SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
_____________________________
Date of report (Date of earliest event reported) December 4, 1997
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ALTEON INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-19529 13-3304550
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(State or Other Juris- (Commission (I.R.S. Employer
diction of Incorporation) File Number) Identification No.)
170 Williams Drive, Ramsey, New Jersey 07446
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 934-5000
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(Former Name or Former Address, If Changed Since Last Report)
Item 5. Other Events.
The Company and Genentech, Inc. ("Genentech") have entered
into a Stock Purchase Agreement pursuant to which the Company will
sell to Genentech shares of its Common Stock, Series G Preferred
Stock and Series H Preferred Stock. The Company and Genentech have
also entered into a Development Collaboration and License Agreement
providing, inter alia, for the collaborative development between
the Company and Genentech of certain products and for certain
exclusive license rights to Genentech for certain of the Company's
products.
The terms of the Preferred Stock and certain obligations of
the Company in connection with the issuance of the Preferred Stock
are set forth in the Certificates of Designations of the Preferred
Stock and the Stock Purchase Agreement, copies of which are
attached hereto as Exhibits 3.1, 3.2 and 10.1. The terms of the
Company's collaborative and licensing relationship with Genentech
are set forth in the Development Collaboration and License
Agreement, a copy of which is attached hereto as Exhibit 10.2.
In connection with the foregoing transactions, the Company
issued the following press release:
RAMSEY, N.J., and SOUTH SAN FRANCISCO, Calif., Dec. 4
/PRNewswire/ -- Alteon Inc. (Nasdaq: ALTN) and Genentech, Inc.
(NYSE: GNE) today announced they have entered into a series of
agreements for the continued development and marketing of
Pimagedine, an Advanced Glycosylation End-product (A.G.E.)
formation inhibitor currently in Phase III clinical trials to treat
kidney disease in diabetic patients. The agreements also include
rights to second-generation A.G.E. formation inhibitors, currently
in pre-clinical development. Investments, milestones and funding
for development efforts associated with Pimagedine and
second-generation compounds could approach $200 million, excluding
royalties.
By entering into these agreements, Alteon has granted
Genentech worldwide exclusive license rights to Pimagedine (except
for Japan, China, South Korea and Taiwan, territories covered under
a previous Alteon agreement with Yamanouchi Pharmaceutical Co. of
Japan, and Israel, Jordan, Bulgaria, Cyprus and South Africa,
territories covered under a previous Alteon agreement with Gamida).
Alteon has also granted Genentech exclusive license rights to
second-generation A.G.E. formation inhibitor products (and any
future Alteon compounds in this class), to be selected by Genentech
after review of Alteon's A.G.E. formation inhibitor portfolio, in
the same territory as for Pimagedine.
PIMAGEDINE
In order to fund the continued development of Pimagedine and
support possible additional clinical trials for expanded
indications of the drug, Genentech will make a series of equity
investments in Alteon. Genentech will make an initial equity
investment of $15 million in combination of Alteon common stock and
convertible preferred stock. Thereafter, Genentech will fund
development costs for Pimagedine with an investment of up to $48
million in Alteon convertible preferred stock, payable as an
initial $16 million cash investment in January 1998, with future
investments to follow.
Under the terms of the deal, Alteon will receive an additional
$50 million in payments from Genentech upon meeting milestones
relating to U.S. and European regulatory filings and approvals.
Following commercialization, Alteon will receive a significant
royalty on net sales of Pimagedine within the licensed territories.
SECOND-GENERATION PRODUCTS
Alteon has also granted to Genentech an exclusive license to
second-generation products, to be selected from those currently in
Alteon's portfolio of A.G.E. formation inhibitors and any future
Alteon compounds in this class. Genentech will assume all costs
associated with the development of second-generation products.
Alteon will receive $50 million in milestone payments relating to
U.S. and European regulatory filings and approvals, as well as a
significant royalty on net sales within the licensed territories.
DEVELOPMENT/MARKETING RESPONSIBILITIES
Under the agreements, all development activities in the United
States will be jointly managed by a steering committee with
representatives from Alteon and Genentech. Genentech will advise
Alteon on development outside the United States, and on marketing
and sales of licensed products throughout the licensed territory.
"We are extremely pleased to be working with a company
possessing the same entrepreneurial spirit as our own. Genentech's
many contributions to pharmaceutical progress are clear examples of
its commitment to cutting edge research and development," said
James J. Mauzey, Alteon Chairman and Chief Executive Officer. "Our
collaboration with Genentech provides us with an extraordinary
opportunity to introduce products that offer breakthrough potential
for the treatment of diabetic complications and other conditions.
It also allows us to intensify our efforts on the development of
other exciting products in our pipeline."
"This agreement with Alteon represents a significant business
opportunity and reflects Genentech's corporate strategy to license
late-stage products that can augment our product portfolio and
contribute to revenues near-term," said Arthur D. Levinson, Ph.D.,
Genentech President and Chief Executive Officer. "Working together
with Alteon, we look forward to completing development and filing
for approval so this important treatment can be available to people
with diabetes and their families."
Genentech, Inc. is a leading biotechnology company that
discovers, develops, manufactures and markets human pharmaceuticals
for significant unmet medical needs. Eleven of the currently
marketed biotechnology products stem from Genentech science.
Genentech markets or promotes eight biotechnology products in the
United States. Genentech is headquartered in South San Francisco,
California, and is traded on the New York Stock Exchange and
Pacific Exchange under the symbol GNE. Genentech's worldwide Web
address is http://www.gene.com.
Alteon is a leader in the discovery and development of
pharmaceutical products for the treatment of the complications of
diabetes and age-related diseases. Pimagedine, its lead
first-in-class compound, is being developed to inhibit or block
abnormal glucose/protein complexes that lead to diabetic
complications such as kidney disease and retinopathy. Three
pivotal clinical trials evaluating Pimagedine for the complications
of diabetes are ongoing: two Phase III ACTION (A Clinical Trial In
Overt Nephropathy) trials in diabetic patients with progressive
kidney disease; and a Phase III trial in patients with end-stage
renal disease (ESRD), which was recently expanded from a Phase II
trial because of a positive trend in the mortality rate of treated
patients versus those on placebo. The ACTION trials are being
conducted at more than 100 North American sites and involve over
1,200 patients. ACTION I (in Type I diabetics) is scheduled to be
unblinded in 1998. In addition, Alteon is continuing to broaden
its product pipeline through extensive research on two new
categories of agents: A.G.E. cross-link breakers and the glucose
lowering agent series of compounds.
Any statements contained in this press release that relate to
future plans, events or performance are forward-looking statements
that involve risks and uncertainties including, but not limited to,
those relating to technology and product development, regulatory
approval processes, intellectual property rights and litigation,
competitive products and other risks identified in Alteon's filings
with the Securities and Exchange Commission. Actual results,
events or performances may differ materially. Alteon undertakes no
obligation to publicly release the result of any revision to these
forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
# # #
In connection with the sale of the Common and Preferred Stock,
the Company amended the Stockholders' Rights Agreement dated July
27, 1995 between the Company and Registrar and Transfer Company, as
Rights Agent, to provide that under certain circumstances Genentech
and certain of its affiliates will not be deemed to be Beneficial
Owners (as defined in such Agreement) of the Common Stock issuable
or issued upon conversion of the Preferred Stock.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
The following Exhibits are furnished in accordance with
the provisions of Item 601 of Regulation S-K:
3.1 Certificate of Designations of Series G Preferred Stock of
Alteon Inc.
3.2 Certificate of Designations of Series H Preferred Stock of
Alteon Inc.
4.1 Amendment to Stockholders' Rights Agreement between Alteon
Inc. and Registrar and Transfer Company, as Rights Agent
10.1 Stock Purchase Agreement dated as of December 1, 1997 between
Alteon Inc. and Genentech, Inc.(without Exhibits B and C which
are filed as Exhibits 3.1 and 3.2, respectively, to this
Current Report on Form 8-K)
10.2 Development Collaboration and License Agreement between
Alteon Inc. and Genentech, Inc. dated as of December 1, 1997
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Alteon Inc.
By: /s/ James J. Mauzey
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James J. Mauzey
Chairman of the Board and
Chief Executive Officer
Date: December 10, 1997
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
3.1 Certificate of Designations of Series G Preferred Stock of
Alteon Inc.
3.2 Certificate of Designations of Series H Preferred Stock of
Alteon Inc.
4.1 Amendment to Stockholders' Rights Agreement between Alteon
Inc. and Registrar and Transfer Company, as Rights Agent
10.1 Stock Purchase Agreement dated as of December 1, 1997 between
Alteon Inc. and Genentech, Inc.(without Exhibits B and C which
are filed as Exhibits 3.1 and 3.2, respectively, to this Current
Report on Form 8-K)
10.2 Development Collaboration and License Agreement dated as of
December 1, 1997 between Alteon Inc. and Genentech, Inc.
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CERTIFICATE OF DESIGNATIONS
OF SERIES G PREFERRED STOCK
OF ALTEON INC.
Pursuant to Section 151 of the General Corporation Law of
the State of Delaware, Alteon Inc. (the "Corporation"), organized
and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof,
DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board
of Directors of the Corporation by Article Fifth of the Restated
Certificate of Incorporation of the Corporation (the "Certificate
of Incorporation"), the Board of Directors of the Corporation on
December 3, 1997, adopted the following resolution creating a
series of Preferred Stock designated as Series G Preferred Stock:
RESOLVED, that, pursuant to the authority vested in
the Board of Directors of the Corporation in accordance
with the provisions of the Certificate of Incorporation
of the Corporation, a series of Preferred Stock of the
Corporation is hereby created and that the designation
and number of shares thereof and the voting powers,
preferences and relative, participating, optional and
other special rights of the shares of such series, and
the qualifications, limitations or restrictions thereof
are as follows:
SECTION 1. Designation and Number of Shares. The shares
of such series shall be designated as "Series G Preferred Stock"
(the "Series G Preferred Stock"), par value $0.01 per share. The
number of shares initially constituting the Series G Preferred
Stock shall be 939.
SECTION 2. Dividends or Distributions.
(a) Quarterly Dividends. The holders of the shares of
Series G Preferred Stock shall be entitled to receive, out of the
assets of the Corporation legally available therefor, cumulative
quarterly dividends, payable in shares of Series G Preferred Stock,
whether or not declared, on the last day of each fiscal quarter in
each year (the "Dividend Payment Date"), commencing upon the
Dividend Payment Date next following the first issuance of a share
of Series G Preferred Stock, at the rate per annum equal to the
Prime Rate published in The Wall Street Journal five (5) Business
Days (as defined in Section 5(a)) prior to such issuance. Such
dividend shall be calculated by multiplying the number of shares of
Series G Preferred Stock held by a holder on the Dividend Payment
Date by such Prime Rate per annum.
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(b) Record Date. The Dividend Payment Date shall be the
record date for the determination of holders of shares of Series G
Preferred Stock entitled to receive a dividend declared thereon.
(c) Accrual and Accumulation. Dividends shall begin to
accrue and be cumulative on outstanding shares of Series G
Preferred Stock from and after the date of issue of such shares of
Series G Preferred Stock. Accrued but unpaid dividends shall not
bear interest. Notwithstanding anything to the contrary contained
herein, the Corporation shall not be required to deliver
certificates representing shares of Series G Preferred Stock in
payment of accrued dividends on any date other than a Dividend
Payment Date.
(d) Other Dividends and Distributions. The holders of
the shares of Series G Preferred Stock shall not be entitled to
receive any other dividends or distributions except as provided
herein.
(e) Necessary Actions. The Corporation shall take any
and all corporate action necessary to declare and pay such
dividends described in this Section 2.
(f) Limitation on Dividends. Dividends shall accrue but
shall not be payable on the shares of Series G Preferred Stock held
by any holder during any period when such holder, its Affiliates
(as hereinafter defined) and any group (a "Group") (within the
meaning of Rule 13d-5 promulgated pursuant to the Securities and
Exchange Act of 1934, as amended from time to time (the "Exchange
Act") of which such holder or any of its Affiliates is a member is
the beneficial owner (as defined in Rule 13d-3 promulgated pursuant
to the Exchange Act) (a "Beneficial Owner"), in aggregate, directly
or indirectly, of more than forty (40%) percent of the Common Stock
of the Corporation. For purposes of this Certificate of
Designations of Series G Preferred Stock (the "Certificate"),
"Affiliate" shall have the meaning given it in Rule 405 promulgated
under the Securities Act of 1933, as amended from time to time (the
"Securities Act"), provided, however, that an affiliate which is
not controlled (within the meaning of Rule 405 promulgated under
the Securities Act) by a holder of Series G Preferred Stock shall
not be deemed to be an Affiliate unless such affiliate files
statements regarding the securities of the Corporation pursuant to
Regulation 13D-G under the Exchange Act, and provided, further,
that a holder and its Affiliate(s) shall not be deemed to be a
member of a Group unless a member of such Group has filed
statements regarding the securities of the Corporation pursuant to
Regulation 13D-G under the Exchange Act stating that such holder or
its Affiliate(s) is a member of such Group.
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SECTION 3. Voting Rights. The Series G Preferred Stock
shall have no voting rights whatsoever, except as required under
the General Corporation Law of Delaware.
SECTION 4. Certain Restrictions.
(a) Restrictions. Whenever quarterly dividends payable
on the Series G Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends,
whether or not declared, on shares of Series G Preferred Stock
outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series G Preferred Stock;
(ii) declare or pay dividends on, or make any
other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Series G Preferred Stock, except dividends paid
ratably on the Series G Preferred Stock and all such parity stock
on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series G Preferred Stock, except for (x) redemptions, purchases or
other acquisitions made ratably of the Series G Preferred Stock and
all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled, (y) redemptions, purchases or other
acquisitions made pursuant to Section 8, or redemption, purchases
or other acquisitions of the 6% Cumulative Convertible Preferred
Stock or Series H Preferred Stock made pursuant to the Certificate
of Designations for such stock or any agreement with the holders
thereof in effect on the date this Certificate of Designations is
executed.
SECTION 5. Conversion Rights. The shares of Series G
Preferred Stock may be converted into shares of Common Stock or
cash as set forth in this Section 5.
(a) Conversion by Holder. Subject to and in compliance
with the provisions of this Section 5, any shares of Series G
Preferred Stock may, at the option of the holder thereof upon at
least seventy (70) days prior written notice to the Corporation, be
converted into fully-paid and nonassessable shares of Common Stock.
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The number of shares of Common Stock which a holder of Series G
Preferred Stock shall be entitled to receive upon conversion of a
share of Series G Preferred Stock shall be the quotient
(hereinafter, the "Conversion Ratio") obtained by dividing $10,000
(the "Original Issuance Price") by the average of the Fair Market
Value of the Common Stock for the twenty (20) Business Days
immediately preceding the Conversion Date (as such terms are
hereinafter defined) (such average being hereinafter referred to as
the "Conversion Value"). For purposes of this Certificate, (i)
"Business Day" shall mean a day on which the Nasdaq National Market
or, if the Common Stock is not then listed on the Nasdaq National
Market, any other established exchange or national system on which
the Common Stock is listed, is open for trading and (ii) "Fair
Market Value" shall mean, for any Business Day, the closing sales
price of the Common Stock (or the closing bid, if no sales were
reported) as quoted on the Nasdaq National Market, or if the Common
Stock is not then quoted on the Nasdaq National Market, on any
established stock exchange or national market system on which the
Common Stock is listed for such Business Day.
(b) Conversion by Corporation. Subject to and in
compliance with the provisions of this Section 5, any shares of
Series G Preferred Stock may at any time (subject to the limitation
in Section 5(e)(iii)) at the option of the Corporation upon at
least seventy (70) days prior written notice to the holder of
Series G Preferred Stock, be converted into fully-paid and
nonassessable shares of Common Stock or cash. Upon conversion of
shares of Series G Preferred Stock by the Corporation, a holder of
Series G Preferred Stock shall be entitled to a number of shares of
Common Stock equal to the Conversion Ratio for each share of Series
G Preferred Stock converted.
(c) Conversion Procedure. In order to convert Series G
Preferred Stock into Common Stock, a holder of Series G Preferred
Stock or the Corporation, as the case may be, shall deliver to the
other written notice (a "Conversion Notice") of its election to
make such conversion at least seventy (70) days prior to the
intended date of conversion (the "Conversion Date"). The
Conversion Notice, if delivered by a holder, shall be delivered to
the Corporation at its principal office and if delivered by the
Corporation shall be delivered to the holder at its address as
shown on the records of the Corporation. The Conversion Notice
shall specify the Conversion Date, set forth the number of shares
of Series G Preferred Stock to be converted upon the Conversion
Date and, in the case of conversion by the holder, shall state the
name or names (with address or addresses) in which the
certificate(s) for shares of Common Stock issuable upon such
conversion shall be issued and, in the case of conversion by the
Corporation, shall state that the certificate(s) for shares of
Common Stock issuable upon conversion shall be issued in the name
and address of the holder, unless instructed otherwise by such
holder. On the Conversion Date the holder shall surrender the
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certificate(s) representing the shares of Series G Preferred Stock
being converted, duly endorsed, to the Corporation at its principal
office or at the office of its transfer agent. As promptly as
possible after the Conversion Date, the Corporation shall issue and
deliver to such holder, at the Corporation's sole election, such
certificate(s) as such holder may request for the number of whole
shares of Common Stock issuable upon the conversion of such shares
of Series G Preferred Stock, in accordance with the provisions of
this Section 5, or cash in the amount equal to $10,000 for each
share of Series G Preferred Stock being converted, or any
combination of Common Stock and cash; as well as cash as provided
in Section 5(f) in respect of any fraction of a share of Common
Stock issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of
business on the Conversion Date, and at such time the rights of the
holder of the converted shares of Series G Preferred Stock shall
cease (other than the right to receive accrued but unpaid
dividends, whether or not declared, as of such Conversion Date),
and the person or persons in whose name or names any certificate(s)
for shares of Common Stock shall be issuable shall be deemed to
have become the holder or holders of record of the shares of Common
Stock represented thereby unless the Corporation delivers cash to
such holders as permitted by this Section 5(c).
(d) Adjustments for Stock Splits, Recombinations, etc.
(i) The Conversion Date (as defined in Section
5(c)) shall be subject to adjustment from time to time as follows:
(A) In the event the Corporation should at any
time or from time to time after the date hereof fix a record date
which is less than twenty-one (21) days prior to a Conversion Date
for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable
in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive
directly or indirectly, additional shares of Common Stock
(hereinafter, the "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or
exercise thereof), then such Conversion Date shall be extended to
the date which is twenty-one (21) days after such record date.
(B) In the event the Corporation should at any
time or from time to time after the date hereof fix a record date
which is less than twenty-one (21) days prior to a Conversion Date
for a combination of the outstanding shares of Common Stock, then
such Conversion Date shall be extended to the date which is
twenty-one (21) days after such record date.
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(ii) In the event that after the date hereof the
Corporation shall declare a dividend payable in securities of other
persons, evidences of indebtedness issued by this Corporation or
other persons, assets (excluding cash dividends), or options or
rights not referred to in Section 5(d)(i), then, in each such case
each holder of Series G Preferred Stock shall be entitled to a
proportionate share of any such distribution as though such holder
were the holder of the number of shares of Common Stock into which
such holder's shares of Series G Preferred Stock are convertible as
of the record date fixed for the determination of the holders of
Common Stock entitled to receive such distribution. For purposes
of the foregoing, the average Fair Market Value of the Common Stock
over the twenty (20) Business Days prior to the record date shall
be utilized in calculating the Conversion Value and Conversion
Ratio.
(iii) If at any time or from time to time after the
date hereof there shall be a recapitalization of the Common Stock
(other than a Corporate Reorganization under Section 7 or a
subdivision or combination provided for above in this Section
5(d)), provision shall be made so that each holder of Series G
Preferred Stock shall thereafter be entitled to receive upon any
conversion of the Series G Preferred Stock under this Section 5 the
number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion of Series G Preferred Stock pursuant to
Section 5 would have been entitled on such recapitalization, all
subject to further adjustment as provided hereinbelow or with
respect to such other securities or property by the terms thereof.
In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the
rights of the holders of Series G Preferred Stock after the
recapitalization to the end that the provisions of this Section 5
(including the adjustment in the Conversion Ratio and the number of
shares of Common Stock issuable on conversion) shall be applicable
after that event as nearly equivalent as may be practicable.
(e) Limitations Upon Conversion. Notwithstanding any
other provision of this Section 5:
(i) In no event shall any holder of Series G
Preferred Stock be entitled to deliver a Conversion Notice with
respect to the conversion into Common Stock of any shares of Series
G Preferred Stock to the extent that, after giving immediate effect
to such conversion (but employing for purposes of calculating the
number of shares of Common Stock to be issued upon such conversion,
in lieu of any Conversion Value, the Fair Market Value for the
Business Day immediately preceding the date of such Conversion
Notice), such holder, its Affiliates and any Group of which such
holder or its Affiliates is a member would be the Beneficial Owner,
in aggregate, directly or indirectly, of more than forty percent
(40%) of the Common Stock that (but for this Section 5(e)) would be
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<PAGE>
outstanding following such conversion. To the extent a Conversion
Notice provides for the conversion on the Conversion Date of shares
of Series G Preferred Stock in excess of that permitted under this
Section 5(e)(i), then such Conversion Notice shall be deemed to
cover the maximum number of shares of Series G Preferred Stock
which the holder thereof is entitled to convert on such Conversion
Date.
(ii) In addition to the limitation imposed by
Section 5(e)(i), on a Conversion Date in no event shall any holder
of Series G Preferred Stock be entitled to convert into Common
Stock any shares of Series G Preferred Stock to the extent that,
after giving effect to such conversion pursuant to the provisions
of this Section 5, such holder, its Affiliates and any Group of
which such holder or its Affiliates is a member would be the
Beneficial Owner, in aggregate, directly or indirectly, of more
than forty percent (40%) of the Common Stock that (but for this
Section 5(e)) would be outstanding following such conversion. To
the extent a Conversion Notice provides for the conversion on the
Conversion Date of shares of Series G Preferred Stock in excess of
that permitted under this Section 5(e)(ii), then such Conversion
Notice shall be deemed to cover the maximum number of shares of
Series G Preferred Stock which the holder thereof is entitled to
convert on such Conversion Date.
(iii) The Corporation shall not be entitled to
convert any shares of Series G Preferred Stock into shares of
Common Stock if the holder of the Series G Preferred Stock and its
Affiliates would be the Beneficial Owner of more than ten percent
(10%) of the Common Stock that (but for this Section 5(e)) would be
outstanding following any such conversion or if pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 the holder of
the shares of Common Stock to be issued upon conversion would be
required to make a filing in advance of the acquisition of such
shares. To the extent that a Conversion Notice provides for the
conversion on the Conversion Date of shares of Series G Preferred
Stock in excess of that permitted pursuant to the prior sentence,
then upon written notice from the holder to the Corporation
specifying the holder's Beneficial Ownership percentage on the date
of the Conversion Notice, such Conversion Notice shall be deemed to
cover the maximum number of shares of Series G Preferred Stock
which the Corporation is entitled to convert on such Conversion
Date. In addition, at any time that the holder of the Series G
Preferred Stock and its Affiliates is the Beneficial Owner of more
than ten percent (10%) of the Common Stock, the Corporation shall
not be entitled to convert any shares of Series G Preferred Stock,
provided, however, that, on a Conversion Date which is after the
later of (A) the date which is six (6) months and one (1) Business
Day from the last date on which the holder of Series G Preferred
Stock or its Affiliates purchased or otherwise acquired (as those
terms have been interpreted by the courts for the purposes of
Section 16 of the Exchange Act) any Common Stock of the Corporation
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or (B) the date which is six (6) months and one (1) Business Day
from the date on which the holder of Series G Preferred Stock has
purchased all shares of Series G Preferred Stock and Series H
Preferred Stock which it is obligated to purchase pursuant to that
certain Stock Purchase Agreement by and between the Corporation and
Genentech, Inc., dated as of December 1, 1997 (the "Stock Purchase
Agreement"), the Corporation may convert to cash all, but not less
than all, of the shares of Series G Preferred Stock and Series H
Preferred Stock held by such holder. Any purchases or acquisitions
of Common Stock by the holder after receipt of a Conversion Notice
providing for conversion pursuant to the preceding sentence shall
not be included in calculating the time period described in phrase
(A) of such sentence. For purposes of this Section 5(e)(iii) only,
a Conversion Date set forth in a Conversion Notice delivered to the
Company by a holder shall be deemed to be a date on which the
holder has purchased or acquired Common Stock.
For purposes of this Section 5(e), all calculations of the number
of shares of Common Stock that (but for this Section 5(e)) would be
outstanding following any conversion of Series G Preferred Stock
shall be made upon the assumption that the Corporation would elect,
pursuant to Section 5(b), to issue shares of Common Stock, and not
cash, in connection with such conversion.
(f) Cash in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon the conversion of shares of Series G Preferred
Stock. In lieu of any fractional shares of Common Stock that would
otherwise be issuable upon conversion of Series G Preferred Stock,
the Corporation shall pay to the holder of the shares of Series G
Preferred Stock that were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of
the Conversion Value. The determination as to whether or not any
fractional shares are issuable shall be based upon the total number
of shares of Series G Preferred Stock being converted at any one
time by any holder thereof, and not upon each share of Series G
Preferred Stock being converted by such holder.
(g) Partial Conversion. In the event some but not all
of the shares of Series G Preferred Stock represented by a
certificate or certificates surrendered by a holder are converted,
then Corporation shall execute and deliver to or on the order of
the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series G Preferred Stock that
were not converted.
(h) Standstill. For a period of five (5) years
following the first issuance of a share of Series G Preferred
Stock, during each calendar week within a Restricted Period (as
hereinafter defined), no holder of Series G Preferred Stock shall
sell, transfer, assign, pledge, hypothecate or otherwise dispose
of, directly or indirectly, more than the Restricted Amount (as
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hereinafter defined) in such calendar week in the Restricted
Period. A "Restricted Period" shall mean any period commencing on
the date which is twenty-five (25) Business Days preceding the
Conversion Date (provided that a Conversion Notice has been
provided to the Corporation under this Section 5) and ending on the
Conversion Date applicable to such Conversion Notice, or any other
period of time designated as a Restricted Period in this
Certificate. The "Restricted Amount" applicable to any such
calendar week within the Restricted Period shall mean that number
of shares of Common Stock equal to twenty-five (25%) percent of the
average weekly trading volume of the Common Stock for the four (4)
week period preceding the first Business Day within the Restricted
Period. Neither the Corporation nor its transfer agent shall be
required to register upon the books and records of the Corporation
any sale, transfer, assignment, pledge, hypothecation or other
disposition of Common Stock made contrary to this Section 5(h).
Furthermore, in the event of any violation of this Section 5(h),
then the Corporation shall not be obligated to effect the subject
conversion. In the case of conversion of Series G Preferred Stock
by the Corporation, the Restricted Period shall begin on the date
of delivery of the Conversion Notice.
(i) Conversion Upon Default. In the event of a material
uncured default by the Corporation under any of the Transaction
Documents (as such term is defined in the Stock Purchase
Agreement), Genentech shall have the right to convert its shares of
Series G Preferred Stock into shares of Common Stock according to
the provisions of Section 5. Notwithstanding the foregoing, for
the purposes of Genentech's right to convert under this Section
5(i), the limitations set forth in Sections 5(e)(i) and 5(e)(ii)
shall not apply.
(j) Automatic Conversion. Each share of Series G
Preferred Stock shall automatically be converted into shares of
Common Stock at its then effective Conversion Ratio immediately
upon the transfer of ownership by the initial holder to a third
party which is not an Affiliate of such holder or a member of any
Group of which such holder or any of its Affiliates is a member.
In the event of such an automatic conversion, the outstanding
shares of Series G Preferred Stock shall be converted automatically
without any further action by the holder of such shares and whether
or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent. The Corporation shall not
be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Series G Preferred Stock are
delivered to the Corporation or its transfer agent. Such
conversion shall be deemed to have been made on the date of
transfer to such third party holder and the person(s) entitled to
receive shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date. For purposes of this
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Section 5(j) only, "Affiliate" shall have the meaning given it in
Rule 405 promulgated under the Securities Act.
SECTION 6. Liquidation Rights. Upon the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, no distribution shall be made (a) to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series G Preferred
Stock unless, prior thereto, the holders of shares of Series G
Preferred Stock shall have received an amount equal to (i) the
Original Issuance Price per share for the Series G Preferred Stock,
plus (ii) the Original Issuance Price per share for each share of
Series G Preferred Stock constituting accrued and unpaid dividends
thereon, whether or not declared, to the date of such distribution,
or (b) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series G Preferred Stock, except distributions made ratably on the
Series G Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. Corporate Reorganization. If at any time or
from time to time there shall be a reorganization, consolidation,
merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property (each of such
transactions, a "Corporate Reorganization"), then, at such time and
in any such case the Corporation shall provide each holder of
Series G Preferred Stock with notice of such transaction and the
details of such exchange at least fifteen (15) days before the
closing of such transaction, and each such holder of Series G
Preferred Stock shall have the right, at its election, to convert
such shares of Series G Preferred Stock into shares of Common Stock
prior to such closing, or to receive in such transaction the amount
of the liquidation preference set forth in Section 6, as
appropriate, in the form of the other stock or securities, cash
and/or other property as is received by the holders of the Common
Stock. For purposes of the foregoing, the average Fair Market
Value of the Common Stock over the twenty (20) Business Days prior
to the closing of such transaction shall be utilized in calculating
the Conversion Value and Conversion Ratio, and a Restricted Period
shall commence on the date the holder of the Series G Preferred
Stock receives notice of such transaction and shall terminate on
the date on which such transaction closes.
SECTION 8. Corporation's Repurchase Obligation. For a
period of five (5) years following the first issuance of Series G
Preferred Stock, if at any time the Corporation shall repurchase (a
"Common Stock Repurchase") any shares of Common Stock from any
person or entity other than a holder of Series G Preferred Stock or
Series H Preferred Stock or Common Stock issued upon conversion of
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6% Cumulative Convertible Preferred Stock, then the Corporation
shall repurchase from each holder of shares of Series G Preferred
Stock the number of whole shares of Series G Preferred Stock
determined by multiplying the number of shares of Series G
Preferred Stock then held by such holder by a fraction, the
numerator of which is the number of shares of Common Stock
repurchased by the Company from the other holder(s) and the
denominator of which is the number of shares of Common Stock issued
and outstanding on the date of the Common Stock Repurchase. The
repurchase price per share of Series G Preferred Stock repurchased
pursuant to this Section 8 shall be the product of the number of
shares of Common Stock into which a share of Series G Preferred
Stock is convertible on the date of the Common Stock Repurchase and
the price per share of Common Stock paid by the Corporation in
connection with the Common Stock Repurchase. For purposes of the
foregoing, the average Fair Market Value of the Common Stock over
the twenty (20) Business Days prior to the closing of the Common
Stock Repurchase shall be utilized in calculating the Conversion
Value and Conversion Ratio, and a Restricted Period shall commence
on the date the holder of the Series G Preferred Stock receives
notice of the Common Stock Repurchase and shall terminate on the
date of the Common Stock Repurchase. Such repurchase of shares of
Series G Preferred Stock shall be effected on the date of the
Common Stock Repurchase.
SECTION 9. No Redemption; No Sinking Fund.
(a) No Redemption. The shares of Series G Preferred
Stock shall not be subject to redemption by the Corporation or at
the option of any holder of Series G Preferred Stock except as set
forth in the Certificate of Incorporation or in Section 8.1 of the
Stock Purchase Agreement; provided, however, that, subject to
Section 4 hereof, the Corporation may purchase or otherwise acquire
outstanding shares of Series G Preferred Stock by offer to any
holder or holders of shares of Series G Preferred Stock and the
Corporation may deliver cash in lieu of Common Stock upon the
conversion of the shares of Series G Preferred Stock by the holders
thereof or by the Corporation.
(b) No Sinking Fund. The shares of Series G Preferred
Stock shall not be subject to or entitled to the operation of a
retirement or sinking fund.
SECTION 10. Ranking. The Series G Preferred Stock shall
rank on parity in all respects with the 6% Cumulative Convertible
Preferred Stock and the Series H Preferred Stock and superior in
all respects to the Series F Preferred Stock. Nothing contained
herein shall limit or restrict the ability of the Board of
Directors of the Corporation, pursuant to Article Fifth of the
Certificate of Incorporation, to fix powers, preferences or rights
of the shares of one or more series of Preferred Stock of the
Corporation that are superior to the powers, preferences or rights
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of the Series G Preferred Stock or the ability of the Corporation
to issue shares of such Preferred Stock.
SECTION 11. Fractional Shares. To the extent necessary,
the Corporation shall issue fractions of shares of Series G
Preferred Stock issuable in payment of dividends. Such fractions
shall be rounded to two (2) decimal places.
SECTION 12. Re-acquired Shares. Any shares of Series G
Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever (including upon conversion thereof) shall
be retired and canceled promptly after the acquisition thereof.
All such shares, upon their cancellation, shall become authorized
but unissued shares of Preferred Stock, without designation as to
series until such shares are once more designated as part of a
particular series by the Board of Directors pursuant to the
provisions of Article Fifth of the Certificate of Incorporation.
SECTION 13. Reservation of Common Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
shares of Series G Preferred Stock, such number of its shares of
Common Stock as from time to time shall be sufficient to effect the
conversion of all outstanding shares of Series G Preferred Stock.
If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of
all then outstanding shares of Series G Preferred Stock, then the
Corporation shall promptly take such corporate action as may be
necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary
amendment to the Certificate of Incorporation.
SECTION 14. Amendment. None of the powers, preferences and
relative, participating, optional and other special rights of the
Series G Preferred Stock as provided herein or in the Certificate
of Incorporation shall be amended in any manner which would alter
or change the powers, preferences, rights or privileges of the
holders of Series G Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least sixty-seven
(67%) percent of the outstanding shares of Series G Preferred
Stock, voting as a separate class.
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IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be duly executed in its corporate
name on this day of __________, 1997.
ALTEON INC.
By:
Name: ________________________
Title: _______________________
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CERTIFICATE OF DESIGNATIONS
OF SERIES H PREFERRED STOCK
OF ALTEON INC.
Pursuant to Section 151 of the General Corporation Law of
the State of Delaware, Alteon Inc. (the "Corporation"), organized
and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof,
DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board
of Directors of the Corporation by Article Fifth of the Restated
Certificate of Incorporation of the Corporation (the "Certificate
of Incorporation"), the Board of Directors of the Corporation on
December 3, 1997, adopted the following resolution creating a
series of Preferred Stock designated as Series H Preferred Stock:
RESOLVED, that, pursuant to the authority vested in
the Board of Directors of the Corporation in accordance
with the provisions of the Certificate of Incorporation
of the Corporation, a series of Preferred Stock of the
Corporation is hereby created and that the designation
and number of shares thereof and the voting powers,
preferences and relative, participating, optional and
other special rights of the shares of such series, and
the qualifications, limitations or restrictions thereof
are as follows:
SECTION 1. Designation and Number of Shares. The shares
of such series shall be designated as "Series H Preferred Stock"
(the "Series H Preferred Stock"), par value $0.01 per share. The
number of shares initially constituting the Series H Preferred
Stock shall be 4,800.
