<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-19119
CEPHALON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2484489
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
145 BRANDYWINE PARKWAY, 19380
WEST CHESTER, PENNSYLVANIA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (610) 344-0200
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange
Title of each class on which registered
------------------- -------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES [X]. No [_].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant is approximately $201,828,095. Such aggregate market value was
computed by reference to the closing price of the Common Stock as reported on
the Nasdaq National Market on February 19, 1999. For purposes of making this
calculation only, the registrant has defined affiliates as including all
directors and beneficial owners of more than ten percent of the Common Stock of
the Company.
The number of shares of the registrant's Common Stock outstanding as of
February 19, 1999 was 28,820,542.
The purpose of Amendment No. 1 is to refile Exhibits 4.3(b), 10.5(h),
10.5(i), 10.5(j) and 10.5(k). Portions of these Exhibits have been omitted and
have been filed separately with the Securities and Exchange Commission pursuant
to an application for confidential treatment filed with the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Act of 1934, as
amended.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The Information required by this item was previously filed.
SCHEDULES
All schedules are omitted because they are not applicable or are not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
Reports on Form 8-K
During the fiscal quarter ended December 31, 1998, the Company filed a
Current Report on Form 8-K on December 28, 1998 announcing approval from the
U.S. Food and Drug Administration to market PROVIGIL(R) (modafinil) Tablets for
the treatment of excessive daytime sleepiness associated with narcolepsy.
EXHIBITS
The following is a list of exhibits filed as part of this annual report on
Form 10-K. Where so indicated by footnote, exhibits which were previously filed
are incorporated by reference. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated in parenthesis.
<TABLE>
<CAPTION>
EXHIBIT
NO.
--
<S> <C>
3.1 Restated Certificate of Incorporation, as amended. (Exhibit 3.1)(19)
3.2 Bylaws of the Registrant, as amended. (Exhibit 3.1)(19)
4.1 Specimen copy of stock certificate for shares of Common Stock of the Registrant (Exhibit
4.1)(10).
4.2 Amended and Restated Rights Agreement, dated as of January 1, 1999, between Cephalon, Inc. and
StockTrans, Inc. as Rights Agent (Exhibit 1) (22).
**4.3(a) Form of Note Purchase Agreement dated as of February 24, 1999 by and
between Cephalon and Investor.
*4.3(b) Form of Revenue Sharing Senior Secured Note due 2002 dated March
1, 1999. (21)
**4.3(c) Form of Class A Warrant.
**4.3(d) Form of Class B Warrant.
*4.3(e) Security Agreement dated March 1, 1999 between Cephalon, Inc. and Delta Opportunity Fund,
Ltd., as collateral agent.
*4.3(f) Patent and Trademark Agreement dated March 1,1999 between Cephalon, Inc. and Delta
Opportunity Fund, Ltd., as collateral agent.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
--
<S> <C>
10.1 Letter agreement dated March 22, 1995, between Cephalon, Inc. and the Salk Institute for
Biotechnology Industrial Associates, Inc. (Exhibit 99.1)(15).
10.2 Deliberately omitted.
10.3 Stock Purchase Agreement dated July 28, 1995, between Cephalon, Inc. and Kyowa Hakko
Kogyo Co., Ltd. (Exhibit 99.3)(16).
10.4(a) License Agreement, dated May 15, 1992, between Cephalon, Inc. and Kyowa Hakko Kogyo Co.,
Ltd. (Exhibit 10.6)(4)(20).
10.4(b) Letter agreement dated March 6, 1995 amending License Agreement between Cephalon, Inc. and
Kyowa Hakko Kogyo Co., Ltd. (Exhibit 10.4(6))(14)(20).
10.5(a) Supply Agreement, dated January 20, 1993, between Cephalon, Inc. and Laboratoire L. Lafon
(Exhibit 10.1)(7)(20).
10.5(b) License Agreement, dated January 20, 1993, between Cephalon, Inc. and Laboratoire L. Lafon
(Exhibit 10.2)(7)(20).
10.5(c) Trademark Agreement, dated January 20, 1993, between Cephalon, Inc. and Genelco S.A.
(Exhibit 10.3)(7)(20).
10.5(d) Amendment to License Agreement and Supply Agreement, dated July 21, 1993, between
Cephalon, Inc. and Laboratoire L. Lafon (Exhibit 10.1)(10)(11).
10.5(e) Amendment to Trademark Agreement, dated July 21, 1993, between Cephalon, Inc. and
Genelco S.A. (Exhibit 10.2)(11)(20).
10.5(f) Amendment No. 3 to License Agreement dated June 8, 1995, between Cephalon, Inc. and
Laboratoire L. Lafon (Exhibit 99.2)(15).
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))(17)(20).
*10.5(h) Amendment No. 5 to License Agreement and Supply Agreement dated January 21, 1998 between
Cephalon, Inc. and Laboratoire L. Lafon. (21)
*10.5(i) Amendment No. 6 to License Agreement and Supply Agreement dated February 2, 1998 between
Cephalon, Inc. and Laboratoire L. Lafon. (21)
*10.5(j) Amendment No. 3 to Trademark Agreement dated January 21, 1998 between Cephalon, Inc. and Genelco
S.A. (21)
*10.5(k) Amendment No. 4 to Trademark Agreement dated February 9, 1998 between Cephalon, Inc. and Genelco
S.A. (21)
+10.6(a) Cephalon, Inc. Amended and Restated 1987 Stock Option Plan (Exhibit 10.7)(4).
+10.6(b) Cephalon, Inc. Equity Compensation Plan (Exhibit 10.6(b))(17).
+10.6(c) Cephalon, Inc. Non-Qualified Deferred Compensation Plan (Exhibit 10.6(c))(10).
10.7 Form of Note Purchase Agreement, dated as of January 15, 1997, between Cephalon, Inc. and
the several purchasers of Cephalon's Senior Convertible Notes, without exhibits (10.1)(18).
10.8(a) Amended and Restated Agreement of Limited Partnership, dated as of June 22, 1992, by and
among Cephalon Development Corporation, as general partner, and each of the limited partners
of Cephalon Clinical Partners, L.P. (Exhibit 10.1)(6).
10.8(b) Amended and Restated Product Development Agreement, dated as of August 11, 1992, by and
between the Registrant and Cephalon Clinical Partners, L.P. (Exhibit 10.2)(6)(20).
10.8(c) Purchase Agreement, dated as of August 11, 1992, by and between the Registrant and each of
the limited partners of Cephalon Clinical Partners, L.P. (Exhibit 10.3)(6)(20).
10.8(d) Form of Series A Warrant to purchasers of Units including a limited partnership interest in
Cephalon Clinical Partners, L.P. (Exhibit 10.4)(6).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
No.
--
<S> <C>
10.8(e) Form of Series B Warrant to purchasers of Units including a limited partnership interest in
Cephalon Clinical Partners, L.P. (Exhibit 10.5)(6).
10.8(f) Incentive Warrant to purchase 115,050 shares of Common Stock of the Registrant issued to
PaineWebber Incorporated (Exhibit 10.6)(6).
10.8(g) Fund Warrant to purchase 19,950 shares of Common Stock of the Registrant issued to
PaineWebber R&D Partners III, L.P. (Exhibit 10.7)(6).
10.8(h) Pledge Agreement, dated as of August 11, 1992, by and between Cephalon Clinical Partners, L.P.
and the Registrant (Exhibit 10.8)(6).
10.8(i) Promissory Note, dated as of August 11, 1992, issued by Cephalon Clinical Partners, L.P. to the
Registrant (Exhibit 10.9)(6).
10.8(j) Form of Promissory Note, issued by each of the limited partners of Cephalon Clinical Partners,
L.P. to Cephalon Clinical Partners, L.P. (Exhibit 10.10)(6).
10.9 Supply, Distribution and License Agreement, dated as of July 27, 1993, by and between Kyowa
Hakko Kogyo Co., Ltd. and Cephalon, Inc. (Exhibit 10.3)(11)(20).
10.10(a) Agreement between Cephalon, Inc. and Chiron Corporation dated as of January 7, 1994
(Exhibit 10.1)(12)(20).
10.10(b) Letter agreement dated January 13, 1995 amending Agreement between Cephalon, Inc. and
Chiron Corporation (Exhibit 10.12(b))(14)(20).
10.10(c) Letter agreement dated May 23, 1995 amending Agreement between Cephalon, Inc. and Chiron
Corporation (Exhibit 10.12(c))(17)(20).
10.11(a) Agreement between Cephalon, Inc. and TAP Holdings Inc. (formerly TAP Pharmaceuticals
Inc.) dated as of May 17, 1994 (Exhibit 99.2)(13)(20).
10.11(b) Amendment dated June 28, 1996 amending Agreement between Cephalon, Inc. and TAP
Holdings Inc. (Exhibit 10.13(b))(19)(21)
*10.12 Toll Manufacturing and Packaging Agreement dated February 24, 1998 between Cephalon, Inc. and
Circa Pharmaceuticals, Inc. (21)
**21 Subsidiaries of Cephalon, Inc.
**23.1 Consent of Arthur Andersen LLP.
**24 Power of Attorney (included on the signature page to this Form 10-K Report).
**27 Financial Data Schedule
</TABLE>
* Filed herewith.
** Previously filed
+ Compensation plans and arrangements for executives and others.
(1 ) Filed as an Exhibit to the Registration Statement on Form S-1 filed on
March 15, 1991.
(2) Filed as an Exhibit to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No. 33-39413) filed on April 19, 1991.
(3) Filed as an Exhibit to Pre-Effective Amendment No. 2 to the Registration
Statement on Form S-1 (Registration No. 33-39413) filed on April 22, 1991.
(4) Filed as an Exhibit to the Transition Report on Form 10-K for transition
period from January 1, 1991 to December 31, 1991, as amended by Amendment
No. 1 filed on September 4, 1992 on Form 8.
(5) Filed as an Exhibit to the Company's Current Report on Form 8-K filed on
December 31, 1992.
(6) Filed as an Exhibit to the Registration Statement on Form S-3 (Registration
No. 33-56816) filed on January 7, 1993.
(7) Filed as an Exhibit to the Registration Statement on Form S-3 (Registration
No. 33-58006) filed on February 8, 1993.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.
4
<PAGE>
(9) Filed as an Exhibit to the Company's Current Report on Form 8-K dated June
8, 1993.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
(11) Filed as an Exhibit to the Registration Statement on Form S-3 (Registration
No. 33-73896) filed on January 10, 1994.
(12) Filed as an Exhibit to the Company's Current Report on Form 8-K dated
January 10, 1994.
(13) Filed as an Exhibit to the Company's Current Report on Form 8-K dated May
17, 1994.
(14) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
(15) Filed as an Exhibit to the Registration Statement on Amendment No. 1 to
Form S-3 (Registration No. 33-93964) filed on June 30, 1995.
(16) Filed as an Exhibit to the Registration Statement on Amendment No. 2 to
Form S-3 (Registration No. 33-93964) filed on July 31, 1995.
(17) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
(18) Filed as an Exhibit to the Registration Statement on Form S-3 (Registration
No. 333-20321) filed on January 24, 1997.
(19) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
(20) Portions of the Exhibit have been omitted and have been filed separately
pursuant to an application for confidential treatment granted by the
Securities and Exchange Commission.
(21) 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.
(22) Filed as an Exhibit to the Company's Form 8-A/A (12G) filed on January 20,
1999.
5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Date: May 24, 1999 Cephalon, Inc.
By: /s/ Frank Baldino, Jr., Ph.D.
---------------------------------------
Frank Baldino, Jr., Ph.D.
President and Chief Executive Officer
<PAGE>
Exhibit Index
The Exhibits that have been filed herewith this Form 10-K/A are summarized
as follows:
Exhibit No. Description
- ---------- -----------
*4.3(b) Form of Revenue Sharing Senior Secured Note due 2002
dated March 1, 1999.
*10.5(h) Amendment No. 5 to License Agreement and Supply
Agreement dated January 21, 1998 between Cephalon,
Inc. and Laboratoire L. Lafon.
*10.5(i) Amendment No. 6 to License Agreement and Supply
Agreement dated February 2, 199 between Cephalon, Inc.
and Laboratoire L. Lafon.
*10.5(j) Amendment No. 3 to Trademark Agreement dated January
21, 1998 between Cephalon, Inc. and Genelco S.A.
*10.5(k) Amendment No. 4 to Trademark Agreement dated February
9, 1998 between Cephalon, S.A.
*10.12 Toll Manufacturing and Packaging Agreement dated
February 24, 1998 between Cephalon, Inc. and Cirea
Pharmaceuticals, Inc.
*Portions of this Exhibit have been omitted and have
been filed separately with the Securities and Exchange
Commission pursuant to an application for confidential
treatment filed with the Securities and Exchange
Commission pursuant to Rule 246-2 under the Securities
Exchange Act of 1934, as amended
<PAGE>
EXHIBIT 4.3(B)*
ANNEX I
TO
NOTE PURCHASE
AGREEMENT
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). THE ISSUANCE TO THE HOLDER OF THE SHARES OF COMMON STOCK
ISSUABLE IN PARTIAL PAYMENT OF PRINCIPAL OR THE REDEMPTION PRICE OF THIS NOTE
AND IN PAYMENT OF INTEREST ON THIS NOTE ARE NOT COVERED BY A REGISTRATION
STATEMENT UNDER THE 1933 ACT. PURSUANT TO THE NOTE PURCHASE AGREEMENT, THIS
NOTE HAS BEEN ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT ONLY
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF
THE RESALE THEREOF UNDER THE 1933 ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
CEPHALON, INC.
11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002
No. ____ $________
New York, New York
March 1, 1999
FOR VALUE RECEIVED, CEPHALON, INC., a Delaware corporation
(hereinafter called the "Company"), hereby promises to pay to [NAME], [ADDRESS],
or registered assigns (the "Holder"), or order, the sum of ______________
Dollars ($________________), on the Maturity Date, and to pay interest on the
unpaid principal balance hereof at the Applicable Rate from the date hereof,
until the same becomes due and payable, whether at maturity or upon acceleration
or by repurchase in accordance with the terms hereof or otherwise. Any amount,
including, without limitation, principal of or interest on this Note or the
Optional Redemption Price, the Repurchase Price or the Registration Repurchase
Price, that is payable under this Note that is not paid when due shall bear
interest at the Default Rate from the due date thereof until the same is paid
("Default Interest"). Regular interest shall be payable in arrears on each
Interest Payment Date, commencing on June 1, 1999, on the principal amount
outstanding on such date. Regular interest on this Note shall be computed on
the basis of a 360-day year of 12 30-day months and actual days elapsed. No
regular interest shall be payable on an Interest Payment Date on any portion of
the principal amount of this Note which shall have been redeemed prior to such
Interest Payment Date so long as the Company shall have complied in full with
its obligations with respect to such redemption.
All payments of principal of and premium, if any, interest, and other
amounts on this Note shall be made in lawful money of the United States of
America, or, at the option of the
* Certain portions of this exhibit have been omitted based upon a request
for confidential treatment that has been filed with the Commission. The
omitted portions have been filed separately with the Commission.
-1-
<PAGE>
Company and subject to the provisions of this Note, interest payable on the
Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock or, in accordance with Section 1.4, the
Company is entitled under certain circumstances to pay a portion of the
principal of this Note in shares of Common Stock. All cash payments shall be
made by wire transfer of immediately available funds to such account as the
Holder may from time to time designate by written notice in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case of
any Interest Payment Date which is not the date on which this Note is paid in
full, the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date. Certain
capitalized terms used in this Note are defined in Article VIII.
The obligations of the Company under this Note shall rank in right of
payment on a parity with all other unsubordinated obligations of the Company for
indebtedness for borrowed money or the purchase price of property. This Note is
issued pursuant to the Note Purchase Agreement and the Holder of this Note and
this Note are subject to the terms and entitled to the benefits of the Note
Purchase Agreement. This Note is entitled to the benefits of the Security
Agreement and the Patent and Trademark Security Agreement.
The following terms shall apply to this Note:
ARTICLE I
CERTAIN PAYMENTS IN COMMON STOCK;
OPTIONAL REDEMPTION
1.1 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If the
-------------------------------------------------
Company exercises its option to make a payment of interest on this Note wholly
or partly in Common Stock (herein sometimes called the "Share Interest Payment
Option"), the issuance of Interest Payment Shares upon such exercise of the
Share Interest Payment Option shall have been authorized by the Board of
Directors of the Company.
(b) The Company shall not be permitted to exercise the Share Interest
Payment Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of Interest Payment Shares or the public
resale of such Interest Payment Shares by the Holder would require
registration or filing with or
-2-
<PAGE>
approval of any governmental authority under any law or regulation, and
such registration, filing or approval has not been effected or obtained or
is not in effect or on such Interest Payment Date or the date the Company
delivers the Interest Payment Shares to the Holder the Interest Share
Registration Statement is unavailable for use by the Holder for the resale
of the Interest Payment Shares;
(iii) the outstanding shares of Common Stock are neither (A) listed or
admitted for trading on a national securities exchange nor (B) quoted on
Nasdaq; or the Interest Payment Shares shall not at the time of issuance
have been authorized for listing, upon official notice of issuance, on the
principal securities exchange on which the Common Stock is then listed and
traded;
(iv) the Interest Share Price for the Interest Payment Shares is less
than the par value of the Common Stock; or
(v) an Event of Default has occurred and is continuing on the date
the Company makes such election or on the applicable Interest Payment Date.
(c) The Company may exercise its right to elect the Share Interest
Payment Option with respect to any Interest Payment Date only by giving notice
of such election to the Holder not less than 24 or more than 28 Trading Days
prior to such Interest Payment Date, which notice shall state the percentage of
the interest payable on such Interest Payment Date which is to be paid in
Interest Payment Shares. The Company shall have the right to elect the Share
Interest Payment Option with respect to this Note only if the Company also
elects the similar option which it has with respect to the Other Notes for the
interest due thereon on the date which is such Interest Payment Date and in each
such case pro rata among this Note and the Other Notes, based on the amounts of
interest due on such date hereon and thereon. If the Company elects the Share
Interest Payment Option with respect to a particular Interest Payment Date, the
Company shall issue to the Holder in respect of such Interest Payment Date the
aggregate number of whole shares of Common Stock determined by dividing the per
share Interest Share Price of the Common Stock on the applicable Interest
Payment Date into an amount equal to 102% of the total amount of lawful money of
the United States of America which the Holder would receive if the aggregate
amount of interest on this Note which is being paid in Common Stock were being
paid in such lawful money. If the Company elects the Share Interest Payment
Option with respect to an Interest Payment Date, the Interest Payment Shares for
such Interest Payment Date shall become issuable on such Interest Payment Date
and the Company shall deliver, or cause to be delivered, the appropriate number
of shares of Common Stock to the Holder within three Trading Days after the
applicable Interest Payment Date. If in any case the Company shall fail to
deliver or cause to be delivered such number of shares of Common Stock to the
Holder within such period of three Trading Days, then in addition to any other
liabilities the Company may have hereunder and under applicable law (1) the
Company shall pay or reimburse the Holder on demand for all out-of-pocket
expenses, including, without limitation, reasonable fees and expenses of legal
counsel, incurred by the Holder as a result of such failure, (2) if as a result
of such failure the Holder shall suffer any direct damages or liabilities from
such
-3-
<PAGE>
failure (including, without limitation, margin interest and the cost of covering
a purchase (whether by the Holder or the Holder's securities broker) or
borrowing of shares of Common Stock by the Holder for purposes of settling any
trade involving a sale of shares of Common Stock made by the Holder during the
period beginning on the date the Company notified the Holder of the Company's
election of the Share Interest Payment Option and ending on the date the Company
delivers or causes to be delivered to the Holder the shares of Common Stock
issuable in respect thereof), then the Company shall upon demand of the Holder
pay to the Holder an amount equal to the actual direct, out-of-pocket damages
and liabilities suffered by the Holder by reason thereof which the Holder
documents to the reasonable satisfaction of the Company, and (3) the Holder may
by written notice (which may be given by mail, courier, personal service or
telephone line facsimile transmission) or oral notice (promptly confirmed in
writing), given at any time prior to delivery to the Holder of the shares of
Common Stock issuable in connection with such exercise of the Share Interest
Payment Option, require payment in cash of the interest in respect of which the
Company exercised the Share Interest Payment Option, in which case the amount of
such interest shall be immediately due and payable, with Default Interest
thereon from the applicable Interest Payment Date until paid in full and the
Company shall not be obligated or entitled to issue such Interest Payment Shares
in respect of such Interest Payment Date. Notwithstanding the foregoing the
Company shall not be liable to the Holder under clause (2) of the immediately
preceding sentence to the extent the failure of the Company to deliver or to
cause to be delivered such shares of Common Stock results from fire, flood,
storm, earthquake, shipwreck, strike, war, acts of terrorism, crash involving
facilities of a common carrier, acts of God, or any similar event outside the
control of the Company (it being understood that the action or failure to act of
the Transfer Agent shall not be deemed an event outside the control of the
Company except to the extent resulting from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, the bankruptcy, liquidation or reorganization of
the Transfer Agent under any bankruptcy, insolvency or other similar law or any
similar event outside the control of the Transfer Agent). The Holder shall
notify the Company in writing (or by telephone conversation, confirmed in
writing) as promptly as practicable following the third Trading Day after such
Interest Payment Date if the Holder becomes aware that shares of Common Stock so
issuable have not been received as provided herein. If the Company shall have
exercised the Share Interest Payment Option with respect to a particular
Interest Payment Date and either (1) the Company shall notify the Holder on or
after such Interest Payment Date that the Interest Payment Shares might not be
delivered within three Trading Days after such Interest Payment Date or (2) the
Holder learns after the date which is three Trading Days after such Interest
Payment Date that the Holder has not received such Interest Payment Shares,
then, without releasing the Company of its obligations with respect thereto,
from and after the next succeeding Trading Day the Holder shall make reasonable
efforts not to sell shares of Common Stock in anticipation of receipt of such
Interest Payment Shares in a manner which is likely to increase materially the
liability of the Company under clause (2) of the second preceding sentence. No
fractional shares of Common Stock shall be issued in payment of interest on this
Note. In lieu thereof, the Company may, at its option, issue a number of shares
of Common Stock which reflects a rounding up to the next whole number or may pay
lawful money of the United States of America in lieu of issuance of such
fractional share.
