<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
Commission File No.
0-19731
GILEAD SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3047598
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
353 Lakeside Drive, Foster City, California 94404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415-574-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes___X____ No________
Number of shares outstanding of the issuer's common stock, par value $.001
per share, as of October 10, 1996: 28,559,023.
<PAGE>
GILEAD SCIENCES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Condensed Consolidated Financial Statements and Notes
Condensed Consolidated Balance Sheets - September 30, 1996
and December 31, 1995...................................... 3
Condensed Consolidated Statements of Operations - for the
three months and nine months ended September 30, 1996 and
1995....................................................... 4
Condensed Consolidated Statements of Cash Flows - for the
nine months ended September 30, 1996 and 1995............. 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 10
SIGNATURES................................................. 11
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements and Notes
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Current assets: (unaudited) (Note)
Cash and cash equivalents $ 156,043 $ 27,420
Short-term investments 134,260 128,239
Accounts receivable (less allowances of
$1,326 at September 30, 1996) 2,994 -
Other current assets 13,330 1,558
---------- ----------
Total current assets 306,627 157,217
Property and equipment, net 7,609 8,369
Other assets 1,209 1,073
---------- ----------
$ 315,445 $ 166,659
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,941 $ 2,412
Accrued clinical and preclinical expenses 5,549 3,923
Other accrued liabilities 4,682 2,229
Deferred contract revenues 1,000 208
Current portion of equipment financing
obligations and long-term debt 2,882 2,906
---------- ----------
Total current liabilities 16,054 11,678
Noncurrent portion of equipment financing
obligations and long-term debt 1,492 3,482
Commitments
Stockholders' equity:
Common stock, par value $.001 per share;
60,000,000 shares authorized; 28,558,823
shares and 23,769,878 shares issued and
outstanding at September 30, 1996 and
December 31, 1995, respectively 29 24
Additional paid-in capital 424,974 265,460
Unrealized gains (losses) on investments, net 11 167
Accumulated deficit (126,404) (112,754)
Deferred compensation (711) (1,398)
---------- ----------
Total stockholders' equity 297,899 151,499
---------- ----------
$ 315,445 $ 166,659
---------- ----------
---------- ----------
</TABLE>
Note: The consolidated balance sheet at December 31, 1995 has been derived
from audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
3
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GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ---------------------
1996 1995 1996 1995
------- ------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Product sales, net $ 3,353 $ - $ 4,755 $ -
Contract revenues 21,301 1,067 22,884 2,932
------- ------- --------- --------
Total revenues 24,654 1,067 27,639 2,932
------- ------- --------- --------
Costs and expenses:
Cost of sales 447 - 548 -
Research and development 11,163 8,194 31,008 23,748
Selling, general and administrative 7,641 2,769 19,947 7,949
------- ------- --------- --------
Total costs and expenses 19,251 10,963 51,503 31,697
------- ------- --------- --------
Income (loss) from operations 5,403 (9,896) (23,864) (28,765)
Interest income, net 3,907 1,470 10,214 3,531
------- ------- --------- --------
Net income (loss) $ 9,310 $(8,426) $ (13,650) $(25,234)
------- ------- --------- --------
------- ------- --------- --------
Net income (loss) per share $ 0.30 $ (0.40) $ (0.50) $ (1.28)
------- ------- --------- --------
------- ------- --------- --------
Common and common equivalent
shares used in the calculation of net
income (loss) per share 30,549 21,085 27,500 19,785
------- ------- --------- --------
------- ------- --------- --------
</TABLE>
See accompanying notes.
4
<PAGE>
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (13,650) $ (25,234)
Adjustments used to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 3,718 3,273
Changes in assets and liabilities:
Accounts receivable (2,994) -
Other current assets (11,772) (153)
Other assets (136) 83
Accounts payable (471) 151
Accrued clinical and preclinical expenses 1,626 1,042
Other accrued liabilities 2,453 577
Deferred contract revenues 792 (1,034)
---------- ----------
Total adjustments (6,784) 3,939
---------- ----------
Net cash used in operating activities (20,434) (21,295)
---------- ----------
Cash flows from investing activities:
Purchases of short-term investments (324,752) (125,302)
Sales of short-term investments 201,366 10,455
Maturities of short-term investments 117,209 105,062
Capital expenditures (1,565) (485)
---------- ----------
Net cash used in investing activities (7,742) (10,270)
---------- ----------
Cash flows from financing activities:
Payments of equipment financing obligations
and long-term debt (2,014) (2,085)
Proceeds from issuance of common stock 158,813 90,750
---------- ----------
Net cash provided by financing activities 156,799 88,665
---------- ----------
Net increase in cash and cash equivalents 128,623 57,100
Cash and cash equivalents at beginning of period 27,420 15,297
---------- ----------
Cash and cash equivalents at end of period $ 156,043 $ 72,397
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
5
<PAGE>
GILEAD SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The information at September 30, 1996, and for the three and nine month
periods ended September 30, 1996 and 1995, is unaudited but includes all
adjustments (consisting only of normal recurring adjustments) which, in the
opinion of management, are necessary to state fairly the financial information
set forth therein in accordance with generally accepted accounting principles.
The interim results are not necessarily indicative of results to be expected
for the full fiscal year. These financial statements should be read in
conjunction with the audited financial statements for the nine month period
ended December 31, 1995 included in the Company's annual report to security
holders furnished to the Securities and Exchange Commission pursuant to Rule
14a-3(b) in connection with the Company's 1996 Annual Meeting of Stockholders
and the interim financial statements included in the previously filed
quarterly reports (Form 10-Q) for the three and six months ended March 31,
1996 and June 30, 1996.
PER SHARE DATA
Net income per share is computed using the weighted average number of
common shares and dilutive common equivalent shares attributable to stock
options outstanding during the period. Net loss per share is computed using
the weighted average number of common shares outstanding during the period.
Common stock equivalents relating to stock options are excluded from the net
loss per share computation as their effect is antidilutive.
DEFERRED COMPENSATION
The Company records deferred compensation on option grants for the
difference between the grant price and the market value on the date of grant
and amortizes such amounts over the five year vesting period of the options.
2. INVESTMENTS
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. The Company's debt securities, which consist primarily of commercial
paper of major U.S. corporations, U.S. Treasury Securities and Certificates of
Deposit, are classified as available-for-sale and are carried at estimated
fair value in cash equivalents and short-term investments. Unrealized gains
and losses are reported as a separate component of stockholders' equity. The
amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains and losses on
available-for-sale securities are included in interest income and expense.
The cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are
included in interest income. At September 30, 1996, the contractual
maturities of the debt securities do not exceed three years.
6
<PAGE>
3. CONTRACT REVENUE
In August 1996, Gilead and Pharmacia & Upjohn S.A. ("P&U") entered into a
collaboration to market VISTIDE-Registered Trademark- (cidofovir injection) in
all countries outside the United States. Under the terms of the agreement,
P&U paid Gilead an initial license fee of $10.0 million. If European
marketing authorization is received for VISTIDE, Gilead will receive an
additional cash milestone payment of $10.0 million, and, at Gilead's option,
P&U will purchase $40.0 million of newly issued Gilead Series B Preferred
Stock priced at 145 percent of the average closing price of Gilead's Common
Stock over a thirty-day trading period. In addition, P&U will pay Gilead
royalties on its VISTIDE sales.
In September 1996, Gilead and F. Hoffmann-La Roche Ltd and Hoffmann-La
Roche Inc. (collectively, "Roche") entered into a collaboration agreement to
develop and commercialize therapies to treat and prevent viral influenza.
Under the agreement, Roche received exclusive worldwide rights to Gilead's
proprietary influenza neuraminidase inhibitors. In October 1996, Roche made
an initial cash payment to Gilead of $10.3 million and Gilead is entitled to
additional cash payments of up to $40 million upon achievement of
developmental and regulatory milestones. In addition, Roche will fund all
research and development costs and pay Gilead royalties on the net sales of
any products developed under the collaboration.
The $10.0 million received from P&U and the $10.3 million received from
Roche were recorded as contract revenue in the third quarter.
4. ACCOUNTS RECEIVABLE
Gilead sells VISTIDE through major drug wholesalers in the U.S. In August
1996 a major wholesaler, FoxMeyer Corporation, filed for bankruptcy protection
under Chapter 11 of the U.S. Bankruptcy Code. The total receivable
outstanding as of September 30, 1996 from FoxMeyer of $629,000 has been
reserved.
5. SUBSEQUENT EVENT
In October 1996, the Company entered into an unsecured $3.0 million term
loan to finance its research and development facilities expansion and the
acquisition of related laboratory equipment. The four-year loan requires
quarterly principal payments of $187,500 plus interest. The interest rate is
fixed at 6.9% for the first year of the loan, and will be reset periodically
thereafter based on applicable LIBOR rates.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
Since its inception in June 1987, Gilead has devoted substantially all of
its resources to its research and development programs, with significant
expenses relating to commercialization beginning in 1996. The Company
achieved profitability in the quarter ended September 30, 1996 due primarily
to initial payments under collaboration agreements entered into with P&U and
Roche during the quarter. The Company, however, expects to incur losses for
the quarter and the year ended December 31, 1996 due primarily to its research
and development programs, including preclinical studies, clinical trials and
manufacturing, as well as marketing and sales efforts in support of
VISTIDE-Registered Trademark-(cidofovir injection) sales. On June 26, 1996
the U.S. Food and Drug Administration (FDA) granted marketing clearance of
VISTIDE for the treatment of cytomegalovirus retinitis (CMV) in patients with
AIDS. The Company is independently marketing VISTIDE in the United States
with an antiviral specialty sales force. The Company
7
<PAGE>
expects to incur losses in the future that will fluctuate from quarter to
quarter. Such fluctuations may be substantial. There can be no assurance
that the Company will successfully develop, commercialize, manufacture and
market additional products or sustain profitability. As of September 30,
1996, the Company's accumulated deficit was approximately $126.4 million.
The successful development and commercialization of the Company's products
will require substantial and ongoing efforts at the forefront of the life
sciences industry. The Company is pursuing preclinical or clinical
development of a number of additional product candidates. Even if these
product candidates appear promising during various stages of development, they
may not reach the market for a number of reasons. Such reasons include the
possibilities that the potential products will be found ineffective or unduly
toxic during preclinical or clinical trials, fail to receive necessary
regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical to market or be precluded from commercialization by proprietary
rights of others.
As a company in an industry undergoing rapid change, the Company faces
significant challenges and risks, including the risks inherent in its research
and development programs, uncertainties in obtaining and enforcing patents,
the lengthy and expensive regulatory approval process, intense competition
from pharmaceutical and biotechnology companies, increasing pressure on
pharmaceutical pricing from payors, patients and government agencies,
limitations on the availability of capital and uncertainties associated with
the eventual market acceptance of VISTIDE or any of the Company's products in
development. These risks are discussed in greater detail in the Company's
Annual Report on Form 10-K for the nine month period ended December 31, 1995.
Stockholders and potential investors in the Company should carefully consider
these risks in evaluating the Company and should be aware that the realization
of any of these risks could have a dramatic and negative impact on the
Company's stock price.
This Report contains forward-looking statements relating to future expense
levels and financial results. These statements involve inherent risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, the risks described in this
Overview and discussed in the Company's Annual Report on Form 10-K for the
nine month period ended December 31, 1995.
RESULTS OF OPERATIONS
REVENUES
The Company had total revenues of $24.7 million and $1.1 million for the
quarters ended September 30, 1996 and 1995, respectively. Total revenues for
the nine month periods ended September 30, 1996 and 1995 were $27.6 million
and $2.9 million, respectively. Revenues increased during the three and nine
month periods ended September 30, 1996, primarily due to contract revenue
resulting from the Company's collaborative agreements with both P&U and Roche.
Gilead received $20.3 million related to these agreements for the quarter
ended September 30, 1996. The Company's total revenues also included net
product sales from the sale of VISTIDE of $3.4 million and $4.8 million for
the three and nine month periods ended September 30, 1996, respectively.
COSTS AND EXPENSES
The Company's cost of sales was $0.4 million for the quarter ended
September 30, 1996, and $0.5 for the nine month period ended September 30,
1996. The Company has no cost of sales for the three and nine month periods
ended September 30, 1995. Cost of sales resulted from the Company's sale of
VISTIDE which was launched in June 1996.
8
<PAGE>
For the quarter ended September 30, 1996, the Company's research and
development expenses increased 36% to $11.2 million from $8.2 million for the
same period in 1995. The Company's research and development expenses
increased 31% to $31.0 million for the nine month period ended September 30,
1996 from $23.7 million for the same period in 1995. This increase was due
primarily to increases in expenses associated with the Company's ongoing
clinical trials for VISTIDE and for several product candidates, as well as
increases in research and development staffing and preclinical expenses. The
Company expects its research and development expenses in the remainder of 1996
to increase reflecting anticipated increased expenses related to clinical
trials and manufacturing.
Selling, general and administrative expenses were $7.6 million and $2.8
million for the quarters ended September 30, 1996 and 1995, respectively,
representing an increase of 176%. For the nine month periods ended September
30, 1996 and 1995, such expenses were $19.9 million and $7.9 million,
respectively, an increase of 151%. This increase is attributable primarily to
the establishment of marketing and sales capabilities in connection with the
launch of VISTIDE, as well as activities in support of the Company's expanded
research and development efforts. The Company expects its selling, general
and administrative expenses to increase during the remainder of 1996 in
connection with ongoing marketing and sales activities.
NET INTEREST INCOME
The Company had net interest income of $3.9 million and $1.5 million for
the quarters ended September 30, 1996 and 1995, respectively, representing an
increase of 166%. Net interest income for the nine month periods ended
September 30, 1996 and 1995 was $10.2 million and $3.5 million, respectively,
an increase of 189%. Net interest income has significantly increased due to
the Company's higher average cash and cash equivalents and short-term
investment balances which resulted from the Company's two public offerings of
common stock completed in February 1996 and August 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments were $290.3 million
at September 30, 1996 compared to $155.7 million at December 31, 1995. This
increase is primarily the result of the Company's public offering of common
stock in February 1996 which generated $155.6 million in net proceeds, and the
$10.0 million license fee paid by P&U in August 1996. The Company expects to
incur construction and equipment costs of approximately $3.0 million related
to the build-out of a 37,000 square foot facility leased in August 1996. The
costs will be incurred during the fourth quarter of 1996 and the Company
expects to occupy this space by December 1996. For the full year 1996, the
Company expects to incur substantial research and development and selling,
general and administrative expenses.
Net cash used in operations was $20.8 million and $21.3 million for the
nine month periods ended September 30, 1996 and 1995, respectively. The
Company expects its cash requirements to grow in future periods due to higher
expenses. However, the Company believes that its existing capital resources,
including net product revenues and contract revenues, will be adequate to
satisfy its capital needs for the foreseeable future. The Company's future
capital requirements will depend on many factors, including the progress of
the Company's research and development, the scope and results of preclinical
studies and clinical trials, the cost, timing and outcomes of regulatory
reviews, the rate of technological advances, determinations as to the
commercial potential of the Company's products under development, the
commercial performance of VISTIDE and any of the Company's products in
development that receive marketing approval, administrative and legal
expenses, the status of competitive products, the establishment of
manufacturing capacity or third-party manufacturing arrangements, the
establishment of sales and marketing capabilities and the establishment of
collaborative relationships with other companies.
9
<PAGE>
The Company may in the future require additional funding, which could be
in the form of proceeds from equity or debt financings or additional
collaborative agreements with corporate partners. If such funding is
required, there can be no assurance that it will be available on favorable
terms, if at all.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.40 License and Supply Agreement between Registrant and Pharmacia &
Upjohn S.A. dated August 7, 1996 (Registrant is applying for
confidential treatment with respect to portions of this Exhibit).
10.41 Series B Preferred Stock Purchase Agreement between Registrant
and Pharmacia & Upjohn S.A. dated August 7, 1996.
10.42 Development and License Agreement between Registrant and F.
Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc dated September 27,
1996 (Registrant is applying for confidential treatment with
respect to portions of this Exhibit).
10.43 Copromotion Agreement between Registrant and Roche Laboratories
Inc. dated September 27, 1996 (Registrant is applying for
confidential treatment with respect to portions of this Exhibit).
11.1 Computation of per share earnings
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended September
30, 1996.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GILEAD SCIENCES, INC.
----------------------------------
(Registrant)
Date: October 25, 1996 /S/ JOHN C. MARTIN
----------------------------------
John C. Martin
President and Chief Executive Officer
Date: October 25, 1996 /S/ MARK L. PERRY
----------------------------------
Mark L. Perry
Vice President, Chief Financial Officer
and General Counsel
11
<PAGE>
LICENSE AND SUPPLY
AGREEMENT
between
GILEAD SCIENCES, INC.
and
PHARMACIA & UPJOHN S.A.
<PAGE>
TABLE OF CONTENTS
Page
Table of Contents 1
Background 4
ARTICLE 1 Definitions
1.1 "Affiliate" 5
1.2 "Best Efforts"
1.3 "Cidofovir"
1.4 "Competitive CMV Product"
1.5 "CPMP"
1.6 "EMEA"
1.7 "European Union"
1.8 "First Commercial Sale"
1.9 "Gilead Know-How"
1.10 "Gilead Patents"
1.11 "Gilead Technology"
1.12 "Joint Strategic Committee" 6
1.13 "Licensed Product"
1.14 "Net Sales"
1.15 "Non-Patented Product"
1.16 "P&U Know-How"
1.17 "P&U Patents"
1.18 "P&U Technology
1.19 "P&U Territory
1.20 "Patented Product" 7
1.21 "Proprietary Information"
1.22 "Specifications"
1.23 "Valid Claim"
1.24 "Vistide"
ARTICLE 2 Grant of Rights
2.1 License Grants
2.2 Sublicensing 8
2.3 P&U Right of First Negotiation
2.4 P&U Acquisition of Competitive Product
2.5 P&U Acknowledgement of Other Gilead Products
2.6 Maintenance of Licenses to Gilead of Gilead Patents 9
ARTICLE 3 Development and Regulatory Affairs
3.1 Joint Strategic Committee
3.2 Gilead's Obligations 10
3.3 P&U's Obligations
3.4 Development Costs 11
3.5 Clinical Materials
3.6 Adverse Reactions
3.7 Intraocular Clinical Development
1.
<PAGE>
ARTICLE 4 Due Diligence
4.1 Marketing Approval
4.2 Territorial Diligence 12
ARTICLE 5 Compensation
5.1 License Fee
5.2 Milestone Payment
5.3 Royalty Payments on Net Sales
5.4 Quarterly Payment Mechanism: Year-End Reconciliation 14
5.5 Sublicense
5.6 Expiration of Royalty Payment Obligations
ARTICLE 6 Supply and Manufacturing
6.1 Supply of Cidofovir
6.2 Technology Transfer
6.3 Supply of Intraocular Cidofovir 15
6.4 Supply Prices
6.5 Specifications
6.6 Forecasts and Orders
6.7 Acceptance; Shipment and Risk of Loss 16
6.8 Invoices
6.9 Shortages of Supply
ARTICLE 7 Marketing
7.1 Promotion and Marketing Efforts 17
7.2 Pricing
7.3 Trademarks
7.4 Use of the Gilead Name
7.5 Distribution of Licensed Product
7.6 Export Control
ARTICLE 8 Payments; Records; Audit 18
8.1 Payment; Report
8.2 Exchange Rate; Manner and Place of Payment
8.3 Records and Audit
8.4 Withholding Taxes 19
ARTICLE 9 Term and Termination
9.1 Term
9.2 Licenses Upon Expiration
9.3 Termination for Breach
9.4 Termination in Event of Patent Challenge 20
9.5 Unconditional Right to Terminate
9.6 Reversion of Product Rights
9.7 Survival
ARTICLE 10 Intellectual Property
10.1 Prosecution of Patents
10.2 Infringement of Patents by Third Parties
10.3 Infringement of Third Party Rights
2.
<PAGE>
10.4 Patent Marking 21
10.5 JSC Review of Patent Strategy
ARTICLE 11 Indemnification
11.1 Indemnification by Gilead
11.2 Indemnification by P&U
11.3 Mechanics 22
11.4 Insurance Coverage
ARTICLE 12 Confidentiality
12.1 Proprietary Information; Exceptions
12.2 Authorized Disclosure 23
12.3 Return of Proprietary Information
ARTICLE 13 Representations and Warranties 24
13.1 Mutual Representations and Warranties
13.2 Gilead Representation and Warranties
13.3 No Other Representations
ARTICLE 14 Dispute Resolutions; Venue and Governing Law 25
14.1 Disputes
14.2 Alternative Dispute Resolution
14.3 Arbitration Procedure
14.4 Jurisdiction 26
14.5 Governing Law
ARTICLE 15 Miscellaneous 27
15.1 Agency
15.2 Assignment
15.3 Disclosure
15.4 Amendment
15.5 Notices
15.6 Force Majeure 28
15.7 Severability
15.8 Cumulative Rights
15.9 Waiver
15.10 Entire Agreement
EXHIBITS Exhibit A: Gilead Patents
Exhibit B: Endispute Rules
3.
<PAGE>
LICENSE AND SUPPLY AGREEMENT
THIS LICENSE AND SUPPLY AGREEMENT (the "Agreement"), dated as of August 7,
1996 (the "Effective Date"), is made by and between GILEAD SCIENCES, INC., a
Delaware corporation ("Gilead"), and Pharmacia & Upjohn S.A., ("P&U") a
Luxembourg corporation with reference to the following:
BACKGROUND
WHEREAS, Gilead has developed a proprietary compound previously designated
as HPMPC or GS 504 and now known under the generic name of cidofovir; and
WHEREAS, Gilead has received marketing approval in the United States and
has filed an application for marketing approval in Europe of an injectable form
of cidofovir for intravenous use known as "Vistide-Registered Trademark-
(cidofovir injection)" for the treatment of cytomegalovirus ("CMV") retinitis in
patients with AIDS; and
WHEREAS, Gilead is currently conducting Phase I/II clinical trials for the
delivery of an intraocular formulation of cidofovir to treat CMV retinitis in
patients with AIDS; and
WHEREAS, P&U, through its divisions and/or affiliates, is engaged in the
production, commercialization and sale of pharmaceuticals; and
WHEREAS, Gilead and P&U desire to enter into a license and supply agreement
for the development, manufacture and marketing of injectable formulations of
cidofovir for intravenous and intraocular use; and
WHEREAS, to bring injectable forms of cidofovir to market in the P&U
Territory on a timely basis and maximize the value of such product, P&U
requires, in addition to a license under Gilead's patent rights covering
cidofovir, access to Gilead regulatory approvals, the assurance of product
supply and the transfer of certain know-how related to cidofovir, and also
desires the benefit of Gilead's further efforts to develop cidofovir for
intraocular delivery; and
WHEREAS, Gilead and P&U have entered into a Series B Preferred Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement") with a
view to entering into this License and Supply Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and obligations set forth in this Agreement, the parties hereby agree
as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms will have the following meanings:
4.
<PAGE>
1.1 "AFFILIATE" means any entity that directly or indirectly Owns, is
Owned by or is under common Ownership with, a party to this Agreement, where
"Own" or "Ownership" means direct or indirect possession of at least fifty
percent (50%) of the outstanding voting securities of a corporation or a
comparable ownership in any other type of entity, PROVIDED, HOWEVER, that if the
law of the jurisdiction in which such entity operates does not allow fifty
percent (50%) or greater ownership by a party to this Agreement, such ownership
interest shall be at least forty percent (40%).
1.2 "BEST EFFORTS" has the meaning assigned to it in Section 4.1.
1.3 "CIDOFOVIR" means (S)-1-(3-hydroxy-2-phosphonylmethoxypropyl)-
cytosine, also known scientifically as HPMPC, which is the active agent
contained in the Gilead pharmaceutical known as "Vistide-Registered Trademark-
(cidofovir injection)." As used in this Agreement, the term "Cidofovir" excludes
prodrugs the active species of which is HPMPC.
1.4 "COMPETITIVE CMV PRODUCT" has the meaning assigned to it in Section
2.3.
1.5 "CPMP" means the Committee for Proprietary Medicinal Products, which
represents the medicine authorities of the European Community member states.
1.6 "EMEA" means the European Medicines Evaluation Agency, which
coordinates the scientific review of human pharmaceutical products under the
centralized licensing procedure of the European Community.
1.7 "EUROPEAN UNION" or "EU" means the following countries: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
The Netherlands, Portugal, Spain, Sweden, the United Kingdom, and future members
of the European Union (or its successor), upon their admission for full
membership (with commercial rights and privileges substantially comparable to
those of the foregoing countries).
1.8 "FIRST COMMERCIAL SALE" means, in any particular country, the first
sale for use by the general public of the Licensed Product after required
marketing and pricing approvals have been granted by the governing health
authority of that country.
1.9 "GILEAD KNOW-HOW" means all proprietary inventions, technology,
trade secrets, clinical and preclinical results, and any physical, chemical or
biological material, or other information, owned or acquired with right to
sublicense during the term of this Agreement by Gilead or any Affiliate of
Gilead, which are necessary or useful to P&U in the development, formulation,
use or sale of the Licensed Product.
1.10 "GILEAD PATENTS" mean all patents and patent applications, both
foreign and domestic, which cover Cidofovir and which now or at any time during
the term of this Agreement are owned by or licensed to Gilead or any Gilead
Affiliate with the right to sublicense. Set forth as Exhibit A is a list of the
Gilead Patents as of the Effective Date. Such Exhibit shall be updated no more
frequently than annually upon P&U's request. Gilead Patents expressly excludes
patents and patent applications covering proforms of Cidofovir, or their use or
manufacture, in particular esters or amides of Cidofovir, or cyclic HPMPC (also
known as GS 930).
1.11 "GILEAD TECHNOLOGY" means Gilead Patents and Gilead Know-How.
5.
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1.12 "JOINT STRATEGIC COMMITTEE" OR "JSC" means that committee comprised
of three named representatives of Gilead and three named representatives of P&U
whose responsibility shall be as set forth in Section 3.1.
1.13 "LICENSED PRODUCT" means any formulation of Cidofovir manufactured
or sold pursuant to this Agreement exclusively for intravenous or intraocular
administration. Licensed Products may be either Patented Products or Non-
Patented Products. Licensed Products exclude formulations of Cidofovir other
than intravenous and intraocular formulations.
1.14 "NET SALES" means the gross billings for the sale to a third party
of Licensed Product in finished product form made by P&U or its Affiliates or
sublicensees, as appropriate, less the following deductions:
(a) Amounts repaid or credited by reason of timely rejections or
returns;
(b) Taxes, excises or other governmental charges upon or
measured by the production, sale, transportation, delivery or use of goods;
(c) Transportation and delivery charges actually incurred,
including shipping insurance;
(d) Normal and customary trade, cash and quantity discounts,
rebates and allowances granted to third parties, including mandatory rebates to
governmental agencies with discounts etc, which are based on multiple products
to be allocated reasonably; and
(e) Retroactive price reductions imposed by public authorities.
Notwithstanding the foregoing, amounts received by P&U or its Affiliates or
sublicensees for the sale of Licensed Products among P&U and its Affiliates or
sublicensees for resale shall not be included in the computation of Net Sales
hereunder.
1.15 "NON-PATENTED PRODUCT" means any Licensed Product, P&U's activities
with respect to which would not, in the absence of a license granted herein,
infringe a Valid Claim of any Gilead Patent in the country in which such
activity occurs or in a country where no Gilead Patent issues.
1.16 "P&U KNOW-HOW" means all proprietary inventions, technology, trade
secrets, clinical and preclinical results, and any physical, chemical or
biological material, or other information owned or acquired with right to
sublicense during the term of this Agreement by P&U or any Affiliate of P&U,
which are used in the manufacture, use or sale of Licensed Product.
1.17 "P&U PATENTS" means all patents and patent applications, both
foreign and domestic, which result from P&U's work with Licensed Product, or
cover inventions practiced by P&U in the manufacture, use or sale of Licensed
Product, and which now or at any time during the term of this Agreement are
owned by or licensed to P&U or any P&U Affiliate with the right to sublicense.
1.18 "P&U TECHNOLOGY" means P&U Patents and P&U Know-How.
1.19 "P&U TERRITORY" means initially the world excluding the United
States, its territories and possessions subject to subsequent reductions as
provided in Article 4.
6.
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1.20 "PATENTED PRODUCT" means any Licensed Product, P&U's activities with
respect to which, absent the license grants set forth herein, would infringe a
Valid Claim of any Gilead Patent in the country in which such activity occurs.
1.21 "PROPRIETARY INFORMATION" means, subject to the limitations set
forth in Section 11.1 hereof, all information received by a party hereto
pursuant to this Agreement to the other party. In particular, Proprietary
Information shall be deemed to include, but is not limited to, any patent
application or drawing, any trade secret, information, invention, idea, samples
of assay components, process, formula, or test data relating to any research
project, work in process, future development engineering, manufacturing,
regulatory, marketing, servicing, financing or personnel matter relating to the
disclosing party, its present or future products, sales, suppliers, clients,
customers, employees, investors or business, whether in oral, written, graphic
or electronic form.
1.22 "SPECIFICATIONS" means those specifications for bulk Cidofovir and
all associated test methods and finished Licensed Product as defined by Gilead.
Such specifications may be modified from time to time by Gilead, as provided in
Section 6.5 below.
1.23 "VALID CLAIM" means a claim of (a) an issued patent, which claim has
not lapsed, been canceled, or become abandoned and which claim has not been
declared invalid or unenforceable by a court of competent jurisdiction in a
final decision from which no appeal has or can be taken, or (b) a patent
application, so long as such application is being diligently prosecuted.
1.24 "VISTIDE" means the intravenous formulation of Cidofovir which is
presently the subject of an application for marketing approval which has been
filed by Gilead with the CPMP under the EMEA's centralized procedure.
ARTICLE 2
GRANT OF RIGHTS
2.1 LICENSE GRANTS.
(a) GILEAD TECHNOLOGY. Subject to the terms of this
Agreement, Gilead hereby grants to P&U an exclusive license to use the Gilead
Technology only for the manufacture, importation, use, sale and offer for
sale of the Licensed Product in the P&U Territory, with a right to sublicense
its Affiliates. Gilead grants no rights to P&U to manufacture bulk cidofovir
or to import, sell or offer for sale Cidofovir in the fifty United States
provided, however, that the foregoing shall not restrict P&U from
manufacturing bulk cidofovir following the expiration of Gilead's supply
obligations under Article 6.
(b) P&U TECHNOLOGY. Subject to the terms of this Agreement,
P&U hereby grants to Gilead and its Affiliates a non-exclusive license to use
the P&U Technology only for the manufacture, importation, use, sale and offer
for sale of (i) Licensed Products outside of the P&U Territory, and (ii)
pharmaceuticals containing Cidofovir which are not Licensed Products, on a
worldwide basis, and (iii) otherwise in the performance of this Agreement.
Such license shall be royalty-free, except that if any such P&U Technology is
in-licensed by P&U and a running royalty obligation to a non-Affiliate of P&U
is applicable thereto, then such running royalty obligation shall be passed
along to Gilead. If Gilead does not agree to pay any such passed-along
amount, then the sublicense for such in-licensed technology shall not be
granted.
7.
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2.2 SUBLICENSING. P&U shall have the right to sublicense the rights
granted under Section 2.1(a) to its non-Affiliates with the prior written
consent of Gilead, which consent shall not be unreasonably withheld. Gilead
shall have the right to sublicense the rights granted under Section 2.1(b) to
its non-Affiliates with the prior written consent of P&U, which consent shall
not be unreasonably withheld.
2.3 P&U RIGHT OF FIRST NEGOTIATION. Except as otherwise provided in
this Section 2.3, P&U shall have a right of first negotiation with respect to
any product or potential product in a country of the P&U Territory (other
than a Licensed Product) that Gilead intends to license to a third party
which is, or which can reasonably be expected to be, indicated for the
prevention and/or treatment of CMV infection (a "Competitive CMV Product") as
follows: Gilead shall notify P&U in writing that it intends to seek third
party licensees for a Competitive CMV Product prior to contacting any such
potential third party licensees. Such written notice shall include
sufficient detailed technical information concerning the Competitive CMV
Product as P&U may reasonably require to evaluate its interest in such
product. P&U shall notify Gilead within [ ] after receiving
Gilead's notice of such licensing opportunity whether it is interested in
negotiating with Gilead the terms under which P&U shall license such
Competitive CMV Product from Gilead. If P&U provides such notice, the
parties shall negotiate in good faith for a period of up to [ ]
after Gilead receives P&U's notice of interest (the "Negotiation Period") the
terms of an agreement pursuant to which P&U will license such Competitive CMV
Product from Gilead. Neither Gilead nor P&U shall have any obligation to
actually enter into a license with respect to a Competitive CMV Product.
Gilead shall be free to discuss licensing such Competitive CMV Product to
third parties and to grant such a license (i) if P&U does not respond to
Gilead's notice of intent to license the Competitive CMV Product within
[ ] after P&U's receipt thereof, at any time after expiration
of such [ ] period, or (ii) if Gilead and P&U fail to agree upon
the terms of a possible license to the Competitive CMV Product during the
Negotiation Period, at any time after expiration of the Negotiation Period.
The foregoing right of first negotiation shall not apply to (i) any product
which Gilead is developing and marketing independently for the treatment of
CMV infection, or (ii) any products incorporating PMEA
(9-[phosphonomethoxyethyl] adenine) or its prodrug forms, including
specifically adefovir dipivoxil (also known as GS 840 or bis-POM PMEA).
2.4 P&U ACQUISITION OF COMPETITIVE PRODUCT. In the event P&U
acquires rights to any Competitive CMV Product (either by licensing
technology from, or acquiring, a third party) in the P&U Territory, P&U shall
promptly so inform Gilead. At least [ ] before filing an
application for marketing approval for such Competitive CMV Product, P&U
shall have the option to terminate the license granted to it in Section
2.1(a) with respect to the country or countries where P&U has obtained such
product rights. If P&U does not provide notice of its intent to exercise such
option in such country or countries during such time period, Gilead may elect
at any time thereafter to convert the exclusive license granted to P&U
pursuant to Section 2.1(a) to a non-exclusive license, solely with respect to
such country or countries. Such conversion shall be effective upon receipt
by P&U of Gilead's written notice to P&U of such election. Any such
termination or conversion of P&U's license shall not otherwise affect the
parties' rights and obligations under this Agreement.