SECTION 2. Dividends or Distributions.
(a) Quarterly Dividends. The holders of the shares of
Series H Preferred Stock shall be entitled to receive, out of the
assets of the Corporation legally available therefor, cumulative
quarterly dividends, payable in shares of Series H Preferred Stock,
whether or not declared, on the last day of each fiscal quarter in
each year (the "Dividend Payment Date"), commencing upon the
Dividend Payment Date next following the first issuance of a share
of Series H Preferred Stock, at the rate per annum equal to the
Prime Rate published in The Wall Street Journal five (5) Business
Days (as defined in Section 5(a)) prior to such issuance. Such
dividend shall be calculated by multiplying the number of shares of
Series H Preferred Stock held by a holder on the Dividend Payment
Date by such Prime Rate per annum.
<PAGE>
(b) Record Date. The Dividend Payment Date shall be the
record date for the determination of holders of shares of Series H
Preferred Stock entitled to receive a dividend declared thereon.
(c) Accrual and Accumulation. Dividends shall begin to
accrue and be cumulative on outstanding shares of Series H
Preferred Stock from and after the date of issue of such shares of
Series H Preferred Stock. Accrued but unpaid dividends shall not
bear interest. Notwithstanding anything to the contrary contained
herein, the Corporation shall not be required to deliver
certificates representing shares of Series H Preferred Stock in
payment of accrued dividends on any date other than a Dividend
Payment Date.
(d) Other Dividends and Distributions. The holders of
the shares of Series H Preferred Stock shall not be entitled to
receive any other dividends or distributions except as provided
herein.
(e) Necessary Actions. The Corporation shall take any
and all corporate action necessary to declare and pay such
dividends described in this Section 2.
(f) Limitation on Dividends. Dividends shall accrue but
shall not be payable on the shares of Series H Preferred Stock held
by any holder during any period when such holder, its Affiliates
(as hereinafter defined) and any group (a "Group") (within the
meaning of Rule 13d-5 promulgated pursuant to the Securities and
Exchange Act of 1934, as amended from time to time (the "Exchange
Act") of which such holder or any of its Affiliates is a member is
the beneficial owner (as defined in Rule 13d-3 promulgated pursuant
to the Exchange Act) (a "Beneficial Owner"), in aggregate, directly
or indirectly, of more than forty (40%) percent of the Common Stock
of the Corporation. For purposes of this Certificate of
Designations of Series H Preferred Stock (the "Certificate"),
"Affiliate" shall have the meaning given it in Rule 405 promulgated
under the Securities Act of 1933, as amended from time to time (the
"Securities Act"), provided, however, that an affiliate which is
not controlled (within the meaning of Rule 405 promulgated under
the Securities Act) by a holder of Series H Preferred Stock shall
not be deemed to be an Affiliate unless such affiliate files
statements regarding the securities of the Corporation pursuant to
Regulation 13D-G under the Exchange Act, and provided, further,
that a holder and its Affiliate(s) shall not be deemed to be a
member of a Group unless a member of such Group has filed
statements regarding the securities of the Corporation pursuant to
Regulation 13D-G under the Exchange Act stating that such holder or
its Affiliate(s) is a member of such Group.
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SECTION 3. Voting Rights. The Series H Preferred Stock
shall have no voting rights whatsoever, except as required under
the General Corporation Law of Delaware.
SECTION 4. Certain Restrictions.
(a) Restrictions. Whenever quarterly dividends payable
on the Series H Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends,
whether or not declared, on shares of Series H Preferred Stock
outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series H Preferred Stock;
(ii) declare or pay dividends on, or make any
other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Series H Preferred Stock, except dividends paid
ratably on the Series H Preferred Stock and all such parity stock
on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series H Preferred Stock, except for (x) redemptions, purchases or
other acquisitions made ratably of the Series H Preferred Stock and
all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled, (y) redemptions, purchases or other
acquisitions made pursuant to Section 8, or redemption, purchases
or other acquisitions of the 6% Cumulative Convertible Preferred
Stock or Series G Preferred Stock made pursuant to the Certificate
of Designations for such stock or any agreement with the holders
thereof in effect on the date this Certificate of Designations is
executed.
SECTION 5. Conversion Rights. The shares of Series H
Preferred Stock may be converted into shares of Common Stock or
cash as set forth in this Section 5 at any time following the
earlier of: (i) the granting of approval by the U.S. Food and Drug
Administration (or any successor thereto) for the marketing and
sale of any product which contains as an active ingredient the
compound "Pimagedine" and which is a "Licensed Product"(as such
terms are defined in that certain Development Collaboration and
License Agreement (the "License Agreement") entered into by and
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between the Corporation and Genentech, Inc. ("Genentech") as of
December 1, 1997; (ii) termination by Genentech of the License
Agreement pursuant to Section 10.4(a) or 10.5 thereof; or (iii)
December 1, 2002. Notwithstanding the foregoing, Genentech may
convert up to that number of shares of Series H Preferred Stock
described in the following sentence at any time when the product of
(A) the average Fair Market Value (as hereinafter defined) of the
Corporation's Common Stock for the twenty (20) days preceding the
date of delivery of a Conversion Notice (as hereinafter defined)
times (B) the number of outstanding shares of the Corporation's
Common Stock on the date of delivery of a Conversion Notice, is
less than two (2) times the aggregate price paid by Genentech to
the Corporation for all shares of Series G Preferred Stock and
Series H Preferred Stock then held by it (the "Purchase Price").
The number of shares of Series H Preferred Stock which Genentech
shall be entitled to convert at any time shall not exceed that
number of shares of Series H Preferred Stock, the Original Issuance
Price (as hereinafter defined) of which, when added to the product
of (A) and (B) of the preceding sentence, after giving effect to
such conversion, will cause such sum to exceed two (2) times the
Purchase Price of the Series G Preferred Stock and Series H
Preferred Stock held by Genentech following such conversion,
provided, however, that such Original Issuance Price shall be
rounded up to the nearest multiple of $2,500,000. Genentech's right
to convert shares of Series H Preferred Stock pursuant to the
preceding sentence shall be suspended for a period of six (6)
months following the effective date of termination of the License
Agreement by Genentech under Section 10.5 of the License Agreement,
unless such termination occurs within sixty (60) days after new
technical data regarding the development of Pimagedine becomes
available to Genentech.
(a) Conversion by Holder. Subject to and in compliance
with the provisions of this Section 5, any shares of Series H
Preferred Stock may, at the option of the holder thereof upon at
least seventy (70) days prior written notice to the Corporation, be
converted into fully-paid and nonassessable shares of Common Stock.
The number of shares of Common Stock which a holder of Series H
Preferred Stock shall be entitled to receive upon conversion of a
share of Series H Preferred Stock shall be the quotient
(hereinafter, the "Conversion Ratio") obtained by dividing $10,000
(the "Original Issuance Price") by the average of the Fair Market
Value of the Common Stock for the twenty (20) Business Days
immediately preceding the Conversion Date (as such terms are
hereinafter defined) (such average being hereinafter referred to as
the "Conversion Value"). For purposes of this Certificate, (i)
"Business Day" shall mean a day on which the Nasdaq National Market
or, if the Common Stock is not then listed on the Nasdaq National
Market, any other established exchange or national system on which
the Common Stock is listed, is open for trading and (ii) "Fair
Market Value" shall mean, for any Business Day, the closing sales
price of the Common Stock (or the closing bid, if no sales were
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reported) as quoted on the Nasdaq National Market, or if the Common
Stock is not then quoted on the Nasdaq National Market, on any
established stock exchange or national market system on which the
Common Stock is listed for such Business Day.
(b) Conversion by Corporation. Subject to and in
compliance with the provisions of this Section 5, any shares of
Series H Preferred Stock may at any time (subject to the limitation
in Section 5(e)(iii)) at the option of the Corporation upon at
least seventy (70) days prior written notice to the holder of
Series H Preferred Stock, be converted into fully-paid and
nonassessable shares of Common Stock or cash. Upon conversion of
shares of Series H Preferred Stock by the Corporation, a holder of
Series H Preferred Stock shall be entitled to a number of shares of
Common Stock equal to the Conversion Ratio for each share of Series
H Preferred Stock converted.
(c) Conversion Procedure. In order to convert Series H
Preferred Stock into Common Stock, a holder of Series H Preferred
Stock or the Corporation, as the case may be, shall deliver to the
other written notice (a "Conversion Notice") of its election to
make such conversion at least seventy (70) days prior to the
intended date of conversion (the "Conversion Date"). The
Conversion Notice, if delivered by a holder, shall be delivered to
the Corporation at its principal office and if delivered by the
Corporation shall be delivered to the holder at its address as
shown on the records of the Corporation. The Conversion Notice
shall specify the Conversion Date, set forth the number of shares
of Series H Preferred Stock to be converted upon the Conversion
Date and, in the case of conversion by the holder, shall state the
name or names (with address or addresses) in which the
certificate(s) for shares of Common Stock issuable upon such
conversion shall be issued and, in the case of conversion by the
Corporation, shall state that the certificate(s) for shares of
Common Stock issuable upon conversion shall be issued in the name
and address of the holder, unless instructed otherwise by such
holder. On the Conversion Date the holder shall surrender the
certificate(s) representing the shares of Series H Preferred Stock
being converted, duly endorsed, to the Corporation at its principal
office or at the office of its transfer agent. As promptly as
possible after the Conversion Date, the Corporation shall issue and
deliver to such holder, at the Corporation's sole election, such
certificate(s) as such holder may request for the number of whole
shares of Common Stock issuable upon the conversion of such shares
of Series H Preferred Stock, in accordance with the provisions of
this Section 5, or cash in the amount equal to $10,000 for each
share of Series H Preferred Stock being converted, or any
combination of Common Stock and cash; as well as cash as provided
in Section 5(f) in respect of any fraction of a share of Common
Stock issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of
business on the Conversion Date, and at such time the rights of the
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holder of the converted shares of Series H Preferred Stock shall
cease (other than the right to receive accrued but unpaid
dividends, whether or not declared, as of such Conversion Date),
and the person or persons in whose name or names any certificate(s)
for shares of Common Stock shall be issuable shall be deemed to
have become the holder or holders of record of the shares of Common
Stock represented thereby unless the Corporation delivers cash to
such holders as permitted by this Section 5(c).
(d) Adjustments for Stock Splits, Recombinations, etc.
(i) The Conversion Date (as defined in Section
5(c)) shall be subject to adjustment from time to time as follows:
(A) In the event the Corporation should at any
time or from time to time after the date hereof fix a record date
which is less than twenty-one (21) days prior to a Conversion Date
for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable
in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive
directly or indirectly, additional shares of Common Stock
(hereinafter, the "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or
exercise thereof), then such Conversion Date shall be extended to
the date which is twenty-one (21) days after such record date.
(B) In the event the Corporation should at any
time or from time to time after the date hereof fix a record date
which is less than twenty-one (21) days prior to a Conversion Date
for a combination of the outstanding shares of Common Stock, then
such Conversion Date shall be extended to the date which is
twenty-one (21) days after such record date.
(ii) In the event that after the date hereof the
Corporation shall declare a dividend payable in securities of other
persons, evidences of indebtedness issued by this Corporation or
other persons, assets (excluding cash dividends), or options or
rights not referred to in Section 5(d)(i), then, in each such case
each holder of Series H Preferred Stock shall be entitled to a
proportionate share of any such distribution as though such holder
were the holder of the number of shares of Common Stock into which
such holder's shares of Series H Preferred Stock are convertible as
of the record date fixed for the determination of the holders of
Common Stock entitled to receive such distribution. For purposes
of the foregoing, the average Fair Market Value of the Common Stock
over the twenty (20) Business Days prior to the record date shall
be utilized in calculating the Conversion Value and Conversion
Ratio.
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(iii) If at any time or from time to time after the
date hereof there shall be a recapitalization of the Common Stock
(other than a Corporate Reorganization under Section 7 or a
subdivision or combination provided for above in this Section
5(d)), provision shall be made so that each holder of Series H
Preferred Stock shall thereafter be entitled to receive upon any
conversion of the Series H Preferred Stock under this Section 5 the
number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion of Series H Preferred Stock pursuant to
Section 5 would have been entitled on such recapitalization, all
subject to further adjustment as provided hereinbelow or with
respect to such other securities or property by the terms thereof.
In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the
rights of the holders of Series H Preferred Stock after the
recapitalization to the end that the provisions of this Section 5
(including the adjustment in the Conversion Ratio and the number of
shares of Common Stock issuable on conversion) shall be applicable
after that event as nearly equivalent as may be practicable.
(e) Limitations Upon Conversion. Notwithstanding any
other provision of this Section 5:
(i) In no event shall any holder of Series H
Preferred Stock be entitled to deliver a Conversion Notice with
respect to the conversion into Common Stock of any shares of Series
H Preferred Stock to the extent that, after giving immediate effect
to such conversion (but employing for purposes of calculating the
number of shares of Common Stock to be issued upon such conversion,
in lieu of any Conversion Value, the Fair Market Value for the
Business Day immediately preceding the date of such Conversion
Notice), such holder, its Affiliates and any Group of which such
holder or its Affiliates is a member would be the Beneficial Owner,
in aggregate, directly or indirectly, of more than forty percent
(40%) of the Common Stock that (but for this Section 5(e)) would be
outstanding following such conversion. To the extent a Conversion
Notice provides for the conversion on the Conversion Date of shares
of Series H Preferred Stock in excess of that permitted under this
Section 5(e)(i), then such Conversion Notice shall be deemed to
cover the maximum number of shares of Series H Preferred Stock
which the holder thereof is entitled to convert on such Conversion
Date.
(ii) In addition to the limitation imposed by
Section 5(e)(i), on a Conversion Date in no event shall any holder
of Series H Preferred Stock be entitled to convert into Common
Stock any shares of Series H Preferred Stock to the extent that,
after giving effect to such conversion pursuant to the provisions
of this Section 5, such holder, its Affiliates and any Group of
which such holder or its Affiliates is a member would be the
Beneficial Owner, in aggregate, directly or indirectly, of more
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than forty percent (40%) of the Common Stock that (but for this
Section 5(e)) would be outstanding following such conversion. To
the extent a Conversion Notice provides for the conversion on the
Conversion Date of shares of Series H Preferred Stock in excess of
that permitted under this Section 5(e)(ii), then such Conversion
Notice shall be deemed to cover the maximum number of shares of
Series H Preferred Stock which the holder thereof is entitled to
convert on such Conversion Date.
(iii) The Corporation shall not be entitled to
convert any shares of Series H Preferred Stock into shares of
Common Stock if the holder of the Series H Preferred Stock and its
Affiliates would be the Beneficial Owner of more than ten percent
(10%) of the Common Stock that (but for this Section 5(e)) would be
outstanding following any such conversion or if pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 the holder of
the shares of Common Stock to be issued upon conversion would be
required to make a filing in advance of the acquisition of such
shares. To the extent that a Conversion Notice provides for the
conversion on the Conversion Date of shares of Series H Preferred
Stock in excess of that permitted pursuant to the prior sentence,
then upon written notice from the holder to the Corporation
specifying the holder's Beneficial Ownership percentage on the date
of the Conversion Notice, such Conversion Notice shall be deemed to
cover the maximum number of shares of Series H Preferred Stock
which the Corporation is entitled to convert on such Conversion
Date. In addition, at any time that the holder of the Series H
Preferred Stock and its Affiliates is the Beneficial Owner of more
than ten percent (10%) of the Common Stock, the Corporation shall
not be entitled to convert any shares of Series H Preferred Stock,
provided, however, that, on a Conversion Date which is after the
later of (A) the date which is six (6) months and one (1) Business
Day from the last date on which the holder of Series H Preferred
Stock or its Affiliates purchased or otherwise acquired (as those
terms have been interpreted by the courts for the purposes of
Section 16 of the Exchange Act) any Common Stock of the Corporation
or (B) the date which is six (6) months and one (1) Business Day
from the date on which the holder of Series H Preferred Stock has
purchased all shares of Series G Preferred Stock and Series H
Preferred Stock which it is obligated to purchase pursuant to that
certain Stock Purchase Agreement by and between the Corporation and
Genentech, Inc., dated as of December 1, 1997 (the "Stock Purchase
Agreement"), the Corporation may convert to cash all, but not less
than all, of the shares of Series H Preferred Stock and Series G
Preferred Stock held by such holder. Any purchases or acquisitions
of Common Stock by the holder after receipt of a Conversion Notice
providing for conversion pursuant to the preceding sentence shall
not be included in calculating the time period described in phrase
(A) of such sentence. For purposes of this Section 5(e)(iii) only,
a Conversion Date set forth in a Conversion Notice delivered to the
Company by a holder shall be deemed to be a date on which the
holder has purchased or acquired Common Stock.
-8-
<PAGE>
For purposes of this Section 5(e), all calculations of the number
of shares of Common Stock that (but for this Section 5(e)) would be
outstanding following any conversion of Series H Preferred Stock
shall be made upon the assumption that the Corporation would elect,
pursuant to Section 5(b), to issue shares of Common Stock, and not
cash, in connection with such conversion.
(f) Cash in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon the conversion of shares of Series H Preferred
Stock. In lieu of any fractional shares of Common Stock that would
otherwise be issuable upon conversion of Series H Preferred Stock,
the Corporation shall pay to the holder of the shares of Series H
Preferred Stock that were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of
the Conversion Value. The determination as to whether or not any
fractional shares are issuable shall be based upon the total number
of shares of Series H Preferred Stock being converted at any one
time by any holder thereof, and not upon each share of Series H
Preferred Stock being converted by such holder.
(g) Partial Conversion. In the event some but not all
of the shares of Series H Preferred Stock represented by a
certificate or certificates surrendered by a holder are converted,
then Corporation shall execute and deliver to or on the order of
the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series H Preferred Stock that
were not converted.
(h) Standstill. For a period of five (5) years
following the first issuance of a share of Series H Preferred
Stock, during each calendar week within a Restricted Period (as
hereinafter defined), no holder of Series H Preferred Stock shall
sell, transfer, assign, pledge, hypothecate or otherwise dispose
of, directly or indirectly, more than the Restricted Amount (as
hereinafter defined) in such calendar week in the Restricted
Period. A "Restricted Period" shall mean any period commencing on
the date which is twenty-five (25) Business Days preceding the
Conversion Date (provided that a Conversion Notice has been
provided to the Corporation under this Section 5) and ending on the
Conversion Date applicable to such Conversion Notice, or any other
period of time designated as a Restricted Period in this
Certificate. The "Restricted Amount" applicable to any such
calendar week within the Restricted Period shall mean that number
of shares of Common Stock equal to twenty-five (25%) percent of the
average weekly trading volume of the Common Stock for the four (4)
week period preceding the first Business Day within the Restricted
Period. Neither the Corporation nor its transfer agent shall be
required to register upon the books and records of the Corporation
any sale, transfer, assignment, pledge, hypothecation or other
disposition of Common Stock made contrary to this Section 5(h).
Furthermore, in the event of any violation of this Section 5(h),
-9-
<PAGE>
then the Corporation shall not be obligated to effect the subject
conversion. In the case of conversion of Series H Preferred Stock
by the Corporation, the Restricted Period shall begin on the date
of delivery of the Conversion Notice.
(i) Conversion Upon Default. In the event of a material
uncured default by the Corporation under any of the Transaction
Documents (as such term is defined in the Stock Purchase
Agreement), Genentech shall have the right to convert its shares of
Series H Preferred Stock into shares of Common Stock according to
the provisions of Section 5. Notwithstanding the foregoing, for
the purposes of Genentech's right to convert under this Section
5(i), the limitations set forth in Sections 5(e)(i) and 5(e)(ii)
shall not apply.
(j) Automatic Conversion. Each share of Series H
Preferred Stock shall automatically be converted into shares of
Common Stock at its then effective Conversion Ratio immediately
upon the transfer of ownership by the initial holder to a third
party which is not an Affiliate of such holder or a member of any
Group of which such holder or any of its Affiliates is a member.
In the event of such an automatic conversion, the outstanding
shares of Series H Preferred Stock shall be converted automatically
without any further action by the holder of such shares and whether
or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent. The Corporation shall not
be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Series H Preferred Stock are
delivered to the Corporation or its transfer agent. Such
conversion shall be deemed to have been made on the date of
transfer to such third party holder and the person(s) entitled to
receive shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date. For purposes of this
Section 5(j) only, "Affiliate" shall have the meaning given it in
Rule 405 promulgated under the Securities Act.
SECTION 6. Liquidation Rights. Upon the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, no distribution shall be made (a) to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series H Preferred
Stock unless, prior thereto, the holders of shares of Series H
Preferred Stock shall have received an amount equal to (i) the
Original Issuance Price per share for the Series H Preferred Stock,
plus (ii) the Original Issuance Price per share for each share of
Series H Preferred Stock constituting accrued and unpaid dividends
thereon, whether or not declared, to the date of such distribution,
or (b) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series H Preferred Stock, except distributions made ratably on the
-10-
<PAGE>
Series H Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. Corporate Reorganization. If at any time or
from time to time there shall be a reorganization, consolidation,
merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property (each of such
transactions, a "Corporate Reorganization"), then, at such time and
in any such case the Corporation shall provide each holder of
Series H Preferred Stock with notice of such transaction and the
details of such exchange at least fifteen (15) days before the
closing of such transaction, and each such holder of Series H
Preferred Stock shall have the right, at its election, to convert
such shares of Series H Preferred Stock into shares of Common Stock
prior to such closing, or to receive in such transaction the amount
of the liquidation preference set forth in Section 6, as
appropriate, in the form of the other stock or securities, cash
and/or other property as is received by the holders of the Common
Stock. For purposes of the foregoing, the average Fair Market
Value of the Common Stock over the twenty (20) Business Days prior
to the closing of such transaction shall be utilized in calculating
the Conversion Value and Conversion Ratio, and a Restricted Period
shall commence on the date the holder of the Series H Preferred
Stock receives notice of such transaction and shall terminate on
the date on which such transaction closes.
SECTION 8. Corporation's Repurchase Obligation. For a
period of five (5) years following the first issuance of Series H
Preferred Stock, if at any time the Corporation shall repurchase (a
"Common Stock Repurchase") any shares of Common Stock from any
person or entity other than a holder of Series G Preferred Stock or
Series H Preferred Stock or Common Stock issued upon conversion of
6% Cumulative Convertible Preferred Stock, then the Corporation
shall repurchase from each holder of shares of Series H Preferred
Stock the number of whole shares of Series H Preferred Stock
determined by multiplying the number of shares of Series H
Preferred Stock then held by such holder by a fraction, the
numerator of which is the number of shares of Common Stock
repurchased by the Company from the other holder(s) and the
denominator of which is the number of shares of Common Stock issued
and outstanding on the date of the Common Stock Repurchase. The
repurchase price per share of Series H Preferred Stock repurchased
pursuant to this Section 8 shall be the product of the number of
shares of Common Stock into which a share of Series H Preferred
Stock is convertible on the date of the Common Stock Repurchase and
the price per share of Common Stock paid by the Corporation in
connection with the Common Stock Repurchase. For purposes of the
foregoing, the average Fair Market Value of the Common Stock over
the twenty (20) Business Days prior to the closing of the Common
-11-
<PAGE>
Stock Repurchase shall be utilized in calculating the Conversion
Value and Conversion Ratio, and a Restricted Period shall commence
on the date the holder of the Series H Preferred Stock receives
notice of the Common Stock Repurchase and shall terminate on the
date of the Common Stock Repurchase. Such repurchase of shares of
Series H Preferred Stock shall be effected on the date of the
Common Stock Repurchase.
SECTION 9. No Redemption; No Sinking Fund.
(a) No Redemption. The shares of Series H Preferred
Stock shall not be subject to redemption by the Corporation or at
the option of any holder of Series H Preferred Stock except as set
forth in the Certificate of Incorporation, the Stock Purchase
Agreement or the License Agreement; provided, however, that,
subject to Section 4 hereof, the Corporation may purchase or
otherwise acquire outstanding shares of Series H Preferred Stock by
offer to any holder or holders of shares of Series H Preferred
Stock and the Corporation may deliver cash in lieu of Common Stock
upon the conversion of the shares of Series H Preferred Stock by
the holders thereof or by the Corporation.
(b) No Sinking Fund. The shares of Series H Preferred
Stock shall not be subject to or entitled to the operation of a
retirement or sinking fund.
SECTION 10. Ranking. The Series H Preferred Stock shall
rank on parity in all respects with the 6% Cumulative Convertible
Preferred Stock and the Series G Preferred Stock and superior in
all respects to the Series F Preferred Stock. Nothing contained
herein shall limit or restrict the ability of the Board of
Directors of the Corporation, pursuant to Article Fifth of the
Certificate of Incorporation, to fix powers, preferences or rights
of the shares of one or more series of Preferred Stock of the
Corporation that are superior to the powers, preferences or rights
of the Series H Preferred Stock or the ability of the Corporation
to issue shares of such Preferred Stock.
SECTION 11. Fractional Shares. To the extent necessary,
the Corporation shall issue fractions of shares of Series H
Preferred Stock issuable in payment of dividends. Such fractions
shall be rounded to two (2) decimal places.
SECTION 12. Re-acquired Shares. Any shares of Series H
Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever (including upon conversion thereof) shall
be retired and canceled promptly after the acquisition thereof.
All such shares, upon their cancellation, shall become authorized
but unissued shares of Preferred Stock, without designation as to
series until such shares are once more designated as part of a
particular series by the Board of Directors pursuant to the
provisions of Article Fifth of the Certificate of Incorporation.
-12-
<PAGE>
SECTION 13. Reservation of Common Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
shares of Series H Preferred Stock, such number of its shares of
Common Stock as from time to time shall be sufficient to effect the
conversion of all outstanding shares of Series H Preferred Stock.
If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of
all then outstanding shares of Series H Preferred Stock, then the
Corporation shall promptly take such corporate action as may be
necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary
amendment to the Certificate of Incorporation.
SECTION 14. Amendment. None of the powers, preferences and
relative, participating, optional and other special rights of the
Series H Preferred Stock as provided herein or in the Certificate
of Incorporation shall be amended in any manner which would alter
or change the powers, preferences, rights or privileges of the
holders of Series H Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least sixty-seven
(67%) percent of the outstanding shares of Series H Preferred
Stock, voting as a separate class.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be duly executed in its corporate
name on this day of __________, 1997.
ALTEON INC.
By:
Name: ________________________
Title: _______________________
-13-
<PAGE>
AMENDMENT TO
STOCKHOLDERS' RIGHTS AGREEMENT
BETWEEN
ALTEON INC.
AND
REGISTRAR AND TRANSFER COMPANY, AS RIGHTS AGENT
AMENDMENT TO STOCKHOLDERS' RIGHTS AGREEMENT dated as of December
1, 1997 between Alteon Inc., a Delaware corporation, (the "Company")
and Registrar and Transfer Company, as Rights Agent (the "Rights
Agent").
PRELIMINARY STATEMENTS
A. The Company and the Rights Agent are parties to the
Stockholders' Rights Agreement dated as of July 27, 1995, as amended
(the "Agreement").
B. Section 26 of the Agreement provides for the amendment of
the Agreement by the Company.
C. The Company wishes to amend the Agreement to provide for
certain exceptions to its terms.
NOW THEREFORE, for good and valuable consideration, the Company
and the Rights Agent agree as follows:
1. The Agreement is hereby amended by the addition of the
following Section 34:
SECTION 34. Certain Exceptions. For purposes of this
Agreement and subject to the following sentence, neither
Genentech, Inc. ("Genentech") nor its Affiliates (which
term shall, for purposes of this Section 34 only, have the
meaning given it below) shall be deemed to be a Beneficial
Owner of Common Shares which are (i) issuable (but
unissued) upon conversion of the Company's Series G
Preferred Stock or Series H Preferred Stock (collectively,
the "Preferred Stock") or (ii) issued upon conversion of
the Preferred Stock (the Common Shares referred to in
phrase (i) being referred to as the "Exempt Unissued
Shares" and the Common Shares referred to in phrase (ii)
being referred to as the "Exempt Issued Shares" and such
shares being referred to collectively as the "Exempt
Shares"). Genentech and its Affiliates shall not be deemed
to be the Beneficial Owners of the Exempt Issued Shares
only if, and for so long as, the total number of Common
Shares (excluding Exempt Unissued Shares and Exempt Shares
issued upon conversion of the Preferred Stock at the option
of the Company) of which Genentech, its Affiliates and any
"group" (within the meaning of Rule 13d-5 promulgated
pursuant to the Exchange Act) of which Genentech or any of
its Affiliates is a member
<PAGE>
would be deemed to be the Beneficial Owner does not exceed
forty percent (40%) of the Company's issued and outstanding
Common Shares, provided that any increase in the percentage
of Common Shares Beneficially Owned by Genentech or an
Affiliate or a group of which Genentech or any of its
Affiliates is a member solely as the result of a reduction
in the Company's outstanding Common Shares shall be
disregarded for purposes of determining such forty percent
(40%) Beneficial Ownership. Common Shares which would be
Exempt Issued Shares but for the preceding sentence shall
be treated as Beneficially Owned for purposes of this
Agreement for so long as they are not eligible for the
exemption provided by the preceding sentence. For purposes
of this Section 34 only, "Affiliate" shall mean an
affiliate (as such term is defined in Rule 405 promulgated
under the Securities Act) of Genentech, provided, however,
that an affiliate of Genentech which is not controlled
(within the meaning of Rule 405) by Genentech shall not be
deemed to be an Affiliate unless such affiliate files
statements regarding the securities of the Company pursuant
to Regulation 13D-G under the Exchange Act and provided,
further, that neither Genentech nor its Affiliate(s) shall
be deemed to be a member of a group unless a member of such
group has filed statements regarding the securities of the
Company pursuant to Regulation 13D-G under the Exchange Act
stating that Genentech or its Affiliate(s) is a member of
such group.
2. Except as specifically modified by this Amendment, all terms
of the Agreement shall remain in full force and effect and shall be
unaffected by this Amendment.
* * * * * * * * *
2
<PAGE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the
date first written above.
ALTEON INC.
By:
-----------------------------
Name: James J. Mauzey
Title: Chairman and
Chief Executive Officer
REGISTRAR AND TRANSFER COMPANY
By:
-----------------------------
Name:
Title:
3
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
ALTEON INC.
AND
GENENTECH, INC.
DATED AS OF
DECEMBER 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS; SALE AND PURCHASE OF SHARES. . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase. . . . . . . . . . . . . . . . . . 1
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . 2
2. CLOSING DATE; DELIVERY. . . . . . . . . . . . . . . . . . . 2
2.1 Closing Dates and Location . . . . . . . . . . . . . 2
(a) First Closing. . . . . . . . . . . . . . . . . . 2
(b) Subsequent Closings. . . . . . . . . . . . . . . 2
(c) Amounts Purchased at Subsequent Closings . . . . 3
(d) Certain Adjustments. . . . . . . . . . . . . . . 3
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . 4
3. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY . . . . . . . 7
4.1 Organization and Standing. . . . . . . . . . . . . . 7
4.2 Changes. . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Litigation . . . . . . . . . . . . . . . . . . . . . 8
4.4 Compliance With Applicable Laws and Other Instruments;
Non-Contravention. . . . . . . . . . . . . . . . . . 9
4.5 Reports and Financial Statements . . . . . . . . . . 9
4.6 Shares . . . . . . . . . . . . . . . . . . . . . . .10
4.7 Securities Laws; Governmental Approvals. . . . . . .10
4.8 Capital Stock. . . . . . . . . . . . . . . . . . . .10
4.9 Corporate Acts and Proceedings . . . . . . . . . . .11
4.10 No Brokers or Finders. . . . . . . . . . . . . . . .11
4.11 Compliance with Environmental Law. . . . . . . . . .11
4.12 Company Disclosure Documents . . . . . . . . . . . .11
4.13 No Implied Representations . . . . . . . . . . . . .11
4.14 Filing of Reports. . . . . . . . . . . . . . . . . .11
4.15 Insurance. . . . . . . . . . . . . . . . . . . . . .12
4.16 Tax Returns, Payments, and Elections . . . . . . . .12
4.17 Subsidiaries . . . . . . . . . . . . . . . . . . . .12
4.18 Complaints . . . . . . . . . . . . . . . . . . . . .13
4.19 Patents and Trademarks . . . . . . . . . . . . . . .13
4.20 Manufacturing and Marketing Rights . . . . . . . . .14
5. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE
PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . .14
5.1 Authorization. . . . . . . . . . . . . . . . . . . .14
5.2 Investment Experience. . . . . . . . . . . . . . . .14
5.3 Investment Intent. . . . . . . . . . . . . . . . . .14
5.4 Registration or Exemption Requirements . . . . . . .14
5.5 Restriction on Sales, Short Sales and Hedging
Transactions . . . . . . . . . . . . . . . . . . . .15
(i)
<PAGE>
TABLE OF CONTENTS (continued)
Page
5.6 No Legal, Tax or Investment Advice . . . . . . . . .15
5.7 Acquisition of Common Stock. . . . . . . . . . . . .15
5.8 Sales of Common Stock. . . . . . . . . . . . . . . .15
6. CONDITIONS TO FIRST CLOSING.. . . . . . . . . . . . . . . .16
6.1 Opinion of Counsel . . . . . . . . . . . . . . . . .16
6.2 Secretary's Certificate. . . . . . . . . . . . . . .16
6.3 Officers' Certificates . . . . . . . . . . . . . . .16
6.4 Obligations; Consents. . . . . . . . . . . . . . . .16
6.5 Transaction Documents. . . . . . . . . . . . . . . .17
6.6 Transactions Not Prohibited. . . . . . . . . . . . .17
6.7 Initial Registration Statement . . . . . . . . . . .17
7. CONDITIONS TO SUBSEQUENT CLOSINGS . . . . . . . . . . . . .17
7.1 Officers' Certificates . . . . . . . . . . . . . . .17
7.2 Obligations; Consents. . . . . . . . . . . . . . . .18
7.3 Transactions Not Prohibited. . . . . . . . . . . . .18
8. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . .18
8.1 Registration Requirements. . . . . . . . . . . . . .18
(a) Registration of Initial Registered
Securities. . . . . . . . . . . . . . . . . . .18
(b) Request for Registration. . . . . . . . . . . .19
(c) Piggyback Registration. . . . . . . . . . . . .20
(d) Shelf Registration. . . . . . . . . . . . . . .21
(e) Registration Expenses . . . . . . . . . . . . .22
(f) Registration Procedures . . . . . . . . . . . .22
(g) Standstill. . . . . . . . . . . . . . . . . . .24
(h) Rule 144. . . . . . . . . . . . . . . . . . . .24
(i) Furnishing Information. . . . . . . . . . . . .25
(j) Assignment of Registration Rights . . . . . . .25
(k) Limitations on Subsequent Registration
Rights. . . . . . . . . . . . . . . . . . . . .25
(l) Amendment of Registration Rights. . . . . . . .26
(m) Termination of Registration Rights. . . . . . .26
(n) Non-Resale Periods. . . . . . . . . . . . . . .26
8.2 Indemnification and Contribution . . . . . . . . . .26
(a) Indemnification by the Company. . . . . . . . .26
(b) Indemnification by the Holder . . . . . . . . .27
(c) Indemnification Procedure . . . . . . . . . . .28
(d) Contribution. . . . . . . . . . . . . . . . . .28
(e) Other Liability . . . . . . . . . . . . . . . .29
8.3 Repurchases. . . . . . . . . . . . . . . . . . . . . .29
9. RESTRICTIONS ON TRANSFERABILITY OF SHARES; COMPLIANCE WITH
SECURITIES ACT. . . . . . . . . . . . . . . . . . . . . . .29
9.1 Restrictions on Transferability. . . . . . . . . . .29
(ii)
<PAGE>
TABLE OF CONTENTS (continued)
Page
9.2 Restrictive Legend . . . . . . . . . . . . . . . . .30
9.3 Transfer of Shares . . . . . . . . . . . . . . . . .30
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .30
10.1 Survival of Representations and Warranties . . . . .30
10.2 Parties in Interest. . . . . . . . . . . . . . . . .31
10.3 Headings . . . . . . . . . . . . . . . . . . . . . .31
10.4 Severability; Choice of Law. . . . . . . . . . . . .31
10.5 Entire Agreement; Amendments and Waivers . . . . . .31
10.6 Counterparts . . . . . . . . . . . . . . . . . . . .31
10.7 Notices. . . . . . . . . . . . . . . . . . . . . . .31
LIST OF EXHIBITS
EXHIBIT A DISCLOSURE SCHEDULE
EXHIBIT B CERTIFICATE OF DESIGNATIONS FOR SERIES G
PREFERRED STOCK
EXHIBIT C CERTIFICATE OF DESIGNATIONS FOR SERIES H
PREFERRED STOCK
EXHIBIT D EXHIBITS TO COMPANY SEC REPORTS REQUESTED
BY AND DELIVERED TO THE PURCHASER
EXHIBIT E OPINION OF COUNSEL
(iii)
<PAGE>
ALTEON INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
December 1, 1997, between Alteon Inc., a Delaware corporation,
having offices at 170 Williams Drive, Ramsey, New Jersey 07446 (the
"Company"), and Genentech, Inc., a Delaware corporation having
offices at 1 DNA Way, South San Francisco, California 94080 (the
"Purchaser").
