent Rights" shall mean Patent Rights that are proprietary to
Cephalon.
1.9 "Cephalon Technology" shall mean Technology that is proprietary to
Cephalon. With respect to CEP-1347, Cephalon Technology includes the drug
development dossier related to the filing of an investigational new drug
application by Cephalon that supports short-term clinical studies; as well as
any Cephalon Patent Rights and Cephalon Know-How to the extent that it relates
to the synthesis, composition and uses of CEP-1347 in the Field.
1.10 "Compounds" shall mean:
(a) Subject to the exclusions set forth below, "Compounds" shall include
(i) CEP-1347; (ii) FPs that inhibit the same Targets (as such term is defined
herein) as does CEP-1347 including, without limitation, CEP-5229, CEP-5732,
CEP-6107, CEP-6141, CEP-5283, CEP-5398, CEP-5567, CEP-5280; (iii) FPs that act
upon any other Targets that may be selected by the JMT (as defined below); and
(iv) chemical entities other than FPs that are selected pursuant to the
unanimous consent of the Parties, and act upon Target(s) in the Field. For
purposes of this subsection, an FP or other chemical entity shall be deemed to
be a Compound only insofar as it has been conceived prior to the end of the
Research Program and synthesized prior to the later of (i) one (1) year
following the date of conception; and (ii) the end of the Research Program. Any
such chemical entities that act upon a Target and fulfill potency criteria
established by the JMT, but fail to meet the selectivity requirements
established by the JMT or would otherwise be excluded as "Compounds" under the
terms of subsection 1.10(b) below, nevertheless may be
3
<PAGE>
designated by the JMT to be "Compounds" so long as such chemical entities are
not covered by the terms of any then-existing third party obligations of
Cephalon.
(b) Notwithstanding the foregoing, "Compounds" shall not include any
chemical entities (whether or not FPs) which (i) are subject to any outstanding
third party obligations of Cephalon, as set forth on Exhibit C hereto; or (ii)
predominantly inhibit the biological activity, with an IC/50/ less than 50 nM,
of the following tyrosine kinases and receptors: nerve growth factor receptors
(e.g., trkA, trkB, trkC and homologues thereof), vascular endothelial growth
factor receptors (e.g., VEGFR1, VEGFR2 and homologues thereof), and glial
derived neurotrophic factor receptors (e.g., ret and its associated GFRa1,
GFRa2, GFRa3, and GFRa4 accessory receptors and homologues thereof). Any such
chemical entities that are deemed to fall outside the definition of Compounds as
a result of the application of this subsection 1.10(b) shall remain the sole and
exclusive property of Cephalon, and will not be subject to the terms and
conditions hereof.
1.11 "Development Compounds" shall mean Compounds that meet the criteria
established, and are selected, by the JMT to be Development Compounds, unless
and until said Compounds are otherwise excluded from further development by the
JMT in accordance with the terms of Section 3.2 below.
1.12 "Development Program" shall mean a program including, but not limited to,
preclinical, clinical, scale-up manufacturing and commercial development of a
Development Compound conducted by the Parties pursuant to this Agreement
primarily with the intent, and for the purpose, of generating data for
submission to regulatory authorities in support of an application for
governmental approval necessary to permit the commercialization of a Licensed
Product.
1.13 "Effective Date" shall mean the date hereof.
1.14 "Field" shall mean the treatment of diseases of the nervous system.
1.15 "FTE" shall mean a full time equivalent employee.
1.16 "Initial Research Term" shall mean the initial three (3) year period of the
Research Program, commencing upon the Effective Date of this Agreement.
1.17 "Joint Compounds" shall mean Compounds (as defined herein) that have been
conceived or reduced to practice jointly, as determined by the patent laws of
the United States, by Cephalon and Lundbeck during the conduct of the Research
Program.
1.18 "Joint Know-How" shall mean Know-How that is proprietary jointly to both
Parties.
1.19 "Joint Licensed Products" shall mean all pharmaceutical products that
contain Joint Compounds.
4
<PAGE>
1.20 "Joint Patents" shall mean all Patent Rights that are proprietary jointly
to both Parties.
1.21 "Joint Technology" shall mean Technology that is proprietary jointly to
both Parties.
1.22 "Joint Management Team" or "JMT" shall mean the group of research,
development, and commercial executives collectively designated to serve in such
capacity by each of Cephalon and Lundbeck.
1.23 "Know-How" shall mean know-how, trade secrets, Targets, inventions,
discoveries, technical information (including preclinical data and clinical
results), formulae, processes, expert opinions, data, and other confidential and
proprietary information, other than Kyowa Technology, owned, controlled or
licensed (with the right to assign or sublicense) by either Party or any of its
Affiliates, to the extent that it relates to the conduct of the Research Program
or a Development Program, or to the composition, manufacture or use of Compounds
or Licensed Products.
1.24 "Kyowa Licensed Products" shall mean all pharmaceutical products that
contain CEP-1347.
1.25 "Kyowa Technology" shall mean the patent rights, including all U.S. patent
applications and issued patents owned or controlled by Kyowa and its Affiliates
covering the composition, manufacture or use of CEP-1347 (as well as the use of
K252a solely in connection with the manufacture of CEP-1347) including but not
limited to any provisionals, divisionals, continuations, continuations-in-part,
reissues, reexaminations, extensions derived therefrom, as well as all foreign
patent applications, granted foreign patents and all counterparts thereof
including, but not limited to, supplemental protection certificates,
administrative protection certificates (or other governmental actions) which
provide exclusive rights to the patent holders in the patented subject matter,
manufacturing rights, and know-how relating to K252a and CEP-1347 to the extent
that they have been granted to Cephalon pursuant to the Kyowa License. A copy of
the Kyowa License is attached hereto as Exhibit D.
1.26 "Licensed Products" shall mean Cephalon Licensed Products, Kyowa Licensed
Products, and Lundbeck Licensed Products.
1.27 "Lundbeck Compounds" shall mean Compounds (as defined herein) that have
been conceived or reduced to practice solely by Lundbeck.
1.28 "Lundbeck Licensed Products" shall mean all pharmaceutical products that
contain Lundbeck Compounds.
1.29 "Lundbeck Know-How" shall mean Know-How that is proprietary to, or licensed
by, Lundbeck.
5
<PAGE>
1.30 "Lundbeck Patent Rights" shall mean Patent Rights that are proprietary to,
or licensed by, Lundbeck.
1.31 "Lundbeck Technology" shall mean Technology that is proprietary to, or
licensed by, Lundbeck.
1.32 "Marketing Authorization Application" or "MAA" shall mean an application
seeking the approval of the competent regulatory authority in any country in the
Territory (including, without limitation, the European Medicines Evaluation
Agency or "EMEA") to enable one of the Parties (or an Affiliate or assignee
thereof) to market a Cephalon Licensed Product or a Kyowa Licensed Product.
1.33 "Net Sales" shall mean the gross receipts derived in arms-length
transactions from the sale of Licensed Products in the Territory by Lundbeck (or
by its Affiliates, sublicensees, distributors or other authorized third parties
holding rights granted by Lundbeck to market and sell Cephalon Licensed Products
or Kyowa Licensed Products under this Agreement) to independent third parties in
the Territory, less an amount equal to three percent (3%) of such gross receipts
which amount shall be deducted in lieu of deducting any actual amounts for
transportation or insurance charges, taxes and duties, discounts, allowances,
rebates and commissions, or any other customary deductions which might otherwise
be taken. Sales between or among Lundbeck and its Affiliates (or sublicensees,
distributors or other authorized third party marketers) shall be excluded from
the computation of gross receipts hereunder except where such Affiliates (or
sublicensees or other authorized third party marketers) are end users, but gross
receipts shall include the subsequent final sales to third parties by such
Affiliates (or sublicensees or other authorized third party marketers). Where
(i) Cephalon Licensed Products and/or Kyowa Licensed Products are sold as one of
a number of items without a separate price; or (ii) the consideration for the
Cephalon Licensed Products and/or Kyowa Licensed Products shall include any
non-cash element; or (iii) the Cephalon Licensed Products and/or Kyowa Licensed
Products shall be transferred in any manner other than an invoiced sale, except
for Cephalon Licensed Products and/or Kyowa Licensed Products transferred as
samples or any other similar transfer for promotional purposes usually made in
the relevant part of the Territory, the gross receipts applicable to any such
transaction shall be deemed to be Lundbeck's average gross receipts for the
applicable quantity of Cephalon Licensed Products and/or Kyowa Licensed Products
at that time in the country in which the transaction occurred. If there are no
independent gross receipts of Cephalon Licensed Products and/or Kyowa Licensed
Products in the country at that time, then Lundbeck and Cephalon shall mutually
agree on a surrogate measure to be used in lieu thereof.
1.34 "Party" or "Parties" shall mean Cephalon and/or Lundbeck, as the case may
be.
1.35 "Patent Rights" shall mean all patent applications (whether in preparation
or filed) and issued patents, owned, controlled or licensed (with the right to
assign or sublicense) by a Party or Parties to this Agreement (or an Affiliate
thereof) covering the assays, Targets, processes, composition, manufacture or
use of any Compound (as well as any Know-How that may be
6
<PAGE>
patentable) that are owned by one or both of the Parties, including but not
limited to any provisionals, divisionals, continuations, continuations-in-part,
reissues, reexaminations, extensions derived therefrom, as well as all foreign
patent applications, granted patents and all counterparts thereof including, but
not limited to, substitutions, confirmations, registrations, revalidations,
supplemental protection certificates, administrative protection certificates (or
other governmental actions) which provide exclusive rights to the patent holders
in the patented subject matter. All such Cephalon Patent Rights in existence as
of the Effective Date shall be as set forth on Exhibit A hereto.
1.36 "Research Program" shall mean the program of preclinical discovery research
that will focus on the selection and validation of Targets and the discovery and
evaluation of Compounds in the Field, all to be conducted by the Parties under
the terms of this Agreement as more fully described in Exhibit E hereto.
1.37 "Target" or "Targets" shall mean a component of the human nervous system,
which component in its function or malfunction is involved in treating, or
otherwise relates to, diseases in the Field. More specifically, Targets will be
defined in terms of their respective protein or genetic sequence(s), molecular
structure(s), biochemical activity, binding of ligand(s) or interaction with
other components of the human nervous system.
1.38 "Technology" shall mean, collectively, Patent Rights and Know-How, but
excluding Kyowa Technology. For purposes of clarification, the term Technology
expressly excludes any Patent Rights and Know-How that either Party may license
from a third party after the Effective Date of this Agreement, unless (i) such
Party is permitted to grant a sublicense or other rights thereunder to the other
Party; and (ii) the sublicensing Party shall have executed and delivered a
sublicense or other agreement in a form reasonably required in connection
therewith.
1.39 "Territory" shall mean generally the regions of Europe, the Middle East,
and South America (including, without limitation, the countries within those
regions listed in Exhibit F hereto), as well as the countries of Australia, New
Zealand and South Africa.
1.40 "Valid Claim" shall mean a claim of an issued patent that has not lapsed or
become abandoned or been declared invalid or unenforceable by a court or agency
of competent jurisdiction from which no appeal can be or is taken. Article 2.
Research and Development Programs
2.1 Research Activities. The Parties agree to conduct a joint Research Program
as described in Exhibit E to discover and synthesize Compounds that act upon
Target(s) and may have efficacy in the Field. Under the Research Program the
Parties shall select and validate Targets, and evaluate Compounds as potential
modulators of those Targets. For purposes of clarification, Lundbeck shall not
use Cephalon Technology except in connection with the fulfillment of its
obligations and furtherance of its rights established hereunder. The Research
Program also may include studies relating to the potential efficacy of CEP-1347
in treating diseases in the Field,
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concentrating on, but without being limited to, studies relating to the
potential efficacy of CEP-1347 in treating neurodegenerative diseases and the
validation of key signaling kinases that act upon those Target(s) that are the
same as those targeted by CEP-1347 in neural tissues.
2.2 Selection of Compounds and Compound Synthesis. In addition to those
chemical entities defined as Compounds under the terms of Section 1.10 hereof,
the Parties shall determine whether or not certain other chemical entities shall
be deemed to be Compounds. For purposes of clarification, and subject to the
grant of any rights hereunder, the Party holding proprietary rights to any such
Compound(s) shall continue to hold all such rights in said Compound(s) during
the pendency of this Agreement and following the termination thereof.
2.3 Extension of the Research Program. At the option of Lundbeck, the Research
Program shall be extended for an additional term either of one (1) or two (2)
twelve-month periods beyond the date of expiry of the Initial Research Term,
with the level of financial support to be provided by Lundbeck to Cephalon
during any such extension period to be established in accordance with the terms
of Section 6.3 hereof.
2.4 Development Activities. The Parties agree jointly to conduct a Development
Program for the use of CEP-1347 to treat diseases in the Field, and of other
Development Compounds as may be selected by the JMT.
2.5 Term of the Development Program. The Development Program shall continue for
so long as the Parties agree, subject to the oversight and direction of the JMT,
to pursue marketing approval for not less than one Development Compound.
2.6 Use of Research Materials. The Parties agree that all compositions,
biological materials and animals used in the Research Program and the
Development Program shall be used in compliance with all applicable laws and
regulations.
Article 3. Joint Management Team
3.1 Joint Management Team. The JMT shall consist of six (6) members, three (3)
of whom shall be appointed by Cephalon and three (3) of whom shall be appointed
by Lundbeck. Each Party may change its representatives to the JMT at its sole
discretion. The JMT shall meet face-to-face at least two (2) times per year, and
shall communicate regularly and no less frequently than once per calendar
quarter. The first such meeting shall be held within ninety (90) days after the
Effective Date. The location of the meetings shall alternate between the
corporate headquarters of the Parties unless otherwise agreed to by the Parties.
3.2 Responsibilities of the JMT. The responsibilities of the JMT shall include:
(a) Management of the Research Program. The JMT shall establish and may
amend the scientific objectives of the Research Program from time to time and
shall review the progress
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of the Research Program. The JMT also shall guide the research activities of the
Parties with respect to the Research Program. For example, the JMT shall
determine the Target(s) and assay systems against which Compounds will be
screened for use in the Field. At any time during the pendency of the Research
Term, the JMT may change the Target(s), select additional Target(s) in the
Field, or redefine the principal Target of CEP-1347 or of any other Compound.
(b) Selection of Development and Backup Compounds. The JMT shall develop a
set of criteria by which a Compound shall be deemed to be either a Development
Compound or a Backup Compound. Such criteria may be revised at the sole
discretion of the JMT from time to time, but shall at least include references
to biological activity levels associated with the Target(s), as well as
customary pharmaceutical criteria (e.g., solubility, bioavailability and
safety). Once a Compound has fulfilled the criteria set forth at a given time,
the Compound shall remain classified as a Development Compound, or a Backup
Compound, as the case may be, for purposes of this Agreement. In addition,
Compounds that fail to meet such criteria for selection as a Development
Compound or as a Backup Compound at any given time hereunder, may be reevaluated
by the Parties against new Target(s) and thereafter may be designated by the JMT
as a Development Compound or a Backup Compound on the basis of having met such
revised selection criteria; provided however, that the JMT may not reevaluate
any such Compound that (i) is proprietary to a Party, and (ii) following the
initial evaluation thereof, has been selected by a Party for development outside
the scope of this Agreement.
(c) Catalogue of Compounds. The JMT shall maintain a complete list of all
Compounds to be evaluated under the Research Program, which list shall specify
the designation of all such Compounds either as Cephalon Compounds, Lundbeck
Compounds or Joint Compounds.
(d) Management of the Development Program. The JMT shall establish,
periodically review, and modify as may be necessary and advisable, the
preclinical, clinical and commercial objectives of a Development Program for
each Development Compound from time to time. Promptly following the Effective
Date, the JMT shall establish these objectives, and agree upon a projected
budget (which will be revised and set forth in writing on an annual basis) and
appropriate cost accounting methodologies for the Development Program. The JMT,
in its sole discretion, also will manage and coordinate all development
activities of the Parties with respect to the Development Program, including
scheduling preclinical studies and clinical trials for Development Compounds;
establishing milestones for the completion of Development Program objectives,
including without limitation those relating to anticipated filing dates to an
IND (or equivalent) filing and an MAA filing; nominating and selecting a
Compound for development as a Development Compound; evaluating the progress of
the Parties with respect to the Development Program; determining to end the
development of a Development Compound or to designate a Backup Compound as a
Development Compound; and generally ensuring that each Party exercises
consistently its respective commercially reasonable diligence to undertake and
complete in a timely manner the Development Program with respect to each
Development Compound.
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3.3 Decision Making by the JMT and Dispute Resolution.
(a) Regardless of the number of individual members of the JMT that may
attend any given meeting or proceeding, each Party shall be entitled to cast one
vote on all matters to be determined by the JMT, and each such matter shall be
governed by unanimous consent of the Parties. The Parties shall prepare and
approve written minutes of all JMT meetings, not later than thirty (30) days
after any such meeting(s). The Parties shall cooperate in implementing all
decisions taken by the JMT.
(b) If the JMT does not agree that any particular pre-clinical or clinical
study is necessary for a Development Compound, either Party may conduct such a
study at its own risk and expense. Data from such a study shall be made
available to the other Party pursuant to Article 11. Notwithstanding the
foregoing, neither Party may conduct a study that the other Party reasonably
believes would jeopardize the regulatory approval or commercialization of any
Development Compound worldwide.
(c) Any matters otherwise within the discretion of the JMT which cannot be
resolved by the JMT shall be subject to resolution as provided in Section 21.10.
Article 4. General Responsibilities of the Parties
4.1 General. The Parties agree to cooperate with each other in good faith to
ensure the success of the Research Program and Development Program. The Parties
agree to use commercially reasonable diligence to perform the tasks assigned to
them by the JMT and to perform their other obligations pursuant to this
Agreement, including without limitation the diligence requirements set forth in
Section 8.2. However, nothing in this Agreement shall give either Party the
authority to control or direct the activities of any employees or agents of the
other Party.
4.2 Research and Development of Development Compounds. The conduct of, and
expenses relating to, the Development Program (other than with respect to
CEP-1347) shall be shared equally by the Parties. With respect to CEP-1347, the
Parties will share equally all costs incurred under the Development Program
except for (i) those costs incurred in connection with the activities described
in Sections 4.3 and 4.4; and (ii) those costs specified in Section 6.4(a).
4.3 Process Development for CEP-1347. As contemplated under Section 9.1 hereof,
Cephalon shall be responsible for supplying Lundbeck with sufficient quantities
of K252a starting material. Promptly following the receipt by Lundbeck of such
starting material as well as the Cephalon Technology, Lundbeck shall be
responsible for the conduct and expenses associated with all chemical process
development for CEP-1347. During the term of this Agreement Cephalon shall use
its best efforts to make available to Lundbeck appropriate Cephalon personnel to
transfer to Lundbeck all applicable Cephalon Technology and Kyowa Technology
necessary for the production of CEP-1347.
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4.4 Drug Development for CEP-1347. Unless otherwise agreed upon by the Parties,
Lundbeck shall be responsible for conducting, and expenses incurred therewith,
the following activities:
(a) performing subchronic six-month drug safety studies in two (2) species
pursuant to ICH guidelines;
(b) filing an investigational new drug application ("IND"), or its
equivalent with a regulatory authority of a member state of the European Union,
for CEP-1347 in accordance with the schedule set forth in the Development Plan
as defined by the JMT; and
(c) performing Phase I clinical trials for safety and tolerability (single
and multiple dosages in volunteers, including pharmacokinetic analysis thereof).
Article 5. Grant of Rights
5.1 Exclusive Licenses.
(a) Cephalon Licensed Products. Subject to the limitations established in
Section 5.6, Cephalon hereby grants to Lundbeck an exclusive license (exclusive
even as to Cephalon) under the Cephalon Technology to make, have made, use and
sell Cephalon Licensed Products in the Territory. This grant shall permit
Lundbeck to develop and commercialize Development Compounds in the Territory,
whether within or outside the Field.
(b) Lundbeck Licensed Products. To the extent that Lundbeck agrees to
designate Lundbeck Compounds as contemplated under Section 1.10 hereof, Lundbeck
hereby grants to Cephalon a royalty-free exclusive license (exclusive even as to
Lundbeck) under the Lundbeck Technology to make, have made, use and sell
Lundbeck Licensed Products outside the Territory.
(c) Joint Licensed Products. To the extent applicable, each Party hereby
grants to the other Party for the term of this Agreement a royalty-free
exclusive license under the Joint Technology to make, have made, use and sell
Joint Licensed Products in the Territory, as to Lundbeck, and outside the
Territory, as to Cephalon.
5.2 Marketing and Distribution Rights to Cephalon Licensed Products. Lundbeck
may market and distribute Cephalon Licensed Products in the Territory through
the channels normally used for the Lundbeck product portfolio including, but not
limited to, Affiliates, agents, distributors, joint venture partners and
co-promotion and co-marketing partners (even if any such commercial contract
between Lundbeck and the applicable third party is formally described or
structured as a license). Subject to the written consent of Cephalon, with such
consent not to be unreasonably withheld, taking into account the commercial
interests of Lundbeck, Lundbeck may grant rights to third parties to market,
promote, sell and distribute Cephalon Licensed
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Products in any country in the Territory, where Lundbeck does not itself or
through its then-existing ordinary channels, wish to market Cephalon Licensed
Products. However, if Cephalon has established, or plans to develop, a
commercial operation in any such country in the Territory, then prior to doing
so Lundbeck hereby agrees to negotiate in good faith for a period not to exceed
sixty (60) days to grant such rights to Cephalon under terms and conditions to
be mutually agreed upon. If Lundbeck and Cephalon fail to so reach agreement
within such period, then Lundbeck may discuss terms and conditions with third
parties but it shall not enter into any such agreement with a third party on
terms and conditions more favorable to such third party than those offered to
Cephalon without first offering such more favorable terms to Cepahlon in
accordance with the procedures set forth herein. If Lundbeck thereafter enters
into such an agreement with a third party with the consent of Cephalon, then
such agreement shall contain terms and conditions customary in the
pharmaceutical industry with respect to such commercial arrangements, including
without limitation those relating to the prompt disclosure of adverse drug
experiences and any adverse regulatory or other governmental actions relating to
the Cephalon Licensed Products.
5.3 Exclusive Sublicense to Kyowa Licensed Products. Subject to the terms and
conditions set forth herein, and pursuant to the Kyowa License, Cephalon hereby
grants to Lundbeck an exclusive sublicense (exclusive even as to Cephalon) under
the Kyowa Technology to use and sell Kyowa Licensed Products in the Territory.
Lundbeck acknowledges that the rights of Cephalon with regard to Kyowa Licensed
Products under the Kyowa License are semi-exclusive as to Kyowa and, therefore,
that the rights granted hereunder to Lundbeck also are semi-exclusive as to
Kyowa in the Territory. Moreover, Lundbeck hereby agrees to cooperate with
Cephalon so as to ensure continued satisfaction of all those terms and
conditions of the Kyowa License, a copy of which Kyowa License is attached
hereto as Exhibit D. Subject to the determination by the Parties that Lundbeck
shall be responsible for the bulk synthesis and manufacture of commercial
supplies of CEP-1347, Cephalon hereby grants to Lundbeck manufacturing rights to
the extent that Kyowa has, or shall have, granted such rights to Cephalon.
5.4 Marketing and Distribution Rights to Kyowa Licensed Products. Lundbeck may
market and distribute Kyowa Licensed Products through the channels normally used
for the Lundbeck product portfolio, including but not limited to, Affiliates,
agents, distributors, joint venture partners and co-promotion and co-marketing
partners (even if the contractual relationship between Lundbeck and its partners
is formally built up as a license). Subject to the written consent of Cephalon,
with such consent not to be unreasonably withheld taking Lundbeck's commercial
interests into consideration, Lundbeck may grant rights to third parties to
market, promote, sell and distribute Kyowa Licensed Products in any country in
the Territory , where Lundbeck does not itself or through its then existing
ordinary channels, wish to market Kyowa Licensed Products. However if Cephalon
has established, or plans to develop, a commercial operation in any such country
in the Territory, then prior to doing so Lundbeck hereby agrees to negotiate in
good faith for a period not to exceed sixty (60) days to grant such rights to
Cephalon under terms and conditions to be mutually agreed upon. If Lundbeck and
Cephalon fail to so
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<PAGE>
reach agreement within such period, then Lundbeck may discuss terms and
conditions with third parties but it shall not enter into any such agreement
with a third party on terms and conditions more favorable to such third party
than those offered to Cephalon without first offering such more favorable terms
to Cepahlon in accordance with the procedures set forth herein. If Lundbeck
thereafter enters into such an agreement with a third party with the consent of
Cephalon, then such agreement shall contain terms and conditions customary in
the pharmaceutical industry with respect to such commercial arrangements,
including without limitation those relating to the prompt disclosure of adverse
drug experiences and any adverse regulatory or other governmental actions
relating to the Kyowa Licensed Products.
5.5 Potential Additional Rights to Kyowa Licensed Products
(a) Cephalon agrees to use its reasonable best efforts to obtain the
exclusive right and license (exclusive even as to Kyowa) to commercialize Kyowa
Licensed Products in Europe. If Kyowa shall grant to Cephalon an exclusive
license (exclusive even as to Kyowa) under the Kyowa Technology in Europe with
regard to Kyowa Licensed Products then, without further action or remuneration,
Lundbeck hereby shall be granted an exclusive sublicense (exclusive as to
Cephalon and to Kyowa) to all such rights in Europe.
(b) If Cephalon is unable to obtain an exclusive license as described in
Section 5.5(a), Cephalon agrees to use its reasonable best efforts to assist
Lundbeck to obtain the marketing rights, presently retained by Kyowa, to
commercialize Kyowa Licensed Products in Europe in the Field. In the event that
Lundbeck is unable to secure at least such marketing rights as described in this
Section 5.5(b), then it may terminate the portion of this Agreement that relates
to Kyowa Licensed Products as provided for in Section 17.2.