2.5 P&U ACKNOWLEDGEMENT OF OTHER GILEAD PRODUCTS. P&U acknowledges
that Gilead has entered into a License and Supply Agreement with American
Home Products for the development and worldwide marketing of topical
ophthalmic formulations of Cidofovir, and that Gilead is developing
independently a topical gel formulation of Cidofovir which is not a
Competitive CMV Product. P&U also confirms its understanding that Gilead
maintains an active program to develop prodrugs of Cidofovir, the most
advanced of which is cyclic HPMPC (or GS 930). P&U confirms its understanding
that these other formulations and products, among others, are not included in
the license granted to P&U under this Agreement.
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2.6 MAINTENANCE OF LICENSES TO GILEAD OF GILEAD PATENTS. Gilead
shall use diligent efforts to maintain valid licenses to the Gilead Patents
which are in-licensed by Gilead and listed on Exhibit A as of the Effective
Date. Gilead shall give prompt notice to P&U when it becomes aware of the
possibility of a breach or default of any such license. Both parties shall
meet and mutually determine an appropriate course of action to prevent such a
breach or default.
ARTICLE 3
DEVELOPMENT AND REGULATORY AFFAIRS
3.1 JOINT STRATEGIC COMMITTEE.
(a) JSC MEMBERSHIP AND GOVERNANCE. The parties shall establish
a Joint Strategic Committee to coordinate the clinical, regulatory,
manufacturing and commercial activities of the parties with respect to Licensed
Product in their respective territories. Each party shall within thirty (30)
days after the Effective Date select three (3) representatives to serve as
members of the JSC. Each party may select additional representatives to replace
the initial JSC members selected by such party as necessary during the term of
the Agreement. Any JSC members selected by one party shall be subject to the
approval of the other party. P&U shall appoint the Chairperson of the JSC for
the first year of the term of this Agreement, and upon the first anniversary of
the Effective Date, Gilead shall appoint the Chairperson of the JSC for the
following year. The parties will similarly alternate responsibility for
appointing the JSC Chairperson for subsequent one-year terms during the term of
this Agreement. The JSC shall attempt to operate by consensus, and any issues
that the JSC is unable to resolve by consensus shall be submitted for resolution
pursuant to Article 14. The Chairperson of the JSC shall be responsible for
providing an agenda for each JSC meeting at least ten (10) days in advance of
such meeting and shall prepare written minutes of all JSC meetings in reasonable
detail. The Chairperson shall distribute such minutes to all JSC members within
twenty (20) days after the relevant JSC meeting.
(b) JSC MEETINGS AND RESPONSIBILITIES. The JSC shall meet at
least two (2) times per year during the term of this Agreement, provided that
either party may request additional meetings as reasonably required. The JSC
will provide the primary means of communication between the parties regarding
the clinical development, regulatory approval and marketing of Licensed
Products. The parties shall report to the JSC on all material clinical,
regulatory and marketing issues relating to Licensed Products, and the JSC shall
make recommendations and provide strategic guidance with respect to such issues.
Specifically, each party shall submit to the JSC any plan relating to
publications, symposia or marketing meetings, marketing efforts, clinical
development efforts (including any pre- and post-marketing clinical trials),
regulatory plans, advertising and promotional materials relating to Licensed
Products, and the labelling of Licensed Products, in advance of its
implementation thereof. Additionally the JSC shall serve as a forum for
discussion of opportunities for cost sharing where such activities would have
mutual benefit. Each party shall submit to the JSC its plans for any clinical
trials of Licensed Product in advance of the anticipated commencement date
thereof. Neither party shall commence any clinical trial of the Licensed
Product until the JSC has approved the plans therefor; provided, however that
Gilead shall not be required to obtain prior JSC approval of any Phase IV
clinical trial of Vistide which was agreed to by Gilead with the U.S. FDA prior
to the Effective Date in connection with obtaining marketing approval, or any
clinical trial of Licensed Product agreed to by Gilead with clinical
investigators prior to the Effective Date. The parties shall present their
plans for commercializing Licensed Products to the JSC, which shall work with
the parties to help formulate a consistent, worldwide commercialization strategy
for Licensed Products.
9.
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3.2 GILEAD'S OBLIGATIONS.
(a) DISCLOSURE OF GILEAD KNOW-HOW. Following the Effective Date
and through the term of this Agreement, Gilead shall make available to P&U,
subject to the terms of this Agreement, all Gilead Know-How, PROVIDED, HOWEVER,
that Gilead shall not be obligated to transfer Gilead Know-How which relates to
the manufacture of bulk Cidofovir, except to the extent required for regulatory
purposes or to satisfy its customary internal requirements for quality control.
(b) REGULATORY FILINGS. Gilead shall provide P&U with letters
of reference to its dossier of regulatory filings for Licensed Products in the
Territory, including the drug master file regarding the manufacture of bulk
Cidofovir and any other comparable files. Gilead shall also provide reasonable
technical assistance required by P&U in connection with the regulatory filings
referred to in Section 3.3, at no additional cost to P&U. Gilead shall provide
additional information as may be required by the regulatory authorities of a
particular country within the P&U Territory if a letter of reference is not
sufficient for that country.
(c) CENTRALIZED CPMP APPROVAL OF VISTIDE; SUBSEQUENT TRANSFER
OF MAA. Gilead, as approved by the JSC, will perform [
]any additional clinical trials and make regulatory filings necessary
to obtain marketing approval of Vistide by the CPMP under the EMEA's
centralized licensing procedure. Gilead shall be the primary party
responsible for all communications with regulatory authorities in connection
with such filings, especially in regard to providing medical expertise,
provided that P&U will have a right to participate in all meetings between
Gilead and such authorities relating to development of Licensed Product under
this Agreement. As provided in Section 3.3, after Gilead has obtained CPMP
approval of Vistide, P&U shall be the primary party responsible for obtaining
any other required national or local reimbursement and pricing approvals and
agreements for Vistide in the European Union countries. Gilead shall
transfer to P&U the marketing authorization application ("MAA"), or resulting
marketing authorization ("MA") covering Vistide, which is presently held by
Gilead Sciences Limited, a U.K. company wholly owned by Gilead. The parties
agree to effect such transfer in the manner most convenient to the parties
which conforms with applicable regulatory requirements. Each party shall
bear its own expenses incurred in connection with such transfer, except that
any transfer-related filing fees shall be divided equally by the parties. If
such transfer occurs by means of the sale of Gilead Sciences Limited, the
purchase price shall be equal to Gilead's invested capital (which is
nominal), P&U shall promptly thereafter change the name of such entity so as
not to include the name of "Gilead", and Gilead shall indemnify P&U for any
liabilities of such company incurred prior to the date of such sale.
3.3 P&U'S OBLIGATIONS.
(a) DISCLOSURE OF P&U KNOW-HOW. Subject to Section 2.1(b), P&U
shall disclose to Gilead any P&U Know-How which is discovered or developed
during the term of this Agreement.
(b) REGULATORY FILINGS. Except as provided in Section 3.2(c),
P&U will file such additional regulatory filings as may be necessary for the
sale of Licensed Product within the P&U Territory in its own name. P&U will be
responsible for all communications with regulatory authorities in connection
with such filings provided that Gilead will have the right to participate in all
meetings between P&U and such regulatory authorities relating to the development
or marketing of Licensed Products under this Agreement. P&U will keep Gilead
informed of the progress of such filings in each country, and will provide
Gilead with at least fifteen (15) days advance notice of the final submission of
an application for marketing approval in any country of the P&U Territory. P&U
will provide Gilead with access to all regulatory filings with respect to
Licensed Product made in the P&U Territory, and will
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promptly advise Gilead when it has obtained marketing approval, reimbursement
approval, or pricing approval of Licensed Products in each country.
3.4 DEVELOPMENT COSTS. P&U shall be responsible for the [
] clinical trials of Licensed Product in the P&U Territory including
expanded access or compassionate use programs, [
] of all
external development costs which are approved by the JSC and which are (i)
required in order to obtain marketing approval of Licensed Product in countries
of the P&U Territory, or (ii) required in order to improve approved product
labelling. In Japan, [
] subject to advance budget approval by the JSC. [
] From time to time, the parties
may agree to allocate the costs of clinical trials of Licensed Product in a
manner other than that set forth in this Agreement.
3.5 CLINICAL MATERIALS. Gilead shall timely supply P&U with such
quantities of Licensed Product in final form as may be reasonably required by
P&U for the conduct of clinical trials. P&U will reimburse Gilead for its
actual costs of manufacturing such material as set forth in Article 6.
3.6 ADVERSE REACTIONS. The parties agree that, to the extent permitted
by applicable law, Gilead shall be responsible outside of the P&U Territory for
the reporting of adverse events related to the use of Licensed Product, and P&U
shall be responsible inside the P&U Territory for the reporting of such adverse
events. In this regard, each party agrees to advise regulatory authorities of
the other's role and to conform with the adverse event reporting procedures of
the countries in which they are marketing Licensed Products. The parties shall
agree upon standard operating procedures for reporting such adverse events to
governmental regulatory authorities and to each other prior to the date of First
Commercial Sale of Licensed Product in any country in the P&U Territory. Any
modifications to the standard procedure for adverse event reporting shall be
effective only upon the mutual consent of the parties. The provisions of this
Section 3.6 shall survive termination of this Agreement so long as both parties
are marketing Licensed Products.
3.7 INTRAOCULAR CLINICAL DEVELOPMENT. The JSC will meet to agree upon a
clinical development plan for the intraocular formulation of cidofovir which
shall have the same development costs sharing arrangement between the Parties as
for Vistide under Section 3.4.
ARTICLE 4
DUE DILIGENCE
4.1 MARKETING APPROVAL. P&U shall devote its Best Efforts to obtain
marketing approval for Licensed Product in substantially all markets in the P&U
Territory and to achieve First Commercial Sale of Licensed Product on a timely
basis thereafter in each country where approval is obtained. [
]
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4.2 TERRITORIAL DILIGENCE. Specifically, to maintain its license
rights under Section 2.1(a) in each country of the P&U territory, P&U shall
use Best Efforts to obtain marketing, pricing and reimbursement approval for
each country in the P&U Territory (subject to approval by the JSC and Section
4.2 (b) below) and to achieve First Commercial sale of Licensed Product in
each such country within [ ] of receiving all required
approvals. For Japan the Parties agree to [
]
If P&U fails to satisfy such diligence standards in any particular country
in the P&U Territory, Gilead shall have the right to notify P&U of its intent to
terminate P&U's license in such country. Upon receipt of such notice, P&U shall
have a sixty (60) day period within which to submit to Gilead a specific,
written plan to achieve regulatory and, where required, pricing and
reimbursement approvals and its action steps for First Commercial Sale of
Licensed Product within the country in question within [ ] after
regulatory and, where required, pricing and reimbursement approval. The efforts
of P&U sublicensees shall be treated as efforts of P&U for purposes of this
Section 4.2. If P&U later fails to make the First Commercial Sale of Licensed
Product within such additional [ ] period, the countries shall be
excluded from the definition of P&U Territory upon ninety (90) days' advance
written notice from Gilead, except if such delay is shown to be outside the
control of P&U.
(a) REPORTS. Each Party shall provide regular reports to the
JSC concerning the development and marketing of Licensed Product in the various
countries of the world.
(b) EXCEPTIONS. Nothing in this Section 4.2 shall require P&U
to develop or market the Licensed Product in any country in which by reason of
pricing restrictions, costs of doing business, or other reasons P&U can
demonstrate to Gilead's satisfaction (not to be unreasonably withheld) that P&U
would reasonably not choose to market Licensed Product in view of market
potential, profit potential or strategic purpose in view of conditions then
prevailing in such country (either directly or by reason of the effect that such
activity would have on other markets for the Licensed Product). It is
specifically understood that any request by P&U for relief under this Section
4.2(b) shall be accompanied by a specific and detailed economic analysis
presenting the basis for its conclusion. P&U shall not lose any license rights
for failure of diligence under Article 4 in any territory in which P&U is able
to demonstrate P&U's reasoning to Gilead's satisfaction. In addition, P&U may
propose to the JSC that regulatory approval for Licensed Product not be sought
or obtained in a particular country. P&U shall not be relieved of its
obligations under this Section 4.2 unless Gilead consents to removing such
country from P&U's diligence obligations or delaying the time periods set forth
above to take into account unforeseen circumstances.
ARTICLE 5
COMPENSATION
5.1 LICENSE FEE. P&U shall pay to Gilead a license fee of ten million
dollars ($10,000,000) within ten (10) days of the Effective Date. Such license
fee shall be nonrefundable and noncreditable.
5.2 MILESTONE PAYMENT. P&U shall pay to Gilead a ten million dollar
($10,000,000) milestone payment within thirty (30) days after its receipt of
notice from Gilead that the CPMP has issued a decision granting a marketing
authorization for Vistide. Such milestone payment shall be nonrefundable and
noncreditable.
5.3 ROYALTY PAYMENTS ON NET SALES. P&U shall make royalty payments to
Gilead on Net Sales of Licensed Products in the P&U Territory, payable on a
quarterly calendar basis ("Royalty Payments"). Royalty Payments shall be
calculated on Net Sales of Patented Products as set forth in
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subsection (a) below and shall be calculated on Net Sales of Non-Patented
Products as set forth in subsection (b) below.
(a) PATENTED PRODUCTS ROYALTY. [
]
(b) NON-PATENTED PRODUCTS ROYALTY. [
]
(c) ADJUSTMENT FOR PACKAGED PRODUCT. In the event Licensed
Product is sold as a package with other products (a "Packaged Product"), then
the Net Sales applicable to such sale of the Packaged Product shall be
determined in a fair and reasonable manner.
(d) PAYMENT FOR NON-PATENT BENEFITS. In establishing a
structure which provides for a lower Royalty Payment for Non-Patented Products,
the parties recognize, and P&U acknowledges, the substantial value of the
various actions being taken by Gilead under this Agreement, in addition to the
grant of a patent license, to enable the rapid and effective market introduction
of the Licensed Products in the P&U Territory. These actions include, by way of
example, the completion of the CPMP approval process and the transfer of the
MAA; ongoing access to Gilead regulatory filings; the supply commitments set
forth in Article 6; the willingness to transfer manufacturing know-how; the
licenses under the Gilead Know-How and trademarks; and ongoing access to
improvements in the Licensed Products made by Gilead during the term of this
Agreement, including the possible introduction of an intraocular formulation of
Cidofovir. The parties agree that the Royalty Payment (plus the license fee,
supply payments, and the cost reimbursements provided for elsewhere herein)
provides fair compensation to Gilead for these
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additional benefits in the case of the sale of Patented Products, and that
because Gilead is not being otherwise compensated under this Agreement for
such additional benefits, a lesser Royalty Payment is appropriate for the
sale of Licensed Products not covered by Gilead Patents. The parties have
agreed to the payment structure set forth herein as a convenient and fair
mechanism to compensate Gilead for these additional benefits.
5.4 QUARTERLY PAYMENT MECHANISM; YEAR-END RECONCILIATION. For each of
the first three calendar quarters of each calendar year in which a Royalty
Payment is due, P&U shall make a payment to Gilead equal to (i) P&U's total Net
Sales of Patented Products and Non-Patented Products during such quarter
multiplied by (ii) the total Royalty Payment that was due with respect to the
previous calendar year divided by the total Net Sales of Patented Products and
Non-Patented Products during such previous calendar year. During the first
calendar year of this Agreement during which there are Net Sales, the rate under
(ii) above shall be [ ] The payment due with respect to the final calendar
quarter of the year shall be equal to the total Royalty Payment due for such
year less the aggregate Royalty Payments made with respect to the first three
quarters of the year. (Thus, during the first three calendar quarters of each
calendar year, the Royalty Payment shall be made on the basis of the average
rate applicable to Net Sales during the previous year. At the end of the year,
a reconciliation shall occur so that the actual payments for the year as a whole
are equal to the amount due under Section 5.3.)
5.5 SUBLICENSE. In the event P&U sublicenses its right to sell Licensed
Product, such sublicenses shall include an obligation for the sublicensee to
account for and report its Net Sales of Licensed Products on the same basis as
if such sales were Net Sales of Licensed Products by P&U, and P&U shall pay
Royalty Payments to Gilead as if the Net Sales of the sublicensee were Net Sales
of P&U.
5.6 EXPIRATION OF ROYALTY PAYMENT OBLIGATIONS. On a country-by-country
and product-by-product basis, P&U's Royalty Payment obligations (i) with respect
to Patented Products shall expire upon the date on which P&U's activities with
respect to a Licensed Product no longer infringe a Valid Claim of a Gilead
Patent in such country, and (ii) with respect to Non-Patented Products shall
expire on the date which is [ ] after the date of First Commercial
Sale of such product in such country. Upon expiration of P&U's Royalty Payment
obligations in a country with respect to a Licensed Product, P&U's exclusive
license under Gilead Know-How in such country shall convert with no further
action required to a nonexclusive license, and P&U may thereafter continue to
sell such Licensed Product in such country on a royalty-free basis. Thereafter,
Gilead may obtain marketing approval and market such product in such country, at
Gilead's sole expense, with no obligation to P&U.
ARTICLE 6
SUPPLY AND MANUFACTURING
6.1 SUPPLY OF CIDOFOVIR. Subject to the terms and conditions of this
Article 6, Gilead shall supply to P&U all of its requirements of bulk Cidofovir
for sales of Licensed Products in the P&U Territory; P&U shall not obtain bulk
Cidofovir from a third party or manufacture it directly without Gilead's written
consent. Such supply obligation shall terminate upon the expiration of the last
Gilead Patent. P&U will be responsible for obtaining supply of finished
Licensed Product, by manufacturing directly or through a third party. It is
understood by Gilead that P&U wishes to enter into a direct manufacturing
agreement with Ben Venue to provide for at least the initial supply of finished
Licensed Product. Gilead shall assist P&U in consummating this agreement.
6.2 TECHNOLOGY TRANSFER. Gilead shall cooperate in the timely transfer
of Gilead Technology relating to the manufacture of finished Licensed Product to
P&U or its sublicensee approved
[*] CONFIDENTIAL TREATMENT REQUESTED
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by Gilead. Gilead will have the right to test and approve samples from the
first three (3) lots of finished Licensed Product manufactured by P&U prior to
release for commercial distribution. Any such transfer of Gilead Technology
shall be subject to the confidentiality obligations of the parties hereunder.
Such technology transfer shall be provided without charge to P&U, except that if
any Gilead or other personnel need to travel in order to effect such transfer,
the costs of such travel and associated lodging and other expenses shall be
borne by P&U.
6.3 SUPPLY OF INTRAOCULAR CIDOFOVIR. The parties intend that Gilead
shall supply P&U with clinical materials for intraocular Cidofovir, but that P&U
will obtain its own source of manufacturing capacity for commercial quantities
of intraocular Cidofovir. In such event, subject to the termination provisions
of Section 9.3, Gilead shall supply such quantities of bulk Cidofovir as may be
ordered by P&U to enable the production of intraocular Cidofovir.
6.4 SUPPLY PRICES. [
]
6.5 SPECIFICATIONS. Promptly following execution of this Agreement,
Gilead shall deliver to P&U its current specifications for bulk Cidofovir (the
"Specifications"), which are consistent with those set forth in the applications
for marketing approval of Vistide filed by Gilead in the United States and
Europe. The parties recognize that Gilead may hereafter make changes to the
Specifications for bulk Cidofovir. Any changes in the Specifications which
requires regulatory approval, or materially and demonstrably adversely affects
the Licensed Product as then being developed or sold by P&U, may be made by
Gilead only with the prior written approval of P&U. Any changes in the
Specifications which do not require regulatory approval, and do not materially
and demonstrably adversely affect the Licensed Product as then being developed
or sold by P&U, may be made by Gilead upon written notice to P&U. In no event
shall Gilead cease to supply P&U with bulk Cidofovir conforming to the old
Specifications until P&U has obtained the necessary approvals provided, however,
that P&U shall make a good faith effort to obtain the necessary approvals in a
timely fashion.
6.6 FORECASTS AND ORDERS. P&U shall provide Gilead with rolling
forecasts of its expected requirements of bulk Cidofovir over the next 18
months. Forecasts shall be due quarterly and shall set forth (i) P&U's actual
requirements for the following two quarters, which portion of the forecast shall
be binding and serve as an order for bulk Cidofovir, and (ii) P&U's best
estimate of its requirements for the following four quarters. Gilead shall
deliver the bulk Cidofovir ordered for delivery by the start of each calendar
quarter, but in no event shall Gilead be required to deliver more Cidofovir in
any given quarter than was estimated for such quarter in the last two applicable
forecasts. In addition, except with the written consent of Gilead, P&U may not
increase its forecast of any material requirements in a
[*] CONFIDENTIAL TREATMENT REQUESTED
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particular calendar quarter by more than twenty five percent (25%) from its
forecast for such quarter during its immediately preceding forecast.
6.7 ACCEPTANCE; SHIPMENT AND RISK OF LOSS.
(a) ACCEPTANCE. Gilead (directly or through its supplier) shall
test a portion of each batch in each delivery of Cidofovir and supply P&U with a
sample of bulk Cidofovir and a certificate of analysis ("CERTIFICATE OF
ANALYSIS") confirming that such batch meets the Specifications. P&U may then
retest the Cidofovir to confirm that it meets Specifications. P&U may reject
any batch of Cidofovir for failure to meet Specifications by providing written
notice to Gilead within fifteen (15) days of P&U's receipt of such batch. In
the event that P&U rejects any batch of Cidofovir, Gilead shall use its Best
Efforts to supply P&U with replacement material within thirty (30) days after
Gilead receives P&U's written notice of rejection. If Gilead agrees that the
batch did not meet Specifications, such replacement batch shall be provided
without charge. If Gilead disagrees with P&U's determination that certain
material does not meet the Specifications, such material shall be submitted to a
mutually acceptable third party laboratory. Such third party laboratory shall
determine whether the material in question meets the Specifications and the
parties agree that such laboratory's determination shall be final and
determinative. The party against whom the third party tester rules shall bear
all costs of the third party testing. If the third-party tester rules that the
batch fails to meet Specifications, Gilead's replacement of the batch shall be
at no charge to P&U. If the third party tester rules that the batch did meet
Specifications, P&U shall accept such batch for use or reimburse Gilead's cost
of manufacture. If for any reason P&U does not use a batch of material
delivered to it by Gilead, it shall destroy or return such batch of material, as
directed by Gilead.
(b) SHIPMENT; RISK OF LOSS. Unless otherwise agreed to in
writing, all shipments shall be F.O.B the place of manufacture. Material
supplied under this Article 6 shall be made available for shipment upon
acceptance of the relevant sample in accordance with Section 6.9(a). Shipment
shall occur by such method and carrier as P&U may designate, and all
transportation expenses for the delivery of material to P&U shall be borne by
P&U. P&U shall bear the risk of loss of any material following shipment from
the place of manufacture.
(c) MINIMUM INVENTORIES. P&U acknowledges the inherent risk
that a batch of bulk or finished product may be lost in production or shipment,
and agrees to maintain an inventory of materials it purchases from Gilead
sufficient to supply at least ninety (90) days worth of P&U's requirements in
the event of late delivery by Gilead.
6.8 INVOICES. Gilead will invoice P&U for each batch of material
supplied to P&U under this Article 6. P&U shall pay such invoices within
[ ] of receipt of goods. Any invoiced amount which is not paid
within [ ] period shall be assessed a late payment fee at
the rate of 10% per annum or the maximum rate permitted by applicable law
with respect to such payment obligations, whichever is less.
6.9 SHORTAGES OF SUPPLY. If Gilead is unable to supply quantities of
bulk Cidofovir ordered by P&U in accordance with this Article 6, then, unless
the parties otherwise agree at the time, Gilead shall allocate the available
bulk Cidofovir, as the case may be, between itself and P&U on a pro rata basis
in accordance with the respective utilization of each party of the material in
question in the four calendar quarters immediately preceding the quarter in
which such shortage occurs. In such event, Gilead shall further use its
reasonable efforts to remedy the shortage in question. The product allocation
provided in this Section 6.9 shall be the sole remedy of P&U in the event of
such a supply shortage, and Gilead shall not have monetary liability as a result
of such supply shortage.
[*] CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 7
MARKETING
7.1 PROMOTION AND MARKETING EFFORTS. Upon gaining the necessary
regulatory, pricing and reimbursement approvals, P&U and/or its sublicensees
shall use its Best Efforts to promote and market the Licensed Product in all
countries in the P&U Territory (except in those countries where the provisions
of Article 4 do not require such marketing). Any sublicense of marketing rights
by P&U shall include a covenant for such sublicensee to use Best Efforts to
maintain and increase sales of the Licensed Product in each country covered by
the sublicense.
7.2 PRICING. P&U shall determine, in its sole discretion, the pricing,
discounting policy and other commercial terms relating solely to Licensed
Products.
7.3 TRADEMARKS. P&U shall sell Licensed Product under the mark
"Vistide" and other trademarks selected and owned by Gilead to the extent
allowed by regulatory authorities in the P&U Territory. In the event such
authorities do not permit P&U to use the Gilead trademarks, P&U shall select and
own its own trademarks for the commercialization of Licensed Product. Gilead
hereby grants P&U a limited license to the use of the Gilead marks, trade names
and logos to be designated by Gilead in connection with the commercialization
activities provided for herein (collectively, the "Marks") for the sole purpose
of selling Licensed Products in the P&U Territory. Such license shall be
exclusive so long as P&U is making Royalty Payments to Gilead under Article 5,
and thereafter shall be perpetual with respect to the name "Vistide" and other
product names and logos previously designated by Gilead specifically for
Licensed Product, but shall expire with respect to Marks used more generally by
Gilead. P&U may sublicense its rights under this Section 7.3 to its non-
Affiliates with the prior written consent of Gilead, which consent shall not be
unreasonably withheld. P&U shall submit any materials bearing the Gilead Marks
to Gilead for approval prior to using such materials to commercialize Licensed
Products, and Gilead shall not unreasonably withhold such approval. P&U will
not take any action which may damage the goodwill associated with the Gilead
Marks and will not damage the reputation for quality associated with the Gilead
Marks. Except as provided in this Section 7.3, P&U shall have no right or
interest in any Gilead trademark used in association with any Gilead product.
7.4 USE OF THE GILEAD NAME. Gilead and P&U agree that the packaging and
promotional materials for the Licensed Product marketed by P&U and/or P&U's
sublicensees shall identify Gilead as developer and licensor, to the extent that
P&U can reasonably accommodate same. P&U hereby acknowledges Gilead's ownership
of the Gilead Sciences name. Gilead hereby agrees to indemnify and hold P&U
harmless from any use hereunder of the Gilead Sciences name in connection with
Licensed Product in the P&U Territory which occurs with the consent of Gilead,
provided that P&U provides Gilead prompt notice of any such claim and grants to
Gilead the exclusive ability to defend (with the reasonable cooperation of P&U)
and settle any such claim. If only one name is allowed pursuant to governmental
laws or regulations, then P&U may use its name alone, without identifying Gilead
as developer and licensor.
7.5 DISTRIBUTION OF LICENSED PRODUCT. P&U shall be responsible for
distribution of Licensed Product in the P&U Territory. Gilead shall apply for
exemptions or waivers available under U.S. export control laws applicable to the
shipment of Licensed Products to locations designated by P&U.
7.6 EXPORT CONTROL. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the United
States of America or other countries which may be imposed upon or related to
Gilead or P&U from time to time. Each party agrees that it will not
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export, directly or indirectly, any technical information acquired from the
other party under this Agreement or any products using such technical
information to a location or in a manner that at the time of export requires an
export license or other governmental approval, without first obtaining the
written consent to do so from the appropriate agency or other governmental
entity.
ARTICLE 8
PAYMENTS; RECORDS; AUDIT
8.1 PAYMENT; REPORT. All amounts payable to either party under this
Agreement shall be paid in U.S. dollars within [ ] of the end
of each calendar quarter or as otherwise specifically provided herein. Each
payment of Royalty Payments shall be accompanied by a statement, country by
country, of the amount of Net Sales during such quarter and on a cumulative
basis for the current year and the amount of Royalty Payments or other
payments due on such sales. An itemized calculation of [
] as described in
Section 6.4 will also be provided together with quarterly payments.
8.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments due
hereunder from time to time shall be paid in U.S. Dollars. For purposes of
computing such payments, the Net Sales of Licensed Product sold for foreign
(i.e., non-United States) funds shall first be determined in the foreign funds
for which such Licensed Product is sold and then converted to its equivalent in
the U.S. Dollars. Conversion of the amounts of Net Sales from local currencies
to U.S. dollars will be made using the same method by P&U in the normal
conversion of financial statements for internal and external reporting purposes
on a monthly basis using at least three (1st, 15th and end of month) exchange
rates as published by the local country source customarily used by P&U in the
month in which sales were invoiced.
Notwithstanding the foregoing, if by reason of any restrictive
exchange laws or regulations, P&U shall be unable to convert to U.S. Dollars the
amount, determined as above, equivalent to the amount due by P&U hereunder, then
P&U shall so notify Gilead promptly and provide an explanation of the
circumstances. In such event, P&U shall make all such payments or the balance
thereof due hereunder and which is not paid in foreign currency as provided
below, in U.S. Dollars as soon as reasonably possible after and to the extent
that such restrictive exchange laws or regulations are lifted so as to permit
P&U to pay amounts due under this Section 8.2 in U.S. Dollars. P&U shall
promptly notify Gilead if such restrictions are so lifted. At its option Gilead
shall meanwhile have the right to request the payment (to it or to its nominee),
and, upon request, P&U shall pay or cause to be paid amounts due (or such
portions thereof as are specified by Gilead) in the currency of any other
country designated by Gilead and legally available to P&U under the then-
existing laws or regulations. Any payments shall be payable to Gilead by wire
transfer at such bank in the United States as Gilead shall specify from time to
time. Not less than one (1) business day prior to such wire transfer, the
remitting party shall telefax the receiving party advising it of the amount and
of the payment to be made.
8.3 RECORDS AND AUDIT.
(a) P&U shall keep complete and accurate records pertaining to
the sale or other disposition of the Licensed Product and of the Royalty
Payments and other amounts payable under this Agreement in sufficient detail to
permit Gilead and/or its licensors to confirm the accuracy of all payments due
hereunder. Gilead shall have the right to cause an independent, certified
public accountant to which P&U has no reasonable objection to audit such records
to confirm P&U's Net Sales and Royalty Payments including supply price
adjustments as described in Section 6.4 for the preceding year. Such audit
rights may be exercised no more often than once a year, within three (3) years
after the Royalty Payment period
[*] CONFIDENTIAL TREATMENT REQUESTED
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to which such records relate, upon notice to P&U and during normal business
hours. Gilead will bear the full cost of such audit unless such audit discloses
an underpayment of more than five percent (5%) from the amount of Royalty
Payments due. In such case, P&U shall bear the full cost of such audit. The
terms of this Section 8.3 (a) shall survive any termination or expiration of
this Agreement for a period of three (3) years.
(b) Upon reasonable notice, P&U may perform GMP audits of Gilead
facilities, or contract manufacturers for Gilead, as they are or might be used
in the production of items controlled in the registration applications under
Paragraph 3.2(c) when the registration transfers to P&U or Paragraph 3.2(b) when
P&U successfully gains its own approvals. Expenses for such audits will be
borne by P&U.
8.4 WITHHOLDING TAXES. All payments made by P&U to Gilead under this
Agreement and the Stock Purchase Agreement shall be made free and clear of any
deductions or withholdings except to the extent provided for in this Section
8.4. Any and all taxes levied on account of Royalty Payments paid or owed from
a country in which provision is made in the law or by regulation for withholding
will be deducted from Royalty Payment paid Gilead hereunder. P&U shall
cooperate with Gilead to claim exemption from such deductions or withholdings
under any double taxation or similar agreement in force from time to time and
shall endeavor to secure any such exemptions before Royalty Payments are made
hereunder. If P&U makes any payment without reduction for withholding and it
later transpires that an amount of tax should have been withheld on such Royalty
Payment ("under withheld tax"), P&U shall be entitled to recover the under
withheld tax by an additional withholding from any payment due to Gilead under
this Agreement. Similarly, if P&U withholds an amount of tax which is later
determined to have not been due, P&U shall reimburse Gilead for such over
withheld amounts.
ARTICLE 9
TERM AND TERMINATION
9.1 TERM. The term of this Agreement shall commence upon the Effective
Date and, unless sooner terminated as provided in this Article 9, expire on the
expiration of all the Royalty Payment obligations set forth under Article 5.
9.2 LICENSES UPON EXPIRATION. In the event that the Agreement expires
as set forth in Section 9.1 above without early termination, the license granted
under Section 2.1 with respect to the Gilead Technology shall automatically
become a non-exclusive, irrevocable, fully-paid license to use and/or sublicense
the use of Gilead Know-How to manufacture, use and sell the Licensed Products
worldwide. In any event of termination of this Agreement by reason other than
breach of this Agreement by Gilead, the licenses to Gilead set forth in Section
2.1(b) shall survive.
9.3 TERMINATION FOR BREACH. Each party shall have the right to
terminate this Agreement and its obligations hereunder for material breach by
the other party, which breach remains uncured for ninety (90) days after written
notice is provided to the breaching party, or in the case of an obligation to
pay Royalty Payments or other amounts owing under this Agreement, which breach
remains uncured for thirty (30) days after written notice to the breaching party
unless there exists a bona fide dispute as to whether such Royalty Payments or
other amounts are owing. Notwithstanding any termination under this Section 9.3,
any obligation to pay Royalty Payments which had accrued or become payable as of
the date of termination shall survive termination of this Agreement.
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9.4 TERMINATION IN EVENT OF PATENT CHALLENGE. Gilead shall have the
right to terminate this Agreement if P&U challenges the validity of the Gilead
Patents within any country in the P&U Territory effective thirty (30) days after
P&U's receipt of written notice of such termination by Gilead.
9.5 UNCONDITIONAL RIGHT TO TERMINATE. P&U may in its sole
discretion terminate this Agreement in whole but not in part by providing
[ ] written notice to Gilead, provided that such termination
shall not be effective until at least [ ] after the Effective Date.