PRELIMINARY STATEMENT
A. The Company and the Purchaser are entering into that
certain Development Collaboration and License Agreement of even date
herewith (the "License Agreement"), pursuant to which, inter alia,
the Company has granted to the Purchaser certain license rights with
respect to the compounds identified therein; and
B. In order to provide the Company with funds for further
collaborative development of such compounds in the United States by
the Company and the Purchaser, the Company wishes to sell, and the
Purchaser desires to purchase, shares of the Company's Common Stock
and Preferred Stock on the terms and conditions set forth in this
Agreement. Unless defined herein, capitalized terms used herein
shall have the meanings set forth in the License Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties contained in this Agreement, the parties
hereto agree as follows:
1. DEFINITIONS; SALE AND PURCHASE OF SHARES.
1.1 Definitions. All capitalized terms used herein without
further definition shall have the meanings ascribed thereto in the
License Agreement.
1.2 Sale and Purchase. Subject to the terms and conditions
hereof, the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, the following number of
shares of Common Stock and Preferred Stock:
Common Stock (as defined below) 837,314 shares
Series G Preferred Stock 939 shares
(as defined below)
Series H Preferred Stock subject to Section 2.1(b) and (c)
(as defined below) below and the License Agreement,
up to 4,800 shares
At the first Closing (as hereinafter defined), the Company is to
issue to the Purchaser and the Purchaser is to purchase the Common
Stock and the Series G Preferred Stock identified above. If
<PAGE>
necessary, immediately prior to such first Closing, the exact
numbers of shares of Common Stock and Series G Preferred Stock to be
purchased by the Purchaser hereunder shall be adjusted, if and as
needed, based on the total consideration of $15,000,000 and the
purchase price of the Common Stock set forth in Section 1.3(a), so
that in no event shall the Purchaser be obligated to purchase or
hold five percent (5%) or more of the outstanding Common Stock of
the Company immediately after such first Closing. The total amount
of Common Stock and Preferred Stock sold to the Purchaser pursuant
to this Agreement is hereinafter referred to as the "Shares."
1.3 Purchase Price.
(a) The per share purchase price of the Common Stock
to be purchased at the first Closing shall be $6.70 per share.
(b) The per share purchase price of the Series G
Preferred Stock shall be $10,000.
(c) The per share purchase price of the Series H
Preferred Stock shall be $10,000.
2. CLOSING DATE; DELIVERY.
2.1 Closing Dates and Location. The closings of the
purchase and sale of the Shares hereunder (each, a "Closing") will
be held at the offices of Smith, Stratton, Wise, Heher & Brennan,
600 College Road East, Princeton, New Jersey 08540, on or before the
following dates (each, a "Closing Date"):
(a) First Closing. With respect to the first Closing
of the purchase of the Common Stock and Series G Preferred Stock as
set forth above, the later of December 15, 1997, or the Business Day
immediately following the date on which Purchaser receives a copy of
the Company's Certificates of Designations (attached as Exhibits B
and C hereto) filed as required under Section 6.4 below and file
stamped by the Delaware Secretary of State, or such other date as
may be agreed upon by the parties.
(b) Subsequent Closings. With respect to subsequent
Closings, the agreed-upon Development Costs for the collaborative
development of Pimagedine Products in the United States shall be
funded in advance by purchases of Series H Preferred Stock. Subject
to the other terms of the License Agreement, such funding and
Closings shall begin on January 31, 1998 and continue on a quarterly
basis thereafter on July 1, 1998, October 1, 1998, January 2, 1999,
April 1, 1999, July 1, 1999 and October 1, 1999, with the final
Closing on January 2, 2000, or such other date on which the
aggregate purchase price of the Series H Preferred Stock purchased
hereunder equals the lesser of (i) $48,000,000, or (ii) the amount
of total Development Costs agreed-upon under Section 3 of the
License Agreement.
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(c) Amounts Purchased at Subsequent Closings. The
aggregate purchase price of the Series H Preferred Stock to be
purchased on January 31, 1998 shall be $16,000,000. At the Closings
on July 1, 1998 and October 1, 1998, the Purchaser shall purchase a
number of shares of Series H Preferred Stock having an aggregate
purchase price equal to one-half of the excess, if any, of the
aggregate annual Development Costs as set forth in the agreed-upon
Collaborative Budget established by the Joint Steering Committee for
1998 for Pimagedine Products in the United States over $16,000,000.
In the event that the agreed-upon Collaborative Budget established
by the Joint Steering Committee for 1998 for Pimagedine Products in
the United States is less than $16,000,000 or is decreased by the
Joint Steering Committee in the second half of 1998 to less than
$16,000,000, the Company shall purchase from the Purchaser for an
amount per share equal to the purchase price paid by the Purchaser
that number of shares of Series H Preferred Stock that equals the
difference between such Collaborative Budget for 1998 and
$16,000,000. The aggregate purchase price of the Series H Preferred
Stock to be purchased at each quarterly Closing in 1999 shall be
equal to one-fourth (1/4th) of the aggregate annual Development
Costs as set forth in the agreed-upon Collaborative Budget
established by the Joint Steering Committee for 1999 for Pimagedine
Products in the United States, until the Purchaser has purchased
shares of Series H Preferred Stock having an aggregate purchase
price of up to the lesser of (i) $48,000,000, or (ii) the total
amount of the Development Costs agreed-upon under Section 3 of the
License Agreement.
(d) Certain Adjustments.
(i) If the annual Collaborative Budget for
Pimagedine Products in the United States is increased by the Joint
Steering Committee during the second half of 1998, the calculation
of the excess of the amounts contained in such Collaborative Budget
over $16,000,000 pursuant to Section 2.1(c) above shall be adjusted
at the time of the July 1, 1998 and October 1, 1998 Closings to
reflect such increase.
(ii) If the annual Collaborative Budget for
Pimagedine Products in the United States is adjusted or modified by
the Joint Steering Committee during 1999, the purchase price of the
Series H Preferred Stock to be purchased at each Closing during 1999
after the date of such adjustment shall be adjusted by adding to or
subtracting from, as the case may be, such purchase price an amount
equal to the quotient obtained by dividing the amount of the
increase or decrease, as the case may be, in such annual
Collaborative Budget by the number of Closings remaining in 1999.
(iii) Commencing in January 1999, the aggregate
purchase price for additional shares of Series H Preferred Stock to
be purchased at any Closing in any April shall be reduced by the
amount, if any, by which the aggregate purchase price of the Series
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<PAGE>
H Preferred Stock purchased through December 31 of the prior year
exceeded the actual Development Costs incurred through December 31
of the prior year for the development of the Pimagedine Products in
the United States. Subject to a maximum aggregate purchase price of
$48,000,000, commencing in January 1999, the aggregate purchase
price for additional shares of Series H Preferred Stock to be
purchased at any Closing in any April shall be increased by the
amount, if any, by which the aggregate purchase price of the Series
H Preferred Stock purchased through December 31 of the prior year
was less than the agreed-upon Development Costs of the Company
through December 31 of the prior calendar year; provided that, the
Joint Steering Committee must have approved an appropriate budget
modification or authorized spending in excess of the budgeted amount
for the prior calendar year.
(iv) If the Purchaser elects to terminate the
License Agreement in its entirety in accordance with Section 10.4(a)
or 10.5 of the License Agreement, the Purchaser shall remain
obligated to purchase shares of Series H Preferred Stock hereunder
only as and to the extent provided in Section 3.11(c) of the License
Agreement. Except as provided in Section 3.11(c) of the License
Agreement, the Purchaser shall have no further obligation to
purchase shares of Series H Preferred Stock in connection with the
termination of the License Agreement.
2.2 Delivery. At each Closing, the Company will deliver to
the Purchaser certificates registered in the Purchaser's name,
representing the shares of Common Stock and Preferred Stock, as the
case may be, purchased by the Purchaser, and the Purchaser will pay
to the Company by certified check or wire transfer (to such account
as the Company may designate in writing to the Purchaser at least
one (1) Business Day prior to such Closing) the amount of the
Purchase Price for the Shares purchased at such Closing.
3. DEFINITIONS.
Unless the context otherwise requires, the terms defined in
this Section 3 shall have the meanings herein specified for all
purposes of this Agreement.
"Affiliate" shall have the meaning set forth in Rule 405
under the Securities Act; provided, however, that an Affiliate which
is not controlled (within the meaning of Rule 405 under the
Securities Act) by the Purchaser shall not be deemed to be an
Affiliate unless such Affiliate files statements regarding the
securities of the Company pursuant to Regulations 13D-G under the
Exchange Act.
"Agreement" means this stock purchase agreement,
including the exhibits hereto, as may be validly amended hereunder.
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<PAGE>
"Business Day" means a day on which the Nasdaq National
Market or, if the Common Stock is not then listed on the Nasdaq
National Market, any other established exchange or national system
on which the Common Stock is listed, is open for trading.
"Certificate" means the Certificate of Incorporation of
the Company as filed with the Delaware Secretary of State, as
amended to the date hereof, including the Company's Certificates of
Designations (attached as Exhibits B and C hereto) filed as required
under Section 6.4 below and file stamped by the Delaware Secretary
of State.
"Closing" is defined in Section 2.1 hereof.
"Closing Date" is defined in Section 2.1 hereof.
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means the shares of Common Stock, $.01
par value, authorized by the Certificate, any additional shares of
Common Stock which may be authorized in the future by the Company,
and any stock into which such Common Stock may hereafter be changed,
and shall also include capital stock of any other class of the
Company which is not preferred as to dividends or assets over any
other class of stock of the Company and which is not subject to
redemption.
"Company Disclosure Documents" means the Company SEC
Reports, the Company's Press Releases provided to the Purchaser
prior to the execution of this Agreement and the Disclosure Schedule
attached as Exhibit A hereto.
"Company's Press Releases" means all press releases
issued by the Company since January 1, 1997.
"Company SEC Reports" means the Company's (i) Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, as
filed with the Commission, (ii) Quarterly Report on Form 10-Q for
the fiscal quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997, as filed with the Commission, (iii) Forms 8-K
filed with the Commission since January 1, 1997 and (iv) the
Company's Proxy Statement for its Annual Meeting of Stockholders
held June 10, 1997.
"Conversion Date" shall have the meaning given it in the
Certificates of Designations for the Series G Preferred Stock and
the Series H Preferred Stock.
"Conversion Shares" means the shares of Common Stock
issued upon conversion of the Preferred Stock.
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"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and the regulations promulgated
thereunder.
"Fair Market Value" means, for any Business Day, the
average of the closing sales prices of the Common Stock (or the
closing bid, if no sales were reported) as quoted on the Nasdaq
National Market, or if the Common Stock is not then quoted on
Nasdaq, on such other established exchange or national system on
which the Common Stock is listed, over the prior twenty (20)
Business Days.
"Group" shall have the meaning given it in Rule 13d-5
under the Exchange Act, provided, however, that the Purchaser or its
Affiliate(s) shall not be deemed to be a member of a Group unless a
member of such Group has filed statements regarding the securities
of the Company pursuant to Regulation 13D-G under the Exchange Act
stating that the Purchaser or its Affiliate(s) is a member of such
Group.
"Holder" means any person, including the Purchaser,
owning or having the right to acquire Registrable Securities, or any
assignee thereof in accordance with Section 7.1(j) hereof.
"Initial Registered Securities" is defined in Section
7.1(a) hereof.
"Initial Registration Statement" is defined in Section
7.1(a) hereof.
"License Agreement" means that certain Development
Collaboration and License Agreement of even date herewith between
the Company and the Purchaser, including the exhibits thereto.
"Preferred Stock" shall mean the Series G Preferred
Stock and the Series H Preferred Stock.
"Purchase Price" means, as to any of the Shares, the
purchase price set forth in Section 1.3 hereof.
"Registrable Securities" means (i) the Common Stock
constituting a portion of the Shares, (ii) the Conversion Shares,
and (iii) any Common Stock or other security of the Company issued
as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a stock split, dividend,
recapitalization, other distribution or similar event with respect
to or in exchange for or in replacement of such Common Stock;
provided, however, that such shares of Common Stock shall only be
treated as Registrable Securities if and so long as they (A) have
not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, (B) have not
been sold in a transaction exempt from the registration and
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<PAGE>
prospectus delivery requirements of the Securities Act under Section
4(1) thereof so that all transfer restrictions and restrictive
legends with respect to such Common Stock are removed upon the
consummation of such sale and the seller and purchaser of such
Common Stock receive an opinion of counsel for the Company, which
shall be in form and content reasonably satisfactory to the seller
and buyer and their respective counsel, to the effect that such
Common Stock in the hands of the purchaser is freely transferable
without restriction or registration under the Securities Act in any
public or private transaction, or (C) cannot be sold in any three
(3) month period pursuant to Rule 144 promulgated by the Commission
under the Securities Act.
The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the
Securities Act, and the declaration or ordering of effectiveness of
such registration statement or document.
"Registration Expenses" is defined in Section 7.1(e)
hereof.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and the regulations promulgated
thereunder.
"Selling Expenses" is defined in Section 7.1(e) hereof.
"Series G Preferred Stock" means the Company's Series
G Preferred Stock as more fully described in the form of Certificate
of Designations attached as Exhibit B hereto.
"Series H Preferred Stock" means the Company's Series
H Preferred Stock as more fully described in the form of Certificate
of Designations attached as Exhibit C hereto.
"Shares" is defined in Section 1.2 hereof.
"Transaction Documents" means this Agreement and the
License Agreement, including the exhibits hereto and thereto, each
as may be amended from time to time.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants to the Purchaser as of the
date hereof as follows:
4.1 Organization and Standing. The Company is a corporation
duly organized and validly existing under, and by virtue of, and is
in good standing under the laws of, the State of Delaware, and has
the requisite corporate power and authority to own its properties,
to carry on its business as now being conducted, and to carry out
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<PAGE>
the transactions contemplated under the Transaction Documents. Other
than as disclosed in the Company Disclosure Documents, the Company
has no subsidiaries or direct or indirect ownership interest in any
firm, corporation, association or business which, either
individually or in the aggregate, are material to the business of
the Company. The Company is qualified to do business and is in good
standing as a foreign corporation in every jurisdiction in which its
ownership of property or conduct of business requires it so to be
qualified and in which the failure to so qualify would have a
material adverse effect on the financial condition or business of
the Company.
4.2 Changes. Except as set forth in the Company Disclosure
Documents, since September 30, 1997, the Company has not, to the
extent material to the Company (i) incurred any debts, obligations
or liabilities, absolute, accrued or contingent, whether due or to
become due, other than in the ordinary course of business, (ii)
mortgaged, pledged or subjected to lien, charge, security interest
or other encumbrance any of its assets, tangible or intangible,
(iii) waived any debt owed to the Company, (iv) satisfied or
discharged any lien, claim or encumbrance or paid any obligation
other than in the ordinary course of business, (v) declared, set
aside or paid any dividends or other distribution with respect to
the capital stock of the Company, (vi) changed any material contract
or arrangement by which the Company or any of its assets is bound,
(vii) sold, assigned or transferred any of its patents, trademarks,
copyrights, trade secrets or other intangible assets or (vii)
entered into any transaction other than in the usual and ordinary
course of business. Other than as may be set forth in the Company
Disclosure Documents, there has been no material adverse change in
the financial condition or business, assets or properties,
liabilities or operating results of the Company since the date of
the financial statements contained in the Company Disclosure
Documents other than normal recurring operating losses, and there
has not occurred any loss, destruction or damage affecting the
business, properties, prospects or financial condition of the
Company, whether or not insured, which has or may have a material
adverse effect on the Company.
4.3 Litigation. Other than as described in the Company
Disclosure Documents, there are no legal actions, suits,
arbitrations or other legal, administrative or governmental
proceedings pending or, to the best of the Company's knowledge,
threatened against the Company or its properties, assets or
business, and neither the Company nor any of its officers is aware
of any facts which might result in or form the basis for any such
action, suit or other proceeding, in each case which, if adversely
determined, would, individually or in the aggregate, affect the
execution and delivery of the Transaction Documents or the
performance by the Company of its obligations hereunder and
thereunder, or have a material adverse effect on the financial
condition or business of the Company. The Company is not in default
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<PAGE>
with respect to any judgment, order or decree of any court or any
governmental agency or instrumentality, which default would have a
material adverse effect on the financial condition or business of
the Company.
4.4 Compliance With Applicable Laws and Other Instruments;
Non-Contravention. The business and operations of the Company have
been and are being conducted in accordance with all applicable laws,
rules and regulations of all governmental authorities, except for
such violations of applicable laws, rules and regulations which
would not, individually or in the aggregate, have a material adverse
effect on the financial condition or business of the Company.
Neither the execution and delivery of, nor the performance of or
compliance with, the Transaction Documents and the transactions
contemplated hereby and thereby will, with or without the giving of
notice or passage of time, (i) result in any breach of, or
constitute a default under, or result in the imposition of any lien
or encumbrance upon any asset or property of the Company pursuant
to, any agreement or other instrument to which the Company is a
party or by which it or any of its properties, assets or rights is
bound or affected, except for such breach or default or the
imposition of any such lien or encumbrance which, either
individually or in the aggregate, would not have a material adverse
effect on the financial condition or business of the Company or (ii)
violate the Certificate or Bylaws of the Company, or any law, rule,
regulation, judgment, order or decree. The Company is not in
violation of its Certificate or Bylaws nor in violation of, or in
default under, any lien, indenture, mortgage, lease, agreement,
instrument, commitment or arrangement, except for such defaults
which would not, individually or in the aggregate, have a material
adverse effect on the financial condition or business of the
Company, or subject to any restriction which would prohibit the
Company from entering into or performing its obligations under the
Transaction Documents.
4.5 Reports and Financial Statements. The Company has
furnished the Purchaser with true and complete copies of its Company
SEC Reports (without exhibits thereto except for such exhibits as
the Purchaser has requested, a list of which is attached as Exhibit
D hereto). As of their respective filing dates the Company SEC
Reports were prepared in all material respects in accordance with
the applicable requirements of the Securities Act or the Exchange
Act, as the case may be. The audited consolidated financial
statements and unaudited interim financial statements of the Company
included in the Company SEC Reports comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect
thereto, and the financial statements included in the Company SEC
Reports have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of the Company as at the
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<PAGE>
dates thereof and the results of its operations and cash flows for
the periods then ended, subject, in the case of the unaudited
interim financial statements, to normally recurring year-end
adjustments and any other adjustments described in such financial
statements.
4.6 Shares. The Shares, when issued, paid for and delivered
pursuant to the terms of the Agreement, will be duly and validly
authorized, issued and outstanding, fully paid, nonassessable and
free and clear of all pledges, liens, encumbrances and restrictions
other than the restrictions on transfer set forth in Section 8.
4.7 Securities Laws; Governmental Approvals. Based in part
upon the representations and warranties of the Purchaser contained
in Section 5 of this Agreement, the offer, sale, issuance and
delivery to Purchaser of the Shares as contemplated by this
Agreement are exempt from the registration requirements of the
Securities Act, and from the registration or qualification
requirements of the laws of any applicable state or other U.S.
jurisdiction. Based in part on the representations and warranties
of the Purchaser contained in Section 5 of this Agreement, no
authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental instrumentality,
domestic or foreign, under any applicable laws, rule or regulations,
is or will be necessary for or in connection with the offer, sale,
issuance and delivery to Purchaser of the Shares as contemplated by
this Agreement or for the performance by the Company of its
obligations under the Transaction Documents, except for (i) filing
of the Certificates of Designations attached as Exhibits B and C
hereto with the Secretary of State of the State of Delaware and (ii)
such other filings under applicable securities laws which will be
made by the Company (or in the case of Section 13 of the Exchange
Act, by the Purchaser) within the prescribed periods.
4.8 Capital Stock. At September 30, 1997, 16,515,970
shares of the Common Stock were issued and outstanding, 2,060 shares
of the Company's 6% Cumulative Convertible Preferred Stock were
issued and outstanding and options and warrants to purchase
3,516,614 shares of the Company's Common Stock were issued and
outstanding. All of the outstanding shares of the Company's capital
stock are validly issued, fully paid and nonassessable and were
issued in compliance with all applicable federal and state
securities laws. Except as set forth in the Company Disclosure
Documents, the Company has not agreed to register the sale of any of
its securities under the Securities Act, and there are no
outstanding subscriptions, options, warrants, calls, contracts,
demands, commitments, conversion rights or other agreements or
arrangements of any character or nature whatever under which the
Company is or may be obligated to issue its Common Stock, preferred
stock or warrants or options to purchase Common Stock or preferred
stock. No holder of any security of the Company is entitled to any
rights of first refusal, preemptive or similar rights to purchase
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any securities of the Company (including, without limitation, the
Shares).
4.9 Corporate Acts and Proceedings. This Agreement and the
other Transaction Documents have been duly authorized by the
requisite corporate action, and each has been duly executed and
delivered by an authorized officer of the Company and is a valid and
binding obligation of the Company, enforceable in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and as
to limitations on the enforcement of the remedy of specific
performance and other equitable remedies. The Company has taken all
requisite corporate action necessary for the authorization,
creation, issuance and delivery to Purchaser of the Shares and to
carry out and perform all of the Company's other obligations under
the Transaction Documents.
4.10 No Brokers or Finders. To the knowledge of the Company,
no person, firm or corporation has or will have, as a result of any
act or omission of the Company, any right, interest or valid claim
against the Purchaser for any commission, fee or other compensation
as a finder or broker in connection with the transactions
contemplated by this Agreement.
4.11 Compliance with Environmental Law. Except as disclosed
in the Company Disclosure Documents, the Company is not in violation
in any material respect of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and,
to the best of the Company's knowledge, no material expenditures are
or will be required in order to comply with any such existing
statute, law or regulation. To the best of the Company's knowledge,
the Company does not have any material liability to any governmental
authority or other third party arising under or as a result of any
such past or existing statute, law or regulation.
4.12 Company Disclosure Documents. The Company Disclosure
Documents, when read as a whole, as updated by the Company Press
Releases and as of the date hereof, do not contain any untrue
statements of a material fact and do not omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.13 No Implied Representations. All of the Company's
representations and warranties are contained in this Agreement, and
no other representations or warranties by the Company shall be
implied.
4.14 Filing of Reports. Since the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, the
Company has filed with the Commission all reports and other material
required to be filed by it therewith pursuant to Section 13, 14 or
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15(d) of the Exchange Act, and the Company is eligible to register
the offer and resale of the Shares by the Purchaser on a
Registration Statement on Form S-3 or a successor form.
4.15 Insurance. The Company has in full force and effect
fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it
to replace any of its properties that might be damaged or destroyed.
The Company has in full force and effect products liability
insurance policies in amounts customary for companies similarly
situated.
4.16 Tax Returns, Payments, and Elections. Except as
disclosed in the Company Disclosure Documents, the Company has filed
all tax returns and reports as required by law. These returns and
reports are true and correct in all material respects. The Company
has paid all taxes and other assessments due, except those contested
by it in good faith. The provision for taxes of the Company as
shown in the financial statements is adequate for taxes due or
accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation,
or amortization) that would have a material effect on the business,
properties, prospects, or financial condition of the Company. The
Company has never had any tax deficiency proposed or assessed
against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or
governmental charge. Except as disclosed in the Company Disclosure
Documents, none of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns has
ever been audited by governmental authorities. Since the date of
the financial statements, the Company has made adequate provisions
on its books of account for all taxes, assessments, and governmental
charges with respect to its business, properties, and operations for
such period. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes,
including, but not limited to, federal income taxes, Federal
Insurance Contribution Act taxes and Federal Unemployment Tax Act
taxes required to be withheld or collected therefrom, and has paid
the same to the proper tax receiving officers or authorized
depositaries.
4.17 Subsidiaries. The Company does not own or control,
directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a
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participant in any joint venture, partnership, or similar
arrangement.
4.18 Complaints. Except as disclosed in the Company
Disclosure Documents, the Company has received no complaints which
it believes to be material from clinical subjects concerning alleged
defects in its products (or the design thereof) that, if true, would
materially adversely affect the operations or financial condition of
the Company.
4.19 Patents and Trademarks. To the best of its knowledge,
the Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, and proprietary rights and processes
necessary for its business as now conducted and as proposed to be
conducted without any conflict with, or infringement of the rights
of, others. Except as disclosed in the Company Disclosure Documents
and except for agreements with its own employees or consultants, and
standard end-user license agreements, there are no outstanding
options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options,
licenses, or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, and proprietary rights and processes of any
other person or entity. The Company has not received any
communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade
secrets, or other proprietary rights or processes or any other
person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or
subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or
that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed,
will, to the best of the Company's knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant, or instrument
under which any of such employees is now obligated. The Company
does not believe it is or will be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made
prior to their employment by the Company except for such inventions
as to which the Company has obtained all necessary rights to do so.
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4.20 Manufacturing and Marketing Rights. Except as disclosed
in the Company Disclosure Documents, the Company has not granted
rights to manufacture, produce, assemble, license, market, or sell
its products to any other person and is not bound by any agreement
that affects the Company's exclusive right to develop, manufacture,
assemble, distribute, market, or sell its products.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE PURCHASER.
The Purchaser hereby represents and warrants to, and covenants
and agrees with, the Company, as of the date hereof as follows:
5.1 Authorization. The Purchaser has all requisite legal
and corporate or other power and capacity and has taken all
requisite corporate or other action to execute and deliver the
Transaction Documents, to purchase the Shares and to carry out and
perform all of its obligations under the Agreement and other
Transaction Documents. Each of the Transaction Documents constitutes
the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and as to limitations on the enforcement
of the remedy of specific performance and other equitable remedies.
5.2 Investment Experience. The Purchaser is an "accredited
investor" as defined in Rule 501 under the Securities Act. The
Purchaser is aware of the Company's business affairs and financial
condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable
decision to acquire the Shares. The Purchaser has such business and
financial experience as is required to give it the capacity to
evaluate the risks of an investment in the Shares and to protect its
own interests in connection with the purchase of the Shares. The
Purchaser is not a "broker" or a "dealer" as defined in the Exchange
Act.
5.3 Investment Intent. The Purchaser is purchasing the
Shares and the Conversion Shares for its own account for investment
only and not with a view to any resale or distribution thereof,
except pursuant to (i) an effective registration statement under the
Securities Act and in compliance with the requirements of state
securities laws, (ii) an opinion of counsel to the Company that such
registration or compliance is not required or (iii) Rule 144 under
the Securities Act.
5.4 Registration or Exemption Requirements. The Purchaser
further acknowledges and understands that the Shares and the
Conversion Shares may not be resold or otherwise transferred except
in a transaction registered under the Securities Act and applicable
state laws or unless an exemption from such registration is
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available or unless pursuant to Rule 144 under the Securities Act.
The Purchaser understands that the certificates evidencing the
Shares and the Conversion Shares will be imprinted with a legend
that prohibits the transfer of the Shares unless (i) such
transaction is registered, (ii) the Company receives an opinion
reasonably satisfactory to the Company of counsel reasonably
satisfactory to the Company to the effect that registration is not
required or (iii) pursuant to Rule 144 under the Securities Act.
5.5 Restriction on Sales, Short Sales and Hedging
Transactions. During the period of twenty five (25) Business Days
immediately prior to the execution of this Agreement by the
Purchaser and the period of twenty five (25) Business Days prior to
each Conversion Date, the Purchaser did not and the Purchaser will
not, directly or indirectly, execute or effect or cause to be
executed or effected any short sale, option or equity swap
transactions in or with respect to the Common Stock or any other
derivative security transaction the purpose or effect of which is to
hedge or transfer to a third party all or any part of the risk of
loss associated with the ownership of the Shares or the Conversion
Shares to be purchased on such Conversion Date by the Purchaser.
5.6 No Legal, Tax or Investment Advice. The Purchaser
understands that nothing in the Company Disclosure Documents, this
Agreement or any other materials presented to the Purchaser in
connection with the purchase and sale of the Shares constitutes
legal, tax or investment advice. The Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase
of the Shares.
5.7 Acquisition of Common Stock. From the date of this
Agreement and until the tenth (10th) anniversary of the date of this
Agreement, the Purchaser, its Affiliates and any Group of which the
Purchaser or any of its Affiliates is a member shall not at any time
be the beneficial owner (as defined in Rule 13d-3 promulgated
pursuant to the Exchange Act) of, in aggregate, more than forty
percent (40%) of the shares of Common Stock outstanding from time to
time, exclusive of any shares of Common Stock issuable but not
issued upon conversion of Series G Common Stock or Series H Common
Stock by the Company.
5.8 Sales of Common Stock. From and after the date of this
Agreement until the fifth (5th) anniversary of the date of this
Agreement, during each calendar week no holder of the Shares or the
Conversion Shares shall sell, transfer, assign, pledge, hypothecate
or otherwise dispose of, directly or indirectly, more than that
number of shares of Common Stock which is equal to twenty-five
percent (25%) of the average weekly trading volume of the Common
Stock for the four (4) preceding calendar weeks; provided, however,
that shares of Common Stock received by the Purchaser upon the
Company's conversion of the Series G Preferred Stock or Series H
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Preferred Stock shall not be included for purposes of determining
the number of shares which may be sold by the Purchaser pursuant to
this Section and such shares shall not be subject to the foregoing
volume restrictions. Such holder shall give the Company notice of
any directions given to a broker or other third party instructing
such party to sell or otherwise transfer Common Stock and shall
notify the Company of any such sales or transfers not later than
three (3) Business Days after such holder learns that any such sale
or transfer has been effected.
6. CONDITIONS TO FIRST CLOSING.
The obligation of the Company to sell, and the Purchaser to
buy, the Shares shall be conditioned on the satisfaction of the
following conditions on the date of the first Closing hereunder.
6.1 Opinion of Counsel. The Purchaser shall have received
an opinion of Smith, Stratton, Wise, Heher & Brennan, dated the
Closing Date, substantially in the form attached hereto as Exhibit
E.
6.2 Secretary's Certificate. The Purchaser shall have
received a Secretary's Certificate, dated the Closing Date,
certifying the Certificate and Bylaws of the Company, the
resolutions of the Board of Directors of the Company and the
signatures of the officers of the Company to execute this Agreement
and the other Transaction Documents and certificates to be delivered
by the Company in connection with the transactions contemplated
hereby and thereby. All corporate and other proceedings in
connection with the transactions contemplated under the Transaction
Documents shall be reasonably satisfactory to the Purchaser and its
counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may
reasonably request.
6.3 Officers' Certificates. The Company shall have received
from the Purchaser a certificate of an officer of the Purchaser,
dated the Closing Date, to the effect that the Purchaser's
representations and warranties contained in this Agreement and the
other Transaction Documents are true and correct as of the Closing
Date as though made on and as of that date. The Purchaser shall
have received from the Company a certificate of an officer of the
Company, dated the Closing Date, to the effect that the Company's
representations and warranties contained in this Agreement and the
other Transaction Documents are true and correct as of the Closing
Date as though made on and as of that date and that the Company has
performed all of the conditions to the Closing set forth in Section
6.4.
6.4 Obligations; Consents. The Company shall have performed
and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
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complied with by it on or before the Closing Date, including,
without limitation filing with the Secretary of State of the State
of Delaware the Certificates of Designations attached hereto as
Exhibits B and C and providing Purchaser with a file stamped copy of
each. The Purchaser shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or
before the Closing Date. The Company shall have obtained all
consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated under the Transaction
Documents, including, without limitation, all governmental and
regulatory consents, approvals or authorizations required in
connection therewith.
6.5 Transaction Documents. The Transaction Documents shall
have been executed and delivered on behalf of each of the Company
and the Purchaser.
6.6 Transactions Not Prohibited. There shall be no action
or proceeding commenced or, to the knowledge of the parties,
threatened before any legal or administrative tribunal or by any
administrative organization, and no judgment, order or injunction
shall have been rendered by any such tribunal or organization for
the purpose of restraining or prohibiting the transactions
contemplated by the Transaction Documents.
6.7 Initial Registration Statement. The Company shall have
delivered to the Purchaser a draft of a Registration Statement on
Form S-3 covering the Initial Registered Securities (as hereinafter
defined) (the "Initial Registration Statement").
7. CONDITIONS TO SUBSEQUENT CLOSINGS.
The obligation of the Company to sell, and the Purchaser
to buy, the Shares shall be conditioned on the satisfaction of the
following conditions on each subsequent Closing Date hereunder.