(c) If within one (1) year after the Effective Date Cephalon is unable to
obtain an exclusive license as described in Section 5.5(a) and Lundbeck is
unable to secure the marketing rights as described in Section 5.5(b), but
Lundbeck does not elect to terminate its rights as to the Kyowa Licensed
Products then, without further action or remuneration, the Territory
automatically shall be expanded to include all other countries of the world
(except for those in North America), and the Parties shall negotiate in good
faith to reach mutual agreement as to the amount of additional royalties or
other payments to be made by Lundbeck to Cephalon hereunder. In the event of
said expansion of the Territory, the royalty rate shall remain constant with
respect to those countries in the Territory as of the Effective Date, and may be
increased to an amount not to exceed [*The confidential material contained
herein has been omitted and has been separately filed with the Commission.] of
Net Sales for those countries that may be added to the Territory after the
Effective Date as contemplated herein, taking into account whether or not Kyowa
has, or plans to, exercise its semi-exclusive rights in all or part of the
Territory.
5.6 Use of Compounds Outside the Field.
If Lundbeck determines that it will not conduct preclinical, clinical and
commercial development activities of one or more Development Compound(s) having
indications outside the
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Field, then Lundbeck may sublicense its development and commercialization rights
in the Territory to a third party subject to the written consent of Cephalon,
with such consent not to be unreasonably withheld taking Lundbeck's commercial
interests into consideration. However, prior to doing so Lundbeck agrees to
negotiate in good faith for a period not to exceed sixty (60) days to grant such
development and commercialization rights to Cephalon. If the Parties are unable
to agree on mutually acceptable terms and conditions within such period, then
Lundbeck may discuss sublicense terms and conditions with third parties but it
shall not enter into any such agreement with a third party on terms and
conditions more favorable to such third party than those offered to Cephalon
without first offering such more favorable terms to Cephalon in accordance with
the procedures set forth herein. For purposes of clarification, nothing in this
Agreement shall be construed so as to preclude Cephalon from developing and
commercializing outside the Field on a worldwide basis any Cephalon Compound
that has not been designated as a Development Compound or a Backup Compound.
5.7 Co-Promotion Rights in Canada.
Cephalon hereby agrees that it will not grant to any third party (other
than to an Affiliate) the right to co-promote in Canada either the Kyowa
Licensed Products or the Cephalon Licensed Products without first negotiating in
good faith for a period not to exceed sixty (60) days to reach agreement on
mutually acceptable terms and conditions that would grant such rights to
Lundbeck. If the Parties are unable to agree on mutually acceptable terms of
co-promotion within such period, then Cephalon may discuss co-promotion terms
with third parties but it shall not enter into any such agreement with a third
party on terms and conditions more favorable to such third party than those
offered to Lundbeck without first offering such more favorable terms to Lundbeck
in accordance with the procedures set forth herein.
Article 6. Research and Development Funding
6.1 General. Except as otherwise provided herein, all payments shall be due and
payable within thirty (30) days from the date that either Party receives an
invoice from the other Party, unless the invoicing Party consents in writing to
other payment terms. All payments by either Party in connection with this
Agreement shall be made by wire transfer and in U.S. dollars unless otherwise
agreed to by the Parties in writing.
6.2 Funding for Research Program during the Initial Research Term. Lundbeck
agrees to provide financial support for the employment by Cephalon of not less
than [*The confidential material contained herein has been omitted and has been
separately filed with the Commission.] FTEs during the entirety of the Initial
Research Term, and Cephalon hereby represents that such financial support shall
be used by Cephalon solely to fund such employment in direct support of the
Research Program. In connection herewith, Lundbeck will make twelve (12)
quarterly payments to Cephalon, the first of which shall be due and payable on
July 1, 1999. The first quarterly payment shall be prorated to cover that
remaining portion of the calendar quarter from the Effective Date to July 1,
1999 as well as the full amount for the following calendar quarter July 1 to
September 30, 1999. Subsequent payments shall be due and payable on the first
day of
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each calendar quarter during the Initial Research Term. Notwithstanding the
above, the total number of Cephalon FTEs to be funded by Lundbeck hereunder may
exceed [*The confidential material contained herein has been omitted and has
been separately filed with the Commission.] in any given calendar quarter and
will be determined by mutual agreement of the Parties upon the recommendation of
the JMT, which will take into account the resources and expertise contributed to
the Research Program directly by Lundbeck. Each Cephalon FTE initially shall be
chargeable at a rate per annum of [*The confidential material contained herein
has been omitted and has been separately filed with the Commission.] ; such
amount shall be increased or decreased on December 31 of each year during the
Initial Research Term by the percentage increased or decrease in the U.S.
Consumer Price Index for those payments made by Lundbeck to Cephalon during the
following calendar year. For purposes of clarification, Lundbeck shall pay
Cephalon on July 1, 1999 an amount not less than [*The confidential material
contained herein has been omitted and has been separately filed with the
Commission.] covering the period July 1 to September 30, 1999, plus any
additional amount necessary to cover on a prorata basis the period from the
Effective Date to June 30, 1999. In addition, any external expenses incurred
(whether by Cephalon or by Lundbeck) during the Initial Research Term and
relating to the conduct of the Research Program shall be approved in advance by
the JMT and costs of any such approved external studies shall be shared equally
by the Parties.
6.3 Funding for Research Program during an Extended Research Term. If the
Research Program is extended beyond the Initial Research Term, then the amount
of financial support to be paid to Cephalon by Lundbeck during any such
extension period shall, unless otherwise agreed upon by the Parties, be
sufficient to support [*The confidential material contained herein has been
omitted and has been separately filed with the Commission.] (with the funding
level per FTE to be adjusted in accordance with changes in the Consumer Price
Index ("CPI") during the Initial Research Term).
6.4 Funding for the Development Program.
(a) Funding for CEP-1347. Lundbeck agrees to pay Cephalon [*The
confidential material contained herein has been omitted and has been separately
filed with the Commission.] in quarterly installments of [*The confidential
material contained herein has been omitted and has been separately filed with
the Commission.] each during the first year of this Agreement to cover costs
incurred by Cephalon in connection with the transfer of Kyowa Technology and
Cephalon Technology relating to CEP-1347. The first such payment shall be due on
July 1, 1999, and subsequent payments shall be due at the beginning of each
calendar quarter. In addition, and subject to the Cephalon Technology having
been transferred, Lundbeck also agrees to assume all costs necessary to develop
a plant scale chemical manufacturing process for CEP-1347, and to produce
sufficient bulk quantities of CEP-1347 necessary and sufficient to conduct (i)
Phase II clinical studies; and (ii) required six (6) month preclinical drug
safety studies. As established under Section 4.2 hereof, the Parties shall share
equally all costs incurred in connection with the development of CEP-1347 (other
than those to be funded solely by Lundbeck as provided in Section 4.2).
(b) Funding for Other Development Compounds. For those Development
Compounds other than CEP-1347, all costs incurred under the Development Program
shall be borne equally by the Parties in accordance with the plans and budgets
approved by the JMT including, without limitation, external expenses as well as
fully-burdened internal costs of operation.
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6.5 Records and Audits Relating to the Research Program and the Development
Programs. The Parties shall maintain complete and accurate records of their
respective employee hours devoted, and expenses incurred, in connection with the
Research Program and the Development Program(s) for a period of not less than
three (3) years from the date of incurrence. Each Party shall have the right, at
its own expense and through a certified public accountant or like person
reasonably acceptable to the other Party, to examine such records during regular
business hours during the life of this Agreement; provided, however, that such
examination shall not take place more often than once a year and shall not cover
such records for more than the preceding two (2) years and provided further that
such certified public accountant shall report to the other Party only as to the
accuracy of said records.
Article 7. License Fees, Royalties and Milestone Payments
7.1 License Fees. Lundbeck shall pay Cephalon on the Effective Date, by wire
transfer (or as otherwise agreed upon by the Parties), an amount equal to [*The
confidential material contained herein has been omitted and has been separately
filed with the Commission.] multiplied by the average closing price of Cephalon
common stock for the five (5) trading days immediately prior to the Effective
Date.
7.2. Royalty Payments. Lundbeck shall pay the following amounts to Cephalon as
royalties on Net Sales:
(a) Lundbeck shall pay to Cephalon a royalty in the amount of [*The
confidential material contained herein has been omitted and has been separately
filed with the Commission.] of the Net Sales of Kyowa Licensed Products in the
Territory. Such royalty shall be payable on all such Net Sales completed prior
to the last to occur of (i) the expiration date of the last to expire of Valid
Claims of Patent Rights granted to Cephalon under the Kyowa License; (ii) the
expiration date of Valid Claims of any applicable R&D Patent Rights (if jointly
owned or solely owned by Cephalon); (iii) the end of any period of market
exclusivity under an MAA for Kyowa Licensed Products (or under the terms of
applicable laws and regulations) unless said market exclusivity is granted or
otherwise based solely upon Lundbeck Technology; and (iv) that date which is ten
(10) years from the date of first sale of a Kyowa Licensed Product.
Notwithstanding the above, if any third party (other than Kyowa, or an
Affiliate, sublicensee or authorized third party marketer thereof) shall market
and sell in the Territory pharmaceutical product(s) containing CEP-1347 and
having registered indications that are the same or substantially similar as
those held by Lundbeck for the Kyowa Licensed Products, and the market share in
terms of the defined daily dosage of products sold by all such third-party
competitor(s) in any given country in the Territory is at least thirty percent
(30%) of the respective Lundbeck market share in defined daily dosage of Kyowa
Licensed Products sold, then the royalty to be paid by Lundbeck to Cephalon
hereunder shall be reduced from [*The confidential material contained herein has
been omitted and has been separately filed with the Commission.] of Net Sales of
such Kyowa Licensed Products. For purposes of clarification, this royalty rate
reduction shall be made effective only for those countries in the Territory in
which the aforementioned market share threshold has been
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met, and only during those rolling twelve (12) month periods hereunder in which
the aforementioned market share threshold has been met.
(b) Lundbeck shall pay to Cephalon a royalty in the amount of [*The
confidential material contained herein has been omitted and has been separately
filed with the Commission.] of the Net Sales of Cephalon Licensed Products in
the Territory. Such royalty shall be payable on all such Net Sales completed
prior to the last to occur of (i) the expiration date of the last to expire of
valid claims of patent rights granted to Cephalon; (ii) the expiration date of
valid claims of any applicable Cephalon or jointly owned R&D Patent Rights;
(iii) the last day of any period of market exclusivity under an MAA for Cephalon
Licensed Products (or under the terms of applicable laws and regulations) unless
said market exclusivity is granted or otherwise based solely upon Lundbeck
Technology; and (iv) that date which is ten (10) years from the date of first
sale of a Cephalon Licensed Product. Notwithstanding the above, if any third
party shall market and sell in the Territory pharmaceutical product(s)
containing the active drug substance found in any such Cephalon Licensed Product
and having registered indications that are the same or substantially similar as
those held by Lundbeck for the Cephalon Licensed Products, and the market share
in terms of the defined daily dosage of products sold by all such third-party
competitor(s) in any given country in the Territory is at least thirty percent
(30%) of the respective Lundbeck market share in defined daily dosage of
Cephalon Licensed Products sold, then the royalty to be paid by Lundbeck to
Cephalon hereunder shall be reduced from [*The confidential material contained
herein has been omitted and has been separately filed with the Commission.] of
Net Sales of such Cephalon Licensed Products. For purposes of clarification,
this royalty rate reduction shall be made effective only for those countries in
the Territory in which the aforementioned market share threshold has been met,
and only during those rolling twelve (12) month period hereunder in which the
aforementioned market share threshold has been met.
(c) Lundbeck shall maintain (and shall require its Affiliates, sublicensees
and third party marketers to maintain, if applicable) complete and accurate
records of all sales of Cephalon Licensed Products & Kyowa Licensed Products
pursuant to the licenses granted hereunder, for a period of not less than five
(5) years from the date of the applicable Net Sales. Cephalon shall have the
right, at its own expense and through a certified public accountant or like
person reasonably acceptable to Lundbeck, to examine such records during regular
business hours during the life of this Agreement and for twelve (12) months
after the later of its termination or the last sale of Cephalon Licensed
Products & Kyowa Licensed Products by Lundbeck subject to the royalty
obligations outlined above; provided, however, that such examination shall not
take place more often than once a year and shall not cover such records for more
than the preceding two (2) years and provided further that such certified public
accountant shall report to Cephalon only as to the accuracy of said royalty
statements and payments.
(d) Within thirty (30) days after the end of each calendar quarter during
the pendency of this Agreement, Lundbeck shall deliver to Cephalon a true
accounting of all Cephalon Licensed Products and Kyowa Licensed Products sold by
Lundbeck (and by its Affiliates, sublicensees and third party marketers, if
applicable) during such calendar quarter and shall, at the same time, pay all
royalties due Cephalon on the basis of the Net Sales attributable thereto,
except that Lundbeck
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shall deliver such accounting within ninety (90) days of the end of said
calendar quarter for any countries in the Territory in which neither Lundbeck,
nor an Affiliate thereof, is engaged directly in the marketing and sale of the
Licensed Products. Such accounting shall show sales on a country-by country and
Licensed Product-by-Licensed Product basis, and such accounting shall state the
Net Sales subject to royalty under this Article 7, the calculation of royalties
with respect thereto, and shall separately show the calculation of all
adjustments thereto.
(e) All royalties due under this agreement shall be payable in U.S.
dollars. If governmental regulations prevent remittances from a country of the
territory to any other country with respect to sales made in the country, the
obligation of Lundbeck to pay royalties on sales in that country shall be
suspended until such remittances are possible, and once they are possible,
Lundbeck shall pay Cephalon any back royalties which may be owed. Alternatively,
Cephalon shall have the right, upon giving written notice to Lundbeck, to
receive payment in that country in local currency. Monetary conversions from the
currency of a foreign country, in which Cephalon Licensed Products & Kyowa
Licensed Products are sold, into United States currency shall be made at the
official exchange rate in force in that country for financial transactions at
the close of the last business day of the calendar quarter for which the
royalties are being paid. If there is no such official exchange rate, the
conversion shall be made at the rate prevailing on the last day of each of the
applicable calendar quarter as published in The Wall Street Journal under the
heading "Foreign Exchange," unless otherwise agreed upon in writing by the
Parties.
7.3 Additional License Fee for Exclusivity in Europe for CEP-1347. If, within
one (1) year of the Effective Date, Lundbeck holds exclusive (exclusive even as
to Cephalon and Kyowa) marketing rights to CEP-1347 in Europe as contemplated
under subsections 5.5(a) or 5.5(b), then Lundbeck shall pay Cephalon on such
date as it obtains such exclusive marketing rights an amount equal to [*The
confidential material contained herein has been omitted and has been separately
filed with the Commission.]
7.4 Milestone Payments.
(a) In consideration of the rights granted pursuant to this Agreement, and
subject to Sections 7.3 and 7.4(b), Lundbeck shall pay Cephalon those amounts
set forth below not later than sixty (60) days following the completion of the
milestones set forth below:
(i) [*The confidential material contained herein has been omitted and
has been separately filed with the Commission.] on the filing of an IND for
CEP-1347 in the United States (or its equivalent in a member state of the
European Union), which amount shall be due and payable on the first to
occur of (A) the date on which Lundbeck obtains exclusive marketing rights
to CEP-1347 in Europe pursuant to subsections 5.5(a) or (b), or (B)
eighteen (18) months from the date of the Effective Date; provided however,
that no such milestone payment shall be due and payable if Lundbeck has
terminated its rights to the Kyowa Licensed Products pursuant to Section
17.2;
(ii) [*The confidential material contained herein has been omitted and
has been separately filed with the Commission.] on the date of filing of an
IND in the United States (or its equivalent in a member state of the
European Union) for each
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Development Compound other than CEP-1347, which other Development Compound
is active principally with respect to a Target other than the primary
Target identified with CEP-1347 (or with another Development Compound) as
of the date of such filing;
(iii)[*The confidential material contained herein has been omitted and
has been separately filed with the Commission.] upon the initiation of a
Phase II clinical trial for CEP-1347, and [*The confidential material
contained herein has been omitted and has been separately filed with the
Commission.] upon the initiation of a Phase II clinical trial for each
Development Compound other than CEP-1347, which other Development Compound
is active principally with respect to a Target other than the primary
Target identified with CEP-1347 (or with another Development Compound) as
of the date of such filing;
(iv) [*The confidential material contained herein has been omitted and
has been separately filed with the Commission.] upon the initiation of a
Phase III clinical trial for CEP-1347, and [*The confidential material
contained herein has been omitted and has been separately filed with the
Commission.] upon the initiation of a Phase III clinical trial for each
Development Compound other than CEP-1347, which other Development Compound
is active principally with respect to a Target other than the primary
Target identified with CEP-1347 (or with another Development Compound) as
of the date of such filing;
(v) [*The confidential material contained herein has been omitted and
has been separately filed with the Commission.] upon the filing of the
first MAA for CEP-1347, and [*The confidential material contained herein
has been omitted and has been separately filed with the Commission.] upon
the filing of the first MAA for each Development Compound other than
CEP-1347, which other Development Compound is active principally with
respect to a Target other than the primary Target identified with CEP-1347
(or with another Development Compound) as of the date of such filing;
provided however, that [*The confidential material contained herein has
been omitted and has been separately filed with the Commission.] of each
such milestone payment made under this subsection 7.4(a)(v) with respect to
a Development Compound shall be credited against the future royalties owed
to Cephalon by Lundbeck on Net Sales in the Territory of each Cephalon
Licensed Product or Kyowa Licensed Product containing such Development
Compound.
(b) [*The confidential material contained herein has been omitted and has
been separately filed with the Commission.] upon the filing of the first MAA for
each Development Compound that is active principally with respect to the primary
Target identified with CEP-1347 (or with another Development Compound) as of the
date of such filing, and an additional [*The confidential material contained
herein has been omitted and has been separately filed with the Commission.] upon
approval of any such MAA.
7.5 Credits against Milestone Payments. Milestone payments made by Lundbeck
under the terms of Section 7.4 hereof in connection with a Development Compound
that fails in development, or for which Lundbeck otherwise fails to obtain
approval of the applicable MAA, and is subsequently replaced by a Backup
Compound that is so designated by the JMT as a Development Compound for the same
indication, shall be credited against milestone payments for such Backup
Compound.
7.6 Credit Against Payments Due. In the event that any amount owed to the other
Party hereunder is not paid in accordance with the terms set forth herein, the
creditor shall have the right to credit that amount against any amounts that the
creditor may owe to the debtor.
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7.7 Taxes. If Lundbeck is required by law to withhold any taxes or other
governmental obligations from the milestone or royalty obligations to be paid to
Cephalon under the terms of this Article 7, then Lundbeck shall provide notice
to Cephalon of any such requirement. In such event, Lundbeck may withhold and
pay such taxes or obligations on behalf of Cephalon, provided that Lundbeck
sends to Cephalon original receipts of such payments (or if it is not possible
to obtain an original receipt, other official written confirmation thereof).
7.8 Stock Purchase. In addition to all payments to be made under this Article
7, Lundbeck agrees to purchase from Cephalon on the Effective Date, and under
the terms and conditions of that certain Stock Purchase Agreement attached
hereto as Exhibit G (the "Stock Purchase Agreement"), [*The confidential
material contained herein has been omitted and has been separately filed with
the Commission.] shares of Cephalon common stock (the "Common Stock"), at a
purchase price per share equal to the average closing price of the Common Stock
for the five (5) trading days immediately prior to the date of said Stock
Purchase Agreement.
Article 8. Regulatory Matters
8.1 Regulatory Approvals. Lundbeck shall be responsible for obtaining all
necessary regulatory and marketing approvals for the use and sale of Licensed
Products in the Territory, unless otherwise agreed to by the Parties. Similarly,
Cephalon shall be responsible for obtaining all necessary regulatory and
marketing approvals for the use and sale of Licensed Products outside the
Territory.
8.2 Diligence in Regulatory Submissions and Product Launch. Lundbeck agrees to
prepare and file MAAs for Licensed Products in the Territory using resources as
if said Licensed Products were of Lundbeck origin and have the same commercial
potential. Unless otherwise agreed upon by the Parties, Lundbeck agrees to file
a MAA with the EMEA (or with a regulatory authority in another substantial
market in the Territory) within one (1) year following successful completion of
the Development Program (including all related activities) for any Kyowa
Licensed Products and Cephalon Licensed Products, and to launch such Licensed
Products in the Territory as soon as practicable following the date of marketing
(and, if applicable, pricing and reimbursement) approval in each country in the
Territory, and in a manner at least consistent with the launch of other products
having the same or similar commercial potential that are marketed and sold by
Lundbeck in such country. For purposes of this Section 8.2, the Parties
acknowledge that "successful completion" shall be understood to mean that,
following discussion by the JMT and reasonable consideration of the views
expressed by Cephalon, Lundbeck in its discretion deems the results of the
Development Program being of such a quality and having such content that
Lundbeck wishes to file a MAA for the Development Compound in question.
8.3 Cooperation. Subject to the limitations set forth in Section 11.2 below,
both Parties hereby agree to: (i) cooperate with each other and render
assistance in connection with the filing of an MAA (or other application for
regulatory approval) with any governmental authority or agency which may be
required to obtain
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approval to market Licensed Products or to obtain pricing and reimbursement
approval; and (ii) execute documents, and provide a letter of authorization or
other documentation to the appropriate regulatory authorities or to any other
governmental authority or agency, as necessary or advisable, to enable either
Party to file, refer to or incorporate by reference all technical information
including data on file with any such agency or authority concerning Licensed
Products that may be contained in a drug master file or otherwise. In the event
that any such drug master file is supplemented or modified, each Party agrees to
notify the other Party promptly that supplements or modifications have been
made.
8.4 Adverse Drug Events. The Parties hereby agree that, not later than the
initiation of Phase I clinical studies, they will establish procedures for the
handling and reporting of adverse drug events, and that such procedures shall
require that the Parties inform each other in an appropriate and efficient
manner of any such adverse drug events with respect to Development Compounds and
the Licensed Products, taking into account those procedures used regularly by
the Parties and those requirements of the EMEA, the FDA and other relevant
regulatory authorities.
8.5 Notice of Governmental Action. During the term of this Agreement, each
Party further agrees to immediately notify the other Party about any information
such Party received regarding any threatened or pending action by a governmental
agency which may involve the safety and efficacy claims of Development Compounds
or Licensed Products or the continued clinical testing or marketing thereof.
Upon receipt of any such information, Cephalon shall consult with Lundbeck in an
effort to arrive at a mutually acceptable procedure for taking appropriate
action; provided, however, that nothing contained herein shall be construed as
restricting the right of either Party to make a timely report of such matter to
any government agency or take other action that it deems to be appropriate or
required by applicable law or regulation.
8.6 Product Recalls. If (i) any governmental or regulatory authority issues a
request, directive, or order that any Licensed Product be recalled or withdrawn
from the market, (ii) a court of competent jurisdiction in a final,
nonappealable judgment orders a recall or withdrawal of any Licensed Product, or
(iii) following discussion between the Parties, and giving due consideration to
the views of the other Party, the Party holding the MAA (or analogous marketing
application outside the Territory) for the applicable Licensed Product
determines in its sole discretion that said Licensed Product should be recalled
or withdrawn from one or more countries within its respective territory, then
the Parties together shall take all appropriate corrective actions to effect the
recall or withdrawal. The costs and expenses of notification and destruction or
return of the recalled or withdrawn Licensed Product in the Territory shall be
borne by Lundbeck, and outside the Territory shall be borne by Cephalon.
Article 9. Manufacture and Supply of Development Compounds and Licensed Products
9.1 Supply of K252a Precursor. Upon request of Lundbeck, Cephalon agrees to use
its reasonable best efforts to provide Lundbeck with a sufficient supply of GMP
quality compound K252a (i.e., the starting material for the synthesis of
CEP-1347) in order to permit Lundbeck to develop a scale-up synthetic process
for the manufacture of CEP-1347. Lundbeck acknowledges
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that Cephalon presently must obtain its K252a material from Kyowa. Such supply
shall be provided by Cephalon to Lundbeck At Cost, and Lundbeck thereafter shall
undertake all chemical process development efforts necessary to produce
CEP-1347. All expenses incurred by the Parties in producing K252a (as well as
those incurred in producing CEP-1347 as provided below), necessary to conduct
any preclinical and clinical studies other than those referenced in subsections
4.4(a) and 4.4(c) will be borne equally by the Parties; if any studies
referenced in subsections 4.4(a) and 4.4(c) must be repeated due to changes
associated with the scale-up process for the manufacture of CEP-1347 then any
such additional costs incurred shall be borne equally by the Parties.
9.2 Supply of CEP-1347. If the Parties determine that Lundbeck shall
manufacture CEP-1347, and Cephalon supplies Lundbeck with the requisite K252a,
then as provided above in Section 9.1 Lundbeck shall reimburse Cephalon for such
K252a At Cost, and Lundbeck shall supply Cephalon with CEP-1347 At Cost. If
Lundbeck is unable to manufacture CEP-1347 or if for any other reason the
Parties determine that Cephalon shall manufacture CEP-1347, then Cephalon may,
with the written consent of Lundbeck (such consent not to be unreasonably
withheld), engage a third party manufacturer to produce CEP-1347 and Cephalon
shall in turn supply CEP-1347 to Lundbeck At Cost (which, for purposes of
clarification, shall include as well those costs associated with the production
of K252a).
9.3 Other Preclinical and Clinical Supplies. The costs of manufacturing all
Development Compounds other than CEP-1347 in quantities sufficient to conduct
all necessary and advisable preclinical and clinical studies, as determined by
the JMT, will be shared equally by the Parties.
9.4 Other Commercial Supplies. If the Parties agree that Lundbeck will be
responsible for manufacturing Development Compounds other than CEP-1347, then
Lundbeck will supply such Development Compound bulk drug substances to Cephalon
At Cost. If the Parties agree that Cephalon shall manufacture Development
Compounds other than CEP-1347, or if Lundbeck is unable to manufacture such
Development Compounds, then Cephalon may select a third party manufacturer for
such Development Compounds, and Cephalon will supply the Development Compounds
other than CEP-1347 to Lundbeck At Cost.
9.5 Competitive Pricing. Notwithstanding anything to the contrary in this
Article 9, if Cephalon determines in its sole discretion that CEP-1347, any
other Compounds or any Licensed Products can by manufactured by a third party at
a cost lower than that proposed by Lundbeck under the terms of this Agreement,
and Cephalon has not committed to purchase all of its requirements of such
Compounds or Licensed Products from Lundbeck, and Cephalon further determines in
its sole discretion to engage said third party to so manufacture Compounds or
Licensed Products, then Lundbeck will cooperate and will take all steps
reasonably necessary (including, without limitation, the transfer of Know-How)
to enable said third party to undertake such manufacture; provided however, that
in such case Lundbeck shall be entitled to continue to synthesize and
manufacture said Compounds and Licensed Products for its own use and sale to
third parties in the Territory.