Termination under this provision will not relieve P&U of any obligation
occurred prior to termination, such as confidentiality, payments and other
provisions which by their nature would survive termination.
9.6 REVERSION OF PRODUCT RIGHTS. In the event that a party terminates
this Agreement pursuant to Sections, 9.3, 9.4 or 9.5 above, all licenses granted
to the other party under Section 2.1 hereof shall terminate. In the event that
P&U permanently loses its right to use and sell the Licensed Product in any
country other than by reason of any action or failure to act on the part of
Gilead or any party acting on behalf of Gilead, all licenses granted under
Section 2.1(a) hereof shall terminate in such country.
9.7 SURVIVAL. Articles 1, 9, 11, 12, 14 and 15 and Section 3.6 of this
Agreement shall survive termination of this Agreement for any reason (subject to
any subsequent dates of termination referred to in such individual Articles).
ARTICLE 10
INTELLECTUAL PROPERTY
10.1 PROSECUTION OF PATENTS. Gilead Patents shall be prosecuted and
maintained by Gilead or its licensors, at Gilead's expense. P&U Patents shall
be prosecuted and maintained by P&U, at its expense. In the event that Gilead
elects not to maintain any issued patent within the Gilead Patents or not to
file any patent term extensions to the Gilead Patents which P&U believes are
appropriate to obtain an extended period of market exclusivity for Licensed
Product, Gilead will offer to assign such patent rights to P&U. If P&U elects
to take over responsibility for such patent rights any license obligations which
specifically relate to such patent rights are terminated, i.e., royalties for
Patented Products.
10.2 INFRINGEMENT OF PATENTS BY THIRD PARTIES.
(a) NOTIFICATION. Each party shall promptly notify the other in
writing of any alleged or threatened infringement of the Gilead Patents of which
it becomes aware.
(b) GILEAD PATENTS. Gilead shall have the right, but not the
obligation, to bring, at Gilead's expense and in its sole control, an
appropriate action against any person or entity infringing a Gilead Patent
directly or contributorily. If Gilead does not bring such action within ninety
(90) days of notification thereof to or by P&U, P&U will have the right to bring
such action at P&U's sole expense and will be entitled to all relief and damages
awarded. In either situation, P&U or Gilead will fully cooperate with the
responsible party at the responsible party's expense. Such cooperation shall
include, if required in order to bring such an action, providing information
relating to infringement.
10.3 INFRINGEMENT OF THIRD PARTY RIGHTS. In the event that any Licensed
Product manufactured, used or sold under this Agreement becomes the subject of a
third party claim for patent or trademark infringement anywhere in the world,
and irrespective of whether Gilead or P&U is charged
[*] CONFIDENTIAL TREATMENT REQUESTED
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with said infringement, and the venue of such claim, the parties shall promptly
meet to consider the claim and the appropriate course of action. Unless the
parties otherwise agree, the party against which such third party infringement
claim is brought shall defend against such claim at its sole expense and the
other party shall have the right, but not the obligation, to participate in any
such suit, at its sole option and at its own expense. Such other party shall
reasonably cooperate with the party conducting the defense of the claim,
including if required to conduct such defense, furnishing a power of attorney.
Neither party shall enter into any settlement that affects the other party's
rights or interests without such other party's written consent, which consent
shall not be unreasonably withheld. If in the opinion of P&U's counsel, a
license with respect to such third party patents or trademarks is necessary to
enable P&U to continue to make, use, sell offer for sale or import Licensed
Product, then P&U shall notify Gilead of such conclusion and the basis for it
and give Gilead a reasonable opportunity to oppose such claim. In the event
that Gilead elects not to oppose the claim or does not successfully obtain any
necessary license, P&U shall have the right to negotiate directly with such
third party for a license. Fifty percent (50%) of any royalty payable to a
third party by P&U necessary to make, use or sell Licensed Product will be
deductible from any royalty due Gilead but no such deduction will be more than
fifty percent (50%) of any amount due Gilead in a reporting period. Any third
party royalties not deductible in any one reporting period may be carried over
to the next reporting period until extinguished.
10.4 PATENT MARKING. P&U shall mark Licensed Products with appropriate
patent numbers or indicia at Gilead's instruction and election, as, when and
where P&U may reasonably accommodate same, given packaging, printing schedules
and other factors, in those countries where markings have notice value as
against infringers.
10.5 JSC REVIEW OF PATENT STRATEGY. The JSC will review overall patent
defense and enforcement strategy, and resolve any disagreements between the
parties on patent-related matters.
ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION BY GILEAD. Gilead hereby agrees to indemnify, hold
harmless and defend P&U against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts P&U becomes legally
obligated to pay because of any claim or claims against it to the extent that
such claim or claims (i) arise out of the failure of bulk Cidofovir supplied
hereunder to meet the Specifications, (ii) arise out of the breach or alleged
breach of any representation or warranty by Gilead hereunder, or (iii) are due
to the gross negligence or willful misconduct of Gilead; PROVIDED that (a) P&U
provides Gilead with prompt notice of any such claim and the exclusive ability
to defend (with the reasonable cooperation of P&U) and settle any such claim and
(b) such indemnities shall not apply to the extent such claims are covered by
P&U's indemnity set forth in Section 11.2 below.
11.2 INDEMNIFICATION BY P&U. P&U hereby agrees to indemnify, hold
harmless and defend Gilead against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts Gilead becomes legally
obligated to pay because of any claim or claims against it to the extent that
such claim or claims (i) result from P&U's activities under this Agreement, (ii)
arise out of the breach or alleged breach of any representation or warranty by
P&U hereunder, (iii) are due to the gross negligence or willful misconduct of
P&U, or (iv) arise out of the possession, final manufacture, use, sale or
administration of the Licensed Product by P&U or P&U's Affiliates or
sublicensees; PROVIDED that (a) Gilead provides P&U with prompt
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notice of any such claim and the exclusive ability to defend (with the
reasonable cooperation of Gilead) or settle any such claim and (b) such
indemnities shall not apply to the extent such claims are covered by Gilead's
indemnity set forth in Section 11.1 above.
11.3 MECHANICS. In the event that the parties cannot agree as to the
application of Sections 11.1 and 11.2 above to any particular loss or claim, the
parties may conduct separate defenses of such claim. Each party further
reserves the right to claim indemnity from the other in accordance with Sections
11.1 and 11.2 above upon resolution of the underlying claim, notwithstanding the
provisions of Sections 11.1 and 11.2 above requiring the indemnified party to
tender to the indemnifying party the exclusive ability to defend such claim or
suit.
11.4 INSURANCE COVERAGE. Both Parties represent and warrant that they
are covered and will continue to be covered by a comprehensive general liability
insurance program which covers all their activities and obligations hereunder.
Each party will provide the other with written notice at least fifteen (15) days
prior to any cancellation or material change in such insurance program. Each
Party will maintain such insurance program, or other program with comparable
coverage, beyond the expiration or termination of this Agreement during (i) the
period that any Licensed Product is being commercially distributed or sold other
than for the purpose of obtaining regulatory approvals by P&U or by a
sublicensee, Affiliate or agent of P&U and (ii) a commercially reasonable period
thereafter.
ARTICLE 12
CONFIDENTIALITY
12.1 PROPRIETARY INFORMATION; EXCEPTIONS. Each party will maintain all
Proprietary Information received by it under this Agreement in trust and
confidence and will not disclose any such Proprietary Information to any third
party or use any such Proprietary Information for any purposes other than those
necessary or permitted for performance under this Agreement. In particular,
neither party shall use any Know-How of the other party for the manufacture or
sale of any product other than the Licensed Product, except as expressly
authorized by this Agreement. Each party may use such Proprietary Information
only to the extent required to accomplish the purposes of this Agreement.
Proprietary Information shall not be used for any purpose or in any manner that
would constitute a violation of any laws or regulations, including without
limitation the export control laws of the United States. Proprietary
Information shall not be reproduced in any form except as required to accomplish
the intent of this Agreement. No Proprietary Information shall be disclosed to
any employee, agent, consultant, Affiliate, or sublicensee who does not have a
need for such information. To the extent that disclosure is authorized by this
Agreement, the disclosing party will obtain prior agreement from its employees,
agents, consultants, Affiliates, sublicensees or clinical investigators to whom
disclosure is to be made to hold in confidence and not make use of such
information for any purpose other than those permitted by this Agreement. Each
party will use at least the same standard of care as it uses to protect its own
Proprietary Information of a similar nature to ensure that such employees,
agents, consultants and clinical investigators do not disclose or make any
unauthorized use of such Proprietary Information, but no less than reasonable
care. Each party will promptly notify the other upon discovery of any
unauthorized use or disclosure of the Proprietary Information.
Proprietary Information shall not include any information which:
(a) is now, or hereafter becomes, through no act or failure to
act on the part of the receiving party in breach hereof, generally known or
available;
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(b) is known by the receiving party at the time of receiving
such information, as evidenced by its written records;
(c is hereafter furnished to the receiving party by a third
party, as a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving party without
any breach of this Agreement; or
(e) is the subject of a written permission to disclose provided
by the disclosing party.
The parties agree that the material financial terms of the Agreement will
be considered Proprietary Information of both parties. Notwithstanding the
foregoing, either party may disclose such terms except for Cost of Goods and
Royalty Payments to bona fide potential corporate partners, to the extent
required or contemplated by this Agreement, and to financial underwriters and
other parties with a need to know such information. All such disclosures shall
be made only to parties under an obligation of confidentiality.
12.2 AUTHORIZED DISCLOSURE. Notwithstanding any other provision of this
Agreement, each party may disclose Proprietary Information if such disclosure:
(a) is in response to a valid order of a court or other
governmental body of the United States or a foreign country, or any political
subdivision thereof; PROVIDED, HOWEVER, that the responding party shall first
have given notice to the other party hereto and shall have made a reasonable
effort to obtain a protective order requiring that the Proprietary Information
so disclosed be used only for the purposes for which the order was issued;
(b) is otherwise required by law or regulation, including SEC
related documents; or
(c) is otherwise necessary to file or prosecute patent
applications, prosecute or defend litigation or comply with applicable
governmental regulations or otherwise establish rights or enforce obligations
under this Agreement, but only to the extent that any such disclosure is
necessary. Under no circumstances will P&U disclose publicly proprietary
features of Gilead manufacturing technology for Cidofovir; PROVIDED, HOWEVER,
that Gilead shall cooperate with P&U to disclose such information to the extent
required to provide P&U with reasonable protection from liability by reason of
this prohibition on disclosure.
12.3 RETURN OF PROPRIETARY INFORMATION. In the event either party loses
a license to Know-How which was granted to it under this Agreement, such party
shall use diligent efforts (including without limitation a diligent search of
files and computer storage devices) to return all Proprietary Information
received by it from the other party, PROVIDED, HOWEVER, that such party may keep
one copy of such Proprietary Information for legal archival purposes. Access to
the copy so retained by a party's legal department shall be restricted to
counsel and no use of such Proprietary Information shall not be used except in
the resolution of any claims or disputes arising out of this Agreement.
23.
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ARTICLE 13
REPRESENTATIONS AND WARRANTIES
13.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each party hereby represents
and warrants:
(a) CORPORATE POWER. Such party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
(b) DUE AUTHORIZATION. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.
13.2 GILEAD REPRESENTATIONS AND WARRANTIES.
(a) Gilead represents and warrants that it is unaware of any
patents or trade secret rights owned or controlled by a third party, to which it
does not already have rights, which would dominate, or be infringed or
misappropriated by the manufacture of Licensed Product or its use or sale, and
is unaware of any claims of such domination, infringement or misappropriation.
(b) Gilead makes the following representations and warranties
with respect to all bulk Cidofovir supplied by it hereunder:
A. Such Cidofovir shall be manufactured in accordance with all
United States federal, state and local statutes, ordinances and regulations,
including but not limited to, the Federal Food, Drug and Cosmetic Act of 1938,
as amended from time to time (the "Act"), and the regulations thereunder,
including Good Manufacturing Practice Regulations which are in force or are
hereafter adopted. Gilead shall also endeavor in good faith to satisfy any
additional requirements of other regulatory agencies with respect to the bulk
Cidofovir supplied by it to P&U hereunder.
B. Cidofovir delivered hereunder shall not be adulterated or
misbranded within the meaning of the Act.
C. Gilead has good and marketable title to, and the right to
sell, the Cidofovir and Licensed Product.
13.3 NO OTHER REPRESENTATIONS. THE EXPRESS REPRESENTATIONS AND
WARRANTIES STATED IN THIS ARTICLE 13 ARE IN LIEU OF ALL OTHER REPRESENTATIONS
AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
24.
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ARTICLE 14
DISPUTE RESOLUTIONS; VENUE AND GOVERNING LAW
14.1 DISPUTES. The parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either party's rights and/or obligations hereunder or thereunder. It is the
objective of the parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, the
parties agree to follow the procedures set forth in this Article 14 if and when
a dispute arises under this Agreement.
In the event of disputes between the parties, including disputes among the
members of the JSC which such committee is unable to resolve, either party may,
by written notice to the other, have such dispute referred to their respective
executive officers designated below or their successors, for attempted
resolution by good faith negotiations within fourteen (14) days after such
notice is received. Said designated officers are as follows:
FOR P&U: Secretary
FOR GILEAD: Chief Executive Officer
In the event the designated executive officers are not able to resolve such
dispute, either Party may at anytime after the 14 day period invoke the
provisions of Section 14.2 hereinafter.
14.2 ALTERNATIVE DISPUTE RESOLUTION. Any dispute, controversy or claim
arising out of or relating to the validity, construction, enforceability or
performance of this Agreement, including disputes relating to alleged breach or
to termination of this Agreement, other than disputes which are expressly
prohibited herein from being resolved by this mechanism, shall be settled by
binding Alternative Dispute Resolution ("ADR") in the manner described below:
(a) ADR REQUEST. If a party intends to begin an ADR to resolve
a dispute, such Party shall provide written notice (the "ADR Request") to
counsel for the other Party informing such other Party of such intention and the
issues to be resolved. From the date of the ADR Request and until such time as
any matter has been finally settled by ADR, the running of the time periods
contained in Section 9.3 as to which party must cure a breach of this Agreement
shall be suspended as to the subject matter of the dispute.
(b) ADDITIONAL ISSUES. Within ten (10) business days after the
receipt of the ADR Request, the other party may, by written notice to the
counsel for the party initiating ADR, add additional issues to be resolved.
14.3 ARBITRATION PROCEDURE. The ADR shall be conducted pursuant to
ENDISPUTE Rules A and C (1993), attached hereto as Exhibit B. Notwithstanding
those rules, the following provisions shall apply to the ADR hereunder:
(a) ARBITRATOR. The arbitration shall be conducted by a panel
of three arbitrators ("the Panel"). The Panel shall be selected from a pool of
retired independent federal judges to be presented to the parties by ENDISPUTE.
25.
<PAGE>
(b) PROCEEDINGS. The time periods set forth in the ENDISPUTE
rules shall be followed, unless a party can demonstrate to the Panel that the
complexity of the issues or other reasons warrant the extension of one or more
of the time tables. In such case, the Panel may extend such time tables, but in
no event shall the time tables being extended so that the ADR proceeding extends
more than 18 months from its beginning to the Award. In regard to such time
tables, the parties (i) acknowledge that the issues that may arise in any
dispute involving this Agreement may involve a number of complex matters and
(ii) confirm their intention that each party will have the opportunity to
conduct complete discovery with respect to all material issues involved in a
dispute within the framework provided above. Within such time frames, each
party shall have the right to conduct discovery in accordance with the Federal
Rules of Civil Procedure. The Panel shall not award punitive damages to either
Party and the Parties shall be deemed to have waived any right to such damages.
The Panel shall, in rendering its decision, apply the substantive law of the
State of California, without regard to its conflict of laws provisions, except
that the interpretation of and enforcement of this Section 14.3(b) shall be
governed by the Federal Arbitration Act. The Panel shall apply the Federal
Rules of Evidence to the hearing. The proceeding shall take place in the City
of Chicago. The fees of the Panels and ENDISPUTE shall be paid by the losing
Party which shall be designated by the Panel. If the Panel is unable to
designate a losing party, it shall so state and the fees shall be split equally
between the Parties.
(c) AWARD. The Panel is empowered to award any remedy allowed
by law, including money damages, multiple damages, prejudgment interest and
attorneys' fee, and to grant final, complete, interim, or interlocutory relief,
including injunctive relief but excluding punitive damages.
(d) COSTS. Except as set forth in Section 14.3(c), above, each
party shall bear its own legal fees. The Panel shall assess its costs, fees and
expenses against the party losing the ADR unless it believes that neither party
is the clear loser, in which case the Panel shall divide such fees, costs and
expenses according to the Panel's sole discretion.
(e) CONFIDENTIALITY. The ADR proceeding shall be confidential
and the Panel shall issue appropriate protective orders to safeguard each
party's Proprietary Information. Except as required by law, no party shall make
(or instruct the Panel to make) any public announcement with respect to the
proceedings or decision of the Panel without prior written consent of each other
party. The existence of any dispute submitted to ADR, and the award, shall be
kept in confidence by the parties and the Panel, except as required in
connection with the enforcement of such award or as otherwise required by
applicable law.
14.4 JURISDICTION. For the purposes of this Article 14, the parties
acknowledge their diversity (Gilead having its principal place of business in
California and P&U having its principal place of business in Luxembourg) and
agree to accept the jurisdiction of the Federal District Court in San Francisco,
CA for the purposes of enforcing awards entered pursuant to this Article and for
enforcing the agreements reflected in this Article.
14.5 GOVERNING LAW. This Agreement is made in accordance with and shall
be governed and construed under the laws of the State of California, as such
laws are applied to contract entered into and to be performed within such state.
26.
<PAGE>
ARTICLE 15
MISCELLANEOUS
15.1 AGENCY. Neither party is, nor will be deemed to be, an employee,
agent or legal representative of the other party for any purpose. Neither party
will be entitled to enter into any contracts in the name of, or on behalf of the
other party, nor will a party be entitled to pledge the credit of the other
party in any way or hold itself out as having authority to do so. This
Agreement is an arm's-length license agreement between the parties and shall not
constitute or be construed as a joint venture.
15.2 ASSIGNMENT. Except as otherwise provided herein, neither this
Agreement nor any interest hereunder will be assignable in part or in whole by
any party without the prior written consent of the other; PROVIDED, HOWEVER,
that either party may assign this Agreement to any successor by merger or sale
of substantially all of its business to which this Agreement relates in a manner
such that the assignor will remain liable and responsible for the performance
and observance of all its duties and obligations hereunder. This Agreement will
be binding upon the successors and permitted assigns of the parties and the name
of a party herein will be deemed to include the names of such party's successors
and permitted assigns to the extent necessary to carry out the intent of this
Agreement. Any assignment which is not in accordance with this Section 15.2
will be void.
15.3 DISCLOSURE. Any public disclosure of this Agreement and the terms
hereof, including but not limited to press releases, will be reviewed and
consented to by each party prior to such disclosure. Such consent shall not be
untimely or unreasonably withheld by either party.
15.4 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
15.5 NOTICES. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing unless otherwise specified
and shall be deemed to have been properly given and to be effective on the date
of delivery if delivered in person or by facsimile or three (3) days after
mailing by registered or certified mail, postage paid, to the other party at the
following address:
In the case of Gilead:
Gilead Sciences, Inc.
353 Lakeside Drive
Foster City, CA 94404
Telephone: (415) 574-3000
FAX: (415) 578-9264
Attention: Chief Executive Officer
In the case of P&U: and copy to:
Secretary V.P. of Business Development
Pharmacia & Upjohn S.A Pharmacia & Upjohn Company
c/o Credit Europeen 7000 Portage Road
52 route d'Esch Portage, Michigan 49001
L-1470 Luxembourg FAX 616-323-6247
27.
<PAGE>
Either party may change its address for communications by a notice to the other
party in accordance with this Section 15.5.
15.6 FORCE MAJEURE. Any delay in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
earthquake, explosion, riots, wars, civil disorder, rebellion or sabotage. The
party suffering such occurrence shall immediately notify the other party and any
time for performance hereunder shall be extended by the actual time of delay
caused by the occurrence.
15.7 SEVERABILITY. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted, to achieve the intent of the parties to this Agreement to the
extent possible rather than voided. In any event, all other terms, conditions
and provision of this Agreement shall be deemed valid and enforceable to the
full extent.
15.8 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
15.9 WAIVER. No waiver by either party hereto on any breach or default
of any of the covenants or agreements herein set forth shall be deemed a waiver
as to any subsequent or similar breach or default.
15.10 ENTIRE AGREEMENT. This Agreement, the Stock Purchase Agreement and
any and all Exhibits referred to herein and therein embody the entire
understanding of the parties with respect to the subject matter hereof and shall
supersede all previous communications, representations or understandings, either
oral or written, between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, both Gilead and P&U have executed this Agreement by
their respective officer hereunto duly authorized.
GILEAD SCIENCES, INC. PHARMACIA & UPJOHN, S.A.
By: /s/ John C. Martin By: /s/ Robert C. Salisbury
--------------------------- ---------------------------------------
Name: John C. Martin Name: Robert C. Salisbury
------------------------- -------------------------------------
Title: CEO Title: Chairman, Board of Directors, PUSA
------------------------ ------------------------------------
By: /s/ Carl-Johan Blomberg
---------------------------------------
Name: Carl-Johan Blomberg
-------------------------------------
Title: Finance Director, PUSA
------------------------------------
Date: August 7, 1996
28.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A - GILEAD PATENTS
GILEAD FILING FOR. FILING ISSUE EXP. ANNUITY
DOCKET # COMPOUND DATE DATE DATE DATE COUNTRY/SERIAL # PATENT # DUE
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[
</TABLE>
]
[*] CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT B
COPYRIGHT 1993 ENDISPUTE - VERSION 1.3
<PAGE>
EXHIBIT B
ENDISPUTE ARBITRATION RULES AND
PROCEDURES
SECTION A APPLICATION OF RULES
RULE A-1 SCOPE OF RULES
The ENDISPUTE Arbitration Rules and Procedures ("Rules") govern binding
Arbitration of disputes administered by ENDISPUTE.
RULE A-2 PARTY-AGREED PROCEDURES
Before or during the Arbitration process, the Parties may agree on any
arbitration procedures not inconsistent with applicable law. The Parties will
promptly notify the ENDISPUTE Arbitration Case Manager ("Case Manager") in
writing of any party-agreed procedures. These procedures will be enforceable as
if contained in these Rules. These Rules shall control any matters not specified
in the party-agreed procedures.
RULE A-3 CHOICE OF RULES
When the Parties submit a dispute to ENDISPUTE for binding Arbitration, the
Case Manager will ask them to specify whether they wish to conduct the
Arbitration under the Streamlined or the Comprehensive Rules. If the Parties do
not agree to a choice of Rules, the Streamlined Rules will govern all
Arbitrations in which no disputed claim or counterclaim exceeds $250,000, not
including interest, and the Comprehensive Rules will govern all other
Arbitrations. If the Arbitration is conducted under the Streamlined Rules, then
Sections A and B of these Rules apply. If the Arbitration is conducted under the
Comprehensive Rules, then Sections A and C of these Rules apply. The Parties may
also choose to use Bracketed Arbitration, or Final Offer Arbitration, as set
forth in Section D of these Rules.
RULE A-4 AMENDMENT OF RULES
ENDISPUTE may amend these Rules. The Rules in effect on the date of the
commencement of an Arbitration (as defined in Rule B-1 and Rule C-1) will apply
to that Arbitration.
RULE A-5 CONFLICT WITH LAW
If any of these Rules or a modification of these Rules agreed on by the
Parties is discovered to be in conflict with a mandatory provision of applicable
law, the provision of law will govern, and no other Rule will be affected.
RULE A-6 DEFINITIONS
As used in these Rules the term "days" means calendar days.
Where these Rules refer to "conference" or "hearing", except for the
Arbitration hearing, it may be conducted in person or by telephone, at the
discretion of the Case Manager or the Arbitrator.
The time limits stated in these Rules are for the purpose of expediting
the Arbitration process, and may be extended or modified at ENDISPUTE's
discretion.
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EXHIBIT B
SECTION C COMPREHENSIVE ARBITRATION RULES
RULE C-1 COMMENCING AN ARBITRATION
C-1.1 BY AGREEMENT OF THE PARTIES:
All Parties to a dispute may commence an Arbitration under these Rules by
signing an ENDISPUTE Agreement to Arbitrate form and serving it on any ENDISPUTE
office. An Arbitration will be deemed to have commenced under these Rules when
ENDISPUTE receives the Agreement to Arbitrate and appropriate filing fees.
C-1.2 BY CONTRACTUAL AGREEMENT TO ARBITRATE:
Any Party may commence an Arbitration by serving on the other Parties to
the dispute a written Notice of Arbitration based on the Parties' contractual
agreement to arbitrate, with a copy sent to any ENDISPUTE office. An Arbitration
will be deemed to have commenced under these Rules when ENDISPUTE receives the
Notice of Arbitration and appropriate filing fees.
The Notice of Arbitration will include:
(1) A brief description of the nature of the dispute, the identities of
the Parties, amounts in controversy, and relief or remedy sought.
(2) A copy of the text of the agreement to arbitrate.
(3) The names, mailing address, telephone and fax numbers of all parties
to the Arbitration and their representatives, if known.
C-1.3 PROCEDURES:
Upon receipt of the Agreement to Arbitrate or the Notice of Arbitration,
ENDISPUTE will designate a Case Manager, notify all Parties of the date of the
commencement of the Arbitration, and send all Parties a copy of these Rules.
RULE C-2 RESPONSE TO CLAIMS; COUNTERCLAIMS
Within fourteen (14) days after receiving the Notice of Arbitration the
Responding Party may serve a Response to Claims which will include:
(1) Any jurisdictional challenges, and the grounds for each challenge.
(2) Any corrections to information in the Notice of Arbitration.
(3) A brief statement of the Responding Party's defenses to the claims.
(4) Any counterclaims within the scope of the applicable arbitration
agreement, with a brief description of the nature of each
counterclaim, amounts in controversy, and relief or remedy sought. If
a counterclaim is asserted, the appropriate filing fee will accompany
the copy served on ENDISPUTE.
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EXHIBIT B
RULE C-3 REPLY TO COUNTERCLAIMS
A Reply to Counterclaims may be served within fourteen (14) days after
receiving the Counterclaims which will include:
(1) Any jurisdictional challenges, and the grounds for each challenge.
(2) A statement of the defenses to the counterclaims.
RULE C-4 FAILURE TO RESPOND
If any Party fails to file a Response to Claims or Reply to Counterclaims,
that Party will be deemed to have denied the claims or counterclaims made
against it and to have waived the right to assert counterclaims and challenges
to jurisdiction.
RULE C-5 AMENDMENTS AND ADDITIONS TO CLAIMS AND COUNTERCLAIMS
Amendments and additions to claims and counterclaims may be made only on
application to the Arbitrator, who may allow such changes for good cause,
and, if appropriate, amend time limits.
RULE C-6 ADMINISTRATIVE CONFERENCES AND HEARINGS
Any Party may contact the Case Manager at any time to ask questions
regarding these Rules, discuss procedural issues that have arisen or may be
anticipated during the Arbitration process or to seek ENDISPUTE's assistance in
exploring settlement through mediation or other ADR processes.
The Case Manager will conduct a Preliminary Conference with all Parties to
the Arbitration, if possible within seven (7) days after service of the Response
to Claims or of the Response to Counterclaims.
During the Preliminary Conference the Case Manager will answer questions
regarding these Rules and discuss Arbitrator selection, discovery issues,
anticipated problems or procedural issues, and the location and scheduling of
the Arbitration hearing, including the length of time the Arbitration hearing is
likely to require. The Case Manager may also offer ENDISPUTE's assistance in
exploring settlement through mediation or other ADR processes.
The Case Manager may convene further conferences with the Parties to
establish a schedule for discovery, to assist the Parties in identifying and
narrowing the issues to be arbitrated, and to discuss other pre-hearing or
procedural matters, including identification of witnesses and experts to be
called, pre-marking of exhibits and preliminary hearings with the Arbitrator.
In these preliminary proceedings, the Parties and the Case Manager will
identify any substantive, evidentiary, procedural or discovery-related disputes
that should be considered in preliminary hearing before the Arbitrator. When the
Arbitrator is selected, the Case Manager will make arrangements for a
preliminary hearing before the Arbitrator.
RULE C-7 INTERPRETATION OF RULES, JURISDICTION
Once appointed, the Arbitrator will resolve disputes about the
interpretation and applicability of these Rules, including disputes relating to
the duties of the Arbitrator and the conduct of the Arbitration hearing.
Disputes arising before the appointment of the Arbitrator will be resolved by
the Case Manager. The Arbitrator may review any Case Manager decision.
Jurisdictional disputes, including disputes over the existence, validity,
interpretation or scope of the agreement under which Arbitration is sought, will
be submitted to and ruled on by the Arbitrator.
8
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EXHIBIT B
RULE C-8 REPRESENTATION
The Parties may be represented in the Arbitration by attorneys or others. A
Party who is to be represented will promptly notify the Case Manager and the
other Parties of the name, address, telephone and fax numbers of its
representative. The representative of a Party may act on its behalf in complying
with these Rules.
RULE C-9 SERVICE
Service under these Rules will be made by submitting one copy of all
pleadings and attachments and any other documents requiring service to each
Party and two copies to the Case Manager. If a three-member Arbitrator panel is
used, four copies of all documents will be served on the Case Manager. Service
may be made by hand delivery, Federal Express or other similar service, fax or
U.S. mail.
RULE C-10 WITHDRAWAL FROM ARBITRATION
No party may terminate or withdraw from an Arbitration after it commences
(as defined in Rule B-1 and Rule C-1) except by written agreement by all Parties
to the Arbitration.
RULE C-11 EX PARTE COMMUNICATIONS
No Party will have any EX PARTE communication with the Arbitrator regarding
any issue related to the Arbitration. All necessary pre-hearing communication
with the Arbitrator will be initiated through the Case Manager as provided in
these Rules.
RULE C-12 ARBITRATOR SELECTION AND REPLACEMENT
C-12.1 NUMBER OF ARBITRATORS:
Unless otherwise agreed by the Parties, a single Arbitrator will be
selected to serve under these Rules.
C-12.2 CONFLICTS:
The Case Manager will identify a list of Arbitrator candidates for the
Arbitration. Each Arbitrator candidate will complete ENDISPUTE's Arbitrator
Disclosure Form, disclosing any potential conflict of interest or past or
present relationship with any of the Parties or their representatives. The Case
Manager will pre-screen the Arbitrator candidates and disqualify those whom the
Case Manager determines have a conflict of interest or relationship which might
interfere with the candidate's neutrality.
C-12.3 ARBITRATOR SELECTION:
Within seven (7) days after the Preliminary Conference, the Case Manager
will send the Parties a list of at least five Arbitrator candidates, with a
brief description of their background and experience. The Case Manager will
provide the Parties with all Arbitrator Disclosure Forms provided by the
Arbitrator candidates.
Within seven (7) days after receiving the list of Arbitrator candidates,
the Parties will notify the Case Manager and the other Parties of any prior
contacts or potential conflicts with Arbitrator candidates on the list and will
make any challenges for cause. ENDISPUTE will promptly rule on any challenges
for cause. If ENDISPUTE determines that an Arbitrator candidate should be
removed from the list for cause shown or other conflict, the Case Manager will
promptly replace this candidate on the list.
Within fourteen (14) days after receiving the list of candidates, assuming
none were replaced for cause, or seven (7) days after the Case Manager has made
any necessary replacements, each Party will return the list to the Case Manager
indicating up to two (2) peremptory strikes and ranking the remaining
9
<PAGE>
EXHIBIT B
candidates in order of preference. If a party fails to return the list to the
Case Manager within this time, it will be deemed to have accepted the
candidates. The Case Manager will select the Arbitrator from among the
candidates remaining after the Parties' peremptory strikes, selecting the
candidate with the highest total ranking by the Parties, and notify the parties
and the Arbitrator. If this process does not result in the selection of an
Arbitrator, it will be repeated twice. If an Arbitrator is still not selected,
ENDISPUTE will designate the Arbitrator.
In cases involving more than two Parties or the selection of more than one
Arbitrator, the Case Manager's list will include a sufficient number of
candidates to yield the specified number of Arbitrators, while allowing each
Party up to two (2) peremptory strikes.
Entities whose interests are not adverse with respect to the issues in
dispute will be treated as a single Party for purposes of the Arbitrator
selection process. ENDISPUTE will determine whether the interests between
entities are adverse for purposes of Arbitrator selection, considering such
factors as whether the entities are represented by the same attorney and whether
the entities are presenting joint or separate positions at the Arbitration.
C-12.4 CHAIRPERSON:
In cases involving more than one Arbitrator, the Case Manager will
designate one of the Arbitrators as Chairperson of the Arbitration Panel and
will promptly notify the Parties of that designation. The Chairperson will
have the power to act as a single Arbitrator for the purposes of ruling on
preliminary discovery and procedural matters. Reference to the Arbitrator in
these Rules will apply to the Chairperson of the Arbitration Panel where
appropriate.
C-12.5 ARBITRATOR REPLACEMENT:
Except as provided below, if an Arbitrator becomes disqualified or
disabled, or otherwise resigns, or refuses or is unable to perform his or her
duties, a successor Arbitrator will be chosen either by agreement of the Parties
or pursuant to Rule C-12.
If, after the beginning of the hearing but before the issuance of an award,
a member of a panel of Arbitrators becomes disqualified or disabled, or
otherwise resigns, or refuses or is unable to perform his or her duties as a
panel member, a new Arbitrator will be appointed in accordance with Rule C-12,
unless the Parties agree to proceed with the remaining two Arbitrators.
ENDISPUTE will make the final determination as to whether an Arbitrator has
become disqualified or disabled, or has resigned or refused or is unable to
perform or discharge his or her duties as an Arbitrator.
C-12.6 ARBITRATOR'S OATH:
All Arbitrators will execute an oath of office before being called on to
make any determinations in the Arbitration proceeding and, in any event, before
the taking of evidence in the Arbitration hearing.
RULE C-13 EXCHANGE OF INFORMATION
C-13.1 COOPERATION AND TIMING
The Parties will cooperate in good faith in the voluntary, prompt and
informal exchange of non-privileged documents and other information relevant to
the Arbitration. The Parties and the Arbitrator will make every effort to
conclude the information exchange process within ninety (90) days after the
Arbitrator is selected.