-4-
<PAGE>
(d) If the Company elects the Share Interest Payment Option with
respect to a payment of interest on this Note with respect to a particular
Interest Payment Date, the Company shall deliver to the Holder, on or prior to
the date on which Interest Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the cash interest payment to which the Holder is entitled,
(ii) the portion of such interest payment being made in Interest Payment Shares
and the amount which is 102% thereof, (iii) the number of Interest Payment
Shares allocable to such payment, as calculated pursuant to this Section 1.1,
(iv) any rounding adjustment to such number or any payment necessary to be made
pursuant to Section 1.1(c), (v) a brief statement of the facts requiring such
adjustment, and (vi) a brief statement that none of the conditions set forth in
Section 1.1(b) has occurred and is existing and that all of the requirements of
this Section 1.1 have been met. The Interest Payment Shares shall be duly
issued in the name of the Holder or its nominee. Such Company Certificate shall
be conclusive evidence of the correctness of the calculation of the number of
Interest Payment Shares allocable to the payments to which such Company
Certificate relates and of any adjustments to such number made pursuant to this
Section 1.1 in the absence of manifest error. On or before the pertinent
payment date, the Company shall issue, or cause the transfer agent for the
Common Stock to prepare and issue, the Interest Payment Shares in the name of
the Holder or its nominee before being so delivered by the Company on the
payment date.
(e) The Interest Payment Shares, when issued pursuant to and in
compliance with this Section 1.1, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of Common Stock, will be, and for all
purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on this Note to which such Interest
Payment Shares relate.
1.2 OPTIONAL REDEMPTION. (a) At any time during the Optional
-------------------
Redemption Period, the Company shall have the right to redeem at any one time
all or from time to time any part of the outstanding principal amount of this
Note at the Optional Redemption Price pursuant to this Section 1.2 on any
Optional Redemption Date, so long as (x) on the date an Optional Redemption
Notice is given and at all times to and including the applicable Optional
Redemption Date, no Event of Default and no event which, with notice or passage
of time, or both, would become an Event of Default has occurred and is
continuing (unless the requirements of this clause (x) will be satisfied
immediately after the applicable Optional Redemption Date and the Company shall
furnish to the Holder Company Certificates to such effect on the date the
applicable Optional Redemption Notice is given to the Holder and on the
applicable Optional Redemption Date), (y) on the date an Optional Redemption
Notice is given and at all times to and including the applicable Optional
Redemption Date no Repurchase Event or Registration Repurchase Event has
occurred with respect to which the Holder has the right to exercise repurchase
rights pursuant to Sections 5.1 and 5.2 or Section 5.3 or with respect to which
the Holder has exercised such repurchase rights and the Repurchase Price or the
Registration Repurchase Price, as the case may be, has not been paid to the
Holder and no event which, with notice or passage of time, or both, would become
a
-5-
<PAGE>
Repurchase Event has occurred and is continuing, and (z) on the date an Optional
Redemption Notice is given, the Company has funds available to pay the Optional
Redemption Price. In order to exercise its right of redemption under this
Section 1.2, the Company shall give an Optional Redemption Notice to the Holder
not less than 20 days or more than 30 days prior to the Optional Redemption Date
stating that: (1) the Company is exercising its right to redeem a specified
portion of this Note in accordance with this Section 1.2, (2) the principal
amount of this Note to be redeemed, (3) the Optional Redemption Price and (4)
the Optional Redemption Date. On the applicable Optional Redemption Date (or
such later date as the Holder surrenders this Note to the Company) the Company
shall pay to or upon the order of the Holder, by wire transfer of immediately
available funds to such account as shall be specified for such purpose by the
Holder at least one Business Day prior to the Optional Redemption Date, an
amount equal to the Optional Redemption Price of the portion (which may be all)
of this Note to be redeemed.
(b) The Company shall not be entitled to give an Optional Redemption
Notice or to redeem any portion of this Note with respect to which the Company
has given the Holder notice pursuant to Section 1.4 that the Company is
exercising the Share Principal Payment Option and to which exercise the Holder
has consented.
(c) Any redemption of this Note pursuant to this Section 1.2 shall be
made at the same time as a redemption by the Company of a pro rata portion
(based on the outstanding principal amounts) of the Other Notes and in each such
case the aggregate principal amount of this Note and the Other Notes to be so
redeemed shall be at least $5,000,000.00 or such lesser aggregate principal
amount of this Note and the Other Notes as shall remain outstanding at the time
an Optional Redemption Notice is given. The Company shall not redeem any of the
Other Notes pursuant to the provisions thereof similar to this Section 1.2 or
repurchase or otherwise acquire any of the Other Notes (other than a mandatory
redemption pursuant to provisions of the Other Notes comparable to Article V)
unless the Company offers simultaneously to redeem, repurchase or otherwise
acquire a pro rata portion (based on outstanding principal amount) of this Note
for cash at the same unit price as the Other Note or Other Notes.
1.3 NO PREPAYMENT. Except as specifically provided in Sections 1.2
-------------
and 6.2, this Note may not be prepaid, redeemed or repurchased at the option of
the Company prior to the Maturity Date. The Company shall not repurchase or
otherwise acquire any of the Other Notes unless the Company offers
simultaneously to redeem, repurchase or otherwise acquire a pro rata portion of
this Note for cash at the same price per unit of outstanding principal amount as
the Other Note or Other Notes. Nothing in this Section 1.3 shall limit the
Company's rights under Article VII.
1.4 ISSUANCE OF COMMON STOCK IN LIEU OF CASH PAYMENT OF PRINCIPAL OR
----------------------------------------------------------------
REDEMPTION PREMIUM. (a) The Company shall have the right to elect to pay (1) a
- ------------------
portion of the principal amount of this Note on the Maturity Date or (2) a
portion of the Optional Redemption Price payable upon a redemption of this Note
in accordance with Section 1.2, in either such case in shares of Common Stock,
if the Holder consents to such election (herein sometimes called the "Share
Principal Payment Option"). If the Company elects the Share Principal Payment
Option, the
-6-
<PAGE>
issuance of Principal Payment Shares upon the exercise of the Share Principal
Payment Option shall have been authorized by the Board of Directors of the
Company. Such election, once made, shall be irrevocable.
(b) The Company shall not be entitled to exercise the Share
Principal Payment Option with respect to payment of a portion of this principal
Note if:
(i) the number of shares of Common Stock authorized, unissued, and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such principal to be paid in Common
Stock;
(ii) the issuance or delivery of Principal Payment Shares or the
public resale of such Principal Payment Shares by the Holder would require
registration or filing with or approval of any governmental authority under
any law or regulation, and such registration, filing or approval has not
been effected or obtained or is not in effect or on the Maturity Date the
Payment Share Registration Statement is unavailable for use by the Holder
for the resale of the Principal Payment Shares;
(iii) the outstanding shares of Common Stock are neither (A) listed
or admitted to trading on a national securities exchange nor (B) quoted on
Nasdaq; or the Principal Payment Shares shall not at the time of issuance
have been authorized for listing, upon official notice of issuance, on the
principal securities exchange on which the Common Stock is then listed and
traded;
(iv) the Payment Share Price for the Principal Payment Shares is less
than the par value of the Common Stock; or
(v) an Event of Default has occurred and is continuing on the date
the Company makes such election or on the Maturity Date.
(c) The Company may exercise its right to elect the Share Principal
Payment Option only by giving notice of such election to the Holder at least 100
Trading Days prior to the Maturity Date or the applicable Optional Redemption
Date, as the case may be. The Company shall have the right to elect the Share
Principal Payment Option with respect to a portion of the principal amount of
this Note that is due on the Maturity Date that is equal to not more than 50
percent of the original principal amount of this Note (or, if less than 50
percent of the original principal amount of this Note is outstanding, up to the
outstanding principal amount of this Note). The Company shall have the right to
elect the Share Principal Payment Option with respect to a portion of the
Optional Redemption Price equal to not more than 20 percent of the principal
amount of this Note to be redeemed on any Optional Redemption Date. In each
such case, the Company shall have the right to elect the Share Principal Payment
Option with respect to this Note only if:
-7-
<PAGE>
(i) the Company also elects the similar option which it has with
respect to the Other Notes for the principal thereof due on the date which
is the Maturity Date or a portion of the redemption price thereof which is
payable on the applicable Optional Redemption Date, as the case may be, and
in each such case pro rata among this Note and the Other Notes, based on
the outstanding principal amounts hereof and thereof; and
(ii) the Holder in its sole discretion consents to such election with
respect to this Note by notice to the Company within ten Trading Days after
the Company makes such election.
If the Company elects the Share Principal Payment Option and the Holder so
consents, the Company shall issue and deliver, or cause to be delivered to the
Holder on or before the Maturity Date or the applicable Optional Redemption
Date, as the case may be, the aggregate number of whole shares of Common Stock
determined by dividing the per share Payment Share Price on the Maturity Date or
the applicable Optional Redemption Date, as the case may be, into an amount
equal to 105% of the total amount of lawful money of the United States of
America which the Holder would receive if the aggregate amount of principal of
this Note or the portion of the Optional Redemption Price of this Note, as the
case may be, which is being paid in Common Stock were being paid in such lawful
money. If the Company shall fail to deliver or cause to be delivered such
number of shares of Common Stock to the Holder on or prior to the Maturity Date,
or the applicable Optional Redemption Date, as the case may be, then in addition
to any other liabilities the Company may have hereunder and under applicable law
(1) the Company shall pay or reimburse the Holder on demand for all out-of-
pocket expenses, including, without limitation, reasonable fees and expenses of
legal counsel, incurred by the Holder as a result of such failure, (2) if as a
result of such failure the Holder shall suffer any direct damages or liabilities
from such failure (including, without limitation, margin interest and the cost
of covering a purchase (whether by the Holder or the Holder's securities broker)
or borrowing of shares of Common Stock by the Holder for purposes of settling
any trade involving a sale of shares of Common Stock made by the Holder during
the period beginning on the date the Company notified the Holder of the
Company's election of the Share Principal Payment Option and ending on the
Maturity Date or the applicable Optional Redemption Date, as the case may be),
then the Company shall upon demand of the Holder pay to the Holder an amount
equal to the actual direct, out-of-pocket damages and liabilities suffered by
the Holder by reason thereof which the Holder documents to the reasonable
satisfaction of the Company, and (3) the Holder may by written notice (which may
be given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing), given at any time
prior to delivery to the Holder of the shares of Common Stock issuable in
connection with such exercise of the Share Principal Payment Option, require
payment in cash of the portion of the principal amount of this Note in respect
of which the Company exercised the Share Principal Payment Option, in which case
the amount of such principal shall be immediately due and payable, with Default
Interest thereon from the Maturity Date or the applicable Optional Redemption
Date, as the case may be, until paid in full and the Company shall not be
obligated or entitled to issue such Principal Payment Shares in respect of such
payment of principal or the Optional Redemption Date, as the case may be.
Notwithstanding the foregoing the Company shall not be liable to the
-8-
<PAGE>
Holder under clause (2) of the immediately preceding sentence to the extent the
failure of the Company to deliver or to cause to be delivered such shares of
Common Stock results from fire, flood, storm, earthquake, shipwreck, strike,
war, acts of terrorism, crash involving facilities of a common carrier, acts of
God, or any similar event outside the control of the Company (it being
understood that the action or failure to act of the Transfer Agent shall not be
deemed an event outside the control of the Company except to the extent
resulting from fire, flood, storm, earthquake, shipwreck, strike, war, acts of
terrorism, crash involving facilities of a common carrier, acts of God, the
bankruptcy, liquidation or reorganization of the Transfer Agent under any
bankruptcy, insolvency or other similar law or any similar event outside the
control of the Transfer Agent). The Holder shall notify the Company in writing
(or by telephone conversation, confirmed in writing) as promptly as practicable
following the Maturity Date or the applicable Optional Redemption Date, as the
case may be, if the Holder becomes aware that shares of Common Stock so issuable
have not been received as provided herein. If the Company shall have exercised
the Share Principal Payment Option with respect to a particular payment and
either (1) the Company shall notify the Holder that such Principal Payment
Shares might not be delivered when due or (2) the Holder learns after the date
on which such Principal Payment Shares are due to be delivered to such Holder
that the Holder has not received such Principal Payment Shares, then, without
releasing the Company of its obligations with respect thereto (x) from and after
the next succeeding Trading Day the Holder shall make reasonable efforts not to
sell shares of Common Stock in anticipation of receipt of such Principal Payment
Shares is a manner which is likely to increase materially the liability of the
Company under clause (2) of the second preceding sentence and (y) if the Company
so requests, the Holder will advise the Company of the Holder's open trading
position in the Common Stock with respect to which the Holder expects receipt of
such Principal Payment Shares and will take such action as may be directed by
the Company to close such open trading position (subject to prevailing market
conditions) so long as the Company pays in advance, or makes provision for such
payment which is satisfactory to the Holder in its sole discretion, of all
amounts required by the Holder to assure that the Holder will not suffer any
economic or trading loss by reason of taking such action. No fractional shares
of Common Stock shall be issued in payment of principal or any portion of the
Optional Redemption Price of this Note. In lieu thereof, the Company may, at its
option, issue a number of shares of Common Stock which reflects a rounding up to
the next whole number or may pay lawful money of the United States of America in
lieu of issuance of such fractional share.
(d) (1) If the Company shall be entitled to issue Principal Payment
Shares on the Maturity Date, the Company shall deliver to the Holder, on or
prior to the Maturity Date:
(A) a Company Certificate setting forth (i) the total amount of
principal to which the Holder is entitled, (ii) the portion of the
principal of this Note being paid in Principal Payment Shares and the
amount which is 105% thereof, (iii) the number of Principal Payment Shares
allocable to the payment of such amount, as calculated pursuant to this
Section 1.4, (iv) any rounding adjustment to such number or any payment
necessary to be made pursuant to Section 1.1(c), (v) a brief statement of
the facts requiring such adjustment, and (vi) a brief statement that none
of the conditions set forth in Section 1.4(b) has occurred and is existing
and that all of the requirements of this Section 1.4 have been met; and
-9-
<PAGE>
(B) an opinion of counsel selected by the Company and reasonably
acceptable to the Majority Holders to the effect set forth in EXHIBIT B.
(2) If the Company shall be entitled to issue Principal Payment
Shares in partial payment of the Optional Redemption Price, the Company shall
deliver to the Holder, on or prior to the applicable Optional Redemption Date:
(A) a Company Certificate setting forth (i) the total amount of
principal being redeemed on such Optional Redemption Date, (ii) the portion
of the premium on such principal amount of this Note being paid in
Principal Payment Shares and the amount which is 105% thereof, (iii) the
number of Principal Payment Shares allocable to the payment of such amount,
as calculated pursuant to this Section 1.4, (iv) any rounding adjustment to
such number or any payment necessary to be made pursuant to Section 1.1(c),
(v) a brief statement of the facts requiring such adjustment, and (vi) a
brief statement that none of the conditions set forth in Section 1.4(b) has
occurred and is existing and that all of the requirements of this Section
1.4 have been met; and
(B) an opinion of counsel selected by the Company and reasonably
acceptable to the Majority Holders to the effect set forth in EXHIBIT B.
(3) The Principal Payment Shares shall be duly issued in the name of
the Holder or its nominee. Such Company Certificate shall be conclusive
evidence of the correctness of the calculation of the number of Principal
Payment Shares and of any adjustments to such number made pursuant to this
Section 1.4 in the absence of manifest error. On or before the Maturity Date or
the applicable Optional Redemption Date, as the case may be, the Company shall
issue, or cause the Transfer Agent for the Common Stock to prepare and issue,
the Principal Payment Shares in the name of the Holder or its nominee before
being so delivered by the Company on the Maturity Date or the applicable
Optional Redemption Date, as the case may be.
(f) The Principal Payment Shares, when issued pursuant to and in
compliance with this Section 1.4, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of Common Stock, will be, and for all
purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the portion of the principal amount of this Note to
which such Principal Payment Shares relate or the portion of the Optional
Redemption Price of this Note to which such Principal Payment Shares relate, as
the case may be.
(g) Notwithstanding any other provision hereof, if the Aggregate
Share Payment Amount exceeds the Share Payment Threshold, then the Holder shall
have the right, exercisable
-10-
<PAGE>
by notice given to the Company on or before the Business Day immediately
preceding the Maturity Date, to receive payment in cash rather than Principal
Payment Shares on the Maturity Date of all or any portion of the Holder's pro
rata (based on the portion of the principal amount of this Note and the Other
Notes which the Company has elected to pay in shares of Common Stock and as to
which the holders have consented) portion of such excess.
ARTICLE II
ADDITIONAL INTEREST
2.1 RIGHT TO ADDITIONAL INTEREST. In addition to all other amounts
----------------------------
provided in this Note and the Other Notes to be paid by the Company, the Holder
and the registered holders of the Other Notes shall be entitled to payments
based on a portion of the Net Revenues of the Products and the Competitive
Products in the Territory during the Payment Period. The amount of such
payments based on a portion of such Net Revenues of the Products and the
Competitive Products during any Determination Period shall be the product
obtained by multiplying (x) an amount equal to the Net Revenues from the
Products and the Competitive Products in the Territory during such Determination
Period times (y) the Payment Percentage in effect during such Determination
Period, with each change therein during such Determination Period being given
effect (such product, the "Noteholder Payment Amount"). Based on the U.S.
federal income tax laws in effect on the Issuance Date, the Company intends to
treat the Noteholder Payment Amounts as additional interest on this Note for
U.S. federal income tax purposes. The Company shall remain obligated to make
payments to the Holder pursuant to this Article II notwithstanding the payment
or redemption of all or any portion of this Note.
2.2 CALCULATION OF NET REVENUES. The Company shall maintain in
---------------------------
reasonable and adequate detail records of all components of and adjustments made
in determining Net Revenues of the Products and the Competitive Products in the
Territory during each Determination Period. Within 45 days after the end of
each Determination Period, the Company shall (a) furnish to the Holder a Company
Certificate setting forth (x) in reasonable detail for each Product or
Competitive Product for which there were sales in the Territory during such
Determination Period the amounts of (1) gross sales (excluding sales to
Affiliates), (2) prompt payment and other discounts, (3) transportation and
related insurance charges, (4) returns, bad debt and other allowances, (5) taxes
deducted from gross sales in determining Net Revenues, (6) distributors',
consignees' and wholesalers' fees and commissions, and (7) Net Revenues, in each
such case of the preceding clauses (1) through (7) for such Determination
Period, (y) the percentage and the amount, in currency of the United States of
America, of such Net Revenues to be paid to the Holder and the holders of the
Other Notes pursuant to Article II hereof and thereof, identifying each such
Person, and (z) a statement that the information set forth in such Company
Certificate is true and correct and (b) pay to the Holder an amount equal to the
portion of the Noteholder Payment Amount for such Determination Period to which
the Holder is entitled.
-11-
<PAGE>
2.3 ALLOCATION OF NOTEHOLDER PAYMENT AMOUNT. The Noteholder Payment
---------------------------------------
Amount for any Determination Period shall be allocated among the Persons
(including the Holder) who were registered holders of this Note and the Other
Notes at any time during such Determination Period pro rata based on the
principal amounts held by each and the portion of such Determination Period
during which such registered holders held this Note and the Other Notes.
2.4 RECORDS, INSPECTION, ETC. The Holder shall have the right,
------------------------
exercisable from time to time, to examine, or to have its representatives
examine, the relevant books of account and records of the Company, its
Subsidiaries and their respective Affiliates upon reasonable prior notice and
during normal business hours, to confirm the accuracy of the statements and
information provided to the Holder pursuant to this Article II and the amounts
of the payments required to be made by the Company to the Holder pursuant to
this Article II. The Holder shall have the right from time to time to retain a
firm of independent public accountants to examine the books of account and
records of the Company and its Subsidiaries for any one or more Determination
Periods for purposes of confirming the accuracy of such statements, information
and amounts. The cost of such accountants shall be paid by the Holder unless
(i) the amount of the Noteholder Payment Amount as determined by such
accountants for any Determination Period was more than $25,000 greater than the
amount thereof set forth in the Company Certificate furnished to the Holder for
such Determination Period pursuant to Section 2.2 or (ii) the Company shall have
failed to furnish a Company Certificate for such Determination Period to the
Holder pursuant to Section 2.2 on or before the due date for such Company
Certificate. The Company shall not be obligated to maintain the books and
records referred to in this section for more than three years after the end of
the Payment Period.
2.5 CERTAIN TRANSFERS OF PRODUCT OR PRODUCT RIGHTS. The Company
----------------------------------------------
shall not sell, assign, transfer or convey (including, without limitation, by
means of a license) any Product or Competitive Product as an entirety or
substantially as an entirety (except to the extent unrelated to sales and
marketing of the Products and Competitive Products in the Territory), or any of
its rights relating to any Product or Competitive Product in the Territory
unless (1) such transfer is expressly made subject to the lien, security
interest and other rights of the Holder and the holders of the Other Notes under
the Transaction Documents, (2) such transferee shall execute and deliver such
documents and instruments as shall be reasonably satisfactory to the Majority
Holders to give effect to the preceding clause (1), and (3) such transferee
shall by written instrument reasonably satisfactory to the Majority Holders
expressly assume, jointly and severally with the Company, all obligations for
the due and punctual payment and performance of all of the Company's obligations
under this Article II and under the Security Agreement and Patent and Trademark
Security Agreement; provided, however, that the provisions of this clause (3)
only shall be inapplicable to any license or sublicense by the Company of its
rights with respect to a Product or Competitive Product with respect to the
Territory to a Person in connection with a co-marketing arrangement between the
Company and such Person, so long as all revenues from sales of such Product or
Competitive Product by such Person are included in the computation of Net
Revenues for purposes of determining the Noteholder Payment Amount, whether or
not such revenues are received by the
-12-
<PAGE>
Company or reflected in the Company's books, records or financial statements.
2.6 NO REDEMPTION. The obligations of the Company under this Article
-------------
II shall not be extinguished or eliminated by any redemption of this Note
pursuant to Section 1.2, any acceleration or payment of this Note upon the
occurrence of an Event of Default, any exercise by the Holder of repurchase
rights under Article V or any prepayment of this Note in accordance with Section
6.2.
ARTICLE III
CERTAIN COVENANTS
So long as the Company shall have any obligation under this Note,
unless otherwise consented to in advance by the Majority Holders:
3.1 LIMITATIONS ON CERTAIN INDEBTEDNESS. The Company will not
-----------------------------------
itself, and will not permit any Subsidiary to, create, assume, incur or in any
manner become liable in respect of, including, without limitation, by reason of
any business combination transaction (all of which are referred to herein as
"incurring"), any Indebtedness other than Permitted Indebtedness.