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9.6 Definitive Supply Agreement. The Parties agree to negotiate in good faith
the terms of a definitive supply agreement with regard to the Development
Compounds (and their associated Licensed Products) under which one Party may
manufacture and supply such Development Compounds to the other Party, which
supply agreement shall contain terms and conditions customary in the industry,
including without limitation those relating to quality control, records, storage
and inspection. Regardless of whether Lundbeck synthesizes and manufactures the
Development Compounds, or said Development Compounds are synthesized and
manufactured by Cephalon, Lundbeck will be responsible for manufacturing the
finished, packaged Licensed Products to be marketed and sold in the Territory,
and Cephalon will be responsible for manufacturing the finished, packaged
Licensed Products to be marketed and sold outside the Territory.
Article 10. Marketing, Promotion and Sale of Product
10.1 Marketing. Lundbeck agrees to use its commercially reasonable best efforts
to promote the sale of Kyowa Licensed Products and Cephalon Licensed Products in
the Territory and to maximize the Net Sales thereof. In connection with these
efforts, Lundbeck shall regularly prepare and update a commercialization plan
(the "Plan") for the review of the JMT not less than once per calendar year
following the filing of the first MAA, which Plan will set forth the Product
marketing and selling strategies, and will include an estimated promotional
budget, detailing objectives, planned training and educational programs for its
sales force, upcoming symposia, seminars and professional relations events in
the Territory, and other matters appropriate and customary in the industry for
such a Plan, all of which shall take into consideration the experience and
perspective of Lundbeck with respect to optimal marketing and selling practices
in the Territory. Similarly, Cephalon shall regularly prepare and update a
commercialization plan (the "Plan") for the review of the JMT for any Licensed
Products being sold outside of the Territory. For purposes of this Section 10.1,
"commercially reasonable best efforts" shall mean that during any given calendar
year following commercial launch of Licensed Products in the Territory, Lundbeck
shall complete that number of details, and incur promotional expenses, at a
level comparable to that completed and incurred by other firms marketing and
selling pharmaceutical products with the same or substantially the same
indications, clinical efficacy and safety profiles, cost per dosage and general
marketability, as those of the Licensed Product(s), but taking into account the
relative resources of Lundbeck. Notwithstanding anything to the contrary herein,
if Lundbeck is found not to have exercised commercially reasonable best efforts
as defined herein, and if the remedy for such failure is the forfeiture of
marketing rights to Cephalon, then Cephalon shall pay Lundbeck a royalty of
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.] of Net Sales of Kyowa Licensed Products
(less any royalty payments owed by Cephalon to Kyowa as a result of such sales)
and a royalty of [*The confidential material contained herein has been omitted
and has been separately filed with the Commission.] of Net Sales of Cephalon
Licensed Products with respect to all sales in such forfeited countries in the
Territory. Moreover, if Lundbeck determines in good faith that it would not be
in the mutual best interests of the Parties for it to commence (or to continue,
as the case may be) marketing and selling Kyowa Licensed Products or Cephalon
Licensed Products in any given country in the
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Territory for which it has received marketing approval, then it will promptly
notify Cephalon of such determination and the Parties will discuss appropriate
resolution, which may include the forfeiture of territorial rights in such
countries to Cephalon under terms and conditions to be mutually agreed upon;
provided however, that Lundbeck shall be deemed to be marketing and selling the
applicable Licensed Product in all countries of the European Union if it is
marketing and selling said Licensed Product in each of the following countries:
France, Germany, Italy, Spain, the United Kingdom, the Netherlands, Denmark and
Sweden.
10.2 Compliance. Lundbeck shall have obtained and shall maintain in good
standing all required permits, licenses and regulatory approvals necessary or
advisable to market, promote, sell and distribute Kyowa Licensed Products and
Cephalon Licensed Products in the Territory. Lundbeck shall comply with all
local laws, rules, regulations, and reporting requirements in force in the
Territory covering, among other things, the marketing, promotion and sale, and
the payment for, the Kyowa Licensed Products and Cephalon Licensed Products.
10.3 Sale of Product. Prior to filing the initial MAA for a Kyowa Licensed
Product or Cephalon Licensed Product in the Territory, the Parties will
establish in writing non-binding aggregate Net Sales to be obtained in the
Territory for each calendar year hereunder ("Annual Sales Objective"). In the
event that a Kyowa Licensed Product or Cephalon Licensed Product has more than
one indication, the Annual Sales Objective may include separate minimum Annual
Sales Objectives for each Kyowa Licensed Product or Cephalon Licensed Product
indication. If Lundbeck fails to meet any such Annual Sales Objective, then the
Parties shall meet to discuss whether such shortfall is due principally to
market conditions beyond the control of Lundbeck, or whether certain marketing
and sales initiatives or other actions should be taken.
Article 11. Rights to Data and Regulatory Compliance
11.1 Sharing of Data. Subject to the license grants set forth in Article 5 and
the buy-back rights established under Section 11.2 below, the Parties shall have
reciprocal rights to use all data generated by the Parties under the Research
Program and the Development Program in each of its respective territories solely
in connection with the development and commercialization of Kyowa Licensed
Products or Cephalon Licensed Products. The Parties shall agree on a format to
be used to enable the Parties to have prompt, direct electronic access to all
data generated (whether generated jointly or by either Party separately).
11.2 Buy-Back Rights to Use Data for New MAAs. Except as provided in Article 4
with respect to the production of CEP-1347, either Party (the "Declining Party")
may decide not to share the costs incurred in generating data in the course of
developing a particular Kyowa Licensed Product or Cephalon Licensed Product. If
the Declining Party wishes subsequently to use said data in its respective
territory for purposes of seeking a new MAA, then the Declining Party shall
reimburse the other Party for half of its total costs incurred in generating
such data plus a premium of [*The confidential material contained herein has
been omitted and has been separately filed with the Commission.], compounded
annually, of all such costs. Unless otherwise agreed upon by the Parties, the
Declining Party shall have the opportunity to license
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the right to use such data at any time prior to ninety (90) days after the
completion of the first Phase II clinical trial which demonstrates proof of
efficacy for any indication of the relevant Kyowa Licensed Product or Cephalon
Licensed Product. The Parties also agree to negotiate in good faith an
adjustment in milestone payments and/or royalties otherwise due under this
Agreement would also be appropriate for the relevant Kyowa Licensed Product or
Cephalon Licensed Product. Thereafter, after the completion of the first Phase
II clinical trial which demonstrates proof of efficacy for any indication, both
Parties agree to negotiate in good faith if one of the Parties desires to buy
back into the Development Program for a specific Development Compound.
Notwithstanding the foregoing, this Section 11.1 shall not affect the obligation
of the Parties to share data regarding adverse drug events or other medical or
safety information as contemplated in Section 8.4.
Article 12. Limited Liability
OTHER THAN THOSE WARRANTIES SET FORTH IN SECTIONS 19 AND 20 BELOW, NEITHER PARTY
MAKES ANY WARRANTIES (EXPRESS OR IMPLIED) AS TO THE COMPOUNDS, THE CONDUCT OF
THE RESEARCH PROGRAM AND THE DEVELOPMENT PROGRAM, OR THE LICENSED PRODUCTS.
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE SOLE AND EXCLUSIVE REMEDY OF EITHER
PARTY HERETO FOR ANY LIABILITY OF A PARTY OF ANY KIND, INCLUDING LIABILITY BASED
ON WARRANTY (EXPRESS OR IMPLIED, WHETHER CONTAINED HEREIN OR ELSEWHERE),
NEGLIGENCE, STRICT LIABILITY, CONTRACT OR OTHERWISE IS LIMITED TO THE
REPLACEMENT OF COMPOUND OR THE REFUND OF THE SUPPLY PRICE THERFOR. NEITHER PARTY
SHALL IN ANY CASE BE LIABLE FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF
ANY KIND.
Article 13. Trademark for Licensed Products
13.1 Selection of Trademarks. The Parties acknowledge that it may be in their
mutual best interests to attempt to develop a single trademark for use within
and outside the Territory for a given Licensed Product, and agree to discuss
this matter at an appropriate time prior to commercial launch. Notwithstanding
the above, following consultation with Cephalon, Lundbeck may freely select and
develop a trademark(s) under which a Licensed Product will be sold in the
Territory (the "Lundbeck Trademark"), and all Lundbeck Trademarks shall be owned
by, and registered in the name of, Lundbeck. Following consultation with
Lundbeck, Cephalon may freely select and develop a trademark(s) under which a
Licensed Product will be sold outside the Territory (the "Cephalon Trademark"),
and all Cephalon Trademarks shall be owned by, and registered in the name of,
Cephalon.
13.2 License Upon Termination For Breach. If this Agreement is terminated
pursuant to Section 17.3 due to breach by Lundbeck, then Lundbeck immediately
will grant to Cephalon a perpetual, exclusive (exclusive even as to Lundbeck),
fully-paid, royalty-free license to use in the
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Territory the Lundbeck Trademark(s) in connection with the marketing and sale by
Cephalon of the Licensed Products.
Article 14. Inventions
14.1 Disclosure of Inventions. During the pendency of this Agreement, the
Parties agree to disclose to each other any and all inventions, discoveries and
improvements that may be conceived, reduced to practice, or made by either Party
while engaged in the performance of this Agreement and that are within the scope
of the licenses granted under Article 5 hereof, including without limitation any
new compositions, formulations, uses, methods of formulating, processes, or the
administration thereof (collectively, the "R&D Inventions"). The Parties further
agree to exchange any Know-How related to or covered by the R&D Inventions that
is reasonably necessary in order to utilize such R&D Inventions.
14.2 Inventorship. Inventorship and ownership with respect to all patentable R&D
Inventions shall be determined in accordance with applicable patent law.
Article 15. Patents
15.1 (a) Cephalon Patent Rights. Cephalon, at its own expense, shall prepare,
file, prosecute and maintain the Cephalon Patent Rights in the Territory.
Cephalon shall keep Lundbeck fully advised of the status of all Cephalon Patent
Rights. In addition, Cephalon shall make commercially reasonable efforts to send
Lundbeck advance drafts of any papers to be filed relating to Cephalon Patent
Rights in the Territory and shall consider the suggestions of Lundbeck and its
patent counsel with respect to the prosecution and maintenance of Cephalon
Patent Rights in the Territory. If Cephalon fails to prepare, file, prosecute or
maintain Cephalon Patent Rights as required by this Agreement, then Lundbeck
shall have the right to assume responsibility and control at its own expense for
said preparation, filing, prosecution and maintainance of any such Cephalon
Patent Rights in the name and on the account of Cephalon. Each Party shall
cooperate reasonably with the other upon request in promptly executing any and
all patent applications, or other instruments deemed necessary or useful by
either or both Parties in connection with the application, prosecution or
maintenance of Cephalon Patent Rights in the Territory.
(b) Lundbeck Patent Rights. Lundbeck, at its own expense, shall prepare,
file, prosecute and maintain the Lundbeck Patent Rights on a worldwide basis.
Lundbeck shall keep Cephalon fully advised of the status of all Lundbeck Patent
Rights. In addition, Lundbeck shall make commercially reasonable efforts to send
Cephalon advance drafts of any papers to be filed relating to Lundbeck Patent
Rights outside the Territory and shall consider the suggestions of Cephalon and
its patent counsel with respect to the prosecution and maintenance of Lundbeck
Patent Rights outside the Territory. If Lundbeck fails to prepare, file,
prosecute or maintain Lundbeck Patent Rights as required by this Agreement, then
Cephalon shall have the right to assume responsibility and control at its own
expense for said preparation, filing, prosecution and
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maintainance of any such Lundbeck Patent Rights in the name and on the account
of Lundbeck. Each Party shall cooperate reasonably with the other upon request
in promptly executing any and all patent applications, or other instruments
deemed necessary or useful by either or both Parties in connection with the
application, prosecution or maintenance of Lundbeck Patent Rights outside the
Territory.
15.2 Jointly Owned R&D Patent Rights. Cephalon shall in the names of both
Parties prepare, file, prosecute and maintain patent application and patents
claiming the R&D Inventions in the Territory (the "R&D Patent Rights") that are
jointly owned by both Parties. Cephalon shall keep Lundbeck fully advised of the
status of all such R&D Patent Rights. In addition, Cephalon shall make
reasonable efforts to send Lundbeck advance drafts of any papers to be filed
relating to such jointly owned R&D Patent Rights and shall consider the
suggestions of Lundbeck and its patent counsel with respect to the prosecution
and maintenance of such R&D Patent Rights. If Cephalon fails to prepare, file,
prosecute or maintain such R&D Patent Rights, then Lundbeck shall have the right
to assume responsibility for the preparation, filing, prosecution, and
maintenance of any such R&D Patent Rights. Each Party shall cooperate reasonably
with the other upon request in promptly executing any and all patent
applications, or other instruments deemed necessary or useful by either or both
Parties in connection with the application, prosecution or maintenance of the
jointly owned R&D Patent Rights. For purposes of clarification, the Parties
acknowledge that jointly owned R&D Patent Rights may include Joint Compounds,
and that in such case the provisions of subsection 5.1(c) shall govern the
rights of the Parties with respect thereto.
15.3 Solely Owned R&D Patent Rights. Unless the Parties agree otherwise, the
owner of solely owned R&D Patent Rights shall have the right, but not the
obligation, to prepare, file, prosecute and maintain such R&D Patent Rights at
its own expense. If the sole owner of the R&D Patent Rights fails to prepare,
file, prosecute or maintain such R&D Patent Rights, then the other party shall
have the right but not the obligation to assume responsibility and control at
its own expense for the preparation, filing, prosecution and maintenance of any
such R&D Patent Rights in the name of the Party owning said R&D Patent Rights.
Each Party shall cooperate reasonably with the other upon request in promptly
executing any and all patent applications, or other instruments deemed necessary
or useful by either or both Parties in connection with the application,
prosecution or maintenance of the solely owned R&D Patent Rights.
15.4 Costs of Patent Preparation, Prosecution and Maintenance. The expenses of
preparing, filing, prosecuting and maintaining jointly owned R&D Patent Rights
shall be shared equally by the Parties, unless one Party decides not to
prosecute or wishes to abandon its rights in and to such patent rights (the
"Abandoning Party"). In such case, the Abandoning Party shall provide the other
Party (the "Retaining Party") with timely notice of such intent. The Retaining
Party shall have the right to assume ownership and responsibility for preparing,
filing, prosecuting and maintaining such R&D Patent Rights at its sole expense
and shall, for the term of this Agreement, grant the Abandoning Party a
nonexclusive, irrevocable license to such R&D Patent Rights for internal
research purposes only. On an annual basis, the Parties shall exchange
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documentation establishing the aggregate amount of expense incurred in the
preparation, filing, prosecution and maintenance of jointly owned R&D Patent
Rights (excluding costs expended as a Retaining Party). The Parties further
agree to make appropriate payments to each other at the end of each calendar
year to equalize their respective expenses incurred relating to said jointly
owned R&D Patent Rights.
Article 16. Infringement
16.1 Notice Regarding and Authority to Take Action Against Infringers. Each
Party shall promptly notify the other Party of any known infringement by third
parties of the proprietary rights of either Party with regard to Development
Compounds, Licensed Products and R&D Patent Rights. If any of the Cephalon
Patent Rights and R&D Patent Rights are infringed in the Territory, Cephalon
shall have the right but not the obligation to commence appropriate legal action
to enjoin such infringement at its sole expense; in such case Lundbeck shall
provide its complete cooperation to Cephalon at its expense, but Cephalon shall
be entitled to retain any damages or awards that may result from its initiation
of said action. If Cephalon fails to initiate such action within ninety (90)
days after being notified of the infringement, then Lundbeck shall have the
right, but not the obligation, to undertake such action at its own expense in
the name of Cephalon, and Cephalon shall provide its complete cooperation to
Lundbeck at its expense. Any damages or awards resulting from the prosecution of
such claim by Lundbeck shall be applied first to reimburse Lundbeck for its
costs and expenses, with any balance to be shared by the Parties with an amount
equal to [*The confidential material contained herein has been omitted and has
been separately filed with the Commission.] of such balance being retained by
Lundbeck and [*The confidential material contained herein has been omitted and
has been separately filed with the Commission.] of such balance being given to
Cephalon. If no such damages or awards result from said prosecution or if such
damages or awards are insufficient to fully reimburse the costs and expenses of
Lundbeck associated with said prosecution, then Cephalon shall reimburse
Lundbeck in an amount equal to [*The confidential material contained herein has
been omitted and has been separately filed with the Commission.] of such
unreimbursed costs and expenses; provided however, that such reimbursement shall
be effected by reducing, during that twelve-month period immediately following
the issuance of the final order in any such action, the royalties otherwise
payable by Lundbeck to Cephalon hereunder, but in no case shall such reduction
exceed the aggregate amount due and payable by Lundbeck to Cephalon during said
twelve-month period (less any amounts otherwise that are payable by Cephalon to
Kyowa on the basis of Net Sales that resulted in such royalty payments).
Notwithstanding the foregoing, the Parties acknowledge that the Kyowa License,
which is attached hereto as Exhibit D, establishes all applicable procedures and
responsibilities for enforcement of rights relating to the Kyowa Technology.
16.2 Notice of Infringement of Third Party Patents. Each Party shall promptly
notify the other Party of any claim asserting infringement of the proprietary
rights of the other Party or of Kyowa by Development Compounds, Cephalon
Licensed Products, Kyowa Licensed Products and R&D Patent Rights.
16.3 Infringement of Third Party Patents. If a claim alleging infringement of
third party patents in the Territory is made against Lundbeck, then Cephalon may
elect to defend against
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such a claim on behalf of Lundbeck at the cost and expense (including, without
limitation, attorneys fees) of Cephalon, but Lundbeck may be represented in such
event by legal counsel in an advisory capacity at its own expense. However, if
Cephalon does not elect to defend against such a claim within one hundred twenty
(120) days after receiving notice (whether from Lundbeck or otherwise) of such
claim, Lundbeck has the right, but not the obligation, to defend against such
claim at its own expense. The Party assuming said defense shall keep the other
Party informed of the status of the case. If the Party assuming said defense
determines to file a counterclaim against the third party claiming infringement,
and subsequently prevails in obtaining damages or awards, then it shall be
entitled to retain any such amounts. Regardless of which Party assumes the
defense of any such claim, if damages are awarded based upon said claim, then
the Parties shall allocate the responsibility for paying said damages in
proportion to their respective economic interests in the country or countries
within the Territory as to which such damage award is based. Notwithstanding the
foregoing, the Parties acknowledge that the Kyowa License, which is attached
hereto as Exhibit D, establishes all applicable procedures and responsibilities
for the defense of infringement claims raised with respect to Kyowa Licensed
Products.
Article 17. Term and Termination
17.1 Term of the Agreement. This Agreement shall commence as of the Effective
Date, and will terminate by mutual agreement of the Parties, or otherwise in
accordance with the provisions of this Article 17.
17.2 Termination By Lundbeck of Rights to Kyowa Licensed Products. If Lundbeck
is unable to obtain exclusive marketing rights to the Kyowa Licensed Products in
Europe under the terms of subsections 5.5(a) or (b) hereof within one (1) year
after the Effective Date, then Lundbeck may either: (i) end its support for the
development of CEP-1347 and the Kyowa Licensed Products and thereby terminate
any and all of its rights under this Agreement to CEP-1347 and the Kyowa
Licensed Products; or (ii) elect to expand the Territory as provided in
subsection 5.5(c) hereof. Effective notice of termination under this Section
17.2 must be made in writing and delivered to Cephalon not less than sixty (60)
days from the first anniversary of the Effective Date unless otherwise agreed
upon by the Parties. In the event of such termination, Lundbeck shall return to
Cephalon all Kyowa Technology and further shall provide to Cephalon all data and
other information relating to CEP-1347 and Kyowa Licensed Products. The rights
and obligations of the Parties with regard to the Compounds (other than
CEP-1347) and the Cephalon Licensed Products shall not be affected by the
termination of rights by Lundbeck with regard to CEP-1347 and Kyowa Licensed
Products.
17.3 Termination of the Research Program. Unless otherwise extended under the
terms of Section 2.3 hereof, the Research Program shall end on June 30, 2002.
Notwithstanding the above, Lundbeck may terminate the Research Program with such
termination to be made effective at any time following the first anniversary of
the Effective Date, pursuant to thirty (30) days written notice to Cephalon, but
upon any such termination Lundbeck shall remain obligated to make all those
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payments to Cephalon in support of the Research Program as described in Section
6.2 that would otherwise be due during the remaining portion of the Initial
Research Term as defined in Section 1.16, or one (1) year following the
effective date of said termination, whichever is shorter. In such event, the
rights and obligations of the Parties with respect to the Development Compounds
(as well as the Backup Compounds thereto) and the Licensed Products thereafter
shall be modified as provided in this Section 17.3, and the terms and conditions
of Sections 3.2(b) and 5.6 shall be applicable. Upon any such expiration or
termination of the Research Program, the license and sublicense granted under
Sections 5.1(a) and 5.3 hereof automatically shall be curtailed so as to limit
going forward the exclusive rights granted to Lundbeck thereunder as follows:
(i) Lundbeck shall have exclusive rights only as to the Development Compounds
(and to Backup Compounds thereto) and only for so long as at least one such
Development Compound is being diligently developed or commercialized by Lundbeck
in accordance with the schedule established by the JMT; and (ii) Lundbeck shall
have the right to use Kyowa Technology and Cephalon Technology (regardless of
whether it has been developed under the Research Program) only in connection
with the further development of Development Compounds (and of Backup Compounds
thereto). For purposes of clarification, the Parties hereby confirm that all
worldwide rights to Cephalon Compounds shall revert to Cephalon unless they are
designated as Development Compounds or Backup Compounds, or are Development
Compounds for which development has been discontinued. Upon termination of the
Research Program, the cooperation between the Parties under this Agreement shall
continue for all Compounds which have met the criteria for being either Backup
Compounds or Development Compounds.
17.4 Termination of Development Program For A Development Compound. All rights
to any Cephalon Compounds that have been designated as Development Compounds and
for which development has been discontinued in its entirety by Lundbeck
automatically shall revert to Cephalon, unless Lundbeck confirms in writing
immediately upon any such discontinuance that such Development Compound shall be
replaced by a Backup Compound shown to be active principally against the primary
Target as said discontinued Development Compound and that it will promptly
commence active development of said Backup Compound.
17.5 Termination of this Agreement in its Entirety by Lundbeck. Lundbeck may
terminate this Agreement in its entirety with such termination to be made
effective at any time following the first anniversary of the Effective Date,
pursuant to thirty (30) days written notice to Cephalon, but upon any such
termination without cause Lundbeck shall remain obligated to make all those
payments to Cephalon in support of the Research Program as described in Section
6.2 that would otherwise be due during the remaining portion of the Initial
Research Term as defined in Section 1.16, or one (1) year following the
effective date of said termination, whichever is shorter. Subject to the terms
of Section 17.10, Lundbeck otherwise shall be relieved from all other
obligations that may accrue following the effective date of said termination,
including without limitation, any further milestone payments, development cost
payments, and royalty payments (except those applicable royalties due on Net
Sale of any unsold inventory of Cephalon Licensed Product or Kyowa Licensed
Product) which are incurred sixty
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(60) days after receipt at Cephalon of Lundbeck's written notice of termination.
Notwithstanding the above, Lundbeck shall have the right to sell in accordance
with the terms of this Agreement all unsold inventories of such Kyowa Licensed
Products and Cephalon Licensed Products in its possession unless Cephalon shall
exercise, at its sole discretion, the option, by written notice to Lundbeck on
or before the effective date of such expiration or termination, to repurchase
all remaining inventory then held by Lundbeck at the cost to Lundbeck to
Cephalon for such inventory. Lundbeck acknowledges that except as provided
herein, upon any such termination it shall have no further rights with respect
to the Cephalon Technology, the Cephalon Licensed Products, the Kyowa Technology
or the Kyowa Licensed Products and Cephalon acknowledges that except as provided
herein, upon any such termination Cephalon shall have no further rights with
respect to Lundbeck Licensed Products.
17.6 Termination for Breach By Either Party. Upon breach of any material
provision of this Agreement, the breaching Party will be given written notice
and ninety (90) days within which to remedy such breach. Failure to remedy any
such breach within this time period will constitute sufficient grounds for
termination by the other Party without any further notice. Cephalon can not
terminate this Agreement unless Lundbeck breaches a material obligation and does
not remedy same in accordance with this Section.
17.7 Effects of Termination by Cephalon For Breach. Upon termination of this
Agreement due to unremedied breach by Lundbeck, the following provisions shall
apply:
(a) All rights granted to Lundbeck under this Agreement shall
immediately revert to Cephalon, except as provided below, and Lundbeck
shall immediately cease its use of Cephalon Technology and Kyowa
Technology;
(b) Any outstanding unpaid invoices shall become due and payable
immediately in lieu of any payment terms previously agreed upon by the
Parties;
(c) Lundbeck shall cease use of all Development Compounds and Backup
Compounds in the Territory, and shall cease all marketing, sales and
distribution of Licensed Products in the Territory; provided, however, that
Lundbeck shall have the right to sell in accordance with the terms of this
Agreement all unsold inventories of such Kyowa Licensed Products and
Cephalon Licensed Products in its possession unless Cephalon, at its sole
discretion, shall exercise the option, by written notice to Lundbeck on or
before the effective date of such expiration or termination, to repurchase
all remaining inventory then held by Lundbeck at the cost to Lundbeck to
Cephalon for such inventory;
(d) Lundbeck will provide Cephalon with all copies of any MAA (or its
equivalent outside the Territory) for Development Compounds and any
accompanying documentation (including without limitation all regulatory
agency correspondence) in its possession or, if such registration
application has not yet been filed in the Territory prior to the date of
said termination or expiration, with all pre-clinical and clinical data
relating to all Development Compounds in its
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possession on such date. At the request of Cephalon, Lundbeck shall take
all steps as may be required by applicable law to transfer any such
Development Compound registration to Cephalon, or otherwise to enable
Cephalon to market and sell Cephalon Licensed Products and Kyowa Licensed
Products in the Territory, and also shall provide full support to Cephalon
to facilitate the prompt execution of such legal transfer. In no event
shall Cephalon be obligated to pay any fee or to make any other payment to
Lundbeck, to the local government in the Territory, or to any third party,
to effect such legal transfer; and
(e) Lundbeck immediately will grant to Cephalon a perpetual, exclusive
(exclusive even as to Lundbeck), fully-paid, royalty-free license under the
Joint Technology, and under any other Patent Rights and Know-How held by
Lundbeck necessary to enable Cephalon to make, have made, use and sell
Kyowa Licensed Products, Cephalon Licensed Products and Joint Licensed
Products in the Territory, and to make, have made, use and sell Lundbeck
Licensed Products and Joint Licensed Products outside the Territory.