C-13.2 INTERROGATORIES:
Within seven (7) days after service of the Response to Claims or Response
to Counterclaims, the Responding Party may serve on any other Party up to ten
(10) interrogatories, without subparts, for the purpose of identification of
documents and witnesses. These interrogatories will be answered within seven (7)
days.
10
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EXHIBIT B
C-13.3 DOCUMENT EXCHANGE:
Within seven (7) days after service of the Response to Claims or Response
to Counterclaims, the Parties will provide to each other copies of all documents
in their possession or control on which they then rely in support of their
positions.
C-13.4 EXPERTS:
Within seven (7) days after service of the Response to Claims or Response
to Counterclaims, the Parties will provide to each other the names and addresses
of experts who may be called upon to testify or whose report may be introduced
at the Arbitration hearing.
C-13.5 DEPOSITIONS:
At any time after the filing of the Response to Claims or Response to
Counterclaims, but no later than thirty (30) days before the Arbitration
hearing, each Party may take one deposition of an opposing Party as a matter of
right. The Parties will attempt to agree to time, location and duration of the
deposition, and if the Parties do not agree these will be determined by the
Arbitrator.
Any Party may conduct depositions of its own witnesses which may be
introduced as evidence at the Arbitration hearing if the other Party was given
fair opportunity to attend the deposition and cross-examine.
C-13.6 OTHER DISCOVERY:
Upon the request of any Party, the Arbitrator will conduct a conference
for the purpose of determining additional information to be exchanged. Parties
may request additional depositions, interrogatories or document production. If
the Arbitrator determines that the requesting Party has a reasonable need for
the requested information and that the request is not overly burdensome on the
opposing Party, the Arbitrator may order the additional information exchange.
C-13.7 CONTINUING OBLIGATION:
As they become aware of new documents or information, including experts who
may be called upon to testify, all Parties remain under a continuing obligation
to provide documents upon which they rely, to supplement their responses, and to
honor any informal agreements or understandings between the Parties regarding
documents or information to be exchanged. Documents which have not been
previously exchanged will not be considered by the Arbitrator at the hearing,
unless agreed by the Parties.
C-13.8 DISCOVERY DISPUTES
The Parties will promptly notify the Case Manager when an unresolved
dispute exists regarding discovery issues. The Case Manager will discuss the
matter with the Parties to determine the nature of the dispute and will
attempt to resolve that dispute. If the Case Manager does not resolve the
dispute, the Case Manager will arrange a conference concerning the dispute
before the Arbitrator by telephone, or in person, and the Arbitrator will decide
the dispute.
RULE C-14 SCHEDULING AND LOCATION OF HEARINGS
The Case Manager will determine the location, date and time of the
Arbitration hearing and other proceedings after consultation with the Arbitrator
and the Parties and will provide reasonable notice of the hearing date and time.
The Case Manager will make every effort to schedule the Arbitration hearing
within one hundred and twenty days (120) of the commencement of the Arbitration,
absent unusual circumstances.
The parties may agree on or the Arbitrator for good cause may order a
rescheduling of the hearing date.
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EXHIBIT B
RULE C-15 PRE-HEARING SUBMISSIONS AND MOTIONS
C-15.1 CONFERENCE:
The Arbitrator may require a pre-hearing conference for the purpose of
narrowing the focus of the Arbitration hearing by stipulations of fact and joint
statements of issues to be determined, as well as resolving other outstanding
issues relating to the conduct of the hearing.
C-15.2 SUBMISSIONS:
No later than seven (7) days before the hearing date, each Party will serve
on the Case Manager and all other Parties a list of all documents and other
exhibits it intends to introduce at the hearing and a list of all witnesses who
will testify on its behalf with a brief statement of the subject matter on which
they are expected to testify and an estimate of the length of the witness's
direct testimony.
A copy of any document or other exhibit a Party intends to introduce at the
hearing that has not previously been provided to the Case Manager or the other
Parties will be provided with the submission of witness and exhibit lists.
The Parties will pre-mark all exhibits they intend to introduce as evidence
at the hearing.
The Arbitrator may require or any Party may elect to submit written
statements of their positions before the Arbitration hearing. Unless the
Arbitrator requests or permits otherwise, these statements will be submitted at
least seven (7) days before the scheduled hearing date and will not exceed
twenty (20) double-spaced 8 1/2" x 11" typewritten pages in length. These
statements may include summaries of the facts and evidence a Party intends to
present, discussion of the applicable law and the basis for award or denial of
the relief sought. Rebuttal Statements or other pre-hearing written submissions
may be permitted or required at the discretion of the Arbitrator.
C-15.3 MOTIONS FOR SUMMARY DECISION:
Upon agreement of all Parties interested in a particular dispute or portion
of a dispute, the Arbitrator may hear and decide Motions for Summary Decision.
If the Parties agree, they may submit to the Arbitrator written statements of
their positions on the Motion not to exceed twenty (20) double-spaced 8 1/2" x
11" typewritten pages in length. The Arbitrator will apply the same standard in
deciding these Motions as would be applicable to the Arbitration Award.
RULE C-16 SECURING WITNESSES FOR THE ARBITRATION HEARING
At the request of another Party, all other Parties will produce for the
Arbitration hearing all witnesses in their employ or under their control and
without need of subpoena. The Arbitrator may issue subpoenas for the attendance
of witnesses or the production of documents. In the event a Party or a
subpoenaed person objects to the production of a witness or other evidence, the
Party may file an objection with the Arbitrator, who will promptly rule on the
objection, weighing both the burden on the producing Party and the need of the
proponent for the witness.
RULE C-17 THE ARBITRATION HEARING
C-17.1 PROCEDURES:
The Arbitrator will ordinarily conduct the Arbitration hearing in the
manner set forth in these Rules. The Arbitrator may vary these procedures if the
Arbitrator determines it is reasonable and appropriate to do so. The Arbitrator
may impose reasonable time limits on each phase of the proceeding and may limit
testimony to exclude evidence that would be immaterial or unduly repetitive,
provided that all Parties are afforded the opportunity to present material and
relevant evidence.
The Arbitrator will require witnesses to testify under oath if requested by
any Party.
The Arbitrator will determine the order of proof, which will generally be
similar to that of a court trial, including opening and closing statements.
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EXHIBIT B
C-17.2. EVIDENCE:
The Arbitrator will consider evidence that the Arbitrator finds is relevant
and material to the dispute, giving the evidence such weight as the Arbitrator
determines is appropriate. The Arbitrator may be guided in that determination
by judicial rules of evidence; however, conformity to the judicial rules of
evidence is not required, except that the Arbitrator shall apply the law
relating to privileges and work product.
The Arbitrator may receive and consider witnesses' deposition testimony
recorded by transcript or videotape, provided that the other Parties had the
opportunity to amend and cross examine. The Arbitrator may in his or her
discretion receive and consider witness affidavits or other recorded testimony,
but will give that evidence only such weight as the Arbitrator deems
appropriate.
The Parties will not offer as evidence and the Arbitrator will not admit or
consider prior settlement offers by the Parties or statements or recommendations
made by a mediator or other person in connection with efforts to resolve the
dispute being arbitrated.
C-17.3. CLOSING:
When the Arbitrator determines that all relevant and material evidence and
arguments have been presented, the Arbitrator will declare the hearing closed.
The Arbitrator may defer the closing of the hearing for up to twenty (20) days
to permit the Parties to submit post-hearing briefs and or to make closing
arguments, as the Arbitrator deems appropriate, before rendering an award.
C-17.4. REOPENING:
At any time before the award is rendered, the Arbitrator may, on his or her
own initiative or on application of a Party, for good cause shown, re-open the
hearing. If the hearing is re-opened and the re-opening prevents the rendering
of the award within the time limits specified by these Rules, the time limits
will be extended for an appropriate period of time.
C-17.5. PARTY ABSENCE:
The Arbitrator may proceed with the hearing in the absence of a Party who,
after receiving reasonable notice, fails or declines to be present. The
Arbitrator will not render an award solely on the basis of the default or
absence of the Party, but will require any Parties who are present to submit
such evidence as the Arbitrator may require for the rendering of an award.
C-17.6 RECORD:
No stenographic record will be made of the hearing unless agreed by the
Parties.
RULE C-18 WAIVER OF HEARING
The Parties may agree to waive oral hearing and submit the dispute to the
Arbitrator for an award based on written submissions and other evidence upon
which the Parties agree.
RULE C-19 THE AWARD
C-19.1. TIMING:
The Arbitrator will render the award within ten (10) days after the date of
the closing of the hearing or, if an arbitration hearing has been waived, within
ten (10) days after the date of the Arbitrator's receiving all materials
specified by the Parties.
C-19.2. MAJORITY:
Where a panel of Arbitrators has heard the case, the decision and award of
a majority of the panel will constitute the Arbitration Award and will be
binding on the Parties.
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EXHIBIT B
C-19.3. STANDARD FOR AWARD:
Unless the Parties specify a different standard, in making the award the
Arbitrator shall be guided by principles of law and equity as applied to the
facts found at the Arbitration, including those relating to custom and agreement
between the Parties.
The Arbitrator is empowered to award any remedy allowed by law, including
multiple damages, prejudgment interest and attorneys' fees, and to grant final,
complete, interim, or interlocutory relief, including injunctive relief.
Notwithstanding this empowerment, the Arbitrator may not award punitive damages
unless previously agreed by the Parties, or unless punitive damages are required
by law to be an available remedy in such cases, or unless punitive damages are
available pursuant to special ENDISPUTE Arbitration Rules applicable to the
case. In the award, the Arbitrator may also asses Arbitration fees and expenses
in favor of either Party if provided by agreement of the Parties, or in favor of
ENDISPUTE in the event that the Arbitrator finds that fees or expenses are due
ENDISPUTE.
The award will consist of a written statement signed by the Arbitrator
regarding the disposition of each claim and the amounts of any damages awarded
as to each claim, or any other relief granted. The Arbitrator will also provide
a concise statement of the Arbitrator's reasons for the award, but such
statement shall not become part of the award nor be admissible in any judicial
proceeding to enforce or vacate the award.
C-19.4. ISSUANCE:
ENDISPUTE will issue the Arbitrator's award by serving copies on the
Parties. The date of issuance will be the date that the award is placed in the
mail or personally served on the Parties.
C-19.5. CORRECTION:
Within seven (7) days after issuance of the award, any Party, with notice
to all other Parties, may request that the Arbitrator correct any computational,
clerical, typographical or similar error in an award, or the Arbitrator may
correct such errors in the award on his or her own initiative. The Arbitrator
willmake any necessary and appropriate correction to the award within seven (7)
days of receiving a request. The corrected award will be issued pursuant to
this Rule.
C-19.6. FINAL AND BINDING:
After the expiration of seven (7) days from issuance of an award as to
which no correction is made or requested, the award will be final and binding on
the Parties. If the award is corrected as provided for above, the corrected
award will be final and binding on the Parties after the expiration of seven (7)
days from its issuance.
C-19.7. COMPLIANCE:
Unless otherwise ordered by the Arbitrator, any money damages awarded will
be paid and any other relief awarded will be complied with within thirty (30)
days of the issuance of the award, assuming that no correction has been made, or
within thirty (30) days of issuance of a corrected award. If a Party fails to
pay within thirty (30) days or the time period ordered by the Arbitrator,
interest will accrue on the total award at 12% per annum or 1% per month,
beginning on the date of issuance of the award.
RULE C-20 ENFORCEMENT OF THE AWARD
Proceedings to enforce, confirm, modify or vacate an award will be
controlled by and conducted in conformity with the Federal Arbitration Act 9
U.S.C. Sec. 9 ET SEQ. or applicable state law. The prevailing Party in any such
proceeding will recover from the non-prevailing Party all reasonable costs,
including attorneys fees and expenses, incurred in connection with the action.
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EXHIBIT B
RULE C-21 CONFIDENTIALITY AND PRIVACY
The Parties, the Case Manager, and the Arbitrator will treat the
Arbitration proceeding, including the hearing and any conferences, discovery or
other related events, as confidential, except as necessary in connection with a
judicial challenge to or enforcement of an award, or unless otherwise required
by law or judicial decision.
The Arbitrator may issue orders to protect the confidentiality of
proprietary information, trade secrets or other sensitive information.
The Arbitrator, the Case Manager, and the Parties will maintain the privacy
of all Arbitration conferences and hearings. Subject to the discretion of the
Arbitrator and agreement of the Parties, any person having a direct interest
in the Arbitration may attend the Arbitration conferences and hearings. The
Arbitrator will have the discretion to exclude any person or non-party witness
from any part of a hearing.
RULE C-22 WAIVER OF OBJECTION
If a Party becomes aware of a violation or failure to comply with these
Rules and fails to object promptly in writing, the objection will be deemed
waived, unless the Arbitrator determines that waiver will cause substantial
injustice or hardship.
RULE C-23 SETTLEMENT AND CONSENT AWARD
The Parties may agree, at any stage of the proceedings, to submit the case
to ENDISPUTE for mediation. The ENDISPUTE mediator assigned to the case will not
be the Arbitrator or any of the Arbitrator candidates submitted to the Parties.
The Parties may also agree to seek the assistance of the Arbitrator in
reaching settlement. However, the Arbitrator's assistance in such settlement
efforts will not disqualify the Arbitrator from serving as Arbitrator if
settlement is not reached.
If the Parties inform the Case Manager, in writing, that they have reached
a settlement, the Arbitration will be deemed terminated. If the Parties request,
the Arbitrator will set forth the terms of the agreed settlement in an award
which will be referred to as a Consent Award and will be binding on the Parties.
RULE C-24 SANCTIONS
The Arbitrator may award appropriate sanctions for failure of a Party to
comply with its obligations under any of these Rules. These sanctions may
include but are not limited to assessment of costs, prohibition of certain
evidence, or in extreme cases, ruling on an issue submitted to Arbitration
adversely to the Party who has failed to comply.
RULE C-25 DISQUALIFICATION OF THE ARBITRATOR AND EXCLUSION OF LIABILITY
The Parties agree not to call the Arbitrator, the Case Manager or any other
ENDISPUTE employee as a witness or as an expert in any pending or subsequent
litigation or other proceeding involving the Parties and relating to the dispute
which is the subject of the Arbitration. The Parties agree that the Case
Manager, Arbitrator, and any other ENDISPUTE employees will be disqualified as a
witness or an expert in any pending or subsequent litigation or other proceeding
relating to the dispute which is the subject of the Arbitration. The Parties
agree to defend the Arbitrator, the Case Manager and ENDISPUTE from any
subpoenas from outside parties arising from the Arbitration. The Parties agree
that
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EXHIBIT B
neither ENDISPUTE nor the Arbitrator nor the Case Manager is a necessary party
in any litigation or other proceeding relating to the Arbitration or the subject
matter of the Arbitration.
Neither ENDISPUTE nor its employees or agents, including the Arbitrator and
Case Manager, shall be liable to any Party for any act or omission in connection
with any Arbitration conducted under these Rules.
RULE C-26 FEES
Each party will pay its pro rata share of ENDISPUTE's fees and expenses
as set forth in the ENDISPUTE Fee schedule in the effect at the time of the
Commencement of the Arbitration. ENDISPUTE's agreement to render service is
not only with the party, but also with the attorney or other representative
of the Party in the Arbitration.
<PAGE>
GILEAD SCIENCES, INC.
AND
PHARMACIA & UPJOHN S.A.
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
TABLE OF CONTENTS
PAGE
1. PURCHASE OF SERIES B PREFERRED STOCK. . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . 1
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 2
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 No Conflict with Other Instruments. . . . . . . . . . . . . . . . 2
3.3 Restated Certificate of Incorporation; Bylaws . . . . . . . . . . 2
3.4 Organization and Good Standing. . . . . . . . . . . . . . . . . . 2
3.5 Disclosure Documents. . . . . . . . . . . . . . . . . . . . . . . 2
3.6 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.8 Valid Issuance of Shares. . . . . . . . . . . . . . . . . . . . . 3
3.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.10 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . 3
3.11 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES OF P&U . . . . . . . . . . . . . . . . . 4
4.1 Legal Power . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Due Execution . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Investment Representations. . . . . . . . . . . . . . . . . . . . 4
4.4 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . 5
5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Conditions to Obligations of P&U at First Closing . . . . . . . . 5
5.2 Conditions to Obligations of P&U at Second Closing. . . . . . . . 6
5.3 Conditions to Obligations of the Company. . . . . . . . . . . . . 6
6. COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. Covenants of P&U
6.1 Sale Restriction. . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Standstill Agreement. . . . . . . . . . . . . . . . . . . . . . . 6
B. Covenants of the Company
6.3 Shares Available. . . . . . . . . . . . . . . . . . . . . . . . . 6
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
7. REGISTRATION RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Piggyback Registrations . . . . . . . . . . . . . . . . . . . . . 7
7.3 Demand Registrations on Form S-3. . . . . . . . . . . . . . . . . 8
7.4 Expenses of Registration. . . . . . . . . . . . . . . . . . . . . 9
7.5 Obligations of the Company. . . . . . . . . . . . . . . . . . . . 9
7.6 Termination of Registration Rights. . . . . . . . . . . . . . . . 10
7.7 Delay of Registration; Furnishing Information . . . . . . . . . . 10
7.8 Assignment of Registration Rights.. . . . . . . . . . . . . . . . 10
7.9 "Market Stand-Off" Agreement. . . . . . . . . . . . . . . . . . . 10
8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 11
8.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 Separability. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.6 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . 11
8.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 11
8.9 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . 11
8.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXHIBITS
A - Certificate of Designation of Series B Preferred Stock
B - Form of Opinion of General Counsel
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made
as of August 7, 1996, by and between Gilead Sciences, Inc., a Delaware
corporation with its principal office at 353 Lakeside Drive, Foster City,
California 94404 (the "Company"), and Pharmacia & Upjohn S.A, a Luxembourg
corporation with its principal office at Credit Europeen, 52 route d'Esch, L-
1470 Luxembourg ("P&U").
RECITALS
WHEREAS, the Company and P&U have entered into that certain License and
Supply Agreement of even date herewith (the "License Agreement"); and
WHEREAS, in connection with the License Agreement, the Company desires to
sell to P&U and P&U desires to purchase from the Company shares of Series B
Preferred Stock of the Company, on the terms and subject to the Condition
Precedent (as defined below) and the other conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, do hereby agree as follows:
1. PURCHASE OF SERIES B PREFERRED STOCK
1.1 PURCHASE AND SALE. At the Closing (as defined in Section
2.1), subject to the Condition Precedent (as defined below), the Company will
sell to P&U and P&U will purchase from the Company that whole number of shares
(rounded down to the nearest share) of Series B Preferred Stock of the Company
(the "Shares") determined by dividing Forty Million Dollars ($40,000,000) (the
"Purchase Price") by the Purchase Price Per Share (as defined below). The
Series B Preferred Stock (the "Preferred Stock") will have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Designation of Series B Preferred Stock of the Company in the form attached
hereto as Exhibit A (the "Certificate of Designation"). The "Purchase Price Per
Share" shall be equal to one hundred and forty-five percent (145%) of the
arithmetic average of the closing sales prices of the Company's Common Stock, as
reported by the Nasdaq Stock Market ("Nasdaq"), for those days on which the
Company's Common Stock was traded during the thirty (30) Nasdaq trading days
ending on the Nasdaq trading day prior to the date Gilead publicly announces the
decision granting marketing authorization referenced below in the Condition
Precedent. The Closing will be subject to the Condition Precedent that the
Committee for Proprietary Medicinal Products, which represents the medicine
authorities of the European Community member states, has issued a decision
granting a marketing authorization for Vistide-Registered Trademark- (cidofovir
injection).
2. CLOSING; DELIVERY.
2.1 CLOSING. The completion of the sale and purchase of the Shares
(the "Closing") shall be held on such date as the parties shall agree, provided
such date is within sixty (60) days of the public announcement referenced in
Section 1.1, at the offices of Cooley Godward Castro Huddleson & Tatum, Five
Palo Alto Square, Suite 400, Palo Alto, California 94306. The closing shall be
subject to the conditions set forth in Section 5. Notwithstanding the
foregoing, the Company shall have the right to decline the purchase of the
Shares provided for in this Agreement by delivering written notice to P&U within
such sixty (60) day period, in which
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case the purchase of the Shares shall not occur and neither party shall have any
further obligation under this Agreement.
2.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to P&U a stock certificate, in the
name of P&U, representing the Shares, dated as of the Closing Date, against
payment of the purchase price therefor by wire transfer to an account designated
by the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to P&U as follows:
3.1 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the License
Agreement has been taken. The Company has the requisite corporate power to
enter into this Agreement and the License Agreement and carry out and perform
its obligations under the terms of this Agreement and the License Agreement. At
the Closing, the Company will have the requisite corporate power to sell the
applicable Shares. Each of this Agreement and the License Agreement has been
duly authorized, executed and delivered by the Company and, upon due execution
and delivery by P&U, each such Agreement will be a valid and binding agreement
of the Company, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by equitable principles.
3.2 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement and the License Agreement will not result in
any violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice: (a) any provision of the
Company's Restated Certificate of Incorporation or Bylaws as in effect on the
date hereof or at the Closing; (b) any provision of any judgment, decree or
order to which the Company is a party or by which it is bound; (c) any material
contract, obligation or commitment to which the Company is a party or by which
it is bound; or (d) to the Company's knowledge, any statute, rule or
governmental regulation applicable to the Company.
3.3 RESTATED CERTIFICATE OF INCORPORATION; BYLAWS. The Company
has delivered to P&U true, correct and complete copies of the Restated
Certificate of Incorporation and Bylaws of the Company, as in effect on the date
hereof.
3.4 ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
3.5 DISCLOSURE DOCUMENTS. The Company's Registration Statement
on Form S-3 (No. 333-868) filed with the Securities and Exchange Commission (the
"SEC") on January 23, 1996 (as amended through February 16, 1996), Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, Notice to Shareholders
and Proxy Statement for its Annual Meeting of Shareholders held on May 14, 1996,
and Forms 10-Q for the fiscal quarters ended March 31 and June 30, 1996, when
filed with the SEC (a) did not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) complied in all material respects with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the applicable rules and regulations
promulgated thereunder. Since January 1, 1993, the Company has filed with the
SEC, and has made available to P&U, true and complete copies of each form,
registration statement, report,
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<PAGE>
schedule, proxy, information statement and other documents (including exhibits
and amendments thereto), required to be filed by the Company under the
Securities Act or the Exchange Act.
3.6 ABSENCE OF CHANGES. Since June 30, 1996, the Company has
conducted its business in the ordinary course consistent with past practices,
and there has not been:
(a) any material adverse change in the condition (financial or
otherwise) assets, liabilities or business of the Company;
(b) any damage, destruction or casualty loss which would have a
material adverse effect on the Company;
(c) any declaration, setting aside or payment of any dividend or
other distribution in respect of the Company's capital stock; or
(d) any material increase in indebtedness for borrowed money,
current liabilities or total liabilities.
3.7 CAPITALIZATION. The authorized capital stock of the Company
consists of 60,000,000 shares of Common Stock, of which 28,486,798 shares were
issued and outstanding as of July 19, 1996, and 5,000,000 shares of preferred
stock, none of which are outstanding. The Company has designated and reserved
400,000 shares of Series A Junior Participating Preferred Stock for potential
issuance pursuant to its Preferred Share Purchase Rights Plan, none of which
have been issued or are outstanding. All such issued and outstanding shares
have been duly authorized and validly issued, and are fully paid and
nonassessable. As of july 19, 1996, the Company had outstanding options to
purchase 4,371,844 shares of Common Stock. Except as otherwise set forth
herein, there are no preemptive or other outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from the Company
of any shares of its capital stock or other securities of the Company, except as
set forth in the documents filed with the SEC as described in Section 3.5.
3.8 VALID ISSUANCE OF SHARES. The Shares which will be
purchased by P&U hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly authorized and issued, fully paid and nonassessable and, based in part
upon the representations of P&U in Section 4.3 of this agreement, will be issued
in compliance with all applicable federal and state securities laws.
3.9 LITIGATION. There is no action, suit, proceeding nor, to
the best of its knowledge, any investigation pending or currently threatened
against the Company, nor, to the best of its knowledge, is there any basis
therefor. The foregoing includes, without limitation, any action, suit,
proceeding or investigation, pending or threatened, that questions the validity
of this Agreement, the License Agreement or any other agreement contemplated
hereby or the right of the Company to enter into such agreements, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company.
3.10 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for (a) any filing required
to be filed pursuant to the HSR act as contemplated in Section 1 and,
(b) notices required or permitted to be filed with certain state and federal
securities commissions, which notices will be filed on a timely basis.
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3.11 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this agreement based on arrangements made
by the Company.
4. REPRESENTATIONS AND WARRANTIES OF P&U.
P&U hereby represents and warrants to the Company as follows:
4.1 LEGAL POWER. P&U has the requisite corporate power to enter
into this agreement, to carry out and perform its obligations under the terms of
this Agreement and, at each Closing, will have the requisite corporate power to
purchase the Shares.
4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by P&U, and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of P&U, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles.
4.3 INVESTMENT REPRESENTATIONS. In connection with the offer,
purchase and sale of the Shares (which shall for purposes of this Section 4.3
include shares of Common Stock issuable or issued upon conversion of the
Shares), P&U makes the following representations:
(a) P&U is acquiring the Shares for its own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act.
(b) P&U understands that (i) the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
that such securities must be held by it indefinitely, and that P&U must,
therefore, bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration; (ii) each certificate representing such shares
will be endorsed with the following legends:
A) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
B) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING RESTRICTIONS ON TRANSFERABILITY,
OF THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AUGUST 7,
1996.
And (iii) the Company will instruct its transfer agent not to register the
transfer of the Shares (or any portion thereof) unless the conditions specified
in the foregoing legends are satisfied.
(c) P&U has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Shares to be purchased hereunder. P&U has had access to all
of the information regarding the Company it has considered necessary to evaluate
such investment.
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(d) P&U is an "accredited investor" as such term is defined
in rule 501(a) of the rules and regulations promulgated under the securities
act.
4.4 HART-SCOTT-RODINO. P&U'S acquisition of the Shares is
exempt from the premerger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, pursuant to 15 U.S.C. Section 28(c)(9),
because (i) it is an acquisition of voting securities solely for the purpose of
investment; (ii) P&U has no intention of participating in the formulation,
determination, or direction of the basic business decisions of the Company; and
(iii) as a result of such acquisition, P&U will hold less than 10% of the
outstanding voting securities of the Company (based on the current
capitalization of the Company, as set forth in Section 3.6).
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF P&U AT CLOSING. P&U'S
obligation to purchase the Shares at the Closing is subject to the fulfillment
to its reasonable satisfaction, on or prior to the Closing, of all of the
following conditions, any of which may be waived by P&U:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have
performed and complied with all obligations and conditions herein required to be
performed or complied with by it on or prior to the Closing and a Certificate
duly executed by an officer of the Company, to the effect of the foregoing,
shall be delivered to P&U.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to P&U, and P&U shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
(d) QUALIFICATIONS; LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares shall have been duly obtained and shall
be effective on and as of the Closing. No stop order or other order enjoining
the sale of the Shares shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
SEC.
(e) OPINION OF GENERAL COUNSEL. P&U Shall have received
from Mark L. Perry, Vice President and General Counsel of the Company, an
opinion letter addressed to P&U, dated the date of the Closing, in substantially
the form attached hereto as Exhibit B.
(f) CERTIFICATION OF DESIGNATION. The Company shall have
filed the Certificate of Designation with the Secretary of State for the State
of Delaware.
(g) LICENSE AGREEMENT. The Company and P&U shall have
executed and delivered the License Agreement.
(h) CONDITION PRECEDENT. The Condition Precedent set forth
in Section 1.1 shall have been satisfied.
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<PAGE>
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
fulfillment to its reasonable satisfaction, on or prior to the Closing of the
following conditions, any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by P&U in Section 4 hereof shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. P&U shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by it on or before each Closing, and a Certificate duly
executed by an officer of P&U, to the effect of the foregoing, shall be
delivered to the Company.
(c) QUALIFICATIONS; LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares shall have been duly obtained and shall
be effective on and as of each Closing. No stop order or other order enjoining
the sale of the Shares shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
SEC.
(d) CERTIFICATE OF DESIGNATION. the Company shall have
filed the Certificate of Designation with the Secretary of State for the State
of Delaware.
6. COVENANTS.
A) COVENANTS OF P&U.
6.1 SALE RESTRICTION. P&U hereby covenants and agrees that,
without the prior written consent of the Company, it will not contract to sell,
sell or otherwise transfer, loan, pledge or grant any rights with respect to any
of the Shares (or Underlying Common Stock) acquired pursuant to this Agreement
(or purchase or sell any derivative security that has a similar effect or enter
into any contract that has a similar effect) until five (5) years after the
Closing. Thereafter, P&U may dispose of any or all of the Shares (or Underlying
Common Stock), subject to the provisions of Section 4.3, provided that it gives
the Company at least thirty (30) days notice prior to any sale or disposition in
order to enable the Company to attempt to place the securities in orderly block
transactions to minimize any disruptive effect of such sale or disposition on
the trading market for the Company's Common Stock. Such advance notice
requirement shall not require P&U to accept any offer that the Company may
arrange or restrict in any manner P&U's control over the ultimate disposition of
the Shares.
6.2 STANDSTILL AGREEMENT. Other than the Shares (or underlying
common stock) which it is purchasing pursuant to this Agreement, P&U hereby
covenants and agrees that it will not, nor will it permit any of its affiliates
(as defined in Section 1.1 of the license agreement) to, purchase or otherwise
acquire, directly or indirectly, any equity securities of the Company (or rights
or options to purchase such securities) without the prior approval of the
Company. This provision shall terminate and be of no further force or effect
five (5) years from the closing or such earlier date as shall be agreed to by
the Company.
B) COVENANTS OF THE COMPANY.
6.3 SHARES AVAILABLE. The Company hereby covenants and agrees
that it shall take all necessary and appropriate actions to ensure that (a) it
shall have available under its Restated Certificate of Incorporation as in
effect on the Closing Date sufficient authorized but
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unissued shares of its Preferred Stock to issue and sell to P&U all of the
Shares, and (b) it shall have available under its Restated Certificate of
Incorporation as in effect at the time of any conversion of the Shares
sufficient authorized but unissued shares of its Common Stock to issue to P&U
upon such conversion.
7. REGISTRATION RIGHTS.
7.1 DEFINITIONS. As used in this Section 7, the following terms
shall have the following respective meanings:
"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the securities
described in (i) above. Notwithstanding the foregoing, Registrable Securities
shall not include any securities sold by a person to the public either pursuant
to a registration statement or Rule 144 or sold in a private transaction in
which the transferor's rights under this Section 7 are not assigned.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 7.2 and 7.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall have the meaning set forth in Section 1.1.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any similar registration form under the securities act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the sec.
7.2 PIGGYBACK REGISTRATIONS. The Company shall notify all
Holders of Registrable Securities in writing at least twenty (20) days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of Common Stock of the Company (including, but not limited
to, registration statements relating to secondary offerings of Common Stock of
the Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such registrable
securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within ten (10) days after the above-described notice from the Company,
so notify the Company in writing. Such notice shall state the intended method
of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable
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Securities in any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration statements
as may be filed by the Company with respect to offerings of its securities, all
upon the terms and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under
which the Company gives notice under this Section 7.2 is for an underwritten
offering, the Company shall so advise the Holders of Registrable Securities. In
such event, the right of any such Holder to be included in a registration
pursuant to this Section 7.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their registrable securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company,
including the indemnification provisions thereof. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the total number of shares to be
underwritten, the number of shares that may be included in the underwriting by
the Holders may be reduced or eliminated, provided that any such reduction shall
be on a pro rata basis among the Holders and any other Holder of registration
rights granted by the Company that wishes to participate in such underwriting.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 7.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 7.4 hereof.
7.3 DEMAND REGISTRATIONS ON FORM S-3. In case the Company shall
receive from any Holder of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 with respect to all or a part
of the Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of registration rights granted by the Company; and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holders of registration rights granted by the Company who join in such request
as are specified in a written request given within ten (10) days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 7.3:
(i) if Form S-3 is not available for such offering by
the Holders; or
(ii) if the Holders, together with the Holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities at an aggregate
price to the public of less than $5,000,000; or
(iii) if the Company shall furnish to the Holders a
certificate signed by a member of the Board of Directors of the Company stating
that in the good faith judgment of the Board of Directors of the Company, on the
advice of the Company's investment bankers, such registration would have a
detrimental effect on the market for the
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Company's Common Stock, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
one hundred eighty (180) days after receipt of the request of the Holder or
Holders under this Section 7.3; or
(iv) if the Company has already effected three (3)
registrations on Form S-3 for the Holders pursuant to this Section 7.3; or
(v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Any Registratable Securities sold in a registration
pursuant to this Section 7.3 shall be offered and sold in an underwritten public
offering managed by underwriters reasonably acceptable to the Company.
(d) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
7.4 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 7.2 shall be borne by the
Company. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 7.3 shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of shares so registered. All Selling Expenses incurred in connection
with any registrations hereunder, shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of shares so
registered.
7.5 OBLIGATIONS OF THE COMPANY. The obligations of the Company
to effect the registration of any Registrable Securities pursuant to this
Section 7 shall at all times be subject to the restrictions on sale or other
disposition of the Shares set forth in Section 6.1. Whenever required to effect
such a registration, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such 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 such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
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(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of the Holders participating in
the registration, on the date that such Registrable Securities are delivered to
the underwriters for sale: (i) an opinion, dated as of such date, of the counsel
representing the Company 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, and (ii) a letter dated as of such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters.
7.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted to a Holder under this Section 7 shall terminate and be of no further
force and effect upon the date on which all Registrable Securities held by and
issuable to such Holder may be sold under Rule 144 during any ninety (90) day
period. This Section 7 and the registration rights granted hereunder shall
terminate in their entirety ten (10) years from the date of this Agreement.
7.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 7.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 7.2 or 7.3 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
7.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 7 may be
assigned by a Holder to a transferee or assignee of Registrable Securities that
is an Affiliate (as defined in Section 1.1 of the License Agreement) or a
successor to substantially all the business or assets of the Holder; provided,
however (i) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned, and (ii) such transferee shall agree to be subject to all
restrictions with respect to the Shares set forth in this Agreement.
