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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-20954
COCENSYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0538836
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
213 TECHNOLOGY DRIVE, IRVINE, CA 92718
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(714) 753-6100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$.001 PAR VALUE 22,661,489
(CLASS OF COMMON STOCK) (OUTSTANDING AT JULY 31, 1997)
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COCENSYS, INC.
(A development stage company)
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets as of June 30, 1997
and December 31, 1996 3
Condensed Statements of Operations for the
three-month and six-month periods ended
June 30, 1997 and 1996 and the period from
inception (February 15, 1989) through June 30, 1997 4
Condensed Statements of Cash Flows for the
three-month and six-month periods ended
June 30, 1997 and 1996 and the period from
inception (February 15, 1989) through June 30, 1997 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 10
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES. 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 14
SIGNATURES 16
2
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COCENSYS, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
(In thousands, except share and par value amounts)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,192 $ 1,050
Short-term investments 15,180 16,949
Receivables from corporate partners 657 659
Other current assets 810 556
-------- --------
TOTAL CURRENT ASSETS 18,839 19,214
Property and equipment, net 2,494 2,685
Notes receivable from officers 279 126
Other assets, net 26 26
-------- --------
$ 21,638 $ 22,051
-------- --------
-------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 764 $ 1,437
Other accrued liabilities 2,828 2,556
Advances from corporate partners 151 446
Capital lease obligation - current portion 559 341
-------- --------
TOTAL CURRENT LIABILITIES 4,302 4,780
Capital lease obligation, less current portion 227 284
Other liabilities 38 40
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.001 par value,
5,000,000 shares authorized; 100,000 shares of
Series B convertible issued and outstanding
at June 30, 1997 and December 31, 1996; 100,000 shares
of Series C convertible issued and outstanding at
June 30, 1997 12,000 7,000
Common stock - $.001 par value,
75,000,000 shares authorized; 22,661,489 shares
issued and outstanding at June 30, 1997 and
22,083,346 at December 31, 1996 96,076 93,986
Deficit accumulated during the development stage (90,468) (83,162)
Deferred compensation (562) (905)
Unrealized gain (loss) on investments 25 28
-------- --------
TOTAL STOCKHOLDERS' EQUITY 17,071 16,947
-------- --------
$ 21,638 $ 22,051
-------- --------
-------- --------
</TABLE>
See accompanying notes.
3
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COCENSYS, INC.
(A development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED SIX MONTHS ENDED (FEBRUARY 15,
JUNE 30, JUNE 30, 1989) TO
----------------------- ----------------------- JUNE 30,
1997 1996 1997 1996 1997
REVENUES -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Co-promotion revenues from corporate partners $ 1,185 $ 3,213 $ 2,308 $ 4,011 $ 29,209
Co-development revenues from corporate partners 6,247 3,716 6,949 4,549 14,992
-------- -------- -------- -------- ---------
Total revenues 7,432 6,929 9,257 8,560 44,201
OPERATING EXPENSES
Research and development 5,984 4,961 11,416 9,784 79,588
Marketing, general and administrative 2,825 2,926 5,504 5,589 43,134
Acquired research and development - - - - 14,879
-------- -------- -------- -------- ---------
Total operating expenses 8,809 7,887 16,920 15,373 137,601
-------- -------- -------- -------- ---------
OPERATING LOSS (1,377) (958) (7,663) (6,813) (93,400)
Interest income 189 357 408 629 3,503
Interest expense (37) (28) (51) (58) (571)
-------- -------- -------- -------- ---------
NET LOSS $ (1,225) $ (629) $ (7,306) $ (6,242) $ (90,468)
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Net loss per share $ (0.05) $ (0.03) $ (0.33) $ (0.29)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in computing net loss per share 22,519 21,917 22,391 21,555
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes.
4
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COCENSYS, INC.
(A development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
SIX MONTHS ENDED (FEBRUARY 15,
JUNE 30, 1989) TO
------------------------- JUNE 30,
1997 1996 1997
---------- ---------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (7,306) $ (6,242) $ (90,468)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 530 1,025 6,419
Amortization of deferred compensation 142 374 3,480
Issuance of stock and warrants for services - - 1,917
Loss on sale of fixed assets 12 - 38
Acquired research and development - - 12,279
Increase in other current assets (254) (196) (882)
Decrease (increase) in receivable from corporate
partner 2 - (657)
Increase (decrease) in advances from corporate
partners (295) 997 151
Increase (decrease) in accounts payable and other
accrued liabilities (403) (89) 3,354
--------- --------- ----------
NET CASH USED IN OPERATING ACTIVITIES (7,572) (4,131) (64,369)
--------- --------- ----------
INVESTING ACTIVITIES
Decrease (increase) in short-term investments 1,766 (8,560) (15,156)
Purchase of property and equipment (351) (475) (5,976)
Increase in other assets and notes receivable from
officers (153) (89) (461)
Cash received on sale of fixed assets - - 19
Increase in deferred sales organization costs - - (1,571)
Increase in deferred patent costs - - (904)
Acquisition of Acea Pharmaceuticals, net of cash
acquired - - (62)
--------- --------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,262 (9,124) (24,111)
--------- --------- ----------
FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock 2,291 14,840 61,076
Net cash proceeds from issuance of preferred stock 5,000 7,000 28,381
Proceeds from sale/leaseback of fixed assets and notes
payable 529 535 4,762
Payments on capital lease obligations and notes payable (368) (553) (3,547)
--------- --------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,452 21,822 90,672
--------- --------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,142 8,657 2,192
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,050 6,895 -
--------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,192 $ 15,462 $ 2,192
--------- --------- ----------
--------- --------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 39 $ 58 $ 793
--------- --------- ----------
--------- --------- ----------
</TABLE>
See accompanying notes.
5
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim financial information for the three and six-month periods
ended June 30, 1997 and 1996 is unaudited but includes all adjustments
(consisting only of normal recurring entries) which the Company's
management believes to be necessary for the fair presentation of the
financial position, results of operations and cash flows for the periods
presented. The accompanying interim financial statements should be read
in conjunction with the financial statements and related notes included in
the Company's 1996 Annual Report on Form 10-K for the year ended December
31, 1996. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
Securities and Exchange Commission rules and regulations. Interim results
of operations for the three-month and six-month periods ended June 30,
1997, are not necessarily indicative of operating results to be expected
for the full year.
REVENUE AND EXPENSE RECOGNITION
See Notes 2 through 6 for revenue recognition policies related to
co-promotion and co-development revenues from corporate partners. The
initial costs incurred in establishing the sales and marketing
organization were deferred until initiation of the Company's sales efforts
on August 1, 1994. Such costs were amortized over the contract term
(through December 31, 1996) of the Company's Promotion Agreement with
Novartis (formerly Ciba-Geigy Corporation).
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding during the periods. Common stock equivalents
from stock options and warrants are excluded from the calculation as their
effect would be antidilutive.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements
to conform to the 1997 presentation.
6
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
2. MARKETING AND DEVELOPMENT COLLABORATION WITH WARNER-LAMBERT COMPANY
In October 1995, the Company entered into a collaboration with
Warner-Lambert Company and its Parke-Davis division to develop and market
therapeutic drugs for the treatment of certain CNS disorders. This
arrangement consists of the Research, Development and Marketing
Collaboration Agreement (the "Warner Collaboration Agreement"), for the
worldwide development and commercialization of a new class of neurological
and psychiatric drugs, termed subtype selective NMDA receptor antagonists
("SSNRAs"), and the Parke-Davis Promotion Agreement, pursuant to which the
Company co-promoted Parke-Davis' CNS drug, Cognex-Registered Trademark-,
to United States neurologists for the treatment of Alzheimer's disease.
Under the Warner Collaboration Agreement, both companies are sharing
technology and resources to develop SSNRA candidates. The parties are
obligated to make specified contributions to development costs with
respect to any development candidates. Promotion costs of, and profits
from any products developed under the agreement will be shared equally in
the United States and Japan. Warner-Lambert will have the exclusive right
to develop and market any product, at its own cost, for markets outside
the United States and Japan, subject to a specified royalty payment to the
Company. Warner-Lambert is obligated to pay its specified portion of the
development costs and to make certain milestone payments, upon achievement
of certain clinical development and regulatory milestones, for each
development compound. Payments received under the Warner Collaboration
Agreement will be recognized as co-development revenues by the Company.
Pursuant to the Warner Collaboration Agreement, Warner-Lambert purchased
$2.0 million of CoCensys common stock in October 1995 and an additional
$2.0 million of CoCensys common stock in March 1997.
The original Parke-Davis Promotion Agreement, entered into in October
1995, was terminated on December 31, 1996, when a revised promotion
agreement relating to Cognex took effect. Under the original Parke-Davis
Promotion Agreement for Cognex, the Company realized co-promotion revenues
from its share of sales of Cognex above certain baseline levels specified
in the contract. Under the revised Parke-Davis Promotion Agreement for
Cognex, the Company realized co-promotion revenues based upon the number
of prescriptions for Cognex written by certain targeted neurologists and
other doctors during each quarter, with a specified minimum payment. The
revised Cognex agreement was terminated in June 1997.
In July 1997, the Company entered into a new Parke-Davis Promotion
Agreement, pursuant to which the Company will co-promote
Zarontin-Registered Trademark-, Parke-Davis' drug for pediatric epilepsy.
Under the terms of the Zarontin agreement, the Company will realize
co-promotion revenue on the basis of the number of prescriptions for
Zarontin written each quarter over a specified baseline.
7
<PAGE>
COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
3. PROMOTION AGREEMENT WITH SOMERSET PHARMACEUTICALS, INC.
In January 1996, the Company and Somerset Pharmaceuticals, Inc.
("Somerset") entered into the Somerset Promotion Agreement, pursuant to
which the Company promotes Somerset's drug Eldepryl-Registered Trademark-
to neurologists in the United States for the treatment of Parkinson's
disease. Effective January 1, 1997, the initial agreement was superceded
by the 1997 Somerset Promotion Agreement which is subject to certain
provisions for early termination and renewal. Under the 1997 Somerset
Promotion Agreement, CoCensys has the exclusive right to detail Eldepryl
to certain neurologists and other physicians in the United States. Under
the 1997 Somerset Promotion Agreement, CoCensys is compensated based upon
the number of details undertaken and gross sales of Eldepryl.
Compensation paid to CoCensys is subject to adjustment in the event of
governmental or other third-party actions that may materially affect it.
To finance a portion of its sales force to promote Eldepryl, CoCensys
receives quarterly advances from Somerset, which are subject to repayment
on a pro rata basis if specified numbers of details are not undertaken by
the Company on behalf of Somerset.
4. DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH G.D. SEARLE & CO.
In May 1996, the Company entered into an agreement with G.D. Searle & Co.
("Searle") to co-develop and co-promote the Company's lead compound for
the treatment of insomnia along with its back-up compounds. Pursuant to
the agreement, Searle paid a $3.0 million license fee and purchased
100,000 shares of the Company's Series B Convertible Preferred Stock for
$7.0 million. The license fee was recognized as co-development revenue in
1996. The preferred stock is convertible to common stock on May 17, 1998,
or earlier at the Company's discretion. The number of shares issuable
upon conversion shall be equal to $7.0 million divided by the then current
common stock price (subject to certain minimum and maximum limits).