17.8 Effects of Termination by Lundbeck For Breach. Upon termination of this
Agreement due to unremedied breach by Cephalon, the following provisions shall
apply:
(a) Cephalon shall not use any Development Compounds or Backup
Compounds in the Territory, nor shall it initiate any marketing, sales or
distribution of Licensed Products in the Territory;
(b) Cephalon will provide Lundbeck with all pre-clinical and clinical
data relating to a Development Compound or a Licensed Product in its
possession on such date, together with all other documentation and data
necessary to enable Lundbeck to continue to market and sell Kyowa Licensed
Products, Cephalon Licensed Products and Joint Licensed Products in the
Territory; and
(c) Cephalon immediately will grant to Lundbeck a perpetual, exclusive
(exclusive even as to Cephalon), fully-paid, royalty-free license under the
Joint Technology, and under any other Patent Rights and Know-How held by
Cephalon necessary to enable Lundbeck to make, have made, use and sell
Kyowa Licensed Products, Cephalon Licensed Products and Joint Licensed
Products in the Territory.
17.9 General Effects of Termination by Either Party for Breach. Upon termination
of this Agreement due to unremedied breach by either Party (the "Breaching
Party"), the Breaching Party shall have no liability to the other Party (or to
any third party) for any damages, losses, indemnity, compensation, costs or
expenses of any kind for lost profits or prospective sales, investments made or
expenses incurred in connection with the establishment, development or
maintenance of its business, markets or customers, fees for transferring
Development Compounds, product registrations, or any similar claims, damages,
fees or payments.
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17.10 Survival of Obligations. All terms and conditions of this Agreement which
the Parties agree shall survive the expiration or termination hereof shall
within sixty (60) days from the Effective Date be listed in Exhibit G hereto,
but shall include without limitation, those terms and conditions relating to to
confidentiality, indemnification, intellectual property rights generally, and
rights to payment. More specifically, the termination of this Agreement shall
not relieve the Parties of any obligations accruing prior to such termination,
and any such termination shall be without prejudice to the rights of either
Party against the other, including without limitation the obligation to pay for
CEP-1347 purchased, or royalties for Kyowa Licensed Products and Cephalon
Licensed Products sold prior to said termination.
Article 18. Confidentiality.
18.1 Confidentiality Information. During the term of this Agreement, and for ten
(10) years after its termination or expiration, each Party shall maintain in
confidence any information concerning the subject matter hereof provided by the
other Party (the "Providing Party"), and that is considered to be confidential
by the Providing Party, regardless of whether provided prior to or after the
Effective Date. Such information, collectively the "Confidential Information"
includes but is not limited to Technology, documentation, business plans, cost
and operational information, whether or not related to Compounds or Licensed
Products. Confidential Information shall not be used or disclosed to others
except for carrying out the purpose of this Agreement. The foregoing obligation
of confidentiality shall not apply to any portion of the Confidential
Information that a Party ("Receiving Party") can demonstrate:
(a) was already known to the Receiving Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure to the Receiving Party, other than
through any act or omission of the Receiving Party in breach of this
Agreement;
(d) was subsequently lawfully disclosed to the Receiving Party by a
third party; or
(e) the Receiving Party was compelled to disclose by governmental
administrative agency or judicial requirements; provided however, that any
disclosure under this subsection 18.1(e) shall neither relieve the
Receiving Party from attempting to impose confidentiality obligations on
the governmental administrative agency or judicial body, to the extent
feasible, nor shall it relieve the Receiving Party from maintaining the
confidentiality of the Confidential Information with respect to third
parties other than the agency or body as to which such compelled disclosure
has been made.
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18.2 Protection of Confidential Information. The Parties shall take all
reasonable steps to eliminate the risk of disclosure of Confidential
Information, including, without limitation, ensuring that only employees,
agents, and representatives with a need to know the Confidential Information
have access thereto. The Parties acknowledge by the signing of this Agreement
that such employees, agents, and representatives are to be bound by
substantially similar obligations of confidentiality as are established under
this Article 18.
18.3 Presumptive Confidentiality of Information Exchanged. All information
exchanged by the Parties under the terms and conditions of this Agreement shall
be considered Confidential Information and treated as such unless otherwise
specified and agreed upon by the Parties.
18.4 Use Following Termination For Breach. In the event that this Agreement is
terminated for breach under the terms of Article 17, nothing herein shall be
construed so as to preclude the non-breaching Party from disclosing to a
competent regulatory authority or to a third party any preclinical or clinical
data, or other Confidential Information, that it may deem necessary or advisable
in order to support the further development or commercialization of Development
Compounds or Licensed Products.
Article 19. Representations, Warranties and Covenants
19.1 General Representations. Each Party hereby represents and warrants to the
other as follows:
(a) Duly Organized. It is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification and
has all requisite power and authority, corporate or otherwise, to conduct
its business as now being conducted, to own, lease and operate its
properties and to execute, deliver and perform this Agreement;
(b) Due Execution. The execution, delivery and performance by it of
this Agreement have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of its
stockholders, (ii) violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently
in effect having applicability to it or any provision of its charter or
by-laws, or (iii) result in a breach of or constitute a default under any
agreement, mortgage, lease, license, permit, patent or other instrument or
obligation to which it is a Party or by which it or its assets may be bound
or affected;
(c) No Third Party Approval. No authorization, consent, approval,
license, exemption of, or filing or registration with, any court or
governmental authority or regulatory body is required for the due
execution, delivery or performance by it of this Agreement;
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(d) Binding Agreement. This Agreement is a legal, valid and binding
obligation of such Party, enforceable against it in accordance with its
terms and conditions, except as may be limited by bankruptcy laws or other
laws affecting the rights of creditors generally, and rules of law
governing equitable remedies. Each is not under any obligation to any
person, contractual or otherwise, that is conflicting or inconsistent in
any respect with the terms of this Agreement or that would impede the
diligent and complete fulfillment of its obligations hereunder;
(e) Inventions. It will take all steps reasonably necessary to ensure
that its employees convey to it all rights in and to any and all inventions
that may be conceived or reduced to practice by said employees;
(f) Debarment. It is not debarred or suspended from receiving
contracts from the United States or Danish government or other governmental
authority or agency;
(g) Good Practices. All preclinical and clinical studies involving
Compounds will be conducted in accordance with current good laboratory
practices (GLP) as specified by the applicable laws and regulations in the
relevant country at the time of such laboratory research; good clinical
practices (GCP) as specified by the applicable laws and regulations in the
relevant country at the time of such studies, and that the K252a starting
material and the Development Compounds will be manufactured in accordance
with current good manufacturing practices (GMP) as specified by the
applicable laws and regulations of the relevant countries at the time of
manufacture; and
(h) Full Disclosure. It has disclosed in good faith any and all material
information related to the subject matter hereof and to the performance of
its obligations hereunder.
19.2 Cephalon Representations, Warranties and Covenants. Cephalon hereby
represents, warrants and covenants to Lundbeck that, as of the Effective Date:
(a) To the best of its knowledge and belief, Cephalon is the sole
owner of the entire right, title and interest in and to those Cephalon
Patent Rights which include a Valid Claim for Compounds and the same are
free of any liens, encumbrances, restrictions, licenses and other legal or
equitable claims of any kind or nature;
(b) To the best of its knowledge and belief, Cephalon is the sole
licensee of the entire right, title and interest in the part of the Kyowa
Technology, which is sublicensed to Lundbeck under this Agreement and the
same are free of any liens, encumbrances, restrictions, licenses and other
legal or equitable claims of any kind or nature;
(c) It has the right to grant to Lundbeck the licenses provided for in
this Agreement;
(d) Except as otherwise provided herein, during the term of this
Agreement it will not grant rights to any third party (including, without
limitation, an Affiliate of Cephalon) with respect to the research,
development, use, manufacture, marketing, sale or distribution of Backup
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Compounds and Development Compounds in the Territory;
(e) To the best of its knowledge and belief, there are no third Party
rights, licenses or patents, other than those granted to Lundbeck
hereunder, which are necessary for Lundbeck's use and enjoyment of the
licenses granted to Lundbeck;
(f) The Kyowa License in the form attached hereto as Schedule D sets
forth all obligations that are applicable to Lundbeck as a sublicensee of
Cephalon hereunder;
(g) It will use its best efforts to secure from Kyowa not later than
one (1) year from the Effective Date a commitment that, if the Kyowa
License is terminated, Kyowa will enter into a license agreement granting
Lundbeck rights to the Kyowa Licensed Products under substantially the same
terms and conditions as the Kyowa License; and
(h) For so long as Lundbeck is engaged in the development or
commercialization of a Cephalon Licensed Product or a Kyowa Licensed
Product, it shall neither directly or indirectly develop nor commercialize
any pharmaceutical product in the Territory if the active ingredient of
which is a Compound whose primary mode of action has the same or similar
Target as the Target of such Development Compound (or a Backup Compound
thereto).
19.3 Lundbeck Representations and Covenants. Lundbeck hereby represents and
covenants to Cephalon that:
(a) Lundbeck is acknowledged by the authorities in parts of the
Territory as an approved manufacturer and marketer of drugs, and is as such
under the inspection of the competent authorities; and
(b) During the pendency of the Research Program, it will not engage in
any research or development activity with respect to any chemical entities
that have Targets that are the same as, or substantially similar to, the
Targets established by the JMT.
19.4 Warranty Disclaimers. Nothing in this Agreement shall be construed as:
(a) a warranty or representation by Cephalon as to the validity or
scope of the Cephalon Technology, other than as specifically provided to
the contrary herein;
(b) a warranty or representation that anything made, used, sold or
otherwise disposed of under this Agreement is or will be free from
infringement of patents, copyrights and trademarks of third Parties;
(c) an obligation to bring or prosecute actions or suits against third
parties for infringement;
(d) except as otherwise provided herein, conferring rights to use in
advertising, publicity or
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otherwise any trademark or the name of Cephalon or Lundbeck;
(e) any representation by either Party, express or implied, other than
as specifically set forth herein, including representations of
merchantability or fitness for a particular purpose, or that the use,
manufacture, sale or distribution of Licensed Products will not infringe
upon any third party patent, copyright, trademark or other rights.
Article 20. Indemnification
20.1 Lundbeck Indemnitees. Cephalon shall indemnify and hold Lundbeck, its
parent companies, Affiliates and subsidiaries, and the officers, directors and
employees of each of them (the "Lundbeck Indemnitees") harmless from any and all
liability, loss, damages, costs or expenses (including reasonable attorneys'
fees) stemming from third party claims or actions (or the threat thereof) that
are based upon (i) the breach of any material covenant, representation or
warranty of Cephalon contained in this Agreement; (ii) the manufacture, use,
marketing, promotion, sale or distribution by Cephalon (or any Affiliate,
assignee or sublicensee thereof) of any Development Compounds or Licensed
Products; (iii) the use by any person of any Licensed Products that were
manufactured, marketed, sold or distributed by Cephalon (or any Affiliate,
assignee or sublicensee thereof), including without limitation, any claim that
said use resulted in personal injury or death; and (iv) the costs incurred by
Lundbeck in the successful enforcement of its rights under this Section 20.1.
Notwithstanding anything to the contrary herein, Cephalon shall have no
obligation to so indemnify the Lundbeck Indemnitees to the extent that such
losses, liabilities, obligations, claims, fees or expenses are based upon the
conduct of the Lundbeck Indemnitees.
20.2 Cephalon Indemnitees. Lundbeck shall indemnify and hold Cephalon, its
parent companies, Affiliates and subsidiaries, and the officers, directors and
employees of each of them (the "Cephalon Indemnitees") harmless from any and all
liability, loss, damages, costs or expenses (including reasonable attorneys'
fees) stemming from third party claims or actions (or the threat thereof) that
are based upon (i) the breach of any material covenant, representation or
warranty of Lundbeck contained in this Agreement; (ii) the manufacture, use,
marketing, promotion, sale or distribution by Lundbeck (or any Affiliate,
assignee or sublicensee thereof) of any Development Compounds or Licensed
Products; (iii) the use by any person of any Development Compounds or Licensed
Products that were manufactured, marketed, sold or distributed by Lundbeck (or
any Affiliate, assignee or sublicensee thereof), including without limitation,
any claim that said use resulted in personal injury or death; and (iv) the costs
incurred by Cephalon in the successful enforcement of its rights under this
Section 20.2. Notwithstanding anything to the contrary herein, Lundbeck shall
have no obligation to so indemnify the Cephalon Indemnitees to the extent that
such losses, liabilities, obligations, claims, fees or expenses are based upon
the conduct of the Cephalon Indemnitees.
20.3 Indemnification Procedures. In the event that one Party receives notice of
a claim, lawsuit, or liability for which it is entitled to indemnification by
the other Party, the Party
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receiving notice shall give prompt notification to the indemnifying Party. The
Party being indemnified shall cooperate fully with the indemnifying Party
throughout the pendency of the claim, lawsuit or liability, and the indemnifying
Party shall have complete control over the conduct and disposition of the claim,
lawsuit, or liability, except that indemnifying Party shall have no obligation
to provide indemnity with respect to any amounts paid in settlement of any
claims if such settlement is effected without the prior written consent of the
indemnifying Party.
Article 21. General.
21.1 Headings. The headings and captions used herein are for the convenience of
the Parties only and are not to be construed to define, limit, or affect the
construction or interpretation thereof.
21.2 Severability. The provisions of this Agreement are separate and divisible,
and the invalidity or unenforceability of any part shall not affect the validity
or enforceability of any remaining part or parts, all of which shall remain in
full force and effect. However, the Parties agree to substitute, any invalid or
unenforceable provision, by a valid and enforceable provision which maintains,
to the greatest extent possible, the respective interests of the Parties
otherwise established hereunder.
21.3 Entire Agreement. This Agreement contains the entire agreement of the
Parties regarding the subject matter hereof and supersedes all prior agreements,
understandings or conditions (whether oral or written) regarding the same. This
Agreement may not be changed, modified, amended or supplemented except by a
written instrument signed by both Parties.
21.4 Assignability and Sublicenses. Except as otherwise provided herein, this
Agreement shall not be assignable, sublicensable or transferable, either in
whole or in part, by either Party without the prior written consent of the
other. In any event, no such assignment, sublicense or transfer shall relieve
any Party of responsibility for the performance of any accrued obligation which
such Party has then hereunder.
21.5 Publications. The Parties to this Agreement are free to make presentations
and publications relating to the results of any activities conducted pursuant to
this Agreement prior to marketing of Cephalon Licensed Product or Kyowa Licensed
Product, but with due regard to the protection of Confidential Information and
always provided that the other Party has approved the scientific content of any
such presentation or publication. For that purpose, the Parties agree to provide
the JMT with a copy of any proposed written presentation, abstract and/or
publication relating to the results of such activities at least thirty (30) days
prior to submission thereof for publication or presentation thereof. Each Party
will take due note of any comment by the other Party and shall respect the
response of the other Party.
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21.6 Public Announcements. Each Party agrees that, except as may be required by
law, it shall not disclose the existence, substance or details of this Agreement
without the prior written consent of the other Party. In cases in which
disclosure is proposed or required by law, the disclosing Party, prior to such
disclosure, will notify the non-disclosing Party of the contents of the proposed
disclosure, provided however, that subsequent disclosure(s) of the same or
substantially similar contents shall not require further consent. The
non-disclosing Party shall have the right to make reasonable changes to the
disclosure to protect its interests. The disclosing Party shall not unreasonably
refuse to include such changes in its disclosure.
21.7 Further Assurances. Each Party hereto agrees to execute, acknowledge and
deliver such further instruments, and to take such other actions, as may be
necessary to appropriate in order to carry out the purposes and intent of this
Agreement.
21.8. Notices and Reports. All notices, consents or approvals required by this
Agreement shall be in writing and sent by courier or by certified or registered
air mail, postage prepaid or by facsimile or courier (confirmed by such
certified or registered mail) to the Parties at the following addresses or such
other addresses as may be designated in writing the respective Parties. Notices
shall be deemed effective on the date of mailing.
If to Cephalon:
Senior Vice President & General Counsel
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380-4245 USA
Telephone: (610) 738-6337
Facsimile: (610) 738-6590
If to Lundbeck:
General Counsel
H. Lundbeck A/S
9 Ottiliavej, DK-2500 Valby,
Copenhagen DENMARK
Telephone: 45 3630 1311
Facsimile: 45 3630 2732
21.9 Waiver. The waiver by either Party of a breach of any provisions contained
herein shall be effective only if made in writing and shall in no way be
construed as a waiver of any succeeding breach of such provision or the waiver
of the provision itself.
21.10 Dispute Resolution. Any dispute concerning or arising out of this
Agreement or concerning the existence or validity hereof, shall be determined by
the following procedure.
39
<PAGE>
(a) Both Parties understand and appreciate that their long term mutual
interest will be best served by affecting a rapid and fair resolution of any
claims or disputes which may arise out of services performed under this contract
or from any dispute concerning the terms of this Agreement. Therefore, both
Parties agree to use their best efforts to resolve all such disputes as rapidly
as possible on a fair and equitable basis. Toward this end both Parties agree to
develop and follow a process for presenting, rapidly assessing, and settling
claims on a fair and equitable basis which takes into account the precise
subject and nature of the dispute.
(b) If any dispute or claim arising under this Agreement cannot be readily
resolved by the Parties pursuant to the process described above, the Parties
agree to refer the matter to a panel consisting of the Chief Executive Officer
("CEO") of each Party for review and resolution. A copy of the terms of this
Agreement, agreed upon facts (and areas of disagreement), and concise summary of
the basis for the contentions of each Party will be provided to both such CEOs
who shall review the same, confer, and attempt to reach a mutual resolution of
the issue.
(c) If the matter has not been resolved utilizing the foregoing process,
either or both Parties may elect to pursue definitive resolution through binding
arbitration, which the Parties agree to accept in lieu of litigation or other
legally available remedies (with the exception of injunctive relief where such
relief is necessary to protect a Party from irreparable harm pending the outcome
of any such arbitration proceeding). Binding arbitration shall be settled in
accordance with the Rules of Conciliation and Arbitration of the International
Chamber of Commerce by a panel of three arbitrators chosen in accordance with
said Rules. This Agreement shall be governed by and construed in accordance with
the substantive laws of the State of New York and of the United States of
America, without regard to the conflicts of laws provision thereof. The
arbitration will be conducted in English and will be held in London, England.
Judgment upon the award rendered may be entered in any court having jurisdiction
and the Parties hereby consent to the said jurisdiction and venue, and further
irrevocably waive any objection which either Party may have now or hereafter to
the laying of venue of any proceedings in said courts and to any claim that such
proceedings have been brought in an inconvenient forum, and further irrevocably
agrees that a judgment or order in any such proceedings shall be conclusive and
binding upon the Parties and may be enforced in the courts of any other
jurisdiction thereof.
21.11 Force Majeure. A Party shall not be liable for nonperformance or delay in
performance (other than of obligations regarding any payments or of
confidentiality) caused by any event reasonably beyond the control of such Party
including, without limitation, wars, hostilities, revolutions, riots, civil
disturbances, national emergencies, strikes, lockouts, unavailability of
supplies, epidemics, fires, floods, earthquakes, other forces of nature,
explosions, embargoes, or any other Acts of God, or any laws, proclamations,
regulations,
40
<PAGE>
ordinances, or other acts or orders of any court, government or governmental
agency. Any occurrence of Force Majeure shall be reported promptly to the other
Party.
IN WITNESS THEREOF, the Parties have executed this Agreement by their duly
authorized representatives, as of the day and year first above written.
H. LUNDBECK A/S CEPHALON, INC.
By: CLAUS BRAESTRUP By: PETER E. GREBOW
----------------------------- -------------------------------
Claus Braestrup Peter E. Grebow
Executive Vice President, R&D Senior Vice President, Business
Development
By: TORBEN SKARSFELDT
-----------------------------
Torben Skarsfeldt
Board Member
[STAMP]
41
<PAGE>
Exhibit A - Listing of Patents
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CEP 1347 and Relatives:
US 5,621,100 April 15, 1997 Claims 1347 composition of matter
US 5,621,101 April 15, 1997 Composition claims to selected novel
indolocarbazoles
US 5,741,808 April 21, 1998 Method of use and composition claims for selected
indolocarbazole aglycones
US 5,756,494 May 25, 1998 Method of use and composition claims for 1347 and
other indolocarbazoles
WO 9746565 Published, Composition of matter for 3,9-aralkyl,
Dec. 11, 1998 alkyl-alkoxy, etc.
Fused Pyrrolocarbazoles:
US 5,475,110 Dec. 12, 1995 Broad claims to the FP series
US 5,591,855 Jan. 7, 1997 Claims to expanded N13 and aromatic ring
substitutions
US 5,594,009 Jan. 14, 1998 Method claims
US 5,616,724 April 1, 1998 Composition of matter claims to 6-oxo class
US 5,705,511 Jan. 6, 1998 Expanded genus, heterocyclics... broadened
compositions of matter
US 5,801,190 Sept. 1, 1998 Expanded 6-oxo genus
US 5,808,060 Sept. 15, 1998 Analogs of FPs without ring nitrogens
[*The confidential material [*The confidential material [*The confidential material
contained herein has been contained herein has been contained herein has been
omitted and has been omitted and has been omitted and has been
separately filed with separately filed with separately filed with
the Commission.] the Commission.] the Commission.]
[*The confidential material [*The confidential material [*The confidential material
contained herein has been contained herein has been contained herein has been
omitted and has been omitted and has been omitted and has been
separately filed with separately filed with separately filed with
the Commission.] the Commission.] the Commission.]
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit B - Structure of CEP-1347
(DIAGRAM ART APPEARS HERE)
<PAGE>
Exhibit C - Third Party Obligations
<PAGE>
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT (the "Agreement") is made by and among Cephalon,
Inc., a Delaware corporation with its principal place of business located at 145
Brandywine Parkway, West Chester, Pennsylvania 19380-4245, U.S.A. ("Cephalon"),
and Orion Corporation Orion Pharma, a Finnish corporation with its principal
place of business located at Orianintie I, FIN-02200, Espoo, Finland ("Orion").
WIITNESSETH:
WHEREAS, the Institute of Biotechnology of the University of Helsinki
("Institute of Biotechnology" as defined in the LSRA identified herein below)
and Professor Matt Saarma, Ph.D. and certain of his scientific research
colleagues at the Institute of Biotechnology (collectively, the "Institute
Scientists" as defined in. the LSRA identified herein below) granted to Cephalon
an exclusive, worldwide, royalty-bearing right and license, with the further
right to sublicense, to make, have made, use, have used, sell, have sold, import
and have imported all Institute Technology (as defined in the LSRA identified
herein below) under the terms and conditions of a License and Sponsored Research
Agreement (the "LSRA") between said parties having an effective date of July 1,
1997;
WHEREAS, the Institute of Biotechnology and Institute Scientists granted to
Cephalon the right to obtain an exclusive or nonexclusive (as determined by
Cephalon), worldwide, royalty-bearing right and license, with the further right
to sublicense, to make, have made, use, have used, sell, have sold, import and
have imported all Option Patent Fights (as defined in the Option Agreement
identified herein below) under the terms and conditions of an Option Agreement
(the "Option Agreement") between the parties having an effective date of October
30, 1998; and
WHEREAS, Cephalon wishes to grant, and Orion wishes to obtain, a sublicense
covering Cephalon's rights and obligations as to the Institute Technology and
Option Patent Rights pursuant to Cephalon's letter of intent to Orion having an
effective date of January 18, 1999 (the "Letter of Intent");
NOW, THEREFORE, for good and valuable consideration, the adequacy of which
is hereby affirmed, the parties hereby agree as follows.
1. DEFIINITIIONS
Terms that are capitalized as defined terms in this Agreement shall have
the meanings set forth below:
<PAGE>
1.1 "Affiliate" means any individual or entity directly or indirectly
controlling, controlled by or under common control with, a Party to this
Agreement. Without limiting the foregoing, the direct or indirect ownership of
50 percent or more of the outstanding voting securities of an entity, or the
right to receive 50 percent or more of the profits or earnings of an entity, or
the right to control the policy decisions of a person or entity, shall be deemed
to constitute control.
1.2 "Effective Date" means March31, 1999.
1.3 "Extended Term" means the eighteen (18) month period (January 1, 1999 to
June 30, 2000) by which the Research Program as set forth in the LSRA may be
extended pursuant to Section 3 of the LSRA.
1.4 "Field" means the diseases broadly classified as neurodegenerative,
neurologic, neuropsychiatric and oncologic and includes but is not limited to
the research, diagnostic, prophylactic and/or therapeutic aspects of such
diseases. Rights to Institute Technology, to the extent that they relate to such
other diseases that fa1l outside of these disease classifications, shall not be
considered to fall within the Field and such rights are acknowledged to be
retained by the Institute.
1.5 "Improvements" means:
(1) any new products, processes, and techniques, developed either by
Cephalon or Orion, that fall within the scope of a claim of the Patent Rights or
Option Patent Rights;
(2) any assay or method, developed either by Cephalon or Orion, whose key
substituents incorporate or utilize Institute Technology or Option Patent
Rights; and
(3) any assay system, developed either by Cephalon or Orion, that is useful
to screen the interaction of potential agonists, antagonists or other modulators
of any novel composition that falls within the scope of a claim of the Patent
Rights or Option Patent Rights, but not including such potential agonists,
antagonists or modulators themselves, unless they independently fall within the
scope of such claims. The term "assay systems" includes, but is not limited to,
methodologies, reagent sources and descriptions, validation schemes and the
results thereof. Notwithstanding the foregoing, products, processes, techniques,
assays, assay methods and assay systems developed by the Parties shall only be
considered Improvements to the extent that they relate to GDNF receptor or GDNF
signaling cascade assay development.