7.1 Officers' Certificates. The Purchaser shall have
received from the Company a certificate of an officer of the
Company, dated the Closing Date, to the effect that the Company's
representations and warranties contained in this Agreement and the
other Transaction Documents are true and correct as of the Closing
Date as though made on and as of that date and that the Company has
performed all of the conditions to the Closing set forth in Section
7.2. Notwithstanding the foregoing, such representations and
warranties shall reflect any updated Company Disclosure Documents
delivered to the Purchaser prior to any subsequent Closing Date;
provided that such representations and warranties, as updated by the
Company Disclosure Documents, are true and correct, the obligation
of the Purchaser to purchase shares of Series H Preferred Stock at
any Closing shall not be affected by the content of such
representations or warranties as so updated.
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7.2 Obligations; Consents. The Company shall have performed
and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Closing Date. The Purchaser
shall have performed and complied with all agreements, obligations
and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing Date. The
Company shall have obtained all consents, permits and waivers
necessary or appropriate for consummation of the transactions
contemplated under the Transaction Documents, including, without
limitation, all governmental and regulatory consents, approvals or
authorizations required in connection therewith.
7.3 Transactions Not Prohibited. There shall be no action
or proceeding commenced or, to the knowledge of the parties,
threatened before any legal or administrative tribunal or by any
administrative organization, and no judgment, order or injunction
shall have been rendered by any such tribunal or organization for
the purpose of restraining or prohibiting the transactions
contemplated by the Transaction Documents.
8. COVENANTS.
8.1 Registration Requirements.
(a) Registration of Initial Registered Securities.
(i) In addition to the registration rights set
forth in Sections 8.1(b), (c) and (d) hereof, the Purchaser has
requested and the Company has agreed to effectuate registration
under the Securities Act of Registrable Securities consisting of (A)
the Common Stock purchased in the first Closing, (B) Common Stock
issuable or issued on conversion of the Series G Preferred purchased
in the first Closing, and (C) Common Stock or any other security (if
any) included in clause (iii) of the definition of "Registrable
Securities" in Section 3 hereof to the extent that such Common Stock
or other security relates to the Common Stock described in Section
8.1(a)(A) or (B) (collectively, the "Initial Registered
Securities").
(ii) Subject to the other terms of this Section 8,
using its diligent best efforts, and as soon as reasonably
practicable after the first Closing Date (but in no event later than
thirty (30) days after such first Closing Date), the Company shall
prepare and file with the Commission the Initial Registration
Statement, and shall secure the effectiveness of such Initial
Registration Statement as soon as reasonably practicable thereafter.
(iii) The Company shall be obligated to maintain
the effectiveness of the Initial Registration Statement until the
sale of all of the Initial Registered Securities has been completed
or the Initial Registered Securities have ceased to be Registrable
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Securities.
(iv) If the Company is unable to cause the Initial
Registration Statement to become effective within ninety (90) days
after the date of the first Closing as contemplated, the Company, to
the extent that it may lawfully do so, shall, if the Purchaser so
requests in writing not later than ninety (90) days after the
expiration of such ninety (90) day period, purchase from the
Purchaser the Initial Registered Securities included in such
registration statement for a purchase price equal to the Purchase
Price for such Initial Registered Securities, or in the case of
Initial Registered Securities consisting of Common Stock issued upon
conversion of the Series G Preferred Stock, for a purchase price
equal to the Conversion Value (as defined in the Certificate of
Designation for such Series G Preferred Stock attached hereto as
Exhibit B). Such purchase shall be effected not later than fifteen
(15) days after the Company's receipt of the Purchaser's request
therefor.
(b) Request for Registration.
(i) At any time and from time to time after the
purchase of Shares hereunder, the Holder(s) of Registrable
Securities (the "Initiating Holder(s)") may request registration
under the Securities Act of all or a portion of its or their
Registrable Securities, provided that the anticipated aggregate
offering price of the Registrable Securities to be sold, including
underwriting discounts and commissions, is at least $1,500,000.
Such request must specify the number of Registrable Securities
requested to be registered by the Initiating Holder(s).
(ii) Subject to the other terms of this Section 8
(including, without limitation, Section 8.1(g)), using its diligent
best efforts, and as soon as reasonably practicable after receipt of
the request for registration under Section 8.1(b)(i) (but in no
event later than sixty (60) days after receipt of such request), the
Company shall prepare and file a registration statement with the
Commission under the Securities Act to register the offer and resale
of the number of Registrable Securities specified in such request
and shall secure the effectiveness of such registration statement as
soon as reasonably practicable thereafter.
(iii) If the Initiating Holder(s) intend to
distribute the Registrable Securities covered by their request under
Section 8.1(b)(i) by means of an underwriting, they shall so advise
the Company as part of their request under such Section. The right
of any Initiating Holder(s) to include securities in such
registration shall be conditioned upon the inclusion of such
securities in the underwriting. The Initiating Holder(s) shall
enter into an underwriting agreement in customary form with the
representative of the underwriter(s) selected by a majority in
interest of the Initiating Holder(s) and reasonably acceptable to
the Company. If the underwriter determines and advises the
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Initiating Holder(s) that marketing factors require a limitation of
the number of shares of Registrable Securities to be underwritten,
then the numbers of shares of Registrable Securities to be included
in the registration statement by the Initiating Holder(s) shall be
reduced pro rata among such Initiating Holder(s) (based on the
respective amounts of Registrable Securities then held by such
Initiating Holder(s)). If any Initiating Holder disapproves of the
terms of the underwriting, such Initiating Holder may elect to
withdraw therefrom by written notice to the underwriter and the
Company.
(iv) The Company is obligated to effect no more
than one (1) registration for the Purchaser or its transferees or
assignees during any six (6) month period. Notwithstanding the
foregoing, if the Company furnishes to the Initiating Holder(s) a
certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the board of directors of
the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed and it
is therefore essential to defer such filing, the Company shall have
the right to defer such filing for a period of not more than sixty
(60) days after receipt of such certificate by the Initiating
Holder(s); provided, however, that the Company may not utilize this
deferral right more than once in any twelve (12) month period.
(c) Piggyback Registration.
(i) If (but without any obligation to do so) the
Company proposes to register any of its capital stock or other
securities under the Securities Act in connection with the public
offering of such securities (other than a registration relating
solely to an employee benefit plan of the Company or a registration
relating solely to a Rule 145 transaction), the Company shall
promptly give each Holder of Eligible Registrable Securities written
notice of such registration, together with a list of jurisdictions
in which the Company intends to attempt to qualify such securities
under applicable state securities laws. For purposes of this Section
8.1(c), "Eligible Registrable Securities" shall mean all Registrable
Securities other than Registrable Securities which are then covered
by an effective registration statement.
(ii) Subject to the other terms of this Section 8,
upon the written request of each Holder of Eligible Registrable
Securities given within thirty (30) days after receipt of the notice
from the Company under Section 8.1(c)(i), the Company shall include
in such registration (and any related qualification under applicable
state securities laws), and in any underwriting involved therein,
all of the Eligible Registrable Securities each such Holder has
requested to be registered.
(iii) In the event the proposed registration is an
underwritten public offering, the Company shall so advise the
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Holders as part of the notice under Section 8.1(c). If the managing
underwriter determines and advises the Company in writing that the
inclusion of shares of requesting Holders, together with shares to
be offered by the Company, would materially adversely affect the
successful marketing of such securities, then the Company
immediately shall provide the Holders requesting inclusion with a
copy of such written advice, and the numbers of shares of Eligible
Registrable Securities to be included in the registration statement
by Holders shall be reduced pro rata among such Holders requesting
inclusion (based on the respective amounts of Eligible Registrable
Securities then held by such Holders requesting inclusion). If any
Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
managing underwriter.
(iv) The Company shall have the right to terminate
or withdraw any registration statement initiated by it under this
Section 8.1(c) prior to the effectiveness of such registration,
whether or not any Holder has elected to include Eligible
Registrable Securities in such registration. The Registration
Expenses (as hereinafter defined) of such withdrawn registration
shall be borne by the Company in accordance with Section 8.1(e)
hereof.
(d) Shelf Registration.
(i) At any time and from time to time after the
purchase of Shares hereunder, the Holder(s) of Registrable
Securities may request registration on Form S-3 (or any successor
short-form registration statement adopted by the Commission) under
the Securities Act of all or a portion of its or their Registrable
Securities. Such request must specify the number of Registrable
Securities requested to be so registered.
(ii) Upon receipt of any such request under Section
8.1(d)(i), the Company promptly shall notify all other Holders (if
any) of such proposed registration. Such other Holders shall have
thirty (30) days in which to request in writing to the Company that
all or any portion of their Registrable Securities be included in
such registration.
(iii) Subject to the other terms of this Section
8 (including, without limitation, Section 8.1(g)), using its
diligent best efforts, and as soon as reasonably practicable after
its receipt of the request for registration under Section 8.1(d)(i)
(but in no event later than sixty (60) days after receipt of such
request), the Company shall prepare and file a registration
statement on Form S-3 (or any successor short-form registration
statement adopted by the Commission) with the Commission under the
Securities Act to register the offer and resale of the Registrable
Securities specified in the request(s) under Section 8.1(d)(i) and
(ii) hereof. The Company shall cause such registration statement to
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become effective as soon as reasonably practicable thereafter and to
remain effective until the earlier of (A) three (3) years
thereafter, (B) the completion of the distribution described therein
or (C) the date on which all of the Registrable Securities covered
by the registration statement cease to be Registrable Securities.
(iv) The Company shall not be obligated to effect
any such registration under this Section 8.1(d): (A) if the Company
is not qualified as a registrant entitled to use Form S-3 (or any
successor short-form registration statement adopted by the
Commission); (B) if the Holder(s) requesting registration under
Sections 8.1(d)(i) and (ii) propose to sell Registrable Securities
in an aggregate amount less than $500,000, unless all registration
expenses are borne by the requesting Holders; or (C) if the Company
furnishes to the Holder(s) requesting registration under this
Section 8.1(d) a certificate signed by the Chief Executive Officer
of the Company stating that in the good faith judgment of the board
of directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such registration statement on
Form S-3 (or any similar successor form) to be filed and it is
therefore essential to defer such filing, in which case the Company
shall have the right to defer such filing for a period of not more
than sixty (60) days after receipt of such certificate by such
Holder(s); provided, however, that the Company may not utilize this
deferral right more than once in any twelve (12) month period.
(v) No registration pursuant to this Section
8.1(d) shall be counted as a request for registration pursuant to
Sections 8.1(a), (b) or (c) hereof.
(e) Registration Expenses. The Company shall pay all
Registration Expenses (as defined below) in connection with any
registration, qualification or compliance hereunder, and each Holder
of Registrable Securities so registered under Section 8.1 shall pay
all Selling Expenses(as defined below) and other expenses that are
not Registration Expenses that relate to the Registrable Securities
of such Holder to be registered. "Registration Expenses" shall mean
all expenses, except for Selling Expenses and compensation of
employees of the Company, incurred by the Company in complying with
the registration provisions herein described, including, without
limitation, all registration, qualification, compliance and filing
fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, fees and disbursements of one (1) counsel
for the participating Holder(s) designated by a majority in interest
thereof up to a maximum of $25,000, blue sky fees and expenses, and
accounting fees (including the expense of any special audits
incident to or required by any such registration). "Selling
Expenses" shall mean all selling commissions, underwriting fees and
stock transfer taxes applicable to the Registrable Securities.
(f) Registration Procedures. In the case of any
registration effected by the Company pursuant to this Section 8.1,
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the Company will use its best efforts:
(i) except as otherwise expressly provided in this
Section 8.1, to keep such registration effective until the earlier
of (A) the date on which all of the Registrable Securities included
in the registration statement have been resold, or (B) the date on
which all Registrable Securities included in the registration
statement cease to be Registrable Securities;
(ii) to respond promptly to any comments of the
Commission relating to the registration statement, and to prepare
and file with the Commission such amendments (including
post-effective amendments) and supplements to the registration
statement and the prospectus used in connection with the
registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by the registration statement;
(iii) to furnish such number of registration
statements and other documents incident thereto, including any
amendment of or supplement to the registration statement or
prospectus, as any Holder of Registrable Securities covered by such
registration statement may reasonably request to facilitate the
public sale or other disposition of all or any of the Registrable
Securities;
(iv) to cause the Shares to be listed on the Nasdaq
National Market, or if the Common Stock is not then listed on
Nasdaq, any securities exchange or quoted on each quotation service
on which the Common Stock of the Company is then listed or quoted;
(v) to provide a transfer agent and registrar for
all securities registered pursuant to the registration statement and
a CUSIP number for all such securities;
(vi) to file the documents required of the Company
and otherwise use its best efforts to maintain requisite blue sky
clearance in (A) all U.S. jurisdictions in which any of the Shares
are originally sold and (B) all other states specified in writing by
the Purchaser; provided, however, that, as to clause (B), the
Company shall not be required to qualify to do business in any state
in which it is not now so qualified or has not so consented except
as may be required by the Securities Act;
(vii) to keep each Holder of Registrable
Securities covered by the registration statement generally advised
in writing as to the filing and completion of each registration,
qualification and compliance;
(viii) in the event of an underwritten public
offering, to enter into and perform its obligations under the
underwriting agreement for the offering;
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(ix) on the closing date of any public offering (in
the case of an underwritten public offering), or on the date the
registration statement becomes effective (in the case of any other
public offering), to furnish (A) an opinion of counsel for the
purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public
offering, addressed to the underwriters (if any) and to the Holders
of Registrable Securities covered by such registration statement, to
the effect that (I) the registration statement has become effective
under the Securities Act and, to the knowledge of such counsel
(after due inquiry), no stop order or proceedings with respect
thereto are threatened or pending, and (II) the registration
statement and each prospectus forming a part thereof and each
supplement or amendment thereto (except for the financial statements
and schedules) complies in all material respects with the Securities
Act, and (B) a letter from the independent certified public
accountants, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters (if any)
and to the Holders of Registrable Securities covered by such
registration statement; and
(x) to advise the Holders of Registrable Securities
covered by a registration statement promptly at any time when the
prospectus (including any supplements thereto) contained in a
registration statement then in effect under this Section 8 includes
an untrue statement of material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing.
(g) Standstill. Commencing after the first (1st)
anniversary of the date of this Agreement, no Holder shall effect
any public sale or distribution (including sales pursuant to Rule
144) of the Registrable Securities or the Preferred Shares during
the seven (7) days prior to and the ninety (90) day period beginning
on the effective date of any underwritten public offering of the
Common Stock unless the underwriters managing such offering
otherwise agree, provided that the anticipated aggregate offering
price of the securities to be sold, including underwriting discounts
and commissions, is at least $1,500,000 and the Company is actively
employing its good faith efforts to cause such registration
statement to become effective. In addition, commencing on the date
of this Agreement, no Holder shall effect any public sale or
distribution (including sales pursuant to Rule 144) at any time
after notice from the Company that a prospectus relating thereto
which is required to be delivered under the Securities Act contains
an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading.
(h) Rule 144. With a view to making available to the
Purchaser the benefits of Rule 144 under the Securities Act and any
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other rule or regulation of the Commission that may at any time
permit the Purchaser to sell Registrable Securities to the public
without registration or pursuant to a registration statement on Form
S-3, the Company covenants and agrees to use its best efforts to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) the
date on which the Shares may be sold pursuant to Rule 144(k) (or any
successor rule) or (B) such date as all of the Registrable
Securities shall have ceased to be Registrable Securities; and (ii)
file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and
Exchange Act.
(i) Furnishing Information. Each Holder selling
Registrable Securities in any registration under this Section 8.1
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of
disposition of such securities as shall be required to effect the
registration of its Registrable Securities and to execute such
documents in connection therewith as the Company may reasonably
request (and in any case only as shall be necessary to allow the
Company to comply with the provisions hereof).
(j) Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to
this Agreement may be assigned by any Holder of Registrable
Securities to a transferee or assignee of such Registrable
Securities, provided that after such transfer or assignment, such
transferee or assignee is the Holder of Registrable Securities with
a Fair Market Value of at least $500,000 and provided, further, that
the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of the name and address of
such transferee or assignee and the Registrable Securities with
respect to which such registration rights are being assigned, and
provided, further, that such assignment shall be effective only if
immediately following such transfer or assignment the securities
covered by such transfer or assignment are still Registrable
Securities.
(k) Limitations on Subsequent Registration Rights.
From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holder(s) of a majority in
interest of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder to
include such securities in any registration filed under this Section
8, unless under the terms of such agreement, such holder or
prospective holder may include such securities only to the extent
that such inclusion will not reduce the amount of Registrable
Securities of the Holder(s) of Registrable Securities included in
that registration.
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<PAGE>
(l) Amendment of Registration Rights. Any provision
of this Section 8.1 may be amended and the observance thereof may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the
Company and the Holder(s) of a majority in interest of the
Registrable Securities. Any amendment or waiver effected in
accordance with this Section 8.1(l) shall be binding upon each
Holder of Registrable Securities then outstanding, each future
Holder of Registrable Securities, and the Company.
(m) Termination of Registration Rights. The
registration rights granted pursuant to this Section 8.1 shall
terminate at the time at which all of the Registrable Securities
then outstanding can be sold within a given three (3) month period
without compliance with the registration requirements under the
Securities Act, pursuant to Rule 144 or other applicable exemption,
as supported by a written opinion of legal counsel to the Company,
which opinion shall be reasonably satisfactory in form and substance
to legal counsel for the Holder(s); provided, however, that in no
event shall the registration rights granted hereunder terminate
while any shares of the Series H Preferred Stock may be issued
pursuant to the terms of this Agreement.
(n) Non-Resale Periods. At any time and from time to
time after effectiveness of a registration statement filed by the
Company pursuant to this Section 8, the Company may refuse to permit
the Holder of the securities covered by such registration statement
to resell any securities pursuant to such registration statement,
and such Holder will not effectuate any such resale of the
registered securities during the time period requested by the
Company (the time period with respect to each such request, a
"Non-Resale Period"). The total number of days in all of the
Non-Resale Period(s) requested by the Company hereunder (if any) may
not exceed thirty (30) days in the aggregate. In order to exercise
this right hereunder, the Company must furnish to the Holders a
certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the board of directors of
the Company, it would be seriously detrimental to the Company and
its shareholders for sale of the registered securities to continue.
8.2 Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify and hold harmless each Holder of Registrable Securities
(and its officers, directors, employees, affiliates and agents), and
each underwriter (if any), and each person who controls any
underwriter, from and against any and all losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect
thereof) to which any of them may become subject (under the
Securities Act or otherwise) with respect to any registration,
qualification or compliance under this Section 8.1 insofar as such
losses, claims, damages, liabilities or expenses (or actions or
-26-
<PAGE>
proceedings in respect thereof) arise out of, or are based upon (i)
any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading,
in any registration statement (on the effective date thereof),
prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident
to any such registration, qualification or compliance, or (ii) any
violation by the Company of any applicable rule or regulation under
the Securities Act relating to any action or inaction required of
the Company in connection with such registration, qualification or
compliance, or (iii) any failure by the Company to fulfill any
undertaking included in the registration statement or related
documents or to fulfill any of its obligations under Sections 8.1 or
8.2 hereof. The Company will, as incurred, reimburse the
indemnified parties herein for any legal or other expenses
reasonably incurred in investigating, defending or preparing to
defend any such claims, actions or proceedings in respect thereof;
provided, however, that the Company shall not be liable in any such
case to the extent that such loss, claim, damage, liability or
expense arises out of, or is based upon (A) any untrue statement or
omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in any
registration statement (on the effective date thereof), prospectus,
offering circular or other document (including any related
registration statement, notification or the like) incident to any
such registration, qualification or compliance, made in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Holder specifically for use in
preparation of such document, (B) an untrue statement or omission in
any prospectus that is corrected in any subsequent prospectus, or
supplement or amendment thereto, that was delivered to the Holder
prior to the sale or sales from which a loss or liability arose, or
(C) the sale of Registrable Securities during a blockage period
described in Section 8.1(g).
(b) Indemnification by the Holder. Each Holder agrees
to indemnify and hold harmless the Company (and its officers,
directors, employees, affiliates and agents), and each underwriter
(if any), and each person who controls any underwriter, from and
against any losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) to which any of them may
become subject (under the Securities Act or otherwise) insofar as
such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise out of, or are based upon (i)
any untrue statement or omission of a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in any
registration statement (on the effective date thereof), prospectus,
offering circular or other document (including any related
-27-
<PAGE>
registration statement, notification or the like) incident to any
such registration, qualification or compliance, made in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Holder specifically for use in
preparation of such document; provided, however, that the Holder
shall not be liable in any such case for any untrue statement or
omission in any registration statement, prospectus or other such
document which statement has been corrected, in writing, by the
Holder and delivered to the Company ten (10) days before the sale
from which such loss occurred, (ii) an untrue statement or omission
in any prospectus delivered by the Holder that is corrected in any
subsequent prospectus, or supplement or amendment thereto, and
delivered to the Holder prior to the sale or sales from which a loss
or liability arose, or (iii) any failure by the Holder to fulfill
any of its obligations under Sections 8.1 or 8.2 hereof. The Holder
will, as incurred, reimburse the indemnified parties herein for any
legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such claims, actions or
proceedings in respect thereof.
(c) Indemnification Procedure. Promptly after receipt
by any indemnified party of a notice of a claim or the beginning of
any action in respect of which indemnity is to be sought against an
indemnifying party pursuant to this Section 8.2, such indemnified
party shall notify the indemnifying party in writing of such claim
or of the commencement of such action, and, subject to the
provisions hereinafter stated, in case any such action shall have
been brought against an indemnified party and the indemnifying party
shall have been notified thereof, the indemnifying party shall be
entitled to participate therein, and, to the extent that it shall
wish, to assume the defense of such action, with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to such indemnified party of the indemnifying
party's election to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal
expenses subsequently incurred by such indemnified party in
connection with the defense thereof; provided, however, that if
there exists or shall exist a conflict of interest that would make
it inappropriate in the reasonable judgment of the indemnified party
for the same counsel to represent both the indemnified party and
such indemnifying party or any affiliate or associate thereof, the
indemnified party shall be entitled to retain its own counsel at the
expense of such indemnifying party. Failure of any indemnifying
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 8.2. No
indemnifying party, in the defense of any such claim or action,
except with the consent of each indemnified party, shall consent to
entry of any judgment or enter into any settlement.
(d) Contribution. If the indemnification provided for
in this Section 8.2 is unavailable to or insufficient to hold
harmless an indemnified party under Section 8.2(a) or Section 8.2(b)
-28-
<PAGE>
in respect of any losses, claims, damages, liabilities or expenses
(or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as result of such losses, claims,
damages, liabilities or expenses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Holder on the
other in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses (or actions
or proceedings in respect thereof). The relative fault shall be
determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Holder on the other
and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) referred to above in this Section
8.2(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8.2(d), no Holder shall be required
to contribute any amount in excess of the amount by which the net
amount received by the Holder from the sale of the Shares to which
such loss relates exceeds the amount of any damages which the Holder
has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No party
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any party who was not guilty of such fraudulent
misrepresentation.
(e) Other Liability. The obligations of the Company
and each Holder under this Section 8.2 shall be in addition to any
liability which the Company and the Purchaser may otherwise have.
8.3 Repurchases. If the Company becomes obligated under this
Agreement or the License Agreement to repurchase any shares of
Series H Preferred Stock from the Purchaser, then not later than
thirty (30) days thereafter, the Company shall purchase from the
Purchaser for an amount per share equal to the purchase price paid
by the Purchaser that number of shares of Series H Preferred Stock
that the Company is obligated to repurchase under this Agreement or
the License Agreement.
9. RESTRICTIONS ON TRANSFERABILITY OF SHARES; COMPLIANCE WITH
SECURITIES ACT.
9.1 Restrictions on Transferability. The Shares and the
Conversion Shares shall not be transferable in the absence of
registration under the Securities Act or an exemption therefrom or
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<PAGE>
in the absence of compliance with any term of this Agreement or in
absence of compliance with Rule 144 under the Securities Act.
9.2 Restrictive Legend. Each certificate representing the
Shares and the Conversion Shares shall bear substantially the
following legends (in addition to any legends required under
applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT") OR THE SECURITIES ACT OF ANY STATE AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE 1933
ACT OR APPLICABLE STATE SECURITIES ACTS OR, IN THE OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH OR SOLD
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.
At such time that Shares and the Conversion Shares may be sold
pursuant to Rule 144(k) under the Securities Act (or any successor
rule), the Company agrees to provide Purchaser with replacement
non-legended certificates evidencing the Shares within ten (10)
Business Days of a written request therefor by Purchaser.
9.3 Transfer of Shares. The Purchaser hereby covenants with
the Company not to make any sale of the Shares or the Conversion
Shares except either (a) a sale of Shares or the Conversion Shares
in accordance with a registration statement, in which case the
Purchaser covenants to comply with the requirement of delivering a
current prospectus, (b) a sale of the Shares or the Conversion
Shares in accordance with Rule 144 under the Securities Act, in
which case the Purchaser covenants to comply with Rule 144 and to
deliver such additional certificates and documents as the Company
may reasonably request, or (c) subject to such conditions as the
Company in its sole discretion shall impose, in accordance with
another exemption from the registration requirements of the
Securities Act. The legend set forth in Section 9.2 will be removed
from a certificate representing the Shares or the Conversion Shares
following and in connection with any sale of the Shares or the
Conversion Shares pursuant to clause (a) or (b) hereof but not in
connection with any sale of the Shares or the Conversion Shares
pursuant to clause (c) hereof.
10. MISCELLANEOUS.
10.1 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the
execution and delivery of this Agreement, any investigation at any
time made by or on behalf of the Purchaser, and the sale and
purchase of the Shares and payment therefor.
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<PAGE>
10.2 Parties in Interest. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the
parties hereto.
10.3 Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and
do not constitute a part of this Agreement.
10.4 Severability; Choice of Law. Should any Section or
provision in this Agreement be rendered void, invalid or
unenforceable by any court of law for any reason, such invalidity or
unenforceability shall not void or render invalid or unenforceable
any other Section or provision of this Agreement. It is the
intention of the parties that the internal laws of the State of
Delaware, without regard to the body of law controlling conflicts of
law, shall govern the validity of this Agreement, the construction
of its terms and the interpretation of the rights and duties of the
parties set forth herein.
10.5 Entire Agreement; Amendments and Waivers. This
Agreement is intended by the parties as a final expression of their
agreement and is intended to be a complete and exclusive statement
of the agreement and understanding between the parties with respect
to the subject matter hereof, and supersedes all prior agreements
and understandings between the parties (oral or written) with
respect to the subject matter hereof, excepting only the other
Transaction Documents. Subject to Section 8.1(l) hereof, the
provisions of this Agreement may not be amended or waived without
the written consent of the Purchaser and the Company.
10.6 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, any one of which need
not contain the signature of more than one party but all such
counterparts taken together shall constitute one and the same
agreement.
10.7 Notices. Any notice, request, demand or other
communication required or permitted to be given under or in
connection with this Agreement shall be deemed to have been
sufficiently given if in writing and personally delivered by
messenger, facsimile transmission (receipt verified), express
courier service (signature required), certified or registered mail,
or telegram, prepaid, to the party for which such notice is
intended, at the address set forth for such party below:
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<PAGE>
In the case of the Purchaser, to:
Genentech, Inc.
1 DNA Way
South San Francisco, California 94080
Attention: Corporate Secretary
Facsimile No.: (650) 952-9881
In the case of the Company, to:
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
Attention: James J. Mauzey
Facsimile No.: (201) 934-0090
With a copy to:
Richard J. Pinto, Esq.
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Facsimile No.: (609) 987-6651
or to such other address for such party as it shall have specified
by like notice to the other party, provided that notices of a change
of address shall be effective only upon receipt thereof. If sent by
messenger, facsimile transmission, express courier service,
certified or registered mail or telegram, the date of mailing or
transmission shall be deemed to be the date on which such notice or
request has been given.
************
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed and delivered by its duly authorized
officer as of the day and year first above written.
ALTEON INC.
By: /s/ James J. Mauzey
-------------------
Name: James J. Mauzey
Title: Chairman and
Chief Executive Officer
GENENTECH, INC.
By: /s/ Nicholas J. Simon
---------------------
Name: Nicholas J. Simon
Title: Vice President
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<PAGE>
EXHIBIT A
DISCLOSURE SCHEDULE
1. Letter from Richard J. Pinto to Tricia Borgia dated October
21, 1997 and all documents referred to therein.
2. Letter from Richard J. Pinto to Tricia Borgia dated
November 26, 1997 and all documents referred to therein.
The Company hereby discloses the following exceptions to its
representations and warranties contained herein:
Section 4.8. The Company has agreed to issue warrants to
purchase 10,000 shares of its Common Stock to the original
purchasers of its 6% Cumulative Convertible Preferred Stock or their
assignees.
Section 4.16. The Company's federal income tax return for the
year 1993 and its New Jersey sales and use tax returns for the
period April 1, 1988 through March 31, 1994 were audited.
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATIONS FOR SERIES G PREFERRED STOCK
[Omitted]
<PAGE>
EXHIBIT C
CERTIFICATE OF DESIGNATIONS FOR SERIES H PREFERRED STOCK
[Omitted]
<PAGE>
EXHIBIT D
EXHIBITS TO COMPANY SEC REPORTS
REQUESTED BY AND DELIVERED TO THE PURCHASER
None
<PAGE>
EXHIBIT E
OPINION OF COUNSEL
, 1997
Genentech, Inc.
1 DNA Way
South San Francisco, CA 94080
Ladies and Gentlemen:
This opinion is rendered to you pursuant to Section 6.1 of the
Stock Purchase Agreement dated , 1997 (the "Purchase
Agreement") between Alteon Inc., a Delaware corporation, (the
"Company") and you (the "Purchaser"). Capitalized terms used but
not otherwise defined in this opinion shall have the meanings
designated in the Purchase Agreement.
In our capacity as counsel for the Company, we have examined
originals or copies certified or otherwise identified to our
satisfaction as being true copies of such corporate records of the
Company, certificates of public officials and of officers of the
Company and others, and other documents as we have deemed necessary
for the purpose of this opinion. In such examination we have
assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as
certified, conformed copies, photocopies or facsimiles. As to
various questions of fact material to our opinion, we have relied on
the representations contained in the Purchase Agreement and on
certificates of, or communications with, officers and
representatives of the Company and certain public officials.
On the basis of such examinations and our consideration of such
questions of law as we have deemed relevant in the circumstances and
subject to the foregoing, we are of the opinion that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own
and lease its properties and to conduct its business as now being
conducted;
(ii) The Shares to be issued and sold by the Company in
accordance with the Purchase Agreement have been duly authorized
and, when issued and delivered against payment therefor as provided
by the Purchase Agreement, will be duly and validly issued and fully
paid and nonassessable, and will not have been issued in violation
of or subject to any preemptive or similar right of shareholders;
<PAGE>
Genentech, Inc.
____________, 1997
Page 2
(iii) The Transaction Documents have been duly authorized,
executed and delivered by the Company, and compliance by the Company
with the provisions thereof and the consummation of the transactions
contemplated thereby will not conflict with or constitute a breach
of, or a default under (a) any agreement or other instrument to
which the Company is a party or by which, to the best of our
knowledge, it or any of its properties, assets or rights is bound or
affected, except for such breach or default which, either
individually or in the aggregate, would not have a material adverse
effect on the financial condition or business of the Company or (b)
the Certificate or Bylaws of the Company;
(iv) No consent, approval, authorization or order of or
filing or registration with any court or governmental agency or body
is required for the execution, delivery and performance of the
Purchase Agreement by the Company and the consummation of the
transactions contemplated thereby;
(v) Except as disclosed in the Company Disclosure Documents
or other documents delivered to you by the Company, to the best of
our knowledge, there are no legal actions, suits, arbitrations or
other legal, administrative or governmental proceedings pending or
threatened against the Company or its properties, assets or
business, and we are aware of no facts which might result in or form
the basis for any such action, suit or other proceeding, in each
case which, if adversely determined, would, individually or in the
aggregate, have a material adverse effect on the financial condition
or business of the Company;
(vi) To the best of our knowledge, the Company is not in
default with respect to any judgment, order or decree of any court
or any governmental decree or instrumentality which would have a
material adverse effect on the financial condition or business of
the Company.
(vii) The Common Stock issuable upon conversion of the Series
G Preferred Stock and the Series H Preferred Stock purchased, or to
be purchased, pursuant to the Purchase Agreement has been duly and
validly reserved for issuance and, when and if issued upon such
conversion in accordance with the Certificates of Designations for
the Series G Preferred Stock and the Series H Preferred Stock will
be validly issued, fully paid and nonassessable.
(viii) Based in part upon the representations made by you in
the Purchase Agreement, the offer and sale of the Series G Preferred
Stock and Series H Preferred Stock to you in accordance with the
terms of the Purchase Agreement is, or will be upon issuance, exempt
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<PAGE>
Genentech, Inc.
__________, 1997
Page 3
from the registration requirements of Section 5 of the Securities
Act of 1933, as amended, by virtue of Section 4(2) thereof and the
rules and regulations promulgated thereunder and from the California
Corporate Securities Law of 1968, and, under such securities laws as
they presently exist, the issuance of Common Stock to you upon
conversion of the Series G Preferred Stock and Series H Preferred
Stock would also be exempt from such registration and qualification
requirements.
A matter stated in this opinion to be "to the best of our
knowledge" is so stated to reflect the fact that, while during the
course of our representation of the Company nothing has come to our
attention that would lead us to believe that the statement of such
matter is inaccurate, we have made no independent factual
investigation with respect to such statement or matter.
The opinions expressed herein are subject to the effects and
limitations imposed by further legislation, administrative
regulation and judicial decisions, which effects may be prospective
or retroactive.
With respect to the opinions expressed herein, we further
advise you that we express no opinion as to any law or regulation
except for laws or regulations of the State of New Jersey or the
United States and except for the Delaware General Corporation Law.
This opinion is issued as of the date hereof and is provided by
us as counsel for the Company to you at your request and for your
exclusive use only and is not to be made available to or relied upon
by any other persons or entities without our prior written consent.
Very truly yours,
-3-
<PAGE>
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO
INDICATE THAT CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS
CONFIDENTIAL INFORMATION. THE CONFIDENTIAL PORTIONS HAVE BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
EXHIBIT 10.2
DEVELOPMENT COLLABORATION
AND
LICENSE AGREEMENT
BETWEEN
ALTEON INC.
AND
GENENTECH, INC.