3.2 MAINTENANCE OF CASH, CASH EQUIVALENT AND ELIGIBLE INVESTMENT
------------------------------------------------------------
BALANCES. The Company shall maintain Cash, Cash Equivalent and Eligible
- --------
Investment Balances during the following periods at least equal to the amounts
set forth below:
Period Amount
------ ------
Issuance Date through December 31,1999
$40 million
January 1, 2000 and thereafter
30 million
The Company's Cash, Cash Equivalent and Eligible Investment Balances shall be
determined as of the end of each calendar quarter. Within fifteen days after
the end of each calendar quarter, the Company shall furnish to the Holder a
Company Certificate setting forth the amount of the Company's Cash, Cash
Equivalent and Eligible Investment Balances as of the end of such calendar
quarter. If at the end of any calendar quarter the Company shall have less than
the required amount of Cash, Cash Equivalents and Eligible Investment Balances,
then the Company shall not be deemed to be in violation of this Section 3.2
unless such insufficiency exists on the date which is 30 days after the end of
such calendar quarter, so long as during such 30-day period the Company is
making bona fide efforts to cure such insufficiency.
-13-
<PAGE>
3.3 PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and
----------------------
will cause each Significant Subsidiary to pay and discharge, all their
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings.
3.4 MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep,
----------------------------------
and will cause each Significant Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance, including, without limitation, products liability
insurance relating to the Product, in at least such amounts and against such
risks as is reasonably adequate for the conduct of their respective businesses
and the value of their respective properties.
3.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company
------------------------------------------------
will continue, and will cause each Significant Subsidiary to continue, to engage
in business of the same general type as now conducted by the Company, and will
preserve, renew and keep in full force and effect, and will cause each
Significant Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business and except
for any Subsidiary which is not involved in the manufacture, sale or marketing
in the Territory of Products or Competitive Products and which the Board of
Directors determines it is no longer in the Company's interest to own or operate
and, if being sold, is being sold for a fair consideration.
3.6 COMPLIANCE WITH LAWS. The Company will comply, and will cause
--------------------
each Significant Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and the Subsidiaries, taken as a whole.
3.7 INVESTMENT COMPANY ACT. The Company will not be or become an
----------------------
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
3.8 LIMITATIONS ON ASSET SALES, LIQUIDATIONS, ETC.; CERTAIN MATTERS.
---------------------------------------------------------------
The Company shall not
-14-
<PAGE>
(a) sell, convey or otherwise dispose of all or substantially all of
the assets of the Company as an entirety or substantially as an entirety in a
single transaction or in a series of related transactions; or
(b) liquidate, dissolve or otherwise wind up the affairs of the
Company.
3.9 LIMITATIONS ON LIENS. The Company will not itself, and will not
--------------------
permit any Subsidiary to, create, assume or suffer to exist any mortgage, lien,
pledge, security interest or other charge or encumbrance (including, without
limitation, the lien or retained security title of a conditional vendor), all of
which are referred to below as "liens", upon all or any part of its property of
any character, whether owned at the date hereof or thereafter acquired, except:
(a) liens upon any property of any Subsidiary or Subsidiaries as
security for indebtedness owing to the Company;
(b) purchase money liens upon any property acquired by the Company or
any Subsidiary, or liens existing on such property at the time of acquisition;
provided that (i) no such lien shall extend to or cover any other property of
the Company or any Subsidiary, (ii) the principal amount of indebtedness secured
by each such lien on any such property shall not exceed the cost (including such
principal amount of the indebtedness secured thereby) to the Company or the
Subsidiary of the property subject thereto, and (iii) the aggregate principal
amount of all indebtedness of the Company and all Subsidiaries secured by all
liens described in this subsection (b) and any extensions, renewals or
replacements thereof, at any one time outstanding, shall not exceed $10 million
for the Company and the Subsidiaries; and the extending, renewing or replacing
of any lien permitted by this subsection (b) or of the indebtedness secured
thereby; provided, however, that in any such case the lien by which any lien is
extended, renewed or replaced shall not extend to or cover any other property of
the Company or any Subsidiary and the principal amount of such indebtedness
extended, renewed or replaced shall not be increased;
(c) liens securing this Note and the Other Notes ratably;
(d) liens for taxes or assessments or governmental charges or levies
on its property if such taxes or assessments or charges or levies shall not at
the time be due and payable or if the amount, applicability, or validity of any
such tax, assessment, charge or levy shall currently be contested in good faith
by appropriate proceedings or necessary preliminary steps are being taken to
contest, compromise or settle the amount thereof or to determine the
applicability or validity thereof and if the Company or such Subsidiary, as the
case may be, shall have set aside on its books reserves (segregated to the
extent required by sound accounting practice) deemed by it adequate with respect
thereto; deposits or pledges to secure payment of worker's compensation,
unemployment insurance, old age pensions or other social security; deposits or
pledges to secure performance of bids, tenders, contracts (other than contracts
for the payment of money borrowed or credit extended), leases, public or
statutory obligations, surety or appeal bonds, or other deposits
-15-
<PAGE>
or pledges for purposes of like general nature in the ordinary course of
business; mechanics', carriers', workers', repairmen's or other like liens
arising in the ordinary course of business securing obligations which are not
overdue for a period of 60 days, or which are in good faith being contested or
litigated, or deposits to obtain the release of such liens; liens created by or
resulting from any litigation or legal proceedings or proceedings being
contested in good faith by appropriate proceedings, provided any execution
levied thereon shall be stayed; leases made, or existing on property acquired,
in the ordinary course of business; landlords' liens under leases to which the
Company or any Subsidiary is a party; and zoning restrictions, easements,
licenses or restrictions on the use of real property or minor irregularities in
title thereto; provided that all such liens described in this subsection (d) do
not, in the aggregate, materially impair the use of such property in the
operations of the business of the Company or any Subsidiary or the value of such
property for the purpose of such business; and
(e) liens existing on the Issuance Date and listed in Schedule 4(r)
to the Note Purchase Agreement.
3.10 PRODUCTS AND COMPETITIVE PRODUCTS MARKETING. Until the end of
-------------------------------------------
the Payment Period, the Company shall use all commercially reasonable efforts to
market the Products and the Competitive Products in the Territory directly or
through reliable third parties.
3.11 MANUFACTURE AND SALE OF THE PRODUCTS AND THE COMPETITIVE
--------------------------------------------------------
PRODUCTS. Until the end of the Payment Period, the Company shall use all
commercially reasonable efforts (a) to manufacture the Products and the
Competitive Products in accordance with GMP in sufficient quantities to meet the
demand therefor, either directly or through third party manufacturing and supply
arrangements, and (b) to sell the Products and the Competitive Products in the
Territory.
3.12 CERTAIN OBLIGATIONS. (a) The Company shall not amend, modify or
-------------------
waive any provision of any of the Lafon Agreements as they relate to the
Territory in a manner which would adversely affect the Collateral Agent's lien
on and Security Interest in the Collateral.
(b) The Company shall perform and comply in all material respects
with the Lafon Agreements; and shall perform and comply in all material respects
with any other agreement relating to any of the Products or the Competitive
Products, the failure to comply with which could have a material adverse effect
on the Net Revenues from the Products and the Competitive Products or adversely
affect the Collateral Agent's lien on and security interest in the Collateral.
3.13 NOTICE OF DEFAULTS. The Company shall notify the Holder
------------------
promptly, but in any event not later than five days after the Company becomes
aware of the fact, of any failure by the Company to comply with this Article
III.
3.14 CERTAIN EVENTS OF DEFAULT. If an Event of Default specified in
-------------------------
clause (c), (e), or (f) of Section 4.1 shall occur and be continuing, then, at
the request of the Majority Holders, the
-16-
<PAGE>
Company shall use all commercially reasonable efforts (a) to sell, license or
otherwise dispose of the Products and the Competitive Products and the Company's
interests therein as they relate to the Territory, subject to the terms and
requirements of the Security Agreement and the Patent and Trademark Security
Agreement, for a cash consideration at least equal to the fair market value
thereof or (b) to complete one or more financing transactions to provide cash to
the Company to enable it to repay or redeem this Note and the Other Notes in
accordance with their terms on the earliest date on which the Company is
permitted to do so and, if such Event of Default involves a violation by the
Company of Section 3.2, to cure such violation.
ARTICLE IV
EVENTS OF DEFAULT
4.1 If any of the following events of default (each, an "Event of
Default") shall occur:
(A) FAILURE TO PAY PRINCIPAL, INTEREST, ETC. The Company fails (1) to
---------------------------------------
pay the principal, the Optional Redemption Price, the Repurchase Price or
the Registration Repurchase Price hereof when due, whether at maturity,
upon acceleration or otherwise, as applicable, (2) to pay or perform the
obligations of the Company under Article II (other than Section 2.4) or (3)
to pay any installment of interest hereon when due and, in the case of this
clause (3) of this Section 4.1(a) only, such failure continues for a period
of five Business Days after the due date thereof; or
(B) BREACH OF CERTAIN COVENANTS. The Company fails to comply with
---------------------------
Section 3.1, 3.10, 3.11, 3.12, 3.13, or 3.14; or
(C) BREACH OF OTHER COVENANTS. The Company fails to comply with
-------------------------
Section 3.2 or fails to comply in any material respect with any other
provision of Article III of this Note (other than Section 3.1, 3.10, 3.11,
3.12, 3.13, or 3.14) or breaches any other material covenant or other
material term or condition of this Note or any of the other Transaction
Documents (other than as specifically provided in clauses (a), (b), (i),
and (j) of this Section 4.1), and such breach continues for a period of
five days after written notice thereof to the Company from the Holder; or
(D) BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
----------------------------------------
warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Transaction Documents) shall be false
or misleading in any material respect when made; or
-17-
<PAGE>
(E) CERTAIN VOLUNTARY PROCEEDINGS. The Company or any Subsidiary
-----------------------------
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due or
shall admit in writing its inability generally to pay its debts as they
become due; or
(F) CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or other
-------------------------------
proceeding shall be commenced against the Company or any Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 consecutive days; or
(G) JUDGMENTS. Any court of competent jurisdiction shall enter one or
---------
more final judgments against the Company or any Subsidiary or any of their
respective properties or other assets in an aggregate amount in excess of
the Judgment Default Threshold, which is not vacated, bonded, stayed,
discharged, satisfied or waived for a period of 30 consecutive days; or
(H) DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any Subsidiary
------------------------------
shall (i) default in any payment with respect to any Indebtedness for
borrowed money (other than this Note) which Indebtedness has an outstanding
principal amount in excess of the Cross-Default Threshold, beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created or (ii) default in the observance or
performance of any agreement, covenant or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness
to become due prior to its stated maturity and such default or event shall
continue beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created (after giving effect to
any consent or waiver obtained and then in effect thereunder); or (b) any
Indebtedness of the Company or any Subsidiary which has an outstanding
principal amount in excess of the Cross-Default Threshold shall, in
accordance with its terms, be declared to be due and payable, or required
to be prepaid other than by a regularly scheduled or required payment prior
to the stated maturity thereof; or
-18-
<PAGE>
(I) SECURITY AGREEMENT AND PATENT AND TRADEMARK SECURITY AGREEMENT,
---------------------------------------------------------------
ETC. The occurrence of any "Event of Default" as defined in the Security
---
Agreement or the Patent and Trademark Security Agreement;
(J) CESSATION OF MANUFACTURE, SALES OR MARKETING. None of the Company
--------------------------------------------
or any of its Affiliates shall (directly or through reliable third parties)
be manufacturing, selling or marketing the Products in the Territory;
then,
(1) upon the occurrence and during the continuation of any Event of
Default specified in clause (a), (b), (d), (i), or (j) of this Section 4.1,
at the option of the Holder, and upon the occurrence of any Event of
Default specified in clause (e) or (f) of this Section 4.1: (X) the
Company shall, pay to the Holder an amount equal to the outstanding
principal amount of this Note plus accrued and unpaid interest on such
principal amount to the date of payment plus accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date of
payment, (V) all other amounts payable hereunder or under any of the other
Transaction Documents shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, reasonable legal
fees and expenses, of collection, (Y) the Collateral Agent shall be
entitled to exercise all rights and remedies under the Security Agreement
and the Patent and Trademark Security Agreement, and (Z) the Holder shall
be entitled to exercise all other rights and remedies available at law or
in equity; and
(2) upon the occurrence and during the continuation of any Event of
Default specified in clause (c), (g) or (h) of this Section 4.1: (A) if
any Event of Default continues during the period of 365 consecutive days
following the occurrence of such Event of Default, then thereafter so long
as any Event of Default is continuing (i) at the option of the Holder the
Company shall pay to the Holder an amount equal to the outstanding
principal amount of this Note plus accrued and unpaid interest on such
principal amount to the date of payment plus accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date of
payment, (ii) all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, reasonable legal fees and expenses, of collection and (and) the
Collateral Agent shall be entitled to exercise all rights and remedies
under the Security Agreement, the Patent and Trademark Security Agreement,
and (B) the Holder shall be entitled to exercise all rights and remedies
available at law or in equity other than those set forth in the immediately
preceding clause (A).
ARTICLE V
-19-
<PAGE>
REPURCHASE UPON A REPURCHASE EVENT
OR REGISTRATION REPURCHASE EVENT
5.1 REPURCHASE RIGHT UPON REPURCHASE EVENT. If a Repurchase Event
--------------------------------------
occurs, in addition to any other right of the Holder, the Holder shall have the
right, at the Holder's option, to require the Company to repurchase all of this
Note, or any portion hereof on the repurchase date that is five Business Days
after the date of the Holder Notice delivered with respect to such Repurchase
Event. The Holder shall have the right to require the Company to repurchase all
or any such portion of this Note if a Repurchase Event occurs at any time while
any portion of the principal amount of this Note is outstanding at a price equal
to the Repurchase Price.
5.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (a) On or
----------------------------------------------------
before the fifth Business Day after the occurrence of a Repurchase Event, the
Company shall give to the Holder a Company Notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised, and
(ii) a description of the procedure (set forth in this Section 5.2)
which the Holder must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver to the
Company on or before the 30th day after a Company Notice (or if no such Company
Notice has been given, within 40 days after the Holder first learns of the
Repurchase Event) (i) a Holder Notice setting forth the name of the Holder and
the principal amount of this Note to be repurchased, and (ii) this Note, duly
endorsed for transfer to the Company of the portion of the outstanding principal
amount of this Note to be repurchased. A Holder Notice may be revoked by the
Holder at any time prior to the time the Company pays the applicable Repurchase
Price to the Holder.
(c) If the Holder shall have given a Holder Notice, then on the date
which is five Business Days after the date such Holder Notice is given (or such
later date as the Holder surrenders this Note) the Company shall make payment in
immediately available funds of the applicable Repurchase Price to such account
as specified by the Holder in writing to the Company at least one Business Day
prior to the applicable repurchase date.
5.3 REPURCHASE RIGHT UPON REGISTRATION REPURCHASE EVENT. If a
---------------------------------------------------
Registration Repurchase Event occurs, in addition to any other right of the
Holder, the Holder shall have the right, at the Holder's option, to require the
Company to repurchase all of this Note, or from time to
-20-
<PAGE>
time any portion hereof, by making payment of the Registration Repurchase Price
to the Holder in immediately available funds to such account as specified by the
Holder by notice to the Company at least one Business Day prior to the
applicable repurchase date, on the repurchase date that is five Business Days
after the date a Holder Registration Repurchase Notice is given by the Holder
(or such later date as the Holder surrenders this Note to the Company). The
Holder shall exercise its right to require repurchase pursuant to this Section
5.3 by giving a Holder Registration Repurchase Notice as follows: (i) if the
Registration Repurchase Event occurs by reason of the Company's failure to
timely file the Registration Statement with the SEC, at any time prior to the
earlier of (x) the date which is 31 days after such event and (y) the date the
Company files the Registration Statement with the SEC or (ii) if the
Registration Repurchase Event occurs by reason of the non-occurrence of the SEC
Effective Date within 90 days after the Issuance Date, at any time prior to the
SEC Effective Date. If the Holder shall have given a Holder Registration
Repurchase Notice, the Company shall repurchase this Note or the portion of this
Note as stated in such Holder Registration Repurchase Notice at a purchase price
equal to the Registration Repurchase Price. A Holder Registration Repurchase
Notice may be revoked by the Holder at any time prior to the time the Company
pays the applicable Registration Repurchase Price.
5.4 OTHER. A Holder Notice or a Holder Registration Repurchase
-----
Notice given by the Holder shall be deemed for all purposes to be in proper form
unless the Company notifies the Holder within three Business Days after such
Holder Notice or Holder Registration Repurchase Notice has been given (which
notice shall specify all defects in such Holder Notice or Holder Registration
Repurchase Notice), and any Holder Notice or Holder Registration Repurchase
Notice containing any such defect shall nonetheless be effective on the date
given if the Holder promptly undertakes to correct all such defects. No such
claim of defect shall limit or delay performance of the Company's obligation to
repurchase any portion of this Note, the repurchase of which is not in dispute.
ARTICLE VI
EXTENSION OF MATURITY DATE
6.1 RIGHT TO EXTEND MATURITY DATE. The Company shall have the right,
-----------------------------
exercisable by notice given to the Holder on a date not earlier than 90 or later
than 30 days prior to the Original Maturity Date, which notice shall refer to
this Section 6.1, to extend the Maturity Date to the Extended Maturity Date so
long as the following conditions precedent are satisfied on the date the Company
gives such notice to the Holder:
(a) no Event of Default and no event which, with notice or passage of
time, or both, would become an Event of Default, shall have occurred and be
continuing;
(b) no Repurchase Event or Registration Repurchase Event shall have
occurred
-21-
<PAGE>
with respect to which the Holder has the right to exercise repurchase
rights under Sections 5.1 and 5.2 or Section 5.3 or with respect to which
the Holder has exercised such repurchase rights and the Repurchase Price or
the Registration Repurchase Price, as the case may be, has not been paid to
the Holder and no event which, with notice or passage of time, or both,
would become a Repurchase Event shall have occurred and be continuing;
(c) Net Revenues from the Products and the Competitive Products in
the Territory during the then most recent full calendar quarter preceding
the date on which the Company gives such notice to the Holder shall have
been at least 75% of the Target Revenues for the Products and the
Competitive Products in the Territory for such calendar quarter;
(d) the Company's Cash, Cash Equivalent and Eligible Investment
Balances shall be greater than the sum of (1) an amount equal to 125% of
the aggregate outstanding principal amount of this Note and the Other Notes
at the close of business on the Business Day prior to the date on which the
Company gives such notice to the Holder plus (2) an amount equal to 400% of
the cash used in operations by the Company and the Subsidiaries during the
then most recently completed fiscal quarter, as shown in the Company's
consolidated statement of cash flows, prepared in accordance with Generally
Accepted Accounting Principles on a basis consistent with the Company's
then most recently prepared audited annual financial statements;
(e) the Company shall be operating under a current business plan
approved by the Company's Board of Directors which shows that from the date
such notice is given to the Holder to the Extended Maturity Date the
Company's Cash, Cash Equivalent and Eligible Investment Balances will not
be less than 125% of the aggregate outstanding principal amount of this
Note and the Other Notes on the date such notice is given to the Holder;
(f) the Company shall have given notice to the holders of all of the
Other Notes to extend the maturity date thereof to the Extended Maturity
Date; and
(g) the Company shall have furnished to the Holder a Company
Certificate setting forth in reasonable detail confirmation of the
satisfaction of the conditions in the preceding clauses (a) through (f).
6.2 ALTERNATIVE RIGHT TO EXTEND MATURITY DATE. If the Company is
-----------------------------------------
unable to satisfy any one or more of the requirements of clause (c), (d) or (e)
of Section 6.1, the Company shall have the right, exercisable by notice given to
the Holder not earlier than 90 or later than 30 days prior to the Original
Maturity Date, which notice shall refer to this Section 6.2, to extend the
Maturity Date to the Extended Maturity Date so long as (x) the conditions
precedent specified in clauses (a) (other than an Event of Default solely by
reason of the Company's violation of Section 3.2), (b) and (f) of Section 6.1
are satisfied on the date the Company gives such notice to the Holder
-22-
<PAGE>
and (y) Net Revenues of the Product and the portion of the Net Revenues of the
Competitive Products included in the determination of the Noteholder Payment
Amount in the Territory during the then most recent full fiscal quarter
preceding the date on which the Company gives such notice to the Holder shall
have been at least $3,750,000. If the Company gives such notice, then from and
after the Original Maturity Date (1) the Applicable Rate shall be increased from
11% per annum to 14% per annum, (2) the Default Rate shall be increased from 21%
per annum to 26% per annum and (3) the Payment Percentage shall be increased to
25 percent and, so long as no Event of Default has occurred and is continuing,
the portion of the Noteholder Payment Amount paid to the Holder for any period
during which such higher Payment Percentage shall be in effect which is in
excess of the portion of the Noteholder Payment Amount which would have been
paid to the Holder if the Payment Percentage during such period were 9.0 percent
shall be paid to and applied by the Holder to the outstanding principal amount
of this Note.
ARTICLE VII
SATISFACTION AND DISCHARGE OF CERTAIN PROVISIONS
7.1. DISCHARGE OF CERTAIN PROVISIONS. If
-------------------------------
(i) the Company shall have deposited with the Collateral Agent, in
trust, funds or Government Obligations, the principal of and interest on
which when due will, together with any funds set aside at the same time and
without the necessity for investment or reinvestment of such funds or for
further investment or reinvestment of the principal amount of or interest
on such Government Obligations, provide funds sufficient to pay at maturity
or upon redemption all of this Note and the Other Notes, including
principal and interest due or to become due to the Maturity Date or earlier
redemption;
(ii) in the case of this Note and the Other Notes which the Company
may elect to redeem pursuant to Section 1.2 and the comparable provisions
of the Other Notes, in whole or in part, prior to their maturity, all
action other than the giving of notice of redemption necessary to redeem
such of this Note and the Other Notes as of the specified redemption date
or dates for this Note and such Other Notes shall have been taken and
arrangements reasonably satisfactory to the Majority Holders shall have
been made for the giving of notice of such redemption;
(iii) notice of such deposit shall have been given to the Holder and
the Holders of the Other Notes as to which such deposit is applicable,
within ten days after the date of such deposit;
(iv) no Event of Default or event which with notice or passage of
time, or both, would become an Event of Default under Section 4.1(e) or
4.1(f) has occurred and is
-23-
<PAGE>
continuing; and
(v) no Event of Default or event which with notice or passage of
time, or both would become an Event of Default (other than as specifically
provided in the immediately preceding clause (iv)) has occurred and is
continuing (unless the requirements of this clause (v) will be satisfied
immediately after the 92-day period hereinbelow specified and the Company
shall furnish to the Holder Company Certificates to such effect on the date
of such deposit and on such 92nd day);
and the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then on the date which is 92 days after the date of
such deposit by the Company with the Collateral Agent, so long as during such
92-day period no Event of Default or event which with notice or passage of time,
or both, would become an Event of Default under Section 4.1(e) or 4.1(f) has
occurred (x) this Note shall cease to be of further effect (except as provided
herein), (y) the Company shall be entitled to release of Collateral (other than
the funds and Government Obligations so deposited and any interest or income
thereon or any proceeds thereof) as provided in the Pledge Agreement and (z) the
Holder, on demand of the Company accompanied by a Company Certificate and an
opinion of counsel and at the cost and expense of the Company, shall execute
proper instruments acknowledging the satisfaction and discharge of this Note to
the extent set forth herein.