7.9 "MARKET STAND-OFF" AGREEMENT. If requested by the Company
or the representative of the underwriters of Common Stock (or other securities)
of the Company, each Holder shall agree not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration, if any) for a period
specified by the representative of the underwriters not to exceed ninety (90)
days following the effective date of a registration statement of the Company
filed under the Securities
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Act, provided that all executive officers and directors of the Company enter
into similar agreements.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the choice of law provisions thereof, and the federal laws of the United
States.
8.2 PUBLIC STATEMENTS. Any statement to the public regarding
this Agreement and the license agreement shall be approved in advance by the
Company and P&U, except as otherwise required by law.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto.
8.4 ENTIRE AGREEMENT. This agreement, the License Agreement and
the exhibits hereto and thereto, and the other documents delivered pursuant
hereto, constitutes the full and entire understanding and agreement among the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other party in any manner by any representations, warranties, covenants,
or agreements except as specifically set forth herein or therein. Nothing in
this Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
8.5 SEPARABILITY. In the event any provision of this Agreement
shall be invalid, illegal, or unenforceable, it shall to the extent practicable,
be modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
8.6 AMENDMENT AND WAIVER. Except as otherwise provided herein,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and P&U. Any amendment
or waiver effected in accordance with this Section shall be binding upon any
holder of any securities purchased under this Agreement (including securities
into which such securities have been converted), each future holder of all such
securities, and the Company.
8.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
and received (a) upon personal delivery, (b) on the fifth day following mailing
by registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company and P&U at their respective addresses first above
written, (c) upon transmission of telegram or facsimile (with telephonic
notice), or (d) upon confirmed delivery by overnight commercial courier service.
8.8 FEES AND EXPENSES. The Company and P&U shall each bear
their own expenses and legal fees incurred on their behalf with respect to this
Agreement, the license agreement and the transactions contemplated hereby and
thereby.
8.9 TITLES AND SUBTITLES. The titles of the Sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
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8.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first
above written.
GILEAD SCIENCES, INC.
By: /s/ John C. Martin
----------------------------------------
John C. Martin
Title: CEO
------------------------------------
PHARMACIA & UPJOHN S.A.
By: /s/ Robert C. Salisbury
----------------------------------------
Robert C. Salisbury
Title: Chairman, Board of Directors, PUSA
-------------------------------------
By: /s/ Carl-Johan Blomberg
---------------------------------------
Carl-Johan Blomberg
Title: Finance Director, PUSA
-------------------------------------
Date: August 8, 1996
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CERTIFICATE OF DESIGNATION
OF
SERIES B PREFERRED STOCK
OF
GILEAD SCIENCES, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
GILEAD SCIENCES, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on July 18, 1996:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Company in accordance with the provisions of its Restated
Certificate of Incorporation, the Board of Directors hereby creates a series of
Preferred Stock, par value $.001 per share, of the Corporation and hereby states
the designation and number of shares, and fixes the relative designations and
the powers, preferences and rights, and the qualifications, limitations and
restrictions thereof (in addition to the provisions set forth in the Restated
Certificate of Incorporation of the Company, which are applicable to the
Preferred Stock of all classes and series), as follows:
SERIES B PREFERRED STOCK:
SECTION 1. DESIGNATION AND AMOUNT. One Million (1,000,000)
shares of Preferred Stock, $.001 par value, are designated "Series B Preferred
Stock" with the designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions specified herein (the "Series B
Preferred"). Such number of shares may be increased or decreased by resolution
of the Board of Directors; PROVIDED, that no decrease shall reduce the number of
shares of Series B Preferred to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Company and convertible into Series B
Preferred.
SECTION 2. DIVIDEND RIGHTS.
(a) Holders of Series B Preferred, in preference to the
holders of Common Stock of the Company, shall be entitled to receive, when and
as declared by the Board of Directors, but only out of funds that are legally
available therefor, cash dividends at the rate of five percent (5%) of the
"Original Issue Price" per annum on each outstanding share of Series B Preferred
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares). The Original Issue Price of the
Series B Preferred shall be the price per share paid by the holders of Series B
Preferred upon its initial issuance. Such dividends shall be payable only when,
as and if declared by the Board of Directors and shall be non-cumulative.
EXHIBIT A
1
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(b) So long as any shares of Series B Preferred shall be
outstanding, no cash dividend shall be paid or declared, nor shall any other
distribution be made, on the Common Stock until all dividends (set forth in
Section 2(a) above) on the Series B Preferred shall have been paid or declared
and set apart. In the event cash dividends are paid on any share of Common
Stock, an additional dividend shall be paid with respect to all outstanding
shares of Series B Preferred in an amount equal per share (on an as-if-converted
to Common Stock basis) to the amount paid or set aside for each share of Common
Stock. The provisions of this Section 2(b) shall not, however, apply to (i) a
dividend payable in Common Stock, (ii) the acquisition of shares of Common Stock
or other securities in exchange for shares of other Common Stock, or (iii) any
repurchase of any outstanding securities of the Company that is approved by the
Company's Board of Directors.
SECTION 3. VOTING RIGHTS. Except as otherwise provided
in Section 8 below or as required by law, the Series B Preferred shall be voted
with the shares of the Common Stock of the Company and not as a separate class,
at any annual or special meeting of stockholders of the Company, upon the
following basis: each holder of shares of Series B Preferred shall be entitled
to such number of votes as shall be equal to the whole number of shares of
Common Stock into which such holder's aggregate number of shares of Series B
Preferred are convertible (pursuant to Section 5 hereof) immediately after the
close of business on the record date fixed for such meeting.
SECTION 4. LIQUIDATION RIGHTS.
(a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of Common Stock, the holders of Series B Preferred
shall be entitled to be paid out of the assets of the Company an amount per
share of Series B Preferred equal to the Original Issue Price plus all declared
and unpaid dividends (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series B Preferred held by them.
(b) After the payment of the full liquidation preference of
the Series B Preferred as set forth in Section 4(a) above, the assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
(c) The following events shall not be considered a
liquidation, dissolution or winding up under this Section 4:
i. any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockHolders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions in which in excess of fifty
percent (50%) of the Company's voting power is transferred (an "Acquisition");
or
ii. a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
2
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(d) If, upon any liquidation, distribution or winding
up, the assets of the Company shall be insufficient to make payment in full to
all holders of Series B Preferred of the liquidation preference set forth in
Section 4(a) above, then such assets shall be distributed among the holders of
Series B Preferred at the time outstanding, ratably in proportion to the full
amounts to which they would otherwise be respectively entitled.
SECTION 5. CONVERSION RIGHTS. The holders of the Series B
Preferred shall have the following rights with respect to the conversion of the
Series B Preferred into shares of Common Stock (the "Conversion Rights"):
(a) OPTIONAL CONVERSION. Subject to and in compliance with
the provisions of this Section 5, any shares of Series B Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series B Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series B Conversion Rate" then in effect
(determined as provided in Section 5(b) by the number of shares of Series B
Preferred being converted.
(b) SERIES B CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series B Preferred (the "Series B
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series B Preferred by the "Series B Conversion Price," calculated
as provided in Section 5(c).
(c) SERIES B CONVERSION PRICE. The conversion price for
the Series B Preferred shall initially be the Original Issue Price of the Series
B Preferred (the "Series B Conversion Price"). Such initial Series B Conversion
Price shall be adjusted from time to time in accordance with this Section 5.
All references to the Series B Conversion Price herein shall mean the Series B
Conversion Price as so adjusted.
(d) MECHANICS OF CONVERSION. Each holder of Series B
Preferred who desires to convert the same into shares of Common Stock pursuant
to this Section 5 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series B
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series B Preferred being converted. Thereupon, the Company shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and
shall promptly pay in cash or, to the extent sufficient funds are not then
legally available therefor, in Common Stock (at the Common Stock's fair market
value as determined by the Board of Directors, with reference to the current
trading price for the Common Stock), any declared and unpaid dividends on the
shares of Series B Preferred being converted. Such conversion shall be deemed
to have been made at the close of business on the date of such surrender of the
certificates representing the shares of Series B Preferred to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the date that the first
share of Series B Preferred is issued (the "Original Issue Date") effect a
subdivision (or stock split) of the outstanding Common Stock without a
corresponding subdivision of the Preferred Stock, the Series B Conversion Price
in effect immediately before that subdivision shall be proportionately
decreased. Conversely, if the Company shall at any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock
into a smaller number of shares (or reverse stock split) without a corresponding
combination of the Preferred Stock, the Series B
3
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Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS. If the Company at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Series B
Conversion Price that is then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Series B Conversion Price then
in effect by a fraction (1) the numerator of which is the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (2) the denominator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Series B Conversion Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series B Conversion Price shall be adjusted pursuant to this
Section 5(f) to reflect the actual payment of such dividend or distribution.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series B Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Company which they
would have received had their Series B Preferred been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Series B Preferred or with respect
to such other securities by their terms.
(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue
Date, the Common Stock issuable upon the conversion of the Series B Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section 4(c) or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 5), in
any such event each holder of Series B Preferred shall have the right thereafter
to convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series B Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(i) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date,
there is a capital reorganization of the Common Stock (other than an Acquisition
or Asset Transfer as defined in Section 4(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 5), as a part of such capital
4
<PAGE>
reorganization, provision shall be made so that the holders of the Series B
Preferred shall thereafter be entitled to receive upon conversion of the
Series B Preferred the number of shares of stock or other securities or property
of the Company to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities 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 B Preferred after the capital reorganization to the end
that the provisions of this Section 5 (including adjustment of the Series B
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series B Preferred) shall be applicable after that event and
be as nearly equivalent as practicable.
(j) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Series B Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series B Preferred, if the Series B Preferred is then convertible pursuant to
this Section 5, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series B
Preferred at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 4(c)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 4(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series B Preferred at least ten (10) days prior to the record
date specified therein a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (ii) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (iii) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(l) AUTOMATIC CONVERSION.
i. Each share of Series B Preferred shall
automatically be converted into shares of Common Stock, based on the then-
effective Series B Conversion Price, if the arithmetic average of the closing
prices for the Company's Common Stock quoted on the Nasdaq Stock Market, over
any thirty (30) consecutive Nasdaq trading days, exceeds one hundred and forty-
five percent (145%) of the Original Issue Price of the Series B Preferred. Upon
such automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 5(d).
ii. Upon the occurrence of the event specified in
paragraph (i) above, the outstanding shares of Series B Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common
5
<PAGE>
Stock issuable upon such conversion unless the certificates evidencing such
shares of Series B Preferred are either delivered to the Company or its transfer
agent as provided below, or the holder notifies the Company or its transfer
agent that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with such certificates. Upon the occurrence of
such automatic conversion of the Series B Preferred, the holders of Series B
Preferred shall surrender the certificates representing such shares at the
office of the Company or any transfer agent for the Series B Preferred.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series B Preferred surrendered were convertible on the date
on which such automatic conversion occurred, and any declared and unpaid
dividends shall be paid in accordance with the provisions of Section 5(d).
(m) FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Series B Preferred. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series B Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Company shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors, with reference to the current trading price for the Common Stock)
on the date of conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company 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 the Series B Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series B Preferred. 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 the Series B Preferred,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(o) NOTICES. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
SECTION 6. REACQUIRED SHARES. Any shares of Series B
Preferred purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set forth
herein, in the Restated Certificate of Incorporation, or in any other
Certificate of Designation creating a series of Preferred Stock or any similar
stock or as otherwise required by law.
SECTION 7. NO REDEMPTION. The shares of Series B Preferred
shall not be redeemable.
6
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FORM OF OPINION OF GENERAL COUNSEL
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted.
3. The Company's authorized capital stock consists of (a) sixty million
(60,000,000) shares of Common Stock, of which 28,486,798 shares were issued and
outstanding as of July 19, 1996 (as to which such counsel may rely on a
certificate of the transfer agent and registrar of the Company's shares), and
(b) five million (5,000,000) shares of Preferred Stock, none of which were
outstanding prior to the First Closing. To the best of my knowledge, except as
set forth in the Agreement, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to purchase
any of the authorized but unissued capital stock of the Company.
4. The execution and delivery of the Agreement by the Company and the issuance
of the Shares pursuant thereto will not violate any provision of the Company's
Restated Certificate of Incorporation or Bylaws and will not violate or
contravene (a) any governmental statue, rule or regulation (which is limited to
the laws of the State of California, the corporate law of the State of Delaware
and the federal laws of the United States of America) applicable to the Company
or (b) any order, writ, judgment, injunction, decree, determination or award
which has been entered against the Company and of which I am aware, the
violation or contravention of which would materially and adversely affect the
Company, its assets, financial condition or operations.
5. To the best of my knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreement or might
result, either individually or in the aggregate, in any material adverse change
in the assets, financial condition or operations of the Company.
6. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any regulatory authority or governmental
body in the United States (which is limited to the laws of the State of
California, the corporate law of the State of Delaware and the federal laws of
the United States of America) required for the consummation by the Company of
the transactions contemplated by the Agreement, have been made or obtained,
except for notices required or permits to be filed with state or federal
agencies.
7. The Shares have been duly authorized and, upon issuance and delivery
against payment therefor in accordance with the terms of the Agreement, the
Shares will be validly issued, outstanding, fully paid and nonassessable.
8. This Agreement has been duly and validly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company.
EXHIBIT B
<PAGE>
SECTION 8. AMENDMENT. The Restated Certificate of
Incorporation of the Company shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series B Preferred so as to affect them adversely without the affirmative vote
of the holders of at least a majority of the outstanding shares of Series B
Preferred, voting together as a single class.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Designation as of August __ 1996.
---------------------------------------------
John C. Martin
President and Chief Executive Officer
---------------------------------------------
Mark L. Perry
Vice President, General Counsel and Secretary
7
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DEVELOPMENT AND LICENSE AGREEMENT
BY AND BETWEEN
GILEAD SCIENCES, INC.
AND
F. HOFFMANN-LA ROCHE LTD
AND
HOFFMANN-LA ROCHE INC.
SEPTEMBER 27, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Budget". . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Cost of Goods Sold". . . . . . . . . . . . . . . . . . . . 2
1.4 "Cover" . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Development Costs" . . . . . . . . . . . . . . . . . . . . 2
1.6 "Development Plan". . . . . . . . . . . . . . . . . . . . . 3
1.7 "European Union". . . . . . . . . . . . . . . . . . . . . . 3
1.8 "First Commercial Sale" . . . . . . . . . . . . . . . . . . 3
1.9 "Generically Equivalent Product". . . . . . . . . . . . . . 3
1.10 "Gilead Know-How" . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Gilead Patent Rights". . . . . . . . . . . . . . . . . . . 3
1.12 "IND" (or "Investigational New Drug Application") . . . . . 3
1.13 "Joint Patent Rights" . . . . . . . . . . . . . . . . . . . 4
1.14 "NDA" (or "New Drug Application") . . . . . . . . . . . . . 4
1.15 "Net Sales" . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 "Phase III Clinical Trial". . . . . . . . . . . . . . . . . 4
1.17 "Product(s)". . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 "Proprietary Information" . . . . . . . . . . . . . . . . . 5
1.19 "Roche Know-How". . . . . . . . . . . . . . . . . . . . . . 5
1.20 "Roche Patent Rights" . . . . . . . . . . . . . . . . . . . 5
1.21 "Steering Committee". . . . . . . . . . . . . . . . . . . . 5
1.22 "Third Party" . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 "Third Party Royalties" . . . . . . . . . . . . . . . . . . 6
1.24 "Valid Claim" . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2. GRANT OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . 6
2.1 License Grant.. . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Sublicensing. . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Right of First Refusal. . . . . . . . . . . . . . . . . . . 6
2.4 Gilead Sublicenses. . . . . . . . . . . . . . . . . . . . . 7
2.5 Disclosure of Gilead Know-How.. . . . . . . . . . . . . . . 7
2.6 Related Technology. . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3. DEVELOPMENT AND REGULATORY AFFAIRS. . . . . . . . . . . . . 7
3.1 Steering Committee. . . . . . . . . . . . . . . . . . . . . 7
3.2 Clinical Development and Regulatory Filings.. . . . . . . . 9
i.
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TABLE OF CONTENTS
(CONTINUED)
3.3 Development Costs.. . . . . . . . . . . . . . . . . . . . . 9
3.4 Adverse Reactions.. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4. DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Due Diligence.. . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Global Commercial Roll-Out. . . . . . . . . . . . . . . . . 13
4.3 Commercial Due Diligence. . . . . . . . . . . . . . . . . . 13
4.4 Reports.. . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5. COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 License Fee . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Milestone Payments. . . . . . . . . . . . . . . . . . . . . 14
5.3 Royalty Payments; Adjustments.. . . . . . . . . . . . . . . 15
5.4 Sublicense. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Payment Structure.. . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6. MANUFACTURING . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Pre-Commercial Manufacturing. . . . . . . . . . . . . . . . 19
6.2 Commercial Manufacturing. . . . . . . . . . . . . . . . . . 19
ARTICLE 7 MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Pricing.. . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Use of The Gilead Name. . . . . . . . . . . . . . . . . . . 20
ARTICLE 8. PAYMENTS; RECORDS; AUDIT. . . . . . . . . . . . . . . . . . 20
8.1 Payment; Report.. . . . . . . . . . . . . . . . . . . . . . 20
8.2 Exchange Rate; Manner and Place of Payment. . . . . . . . . 20
8.3 Records and Audit.. . . . . . . . . . . . . . . . . . . . . 21
8.4 Withholding Taxes.. . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 9. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . . 22
9.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Licenses upon Expiration. . . . . . . . . . . . . . . . . . 22
9.3 Termination for Breach. . . . . . . . . . . . . . . . . . . 23
9.4 Termination for Gilead's Breach.. . . . . . . . . . . . . . 23
9.5 Product Reversion.. . . . . . . . . . . . . . . . . . . . . 23
9.6 Termination by Roche For Convenience. . . . . . . . . . . . 24
9.7 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 24
ii.
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TABLE OF CONTENTS
(CONTINUED)
ARTICLE 10. INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . 24
10.1 Ownership of Inventions.. . . . . . . . . . . . . . . . . . 24
10.2 Prosecution of Patents. . . . . . . . . . . . . . . . . . . 24
10.3 Infringement of Patents by Third Parties. . . . . . . . . . 26
10.4 Infringement of Third Party Rights. . . . . . . . . . . . . 27
10.5 Patent Marking. . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 28
11.1 Indemnification by Gilead.. . . . . . . . . . . . . . . . . 28
11.2 Indemnification by Roche. . . . . . . . . . . . . . . . . . 28
11.3 Mechanics.. . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 Insurance Coverage. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 12. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . 30
12.1 Proprietary Information; Exceptions.. . . . . . . . . . . . 30
12.2 Authorized Disclosure . . . . . . . . . . . . . . . . . . . 31
12.3 Return of Proprietary Information.. . . . . . . . . . . . . 31
12.4 Publications. . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 13. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 32
13.1 Mutual Representations and Warranties.. . . . . . . . . . . 32
13.2 Gilead Representations and Warranties.. . . . . . . . . . . 32
13.3 No Other Representations. . . . . . . . . . . . . . . . . . 33
ARTICLE 14. DISPUTE RESOLUTIONS; VENUE AND GOVERNING LAW. . . . . . . 33
14.1 Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.2 Alternative Dispute Resolution. . . . . . . . . . . . . . . 34
14.3 Arbitration Procedure.. . . . . . . . . . . . . . . . . . . 34
14.4 Judicial Enforcement. . . . . . . . . . . . . . . . . . . . 36
14.5 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 36
15.1 Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.2 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 36
15.3 Amendment.. . . . . . . . . . . . . . . . . . . . . . . . . 36
15.4 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.5 Force Majeure.. . . . . . . . . . . . . . . . . . . . . . . 37
15.6 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 38
iii.
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TABLE OF CONTENTS
(CONTINUED)
15.7 Export Control. . . . . . . . . . . . . . . . . . . . . . . 38
15.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . 38
15.9 Cumulative Rights.. . . . . . . . . . . . . . . . . . . . . 38
15.10 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 38
iv.
<PAGE>
DEVELOPMENT AND LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT (the "AGREEMENT"), dated as of
September 27, 1996 (the "EFFECTIVE DATE"), is made by and between GILEAD
SCIENCES, INC., a Delaware corporation ("GILEAD"), on the one hand, and F.
HOFFMANN-LA ROCHE LTD, a corporation organized under the laws of Switzerland,
and HOFFMANN-LA ROCHE INC, a corporation organized under the laws of New Jersey,
on the other hand (collectively, "ROCHE").
BACKGROUND
WHEREAS, Gilead has discovered and is developing a series of proprietary
compounds which act as influenza neuraminidase inhibitors and may be effective
in the prevention and treatment of influenza; and
WHEREAS, Roche, through its divisions and/or subsidiaries, is engaged in
the development, production and commercialization of pharmaceuticals, but prior
to the date of this Agreement has not established a research program in the area
of influenza neuraminidase inhibition or discovered compounds which have such
effect; and
WHEREAS, Gilead and Roche desire to enter into a development and license
agreement for the worldwide development and marketing of influenza neuraminidase
inhibitors for the prevention and treatment of influenza.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and obligations set forth in this Agreement, the parties hereby agree
as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms will have the following meanings:
1.1 "AFFILIATE" means any entity that directly or indirectly Owns, is
Owned by or is under common Ownership with, a party to this Agreement, where
"Own" or "Ownership" means direct or indirect possession of at least fifty
percent (50%) of the outstanding voting securities of a corporation or a
comparable ownership in any other type of entity, provided, however, that if the
law of the jurisdiction in which such entity operates does not allow fifty
percent (50%) or greater ownership by a party to this Agreement, such ownership
interest shall be at least forty percent (40%). The term Affiliate shall not
include Genentech, Inc., 460 Point San Bruno Boulevard, South San
1.
<PAGE>
Francisco, California, prior to the time Roche delivers notice to Gilead
designating Genentech as its Affiliate.
1.2 "BUDGET" means the annual budget approved by the parties from time to
time pursuant to Section 3.3(d).
1.3 "COST OF GOODS SOLD" means the manufacturing cost of Product sold by
Roche, its Affiliates and sublicensees, calculated in accordance with reasonable
cost accounting methods of such parties, provided that such methods comply with
generally accepted accounting principles and the further provisions of this
Section 1.3. Cost of Goods Sold shall consist of direct labor and materials and
a reasonable allocation of indirect labor, facilities expense (including
depreciation over the expected life of the buildings and equipment), and
administration costs. Cost of Goods Sold shall exclude costs associated with
process development, initial Product batches for regulatory approval, plant
start-up costs, excess capacity, Third Party royalties, or any costs for which
provision has been made in the definition of Net Sales. In the event of any
transfer of Product among Roche, its Affiliates or sublicensees, the Cost of
Goods Sold shall exclude any profit or other mark-up by any such parties.
1.4 "COVER" (including variations thereof such as "Covered," "Coverage,"
or "Covering") shall mean that the manufacture, use or sale of a particular
product would infringe a Valid Claim of an issued patent in the absence of
rights under such patent. The determination of whether a product is Covered by
particular patent rights shall be made on a country by country basis.
1.5 "DEVELOPMENT COSTS" mean the costs incurred by Gilead or for its
account after the Effective Date which are consistent with the Development Plan
and are specifically attributable to the development of Products. Such costs
shall mean the direct costs and the indirect costs of all Gilead development
personnel and any third party costs, all of them incurred to further the Product
development program. Indirect costs related to the Development Plan shall
include but not be limited to salaries, employee benefits, use of facilities and
equipment, personnel, travel materials and supplies, which shall be absorbed
into the Development Costs based on generally accepted accounting principles and
methods approved by Roche, such approval not to be unreasonably withheld.
2.
<PAGE>
1.6 "DEVELOPMENT PLAN" means the plan for the development of Products
approved from time to time pursuant to Section 3.3. The initial Development
Plan, reflecting the mutual objectives of the parties with respect to the
sequence of events leading up to the filing of regulatory submissions, has been
agreed to by the parties as of the Effective Date.
1.7 "EUROPEAN UNION" or "EU" means the following countries: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, The
Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
1.8 "FIRST COMMERCIAL SALE" means the first sale, in any particular
country, by Roche or its Affiliates or sublicensees of Product for use by the
general public after required marketing and pricing approval has been granted by
the governing health authority of that country.
1.9 "GENERICALLY EQUIVALENT PRODUCT" shall mean a product marketed by a
Third Party, not under license from Roche, which contains as an active
ingredient an influenza neuraminidase inhibitor the composition of matter of
which is within the scope of a Gilead Patent Right or a Joint Patent Right.
1.10 "GILEAD KNOW-HOW" means all proprietary inventions, technology, trade
secrets, clinical and preclinical results, and any physical, chemical or
biological material, or other information excluding Gilead Patent Rights and
Joint Patent Rights, owned or acquired with right to sublicense during the term
of this Agreement by Gilead or any Affiliate of Gilead, which are necessary or
useful to Roche in the development, formulation, manufacture, use or sale of
Products.
1.11 "GILEAD PATENT RIGHTS" mean the rights under patents and patent
applications, both foreign and domestic, which (a) Cover an influenza
neuraminidase inhibitor, or its manufacture, formulation or use, including
intermediates for the manufacture or use thereof, (b) are based on an invention
made at any time prior to the fifth anniversary of the Effective Date and (c)
are owned by or licensed to Gilead or any Gilead Affiliate with the right to
sublicense. Notwithstanding the foregoing, Gilead Patent Rights shall exclude
Joint Patent Rights but shall include "Gilead Patents," which are defined as
those patents and patent applications owned by or licensed to Gilead or any
Gilead Affiliate with the right to sublicense that are encompassed within Gilead
Patent Rights. Set forth as Exhibit A is a list of the Gilead Patents as of the
Effective Date. Such Exhibit shall be updated no more frequently than annually
upon Roche's request.
1.12 "IND" (OR "INVESTIGATIONAL NEW DRUG APPLICATION") means an application
as defined in the United States Food, Drug and Cosmetic Act and applicable
regulations promulgated thereunder to the United States Food and Drug
Administration (the "FDA") or the equivalent application to the equivalent
agency in any other country or
3.
<PAGE>
group of countries, the filing of which is necessary to commence clinical
testing of Products in humans.
1.13 "JOINT PATENT RIGHTS" mean the rights under patents and patent
applications, both foreign and domestic, which (a) Cover an influenza
neuraminidase inhibitor, or its manufacturing formulation or use, including
intermediates for the manufacture or use thereof, (b) are based on an invention
made at any time prior to the fifth anniversary of the Effective Date, and (c)
are owned jointly by Gilead and Roche. Exhibit A shall be amended to include
Joint Patents when such patent applications are first filed.
1.14 "NDA" (OR "NEW DRUG APPLICATION") means an application as defined in
the United States Food, Drug and Cosmetic Act and applicable regulations
promulgated thereunder to the United States FDA or the equivalent application to
the equivalent agency in any other country or group of countries, the filing of
which is necessary to commence commercial sale of Products.
1.15 "NET SALES" means the gross sales invoiced by Roche, its Affiliates or
sublicensees for Product to Third Parties other than sublicensees, less
deductions of returns (including withdrawals and recalls), rebates (price
reductions, including Medicaid and similar types of rebates, e.g. chargebacks),
volume (quantity) discounts, discounts granted at the time of invoicing, sales
taxes and other taxes directly linked to and included in the gross sales amount
as computed on a product by product basis for the countries concerned
(hereinafter referred to as "Adjusted Gross Sales").
From the Adjusted Gross Sales there shall be a lump sum deduction of
[ ] for those sales-related deductions which are not
accounted for on a product by product basis (e.g., outward freights,
transportation insurance, packaging materials for dispatch of goods, custom
duties, discounts granted later than at the time of invoicing, cash discounts
and other direct sales expenses).
In the case of Products being sold as part of a combination product
containing the Product and one or more other therapeutically active ingredients,
the parties shall negotiate an appropriate royalty adjustment to reflect the
relative significance of each such ingredient, based on the estimated fair
market value of each such therapeutically active ingredient.
Notwithstanding the foregoing, amounts received by Roche or its Affiliates
or sublicensees for the sale of Licensed Products among Roche and its Affiliates
or sublicensees for resale shall not be included in the computation of Net Sales
hereunder.
1.16 "PHASE III CLINICAL TRIAL" means any clinical trial primarily designed
to serve as a pivotal, well-controlled study upon which approval of an NDA will
be based,
[*] CONFIDENTIAL TREATMENT REQUESTED
4.
<PAGE>
including such a study referred to or denominated as a Phase II/III study in the
United States or the equivalent elsewhere.
1.17 "PRODUCT(S)" means any pharmaceutical product containing an influenza
neuraminidase inhibitor Covered by a Gilead Patent Right, a Roche Patent Right
or a Joint Patent Right.
1.18 "PROPRIETARY INFORMATION" means, subject to the limitations set forth
in Section 12.1 hereof, all information disclosed by a party hereto to the other
party pursuant to this Agreement. In particular, Proprietary Information shall
be deemed to include, but is not limited to, information relating to research
and development programs and results, therapeutic candidates and products,
clinical and preclinical data, trade secrets, business strategy, patent
applications, licenses, suppliers, manufacturers, product and marketing
strategy, customers, market data, personnel and consultants.
1.19 "ROCHE KNOW-HOW" means all proprietary inventions, technology, trade
secrets, clinical and preclinical results, and any physical, chemical or
biological material, or other information excluding Roche Patent Rights and
Joint Patent Rights, owned or acquired with right to sublicense during the term
of this Agreement by Roche or any Affiliate of Roche, which are necessary or
useful to Roche in the development, formulation, manufacture, use or sale of
Products.
1.20 "ROCHE PATENT RIGHTS" means the rights under patents and patent
applications, both foreign and domestic, which (a) Cover an influenza
neuraminidase inhibitor, or its manufacture, formulation or use, including
intermediates for the manufacture or use thereof, (b) are based on an invention
made at any time prior to the fifth anniversary of the Effective Date, and (c)
are owned by or licensed to Roche or any Roche Affiliate, with the right to
sublicense. Notwithstanding the foregoing, Roche Patent Rights shall exclude
Joint Patent Rights, but shall include "Roche Patents," which are defined as
those patents and patent applications owned by or licensed to Roche or any Roche
Affiliate with the right to sublicense that are encompassed within Roche Patent
Rights. Exhibit A shall be amended to include Roche Patents when such patent
applications are first filed. Such Exhibit shall be updated no more frequently
than annually upon Gilead's request.
1.21 "STEERING COMMITTEE" means that committee comprised of an equal number
of representatives of Gilead and Roche, but not less than two (2)
representatives from each company, which shall have the responsibilities set
forth in Section 3.1 and elsewhere in this Agreement.
1.22 "THIRD PARTY" means any person or entity other than Gilead, Roche or
an Affiliate of either party hereto.
5.
<PAGE>
1.23 "THIRD PARTY ROYALTIES" means any royalties or license fees owing to a
Third Party attributable to the manufacture, use or sale of Products and in
consideration of a license under any patent which such Product would otherwise
infringe.
1.24 "VALID CLAIM" means a claim in the Gilead Patent Rights, the Roche
Patent Rights, or the Joint Patent Rights, which has not been disclaimed or held
invalid by a decision beyond the right of review or otherwise has been finally
determined by a court of competent jurisdiction to be unenforceable.
ARTICLE 2
GRANT OF RIGHTS
2.1 LICENSE GRANT. Subject to the terms of this Agreement, Gilead hereby
grants to Roche and its Affiliates a sole and exclusive, worldwide license under
the Gilead Patent Rights, Gilead's interest in the Joint Patent Rights, and the
Gilead Know-How only for the manufacture, importation, use, sale and offer for
sale of Products for any and all uses. Roche agrees that the Gilead Patents and
the Gilead Know-How will not be used for any other purpose.
2.2 SUBLICENSING. Except as otherwise provided in Section 2.3 below,
Roche shall have the right to sublicense the rights granted under Section 2.1 to
Third Parties. If Roche grants a sublicense, all of the terms and conditions of
this Agreement shall apply to the sublicensee to the same extent as they apply
to Roche for all purposes of this Agreement. Roche assumes full responsibility
for the performance of all obligations so imposed on such sublicensee and will
itself pay and account to Gilead for all royalties due under this Agreement by
reason of the operations of any such sublicensee.
2.3 RIGHT OF FIRST REFUSAL. In the event Roche desires to sublicense
the rights granted pursuant to Section 2.1 above to any Third Party for
commercialization in any of the following countries: the [ ]
Roche shall first present an offer to Gilead for such rights. Gilead and
Roche shall negotiate such offer in good faith for at least [ ]
from the date the offer is received by Gilead; PROVIDED, HOWEVER, that Roche
shall not have an obligation to engage in such negotiations with respect to
countries where Gilead has not established a sales force or committed to do
so prior to the anticipated launch of the Product in such country. If, at
the end of such [ ] period, the parties have been unable to
reach agreement on the essential terms of an agreement granting Product
rights in such country or countries to Gilead, Roche shall be free to offer
the rights to Products in such country or countries to any Third Party;
provided, however, that Roche shall not make an offer more favorable to any
such Third Party than the offer last made to Gilead by Roche without first
giving Gilead at least [ ] to consider and accept such more
favorable offer.
[*] CONFIDENTIAL TREATMENT REQUESTED
6.
<PAGE>
2.4 GILEAD SUBLICENSES. It is the understanding of the parties that the
license granted to Roche in Section 2.1 includes any future technology which
Gilead may acquire by license, with the right to sublicense, which is relevant
to the activities defined in Section 2.1. In the event Gilead obtains under
license from a Third Party technology the subject matter of which falls under
the license granted herein, Gilead shall promptly advise Roche of such license
and the terms which would be applicable to Roche in the event a sublicense is
granted hereunder. Roche may decline to accept the sublicense in question. If,
following such disclosure, Roche elects to receive such sublicense, then such
technology shall automatically be sublicensed to Roche hereunder without further
consideration to Gilead. In the event of any such sublicense, the terms of the
agreement between Gilead and its licensor shall govern in the event of any
inconsistency between such Third Party license agreement and this Agreement, and
the rights granted to Roche herein shall be explicitly subject to such Third
Party license agreement.