Under the agreement, both companies are obligated to pay a portion of the
development costs of the compound and its back-up compounds. In addition,
the Company will receive nonrefundable milestone payments upon the
occurrence of certain events in the development of the compound. The
parties will co-promote any products derived from the collaboration in the
United States, while Searle will have the right to develop, register and
market the products in the rest of the world, subject to specified royalty
payments.
5. MARKETING AND DEVELOPMENT COLLABORATION WITH NOVARTIS PHARMA, A.G.
In May 1994, the Company entered into a marketing and development
collaboration with Novartis Novartis Pharma, A.G. (formerly Ciba-Geigy
Limited) for the co-promotion by the Company of certain Novartis products
and the development and commercialization of ACEA 1021, a compound being
developed by the Company. This collaboration consisted of the Novartis
Promotion Agreement and the Novartis Research and Development Agreement.
Pursuant to the Novartis Promotion Agreement, CoCensys established a sales
force to co-promote and market certain Novartis products in the United
States initially to psychiatrists. The agreement
8
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COCENSYS, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
provided for the advance of funds to the Company to cover a portion of the
expenses incurred by the CoCensys sales force in promoting the Novartis
products. CoCensys realized co-promotion revenues from its share of sales
of Novartis products above certain baseline levels specified in the
contract. The Novartis Promotion Agreement terminated at the end of 1996.
In connection with the Novartis Research and Development Agreement,
Novartis purchased $7.0 million of CoCensys common stock and agreed to
make certain nonrefundable milestone payments in connection with specified
events in the course of the development of ACEA 1021. Novartis has
advised the Company that it will not continue the development of ACEA
1021. The agreement will terminate in October 1997. While the Company is
actively looking for a new partner to develop ACEA 1021, there can be no
assurance that the Company will be able to secure another partner to
continue the development of this compound.
6. DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH WYETH-AYERST LABORATORIES
In May 1997, the Company entered into a development and commercialization
agreement for Co 2-6749, its lead anxiolytic compound, with Wyeth-Ayerst
Laboratories, the pharmaceutical division of American Home Products
Corporation ("AHP"). Under the terms of the agreement, Wyeth-Ayerst made
upfront payments to CoCensys of $5.0 million in licensing fees and AHP
paid $5.0 million to purchase convertible preferred stock. Additionally,
CoCensys will receive specified milestone payments dependent upon the
achievement of key development events and $3.0 million per year for up to
three years to identify back-up compounds. Payments due to CoCensys for
work performed identifying back-up compounds are due quarterly, beginning
in May 1997. Wyeth-Ayerst will be responsible for the development of Co
2-6749. The Company and Wyeth-Ayerst will co-promote any resulting
product in certain market segments in the United States, while
Wyeth-Ayerst will have rights to develop, register and market any drugs
derived from the collaboration in the rest of the world, subject to
royalty payments. The preferred stock is convertible into common stock
after May 12, 1999, into a number of shares of common stock equal to $5.0
million divided by the conversion price, which will be determined pursuant
to a formula based on the market price of the common stock at the time of
conversion (subject to certain minimum and maximum limits).
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE COMPANY'S 1996 ANNUAL REPORT
ON FORM 10-K.
OVERVIEW
CoCensys, Inc. is a biopharmaceutical company dedicated to the discovery,
development, marketing and sales of small molecule drugs to treat
neurological and psychiatric disorders. The Company's product discovery and
development programs are focused on the exploration of novel receptors and
enzymes and their ligands and inhibitors through three technology platforms:
GABA receptor enhancers or Epalons; glutamate antagonists; and ICE-like
protease inhibitors.
The Company's lead Epalon compound, CCD 1042 (ganaxolone), an anticonvulsant
and anti-migraine compound, is in separate Phase II clinical trials for
pediatric epilepsy, adult epilepsy and migraine. The Company anticipates that
CCD 3693, its lead compound for the treatment of insomnia, will enter Phase I
trials in the third quarter of 1997.
Since its inception in February 1989, the Company has devoted substantially
all of its resources to the discovery and development of neuropharmaceutical
products for the treatment of disorders affecting the central nervous system.
The Company has incurred losses since inception and expects losses to
continue for the foreseeable future, primarily due to the expansion of
programs for research and development. Operating results are expected to
fluctuate as a result of uncertainty in the timing and amount of revenues to
be earned from product co-promotion and co-development activities and from
achievement of research and development milestones, and uncertainty in the
timing and amount of expenses for product development, including clinical
trials. As of June 30, 1997, the Company's accumulated deficit was
approximately $90.5 million.
RESULTS OF OPERATIONS
The Company recognized $1.2 and $2.3 million in co-promotion revenues for the
three and six-month periods ended June 30, 1997, respectively, compared to
$3.2 and $4.0 million during the same periods in 1996. The decreases in both
the three and six-month periods compared to the same periods a year earlier
is due primarily to a nonrecurring adjustment of $2.3 million, relating to
settlement of co-promotion activities with Novartis Pharma A.G. ("Novartis"),
that was recorded in the second quarter of fiscal 1996.
The Company recognized $6.2 and $6.9 million in co-development revenues for
the three and six-month periods ended June 30, 1997, respectively, compared
to $3.7 and $4.5 million for the comparable periods of 1996. The increases
in both the three and six-month periods of the current year are primarily due
to recognition of $5.7 of co-development revenue under the Wyeth-Ayerst
10
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development and commercialization agreement that was signed in May of 1997.
In the second quarter of fiscal 1996, the Company recognized $3.0 million of
co-development revenue related to the G.D. Searle agreement.
Research and development ("R&D") expenses increased to $6.0 and $11.4 million
for the three and six-month periods ended June 30, 1997, respectively, from
$4.9 and $9.8 million in the comparable periods of the prior year. These
increases resulted primarily from higher product development costs incurred
to support Phase II clinical trials of CCD 1042 in both migraine and epilepsy
and pre-clinical development of CCD 3693, partially offset by lower product
development costs associated with the ACEA 1021 program. Clinical
development of ACEA 1021 was suspended in April 1997 following the decision
of Novartis, the Company's development partner, not to continue participation
in the development of ACEA 1021. The Company does not intend to resume
clinical development of ACEA 1021 until it secures another partner. There
can be no assurance that the Company will be able to secure another partner
to continue the clinical development of ACEA 1021.
Marketing, general and administrative expense decreased to $2.8 and $5.5
million for the three and six-month periods ended June 30, 1997,
respectively, from $2.9 and $5.6 million in the same periods of the prior
year. The decreases in the three and six-month periods of the current year
in comparison to the same periods in the prior year are primarily
attributable to reductions in certain promotional marketing expenses,
partially offset by increases in salaries and other general corporate
expenses.
Interest income decreased to $.2 and $.4 million for the three and six-month
periods ended June 30, 1997, respectively, from $.4 and $.6 million in the
same periods of the prior year. The decrease was due to lower average levels
of cash and short-term investment balances in the current year.
LIQUIDITY AND CAPITAL RESOURCES
From its inception in February 1989 through June 30, 1997, the Company has
financed its operations primarily through private and public offerings of
its equity securities, raising net proceeds of approximately $89.5 million
through sales of these securities. As of June 30, 1997, the Company's
balance of cash, cash equivalents and short-term investments totaled $17.4
million, compared to $18.0 million at December 31, 1996.
As of June 30, 1997, the Company had invested $6.0 million in leasehold
improvements, laboratory and computer equipment and office furnishings and
equipment since inception. The Company has financed $3.3 million of these
capital additions through capital lease lines. In addition, the Company
leases its laboratory and office facilities under operating leases.
Additional equipment will be needed as the Company increases its research and
development activities. The Company has no material commitments for the
acquisition of property and equipment.
Pursuant to the Parke-Davis Promotion Agreement, the Company promoted Parke-
Davis' CNS drug, Cognex-Registered Trademark-, to neurologists in the
United States. Funds were prepaid to the Company quarterly to cover the
training and operating expenses incurred by the Company's sales force in
promoting Cognex. This agreement was terminated in June 1997. In July
1997, the Company entered into a
11
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new agreement with Parke-Davis to co-promote Zarontin-Registered Trademark-,
Parke-Davis' drug for pediatric epilepsy. Under the terms of this agreement,
the Company will be compensated based on the number of prescriptions written
over a specified baseline.
Pursuant to the Warner Collaboration Agreement, Warner-Lambert is obligated
to make certain milestone payments for each compound selected for
development, as well as pay for its share of development costs. Also
pursuant to this contract, Warner-Lambert purchased $2.0 million of CoCensys
common stock in October 1995 and an additional $2.0 million of CoCensys
common stock in March 1997.
Pursuant to the 1997 Somerset Promotion Agreement, the Company promotes
Somerset's drug Eldepryl-Registered Trademark- to certain neurologists
and other physicians in the United States. Funds are advanced to the
Company quarterly to cover a portion of the training and operating
expenses incurred by the Company's sales force in promoting Eldepryl.
Pursuant to the 1997 Wyeth-Ayerst Development and Commercialization
Agreement, Wyeth-Ayerst is obligated pay all development costs related to Co
2-6749, as well as make milestone payments upon the occurrence of certain
agreed upon events. Furthermore, Wyeth-Ayerst is required to pay the Company
$3.0 million per year for up to three years to identify back-up compounds.
CoCensys' operations to date have consumed substantial amounts of cash. The
negative cash flow from operations is expected to continue and will likely
increase over the foreseeable future, subject to the Company's ability to
mitigate such negative cash flows with revenues, if any, derived from the
sale of products from current and potential future marketing collaborations.
The Company anticipates that its existing capital resources, including
funding expected to be available through current partner collaborations
(including milestone payments and co-promotion revenues), will be adequate to
satisfy its capital needs for at least the next 12 months. There can be no
assurance that milestone-based payments or co-promotion revenues will be
sufficient to meet the Company's capital requirements. The Company will need
to obtain substantial additional funds to conduct the costly and
time-consuming research, preclinical development and clinical trials
necessary to bring its products to market. The Company intends to seek
additional funding through additional research and development collaborations
with suitable corporate partners, through additional marketing collaborations
to increase revenues generated from sales of products and/or through public
or private financing. There can be no assurance that additional financings
or suitable collaborations will be available on favorable terms, if at all.
Insufficient funds may require the Company to delay, scale back or eliminate
some or all of its research and product development programs or to license
third parties to commercialize products or technologies that the Company
would otherwise seek to develop itself.
The Company's future capital requirements will depend on many factors,
including the progress of the Company's research and development programs,
the level of co-promotion revenues, the scope and results of preclinical
testing and clinical trials, the time and costs involved in obtaining
regulatory approvals, the rate of technological advances, determinations as
to the commercial potential of the Company's products under development, the
status of competitive products, the expansion of sales and marketing
capabilities, the establishment of third-party manufacturing arrangements and
the establishment of additional collaborative relationships.
12
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ADDITIONAL RISKS
In addition to those discussed above, the Company is subject to the following
risks:
The Company's products are in an early stage of development and face a high
degree of technological, regulatory and competitive risks. Drug discovery
and development are capital intensive activities, and there can be no
assurance the Company will be able to raise the additional capital necessary
to develop and commercialize products. The Company's strategy for the
development, clinical testing and commercialization of its products includes
entering into various collaborations with corporate partners, licensors,
licensees and others. There can be no assurance that the Company will be
able to negotiate further collaborative arrangements on acceptable terms, if
at all, or that the current collaborative efforts will be successful. Human
clinical trials require considerable time and funding, and results from any
stage of testing may not predict results of later stages. In addition, if
results of any clinical trial fail to meet the Company's requirements, the
study plan for such compound may be adjusted or another compound may be
substituted, either of which may result in delays in future clinical studies.