So long as this Note shall remain outstanding after such discharge,
this Note shall continue in effect following the discharge provided for above
solely with respect to rights of registration of transfer, exchange or
replacement of outstanding Notes, rights to receive payment of the principal
hereof and interest hereon in accordance with the terms of this Note from such
deposited funds or the proceeds of or interest on such deposited Government
Obligations, the rights under Article II and the rights under Sections 3.10 and
3.11; provided, however, that, following such discharge, no claim for payment of
principal of or interest on this Note shall be made against the Company. Upon
such discharge, any Event of Default which occurred prior to such discharge
solely by reason of one or more provisions of this Note with which the Company
thereafter is no longer obligated to comply, then such Event of Default shall no
longer exist.
7.2. DEPOSITED MONEYS AND GOVERNMENT OBLIGATIONS TO BE HELD IN
---------------------------------------------------------
ACCORDANCE WITH SECURITY AGREEMENT. All funds and Government Obligations
- ----------------------------------
deposited with the Collateral Agent pursuant to Section 7.1 shall be held in
trust and subject to and in accordance with the terms of the Security Agreement
and such funds and interest on such Government Obligations shall be applied by
it to the payment of the Notes in accordance with the Security Agreement.
7.3. REINSTATEMENT. If (i) the Collateral Agent is unable to apply
-------------
any funds in accordance with Section 7.2 and the Security Agreement by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application and (ii) the Majority
Holders so specify by this notice to the Company, the Company's obligations
under this Note shall be revived and reinstated as though no deposit had
occurred pursuant to Section 7.1
-24-
<PAGE>
until such time as the Collateral Agent is permitted to apply all such funds in
accordance with Section 7.2 and the Security Agreement.
ARTICLE VIII
DEFINITIONS
8.1 CERTAIN DEFINED TERMS. (a) All the agreements or instruments
---------------------
herein defined shall mean such agreements or instruments as the same may from
time to time be supplemented or amended or the terms thereof waived or modified
to the extent permitted by, and in accordance with, the terms thereof and of
this Note.
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Aggregate Share Payment Amount" means the sum of (1) the principal
amount of this Note as to which the Company has elected the Share Principal
Payment Option and to which the Holder has consented plus (2) the aggregate
principal amount of the Other Notes as to which the Company has elected to make
payment in shares of Common Stock pursuant to provisions comparable to Section
1.4 and to which the respective holders of the Other Notes have consented in
accordance with the terms of the Other Notes.
"Applicable Rate" means 11 percent per annum except that, if the
Company exercises its right to extend the Original Maturity Date to the Extended
Maturity Date pursuant to Section 6.2, then from and after the Original Maturity
Date such rate shall be increased to 14 percent per annum (or in either such
case such lesser rate as shall be the highest rate permitted by applicable law).
"Assignment Agreement" shall have the meaning provided in the Note
Purchase Agreement.
"Business Day" means any day other than a Saturday, Sunday or a day on
which commercial banks in The City of New York are authorized or required by law
or executive order to remain closed.
"Cash, Cash Equivalent and Eligible Investment Balances" of any Person
on any date shall be determined from such Person's books maintained in
accordance with Generally Accepted Accounting Principles, and means, without
duplication, the sum of (1) the cash accrued by such Person and its subsidiaries
on a consolidated basis on such date and available for use by such Person and
its subsidiaries on such date, (2) all assets which would, on a consolidated
balance sheet of such Person and its subsidiaries prepared as of such date in
accordance with
-25-
<PAGE>
Generally Accepted Accounting Principles, be classified as cash equivalents and
(3) all Eligible Marketable Securities which are assets which would, on a
consolidated balance sheet of such Person and its subsidiaries prepared as of
such date in accordance with Generally Accepted Accounting Principles, be
classified as marketable securities.
"Collateral Agent" means Delta Opportunity Fund, Ltd., as collateral
agent under the Security Agreement and the Patent and Trademark Security
Agreement, or its successors.
"Common Stock" means the Common Stock, par value $.01 per share, or
any shares of capital stock of the Company into which such shares shall be
changed or reclassified after the Issuance Date.
"Company" shall have the meaning provided in the first paragraph of
this Note.
"Company Certificate" means a certificate of the Company signed by an
Officer.
"Company Notice" means a Company Notice in the form attached hereto as
EXHIBIT C.
"Competitive Product" means a product, method or system, other than
the Product, that (x) has received regulatory approval for use, or has received
regulatory approval for any substantially similar use, in a human therapeutic
indication as any Product, or (y) is so used for human therapeutic indication of
excessive sleep disorder or excessive daytime sleep disorder but shall not
include any product, method or system that an Affiliate of the Company was
testing in preclinical or clinical trials or for which regulatory approval was
received, prior to becoming an Affiliate of the Company.
"Cross-Default Threshold" means as of any date an amount equal to the
greater of
(1) an amount equal to the product obtained by multiplying (a) the
amount, if any, by which the Company's Cash, Cash Equivalent and Eligible
Investment Balances on such date exceed the aggregate outstanding principal
amount of this Note and the Other Notes on such date times (b) 50 percent;
and
(2) $1,000,000 for any single Indebtedness of the type referred to in
Section 4.7 and $2,000,000 in the aggregate for the Company and the
Subsidiaries for all Indebtedness referred to in Section 4.1(h).
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
"Default Rate" means 21 percent per annum except that, if the Company
exercises its right to extend the Original Maturity Date to the Extended
Maturity Date pursuant to Section 6.2,
-26-
<PAGE>
then from and after the Original Maturity Date such rate shall be increased to
26 percent per annum (or in either case such lesser rate equal to the highest
rate permitted by applicable law).
"Determination Period" means each calendar quarter, except that the
first Determination Period shall begin on the Issuance Date and end on March 31,
1999 and the final Determination Period shall end on the last day of the Payment
Period.
"Eligible Bank" means a corporation organized or existing under the
laws of the United States or any other state, having combined capital and
surplus of at least $100 million and subject to supervision by federal or state
authority and which has a branch located in New York, New York.
"Eligible Marketable Securities" of the Company as of any date means
marketable securities which would be reflected on a consolidated balance sheet
of the Company and its subsidiaries prepared as of such date in accordance with
Generally Accepted Accounting Principles and which are debt obligations within
the Company's investment policies set forth on Exhibit M to the Company's Senior
Convertible Notes due April 7, 1998.
"Event of Default" shall have the meaning provided in Section 4.1.
"Extended Maturity Date" means March 1, 2003.
"Fundamental Change" means
(a) Any consolidation or merger of the Company or any Subsidiary with
or into another entity (other than a merger or consolidation of a
Subsidiary into the Company or a wholly-owned Subsidiary) where the
stockholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of the
surviving corporation of such consolidation or merger immediately following
such transaction; or the sale of all or substantially all of the assets of
the Company and the Subsidiaries in a safe transaction or a series of
related transactions; or
(b) The occurrence of any transaction or event in connection with
which all or substantially all the Common Stock shall be exchanged for,
converted into, acquired for or constitute the right to receive
consideration (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock which is (or will, upon consummation of or immediately following such
transaction or event, will be) listed on a national securities exchange or
approved for quotation on Nasdaq or any similar United States system of
automated dissemination of transaction reporting of securities prices; or
(c) The acquisition by a Person or entity or group of Persons or
entities acting
-27-
<PAGE>
in concert as a partnership, limited partnership, syndicate or group, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, of beneficial ownership of securities of
the Company representing 50% or more of the combined voting power of the
outstanding voting securities of the Company ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.
"GMP" means the Good Manufacturing Practices established from time to
time by the United States Food and Drug Administration.
"Government Obligations" means direct obligations of, or obligations
the timely payment of the principal of and the interest on which are
unconditionally guaranteed by, the United States of America and which are not,
by their terms, callable.
"Holder" shall have the meaning provided in the first paragraph of
this Note.
"Holder Notice" means a Holder Notice in the form attached hereto as
EXHIBIT D.
"Holder Registration Repurchase Notice" means a Holder Registration
Repurchase Notice in the form attached hereto as EXHIBIT E.
"Indebtedness" as used in reference to any Person means all
indebtedness of such Person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally Accepted Accounting Principles and
shall include all such indebtedness guaranteed in any manner by such Person or
in effect guaranteed by such Person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such Person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such Person, although such Person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such Person.
"Interest Payment Dates" means each March 1, June 1, September 1 and
December 1 and the Maturity Date.
"Interest Payment Shares" means the shares of Common Stock and the
related Preferred Share Purchase Rights issuable in payment of interest on this
Note in accordance with Section 1.1.
-28-
<PAGE>
"Interest Share Price" for any Interest Payment Date means the
arithmetic average of the Market Price of the Common Stock for all of the
Trading Days during the 20 consecutive Trading Days beginning on the third
Trading Day following the date on which the Company notifies the Holder in
accordance with Section 1.1(c) of the exercise of its election of the Interest
Share Payment Option with respect to such Interest Payment Date.
"Interest Share Registration Statement" means the registration
statement filed by the Company with the SEC under the 1933 Act pursuant to
Section 8 (a) (1) of the Note Purchase Agreement.
"Issuance Date" means March 1, 1999.
"Judgment Default Threshold" means as of any date of determination an
amount equal to the greater of
(1) an amount equal to the product obtained by multiplying (a) the
amount, if any, by which the Company's Cash, Cash Equivalent and Eligible
Investment Balances on such date exceed the aggregate outstanding principal
amount of this Note and the Other Notes on such date times (b) 50 percent;
and
(2) $1,000,000.
"Lafon" means Laboratoire L. Lafon, a French corporation.
"Lafon Agreements" means (1) the License Agreement, dated January 20,
1993, by and between Lafon and the Company, as amended, (2) the Trademark
Agreement, dated January 20, 1993, by and between Genelco S.A. and the Company,
as amended, and (3) the Supply Agreement, dated January 20, 1993, between the
Company and Lafon, as amended.
"Majority Holders" means at any time such of the holders of this Note
and the Other Notes which hold Notes and Other Notes which, based on the
outstanding principal amounts thereof, represent a majority of the aggregate
outstanding principal amount of this Note and the Other Notes.
"Market Price" of any security on any date shall mean the closing bid
price of such security on such date on Nasdaq or such other securities exchange
or other market on which such security is listed for trading on such date which
constitutes the principal securities market for such security, as reported by
Bloomberg, L.P.
"Maturity Date" means at any time the Original Maturity Date or the
Extended Maturity Date, as in effect at such time.
-29-
<PAGE>
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"Net Revenues" means, with respect to sales for any period and with
respect to any item, the amount thereof accrued by the Company for financial
reporting purposes, determined under the Generally Accepted Accounting
Principles used in the preparation of the Company's then most recently published
audited financial statements, from sales of Products or Competitive Products (as
and to the extent applicable) by the Company, any Affiliate of the Company or
any licensee or sublicensee of the Company or any Affiliate of the Company, but
excluding sales to any Affiliate, licensee or sublicensee of the Company or any
Affiliate of the Company; provided, however, that if for any period the
aggregate Net Revenues for the Products and the Competitive Products (before
application of this proviso) would exceed the Target Revenues for such period,
then in determining Net Revenues for such period there shall be excluded the
portion thereof, if any, arising from Competitive Products equal to the lesser
of (x) the amount thereof for such period arising from Competitive Products and
(y) the portion of the aggregate Net Revenues for the Products and the
Competitive Products for such period (before application of this proviso) which
shall be in excess of the Target Revenues for such period. In determining such
amount, the amounts received from such sales shall be reduced by related prompt
payment and other trade discounts, transportation and related insurance charges,
returns, bad debt and other allowances, taxes (except income and franchise
taxes) and distributors', consignees' and wholesalers' fees and commissions.
The terms "licensee" and "sublicensee" shall mean any Person licensed or
sublicensed by the Company or any Affiliate of the Company, including, without
limitation, pursuant to any marketing, co-marketing or co-detailing agreement
(or similar arrangement that is the functional equivalent of a license), but
excluding customary distribution, wholesaling and consignment arrangements. For
the purposes of this definition, distribution, wholesaling or consignment
arrangements shall be limited to arrangements where the distributor, wholesaler
or consignee is not obligated, in addition to selling a Product or Competitive
Product, to undertake any significant promotional or similar marketing efforts
directed at a Product or Competitive Product. In computing the portion of Net
Revenues from Products which contain modafinil or any compound based on or
derived therefrom as an active ingredient in combination with any other
substance as an active ingredient which substance is also sold by the Company or
any of its Affiliates not in combination with modafinil or any such compound
based or derived therefrom, the portion of Net Revenues from such combination
product included in Net Revenues for any period shall be a portion of the total
Net Revenues for such combination product for such period which portion shall be
determined as the product obtained by multiplying (x) an amount equal to the Net
Revenues for such period from sales of such combination product times (y) a
fraction (i) the numerator of which shall be the unit price at which the Company
or an Affiliate sells products containing modafinil or such compound based on or
derived therefrom and (ii) the denominator of which shall be the sum of (A) the
amount referred to in the immediately preceding clause (i) plus (B) the unit
price at which the Company or an Affiliate sells the products containing such
other substance; provided, however, that in no event shall such combination
product be sold at a unit price less than the amount referred to in the
immediately preceding clause (i). In calculating Net Revenues, any particular
unit of a
-30-
<PAGE>
Product or Competitive Product shall be taken into account only once.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means this instrument as originally executed, or if later
amended or supplemented in accordance with its terms, then as so amended or
supplemented.
"Noteholder Payment Amount" shall have the meaning provided in Section
2.1.
"Note Purchase Agreement" means the Note Purchase Agreement, dated as
of February 24, 1999, by and between the Company and the original Holder of this
Note.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Date" means each Business Day on which this Note
is to be redeemed in whole or in part pursuant to Section 1.2.
"Optional Redemption Notice" means an Optional Redemption Notice in
the form attached hereto as EXHIBIT A.
"Optional Redemption Period" means the period which commences on March
1, 2001 and ends on the Original Maturity Date.
"Optional Redemption Price" means an amount in cash equal to the sum
of (1) 120% of the outstanding principal amount of this Note specified in an
Optional Redemption Notice as being redeemed by the Company plus (2) accrued and
unpaid interest on such principal amount to the applicable Optional Redemption
Date plus (3) accrued and unpaid Default Interest, if any, on the amount
referred to in the immediately preceding clause (2) at the rate provided in this
Note to the Optional Redemption Date.
"Original Maturity Date" means March 1, 2002.
"Other Note Purchase Agreements" means the several Note Purchase
Agreements, dated as of February 24, 1999, by and between the Company and the
respective original holders of the Other Notes.
"Other Notes" means the several 11% Senior Secured Notes due 2002
issued by the Company pursuant to the Other Note Purchase Agreements.
-31-
<PAGE>
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement, dated as of March 1, 1999, by and between the
Company and the Collateral Agent.
"Payment Percentage" means six percent; provided, however, that if an
Event of Default shall have occurred, then the Payment Percentage shall be
increased to 25 percent during the period from the date of such Event of Default
until the earlier of (x) the date no Event of Default is continuing and (y) the
date the Company pays the redemption price in full for a redemption of this Note
and the Other Notes pursuant to Section 1.2 and the comparable provisions of the
Other Notes; provided further, however, that if the Company extends the Original
Maturity Date to the Extended Maturity Date pursuant to Section 6.2, then the
Payment Percentage shall be increased as provided in Section 6.2; and provided
further, however, that, unless a Fundamental Change shall have occurred, if the
Company redeems all or any portion of this Note pursuant to Section 1.2 and the
Other Notes pursuant to the comparable provisions thereof, then the Payment
Percentage (as in effect immediately prior to such redemption) which shall be
applicable during the last 12 months of the Payment Period shall be reduced for
each such redemption by an amount determined as
RPP = PP x PR x D
-- ---
PO 365
where
RPP = amount of reduction in the Payment Percentage (as in effect
immediately prior to such redemption) by reason of such
redemption
PP = Payment Percentage which would be in effect without regard to
any reduction thereof at any time pursuant to this formula.
PR = the aggregate principal amount of this Note and the Other
Notes redeemed in such redemption
PO = the original aggregate principal amount of this Note and the
Other Notes
D = the number of calendar days during the period commencing on
and including the date the Company pays the full redemption
price of this Note and the Other Notes which is in connection
with such redemption and ending on and excluding the date
which is the third anniversary of the Issuance Date
"Payment Period" means the period which commences on the Issuance
Date and ends on the fifth anniversary of the Issuance Date; provided, however,
that if in accordance with Article VI the Company elects to extend the Maturity
Date to the Extended Maturity Date, effective
-32-
<PAGE>
on the date the Company gives notice of such extension to the Holder and the
holders of the Other Notes, the Payment Period shall be extended by one year
from the date the Payment Period would have ended as in effect immediately prior
to such extension of the Maturity Date.
"Payment Share Price" means the arithmetic average of the Market Price
of the Common Stock for all of the Trading Days during the 90 consecutive
Trading Days ending on (and including) the Trading Day which is three Trading
Days prior to the Maturity Date or the applicable Optional Redemption Date, as
the case may be.
"Payment Share Registration Statement" means the Registration
Statement required to be filed by the Company with the SEC pursuant to Section
8(a)(2) of the Note Purchase Agreement if the Company elects to make the Share
Principal Payment Option and the Holder consents to such election.
"Permitted Indebtedness" means
(1) Indebtedness outstanding on the Issuance Date; and
(2) Indebtedness incurred after the Issuance Date which is unsecured
and on a parity with or subordinated to this Note and the Other Notes.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, unincorporated association
or similar entity or any government, governmental agency or political
subdivision.
"Preferred Share Purchase Rights" means the Preferred Share Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar
rights issued by the Company with respect to the Common Stock after the date of
this Agreement).
"Principal Payment Shares" means the shares of Common Stock and the
related Preferred Share Purchase Rights issuable in payment of a portion of the
principal amount of the Note in accordance with Section 1.4.
"Products" means all pharmaceutical compositions containing modafinil
or any compound based on or derived therefrom as an active ingredient, whether
alone or in combination with any other substance, which are developed, marketed
or sold by the Company or any Subsidiary or Affiliate of the Company, including,
without limitation, that pharmaceutical composition marketed by the Company on
the Issuance Date under the name Provigil(R).
"Registration Repurchase Event" means the occurrence of either of the
following events:
-33-
<PAGE>
(a) the Company fails to file the Registration Statement within the
45-day period provided in Section 8(a)(1) of the Note Purchase Agreement;
or
(b) the SEC Effective Date shall not have occurred on or before the
date which is 90 days after the Issuance Date.
"Registration Repurchase Price" means an amount in cash equal to the
sum of (1) 100% of the principal amount of this Note to be repurchased, plus (2)
accrued and unpaid interest on such principal amount to the date of such
repurchase, plus (3) accrued and unpaid Default Interest, if any, thereon at the
rate provided in this Note to the date of repurchase in accordance with Article
V.
"Registration Statement" means the Registration Statement required to
be filed by the Company with the SEC pursuant to Section 8(a)(1) of the Note
Purchase Agreement.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) Any Fundamental Change; or
(b) The occurrence of any Event of Default specified in Article IV of
this Note; provided, however, that in the case of only an Event of Default
specified in clause (c), (g) or (h) of Section 4.1, such Event of Default
shall become a Repurchase Event only on and after the date which is 365
days after the occurrence of such Event of Default if any Event of Default
is continuing at such time.
"Repurchase Price" means with respect to any repurchase pursuant to
Sections 5.1 and 5.2 an amount in cash equal to the sum of (1) 101% of the
outstanding principal amount of this Note plus (2) accrued and unpaid interest
on such principal amount to the date of such repurchase plus (3) accrued and
unpaid Default Interest, if any, thereon at the rate provided in this Note to
the date of such repurchase.
"Rights Agreement" means the Amended and Restated Rights Agreement,
dated as of January 1, 1999, by and between the Company and Stocktrans, Inc., as
Rights Agent.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
first declared effective by the SEC.
"Security Agreement" means the Security Agreement, dated as of March
1, 1999, by and between the Company and the Collateral Agent.
-34-
<PAGE>
"Share Interest Payment Option" shall have the meaning provided in
Section 1.1(a).
"Share Payment Threshold" means the product obtained by multiplying
(x) the volume-weighted average Trading Price (as reported by Bloomberg, L.P. in
its AQR function, or if such source or function ceases to be available, a
comparable source and function selected by the Majority Holders and acceptable
to the Company in its reasonable judgment) for all of the Trading Days during
the 90 consecutive Trading Days ending on (and including) the Trading Day that
is three Trading Days prior to the Maturity Date, times (y) the aggregate number
of shares of Common Stock traded during such 90 consecutive Trading Days, as
reported by Bloomberg, L.P. (or if such source ceases to be available, a
comparable source selected by the Majority Holders and acceptable to the Company
in its reasonable judgment), times (z) 0.05.
"Share Principal Payment Option" shall have the meaning provided in
Section 1.4(a).
"Significant Subsidiary" shall have the meaning provided in Regulation
S-X of the SEC, except that a Subsidiary shall not be a Significant Subsidiary
only if such Subsidiary, when consolidated for financial reporting purposes with
all other Subsidiaries which are not Significant Subsidiaries, would not
constitute a Significant Subsidiary.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Target Revenues" means for any period the amount set forth for such
period in EXHIBIT F attached hereto.
"Territory" means the United States, its territories and possessions.
"Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market for
the Common Stock is open for general trading of securities.
"Trading Price" for any trade of the Common Stock on any date means
the lowest sale price (regular way) for one share of Common Stock on such date
in such trade, on the first applicable among the following: (a) the national
securities exchange on which the Common Stock is listed which constitutes the
principal securities market for the Common Stock, (b) Nasdaq, (c) the Nasdaq
SmallCap Market or (d) such other market as at the time constitutes the
principal trading market for the Common Stock, in any such case as reported by
Bloomberg, L.P. (subject to equitable adjustment from time to time on terms
reasonably acceptable to the Majority Holders for (i) stock splits, (ii) stock
dividends, (iii) combinations, (iv) capital reorganizations, (v) issuance to all
-35-
<PAGE>
holders of Common Stock of rights or warrants to purchase Common Stock at a
price per share less than the Trading Price which would otherwise be applicable,
(vi) the distribution by the Company to all holders of Common Stock of evidences
of indebtedness of the Company or cash (other than regular quarterly cash
dividends), (vii) Tender Offers by the Company or any subsidiary of the Company
or other repurchases of Common Stock in one or more transactions which,
individually or in the aggregate, result in the purchase of more than 10% of the
Common Stock outstanding and (viii) similar events, in each such case relating
to the Common Stock and which occur on or after the Issuance Date).