DATED AS OF
DECEMBER 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 "Affiliate". . . . . . . . . . . . . . . . . . . . . 2
1.2 "AGE". . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 "AGE-Inhibitor Assay". . . . . . . . . . . . . . . . 3
1.4 "AGE-Inhibitor Candidate". . . . . . . . . . . . . . 3
1.5 "Agreement . . . . . . . . . . . . . . . . . . . . . 3
1.6 "Allocable Overhead. . . . . . . . . . . . . . . . . 3
1.7 "Alteon. . . . . . . . . . . . . . . . . . . . . . . 4
1.8 "ALT-946 . . . . . . . . . . . . . . . . . . . . . . 4
1.9 "Collaborative Budget. . . . . . . . . . . . . . . . 4
1.10 "Collaborative Plan" . . . . . . . . . . . . . . . . 4
1.11 "Combination Product . . . . . . . . . . . . . . . . 4
1.12 "Compound" . . . . . . . . . . . . . . . . . . . . . 5
1.13 "Development Costs . . . . . . . . . . . . . . . . . 5
1.14 "Development Data. . . . . . . . . . . . . . . . . . 5
1.15 "Development Programs" . . . . . . . . . . . . . . . 5
1.16 "FDA". . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 "Field". . . . . . . . . . . . . . . . . . . . . . . 6
1.18 "First Commercial Sale". . . . . . . . . . . . . . . 6
1.19 "Foreign Regulatory Authority. . . . . . . . . . . . 6
1.20 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . 6
1.21 "Genentech . . . . . . . . . . . . . . . . . . . . . 6
1.22 "Genentech Development Budget. . . . . . . . . . . . 6
1.23 "Genentech Development Plan" . . . . . . . . . . . . 6
1.24 "IND . . . . . . . . . . . . . . . . . . . . . . . . 6
1.25 "Inhibition Threshold" . . . . . . . . . . . . . . . 7
1.26 "Indication" . . . . . . . . . . . . . . . . . . . . 7
1.27 "Initial Indications". . . . . . . . . . . . . . . . 7
1.28 "Joint Steering Committee" . . . . . . . . . . . . . 7
1.29 "Licensed Know-How". . . . . . . . . . . . . . . . . 7
1.30 "Licensed Patents" . . . . . . . . . . . . . . . . . 7
1.31 "Licensed Product" . . . . . . . . . . . . . . . . . 8
1.32 "Major European Country. . . . . . . . . . . . . . . 8
1.33 "NDA . . . . . . . . . . . . . . . . . . . . . . . . 8
1.34 "Net Sales". . . . . . . . . . . . . . . . . . . . . 8
1.35 "Party". . . . . . . . . . . . . . . . . . . . . . . 9
1.36 "Person" . . . . . . . . . . . . . . . . . . . . . . 9
1.37 "Pimagedine" . . . . . . . . . . . . . . . . . . . . 9
1.38 "Pimagedine Product" . . . . . . . . . . . . . . . . 9
1.39 "Regulatory Approval . . . . . . . . . . . . . . . . 9
1.40 "Retained Rights". . . . . . . . . . . . . . . . . . 9
1.41 "Second Generation Candidate". . . . . . . . . . . . 9
1.42 "Second Generation Compound. . . . . . . . . . . . .10
1.43 "Second Generation Product". . . . . . . . . . . . .10
1.44 "Selection Date" . . . . . . . . . . . . . . . . . .10
1.45 "Stock Purchase Agreement" . . . . . . . . . . . . .10
1.46 "Sublicensee". . . . . . . . . . . . . . . . . . . .10
1.47 "Territory". . . . . . . . . . . . . . . . . . . . .10
(i)
<PAGE>
1.48 "Therapeutically Active. . . . . . . . . . . . . . .10
1.49 "Third Party". . . . . . . . . . . . . . . . . . . .11
1.50 "Third Party Manufacturer(s) . . . . . . . . . . . .11
1.51 "Valid Claim". . . . . . . . . . . . . . . . . . . .11
2. JOINT STEERING COMMITTEE. . . . . . . . . . . . . . . . . .11
2.1 Creation; Meetings . . . . . . . . . . . . . . . . .11
2.2 Activities . . . . . . . . . . . . . . . . . . . . .12
2.3 Decision-Making Responsibility . . . . . . . . . . .13
2.4 Objectives . . . . . . . . . . . . . . . . . . . . .14
2.5 Decision-Making; Deadlock. . . . . . . . . . . . . .14
3. PRODUCT DEVELOPMENT . . . . . . . . . . . . . . . . . . . .15
3.1 Collaborative Development of Pimagedine
in the United States . . . . . . . . . . . . . . . .15
3.2 Joint Determination of Which AGE-Inhibitor
Candidates to Test in AGE-Inhibitor Assay and
How to Test Them; Joint Agreement on Which
AGE-Inhibitor Candidates are Second
Generation Candidates. . . . . . . . . . . . . . . .17
3.3 Evaluation of Potential Second Generation
Compounds for Development; Evaluation
of Other Indications . . . . . . . . . . . . . . . .18
3.4 Funding for Collaborative Development of
Pimagedine and Second Generation Products. . . . . .21
3.5 General Conduct of Collaborative Development . . . .23
3.6 Genentech Development of Pimagedine and
Second Generation Products in the Territory
Outside the United States. . . . . . . . . . . . . .24
3.7 Exchange of Data . . . . . . . . . . . . . . . . . .25
3.8 Records. . . . . . . . . . . . . . . . . . . . . . .26
3.9 Disagreement Regarding Development of a
Compound for a Particular Indication . . . . . . . .26
3.10 Substitution of Compounds and Products . . . . . . .27
3.11 Restriction on Use of Stock Purchase
Proceeds; Release. . . . . . . . . . . . . . . . . .27
3.12 Right of First Negotiation for AGE-Breaker
Candidates28 . . . . . . . . . . . . . . . . . . . . .
3.13 Genentech Decision Not to Develop. . . . . . . . . .29
4. GRANT OF RIGHTS; COMMERCIALIZATION; MARKETING . . . . . . .30
4.1 License Grant. . . . . . . . . . . . . . . . . . . .30
4.2 Sublicense Rights. . . . . . . . . . . . . . . . . .30
4.3 Reservation of Rights; No Implied Licenses . . . . .30
4.4 Restrictions on Alteon . . . . . . . . . . . . . . .31
4.5 Cross-License Rights; Regulatory Filings . . . . . .32
4.6 Commercialization Obligations of Genentech . . . . .32
(ii)
<PAGE>
4.7 Marketing Obligations. . . . . . . . . . . . . . . .33
4.8 Supply of Products . . . . . . . . . . . . . . . . .34
4.9 Adverse Reaction Reporting . . . . . . . . . . . . .34
5. MILESTONE AND ROYALTY PAYMENTS. . . . . . . . . . . . . . .35
5.1 Milestone Payments . . . . . . . . . . . . . . . . .35
5.2 Royalty Payments . . . . . . . . . . . . . . . . . .36
5.3 Spillover Sales. . . . . . . . . . . . . . . . . . .37
5.4 Obligation to Pay Royalties. . . . . . . . . . . . .39
5.5 Third Party Royalties. . . . . . . . . . . . . . . .39
6. PAYMENTS AND REPORTS. . . . . . . . . . . . . . . . . . . .39
6.1 Payment. . . . . . . . . . . . . . . . . . . . . . .39
6.2 Mode of Payment. . . . . . . . . . . . . . . . . . .40
6.3 Records Retention. . . . . . . . . . . . . . . . . .40
6.4 Audit Request. . . . . . . . . . . . . . . . . . . .40
6.5 Corrective Payments; Cost of Audit . . . . . . . . .41
6.6 No Non-Monetary Consideration for Sales. . . . . . .41
6.7 Taxes; Restrictions on Payment . . . . . . . . . . .41
7. INDEMNIFICATION; INSURANCE. . . . . . . . . . . . . . . . .42
7.1 Indemnification by Genentech . . . . . . . . . . . .42
7.2 Indemnification by Alteon. . . . . . . . . . . . . .42
7.3 Complete Indemnification . . . . . . . . . . . . . .43
7.4 Conditions to Indemnification. . . . . . . . . . . .43
7.5 Insurance. . . . . . . . . . . . . . . . . . . . . .43
7.6 Survival . . . . . . . . . . . . . . . . . . . . . .44
8. PATENTS.. . . . . . . . . . . . . . . . . . . . . . . . . .44
8.1 Patent Prosecution and Maintenance . . . . . . . . .44
8.2 Patent Enforcement . . . . . . . . . . . . . . . . .46
8.3 Infringement Action by Third Parties . . . . . . . .47
8.4 Survival . . . . . . . . . . . . . . . . . . . . . .47
9. CONFIDENTIALITY AND NON-USE . . . . . . . . . . . . . . . .47
9.1 Confidentiality and Non-use; Exceptions. . . . . . .47
9.2 Authorized Disclosure. . . . . . . . . . . . . . . .48
9.3 Publications . . . . . . . . . . . . . . . . . . . .49
9.4 Third Party Information. . . . . . . . . . . . . . .49
9.5 Remedies . . . . . . . . . . . . . . . . . . . . . .49
9.6 Survival . . . . . . . . . . . . . . . . . . . . . .50
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . .50
10.1 Term . . . . . . . . . . . . . . . . . . . . . . . .50
10.2 Effect of Expiration of Term . . . . . . . . . . . .50
10.3 Insolvency or Bankruptcy . . . . . . . . . . . . . .50
10.4 Breach . . . . . . . . . . . . . . . . . . . . . . .51
(iii)
<PAGE>
10.5 Termination by Genentech . . . . . . . . . . . . . .53
10.6 Discontinuance of Sales. . . . . . . . . . . . . . .53
10.7 Additional Effects of Termination. . . . . . . . . .53
10.8 Right to Sell Stock on Hand. . . . . . . . . . . . .54
10.9 Termination of Sublicenses . . . . . . . . . . . . .54
10.10 Accrued Rights, Surviving Obligations. . . . . . . .54
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .55
11.1 Relationship of Parties. . . . . . . . . . . . . . .55
11.2 Force Majeure. . . . . . . . . . . . . . . . . . . .55
11.3 Non-solicitation of Employees. . . . . . . . . . . .55
11.4 Assignment . . . . . . . . . . . . . . . . . . . . .55
11.5 Representations and Warranties . . . . . . . . . . .56
11.6 Further Actions. . . . . . . . . . . . . . . . . . .56
11.7 Notice . . . . . . . . . . . . . . . . . . . . . . .56
11.8 Use of Names . . . . . . . . . . . . . . . . . . . .57
11.9 Public Announcements . . . . . . . . . . . . . . . .57
11.10 Costs and Expenses . . . . . . . . . . . . . . . . .57
11.11 Waiver . . . . . . . . . . . . . . . . . . . . . . .57
11.12 Inconsistency. . . . . . . . . . . . . . . . . . . .57
11.13 Compliance with Law. . . . . . . . . . . . . . . . .58
11.14 Severability . . . . . . . . . . . . . . . . . . . .58
11.15 Amendment. . . . . . . . . . . . . . . . . . . . . .58
11.16 Governing Law. . . . . . . . . . . . . . . . . . . .58
11.17 Alternative Dispute Resolution . . . . . . . . . . .58
11.18 Prevailing Party . . . . . . . . . . . . . . . . . .59
11.19 Entire Agreement . . . . . . . . . . . . . . . . . .59
11.20 Counterparts . . . . . . . . . . . . . . . . . . . .59
11.21 Descriptive Headings . . . . . . . . . . . . . . . .59
LIST OF EXHIBITS
EXHIBIT A LICENSED PATENTS
EXHIBIT B AGE-INHIBITOR CANDIDATES
EXHIBIT C SECOND GENERATION CANDIDATES
EXHIBIT D SPILLOVER SALES AUDIT CRITERIA
(iv)
<PAGE>
DEVELOPMENT COLLABORATION
AND LICENSE AGREEMENT
THIS DEVELOPMENT COLLABORATION AND LICENSE AGREEMENT (this
"Agreement") dated as of December 1, 1997 (the "Effective Date")
between Alteon Inc., a Delaware corporation, having offices at 170
Williams Drive, Ramsey, New Jersey 07446 ("Alteon"), and Genentech,
Inc., a Delaware corporation, having offices at One DNA Way, South
San Francisco, California 94080 ("Genentech"), is entered into with
reference to the following:
PRELIMINARY STATEMENTS
A. Alteon has acquired, and possesses the right to license,
worldwide proprietary rights to a range of health care related
technologies discovered at The Rockefeller University
("Rockefeller") pursuant to that certain Research and Option
Agreement dated as of March 18, 1986, as amended and assigned to
Alteon (formerly known as Geritech Inc.) pursuant to an Amendment
and Assignment of Research and Option Agreement dated as of
September 25, 1987, as amended (the "Rockefeller Agreement"), The
Picower Institute for Medical Research ("Picower") pursuant to that
certain Research and License Agreement dated as of September 5,
1991, as amended (the "Picower Agreement"), Washington University
("Washington"), pursuant to that certain Research Collaboration and
License Agreement dated as of June 2, 1995, as amended (the
"Washington Agreement"), or at Alteon, relating to the use of
Pimagedine (as defined below) and certain other compounds, including
but not limited to the Second Generation Compounds (as defined
below) for various potential applications, including certain
applications associated with diabetic complications, aging and
related conditions in humans.
B. Alteon has entered into license arrangements for certain
rights to Pimagedine and/or Second Generation Candidate(s) in
particular fields and in particular countries with each of the
following: (i) Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi")
pursuant to that certain Research Collaboration and Development
Agreement and that certain License Agreement, each dated as of June
16, 1989, as amended (collectively, the "Yamanouchi Agreements"),
(ii) Corange International Limited ("CIL") pursuant to that certain
License Agreement dated as of December 30, 1994, as amended (the
"CIL Agreement"), (iii) Eryphile BV ("Eryphile") pursuant to that
certain Clinical Testing Agreement and that certain Distribution
Agreement, each dated as of September 25, 1995, as amended (the
"Eryphile Agreements"), (iv) Applied Immunesciences, Inc. ("AIS")
pursuant to that certain License Agreement dated as of September 25,
1987 (the "AIS Agreement"), and (v) IDEXX Laboratories, Inc.
("IDEXX") pursuant to that certain License and Supply Agreement
dated as of June 17, 1997 (the "IDEXX Agreement").
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C. Alteon has entered into that certain Supply Agreement
(the "Ganes Supply Agreement") with Ganes Chemicals, Inc. ("Ganes")
dated September 12, 1997, pursuant to which Alteon has agreed to
purchase from Ganes not less than * of Alteon's bulk requirements
for Pimagedine.
D. Genentech has experienced personnel and other
capabilities conducive to the development and commercialization of
human pharmaceuticals in the Territory, including pre-clinical and
clinical testing, regulatory filings and approvals, manufacture and
supply, marketing and sales.
E. Genentech recognizes that Pimagedine and the Second
Generation Candidates represent a potentially valuable source of
potential products for development, commercialization, manufacture,
use and sale in the Field in the Territory. Genentech is interested
in obtaining an exclusive right and license to further develop and
commercialize such compounds as Licensed Products in the Field in
the Territory, including collaborative development with Alteon of
Licensed Products in the Field in the United States.
F. Genentech is interested in providing Alteon with funding
for Alteon's collaborative work with Genentech of Licensed Products
in the Field in the United States. In order to provide Alteon with
such funding, Alteon and Genentech are entering into the Stock
Purchase Agreement (as defined below), pursuant to which Genentech
shall obtain various equity interests in Alteon, and Alteon shall
sell such equity interests to Genentech.
G. Pursuant to the terms of this Agreement, Alteon and
Genentech shall also enter into the Manufacture and Supply Agreement
(as defined below), pursuant to which the Parties will arrange for
the supply of bulk and finished Products for
pre-clinical and clinical testing, regulatory approvals and
commercial sale.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the Parties contained in this Agreement, the Parties
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have those
meanings set forth in this Section 1 unless the context dictates
otherwise.
1.1 "Affiliate", with respect to any Party, shall mean any
Person controlled by, or under common control with, such Party. For
these purposes, "control" shall refer to: (i) the possession,
directly or indirectly, of the power to direct the management or
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policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, or (ii) the ownership,
directly or indirectly, of at least fifty percent (50%) of the
voting securities or other ownership interest of a Person.
1.2 "AGE" shall mean advanced glycosylation endproduct.
1.3 "AGE-Inhibitor Assay" shall mean an assay modified, as
agreed upon by the Parties under Section 3.2(a) from time to time,
from the existing assay for blocking activity developed by Alteon,
which *, as more fully described in a memorandum from Alteon to
Genentech dated as of December 1, 1997 regarding such
AGE-inhibition assay. * The Parties shall agree on how to run any
AGE-Inhibitor Assay, and how to optimize any AGE-Inhibitor Assay to
measure inhibitory activity, as provided in Section 3.2(a).
1.4 "AGE-Inhibitor Candidate" shall mean all compounds or
agents, which meet all of the following criteria: (a) Alteon owns or
controls (solely or jointly) or has in its possession such compound
or agent, and has the right to grant licenses or sublicenses as to
it, as of the Effective Date or thereafter during the term of this
Agreement; (b) Alteon has any reasonable basis to believe such
compound or agent has AGE-inhibitory activity; and (c) the Parties
agree, in accordance with section 3.2(a), to test such compound or
agent in the AGE-Inhibitor Assay, to determine its effect in
blocking the formation of AGE crosslinks. Notwithstanding the
foregoing, the Parties agree that ALT-946 is an AGE-Inhibitor
Candidate hereunder.
1.5 "Agreement" shall mean this Development Collaboration
and License Agreement, dated as of the Effective Date, including any
and all exhibits, attachments and schedules attached hereto and
incorporated herein, and any valid amendments or modifications to
any of the foregoing.
1.6 "Allocable Overhead" shall mean the costs incurred by
a Party or for its account that are attributable to such Party's
supervisory, services, occupancy costs (including utilities,
maintenance, plant management and administrative services, expenses
related to environmental protection, security and surveillance,
rent, insurance, depreciation and amortization of leasehold
improvements) corporate bonus (to the extent not charged directly
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to a department), and its payroll, information systems, human
relations or purchasing functions which are allocated to company
departments based on space occupied or headcount or another
activity-based method. "Allocable Overhead" shall not include any
costs attributable to general corporate activities, including,
without limitation, executive management, investor relations,
business development, legal affairs, or finance. "Allocable
Overhead" of a Party shall be derived in accordance with GAAP.
1.7 "Alteon" shall mean Alteon Inc., a Delaware corporation,
and its successors and permitted assigns hereunder.
1.8 "ALT-946" shall mean the compound designated by Alteon
as ALT-946.
1.9 "Collaborative Budget" shall mean any budget agreed upon
by the Parties for the Development Costs to be incurred by Alteon or
on its behalf, and to be paid for or reimbursed by Genentech
hereunder (whether directly or through purchase of stock), for the
collaborative development of any Licensed Product in the Field in
the United States.
1.10 "Collaborative Plan" shall mean any work plan agreed
upon by the Parties for the collaborative development of any
Licensed Product in the Field in the United States. For purposes of
the foregoing, the Parties have agreed upon the Initial Indications
for Pimagedine for which to seek Regulatory Approval in the United
States.
1.11 "Combination Product" shall mean any Licensed Product
that contains, in addition to any Compound, one (1) or more other
Therapeutically Active ingredients. For any Combination Product,
the Net Sales of such Combination Product in the Territory shall be
calculated by multiplying the total aggregate Net Sales of such
Combination Product, as determined under Section 1.34, by a
fraction, the numerator of which shall be the invoice price of the
Licensed Product as sold separately, and the denominator of which
shall be the aggregate invoice price of all of the Therapeutically
Active components of the Combination Product as sold separately,
including the Licensed Product. If, in a country-by-country basis,
no such separate sales are made by Genentech and/or its Sublicensee,
the Net Sales of the Combination Product in such country shall be
calculated by multiplying the total aggregate Net Sales of such
Combination Product, as determined under Section 1.34, by a
fraction, the numerator of which shall be the
fully-allocated cost of the Licensed Product alone (as determined in
accordance with GAAP, and the denominator of which shall be the
aggregate fully-allocated cost of all of the Therapeutically Active
components of the Combination Product, including the Licensed
Product (as determined in accordance with GAAP.
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1.12 "Compound" shall mean (a) Pimagedine and (b) all Second
Generation Candidates.
1.13 "Development Costs" shall mean all costs and expenses
paid or accrued by or on behalf of either Party (and in Genentech's
case, by or on behalf of any Sublicensee) for the development of and
commercialization of any Licensed Product during the term of this
Agreement, at any time from the commencement of such development of
such Licensed Product through the date of Regulatory Approval to
market and sell such Licensed Product in the Field in the Territory.
Such "Development Costs" shall include, without limitation, all
direct materials costs, direct labor costs, and costs for research
supplies and consulting contracts, associated with the following
activities: (a) conduct of pre-clinical and clinical trials of the
Licensed Product, including clinical grants, contract research
organizations, clinical laboratories, travel expenses, investigator
meetings, safety committee meetings, and the packaging, labeling,
and delivery of Licensed Product to the study sites; (b) development
of formulations of such Licensed Product for clinical testing and
commercial supply, including stability, validation and scale-up
studies, qualification lots, product quality testing, process
equipment testing, qualification and validation, and development and
validation of formulation and/or process improvements; and (c) the
preparation, filing, reviewing and obtaining of all Regulatory
Approvals from the FDA and Foreign Regulatory Authorities, including
all data and other information for such submissions, and all
regulatory, medical, product surveillance, statistical and other
support for the clinical studies and regulatory filings to seek,
obtain and maintain such Regulatory Approvals in order to market and
sell the Licensed Product in the Field in the Territory.
"Development Costs" shall include such Party's Allocable Overhead,
but shall not include any costs and expenses includable in a Party's
fully burdened cost of manufacture and supply of bulk and/or
finished Licensed Product pursuant to the Manufacture and Supply
Agreement. Each Party's Development Costs (including Allocable
Overhead) shall be derived in accordance with GAAP.
1.14 "Development Data" shall mean all relevant data,
results, studies, dossiers and other information in a Party's
possession or control during the term of this Agreement and that
relates to the development, manufacture, supply or use of any
Compound or Licensed Product which Genentech has undertaken to
develop hereunder, including, without limitation, as contained in
any studies, reports, publications and/or regulatory filing for any
Regulatory Approval.
1.15 "Development Programs" shall have the meaning set forth
in Section 3.4(a).
1.16 "FDA" shall mean the United States Food and Drug
Administration, or any successor thereto.
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1.17 "Field" shall mean all human pharmaceutical uses of all
dosage forms of all Licensed Products, other than the Retained
Rights as provided in Section 1.40. The "Field" shall include,
without limitation, the treatment of diabetes and the complications
of diabetes.
1.18 "First Commercial Sale" shall mean, in each country in
the Territory, the first sale of a Licensed Product to a Third Party
(other than for purposes of obtaining Regulatory Approvals) in
connection with the nationwide introduction of the Licensed Product
by Genentech and/or its Sublicensee in such country, following
receipt of all necessary Regulatory Approvals to market and sell the
Licensed Product in the country, and where no such Regulatory
Approval is required, the first sale of a Licensed Product in that
country in connection with the nationwide introduction of the
Licensed Product in that country.
1.19 "Foreign Regulatory Authority" shall mean any applicable
regulatory agency, department, bureau or other governmental entity
or authority of any country or regulatory jurisdiction in the
Territory outside the United States, having responsibility in such
country or regulatory jurisdiction for any Regulatory Approvals of
any kind applicable to the development, pre-clinical and/or clinical
testing, manufacture, supply, marketing and/or sale of a Licensed
Product in such country or regulatory jurisdiction.
1.20 "GAAP" shall mean generally accepted accounting
principles in the United States, consistently applied by the Party
at issue (including, in the case of Genentech, its Sublicensee).
1.21 "Genentech" shall mean Genentech, Inc., a Delaware
corporation, and its successors and permitted assigns.
1.22 "Genentech Development Budget" shall mean any budget
established by Genentech for the Development Costs to be incurred by
Genentech or on its behalf for the development of any Licensed
Product in the Field in the Territory, or any country(ies) or
jurisdiction(s) thereof, including any Collaborative Budget agreed
upon by the Parties for the United States.
1.23 "Genentech Development Plan" shall mean any plan
established by Genentech for the development of any Licensed Product
in the Field in the Territory, or any country(ies) or
jurisdiction(s) thereof, including any Collaborative Plan agreed
upon by the Parties for the United States.
1.24 "IND" shall mean any investigational new drug
application (as such terms are used in Title 21 of the United States
Code of Federal Regulations) filed with the FDA seeking Regulatory
Approval to clinically test a Licensed Product in the Field in
humans.
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1.25 "Inhibition Threshold" shall mean, with reference to any
AGE-Inhibitor Candidate as measured in any AGE-Inhibitor Assay
hereunder, in each case also measuring Pimagedine as the standard of
comparison, that the inhibitory activity of such AGE-Inhibitor
Candidate as measured in such AGE-Inhibitor Assay is at least * of
that of Pimagedine in such testing; provided, however, that if the
Parties agree, in accordance with Section 3.2(a), that the range of
error for the AGE-Inhibitor Assay as then in use is less than *, and
agree on what the range of error for such AGE-Inhibitor Assay is, in
such case the * figure herein shall be reduced to two (2) times the
agreed-upon error range for such AGE-Inhibition Assay. By way of
example only, if the Parties have agreed, under Section 3.2(a), that
the AGE-Inhibition Assay then in use has a range of error of *, then
the Inhibition Threshold for any AGE-Inhibitor Candidate as measured
in such AGE-Inhibition Assay shall equal * of the inhibitory
activity of Pimagedine as measured in such AGE-Inhibition Assay.
1.26 "Indication" shall mean the primary clinical condition,
end-point and/or disease state to be treated, and the entire patient
population which may benefit from such treatment.
1.27 "Initial Indications" shall mean: (a) the treatment of
type I diabetics with overt nephropathy;(b) the treatment of type II
diabetics with overt nephropathy; and (c) the treatment of diabetics
with end stage renal disease.
1.28 "Joint Steering Committee" shall have the meaning set
forth in Section 2.1.
1.29 "Licensed Know-How" shall mean any and all proprietary
inventions, discoveries, claims, formulae, formulations, processes,
methods, techniques, practices, trade secrets, technologies,
specifications, designs, knowledge, know-how, data, results,
pre-clinical information, clinical information, Development Data or
other proprietary information, whether or not patentable, that are
owned or controlled by Alteon (solely or jointly) or in Alteon's
possession and as to which Alteon has the right to grant licenses or
sublicenses, as of the Effective Date or thereafter during the term
of this Agreement, and that relate to any Licensed Product in the
Field in the Territory or to the development, manufacture, use or
sale of any Licensed Product in the Field in the Territory.
"Licensed Know-How" shall not include any of the foregoing that is
ascertainable from publicly available information or that is known
to or independently developed by Genentech without reference to any
proprietary information of Alteon hereunder.
1.30 "Licensed Patents" shall mean all patents and patent
applications (including inventor's certificates and utility models)
throughout the Territory, that are owned or controlled by Alteon
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(solely or jointly) or in its possession and as to which Alteon has
the right to grant licenses or sublicenses, as of the Effective Date
or thereafter during the term of this Agreement, and that relate to
any Licensed Product in the Field in the Territory or the
development, manufacture, use or sale of any Licensed Product in the
Field in the Territory. "Licensed Patents" shall also include any
and all extensions, renewals, substitutions, divisions,
continuations, continuations-in-part, divisions, patents-of-addition,
reissues, reexaminations and/or supplementary protection
certificates to any of the foregoing in the Territory, as of the
Effective Date or thereafter during the term of this Agreement.
Exhibit A attached to and incorporated into this Agreement contains
a list of all of the foregoing in existence as of the Effective
Date. During the term of this Agreement commencing with January 1,
1999, and thereafter not later than January 1 of each calendar year,
the Parties shall amend this Agreement by attaching an updated
Exhibit A. For purposes of this Agreement, as provided more
generally in Section 4.3(c), the Parties have agreed that this
Section 1.30 shall be construed to include only those patents,
patent applications, etc., that relate to Licensed Products or their
development, manufacture, use or sale in the Field in the Territory,
and do not include any patents, patent applications, etc., that
relate to products not covered by the license hereunder (including,
without limitation, any AGE breaker compounds (i.e., compounds that
break rather than block or inhibit)).
1.31 "Licensed Product" shall mean any pharmaceutical
formulation in the Field that contains any Compound as a
Therapeutically Active ingredient, the manufacture, use or sale of
which in the Territory would either: (a) be based upon, derived from
or incorporate any of the Licensed Know-How; or (b) be covered by
one or more Licensed Patents and, but for this Agreement, constitute
an infringement of a Valid Claim thereof. "Licensed Products" shall
include any and all Pimagedine Products, Second Generation Products
and Combination Products.
1.32 "Major European Country" shall mean France, Germany,
Italy, the United Kingdom or Spain.
1.33 "NDA" shall mean a new drug application or product
license application (as such terms are used in Title 21 of the
United States Code of Federal Regulations), as the case may be,
filed with the FDA seeking Regulatory Approval to market and sell a
Licensed Product for a particular indication in the Field in the
United States.
1.34 "Net Sales" shall mean, collectively, the gross invoiced
sales price of all Licensed Products sold or commercially disposed
of for value by Genentech and/or any Sublicensee to any Third Party
in the Territory, less the sum of (a) and (b), as determined under
GAAP, where: (a) is a provision for (i) trade, cash and quantity
discounts or rebates on Licensed Products (other
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than price discounts granted at the time of invoicing and included
in the determination of the gross invoiced sales price), (ii)
credits or allowances given or made for rejection or return of, and
for uncollectible amounts on, previously sold Licensed Products,
retroactive price reductions (including Medicare and similar
rebates), or for wastage replacement or indigent patient programs,
(iii) any tax, duty, tariff or other governmental charges (including
any tax such as a value added tax), other than an income tax, levied
on the sale, transportation or delivery of a Licensed Product and
borne by the seller thereof, and (iv) any charges allowed or prepaid
for freight, insurance costs or other transportation costs billed to
the final customer; and (b) is a periodic adjustment to the
provision determined in clause (a) to reflect amounts actually
incurred under clauses (a) (i), (ii), (iii) and (iv). "Net Sales"
of any Combination Product shall be determined in accordance with
Sections 1.11 and 1.34.
1.35 "Party" shall mean Alteon or Genentech and, when used
in the plural, shall mean Alteon and Genentech.
1.36 "Person" shall mean any natural person, corporation,
firm, business trust, joint venture, association, organization,
company, partnership or other business entity, or any government or
any agency or political subdivision thereof.
1.37 "Pimagedine" shall mean the compound commonly known as
pimagedine, and also known as aminoguanidine hydrochloride.
1.38 "Pimagedine Product" shall mean any Licensed Product
that contains Pimagedine as a Therapeutically Active ingredient.
1.39 "Regulatory Approval" shall mean any and all approvals
(including pricing and reimbursement approvals), licenses,
registrations or authorizations of any kind of the FDA or any
Foreign Regulatory Authority necessary for the marketing and sale,
and manufacture if necessary, of a Licensed Product in any country
or regulatory jurisdiction in the Territory. "Regulatory Approval"
in the United States shall include, without limitation, FDA approval
of an NDA.
1.40 "Retained Rights" shall mean (a) all topical dosage
forms of Licensed Products for topical applications, (b) all
inhalation dosage forms of Licensed Products for inhalation
applications, and (c) all non-human applications of Licensed
Products; provided, however, that in each case such forms and
applications comply with the other terms of this Agreement including
Section 4.4.
1.41 "Second Generation Candidate" shall mean any and all
AGE-Inhibitor Candidates that meet all of the following criteria:(a)
the AGE-Inhibitor Candidate, as run in the AGE-Inhibitor
Assay, has inhibitory activity as measured in such AGE-
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Inhibitory Assay that the Parties agree, under Section 3.2(b), is
equal to or in excess of the Inhibition Threshold; and (b) the
Parties agree, in accordance with Section 3.2(b), on such results
themselves, and that the AGE-Inhibitor Candidate is thereby a
"Second Generation Candidate" for purposes of this Agreement,
including the license grant to Genentech hereunder. Notwithstanding
the foregoing, the Parties agree that ALT-946 is a Second Generation
Candidate hereunder.
1.42 "Second Generation Compound" shall mean any compound or
agent which is a Second Generation Candidate and which the Parties
agree in writing to develop in collaboration pursuant to Section 3.3
of this Agreement, or that Genentech elects to develop pursuant to
Section 3.6 of this Agreement.
1.43 "Second Generation Product" shall mean any Licensed
Product that contains a Second Generation Compound as a
Therapeutically Active ingredient.
1.44 "Selection Date" shall mean, for the collaborative
development of a particular Compound for a particular indication in
the Field in the United States, the date by which: (a) Genentech has
selected the Compound for development for a particular indication,
except in the case of Pimagedine, which the Parties deem to be
selected for development for the Initial Indications as of the
Effective Date; and (b) the Parties have agreed upon a Collaborative
Development Plan and Collaborative Development Budget for such
development in the United States. For the development by Genentech
of a particular Compound for a particular indication in the Field in
the Territory outside the United States, the "Selection Date" shall
mean the date by which: (i) Genentech has selected the Compound for
development for a particular indication; and (ii) Genentech has
established a Genentech Development Plan and Genentech Development
Budget for such in the Territory outside the United States.
1.45 "Stock Purchase Agreement" shall mean that certain Stock
Purchase Agreement, dated of the Effective Date, between Alteon and
Genentech, including any and all exhibits, attachments and schedules
attached hereto and incorporated herein, and any valid amendments or
modifications to any of the foregoing.
1.46 "Sublicensee" shall mean any Affiliate or Third Party
who is granted sublicense rights by Genentech pursuant to Section
4.2.
1.47 "Territory" shall mean the entire world except Japan,
South Korea, the Republic of China (Taiwan), The People's Republic
of China, Israel, Bulgaria, Cyprus, Jordan and South Africa.
1.48 "Therapeutically Active" shall mean that a compound or
agent has biologic activity in vivo as a therapeutic agent, and
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shall not include any diluent, vehicle, adjuvant or other ingredient
(other than a Licensed Product) that does not have any, or has only
incidental, therapeutic properties when present alone.
1.49 "Third Party" shall mean any Person who or which is
neither a Party nor an Affiliate of a Party.
1.50 "Third Party Manufacturer(s)" shall have the meaning set
forth in Section 2.2(e).
1.51 "Valid Claim" shall mean a claim of any Licensed Patent
that (a) has not been held invalid, unpatentable or unenforceable by
final decision of a court or other governmental agency of competent
jurisdiction, which decision is unappealable or is not appealed
within the time allowed for appeal, (b) is not rendered or admitted
to be invalid or unenforceable through reissue, disclaimer or
otherwise, and (c) is not the subject of an open interference
proceeding.
2. JOINT STEERING COMMITTEE.
2.1 Creation; Meetings.
(a) Alteon and Genentech shall establish a joint
steering committee (the "Joint Steering Committee"), which shall
consist of an equal number, up to a maximum of three (3), of
representatives appointed by each of the Parties. Within thirty
(30) days after the execution of this Agreement by both Parties,
Alteon and Genentech shall determine the number of representatives
to be appointed initially to the Joint Steering Committee, and each
shall appoint its representatives to serve on the Committee. It is
anticipated that each of the Parties shall designate at least one
representative with clinical development expertise. The Joint
Steering Committee shall be co-chaired by a representative of each
of Alteon and Genentech, as designated from time to time.
Representative(s) designated by the Joint Steering Committee from
time to time shall be the Secretary or co-Secretaries of the Joint
Steering Committee. Each Party may designate appropriate personnel
who shall assist the representatives of the Parties, and the Joint
Steering Committee may create subcommittees from time to time, with
each subcommittee to consist of an equal number of members
designated by each of Alteon and Genentech. Each Party shall be free
to change its representatives on the Joint Steering Committee and/or
any subcommittee, on notice to the other Party. The Joint Steering
Committee shall exist until the expiration or termination of this
Agreement.