1.6 "Institute" means the Institute of Biotechnology and institute Scientists as
identified above.
<PAGE>
1.7 "Institute Discoveries" means the experimental data and results and
associated methods and procedures, as well as tangible outcomes of research,
including but not limited to reagents, such as DNA clones, vectors, expression
systems, cell lines, peptides, proteins, hybridomas and antibodies that are
developed or used by the Institute in the course of the Research Program as set
forth in the LSRA between the Institute and Cephalon.
1.8 "Institute Inventions" means all Institute Discoveries and inventions
(including each process, use, article of manufacture and composition of matter)
that are first conceived or reduced to practice by the Institute in the course
of the Research Program as set forth In the LSRA between the Institute and
Cephalon.
1.9 "Institute Know-How" means know-how, trade secrets, technical information
(including but not limited to preclinical data and clinical results), formulas,
processes and data owned or controlled by the Institute and/or any of its
Affiliates, to the extent that it relates to Institute Discoveries or Institute
Inventions and that is produced in the course of the Research Program as set
forth in the LSRA between the Institute and Cephalon.
1.10 "Institute Patent Rights" means all United States patent applications or
issued patents owned or controlled by the Institute and/or any of its
Affiliates, but only to the extent that they contain one or more claims covering
the Institute Discoveries, Institute Inventions and Institute Know-How,
including provisionals, divisionals, continuations, continuations-in-pat,
reissues and extensions derived therefrom, as well as all foreign patents and
foreign patent counterparts thereof. Institute Patent Rights retroactively
extend back to July 26, 1996, the effective date of a prior non-exclusive
license between the Institute and Cephalon. Notwithstanding the effective date
of the LSRA, Institute Patent Rights shall include Institute fights in and to
U.S. patent application [*The confidential material contained herein has been
omitted and has been separately filed with the Commission.] which was initially
filed prior to the effective date of the LSRA [*The confidential material
contained herein has been omitted and has been separately filed with the
Commission.] and corresponding PCT International Application No. PCT/US
96/18I97. Institute Patent Rights also include the PCT Application No. 98/09056
entitled Glial Cell Line Derived Neurotrophic Factor Receptors filed on May 4,
1998 and published as WO 98/52591 on November 26, 1998.
1.11 "Institute Technology" means collectively:
(i) Institute Discoveries,
(ii) Institute Inventions,
(iii) Institute Know-How, and
(iv) Institute Patent Rights.
1.12 "Invention-by-Invention" refers to an Institute Invention or a group of
Institute Inventions that are substantially related. For example, a novel GDNF
receptor, its homologs and allelic variants and antibodies to the foregoing are
substantially related
<PAGE>
and would be considered to be the same invention. The discovery of small
molecule agonists or other ligands of such receptors would be considered to be
another invention.
1.13 "Licensed Process" means any process or method for the production,
manufacture or use of any Institute Discoveries, Institute Inventions or
Institute Know-How that is covered by a Valid Claim of any Institute Patent
Rights in the Field.
1.14 "Licensed Product" means any article, composition, apparatus, substance,
chemical material which incorporates or utilizes any Institute Discovery
Institute Invention, or Institute Know-How and is covered by a Valid Claim of
any Institute Patent Rights in the Field.
1.15 "Option Licensed Process" means any process or method falling within the
scope of Option Technology that is covered by a Valid Claim of any Option Patent
Rights.
1.16 "Option Licensed Product" means any article, composition, apparatus,
substance, chemical material or biological material falling within the scope of
Option Technology that is covered by a Valid Claim of any Option Patent Rights.
1.17 "Option Patent Rights" means all United States patent applications or
issued patents owned or controlled by the Institute Scientists, Institute of
Biotechnology and/or any of their Affiliates, but only to the extent that they
contain one or more claims covering Option Technology, including provisionals,
divisionals, continuations, continuations-in-part, reissues and extensions
derived therefrom, as well as all foreign patents and foreign patent
counterparts thereof. In the event that such patent applications or issued
patents are co-owned by the Institute and a third party, Option Patent Rights
include only those claims covering Option Technology that are owned by the
Institute.
1.18 "Option Technology" means:
(1) all Institute Discoveries, Institute Inventions, Institute Know-How,
and Institute Patent Rights that are outside of the Field; and
(2) all Institute discoveries, inventions and know-how made outside of the
Research Program as set forth in the LSRA between the Institute and Cephalon,
not committed to a third-party commercial relationship, and patent applications
or patents that relate to the subject matter of the Research Program as set
forth in the LSRA, between the Institute and Cephalon, such as receptors for
GDNF, Neurturin, Persefin, and their homologs (hereafter GDNF family), ligands
of receptors for GDNF family members and components of the signaling cascade for
GDNF family receptors, regardless of whether such discoveries and inventions are
inside or outside of the Field.
<PAGE>
Thus, for example, Option Technology includes, but is not limited to, the
discovery and/or characterization of ligands that interact with GDNF, GDNF
receptors or GDNF-related receptors, including Drosophila ligands and vertebrate
and invertebrate homologs of such invertebrate ligands as embodied in a
Provisional Application No. [*The confidential material contained herein has
been omitted and has been separately filed with the Commission.]
1.19 "Parties" or the "Parties to this Agreement" means Cephalon and Orion.
1.20 "Proprietary Information" means information that is generated by the
signatory parties to the LSRA and Option Agreement, that is considered as being
confidential by its originator, and includes but is not limited to data,
formulas, trade secrets, know-how, methods, materials, prototypes, processes,
documentation, business plans, cost and operational information. Any information
and research results that are produced by the Institute in the course of the
Research Program as set forth in the LSRA between the Institute and Cephalon
shall be considered to be Institute Discoveries and/or Institute Know-How rather
than "Proprietary Information.
1.21 "Research Program" means the research activities as set forth in the LSRA
between the Institute and Cephalon as it may be amended from time-to-time.
1.22 "Territory" means the entire world.
1.23 "Valid Claim" means a claim of an issued patent that has not lapsed or
become abandoned or been declared invalid or unenforceable by a court or agency
of competent jurisdiction from which no appeal can be or was taken.
2. GRANT OF SUBLICENSE
2.1 Subject to the terms and conditions set forth herein, Cephalon hereby grants
a sublicense in the Territory to Orion under the rights to Institute Technology
granted to Cephalon under the LSRA (Exhibit A). Subject to the terms and
conditions set forth herein, Cephalon also hereby grants a sublicense in the
Territory to Orion under the rights to Option Patent Rights granted to Cephalon
on an Invention-by Invention basis under the LSRA and Option Agreement (Exhibit
B). The current list of Institute Technology and Option Patent Rights to which
rights are granted to Orion pursuant to this Agreement are listed in Exhibit C.
<PAGE>
Exhibit C
List of Institute Technology and Option Patent Rights to which rights are
granted to Orion pursuant to this Agreement
Patent Rights
- -------------
Glial Cell-line-Derived Neurotrophic Factor Receptors filed with Ret claims
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.] corresponding PCT US 96/18197 (filed 13
November 1996)
Glial Cell Lin-Derived Neurotrophic Factor Receptors filed with GDNFRB (GFRa2)
claims [*The confidential material contained herein has been omitted and has
been separately filed with the Commission.] corresponding PTC US 98/09056 (filed
4 May 1998)
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
Institute Technologies
- ----------------------
1. hGDNF in sense orientation in expression vector pEFBos
2. hGDNF is antisense orientation in pEFBos
3. rGDNF in pCRII
4. mPSP in pCDNA3
5. rGFRa2 cDNA in pCDNA3
6. mGFRa3 in pCDNA3
7. hGDNF cDNA in pCRII
8. mNTN in pCDNA3
9. rGFRa1 in pCDNA3
10. h c-Ret short form in pCDNA3 (Vassilis Pachnis)
11. h c-Ret long isoform in pCDNA3 (Vassilis Pachnis)
12. h c-Ret long isoform extracellular domain in pIG I vector as the fusion
with IgG Fc
13. r GFRa1 with the N-terminal fusion of GFP in PCDNA3
14. r GFRa1 with the N-terminal fusion of GFP in pBactin vector
15. NIH 3T3 firoblasts stably expressing rGFRa1
16. Neuro 2A endogenously expressing Ret and stably transfected with rGFRa1
(Marc Billaud)
17. Mice lacking GFRa2 gene function (GFRa2-/- mice, 2 lines), one line with
nlacZ knocking GFRa2nlacZ, potentially expressing the lacZ marker with
nuclear localization signal)
18. ES cells with targeted disruption of GFRa2 gene (GRFa2+/- 2 clones, one
Gfra2nlacZ)
19. GFRa2 gene targeting vectors (replacement type, one with neoR, one with
nlacZneoR)
20. GFRa2 mouse genomic DNA fragments
21. Rabbit anisera against GFRa2 and GFRa3 peptides (poorly characterized)
22. Transgenic mice overexpressing hGDNF under the translation elongation
factor I promoter; 4 mice lines (testis specific expression of GDNF)
<PAGE>
Option Patent Rights
- --------------------
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
Option Technologies
- -------------------
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
<PAGE>
TAP Holdings Inc.
June 28, 1996
Page 15
ATTACHMENT A
Required Criteria
-----------------
For establishing Subject Compounds under subparagraphs 1(b) and (c)
I. Subject Compounds must meet all of the criteria set forth in one row of the
following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Assay % I Kinase Activity(a) % I Trk Phosphorylation Whole Cell(b)
Concentration(c) % Inhibition(d) Concentration % Inhibition
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trlc 50 nM => 50% 50 nM >= 50%
PDGF 500 nM => 50% 100 nM >= 50%
- --------------------------------------------------------------------------------
</TABLE>
a Inhibition of PLC-y phosphorylation in the trk ELISA screen
b Inhibition of NGF or PDGF-induced receptor phosphorylation in whole
cell screens
c Concentration = screening concentration of drug
d % inhibition = the minimal % inhibition at the screening concentration
that would meet criteria
Note: Additional rows will be added to the foregoing table, specifying the
criteria for VEGF, EGF and FGF, as determined by the Development Committee
II. Subject Compounds must meet all of the criteria set forth in each row of
the following table:
<TABLE>
<CAPTION>
-----------------------------------------------------
% I Kinase Activity
Assay Concentration % Inhibition
-----------------------------------------------------
<S> <C> <C>
PKC 10 uM less than 50%
Insulin 10 uM less than 50%
-----------------------------------------------------
</TABLE>
ATTACHMENT A IS SUBJECT TO AMENDMENT BY THE DEVELOPMENT
-------------------------------------------------------
COMMITTEE
---------
<PAGE>
===============
Discovery Flow
===============
------------------- ----------------
Indolocarbazole
Kyowa Hakko Major Fused-
Ceph (re-synthesis) - Minor Emphasis - pyrrolocarbazole
------------------- ----------------
Combinatorial/
Medicinal Chemistry
|
|
Assay --------------- Reagent
Validation/ --- Screening Group --- Support
Automation --------------- Recomb.
Expression
|
|
Trk, TrkB, PDGF, VEGF, IGF, Insulin, FGF
|
|
|In vitro whole cell functional
|
|
Cell
Biology
|
|
Chemical Resynthesis
| |
| |
2563 salts/process optimization process chem. general for FP's
|
|
TAP In Vivo Models
<PAGE>
Exhibit D - Kyowa License
+ list of terms and conditions made applicable for Lundbeck
<PAGE>
Page No. 1 [LOGO]
KYOWA
LICENSE AGREEMENT
This License Agreement, as defined in Article 13 in a screening consignment
agreement which was signed by both parties on 19th of April 1991, made and
entered into as of the 15 day of May 1992 by and between Cephalon, Inc., having
its principal office at 145 Brandywine Parkway, West Chester, PA 19380 U.S.A.
(hereinafter referred to as "CEPHALON") and Kyowa Hakko Kogyo Co., Ltd., having
its principal office at 1-6-1 Ohtemachi, Chiyoda-ku, Tokyo 100 Japan
(hereinafter referred to as "KYOWA").
WITNESSETH
----------
Whereas, KYOWA has in its possession Large numbers of Substance(s) (as
hereinafter defined) which are potential candidates for therapeutic use, and
owns the Patents (as hereinafter defined) and the Know-How (as hereinafter
defined) relating to the Substance(s); and
Whereas, KYOWA and CEPHALON have entered into a screening consignment agreement
dated April 19,1991, under which KYOWA consigned the Substance(s) to CEPHALON
for screening and granted to CEPHALON the option to enter into the License
Agreement; and
Whereas, the parties have a mutual desire to engage in the R & D (as hereinafter
defined) with respect to the Substance(s) provided by KYOWA; and
Whereas, CEPHALON desires to develop and sell the Pharmaceutical(s) (as
hereinafter defined) as human medicines in the Territory (as hereinafter
defined) and CEPHALON exercised the option pursuant to said screening
consignment agreement;
NOW THEREFORE, the parties agree as follows:
Article 1. Definitions
- ----------------------
1.1 "Substance(s)" shall mean K-252A and the derivatives of K-252A obtained by
KYOWA through the research and experiment activities, including, but not limited
to, the derivatives listed on Exhibit A hereto, and derivatives of any of the
foregoing developed by the parties hereto during the term of this License
Agreement, which may
<PAGE>
Page No. 2 [LOGO]
KYOWA
be included within the scope of the claims of the Patents.
1.2 "Screening" shall mean the screening system of CEPHALON. The Screening shall
consist of the following phases, as described in CEPHALON's Neuroscreen
brochure:
Phase I Determine cytotoxicity
Phase II Establish neurotrophic potential
Phase III Identify responsive neuronal populations
1.3 "Pharmaceuticals(s)" shall mean any preparation in finished product form for
human use, ready for administration to the ultimate consumer containing the
Substance(s) as a therapeutically active ingredient.
1.4 "R&D" shall mean the activity including Phase IV (determine efficacy in
animal models and evaluate blood-brain barrier transport) of CEPHALON's
screening system, further laboratory investigations, clinical trials, field
studies and any registry activities of the Substance(s) conducted by CEPHALON in
order to market any Pharmaceutical in the Territory.
1.5 "Territory" shall mean all the world except Japan.
1.6 "Know-How" means the pharmacological, toxicological, clinical, analytical
and pharmaceutical data, instructions, specifications, experiences and
information relating to the manufacture, formulation, quality control, safety
and effectiveness of the Substance(s), owned by or under the control of KYOWA or
its Affiliates which is in existence as of the date of this License Agreement or
developed during the term of this License Agreement.
1.7 "Patents" means the patents and the patent applications in any jurisdiction
owned or controlled by KYOWA or its Affiliates and containing a claim covering
the use, manufacture or composition of a Substance, and any continuations,
additions, renewals, divisions, and reissues of any of the foregoing. The
Patents shall include any patent applications and patents that claim a joint
invention of both parties made after the signature of the screening consignment
agreement.
1.8 "Affiliate(s)" shall mean any corporation, association or other entity which
directly or indirectly controls, is controlled by, or is under common control
with the party in question. As used herein the term control means possession of
the power to direct, or cause the direction of, the management and policies of a
corporation or entity
<PAGE>
Page No. 3 [LOGO]
KYOWA
by reason of any ownership interest therein.
Article 2. Kind and Scope of License
- ------------------------------------
2.1 KYOWA hereby grants to CEPHALON the exclusive right to Substance(s) and
license in the U.S. and the semi-exclusive right and license in the Territory
except the U.S. under the Patents owned or controlled by KYOWA or its Affiliates
and Know-How to develop and use the Substance(s) solely to conduct the R & D and
to make, have made, use and sell the Pharmaceutical(s) in the Territory. KYOWA's
semi-exclusive rights retained in the Territory outside of the U.S. means that
KYOWA or its Affiliate(s) or one sublicensee of KYOWA (but not both) per country
may exercise KYOWA's retained rights in the Territory outside of the U.S. KYOWA
shall retain the right to manufacture the Substance(s), and CEPHALON shall not
manufacture the Substance(s) except as permitted punuant to Article 7.2
Notwithstanding the foregoing, the both parties have acknowledged that Kyowa
Medex had already distributed [K252A, K2523, KT5720, KT5926 and KT5823 as
protein kinase inhibitors.
2.2 The license granted to CEPHALON hereunder shall carry with it the right to
grant sublicenses in the Territory, without the prior written consent of KYOWA.
Article 3. Disclosure of Know-How
- ---------------------------------
3.1 Promptly after the effective date of this License Agreement, and
periodically thereafter during the term of this License Agreement, KYOWA shall
disclose to CEPHALON the available Know-How to the extent that the parties
decides it is necessary for the R & D, registration and sales of the
Pharmaceutical(s).
3.2 CEPHALON shall furnish KYOWA with a semiannual report on he R&D at a meeting
semiannually held by the both parties. Said report shall contain the full
content of any progress and findings acquired by CEPHALON in the R & D. In
addition to such a semiannual report, CEPHALON shall as promptly as practicable,
provide KYOWA with the result, information and data of the R & D in the written
report form. CEPHALON shall not knowingly conceal from KYOWA nor intentionally
neglect to report with respect to any significant part of the R & D for any
purpose or reason.
3.3 Whenever requested by KYOWA, CEPHALON shall answer, in writing if so
requested, any reasonable question that may be put by KYOWA with respect to thef
above reports pursuant to Article 3.2 and the matters in connection with the
R&D.
<PAGE>
Page No. 4 [LOGO]
KYOWA
Article 4. Consideration and Payments
- -------------------------------------
4.1 In consideration of the grant of the rights and license under the provisions
of Article 2, CEPHALON shall pay to KYOWA one time payment of the amount of US
Dollars ________________ at the time CEPHALON submits the first Investigational
New Drug (I.N.D.) application relating to the Pharmaceutical(s) to the United
States Food and Drug Administration (F.D.A.).
4.2 Royalties shall be considered only when both parties feel it is necessary to
set the royalties depending on countries on such terms and conditions as may be
agreed by both parties. If the royalties to be paid by CEPHALON to KYOWA
established by the time CEPHALON files the initial I.N.D. for a Pharmaceutical
with the F.D.A., the parties shall negotiate the royalties in good faith during
the sixty (60) day period thereafter. In no event shall CEPHALON be required to
pay a royalty for the Pharmaceutical(s) which, together with the amount paid for
the supply of the related substance under Article 7.1, is greater than _______
of the net sales price of the Pharmaceutical.
Article 5. No Warranty
- ----------------------
Except as may be provided in the Supply Agreement between KYOWA and CEPHALON
pursuant to Article 7.3, KYOWA shall not be liable for any damages arising out
of or resulting from any activity of CEPHALON with respect to the Substance(s)
and Pharmaceutical(s) whether or not the activity by CEPHALON involves the use
of the Know-How or other information supplied by KYOWA. CEPHALON shall not be
liable for any damages arising out of or resulting from any activity of KYOWA
with respect to the Substance(s) and Pharmaceutical(s)) whether or not the
activity by KYOWA involves the use of information pursuant to Article 3.2 or
other information supplied by CEPHALON.
Article 6. Registration and Marketing
- -------------------------------------
6.1 Within a reasonable time after the date of this License Agreement. CEPHALON
shall initiate and diligently pursue the R & D and other operations necessary
for registration and marketing of the Pharmaceutical(s) in the Territory. KYOWA
shall assist CEPHALON in pursuing the R & D as much as KYOWA can spare its
staff.
6.2 CEPHALON shall evaluate, promote and advertise the Pharmaceutical(s) and
shall make all reasonable efforts necessary to ensure their earliest possible
<PAGE>
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KYOWA
marketing in the Territory.
6.3 CEPHALON shall promptly inform KYOWA in writing of (i) the date and content
of the registration of the Pharmaceutical(s), (ii) the date and content of the
official approval(s) of the relevant authorities to market the Pharmaceutical(s)
and (iii) the marketing date of the Pharmaceutical(s) in the Territory.
6.4 The label of the Pharmaceutical(s) sold by CEPHALON shall bear the legend
"Licensed from Kyowa Hakko Kogyo Co., Ltd.".
Article 7. Supply of the Substance(s)
- -------------------------------------
7.1 CEPHALON shall purchase all its requirements of the Substance(s) from
KYOWA,for the R&D and the manufacture and the sales of the Pharmaceuticals the
Territory on such terms and conditions as may be agreed by both parties in a
Supply Agreement pursuant to Article 7.3, provided that such terms and
conditions shall be negotiated and agreed between the both parties hereto by the
time CEPHALON submit the first I.N.D. application of the Pharmaceutical(s) to
the F.D.A. However, samples of the Substance(s) which are required for the
pre-clinical study within the R & D until the time CEPHALON submits the first
I.N.D. application to the F.D.A. shall be provided to CEPHALON by KYOWA free of
charge.
7.2 The Supply Agreement will provide that if for any reason KYOWA is unable to
supply CEPHALON's requirements of the Substance(s), KYOWA will arrange for a
third party to manufacture the needed quantities of Substance(s) upon the same
terms and conditions as continued in the Supply Agreement, or KYOWA will grant
to CEPHALON a right to make or have made the Substance(s) on such terms and
conditions as may be agreed by the both parties hereto
7.3 KYOWA and CEPHALON agree that a Supply Agreement which incorporates Articles
7.1 and 7.2 and any other necessary terms and conditions with respect to the
supply of the Substance(s)) shall be separately executed by the parties hereto.
Article 8. Regulatory Considerations
- ------------------------------------
When CEPHALON submits the first I.N.D. application relating to the Substance(s)
to the F.D.A. KYOWA shall file a manufacturing master file as required by the
United States Food & Drug Act and regulations so as to permit the timely supply
of the
<PAGE>
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KYOWA
Substance(s) to CEPHALON.
Article 9. Confidentiality
- --------------------------
9.1 It is expressly agreed that the Know-How disclosed by KYOWA to CEPHALON and
scientific and technical advice and support furnished by KYOWA to CEPHALON
pursuant to Article 3.1 shall be treated by CEPHALON as confidential. CEPHALON
shall not disclose any such Know-How and advice and support to any third party
without the prior written consent of KYOWA, except to the extent required by the
appropriate governmental authorities. Notwithstanding the foregoing, CEPHALON
may disclose such information to any person to whom CEPHALON grants a sublicense
as permitted under Article 2.2 if such person agrees to be bound by the same
confidentiality obligation with respect to such information. The obligations
undertaken by CEPHALON under this Article 10.1 shall survive for ten (10) years
beyond the termination of this License Agreement.
9.2 It is expressly agreed that the information disclosed by CEPHALON to KYOWA
and scientific and technical advice and support furnished by CEPHALON pursuant
to Articles 3.2 and 3.3 shall be treated by KYOWA as confidential, and KYOWA
shall not disclose any such information and advice and support to any third
party without the prior written consent of CEPHALON, except to the extent
required by the appropriate governmental authorities. Notwithstanding the
foregoing, KYOWA may disclose such information to any person to whom KYOWA
grants a sublicense as permitted under Article 2.1 if such person agrees to be
bound by the same confidentiality obligations with respect to such information.
The obligation undertaken under this Article 9.2 shall survive for ten (10)
years beyond the termination of this License Agreement,
9.3 The obligations undertaken by the parties hereto pursuant to Article 9.1 and
9.2 shall not, in any event, apply to any information which:
(a) at the time of disclosure is or thereafter becomes available to the public
in published literature or otherwise through no fault of the receiving party; or
(b) as known to, or otherwise in its possession of the receiving party prior to
the receipt of such information from the other party as evidenced by the written
records of the receiving party; or
(c) is obtained by the receiving party from a third party who would not be
breaching a
<PAGE>
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KYOWA
commitment of confidentiality by disclosing such information; or
(d) was Independently developed by the receiving party by an employee who did
not have access to the disclosed information; or
(e) was disclosed in accordance with Article l0.
Article 10. Publicity and Publication
- -------------------------------------
10.1 CEPHALON and KYOWA agree not to issue any press release or other public
statement disclosing the existence of or relating to this License Agreement
without the prior written consent of the other party, provided, however, that
neither party shall be prevented from complying with any duty of disclosure
(including SEC filings) it may have pursuant to securities or other applicable
law. The form of initial press release announcing this transaction, in the form
attached as Exhibit B hereto, is accepted by both parties.
lO.2 If either party wishes to publish or present information related to the
Substance(s) in a scientific journal or conference proceeding, it shall furnish
a copy of the proposed manuscript or presentation outline to the other party as
soon as practicable, but in no event less than thirty (30) days before
manuscript submission or the presentation date. The parties will cooperate to
permit patent filings and any other protections to be instituted to protect any
such proposed disclosure before the disclosure occurs.
Article 11. Patents
- -------------------
11.1 Neither party shall be obliged to defend or hold harmless the other party
against any suit, damage claim or demand based on actual or alleged infringement
of any patent resulting from the exercise or use of any right or license granted
hereunder.
11.2 Notwithstanding the foregoing, each party shall promptly notify the other
party of any suit, damage claim or demand referred to in Article 11.1, whereupon
the parties shall negotiate to determine which party, if any, should defend or
prosecute. Neither party may settle such claim or action without the consent of
the other party. The parties also shall discuss how the expenses of defense or
prosecution should be treated, including the reduction of royalties if CEPHALON
is defending or prosecuting the action.
<PAGE>
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11.3 In the event that CEPHALON becomes aware of a product, made, used or sold
in the Territory which it believes to infringe a valid claim of an issued
Patents owned or controlled by KYOWA or its Affiliates. CEPHALON shall promptly
advise KYOWA of all the facts and circumstances known in connection therewith.
KYOWA shall have the right to enforce such Patents against such infringement, at
its own expense. In the event that, one hundred eighty (180) days after
receiving notice from CEPHALON of the infringement, KYOWA fails to decide to
institute any action to so enforce such Patents, or if KYOWA fails to timely
implement such action which KYOWA has decided to institute, then CEPHALON shall
have the right to do so at its own expense and in its own name if possible.
KYOWA shall cooperate with CEPHALON in such effort including being joined as a
party to such lawsuit. The party bearing the expenses for such litigation shall
keep any damages recovered therefrom.
11.4 KYOWA agrees to diligently prosecute and maintain the Patents owned or
controlled by KYOWA or its Affiliates and to inform CEPHALON of all written
communications to and from Patent Office in the Territory including providing
CEPHALON with copies of all such written communications upon request of
CEPHALON. However, if Kyowa does not prosecute the Patent CEPHALON may prosecute
the Patent in the CEPHALON's Territory.