"Transaction Documents" means this Note, the Note Purchase Agreement,
the Security Agreement, the Patent and Trademark Security Agreement, and the
Warrants.
"Transfer Agent" means Stocktrans, Inc., or its successor as transfer
agent and registrar for the Common Stock.
"Warrants" means Common Stock Purchase Warrants of the Company issued
to the original Holder of this Note pursuant to the Note Purchase Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
--------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.2 NOTICES. Except as otherwise specifically provided herein, any
-------
notice herein required or permitted to be given shall be in writing and may be
personally served, sent by telephone line facsimile transmission or delivered by
courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three days after being deposited in the facilities of the
United States Postal Service, certified, with postage pre-paid and properly
addressed, if sent by mail. For the purposes hereof, the address and facsimile
line transmission number of the Holder shall be as furnished by the Holder for
such purpose and shown on the records of the Company; and the address of the
Company shall be 145 Brandywine Parkway, West Chester, Pennsylvania 19380,
Attention: Chief Financial Officer (telephone line facsimile transmission
number (610) 344-7563). The Holder or the Company may change its address for
notice by service of written notice to the other as herein provided.
-36-
<PAGE>
9.3 AMENDMENT, WAIVER, ETC. Neither this Note or any Other Note nor
----------------------
any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by the
Company and the Majority Holders, provided that no such change, waiver,
discharge or termination shall, without the consent of the Holder and the
holders of the Other Notes affected thereby (i) extend the scheduled final
maturity of this Note or any Other Note, or reduce the rate or extend the time
of payment of interest (other than as a result of waiving the applicability of
any post-default increase in interest rates) hereon or thereon or reduce the
principal amount hereof or thereof or the Optional Redemption Price, the
Repurchase Price or the Registration Repurchase Price, (ii) release the
collateral or reduce the amount of collateral required to be deposited or
maintained by the Company pursuant to the Security Agreement or the Patent and
Trademark Security Agreement, except as expressly provided in the respective
agreement, (iii) amend, modify or waive any provision of Article II, (iv) amend,
modify or waive any provision of this Section 9.3, (v) reduce any percentage
specified in, or otherwise modify, the definition of Majority Holders or (vi)
except as provided in this Note, change the method of calculating the Payment
Share Price, the Interest Share Price or the Optional Redemption Price in a
manner adverse to the Holder.
9.4 ASSIGNABILITY. This Note shall be binding upon the Company and
-------------
its successors, and shall inure to the benefit of and be binding upon the Holder
and its successors and permitted assigns. The Company may not assign its rights
or obligations under this Note.
9.5 CERTAIN EXPENSES. The Company shall pay on demand all expenses
----------------
incurred by the Holder, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with (x) any amendment or waiver of this Note
or any other Transaction Document, (y) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (z) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Holder under the Transaction Documents, including any action
or proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Holder.
9.6 GOVERNING LAW. This Note shall be governed by the internal laws
-------------
of the State of New York, without regard to the principles of conflict of laws.
9.7 TRANSFER OF NOTE AND NOTEHOLDER PAYMENT AMOUNT. This Note has
----------------------------------------------
not been and is not being registered under the provisions of the 1933 Act or any
state securities laws and this Note may not be transferred unless the Holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
this Note may be sold or transferred without registration under the 1933 Act.
Prior to any such transfer, such transferee shall have represented in writing to
the Company that such transferee has requested and received from the Company all
information relating to the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the
Subsidiaries deemed relevant by such transferee; that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
foregoing and has had the opportunity
-37-
<PAGE>
to obtain and review the reports and other information concerning the Company
which at the time of such transfer have been filed by the Company with the SEC
pursuant to the 1934 Act. If such transfer is intended to assign the rights and
obligations under 5(a), 5(b), 8, 9 and 10 of the Note Purchase Agreement, such
transfer shall otherwise be made in compliance with Article V of the Note
Purchase Agreement. The Holder may not transfer a portion of this Note to any
Person if such transfer would result in an increase in the aggregate number of
registered holders of this Note and the Other Notes of more than one such holder
without the prior written consent of the Company, which consent will not be
unreasonably withheld. Any instrument issued upon any such transfer of a portion
of this Note which results in such increase of one holder shall bear a legend
that the holder thereof shall not be entitled to transfer such instrument in a
manner which would further increase the aggregate number of registered holders
of this Note and the Other Notes without the prior written consent of the
Company, which consent shall not be unreasonably withheld. The Holder shall have
the right to transfer all or any part of its rights under Article II of this
Note separate from its rights under the other provisions of this Note only with
the prior written consent of the Company, which consent will not be unreasonably
withheld.
9.8 ENFORCEABLE OBLIGATION. The Company represents and warrants that
-----------------------
at the time of the original issuance of this Note it received the full purchase
price payable pursuant to the Note Purchase Agreement in an amount at least
equal to the original principal amount of this Note, and that this Note is an
enforceable obligation of the Company which is not subject to any offset,
reduction, counterclaim or disallowance of any sort.
9.9 NOTE REGISTER; REPLACEMENT OF NOTES. The Company shall maintain
-----------------------------------
a register showing the names, addresses and telephone line facsimile numbers of
the Holder and the registered holders of the Other Notes. The Company shall
also maintain a facility for the registration of transfers of this Note and the
Other Notes and at which this Note and the Other Notes may be surrendered for
split up into instruments of smaller denominations or for combination into
instruments of larger denominations. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security) or (b)
in the case of mutilation, upon surrender and cancellation of this Note, the
Company will execute and deliver to the Holder a new Note of like tenor without
charge to the Holder.
9.10 PAYMENT OF NOTE ON REDEMPTION OR REPURCHASE; DEPOSIT OF
-------------------------------------------------------
REDEMPTION PRICE OR REPURCHASE PRICE, ETC. (a) If this Note or any portion of
- -----------------------------------------
this Note is to be redeemed as provided in Section 1.2 or repurchased as
provided in Sections 5.1 and 5.2 or Section 5.3 and any notice required in
connection therewith shall have been given as provided therein and the Company
shall have otherwise complied with the requirements of this Note with respect
thereto, then this Note or the portion of this Note to be so redeemed or
repurchased and with respect to which any such notice has been given shall
become due and payable on the date stated in such notice at the applicable
Optional Redemption Price, Repurchase Price or Registration Repurchase Price.
On and after the Optional Redemption Date or repurchase date so stated in such
notice, provided that the
-38-
<PAGE>
Company shall have deposited with an Eligible Bank on or prior to such Optional
Redemption Date or repurchase date, an amount sufficient to pay the applicable
Optional Redemption Price, Repurchase Price or Registration Repurchase Price,
interest on this Note or the portion of this Note to be so redeemed or
repurchased shall cease to accrue, and this Note or such portion hereof shall be
deemed not to be outstanding and shall not be entitled to any benefit with
respect to principal of or interest on the portion to be so redeemed or
repurchased except to receive payment of the applicable Optional Redemption
Price, Repurchase Price or Registration Repurchase Price. On presentation and
surrender of this Note or such portion hereof, this Note or the specified
portion hereof shall be paid and redeemed or repurchased at the applicable
Optional Redemption Price, Repurchase Price or Registration Repurchase Price. If
a portion of this Note is to be redeemed or repurchased, upon surrender of this
Note to the Company in accordance with the terms hereof, the Company shall
execute and deliver to the Holder without service charge, a new Note or Notes,
having the same date hereof and containing identical terms and conditions, in
such denomination or denominations as requested by the Holder in aggregate
principal amount equal to, and in exchange for, the unredeemed or unrepurchased
portion of the principal amount of this Note so surrendered.
(b) Upon the payment in full of all amounts payable by the Company
under this Note and the Other Notes (other than amounts payable pursuant to
Article II hereof and thereof which are not yet due) or the deposit thereof as
provided in Section 9.10(a) and the like provisions of the Other Notes,
thereafter the obligations of the Company under this Note shall be as set forth
in Article II, Sections 3.10, 3.11, this Article IX, and, in the case of such
deposit, to pay the Optional Redemption Price, Repurchase Price or Registration
Repurchase Price, as the case may be, from the funds so deposited. Upon such
payment or deposit, any Event of Default which occurred prior to such payment or
deposit by reason of one or more provisions of this Note with which the Company
thereafter is no longer obligated to comply, then such Event of Default shall no
longer exist.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-39-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer as of the day and in the year first
above written.
CEPHALON, INC.
By:
Name:
Title:
-40-
<PAGE>
EXHIBIT A
---------
OPTIONAL REDEMPTION NOTICE
(SECTION 1.2 OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: ___________________________
(Name of Holder)
(1) Pursuant to the terms of the 11% Revenue Sharing Senior Secured
Note due 2002 (the "Note"), Cephalon, Inc., a Delaware corporation (the
"Company"), hereby notifies the above-named Holder that the Company is
exercising its right to redeem the Note in accordance with Section 1.2 of the
Note as set forth below:
(i) The principal amount of the Note to be redeemed is
$_____________.
(ii) The Optional Redemption Price is $_______________.
(iii) The Optional Redemption Date is ______________.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _________________________ CEPHALON, INC.
By:
Title:
A-41
<PAGE>
EXHIBIT B
---------
FORM OF OPINION OF COUNSEL TO BE
DELIVERED IN CONNECTION WITH ISSUANCE
OF PRINCIPAL PAYMENT SHARES
[Letterhead of Counsel]
_______________, 200_____
To The Holders Listed on Schedule A hereto
Re: Cephalon, Inc.
--------------
Ladies and Gentlemen:
We have acted as counsel to Cephalon, Inc., a Delaware corporation (the
"Company"), in connection with the issuance by the Company of
____________________________ Principal Payment Shares in accordance with the
terms of the Company's 11% Revenue Sharing Senior Secured Notes due 2002 in the
original aggregate principal amount of $30,000,000 (the "Notes"), which Notes
were issued pursuant to the several Note Purchase Agreements, dated as of
February __, 1999 (the "Note Purchase Agreements"), by and between the Company
and the Buyers parties thereto (the "Buyers"). All capitalized terms used
herein without definition are used herein with the respective meanings ascribed
to them in the Notes or, if not defined in the Notes, in the Note Purchase
Agreements. This opinion is being delivered to you pursuant to Section
1.4(d)[(1)(B) OR (2)(B)] of the Notes. In connection with this opinion letter,
we have relied upon the representations and warranties of the Company set forth
in the Note Purchase Agreements and the Notes (the "Principal Documents").
As to various questions of fact material to our opinion, we have also relied
upon certificates of officers and representatives of the Company and upon
certificates of public officials. We have made no independent review or
investigation of any nature as to such representations and warranties, the
matters set forth in the certificates or the assumptions set forth below upon
which we are relying, and no inference of any knowledge on the part of this Firm
as to these legal or factual matters should be drawn from our representation of
the Company in connection with the Principal Documents or otherwise.
We have also assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with originals of all
documents submitted to us as copies. We have also assumed that the Principal
Documents have each been duly authorized,
B-42
<PAGE>
executed and delivered by all parties thereto other than the Company and that
all such other parties have full power, authority and legal right to execute,
deliver and perform their obligations under the Principal Documents, and that
such Principal Documents are valid, binding and enforceable in accordance with
their respective terms against such other parties.
Based on the foregoing, and subject to the qualifications and limitations set
forth below, we are of the opinion that the Principal Payment Shares are duly
authorized and will be, upon issuance and delivery in accordance with the terms
of the Notes, validly issued, fully paid and nonassessable. Upon issuance, each
Principal Payment Share will have attached thereto a Preferred Share Purchase
Right pursuant to the terms of the Company's Rights Plan if and as then in
effect. We express no opinion as to the validity of the Rights Plan or the
Preferred Share Purchase Rights. None of the Principal Payment Shares are
subject to preemptive rights pursuant to the Certificate of Incorporation or the
Delaware General Corporation Law (the "DGCL") or, to our knowledge, other
similar rights of the stockholders of the Company.
The foregoing opinions and comments are subject to the following additional
qualifications:
(a) Wherever we have stated herein that we have assumed a matter, it
is intended to indicate that we have assumed such matter without making any
independent legal or factual review or investigation of any nature to determine
the accuracy of such assumption, and without expressing any opinion or
conclusion of any kind concerning the matter, and no inference as to our
knowledge of any legal or factual matters bearing on the accuracy of any such
assumption should be drawn from the fact of our current or prior representation
of the Company.
(b) We express no opinion with respect to the laws of any jurisdiction
other than the federal laws of the United States of America, the laws of the
Commonwealth of Pennsylvania and the State of New York and the DGCL. We express
no opinion with respect to any federal or state laws relating to tax and
antitrust matters. We express no opinion as to compliance with applicable anti-
fraud statutes, rules or regulations of any applicable jurisdiction governing
the issuance of securities.
(c) The opinions expressed above are subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
(including without limitation preference rules) affecting the rights of
creditors generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(d) [IF OPINION GIVEN PURSUANT TO SECTION 1.4(D)(2)(B) OF NOTE: For
purposes of this opinion, we have assumed that the formulas contained in the
Notes to calculate the Optional Redemption Price represent stipulated damages
that are not plainly disproportionate to the possible loss to the holders of the
Notes and, therefore, are not "penalties" as a matter of law. We express no
opinion as to whether the issuance of the Principal Payment Shares may be
determined to be interest payable with respect to the Notes, or as to the effect
of any laws of any
B-43
<PAGE>
jurisdiction restricting the interest that may be charged upon debt obligations,
and our opinion set forth above assumes that such laws do not adversely affect
any determination that the Principal Payment Shares are fully paid and non-
assessable.]
(e) The foregoing opinion and comments are as of the date hereof, and
we assume no obligation to update or supplement them to reflect any facts or
circumstances which may hereafter come to our attention or any changes in laws
which may hereafter occur.
This opinion letter is solely for the benefit of the Holders for use in
connection with the transactions contemplated by the Notes and may not be relied
upon by any other person or for any other purpose without our express written
consent.
Very truly yours,
B-44
<PAGE>
Schedule A
Holders of Notes
----------------
B-45
<PAGE>
EXHIBIT C
---------
COMPANY NOTICE
(SECTION 5.2(A) OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: ___________________________
(Name of Holder)
(1) A Repurchase Event described in the 11% Revenue Sharing Senior
Secured Note due 2002 (the "Note") of Cephalon, Inc., a Delaware corporation
(the "Company"), occurred on ____________________, ______. As a result of such
Repurchase Event, the Holder is entitled to exercise its repurchase rights
pursuant to Section 5.2 of the Note.
(2) The Holder's repurchase right must be exercised on or before
______________, _______.
(3) At or before the date set forth in the preceding paragraph (2),
the Holder must:
(a) deliver to the Company a Holder Notice, in the form attached
as EXHIBIT D to the Note; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _________________________ CEPHALON, INC.
By:
Title:
C-46
<PAGE>
EXHIBIT D
---------
HOLDER NOTICE
(SECTION 5.2(B) OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: CEPHALON, INC.
(1) Pursuant to the terms of the 11% Revenue Sharing Senior Secured
Note due 2002 (the "Note"), the undersigned Holder hereby elects to exercise its
right to require repurchase by the Company pursuant to Sections 5.2(a) and
5.2(b) of $_________________________ of the Note, equal to the sum of
$____________________ principal amount of the Note, $____________________ of
accrued and unpaid interest on such principal amount and $____________________
of Default Interest on such interest at the Repurchase Price provided in the
Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
D-47
<PAGE>
EXHIBIT E
---------
HOLDER REGISTRATION REPURCHASE NOTICE
(SECTION 5.3 OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: CEPHALON, INC.
(1) Pursuant to the terms of the 11% Revenue Sharing Senior Secured
Note due 2002 (the "Note"), the undersigned Holder hereby elects to exercise its
right to require repurchase by the Company pursuant to Section 5.3 of
$____________________ of the Note, equal to the sum of $____________________
principal amount of the Note, $____________________ of accrued and unpaid
interest on such principal amount and $____________________ of Default Interest
on such interest at the Registration Repurchase Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By _________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
E-48
<PAGE>
EXHIBIT F
---------
TARGET REVENUES
Period 3 Months 12 Months
Ended Ended Ended
----- ----------- -----------
[
] *
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS BEEN OMITTTED AND FILED
SEPARATELY WITH THE COMMISSION
F-49
<PAGE>
Exhibit 10.5(h)**
[LOGO OF CEPHALON APPEARS HERE]
January 21, 1998
Laboratoire L. Lafon
39, rue Francois ler
75008 Paris
FRANCE
Re Amendment No. 5 to License Agreement and Supply Agreement
Gentlemen:
This letter shall serve as an amendment to (i) that certain License
Agreement dated as of January 20, 1993, as amended (the "License Agreement"),
between Cephalon, Inc. (hereinafter "Cephalon") and Laboratoire L. Lafon
(hereinafter "Lafon"); and (ii) that certain Supply Agreement (the "Supply
Agreement") dated as of January 20, 1993, as amended, between Cephalon and
Lafon. Unless otherwise defined herein, all capitalized terms shall have the
meanings ascribed to them in the License Agreement and the Supply Agreement.
1. Under the terms of the License Agreement, Lafon granted Cephalon a
license, with the right to sublicense to a Japanese company, to develop and
commercialize in Japan products containing the drug substance "modafinil" (the
"Compound"). Under the terms of the Supply Agreement, Lafon agreed to supply the
Compound to Cephalon or to its sublicensee in Japan. Cephalon hereby provides
notice that it has agreed to such a sublicense arrangement with Nippon Shoji
Kaisha., Ltd. ("Nippon Shoji"), and in connection with such arrangement,
Cephalon and Lafon hereby agree to the following:
a. Under the terms of a sublicense, product development and compound
supply agreement, Cephalon will grant Nippon Shoji the right to make tablets,
use and sell the Product in Japan, and will agree to supply Nippon Shoji with
Compound, as well as provide Nippon Shoji with access to certain pre-clinical
and clinical data concerning the Product. In consideration of this grant of
rights and supply of Compound, Nippon Shoji will pay Cephalon an amount equal to
[*] percent ([*]) of Net Sales of Product in Japan (as well as an additional
[*] percent ([*]) in connection with the use of a trademark which Cephalon will
remit on its behalf directly to the trademark owner). As provided in amendment
number four to the License Agreement and the Supply Agreement dated August 23,
1995, Lafon and Cephalon hereby agree to further amend the aforementioned
License Agreement and Supply Agreement insofar as the
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN
HAS BEEN OMITTED AND HAS BEEN FILED
SEPARATELY WITH THE COMMISSION.
** Certain portions of this exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
royalty rate applicable under Article V(2) of the License Agreement for the
grant of rights in Japan, and the price to be paid to Lafon by Cephalon under
Article 3(b) of the Supply Agreement for the supply of Compound for use in
Japan, shall be an amount equal to [*] percent [*]of Net Sales of Product in
Japan by Nippon Shoji.
b. With reference to Article 8 of the Supply Agreement concerning
the right of rejection of Compound, the parties agree that with respect to
Compound shipped to Japan, Cephalon shall not be deemed to be in receipt of
Compound until the date on which Nippon Shoji has released said Compound into
its inventory, and Cephalon shall have thirty (30) days from such date to notify
Lafon of its intent to reject.
2. With reference to Article 3 of the Supply Agreement, the parties
confirm their understanding with respect to the calculation of compensation to
Lafon for the supply of Compound, as follows:
a. Lafon will supply Compound to Cephalon free of charge for the
following purposes: (i) to conduct pre-clinical and clinical studies in
countries in the Territory prior to the date of initial marketing approval in
such country, and to conduct such studies subsequent to the date of such initial
marketing approval in any given country in the Territory if required by the
respective regulatory authorities or if intended for purposes of obtaining new
or expanded indications for the Product in such country; (ii) to manufacture
Product samples to be distributed by Cephalon prior to the third anniversary
date of commercial launch of the Product in the United States (with such amount
of Compound not to exceed 120 kilograms during any twelve-month period, unless
otherwise mutually agreed); and (iii) to develop a Product formulation that
does not contain Compressil(R).
b. The initial provisional price for Compound ordered by Cephalon
shall be set at an amount equal to US$[*] per kilogram (except for quantities of
Compound to be used for those non-commercial purposes specified in subparagraph
(a) above, as to which no provisional price or compensation shall be due Lafon).
The parties acknowledge that this initial provisional price is based upon the
current selling price charged by Lafon for sale of the Product in France; the
parties further acknowledge that the selling price to be charged by Cephalon for
sale of the Product in the United States may well be lower than such amount, and
accordingly, the parties agree to reduce this initial provisional price to
properly reflect the actual U.S. selling price promptly after such U.S. selling
price is established by Cephalon. Following this adjustment in the provisional
price, and as provided in the Supply Agreement, the parties will adjust the
provisional price annually (or more often, if necessary) so that said
provisional price will reflect accurately the selling price for Product in the
Territory.
c. Within two months after the end of each calendar year, Cephalon
and Lafon will reconcile the provisional price paid by Cephalon for all Compound
delivered during such preceding calendar year with the amount of compensation
due Lafon under the Supply Agreement. Except for (i) those quantities specified
in clause (a) above;
* THE CONFIDENTIAL MATERIAL CONTAINED
HEREIN HAS BEEN OMITTED AND HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
and (ii) a quantity in an amount equal to three percent (3%) of all Compound
delivered in such preceding calendar year (in order to properly reflect the
ordinary and customary yield loss in preparing the finished Product), Cephalon
will pay Lafon for all kilograms of Compound delivered an amount per kilogram
equal to the percentage of Net Sales specified in the Supply Agreement (e.g.,
11% for Compound sold in the United States), multiplied by the average Net Sales
Price per kilogram of Compound sold during the immediately preceding year in the
corresponding country within the Territory.
3. Cephalon and Lafon further confirm their understanding as to the
calculation of "Net Sales," as defined in Article I of the License Agreement, as
follows:
a. With respect to calculations to be made under the terms of the
License Agreement and the Supply Agreement, Cephalon may deduct from its gross
sales proceeds in the Territory the amount of any governmental rebates and
allowances (including Medicaid rebates), and the amount of any wholesaler
credits or chargebacks, as well as those deductions otherwise specified in such
definition.
b. With respect to calculations to be made under the terms of the
License Agreement (but not the Supply Agreement), Cephalon may further deduct
from its gross sales proceeds in the Territory the amount of any uncollected
accounts or receivables.