(b) The Joint Steering Committee will meet at least
once each calendar quarter during the term of this Agreement, or
more or less frequently as the Parties may mutually agree is
appropriate from time to time, at such dates and times as are
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agreed to by the Parties. Meetings in person shall alternate
between the offices of the Parties or such other place as may be
mutually agreed upon. The Joint Steering Committee may also convene
or be polled or consulted from time to time by means of
telecommunications or correspondence. The Secretary or
co-Secretaries of the Joint Steering Committee will prepare written
minutes of each meeting and a written record of all decisions,
whether made at a formal meeting or by other consultation. A quorum
for a meeting shall require each Party to be represented by at least
a majority of the then-designated number of representatives on the
Committee (e.g., one if each Party has two representatives, two if
each Party has at least three members).
2.2 Activities. Subject to the other terms of this
Agreement, the Joint Steering Committee shall oversee the
collaborative development by the Parties of Licensed Products in the
Field in the United States, from the commencement of any such
collaborative efforts through the date of Regulatory Approval to
market and sell any such Pimagedine Product and/or Second Generation
Product in the Field in the United States; and after any such
Regulatory Approval to market and sell in the United States, the
Parties shall continue to collaborate in complying with all
regulatory requirements of maintaining such Regulatory Approvals
(including post-marketing surveillance and adverse event reporting),
and on collaborative development by the Parties of such Licensed
Products for marketing and sale in the United States for additional
indications in the Field. The Joint Steering Committee shall also
provide the forum for Genentech to review with and update Alteon
regarding Genentech's development of Licensed Products in the Field
in the Territory outside the United States, and regarding
Genentech's marketing plans, launches of Licensed Product and other
commercialization efforts relating to all Licensed Products in the
Field in the Territory. The Joint Steering Committee's activities
shall include the following, as described in greater detail in
Sections 3 and 4.8:
(a) planning, mutual agreement, implementation and
supervision of all development of Pimagedine Products in the Field
in the United States for the Initial Indications:
(b) planning, mutual agreement, implementation and
supervision of all development of Pimagedine Products in the Field
in the United States for indications other than the Initial
Indications;
(c) planning, mutual agreement, implementation and
supervision of collaborative development of any Second Generation
Product in the Field in the United States for any potential
indications;
(d) jointly preparing, reviewing, approving and filing
any IND, NDA or other submission seeking any Regulatory Approval
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for any Licensed Product in the Field in the United States, and
coordinating any Genentech submission seeking any Regulatory
Approval for any Licensed Product in the Field in the Territory
outside the United States;
(e) planning, mutual agreement, implementation and
supervision of satisfactory arrangements for the manufacture and
supply to the Parties for their respective needs of bulk Compounds
and/or Licensed Products in finished form, pursuant to Section 4.8,
including mutual review and approval of third party manufacturers
(such approved manufacturers being, individually, a "Third Party
Manufacturer", and collectively the "Third Party Manufacturers");
(f) reviewing with Alteon of Genentech's planning,
implementation and performance of all development of Licensed
Products in the Field in the Territory outside the United States,
including all Genentech Development Budgets and Genentech
Development Plans;
(g) reviewing with Alteon of Genentech's planning,
implementation and performance of pricing, launch, marketing,
distribution and sales of Licensed Products in the Territory;
(h) providing a general mechanism for the exchange of
information, ideas and strategies with regard to the development and
commercialization of Licensed Products in the Territory; and
(i) attempting to resolve any disputes between the
Parties, subject to Sections 2.5 and 11.17.
In addition, the Joint Steering Committee shall have such other
responsibilities as the Parties may agree to assign to it from time
to time.
2.3 Decision-Making Responsibility.
(a) The Parties intend and agree that the development
and commercialization of Licensed Products in the Field in the
Territory outside the United States, and the commercialization of
Licensed Products in the Field in the United States, shall be
Genentech's responsibility, subject to the other terms of this
Agreement. Without limiting the generality of the foregoing,
Genentech shall be responsible for making all decisions, and
undertaking any actions necessary as a result of such decisions, to
be made in connection with the subject matter of Sections 2.2(f) and
(g). Genentech shall consult with and keep informed Alteon with
respect thereto as provided in Section 2.2 and the other terms of
this Agreement.
(b) The Parties intend and agree that the development
of Licensed Products in the Field in the United States shall be a
collaborative endeavor for which the Parties share responsibility,
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subject to the other terms of this Agreement. Without limiting the
generality of the foregoing, the Parties jointly shall be
responsible for making all decisions, and undertaking any actions
necessary as a result of such decisions, to be made in connection
with the subject matter of Sections 2.2(a)-(e). The Parties shall
consult with and keep each other informed with respect thereto as
provided in Section 2.2 and the other terms of this Agreement.
(c) Alteon, in the exercise of its sole discretion,
shall be responsible for making all decisions, and undertaking any
actions necessary as a result of such decisions, to be made in
connection with the manufacture and supply of Licensed Products in
bulk form and as finished Licensed Products solely for itself and
its licensees other than Genentech (including those licensees
identified in Recital B to this Agreement), whether under the Ganes
Supply Agreement (as defined in Recital C) or otherwise. Alteon
shall consult with and keep informed Genentech with respect thereto
as provided in the other terms of this Agreement.
2.4 Objectives. Decisions made by the Parties, including
by the Joint Steering Committee or any subcommittee thereof, shall
be made based on commercial reasonableness and the exercise of each
Party's prudent business judgment, all in the context of the
pharmaceutical industry. Subject to the foregoing and the other
terms of this Agreement, the Parties agree on the following general
objectives for this Agreement:
(a) To develop Compounds as Licensed Products for
marketing and sale in the Field in the Territory;
(b) To seek, as the first priority, Regulatory
Approvals to market and sell Pimagedine Products for the Initial
Indications in the United States, and thereafter to seek Regulatory
Approvals to market and sell Licensed Products for commercially
appropriate indications in the Field in the Territory, including the
United States and the Major European Countries;
(c) To conduct marketing efforts for any given Licensed
Product in any country in the Territory as soon as practicable after
receipt of all necessary Regulatory Approvals to market and sell
such Licensed Product in such country; and
(d) To take all steps desirable and practicable to
optimize profits from the Licensed Products.
2.5 Decision-Making; Deadlock. All decisions that are to be
made or actions that are to be taken by the Joint Steering Committee
under this Agreement will be made unanimously by its members with
the Alteon members cumulatively having one (1) vote and the
Genentech members cumulatively having one (1) vote. If there are
issues on which the Joint Steering Committee cannot reach agreement
because of a "deadlock" (as hereinafter defined), such
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matters will be submitted to the Chief Executive Officer of Alteon
and the Chief Operating Officer of Genentech, or their respective
designees, for prompt resolution (provided that any such designee is
an officer of the designating Party and has all necessary decision-making
authority). If such officers or their designees cannot
resolve the issue under dispute within sixty (60) days, the Parties
may elect to refer the matter for alternative dispute resolution
pursuant to Section 11.17. The term "deadlock" shall mean, with
respect to any matter that is to be considered and voted upon by the
Joint Steering Committee under this Agreement, that one (1) Party
votes in favor of such matter, and the other Party votes against
such matter, or refuses to vote or allow a quorum to be established
to vote on such matter; provided, however, that temporary
inabilities to establish a quorum of the Joint Steering Committee
due to scheduling conflicts or other factors shall not constitute a
"deadlock" hereunder.
3. PRODUCT DEVELOPMENT.
3.1 Collaborative Development of Pimagedine in the United
States.
(a) Following the Effective Date, Alteon shall continue
the development of Pimagedine in the United States, in collaboration
with Genentech, with the goal of filing and obtaining all necessary
Regulatory Approvals to market and sell Pimagedine Products in the
United States for the Initial Indications and/or other indications
selected by the Parties for development as provided in this Section
3, and Alteon shall use all commercially reasonable efforts to
develop Licensed Products which Genentech has undertaken to develop
hereunder and obtain Regulatory Approvals to allow Genentech to
market and sell such Licensed Products in the Field in the United
States. Alteon's efforts hereunder shall be subject to review and
agreement with and oversight by Genentech (through the auspices of
the Joint Steering Committee or otherwise) as provided in this
Agreement. Subject to the other terms of this Agreement, Alteon
shall be responsible for the conduct of all development of
Pimagedine in the United States, including the conduct of all
pre-clinical and clinical trials of Pimagedine Products, the preparation
of all submissions for all Regulatory Approvals of Pimagedine
Products, and the making of all manufacture and supply arrangements
(including for process development, improvements and manufacturing
scale-up) for bulk Pimagedine and/or finished dosage forms of
Pimagedine Products as needed for the conduct of all pre-clinical
and clinical trials in the United States.
(b) As part of such collaboration regarding Pimagedine
Products in the United States, the Parties (through the auspices of
the Joint Steering Committee or otherwise), shall jointly review and
agree on each of the following:
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(i) annual Collaborative Plans and annual
Collaborative Budgets for the development of Pimagedine Products in
the United States for the Initial Indications and any other
indications in the Field selected by the Parties for the United
States, as provided in this Section 3, including annual
Collaborative Plans and annual Collaborative Budgets for calendar
years 1998, 1999 and 2000, and any adjustments or modifications to
any previously agreed-upon Collaborative Plan and/or Collaborative
Budget;
(ii) joint monitoring of the clinical trials of
Pimagedine for the Initial Indications on-going as of the Effective
Date, and joint planning, implementation and monitoring of any other
clinical trial(s) of Pimagedine for any indication in the Field in
the United States, including joint review and agreement on: (A) any
protocols for any pre-clinical or clinical studies; (B) any
pre-clinical results, and with respect to any clinical results, any
interim and/or blinded results, any safety committee reviews and any
unblinded data and results, as and when any of the foregoing become
available; (C) how to address any safety data, efficacy data or
other data of concern to a Party, including by means of any
protocols or amendments, any investigator brochures or amendments or
other communications to investigators, any suggested amendments to
any informed consents or other communications to study participants,
or any study agreements or amendments; (D) whether the data and
results from any pre-clinical and clinical trials for a Pimagedine
Product merit the filing of an NDA with the FDA for such Pimagedine
Product, and if not, on what additional pre-clinical and/or clinical
trial work should be performed (if any) and the design for any such
additional trial work; (E) whether and when to file any NDA for any
Pimagedine Product in the Field in the United States; and (F) any
proposed publications of any data and results (including under
Section 8);
(iii) the Parties' respective responsibilities
for preparation, review, submission and communications to and from
the FDA regarding any NDA for any Pimagedine Product for any
indication in the United States; and
(iv) the Parties' respective responsibilities
for and the conduct of any post-marketing surveillance and safety
reporting and any other regulatory requirements to maintain
Regulatory Approvals for Pimagedine Products in the Territory.
(c) For any Pimagedine Product that receives Regulatory
Approval for marketing and sale in the United States, Genentech
shall be responsible for all marketing and sales of such approved
Pimagedine Product, including overall strategic marketing plans and
budgets, plans and budgets for pre-marketing activities, launches,
post-launch activities, post-approval studies that are not required
to maintain such Regulatory Approvals, and other commercialization
activities. Genentech's efforts hereunder shall
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be subject to review with Alteon (through the auspices of the Joint
Steering Committee or otherwise) as provided in this Agreement, and
subject to Sections 4.6 and 4.7.
3.2 Joint Determination of Which AGE-Inhibitor Candidates
to Test in AGE-Inhibitor Assay and How to Test Them; Joint Agreement
on Which AGE-Inhibitor Candidates are Second Generation Candidates.
(a) The Parties shall agree on which compounds and
agents under Section 1.4 to test in any AGE-Inhibitor Assay
hereunder, including a review promptly after the Effective Date of
Alteon's existing compounds or agents as of the Effective Date, and
thereafter as and when such additional compounds or agents arise.
The Parties shall agree on how to run any AGE-Inhibitor Assay
hereunder, on how to optimize any existing assay to measure
inhibitory activity for purposes of this Agreement, and on the
appropriate range of error for any AGE-Inhibitor Assay and the
Inhibition Threshold applicable thereunder, subject to Section 1.25.
For each AGE-Inhibitor Candidate as tested in any
AGE-Inhibitor Assay hereunder, Alteon (prior to granting any license
or sublicense rights thereto, except for grants, if any, in effect
prior to the Effective Date), shall provide Genentech with complete
results from such testing, and such other available data,
information and biologic materials (including samples of such
AGE-Inhibitor Candidate) with respect to such
AGE-Inhibitor Candidate as Genentech may reasonably request
(provided that nothing in this Section 3.2 shall require Alteon to
expend development efforts on any AGE-Inhibitor Candidate or to
provide Genentech with confidential and proprietary information or
biologic materials of a Third Party without such Third Party's
consent). Alteon has already provided some information to Genentech
hereunder, and shall continue to provide such data, information and
materials (as provided above) promptly and completely for all
AGE-Inhibitor Candidates that the Parties agree hereunder to test in any
AGE-Inhibitor Assay.
(b) The Parties shall review and agree on the results
of testing of any AGE-Inhibitor Candidate in any AGE-Inhibitor Assay
hereunder, and on whether the such AGE-Inhibitor Candidate is a
Second Generation Candidate, as provided in Section 1.41. Exhibit
B attached hereto and incorporated herein lists, as of the Effective
Date, all AGE-Inhibitor Candidates that the Parties have agreed upon
as of the Effective Date, for purposes of testing in an AGE-Inhibitor
Assay hereunder, and Exhibit C attached hereto and incorporated
herein lists, as of the Effective Date, all Second Generation Candidates
that the Parties have agreed upon as of the Effective Date. During the
term of this Agreement, commencing with January 1, 1999 (or sooner as
the Parties may agree), and thereafter not later than January 1 of each
calendar year, the Parties will amend this Agreement by attaching revised
Exhibits B & C listing all agreed-upon AGE-Inhibitor Candidates for testing
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hereunder and all agreed-upon Second Generation Candidates hereunder,
through such date.
(c) In the event of any dispute between the
Parties regarding the matters covered by this Section 3.2, the Joint
Steering Committee, acting in good faith, shall reach mutual
agreement thereon, subject to the other terms of this Agreement
including Sections 2.5 and 11.17.
3.3 Evaluation of Potential Second Generation Compounds for
Development; Evaluation of Other Indications.
(a) Promptly after the Effective Date of this
Agreement, Genentech shall commence preliminary review of ALT-946 so
as to advise Alteon whether or not Genentech believes ALT-946
represents a suitable candidate for continued development by Alteon
as a potential Second Generation Product for joint development and
commercialization under this Agreement.
(b) Within ninety (90) days after all data from at
least one (1) of the on-going clinical trials of Pimagedine for an
Initial Indication under Section 1.27(a) or (b) become available to
the Parties, Genentech and Alteon shall review, as provided in this
Section 3.3, then-agreed-upon Second Generation Candidates for
potential development and commercialization under this Agreement,
with the goal of selecting at least one (1) Second Generation
Compound for development and commercialization under this Agreement.
Genentech and Alteon shall mutually agree on whether to select any
Second Generation Compound(s) for collaborative development with
Alteon in the United States pursuant to this Agreement, and
Genentech shall select any Second Generation Compound(s) for
development in the Territory outside the United States, subject to
review with Alteon as provided in Section 3.6.
(c) The selection of any Second Generation Compound(s)
for development hereunder, including but not limited to ALT-946,
shall entail the following determinations by Genentech (in
collaboration with Alteon for the United States):
(i) review of all pre-clinical data available for
the Second Generation Candidate;
(ii) the preparation of a target product profile
(the "Profile") for each Second Generation Candidate under
consideration, which shall include a description of the Second
Generation Candidate itself and an assessment of the following
criteria by the Parties (for collaborative development in the United
States) and by Genentech (for development in the Territory outside
the United States): *
* Confidential Treatment Requested
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*
(d) Upon completion of the review under Sections 3.3(b)
and (c), if the Parties agree to develop such Second Generation
Product in the Field in the United States, the Parties shall reach
agreement on a Collaborative Plan and Collaborative Budget for such
development of the Second Generation Product in the United States,
in accordance with this Section 3. If Genentech determines to
develop such Second Generation Compound in the Field in the
Territory outside the United States, it shall establish a Genentech
Development Plan and Genentech Development Budget therefor. Any
such development in the Territory shall be deemed to have commenced
hereunder as of the Selection Date (as defined in Section 1.44).
(e) Commencing as of the Selection Date, Genentech
shall provide funding to Alteon for the collaborative development of
any Second Generation Compound in the United States selected
pursuant to this Section 3. As provided in Sections 3.3(d) and
3.4(d), Genentech shall fund all Development Costs deemed reasonably
necessary by the Joint Steering Committee to obtain Regulatory
Approval to market and sell such Second Generation Product in the
United States.
(f) If, as contemplated under Section 3.2, the Parties
have reviewed the available information and agreed that a particular
AGE-Inhibitor Candidate is a Second Generation Candidate, and if at
least ninety (90) days have passed after all data from at least one
of the on-going clinical trials of Pimagedine for an Initial
Indication under Section 1.27(a) or (b) has become available to the
Parties, as contemplated under Section 3.3(b), thereafter Alteon may
inquire of Genentech as to Genentech's interest in developing such
Second Generation Candidate collaboratively in the United States for
any Indication(s) in the Field (subject to the Parties' mutual
agreement on a Collaborative Plan and Collaborative Budget therefor,
as provided in this Section 3), and/or may inquire as to Genentech's
interest in developing such Second Generation Candidate in the
Territory outside the United States for any Indication(s) in the
Field. In such event Genentech agrees to inform Alteon in good
faith within ninety (90) days thereafter whether Genentech has
decided to undertake any such development. If Genentech has decided
affirmatively not to develop such Second Generation Candidate for
any Indications in the Field whatsoever, or for any particular
Indication(s), Alteon shall be
* Confidential Treatment Requested
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entitled to do so, subject however to the other terms of this
Agreement (including Sections 4.3 and 4.4 for any Indication outside
the Field and/or country or jurisdiction outside the Territory, and
Section 3.9 for any Indication in the Field in the Territory).
Prior to when all data from at least one of theon-going clinical trials
of Pimagedine for an Initial Indicationunder Section 1.27(a) or (b) has
become available to the Parties, as contemplated under Section 3.3(b),
Alteon shall be free to make inquiries of Genentech as described above,
but without any potential Alteon development right as provided above.
(g) The provisions of this Section 3.3 shall also apply
with respect to any evaluation by the Parties of the potential
development of Pimagedine in the United States for indications in
the Field other than the Initial Indications, including the
indications of micro-albuminuria and stroke. As regards the
potential indication of stroke, Genentech agrees promptly to
commence evaluation of Pimagedine (when supplied to it by Alteon) in
Genentech's proprietary animal models and assays for stroke.
(h) If at least ninety (90) days have passed after all
data from at least one of the on-going clinical trials of Pimagedine
for an Initial Indication under Section 1.27(a) or (b) has become
available to the Parties, as contemplated under Section 3.3(b),
thereafter Alteon may inquire of Genentech as to Genentech's
interest in developing Pimagedine collaboratively in the United
States for any Indication(s) in the Field other than the Initial
Indications (subject to the Parties' mutual agreement on a
Collaborative Plan and Collaborative Budget therefor, as provided in
this section 3), and/or may inquire as to Genentech's interest in
developing Pimagedine in the Territory outside the United States for
any Indication(s) in the Field other than the Initial Indications.
In such event Genentech agrees to inform Alteon in good faith within
ninety (90) days thereafter whether Genentech has decided to
undertake any such development. If Genentech has decided
affirmatively not to develop Pimagedine for any Indications in the
Field other than the Initial Indications, or for any particular
other Indication(s), Alteon shall be entitled to do so, subject
however to the other terms of this Agreement (including Sections 4.3
and 4.4 for any Indication outside the Field and/or country or
jurisdiction outside the Territory, and section 3.9 for any
Indication in the Field in the Territory). Prior to when all data
from at least one of the on-going clinical trials of Pimagedine for
an Initial Indication under Section 1.27(a) or (b) has become
available to the Parties, as contemplated under Section 3.3(b),
Alteon shall be free to make inquiries of Genentech as described
above, but without any potential Alteon development right part as
provided above.
(i) If * and if by
* Confidential Treatment Requested
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such deadline Genentech has not decided, as a result of the review
described above in this Section 3.3, to develop at least one (1)
Second Generation Product in the Field in the Territory (either
collaboratively in the United States with Alteon, subject to the
Parties' agreement on the applicable Collaborative Plan and
Collaborative Budget, or on its own in the Territory outside the
United States, under a Genentech Development Plan and Genentech
Development Budget), then in such event and effective as of the date
of such deadline, Alteon shall have the right to develop one (1)
Second Generation Candidate for one (1) Indication, provided that
such Indication is in compliance with Section 4.4 of this Agreement.
Subject to Section 4.4 and the confidentiality provisions of Section
9, Alteon shall be entitled to undertake such development on its own
(with or without Third Parties), provided that it undertakes such
development within one (1) year as set forth in Section 3.13, and
Genentech shall have no license rights to such Second Generation
Product for such Indication in the Territory (notwithstanding
anything contained in Sections 3.3(f) or 3.9 of this Agreement). If
Alteon has undertaken such development on its own rather than with
a Third Party, Alteon agrees to first offer such Second Generation
Candidate for such Indication to Genentech pursuant to Section
3.3(f).
3.4 Funding for Collaborative Development of Pimagedine and
Second Generation Products.
(a) In connection with the collaborative development
of any Pimagedine Product and/or any Second Generation Compound in
the Field in the United States hereunder (collectively, the
"Development Programs"), for each calendar year of each such
collaboration the Joint Steering Committee shall prepare and reach
agreement on (i) the Collaborative Plan for such calendar year,
including a detailed description of the specific research and
development activities to be undertaken, a reasonably detailed
description of the goals and scope of such Development Programs, and
a projected timetable for the completion of tasks and the
achievement of milestones, and (ii) the Collaborative Budget for
Development Costs for such calendar year, including a detailed
breakdown thereof for each Compound and indication. The Joint
Steering Committee may revise any Collaborative Plan and/or
Collaborative Budget for any calendar year at any time or from time
to time. The Parties agree that all Alteon's "incremental costs" to
comply with any insurance coverage requirement imposed upon it under
Section 7.5 (or otherwise by joint decision of the Joint Steering
Committee) shall be considered a Development Cost to be included in
the Collaborative Budget for the applicable calendar year. For
purposes of the preceding sentence, "incremental costs" shall mean
all costs payable by Alteon for insurance coverage which supplements
or exceeds the types or amounts of insurance coverage Alteon had in
effect immediately prior to the Effective Date of this Agreement.
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(b) Genentech shall fund up to $48 million worth of
Development Costs for the development of Pimagedine Products in the
United States for the Initial Indications, in accordance with
agreed-upon Collaborative Plans and Collaborative Budgets (or any
lesser amount the Parties may agree to fund hereunder for such
development). The Parties intend that such funding shall cover all
agreed-upon Development Costs to file for Regulatory Approvals to
market and sell Pimagedine Products in the United States for the
Initial Indications, and also to cover Phase III trials of
Pimagedine Products for other indications agreed upon by the Parties
under Section 3.3, including micro-albuminuria and/or stroke. The
amount of Development Costs under such agreed-upon Collaborative
Budget for each calendar year shall be funded to Alteon as purchases
by Genentech of the Series H Preferred Stock (as defined in the
Stock Purchase Agreement) in quarterly installments, subject to (i)
adjustment for agreed-upon modifications (if any) to such
Collaborative Budget, (ii) reduction in the amount of such funding
by the amount of unused funding (if any) Alteon can allocate from
any prior quarter into the next quarter, whether because of
modifications in the Collaborative Plan or Collaborative Budget or
otherwise, and (iii) the other terms of this Agreement and the Stock
Purchase Agreement. Alteon shall apply all funds received from
Genentech hereunder only to fund or reimburse work under agreed-upon
Collaborative Plans and Collaborative Budgets for such Pimagedine
Product. Genentech shall be responsible for all of its own
Development Costs hereunder for development of Licensed Products in
the Territory outside the United States, and for paying Alteon in
cash for all Development Costs (if any) incurred by Alteon in
accordance with agreed-upon Collaborative Plans and Collaborative
Budgets in excess of the maximum of $48 million in proceeds to be
received from Genentech under the Stock Purchase Agreement for sales
of Series H Preferred Stock (as defined therein) to Genentech.
Genentech's failure to purchase Series H Preferred Stock at the
times called for under the Stock Purchase Agreement or to make
timely payment to Alteon of Development Costs in excess of the
maximum of $48 million worth of such stock to be purchased
thereunder shall be considered a material breach of this Agreement.
(c) Notwithstanding Sections 3.4(a) and (b), in
connection with any collaborative development of Pimagedine Products
in the United States, in the event that either: (i) the Parties
agree (through the Joint Steering Committee or otherwise) that
Genentech rather than Alteon should undertake any work under an
agreed-upon Collaborative Plan and Collaborative Budget; or (ii) the
Joint Steering Committee determines that Alteon has failed
adequately to perform any work to be performed by it under any
agreed-upon Collaborative Plan and Collaborative Budget, and
Genentech performs such work instead; then in either case Alteon
shall receive (or have received) funding from Genentech through
purchases of Series H Preferred Stock to cover such Development
Costs incurred by Genentech, and Alteon shall reimburse Genentech
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for Genentech's Development Costs in cash and/or by repurchasing
Series H Preferred Stock from Genentech as provided in the Stock
Purchase Agreement.
(d) With respect to the collaborative development of
Second Generation Products in the United States, the agreed-upon
Collaborative Budget amount for each calendar year shall be paid to
Alteon in equal quarterly installments in advance on the first day
of the first, fourth, seventh, and tenth month of each year, subject
to (i) adjustment for agreed-upon modifications (if any) to such
Collaborative Budget, (ii) reduction in the amount of such funding
by the amount of unused funding (if any) Alteon can allocate from
any prior quarter into the next quarter, whether because of
modifications in the Collaborative Plan or Collaborative Budget or
otherwise, and (iii) the other terms of this Agreement; provided,
however, that the amounts to be paid to Alteon shall not exceed the
Collaborative Budget for such year unless agreed to by the Joint
Steering Committee. Alteon shall apply funds received from
Genentech from the Stock Purchase Agreement for the Series H
Preferred Stock (as defined in the Stock Purchase Agreement) to any
collaborative development of Second Generation Products only as
provided in Section 3.11. Alteon shall apply all funds received
from Genentech hereunder only to fund or reimburse the work under
the agreed-upon Collaborative Plan and Collaborative Budget for such
Second Generation Product. Genentech's failure to make timely
payment to Alteon of Development Costs under the agreed-upon
Collaborative Budget shall be considered a material breach of this
Agreement.
3.5 General Conduct of Collaborative Development. In
connection with any collaborative Development Programs for
Pimagedine Products and/or the Second Generation Products in the
United States, Alteon and, to the extent that the Joint Steering
Committee allocates responsibilities in the Development Programs to
Genentech, Genentech (subject to Section 3.4(c)) shall:
(a) undertake the Development Program, as set forth in
any applicable Collaborative Plan and Collaborative Budget, and such
other activities which, from time to time, the Joint Steering
Committee decides are necessary or desirable for the commercial
success of the Development Programs;
(b) use all reasonable efforts and proceed diligently
to perform the work set out for such Party to perform in the
Collaborative Plan and Collaborative Budget, including, without
limitation, by using personnel with sufficient skills and
experience, together with sufficient facilities, to carry out its
obligations and to accomplish the objectives of the Development
Programs;
(c) conduct the Development Programs in good scientific
manner, and in compliance in all material respects with
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all requirements of applicable laws, rules and regulations, and all
other requirements of any applicable good laboratory practices to
attempt to achieve its objectives efficiently and expeditiously;
(d) within thirty (30) days following the end of each
quarter during the term of each Development Program, furnish the
Joint Steering Committee with written reports summarizing all
activities thereunder during such quarter;
(e) within thirty (30) days following the end of each
six-month period during the term of any of each Development Program
and within thirty (30) days following the expiration or termination
of each Development Program, furnish the Joint Steering Committee
with fully-detailed, written reports on all activities under such
Development Program during such six-month period or the term of such
Development Program, as the case may be; and
(f) allow representatives of the other Party, upon
reasonable notice and during normal business hours, to visit the
facilities where any Development Program is being conducted, and
consult informally, during such visits and by telephone, with
personnel performing work on any Development Programs, subject to
the other terms of this Agreement including Section 9.
3.6 Genentech Development of Pimagedine and Second
Generation Products in the Territory Outside the United States.
(a) Following the Effective Date, Genentech shall have
responsibility for all development of Pimagedine in the Territory
outside the United States, with the goal of filing and obtaining all
necessary Regulatory Approvals to market and sell Pimagedine
Products and Second Generation Products selected by Genentech under
Section 3.3 in the Territory outside the United States for the
Initial Indications and/or other indications selected by Genentech
under Section 3.3. Genentech's efforts hereunder shall be subject
to review with Alteon (through the auspices of the Joint Steering
Committee or otherwise) as provided in this Agreement. Subject to
the other terms of this Agreement, Genentech shall be responsible
for the conduct of all development of Pimagedine Products and Second
Generation Products for all indications in the Field in the
Territory outside the United States, including the conduct of all
pre-clinical and clinical trials of Pimagedine Products, the
preparation of all submissions for all Regulatory Approvals of
Pimagedine Products, the making of all manufacture and supply
arrangements (including for process development, improvements and
manufacturing scale-up) for bulk Pimagedine and/or finished dosage
forms of Pimagedine Products as needed for the conduct of all
pre-clinical and clinical trials in the Territory outside the United
States, and the coordination of all interactions between the FDA and
Foreign Regulatory Authorities regarding the registrational
dossier(s) and other filings for Regulatory Approvals for the
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development and commercialization of Licensed Products in the
Territory outside the United States.
(b) When the Parties have received the results of the
currently on-going clinical trials of Pimagedine in all of the
Initial Indications, and have agreed that such results indicate that
a Pimagedine Product, if filed for Regulatory Approval, should
receive all Regulatory Approvals for market and sale in the United
States for all of the Initial Indications, Genentech shall commence
determining which Compounds should be developed for which
indications in which countries outside the United States, as
provided in Section 3.3 and the other terms of this Agreement.
(c) Genentech shall keep Alteon updated regularly
(through the auspices of the Joint Steering Committee or otherwise),
with Genentech's development activities hereunder, including the
conduct of pre-clinical and clinical trials.
(d) For any Pimagedine Product that receives Regulatory
Approval for marketing and sale in the Territory outside the United
States, Genentech shall be responsible for all marketing and sales
of such approved Pimagedine Product, including overall strategic
marketing plans and budgets, plans and budgets for
pre-marketing activities, launches, post-launch activities,
post-approval studies (whether or not required to maintain such
Regulatory Approvals), and other commercialization activities.
Genentech's efforts hereunder shall be subject to review with Alteon
(through the auspices of the Joint Steering Committee or otherwise)
as provided in this Agreement.
3.7 Exchange of Data.
(a) Within thirty (30) days after the execution of this
Agreement, Alteon shall deliver to Genentech, as Genentech may
request, copies of all Development Data relating to Pimagedine and
Second Generation Candidates which Alteon has available as of such
date and has not previously delivered to Genentech.
(b) During the term of this Agreement, as long as
Genentech has a license under this Agreement to Pimagedine or any
Second Generation Product to which such Development Data relates,
(i) each Party shall provide to the other Party any Development Data
that is generated or developed by or on behalf of such Party from
time to time relating to Pimagedine and the Second Generation
Compound which the Parties have selected for development pursuant to
this Agreement, as such Development Data is generated or developed;
and (ii) each Party shall deliver to the other Party all Development
Data relating to the Compounds or any Licensed Products which
Genentech has undertaken to develop hereunder promptly after such
Development Data become available. Each Party shall maintain such
Development Data delivered to it hereunder in confidence in
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accordance with Section 9 and shall not use such records or
information except as permitted by this Agreement.
3.8 Records.
(a) Each Party shall maintain records, in sufficient
detail and in good scientific manner, which shall be complete and
accurate and shall fully and properly reflect all work done and
Development Data resulting therefrom in the performance of the
Development Programs (including all data in the form required under
all applicable laws and regulations) for purposes of conducting and
concluding the Development Programs and making all required filings
with and reports to the applicable regulatory authorities.
(b) Each Party shall have the right, during normal
business hours and upon reasonable prior notice, to inspect and copy
all such records of the other Party to the extent reasonably
required for the performance of its obligations under this
Agreement. Each Party shall maintain such records and information
contained therein in confidence in accordance with Section 9 and
shall not use such records or information except as permitted by
this Agreement.
3.9 Disagreement Regarding Development of a Compound for a
Particular Indication. Upon conclusion of any evaluation under
Section 3.3 and provided that the first Licensed Product has
received all Regulatory Approvals to market and sell for an
Indication in the Field in the Territory, thereafter if the Parties
disagree regarding whether to pursue the development of Pimagedine
or a Second Generation Candidate, as the case may be, for
particular Indication(s) in the Field in the Territory or for any
Indications in the Field in the Territory (as such disagreement is
evidenced, in the case of collaborative United States development,
by the vote of each Party's representatives on the Joint Steering
Committee, and in the case of Genentech's development outside the
United States, by notice from one Party to the other), then they
shall each have the rights set forth herein. In the event of such
disagreement, the Party that desires to proceed with the development
of such Compound for such Indication(s) (the "Electing Party") may,
at its sole election, proceed with the development of such Compound
for such Indication(s)(the "Elected Product"), including the conduct
of all clinical trials necessary to obtain approval from the
appropriate governmental authorities in any country(ies) in the
Territory, at the Electing Party's sole cost and expense. In such
event, Genentech's license for any such Elected Product under this
Agreement shall continue, whether the Electing Party is Alteon or
Genentech, and Genentech shall have the rights to make, have made,
use and sell such Elected Product for such Indication(s) as provided
in Section 4.1, but the royalties to be paid on Net Sales of such
Elected Product by Genentech and its Sublicensees for such
Indication(s) pursuant to Section 5.2 shall be increased or reduced
as follows:
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(a) If Alteon is the Electing Party, then the royalty
rate applicable to the Net Sales of such Elected Product for such
Indication(s) throughout the Territory, based on an audit performed
by a market research organization selected by the Joint Steering
Committee, shall be increased by fifty percent (50%); and
(b) If Genentech is the Electing Party, then the
royalty rate applicable to the Net Sales of such Elected Product for
such Indication(s) throughout the Territory, based on an audit
performed by a market research organization selected by the Joint
Steering Committee, shall be reduced by fifty percent (50%).