11.5 During the life of this License Agreement, neither party shall
independently develop any chemical analogs based upon the Substance(s) or any
information obtained front the R & D with a purpose of applying for a patent
except in the cases where both parties co-apply for a patent on such terms and
conditions as may be agreed by both parties.
11.6 All the result, information and data directly derived from the R & D
hereunder shall be the sole property of CEPHALON except the cases where both
parties agree to co-apply for any patent or right, providing that KYOWA, its
Affiliates and its sublicensees are hereby granted a royalty-free right to use
the same in KYOWA's respective territory.
Article 12. Communication of Side Effects and Regulations
- ---------------------------------------------------------
12.1 Each party shall promptly report to the other parry any unusual or
unexpected reactions or side effects concerning the Pharmaceutical(s). All such
reports by KYOWA shall meet the requirements of the United States Food and Drug
Administration with respect to the reporting of adverse drug reactions. All such
reports by CEPHALON shall meet the requirements of the appropriate Japanese
regulatory
<PAGE>
Page No. 9 [LOGO]
KYOWA
authority with respect to the reporting of adverse drug reactions.
12.2 Each party shall communicate to the other party all existing or
contemplated laws of regulations of which each party is aware in the Territory
applicable to or affecting the Pharmaceutical(s) and any government action
likely to have an impact on the Pharmaceutical(s).
Article 13. Term and Termination
- --------------------------------
13.1 This License Agreement shall become effective as of the date first above
written and shall expire upon the expiration of the last to expire of the
Patents.
13.2 This License Agreement shall be automatically terminated if:
(a) CEPHALON fails in filing an I.N.D. for any Pharmaceutical(s) within five (5)
years from the date first above written or;
(b) CEPHALON discontinues the development of the Pharmaceutical(s) because of
reasons relating to the safety or efficacy of the Pharmaceutical(s).
No compensation for such termination shall be paid by CEPHALON to KYOWA in any
of the foregoing cases under this Article 13.2.
13.3 If either party breaches any material provision of this License Agreement
and fails to remedy such breach within sixty (60 ) days after the date of notice
thereof by the aggrieved party, the aggrieved party may at any time thereafter
terminate this License Agreement.
13.4 Either party hereto shall have the right to terminate this License
Agreement forthwith by written notice to the other party (i) if the other party
is declared insolvent or bankrupt by a court of competent jurisdiction, (ii) if
a voluntary or involuntary petition in bankruptcy is filed in any court of
competent jurisdiction against the other party or (iii) if other party shall
make or execute an assignment for the benefit of creditors.
13.5 In the event of the termination of this License Agreement pursuant to
Article 13.3 and 13.4, each party shall promptly, at no cost, transfer or
assign, upon request, to the requesting party or to such party's designee, all
approvals, permits, registrations and any other rights obtained by the other
party with respect to the Pharmaceutical(s), to the extent permitted by the laws
in the applicable territory.
<PAGE>
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KYOWA
13.6 No party shall on termination of the License Agreement for whatever reason
be relieved of its obligations accrued hereunder prior to the date of such
termination, including any obligation to make payments or reports relating to
the prior sales or use.
Article 14. Assignment
- ----------------------
Neither this agreement nor any rights or benefits or obligations hereunder shall
be assignable or transferable by either of the parties hereto without the prior
written consent of the other party.
Article 15. Force Majeure
- -------------------------
Neither party shall be responsible nor liable to the other party for failure or
delay in the performance of this License Agreement due to any war, fire,
accident, or other casualty, or any labor disturbance or act of God or the
public enemy, or any other contingency beyond such party's reasonable control.
Article l6. Notices
- -------------------
Any notice or communication required or permitted to be given or made under this
License Agreement by one of the parties hereto to the other shall be in writing
and shall be deemed to have been sufficiently given or made for all purposes if
mailed by registered mail, postage prepaid, addressed to such other party at its
respective address as follows:
Kyowa Hakko Kogyo Co., Ltd. Cephalon, Inc.
1-6-1 Ohtemachi Chiyoda-ku, 145 Brandywine Parkway, West Chester
Tokyo 100 Japan PA 19380 U.S.A.
Attention: General Manager Attention: President
Licensing
Article 17. Entire Agreement
- ----------------------------
This Agreement sets forth the entire agreement of the parties with respect to
the subject matter contained herein and may not be modified or amended except as
expressly stated
<PAGE>
Page No. 11 [LOGO]
KYOWA
herein or by a written agreement duly executed by both parties hereto.
Article 18. Governing Law
- -------------------------
This License Agreement shall be construed and the rights of the parties governed
in accordance with the laws of Japan. All dispute, controversies or differences
which may arise between the parties hereto, out of or in relation to or in
connection with this License Agreement, or the breach thereof, shall be settled
amicably through negotiations between the parties hereto. If such negotiations
should fail to yield an amicable settlement, then such disputes, controversies
or differences shall be brought in West Chester, Pennsylvania and shall be
brought in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Any proceeding brought by CEPHALON shall be brought in
Tokyo, Japan in accordance with the Commercial Arbitration Rules of the Japan
Commercial Arbitration Association. The award rendered by arbitrator(s) shall be
final and binding upon both parties.
Article 19. Severability
- ------------------------
If any provisions hereof shall be determined to be invalid, illegal or
unenforceable, the validity, legality or effect of the other provisions of this
License Agreement shall not be affected or impaired thereby. In the event any
provisions shall be held invalid, illegal or unenforceable the parties shall use
best efforts to substitute a valid, legal and enforceable provision, which,
insofar as practical, implements the purposes hereof.
IN WITNESS WHEREOF, the parties hereto have caused this License Agreement to be
signed and executed in duplicate by their duly authorized representatives as of
the day, month and year first above written.
CEPHALON, INC KYOWA HAKKO KOGYO CO., LTD
By: /s/ ILLEGIBLE By: /s/ ILLEGIBLE
-------------------- ---------------------
Title: Vice President Title: Senior Managing Director
------------------- -----------------------------
Dated: May 15, 1992 Dated: May 15, 1992
------------------- -----------------------------
<PAGE>
EXHIBIT A
Substance(s)
<TABLE>
<CAPTION>
KT# M.W. weight(mg) KT# M.W. weight(mg)
--- ---- ---------- --- ---- ----------
<S> <C> <C> <C> <C> <C>
5554 311 1 5951 496 1.1
5555 467 1.1 5952 480 1
5557 475 0.8 5958 466 1
5632 551 1.2 5959 500 1.1
5633 509 1 6005 601 1.1
5634 464 1 6069 557 1.1
5638 407 1 6076 444 0.9
5639 409 1 6118 479 1.1
5640 339 1 6121 493 1.2
5642 581 1.1 6122 508 0.7
5644 325 1.2 6124 468 0.9
5707 479 1 6160 494 0.8
5709 415 0.9 6169 452 1
5710 399 1.1 6197 480 1
5711 394 1 6228 493 0.9
5713 481 1.1 6239 481 0.7
5720 537 1.2 6240 495 1.2
5738 509 1 6260 481 1.3
5739 523 0.6 6292 478 0.6
5740 551 1 6294 478 0.9
5812 422 0.9 6295 492 1.1
5813 485 1.5 6297 467 1.5
5818 495 1.1 6349 497 1.6
5822 481 1.1 6384 492 0.8
5823 495 1.1 6386 553 1.1
5860 639 1 6398 523 1
5861 546 1 6399 413 0.6
5871 466 1 6400 487 1
5872 550 1 6434 507 1.2
5876 452 0.7 6435 506 0.9
5906 440 1.1 6454 462 0.9
5907 440 1.1 6455 539 1.2
5920 538 1.1 6459 466 1.5
5921 483 1.6 6492 531.5 1
5923 552 1.1 6493 571.5 0.9
5926 525 1.3 6519 325 1.1
5932 436 1 6570 639 1.1
5935 481 1.7 6571 561.5 0.6
5937 508 1 6572 589.5 1.1
5943 480 1.1 6587 453 1.1
5944 464 1 6594 547 0.8
5945 485 1.4 6595 497 0.7
5946 469 1.2 6606 617 0.7
5947 501 1 6607 483 0.8
5948 480 1.2 6616 527 0.6
5949 494 1 6617 455 1.2
5950 522 1 6618 499 0.9
6663 506 0.8
</TABLE>
<PAGE>
Exhibit E - Research Program
[to be provided by Cephalon]
<PAGE>
Proposed Research Collaboration
General Objectives
o Complete development of CEP-1347 and clinically evaluate potential for
treatment of neurodegenerative disease
o Refine and implement novel discovery path based on proposed mechanism (with
fused pyrrolocarbazoles) for identification of "back-up" molecule
o Identify additional innovative targets for further drug discovery efforts
Cephalon Confidential
[Draft: To be approved and implemented by Lundbeck/Cephalon JMT]
<PAGE>
Year 1: Proposed Research Collaboration
Primary Development Objectives:
- -------------------------------
I. Development of CEP-1347
Note: Decision to be made jointly with partner based on the best
opportunity with CEP-1347 or a fused pyrrolocarbazole.
o Complete development activities for CEP-1347 and initiate clinical
evaluation with the following objectives:
o Determine PK and multi-does tolerability in Phase 1
o Evaluate the potential for using a surrogate marker of mechanism
(to facilitate phase 2 dosage selection) and couple with
pre-clinical activities.
o With collaborator, determine the most appropriate path forward
for Phase 2 evaluation in an appropriate neurological disease
(AD, Parkinson's, ALS).
o Continue to define the breadth of pharmacological activities.
Cephalon Confidential
[Draft: To be approved and implemented by Lundbeck/Cephalon JMT]
<PAGE>
Year 1: Proposed Research Collaboration
Primary Research Objectives:
1. Complete, validate and implement discovery cascade; identify potential
development candidates; chemically refine
o Complete the development of the discovery path, immediately target
chemistry, screen, identification of leads (Based on distribution
MLK2/DLK primary initial target).
o Complete the characterization of MLK Family in neuronal death
processes in vitro and in vivo.
o Complete localization and distribution studies IQ (rat and human
brain; non-CNS/PNS tissues)
o Complete confirmation of involvement in cell death of primary
neuronal and/or PC12 cultures (dominant negative; on-going)
o Complete characterization of test for inhibition of SAPK pathway
in vivo (MPTP, MES)
o Initiation of the elucidation of additional discovery targets involved
in neuronal death processes by utilizing "in-house" screens,
literature, genomics information, expression profiles in human
diseased brain and/or biochemical and molecular approaches, identify
candidate kinases, clone, express, characterize and provide for
screening
Cephalon Confidential
[Draft: To be approved and implemented by Lundbeck Cephalon JMT]
<PAGE>
Years 2 and 3: Proposed Research Collaboration
I. Complete characterization of structurally novel, (e.g.:
non-indolocarbazole) selective MLK family member(s) (e.g.: MLK-2) (or
appropriate target) inhibitor and recommend for development (2Q, Year 2)
o Complete all pre-clinical, non-development activities for successful
recommendation of candidate compound
o Support development of candidate compound
II. Continued elucidation and identification of molecular processes involved in
neuronal death (continuation from Year 1)
o Identification and characterization of at least one to two additional
molecular targets for discovery efforts
o Validation of importance in neuronal death and role in specific
disease
o Establishment of necessary reagents, in vitro and in vivo models
per the discovery flow
o Initiate discovery program (targeted chemistry)
Cephalon Confidential
[Draft; To be approved and implemented by Lundbeck/Cephalon JMT]
<PAGE>
Summary of Milestones
Year 1:
-------
o Development Milestones
CEP- 1347 enters phase I (makes assumption of joint
decision to proceed)
o Research Milestones
o Validation and implementation of MLK family member inhibitor
discovery program as a disease relevant target; identification of
viable predevelopment leads
o Initiate characterization of additional neuronal processes of
cell death for target identification
Year 2:
-------
o Research Milestones (Clinical development of CEP-1347 not considered
for simplicity)
o Recommendation of selective MLK family member (or appropriate
Kinase target) inhibitor for development (2Q)
o Expansion of therapeutic utility of leads by further
understanding of molecular involvement of target in disease
process
o Choice and initiation of "new target" discovery program (may
be continuation from Year 1)
Cephalon Confidential
[Draft: To be approved and implemented by Lundbeck/Cephalon JMT]
<PAGE>
Identification/Screening: "Neurotrophic" Small Molecules
II. Target Directed Approach (Proposed)
Recom. Protein Expression
Medicinal - Molecular Biology Compound
Chemistry - Assay Development Library
In Vitro Kinase affinity;
Guide Chemical Effort
K, Determination
Kinase Screen Binding/Enzymatic
MLK-3, DLK, MEK Primary
Trk, PKC Secondary
Biochemical/Molecular
Identification of Relevant
Kinases in Neuronal Cell
Death Processes
Transient Transfection/Tet- Inhibits target
Inducible Cell Assay for Kinase in cells IC(50)
of choice
Inhibition of Target
Biochemical Validation Leads to Functional
Activation of Molecular Target Oral BA Event in Appropriate
in Disease Relevant In Vitro LC/MS/MS Cell Type (e.g.,
and In Vivo Models Neurons)
In Vivo Demonstration of Inhibition of
Molecular Target in the CNS or PNS
po/sc
Pharmacological Evaluation
(Biochemical, Functional, Behavioral) in
Disease Relevant Models
po
General Pharmacology
Recommendation for Development
Cephalon Confidential
[Draft; To be approved and implemented by Lundbeck/Cephalon JMT]
<PAGE>
Exhibit F - List of Countries in the Territory
Europe
Western Europe
- --------------
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
Liechtenstein
Luxembourg
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
Eastern Europe
- --------------
Bosnia-Herzegovina
Bulgaria
Croatia
Czech Republic
Hungary
Poland
Romania
Serbia
Slovakia
Any country that was included within the boundaries of the Union of Soviet
Socialist Republics immediately prior to its dissolution on December 25,
1991.
Middle East
<PAGE>
Babrain
Cyprus
Egypt
Iran
Iraq
Israel
Jordan
Kuwait
Lebanon
Oman
Qatar
Saudi Arabia
Syria
Turkey
United Arab Emirates
Yemen
South America
Argentina
Bolivia
Brazil
Chile
Columbia
Easter Island
Ecuador
Falkland Islands
Fernando de Noronha Archipelago
French Guiana
Galapagos Island
Guyana
Juan Fernandez Islands
Paraguay
Peru
Suriname
Uruguay
Venezuela
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of May
28, 1999 by and between Cephalon, Inc., a Delaware corporation with its
principal place of business located at 145 Brandywine Parkway, West Chester,
Pennsylvania 19380-4245, USA (the "Company"), and H. Lundbeck A/S, a Danish
corporation with its principal place of business located at 9 Ottiliavej,
DK-2500 Valby Copenhagen, DENMARK ("Buyer").
WITNESSETH:
WHEREAS, as of this date the Company and the Buyer will enter into a Joint
Research, Development and License Agreement (the "License Agreement") covering
their collaborative efforts to engage in research, development and
commercialization of certain therapeutic drugs for the treatment of diseases of
the nervous system; and
WHEREAS, concurrent with the execution of the License Agreement by the
Company and Buyer, Buyer has agreed to purchase and the Company has agreed to
sell to Buyer shares (the "Shares") of the Company's common stock, par value
$0.01 per share (the "Common Stock"), on the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the adequacy of which
is hereby affirmed, the parties hereby agree as follows.
1. Authorization and Issuance.
1.1 Authorization of Shares. The Company has authorized the issuance to the
Buyer of [* The confidential material contained herein has been omitted and has
been separately filed with the Commission.] shares of its Common Stock (the
"Shares").
1.2 Issuance and Purchase of Shares. Subject to the terms and conditions
hereof, the Company will issue to the Buyer [* The confidential material
contained herein has been omitted and has been separately filed with the
Commission.] duly authorized, validly issued, fully paid and nonassessable
shares of its Common Stock at a purchase price per share equal to the average
closing price of the Common Stock for the five Trading Days immediately prior to
the date of this Agreement. In consideration for the Shares, Buyer shall pay the
Company in United States dollars the aggregate purchase price for the Shares
effected by wire transfer in accordance with those instructions provided by the
Company to the Buyer. The Company shall deliver to the Buyer on, or as soon as
practicable thereafter, the date hereof a certificate representing the Shares
registered in the name of the Buyer (or in the name of another entity as may
designated by the Buyer). For the purposes of this Agreement, (i) "Trading Day"
means at any time a day on which any of a national securities exchange, Nasdaq
or such other securities market which at such time constitutes the principal
securities market for the Common Stock is open for general trading of
securities; and (ii) "Nasdaq" means the Nasdaq National Market.
-1-
<PAGE>
2. Representations and Warranties of the Company. The Company represents
and warrants to Buyer as of the date hereof as follows:
2.1 Organization and Standing. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Delaware.
2.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to issue the Shares to Buyer and to carry out and
perform all of its obligations hereunder. This Agreement has been duly
authorized, executed and delivered on behalf of the Company and constitutes the
valid and binding agreement of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally; and (ii) as limited by equitable principles
generally. The consummation of the transactions contemplated herein and the
fulfillment of the terms hereof will not (i) result in a breach of any of the
terms or provisions of, or constitute a default under, the Company's Restated
Certificate of Incorporation, the Company's bylaws, or any material indenture,
mortgage, deed of trust or other agreement or instrument to which the Company is
a party or by which it or its properties is bound, or (ii) violate or contravene
any applicable law, rule or regulation or any applicable decree, judgment or
order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties or
assets, in any such case which would be reasonably likely to have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and its subsidiaries,
taken as a whole, or the validity or enforceability of, or the ability of the
Company to perform its obligations under this Agreement.
2.3 Shares. The Company has full corporate power and lawful authority to
issue the Shares to Buyer on the terms and conditions contemplated herein, and
when so issued against payment therefor as provided herein, the Shares will be
validly authorized and issued, fully paid and nonassessable. The issuance and
delivery of the Shares is not subject to preemptive or any similar rights of the
stockholders of the Company or any liens or encumbrances arising through the
Company. The Common Stock is listed for trading on Nasdaq and (1) the Company
and the Common Stock meet the criteria for continued listing and trading on
Nasdaq; (2) the Company has not been notified since January 1, 1996 by the NASD
or the Nasdaq Stock Market of any failure or potential failure to meet the
criteria for continued listing and trading on Nasdaq; and (3) no suspension of
trading in the Common Stock is in effect. The Company knows of no reason that
the Shares will become ineligible for listing on Nasdaq.
2.4 Capitalization. The authorized capital stock of the Company consists
of (A) [* The confidential material contained herein has been omitted and has
been separately filed with the Commission.] shares have been designated Series A
Junior Participating Preferred Stock, and none of which are outstanding. The
Company's Annual Report on Form 10-K for the year ended December 31, 1998
discloses as of the filing date thereof all outstanding options or warrants for
the purchase
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of, or rights to purchase or subscribe for, or securities convertible into,
exchangeable for, or otherwise entitling the holder to acquire, Common Stock or
other capital stock of the Company, or any contracts or commitments to issue or
sell Common Stock or other capital stock of the Company or any such options,
warrants, rights or other securities; and from such date to the date hereof
there has been, no material change in the amount or terms of any of the
foregoing except for the grant or exercise of options to purchase shares of
Common Stock pursuant to the Company's stock option plans in effect on the date
of this Agreement.
2.5 Approvals, Filings, Etc. No authorization, approval or consent of,
or filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company for (x) the execution, delivery
and performance by the Company of this Agreement, (y) the issuance and sale of
the Shares as contemplated by this Agreement and (z) the performance by the
Company of its obligations under this Agreement, other than (1) as may be
required under applicable state securities or "blue sky" laws, (2) the listing
of the shares on Nasdaq, and (3) the filing of a Form D with the Securities and
Exchange Commission ("SEC") with respect to the Shares as required under
Regulation D promulgated under the Securities Act of 1933, as amended (the "1933
Act").
2.6 SEC Filings. The Company has timely filed all reports required to be
filed under the Securities Exchange Act of 1934, as amended (the "1934 Act") and
any other material reports or documents required to be filed with the SEC since
January 1, 1997 (the "SEC Filings"). All of such reports and documents complied,
when filed, in all material respects, with all applicable requirements of the
1933 Act and the 1934 Act. The Company meets the requirements for the use of (i)
Form S-3 for the registration of the resale of the Shares by the Buyer and/or
any subsequent holder(s) of the Shares and (ii) Rule 144 for the sale of the
Shares by the Buyer and/or any subsequent holder(s) of the Shares (subject to
compliance with applicable holding periods by the seller of the Shares). The
Company has not filed any reports with the SEC under the 1934 Act since December
31, 1998 other than the SEC Filings.
2.7 Investment Company. Neither the Company nor any of its subsidiaries
is an "investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended, and the rules and regulations of the SEC
thereunder.
2.8 Absence of Brokers, Finders, Etc. No broker, finder or similar
person or entity is entitled to any commission, fee or other compensation by
reason of action taken by or on behalf of the Company in connection with the
transactions contemplated by this Agreement, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer by
any person or entity for any such commission, fee or other compensation.
2.9 No Solicitation. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
person or entity acting on behalf of the Company, in respect of the Shares or in
connection with the offer and sale of the Shares. Neither the Company nor, to
its knowledge, any person or entity acting on behalf of the Company has, either
directly or indirectly, sold or offered for sale to any person or entity any of
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the Shares or, within the six months prior to the date hereof, any other similar
security of the Company except as disclosed in the SEC Filings; and neither the
Company nor any person or entity authorized to act on its behalf will sell or
offer for sale any promissory notes, warrants, shares of Common Stock or other
securities to, or solicit any offers to buy any such security from, any person
or entity so as thereby to cause the issuance or sale of any of the Shares to be
in violation of any of the provisions of Section 5 of the 1933 Act.
3. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to the Company as of the date hereof as follows:
3.1 Investment Experience. Buyer believes that it has received all the
information it considers necessary or appropriate to enable it to decide whether
to purchase the Shares. Buyer has had an opportunity to become aware of the
Company's business affairs and financial condition, has had an opportunity to
ask questions and receive answers, review documents and gather information about
the Company and has acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Shares. Buyer has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Shares and can
bear the economic risk of its investment. Buyer acknowledges receipt of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, the Company's Proxy Statement for the 1999 Annual Meeting on Schedule 14A
and Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (the "SEC
Documents") filed by the Company with the SEC.
3.2 Investment Intent. Buyer is purchasing the Shares for investment for
its own account only and not with a view to, or for resale in connection with,
any "distribution" thereof within the meaning of the 1933 Act. Buyer has no
present intention of selling, granting any participation in, or otherwise
distributing the Shares, except in compliance with the 1933 Act or pursuant to
an available exemption thereunder.
3.3 Restricted Securities. Buyer understands that the Shares have not
been registered under the Securities Act or registered or qualified under any
state securities law in reliance on specific exemptions therefrom, which
exemptions may depend upon, among other things, the bona fide nature of Buyer's
investment intent as expressed herein. Buyer is familiar with Rule 144 under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
3.4 No Legal, Tax or Investment Advice. Buyer understands that nothing
in the SEC Documents, this Agreement or any other materials presented to Buyer
in connection with the acquisition of the Shares constitutes legal, tax or
investment advice. Buyer has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in connection
with its acquisition of the Shares.
3.5 Corporate Power; Authority. Buyer has all requisite legal and
corporate power and has taken all requisite corporate action to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered on
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<PAGE>
behalf of Buyer and constitutes the valid and binding agreement of Buyer,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) as limited by equitable
principles generally.
4. Restrictions on Transfer and Registration Rights.
4.1 Restrictions on Transferability. The Shares shall not be
transferable in the absence of registration under the Securities Act and any
applicable state securities laws or exemptions therefrom or in the absence of
compliance with any term of this Agreement. The Company shall be entitled to
give stop transfer instructions to the transfer agent with respect to the Shares
in order to enforce the foregoing restrictions.
4.2 Restrictive Legends. Each certificate representing the Shares shall
bear substantially the following legends (in addition to any legends required
under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS
THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT BETWEEN THE
ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED FROM
THE COMPANY).
Notwithstanding the above, the Buyer (or any authorized subsequent holder of the
Shares) may request that the Company remove any such legend from the
certificate(s) evidencing the Shares or issue to Buyer (or to such holder) new
certificate(s) therefor that are free of such legend if, with such request, the
Company shall have received an opinion of counsel, which opinion is reasonably
satisfactory to the Company, to the effect that any transfer by the Buyer (or
said holder) of the Shares will not violate the securities laws of the United
States or any applicable state laws.
4.3 Shelf Registration. The Company shall file one registration on Form
S-3 (or any successor to Form S-3) or any similar short-form registration
statement under the Securities Act for the Shares (the "Registration
Statement"); provided, however, that the Company shall not be required to effect
such registration if the Company shall furnish to Buyer a certificate signed by
the President and Chief Executive Officer stating that in the good faith
judgment of the Board of Directors, it would be seriously detrimental to the
Company and its
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<PAGE>
stockholders for such registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the Registration
Statement for a period of not more than ninety (90) days after the receipt of
the request from Buyer.
4.4 About Registration.
4.4.1 The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Buyer shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Shares to be
registered in accordance with this Section 4 (the "Registrable Securities")
resold by Buyer. "Registration Expenses" shall mean all expenses, except for
Selling Expenses, incurred by the Company in complying with the registration
provisions of this Agreement, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration.
"Selling Expenses" shall mean all selling commissions, underwriting fees and
stock transfer taxes applicable to the Registrable Securities and all fees and
disbursements of counsel for Buyer.
4.4.2 In the case of any registration filed by the Company pursuant
to these registration provisions, the Company will use its best efforts to: (i)
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Registrable Securities;
(ii) cause such Registration Statement to become effective and keep such
Registration Statement effective until the second anniversary of this Agreement
or, if earlier, until Buyer has completed the distribution of all of its Shares;
(iii) furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as Buyer from time
to time may reasonably request; (iv) cause all such Registrable Securities
registered as described herein to be listed on each securities exchange and
quoted on each quotation service on which similar securities issued by the
Company are then listed or quoted; (v) provide a transfer agent and registrar
for all Registrable Securities registered pursuant to the Registration Statement
and a CUSIP number for all such Registrable Securities; (vi) comply with all
applicable rules and regulations of the SEC; and (vii) file the documents
required of the Company and otherwise use its best efforts to maintain requisite
blue sky clearance in (A) all jurisdictions in which any of the Shares are
originally sold and (B) all other states specified in writing by Buyer, provided
as to clause (B), however, that the Company shall not be required to qualify to
do business or consent to service of process in any state in which it is not now
so qualified or has not so consented.