Please indicate your consent to the sublicense arrangement described
above, and your agreement with the other terms, conditions and clarifications
set forth above, by signing this letter in the space provided below, and return
an executed copy to us at your earliest convenience.
CEPHALON, INC.
By /s/ Frank Baldino
----------------------------
Frank Baldino
AGREED, ACKNOWLEDGED AND ACCEPTED:
LABORATOIRE L. LAFON
By: /s/ F.C. Lafon
-----------------------------
F.C. Lafon
<PAGE>
Exhibit 10.5(i)**
[LOGO OF CEPHALON APPEARS HERE]
February 2, 1998
Laboratoire L. Lafon
19 Avenue du Professeur-Cadiot
94701 Maisons Alfort
France
RE: Amendment No. 6 to License Agreement and Supply Agreement
---------------------------------------------------------
Gentlemen:
This letter agreement shall serve as an amendment to (a) the License
Agreement dated January 20, 1993, as previously amended ("License Agreement")
between Cephalon, Inc. ("Cephalon") and Laboratoire L. Lafon ("Lafon"), and (b)
the Supply Agreement dated January 20, 1993, as previously amended (the "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 Republics of Italy and
San Marino (collectively, the "Italian Territory").
2. Appendix A to the License Agreement is hereby amended to add all
patents and patent applications related to the composition, manufacture or use
of modafinil, as filed or registered in the Italian Territory as of the date
hereof, including, without limitation, the following:
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 royalties to be paid by Cephalon
for other licensed territories pursuant to Section 1 of Article V of the License
Agreement and previous letter agreements, the following license fees totaling
[*] US Dollars (USD[*]):
a. [*] US Dollars (USD [*]), payable upon Lafon's signature of this
letter agreement;
* THE CONFIDENTIAL MATERIAL CONTAINED
HEREIN HAS BEEN OMITTED AND HAS BEEN
FILED SEPARATELY WITH THE COMMISSION.
** Certain portions of this exhibit have
been omitted based upon a request for
confidential treatment that has been
filed with the Commission. Pre omitted
portions have been filed separately
with the Commission.
<PAGE>
Laboratoire L. Lafon
February 2, 1998
Page -2-
b. [*] US Dollars (USD [*]), payable upon the initial regulatory
approval of a Licensed Product by the Italian Ministry of Health.
4. Sections 3.b and 3.c of the License Agreement shall not apply to the
Italian Territory. Instead, the following provisions shall apply to product
registration activities in the Italian Territory:
3.b. It is agreed that all product registrations (and applications)
within the Italian Territory are to be in CEPHALON's name (or the
name of a CEPHALON Affiliate or sublicensee). LAFON shall take
such actions as may be required to identify CEPHALON (or its
Affiliate or sublicensee) as the applicant and the holder of the
product license within the Italian 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 Italian Territory, and/or join in any such application by
Cephalon, if required. CEPHALON and/or its sublicensee shall have
the right to meet with the appropriate regulatory authorities
(including pricing and reimbursement authorities), but shall keep
LAFON informed of all such meetings and, upon request, shall
provide LAFON with copies of all relevant correspondence with
such authorities.
3.c. CEPHALON shall conduct, at its own expense, all necessary trials
for purposes of obtaining regulatory approvals of the Licensed
Product in the Italian Territory.
3.d. LAFON will furnish CEPHALON, upon request, copies of
correspondence and communications whether occurring prior to the
date hereof or hereafter between LAFON and the Italian regulatory
authorities related to applications for marketing approval for
the Licensed Product in the Italian Territory.
5. Section l.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 [*] per cent ([*]) during the first [*] from the date of first
commercial sale of the first Licensed Product in each country within the
Territory, and [*] per cent ([*]) thereafter in such country."
*THE CONFIDENTIAL MATERIAL CONTAINED HEREIN
HAS BEEN OMITTED AND HAS BEEN FILED
SEPARATELY WITH THE COMMISSION.
<PAGE>
Laboratoire L. Lafon
February 2, 1998
Page -3-
6. 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 in the Italian Territory 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.
7. 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. Lafon confirms that it is free to enter into this letter agreement,
without obligation to any third party. Cephalon shall not be responsible to any
third party asserting a claim through Lafon with respect to the development,
manufacture or sale of Licensed Product for the Italian Territory.
8. Except as specifically supplemented by this letter agreement, all
provisions of each of the License Agreement and the Supply Agreement (in each
case, as amended prior to the date hereof) 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/ Bruce A. Peacock
----------------------------
Bruce A. Peacock,
Executive Vice President
and Chief Operating Officer
Accepted and agreed to this
10th of February, 1998.
LABORATOIRE L. LAFON
By: /s/ F.C. Lafon
-------------------------
F.C. Lafon
Chief Executive Officer
<PAGE>
Exhibit 10.5(j)**
[LETTERHEAD OF CEPHALON, INC. APPEARS HERE]
January 21, 1998
Genelco S.A.
8 Route de Beaumont
1701 Fribourg
Switzerland
Re: Amendment No. 3 to Trademark License Agreement
Gentlemen:
This letter shall serve as an amendment to that certain Trademark Agreement
dated as of January 20, 1993, as amended (the "Trademark Agreement"), between
Cephalon, Inc. (hereinafter "Cephalon") and Genelco S.A. (hereinafter
"Genelco"). Unless otherwise defined herein, all capitalized terms shall have
the meanings ascribed to them in the Trademark Agreement.
Under the terms of the Trademark Agreement, Genelco granted Cephalon a
license, with the right to sublicense to a Japanese company, to use a trademark
in connection with the commercialization in Japan of products containing the
drug substance "modafinil" (the "Compound"). As required under the terms of the
Trademark Agreement, Nippon Shoji will select a trademark for the Product to be
used in Japan, and will allow said trademark to be registered in the name of
Genelco S.A. In accordance with the terms of the Trademark Agreement, and on
behalf of Nippon Shoji, Cephalon shall pay Genelco S.A. an amount equal to [*]
percent ([*]) of Net Sales of Product in Japan by Nippon Shoji, subject to the
withholding of any tax as required under law.
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS
BEEN OMITTED AND HAS BEEN FILED SEPARATELY
WITH THE COMMISSION.
** Certain portions of this exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
Please indicate your consent to the arrangement described above, and your
agreement with the other terms, conditions and clarifications set forth above,
by signing this letter in the space provided below, and return an executed copy
to us at your earliest convenience.
CEPHALON, INC.
By: /s/ Frank Baldino
------------------------------
Frank Baldino
GENELCO S.A.
By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------
<PAGE>
Exhibit 10.5(k)**
February 9, 1998
Genelco S.A.
8 Route de Beaumont
1701 Fribourg
Switzerland
Re: Amendment No. 4 to Trademark Agreement
--------------------------------------
Gentlemen:
This letter agreement shall serve as an amendment to the Trademark
Agreement dated January 20, 1993, as amended prior to the date hereof (the
"Trademark Agreement") between Cephalon, Inc. ("Cephalon") and Genelco S.A.
("Genelco"). 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 the Republics of Italy and San Marino
(collectively, "Italy").
2. All trademark applications and registered trademarks related to Licensed
Products and/or the Compound, including the mark "Provigil", that are or
will be filed in the Territory are hereby licensed to Cephalon under the
Trademark Agreement.
3. For and in consideration of the expansion of the Territory to include Italy
under this Amendment No. 4 (and in addition to any compensation payable
under the Trademark Agreement with respect to other countries in the
Territory), Cephalon will pay to Genelco, pursuant to Article III(1) of the
Trademark Agreement, a royalty with respect to Net Sales of a Licensed
Product in Italy that will be calculated at the rate of [*] of such Net
Sales.
4. Each of Cephalon and Genelco hereby restates its respective representations
and warranties made in the Trademark Agreement, as amended pursuant to this
letter agreement.
5. 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.
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN
HAS BEEN OMITTED AND HAS BEEN FILED
SEPARATELY WITH THE COMMISSION.
** Certain portions of this exhibit have been omitted based upon a request for
confidential treatment that has been filed with the Commission. The omitted
portions have been filed separately with the Commission.
<PAGE>
Genelco S.A.
Amendment No. 4
February 9, 1998
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 and Chief Executive Officer
Accepted and agreed to this
23/rd/ day of February, 1998.
GENELCO S.A.
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------
<PAGE>
Exhibit 10.12*
TOLL MANUFACTURING AND PACKAGING AGREEMENT
This Toll Manufacturing and Packaging Agreement is made as of this 24/th/
day of February, 1998, by and between Cephalon, Inc., 145 Brandywine Parkway,
West Chester, PA 19380-4245 ("CEPHALON") and Circa Pharmaceuticals, Inc., 33
Ralph Avenue, P.O. Box 30, Copiague, NY 11726-0030 ("CIRCA"').
WHEREAS, CEPHALON holds certain rights to manufacture, market and sell in
the United States, Mexico, Japan, the United Kingdom and Ireland, the
pharmaceutical product modafinil;
WHEREAS, CEPHALON possesses certain know how and other confidential and
proprietary information relating to the process of manufacturing and packaging
modafinil in finished dosage form;
WHEREAS, CEPHALON previously has engaged CIRCA to perform certain
manufacturing and consulting activities relating to the supply of modafinil, and
now wishes to engage CIRCA on a long-term basis to formulate and package
modafinil tablets in dosage form for subsequent sale by CEPHALON in the United
States, Mexico, Japan, the United Kingdom and Ireland, and for certain clinical
and other purposes; and
WHEREAS, CIRCA has suitable facilities and equipment and sufficient
qualified personnel at its plant in Copiague, New York to formulate and package
commercial quantities of modafinil in dosage form, and is willing to provide
such services on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
I. DEFINITIONS
As Used in this Agreement:
1.1 "Active Drug Substance" means the compound modafinil having those
specifications as set forth on Schedule A hereto.
1.2 "Adverse Experience" or "AE" shall mean any unfavorable and unintended
change in the structure (signs), function (symptoms), or chemistry (laboratory
data) of the body temporally associated with any use of a Product or of a
derivative thereof, whether or not the adverse experience is considered to be
related to the use of the Product, including but not limited to any of the
following: an unexpected side effect, injury, toxicity or sensitivity reaction,
which may include an experience of unexpected incidence and severity; an adverse
experience occurring in the course of the use of a drug product in professional
practice; an adverse experience occurring in clinical studies; an adverse
experience occurring from drug overdose; whether accidental or intentional; an
adverse experience occurring from drug abuse; an adverse experience occurring
from drug withdrawal; and any significant failure of expected pharmacological
action.
* Certain portions of this exhibit have been omitted based upon a request
for confidential treatment that has been filed with the Commission. The
omitted portions have been filed separately with the Commission.
-1-
<PAGE>
1.3 "Affiliate" means any corporation or other business entity which,
directly or indirectly, is controlled by, controls, or is under common control
with CEPHALON or CIRCA. For this purpose, "control" shall be deemed to mean
ownership of fifty percent (50%) or more of the stock or other equity of such
entity.
1.4 "Confidential Information" means any confidential or proprietary
information relating to the manufacture and packaging of the Product.
1.5 "Product" means modafinil in final packaged dosage forms meeting the
Product specifications established in Schedule B hereto.
1.6 "Starting Material" means certain interactive raw material (including
without limitation, compressil) necessary to formulate and package the Product
to be acquired directly CIRCA, as set forth in Schedule A hereto.
1.7 "Trademark" or "Trademarks" shall mean Provigil(R), as well as any
other trademark owned or used by CEPHALON in connection with the Product and
listed on Schedule A hereto.
II. APPOINTMENT AND TERM
2.1 Appointment. CEPHALON hereby appoints CIRCA, and CIRCA hereby
------------
accepts appointment, as a toll manufacturer to formulate and package the
Product.
2.2 Manufacturing and Packaging Services. During the term of this
-------------------------------------
Agreement, CIRCA shall formulate Product, which shall include the validation of
commercial batches of the Product in accordance with the procedures established
in Schedule D hereto, and the preparation of the Product for commercial sale to
customers by CEPHALON. In addition, Circa shall label and package Product in
accordance with instructions provided by CEPHALON. CEPHALON will supply masters
for labels, package inserts and packaging. The content of the labels, package
inserts and packaging shall be the sole and exclusive responsibility of
CEPHALON. CIRCA will procure, test, inspect and approve all labels, package
inserts and packaging used for this Product. CIRCA will submit all new labels,
package inserts and packaging used for Product to CEPHALON for approval prior to
use.
2.3 Specific Duties. In addition to its general obligations relating to
----------------
formulating and packaging, CIRCA shall perform the following services:
(i) receiving and storing all Active Drug Substance;
(ii) placing orders for, acquiring and storing all Starting Material
and packaging components;
-2-
<PAGE>
(iii) quality control and testing of all Active Drug Substance,
Starting Material in process materials, bulk tablets, finished
dosage Product and packaging components, in order to assure
compliance with all applicable standards and specifications;
(iv) managing clearance of customs for all Starting Materials and
packaging components, as necessary;
(v) conducting stability testing of Product in accordance with the
procedures established in Schedule D hereto; and
(vi) performing such other services as agreed upon in writing by the
parties.
2.4 Term. Unless terminated in accordance with the provisions of Article
----
XX, this Agreement will remain in effect for a period of three (3) years from
the date hereof (the "Initial Term"), and shall automatically be renewed for
consecutive terms of one year.
III. PRODUCT QUANTITY, QUALITY AND MANUFACTURING PROCESSES
3.1 Quantity. CIRCA will manufacture, package and supply to CEPHALON all
--------
quantities of Product ordered by CEPHALON or an Affiliate thereof for
subsequent sale by CEPHALON or an Affiliate or agent thereof in the United
States, Mexico, Japan, the United Kingdom or Ireland, and for certain clinical
or other purposes as may be determined by CEPHALON. The parties acknowledge
that, during the pendency of this Agreement, CIRCA shall serve as the
manufacturer of a majority of Product produced for sale by CEPHALON in such
geographic ares, provided however, that CEPHALON shall have no obligation to
place any orders for any minimum quantities of Product, and provided further,
that CEPHALON may in its sole discretion engage a second toll manufacturer and
packager to produce Product for sale in such areas.
3.2 Quality. All Product manufactured by CIRCA for CEPHALON under this
-------
Agreement will meet the Product specifications established in Schedule B hereto
(the Specifications"), as well as the quality assurance standards established in
Schedule C hereto (the "Technical Agreement"). Such Specifications, as well as
the terms and conditions of the Technical Agreement, will be provided by
CEPHALON, agreed upon by CIRCA, and are subject to modification from time to
time by mutual agreement of the parties.
3.3 Manufacturing Processes. Circa has furnished CEPHALON with a copy of
-----------------------
its production procedures and has identified to CEPHALON the equipment to be
used to produce the Product, all as set forth in Schedule C hereto. CIRCA agrees
that it will not modify these procedures, nor modify any method of formulation,
packaging, labeling or testing the Product (including analytical procedures,
components, process, Specifications, controls, storage, stability protocols),
without notifying CEPHALON or obtaining CEPHALON's prior written consent as
-3-
<PAGE>
required in Schedule C hereto. Costs incurred by CIRCA as a result of any such
changes or modifications requested by the FDA or by CEPHALON and relating solely
to the production of the Product will be borne by CEPHALON; costs for other
changes will be borne by CIRCA.
IV. TOLLING FEES
For each unit of Product made and supplied to CEPHALON under this Agreement
(provided it meets the quality requirements established herein) CEPHALON will
pay CIRCA a tolling fee in accordance with the terms established in Schedule E
hereto.
V. CONFIDENTIAL INFORMATION AND KNOW-HOW
5.1 The parties acknowledge that CEPHALON has provided Confidential
Information to CIRCA in connection with the formulation and packaging of the
Product, and further acknowledge that all such Confidential Information (as well
as any additional Confidential information provided to CIRCA by CEPHALON
hereunder) shall be subject to the provisions of the Article V. Any and all
information, knowledge, technology, and trade secrets relating to the Product or
the production, packaging, labeling or testing thereof, including any of the
foregoing that is obtained or developed by CIRCA in the performance of this
Agreement (herein the "Know-How") shall be held in confidence by CIRCA, and
CIRCA shall not use such Know-How for itself or for any third party nor disclose
the same to any third party except as provided below.
5.2 CIRCA will disclose to CEPHALON all Confidential Information and Know-
How developed by or for CIRCA during the term of this Agreement, promptly as it
is developed. CIRCA agrees and acknowledges that any Confidential Information
and Know-How, whether developed by CEPHALON, by CIRCA, or by CEPHALON and CIRCA
in collaboration hereunder, shall be the property of CEPHALON, and the CIRCA
shall have no rights or claims to any such Know-How except insofar as it shall
have access to and use of such Know-How to fulfill its obligations hereunder. If
any such Know-How is considered to be a patentable invention, CEPHALON shall be
responsible for the preparation, filing, prosecution and maintenance of all
patent applications and patents covering such invention as provided below.
5.3 All Know-How or other Confidential Information, disclosed or confirmed
in writing and designated as confidential by CEPHALON, shall be held in
confidence by CIRCA, shall not be used by CIRCA for any purpose except as
provided hereunder and shall not be disclosed to third parties except for
disclosure to its Affiliates or governmental authorities, or except as otherwise
necessary to carry out CIRCA's obligations under this Agreement. If CIRCA finds
it necessary to disclose such Confidential Information or Know-How to a third
party, CIRCA will not do so without first obtaining the written consent of
CEPHALON and entering into an agreement with the third party which binds the
third party to the same obligations of restricted use and disclosure as are
undertaken by CIRCA in this Agreement.
-4-
<PAGE>
5.4 CIRCA shall keep all such Know-How and Confidential Information in a
special file which shall be solely under the direction and control of CIRCA's
senior management. CIRCA shall not distribute any such Know-How or Confidential
Information except to its employees who have a need to know in connection with
the performance of their duties in satisfying the obligations of CIRCA
hereunder. Any CIRCA employee who receives such Know-How or Confidential
Information shall be advised as to the confidential nature thereof and the
prohibitions contained herein. CIRCA will use its best efforts to keep a record
of those individuals who have received copies of the Know-How and Confidential
Information or any portions thereof, and all copies of any portions thereof will
be identified by CIRCA as confidential. Upon termination of this Agreement, and
upon the request of CEPHALON, CIRCA shall return or destroy all such Know-How
and Confidential Information and any copies thereof in its possession.
5.5 Termination of this Agreement shall not operate to extinguish CIRCA's
obligation to treat Know-How and Confidential Information as provided herein,
and the same shall continue in effect in accordance with the Article for ten
(10) years with respect to such Confidential Information, and until such
Know-How is otherwise disclosed, as the case may be.
5.6 Nothing contained herein shall be deemed to grant to CIRCA, either
expressed or implied, a license or other right or interest in the Know-How or in
any patent, trademark or other similar property of CEPHALON other than as
expressly provided hereunder.
5.7 CIRCA shall not use the name of CEPHALON, or disclose the existence of
this Agreement for any marketing, advertising or promotional purpose, without
CEPHALON's prior written consent.
5.8 If CEPHALON learns of any confidential or proprietary information of
CIRCA that does not relate to the manufacture or packaging of the Product, then
the provisions of this Article V shall apply to govern CEPHALON with respect to
the treatment of such information.
VI. COMPONENT SUPPLY
6.1 Active Drug Substance. CEPHALON will provide free of charge, and
---------------------
deliver to CIRCA at its designated production facility not less than thirty
(30) days in advance of the date of production of Product, appropriate
quantities of Active Drug Substance which meets the specifications established
in Schedule A. Following such delivery, CIRCA shall assume full responsibility
for the safekeeping and safe handling, and shall bear all risk of loss, of all
such Active Drug Substance that is in its possession. Legal title to all Active
Drug Substance will remain with CEPHALON, provided however, that CIRCA shall
reimburse CEPHALON for the replacement cost of any Active Drug Substance that is
lost, contaminated, or destroyed while in the possession of CIRCA. CIRCA will
use its best efforts to obtain maximum yield of Product from the Active Drug
Substance provided by CEPHALON in connection with the formulation and packaging
services provided hereunder. The parties anticipate that the combined yield loss
suffered in the course of formulating and packaging the Product in any given lot
shall not exceed
-5-
<PAGE>
five percent (5%). Notwithstanding the above, if the yield loss over any given
twelve month period during the term hereof exceeds five percent (5%), then CIRCA
will reimburse CEPHALON for its costs for that amount of Active Drug Substance
lost that exceeds the aforementioned five percent (5%) maximum threshold.
Notwithstanding the above, the parties agree to calculate the actual yield loss
after production by CIRCA of the first ten (10) batches of Product, and to
negotiate in good faith to adjust the aforementioned yield loss threshold if the
actual yield loss proves to be substantially more than or less than five percent
(5%).
6.2 Starting Material. CIRCA will obtain at its expense Starting Material
-----------------
which meets the specifications established in Scheduled A. CIRCA assumes full
responsibility and liability for the storage and handling of all Starting
Material.
6.3 Packaging Components. Product will be labeled and packaged in
--------------------
accordance with instructions provided by CEPHALON. CIRCA will provide to
CEPHALON master samples of all labels, package inserts and packaging prior to
use and CEPHALON thereafter promptly will approve said master samples. Upon
approval by CEPHALON, CIRCA will procure, test, inspect and approve all labels,
package inserts and packaging used in connection with the Products.
VII. FORECASTS AND ORDERS
7.1 Orders. CEPHALON will submit firm written purchase orders to CIRCA
------
not less than ninety (90) days in advance of the required date of shipment.
CEPHALON must deliver all Active Drug Substance necessary to formulate Product
for any given shipment to CIRCA not less than ninety (90) days in advance of
said date of shipment.
7.2 Forecasts and Forecast Changes. CEPHALON will provide CIRCA with an
------------------------------
initial volume forecast setting forth CEPHALON's anticipated quantity
requirements for the forthcoming twelve (12) months on or about the Effective
Date, and with rolling, updated volume forecasts on a quarterly basis
thereafter. Forecasts provided by CEPHALON to CIRCA hereunder are for planning
purposes only. CEPHALON can increase or decrease its firm order quantities with
CIRCA's prior agreement and CIRCA can adjust its shipping quantities with
CEPHALON'S prior agreeement. Both parties shall accommodate reasonable change
requests from the other.