Unfavorable clinical trials could result in cancellation of future clinical
studies. Inherent in the fact that CoCensys is an early stage
biopharmaceutical company are a range of additional risks, including those
associated with obtaining and enforcing patents and protecting proprietary
technology and the risk of regulatory change, among others.
The securities markets have from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. The market prices of the common stock of many publicly
traded biopharmaceutical companies have in the past been, and can in the
future be expected to be, especially volatile due to various external
factors, including but not limited to, announcements of technological
innovations or new products by the Company or its competitors, developments
or disputes concerning patents or proprietary rights, publicity regarding
actual or potential results relating to products under development,
regulatory developments in both the United States and foreign countries and
public concern as to the safety of biotechnology products.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On May 12, 1997, the Company sold 100,000 unregistered shares of Series C
Convertible Preferred Stock (the "Preferred Stock") to American Home Products
Corporation for an aggregate purchase price of $5,000,000. The Preferred
Stock is convertible at the option of the holder at any time after May 11,
1999 at a Conversion Price determined pursuant to a formula based on the
market price of the Common Stock at the time of conversion, subject to a
minimum price of $4.37 and a maximum price of $7.76. The transaction was
exempt from registration under the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof, as a transaction not involving any public
offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an Annual Meeting of Stockholders on June 25, 1997.
The stockholders elected the Board's nominees as Class II directors by the
votes indicated:
Nominee Votes in Favor Votes Withheld
------- -------------- --------------
F. Richard Nichol, Ph.D. 17,079,020 796,242
Timothy J. Rink, M.D. 17,092,626 782,636
The amendment to the Company's 1992 Non-Employee Directors' Stock Option Plan
was ratified with 16,961,900 votes in favor, 836,422 against and 76,940
abstentions.
The Company's 1996 Equity Incentive Plan was approved by a vote of 10,530,958
in favor, 2,474,023 against, 86,195 abstentions and 4,784,086 broker non-
votes.
The selection of Ernst & Young, LLP as the Company's independent auditors was
ratified with 17,810,357 votes in favor, 28,550 against and 36,355
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i).1 Amended and Restated Certificate of Incorporation of
the Company.
3(i).2 Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company.
3(i).3 Certificate of Powers, Designation, Preferences, Rights
and Limitations of Series B Convertible Preferred Stock
of the Company.
3(i).4 Certificate of Amendment of Amended and Restated
Certificate of Incorporation of the Company.
3(i).5 Certificate of Powers, Designation, Preferences, Rights
and Limitations of
14
<PAGE>
Series C Convertible Preferred Stock of the Company.
10.1* 1997 Promotion Agreement, effective April 7, 1997, between
Somerset Pharmaceuticals, Inc. and the Company.
10.2* Development and Commercialization Agreement (No.1), dated
May 12, 1997, between Wyeth-Ayerst Laboratories and the
Company ("Wyeth-Ayerst Agreement No.1").
10.3* Development and Commercialization Agreement (No.2),
dated May 12, 1997, between Wyeth-Ayerst Laboratories and
the Company.
10.4 Preferred Stock Purchase Agreement, dated May 12, 1997,
between American Home Products, Inc. and the Company
(included as Exhibit F to Wyeth-Ayerst Agreement No. 1)
27.1 Financial Data Schedule
* Confidential treatment requested.
(b) Reports on Form 8-K
(i) The Company filed a Form 8-K on June 17, 1997, reporting
under Item 5 that the Company and the Parke-Davis Division
of Warner-Lambert Company have agreed to terminate the
Cognex Promotion Agreement.
(ii) The Company filed a Form 8-K on May 2, 1997, reporting
under Item 5 that Novartis Pharma A.G. has decided not to
participate further in the development of ACEA 1021,
CoCensys' compound for the treatment of stroke and
traumatic brain injury.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
CoCensys, Inc.
Date: August 5, 1997 By: /s/ Peter E. Jansen
-------------------------------------
Peter E. Jansen
Chief Financial Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
16
<PAGE>
Exhibit 3(i).1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COCENSYS, INC.
I.
The name of this corporation is CoCensys, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent,
and the name of the registered agent of the corporation in the State of Delaware
at such address is the Prentice Hall Corporation System.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is thirty-five
million (35,000,000) shares. Thirty million (30,000,000) shares shall be Common
Stock, each having a par value of one-tenth of One Cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of One Cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate
pursuant to the Delaware General Corporation Law, to fix or alter from time to
time the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof, including
without limitation the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions),
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series and the designation thereof, or
any of them (a "Preferred Stock Designation"); and to increase or decrease the
number of shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be decreased in accordance with
the foregoing sentence, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
1.
<PAGE>
C. No share or shares of any series of Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued as part of such series, and the Board of Directors is authorized,
pursuant to Section 243 of the Delaware General Corporation law, to retire any
such share or shares. The retirement of any such share or shares shall not
reduce the total authorized number of shares of Preferred Stock.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
Following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock to the public (the
"Initial Public Offering"), the directors shall be divided into three (3)
classes designated as Class I, Class II and Class III, respectively. Directors
shall be assigned to each class in accordance with a resolution or resolutions
adopted by the Board of Directors. At the first annual meeting of stockholders
following the closing of the Initial Public Offering, the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three (3) years. At the second annual meeting of stockholders following
the closing of the Initial Public Offering, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three (3) years. At the third annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three (3) years to succeed the directors of
the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes shall be filled by either (i) the
affirmative vote of the holders of a majority of the voting power of the
then-outstanding shares of voting stock of the corporation entitled to vote
generally in the election of directors (the "Voting Stock") voting together as a
single class; or (ii) by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors. Newly created directorships resulting from any increase in the
number of directors shall, unless the Board of
2.
<PAGE>
Directors determines by resolution that any such newly created directorship
shall be filled by the stockholders, be filled only by the affirmative vote of
the directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of directors in
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified.
B. The Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. In
furtherance and not in limitation of the power conferred by statute, the Board
of Directors is expressly authorized to adopt, amend, supplement or repeal the
Bylaws.
C. The directors of the corporation need not be elected by written ballot
unless the Bylaws so provide.
D. Following the closing of the Initial Public Offering, no action shall
be taken by the stockholders of the corporation except at an annual or special
meeting of stockholders called in accordance with the Bylaws and no action shall
be taken by the stockholders by written consent.
E. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
F. Any director, or the entire Board of Directors, may be removed from
office at any time (i) with cause by the affirmative vote of the holders of at
least a majority of the voting power of all of the then-outstanding shares of
the Voting Stock, voting together as a single class; or (ii) without cause by
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
Voting Stock.
VI.
(1) A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
(2) The corporation is authorized to provide indemnification of agents (as
defined in Section 145 of the Delaware General Corporation Law) for breach of
duty to the corporation and its stockholders through bylaw provisions, through
agreements with the agents, and/or through
3.
<PAGE>
stockholder resolutions, or otherwise, in excess of the indemnification
otherwise permitted by Section 145 of the Delaware General Corporation Law,
subject to the limitations on such excess indemnification set forth in Section
102 of the Delaware General Corporation Law.
(3) Any repeal or modification of this Article VI by the stockholders of
the corporation shall not adversely affect any right or protection of a director
of the corporation existing at the time of such repeal or modification.
VII.
Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by law,
this Amended and Restated Certificate of Incorporation or any Preferred Stock
Designation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal Article V or Article IX.
VIII.
The corporation is to have perpetual existence.
IX.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, except as provided in
Article VII of this Certificate, and all rights conferred upon the stockholders
herein are granted subject to this right.
4.
<PAGE>
Exhibit 3(i).2
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
COCENSYS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
COCENSYS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on April 25, 1995:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation in accordance with the
provisions of its Amended and 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 rights,
preferences and limitations thereof (in addition to the provisions set
forth in the Restated Certificate of Incorporation of the Corporation,
which are applicable to the Preferred Stock of all classes and
series), as follows:
Series A Junior Participating Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. Three Hundred Fifty Thousand
(350,000) shares of Preferred Stock, $.001 par value, are designated
"Series A Junior Participating Preferred Stock" with the rights,
preferences, privileges and restrictions
1.
<PAGE>
specified herein (the "Junior Preferred Stock"). 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 Junior Preferred Stock 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
Corporation convertible into Junior Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock, par value $.001 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Junior Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $l.00 or (b)
subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise) declared on the Common
Stock since the immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend Payment Date, since
the first issuance of any share or fraction of a share of Junior
Preferred Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Junior
Preferred
2.
<PAGE>
Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Junior Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Junior Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Junior
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
3.
<PAGE>
SECTION 3. VOTING RIGHTS. The holders of shares of Junior
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall
at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Junior Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Determination of Preferences creating a series of
Preferred Stock or any similar stock, or by law, the holders of shares
of Junior Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Junior Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Junior Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
4.
<PAGE>
(I) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock;
(II) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(III) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding
up) to the Junior Preferred Stock; or
(IV) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any shares of
stock ranking on a parity with the Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Junior Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their
5.
<PAGE>
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 Determination of Preferences creating a series of Preferred Stock
or any similar stock or as otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock unless, prior
thereto, the holders of shares of Junior Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the
date of such payment, provided that the holders of shares of Junior
Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (2) to the holders of shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Junior Preferred Stock, except
distributions made ratably on the Junior Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such
case the aggregate amount to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event under
the proviso in clause (1) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other
property, then in any such case each share of Junior Preferred Stock
shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or
6.
<PAGE>
any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Junior Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
SECTION 8. NO REDEMPTION. The shares of Junior Preferred Stock
shall not be redeemable.
SECTION 9. RANK. The Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred
Stock.
SECTION 10. AMENDMENT. The Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner
which would materially alter or change the powers, preferences or
special rights of the Junior Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Junior Preferred Stock, voting
together as a single class.
7.
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this certificate as of May
16, 1996.
/s/ Daniel L. Korpolinski
______________________________________
Daniel L. Korpolinski
President and Chief Executive Officer
/s/ Alan C. Mendelson
_______________________________________
Alan C. Mendelson
Secretary
8.
<PAGE>
Exhibit 3(i).3
CERTIFICATE OF POWERS, DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
COCENSYS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
COCENSYS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law at meetings duly called and held on February 27 and May 16,
1996:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation in accordance with the
provisions of its Amended and 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 rights,
preferences and limitations thereof (in addition to the provisions set
forth in the Restated Certificate of Incorporation of the Corporation,
which are applicable to the Preferred Stock of all classes and
series), as follows:
Series B Convertible Preferred Stock:
SECTION 3. DESIGNATION AND AMOUNT. One Hundred Thousand
(100,000) shares of Preferred Stock, $.001 par value, are designated
"Series B Convertible Preferred Stock" with the rights, preferences,
privileges and restrictions specified herein
1.
<PAGE>
(the "Series B Preferred Stock"). Subject to Section 7 hereof, such
number of shares may be increased or decreased by resolution of the
Board of Directors.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of the Series
B Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, dividends at the rate per share equal to any dividend
declared or paid per share to the Common Stock of the Corporation
("Common Stock"). The right to such dividends on the Series B
Preferred Stock shall be non-cumulative.