2.5 DISCLOSURE OF GILEAD KNOW-HOW. Following the Effective Date and
through the term of this Agreement, Gilead shall make available to Roche,
subject to the terms of this Agreement, all Gilead Know-How.
2.6 RELATED TECHNOLOGY. Roche acknowledges that in consideration of the
collaboration established hereby and the enabling nature of the work previously
done by Gilead, any influenza neuraminidase inhibitors as to which Roche or its
Affiliates acquires rights prior to the fifth anniversary of the Effective Date,
whether by reason of their own efforts or under contract from Third Parties,
shall be included within the definition of Products under this Agreement,
subject to the terms and conditions hereof. Similarly, Gilead acknowledges that
its license to Roche hereunder covers all of the influenza neuraminidase
inhibitors as to which it has rights or acquires rights prior to the fifth
anniversary of the Effective Date.
ARTICLE 3
DEVELOPMENT AND REGULATORY AFFAIRS
3.1 STEERING COMMITTEE.
(a) STEERING COMMITTEE MEMBERSHIP AND GOVERNANCE. The parties
shall establish a Steering Committee to coordinate the activities of the parties
with respect to Products. The Steering Committee in turn may establish such
working groups or other mechanisms as it desires to achieve this result. Except
to the extent otherwise provided in this Agreement, the responsibility of the
Steering Committee for each Product in each country shall terminate following
the initial commercial launch of such Product in such country. The Steering
Committee shall consist of an equal number of representatives of each party,
which shall be at least two (2). The size of the Steering Committee may be
changed by agreement of the parties. Each party shall within thirty
7.
<PAGE>
(30) days after the Effective Date select its initial members of the Steering
Committee. Each party may select additional representatives to replace the
initial Steering Committee members selected by such party as necessary during
the term of the Agreement, and may have other representatives attend meetings of
the Steering Committee in addition to the members of the committee. Any
Steering Committee members selected by one party shall be subject to the
reasonable approval of the other party. The Chairperson of the Steering
Committee shall alternate annually between a representative of Gilead and a
representative of Roche, with the initial Chairperson of the Steering Committee
being appointed by Roche. The Chairperson of the Steering Committee shall be
responsible for providing an agenda for each meeting of the committee at least
ten (10) days in advance of such meeting and shall prepare written minutes of
all committee meetings in reasonable detail. The Chairperson shall distribute
such minutes to all members of the Steering Committee within twenty (20) days
after the relevant meeting. The Steering Committee shall attempt to operate by
consensus, and any issues that the Steering Committee is unable to resolve by
consensus shall be submitted for resolution pursuant to Article 14 below.
(b) STEERING COMMITTEE MEETINGS AND RESPONSIBILITIES. The
Steering Committee shall meet at least two (2) times per year until the First
Commercial Sale of a Product in any country, and thereafter as appropriate for
the continued development and registration of Products. In addition, either
party may request additional meetings as reasonably required. The Steering
Committee shall be responsible for overseeing and monitoring the implementation
of the Development Plan and the Budget. In particular, the Steering Committee
will review and approve each annual Budget pursuant to Section 3.3. The
Steering Committee shall also monitor the allocation of research and development
work between the parties and shall recommend changes as necessary. The parties
shall report to the Steering Committee on all significant clinical and
regulatory issues relating to Products, and the Steering Committee shall make
recommendations and provide strategic guidance with respect to such issues. The
Steering Committee shall meet to review and approve a global clinical trial
program prior to the conduct of any clinical trials, and shall review and
approve the plans for any individual clinical trial of Product in advance of the
anticipated commencement date thereof. Neither party shall commence any
clinical trial of a Product until the Steering Committee has approved the plans
therefor, PROVIDED, HOWEVER, that such requirement for prior approval shall not
apply to post-marketing clinical trials which are not directed towards a change
in the labeling of the Product. In addition to its responsibilities related to
research and development, the Steering Committee shall oversee manufacturing
activities related to the Products and plans for the initial commercial launch
and country-by-country roll out of Products, and Roche shall report to the
Steering Committee in reasonable detail regarding its current and planned
activities in these areas.
8.
<PAGE>
3.2 CLINICAL DEVELOPMENT AND REGULATORY FILINGS.
(a) CLINICAL DEVELOPMENT. The collaborative clinical
development program will follow the most expeditious path to achieve global
registration of Products with both parties playing a significant role in the
execution of clinical development activities. [
] Both parties will contribute to the conduct of clinical trials
as necessary to support the global program. The final distribution of
responsibility will be the decision of the Steering Committee.
(b) REGULATORY FILINGS. Gilead shall prepare and file in its
own name the IND for Products in the United States. [
] The particular responsibility for filings,
interactions with regulatory authorities and the appropriate time for
transfer of regulatory responsibility to Roche will be decided by the
Steering Committee. In any event, prior to the transfer of the IND in the
United States, Roche shall receive copies of all material correspondence with
the FDA and shall have the right to be present at all meetings with the FDA
related to Products. Beginning at the time of transfer of ownership of the
IND to Roche, Roche shall be primarily responsible with Gilead's assistance
for all regulatory affairs in the United States related to Products. In
addition, Gilead shall either transfer ownership of, or provide Roche with
letters of access to, any drug master files or other regulatory dossiers
containing information necessary or useful to Roche in connection with its
regulatory filings for Product, with the choice between transfer or providing
letters of access to be made in the discretion of Gilead. In all countries,
Gilead shall be entitled to receive copies of material correspondence with
regulatory authorities, including filings made by Roche, with respect to
Products, and Gilead shall have the right to be present at all meetings with
regulatory authorities related to Products.
(c) DILIGENCE. Roche and Gilead will each diligently carry out
the global development of Products as provided in this Section 3.2, subject to
the Budgets approved under Section 3.3(d). Without limitation of the foregoing,
such efforts shall include the assignment of appropriate personnel and the
allocation of sufficient resources to carry out such party's responsibilities
under the Development Plan.
3.3 DEVELOPMENT COSTS.
(a) GENERAL. Roche shall pay all its own research and
development expenses in carrying out the Development Plan, as modified from time
to time by the Steering Committee, and shall reimburse Gilead for all its
Development Costs incurred pursuant to the Development Plan and the Budget in
effect at the time.
[*] CONFIDENTIAL TREATMENT REQUESTED
9.
<PAGE>
(b) AUDIT RIGHTS. Gilead shall keep complete and accurate
records pertaining to the Development Costs incurred pursuant to this Agreement
in sufficient detail to permit Roche to confirm the accuracy of such Costs. At
Roche's request, Gilead will cause its independent certified public accountants
to prepare abstracts of Gilead's relevant business records for review by Roche's
independent certified public accountants. If, based on a review of such
abstracts, Roche reasonably believes that a full audit of said business records
would be necessary for the confirmation of the accuracy of the Development
Costs, Roche's independent certified public accountants shall have full access
to review all work papers and supporting documents pertinent to such abstracts,
and shall have the right to discuss such documentation with Gilead's independent
certified public accountants. [
] Such audit rights may be
exercised no more often than once a year, within three (3) years after the
period to which such records relate, upon notice to Gilead and during normal
business hours. Roche will bear the full cost of such audit unless such audit
discloses an overpayment of Development Costs by Roche of more than five percent
(5%) from the amount due. Gilead shall promptly refund any such overpayment. The
terms of this Section 3.3 (b) shall survive any termination or expiration of
this Agreement for a period of three (3) years.
(c) REIMBURSEMENT OF PRIOR RESEARCH EXPENSES. In addition to
the payment of Development Costs as provided herein, Roche shall, within ten
(10) days after the Effective Date, pay to Gilead the amount of [
] as reimbursement for research and preclinical development
expenses incurred by Gilead with respect to Products prior to the Effective
Date. Such payment shall be nonaccountable, nonrefundable and noncreditable.
(d) BUDGET. It is agreed between the parties that as of the
Effective Date, the amount of [ ] is the estimated budget for
reimbursement to Gilead for its internal research and development efforts under
the Development Plan during a period of [ ]
following the Effective Date. In addition, Gilead's external expenses for such
research and development will be reimbursed pursuant to the Budget and in
accordance with Section 3.3(e). Within forty-five (45) days following the
Effective Date, the Steering Committee shall adopt a Budget for all research and
development activities anticipated for the period from the Effective
[*] CONFIDENTIAL TREATMENT REQUESTED
10.
<PAGE>
Date through December 31, 1997. The Budget approved by the Steering
Committee will replace the estimated budget for Gilead's internal expenses
referred to above. On or before October 1, 1997, and not later than October
1 of each subsequent calendar year during the term of this Agreement, the
Steering Committee shall approve annual budgets for all research and
development activities scheduled for the following calendar year; such annual
budgets shall be consistent with the Development Plan, as modified from time
to time by the Steering Committee. Upon approval, annual budgets shall be
the Budget then in effect.
(e) PAYMENTS TO GILEAD; RECONCILIATION. Roche shall pay to
Gilead the amount budgeted for Gilead's Development Costs for each calendar
quarter on or before the first day of such calendar quarter within
[ ] after receipt of an invoice from Gilead. Within
[ ] following the end of each such calendar quarter, Gilead
shall provide an accounting to Roche of the Development Costs actually
incurred by it during such quarter (the "Actual Costs"), but for the first
three quarters of each calendar year such reports shall be for informational
purposes only and Roche's payment of Development Costs shall continue to be
made in accordance with the Budget for such year then in effect. At the end
of each calendar year, the parties shall reconcile any difference between the
amounts paid to Gilead for Development Costs and Gilead's Actual Costs for
such year. If the amounts paid to Gilead for Development Costs exceed its
Actual Costs during such year, the amount of the excess shall be refunded or
credited to Roche. If Gilead's Actual Costs during the year exceeded the
amounts paid by Roche for Development Costs during such year, the excess
shall be paid by Roche as a supplemental payment if Roche approves such
excess amount, which approval shall not be unreasonably withheld.
3.4 ADVERSE REACTIONS. Roche shall be responsible for reporting to the
appropriate regulatory authorities all adverse events related to the use of
Product worldwide, except that prior to the time Gilead transfers ownership of
the IND to Roche as provided in Section 3.2(b), Gilead shall be responsible for
the reporting of such adverse events in the U.S. Adverse events related to the
use of Product worldwide shall be recorded in a single database, and the parties
will coordinate their efforts to assure that all adverse events are reported
properly.
ARTICLE 4
DUE DILIGENCE
4.1 DUE DILIGENCE. Roche shall devote its Best Efforts to commercialize
Product in substantially all markets in the world. As used herein, "Best
Efforts" shall mean that Roche is performing its obligations in a sustained
manner consistent with the efforts major pharmaceutical companies devote to
significant general practice products of
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similar market potential derived from internal research programs. Upon gaining
the necessary regulatory, pricing and reimbursement approvals, Roche and/or its
sublicensees shall use its Best Efforts to promote and market the Product in all
significant markets. Any sublicense of marketing rights by Roche shall include
a covenant for such sublicensee to use Best Efforts to maintain and increase
sales of the Product in each country covered by the sublicense.
12.
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4.2 GLOBAL COMMERCIAL ROLL-OUT. Roche shall endeavor to obtain prompt
approval for the sale of Product in substantially all countries of the world,
once such approval has been obtained in the United States and Europe. In
particular, subject to the exception set forth below, Gilead shall have the
right to terminate Roche's license to any particular Product in any country
of the world [
] (For such purpose, "approval"
shall mean approval as to safety and efficacy but not pricing approval if
separately required.) Gilead shall not have the right to terminate Roche's
license in any particular country where Roche can show that either (a) it
used Best Efforts to achieve such registration within the specified time
period, or (b) it is not reasonable to commercialize the Product in the
country in question (for example, because of pricing). If Roche believes
that either of the conditions set forth in the previous sentence apply, it
shall so notify the Steering Committee at least one year prior to the
expiration of the [ ] time period referred to above, and shall
explain its reasons. If Roche loses Product rights in any country pursuant
to this Section 4.2, Gilead shall obtain rights thereto as provided in
Section 9.5. [
]
4.3 COMMERCIAL DUE DILIGENCE. If, regardless of whether Roche
exercises Best Efforts, annual Net Sales of Products worldwide are less than
[ ] by the conclusion of the [ ] following the date
of First Commercial Sale of a Product in the U.S. or any country of the EU,
then the parties agree to meet and confer in good faith regarding the most
appropriate corrective actions to take in significant markets. The following
factors shall be considered by the parties in determining the most
appropriate course of action: (i) Roche's competitive position, including
promotional spending levels, sizes of field sales forces and market
development expenditures, relative to competitive products; (ii) cost of
goods sold; (iii) policy of health authorities on prophylaxis of influenza
and (iv) Gilead's interest in, and ability to increase revenues by, assuming
all rights to the Product. In the event the parties agree that the rights to
the Product shall revert to Gilead, the parties shall thereupon agree on
appropriate commercial terms for the reversion of such rights.
4.4 REPORTS. Roche shall provide annual reports to Gilead as follows:
(i) by February 1 of each year concerning its marketing activities relating to
Products for the previous year, and (ii) by November 30 of each year concerning
its contemplated marketing activities relating to Products for the subsequent
year. In particular, such reports shall include specific budgets and timetables
for activities in the [
], the positioning of the Product, competitive
issues,
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and Roche's primary sales and marketing objectives with respect to Products in
such countries.
ARTICLE 5
COMPENSATION
5.1 LICENSE FEE. Roche shall pay to Gilead a license fee of [
] within ten (10) days following the Effective Date. Such
license fee shall be nonrefundable and noncreditable.
5.2 MILESTONE PAYMENTS. Roche shall pay to Gilead the following
nonrefundable, noncreditable amounts within thirty (30) days of achievement of
the milestone events set forth below for any Product(1):
<TABLE>
<CAPTION>
U.S. EU JAPAN
<S> <C> <C> <C>
[
]
</TABLE>
- -----------------------------
(1) Each of the milestone payments provided for in this Section 5.2 shall
be payable no more than once and shall encompass all Products taken together.
(2) Payable regardless of the territory in which such trial is conducted.
This milestone shall be satisfied in any event by a decision to proceed to a
Phase II clinical trial in influenza-infected patients.
(3) Payable for any such trial that would qualify as a Phase III Clinical
Trial for a U.S. NDA, even if such trial is conducted outside the U.S.
(4) [
]
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5.3 ROYALTY PAYMENTS; ADJUSTMENTS.
(a) ROYALTY ON PRODUCTS. Roche shall pay Gilead a royalty
payment on Net Sales of Product sold by Roche, its Affiliates or licensees (the
"Royalty") according to the following rates, as adjusted in accordance with
subsections (c), (d), (e) and (f) below:
(i) [ ] of worldwide Net Sales for the
first [ ] in Net Sales in a given calendar year;
(ii) [ ] of worldwide Net Sales for the
[ ] in Net Sales during the same calendar year; and
(iii) [ ] of worldwide Net Sales
for Net Sales in excess of [ ] during the same calendar year.
By way of example, if, in the year 2005, Roche's total Net Sales equal
[ ] then the Royalty payable to Gilead hereunder shall equal
[ ] calculated in the following manner:
AMOUNT OF NET SALES ROYALTY RATE ROYALTY PAYMENT
First [ ]
Next [ ]
Next [ ]
---------------
Total Royalty [ ]
(b) ROYALTY PAYMENT SCHEDULE. For the first calendar year of
Net Sales, the Royalty shall be paid to Gilead in accordance with the schedule
set forth in subsection (a) above. Beginning in the second calendar year of Net
Sales, Roche's first three (3) quarterly payments shall be based upon the
average royalty rate payable with respect to the previous calendar year.
Following the fourth (4th) quarter of each calendar year, Roche shall pay Gilead
the Royalty owing for the full year minus the aggregate payments made for the
first three quarters or, if the aggregate payments made for the first three
quarters exceed the Royalty owing for the full year, Gilead shall refund the
difference to Roche.
(c) UNLICENSED COMPETITION ADJUSTMENT. Except as provided
below, if a Third Party not under license from Roche sells a Generically
Equivalent Product in a country or countries in which Roche, an Affiliate or
sublicensee is selling
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Product and the monetary value of such Third Party's sales of Generically
Equivalent Product, as determined by a reliable Third Party and measured in a
manner as near as practicable to the sales of Product in the same country,
are equal to or greater than [ ] of the monetary value of
the Adjusted Gross Sales of Product in such country or countries, then the
royalty payable by Roche to Gilead on Net Sales of Product in such
country(ies) shall be reduced by [ ] of the Royalty set
forth in subsection (a), until such time as the Third Party's sales drop
below [ ] of the Adjusted Gross Sales in such
country(ies). The royalty reduction provided for in this paragraph (c) shall
be inapplicable during any period of time that Gilead is diligently pursuing
litigation to enforce Gilead Patent Rights or Joint Patent Rights to stop the
sale of the Generically Equivalent Product in question in such country.
(d) COST OF GOODS SOLD ADJUSTMENT. Except as provided below,
if the Cost of Goods Sold for a Product exceeds [ ] of the
Net Sales of such Product in any particular calendar quarter, each measured
on a worldwide basis, then the Royalty payable for such quarter shall be
reduced by [ ] of the amount by which such Cost of Goods Sold exceeds
[ ] of Net Sales. Any Royalty reductions effected under this
paragraph (d) shall be known as a "COGS Adjustment Amount", and shall become
payable to Gilead in the future in any time period(s) in which the Cost of
Goods Sold for the Product in question is less than [ ] of the
Net Sales of such Product, each measured on a worldwide basis. In such time
periods, Gilead shall recover [ ] of the amount by which the Cost of
Goods Sold is less than [ ] of Net Sales, until it has fully
recovered the COGS Adjustment Amount, without interest. This paragraph (d)
shall not effect any reduction in the Royalty rate to less than [
] of the rate set forth in paragraph (a), and shall be inapplicable with
respect to Product sales as to which adjustment is separately provided for
under paragraph (c) or (e).
(e) SECONDARY PATENT COVERAGE. The Royalty rates set forth in
paragraph (a) above are based on the assumption that one or more Valid Claims of
the Gilead Patent Rights, Roche Patent Rights or Joint Patent Rights, if any,
applicable to the Product in question will Cover the composition of matter of
the neuraminidase inhibitor which is an active ingredient in the Product. If,
however, one or more Gilead Patent Rights, Roche Patent Rights or Joint Patent
Rights Cover the manufacture, use or sale of such Product, but there is no Valid
Claim Covering the composition of matter of the influenza neuraminidase
inhibitor which is an active ingredient in the Product, then the following
Royalty rates shall apply. In the event a sale of a particular Product in a
particular country might be described in more than one of the following
subparagraphs, the highest royalty rate shall apply to such sale.
(i) In any event, regardless of patent Coverage, each
Product shall be royalty-bearing at the rate set forth in paragraph (a), subject
to
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adjustment as provided elsewhere under this Agreement but not under this
paragraph (e), for the first [ ] following First Commercial Sale
in each country. If following such [ ] period there is no patent
Coverage for the manufacture, use or sale of the Product in a particular
country, sales of such Product shall thereafter be royalty-free in that
country. If, however, after such [ ] period there is patent Coverage
for the manufacture, use or sale of the Product, but not the composition of
matter of the influenza neuraminidase inhibitor which is an active ingredient
of the Product, then the royalties set forth in Sections 5.3(e)(ii)-(v) shall
apply.
(ii) If the manufacture, use or sale of the Product (but not
the composition of matter of the influenza neuraminidase inhibitor which is an
active ingredient of the Product) is Covered by a Gilead Patent Right, then the
royalty rates set forth in paragraph (a) shall be reduced by [ ] Such
reduced rate shall remain subject to further reduction pursuant to paragraph
(c), in which case the royalty rate could be reduced to [ ] of the rate set
forth in paragraph (a), but there shall not be any reduction pursuant to
paragraph (d) or by reason of Third Party license fees as described in Section
10.4.
(iii) If the manufacture, use, or sale of the Product
(but not the composition of matter of the influenza neuraminidase inhibitor
which is an active ingredient of the Product) is Covered By a Joint Patent
Right, then the royalty rates set forth in paragraph (a) shall be reduced to
[ ] of such rate. Such reduced rate shall remain subject to further
reduction pursuant to paragraph (c) but only to a royalty rate which is [ ]
of the rate set forth in paragraph (a), and there shall not be any reduction
pursuant to paragraph (d) or by reason of Third Party license fees as
described in Section 10.4.
(iv) If the manufacture, use or sale of the Product (but
not the composition of matter of the influenza neuraminidase inhibitor which
is an active ingredient of the Product) is Covered by a Roche Patent Right
based on an invention made or obtained in connection with Roche's work
related to Products, then the royalty rate set forth in paragraph (a) shall
be reduced to [ ] of such rate. Such reduced rate shall not be subject to
any further reduction under this Agreement.
(v) If the manufacture, use or sale of the Product (but not
the composition of matter of the influenza neuraminidase inhibitor which is an
active ingredient of the Product) is Covered only by a Valid Claim of a Roche
patent based on an invention by Roche, which invention was made independently of
Roche's work related to Products resulting from the Development Plan, then no
royalty shall be due under this Agreement.
(f) SUMMARY OF RULES REGARDING ROYALTY ADJUSTMENTS. In
implementing the various Royalty adjustment provisions of this Agreement:
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(i) Royalty reductions under paragraphs (c) and (e)
shall be determined on a country by country basis. If a Royalty adjustment
is called for in one or more countries, but not worldwide, then the Royalty
shall be calculated initially as set forth in paragraph (a), and the Royalty
reduction shall be applied on the basis of the average worldwide Royalty rate
otherwise payable.
(ii) If an adjustment is made under paragraph (c)
(Unlicensed Competition Adjustment), then there shall not be any adjustment
under paragraph (d) (Cost of Goods Sold Adjustment) with respect to the same
sale of Product.
(iii) If an adjustment is made under paragraph (e)
(Secondary Patent Coverage), then such reduced rate shall still be subject to
further reduction as provided in paragraph (c) (Unlicensed Competition
Adjustment), in which case the Royalty could be reduced to [ ] of the rate set
forth in paragraph (a), but there shall not be any reduction under paragraph (d)
(Cost of Goods Sold Adjustment) or by reason of Third Party license fees as
described in Section 10.4.
(iv) Except as expressly provided in Sections 5.3(e)(ii)-
(v), the Royalty rate shall not be reduced to less than [ ] of
the rate set forth in Section 5.3(a).
(g) EXPIRATION OF ROYALTY OBLIGATIONS. The royalty obligations
set forth in subsection (a) above shall expire on a country-by-country basis
upon the later of: (i) in those countries in which a Gilead Patent Right, Joint
Patent Right or Roche Patent Right covers the manufacture, use or sale of a
Product sold by Roche, its Affiliate or a licensee, the date upon which the
manufacture, use or sale of such Product would no longer infringe a Valid Claim
of a Gilead Patent Right, Joint Patent Right or Roche Patent Right in the
absence of rights thereunder; and (ii) [ ] after the date of First
Commercial Sale of the Licensed Product in such country(ies).
5.4 SUBLICENSE. In the event Roche sublicenses its right to sell a
Product, such sublicenses shall include an obligation for the sublicensee to
account for and report its Net Sales of such Product on the same basis as if
such sales were Net Sales of Product by Roche, and Roche shall pay the
applicable Royalty to Gilead as if the Net Sales of the sublicensee were Net
Sales of Roche.
5.5 PAYMENT STRUCTURE. The effect of this Article 5 is to provide for a
royalty payment to Gilead for any Product discovered, developed or acquired by
either party prior to the fifth anniversary of the Effective Date of this
Agreement, whether or not such Product is Covered by a patent and irrespective
of which party owns or controls any relevant patents. In establishing this
payment structure, the parties seek to create incentives for a highly effective
collaboration relating to Products with minimum potential for disputes,
including by way of example possible disagreements related to the
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allocation of work and the determination of inventorship; to recognize that
discoveries and developments related to influenza neuraminidase inhibitors after
the Effective Date are likely to constitute improvements on existing Gilead
Know-How, whether or not such new developments are within the scope of Gilead
Patents; and to provide incentive compensation to Gilead for its anticipated
work during the term of this Agreement, in addition to the grant of a patent
license, to enable the rapid and effective market introduction of Products
worldwide. Roche acknowledges that Gilead has offered, and Roche has
voluntarily declined, a royalty arrangement under which Roche would pay
independent royalties on Gilead Know-How and Gilead Patent Rights, and that
instead of such independent royalties Roche has negotiated the royalty
adjustment provisions of this Section 5.3.
ARTICLE 6
MANUFACTURING
6.1 PRE-COMMERCIAL MANUFACTURING. It is the intention of the parties that
initial pre-clinical and clinical Products, including the bulk drug substance
contained therein, will be produced by Gilead, and that so long as it shall do
so the cost of such manufacturing will be included in Development Costs. The
parties also understand that as part of the Development Plan and the Budget they
will cooperate to improve the manufacturing process in existence as of the
Effective Date. Roche may assume full control of clinical manufacturing of
Products at its own expense at any time it desires upon written notice to
Gilead, and shall in any event have the sole and exclusive responsibility for
the manufacture of clinical Products not later than the commencement of Phase
III Clinical Trials for the initial Product.
6.2 COMMERCIAL MANUFACTURING. Roche shall be solely and exclusively
responsible at its own expense for commercial manufacture of Products, either
itself or through Third Parties.
19.
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ARTICLE 7
MARKETING
7.1 PRICING. Roche shall determine, in its sole discretion, the pricing,
discounting policy and other commercial terms relating to Products.
7.2 USE OF THE GILEAD NAME. Gilead and Roche agree that the packaging and
promotional materials for the Product marketed by Roche and/or Roche's
sublicensees shall identify Gilead as licensor. Roche hereby acknowledges
Gilead's ownership of the Gilead Sciences name. Gilead hereby agrees to
indemnify and hold Roche harmless from any use hereunder of the Gilead Sciences
name which occurs with the consent of Gilead, provided that Roche provides
Gilead prompt notice of any such claim and grants to Gilead the exclusive
ability to defend (with the reasonable cooperation of Roche) and settle any such
claim. If only one name is allowed to be in any specific item of packaging or
promotional material pursuant to governmental laws or regulations, then Roche
may use its name alone on such item, without identifying Gilead as licensor.
ARTICLE 8
PAYMENTS; RECORDS; AUDIT
8.1 PAYMENT; REPORT. All amounts payable to either party under this
Agreement shall be paid in U.S. dollars within [ ] of the end of
each calendar quarter or as otherwise specifically provided herein. Each
payment of royalties owing to Gilead shall be accompanied by a statement, on a
country-by-country basis, of the amount of gross sales, an itemized calculation
of Adjusted Gross Sales and Net Sales showing deductions provided for in Section
1.15 during such quarter, the amount of aggregate worldwide gross sales,
Adjusted Gross Sales and Net Sales during such quarter and on a cumulative basis
for the current year and the amount of Royalty or other payments due on such
sales. If any Royalty reductions are claimed by Roche under this Agreement from
the full rates set forth in Section 5.3(a), then the report shall set forth in
detail the claimed reduction and the related facts.
8.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments due
hereunder from time to time shall be paid in U.S. Dollars. For purposes of
computing such payments, the Net Sales of Product in countries other than the
United States shall be converted into U.S. Dollars as computed in the central
Roche currency conversion system, using the average monthly rate of exchange at
the time for such currencies as retrieved from the Reuters System used by Roche.
If convenient for Roche, such conversion may be made initially into Swiss Francs
and then into U.S. Dollars for purposes of calculating the Royalty, provided
that Gilead is not disadvantaged by reason
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of such multiple conversions (e.g., that the conversion rates used by Roche do
not reflect transaction costs of conversion). The currency conversion system
used by Roche shall be subject to audit by Gilead as described in Section 8.3
and, if not determined to be a system reflecting the fair market value of the
currencies in question, shall be modified as necessary to effect currency
conversion at fair market value.
Notwithstanding the foregoing, if by reason of any restrictive exchange
laws or regulations, Roche shall be unable to convert to U.S. Dollars the
amount, determined as above, equivalent to the amount due by Roche hereunder,
then Roche shall so notify Gilead promptly and provide an explanation of the
circumstances. In such event, Roche shall make all such payments or the balance
thereof due hereunder and which is not paid in foreign currency as provided
below, in U.S. Dollars as soon as reasonably possible after and to the extent
that such restrictive exchange laws or regulations are lifted so as to permit
Roche to pay amounts due under this Section 8.2 in U.S. Dollars. Roche shall
promptly notify Gilead if such restrictions are so lifted. At its option Gilead
shall meanwhile have the right to request the payment (to it or to its nominee),
and, upon request, Roche shall pay or cause to be paid amounts due (or such
portions thereof as are specified by Gilead) in the currency of any other
country designated by Gilead and legally available to Roche under the then-
existing laws of regulations. Any payments shall be payable to Gilead by wire
transfer at such bank in the United States as Gilead shall specify from time to
time. Not less than one (1) business day prior to such wire transfer, the
remitting party shall telefax the receiving party advising it of the amount and
of the payment to be made.
8.3 RECORDS AND AUDIT. Roche shall keep, and shall cause its Affiliates
and sublicensees to keep, complete and accurate records pertaining to the sale
or other disposition of Product and of the Royalty and other amounts payable
under this Agreement in sufficient detail to permit Gilead to confirm the
accuracy of all payments due hereunder. At Gilead's request, Roche will cause
its independent certified public accountants to prepare abstracts of Roche's
relevant business records for review by Gilead's independent certified public
accountants. If, based on a review of such abstracts, Gilead reasonably
believes that a full audit of said business records would be necessary for the
confirmation of the accuracy of all payments due hereunder, Gilead's independent
certified public accountants shall have full access to review all work papers
and supporting documents pertinent to such abstracts, and shall have the right
to discuss such documentation with Roche's independent certified public
accountants. [
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]
Such audit rights may be exercised no more often than once a year, within three
(3) years after the payment period to which such records relate, upon notice to
Roche and during normal business hours. Gilead will bear the full cost of such
audit unless such audit discloses an underpayment of more than five percent (5%)
from the amount of royalties due. Roche shall promptly make up any underpayment.
The terms of this Section 8.3 shall survive any termination or expiration of
this Agreement for a period of three (3) years.
8.4 WITHHOLDING TAXES. Any and all taxes levied on account of royalty
payments paid or owed from a country in which provision is made in the law or by
regulation for withholding will be deducted from royalty payments made to Gilead
hereunder. Roche shall cooperate with Gilead to claim exemption from such
deductions or withholdings under any double taxation or similar agreement in
force from time to time. In addition, Roche shall cooperate with Gilead in all
proper respects to minimize any taxes on royalties hereunder. If Roche makes
any payment without reduction for withholding and it later transpires that an
amount of tax should have been withheld on such royalty payment ("underwithheld
tax"), Roche shall be entitled to recover the underwithheld tax by an additional
withholding from any payment due to Gilead under this Agreement. Similarly, if
Roche withholds an amount of tax which is later determined to have not been due,
Roche shall reimburse Gilead for such over withheld amounts. Gilead shall have
the right to audit correspondence and records relating to such tax issues on the
same terms as described in Section 8.3 above.
ARTICLE 9
TERM AND TERMINATION
9.1 TERM. The term of this Agreement shall commence upon the Effective
Date and, unless sooner terminated as provided in this Article 9, expire on the
expiration of royalty obligations set forth herein.
9.2 LICENSES UPON EXPIRATION. In the event that the Agreement expires as
set forth in Section 9.1 above without early termination, the license granted
under Section 2.1 with respect to the Gilead Patents and Gilead Know-How shall
automatically become a non-exclusive, irrevocable, fully-paid license to use
and/or sublicense the use of Gilead Know-How to manufacture, use and sell
Products in each country where such license had previously been in effect. In
the event one or more countries are eliminated from the
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scope of the Roche license pursuant to Section 4.2 or 9.6, the license to
Roche in this Section 9.2 shall not apply to such countries.
9.3 TERMINATION FOR BREACH. Each party shall have the right to terminate
this Agreement and its obligations hereunder for material breach by the other
party, which breach remains uncured for ninety (90) days after written notice is
provided to the breaching party, or in the case of an obligation to pay a
Royalty or other payments owing under this Agreement, which breach remains
uncured for thirty (30) days after written notice to the breaching party unless
there exists a bona fide dispute as to whether such Royalty or other payments
are owing. Notwithstanding any termination under this Section 9.3, any
obligation to pay Royalty or other payments which had accrued or become payable
as of the date of termination shall survive termination of this Agreement.
9.4 TERMINATION FOR GILEAD'S BREACH. In the event Roche terminates this
Agreement pursuant to Section 9.3 above, all licenses granted to Roche under
this Agreement shall survive, subject to Roche's continued obligation to pay
Royalties to Gilead hereunder. Roche shall retain all of its rights to bring an
action against Gilead under Article 14, including all of its rights for recovery
of damages.
9.5 PRODUCT REVERSION. In the event Gilead terminates this Agreement
pursuant to Section 9.3 above, or Roche terminates this Agreement pursuant to
Section 9.6, all licenses granted to Roche under Section 2.1 hereof shall
terminate, all rights to Products shall automatically revert to Gilead, and
Roche shall cooperate with Gilead in all respects to effect the prompt and
efficient transfer to Gilead of Product development and marketing activities.
In the event of such termination, Roche hereby assigns to Gilead all right,
title and interest in and to all regulatory filings and approvals pertaining
to Products. In addition, contingent upon such termination, Roche hereby
grants to Gilead an exclusive, royalty-free license under the Roche Patents
and the Roche Know-How which are necessary or useful for the manufacture, use
or sale of the Product(s) as such product(s) exist as of the date of
termination. Gilead's rights to practice such Roche technology shall be
limited exclusively to the purpose of development and commercialization of
products that would be Products hereunder. If Roche terminates its rights in
one or more countries under Section 9.6, or loses its rights in one or more
countries pursuant to Section 4.2, this Section 9.5 shall apply only in the
countries in which such termination is effective. If such termination occurs
on less than a worldwide basis, Roche shall (i) supply the requirements of
Gilead or its subsequent licensee for Product (in bulk or finished form), or
intermediates of such Product, at Roche's Cost of Goods Sold, so long as
Roche manufactures or procures the Product or intermediate for its own
account, and (ii) at Gilead's request, assist reasonably in the transfer of
manufacturing processes to new suppliers. If such termination occurs on a
worldwide basis, then Roche shall (i) provide such supply, to the extent it
had established it for its own account prior to such termination, and (ii) at
Gilead's request, assist reasonably in
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the transfer of manufacturing processes to new suppliers. Gilead agrees that
in the event this Section 9.5 comes into effect, it will use diligent efforts
to effect the transfer of Product manufacturing activities to Third Parties
as soon as practicable. Roche's supply obligation under this Section 9.5
shall in any event not continue for more than two (2) years after such
termination.