VIII. SHIPMENT AND PAYMENT
8.1 CIRCA's Responsibilities. CIRCA will properly prepare the Product so
------------------------
that it may be lawfully and safely shipped to warehouse locations in the United
States, Mexico, Japan, the United Kingdom and Ireland as designated by CEPHALON.
CIRCA will prepare and execute all necessary shipping documents. CEPHALON will
choose the carrier by indicating same on its purchase order provided to CIRCA.
-6-
<PAGE>
8.2 Terms of Shipment. CIRCA will ship Product ex factory to CEPHALON's
-----------------
warehouse or other designated sites. All transport costs and risk of loss during
shipment will be borne by CEPHALON.
8.3 Terms of Payment. CEPHALON will pay CIRCA the toll fee within thirty
----------------
(30) days after the date on which CEPHALON receives said invoice from CIRCA,
together with copies of all documentation required for Product release as
provided in Schedule C hereto.
XI. INSPECTION AND ANALYSIS
9.1 Inspection by CIRCA. CIRCA will analyze each Product lot for
-------------------
compliance with the Specifications established in Schedule B. CIRCA will send to
CEPHALON a certificate of analysis and a certificate of release (together with
any other documentation required under procedures established in Schedule C
hereto) prior to, or together with, each shipment of Product. In this regard,
CIRCA agrees to retain all records and documents necessary to fulfill the
requirements established by all applicable regulatory agencies. The parties
acknowledge that, subject to the terms set forth in Schedule C hereof, under the
laws and regulations of the United Kingdom and Ireland, CEPHALON or its
authorized agent shall serve as the designated "Qualified Person" under the laws
and regulation for the European Union for purposes of releasing the Product into
the market.
9.2 Inspection by CEPHALON. CEPHALON or its authorized representative will
----------------------
inspect all shipments upon their receipt and will report any reasonably
discernible defects in the Product to CIRCA within sixty (60) days of its
receipt of the Product and related records. Any defects not reasonable
discernible will be reported to CIRCA by CEPHALON within thirty (30) days of
CEPHALON's discovery of same.
9.3 Non-Conforming Product. If CEPHALON notifies CIRCA in writing that any
----------------------
Product lot does not meet Product Specifications established in Schedule B or
in the Technical Agreement set forth in Schedule C as determined by CEPHALON's
testing and inspection of the Product, then solely at its option CEPHALON may
either (i) demand that CIRCA remanufacture or repackage (as appropriate) said
Product at no charge to CEPHALON and pay all round-trip shipping charges to and
from the destination of the original shipment, or (ii) be relieved of any
obligation to pay CIRCA the toll fees otherwise payable for the manufacture of
said Product, and CIRCA shall reimburse CEPHALON for the costs incurred by
CEPHALON in properly disposing of the Product. In any event, CIRCA shall not be
liable for reimbursing CEPHALON its cost of Active Drug Substance used in
formulating such non-conforming Product, provided however, that nothing herein
shall be construed to limit CIRCA's obligations established in Section 6.1
hereof.
9.4 Independent Testing. If CEPHALON notifies CIRCA that any Product does
-------------------
not meet applicable Specifications or quality assurance guidelines, and CIRCA
does not agree with CEPHALON'S position, the parties will attempt to reach a
mutually acceptable resolution of the dispute. If they are unable to do so after
a reasonable period of time (such period not to exceed three months from the
date of original notification), the matter will be submitted to an
-7-
<PAGE>
independent testing laboratory acceptable to both parties. Both parties will
accept the judgement of the independent laboratory. The cost of such testing
will be borne by the party whose position is determined to have been in error.
If the Product is determined by said independent laboratory to have been
conforming, then the provisions of Section 9.3 hereof shall not apply, and
CEPHALON shall not be relieved of its obligations to pay CIRCA for the
production of such Product.
X. REPRESENTATIONS AND WARRANTIES
10.1 General. CIRCA represents and warrants to CEPHALON that (i) it has
-------
and will maintain throughout the pendency of this Agreement, the expertise, with
respect to personnel and equipment, to fulfill the obligations established
hereunder, and has obtained all requisite licenses, authorizations and approvals
required by federal, state or local government authorities to manufacture the
Product; (ii) the production facility, equipment and personnel to be employed to
formulate and package the Product will be qualified to manufacture GMP grade
product at the time each such batch of Product is produced, and that the
production facility to be employed is in compliance with all applicable laws and
regulations, provided however, that CEPHALON acknowledges that CIRCA shall not
be required to establish or to maintain a dedicated production facility solely
on the basis of this representation; (iii) there are no pending or uncorrected
citations or adverse conditions noted in any inspection of the production
facility to be employed which would cause the Product to be misbranded or
adulterated within the meaning of the federal Food, Drug and Cosmetic Act, as
amended; (iv) it has provided to CEPHALON all FDA inspection reports and FORM
483s received by CIRCA in the last two (2) years, and that the documents
provided are true and complete copies thereof (except as noted); (v) the
execution, delivery and performance of this Agreement by CIRCA does not conflict
with, or constitute a breach of any order, judgement, agreement, or instrument
to which CIRCA is a party; (vi) the execution, delivery and performance of this
Agreement by CIRCA does not require the consent of any person or the
authorization of (by notice or otherwise) any governmental or regulatory
authority (other than those relating to the granting of approval to
commercialize the Product); and (vii) CIRCA has not been debarred by the United
States Food & Drug Administration ("FDA") under the General Drug Enforcement Act
of 1992 (or by any analogous agency or under any analogous law or regulation),
and neither it nor any of its officers or directors has ever been convicted of a
felony under the laws of the United States or of the Territory for conduct
relating to the development or approval of a drug product or relating to the
marketing or sale of a drug product, and further that no individual or firm
debarred by any governmental authority will participate in the performance,
supervision, management or review of the production of Product supplied to
CEPHALON under this Agreement.
10.2 Manufacturing Warranty. CIRCA warrants that all products supplied to
----------------------
CEPHALON will be manufactured in accordance with current good manufacturing
practices as specified by the applicable laws and regulations of the United
States, Mexico, Japan, the European Union, the United Kingdom and of Ireland (as
may be applicable), at the time of manufacture. A statement to this effect shall
be printed on CIRCA'S certificate of analysis for each batch of Product
delivered. Moreover, CIRCA will provide to CEPHALON concurrent with each invoice
the applicable batch records and test results establishing such compliance, as
-8-
<PAGE>
provided in Schedule C hereto.
10.3 Product Warranty. CIRCA hereby warrants that all Product delivered to
----------------
CEPHALON (i) will not be adulterated, misbranded, or otherwise prohibited within
the meaning of any European Union, national, state or local law or regulation,
(ii) will be free from defects in materials (so long as such materials are
within the control of CIRCA during the manufacturing process) and manufacture,
(iii) will conform to the specification set forth in the applicable Product
registration on file with the FDA, the Japanese Ministry of Health and Welfare,
the European Medicines Evaluative Agency, any other authority, and (iv) will
conform to Specifications as established in Schedule B hereto.
10.4 Environmental Warranty. CIRCA warrants that all waste generated in
----------------------
operations under this Agreement will be stored, transported and disposed of in a
safe and environmentally sound manner consistent with all federal, state and
local laws and regulations. CIRCA further warrants that it will conduct its
business so as to comply with the terms and conditions of all air pollution
control permits, sanitary sewer discharge permits, and authorizations required
by applicable federal, state and local laws, rules and regulations relating to
the protection of the environment. CIRCA will not undertake any production or
development activities for itself or on behalf of a third party which, together
with the emissions from activities under this Agreement, would cause air
emissions from isopropyl alcohol or any other substance to exceed any applicable
legal limits.
10.5 Technology Warranty. CEPHALON hereby represents and warrants to CIRCA
-------------------
that the technology established in the Specifications, or as otherwise disclosed
hereunder (collectively, the "Technology") is, to the best knowledge of
CEPHALON, sufficient to enable CIRCA to manufacture and package the Product as
contemplated hereunder. Except as otherwise disclosed to CIRCA, CEPHALON owns
all right, title and interest to said Technology, free and clear of any adverse
ownership claims Except as otherwise disclosed to CIRCA, CEPHALON has not
received any notice that any portion of the Technology infringes upon the
patent, trade secret or other intellectual property rights or interests of any
third party and, to the best knowledge of CEPHALON, there has been no such
infringement.
XI. QUALITY CONTROL, RECORDS AND INSPECTIONS
11.1 Product and Component Samples. CIRCA will maintain a sample of each
-----------------------------
chemical component (including Active Drug Substance) as required by applicable
regulatory standards or as otherwise mutually agreed by CEPHALON and CIRCA.
CIRCA will be responsible for maintaining retention samples of the Product as
may be required by applicable regulatory standards.
11.2 Validation. CIRCA will validate all process, methods, equipment
----------
utilities, facilities and computers used in the formulation, packaging, storage,
testing and release of Product in conformance with the provisions of Schedule D
hereto, and all applicable laws and regulations. CEPHALON will have the right to
review the results of said validation upon request.
-9-
<PAGE>
11.3 Quality Compliance. CIRCA will provide CEPHALON with timely
------------------
notification of all significant deviations, notes to file, and other
deficiencies that may impact the quality of the Product, as well as all FDA
reports regarding testing, manufacture, packaging, or labeling of the Product or
the production facility.
11.4 Manufacturing Records. CIRCA will maintain complete and accurate
---------------------
records relating to the Product and the manufacture, packaging, labeling and
testing thereof for the period required by applicable Regulatory Standards, and
CIRCA shall provide copies thereof to CEPHALON upon CEPHALON's request. The
records shall be subject to audit and inspection under this Article XI.
11.5 Batch Records. CIRCA will supply for each batch of Product, including
-------------
each pilot batch, complete batch production and control records. Records which
include the information relating to the manufacturing, packaging and quality
operation for each lot of Product will be prepared by CIRCA at the time such
operations occur. The records will include, without limitation, mixing and
filling records; container and component traceability records; equipment usage
records; in-process and final laboratory testing results; in-process and final
Product physical inspection results; yield reconciliation for bulk and finished
Product; labeling and packaging records; and records relating to deviations from
approved procedure, as well as CIRCA's investigation and corrective actions.
Copies of batch records will be forwarded to CEPHALON prior to or along with
shipment of each Product lot.
11.6 Records Retention. CIRCA will retain records and documents for
-----------------
periods meeting all applicable regulations of the FDA and other applicable
regulatory agencies.
11.7 Regulatory Inspections. CIRCA will promptly inform CEPHALON of any
----------------------
contact, inspection or audit by any governmental agency, related to or affecting
the Product. CIRCA will promptly provide CEPHALON with copies of any
government-issued inspection observation reports (including without limitation
FDA Form 483s) and agency correspondence, that may affect the Product. CIRCA and
CEPHALON will cooperate in resolving any concerns with any governmental agency.
CIRCA will also inform CEPHALON of any action taken by any governmental agency
against CIRCA or any of its officers and employees, within 24 hours after the
action is taken.
11.8 CEPHALON Inspections. CEPAHLON or its authorized representative will
--------------------
have the right during normal business hours, at reasonable intervals and on
reasonable prior notice, to inspect CIRCA's facilities used in the
manufacturing, packaging, storage, testing, shipping or receiving of Product and
Product components. Such inspections may include GMP inspections and system
audits. Representatives of CEPHALON (and its designated Affiliate) will have
access during audits to all documents, records, reports, data, procedures,
facilities, regulatory submissions, and all other information required to be
maintained by applicable government regulations. CIRCA shall take appropriate
actions to adopt reasonable suggestions of CEPHALON to correct any deficiencies
identified by such inspection or audit. In addition, CEPHALON shall have the
right to observe from time to time the manufacture, packaging and quality
control testing of the Product by CIRCA, including without limitation, the right
to
-10-
<PAGE>
arrange, at its cost and expense, to have a CEPHALON employee or other
representative located on the premises of CIRCA's production facility to
participate in the monitoring of Product production, testing, packaging and
labeling under this Agreement. No testing of the Product by CEPHALON and no
inspection or audit by CEPHALON of the CIRCA production facility under this
Agreement shall operate as a waiver of or otherwise diminish CIRCA's
responsibility to ensure Product quality under this Agreement.
XII. COMPLAINTS, ADVERSE EXPERIENCES AND RECALLS
12.1 Product Complaints and AE's. CEPHALON will correspond with
----------------------------
complainants as to any complaints associated with Product, whether received
during or after the term hereof. CIRCA will assist CEPHALON in investigating
Product complaints by analyzing Product, manufacturing processes and components
to determine the nature and cause of an alleged Product manufacturing defect or
alleged Product failure. CIRCA will also assist CEPHALON in the investigation of
any Adverse Experience (AE) reported to either party when such AEs are believed
to be attributable to the Product. If CEPHALON determines that any reasonable
pyhsical, chemical, biological or other evaluation should be conducted in
relation to an AE or Product compliant, CIRCA will conduct the evaluation and
provide CEPHALON with a written report of such evaluation within thirty (30)
days from receipt of CEPHALON's written request for same, together with samples
of the Product from the relevant lot. CIRCA will notify CEPHALON within 24 hours
of any Product that fails to meet the Specifications set forth in Schedule B
hereto.
12.2 AE Reports. CEPHALON or its Affiliates will file any AE Reports
-----------
required under United States or foreign laws and regulations for the Product.
CIRCA will notify CEPHALON by facsimile transmission of all Product complaints
and AEs received within two (2) days of its receipt thereof. All such notices
shall be sent to the attention of the Director, Medical Affairs at CEPHALON,
facsimile number (610) 738-6313.
12.3 Recall Action. If CEPHALON should elect or be required to initiate a
--------------
Product recall, withdrawal or field correction because of (i) supply by CIRCA of
Product that does not conform to the Specifications and warranties established
by this Agreement or (ii) the negligent or intentional wrongful act or omission
of CIRCA, CEPHALON will notify CIRCA and provide a copy of its recall
letter prior to initiation of the recall. CIRCA will assist CEPHALON (and its
designated Affiliate) in any investigation to determine the cause and extent of
the problem. All regulatory authority contacts and coordination of any recall
activities will be initiated by CEPHALON.
12.4 Recall Expenses. If any Product is recalled as a result of (i)
----------------
supply by CIRCA of Product that does not conform to the warranties in this
Agreement or (ii) the negligent or intentional wrongful act or omission of
CIRCA, then CIRCA will bear all costs and expenses of such recall. Recalls for
any other reason will be at CEPHALON's expense. If each Party contributes to
the cause for a recall, the cost will be shared in proportion to each Party's
contribution.
-11-
<PAGE>
12.5 Recall Records. CIRCA will maintain complete and accurate records
---------------
for such periods as may be required by applicable law or regulation, but not
less than three (3) years following the applicable date of expiration of a given
Product lot, or all Product supplied under this Agreement.
XIII. EQUIPMENT
Notwithstanding anything to the contrary herein, the parties acknowledge
that CEPHALON will reimburse CIRCA for its out-of-pocket expenses incurred in
connection with the purchase of certain tablet tooling equipment required for
the manufacture, packaging and labeling of the Product (the "Equipment"),
including without limitation punches and dies for tablet presses, and special
change parts for bottle handling. The parties shall agree in writing on the
specifications and costs of any such Equipment and related materials prior to
such purchase. CIRCA agrees to use said Equipment solely in connection with the
performance of its duties and obligations established hereunder. CIRCA shall
maintain all such Equipment in good working order. CEPHALON will be responsible
for the cost of purchasing replacement Equipment at the end of its useful life,
provided however that CIRCA will be responsible for any such costs stemming from
damage or premature or undue wear and tear to the Equipment based upon neglect
for misuse by CIRCA. CEPHALON shall retain title to such Equipment, which will
be returned by CIRCA at the request of CEPHALON following termination of this
Agreement.
XIV. INSURANCE
During the term hereof, CIRCA shall maintain product liability/completed
operations insurance for and providing coverage of not less than TEN MILLION AND
00/100 DOLLARS ($10,000,000.00) per occurrence and in the aggregate providing a
defense for and insuring CIRCA against all costs, fees, judgments, and
liabilities arising out of or alleged to rise out of its obligations and
representations and warranties under this Agreement. In addition, CIRCA will
maintain at all times sufficient property casualty insurance to cover the total
quantity of Active Drug Substance and Product on hand at its full cost of
replacement. CIRCA will provide to CEPHALON, upon request, evidence of such
insurance overages. CIRCA further agrees to cause such policies to name CEPHALON
as an additional insured at no cost to CEPHALON.
XV. TRADEMARKS
15.1 CIRCA shall have the non-exclusive right to use the Trademarks in
packaging the Product in connection with fulfilling its obligations hereunder.
The rights granted CIRCA hereunder to use the Trademarks shall in no way affect
CEPHALON's ownership of such Trademarks. No other right, title or interest in
the Trademarks is established hereby, and nothing herein shall be construed to
grant any right or license to CIRCA to use the CEPHALON trademark or the name
CEPHALON, other than as specifically set forth herein.
-12-
<PAGE>
15.2 CIRCA shall not make any use or take any action with respect to the
Trademarks to prejudice or infringe CEPHALON's rights thereto including the use
of any confusingly similar trademark and shall forthwith, upon objection by
CEPHALON, desist from any use thereof or action therewith which is in violation
of this Agreement.
15.3 CIRCA will only market the Product using the relevant Trademarks as
listed in Schedule A during the term of this Agreement. Upon termination of
this Agreement, CIRCA will cease all use of the Trademarks and cancel any
license to such Trademarks granted hereunder.
15.4 CIRCA will use the Trademarks in strict accordance with the
instructions given by CEPHALON, and shall refrain from making any changes in
connection therewith without first obtaining CEPHALON's written consent. CIRCA
further agrees that at all times the Trademarks shall be used in accordance with
good trademark practice, including notation of the fact that they are trademarks
and use of the appropriate notice of registration. CEPHALON reserves the right
to unilaterally determine the adequacy of the use and protection given the
Trademarks by CIRCA as set forth herein.
15.5 CIRCA shall notify CEPHALON, in writing, of any conflicting use of
and applications or registrations for, any of the Trademarks, or any acts of
infringements, or acts of unfair competition involving the Trademark, promptly
after such matters are brought to its attention or its has knowledge thereof.
CIRCA further agrees to assist CEPHALON, at CEPHALON's expense, in registering
or perfecting CEPHALON's rights to the Trademarks in the Territory.
15.6 In the event of any claim or litigation by a third party against
CIRCA alleging that any of the Trademarks initiates or infringes a trademark of
such third party or is invalid, CIRCA shall promptly give notice of such claims
or litigation to CEPHALON and CEPHALON shall assume responsibility for and
control of the handling, defense or settlement thereof. CIRCA shall cooperation
fully with CEPHALON during the pendency of any such claim or litigation.
CEPHALON shall keep CIRCA notified of the current status of any trademark claim,
litigation or infringement of any of the Trademarks and shall permit CIRCA to
assume the handling, defense or settlement thereof if CEPHALON declines to do
so. CEPHALON may at any time modify adopt or withdraw from use of any Trademark
without any liability to CIRCA.
XVI. INVENTIONS
Any inventions or discoveries made by CIRCA in the performance of this
Agreement that relate to the Product (including any new use or change in the
method of producing, testing or storing the Product) shall be owned by CEPHALON.
Any other invention or discovery made by CIRCA in the performance of this
Agreement shall be owned by CIRCA, but CEPHALON shall have a nonexclusive,
perpetual, nontransferable, paid-up license to use any such invention to make or
have made the Product. Each party shall execute such instruments as shall be
required to evidence or effectuate the other party's ownership of any such
inventions, and shall cooperate upon reasonable request (and at the expense of
the requesting party) in the prosecution of patents
-13-
<PAGE>
and other intellectual property rights related to any such invention.
XVII. INDEMNIFICATION
17.1 By CIRCA. CIRCA will indemnify and hold CEPHALON harmless from
---------
any and all liability, damage, loss, cost, or expense (including reasonable
attorneys' fees) which arise from (i) CIRCA'S breach of any of the
covenants, warranties, and representations contained herein, or (ii) CIRCA's
negligence or other wrongful conduct as determined by a court of competent
jurisdiction.
17.2 By CHEPHALON. CEPHALON will indemnify and hold CIRCA harmless
-------------
from any and all liability, damage, loss, cost, or expense (including reasonable
attorneys' fees) which arise from (i) CEPHALON'S breach of any of the covenants,
warranties, and representations contained herein, or (ii) CEPHALON's negligence
or other wrongful conduct as determined by a court of competent jurisdiction, or
(iii) a claim that the manufacture of the Product by CIRCA in accordance with
this Agreement infringes a patent registered in the United States, or any other
jurisdiction.
17.3 By Each Party. In the event that negligence or willful
--------------
misconduct of both CIRCA and CEPHALON contribute to any such loss, damage,
claim, injury, cost or expense, CIRCA and CEPHALON will each indemnify and hold
harmless the other with respect to that portion of the loss, damage, claim,
injury, cost or expense attributable to its negligence or willful misconduct.
17.4 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 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 including the retention of legal
counsel engaged to handle such matter. The indemnifying party hereunder will be
liable for any costs associated with the settlement of any claim or action
brought against it or other party unless it has received prior notice of the
settlement negotiations and has agreed to the settlement.
XVIII. FURTHER ENGAGEMENTS
If CEPHALON develops a revised formulation of the Product, or otherwise
desires to engage CIRCA to formulate or package pharmaceutical products other
than the Product, then the parties will negotiate in good faith to reach
agreement on mutually acceptable terms and conditions under which this Agreement
shall be expanded to cover such additional engagement(s).
-14-
<PAGE>
XIX. TERMINATION
19.1 Without Cause. CEPHALON may terminate this Agreement, effective on
--------------
the third anniversary of the date hereof or on subsequent anniversary date(s),
if applicable, by giving three (3) months written notice to CIRCA.
19.2 Breach. If either party hereto commits a material breach of any of
-------
its obligations hereunder, the non-breaching party may, at its option, terminate
this Agreement by giving the other party at least sixty (60) days prior written
notice of its intent to terminate this Agreement, which notice shall specify the
breach and the termination date, unless the breaching party cures said breach
prior to the specified termination date (or prior to the expiration of a longer
period as may be reasonably necessary to cure such breach, provided that the
breaching party is making diligent efforts to cure such breach, and provided
further that such longer period shall not in any event exceed one hundred twenty
(120) days from the date of notice.)
19.3 Insolvency. Either party may terminate this Agreement immediately in
-----------
its entirety if the other Party files a petition of bankruptcy, is adjudged
bankrupt, takes advantage of any insolvency act, or executes a bill of sale,
deed of trust, or assignment for the benefit of creditors.
19.4 Survival. The rights and obligations contained in sections covering
---------
representations and warranties, indemnification and confidentiality will survive
termination of this Agreement, as will any rights to payment or other rights or
obligations that have accrued under this Agreement prior to termination.