SECTION 3. VOTING RIGHTS. Except as set forth herein, or as
otherwise provided by law, holders of Series B Preferred Stock shall
have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
SECTION 4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or
involuntary (a "Liquidation Event"), the holders of the Series B
Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock or Junior Preferred
Stock of the Corporation, an amount per share (as adjusted for any
combinations, consolidations, stock distributions or stock dividends
with respect to such shares) equal to the quotient of (a) $7,000,000
divided by (b) the number of Series B Preferred Stock issued and
outstanding as of the date of such Liquidation Event. If upon the
occurrence of such Liquidation Event, the assets and funds thus
distributed among the holders of the Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed
among the holders of the Series B Preferred Stock in proportion to the
shares of Series B Preferred Stock then held by them.
SECTION 5. CONVERSION. Subject to the limitations set forth in
Subsection (C) below, the Series B Preferred Stock shall convert only
as follows:
(A) AUTOMATIC CONVERSION. The Series B Preferred Stock
outstanding on May 17, 1998 (the "Automatic Conversion
2.
<PAGE>
Date") shall automatically convert on such date, in whole and not
in part, into such number of fully paid and nonassessable shares of
Common Stock equal to the quotient of $7,000,000 divided by the
average closing price of the Corporation's Common Stock (as reported
in THE WALL STREET JOURNAL, WESTERN ADDITION) for a period of thirty
(30) trading days prior to the Automatic Conversion Date.
(B) CONVERSION AT CORPORATION'S OPTION. At any time prior to
the Automatic Conversion Date, the Corporation shall have the option,
in its sole discretion, to convert the Series B Preferred Stock, in
whole and not in part, into such number of fully paid and
nonassessable shares of Common Stock equal to the quotient of
$7,000,000 divided by the average closing price of the Corporation's
Common Stock (as reported in THE WALL STREET JOURNAL, WESTERN
ADDITION) for a period of thirty (30) trading days prior to date upon
which the Corporation issues notice to the holders of Series B
Preferred Stock of such optional conversion.
(C) LIMITATION ON CONVERTED SHARES. The number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock
shall not be fewer than the quotient of $7,000,000 divided by two
times the closing price of the Common Stock on May 17, 1996 (as
reported in the WALL STREET JOURNAL, WESTERN EDITION) (the "Market
Price"), nor greater than the quotient of $7,000,000 divided by
one-half of the Market Price.
(D) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS OF COMMON
STOCK. In the event the Corporation at any time or from time to time
shall declare or pay any dividend on the Common Stock payable in
Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise,
into a lesser number of shares of Common Stock, then the maximum and
minimum number of shares of Common Stock into which the Series B
Preferred Stock may be converted, shall be proportionately decreased
or increased, as appropriate.
(E) MECHANICS OF CONVERSION. Before any holder of Series B
Preferred Stock shall be entitled to receive shares of Common Stock,
he shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent
for such stock, and shall state therein the name or
3.
<PAGE>
names in which he wishes the certificate or certificates for shares
of Common Stock to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such
holder of Series B Preferred Stock, a certificate or certificates
for the number of shares of Common Stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the Automatic
Conversion Date or the Optional Conversion Date, as appropriate,
and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such
date.
(F) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of the Series B Preferred
Stock, 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 Stock.
(G) FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Series B Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of Series B Preferred Stock 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 a fraction
of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the closing price of the Common Stock
on the date of conversion, multiplied by such fraction.
(H) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any (i) reorganization of the capital stock of the
Corporation, (ii) consolidation or merger of the Corporation in which
the Corporation is not the surviving corporation, or (iii) sale of all
or substantially all of the Corporation's assets to another
corporation (each, an "Event") shall be effected in such a way that
holders of Common Stock shall be entitled to receive securities, cash
or other assets or property, the Automatic Conversion Date shall be
accelerated to the date immediately preceding such Event, or such
other date necessary to assure that any holder of Series B Preferred
Stock receives such shares of stock, securities or other
4.
<PAGE>
assets or property as may be issued or payable with respect to or in
exchange for shares of Common Stock.
SECTION 6. NO REDEMPTION. The shares of Series B Preferred Stock
shall not be redeemable.
SECTION 7. AMENDMENT. The Restated Certificate of Incorporation of
the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights
of the Series B Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series B Preferred Stock, voting together as a
single class.
5.
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this certificate as of May
16, 1996.
/s/ Daniel L. Korpolinski
----------------------------------
Daniel L. Korpolinski
President and Chief Executive Officer
/s/ Alan C. Mendelson
----------------------------------
Alan C. Mendelson
Secretary
6.
<PAGE>
Exhibit 3(i).4
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COCENSYS, INC.
Daniel L. Korpolinski and Alan C. Mendelson hereby certify that:
FIRST: They are the duly elected and acting President and Secretary,
respectively, of CoCensys, Inc., a Delaware corporation.
SECOND: The name of this Corporation is COCENSYS, INC. (the "Corporation").
THIRD: The date on which the Amended and Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware is
February 5, 1993. A Certificate of Retirement of Series A, Series B and Series
C Preferred Stock was filed with the Secretary of State of the State of Delaware
on February 5, 1993. A Certificate of Designation of Series A Junior
Participating Preferred Stock was filed with the Secretary of State of the State
of Delaware on May 15, 1995. A Certificate of Powers, Designation, Preferences,
Rights and Limitations of Series B Convertible Preferred Stock was filed with
the Secretary of State of the State of Delaware on May 17, 1996.
FOURTH: The amendment to the Corporation's Amended and Restated Certificate
of Incorporation set forth below was duly adopted by the Board of Directors of
the Corporation, and approved by the Stockholders in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FIFTH: Article IV, Paragraph A of the Corporation's Certificate of
Incorporation is amended to read in its entirety as follows:
"IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is eighty million
(80,000,000) shares. Seventy-five million (75,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001)."
1.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Amendment of Amended and Restated Certificate of Incorporation this 12th day of
June, 1996 and hereby affirm and acknowledge under penalty of perjury that the
filing of this Certificate of Amendment of Amended and Restated Certificate of
Incorporation of CoCensys, Inc. is the act and deed of COCENSYS, INC.
COCENSYS, INC.
By: /s/ Daniel L. Korpolinski
______________________________________
Daniel L. Korpolinski, President and
Chief Executive Officer
ATTEST:
By: /s/ Alan C. Mendelson
____________________________________
Alan C. Mendelson,
Secretary
2.
<PAGE>
CERTIFICATE OF POWERS, DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
COCENSYS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
COCENSYS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on April 29, 1997:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of the Corporation in
accordance with the provisions of its Amended and 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 rights,
preferences and limitations thereof (in addition to the
provisions set forth in the Restated Certificate of
Incorporation of the Corporation, which are applicable to
the Preferred Stock of all classes and series), as follows:
Series C Convertible Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. One Hundred
Thousand (100,000) shares of Preferred Stock, $.001 par
value, are designated "Series C Convertible Preferred Stock"
with the rights, preferences, privileges and restrictions
specified herein (the
1.
<PAGE>
"Series C Preferred Stock"). Such number of shares may be not
increased or decreased without the consent of the holder.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders
of the Series C Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors,
out of funds legally available therefor, dividends at the
rate per share equal to any dividend declared or paid per
share to the Common Stock of the Corporation ("Common
Stock"). The right to such dividends on the Series C
Preferred Stock shall be non-cumulative.
SECTION 3. VOTING RIGHTS. Except as set forth
herein, or as otherwise provided by law, holders of Series C
Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
SECTION 4. LIQUIDATION PREFERENCE. In the event of any
liquidation, dissolution or winding up of the Corporation,
either voluntary or involuntary (a "Liquidation Event"),
the holders of the Series C Preferred Stock shall be
entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock or Junior
Preferred Stock of the Corporation, an amount per share (as
adjusted for any combinations, consolidations, stock
distributions or stock dividends with respect to such
shares) equal to the quotient of (a) $5,000,000 divided by
(b) the number of shares of Series C Preferred Stock issued
and outstanding as of the date of such Liquidation Event.
If upon the occurrence of such Liquidation Event, the assets
and funds thus distributed among the holders of the Series C
Preferred Stock shall be insufficient to permit the payment
to such holders of the full aforesaid preferential amount,
then the entire assets and funds of the Corporation legally
available for distribution shall be distributed among the
holders of the Series C Preferred Stock in proportion to the
shares of Series C Preferred Stock then held by them.
SECTION 5. CONVERSION. Subject to the limitations set
forth in Subsection (B) below, the Series C Preferred Stock
shall convert only as follows:
(A) CONVERSION AT HOLDER'S OPTION. At any time after
May 11, 1999, the Series C Preferred Stock shall be
convertible, in whole or in part, on a maximum of three
occasions, at the
2.
<PAGE>
option of the holder, into such number of fully paid and
nonassessable shares of Common Stock equal to the quotient
of (a) the product of $50 and the number of shares of
Series C Preferred Stock being converted, divided by (b)
the Conversion Price.
The "Conversion Price" shall be equal to the greater of:
(i) $5.43 or
(ii) the lesser of:
(x) the Future Market Price x 0.80 or
(y) $7.76;
PROVIDED, HOWEVER, that if the Future Market Price is less
than $3.88, the Conversion Price shall be $4.37.
The "Future Market Price" set forth above shall be the
average closing price of the Common Stock for the period
commencing on the 23rd trading day prior to the date upon
which the holder delivers notice to the Corporation of such
conversion (each, a "Conversion Date") and ending on the
third trading day prior to the Conversion Date, as reported
in the WALL STREET JOURNAL, WESTERN EDITION.
(B) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS OF
COMMON STOCK. In the event the Corporation at any time or
from time to time shall declare or pay any dividend on the
Common Stock payable in Common Stock or in any right to
acquire Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common
Stock, then the maximum and minimum number of shares of
Common Stock into which the Series C Preferred Stock may be
converted, shall be proportionately decreased or increased,
as appropriate.
(C) MECHANICS OF CONVERSION. Before any holder of
Series C Preferred Stock shall be entitled to receive shares
of Common Stock, he shall surrender the certificate or
certificates thereof, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and
shall state therein the name or
3.
<PAGE>
names in which he wishes the certificate or certificates
for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series C Preferred Stock,
a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled as aforesaid.
Such conversion shall be deemed to have been made on the
Conversion Date, and the person or persons entitled to
receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such
date.
(D) RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock,
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 C Preferred Stock.
(E) FRACTIONAL SHARES. No fractional share shall be
issued upon the conversion of any share or shares of Series
C Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of Series C
Preferred Stock 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 a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share,
pay the holder otherwise entitled to such fraction a sum in
cash equal to the closing price of the Common Stock on the
date of conversion, multiplied by such fraction.
(F) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. If any (i) reorganization of the capital
stock of the Corporation, (ii) consolidation or merger of
the Corporation in which the Corporation is not the
surviving corporation, or (iii) sale of all or substantially
all of the Corporation's assets to another corporation
(each, an "Event") shall be effected in such a way that
holders of Common Stock shall be entitled to receive
securities, cash or other assets or property, the first
Conversion Date shall be accelerated to the date immediately
preceding such Event, or such other date necessary to assure
that any holder of Series C Preferred Stock receives such
shares of stock, securities or other assets or property as
may be issued or payable with respect to or in exchange for
shares of Common Stock.