4.4.3 Buyer shall furnish to the Company such information regarding
Buyer and the distribution proposed by Buyer as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance described herein. Buyer shall
represent that such information is true and complete.
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<PAGE>
4.4.4 The Company shall submit to the SEC, within three business
days after the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff of the SEC has
no further comments on such Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such request. The
Company shall notify Buyer of the effectiveness of the Registration Statement on
the date that it is declared effective by the SEC. The Company represents and
warrants to Buyer that (a) any Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein), at the time it is
first filed with the SEC, at the time it is ordered effective by the SEC and at
all times during which it is required to be effective hereunder (and each such
amendment and supplement at the time it is filed with the SEC and at all times
during which it is available for use in connection with the offer and sale of
the Registrable Securities) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (b) each Prospectus, at the
time the related Registration Statement is declared effective by the SEC and at
all times that such Prospectus is required by this Agreement to be available for
use by Buyer, shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
4.4.5 The Company will furnish to Buyer one copy of each letter
written by or on behalf of the Company to the SEC or the staff of the SEC and
each item of correspondence from the SEC or the staff of the SEC relating to any
Registration Statement pertaining to the Registrable Securities (other than any
portion of any such letter or item which contains information for which the
Company has sought confidential treatment), each of which the Company hereby
determines to be confidential information and which Buyer hereby agrees to keep
confidential.
4.4.6 As promptly as practicable after becoming aware of such event
or circumstance, the Company will notify Buyer of the occurrence of any event or
circumstance of which the Company has knowledge (x) as a result of which the
Prospectus relating to any Registration Statement pertaining to the Registrable
Securities, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to such Registration Statement and the related Prospectus to
correct such untrue statement or omission.
4.4.7 As promptly as practicable after becoming aware of such event,
the Company will notify Buyer of the issuance by the SEC of any stop order or
other suspension of effectiveness of any Registration Statement pertaining to
the Registrable Securities at the earliest possible time.
4.4.8 The Company will permit Buyer and a firm of counsel designated
by Buyer (and identified in writing to the Company by Buyer prior to the Closing
Date, subject
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<PAGE>
to change by notice to the Company from Buyer), at Buyer's sole expense, to
review and have a reasonable opportunity to comment on such Registration
Statement and all amendments and supplements thereto at least two Business Days
(or such shorter period as may reasonably be specified by the Company) prior to
their filing with the SEC.
4.5 Indemnification and Contribution.
---------------------------------
4.5.1 To the extent not prohibited by applicable law, the Company
will indemnify and hold harmless Buyer against any third party claims to which
it may become subject under the 1933 Act, the 1934 Act, or otherwise, insofar as
such claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue statement of
material fact in any Registration Statement; (ii) any omission to state in any
Registration Statement any material fact required to be stated therein; (iii)
any violation or alleged violation by the Company of the 1933 Act, the 1934 Act
or any state securities law; or (iv) any breach by the Company of any of its
representations and warranties set forth herein or failure by the Company to
fulfil any of its obligations hereunder. Subject to those limitations on legal
counsel set forth in Section 4.5.2, the Company shall reimburse the Buyer
promptly as such expenses are incurred and are due and payable, for any
documented reasonable legal fees or other documented and reasonable expenses
incurred by it in connection with investigating or defending any such claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 4.5.1 shall not apply to (i) a claim arising
out of or based upon information relating to the Buyer furnished in writing to
the Company by the Buyer expressly for use in connection with the preparation of
any Registration Statement or any such amendment thereof or supplement thereto;
(ii) any claim arising out of or based on any statement or omission in any
Prospectus, which statement or omission was corrected in any subsequent
Prospectus that was delivered to the Buyer prior to the pertinent sale or sales
of the Shares by the Buyer; and (iii) amounts paid in settlement of any claim if
such settlement is effected without the prior written consent of the Company.
4.5.2 Promptly after receipt by Buyer under this Section 4.5 of
notice of the commencement of any action (including any governmental action)
that may fall within the scope of indemnification hereunder, Buyer shall deliver
to the Company a notice of the commencement thereof and the Company shall have
the right to participate in and, to the extent the Company so desires, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Buyer; provided, however, that the Buyer shall have the right to retain its own
counsel with the fees and expenses to be paid by the Company if, in the
reasonable opinion of counsel retained by the Company, the representation by
such counsel of the Buyer and the Company would be inappropriate due to actual
or potential differing interests between the Buyer and the Company, in which
case the Company shall not be responsible for more than one such separate
counsel, and one local counsel in each jurisdiction in which an action is
pending, for the Buyer. The failure to deliver notice to the Company within a
reasonable time of the commencement of any such action shall not relieve the
Company of any liability to Buyer under this Section 4.5.2, except to the extent
that the Company is prejudiced in its ability to defend such action. The
indemnification required by this Section 4.5.2 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such
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expense, loss, damage or liability is incurred and is due and payable.
4.5.3 To the extent any indemnification by the Company as set forth
in Section 4.5.1 above is applicable by its terms but is prohibited or limited
by law, the Company agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 4.5.1 to the
fullest extent permitted by law. In determining the amount of contribution to
which Buyer is entitled, there shall be considered the relative fault of each
party, the parties' relative knowledge of and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission and any other equitable
considerations appropriate under the circumstances; provided, however, that (a)
no contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
4.5.1 and (b) no person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any other person or entity who was not guilty of such fraudulent
misrepresentation.
4.5.4 Other Rights. The indemnification and contribution provided in
this Section shall be in addition to any other rights and remedies available at
law or in equity.
4.6 Notice of Sale. If at any time after the date hereof the Buyer
--------------
desires to sell any of the Shares beneficially owned by the Buyer to any
unrelated person or entity, then the Buyer shall fifteen (15) days prior to the
date of any such sale disclose the identity of the purchaser of such shares of
Common Stock, the number of shares proposed to be sold, and the terms and
conditions, including price, of the proposed sale.
4.7 Compliance.
----------
(a) Prior to the effective date of the registration of the Shares, the
Company shall take all actions required to ensure that the Company meets
the requirements for the use of Form S-3 for the registration of the resale
of the Shares by the Buyer and/or any subsequent holder(s) of the Shares.
(b) With a view to making available to Buyer the benefits of Rule 144
promulgated under the 1933 Act, the Company agrees:
(1) so long as Buyer or any subsequent holder(s) of the Shares
own the Shares, promptly upon request, to furnish to such owner such
information as may be necessary and otherwise reasonably to cooperate
with such owner to permit such owner to sell the Shares pursuant to
Rule 144 without registration; and
(2) if at any time the Company is not required to file reports
with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, to use
its best efforts to, upon the request of Buyer or any subsequent
holder(s) of any of the Shares, to make publicly available other
information so long as is necessary to permit publication by brokers
and dealers of
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quotations for the Common Stock and sales of the Shares in accordance
with Rule 15c2-11 under the 1934 Act.
5. Miscellaneous.
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5.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Delaware as such laws are applied to agreements between
Delaware residents entered into and performed entirely in Delaware.
5.2 Survival of Warranties. The representations and warranties of the
Company and Buyer contained in or made pursuant to this Agreement shall survive
until second anniversary date of this Agreement.
5.3 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto (specifically including successors in
interest to the Shares).
5.4 Entire Agreement; Amendments. This Agreement sets forth all of the
promises, covenants, agreements, conditions and undertakings between the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as contained herein. This Agreement
may not be changed orally but only by an agreement in writing, duly executed by
or on behalf of the party or parties against whom enforcement of any waiver,
change, modification, consent or discharge is sought.
5.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by facsimile, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (a) if to Buyer, at H. Lundbeck A/S, 9 Ottiliavej,
DK-2500 Valby Copenhagen, DENMARK, or at such other address as Buyer shall have
furnished the Company in writing, or (b) if to the Company, at 145 Brandywine
Parkway, West Chester, PA 19380-4245, or at such other address as the Company
shall have furnished to Buyer in writing.
5.6 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
5.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
H. LUNDBECK A/S CEPHALON, INC.
By:/s/ Claus Braestrup By:/s/ Peter E. Grebow
----------------------------- ---------------------------
Claus Braestrup Peter E. Grebow
Executive Vice President, R&D Senior Vice President,
Business Development
By:/s/ Torben Skarsfeldt
-----------------------------
Torben Skarsfeldt
Board Member
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Exhibit 10.15
AMENDED AND RESTATED COPROMOTION AGREEMENT
This AMENDED AND RESTATED COPROMOTION AGREEMENT is made as of the Effective
Date (defined below), by and between BRISTOL-MYERS SQUIBB COMPANY, a Delaware
corporation, having a place of business at 777 Scudders Mill Road, Plainsboro,
New Jersey 08536 ("BMS"), and CEPHALON, INC., a Delaware corporation,
maintaining its principal business offices at 145 Brandywine Parkway, West
Chester, Pennsylvania 19380-4245 ("Cephalon").
W I T N E S S E T H:
WHEREAS, BMS markets and distributes a product containing butorphanol
tartrate under the trademark "Stadol NS(R)" which has been approved by the U.S.
Food and Drug Administration ("FDA") for the treatment of pain when an opioid
analgesic is appropriate, including the pain associated with migraine headaches
(as more fully specified in the labeling for the product); and
WHEREAS, Cephalon is engaged in the business of developing and
commercializing pharmaceutical products for the neurology market;
WHEREAS, BMS engaged Cephalon under the terms of a Copromotion Agreement
dated as of July 22, 1994 (the "Copromotion Agreement") to expand the promotion
of Stadol NS(R) (butorphanol tartrate) nasal spray to neurologists; and
WHEREAS, the parties now wish to modify certain terms and conditions of
such engagement as specified herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the corresponding meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person. A Person shall be regarded as in control of another Person if
it/he/she owns, or directly or indirectly controls, more than fifty percent
(50%) of the voting securities (or comparable equity interests) or other
ownership interests of the other Person, or if it/he/she directly or indirectly
possesses the power to direct or cause the direction of the management or
policies
<PAGE>
of the other Person, whether through the ownership of voting securities, by
contract or any other means whatsoever.
"Agreement" means this agreement, together with all appendices, exhibits
and schedules hereto, and as the same may be amended or supplemented from time
to time hereafter by a written agreement duly executed by authorized
representatives of each party hereto.
"Agreement Payment Period" means each of the following periods: January 1
to April 30, May 1 to August 31, and September 1 to December 31, as the case may
be, during the Copromotion Term.
"Agreement Year" means each 12-month period commencing on the first day of
the Copromotion Term and each anniversary thereof during the Copromotion Term.
"Call List" means the list of Covered Physicians as mutually defined by BMS
and Cephalon.
"Call Plan" has the meaning specified in Section 5(d) hereof.
"Confidential and Proprietary Information" has the meaning set forth in
Section 14 hereof.
"Copromotion Term" has the meaning specified in Section 12(a) hereof.
"Costs" with respect to a Funded Activity has the meaning specified in
Section 6(d) hereof.
"Covered Physician" means any neurologist located in the United States.
"Covered Physician Prescriptions" has the meaning in Section 10(b)(1)
hereof.
"Covered Physician Baseline" means Covered Physician Prescriptions equal to
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
"Covered Physician Step-up Baseline" means Covered Physician Prescriptions
equal to [*The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
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<PAGE>
[*The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
"Covered Physician Target" means Covered Physician Prescriptions equal to
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
"Effective Date" of this Agreement means January 1, 1999.
"Funded Activities" has the meaning specified in Section 6(b) hereof.
"IMS America" means the International Marketing Services Prescription
Reporting Service, or such other prescription reporting service to which
Cephalon and BMS may mutually agree to in writing.
"Key Physician Target" means Covered Physician Prescriptions attributed to
Covered Physicians on the Key Target List equal to [*The confidential material
contained herein has been omitted and has been separately filed with the
Commission.]
"Key Target List" means a list of high-potential Key Covered Physicians to
be supplied by BMS.
"Key Target Baseline" means Covered Physician Prescriptions attributed to
Covered Physicians on the Key Target List equal to [*The confidential material
contained herein has been omitted and has been separately filed with the
Commission.]
"Key Target Step-up Baseline" means Covered Physician Prescriptions
attributed to Covered Physicians on the Key Target List equal to [*The
confidential material contained herein has been omitted and has been separately
filed with the Commission.]
3
<PAGE>
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
"Net Sales" means for the applicable period the gross amount invoiced for
the Product by BMS or its licensees to unAffiliated third parties in the
Territory, less the following amounts to the extent deducted on such invoice or
absorbed by BMS: (i) quantity, trade, and/or cash discounts, allowances,
rebates, and price adjustments or reductions allowed or given; (ii) credits,
rebates, chargebacks, or refunds allowed for rejected, outdated or returned
Products; (iii) sales and other excise taxes and duties directly related to the
sale, to the extent that such items are included in the gross invoice price (but
not including taxes assessed against the income derived from such sale). If a
Product is sold for compensation other than cash, Net Sales shall be calculated
based on the gross list price of the Product on the date of sale.
"Net Sales attributable to Covered Physicians" has the meaning set forth in
Section 10(b) hereof.
"Net Sales per Script" has the meaning set forth in Section 10(b) hereof.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority, or any other form of entity not
specifically listed herein.
"Product" means the nasal spray forms (including all dosage strengths) of
Stadol NS(R) (butorphanol tartrate) currently approved by FDA, and any new nasal
spray forms or formulations of such Product, and any new dosage or indication or
use (including all dosage strengths) related to such nasal spray forms or
formulations of Stadol NS(R) (butorphanol tartrate). For sake of clarity and
avoidance of doubt, "Product" does not include any product of BMS containing
butorphanol tartrate in injectable form, such as the product currently marketed
under the tradename "Stadol."
"Product Marketing Committee" has the meaning specified in Section 5
hereof.
"Serious adverse event" and "Non-serious adverse event" have the meanings
set forth in section 8(h) hereof.
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"Target Level Covered Physician Prescriptions" has the meaning set forth on
Schedule A.
"Territory" means the United States of America. For sake of clarity and
avoidance of doubt, Puerto Rico and any U.S. possessions and territories are not
part of the Territory.
"Trademark" means the trademark Stadol NS(R) and any other trademark or
trade name (whether registered or unregistered) used on or with the Product or
in any promotional material related to the Product in the Territory during the
Copromotion Term.
2. Grant of Rights to Cephalon.
(a) BMS hereby engages Cephalon to promote the Product during the
Copromotion Term on a non-exclusive basis to Covered Physicians, upon the terms
and conditions set forth herein.
(b) BMS hereby grants to Cephalon a fully-paid up, nonexclusive right and
license to use the Trademark during the Copromotion Term solely in connection
with the promotion of the Product and the other activities of Cephalon conducted
in the Territory in accordance with this Agreement.
3. Copromotion by Cephalon.
(a) During the Copromotion Term, Cephalon shall use commercially reasonable
efforts to diligently promote the Product in the Territory to Covered Physicians
in a manner substantially equivalent to that which Cephalon employs to promote
its other principal products to neurologists; provided, that in any event
Cephalon will use not less than best efforts, within the standard of commercial
reasonableness, to diligently promote the Product throughout the Territory to
Covered Physicians. As soon as the prescription data for the month of May 1999
becomes available to BMS, BMS will review such data to determine Cephalon's
performance for the period January 1, 1999 to May 31, 1999. If prescriptions for
the Product are below ninety percent (90%) of the Key Physician Target
prescriptions as set forth on Schedule A for that same period, Cephalon will
redirect their sales representatives to:
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(i) increase the number of calls to the Key Target List; and
(ii) increase the number of primary details to the Key Target List.
(b) Except as provided for in Section 6 of this Agreement, Cephalon shall
be solely responsible for the costs and expenses of establishing and maintaining
its sales force and conducting its other activities under this Agreement.
(c) Cephalon shall not knowingly call on any physician who is not a Covered
Physician except as may be provided in the Call Plan.
(d) Cephalon shall provide BMS, within five (5) working days of
transmission, complete copies and/or transcripts of all home office generated
(for example, those sent out by Cephalon's Sales, Marketing and Sales Training
departments) communications (whether written, electronic or visual aids) to a
majority of Cephalon sales representatives concerning the promotion of the
Product. The individual to which these shall be sent will be designated by BMS
upon execution of this Agreement. In addition, all written, electronic and
visual communications provided to a majority of Cephalon sales representatives
regarding Product strategy, positioning or selling messages will be subject to
prior review and approval by BMS.
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
(f) The detail calls made by Cephalon shall present the Product in the
primary position, unless and until the commercial introduction of any product
that has been developed by Cephalon alone or in conjunction with a third party
licensor, licensee or collaborator, including, without limitation, modafinil or
Myotrophin (IGF=1)(TM) (any of the foregoing being referred to as a "Cephalon
Product"). Thereafter, the detail calls made by Cephalon may present the Product
in a position secondary to the Cephalon Product (but not to any other product
copromoted by Cephalon), but in no event may Cephalon present the Product with a
lesser priority than the secondary position.
4. Responsibilities of BMS.
6
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(a) Except as may be provided for in Section 6 of this Agreement, BMS shall
be solely responsible for the costs and expenses of conducting its activities
under this Agreement.
(b) BMS shall have the sole authority to determine the price of the Product
sold by BMS or Cephalon, including price increases or decreases and the timing
thereof as determined by BMS.
(c) BMS shall have the sole responsibility, at its cost and expense, for
Product manufacture, shipping, distribution and warehousing, for the invoicing
and billing of purchasers of the Product, for order confirmation (if any) in
accordance with BMS customary practices, and for the collection of receivables
resulting from Net Sales. BMS will book all sales of the Product. All sales will
be deemed made pursuant to contract between BMS and the customer.
(d) BMS shall use reasonable efforts consistent with applicable legal
requirements to maintain all necessary authorizations with the FDA to market the
Product in the Territory in commercial quantities, provided that Cephalon does
not engage in any act or omission inconsistent with such legal requirements.
(e) Promptly following the execution of this Agreement, BMS shall furnish
Cephalon with the Call List and with the Key Target List.
(f) BMS shall furnish Cephalon, at the cost and expense of BMS (except as
provided in Section 6 hereof), with copies of all promotional materials made
available to the BMS sales force, including translations thereof as may be
reasonably requested by Cephalon to satisfy its obligations under this
Agreement.
(g) BMS shall use all commercially reasonable efforts to achieve and
maintain the status of the Product's neurology indications with pharmacy benefit
manager organizations, formularies and other managed care groups, and will
provide information about uses of the Product in the neurology field (including
data from the Phase IV studies to be conducted by Cephalon pursuant to Section 9
hereof) to such entities. Cephalon will provide such assistance as BMS shall
reasonably request in connection with such activities.
7
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5. Product Marketing Committee.
(a) All materials specifically developed for Covered Physician in-person
promotion and related non-personal promotional activities shall be co-developed
by BMS and Cephalon. In addition, Cephalon shall be entitled to participate in
the BMS marketing committee that has been established for the Product or, if no
such marketing committee exists, a marketing committee for the Product in the
Territory to be established promptly by BMS and Cephalon after execution of this
Agreement (either such committee being referred to herein as the "Product
Marketing Committee"). Cephalon shall be entitled to participate in the
activities of the Product Marketing Committee related to the development and
coordination of the marketing strategy and plans for the Product in the
Territory, which shall include:
(i) developing and revising promotional materials for the Product,
including the package inserts, labeling and other materials used
for Neurologists;
(ii) developing and revising marketing plan for the Product, including
refining a call plan identifying the direct selling activity to
be performed by each of BMS and Cephalon in any given period;
(iii) developing a budget for marketing expenses to be incurred by
each party in connection with marketing of the Product in the
Territory;
(iv) planning market research activities;
(v) preparing the materials related to the Product that are to be
used to train each party's sales force; and
(vi) planning symposia, seminars and other professional relations
events related to the Product, including events targeting
Neurologists.
(b) The Product Marketing Committee shall be composed of four (4) persons,
with Cephalon and BMS each being entitled to designate two (2) individuals. The
initial members shall be designated by each party in writing promptly following
execution of this Agreement. Each party may change its designated members at any
time upon advance written notice to
8
<PAGE>
the other party of any substitution of a member. Decisions and recommendations
of the Product Marketing Committee will be made by vote of Cephalon and BMS,
with each party having two votes; provided, however, BMS shall have ultimate
control and authority to make any decisions regarding the marketing of the
Product.
(c) The Product Marketing Committee shall meet not less than once in each
Agreement Payment Period during the Copromotion Term or as otherwise agreed by
the parties in the writing, at such locations as are designated by each party
alternatingly. Each party shall bear the costs and expenses of its designated
members that are incurred in connection with the Product Marketing Committee
meetings.
(d) Each Call Plan identifying the direct selling and marketing activities
to be conducted by Cephalon in an Agreement Payment Period specifically
targeting Covered Physicians and each marketing expense budget developed by the
Product Marketing Committee shall be subject to the review and written approval
of BMS and Cephalon (the call plan so approved being referred to herein as the
"Call Plan" and the "Budget").
(e) Notwithstanding anything in this Section 5 or that might otherwise
imply to the contrary in this Agreement, BMS shall have strategic responsibility
and sole authority and responsibility for obtaining all legal, regulatory and
medical approvals related to the selling and use of promotional materials
prepared or approved by the Product Marketing Committee.
6. Funding of Promotional Activities.
(a) Except as provided in this Section 6, BMS shall be responsible for all
marketing expenses related to the Product, including the costs of all
promotional materials, advertisements, symposia and other promotional events.
(b) During the Copromotion Term, Cephalon may elect to participate in
symposia, seminars, and other professional relations events planned by BMS or
the Product Marketing Committee (collectively, the "Funded Activities"). If the
parties mutually agree, Cephalon may participate in other planned activities
related to the promotion of the Product in the Territory at a cost to be agreed
upon by the parties.
(c) In the event Cephalon elects to participate in any of the Funded
Activities, Cephalon's share of the aggregate costs of such Funded Activities
shall be the incremental
9
<PAGE>
cost to BMS associated with participation of additional physicians identified by
Cephalon (each, a "Cephalon Funding Obligation").
(d) For purposes of this Section 6, the term "Costs" means, in the case of
the Funded Activities, the direct, out-of-pocket costs and expenses paid by BMS
to an unaffiliated third party in connection with such activities during the
period in question.
7. Training of Cephalon Sales Force.
(a) The parties intend that BMS will provide Cephalon's sales force with
the same or substantially similar training with respect to the Product as has
been given or is to be given to BMS's sales force in the Territory. The Product
Marketing Committee shall develop the Product-related training programs and
schedule for such purpose. Additionally, in-field training programs shall be
held periodically at such location or locations throughout the Territory as
shall be determined by the Product Marketing Committee. Members of the Cephalon
sales force shall attend such Product-related training programs at Cephalon's
cost and expense. BMS shall bear the costs and expenses of its own sales force
and of any training personnel provided for the Product-related training
programs.
(b) Cephalon shall have the authority, and shall be responsible at its cost
and expense, for all other training to be provided to its sales force. The
contents and strategic direction of any training provided by Cephalon that
relates to the Product shall be coordinated and agreed to by Cephalon and BMS.
8. Certain Regulatory Matters.
(a) All regulatory matters regarding the Product shall remain under the
exclusive control of BMS, subject to the participation by Cephalon in matters
related to the marketing of the Product to Covered Physicians. BMS will have the
sole responsibility, at its cost and expense, to respond to Product and medical
complaints and to handle all returns and recalls of the Product.
(b) BMS shall furnish Cephalon with efficacy and safety information
reasonably requested by Cephalon to assist it in promoting the Product to
Covered Physicians, including, without limitation, relevant clinical and safety
data included in the New Drug Application for the Product and information
related to the efficacy and safety profile of the Product since
10
<PAGE>
its approval by the FDA. Such information shall be treated as confidential
information of BMS, and shall not be disclosed to third parties without BMS'
prior written approval.
(c) Beginning as of the Effective Date of this Agreement, each party shall
promptly notify the other party of any significant event(s) that affect the
marketing of the Product, including, but not limited to, adverse drug reactions
and governmental inquiries, whether within or outside the Territory.
"Serious" adverse events for the Product (as defined in section 8(h) below)
learned by Cephalon shall be submitted to BMS within three (3) working days but
no more than four (4) calendar days from the receipt date by Cephalon.
"Non-serious" adverse events for the Product (as defined in section 8(h)
below) that are spontaneously reported to Cephalon shall be submitted to BMS no
more than one (1) month from the date received by Cephalon; provided, however,
that medical and scientific judgment should be exercised in deciding whether
expedited reporting is appropriate in other situations, such as important
medical events that may not be immediately life-threatening or result in death
or hospitalization but may jeopardize the patient or may require intervention to
prevent a serious adverse event outcome.
BMS shall have the reporting responsibility for such events to applicable
regulatory health authorities anywhere in the world.
Cephalon shall report all such adverse events involving the Product learned
by it to:
Vice President, Worldwide Safety & Surveillance
Bristol-Myers Squibb Company
P.O. Box 5400
Mail Stop HW19-1.01
Princeton, New Jersey 08543-5400
U.S.A.
Facsimile No.: (609) 818-3804
Telephone No.: (609) 818-3737
A CIOMS-I form or a form that contains the data elements of a CIOMS-I form is
recommended.
11
<PAGE>
Serious adverse events concerning the Product learned by BMS shall be
reported by BMS to Cephalon at the time that BMS reports such events to FDA, and
shall be sent to:
Cephalon, Inc.
Attn: Medical Affairs
145 Brandywine Parkway
West Chester, Pennsylvania 19380-4245
Facsimile No.:
Telephone No.:
(d) Beginning as of the Effective Date of this Agreement, each party shall
promptly notify the other party in writing of any order, request or directive of
a court or other governmental authority to recall or withdraw the Product in any
jurisdiction. BMS shall be responsible, at its sole cost and expense, for the
costs of any recall or withdrawal of the Product.
(e) Upon being contacted by the Food and Drug Administration (FDA) or any
other federal, state or local agency for any regulatory purpose pertaining to
this Agreement or to the Product, Cephalon shall, if not prohibited by
applicable law, immediately notify BMS and will not respond to the agency until
consulting with BMS, to the maximum feasible extent; provided, however, that the
foregoing shall not be construed to prevent Cephalon in any way from complying,
and Cephalon may permit unannounced FDA or similar inspections authorized by law
and respond to the extent necessary to comply, with its obligation under
applicable law.