3.10 Substitution of Compounds and Products. In the event
that, prior to obtaining all Regulatory Approvals for the marketing
and sale of the first Pimagedine Product in the United States for
all of the Initial Indications, Genentech terminates its license for
Pimagedine pursuant to Section 10.5, but does not terminate this
Agreement in its entirety thereunder, then Alteon shall be required
to use the net proceeds Alteon receives from Genentech pursuant to
the Stock Purchase Agreement for the Series H Preferred Stock (as
such term is defined in the Stock Purchase Agreement) for any
Development Program for Second Generation Compounds as the Parties
may collaboratively conduct in the United States under Section 3.
3.11 Restriction on Use of Stock Purchase Proceeds; Release.
(a) Except as provided in this Section 3.11, Alteon
shall use the amount equal to the net proceeds that it receives from
Genentech pursuant to the Stock Purchase Agreement for the Series H
Preferred Stock (as such term is defined in the Stock Purchase
Agreement) solely for Development Costs in connection with or
relating to Pimagedine and/or Pimagedine Products, or for Second
Generation Compounds and/or Second Generation Products as provided
in Section 3.10.
(b) After obtaining all Regulatory Approvals for the
marketing and sale of the first Pimagedine Product in the United
States for the Initial Indications, and providing that all other
work under Collaborative Plans and Collaborative Budgets agreed upon
to date has been completed or is fully funded, the restrictions
imposed by Sections 3.10 and 3.11(a) shall terminate, and Alteon
shall be permitted to retain and use any unused proceeds that it
receives from Genentech pursuant to the Stock Purchase Agreement
without any restriction or obligation.
(c) In the event that Genentech notifies Alteon that
Genentech is terminating the Agreement in its entirety under Section
10.5, then after the delivery of such notice Alteon must elect
whether to: (i) continue any Development Programs during the six
(6)-month termination notice period, in which case Alteon may expend
proceeds from Genentech in accordance with previously agreed
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upon Collaboration Budgets (as the Parties may agree to modify them
at such time); or (ii) to close down any Development Programs during
the six (6)-month termination notice period, in which case Alteon
may expend proceeds from Genentech in accordance with an agreed upon
budget for winding down such Development Programs. To the extent
that the total proceeds that Alteon receives from Genentech pursuant
to the Stock Purchase Agreement and in cash under Section 3.4(c) are
insufficient to cover the budgeted costs under clauses (i) or (ii),
Genentech shall promptly pay Alteon the remaining balance in cash,
upon Alteon's delivery of a statement reflecting the existence of
such balance and demand for such payment. To the extent that the
total proceeds that Alteon receives from Genentech pursuant to the
Stock Purchase Agreement and in cash pursuant to Section 3.4(c)
exceed the budgeted costs under clauses (i) or (ii), Alteon shall
promptly refund the amount of such excess to Genentech, in cash or
by repurchase of Series H Stock as provided in the Stock Purchase
Agreement. In the event that Genentech notifies Alteon that
Genentech is terminating this Agreement under Section 10.4(a), then
after the delivery of such notice, Genentech shall have no further
funding obligations to Alteon, under agreed upon Collaborative
Budgets or otherwise (except for accrued obligations under agreed-upon
Collaborative Budgets, as provided in Section 10.10), unless Alteon
shall have cured its breach prior to any effective termination by
Genentech under Section 10.4(a).
3.12 Right of First Negotiation for AGE-Breaker Candidates.
(a) Alteon may from time to time conduct research and
development involving AGE-breaker candidates (which, for purposes of
this Section 3.12, shall not include any AGE-Inhibitor Candidates).
If, during the term of this Agreement until the earlier of * Alteon
becomes interested in licensing any such AGE-breaker candidate(s)(or
a class of AGE-breaker candidates) to a Third Party(ies) for
exploitation in the Field, it shall first give Genentech the first
opportunity to negotiate for such license as described in this
Section 3.12. However, nothing in this Section 3.12 shall preclude
Alteon from continuing discussions it has already initiated with
Third Parties prior to the Effective Date of this Agreement;
provided, however, that Alteon shall not enter into any agreement as
a result of such current discussions without first offering such
rights to Genentech hereunder.
(b) Alteon shall notify Genentech of Alteon's interest
in negotiating such license, describing in reasonable detail the
technology and potential scope of rights available, and shall
provide Genentech within thirty (30) days after Alteon's original
notice hereunder with all information, including technical,
scientific and other information, regarding such AGE-breaker
candidate(s)(or such class of AGE-breaker candidates) then
* Confidential Treatment Requested
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currently available and owned by Alteon or in its possession or
control which Alteon is not then contractually or otherwise
prohibited from providing to Genentech. Within such thirty (30)
days Genentech shall notify Alteon if Genentech is interested in
negotiating for the rights to such AGE-breaker candidate(s)(or such
class of AGE-breaker candidates) as provided in this Section 3.12.
If Genentech has notified Alteon that it has such interest, then,
for a period of not more than ninety (90) days following Genentech's
notice to Alteon, the Parties agree to negotiate in good faith to
attempt to reach agreement on the terms of a Genentech license in
the Field relating to the AGE-breaker candidate(s)(or such class of
AGE-breaker candidates).
(c) If the Parties do not reach agreement on the terms
of a Genentech license in the Field relating to such AGE-breaker
candidate(s)(or such class of AGE-breaker candidates) during the
time called for under Section 3.12(b), Alteon shall be free to
negotiate with others and to grant rights to such AGE-breaker
candidate(s)(or such class of AGE-breaker candidates) on terms and
conditions that are not, in the exercise of reasonable and good
faith discretion by Alteon, more favorable to the other party than
the best offer, if any, previously made in writing by Genentech.
If, after twelve (12) months following the end of the ninety
(90)-day negotiation period set forth above, Alteon has not reached
an agreement with another party for such AGE-breaker candidate(s)(or
such class of AGE-breaker candidates), then Alteon shall notify
Genentech, and the provisions of Sections 3.12(b) and 3.12(c) shall
apply to the Parties again unless Genentech notifies Alteon that
Genentech is no longer interested in negotiating with Alteon for
rights to such AGE-breaker candidate(s)(or such class of AGE-breaker
candidates) in the Field.
(d) In addition, in the event additional findings with
respect to such AGE-breaker candidate(s)(or such class of
AGE-breaker candidates) presented to Genentech, are developed during
the period following Alteon's original notice to Genentech pursuant
to Section 3.12(b), Alteon shall give Genentech the opportunity to
review such additional data; provided, however, that the requested
information is available and is owned by Alteon or in its possession
or control and Alteon is not then contractually or otherwise
prohibited from providing such information to Genentech.
3.13 Genentech Decision Not to Develop. From time to time
during the term of this Agreement, Genentech shall have the
affirmative good faith obligation, upon Alteon's request, promptly
to notify Alteon whenever Genentech has determined that it does not
wish to develop, or to proceed with the continued development,
marketing or sale of, any particular Compound or Indication in any
Country in the Territory, so that Alteon, in the exercise of its
discretion, may elect to do so independently of Genentech, subject
however to the other terms of this Agreement (including Sections 4.3
and 4.4 for any Indication outside the Field and/or country or
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jurisdiction outside the Territory, and Section 3.9 for any
Indication in the Field in the Territory). If Alteon exercises any
of its rights under this Agreement to take over development of
Licensed Products (as defined in this Agreement) inside the Field
and/or the Territory or under Section 3.3(i), Alteon must commence
such development within one (1) year thereafter or lose such right
to do so.
4. GRANT OF RIGHTS; COMMERCIALIZATION; MARKETING.
4.1 License Grant. Subject to the terms and conditions of
this Agreement, including, without limitation, Section 4.3, Alteon
hereby grants to Genentech an exclusive (including as to Alteon),
right and license, under the Licensed Patents and the Licensed Know-How,
to use and sell Licensed Products in the Field throughout the
Territory, and a co-exclusive license (together with Alteon) for
each Party to make and have made Licensed Products in the Field in
the Territory.
4.2 Sublicense Rights.
(a) Genentech shall have the right to grant sublicenses
to its Affiliates and Third Parties of the license granted to
Genentech herein, provided that: (i) Genentech shall submit to
Alteon all proposed sublicenses to Sublicensees that are Third
Parties for approval by Alteon, which approval shall not be
unreasonably withheld; (ii) Genentech shall deliver a copy of all
sublicenses to Affiliates of Genentech within ten (10) days after
the full execution thereof (but shall not require Alteon's approval
or consent before entering into any such sublicense with any
Affiliate hereunder); (iii) Genentech shall guarantee and be
responsible for the making of all payments due, and the making of
reports under this Agreement, by reason of Net Sales of any Licensed
Products by its Sublicensees, and their compliance with all
applicable terms of this Agreement; and (iv) each Sublicensee of
Genentech shall agree in writing to keep books and records and
permit Alteon to review such books and records pursuant to
Sections 6.3, 6.4 and 6.5 and to observe all other terms of this
Agreement applicable to Genentech.
(b) In the event of a breach by a Sublicensee in the
observance of applicable terms of this Agreement, Alteon shall be
entitled to proceed against either such Sublicensee or directly
against Genentech, as Alteon may determine in its sole discretion,
to enforce this Agreement.
4.3 Reservation of Rights; No Implied Licenses.
(a) Genentech acknowledges and agrees that, subject to
Section 4.4, Alteon retains (i) all rights to the Compounds outside
the Field; (ii) all rights to the Compounds in all
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countries outside of the Territory; and (iii) all Retained Rights
(as provided in Section 1.40), whether or not in the Territory.
(b) The license granted by Alteon in Section 4.1 is
exclusive to Genentech, except:
(i) that Alteon reserves the rights granted by
Alteon to Rockefeller, Picower, Washington, Yamanouchi, CIL,
Eryphile, AIS and IDEXX or reserved by Rockefeller, Picower,
Washington, Yamanouchi, CIL, Eryphile, AIS or IDEXX pursuant to the
Rockefeller Agreement, the Picower Agreement, the Washington
Agreement, the Yamanouchi Agreements, the CIL Agreement, the
Eryphile Agreements, the AIS Agreement and the IDEXX Agreement,
respectively; provided, however, that during the term of this
Agreement, (A) Alteon shall not modify any such agreement in any
manner that would create a conflict with this Agreement or the Stock
Purchase Agreement, and (B) Alteon shall notify Genentech in the
event of amendment or termination of any agreement identified in
Preliminary Statement A, or any other agreement (if any) which
Alteon reasonably believes to have a material effect on the rights
or responsibilities of Genentech under this Agreement;
(ii) that Alteon reserves the right, on behalf of
itself and its research and development partners, to use the
Licensed Know-How and the Licensed Patents, without cost, for
internal research and development purposes, subject to the other
terms of this Agreement including Sections 4.1, 4.4 and 9; and
(iii) to the extent that Alteon's right to grant such
exclusive license is limited by the provisions of 35 U.S.C.
Section 201 et seq. and the regulations promulgated thereunder.
(c) Except as otherwise expressly provided in this
Agreement, neither Party shall acquire any rights to any patent
applications, patents, know-how or other proprietary technology of
the other Party, including any developed under this Agreement, and
any such rights afforded hereunder shall be limited to the express
scope of the license grant.
4.4 Restrictions on Alteon. Notwithstanding any of the
rights retained by Alteon pursuant to Section 4.3, including,
without limitation, the Retained Rights, for so long as Genentech
has a license under this Agreement, Alteon (on its own or with any
Affiliate or Third Party) shall not develop, market or sell any
product containing Pimagedine, any Pimagedine Product, any Second
Generation Candidate, any Second Generation Compound or any Second
Generation Product for the same Indication for which Genentech
(and/or its Sublicensees) has initiated plans to develop (e.g., by
preparation of a written business or strategic plan relating
thereto) or is developing, marketing or selling any Licensed Product
hereunder. The foregoing limitation shall apply with respect to any
Alteon development of any Licensed Products for any
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Indication outside the Field and/or country or jurisdiction outside
the Territory, but not to any Alteon development of any Licensed
Products for any Indication in the Field in the Territory, which
however shall be subject to the other terms of this Agreement.
4.5 Cross-License Rights; Regulatory Filings.
(a) In the event that, during the term of this
Agreement, either Party develops or acquires the rights to
(including the right to license or sub-license) any new or useful
invention, process or improvement, patentable or unpatentable, that
falls within the scope of the Licensed Know-how and/or Licensed
Patents (an "Improvement"), such Party shall promptly disclose such
full and complete information relating to such Improvement to the
other Party. Each Party hereby grants the other Party a perpetual,
non-exclusive, royalty-free right and license, including the right
to grant sublicenses thereof, to use such Improvements for the
development, manufacture, use or sale of Licensed Products, in the
case of Genentech and it Sublicensees (if any) hereunder, or
products that Alteon is permitted to market and sell hereunder, in
the case of Alteon (subject to the other terms of this Agreement).
(b) Alteon shall have the right to cross-reference and
have access to any filing for Regulatory Approval filed in
connection with the development and commercialization of Licensed
Products in the Field in the Territory. Subject to Sections 4.1, 4.4
and 9, Alteon may allow any Third Party development/marketing
partner or licensee of Alteon to also have the right to
cross-reference and have access to any such filing for Regulatory
Approval, provided that such Third Party has made a corresponding
commitment to permit Alteon to grant the corresponding right to
Genentech with respect to any filing for Regulatory Approval by
Alteon and/or such Third Party for any product that would be
considered a Licensed Product hereunder.
4.6 Commercialization Obligations of Genentech.
(a) Genentech shall use all commercially reasonable
efforts to develop Licensed Products and obtain Regulatory Approvals
as necessary to market and sell Licensed Products in the Territory.
Thereafter, Genentech shall use commercially reasonable efforts to
market and sell Licensed Products in the Territory, and shall be
responsible for all marketing, advertising, promotional and launch
expenses associated with such efforts, as provided in greater detail
in Sections 2 and 3.
(b) For purposes of this Section 4.6, all commercially
reasonable efforts shall initially be deemed to be a launch effort
(including, without limitation, post-launch studies if necessary to
maintain Regulatory Approvals, sales force and marketing budget)
comparable to that of any other product(s) of comparable commercial
importance, relative to other products in Genentech's portfolio;
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and over time, all commercially reasonable efforts shall be deemed
to be efforts comparable to those Genentech has used for other
products in its portfolio which have or are achieving returns and
revenues comparable to the Licensed Product, subject, in all cases,
to Genentech's exercise of its prudent business judgment.
4.7 Marketing Obligations.
(a) Not later than six (6) months after the first
submission of an NDA to the FDA with respect to the first Licensed
Product, Genentech shall submit a marketing plan (a "Marketing
Plan") to the Joint Steering Committee for Alteon's review and
comment. Such Marketing Plan shall provide the strategies and plans
developed for the marketing and sales of such Licensed Product in
the United States, including, without limitation, whether Genentech
and/or Sublicensee(s) shall act as promoter(s) and/or distributor(s)
in the United States, launch plans, pricing strategies (including
cost of goods), and marketing, sales coverage and distribution
plans.
(b) Within six (6) months after the first Licensed
Product has received Regulatory Approval for marketing and sale in
each Major European Country, Genentech shall submit a Marketing Plan
for such Major European Countries to the Joint Steering Committee
for Alteon's review and comment, and shall disclose whether
Genentech and/or any Sublicensee(s) will market and sell such
Licensed Product in each such country.
(c) In the event that Genentech has not filed for all
Regulatory Approvals to market and sell a Licensed Product in any
particular country in the Territory (except for the United States)
within * and Alteon believes in good faith that there is a
commercially reasonable opportunity for sales of such Licensed
Product in such country to generate, directly or indirectly,
significant revenue, then Alteon shall be entitled to deliver to
Genentech a notice requesting that Genentech file for such
Regulatory Approvals for a Licensed Product in such country within
one (1) year. If at the end of such one (1) year period Genentech
has not substantially completed such filings, and if (and only if)
Alteon has substantially completed such filings of such Licensed
Product in such country within one (1) year thereafter, then the
exclusive license granted to Genentech under Section 4.1 with
respect to such Product in such country automatically shall be
converted, at the end of such two (2)-year period, into a * license
to Genentech, and Alteon shall have a * license to such Licensed
Product in such county also, which shall be * and which Alteon may
sublicense to not more than one (1) Affiliate or Third Party in such
country.
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4.8 Supply of Products. As provided in Section 4.1, each
Party has a co-exclusive right and license hereunder to make and
have made Licensed Products in the Field in the Territory.
Genentech has the right and license hereunder to make or have made
all of its pre-clinical, clinical and commercial supplies of
Licensed Products in the Field in bulk and/or finished form in the
Territory hereunder. Alteon has the continued right and license
hereunder to supply itself and its other licensees with regard to
Compounds. In addition, Alteon (whether on its own or by means of
approved Third Party Manufacturer(s)) shall supply all pre-clinical
and clinical trials of Pimagedine Products in the United States for
collaborative development hereunder. Not later than one hundred
eighty (180) days after the Effective Date of this Agreement, the
Parties will enter into a Manufacturing and Supply Agreement (the
"Manufacturing and Supply Agreement") covering such pre-clinical and
clinical commercial supplies for the United States, and including
such other supply commitments and arrangements as the Parties may
agree upon. The Parties contemplate that the transfer price under
such Manufacture and Supply Agreement shall equal * of the supplying
Party's fully burdened manufacturing cost for such manufacture and
supply (as calculated in accordance with GAAP). If, at any time,
Genentech elects to exercise its right and license to make or have
made supplies of any Licensed Product, Genentech shall, if Alteon so
requests, supply all of Alteon's worldwide requirements for such
Licensed Product upon commercially reasonable terms, provided that
the price for such Licensed Product to Alteon shall not exceed * of
Genentech's fully burdened manufacturing cost for such manufacture
and supply (as calculated in accordance with GAAP), and provided
further, that Genentech shall not be obligated to supply Alteon with
amounts which then exceed * of Genentech's own (including its
Sublicensees) requirements for such Licensed Product. Not later
than one hundred (100) days after the Effective Date, Alteon shall
have established and staffed an internal quality control and quality
assurance function to assume the responsibilities of the "quality
control unit" as provided in Title 21 of the United States Code of
Federal Regulations, Section 211.22, and Alteon's quality control
unit shall have responsibility for oversight of manufacturing,
testing and release of Licensed Product to Genentech and its
Sublicensees hereunder.
4.9 Adverse Reaction Reporting.
(a) Each Party shall record, investigate, summarize
and review all adverse drug experiences associated with the
Compounds and the Licensed Products which Genentech has undertaken
for development hereunder. In order that each Party may be fully
informed of the adverse drug experiences known to the other Party
associated therewith, each Party shall report (i) in the case of
Alteon, to its address as provided under Section 11.7, except to the
attention of: Senior Vice President, Development and Regulatory
Affairs, Facsimile (201) 934-0090, and Telephone (201) 934-5000 and
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(ii) in the case of Genentech, to its address as provided under
Section 11.7, except to the attention of: Vice President, Regulatory
Affairs, Facsimile (650) 225-1397, Telephone (650) 225-1557,
on all "adverse events" and "serious adverse events" involving any
Licensed Products ("AE Reports"), as necessary to comply with all
applicable laws, regulations and regulatory requirements relating to
such Licensed Products. Each Party shall make an AE Report to the
other Party after the reporting Party's becoming aware of such an
event, and the reporting Party shall notify the other Party of such
AE Event in sufficient detail and in sufficient time to allow the
other Party to comply with all applicable legal and regulatory
requirements in the Territory. In addition, the reporting party
shall report to the other Party all known instances of use of a
Licensed Product during pregnancy. Each reporting party shall also
advise the other Party promptly of any material regulatory
developments (e.g., proposed recalls, labeling and other
registrational dossier changes, etc.) affecting the Licensed
Products in any country.
5. MILESTONE AND ROYALTY PAYMENTS.
5.1 Milestone Payments.
(a) As consideration to Alteon for the license and
other rights granted to Genentech under this Agreement, Genentech
shall pay to Alteon the following milestone payments upon the first
occurrence of each event set forth below with respect to the first
Pimagedine Product and the first Second Generation Product:
(i) * upon filing of an NDA for Regulatory
Approval to market and sell such Licensed Product in the United
States;
(ii) * upon receipt of all Regulatory Approvals to
market and sell such Licensed Product in the United States;
(iii) * upon (A) filing of all necessary
applications with Foreign Regulatory Authorities for Regulatory
Approval to market and sell such Licensed Product in any of the
Major European Countries, or (B) filing of all necessary
applications with Foreign Regulatory Authorities to market and sell
such Licensed Product under the centralized process for filing such
Regulatory Approvals in Europe;
(iv) * upon (A) receipt of all Regulatory Approvals
from Foreign Regulatory Authorities to market and sell such Licensed
Products in any of the Major European Countries, or (B) receipt of
all Regulatory Approvals from Foreign Regulatory Authorities to
market and sell
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such Licensed Product under the centralized process for issuing such
Regulatory Approvals for Europe.
Genentech shall notify Alteon promptly upon any such filing or
approval triggering milestone payments hereunder, and each of the
payments required pursuant to this Section 5.1(a) shall be paid
within fifteen (15) days after such milestone has been achieved.
(b) All milestone payments hereunder shall be non-refundable.
All milestone payments with respect to the first Licensed Product to
trigger such milestones hereunder shall not be creditable against
any royalties paid with respect to such Licensed Product pursuant to
this Section 5, provided that: (i) if the first Licensed Product to
receive Regulatory Approval for marketing and in any country or
jurisdiction in the Territory is a Second Generation Product, in
such event as to any second Licensed Product hereunder Genentech
shall not owe any milestone payments to Alteon hereunder; and (ii)
all milestone payments paid with respect to the second Licensed
Product to receive any Regulatory Approvals that trigger milestones
hereunder, if it is a Second Generation Product, shall be one
hundred percent (100%) creditable, dollar-for-dollar, against any
and all future royalties to be paid with respect to such Licensed
Product pursuant to Section 5.
5.2 Royalty Payments. As additional consideration to Alteon
for the license and other rights granted to Genentech under this
Agreement, during the term of this Agreement:
(a) Commencing with the First Commercial Sale of any
Pimagedine Product in any country in the Territory, Genentech shall
pay to Alteon a royalty on Net Sales of any such Pimagedine Product
by Genentech and its Sublicensees in an amount equal to * of the Net
Sales of such Pimagedine Product throughout the Territory; provided,
however, that if the First Commercial Sale of any Second Generation
Product occurs in any country or jurisdiction in the Territory
before the First Commercial Sale of any Pimagedine Product in any
country or jurisdiction in the Territory, then Genentech shall pay
to Alteon a royalty on Net Sales by Genentech and its Sublicensees
of all Licensed Products as determined in accordance with Section
5.2(b) for combined Net Sales of such Licensed Products in the
Territory. If the First Commercial Sale of the first Licensed
Product in any country or jurisdiction in the Territory is a
Pimagedine Product, and the next Licensed Product to commence First
Commercial Sale is any Second Generation Product, then Genentech
shall pay to Alteon a royalty on Net Sales of all such Licensed
Products in an amount equal to * of the Net Sales of all such
Licensed Product throughout the Territory by Genentech and its
Sublicensees.
(b) Commencing with the First Commercial Sale of any
Second Generation Product in any country in the Territory, except if
the First Commercial Sale of a Pimagedine Product has already
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occurred (in which case the * royalty rate in Section 5.2(a) shall
apply), Genentech shall pay to Alteon a royalty on Net Sales of all
such Licensed Products by Genentech and its Sublicensees in an
amount equal to the following percentages for the specified amounts
of aggregate annual Net Sales of Licensed Products by Genentech and
its Sublicensees in the Territory in any calendar year:
In Calendar Year
Net Sales of
All Products Royalty Rate
* *
5.3 *
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*
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*
5.4 Obligation to Pay Royalties. The obligation to pay
royalties to Alteon under this Section 5 shall be imposed only once
with respect to the same unit of Licensed Product regardless of the
number of Licensed Patents pertaining thereto. Genentech shall only
be entitled to a credit against royalties or a reduction of the
royalty rate with respect to any Licensed Product in any country
pursuant to an express provision of this Agreement. There shall be
no obligation to pay royalties to Alteon under this Section 5 on
sales of Products among Genentech and its Affiliates and
Sublicensees, but in such instances the obligation to pay royalties
shall arise upon the sale by Genentech and/or its Sublicensees
(including any Affiliates who are Sublicensees) to Third Parties.
Royalty payments under this Section 5 shall be deemed to accrue on
the date of shipment of the Licensed Product or the date of invoice
to the purchaser, whichever is first.
5.5 Third Party Royalties. Genentech and its Sublicensees,
at their sole expense, shall pay all royalties owing to any Third
Party that Genentech and/or its Sublicensees determine, in its
reasonable business judgment, are necessary in order to exercise
Genentech's rights hereunder to develop, make, have made, use or
sell any Licensed Product in the Territory; provided, however, that
Genentech shall be entitled to a credit against royalties due to
Alteon under this Agreement in each calendar quarter in an amount
equal to one hundred percent (100%) of such payments for such
calendar quarter, but in no event shall the royalties due under this
Agreement with respect to any Licensed Product be reduced by more
than fifty percent (50%) of the royalties otherwise payable under
this Agreement during any calendar quarter for such Licensed
Product.
6. PAYMENTS AND REPORTS.
6.1 Payment. All royalty payments due under this Agreement
shall be paid quarterly, no later than sixty (60) days in arrears on
Net Sales for such quarter on a Licensed Product-by-Licensed Product
and country-by-country basis, commencing with the calendar quarter
in which the First Commercial Sale of such Licensed Product in such
country accrued. Each such royalty payment shall be
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accompanied by a statement, Licensed Product-by-Licensed Product and
country-by-country, of the amount of Net Sales during such quarter
in each country's currency, the amount of royalties due on such Net
Sales, and the amount of any credit(s) taken against such royalties
as permitted under this Agreement. All royalty payments not made
when due shall bear interest, calculated from the date such payment
was due, at the rate of two percent (2%) over the prime rate of
interest as reported by Bank of American NT&SA in San Francisco,
California from time to time.
6.2 Mode of Payment. All payments due under this Agreement
shall be made in U.S. Dollars, via wire transfer of immediately
available funds, and shall be made where directed by the receiving
Party from time to time in accordance with Section 11.7, net of any
out-of-pocket transfer costs or fees. Royalty payments due on Net
Sales in countries or jurisdictions in the Territory outside the
United States shall be made in United States dollars, after being
converted by Genentech into United States dollars at the rate of
exchange for such country's or jurisdiction's currency into United
States Dollars as listed in The Wall Street Journal on the last
business day of the calendar quarter in which such sales were made.
6.3 Records Retention. Genentech and its Sublicensees shall
keep complete and accurate records pertaining to the sale of
Licensed Products for a period of five (5) calendar years after the
year in which such sales occurred, and in sufficient detail to
permit Alteon to confirm the accuracy of royalty calculations
hereunder. Alteon shall keep complete and accurate records
pertaining to all Development Costs incurred by Alteon or on its
behalf hereunder for a period of five (5) calendar years after the
year in which such costs were incurred, and in sufficient detail to
permit Genentech to confirm the accuracy of such Development Costs
hereunder.
6.4 Audit Request. At the request and expense of any Party
that has made or received payments under this Agreement or the Stock
Purchase Agreement(such Party being the "reviewing Party") under any
provision of this Agreement, the other Party (and its Sublicensees
in the case of Genentech) shall permit an independent certified
public accountant appointed by the reviewing Party and reasonably
acceptable to the other Party, at reasonable times during regular
business hours and upon at least five (5) business days' prior -
notice and not more frequently than once per year during the Term of
this Agreement, to examine such records under Section 6.3 as may be
necessary to: (i) determine the correctness of any report or payment
made under this Agreement or the Stock Purchase Agreement; or (ii)
obtain information as to any payment or reimbursement due for any
relevant period in the case of the paying Party's failure to report,
pay or reimburse pursuant to this Agreement or the Stock Purchase
Agreement. Any such accountant shall enter into a confidentiality
agreement with both Parties substantially similar to the
confidentiality provisions of this
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Agreement and limiting the disclosure and use of such information to
authorized representatives of the Parties and the purposes germane
to this Section 6.4. Such accountant shall be entitled to review
the then-preceding three (3) years' of the other Party's records,
and the results of such review shall be made available to both
Parties.
6.5 Corrective Payments; Cost of Audit. If any review
reveals a deficiency in the calculation of Alteon's Development
Costs for work under any Collaborative Plan and Collaborative
Budget, Alteon shall promptly refund the amount of any such
overpayment to Genentech (plus interest thereon, calculated from the
date of such overpayment, at the rate of two percent (2%) over the
prime rate of interest as reported by Bank of American NT&SA in San
Francisco, California from time to time), by cash or stock
repurchase, at Alteon's election, in accordance with the Stock
Purchase Agreement; and if such overpayment is by five percent (5%)
or more, Alteon shall pay all costs and expenses of the review. If
any review reveals a deficiency in the calculation of royalties
resulting in any underpayment by Genentech, Genentech shall promptly
refund the amount of any such underpayment to Alteon (plus interest
thereon, calculated from the date such underpayment was due, at the
rate of two percent (2%) over the prime rate of interest as reported
by Bank of American NT&SA in San Francisco, California from time to
time), in cash; and if such underpayment is by five percent (5%) or
more, Genentech shall pay all costs and expenses of the review.
6.6 No Non-Monetary Consideration for Sales. Without the
prior written consent of Alteon, Genentech and its Sublicensees
shall not accept or solicit any non-monetary consideration for the
sale of Licensed Products other than as would be reflected in Net
Sales, except for such quantities of sample goods of Licensed
Products.
6.7 Taxes; Restrictions on Payment. All royalty payments
shall be made hereunder free and clear of taxes, duties, levies or
charges, except for applicable withholding taxes. Genentech shall
make any applicable withholding payments due on behalf of Alteon and
shall promptly provide Alteon with copies of any tax certificate or
other documentation evidencing such withholding as sufficient to
satisfy the requirements of the United States Internal Revenue
Service related to any application by Alteon for a foreign tax
credit for such payment. If by law, regulations or fiscal policies,
remittance of royalties in United States dollars is prohibited or
restricted, Alteon will be notified, and payment of the royalty
obligation shall be made by deposit thereof in local currency to the
credit of Alteon in a recognized banking institution designated by
Alteon. When in any country or jurisdiction in the Territory, the
law, regulations or fiscal policies prohibit both the transmittal
and deposit of royalties on sales in such country, royalty payments
shall be suspended for as
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long as such prohibition is in effect, and as soon as such
prohibition ceases, all royalties that Genentech would have
otherwise been under an obligation to transmit or deposit but for
the prohibition shall forthwith be deposited or transmitted to the
extent allowable.
7. INDEMNIFICATION; INSURANCE.
7.1 Indemnification by Genentech. Genentech shall defend,
indemnify and hold Alteon, its Affiliates, and their respective
directors, officers, employees and agents, harmless from and against
any and all claims, suits or demands for liability, damages, losses,
costs and expenses (including the costs and expenses of attorneys
and other professionals) (collectively, "Claims") arising out of
third party claims or suits resulting from (a) any negligence,
recklessness or wrongful intentional acts or omissions of Genentech
or its Sublicensees, and their respective directors, officers,
employees and agents, in connection with the work performed by
Genentech under the Development Programs, or (b) the use or sale of
Products by Genentech or its Sublicensees, and their respective
directors, officers, employees and agents, pursuant to this
Agreement, including, without limitation, promotion and advertising
of Products and/or interactions and communications with governmental
authorities, physicians or other third parties; excepting in any
case to the extent any such Claims result from the negligence,
recklessness or wrongful intentional acts or omissions of Alteon or
its Affiliates, or their respective directors, officers, employees
or agents.
7.2 Indemnification by Alteon. Alteon shall defend,
indemnify and hold Genentech and its Affiliates and Sublicensees and
their respective directors, officers, employees and agents, harmless
from and against any and all Claims (as defined in Section 7.1)
arising out of third party claims or suits resulting from (a) any
negligence, recklessness or wrongful intentional acts or omissions
of Alteon or its Affiliates, and their respective directors,
officers, employees and agents, in connection with (i) the work
performed by Alteon under any Development Program hereunder, and
(ii) any other development and/or commercialization work relating to
any Licensed Products before the Effective Date, or thereafter in
connection with Alteon's development of Licensed Products under its
Retained Rights hereunder on its own with licensees, including but
not limited to any pre-clinical testing, clinical testing,
manufacture, supply, regulatory filings, publications, filings, or
marketing or sale of Licensed Products (including marketing
promotion and advertising of Products and/or interactions and
communications with governmental authorities, physicians or other
third parties); and (b) any negligence, recklessness or wrongful
intentional acts or omissions in connection with any manufacture and
supply of bulk and/or finished forms of any Licensed Product for
Genentech or its Sublicensees by
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Alteon or any Third Party Manufacturer hereunder for any pre-clinical
or clinical trials hereunder; excepting in any case to the extent
any such Claims result from the negligence, recklessness or wrongful
intentional acts or omissions of Genentech or its Affiliates or
Sublicensees, or their respective directors, officers, employees or
agents.
7.3 Complete Indemnification. As the Parties intend
complete indemnification, all costs and expenses of enforcing
Sections 7.1 and 7.2 shall also be reimbursed by the Indemnitee (as
defined herein).
7.4 Conditions to Indemnification. A person or entity that
intends to claim indemnification under Section 7.1 or 7.2, as the
case may be (the "Indemnitee"), shall promptly notify the other
Party (the "Indemnitor") of any loss, claim, damage, liability or
action in respect of which the Indemnitee intends to claim such
indemnification, and the Indemnitor shall assume the defense thereof
with counsel mutually satisfactory to the Indemnitee whether or not
such claim is rightfully brought; provided, however, that in any
event an Indemnitee shall have the right to retain its own counsel,
with the fees and expenses to be paid by the Indemnitor if
Indemnitor does not assume the defense, or if representation of such
Indemnitee by the counsel retained by the Indemnitor would be
inappropriate due to actual or potential differing interests between
such Indemnitee and any other person represented by such counsel in
such proceedings. The Indemnitee shall permit the Indemnitor to
assume direction and control of the defense of the claim, including
the right to settle the suit or consent to an adverse judgment
thereto, and the consent of the Indemnitee shall not be required
unless such settlement or consent imposes any obligation on the
Indemnitee or materially impairs the Indemnitee's rights in or to
any Licensed Patent, including under this Agreement. The indemnity
agreement in Sections 7.1 and 7.2 shall not apply to amounts paid in
settlement of any loss, claim, damage, liability or action if such
settlement is effected without the consent of the Indemnitor, which
consent shall not be withheld or delayed unreasonably. The failure
to deliver notice to the Indemnitor within a reasonable time after
the commencement of any such action, only if prejudicial to its
ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under Section 7.1 or 7.2, as the case
may be, but the omission so to deliver notice to the Indemnitor will
not relieve it of any liability that it may have to any Indemnitee
otherwise than under Section 7.1 or 7.2, as the case may be. Any
Indemnitee under this Section 7, and its officers, directors,
employees and agents, shall cooperate fully with the Indemnitor and
its legal representatives in the investigations of any action, claim
or liability covered by this indemnification.