4.
<PAGE>
SECTION 6. NO REDEMPTION. The shares of Series C
Preferred Stock shall not be redeemable.
SECTION 7. AMENDMENT. The Restated Certificate of
Incorporation of the Corporation shall not be amended in any
manner which would materially alter or change the powers,
preferences or special rights of the Series C Preferred
Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the
outstanding shares of Series C Preferred Stock, voting
together as a single class.
5.
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this certificate as of May
12, 1997.
/s/ F. Richard Nichol, Ph.D.
--------------------------------------------
President and Chief Executive Officer
/s/ Alan C. Mendelson
--------------------------------------------
Secretary
6.
<PAGE>
1997 PROMOTION AGREEMENT
BETWEEN
SOMERSET PHARMACEUTICALS, INC.
AND
COCENSYS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS................................................... 2
1.1 "Actual Gross Sales".......................................... 2
1.2 "Actual Monthly Details"...................................... 2
1.3 "Actual Quarterly Details".................................... 2
1.4 "Adjusted Annualized Detail Payment Reduction"................ 2
1.5 "Adjusted Detail-Based Compensation Reconciliation Payment"... 3
1.6 "Adjusted Target Details"..................................... 3
1.7 "Affiliate"................................................... 3
1.8 "Annualized Detail Payment Reduction"......................... 3
1.9 "CoCensys ELDEPRYL Sales Force"............................... 3
1.10 "Detail-Based Compensation"................................... 3
1.11 "Detail-Based Compensation Reconciliation Payment"............ 3
1.12 "Effective Date".............................................. 4
1.13 "ELDEPRYL Brand".............................................. 4
1.14 "ELDEPRYL Brand Unit"......................................... 4
1.15 "ELDEPRYL Detail"............................................. 4
1.16 "FDA"......................................................... 4
1.17 "First Position Presentation"................................. 5
1.18 "Gross Sales-Based Compensation".............................. 5
1.19 "Key Prescribers"............................................. 5
1.20 "Key Prescriber Marketing Plan"............................... 5
1.21 "Managing Committee".......................................... 5
1.22 "Minimum Aggregate Monthly Details"........................... 6
1.23 "Minimum Aggregate Quarterly Details"......................... 6
1.24 "Monthly Detail Payment"...................................... 7
1.25 "Monthly Detail Payment Reduction"............................ 7
1.26 "NDA"......................................................... 7
1.27 "Promotional Materials"....................................... 7
1.28 "Proprietary Information"..................................... 7
1.29 "Quarterly Detail Payment".................................... 7
1.30 "Quarterly Detail Payment Reduction".......................... 7
1.31 "Sample"...................................................... 7
1.32 "Target Aggregate Monthly Details"............................ 8
1.33 "Target Aggregate Quarterly Details".......................... 8
1.34 "Term"........................................................ 8
1.35 "Territory"................................................... 9
1.36 "Total Actual Details"........................................ 9
1.37 "Total Detail Payment Reduction".............................. 9
1.38 "Total Government Discounts and Rebates"...................... 9
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE 2. PROMOTION RIGHTS.............................................. 10
2.1 Appointment of CoCensys....................................... 10
2.2 Rights Retained by Somerset................................... 10
ARTICLE 3. MANAGING COMMITTEE; KEY PRESCRIBER MARKETING PLAN............. 11
3.1 Managing Committee............................................ 11
(a) Formation; Meetings...................................... 11
(b) Functions of the Managing Committee...................... 12
3.2 Dispute Resolution............................................ 13
ARTICLE 4. PROMOTION OF ELDEPRYL BRAND................................... 14
4.1 CoCensys ELDEPRYL Sales Force................................. 14
4.2 Training of CoCensys ELDEPRYL Sales Force..................... 14
(a) Continued Training....................................... 14
(b) Training Costs........................................... 15
4.3 CoCensys ELDEPRYL Sales Force Support......................... 15
4.4 Conduct of the CoCensys ELDEPRYL Sales Force.................. 15
4.5 Bonus Program for CoCensys ELDEPRYL Sales Force............... 16
4.6 Other Marketing Activities to Physicians...................... 17
(a) Physicians Who Are Not Key Prescribers................... 17
(b) Non-Sales Call Activity.................................. 17
4.7 Other Uses of CoCensys Sales Force............................ 18
4.8 Number of ELDEPRYL Details.................................... 19
4.9 Records and Reports Regarding Promotion Activities............ 19
4.10 Forwarding of ELDEPRYL Brand Orders........................... 20
ARTICLE 5. SOMERSET RIGHTS AND OBLIGATIONS............................... 20
5.1 [ * ] Marketing Responsibility........................ 20
5.2 Supply and Distribution of ELDEPRYL Brand..................... 21
5.3 Regulatory Compliance......................................... 21
5.4 Product Recall................................................ 21
5.5 Promotional Materials......................................... 22
(a) Somerset Materials....................................... 22
(b) Rights To Promotional Materials.......................... 22
5.6 [ * ] Developments Relating to ELDEPRYL Brand......... 23
5.7 Sales and Inventory Data...................................... 23
5.8 Somerset Costs................................................ 24
ii.
* Confidential treatment requested
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE 6. JOINT OBLIGATIONS............................................. 24
6.1 Assistance and Notifications to Other Party................... 24
6.2 Samples of ELDEPRYL Brand..................................... 25
(a) Costs.................................................... 25
(b) Shrink-Wrap.............................................. 25
(c) Disposition Upon Termination............................. 25
6.3 Requests for Information from Key Prescribers................. 26
6.4 Market Surveys................................................ 26
6.5 Withdrawal of ELDEPRYL Brand.................................. 26
6.6 Non-Solicitation of Employees................................. 27
ARTICLE 7. COMPENSATION.................................................. 27
7.1 Detail-Based Compensation..................................... 27
(a) Detail Payments.......................................... 27
(b) Reduction in Detail Payments............................. 29
(c) Detail-Based Compensation Reconciliation................. 31
(d) ......................................................... 34
7.2 Gross Sales-Based Compensation................................ 34
(a) ......................................................... 34
(b) ......................................................... 34
(c) ......................................................... 35
(d) ......................................................... 35
7.3 Adjustments in the Event of Changes in Government Mandated
Discounts and Rebates......................................... 36
7.4 Audit Rights.................................................. 37
ARTICLE 8. TERM; TERMINATION............................................. 38
8.1 Renewal Terms................................................. 38
8.2 Termination Rights............................................ 38
8.3 Termination Upon Cessation of Sale of ELDEPRYL Brand.......... 38
8.4 Termination for Breach........................................ 38
8.5 Effect of Termination......................................... 39
8.6 Termination of the 1996 Agreement............................. 39
ARTICLE 9. WARRANTIES, REPRESENTATIONS AND COVENANTS..................... 40
9.1 Warranties and Representations of Each Party.................. 40
9.2 Warranties and Representations of Somerset.................... 40
9.3 Warranties and Representations of CoCensys.................... 41
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE 10. INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.................. 41
10.1 Notice........................................................ 41
10.2 Conduct of Infringement Actions............................... 41
ARTICLE 11. INDEMNIFICATION............................................... 42
11.1 Indemnification by Somerset................................... 42
11.2 Indemnification by CoCensys................................... 42
11.3 Indemnification Procedure..................................... 43
ARTICLE 12. CONFIDENTIALITY............................................... 44
12.1 Nondisclosure and Nonuse Obligations.......................... 44
12.2 Exceptions.................................................... 45
12.3 Authorized Disclosure......................................... 45
12.4 Obligations at End of Term.................................... 46
12.5 Retention of Proprietary Information.......................... 46
ARTICLE 13. PUBLICITY..................................................... 47
13.1 ...............................................................47
13.2 ...............................................................47
ARTICLE 14. MISCELLANEOUS................................................. 48
14.1 Notices....................................................... 48
14.2 Captions and Section References............................... 48
14.3 Severability.................................................. 49
14.4 Entire Agreement.............................................. 49
14.5 Amendment..................................................... 49
14.6 Counterparts.................................................. 50
14.7 Waiver........................................................ 50
14.8 Force Majeure................................................. 50
14.9 Assignment; Benefits and Binding Nature of Agreement.......... 50
14.10 Survival...................................................... 51
14.11 Not Strictly Construed Against Either Party................... 51
14.12 Governing Law................................................. 51
iv.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
Exhibit 5.7 - Somerset Standard Sales Report Format.......................... 53
Exhibit 7.1(d) - Examples of Calculation of Detail-Based Compensation Under
Different Hypothetical Scenarios......................................... 54
Exhibit 7.2.................................................................. 57
v.
<PAGE>
1997 PROMOTION AGREEMENT
THIS 1997 PROMOTION AGREEMENT ("Agreement"), is made this 7 day of April,
1997, by and between SOMERSET PHARMACEUTICALS, INC., with offices at 5215 W.
Laurel Street, Tampa, Florida 33607 ("Somerset"), and COCENSYS, INC., with
offices at 213 Technology Drive, Irvine, California 92718 ("CoCensys"), with
respect to the following:
WHEREAS, Somerset has the right, under its approved New Drug Application,
to market ELDEPRYL Brand (as further defined in Section 1.13) in the United
States; and
WHEREAS, CoCensys has established a marketing and a sales organization
which currently is promoting certain drugs belonging to third parties to
neurologists and psychiatrists pursuant to certain agreements on file with the
United States Securities and Exchange Commission as of the date of this
Agreement; and
WHEREAS, the parties executed a Promotion Agreement dated January 4, 1996
whereby Somerset utilized CoCensys' sales force to promote ELDEPRYL Brand to
neurologists in the United States on terms and conditions contained therein.
WHEREAS, the parties wish to terminate the January 4, 1996 Promotion
Agreement and continue their relationship on the revised terms provided for in
this Agreement.
1.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and obligations hereinafter set forth, the parties hereto agree
as follows:
ARTICLE 1.
DEFINITIONS
The following capitalized terms shall have the meanings indicated for
purposes of this Agreement:
1.1 "ACTUAL GROSS SALES" shall mean, during the Term, [ * ].
The amount of Actual Gross Sales may be adjusted upon mutual agreement of the
parties pursuant to Section 7.3.
1.2 "ACTUAL MONTHLY DETAILS" shall have the meaning set forth in Section
7.1(b)(ii)
1.3 "ACTUAL QUARTERLY DETAILS" shall have the meaning set forth in Section
7.1(b)(i).
1.4 "ADJUSTED ANNUALIZED DETAIL PAYMENT REDUCTION" shall have the meaning
set forth in Section 7.1(c)(ii).
1.5 "ADJUSTED DETAIL-BASED COMPENSATION RECONCILIATION PAYMENT" shall have
the meaning set forth in Section 7.1(c)(ii).
2.
* Confidential treatment requested
<PAGE>
1.6 "ADJUSTED TARGET DETAILS" shall have the meaning set forth in Section
7.1(c)(ii).
1.7 "AFFILIATE" shall mean any corporation, association or other entity
which directly or indirectly controls, is controlled by or is under common
control with the party in question. Solely for purposes of this definition, the
term "control" shall mean direct or indirect beneficial ownership equal to or in
excess of 50% of the voting or income interest in such corporation or other
business entity.