Termination will not affect the liability of either party by reason of any act,
default, or occurrence prior to said termination.
19.5 Transfer. If either party terminates this Agreement, CIRCA will upon
---------
request provide reasonable assistance in transferring production of Product to a
facility owned by CEPHALON or a third party selected by CEPHALON.
19.6 Return of Product and Components. Upon termination under this
--------------------------------
Article, CIRCA shall return promptly to CEPHALON all Product, Active Drug
Substance, and packaging components in its possession on the effective date of
termination.
XX. ALTERNATE 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.
20.1 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 contract terms. 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.
-15-
<PAGE>
20.2 If any dispute or claim arising under this contract cannot be
readily resolved by the parties pursuant to the process described in Section
21.1, the parties agree to refer the matter to a panel consisting of one (1)
senior executive employed by each party who is not directly involved in the
claim or dispute for review and resolution. A copy of the contract terms, agreed
upon facts (and areas of disagreement), and concise summary of the basis for
each side's contentions will be provided to both such senior executives who
shall review the same, confer, and attempt to reach a mutual resolution of the
issue.
20.3 If the matter has not been resolved utilizing the process set forth
in this Article XXI, and the parties are unwilling to accept the non-binding
decision of the panel, either or both parties may elect to pursue resolution
through litigation, or other legal remedies available to the parties.
XXI. MISCELLANEOUS
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 hereof.
21.2 Severability. In the event that any provision of this Agreement is
------------
found to be invalid or unenforceable, then the offending provision shall not
render any other provision of this Agreement invalid or unenforceable, and all
other provisions shall remain in full force and effect and shall be
enforceable, unless the provisions which have been found to be invalid or
unenforceable shall substantially affect the remaining rights or obligations
granted or undertaken by either party.
21.3 Entire Agreement. This Agreement, including all those Schedules
----------------
appended hereto, 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, including without
limitation that certain Manufacturing Agreement between the parties dated as of
November 14, 1994 (except for those provisions thereof that were designated by
the parties to survive termination of said Manufacturing Agreement). Further,
this Agreement may not be changed, modified, amended or supplemented except by
written instrument signed by both parties.
21.4 Assignability. This Agreement and the rights hereunder may not be
-------------
assigned or transferred by either party without the prior written consent of the
other party (other than for rights to payment), provided however, that either
party may assign this Agreement to an Affiliate, and provided further that in
the event of a merger, acquisition or sale of substantially all of the assets of
CEPHALON, the rights and obligations of CEPHALON under this Agreement may be
assigned to the survivor or purchaser in that transaction. In the event that
this Agreement is assigned, it shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.
-16-
<PAGE>
21.5 Further Assurances. Each party hereto agrees to execute, acknowledge
------------------
and deliver such further instruments, and to take such other actions, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
21.6 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 waiver of
the provision of itself.
21.7 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, 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. A party whose performance has been excused will perform such
obligations as soon as is reasonably practicable after the termination or
cessation of such event or circumstance.
21.8 Remedies. CIRCA agrees and acknowledges that its failure to produce
--------
Product, its disclosure of Confidential Information, or the breach of any other
provision set forth in this Agreement may cause irreparable harm to CEPHALON,
and therefore that any such breach or threatened breach will entitle CEPHALON to
injunctive relief, in addition to any other legal remedies available to
CEPHALON in a court of competent jurisdiction.
21.9 Governing Law. This Agreement shall in all respects be construed and
-------------
enforced in accordance with the laws of the State of Delaware.
21.10 Independent Contractors. The parties are independent contractors
-----------------------
under this Agreement. Nothing contained in this Agreement is to be construed so
as to constitute CEPHALON and CIRCA as partners, agents or employees of the
other, including with respect to this Agreement. Neither party hereto shall have
any express or implied right or authority to assume or create any obligations on
behalf of, or in the name of, the other party or to bind the other party to any
contract, agreement or undertaking with any third party unless expressly so
authorized in writing by the other party.
21.11 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be considered and shall have the force and
effect of an original.
21.12 Notices. Except as set forth in Section 12.2 above, or as otherwise
-------
stated herein, all notices, consents or approvals required by this Agreement
shall be in writing and sent by certified or registered air mail, postage
prepaid or by facsimile or cable (confirmed by such certified or registered
mail) to the parties at the following addresses or such other addresses as may
be designated in writing by the respective parties. Notices shall be deemed
effective on the date of mailing.
-17-
<PAGE>
Director, Technical Operations
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380-4245
Facsimile: (610) 344-7563
General Manager
Circa Pharmaceuticals, Inc.
33 Ralph Avenue
P.O. Box 30
Copiague, New York 11726-0030
Facsimile: (516) 842-8630
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be executed as of the date first above written.
CEPHALON, INC.
By: /s/ Bruce A. Peacock
------------------------------------
Bruce A. Peacock
CIRCA PHARMACEUTICALS, INC.
By: /s/ Stan J. Martinez
------------------------------------
-18-
<PAGE>
SCHEDULE A
----------
ACTIVE DRUG SUBSTANCE AND STARTING MATERIAL SPECIFICATIONS; TRADEMARKS
----------------------------------------------------------------------
The parties have agreed upon all those applicable specifications for the
Active Drug Substance and Starting Materials as set forth in the following
documents. Any modifications to any such specifications shall be agreed upon by
the parties.
<TABLE>
<CAPTION>
DCRA # DOCUMENT # TITLE
- ------ ---------- -----
<S> <C> <C>
893 PKG/CAPLINER Packaging Component - Cap Liner (PE)
892 PKG/DESS Packaging Component - Desiccant Canister
891 PKG/HDPE Packaging Component - HDPE Container
894 PKG/RAYON Packaging Component - Rayon Coil
865 RM/CRMLNA Raw Material - Croscarmellose Sodium, NF
864 RM/CRN STR Raw Material - Corn Starch
917 RM/IPA Raw Material - Isopropyl Alcohol
867 RM/LACHY Raw Material - Lactose Monohydrate, NF
929 RM/MAGSIL Raw Material - Magnesium Silicate Compressil RM 274
869 RM/MAGSTR Raw Material - Magnesium Stearate, NF
873 RM/MODAF Raw Material - Modafinil
870 RM/PVP Raw Material - Povidone, USP
907 RM/PWATER Raw Material - Purified Water, USP
872 RM/TALC Raw Material - Talc, USP
875 STD/MODAF Requalification of Standard - Modafinil
876 VQ/MODAF Vendor Qualification - Modafinil
</TABLE>
-19-
<PAGE>
Int. Cl.: 42
Prior U.S. Cls.: 100 and 101
Reg. No. 1,983,615
United States Patent and Trademark Office Registered July 2, 1996
- -----------------------------------------------------------------------
SERVICE MARK
PRINCIPAL REGISTER
[LOGO]
CEPHALON, INC. (DELAWARE CORPORATION)
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
FOR: BIOFILARMACEUTICAL RESEARCH AND DEVELOPMENT SERVICES, NAMELY DEVELOPING
FOR OTHERS DIAGNOSTIC AND THERAPEUTIC AGENTS FOR DISEASES OF ANIMALS AND HUMANS,
IN CLASS 42 (U.S. CLS. 100 AND 101).
FIRST USE 6-0-1988: IN COMMERCE 6-0-1988
THE STIPPLING IN THE DRAWING IS FOR SHADING PURPOSES ONLY.
THE MARK IS A STYLIZED LETTER "C" DESIGN
SER. NO. 74-622-072, FILED 1-17-1995
DAVID H. STINE, EXAMINING ATTORNEY
Provigil(R)
Cephalon(R)
-20-
<PAGE>
SCHEDULE B
----------
PRODUCT SPECIFICATIONS
----------------------
The parties have agreed upon all those applicable specifications for the
Product as set forth in the following documents. Any modifications to any such
specifications shall be agreed upon by the parties.
<TABLE>
<CAPTION>
DCRA # DOCUMENT # TITLE
- ------ ---------- -----
<S> <C> <C>
877 BL/MODAF Master Blend - Modafinil Tablets
878 FP/100MODAF Finished Product - Modafinil 100 mg Tablets
890 FP/100MODAFEUR Finished Product Modafinil 100 mg Tablets (European)
879 FP/100MODAFIPA Finished Product - Residual Isopropyl Alcohol in
Modafinil 100 mg Tablets
881 FP/200MODAF Finished Product - Modafinil 200 mg Tablets
882 FP/200MODAFIPA Finished Product - Residual Isopropyl Alcohol in
Modafinil 200 mg Tablets
875 STD/MODAF Requalification of Standard - Modafinil
</TABLE>
-21-
<PAGE>
SCHEDULE C
----------
TECHNICAL AGREEMENT
-------------------
-22-
<PAGE>
[LOGO OF CIRCA PHARMACEUTICALS, INC.]
CEPHALON - CIRCA TECHNICAL AGREEMENT
FOR THE COMMERCIAL MANUFACTURING AND TESTING
OF PROVIGIL(R) DRUG PRODUCT
I. PURPOSE AND SCOPE
This is the Quality Assurance policy between Cephalon and Circa. This agreement
specifies the QA responsibilities and requirements of each party for the
commercial manufacturing and testing of Provigil(R) Drug Product. This policy
also specifies the Provigil related requirements for record keeping, quality
reporting, and change control.
II. DEPARTMENTS AFFECTED
Quality Assurance - Cephalon Quality Assurance - Circa
Commerical Operations - Cephalon Quality Control - Circa
Regulatory Affairs - Cephalon Manufacturing Operations - Circa
Regulatory Affairs - Circa
III. RESPONSIBILITY
It is the responsibility of the Quality Assurance management at Cephalon and
Circa, in cooperation with Manufacturing Operations, Quality Control and
Regulatory Affairs, to assure compliance with this agreement.
IV. RESPONSIBILITIES AND REQUIREMENTS - CIRCA
A. Circa Responsibilities
. Manufacture and test Provigil Drug Product in accordance with cGMP and the
approved Provigil marketing applications.
. Perform a Quality review of every lot of Provigil drug product and
subsequently release or reject the lot in accordance with cGMP.
. All initial and stability testing of both active and inactive components and
finished dosage forms are performed in-house by the staff of the Circa
Quality Control Department in accordance with approved specifications and
procedures (as listed in this agreement) and/or the approved Provigil
marketing applications and protocols for Provigil drug product.
<PAGE>
[LOGO OF CIRCA APPEARS HERE]
. Quality Control Raw Material Report for release of each lot of modafinil
drug substance tested and released for use in the manufacturing of Provigil
drug product.
. Quality Control Release Report for each lot of Provigil Master Blend used
in the manufacturing of Provigil drug product.
. Quality Control Release Report for each lot of Provigil Compression Process
used in the manufacture of Provigil drug product.
. Certificate of Release (to Cephalon) for each labeled and packaged lot of
Provigil final drug product.
. All investigations, incident reports, anomaly reports, associated with the
manufacturing and testing of every lot of Provigil.
The following documents shall be provided to Cephalon on a schedule mutually
agreed to by Circa and Cephalon or on an as need basis:
. Stability Reports
. Product Quality Review Reports (Summarized annually as the "Annual Product
Review)"
- Summary Report - Product complaints
- Summary Report - Incident reports and anomaly explanation reports
- Summary Report - Production deviations
- Summary Report - Out-of-specification results
- Summary Report - QA product disposition
- Summary Report - In-process and finished product data trends
- Summary Report - Retain sample evaluation
V. RESPONSIBILITIES AND REQUIREMENTS - CEPHALON
A. RESPONSIBILITIES
. Cephalon's QA shall review the Provigil summary lot file documentation
prior to market distribution. Documentation of the sponsor review and
disposition will be provided to Circa prior to the shipment of the lot to
the designated distributor.
<PAGE>
[LOGO OF CIRCA APPEARS HERE]
. To assure that all raw materials and packaging components are tested and
released, as per the most current Specifications and Procedures (as listed
in this agreement), and/or the approved Provigil marketing applications and
Standard Operating Procedures, prior to usage in the manufacturing of
Provigil drug product.
. The manufacturing and packaging is to be executed under the most current
Master Batch and Packaging Records (as listed in this agreement), that are
controlled through Circa's internal change control procedure.
. Compile and report the following Provigil specific information necessary
for the periodic product quality assessment:
- Investigations;
- Deviations;
- List of Provigil Lots Released;
- List of Provigil Lots Rejected;
- Product Complaints; and
- Product Stability
- In-Process and Finished Product Data Trends
- Retain Sample Evaluation
B. Change Control - Circa
Circa shall not implement, modify or delete any specification, process, or
procedure directly related to the manufacture or testing of Provigil Drug
Product, or change the equipment used, or change the vendors, without notifying
Cephalon or without prior written approval from Cephalon.
The following require joint Cephalon - Circa approval prior to implementation,
-------------------------
modification or deletion:
. Master Batch Formula: Master Blend
. Master Batch Formula: 100 mg Compression Process
. Master Batch Formula: 200 mg Compression Process
. Modafinil Raw Material Specification and Procedure: RM/MODAF
. In-Process Specification and Procedure: BL/MODAF
. Finish Product Specification and Procedure, Provigil Tablets, 100 mg FP/100
MODAF
. Finished Product Specification and Procedure, Provigil Tablets, 200 mg
FP/200 MODAF
. Stability Specification and Procedure, Provigil Tablets, 100 mg STAB/100
MODAF
. Stability Specification and Procedure, Provigil Tablets, 200 mg STAB/200
MODAF
. Raw Material Specification and Procedure for Magnesium Silicate (Compressil
RM 274)
RM/MAGSIL
. Master Packaging Record: Provigil Tablets, 100 mg Capsule Shaped
<PAGE>
[LOGO OF CIRCA APPEARS HERE]
. Master Packaging Record: Provigil Tablets, 200 mg
. Other procedures, processes, and documentation exclusive to Provigil
manufacturing and testing operations...for example:
- Provigil Process Validation
- Provigil Cleaning Validation
The following require Cephalon notification prior to implementation,
---------------------
modification or deletion:
. "Spec & Pros" specific (but not exclusive) to the manufacturing and testing
operations of Provigil Drug Product.
. Raw Material Specifications and Procedure for the following:
Purified Water, USP: RM/Water <USP>
Isopropyl Alcohol, USP: RM/IPA
Providone K90D, USP: RM/PVP
Lactose Monohydrate, NF: RM/LACHY
Corn Starch, NF: RM/CRNSTR
Croscarmellose Sodium NF: RM/CRMLNA
Talc USP: RM/TALC
Magnesium Stearate, NF: RM/MAGSTR
. Other procedures, processes, and documentation specific to Provigil or the
Cephalon sponsored drug product applications...for example:
- Addition or deletion of a Circa qualified outside testing
laboratory
- Circa's facilities and equipment specific in the manufacturing
and testing of Provigil, including but not limited to:
[*]
C. SUMMARY DOCUMENTATION AND REPORTS - CIRCA
Circa shall provide Cephalon with documentation specific to the manufacturing
testing and quality review of Provigil drug product as indicated below. Upon
request, Circa shall provide any and all Provigil specific manufacturing,
testing, QA and distribution documentation (Lot File documentation).
At a minimum, a copy of the following documents shall be provided to Cephalon
prior to the initial shipment of each lot of Provigil final product:
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS
BEEN OMITTED AND HAS BEEN FILED SEPARATELY
WITH THE COMMISSION.
<PAGE>
[LOGO OF CIRCA APPEARS HERE]
Cephalon's Professional Services will receive and report adverse drug
experiences (ADEs). All spontaneous reports of adverse events received by Circa
or Cephalon will be directed to Cephalon as follows:
Cephalon, Inc.
Professional Services Representative
145 Brandywine Parkway
West Chester, PA 19380-4245
Telephone: 1-800-896-5855 Fax: 610-738-6313
. Cephalon's Professional Services will receive product quality complaints.
All product complaints received by Circa or Cephalon will be directed to
Cephalon's Professional Services as specified above. Cephalon will forward
all product quality complaints to Circa and processed in accordance with
Circa's drug quality complaint procedure.
. Cephalon's Quality Assurance is ultimately responsible for all Provigil
recall activities.
. Cephalon's will periodically monitor and audit Circa's manufacturing and
testing operations for compliance to the Provigil NDA and for compliance to
cGMP.
B. DOCUMENTATION AND REPORTS
. A copy of the Cephalon QA Provigil final product disposition will be sent
to Circa to effect the shipment of same lot to the designated distributor
(CORD).
. Cephalon will report all Provigil product quality complaints to Circa
within 10 working days of receipt.
/s/ Robert Urban 9/17/97
---------------------------------------------- ---------
Cephalon, Inc. Manufacturing Operations Date
/s/ Doug Claney 9/17/97
---------------------------------------------- ---------
Cephalon, Inc. Quality Assurance Date
/s/ [SIGNATURE ILLEGIBLE] 9/16/97
---------------------------------------------- ---------
Circa Pharmaceuticals, Inc. Regulatory Affairs Date
/s/ [SIGNATURE ILLEGIBLE] 9/16/97
---------------------------------------------- ---------
Circa Pharmaceuticals, Inc Quality Assurance Date
<PAGE>
SCHEDULE D
----------
PRODUCT VALIDATION AND STABILITY TESTING PROCEDURES
---------------------------------------------------
The parties have agreed upon all those applicable specifications for Product
validation and stability testing as set forth in the following documents. Any
modifications to any such specifications shall be agreed upon by the parties.
DCRA # DOCUMENT # TITLE
- ------ ---------- -----
874 RD/RA/MODAF Residual Active Assay - Modafinil Cleaning
Validation
880 STAB/100MODAF Stability - Modafinil 100 mg Tablets
889 STAB/100MODAFEU Stability - Modafinil 100 mg Tablets (European)
883 STAB/200MODAF Stability - Modafinil 200 mg Tablets
875 STD/MODAF Requalification of Standard - Modafinil
PV-001-10047 Process Validation Protocol - Master Blend for
Modafinil 100 mg & 200 mg Tablets
PV-002-11047 Process Validation Protocol - Compression Process
for Modafinil 100 mg Tablets
PV-003-11047 Process Validation Protocol - Compression Process
for Modafinil 200 mg Tablets
PV-004-06057 Process Validation Protocol - Packaging Process for
Modafinil 100 mg & 200 mg Tablets
CV-003-21047 Cleaning Validation Protocol - Modafinil 200 mg
Tablets
-23-
<PAGE>
SCHEDULE E
----------
TOLLING FEES
------------
CEPHALON shall pay CIRCA the following amounts in consideration of the
formulation and packaging services rendered hereunder:
BATCH PRICING COST/BATCH
------------- ----------
. A single lot per P.O. and delivery Date:
Provigil(R) 100 mg packed in 100 counts [*]
Provigil(R) 100 mg packed in 12 counts
Provigil(R) 200 mg packed in 100 counts
Provigil(R) 200 mg packed in 6 counts
. 3 or more of the same batch on a single P.O. with the same
delivery date:
Provigil(R) 100 mg packed in 100 counts [*]
Provigil(R) 100 mg packed in 12 counts
Provigil(R) 200 mg packed in 100 counts
Provigil(R) 200 mg packed in 6 counts
VOLUME DISCOUNTS:
- ----------------
A volume discount will be applied when a determined quantity of batches has been
purchased in a 12-month period starting with the anniversary date of the first
commercial batch. The determined quantities for the volume discounts are as
follows:
. [*] Batches: A [*] credit will be applied toward the next P.O.
for commercial batches.
. [*] Batches: A [*] credit will be applied toward the next P.O.
for commercial batches.
Beginning on the first anniversary of the effective date of this
Agreement and on each anniversary thereafter, the above tolling fees shall be
increased or decreased (as the case may be) by the percentage change from the
immediately proceeding anniversary date in the Producer Price Index (PPI) for
finished pharmaceutical preparations, ethical, as published by the Bureau of
Labor Statistics of the U.S. Department of Labor for the region in which the
production facility is located.
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS
BEEN OMITTED AND HAS BEEN FILED SEPARATELY
WITH THE COMMISSION.
-24-
<PAGE>
Page 1 of 2
BUREAU OF LABOR STATISTICS DATA [LOGO]
DATA EXTRACTED ON: FEBRUARY 27, 1998 (11:28 AM)
PRODUCER PRICE INDEX-COMMODITIES
SERIES CATALOG:
Series ID: wpu06.35
Not Seasonally Adjusted
Group: Chemicals and allied products
Item: Preparations, ethical (prescription)
Base Date: 8200
DATA:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ANN
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 162.6 163.4 166.0 167.1 168.2 167.5 168.9 169.8 172.0 172.6 175.1 174.5 169.0
- ---------------------------------------------------------------------------------------------------------------------------------
1989 177.4 177.6 180.3 182.1 182.1 183.4 184.6 187.4 187.7 189.0 190.0 191.1 184.4
- ---------------------------------------------------------------------------------------------------------------------------------
1990 193.1 196.4 197.4 199.5 201.2 199.4 201.0 202.4 202.4 204.4 205.4 206.5 200.8
- ---------------------------------------------------------------------------------------------------------------------------------
1991 208.7 211.5 212.1 216.6 216.7 216.8 219.4 220.8 219.5 223.2 222.5 222.6 217.5
- ---------------------------------------------------------------------------------------------------------------------------------
1992 225.2 227.5 228.5 230.5 230.8 231.3 232.3 234.4 233.2 235.0 234.4 236.9 231.7
- ---------------------------------------------------------------------------------------------------------------------------------
1993 237.2 239.7 240.0 242.1 241.5 241.7 242.8 244.2 243.5 244.9 244.0 244.5 242.2
- ---------------------------------------------------------------------------------------------------------------------------------
1994 247.9 248.5 248.6 249.2 250.7 250.3 249.2 250.2 250.7 250.3 251.9 252.0 250.0
- ---------------------------------------------------------------------------------------------------------------------------------
1995 251.3 253.6 253.3 256.2 255.9 255.4 256.8 257.1 258.8 261.3 261.6 262.6 257.0
- ---------------------------------------------------------------------------------------------------------------------------------
1996 262.3 262.2 263.1 263.4 265.6 266.3 267.1 266.9 266.5 266.6 266.6 267.9 265.4
- ---------------------------------------------------------------------------------------------------------------------------------
1997 270.2 271.0 271.9 271.6 272.7 273.2 273.4 273.5 273.9 275.4(P) 276.4(P) 276.9(P) 273.3(P)
- ---------------------------------------------------------------------------------------------------------------------------------
1998 279.4(P)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
P: Preliminary. All indexes are subject to revision four months after original
publication.
[GRAPH APPEARS HERE] DATA HOME PAGE
--------------