7.5 Insurance. Without limiting any indemnity obligations
under this Agreement, commencing as of the Effective Date and
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thereafter for time period required hereinbelow, each Party shall
obtain and maintain on an on-going basis comprehensive general
liability and products liability insurance (including contractual
liability coverage on such Party's indemnification obligations under
this Agreement) in the amount of at least * per occurrence and
annual aggregate combined single limit for bodily injury and
property damage liability, with such insurance coverage to be
maintained with an insurance company or companies reasonably
acceptable to the other Party and with a deductible or maximum
self-insured retention not to exceed Five Hundred Thousand Dollars
($500,000) per occurrence or annual aggregate for Alteon, or such
other insurance coverage limits as the Joint Steering Committee
shall determine from time to time. Not later than ninety (90) days
after the Effective Date, each Party shall have in place all such
required insurance coverage hereunder and shall have provided
certificates evidencing all such required insurance coverage
hereunder to the other Party. Thereafter each Party shall maintain
such insurance coverage without interruption during the term of this
Agreement and for a period of at least ten (10) years after
expiration or termination of the term, and shall provide
certificates evidencing such insurance coverage without interruption
on an annual basis (by no later than the annual renewal date for
such coverage) during the time period above for which such coverage
must be maintained. Each Party's insurance shall name the other
Party as an additional insured, shall state that it is primary to
any valid and collectible insurance available to the other Party
that also insures the same loss for which the Party has liability
pursuant to this Agreement (including, without limitation, under the
indemnification provisions), shall contain a cross-liability or
severability of interest clause, and shall state that the other
Party shall be provided at least thirty (30) days' prior written
notice of any cancellation or material change in the insurance
policy. To assist Alteon in complying with these requirements,
Genentech agrees to make its risk manager available for
consultation. Either Party's failure to comply with the provisions
of this Section 7.5 shall be considered a material breach of this
Agreement.
7.6 Survival. This Section 7 shall survive the termination
or expiration of this Agreement.
8. PATENTS.
8.1 Patent Prosecution and Maintenance.
(a) During the term of this Agreement, each Party shall
retain title to inventions and knowhow, whether or not patentable,
made or owned solely by it or on its behalf arising out of
activities performed by it or on its behalf under this Agreement.
The Party making the invention shall be the sole owner
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thereof and of any patent applications and patents thereon
(including inventor's certificates and utility models). During the
term of this Agreement, Alteon shall be responsible for the filing,
prosecution and maintenance of all Licensed Patents, at Alteon's
sole cost and expense, in consultation with Genentech (at
Genentech's sole cost and expense). Alteon shall keep Genentech
informed of the status of filing, prosecution and maintenance of
Licensed Patents in each country and jurisdiction in the Territory,
by: (i) providing Genentech with a copy of each patent application
filed by Alteon promptly after filing; (ii) updating Genentech on a
regular basis (and in any event not less frequently than annually)
regarding the status of the patent applications and patents within
the Licensed Patents, including by reviewing the then-current
version of Exhibit A with Genentech as reasonably requested; and
(iii) notifying Genentech of any interference, opposition,
re-examination request, mullity proceeding, appeal or other interparty
action or reissuance proceeding involving the Licensed Patents.
Alteon shall have the right to determine in its sole discretion, but
in consultation with Genentech as provided herein, whether or not to
file, prosecute, maintain or take or not take any other action with
respect to any Licensed Patents. However, if Alteon desires to take
(or not take) any such action, Genentech may elect to do so at its
own expense, in which case Alteon shall provide assistance to
Genentech as reasonably requested and execute such necessary
documents as Genentech may request in connection therewith, at
Genentech's expense.
(b) During the term of this Agreement, in the event it
is determined, in accordance with applicable law, that employees or
agents of each Party or any other Person(s) obliged to assign such
invention to a Party are joint inventors on an invention, the
Parties shall jointly own the patent applications, patents,
inventor's certificates, and utility models covering such invention.
With respect to any such jointly-owned inventions, Alteon (a
"controlling Party") shall have the right to determine in its sole
discretion, but in consultation with Genentech as provided in
Section 8.1(a), whether or not to file, prosecute, maintain or take
or not take any other action with respect to any matter that is
within the Licensed Patents hereunder, and Genentech (a "controlling
Party") shall have the right to determine in its sole discretion,
but in consultation with Alteon as provided in Section 8.1(a),
whether or not to file, prosecute, maintain or take or not take any
other action with respect to any other matter (including, without
limitation, with respect to any component of a Licensed Product
other than a Compound). If either controlling Party does not file
a patent application (or continuing or divisional application)
within ninety (90) days after a request by the other Party to do so,
the non-controlling Party may undertake such filing, prosecution and
maintenance at its sole cost and expense, in which case such patent
application and subsequently issued patent thereon (if any) shall be
owned solely by the non-controlling
Party. The Parties shall assist each other to the
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maximum extent reasonable in securing intellectual property rights
resulting from activities conducted hereunder. As to enforcement of
jointly-owned patents, including actions against an infringer, the
Parties shall consult with each other in good faith as to the best
manner in which to proceed. The Parties agree as a basic principle
that in the case of such actions against infringers, the expenses
incurred and damages awarded shall be for the account of the Party
or Parties that take such actions to the extent of their financial
participation therein. Either Party may withdraw from or abandon
any jointly-owned patent or patent application, on reasonable prior
notice to the other Party providing a free-of-charge
option to assume the prosection and maintenance thereof.
8.2 Patent Enforcement.
(a) As soon as it shall have knowledge thereof, Alteon
shall promptly advise Genentech of any infringement of the Licensed
Patents in the Territory by a Third Party. Alteon shall have the
first right, but not the duty, to institute patent infringement
actions against Third Parties based on any Licensed Patent under
this Agreement. If Alteon does not institute an infringement
proceeding against an offending Third Party within ninety (90) days
after receipt of notice from Genentech, Genentech shall have the
right, but not the duty, to institute such an action. The costs and
expenses of any such action (including fees of attorneys and other
professionals) shall be borne by each Party to the extent of their
participation therein, or, if the Parties elect to cooperate in
instituting and maintaining such action, such costs and expenses
shall be borne by the Parties in such proportions as they may agree
in writing. Each Party shall execute all necessary and proper
documents and take such actions as shall be appropriate to allow the
other Party to institute and prosecute such infringement actions.
(b) In any infringement suit either Party may institute
to enforce any Licensed Patents pursuant to this Agreement, the
other Party shall, at the request of the Party initiating such suit,
reasonably cooperate, including making available relevant records,
papers, information, samples, specimens, and the like. All
reasonable out-of-pocket costs incurred in connection with rendering
cooperation requested hereunder shall be paid by the Party
requesting cooperation.
(c) Any award paid by Third Parties as a result of such
an infringement action (whether by way of settlement or otherwise)
shall be shared by each Party to the extent of their participation
therein, or, if the Parties have elected to cooperate in instituting
and maintaining such action, in such proportions as the they may
agree on in writing.
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8.3 Infringement Action by Third Parties.
(a) In the event of the institution of any suit by a
Third Party against Genentech or any Sublicensee for patent
infringement involving the manufacture, sale, distribution or
marketing of any Licensed Product in the Territory, and such
infringement claim is resulted of the use of the Licensed Patents or
Licensed Know-How, each Party shall promptly notify the other in
writing of its first knowledge of such suit. Alteon may defend such
action at Alteon's sole expense on behalf of Genentech with
attorneys of its own selection, and Genentech hereby agrees to
assist and cooperate with Alteon, at Alteon's own expense, to the
extent necessary in the defense of such suit. In such event (i.e.,
where Alteon has elected to defend in accordance with the preceding
sentence), Alteon shall bear the full costs and expenses of such
defense (including fees of attorneys and other professionals) and,
in any event, whether or not Alteon has elected to defend such
action, Alteon shall assume full responsibility for the payment of
any award for damages, or any amount due pursuant to any settlement
entered into by Alteon with such Third Party, which Alteon shall
have the right to do with Genentech's prior consent, which consent
shall not be unreasonably withheld or delayed. In addition,
Genentech shall be entitled to retain its own counsel in such
proceedings, at Genentech's sole expense.
(b) If Alteon does not commence a defense of such
action with (90) days after receiving notice thereof, Genentech
shall have the right to defend such suit at its own expense, and
Alteon hereby agrees to assist and cooperate with Genentech, at its
own expense, to the extent necessary in the defense of such suit.
In such event, Genentech shall not enter into any settlement
arrangement or other amicable arrangement without the prior consent
of Alteon.
(c) If as a result of any judgment, award, decree or
settlement resulting from an action instituted by a Third Party,
Genentech is required to pay a royalty or damages to such Third
Party, Genentech shall continue to pay the royalties for such
Product in the country which is the subject of such action, but
shall be entitled to a credit against such payments as provided in
Section 5.5.
8.4 Survival. This Section 8 shall survive the termination
or expiration of this Agreement.
9. CONFIDENTIALITY AND NON-USE.
9.1 Confidentiality and Non-use; Exceptions. Except to the
extent expressly authorized by this Agreement or otherwise agreed in
writing, the Parties agree that, for the term of this Agreement and
for five (5) years thereafter the receiving Party (and its
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Sublicensees in the case of Genentech) shall keep, and shall ensure
that its officers, directors, employees and agents keep, completely
confidential and shall not publish or otherwise disclose and shall
not use for any purpose any Development Data or other information
furnished to it by the other Party under this Agreement, except to
the extent that it can be established by the receiving Party by
competent proof that such information:
(a) was already known to the receiving Party (or its
Sublicensee, in the case of Genentech) other than under an
obligation of confidentiality, at the time of disclosure by the
other Party;
(b) was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the
receiving Party;
(c) became generally available to the public or
otherwise part of the public domain after its disclosure and other
than through any act or omission of the receiving Party in breach of
this Agreement; or
(d) was disclosed to the receiving Party (or its
Sublicensee, in the case of Genentech) other than under an
obligation of confidentiality, by a third party who had no
obligation to the disclosing Party not to disclose such information
to others.
The Parties agree that the material financial terms of this
Agreement and the Stock Purchase Agreement, shall also be considered
confidential information of both Parties.
9.2 Authorized Disclosure. Each Party may disclose the
other's Development Data and other confidential information to its
Sublicensees (in the case of Genentech), and its and their officers,
directors, employees and outside consultants (provided that such
Persons first agree to be bound by confidentiality provisions at
least as protective of such confidential information as this Section
9), as reasonably necessary for the purposes of this Agreement.
Each Party may also disclose such confidential information of the
other Party to any Third Party as permitted under Section 9.3, and
to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, complying with applicable
governmental regulations (including, without limitation, to comply
with SEC, Nasdaq or stock exchange disclosure requirements),
complying with legal and regulatory requirements in conducting any
pre-clinical or clinical trials hereunder, filing any submissions
for any Regulatory Approval of a Licensed Product in the Field, or
as otherwise necessary for the purposes of this Agreement; provided,
however, that if a Party is required to make any such disclosure of
the other Party's confidential information it will give reasonable
advance notice to the other Party of such
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disclosure requirement and, except to the extent inappropriate in
the case of patent applications, will use its best efforts to secure
confidential treatment of such information required to be disclosed.
9.3 Publications. Each Party shall consult with the other
Party prior to the submission of any manuscript for publication, or
abstract, poster or other disclosure, if such proposed disclosure
will contain any Development Data or other confidential information
of the other Party. Such consultation shall include (a) providing
a copy of the proposed manuscript or other disclosure to the other
Party at least sixty (60) days prior to the earlier of (i) the
proposed date of submission to the publisher or (ii) the anticipated
date of disclosure to any Third Party, (b) incorporating all
appropriate changes proposed by the other Party as to its
confidential information in the proposed disclosure, and (c)
deleting all confidential information of the other Party as it may
request. During the foregoing consultation period, the Parties
shall also review the proposed disclosures for purposes of
determining whether or not to file any patent application thereon
prior to disclosure, as provided in Section 8.
9.4 Third Party Information
(a) The Parties recognize that Alteon may have other
development/marketing partners and/or other licensees for the
Licensed Know-How. Alteon shall, to the extent reasonably possible,
seek to provide in its agreements with such Third Parties that
confidential information developed by such Third Parties related to
the Compounds and the Licensed Products may be shared by Alteon with
Genentech for Genentech's and its Sublicensees' use under this
Agreement, provided that Genentech is then willing to make a
corresponding commitment to permit Alteon to share confidential
information related to the Compounds and the Licensed Products
developed by or on behalf of Genentech pursuant to this Agreement
with such Third Party, subject to the execution of a confidentiality
agreement among the parties governing such disclosures.
(b) Genentech acknowledges that the Yamanouchi
Agreements contain a provision substantively similar to Section
9.4(a). Genentech consents to permitting Alteon to share relevant
confidential information developed by or on behalf of Genentech
under this Agreement with Yamanouchi and Alteon agrees to share
relevant confidential information developed by Yamanouchi with
Genentech, provided that the Parties and Yamanouchi first enter into
a mutually acceptable confidentiality agreement.
9.5 Remedies. The Parties acknowledge that money damages
alone would not adequately compensate either Party in the event of
a breach by the other (or its Sublicensees in the case of Genentech)
of this Section 9, and that, in addition to all other
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remedies available to such Party at law or in equity, such Party
shall be entitled to injunctive relief for the enforcement of its
rights hereunder.
9.6 Survival. This Section 9 shall survive the termination
or expiration of this Agreement. The provisions of this Section
9 shall replace in their entirety the provisions of the Confidential
Disclosure and Non-use Agreement between the Parties dated as of
July 24, 1996, which is hereby superseded.
10. TERMINATION.
10.1 Term. This Agreement shall commence as of the Effective
Date and, unless sooner terminated as provided hereunder, shall
expire as follows:
(a) As to each Licensed Product and as to each country
or jurisdiction in the Territory, upon the later of: (i) expiration
of the last to expire of the Valid Claims necessary for the use and
sale of such Licensed Product in such country or jurisdiction; or
(ii) twelve and one-half (12-1/2) years from the First Commercial
Sale of such Licensed Product in such country or jurisdiction.
(b) In its entirety upon its expiration as to all
Licensed Products throughout in the Territory.
10.2 Effect of Expiration of Term. Following expiration of
the term of this Agreement, in whole or in part, pursuant to Section
10.1, Genentech shall have the perpetual royalty-free
non-exclusive right and license under the Licensed Know-How and
Licensed Patents to continue to make, have made, use and sell
Licensed Products in the Field in such country(ies) or
jurisdiction(s) in the Territory to which this Agreement is expired,
including the right to grant sublicenses therefor, as previously
licensed under Section 4.1. In addition, commencing at least twelve
(12) months before the expiration of the term in whole or in part,
the Parties shall discuss in good faith whether to enter into an
extension of the Manufacturing and Supply Agreement, or other terms
and conditions for continued manufacture and supply of Licensed
Products in any country(ies) or jurisdiction(s) after expiration.
10.3 Insolvency or Bankruptcy. Either Party may, in addition
to any other remedies available to it by law or in equity, terminate
this Agreement effective on notice to the other Party, in the event
the other Party shall become insolvent or bankrupt, or shall have
made an assignment for the benefit of its creditors, or there shall
have been appointed a trustee or receive of the other Party or
substantially all of its property, or any case or proceeding shall
have been commenced or other action taken by or against the other
Party in bankruptcy or seeking reorganization, liquidation,
dissolution, winding-up, arrangement, composition or
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readjustment of its debts or any other relief under any bankruptcy,
insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or there shall have been
issued a warrant of attachment, execution, distraint or similar
process against any substantial part of the property of the other
Party, and any such event shall have continued for ninety (90) days
undismissed, unbonded and undischarged. Furthermore, all rights and
licenses granted under this Agreement are, and shall be deemed to
be, for purposes of Section 365(n) of the United States Bankruptcy
Code, licenses of rights to "intellectual property" as defined in
Section 101(56) of the United States Bankruptcy Code. The Parties
agree that in the event of the commencement of a bankruptcy
proceeding by or against one Party hereunder under the United States
Bankruptcy Code, the other Party shall be entitled to complete
access to any such intellectual property, and all embodiments of
such intellectual property, pertaining to the rights granted in the
licenses hereunder of the Party by or against whom a bankruptcy
proceeding has been commenced.
10.4 Breach.
(a) Failure by either Party to comply with any of the
material obligations of such Party contained in this Agreement shall
entitle the other Party to give notice to the defaulting Party
specifying the nature of the default and requiring it to cure such
default. If such default is not cured within sixty (60) days after
the receipt of such notice (or, if such default cannot be cured
within such sixty (60) day period, if the defaulting Party does not
commence and diligently continue actions to cure such default in
such sixty (60)-day period, and complete such cure within an
additional thirty (30) days), the other Party shall be entitled,
without prejudice to any of its other rights or remedies conferred
on it by this Agreement, and in addition to any other remedies
available to it by law or in equity, to terminate this Agreement
entirely on notice to the other Party, effective immediately. The
right to terminate this Agreement, as herein provided, shall not be
affected in any way by the other Party's waiver or failure to take
action with respect to any previous default.
(b) In the event that either (i) Genentech fails to
make timely payments to Alteon when required under this Agreement or
the Stock Purchase Agreement, or (ii) Genentech fails materially to
use all commercially reasonable efforts in connection with the
development and commercialization of Licensed Products, either of
which failures shall be deemed a breach of a material obligation of
Genentech hereunder, and Alteon elects pursuant to Section 10.4(a)
to terminate this Agreement, then Genentech shall promptly transfer
to Alteon, at Genentech's expense, copies of all Development Data in
Genentech's possession or control with respect to all Licensed
Products or Compounds. After the effective date of such termination,
Genentech shall have no further obligations to Alteon
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with respect to the development and commercialization of Licensed
Products or Compounds, the underlying rights to the Licensed Patents
and the Licensed Know-How as such rights pertain to such Licensed
Products and Compounds shall be the sole property of Alteon, and all
of Genentech's rights thereto under this Agreement shall terminate,
including the underlying rights to the Licensed Patents and the
Licensed Know-How as such rights pertain to such Licensed Products
or Compounds, as provided in Section 4.1. Genentech, at Genentech's
expense, shall execute all documents and make any filings necessary
to assign all rights with respect to any such Licensed Products and
Compounds, and the underlying rights to the Licensed Patents and the
Licensed Know-How as such rights pertain thereto, to Alteon.
(c) In the event that Alteon fails materially to use
all commercially reasonable efforts in connection with the
development and commercialization of Licensed Products, which
failure shall be deemed a breach of a material obligation of Alteon
hereunder, and Genentech elects under Section 10.4(a) to terminate
this Agreement, then: (i) Alteon shall reimburse Genentech for any
amounts paid or reimbursed by Genentech hereunder or under the Stock
Purchase Agreement that were in excess of the agreed upon
Collaborative Budget for Alteon's Development Costs, including any
accrued and non-cancelable expenditures incurred in accordance with
the agreed- upon Collaborative Budget; (ii) Genentech's further
funding obligations to Alteon shall terminate as provided in Section
3.11(c); and (iii) Alteon shall promptly transfer to Genentech, at
Alteon's expense, copies of all Development Data in Alteon's
possession or control with respect to Licensed Products or
Compounds. After the effective date of such termination, Genentech
shall have no further obligations to Alteon under this Agreement
with respect to the development and commercialization of Licensed
Products except as set forth herein. Such termination shall not
terminate any rights of Genentech under this Agreement, and
Genentech shall continue to have an exclusive license to develop,
make, have made, use and sell Licensed Products, including the
underlying rights to the Licensed Patents and the Licensed Know-How
as such rights pertain to such Licensed Products or Compounds, as
provided in Section 4.1. Such license rights shall be subject to
the royalty obligations in Section 5, except that with respect to
Net Sales that occur following such termination, the applicable
royalty rates set forth in Section 5 shall be reduced by fifty
percent (50%), and Genentech's obligation to make milestone payments
under Section 5.1 shall terminate with respect to any and all
milestones that have not been achieved as of the effective date of
such termination. Alteon, at Alteon's expense, shall execute all
documents and make any filings necessary to perfect such license
rights with respect to any such Licensed Products and Compounds, and
the underlying rights to the Licensed Patents and the Licensed Know-How
as such rights pertain thereto, in Genentech. In addition,
Alteon (on its own or using approved Third Party Manufacturer(s))
shall remain responsible for any manufacture and
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supply obligations hereunder and/or under the Manufacturing and
Supply Agreement until Alteon has fully transferred and enabled
Genentech and/or its designated Sublicensee(s) or Third Party(ies)
to undertake such manufacture and supply of Licensed Products,
including by transfer of the most current version of all regulatory
filings, Licensed Knowhow (including materials and expertise)
necessary to undertake such manufacture and supply, and by making
its personnel and resources available. Alteon shall bear its own
costs and expenses in connection with any such transfers and
enablement.
10.5 Termination by Genentech. Genentech shall have the
right to terminate the license granted pursuant to this Agreement,
in its entirety (or as to any Licensed Product in any country in the
Territory), at any time (or from time to time), in any case of at
least six (6) months' advance notice to Alteon. Such termination
shall be effective six (6) months from the effective date of such
notice, and all Genentech's rights and duties associated therewith
shall cease as of that date, subject to Sections 10.7-10.10.
10.6 Discontinuance of Sales. Alteon may terminate the
license granted herein, as to any Licensed Product in any country in
the Territory in which Genentech voluntarily discontinues commercial
sales of such Products, for any reason other than as set forth in
Section 11.2 or than that Genentech is legally barred from selling
such Products in such country, and Genentech fails to start selling
such Products again in such country within one hundred eighty (180)
days after notice from Alteon to Genentech regarding such
discontinuance.
10.7 Additional Effects of Termination.
(a) Upon termination of this Agreement in part with
respect to any Product in any country in the Territory pursuant to
Section 10.5 or 10.6, Genentech shall promptly: (i) transfer, at
Genentech's expense, to Alteon or such other Person as Alteon shall
designate, any and all rights that it may have under any government
registrations or authorizations in such country with respect to such
Licensed Product (and shall cancel any such registrations or
authorizations with respect thereto as are not transferable); (ii)
provide Alteon, at Genentech's expense, with all Development Data in
Genentech's possession or control relating to any such governmental
registrations or authorizations in such country with respect to such
Licensed Product; and (iii) discontinue all use, sale and
distribution of such Licensed Product in such country (except as
provided in Section 10.8) and the use of the Licensed Patents and
Licensed Know-How in connection therewith. All rights of Genentech
under the licenses for such Licensed Product granted hereunder in
such country shall revert to Alteon. Although this Agreement shall
terminate with respect to such Licensed Product in such country, it
shall continue in effect for such Licensed Product
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in all other countries in the Territory, and for all other Licensed
Products throughout the Territory.
(b) Upon termination of this Agreement in its entirety
pursuant to Section 10.5, Genentech shall promptly: (i) transfer, at
Genentech's expense, to Alteon or such other Person, as Alteon shall
designate, any and all rights that it may have under any government
registrations or authorizations in any country in the Territory with
respect to the Licensed Products (and shall cancel any such
registrations or authorizations with respect thereto as are not
transferable); (ii) provide Alteon, at Genentech's expense, with all
Development Data and other information in Genentech's possession or
control relating to such governmental registrations or authorities
in any country in the Territory with respect to all Licensed
Products; and (iii) discontinue all use, sale and distribution of
all Licensed Products (except as provided in Section 10.8) and the
use of the Licensed Patents and Licensed Know-How in connection
therewith. All rights of Genentech under the licenses for such
Products granted under this Agreement shall revert to Alteon.
10.8 Right to Sell Stock on Hand. Upon the termination of
any license granted in this Agreement, in whole or as to any
Licensed Product in any country in the Territory (except under
Sections 10.3 or 10.4), Genentech shall have the right, for six (6)
months or such longer period as the Parties may reasonably agree, to
dispose of all Licensed Product or substantially completed Licensed
Product then on hand to which such termination applies, and
royalties shall be paid to Alteon with respect to such Licensed
Product as provided in this Agreement.
10.9 Termination of Sublicenses. No termination of this
Agreement in whole or in part (except by Genentech under 10.5 or
Alteon under Section 10.4) shall terminate any sublicenses granted
by Genentech under this Agreement, and thereafter each such
Sublicensee shall be a direct licensee of Alteon, provided that such
Sublicensee is then in full compliance with all terms and conditions
of its sublicense agreement, and such Sublicensee agrees, at least
ten (10) days before the effective date of termination of this
Agreement in whole or in part to assume all obligations of Genentech
under this Agreement.
10.10 Accrued Rights, Surviving Obligations.
(a) Termination, relinquishment or expiration of this
Agreement for any reason shall be without prejudice to any rights
which shall have accrued to the benefit of either Party prior to
such termination, relinquishment or expiration; provided, however,
that each Party agrees to use commercially reasonable efforts to
mitigate all costs and expenses to be paid or reimbursed by the
other Party in connection with any such expiration, relinquishment
or termination. Such termination, relinquishment or expiration
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shall not relieve either Party from obligations which are expressly
indicated to survive termination or expiration of this Agreement.
Without limiting the generality of the foregoing, termination of
this Agreement shall not terminate Genentech's obligation to pay the
royalties applicable to Net Sales of Licensed Products that accrue
under this Agreement prior to the effective date of such
termination.
(b) All of the Parties' respective rights and
obligations under Sections 3.8, 3.11(c), 4.9, 6, 7, 8, 9, 10.2,
10.4, 10.6-10.10, 11.5, 11.7, 11.16 and 11.17 shall survive any
expiration, relinquishment or termination of this Agreement.
11. MISCELLANEOUS.
11.1 Relationship of Parties. Nothing in this Agreement is
intended or shall be deemed to constitute a partnership, agency,
employer-employee or joint venture relationship between the Parties.
Neither Party shall incur any debts or make any commitments for the
other, except to the extent, if at all, specifically provided
herein.
11.2 Force Majeure. Neither Party shall lose any rights
hereunder or be liable to the other for loss or damages or shall
have any right to terminate this Agreement for any default or delay
attributable to any act of God, flood, fire, explosion, strike,
lockout, labor dispute, shortage of raw materials, casualty or
accident, war, revolution, civil commotion, act of public enemies,
blockage or embargo, injunction, law, order, proclamation,
regulation, ordinance, demand or requirement of any government or
subdivision, authority or representative of any such government, or
any other cause beyond the reasonable control of such Party, if the
Party affected shall give prompt notice of any such cause to the
other Party. The Party giving such notice shall thereupon be
excused from such of its obligations hereunder as it is thereby
disabled from performing for so long as it is so disabled. However,
nothing in this Section 11.2 shall excuse or suspend the obligation
to make any payment due hereunder in the manner and at the time
provided.
11.3 Non-solicitation of Employees. During the term of this
Agreement, neither Party shall, directly or indirectly, in any
manner solicit, induce or attempt to induce any senior management
employee, scientist or sales and marketing personnel of the other
Party or terminate his or her employment with such other Party.
11.4 Assignment. Neither Party shall be entitled to assign
its rights hereunder except: (a) as an incident to the merger,
consolidation, reorganization, acquisition of stock or assets
affecting substantially all of the assets or voting control of the
assigning Party; (b) to any wholly-owned Affiliate if the assigning
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Party remains fully liable and responsible for the performance and
observance of all of the wholly-owned Affiliate's obligations
hereunder; or (c) with the prior consent of the other Party hereto.
11.5 Representations and Warranties. Each Party represents
and warrants to the other that: (i) it is free to enter into this
Agreement; (ii) the execution and delivery of this Agreement, the
Stock Purchase Agreement and the Manufacture and Supply Agreement
and the performance of the transactions contemplated hereby and
thereby have been duly authorized by all appropriate corporate
action; (iii) this Agreement, the Stock Purchase Agreement and and
the Manufacture and Supply Agreement are legal and valid obligations
binding on it and enforceable in accordance with its terms; and (iv)
the execution, delivery and performance of this Agreement, the Stock
Purchase Agreement and the Manufacture and Supply Agreement do not
conflict with or violate any other agreement, instrument or
understanding to which it is a party or by which it is bound, nor
violate any law or regulation of any court, governmental body or
agency having jurisdiction over it. In addition, Alteon represents
and warrants to Genentech that: (A) Alteon has the right to grant
the licenses granted in Section 4.1, and has not knowledge of any
rights of any Third Party(ies) that would interfere with the use of
the Licensed Know-how or practice of the Licensed Patents by
Genentech as contemplated under this Agreement; and (B) Alteon has
no knowledge, as of the Effective Date, from which it can be
inferred that any patents or patent applications within the Licensed
Patents are invalid or unenforceable or that their exercise would
infringe patent rights of Third Parties.
11.6 Further Actions. Each Party agrees to execute,
acknowledge and deliver such further instruments, and to do all such
other acts, as may be necessary or appropriate in order to carry out
the purposes and intent of this Agreement.
11.7 Notice. Any notice, request, consent, approval,
designation or other communication required or permitted to be given
under or in connection with this Agreement shall be deemed to have
been sufficiently given if in writing and personally delivered by
messenger, facsimile transmission (receipt verified), express or
overnight courier service (signature required), or telegram,
prepaid, to the Party for which such notice is intended, at the
address set forth for such Party below:
(a) In the case of Alteon, to:
Alteon Inc.
170 Williams Drive
Ramsey, New Jersey 07446
Attention: Chief Executive
Facsimile No.: (201) 934-0090
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(b) In the case of Genentech, to:
Genentech, Inc.
One DNA Way
South San Francisco, California 94080
Attention: Corporate Secretary
Facsimile No.: (650) 952-9881
or to such other address for such Party as it shall have specified
by like notice to the other Party hereunder, provided that notices
of a change of address shall be effective only upon receipt thereof.
If sent by messenger, facsimile transmission, express courier
service, or telegram, the next business day after the date of
mailing or transmission shall be deemed to be the date on which such
notice or request has been given.
11.8 Use of Names. Except as otherwise provided herein,
neither Party shall have any right, express or implied, to use in
any manner the name or other designation of the other Party or any
other trade name or trademark of the other Party for any purpose in
connection with the performance of this Agreement.
11.9 Public Announcements. Except as required by applicable
law, neither Party shall issue any press release or make any other
public announcement concerning this Agreement or the subject matter
hereof, including as necessary to comply with applicable laws or
regulations, without the prior consent of the other Party, which
consent shall not be unreasonably withheld. The Parties agree that
if either is required to file this Agreement with any governmental
agency, such Party will redact the financial and other sensitive
technical or business terms of this Agreement to the extent possible
in order to keep the terms of this Agreement confidential. In any
publication or announcement permitted under this Agreement, each
Party shall acknowledge its collaboration with the other Party under
this Agreement.
11.10 Costs and Expenses. Except as otherwise expressly
provided in this Agreement, each Party shall bear all costs and
expenses associated with the performance of its own obligations
under this Agreement.
11.11 Waiver. A waiver by either Party of any of the terms
and conditions of this Agreement in any instance shall not be deemed
or construed to be a waiver of such term or condition for the
future, or of any subsequent breach hereof. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement
shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either
Party.
11.12 Inconsistency. If there is any inconsistency between
the provisions of this Agreement, the Stock Purchase Agreement or
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the Manufacture and Supply Agreement and any purchase order or other
document passing between the Parties, the provisions of this
Agreement, the Stock Purchase Agreement or the Manufacture and
Supply Agreement shall control and be determinative.
11.13 Compliance with Law. Nothing in this Agreement shall
be deemed to permit a Party to export, reexport or otherwise
transfer any Product sold under this Agreement without compliance
with applicable laws.
11.14 Severability. When possible, each provision of this
Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of this Agreement.
11.15 Amendment. No amendment, modification or supplement of
any provisions of this Agreement shall be valid or effective unless
made in writing and signed by a duly authorized representative of
each Party.
11.16 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey
without regard to its choice of law principles, except that in the
event of any dispute arising out of this Agreement that is the
subject of alternative dispute resolution under Section 11.17 or a
claim before a court of competent jurisdiction, this Agreement shall
be interpreted in accordance with the laws of the jurisdiction of
the defendant (except a defendant by virtue of a counterclaim),
which in the case of Alteon shall be New Jersey and in the case of
Genentech shall be California.
11.17 Alternative Dispute Resolution. If the Parties so
elect, they may submit any dispute between them relating to this
Agreement or the subject matter hereof which cannot be resolved by
the Parties in accordance with the provisions of this Agreement, for
attempted settlement by means of alternative dispute resolution,
which can include, as agreed upon by the Parties, moderated
settlement, minitrial, use of expert advisor mediation, non-binding
arbitration, or binding arbitration, in any case as mutually
selected by the Parties and subject to the governing law provisions
of Section 11.16. All proceedings for the alternative resolution of
a dispute (an "ADR Proceeding"), if elected by the Parties, shall be
designed to conclude within four (4) months of the original notice
and shall be held at a mutually agreeable location. If the Parties
have elected an ADR Proceeding, they shall have thirty (30) days
after their election to agree on an umpire for the ADR Proceeding,
who shall be selected from among the members of JAMS Endispute,
located in Morristown, New Jersey, and to agree on the form of the
ADR Proceeding. If the Parties
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cannot agree on the umpire to be used within such period, JAMS
Endispute shall appoint one of its members to serve as umpire for
the ADR Proceeding, and if the Parties cannot agree on the form of
ADR Proceeding to be used, then non-binding arbitration shall be
used, with an independent arbitrator acceptable to both Parties.
The Parties will cooperate with each other in causing any ADR
Proceeding elected hereunder to be held in as efficient and
expeditious a manner as practicable.
11.18 Prevailing Party. In the event of any dispute between
the Parties relating to this Agreement or the subject matter hereof
that results in a suit or other legal proceeding (including any ADR
Proceeding), the prevailing Party (in addition) to all other amounts
an relief to which such Party may be entitled) shall be entitled to
recover its reasonable attorneys' fees and other costs and expenses
incurred in any such action or legal proceeding.
11.19 Entire Agreement. This Agreement, together with the
Stock Purchase Agreement and the Manufacture and Supply Agreement,
sets forth the entire agreement and understanding between the
Parties as to the subject matter hereof and merges all prior
discussions and negotiations between them. Neither of the Parties
shall be bound by any conditions, definitions, warranties,
understandings or representations with respect to such subject
matter other than as expressly provided herein or as duly set forth
in a valid amendment of this Agreement.
11.20 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, any one of which need
not contain the signature of more than one Party but all such
counterparts taken together shall constitute one and the same
agreement.
11.21 Descriptive Headings. The descriptive headings of this
Agreement are for convenience only, and shall be of no force or
effect in construing or interpreting any of the provisions of this
Agreement.
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IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed and delivered by its duly authorized
officer as of the Effective Date.
ALTEON INC.
By: /s/ James J. Mauzey
--------------------------
Name: James J. Mauzey
Title: Chairman and Chief
Executive Officer
GENENTECH, INC.
By: /s/ Nicholas J. Simon
---------------------
Name: Nicholas J. Simon
Title: Vice President
<PAGE>
<PAGE>
EXHIBIT A
LICENSED PATENTS
*
* Confidential Treatment Requested
<PAGE>
EXHIBIT B
AGE-INHIBITOR CANDIDATES
ALT-946
<PAGE>
EXHIBIT C
SECOND GENERATION CANDIDATES
ALT-946
<PAGE>
EXHIBIT D
*
* Confidential Treatment Requested