1.8 "ANNUALIZED DETAIL PAYMENT REDUCTION" shall have the meaning set
forth in Section 7.1(c)(i).
1.9 "COCENSYS ELDEPRYL SALES FORCE" shall mean those members of
CoCensys's sales force, as more fully described in Section 4.7, who make
ELDEPRYL Details to Key Prescribers.
1.10 "DETAIL-BASED COMPENSATION" shall have the meaning set forth in
Section 7.1(a)(i).
1.11 "DETAIL-BASED COMPENSATION RECONCILIATION PAYMENT" shall have the
meaning set forth in Section 7.1(c)(i).
1.12 "EFFECTIVE DATE" shall mean January 1, 1997.
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1.13 "ELDEPRYL BRAND" shall mean (i) that prescription pharmaceutical
product, in 5 mg capsule form, indicated in the Territory for the adjunctive
treatment of late stage Parkinson's disease, owned by Somerset and promoted as
of the Effective Date under the trademark ELDEPRYL, the active ingredient of
which is selegiline hydrochloride (the "Current Formulation") and
[ * ].
1.14 "ELDEPRYL BRAND UNIT" shall mean 60 capsules, 5 mg each, of ELDEPRYL
Brand.
1.15 "ELDEPRYL DETAIL" shall mean a [ * ] detail for ELDEPRYL
Brand between a CoCensys salesperson and a Key Prescriber. As used herein, [
* ] means that ELDEPRYL Brand is [ * ] such sales call.
1.16 "FDA" shall mean the United States Food and Drug Administration.
1.17 "FIRST POSITION PRESENTATION" shall mean a single discussion relating
to a pharmaceutical product which is held at the commencement of a meeting
between a CoCensys salesperson and a physician.
1.18 "GROSS SALES-BASED COMPENSATION" shall have the meaning set forth in
Section 7.2.
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1.19 "KEY PRESCRIBERS" shall mean those neurologists and "High Prescribing
Non-Neurologists" in the Territory, set forth on a target list approved by the
Managing Committee pursuant to Section 3.1(b)(v), as such target list may be
amended from time to time during the Term, to whom CoCensys will make ELDEPRYL
Details. "High Prescribing Non-Neurologists" shall mean those non-neurologists
in the Territory who rank [ * ] in CoCensys' decile system for
identifying high prescribers of ELDEPRYL Brand, and any other non-neurologists
agreed to by Somerset.
1.20 "KEY PRESCRIBER MARKETING PLAN" shall mean that marketing plan which
has been agreed to by the parties and which sets forth the marketing strategy
and tactics to be used in promoting ELDEPRYL Brand to Key Prescribers during the
Term. The Key Prescriber Marketing Plan may be adjusted from time-to-time
pursuant to Section 3.1(b)(ii).
1.21 "MANAGING COMMITTEE" shall mean the committee established pursuant to
Section 3.1 which is responsible for oversight of the co-promotion relationship
between CoCensys and Somerset in the Territory, including, but not limited to,
the marketing, advertising and promotion of ELDEPRYL Brand pursuant to this
Agreement.
1.22 "MINIMUM AGGREGATE MONTHLY DETAILS" shall be equal to:
[ * ], at the conclusion of the first month of the Term; or
[ * ], at the conclusion of the second month of the Term; or
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[ * ], at the conclusion of the third month of the Term; or
[ * ], at the conclusion of the fourth month of the Term; or
[ * ], at the conclusion of the fifth month of the Term; or
[ * ], at the conclusion of the sixth month of the Term; or
[ * ], at the conclusion of the seventh month of the Term; or
[ * ], at the conclusion of the eighth month of the Term; or
[ * ], at the conclusion of the ninth month of the Term; or
[ * ], at the conclusion of the tenth month of the Term; or
[ * ], at the conclusion of the eleventh month of the Term; or
[ * ], at the conclusion of the twelfth month of the Term.
1.23 "MINIMUM AGGREGATE QUARTERLY DETAILS" shall be equal to:
[ * ], at the conclusion of the first quarter of the Term; or
[ * ], at the conclusion of the second quarter of the Term; or
[ * ], at the conclusion of the third quarter of the Term; or
[ * ], at the conclusion of the fourth quarter of the Term.
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1.24 "MONTHLY DETAIL PAYMENT" shall have the meaning set forth in Section
7.1(a)(ii).
1.25 "MONTHLY DETAIL PAYMENT REDUCTION" shall have the meaning set forth in
Section 7.1(b)(ii).
1.26 "NDA" shall mean an FDA-approved new drug application.
1.27 "PROMOTIONAL MATERIALS" shall have the meaning set forth in
Section 5.5.
1.28 "PROPRIETARY INFORMATION" shall mean any proprietary or confidential
information communicated by one party hereto to the other, whether in written,
electronic, graphic or oral form, which is so identified as proprietary or
confidential by the disclosing party, or which the receiving party knows or has
reason to know is proprietary or confidential including, but not limited to,
financial, marketing, business, technical or scientific information or data.
1.29 "QUARTERLY DETAIL PAYMENT" shall have the meaning set forth in Section
7.1(a)(i).
1.30 "QUARTERLY DETAIL PAYMENT REDUCTION" shall have the meaning set forth
in Section 7.1(b)(i).
1.31 "SAMPLE" shall mean complimentary supply of ELDEPRYL Brand capsules or
other dosage forms which are distributed by the CoCensys ELDEPRYL Sales Force to
Key Prescribers, pursuant to the provisions of the Prescription Drug Marketing
Act.
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1.32 "TARGET AGGREGATE MONTHLY DETAILS" shall be equal to:
[ * ], at the conclusion of the first month of the Term; or
[ * ], at the conclusion of the second month of the Term; or
[ * ], at the conclusion of the third month of the Term; or
[ * ], at the conclusion of the fourth month of the Term; or
[ * ], at the conclusion of the fifth month of the Term; or
[ * ], at the conclusion of the sixth month of the Term; or
[ * ], at the conclusion of the seventh month of the Term; or
[ * ], at the conclusion of the eighth month of the Term; or
[ * ], at the conclusion of the ninth month of the Term; or
[ * ], at the conclusion of the tenth month of the Term; or
[ * ], at the conclusion of the eleventh month of the Term; or
[ * ], at the conclusion of the twelfth month of the Term.
1.33 "TARGET AGGREGATE QUARTERLY DETAILS" shall be equal to:
[ * ], at the conclusion of the first quarter of the Term; or
[ * ], at the conclusion of the second quarter of the Term; or
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[ * ], at the conclusion of the third quarter of the Term; or
[ * ], at the conclusion of the fourth quarter of the Term.
1.34 "TERM" shall mean the period commencing on the Effective Date and
terminating December 31, 1997, unless terminated earlier pursuant to the
provisions of Article 8.
1.35 "TERRITORY" shall mean the United States of America, the District of
Columbia and Puerto Rico, but not any other United States territories or
possessions.
1.36 "TOTAL ACTUAL DETAILS" shall equal the total number of ELDEPRYL
Details conducted by the CoCensys ELDEPRYL Sales Force from the Effective Date
to the date of calculation. "Total Actual Details" shall be calculated (i) as
of the last day of each calendar quarter during the Term; or, (ii) in the event
this Agreement terminates prior to December 31, 1997, as of the last day of each
month during the quarter in which such termination occurs and as of the
effective date of termination.
1.37 "TOTAL DETAIL PAYMENT REDUCTION" shall equal the sum of [ * ] if
any, made to date and shall be calculated (i) at the conclusion of the Term, or
(ii) in the event of termination prior to December 31, 1997, as of the effective
date of termination.
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1.38 "TOTAL GOVERNMENT DISCOUNTS AND REBATES" shall mean all government
mandated discounts and rebates on sales of ELDEPRYL Brand in the Territory
during the Term.
ARTICLE 2
PROMOTION RIGHTS
2.1 APPOINTMENT OF COCENSYS. Subject to Section 4.6, Somerset hereby
appoints CoCensys, effective on the Effective Date and throughout the Term, as
its exclusive agent to detail ELDEPRYL Brand to Key Prescribers in the
Territory, in accordance with this Agreement. In addition, Somerset hereby
appoints CoCensys, as of the Effective Date and throughout the Term, as a
non-exclusive agent to promote ELDEPRYL Brand in the Territory to those third
parties whom CoCensys's regional business directors meet with in the normal
course of their business, in accordance with this Agreement.
2.2 RIGHTS RETAINED BY SOMERSET. Except as otherwise expressly provided
in this Agreement, Somerset shall be responsible for maintaining (or, to the
extent permissible under existing contracts with third parties, causing such
third parties to maintain) all rights in and to ELDEPRYL Brand including, but
not limited to, the NDA(s) for ELDEPRYL Brand, the drug master file(s) for
ELDEPRYL Brand, and all manufacturing, distribution, patent, copyright and
trademark rights relating to ELDEPRYL Brand.
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ARTICLE 3
MANAGING COMMITTEE; KEY PRESCRIBER MARKETING PLAN
3.1 MANAGING COMMITTEE.
(a) FORMATION; MEETINGS. The Managing Committee will be responsible
for all decisions regarding the marketing, advertising and promotion of ELDEPRYL
Brand to Key Prescribers in the Territory. Somerset and CoCensys shall each
appoint one (1) person as voting members of the Managing Committee, who will
have expertise in marketing or sales. Each person will have experience which is
relevant to the promotion of ELDEPRYL Brand contemplated by this Agreement.
Somerset and CoCensys may from time to time each replace their respective voting
representatives on the Managing Committee upon one (1) month prior written
notice to the other party. In addition, each party may bring any non-voting
representatives to meetings of the Managing Committee. Each party will ensure
that at least one of its employees who has experience sufficient to monitor and
coordinate the payments to be made between the parties hereunder will be
available in person or by telephone for each meeting of the Managing Committee.
The Managing Committee will meet quarterly, or more or less often as the
Managing Committee determines to be appropriate. Such meetings shall be
scheduled at mutually convenient times in places alternately selected by
Somerset and CoCensys. Each party will bear its own costs for attendance at
Managing Committee meetings. Any member may designate an alternate to act on
his or her behalf at any meetings by notice (which may be oral) to the other
members, said right not to be exercised more than two (2) times per year by each
such member. Any member of the Managing Committee may request a meeting
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of the Managing Committee by giving written notice of such meeting at least
fourteen (14) days before the desired date of such meeting. Any disputes within
the Managing Committee will be resolved pursuant to Section 3.2 hereof.
(b) FUNCTIONS OF THE MANAGING COMMITTEE. The Managing Committee will
perform the following functions:
(i) establish guidelines to govern the promotion of ELDEPRYL
brand by CoCensys.
(ii) review, comment upon and approve adjustments to the Key
Prescriber Marketing Plan.
(iii) monitor whether third party or governmental actions (e.g.
third party publication, FDA mandated labeling change,
new discovery, new product on the market, infringement of
trademark rights) are having, or are likely to have, a
material effect on Actual Gross Sales and suggest
adjustments to the Key Prescriber Marketing Plan and/or
recommend to the parties amendments to this Agreement to
respond to such third party or governmental actions.
(iv) in accordance with section 7.3, make recommendations to
the parties in the event of material increases in Total
Government Discounts and Rebates.
(v) approve the target list of Key Prescribers, the initial
version of which has already been approved by the
parties. In addition, upon
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approval of the Managing Committee, physicians may, from
time to time, be added to or deleted from the list of Key
Prescribers.