9.6 TERMINATION BY ROCHE FOR CONVENIENCE. Roche shall also have the
right in its discretion to terminate this Agreement on a worldwide basis or
on a country by country basis, on [ ] advance written
notice, provided that (i) Roche shall remain responsible for its performance
of this Agreement during the [ ] period following the giving of such
notice, (ii) Roche shall remain responsible for the completion of any
clinical trials of Product which commenced prior to the giving of such
notice, even if such trial continued beyond such [ ] period,
and (iii) on a worldwide or country by country basis, as the case may be,
Roche shall grant the licenses and effect the transfers provided for in
Section 9.5. In such event, if Gilead grants a license to a Third Party to
the Product rights surrendered by Roche prior to the end of such
[ ] period, Gilead shall use diligent efforts to cause such
new licensee to assume its PRO RATA share of the costs for which Roche is
responsible under this Section 9.6 in respect of the Product rights being
obtained by the new licensee (where "PRO RATA" refers to the period of time
remaining in the [ ] notice period at the time Gilead enters
into such new agreement).
9.7 SURVIVAL. Articles 1, 5, 9, 10, 11, 12, 14 and 15 and Sections 3.3(b)
and 8.3 of this Agreement shall survive termination of this Agreement for any
reason (subject to any subsequent dates of termination referred to in such
individual Articles).
ARTICLE 10
INTELLECTUAL PROPERTY
10.1 OWNERSHIP OF INVENTIONS. Each party shall own any inventions made
solely by its employees or agents. Inventions made jointly by employees or
agents of each party shall be owned jointly by the parties ("Joint Inventions").
Inventorship shall be determined in accordance with U.S. patent laws.
10.2 PROSECUTION OF PATENTS.
(a) GILEAD PATENTS. Gilead Patents shall be prosecuted
(including the handling of interferences) and maintained by Gilead or its
licensors. Gilead shall furnish Roche with copies of draft submissions to the
relevant patent authorities and will consider Roche's comments. If Roche does
not provide Gilead with comments within thirty (30) days of receipt of a draft,
Gilead shall be free to proceed with its submission or other contemplated
action. Further, Gilead shall always be entitled
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to proceed with any submission or other contemplated action if it determines
time is of the essence, provided that Gilead makes reasonable efforts to
inform Roche as early as practicable and to consider its comments where
possible. In the event that Gilead elects not to maintain any issued patent
within the Gilead Patents or not to file any patent term extensions to the
Gilead Patents which Roche believes are appropriate to obtain an extended
period of market exclusivity for Product, Roche shall have the right to elect
to have Gilead or its licensors maintain such patents or file for such patent
term extensions at Roche's sole expense. Gilead shall bear the costs
incurred in connection with the prosecution and maintenance of Gilead
Patents, except that Roche shall make a one-time nonaccountable and
noncreditable payment to Gilead in the amount of [ ] within ten (10)
days of the Effective Date as an additional license fee in consideration of
Gilead's obligation to prosecute and maintain the Gilead Patents after the
Effective Date.
(b) ROCHE PATENTS COVERING PRODUCTS. It is anticipated that as
part of this collaborative development program, patents may be filed by and
issued to Roche that may cover compositions of matter (including formulations)
of Products as well as biological uses or processes for the manufacture of
Products. These patents shall be prosecuted (including the handling of
interferences) and maintained by Roche, at its expense. Roche shall furnish
Gilead with copies of draft submissions to the relevant patent authorities and
will consider Gilead's comments. If Gilead does not provide Roche with
comments within thirty (30) days of receipt of a draft, Roche shall be free to
proceed with its submission or other contemplated action. Further, Roche shall
always be entitled to proceed with any submission or other contemplated action
if it determines time is of the essence, provided that Roche makes reasonable
efforts to inform Gilead as early as practicable and to consider its comments
where possible. Roche shall not abandon claims Covering Products without prior
notice to and consultation with Gilead, and shall not abandon patent
applications covering Products without first offering assignment of such
applications to Gilead, which if it accepts such assignment shall thereafter
prosecute such applications at its sole expense and in its sole discretion. In
the event such applications are assigned to Gilead, Roche shall retain a
nonexclusive license. Such license shall be royalty free outside of the field
of neuraminidase inhibitors, and shall be subject to the Royalties set forth in
Section 5.3 within the field of neuraminidase inhibitors.
(c) JOINT PATENTS. With respect to Joint Inventions, the
parties shall meet and agree upon which party shall prosecute patent
applications Covering such Joint Invention. If either party prosecutes a patent
application on a Joint Invention, such party shall bear its own internal costs,
and the external costs for outside counsel, filing fees, etc. shall be borne
equally by the parties, except as provided in the final sentence of this
paragraph. Except for the licenses granted herein, each party shall be entitled
to practice and sublicense Joint Inventions without restriction or an obligation
to account to the other party. Either party may disclaim its interest in any
particular patent or patent
[*] CONFIDENTIAL TREATMENT REQUESTED
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application covering a Joint Invention, in which case (i) the disclaiming party
shall assign its ownership interest in such patent or patent application to the
other party without consideration, (ii) the party which is then the sole owner
shall be solely responsible for all future costs of such patent or patent
application, and (iii) the disclaiming party shall hold no further rights
thereunder, except for a nonexclusive license. Such license shall be royalty
free outside of the field of neuraminidase inhibitors, and shall be subject to
the Royalties set forth in Section 5.3 within the field of neuraminidase
inhibitors.
10.3 INFRINGEMENT OF PATENTS BY THIRD PARTIES.
(a) NOTIFICATION. Each party shall promptly notify the other in
writing of any alleged or threatened infringement of the Gilead Patent Rights,
Joint Patent Rights or Roche Patent Rights of which it becomes aware.
(b) GILEAD PATENT RIGHTS. Gilead shall have the right, but not
the obligation, to bring, at Gilead's expense and in its sole control, an
appropriate action against any person or entity infringing a Gilead Patent Right
directly or contributorily. If Gilead does not bring such action within ninety
(90) days (forty five (45) days in the case of an action brought under the
Hatch-Waxman Act) of notification thereof to or by Roche, Roche shall have the
right, but not the obligation, to bring at Roche's expense and in its sole
control, such appropriate action. The party not bringing an action under this
paragraph (b) shall be entitled to separate representation in such matter by
counsel of its own choice and at its own expense, but such party shall cooperate
fully with the party bringing such action.
(c) ROCHE PATENT RIGHTS. With respect to Roche Patent Rights,
Roche may take such action as it deems in its best interests. Gilead shall not
have any right to bring an action under Roche Patent Rights, but shall have the
right to be fully informed regarding any litigation brought thereunder by Roche,
including the status of any settlement activity.
(d) JOINT PATENT RIGHTS. With respect to Third Party
infringement of Joint Patent Rights, the parties shall confer and take such
action, and allocate expenses and recoveries in such manner, as they may agree.
In the absence of agreement, the rules applicable to Gilead Patent Rights shall
apply to the Joint Patent Rights in question.
(e) COSTS AND AWARDS. The party which is not in control of any
action brought pursuant to Section 10.3(b), (c) or (d) may elect to contribute
fifty percent (50%) of the costs of litigation against such Third Party
infringer, by providing written notice to the controlling party within ninety
(90) days after such action is first brought. If
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the non-controlling party elects to bear fifty percent (50%) of such litigation
costs, it shall receive fifty percent (50%) of any damage award or settlement
resulting from such action. If the non-controlling party does not elect to
share such litigation costs, it shall not participate in any damage award or
settlement resulting from such action.
(f) SETTLEMENT; ALLOCATION OF PROCEEDS. Neither party shall
settle a claim brought under this Section 10.3 without the consent of the other
party. In the event of any recovery of monetary damages from the Third Party,
whether such damages result from the infringement of Gilead Patents or Roche
Patents, such recovery shall be allocated first to the reimbursement of any
expenses incurred by the parties in the litigation under this Section 10.3
(including, for the purpose, a reasonable allocation of internal counsel and
other expenses), and thereafter as provided in Section 10.3 (e). If the amount
recovered from the Third Party is less than the aggregate expenses of the
parties incurred in connection with such litigation, the recovery shall be
shared pro rata between Gilead and Roche in proportion to their respective
expenses.
10.4 INFRINGEMENT OF THIRD PARTY RIGHTS. In the event that any Product
manufactured, used or sold under this Agreement becomes the subject of a
Third Party claim or there is the potential for a claim for patent
infringement anywhere in the world, and irrespective of whether Gilead or
Roche is charged with said infringement, the parties shall promptly meet to
consider the claim and the appropriate course of action. Unless the parties
otherwise agree, the party against which such Third Party infringement claim
is brought shall defend against such claim at its sole expense and the other
party shall have the right, but not the obligation, to participate in any
such suit, at its sole option and at its own expense. Such other party shall
reasonably cooperate with the party conducting the defense of the claim,
including if required to conduct such defense, furnishing a power of
attorney. Neither party shall enter into any settlement that affects the
other party's rights or interests without such other party's written consent,
which consent shall not be unreasonably withheld. If in the opinion of
Roche's counsel, a license with respect to such Third Party patents is
necessary to avoid substantial risks which could prevent Roche from making,
using, selling, offering for sale or importing Product, then Roche shall
notify Gilead of such conclusion and the basis for it and give Gilead a
reasonable opportunity to discuss Roche's opinion. If Gilead concurs in
Roche's opinion, Roche shall have the right to negotiate directly with such
Third Party for a license, and Roche shall be entitled to apply
[ ] of Third Party Royalties for Net Sales in the country
where the claim exists, as a credit against royalties due under Section 5.3;
provided, however, that the aggregate credit taken in any given calendar
quarter shall not exceed [ ] of the royalties payable to
Gilead during that quarter, on a country-by-country basis, and shall be
subject to further limitations as expressly set forth in Section 5.3. If
Gilead does not concur with Roche's opinion, the matter shall be submitted to
an independent counsel, selected by mutual consent and paid equally by Roche
and Gilead, to determine whether there is a substantial
[*] CONFIDENTIAL TREATMENT REQUESTED
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risk of infringement of such Third Party rights. If such independent counsel
determines that a substantial risk exists, then Roche may negotiate directly
with such Third Party and receive royalty credit as set forth above. If such
independent counsel determines that a substantial risk does not exist, then
Roche may still negotiate for a license from such Third Party if it elects to do
so, but Roche shall not have the right of royalty reduction provided for in this
Section 10.4.
10.5 PATENT MARKING. Products marketed and sold by Roche hereunder shall
be marked with appropriate patent numbers or indicia at Gilead's request,
subject to Roche's consent, not to be unreasonably withheld.
ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION BY GILEAD. Gilead hereby agrees to indemnify, hold
harmless and defend Roche against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts Roche becomes legally
obligated to pay because of any claim or claims against it to the extent that
such claim or claims (i) arise out of the breach or alleged breach of any
representation or warranty by Gilead hereunder, or (ii) are due to the
negligence or misconduct of Gilead; provided that (a) Roche provides Gilead with
prompt notice of any such claim and the exclusive ability to defend (with the
reasonable cooperation of Roche) and settle any such claim and (b) such
indemnities shall not apply to the extent such claims are covered by Roche's
indemnity set forth in Section 11.2 below.
11.2 INDEMNIFICATION BY ROCHE. Roche hereby agrees to indemnify, hold
harmless and defend Gilead against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts Gilead becomes legally
obligated to pay because of any claim or claims against it to the extent that
such claim or claims (i) result from Roche's activities under this Agreement,
(ii) arise out of the breach or alleged breach of any representation or warranty
by Roche hereunder, (iii) are due to the negligence or misconduct of Roche, or
(iv) arise out of the possession, manufacture, use, sale or administration of
the Product by Roche or Roche's Affiliates or sublicensees; provided that (a)
Gilead provides Roche with prompt notice of any such claim and the exclusive
ability to defend (with the reasonable cooperation of Gilead) or settle any such
claim and (b) such indemnities shall not apply to the extent such claims are
covered by Gilead's indemnity set forth in Section 11.1 above.
11.3 MECHANICS. In the event that the parties cannot agree as to the
application of Sections 11.1 and 11.2 above to any particular loss or claim, the
parties may conduct
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separate defenses of such claim. Each party further reserves the right to claim
indemnity from the other in accordance with Sections 11.1 and 11.2 above upon
resolution of the underlying claim, notwithstanding the provisions of Sections
11.1 and 11.2 above requiring the indemnified party to tender to the
indemnifying party the exclusive ability to defend such claim or suit.
11.4 INSURANCE COVERAGE. Each party represents and warrants that it is
covered and will continue to be covered by a comprehensive general liability
insurance program which covers all of each Party's activities and obligations
hereunder. Each party shall provide the other party with written notice at least
fifteen (15) days prior to any cancellation or material change in such insurance
program. Each party shall maintain such insurance program, or other program
with comparable coverage, beyond the expiration or termination of this Agreement
during (i) the period that any Product is being commercially distributed or sold
other than for the purpose of obtaining regulatory approvals by Roche or by a
sublicensee, Affiliate or agent of Roche and (ii) a commercially reasonable
period thereafter.
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ARTICLE 12
CONFIDENTIALITY
12.1 PROPRIETARY INFORMATION; EXCEPTIONS. Each party will maintain all
Proprietary Information received by it under this Agreement in trust and
confidence and will not disclose any such Proprietary Information to any Third
Party or use any such Proprietary Information for any purposes other than those
necessary or permitted for performance under this Agreement. In particular,
Roche shall not use any Gilead Know-How for any purpose other than those
expressly licensed under Section 2.1. Each party may use the other's
Proprietary Information only to the extent required to accomplish the purposes
of this Agreement. Proprietary Information shall not be used for any purpose or
in any manner that would constitute a violation of any laws or regulations,
including without limitation the export control laws of the United States.
Proprietary Information shall not be reproduced in any form except as required
to accomplish the intent of this Agreement. No Proprietary Information shall be
disclosed to any employee, agent, consultant, Affiliate, or sublicensee who does
not have a need for such information. To the extent that disclosure is
authorized by this Agreement, the disclosing party will obtain prior agreement
from its employees, agents, consultants, Affiliates, sublicensees or clinical
investigators to whom disclosure is to be made to hold in confidence and not
make use of such information for any purpose other than those permitted by this
Agreement. Each party will use at least the same standard of care as it uses to
protect its own Proprietary Information of a similar nature to ensure that such
employees, agents, consultants and clinical investigators do not disclose or
make any unauthorized use of such Proprietary Information, but no less than
reasonable care. Each party will promptly notify the other upon discovery of
any unauthorized use or disclosure of the Proprietary Information.
Proprietary Information shall not include any information which:
(a) is now, or hereafter becomes, through no act or failure to
act on the part of the receiving party in breach hereof, generally known or
available;
(b) is known by the receiving party at the time of receiving
such information, as evidenced by its written records;
(c) is hereafter furnished to the receiving party by a third
party, as a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving party without
any breach of this Agreement; or
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(e) is the subject of a written permission to disclose provided
by the disclosing party.
12.2 AUTHORIZED DISCLOSURE. The parties shall issue a joint press release
upon signing this Agreement. The parties agree that the material financial
terms of the Agreement, other than the initial payments provided in Sections
3.3(c) and 5.1 and the aggregate milestone payments provided for in Section 5.2,
will be considered Proprietary Information of both parties. Notwithstanding the
foregoing, either party may make disclosures required by law or regulation,
provided prior notice is given to the other party whenever possible, and may
disclose the material financial terms of the Agreement to bona fide potential
corporate partners, to the extent required or contemplated by this Agreement,
and to financial underwriters, prospective investors and other parties with a
need to know such information. Any such disclosures, and any disclosure of the
development and marketing or Products or other developments under this
Agreement, including but not limited to press releases, will be reviewed and
consented to by each party prior to such disclosure. Such consent shall not be
untimely or unreasonably withheld by either party. All such disclosures shall
be made only to parties under an obligation of confidentiality.
Notwithstanding any other provision of this Agreement, each party may
disclose Proprietary Information if such disclosure:
(a) is in response to a valid order of a court or other
governmental body of the United States or a foreign country, or any political
subdivision thereof; provided, however, that the responding party shall first
have given notice to the other party hereto and shall have made a reasonable
effort to obtain a protective order requiring that the Proprietary Information
so disclosed be used only for the purposes for which the order was issued;
(b) is otherwise required by law or regulation, including SEC
related documents; or
(c) is otherwise necessary to file or prosecute patent
applications, prosecute or defend litigation or comply with applicable
governmental regulations or otherwise establish rights or enforce obligations
under this Agreement, but only to the extent that any such disclosure is
necessary.
12.3 RETURN OF PROPRIETARY INFORMATION. In the event Roche loses its
license to Gilead Patents and Gilead Know-How which was granted to it under this
Agreement, Roche shall use diligent efforts (including without limitation a
diligent search of files and computer storage devices) to return all Proprietary
Information received by it from Gilead, provided, however, that Roche may keep
one copy of such Proprietary Information for legal archival purposes. Access to
the copy so retained by Roche's legal
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department shall be restricted to counsel and such Proprietary Information shall
not be used except in the resolution of any claims or disputes arising out of
this Agreement.
12.4 PUBLICATIONS. Except as required by law, neither Party shall publish
or present, or cause to be published or presented, the results of studies
carried out with respect to Products without the opportunity for prior review by
the other party. Each party shall provide to the other the opportunity to
review any proposed abstracts, manuscripts or presentations which relate to
Products at least thirty (30) days prior to their intended submission for
publication and such submitting party agrees, upon written request from the
other party, not to submit such abstract or manuscript for publication or to
make such presentation until the other party is given a reasonable period of
time to seek patent protection for any material in such publication or
presentation that it believes is patentable.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES
13.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each party hereby represents
and warrants:
(a) CORPORATE POWER. Such party is duly organized and validly
existing under the laws of the state of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.
(b) DUE AUTHORIZATION. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.
13.2 GILEAD REPRESENTATIONS AND WARRANTIES. Gilead warrants and represents
that:
(a) SAFETY DATA. To the best of its knowledge, Gilead has informed
Roche about all significant information in its possession or control concerning
side effects, injury, toxicity or sensitivity reaction and incidents or severity
thereof with respect to any Product tests conducted by Gilead or its
contractors. Roche acknowledges
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that such tests have been entirely preclinical and may not be indicative of
results that may be obtained in humans.
(b) PATENT MATTERS. As of the Effective Date, Gilead has no
knowledge of the existence of any patent owned or controlled by a Third Party
which covers the lead compound identified by Gilead to Roche (GS 4104) and would
prevent Roche from making, using or selling such compound. To the best of
Gilead's knowledge and belief, as of the Effective Date, the patent applications
listed in Exhibit A at the Effective Date are owned by Gilead and Gilead is not
in possession of information that would, in its opinion, render invalid and/or
unenforceable claims directed specifically to GS 4104 that are presently in one
or more of such applications. Notwithstanding the foregoing, if at any time
prior to December 31, 1997, a patent or patent application held by a Third Party
is identified which covers the specific Product being developed by the parties
pursuant to this Agreement, the parties will meet and discuss possible
resolutions of the patent situation. If the resolution involves a license from
the Third Party to its patent rights and/or a license to the Third Party under
Gilead or Roche patent rights, the parties acknowledge that the economic
assumptions underlying this Agreement may no longer be valid, and in such case
the parties will renegotiate the terms of this Agreement in good faith in order
to reflect such resolution.
13.3 NO OTHER REPRESENTATIONS. THE EXPRESS REPRESENTATIONS AND WARRANTIES
STATED IN THIS ARTICLE 13 ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 14
DISPUTE RESOLUTIONS; VENUE AND GOVERNING LAW
14.1 DISPUTES. The parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either party's rights and/or obligations hereunder or thereunder. It is the
objective of the parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, the
parties agree to follow the procedures set forth in this Article 14 if and when
a dispute arises under this Agreement.
In the event of disputes between the parties, including disputes among the
members of the Steering Committee which such committee is unable to resolve, a
party seeking to resolve such dispute will, by written notice to the other, have
such dispute referred to their respective executive officers designated below or
their successors, for
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attempted resolution by good faith negotiations within fourteen (14) days after
such notice is received. Said designated officers are as follows:
For Roche: Head of the Pharma Division
For Gilead: Chief Executive Officer
In the event the designated executive officers are not able to resolve such
dispute, either party may at any time after the 14 day period invoke the
provisions of Section 14.2 hereinafter.
14.2 ALTERNATIVE DISPUTE RESOLUTION. Following settlement efforts pursuant
to Section 14.1, any dispute, controversy or claim arising out of or relating to
the validity, construction, enforceability or performance of this Agreement,
including disputes relating to alleged breach or to termination of this
Agreement under Section 9.3, other than disputes which are expressly prohibited
herein from being resolved by this mechanism, shall be settled by binding
Alternative Dispute Resolution ("ADR") in the manner described below:
(a) ADR REQUEST. If a party intends to begin an ADR to resolve
a dispute, such party shall provide written notice (the "ADR Request") to
counsel for the other party informing such other party of such intention and the
issues to be resolved. From the date of the ADR Request and until such time as
any matter has been finally settled by ADR, the running of the time periods
contained in Section 9.3 as to which party must cure a breach of this Agreement
shall be suspended as to the subject matter of the dispute.
(b) ADDITIONAL ISSUES. Within ten (10) business days after the
receipt of the ADR Request, the other party may, by written notice to the
counsel for the party initiating ADR, add additional issues to be resolved.
(c) NO ADR OF PATENT ISSUES. Disputes regarding the scope,
validity and enforceability of patents shall not be subject to this Section
14.2, and shall be submitted to a court of competent jurisdiction.
14.3 ARBITRATION PROCEDURE. The ADR shall be conducted pursuant to the
ENDISPUTE Rules then in effect, except that notwithstanding those rules, the
following provisions shall apply to the ADR hereunder:
(a) ARBITRATOR. The arbitration shall be conducted by a panel
of three arbitrators (the "Panel"). The Panel shall be selected from a pool of
retired independent federal judges to be presented to the parties by ENDISPUTE.
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(b) PROCEEDINGS. The time periods set forth in the ENDISPUTE
rules shall be followed, unless a party can demonstrate to the Panel that the
complexity of the issues or other reasons warrant the extension of one or more
of the time tables. In such case, the Panel may extend such time tables, but in
no event shall the time tables being extended so that the ADR proceeding extends
more than 18 months from its beginning to the Award. In regard to such time
tables, the parties (i) acknowledge that the issues that may arise in any
dispute involving this Agreement may involve a number of complex matters and
(ii) confirm their intention that each party will have the opportunity to
conduct complete discovery with respect to all material issues involved in a
dispute within the framework provided above. Within such time frames, each
party shall have the right to conduct discovery in accordance with the Federal
Rules of Civil Procedure. The Panel shall not award punitive damages to either
party and the parties shall be deemed to have waived any right to such damages.
The Panel shall, in rendering its decision, apply the substantive law of the
State of California, without regard to its conflict of laws provisions, except
that the interpretation of and enforcement of this Section 14.3(b) shall be
governed by the Federal Arbitration Act. The Panel shall apply the Federal
Rules of Evidence to the hearing. The proceeding shall take place in the City
of New York. The fees of the Panels and ENDISPUTE shall be paid by the losing
Party which shall be designated by the Panel. If the Panel is unable to
designate a losing party, it shall so state and the fees shall be split equally
between the parties.
(c) AWARD. The Panel is empowered to award any remedy allowed by
law, including money damages, multiple damages, prejudgment interest and
attorneys' fee, and to grant final, complete, interim, or interlocutory relief,
including injunctive relief but excluding punitive damages.
(d) COSTS. Except as set forth in Section 14.3(b), above, each
party shall bear its own legal fees. The Panel shall assess its costs, fees and
expenses against the party losing the ADR unless it believes that neither party
is the clear loser, in which case the Panel shall divide such fees, costs and
expenses according to the Panel's sole discretion.
(e) CONFIDENTIALITY. The ADR proceeding shall be confidential
and the Panel shall issue appropriate protective orders to safeguard each
party's Proprietary Information. Except as required by law, no party shall make
(or instruct the Panel to make) any public announcement with respect to the
proceedings or decision of the Panel without prior written consent of each other
party. The existence of any dispute submitted to ADR, and the award, shall be
kept in confidence by the parties and the Panel, except as required in
connection with the enforcement of such award or as otherwise required by
applicable law.
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14.4 JUDICIAL ENFORCEMENT. The parties agree that judgment on any arbitral
award issued pursuant to this Article 14 shall be entered in the United States
District Court for the Northern District of California or, in the event such
court does not have subject matter jurisdiction over the dispute in question,
such judgment shall be entered in the Superior Court of the State of California,
in the County of San Mateo.
14.5 GOVERNING LAW. This Agreement is made in accordance with and shall be
governed and construed under the laws of the State of California, as such laws
are applied to contract entered into and to be performed within such state.
ARTICLE 15
MISCELLANEOUS
15.1 AGENCY. Neither party is, nor will be deemed to be, an employee,
agent or legal representative of the other party for any purpose. Neither party
will be entitled to enter into any contracts in the name of, or on behalf of the
other party, nor will a party be entitled to pledge the credit of the other
party in any way or hold itself out as having authority to do so. This
Agreement is an arm's-length license agreement between the parties and shall not
constitute or be construed as a joint venture.
15.2 ASSIGNMENT. Except as otherwise provided herein, neither this
Agreement nor any interest hereunder will be assignable in part or in whole by
any party without the prior written consent of the other; provided, however,
that either party may assign this Agreement to any of its Affiliates or to any
successor by merger or sale of all or substantially all of its business assets
to which this Agreement relates in a manner such that the assignor will remain
liable and responsible for the performance and observance of all its duties and
obligations hereunder. This Agreement will be binding upon the successors and
permitted assigns of the parties and the name of a party herein will be deemed
to include the names of such party's successors and permitted assigns to the
extent necessary to carry out the intent of this Agreement. Any assignment
which is not in accordance with this Section 15.2 will be void.
15.3 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
15.4 NOTICES. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing unless otherwise specified
and shall be deemed to have been properly given and to be effective on the date
of delivery if delivered in person or by facsimile or three (3) days after
mailing by registered or certified mail, postage paid, to the other party at the
following address:
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In the case of Gilead:
Gilead Sciences, Inc.
353 Lakeside Drive
Foster City, CA 94404
Telephone: (415) 574-3000
FAX: (415) 578-9264
Attention: Chief Executive Officer
AND
Gilead Sciences, Inc.
353 Lakeside Drive
Foster City, CA 94404
Telephone: (415) 574-3000
Fax: (415) 572-6622
Attention: General Counsel
In the case of Roche:
F. Hoffmann-La Roche Ltd
CH-4070 Basel, Switzerland
Telephone: 41-61-688 30 60
FAX: 41-61-688 13 96
Attention: Corporate Law Department
AND
Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, NJ 07110
Telephone: (201) 235-2165
FAX: (201) 235-3500
Attention: Corporate Secretary
Either party may change its address for communications by a notice to the other
party in accordance with this Section 15.4.
15.5 FORCE MAJEURE. Any prevention, delay or interruption of performance
by any party under this Agreement shall not be considered a breach of this
Agreement if and to the extent caused by occurrences beyond the reasonable
control of the party affected, including but not limited to acts of God,
embargoes, governmental restrictions, strikes or
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other concerted acts of workers, fire, flood, earthquake, explosion, riots,
wars, civil disorder, rebellion or sabotage. The party suffering such
occurrence shall immediately notify the other party and any time for performance
hereunder shall be extended by the actual time of prevention, delay, or
interruption caused by the occurrence.
15.6 AFFILIATES. The parties hereto acknowledge that Roche will carry out
many of the activities required or permitted pursuant to this Agreement through
its Affiliates. Roche hereby represents and warrants to Gilead that this
Agreement shall be binding on its Affiliates and further guarantees the
performance of its Affiliates in accordance with this Agreement as if such
Affiliates were parties to this Agreement. In the event either party to this
Agreement is acquired by another company, then the technology and programs of
the acquiring company in existence at the time of such transaction shall not be
subject to this Agreement.
15.7 EXPORT CONTROL. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the United
States of America or other countries which may be imposed upon or related to
Gilead or Roche from time to time. Each party agrees that it will comply with
all applicable export laws and regulations in connection with its activities
under this Agreement.
15.8 SEVERABILITY. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted, to achieve the intent of the parties to this Agreement to the
extent possible rather than voided. If not capable of such interpretation, the
parties shall in good faith seek to agree on an alternative provision reflecting
the intent of the parties which is enforceable. In any event, all other terms,
conditions and provision of this Agreement shall be deemed valid and enforceable
to the full extent.
15.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder shall be
in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
15.10 WAIVER. No waiver by either party hereto on any breach or
default of any of the covenants or agreements herein set forth shall be deemed a
waiver as to any subsequent or similar breach or default.
15.11 ENTIRE AGREEMENT. This Agreement, and all Exhibits and Schedules
referred to herein, embody the entire understanding of the parties with respect
to the subject matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
38.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officer hereunto duly authorized.
GILEAD SCIENCES, INC. F. HOFFMANN-LA ROCHE LTD
By: /s/ John C. Martin By: /s/ W. Henrich
------------------------- ------------------------------
Name: John C. Martin Name: Werner Henrich
----------------------- ------------------------------
Title: CEO Title: Director
---------------------- ------------------------------
HOFFMANN-LA ROCHE INC.
By: /s/ Stephen Sulovar
---------------------------------
Name: Stephen Sulovar
-------------------------------
Title: Sr. Vice President
------------------------------
39.
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Filing
Case No. Title Country Appl. No. Date
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[
]
[*] CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
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COPROMOTION AGREEMENT
This Agreement made this 27th day of September, 1996 by and between Roche
Laboratories Inc., a New Jersey corporation having its principal place of
business at 340 Kingsland Street, Nutley, New Jersey 07110 (hereinafter referred
to as "ROCHE") and Gilead Sciences Inc., a Delaware corporation having a
principal place of business at 353 Lakeside Drive, Foster City, California 94404
(hereinafter referred to as "GILEAD").
WITNESSETH
WHEREAS, ROCHE is presently marketing the product Roferon-Registered
Trademark--A (Interferon alfa-2a, recombinant) for certain cancer indications
and is now developing this product for treating hepatitis C; and
WHEREAS, GILEAD has a professional sales force that calls on physicians and
other health care professionals in order to promote GILEAD products; and
WHEREAS, ROCHE desires to enhance its marketing of the Product (as
hereinafter defined) for treating hepatitis C in the Territory (as hereinafter
defined) by enlisting the support and participation of the GILEAD sales force.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, ROCHE and GILEAD hereby agree as follows:
ARTICLE 1-DEFINITIONS
1.01 In the terms defined herein, the singular shall include the plural and
vice versa.
1.02 The effective date of this Agreement shall be the date the Agreement is
fully executed.
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1.03 The term "Approval Date" shall mean the date the U.S. Food and Drug
Administration has approved the Product for marketing in the Field as
specified in the notice transmitted pursuant to Paragraph 7.01.
1.04 The term "Call" shall mean a visit by a professional sales representative
to a physician licensed to prescribe, dispense or administer legend drugs,
which visit is for the purpose of making a Primary Presentation on the
Product and involving no more than two other product presentations. Such
physician shall be selected from a target audience defined by the
Committee (as hereinafter defined).
1.05 The term "Calendar Year" shall mean a one year period commencing on
January 1. For instance, the first Calendar Year shall mean the period
from January 1, 1997 to December 31, 1998. The second Calendar Year shall
mean the period from January 1, 1998 to December 31, 1999.
1.06 The term "Field" shall mean the treatment of hepatitis C.
1.07 "Net Sales" shall be calculated by taking the gross sales of Product
invoiced by ROCHE and sublicensees in Territory to third parties, less
deductions of returns (including withdrawals and recalls), rebates (price
reductions, including Medicaid and similar types of rebates e.g.
chargebacks), volume (quantity) discounts, discounts granted at the time
of invoicing, sales taxes and other taxes directly linked to and included
in the gross sales amount (hereinafter "Adjusted Gross Sales"). In
addition, from the Adjusted Gross Sales, there shall be a lump sum
deduction of [ ] for those sales related deductions which
are not accounted for on a product by product basis (for example, without
limitation, outward freights, transportation insurance, packaging
materials for dispatch of goods, custom duties, discounts granted later
than at the time of invoicing, cash discounts, and product liability
insurance).
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1.08 The term "Primary Presentation" shall mean a full Product presentation
during which key product attributes are verbally presented; provided,
however, that no more than one presentation in any Call shall be
considered a Primary Presentation, which shall be the presentation on
which the most time is spent during the Call.
1.09 The term "Product" shall mean Roferon-Registered Trademark--A (Interferon
alfa-2a, recombinant) for use in the Field.
1.10 The term "The Term of this Agreement" shall mean the period specified in
Paragraph 7.01.
1.11 The term "Territory" shall mean the United States and its territories,
possessions and commonwealths.
ARTICLE 2 - GRANTS AND OBLIGATIONS
2.01 ROCHE hereby grants to GILEAD during the Term of this Agreement and under
the conditions herein imposed the right to promote and detail jointly with
ROCHE the Product under the trademark "ROFERON-A " for use in the Field in
the Territory. ROCHE shall not enter into any other copromotion or
similar arrangement with a third party regarding the Product for use in
the Field in the Territory during the Term of this Agreement. This
provision shall not preclude ROCHE from using contract personnel to detail
the Product. During the term of this Agreement, GILEAD shall not enter
into any other copromotion or similar arrangement with a third party in
the Field and within the Territory nor shall GILEAD market any other
product in the Field and within the Territory.
2.02 Subject to the provisions of and during the Term of this Agreement, each
party shall use its best efforts consistent with accepted business
practices and legal requirements to deploy its sales force to promote and
detail the Product for use in the Field in the
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Territory in such manner and with such expedition as the party itself
would have adopted in launching, promoting and detailing a major
pharmaceutical Product of its own invention. In this regard, GILEAD will
provide a qualified field sales staff for detailing and promoting the
Product resulting in at least the number of Calls required pursuant to
Paragraph 2.03.