(f) Cephalon shall inform BMS's office of the Vice President, Worldwide
Safety & Surveillance of any Product Quality Complaint received within three (3)
working days but no more than four (4) calendar days from the receipt date by
Cephalon. A Product Quality Complaint is defined as any complaint that questions
the purity, identity, potency or quality of any marketed Product, its packaging,
or labeling, or any complaint that concerns any incident that causes the drug
product or its labeling to be mistaken for, or applied to, another article or
any bacteriological contamination, or any significant chemical, physical, or
other change or deterioration in the distributed drug product, or any failure of
one or more distributed batches of the drug product to meet the specifications
therefor in the NDA for the Product. Such information shall be sent to the same
address as set forth in Section 8(c) above
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<PAGE>
(g) BMS Professional Services Department shall handle all medical inquiries
concerning the Product. Cephalon shall refer all routine medical information
requests in writing to:
Bristol-Myers Squibb Company
Professional Services Department
P.O. Box 4500 P15-01
Princeton, NJ 08543-4500
Urgent medical information requests shall be referred by telephone to:
Professional Services Department: (609) 897-6660.
(h) A "serious" adverse event for the Product is defined as any untoward
medical occurrence that at any dose for the Product: (i) results in death; (ii)
is life-threatening; (iii) requires inpatient hospitalization or prolongation of
existing hospitalization; (iv) results in persistent or significant
disability/incapacity; (v) is a congenital anomaly/birth defect; (vi) results in
drug dependency or drug abuse; (vii) is cancer, or (viii) is an overdose. A
"nonserious" adverse event is defined as that which is not serious.
A "life-threatening" adverse event is defined as an event in which the
patient or subject was at risk of death at the time of the event; it does not
refer to an event which hypothetically might have caused death if it were more
severe.
A "serious medical event" is defined as a medical event that may not be
immediately life-threatening or result in death or hospitalization but, based on
appropriate medical and scientific judgment, may jeopardize the patient/subject
or may require intervention (e.g., medical, surgical) to prevent one of the
other outcomes listed as a serious definition.
9. Compliance with Law.
Each party shall maintain in full force and effect all necessary licenses,
permits and other authorizations required by law to carry out its duties and
obligations under this Agreement. Each party shall comply with all laws,
ordinances, rules and regulations (collectively, "Laws") applicable to its
activities under this Agreement, including without limitation, any requirements
of any product license applicable to the Product in the Territory.
13
<PAGE>
The parties will reasonably cooperate with one another with the goal of ensuring
full compliance with Laws.
10. Copromotion Compensation.
(a) As compensation for services rendered by Cephalon during the
Copromotion Term, BMS shall pay to Cephalon with respect to each Agreement Year
during the term of this Agreement the greater of:
[*The confidential material contained herein has been omitted and has
been separately filed with the Commission.]
14
<PAGE>
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
15
<PAGE>
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
16
<PAGE>
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
No separate payment shall be made for the third Agreement Payment Period in
any Agreement Year. Instead, at the end of each such Agreement Year, a final
reconciliation shall be conducted by comparing the amount to which Cephalon is
otherwise entitled for such Agreement Year pursuant to Section 10(a) above
(calculated using a single Net Sales per Script figure determined for the entire
Agreement Year) against the sum of all amounts (if any) previously paid to
Cephalon pursuant to this Section 10(c) for prior Agreement Payment Periods
during such Agreement Year. If the calculation determines that Cephalon is due
further compensation (or has been overcompensated by BMS) as a result of any
trimester payments made by BMS with respect to the first two payment periods of
any Agreement Year, the balance due to Cephalon (or to be refunded by Cephalon)
shall be computed and paid by the applicable party to the other within sixty
(60) days after the end of such Agreement Year.
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(d) Compensation due Cephalon under this Section 10 above shall be
calculated and paid within 60 days after the end of each Agreement Payment
Period during the Copromotion Term, in accordance with Sections 10(a)-(c) and
11 hereof.
11. Payments and Reporting.
(a) BMS shall furnish Cephalon, on a monthly basis within 40 days after the
end of each month, a report setting forth:
(i) the retail prescriptions for the Product in the Territory that
were written or ordered by (x) Covered Physicians and (y) other
health care professionals during such period, in each case, as
determined by the National Prescriptions Audit Plus: Prescriber
Specialty Report issued by IMS America; and
(ii) the retail Covered Physician Prescriptions in clause 11(a)(i)
above categorized by individual Covered Physician as sorted by
Zip Code and Medical Education Number (ME#) as determined by the
IMS X-Ponent Individual Prescriber database, provided, that
Cephalon shall hold such information in confidence until made
publicly available by IMS America and shall have executed such
confidentiality agreement as may be requested by IMS America with
respect to such disclosure of such information to it; and
(iii) a summary report with an explanation of costs associated with
Funded Activities.
(b) In addition to the reports provided under Section 11(a) above, BMS
shall furnish Cephalon, within 60 days after each Agreement Payment Period, a
report setting forth:
(i) the calculation of Net Sales attributable to Covered Physicians
in the Territory during such period; and
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<PAGE>
(ii) the calculation of Cephalon's compensation under Section 10 with
respect to such Net Sales attributable to Covered Physicians with
respect to such period (and, in addition to a report for the
third Agreement Payment Period, with respect to the entire
Agreement Year).
(c) BMS shall furnish Cephalon, as of the Effective Date of this Agreement,
retail prescription data for the Product on an individual Covered Physician
basis for each month in the preceding twelve (12) months sorted by Zip Code with
the view to enabling Cephalon to determine the projected base level of sales for
each defined Cephalon sales representative territory.
(d) The determination of Cephalon's compensation specified in the report
shall be made in accordance with Section 10 hereof.
(e) All payments to a party under this Agreement shall be made by wire
transfer in immediately available funds in legal currency of the United States
and shall be delivered to the account of such party designated by it in writing
from time to time.
(f) The parties will maintain complete and accurate books and records in
sufficient detail to enable verification of the detail call activity of
Cephalon, the Net Sales attributable to Covered Physicians and the basis for
calculating the compensation paid by BMS to Cephalon hereunder. Either party may
demand an audit of the other party's relevant books and records in order to
verify the other's reports on the aforesaid matters. Upon reasonable prior
notice to the party to be audited, the independent public accountants of the
other party shall have access to the relevant books and records of the party to
be audited in order to conduct a review or audit thereof. Such access shall be
available during normal business hours not more than once each calendar year
during the Copromotion Term and only for a period until two years after the
relevant period in question. The accountants shall be entitled to report its
conclusions and calculations to the party requesting the audit, except that in
no event shall the accountants disclose the names of customers of either party
or the prices or terms of sale charged by BMS for the Product.
The party requesting the audit shall bear the full cost of the performance
of any such audit except as hereinafter set forth. If, as a result of any
inspection of the books and records of BMS, it is shown that BMS' payments to
Cephalon under this Agreement were less than
19
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the amount which should have been paid, then BMS shall make all payments
required to be made to eliminate any discrepancy revealed by said inspection
within 30 days after Cephalon's demand therefor. If, as a result of any
inspection of the books and records of Cephalon, it is shown that BMS's
reimbursements for costs associated with Funded Activities to Cephalon under
this Agreement were more than the amount which should have been paid, then
Cephalon shall reimburse BMS for the discrepancy revealed by said inspection
within 30 days after BMS's demand therefor.
12. Copromotion Term and Termination.
(a) The Copromotion Term shall be for two (2) years and shall begin
effective January 1, 1999 (even if Effective Date of the Agreement is after such
date) and shall end on December 31, 2000, unless terminated earlier in
accordance with Section 12(b), (c) or (d) below or unless extended pursuant to
section 12(e) by the parties' mutual agreement (the "Copromotion Term").
(b) Cephalon may terminate the Copromotion Term:
(i) at any time, without cause, upon ninety (90) days' prior written
notice to BMS. During such notice period, Cephalon shall continue
to fulfill its obligations under this Agreement; or
(ii) Cephalon may terminate the Copromotion Term immediately upon
written notice of termination given to BMS, if BMS has breached a
material obligation or duty under this Agreement that is
continuing 30 days after Cephalon has advised BMS in writing of
the nature of said breach.
(c) BMS may terminate the Copromotion Term upon the occurrence of any of
the following:
(i) Upon sixty (60) days' prior written notice to Cephalon, if:
(A) Cephalon fails to achieve aggregate actual Covered Physician
Prescriptions for any six month period during the term
hereof in excess of ninety percent (90%) of the Covered
Physician Target
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set forth in Schedule A that are needed to generate a
payment under Section 10 hereof to Cephalon with respect to
each such Agreement Year; or
(B) Covered Physician Prescriptions fail to exceed, with respect
to any three (3) consecutive quarters, the minimum Base
Level Covered Physician Prescriptions needed to generate a
payment under Section 10 hereof to Cephalon with respect to
such Agreement Year; or
(C) The annual incentive compensation paid by Cephalon to its
sales representatives for promotion of the Product falls
below twenty percent (20%) of the total payment from BMS to
Cephalon for co-promotion of the Product during any
Agreement Year.
(ii) Upon written notice to Cephalon, if BMS has permanently ceased
manufacturing and marketing the Product because of a significant
safety problem related to the Product; or
(iii) BMS may terminate the Copromotion Term immediately upon written
notice of termination given to Cephalon, if Cephalon has breached
a material obligation or duty under this Agreement that is
continuing 30 days after BMS has advised Cephalon in writing of
the nature of the breach or default.
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
21
<PAGE>
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
(e) The Copromotion Term may be extended as the parties may mutually agree,
it being understood that neither party shall be under any obligation, express or
implied, to do so. In order to be binding upon either party, any such extension,
and the terms governing such extension, must be evidenced by a written agreement
executed by duly authorized representatives of both parties.
(f) Neither the termination nor expiration of the Copromotion Term shall
release or operate to discharge either party from any liability or obligation
that may have accrued prior to such termination or expiration. Any termination
of the Copromotion Term by a party shall not be an exclusive remedy, but shall
be in addition to any legal or equitable remedies that may be available to the
terminating party. However, neither party shall be liable to the other party for
any damages (whether direct, indirect, special, consequential, incidental, or
other, including lost profits) sustained by reason of expiration of this
Agreement or for termination of this Agreement by a party in accordance with the
terms hereof.
22
<PAGE>
(g) If the Copromotion Term is terminated by either party prior to the
completion of a Agreement Payment Period, Cephalon shall be entitled to receive
a pro rata portion of the compensation which it would have been entitled to
receive under Section 10 had the Copromotion Term been in effect for the entire
Agreement Payment Period (calculated based on a pro rata portion of all Base
Level Covered Physician Prescriptions obtained for the Product by Cephalon in
such Agreement Payment Period as compared to all such Base Level Covered
Physician Prescriptions obtained for the Product for such Agreement Payment
Period).
(h) Upon the termination or expiration of the Copromotion Term, Cephalon
shall promptly cease all of its promotion activities pursuant to this Agreement,
discontinue any use of the Trademark, return to BMS all sales training,
promotional, marketing material, BMS call lists and computer files, and any
remaining Product samples (i.e., not already distributed or destroyed with
destruction certified by Cephalon) that may have been supplied to Cephalon by
BMS under this Agreement, and shall provide to BMS (and not be entitled to
retain) any call lists of Covered Physicians provided by BMS for the purposes of
detailing.
(i) This Agreement shall be deemed to be terminated in its entirety and of
no further force and effect if neither party has any further obligation to the
other party in accordance with the terms hereof.
13. Indemnification and Insurance.
(a) BMS shall defend, indemnify and hold Cephalon and its employees,
agents, officers, directors and affiliates (a "Cephalon Party") harmless from
and against any and all losses, liabilities, obligations, claims, fees
(including, without limitation, attorneys fees), expenses incurred by a Cephalon
Party that result from or arise in connection with (i) the breach of any
covenant, representation or warranty of BMS contained in this Agreement, (ii)
the manufacturing, sale or distribution of the Product by BMS or any licensee or
affiliate thereof, including, without limitation, any claim of patent
infringement, (iii) any product liability claim related to the Product,
including, without limitation, the use by any person of any Product that was
manufactured, sold or distributed by BMS or any licensee or affiliate thereof,
(iv) any contamination of or defect in the Product; and (v) breach by BMS of its
obligations under Section 10 hereof. Notwithstanding anything in this Section
13(a), BMS shall not be obligated to indemnify a Cephalon Party for any
liability related to the Product for which Cephalon has assumed an
indemnification obligation under Section 13(b) below.
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<PAGE>
(b) Cephalon shall defend, indemnify and hold BMS and its employees,
agents, officers, directors and affiliates (a "BMS Party") harmless from and
against any and all losses, liabilities, obligations, claims, fees (including,
without limitation, attorneys fees), expenses and lawsuits brought against or
incurred by a BMS Party resulting from or arising in connection with (i) the
breach by Cephalon of any covenant, representation or warranty of Cephalon
contained in this Agreement and (ii) breach by Cephalon of its obligations under
Section 10 hereof.
(c) To receive the benefits of the indemnity under clauses (a) or (b)
above, as applicable, an indemnified party must (i) give the indemnifying party
written notice of any claim or potential claim promptly after the indemnified
party receives notice of any such claim; (ii) allow the indemnifying party to
assume the control of the defense and settlement (including all decisions
relating to litigation, defense and appeal) of any such claim (so long as it has
confirmed its indemnification obligation responsibility to such indemnified
party under this Section 13); and (iii) so long as such cooperation does not
vitiate any legal privilege to which it is entitled, reasonably cooperate with
the indemnifying party in its defense of the claim (including, without
limitation, making documents and records available for review and copying and
making persons within its/his/her control available for pertinent testimony). If
the indemnifying party defends the claim, an indemnified party may participate
in, but not control, the defense of such claim at its/his/her sole cost and
expense. An indemnifying party shall have no liability under this Section 13 as
to any claim for which settlement or compromise of such claim or an offer of
settlement or compromise of such claim is made by an indemnified party without
the prior consent of the indemnifying party.
(d) Cephalon acknowledges and agrees that any Cephalon sales force
personnel (including contract sales personnel, telemarketers, independent
contractors, employees, and agents) used by Cephalon to fulfill its obligations
under this Agreement are not, and are not intended to be or be treated as,
employees of BMS or any of its Affiliates, and that such individuals are not
eligible to participate in any "employee benefit plans", as such term is defined
in section 3(3) of ERISA, that are sponsored by BMS or any of its Affiliates.
BMS shall not be responsible to Cephalon, to any employees, agents,
contractors, telemarketers, or other personnel of Cephalon used by it to perform
its obligations under this Agreement, or to any governmental entity for any
compensation or benefits (including, without limitation, vacation and holiday
remuneration, healthcare coverage or insurance, life
24
<PAGE>
insurance, pension or profit-sharing benefits and disability benefits),
payroll-related taxes or withholdings, or any governmental charges or benefits
(including without limitation unemployment and disability insurance
contributions or benefits and workmen' compensation contributions or benefits)
that may imposed upon or be related to the performance by Cephalon and any of
its employees, agents, contractors, telemarketers, or other personnel used by
Cephalon to discharge its obligations under this Agreement, all of which shall
be the sole responsibility of Cephalon, even if it is subsequently determined by
any court, the IRS or any other governmental agency that such individual may be
a common law employee of BMS or any of its Affiliates. All such matters of
compensation, benefits and other terms of employment for any employee, agent,
contractor, telemarketer, or other personnel used by Cephalon shall be solely a
matter between Cephalon and such individual(s) or entities.
Nothing contained in this Section 13(d) is intended to or will effect or
limit any compensation payable by BMS to Cephalon for the services rendered by
Cephalon pursuant to this Agreement.
(e) Each party shall use commercially reasonable efforts to maintain
adequate insurance against such risks (including product liability) and upon
such terms (including coverages, deductible limits and self-insured retentions)
as is customary for the activities to be conducted by it under this Agreement
and is appropriate to cover its indemnification obligations hereunder. Each
party shall furnish to the other evidence of such insurance, upon request. Such
insurance information shall be kept in confidence in the same manner as any
other confidential information disclosed by one party to the other hereunder.
14. Confidentiality.
(a) Each party acknowledges that it may receive confidential or proprietary
information of the other party in the performance of this Agreement. Each party
shall hold confidential and shall not, directly or indirectly, disclose, publish
or use for the benefit of any third party or itself, except in carrying out its
duties hereunder, any confidential or proprietary information of the other
party, without first having obtained the furnishing party's written consent to
such disclosure or use. "Confidential or proprietary information" shall include,
inter alia, know-how, scientific information, clinical data, efficacy and safety
data, adverse event information, formulas, methods and processes,
specifications, pricing information (including discounts, rebates and other
price adjustments) and other terms and
25
<PAGE>
conditions of sales, customer information, business plans, and all other
intellectual property. This restriction shall not apply to any information
within the following categories:
(i) information that is known to the receiving party or its Affiliates
prior to the time of disclosure to it, to the extent evidenced by written
records or other competent proof;
(ii) information that is independently developed by employees, agents, or
independent contractors of the receiving party or its Affiliates without
reference to or reliance upon the information furnished by the disclosing
party, as evidenced by written records or other competent proof;
(iii) information disclosed to the receiving party or its Affiliates by a
third party that has a right to make such disclosure;
(iv) information that is contained in any written promotional material
prepared by BMS for use in connection with the Product; or
(v) any other information that becomes part of the public domain through no
fault or negligence of the receiving party.
The receiving party shall also be entitled to disclose the other party's
Confidential Information that is required to be disclosed in compliance with
applicable laws or regulations (including, without limitation, to comply with
SEC, NASDAQ or stock exchange disclosure requirements), or by order of any
governmental body or a court of competent jurisdiction; provided that the party
required to disclose such information shall use all reasonable efforts to obtain
confidential treatment of such information by the agency or court.
(b) This obligation shall survive the termination or expiration of this
Agreement for five (5) years.
(c) It is expressly understood and agreed that Cephalon may disclose
confidential information to members of its board of directors who are not
employees of Cephalon, provided, that Cephalon shall ensure that such directors
are bound by a written obligation of
26
<PAGE>
confidentiality to Cephalon as regards confidential information hereunder that
is disclosed to them.
15. Representations and Warranties.
(a) BMS represents and warrants to Cephalon that (i) the execution,
delivery and performance of this Agreement by BMS does not conflict with, or
constitute a breach of any order, judgment, agreement or instrument to which BMS
is a party; (ii) the execution, delivery and performance of this Agreement by
BMS does not require the consent of any person or the authorization of (by
notice or otherwise) any governmental or regulatory authority; (iii) the rights
granted by BMS to Cephalon hereunder do not conflict with any rights granted by
BMS to any third party; (iv) BMS owns the NDA for the Product, and (v) BMS has
not received any written notice of any claim that the manufacture, use or sale
of the Product infringes any patent or other intellectual property right of any
third party.
(b) Cephalon represents and warrants to BMS that (i) the execution,
delivery and performance of this Agreement by Cephalon does not conflict with,
or constitute a breach of any order, judgment, agreement or instrument to which
Cephalon is a party; and (ii) the execution, delivery and performance of this
Agreement by Cephalon does not require the consent of any person or the
authorization of (by notice or otherwise) any governmental or regulatory
authority.
16. Notices. Unless otherwise explicitly set forth herein, any notice
required or permitted to be given hereunder shall be in writing and shall be
delivered personally by hand, or sent by reputable overnight courier, signature
required, to the addresses of each party set forth below or to such other
address or addresses as shall be designated in writing in the same matter:
(a) If to BMS:
Bristol-Myers Squibb U.S. Medicines Group
777 Scudders Mill Road
Plainsboro, NJ 08536
Attention: Vice President and Senior Counsel,
U.S. Medicines Group
27
<PAGE>
with a copy to the attention of the "Vice President and Senior Counsel - USMG"
at the same address.
(b) If to Cephalon:
Cephalon, Inc.
Attn: Sr. Vice President and General Counsel
145 Brandywine Parkway
West Chester, Pennsylvania 19380-4245
Facsimile No.: 610-738-6337
Telephone No.: 610-738-6590
All notices shall be deemed given when received by the addressee.
17. Non-Solicitation. During the Copromotion Term and for a period of one
(1) year thereafter, neither party shall solicit, directly or indirectly, any
individual who was a member of the other party's sales force or marketing group
related to the Product in the Territory during the Copromotion Term, without the
written consent of the other party.
18. Miscellaneous Provisions.
(a) Assignment. Neither party shall assign or otherwise transfer this
Agreement or any interest herein or right hereunder without the prior written
consent of the other party, and any such purported assignment, transfer or
attempt to assign or transfer any interest herein or right hereunder shall be
void and of no effect; except that each party (i) may assign its rights and
obligations hereunder to an Affiliate without the prior consent of the other
party (although, in such event, the assigning party shall remain primarily
responsible for all of its obligations and agreements set forth herein,
notwithstanding such assignment) and (ii) may assign its rights and obligations
to a successor (whether by merger, consolidation, reorganization or other
similar event) or purchaser of all or substantially all of its business assets
relating to the Product, provided, that such successor or purchaser has agreed
in writing to assume all of such party's rights and obligations hereunder and a
copy of such assumption is provided to the other party hereunder.
(b) Non-Waiver. Any failure on the part of a party to enforce at any time
or for any period of time any of the provisions of this Agreement shall not be
deemed or construed
28
<PAGE>
to be a waiver of such provisions or of any right of such party thereafter to
enforce each and every such provision on any succeeding occasion or breach
thereof.
(c) Dispute Resolution. If any dispute arises under this Agreement which
cannot be resolved expeditiously by the Product Marketing Committee after due
consideration, the matter shall be submitted to the President of Cephalon and
the President of the BMS U.S. Pharmaceuticals Group for resolution. Any dispute
that can not be so resolved within 30 days after submission shall be submitted
for arbitration in accordance with the rules of the American Arbitration
Association, and the award or decision made by the arbitrator(s) designated
pursuant to the American Arbitration Association rules of arbitration shall be
binding upon the parties hereto and a judgment consistent therewith may be
entered in any court of competent jurisdiction; provided, however, that nothing
herein contained shall preclude a party from seeking equitable remedies in any
court of competent jurisdiction in order to enforce the provisions of Section 17
hereof. Any such arbitration proceedings shall be conducted in New York, New
York.
(d) Entirety of Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and thereof and
supersedes all previous and contemporaneous verbal and written agreements,
representations and warranties with respect to such subject matter. This
Agreement (or any provision or term hereof) may be released, waived, changed or
supplemented only by a written agreement signed by an officer or other
authorized representative of the party against whom enforcement of any release,
waiver, change or supplement is sought. This Agreement shall not be strictly
construed against either party hereto. This Amended and Restated Agreement shall
not predjudice the right of each Party to receive the benefits of any rights
with respect to Sections 15 (Indemnification and Insurance) and 16
(Confidentiality) of the Copromotion Agreement or any obligations of each Party
relating to the same Sections 15 and 16, which shall have accrued to it under
the Copromotion Agreement prior to the Effective Date of this Amended and
Restated Agreement.
(e) Public Announcements. The form and content of any public announcement
to be made by one party regarding this Agreement, or the subject matter
contained herein, shall be subject to the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by applicable law (including, without limitation, disclosure
requirements of the SEC, NASDAQ, or any other stock exchange) in
29
<PAGE>
which event the other party shall endeavor to give the other party reasonable
advance notice and review of any such disclosure.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
its conflicts of law principles.
(g) Relationship of the Parties. In making and performing this Agreement,
the parties are acting, and intend to be treated, as independent entities and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership, joint venture, or employer and employee relationship
between BMS and Cephalon. Except as otherwise provided herein, neither party may
make any representation, warranty or commitment, whether express or implied, on
behalf of or incur any charges or expenses for or in the name of the other
party. No party shall be liable for the act of any other party unless such act
is expressly authorized in writing by both parties hereto.
(h) Counterparts. This Agreement shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the signatures
of each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
(i) Force Majeure. Neither party shall be liable to the other party for any
failure to perform as required by this Agreement if the failure to perform is
due to circumstances reasonably beyond such party's control, including, without
limitation, acts of God, civil disorders or commotions, acts of aggression,
fire, explosions, floods, drought, war, sabotage, embargo, unexpected safety or
efficacy results obtained with the Product, utility failures, material
shortages, labor disturbances, a national health emergency, or appropriations of
property. A party whose performance is affected by a force majeure event shall
take prompt action using its reasonable best efforts to remedy the effects of
the force majeure event.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BRISTOL-MYERS SQUIBB CEPHALON INC.
COMPANY
By: By: /s/ Robert Roche
----------------------------- -----------------------
Name: Richard J. Lane Name: Robert Roche
Title: President, BMS US Medicines Grp. Title: V.P., Sales &
and Global Marketing Marketing
/s/ Brian A. Markison
Brian A. Markison
President, Neuroscience/ID/Dermatology
31
<PAGE>
SCHEDULE A
CEPHALON 1999 NEUROLOGY BASELINE AND TARGET TRX*
[*The confidential material contained herein has been omitted and has been
separately filed with the Commission.]
<PAGE>
SCHEDULE B
CEPHALON 2000 NEUROLOGY BASELINES AND TARGET TRX
The Baselines for Agreement Year constituting January 1, 2000 to December 31,
2000 shall be negotiated pursuant to Section 1O(b)(4) and when complete set
forth below:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 15,189,000
<SECURITIES> 70,366,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,680,000
<CURRENT-ASSETS> 94,340,000
<PP&E> 34,121,000
<DEPRECIATION> 14,376,000
<TOTAL-ASSETS> 117,354,000
<CURRENT-LIABILITIES> 26,379,000
<BONDS> 38,685,000
0
0
<COMMON> 302,000
<OTHER-SE> 48,137,000
<TOTAL-LIABILITY-AND-EQUITY> 117,354,000
<SALES> 7,252,000
<TOTAL-REVENUES> 14,979,000
<CGS> 839,000
<TOTAL-COSTS> 839,000
<OTHER-EXPENSES> 20,152,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,390,000
<INCOME-PRETAX> (31,442,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,442,000)
<EPS-BASIC> (1.09)
<EPS-DILUTED> (1.09)
</TABLE>