(vi) determine whether and when the CoCensys ELDEPRYL Sales
Force should provide Samples to Key Prescribers.
(vii) otherwise monitor and oversee the promotion and marketing
of ELDEPRYL Brand to physicians in the Territory and the
relationship of the parties hereunder.
3.2 DISPUTE RESOLUTION. In the event of a disagreement between the
parties as to any matters within the scope of the responsibilities of the
Managing Committee, the Managing Committee will, diligently and in good faith,
seek to resolve the matter in dispute. If the Managing Committee is unable to
resolve the dispute, despite its good faith efforts, within thirty (30) days of
first addressing the matter, it shall, within ten (10) days thereafter, refer
such dispute to the President of CoCensys and the President of Somerset who will
discuss and attempt to resolve the dispute. If the Presidents of the parties
are unable to resolve the dispute, the President of Somerset shall have ultimate
authority to resolve all matters within the scope of the responsibilities of the
Managing Committee, except for those matters set forth in Sections 1.19 and
3.1(b)(v).
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ARTICLE 4.
PROMOTION OF ELDEPRYL BRAND
4.1 COCENSYS ELDEPRYL SALES FORCE. During the Term, subject to review and
approval by the Managing Committee and consistent with the Key Prescriber
Marketing Plan, CoCensys shall deploy the CoCensys ELDEPRYL Sales Force for the
delivery of ELDEPRYL Details to the Key Prescribers. [ * ].
4.2 TRAINING OF COCENSYS ELDEPRYL SALES FORCE.
(a) CONTINUED TRAINING. Subsequent to the Effective Date, Somerset
may invite the CoCensys ELDEPRYL Sales Force to attend any training sessions
which are provided by Somerset for the purpose of upgrading information relating
to sales of ELDEPRYL Brand, including, but not limited to, information relating
to new developments as set forth in Section 5.6. It is understood that such
training sessions (i) will be provided on an as-needed basis by Somerset after
discussions between CoCensys and Somerset regarding the content and format of
such sessions and (ii) are subject to the approval of the Managing Committee.
Somerset may require some or all of the CoCensys ELDEPRYL Sales Force to attend
certain training sessions ("Mandatory Training Sessions").
(b) TRAINING COSTS. All costs incurred under Section 4.2(a) shall be
subject to prior approval by the Managing Committee. All costs incurred under
Section 4.2(a)
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(including but not limited to, training costs, transportation, and room and
board) for Mandatory Training Sessions will be borne [ * ]. All costs
incurred under Sections 4.2(a) (including, but not limited to, training costs,
transportation and room and board) for any other training will be borne
[ * ].
4.3 COCENSYS ELDEPRYL SALES FORCE SUPPORT. CoCensys will, [ * ]
employ a product segment manager and appropriate secretarial support to
implement its obligations under this Agreement.
4.4 CONDUCT OF THE COCENSYS ELDEPRYL SALES FORCE. In accordance with the
Key Prescriber Marketing Plan and the terms and conditions of this Agreement,
and subject to the Federal Food, Drug and Cosmetic Act, all regulations
promulgated pursuant thereto and any and all applicable state laws and
regulations, CoCensys shall use commercially diligent efforts to direct its
CoCensys ELDEPRYL Sales Force to detail ELDEPRYL Brand to the Key Prescribers to
so persuade such Key Prescribers to prescribe and use ELDEPRYL Brand. The
CoCensys ELDEPRYL Sales Force shall conduct ELDEPRYL Details, shall execute the
programs set forth in the Key Prescriber Marketing Plan and, where deemed
appropriate by the Managing Committee, shall provide Samples to Key
Prescribers. Somerset may, from time to time and upon reasonable prior notice,
request that a Somerset employee be allowed to join the CoCensys ELDEPRYL Sales
Force for certain ELDEPRYL Details. Upon the authorization of CoCensys sales
management, such authorization not to be unreasonably withheld, CoCensys will
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accommodate such request, provided that [ * ] associated with
its employee engaging in such activity. In addition CoCensys will cause its
regional business directors to make presentations regarding ELDEPRYL Brand to
those third parties with whom such regional business directors meet in the
normal course of their business. All presentations and materials to be utilized
by CoCensys to so market, advertise or promote ELDEPRYL Brand shall be subject
to the prior review of Somerset and, if applicable, the FDA. CoCensys shall
cause the CoCensys ELDEPRYL Sales Force, and all other employees, agents and
representatives of CoCensys, to comply with all applicable laws, regulations and
guidelines in connection with the marketing, advertising and promotion of
ELDEPRYL Brand, including the Prescription Drug Marketing Act and the Federal
Anti-Kickback Statute.
4.5 BONUS PROGRAM FOR COCENSYS ELDEPRYL SALES FORCE. [ * ] an
incentive cash bonus program for the CoCensys ELDEPRYL Sales Force. The amount
of [ * ] to be made available for distribution through such bonus
program (the "Bonus Pool") will be determined by [ * ]. The
size of the Bonus Pool for the second six months of the Term shall be determined
by [ * ] during such period. Notwithstanding the foregoing,
[ * ]. [ * ] establish the criteria to be
used in dividing the Bonus Pool among the CoCensys ELDEPRYL Sales Force.
[ * ] adjust the specific bonus amounts to be paid to individual
members of the
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CoCensys ELDEPRYL Sales Force in order to reflect the ELDEPRYL Brand sales
efforts of such individuals; provided, however, that [ * ]
documentation which lists the names of the recipients and the amount of the
bonus he/she received. [ * ].
4.6 OTHER MARKETING ACTIVITIES TO PHYSICIANS.
(a) PHYSICIANS WHO ARE NOT KEY PRESCRIBERS. During the Term
hereof, CoCensys may, at its sole discretion, make sales calls or presentations
regarding ELDEPRYL Brand to physicians in the Territory who are not Key
Prescribers.
(b) NON-SALES CALL ACTIVITY. During the Term hereof, Somerset
will not make sales calls regarding ELDEPRYL Brand to Key Prescribers in the
Territory. Somerset may, however, engage in other (i.e. non-sales call)
marketing, advertising or promotion activities for ELDEPRYL Brand directed at
neurologists or other physicians in the Territory, provided that all of the
foregoing activities will be funded in full by Somerset. Somerset agrees to
notify CoCensys of any such other activities.
4.7 OTHER USES OF COCENSYS SALES FORCE. Somerset acknowledges and
understands that CoCensys has certain obligations relating to the deployment of
the CoCensys ELDEPRYL Sales Force pursuant to a promotion agreement which is on
file with the United States Securities and Exchange Commission as of the date of
execution of this Agreement. CoCensys represents and warrants that, as of the
Effective Date, there are at least [ * ] members of the
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CoCensys ELDEPRYL Sales Force and that, during the Term, the CoCensys ELDEPRYL
Sales Force will only be utilized to deliver to Key Prescribers (i) a
[ * ] Presentation for a [ * ] pharmaceutical product and (ii)
an ELDEPRYL Detail. CoCensys further represents and warrants that the size of
the CoCensys ELDEPRYL Sales Force will not fall below [ * ] in number
except as a result of attrition, in which event CoCensys will, within sixty
(60) days of the date upon which the size of the CoCensys ELDEPRYL Sales Force
fell below [ * ] hire additional salespeople to replace those lost
through attrition and to cause the size of the CoCensys ELDEPRYL Sales Force
to number at least [ * ] Provided that the CoCensys ELDEPRYL Sales Force
is comprised of at least [ * ] CoCensys sales representatives and
provided that CoCensys continues to meet all of its obligations hereunder, in
the event that CoCensys increases the size of its overall sales force to more
than [ * ] sales representatives, CoCensys shall have the right, in its
sole discretion and upon prior written notice to Somerset and after
consultation with Somerset, to utilize those members of its sales force who are
not members of the CoCensys ELDEPRYL Sales Force to market, advertise, promote
or otherwise sell other pharmaceutical products to neurologists.
Notwithstanding the foregoing, during the Term, CoCensys will not promote any
pharmaceutical product, other than ELDEPRYL Brand, with an approved indication
for Parkinson's disease without the prior written consent of Somerset.
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4.8 NUMBER OF ELDEPRYL DETAILS. CoCensys represents that the CoCensys
ELDEPRYL Sales Force will present at least [ * ] ELDEPRYL Details per
calendar quarter. Failure to deliver the full [ * ] ELDEPRYL Details per
calendar quarter shall not be deemed a material breach of, or failure to perform
under, this Agreement, PROVIDED, HOWEVER, if, in any calendar quarter, CoCensys
fails to deliver the Minimum Aggregate Quarterly Details, and such failure was
not caused by an event of force majeure, then Detail-Based Compensation for such
calendar quarter shall be adjusted pursuant to Section 7.1(b)(i).
4.9 RECORDS AND REPORTS REGARDING PROMOTION ACTIVITIES. CoCensys will
keep complete and accurate records of the ELDEPRYL Details made by the CoCensys
ELDEPRYL Sales Force (including numbers of ELDEPRYL Details, names of Key
Prescribers, date of presentation and general response to such presentations)
and the other activities carried out pursuant to the Key Prescriber Marketing
Plan. CoCensys will provide Somerset a quarterly report summarizing such
matters. CoCensys will maintain such records for three (3) years following the
period to which they relate. CoCensys shall permit Somerset to have such
records examined by independent certified public accountants retained by
Somerset and acceptable to CoCensys, during regular business hours and upon
reasonable advance notice, but not later than three (3) years following the date
of any such records and no more often than one (1) time per year. Such
independent accountants shall, pursuant to separate written contract, keep
confidential any information obtained during such examination and shall report
to Somerset only the number of ELDEPRYL Details per quarter. Any such
information so reviewed and any such information reported shall be considered
the Proprietary Information of CoCensys. In the
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absence of material discrepancies (in excess of [ * ] of the total
number of ELDEPRYL Details required of CoCensys for such quarter) in any request
for a refund resulting from such audit, the accounting expense shall be paid by
Somerset. If material discrepancies do result, CoCensys shall bear the
accounting expense. Any amounts due to Somerset arising from such discrepancies
shall be paid by CoCensys within ten (10) business days of receipt by CoCensys
of a written notice from Somerset that such discrepancies exists. Somerset will
keep complete and accurate records of the activities carried out by Somerset
pursuant to the Key Prescriber Marketing Plan. Somerset will make such records
available to CoCensys during Somerset's regular business hours and will provide
CoCensys a quarterly report summarizing such matters. Somerset will maintain
such records for three (3) years following the period to which they relate.
4.10 FORWARDING OF ELDEPRYL BRAND ORDERS. Any orders for ELDEPRYL Brand
received by CoCensys, including members of the CoCensys ELDEPRYL Sales Force,
will be promptly forwarded to Somerset.
ARTICLE 5.
SOMERSET RIGHTS AND OBLIGATIONS
5.1 [ * ] MARKETING RESPONSIBILITY. Except as explicitly set
forth in this Agreement, Somerset shall be responsible for
[ * ].
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5.2 SUPPLY AND DISTRIBUTION OF ELDEPRYL BRAND. In accordance with
Somerset's general business practices, Somerset shall use commercially diligent
efforts to perform, or cause to be performed, all manufacturing, labeling,
packaging, warehousing, maintenance of inventory, distribution, order entry,
customer services and all other activities to supply and distribute ELDEPRYL
Brand in order to fill the orders generated by the activities of CoCensys
hereunder and to supply and distribute Samples in accordance with Section 6.2.