2.03 During each calendar year, GILEAD shall make at least [ ] Calls and
ROCHE shall make at least [ ] Calls. At the end of the third quarter
of each Calendar Year, ROCHE and GILEAD shall discuss the number of calls
each party is required to make in the subsequent Calendar Year. In the
event that the number of Calls which either party is required to make
changes, then the parties will agree on an appropriate adjustment to the
compensation structure provided in this Agreement.
ARTICLE 3 - PAYMENTS
3.01 Within thirty (30) days of the effective date of this Agreement, ROCHE
shall pay GILEAD a one time, nonrefundable (except as described in this
Section 3.01) fee of [ ] as compensation for its sales efforts
during the remainder of calendar year 1996. In the event that ROCHE does
not receive approval to market the Product by June 30, 1997, then ROCHE or
GILEAD may elect to terminate this Agreement and in such case GILEAD shall
return the [ ] fee minus any direct expenses incurred with regard
to preparing for the launch of the Product.
3.02 ROCHE shall pay GILEAD a royalty on net sales from the first Calendar Year
through the third Calendar Year according to the following three tiers of
gross sales. Gross sales falling within each tier shall first be
converted to Net Sales, against which the appropriate royalty shall be
applied.
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ROYALTY AS
% OF NET SALES
Gross sales from [ ] of base gross [ ]
sales forecast
Gross sales from [ ] of base gross [ ]
sales forecast
Gross sales greater than [ ] of base gross [ ]
sales forecast
The parties have agreed to base gross sales forecasts for Product of
[ ] in the first Calendar Year and [ ] in the
second Calendar Year. A base gross sales forecast for the third Calendar
Year shall be calculated as described in the following sentences and
equation:
At the end of the third quarter of second Calendar year, the Committee
shall determine a gross base sales forecast for the third Calendar Year.
For purposes of this calculation, an estimate of annual gross sales for
the second Calendar Year will be projected based upon gross sales for the
first three quarters of that year. In summary, the 1999 base gross
forecast shall be calculated as the product of the following three
variables:
(Roferon-A percentage market share) [ ]
in interferon Hepatitis C treatments in 1998
X
(The Compounded Annual Growth
Rate for the total dollar market for
interferon Hepatitis C treatments
from the period beginning January 1, 1997
to December 31, 1998)
X
(Total dollar market for interferon
Hepatitis C treatments in 1998)
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By way of example, if in 1997 gross sales of Product are [ ]
then the royalty payable to GILEAD shall be calculated as follows:
- 1997 base gross sales forecast = [ ]
- [ ] of 1997 base gross sales forecast = [ ]
- Net sales are assumed to be [ ] of gross sales, having assumed that
gross sales are reduced by [ ] to calculate Adjusted Gross Sales and
are further reduced by [ ] as a lump sum for additional allowed
indirect expense deductions, pursuant to Paragraph 1.07.
Gross Sales Net Sales Royalty Rate Royalty Due
----------- --------- ------------ -----------
[
]
With regard to an example for the determination of the base gross sales
forecast for 1999, assuming:
- The total market in 1998 for all interferon Hepatitis C products in
the Territory is [ ]
- The compounded annual growth rate for the total market for interferon
Hepatitis C products in the Territory from January 1, 1997 to December
31, 1998 is [ ]
- The annual gross sales of Product in 1998 are [ ] and
therefore the percentage market share for the Product among all
interferon Hepatitis C products in the Territory is [ ].
then the base gross sales forecast for 1999 shall be the following:
[ ]
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3.03 ROCHE will have no liability with respect to payments due GILEAD under
Paragraph 3.02 which might have been earned on the Product by GILEAD but
were not earned, or for any damage of any nature incurred by GILEAD in
anticipation of Net Sales which might have been earned but were not
earned, if, for any reason, including the negligence (but not the willful
misconduct) of ROCHE: (a) ROCHE is unable to ship the Product in the
Territory, (b) the Product is withdrawn from the market in the Territory,
(c) sales of the Product in the Territory do not reach a level reasonably
expected by previous sales, or any level or (d) Force Majeure as set forth
in Article 8. In the event that any of the foregoing occur, excluding
(c), in such a way that the financial assumptions underlying this
Agreement are no longer valid, then the parties will renegotiate the terms
of this Agreement in good faith.
3.04 Within [ ] after the close of each [ ]
during the Term of this Agreement, ROCHE shall submit to GILEAD a
statement showing: (i) the amount of gross sales and Net Sales including,
an itemized calculation of Adjusted Gross Sales, (ii) the deductions
provided for in Paragraph 1.07 during such [ ] and on a cumulative
basis year-to-date, and (iii) the calculation of payments to GILEAD
pursuant to Paragraph 3.02. The calculations provided for herein shall be
subject to audit pursuant to Paragraph 4.15.
3.05 For the one year period commencing upon the expiration of this Agreement
("Residual Year"), ROCHE shall pay GILEAD [ ] of the
total amount paid to GILEAD for the previous calendar year pursuant to
paragraph 3.02. The payment for the Residual Year shall be made in equal
[ ] installments within [ ] after the end of
each [ ] of the Residual Year.
3.06 Under the provisions of this Agreement, all sums due to GILEAD for sales
of the Product for use in the Field within the Territory hereunder will be
payable by ROCHE in U.S. Dollars via wire transfer to GILEAD's account at
the following address:
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Wells Fargo Bank
444 Market Street, 7th Floor
San Francisco, CA 94163
Attn: Jeff Appleton
ABA # 121000 248
Dept. # 068
Acct. # 324-112069
Acct. Name: Gilead Sciences, Inc.
or any other place or bank account as GILEAD may designate to ROCHE in
writing. A copy of relevant report upon which said payment was based will
also be sent by ROCHE to GILEAD at the following address:
Gilead Sciences, Inc.
353 Lakeside Drive
Foster City, CA 94404
Attn: Chief Financial Officer
(415) 574-3000
3.07 Notwithstanding anything in this Agreement to the contrary, in the event
that ROCHE's actual Net Sales in the Territory are reduced, due to
credits, refunds, voluntary or government mandated recalls for any reason
at any time within six (6) months after the completion of any Calendar
Year for which Net Sales have been accrued pursuant to the terms of this
Agreement, then the Net Sales for the Calendar Year in which such credits,
refunds, recalls, etc. occur shall be reduced accordingly and GILEAD shall
return to ROCHE within sixty (60) days of receipt of a notice from ROCHE
requesting such return, any dollar amounts which were paid to GILEAD in
respect of Net Sales during such Calendar Year which are in excess of the
dollar amounts which would have been paid to GILEAD if the Net Sales for
such period reflected the Net Sales actually obtained by ROCHE taking
into account such credits, recalls, refunds or other deductions.
3.08 Within sixty (60) days of the execution of this Agreement, ROCHE and
GILEAD shall agree to an appropriate methodology including the selection
of an independent third party source to determine total sales of the
Product in the Field within the Territory and market
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share relative to all interferon products sold for the treatment of
Hepatitis C. The establishment of sales and market share data described
in this Paragraph shall be at the expense of ROCHE.
3.09 If the difference between the gross sales of Product and the Adjusted
Gross Sales of Product is more than [ ] of the gross sales
of Product for any given quarter as a result of Product rebates or other
pricing matters due to competition in the marketplace, then the parties
will renegotiate in good faith the terms of this Agreement.
ARTICLE 4 - COOPERATION, RIGHTS AND RESPONSIBILITIES
It is among the objectives of the parties to promote and detail the
Product for use in the Field within the Territory in the most effective
and efficient fashion. To achieve this and other objectives, the parties
agree as follows:
4.01 The parties shall each appoint an authorized representative
("Coordinator") with whom communications between the parties relating to
marketing and sales of the Product will be directed. Each party will
notify the other as to the name of the individual so appointed. Each party
may replace its Coordinator at any time, upon written notice to the other
party.
4.02 (a) The Coordinators shall establish a Committee directed by the Roche
Coordinator and consisting of an equal number of representatives of each
party which will meet at least quarterly, at mutually agreeable times and
locations, to discuss and coordinate the joint promotion and detailing of
the Product for use in the Field in the Territory and the strategies and
programs that should be developed to maximize Net Sales. Illustratively,
the Committee shall (i) coordinate the launch of the Product for use in
the Field in the Territory and (ii) guide all continuing joint promotion
and detailing efforts with respect to the Product for use in the Field in
the Territory. Although the parties intend to work cooperatively, ROCHE
will have authority and final responsibility for developing
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marketing strategies and tactics including but not limited to detailing
strategies with respect to the Product.
(b) The Committee shall develop and formulate marketing plans for
specified periods (collectively the "Marketing Plan") which shall set
forth marketing strategies and tactics relating to the Product. ROCHE,
however, shall have the final responsibility for, and control over, the
development and content of the Marketing Plan.
(c) Efforts will be made at the sales territory level to coordinate the
Calls by the ROCHE sales force with the Calls by the GILEAD sales force to
ensure the most effective coverage of the target audiences and to minimize
non-productive efforts.
(d) A party shall have the right to comment upon and make recommendations
to the other party regarding the other party's activities under this
Agreement, which recommendations the other party shall thoroughly evaluate
and consider.
(e) Each party shall bear its own costs associated with its participation
in the Committee and its activities performed under this Agreement.
4.03 (a) During the Term of and subject to any other provision of this
Agreement, each party will provide the other with all information relevant
to the detailing and promotion of the Product for use in the Field within
the Territory within a reasonable time after such information becomes
known to the party, provided such information is not received from an
independent third party under a secrecy obligation. Specifically, the
sales force of each party will receive the same information at the same
time with respect to the Product.
(b) During the Term of this Agreement, each party shall promptly notify
the other party of all information coming into its possession concerning
unexpected side effects, injury, toxicity or sensitivity reaction
including unexpected incidence and severity thereof associated with
commercial or clinical uses, studies, investigations or tests with the
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Product (animal or human), throughout the world, whether or not determined
to be attributable to the Product ("Adverse Reaction Reports"). In the
case of Adverse Reaction Reports within the scope of 21 CFR
314.80(c)(iii), GILEAD shall transmit such Adverse Reaction Reports so
that they are received by ROCHE within three (3) business days after
receipt by GILEAD, or such other reporting period as may be required by
law. ROCHE shall transmit Adverse Reaction Reports to GILEAD on a
periodic basis, but no less often than once every three (3) months;
provided, however, that ROCHE shall promptly notify GILEAD of any Adverse
Reaction Report requiring the alteration of detailing activities by the
GILEAD sales force. All such communications shall be held in the
strictest confidence by GILEAD and shall be subject to the terms of
Paragraph 4.14.
4.04 GILEAD warrants and represents that it will maintain records of Calls made
by its sales force and that these records will accurately represent the
number of Calls made and the relative emphasis given to each Product
during a Call. For all Calendar Years covered by this Agreement, GILEAD
shall issue reports to ROCHE within [ ] after the end of
[ ] of such Calendar Year showing the number of Calls made to
each audience and the relative emphasis assigned to the Product in such
Calls. ROCHE shall be entitled to audit the source data and documents
used to compile such reports pursuant to the provisions of Paragraph 4.15
of this Agreement.
4.05 ROCHE retains and shall retain all proprietary rights and proprietary
interests in the Product until the point of sale and in all supporting
sales and promotional and educational material. GILEAD will not have nor
represent that it has any control or proprietary or property interests in
the Product. Nothing contained herein shall be deemed to grant GILEAD,
either expressly or implied by a license or other right or interest in any
patent, trademark, copyright or other similar property of ROCHE except as
may be necessary for GILEAD to promote and detail the Product as provided
for in this Agreement.
4.06 (a) During the Term of this Agreement, at ROCHE's cost, ROCHE shall create
and develop all sales and promotional materials relating to the Product
for distribution for use
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in the Field. ROCHE shall provide GILEAD with such materials, in amounts
which are reasonable under the terms of the Marketing Plan. Other than
with the advice and consent of ROCHE, GILEAD shall not create or develop
sales, promotional or other similar materials relating to the Product for
distribution to independent third parties.
All sales and promotion material for distributing the Product for use in
the Field which is prepared primarily through a printing technique (except
for memo pads and the like) shall be supplied by ROCHE, free of all
charge, to GILEAD.
All sales and promotional materials relating to the distribution of the
Product for use in the Field which are multi-dimensional in form,
including memo pads and the like, and materials which are prepared
primarily by techniques other than printing shall be supplied to GILEAD by
ROCHE in accordance with paragraph 4.07 of this Agreement.
(b) GILEAD shall not be required to distribute any sales and promotional
material prepared after the date of this Agreement which (i) does not
present GILEAD to the medical and paramedical communities and to the trade
as joining with ROCHE in the detailing and promotion of the Product, (ii)
does not mention the Product, or (iii) includes reference to another ROCHE
pharmaceutical in addition to the Product. At ROCHE's request, and at
GILEAD's sole option, GILEAD may distribute sales and promotion material
of the type identified in this subparagraph (b). Should GILEAD elect to so
distribute such material, it shall be supplied to GILEAD by ROCHE free of
all charge. In no event shall ROCHE be required to distribute any material
which contains a reference (i) to GILEAD (other than in connection with
the joint detailing and promotion of the Product in accordance with this
Agreement) or (ii) any GILEAD pharmaceutical.
4.07 To achieve the objectives of this Agreement, it may be necessary to
distribute multi-dimensional sales and promotional materials, including
memo pads and the like and/or materials which are prepared primarily by
techniques other than printing (all of these materials being hereinafter
identified as "Materials") to health care personnel and
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the trade on an ongoing basis ("Program"). If in ROCHE's sole judgment it
determines that such a Program is best to achieve these objectives, ROCHE
shall provide GILEAD, free of charge, with all of GILEAD's reasonable
requirements for Materials. ROCHE shall cause the production of all
Materials and shall ship GILEAD's requirements of Materials to such
GILEAD's facilities as GILEAD may designate, F.O.B., the ROCHE
distribution site. Materials shall be allotted on a per capita basis to
the ROCHE sales force and the GILEAD sales force as modified by the
expected amount of time and effort to be used by each sales force in
detailing and promoting the Product for use in the Field. All Materials
delivered to GILEAD shall be packaged in the same form and be of the same
quality as those which ROCHE normally distributes to health care personnel
or to the trade in the Territory.
4.08 Each party shall contribute facilities, supplies, personnel (including
management and sales representatives) and other resources without charge
or expense to the other as each party, in its absolute discretion,
believes necessary for the proper performance of terms of this Agreement,
and each party shall bear its own costs incurred in the performance of any
obligations hereunder. Neither party shall have any responsibility for
the firing or compensation of the other party's employees or for any
employee benefits. No employee or representative of a party shall have
any authority to bind or obligate the other party to this Agreement for
any sum or in any manner whatsoever, or to create or impose any
contractual or other liability on the other party without said party's
authorized written approval. For all purposes, and notwithstanding any
other provision of this Agreement to the contrary, GILEAD's legal
relationship under this Agreement to ROCHE shall be that of independent
contractor.
4.09 ROCHE shall have the sole responsibility for the manufacture and
distribution of Product in the Territory. ROCHE shall also be
responsible for insuring that sufficient stock of the Product will be
available in its inventory to promptly fill orders in the Territory from
the trade except for Force Majeure as defined in Article 8.
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4.10 (a) With respect to the Product, ROCHE and GILEAD shall both employ the
Trademark "Roferon-Registered Trademark--A" on all promotional literature
relating to the Product for use in the Territory such as detailing aids
and advertising directed to the Product. All such promotional literature
shall identify the Product as being promoted by ROCHE/GILEAD. At ROCHE's
discretion, all literature which sets forth the Product and sets forth
with at least equal emphasis to the Product, one or more other Products
distributed or sold by ROCHE need not set forth or identify the Product as
being promoted by ROCHE/GILEAD but can simply identify the Product as a
ROCHE Product without the name of GILEAD appearing on said literature.
(b) During the term of this Agreement after approval of the supplemental
new drug application (NDA) by the United States Food and Drug
Administration (FDA) directed to the Product and before launch of the
Product, ROCHE shall provide reasonable assistance to GILEAD, free of
charge, for training and orientation of the GILEAD sales force. ROCHE will
provide GILEAD, free of charge, with reasonable quantities of training
materials which have been created and developed by ROCHE relating to the
Product and its use in the Field. During the term of this Agreement,
GILEAD will not permit any of its sales personnel to promote the Product
unless such sales personnel have been qualified under criteria and/or
tests supplied by ROCHE, which either will be the same as those used to
qualify ROCHE sales personnel or will be approved by ROCHE. The costs of
training the GILEAD sales training personnel incurred by GILEAD shall be
borne by GILEAD.
(c) Neither party shall distribute or have distributed any such
information, except for promotional literature prepared by ROCHE under
subparagraph (a) of this paragraph, which bears the name of the other
without the prior written approval of the other, which approval shall not
be unreasonably withheld. The Product shall be represented solely as a
ROCHE Product. When packaged, the Product will bear the trademark and
label of ROCHE only. All promotional materials or other information
regarding the Product, if any, which is distributed other than to medical
or paramedical communities or trade, will
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not be required to identify GILEAD's involvement in the detailing or
promotion of the Product, but may so identify said involvement if ROCHE in
its sole discretion deems it appropriate to do so.
(d) (i) ROCHE at its option may issue press releases or other public
announcements relating to the Product or the arrangement contemplated by
this Agreement (including a joint press release with GILEAD upon execution
of this Agreement), provided however, that ROCHE shall not issue a press
release or public announcement which relates to the arrangement
contemplated by this Agreement, except for references to GILEAD and the
relationship created by this Agreement in ROCHE's annual and quarterly
reports and other SEC documents, without the prior written approval of
GILEAD, which approval shall not be unreasonably withheld.
(ii) GILEAD at its option may issue press releases or other public
announcements relating to the Product or the arrangement contemplated by
this Agreement (including a joint press release with ROCHE upon execution
of this Agreement), provided however, that GILEAD shall not issue a press
release or public announcement which relates to the arrangement
contemplated by this Agreement, except for references to ROCHE and the
relationship created by this Agreement in GILEAD's annual and quarterly
reports and other SEC documents, without the prior written approval of
ROCHE, which approval shall not be unreasonably withheld.
4.11 (a) ROCHE shall have the sole right and responsibility, and shall bear all
costs related thereto, to take such actions with respect to the Product as
would normally be done in accord with accepted business practices and
legal requirements to obtain and maintain the authorization and/or ability
to market a major pharmaceutical Product in the Territory, including,
without limitation, the following:
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(l) responding to Product and medical complaints relating to the
Product. GILEAD agrees that it shall refer any such complaints which
it receives to ROCHE as soon as reasonably practicable;
(2) handling all returns of the Product. If the Product is returned to
GILEAD, it shall be shipped to ROCHE's nearest facility, with any
reasonable or authorized shipping or other documented direct cost to
be paid by ROCHE. GILEAD shall incur no liability of any nature in
the handling of such returns. GILEAD, if requested, shall advise the
customer who made the return that the Product has been returned to
ROCHE;
(3) handling all recalls of the Product. At ROCHE's request and GILEAD's
option, GILEAD will assist ROCHE in receiving the recalled Product
and any direct documented costs incurred by GILEAD, with respect to
participating in such recall shall be reimbursed by ROCHE;
(4) communicating with any governmental agencies and satisfying their
requirements regarding the authorization and/or continued
authorization to market the Product in commercial quantities in the
Territory;
(5) reporting Adverse Reaction Reports to U.S. regulatory authorities as
required by applicable U.S. law or regulation;
(6) handling Product distribution, inventory and receivables.
(b) Each party shall respond to medical questions or inquiries relating to
the Product directed to such party. Within a reasonable time from the date
of this Agreement, but in no event later than the Approval Date, ROCHE
shall provide GILEAD with all reasonably necessary information which would
enable GILEAD to respond properly and promptly to any such questions or
inquiries. All such information shall be held in the
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strictest confidence by GILEAD and shall be subject to the terms of
Section 4.13 hereof except with regard to providing the proper response to
medical questions or inquiries relating to Product. ROCHE shall use its
best efforts to keep such information current. GILEAD and ROCHE shall
coordinate responses to anticipated inquiries and questions.
4.l2 Notwithstanding the Marketing Plan or any other provision herein to the
contrary, ROCHE will have the sole right and responsibility for
establishing and modifying the terms and conditions with respect to the
sale of the Product, including the price at which the Product will be
sold, any discount attributable to payments on receivables, distribution
of the Product and the like.
4.13 If, for any reason, GILEAD should receive orders for the Product, GILEAD
shall use its best efforts to forward such orders to ROCHE as soon as
practicable.
4.14 Any information provided to GILEAD by ROCHE (or by anyone who was under a
non-disclosure obligation to ROCHE) under this Agreement, except that
information:
(a) which becomes public through no fault of GILEAD; or
(b) which was known by GILEAD prior to its disclosure to GILEAD by ROCHE;
or
(c) which is lawfully obtained by GILEAD from a third party which is
independent of ROCHE and said third party is in lawful possession of said
information; or
(d) which is required to be disclosed by applicable law or regulation; or
(e) which is intended for distribution to the trade:
shall be treated with the strictest confidence and GILEAD shall not use
any such information for any purposes other than that provided in this
Agreement.
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GILEAD shall keep such information in a special file which shall be solely
under the direction and control of the GILEAD Coordinator. GILEAD shall
not distribute any such information except to its employees who have a
need to know such information. Any GILEAD employee who receives such
information shall be advised of the confidential nature thereof and the
prohibitions contained in this section. The Coordinator will use best
efforts to keep a record of those individuals who have received copies of
the information or any portions thereof, and all copies or any portions
thereof will be identified by GILEAD as confidential. Upon termination of
this Agreement, and upon the request of ROCHE, GILEAD shall return or
destroy all such information and copies thereof in its possession, except
that GILEAD may keep one copy of such information in GILEAD's Law
Department files solely for archival purposes. Such archival copy will be
deemed to be the property of ROCHE, and will not be copied or distributed
in any manner without the express prior written permission of ROCHE. The
prohibitions contained herein shall survive the termination of this
Agreement and last for a period of ten (10) years from the date of
termination of this Agreement.
4.15 Each party shall keep, and shall cause its Affiliates and sublicensees to
keep, complete and accurate records pertaining to the Calls (by GILEAD or
ROCHE) or sale or other disposition of Product and of the Royalty and
other amounts payable under this Agreement in sufficient detail to permit
the other party to confirm the accuracy of all Calls completed and
payments due hereunder. At either party's request, the other party will
cause its independent certified public accountants to prepare abstracts of
its relevant business records for review by the other party's independent
certified public accountants. If, based on a review of such abstracts, a
party reasonably believes that a full audit of said business records would
be necessary for the confirmation of the accuracy of all Calls and
payments due hereunder, that party's independent certified public
accountants shall have full access to review all work papers and
supporting documents pertinent to such abstracts, and shall have the right
to discuss such documentation with the other party's independent certified
public accountants. [
[*] CONFIDENTIAL TREATMENT REQUESTED
18
<PAGE>
] Such audit rights may be
exercised no more often than once a year, within three (3) years after the
payment period to which such records relate, upon notice to the party
being audited and during normal business hours. The party requesting such
audit will bear the full cost of such audit unless such audit discloses an
underpayment of more than five percent (5%) from the amount of Calls made
or royalties due. The terms of this Paragraph shall survive any
termination or expiration of this Agreement for a period of three (3)
years.
4.16 Each party will utilize its own sales force to promote and detail the
Product. During the Term of this Agreement, neither party will recruit or
employ any sales representative of the other party who has been involved
in promotion of the Product in the Territory. In addition, neither party
will recruit any sales representative of the other party without prior
consultation with the other party.
ARTICLE 5 - WARRANTIES AND INDEMNIFICATION
5.01 Each party warrants and represents to the other that it has the full right
and authority to enter into this Agreement, and that it is not aware of
any impediment that would inhibit its ability to perform its obligations
under this Agreement.
5.02 ROCHE warrants and represents that it has no knowledge of the existence of
any U.S. patent owned or controlled by anyone other than ROCHE which would
prevent ROCHE
[*] CONFIDENTIAL TREATMENT REQUESTED
19
<PAGE>
from making, using or selling the Product for use in the Field within the
Territory or would prevent GILEAD and ROCHE from jointly promoting or
detailing the Product for use in the Field within the Territory.
5.03 ROCHE will defend, indemnify and hold harmless GILEAD and its directors,
officers, employees and agents against all losses, expenses, claims and
liabilities, known and unknown, of any kind, including all costs and
expenses relating thereto arising at any time as a result of any assertion
relating to the manufacture, handling, use or distribution of Products by
ROCHE, or their sublicensees except to the extent that they result from
acts or omissions of acts of GILEAD, its directors, officers, employees or
agents.
5.04 GILEAD will defend, indemnify and hold harmless ROCHE and its directors,
officers, employees and agents against all losses, expenses, claims and
liabilities, known and unknown, of any kind, including all costs and
expenses relating thereto arising at any time as a result of any assertion
relating to the promotion of Products by GILEAD, except to the extent that
they result from acts or omissions of acts of ROCHE, its directors,
officers, employees or agents
5.05 Regarding the indemnity and hold harmless under Paragraph 5.03, GILEAD
shall give prompt written notice to ROCHE of the commencement of any
action, suit or proceeding for which indemnification may be sought, and
ROCHE shall assume the defense thereof; provided, however, that GILEAD
shall be entitled to participate in any such action, suit or proceeding
with counsel of its own choice, but at its own expense. If ROCHE fails to
assume the defense within a reasonable time, GILEAD may assume such
defense and the reasonable fees and expenses of its attorneys will be
covered by the indemnity provided for in Paragraph 5.03 above. No such
action, suit or proceeding shall be compromised or settled in any manner
which might adversely affect the interests of ROCHE without prior written
consent of ROCHE which consent shall not be unreasonably withheld. ROCHE
agrees to consult with GILEAD with respect to any proposed compromise or
settlement which would adversely affect the interests of GILEAD.
20
<PAGE>
ARTICLE 6 - PATENTS AND TRADEMARK INFRINGEMENT
GILEAD shall advise ROCHE promptly upon its becoming aware of any
infringement by a third party of a patent or trademark owned by ROCHE and
respectively covering or identifying the Product in the Territory. If
warranted in the opinion of ROCHE, ROCHE shall promptly take such legal
action as is required to restrain such infringement. GILEAD shall
cooperate fully with and as requested by ROCHE, at ROCHE's expense, in
ROCHE's attempt to restrain such infringement. GILEAD may be represented
by counsel of its own selection at its own expense in any suit or
proceeding brought to restrain such infringement but ROCHE shall have the
right to control the suit or proceeding.
ARTICLE 7 - TERM AND TERMINATION
7.01 The term of this Agreement shall commence on the effective date of this
Agreement and continue, unless terminated sooner in accordance with the
subsequent provisions of this Article, until December 31, 1999.
Upon termination of this Agreement for any reason or purpose, all rights
to The Product including but not limited to regulatory submissions and
trademarks become or remain the property of ROCHE.
ROCHE shall notify GILEAD in writing of the Approval Date within ten (10)
days thereof.
Paragraphs 3.05, 3.06, 4.05, 4.10(d), 4.11(a), 4.14, 4.15, 5.03 and 5.04
shall survive expiration or termination of this Agreement for any reason.
21
<PAGE>
7.02 Either party may terminate this Agreement for Good Cause (as defined in
Paragraph 7.03 below), effective at any time after providing sixty (60)
days written notice and, if applicable, an opportunity to cure during such
sixty (60) day period (if such cure is effected, such notice with respect
to such Good Cause shall be null and void). If the Agreement is so
terminated by either party for Good Cause, ROCHE shall pay to GILEAD all
dollar amounts due to it under Sections 3.02 and 3.05 through the
effective date of such termination.
7.03 "Good Cause" shall include the failure of the other party to comply with
any of its material obligations contained in this Agreement (including the
failure to detail the Product).
7.04 Termination of this Agreement for Good Cause, shall be without prejudice
to (a) any remedies which any party may then or thereafter have hereunder
or at law; and (b) GILEAD's right to receive any payment accrued under the
Agreement prior to the termination date but which became payable
thereafter; and (c) either party's right to obtain performance of any
obligations provided for in this Agreement which survive termination by
their terms or by a fair interpretation of this Agreement.
7.05 [
]
ARTICLE 8 - FORCE MAJEURE
If either party shall be delayed, interrupted in or prevented from the
performance of any obligation hereunder by reason of an act of God, fire,
flood, earthquake, war (declared or undeclared), public disaster, strike
or labor differences, governmental enactment, rule or regulation, or any
other cause beyond such party's control, such party shall not be liable to
the other therefor; and the time for performance of such obligation shall
be extended
[*] CONFIDENTIAL TREATMENT REQUESTED
22
<PAGE>
for a period equal to the duration of the contingency which occasioned the
delay, interruption or prevention.
Within 15 days of the beginning of the Force Majeure, the party invoking
its Force Majeure rights must, by registered letter notify the other party
of this fact. The termination of the Force Majeure must also be notified
to the other party by registered letter within 15 days of such
termination. If the Force Majeure renders either of the required
notifications impossible, notification must be given as soon as possible.
ARTICLE 9 - MISCELLANEOUS
9.01 This Agreement supersedes all prior agreements and understandings, both
written and oral between the parties with respect to the subject matter
hereof. This Agreement cannot be amended, changed or supplemented, except
in writing signed by each of the parties hereto.
9.02 This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original.
9.03 All notices which are required or may be given pursuant to this Agreement
shall be sufficient upon receipt, if given in writing and delivered by
hand, by electronic media, or by registered or prepaid addressed as
follows:
TO GILEAD: Gilead Sciences, Inc.
353 Lakeside Drive
Foster City, CA 94404
Attn: General Counsel
Phone: (415) 574-3000
Fax: (415) 572-6622
23
<PAGE>
TO ROCHE: Roche Laboratories Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attention: Corporate Secretary
Phone: (201) 235-2165
Fax: (201) 235-3500
The address of either party set forth above may be changed from time to
time by written notice in the manner prescribed herein from the party
requesting the change. A notice sent by ordinary mail or a notice not
given in writing shall be effective upon receipt, but only if
acknowledged in writing by a duly authorized representative of the party
to whom it was sent or given or otherwise upon clear evidence of receipt.
9.04 None of the parties hereto may assign any part or all of this Agreement or
the benefit thereof or any right or obligation thereunder to any other
entity or individual without prior written consent of the other party. Any
purported assignment in violation of the preceding sentence shall be void.
9.05 This Agreement shall be construed, regulated and administered and governed
in all respects under and in accordance with the law of the State of New
Jersey.
9.06 Except to the extent that a party may have otherwise agreed in writing,
no waiver by such party of any breach by any other party of any of the
other party's obligations, agreements or covenants hereunder shall be
deemed to be a waiver by such first party of any subsequent or other
breach of the same or any other obligation, agreement or covenant; nor
shall any forbearance by a party to seek a remedy for any breach by
another be deemed a waiver by said party of its rights or remedies with
respect to such breach or of any subsequent or other breach of the same or
any other obligation, agreement or covenant.
9.07 This Agreement shall be binding upon and inure to the benefit of the
parties to this Agreement and their respective successors.
24
<PAGE>
9.08 Headings as used in this Agreement are for convenience only and are not to
be construed as having any substantive effect by way of limitation or
otherwise.
9.09 If one or more of the provisions of this Agreement shall, by any court or
under any provision of law, be found to be void or unenforceable, the
Agreement as a whole shall not be affected thereby, and the provisions in
question shall be replaced by an interpretation in conformity with law
which comes closer to effecting the parties' original intention.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers effective as of the date first above written.
GILEAD SCIENCES, INC. ROCHE LABORATORIES INC.
By: /s/ Mark Perry By: /s/ George Johnston
-------------------------- --------------------------
Title: VP, CPO & General Counsel Title: Assistant Secretary
-------------------------- -----------------------
Date: Sept. 27, 1996 Date: September 27, 1996
-------------------------- ------------------------
25
<PAGE>
EXHIBIT 11.1
GILEAD SCIENCES, INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- -----------------------
1996 1995 1996 1995
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average common shares 28,500 21,085 27,500 19,785
outstanding during the period
Adjustment for dilutive effect of
outstanding stock options 2,049 - - -
------- ------- -------- --------
Weighted average common and
common equivalent shares used for
primary earnings (loss) per share 30,549 21,085 27,500 19,785
------- ------- -------- --------
------- ------- -------- --------
NET INCOME (LOSS) $ 9,310 $(8,426) $(13,650) $(25,234)
------- ------- -------- --------
------- ------- -------- --------
NET INCOME (LOSS) PER SHARE $ 0.30 $ (0.40) $ (0.50) $ (1.28)
------- ------- -------- --------
------- ------- -------- --------
FULLY DILUTED EARNINGS PER SHARE
Weighted average common shares 28,500 21,085 27,500 19,785
outstanding during the period
Adjustment for dilutive effect of
outstanding stock options 2,431 - - -
------- ------- -------- --------
Weighted average common and
common equivalent shares used for
fully diluted earnings (loss) per
share 30,931 21,085 27,500 19,785
------- ------- -------- --------
------- ------- -------- --------
NET INCOME (LOSS) $ 9,310 $(8,426) $(13,650) $(25,234)
------- ------- -------- --------
------- ------- -------- --------
NET INCOME (LOSS) PER SHARE $ 0.30 $ (0.40) $ (0.50) $ (1.28)
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE
YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 156,043
<SECURITIES> 134,260
<RECEIVABLES> 2,994
<ALLOWANCES> 1,326
<INVENTORY> 0
<CURRENT-ASSETS> 306,627<F1>
<PP&E> 7,609<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 315,445
<CURRENT-LIABILITIES> 16,054
<BONDS> 0
0
0
<COMMON> 29
<OTHER-SE> 297,870
<TOTAL-LIABILITY-AND-EQUITY> 315,445
<SALES> 4,755
<TOTAL-REVENUES> 27,639
<CGS> 548
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 50,955
<LOSS-PROVISION> 843
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,650)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,650)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> 0
<FN>
<F1>Current assets include other current assets.
<F2>Property, plant and equipment is net of depreciation.
</FN>
</TABLE>