Somerset shall accept orders for ELDEPRYL Brand in accordance with Somerset's
general business practices.
5.3 REGULATORY COMPLIANCE. Unless otherwise required by law, Somerset
will retain exclusive authority and responsibility for complying with all
regulatory requirements and maintaining all government agency contacts relating
to ELDEPRYL Brand, including, but not limited to, maintaining and updating the
NDA(s) for ELDEPRYL Brand; [ * ] the reporting of any adverse
drug reactions to the FDA; the filing of Promotional Materials with the FDA; and
the payment of Medicaid and other governmental rebates which in Somerset's sole
judgment are due and owing. Nothing herein shall obligate Somerset
[ * ].
5.4 PRODUCT RECALL. In the event that (i) Somerset determines that an
event, incident or circumstances has occurred which may result in the need for a
recall or other removal of ELDEPRYL Brand or any lot or lots thereof from the
market in the Territory, (ii) the FDA requires a recall of ELDEPRYL Brand or
(iii) the FDA requires distribution of a "Dear Doctor" letter, Somerset shall
promptly advise CoCensys with respect thereto. With respect to clause (i)
above, Somerset shall, in its sole discretion, have the right to order a recall
or other removal
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after such notification. With respect to clauses (ii) and (iii) above, Somerset
shall order such recall or distribute such "Dear Doctor" letter after such
notification. [ * ].
5.5 PROMOTIONAL MATERIALS.
(a) SOMERSET MATERIALS. In accordance with the Key Prescriber
Marketing Plan, Somerset shall, [ * ] produce, provide and ship to
CoCensys reasonable quantities of promotional, sales, marketing and educational
materials for ELDEPRYL Brand (the "Promotional Materials") to allow CoCensys to
fulfill its obligations hereunder. Such Promotional Materials shall include, by
way of example, promotional brochures, videos, visual aids, approved reprints,
medically relevant reminder items, continuing medical education programs,
patient education and compliance programs, medical literature, medical group
presentations, market research and direct mail programs. All Promotional
Materials will be approved by the medical and regulatory departments of
Somerset. In addition to the foregoing, Somerset shall provide CoCensys with
two (2) copies of each item of Promotional Material for CoCensys's archives.
(b) RIGHTS TO PROMOTIONAL MATERIALS. As between Somerset and
CoCensys, Somerset shall own all right, title and interest in and to any
Promotional Materials provided to CoCensys pursuant to this Section 5.5
including applicable copyrights and trademarks. Somerset hereby grants to
CoCensys the right, during the Term, to use all Promotional Materials and all
sales, marketing, educational and training materials produced by Somerset and
supplied to
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CoCensys with respect to ELDEPRYL Brand in conjunction with CoCensys's promotion
of ELDEPRYL Brand.
5.6 [ * ] DEVELOPMENTS RELATING TO ELDEPRYL BRAND. Somerset
will promptly inform CoCensys of the following information relating to ELDEPRYL
Brand: (i) [ * ] (ii) [ * ] (iii)
[ * ] and (iv) any changes in regulations affecting
ELDEPRYL Brand or Somerset's obligations with respect to this Agreement.
CoCensys will promptly inform Somerset of information relating to changes in
regulations affecting CoCensys' obligations with respect to this Agreement.
Based on such information, and subject to any federal, state or local laws
and/or regulations, Somerset shall use commercially diligent efforts to maintain
the training materials supplied to CoCensys pursuant to this Agreement current
with such [ * ] information.
5.7 SALES AND INVENTORY DATA. Somerset will provide CoCensys with a
report of overall sales of ELDEPRYL Brand in the Territory, in Somerset's
standard sales report format, a copy of which is attached hereto as Exhibit 5.7,
for each month of the Term as it becomes available to Somerset in the normal
course of business. Somerset shall also provide CoCensys with a report of
inventories and back orders of ELDEPRYL Brand.
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5.8 SOMERSET COSTS. Except as specifically set forth in this Agreement,
[ * ] in accordance with the marketing budget which has been
established for the Term. In the event [ * ] are materially affecting
sales of ELDEPRYL Brand, Somerset may, after notification to CoCensys,
[ * ] to respond to such [ * ].
ARTICLE 6.
JOINT OBLIGATIONS
6.1 ASSISTANCE AND NOTIFICATIONS TO OTHER PARTY. Each party agrees to
provide to the other reasonable assistance and take actions reasonably requested
by the other party that are necessary to enable the other party to comply with
its obligations hereunder and with any law or regulation applicable to ELDEPRYL
Brand, including, but not limited to, Somerset's meeting its reporting and other
obligations under Section 5.3. Such assistance and actions shall include, among
other things: (i) CoCensys promptly reporting to Somerset adverse drug
reactions of which it becomes aware, so as to permit Somerset to meet its FDA
reporting and other obligations in a timely fashion; (ii) Somerset carrying out
any FDA-mandated notifications relating to ELDEPRYL Brand; (iii) Somerset
immediately notifying CoCensys of any inquiry or other contact by the FDA or any
other governmental agency or authority with Somerset or its Affiliates relating
to ELDEPRYL Brand, except that Somerset will notify CoCensys only of such
inquiries or contacts which may materially affect CoCensys's performance of its
obligations relating to ELDEPRYL Brand under this Agreement or which may
adversely affect Somerset's
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ability to manufacture and supply ELDEPRYL Brand; and (iv) Somerset promptly
notifying CoCensys of any adverse drug reactions to ELDEPRYL Brand or any
regulatory action with respect to ELDEPRYL Brand. Somerset will make available
to CoCensys all FDA-authorized procedures and forms necessary for CoCensys to
meet its obligations hereunder.
6.2 SAMPLES OF ELDEPRYL BRAND.
(a) COSTS. Pursuant to Section 3.1(b)(vi) hereof, the Managing
Committee may determine that the CoCensys ELDEPRYL Sales Force should provide
Samples of ELDEPRYL Brand to some or all Key Prescribers. Upon such
determination, Somerset shall make Samples of ELDEPRYL Brand available to
CoCensys in such amounts and at such times as may be determined by the Managing
Committee. Samples will be shipped to the one or more locations designated by
CoCensys by written notice to Somerset. Sample distribution and accountability
will be administered by Somerset.
(b) SHRINK-WRAP. All Samples shall be encased in shrink-wrap and
packaged appropriately to comply with FDA packaging requirements.
(c) DISPOSITION UPON TERMINATION. Within thirty (30) days after the
end of the Term, or other earlier termination date, CoCensys shall return, or
otherwise dispose of in accordance with written instructions from Somerset, all
remaining Samples provided by Somerset and will provide Somerset with a
certified statement that CoCensys has utilized commercially diligent efforts to
ensure that, to the best of CoCensys's knowledge, all remaining Samples have
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been returned or otherwise properly disposed of and that CoCensys is no longer
in possession or control of any such Samples in any form or fashion.
6.3 REQUESTS FOR INFORMATION FROM KEY PRESCRIBERS. The parties
acknowledge that each may receive requests for medical or technical information,
or reports of adverse drug reactions, concerning ELDEPRYL Brand from Key
Prescribers and others. The parties agree that it shall be the obligation of
Somerset to so respond and/or report, as appropriate, and CoCensys shall ensure
that its employees and agents comply with Somerset's adverse event reporting
procedures and policies.
6.4 MARKET SURVEYS. Each party hereto may, at its discretion and expense,
undertake such market surveys, research or analyses relating to ELDEPRYL Brand
as it deems fit, and such surveys, research or analyses shall remain the
property of the party undertaking same. Each party shall make such surveys,
research and analyses specifically relating to ELDEPRYL Brand available to the
other party at no cost to that other party. Somerset may request that CoCensys
undertake market surveys, research or analyses relating to ELDEPRYL Brand and
CoCensys may, in its sole discretion, elect to undertake such surveys, research
or analyses. [ * ].
6.5 WITHDRAWAL OF ELDEPRYL BRAND. Each party agrees to notify the other
immediately of any pending or threatened event which may lead to withdrawal of
ELDEPRYL Brand from the market, including, without limitation; (i) actual or
threatened regulatory action
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by the FDA or other governmental entity, including, but not limited to, the loss
by Somerset of any right necessary to market ELDEPRYL Brand; or (ii) safety
concerns relating to ELDEPRYL Brand. The final decision as to whether to so
withdraw ELDEPRYL Brand shall be within Somerset's sole discretion. In the
event of such withdrawal of ELDEPRYL Brand, the rights of the parties shall be
governed by Section 8.3 hereof.
6.6 NON-SOLICITATION OF EMPLOYEES. During the Term, neither party will
solicit for the purpose of hiring the sales and marketing employees of the other
party.
ARTICLE 7.
COMPENSATION
7.1 DETAIL-BASED COMPENSATION.
(a) DETAIL PAYMENTS.
(i) Subject to the terms and conditions of this agreement, as
compensation for the ELDEPRYL Details to be made each
calendar quarter by the CoCensys ELDEPRYL Sales Force during
the calendar year 1997, Somerset shall pay
[ * ] ("Detail-Based Compensation") to
CoCensys. Detail-Based Compensation shall be due and
payable in four (4) equal quarterly installments of
[ * ] for each calendar quarter
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during the Term ("Quarterly Detail Payment") (unless subject
to adjustment under Sections 7.1 (a) (ii) or 7.1 (b)).
CoCensys acknowledges that, prior to the date of execution
of this Agreement it received [ * ] of the first
Quarterly Detail Payment due hereunder. The [ * ]
balance of the first Quarterly Detail Payment shall be made
within 5 days after the execution of this Agreement by both
parties, and each subsequent Quarterly Detail Payment shall
be made on April 1, 1997, July 1, 1997 and October 1, 1997.
(ii) In the event that a notice of termination is given by either
party pursuant to Section 8 hereof, then commencing on the
first day of the calendar quarter following the calendar
quarter for which the last Quarterly Detail Payment has been
made, (if the effective date of such termination has not yet
occurred) Detail-Based Compensation shall be paid, until the
effective date of termination, on a monthly basis on the
first day of each month and shall be in the amount of
[ * ] (unless subject to adjustment under
Section 7.1 (b)(ii)) ("Monthly Detail Payment"). The final
Monthly Detail Payment shall be paid on a pro-rata basis in
the event that the effective date of termination does not
occur on the final day of any calendar month.
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(b) REDUCTION IN DETAIL PAYMENTS.
(i) Commencing with the first quarter of the Term, not later
than thirty (30) days after the end of each quarter during
the Term, CoCensys will send to Somerset a statement
indicating the number of ELDEPRYL Details made by the
CoCensys ELDEPRYL Sales Force during each such completed
quarter ("Actual Quarterly Details") and shall compute the
Total Actual Details as of the last day of the completed
quarter in the manner provided in Section 1.36. In the
event that Total Actual Details as of the end of such
quarter are less than the Minimum Aggregate Quarterly
Details for such quarter as set forth in Section 1.23,
Somerset shall be entitled to a "Quarterly Detail Payment
Reduction". The Quarterly Detail Payment Reduction for such
quarter shall be equal to [ * ] where
A = [ * ] (applicable to the end of such quarter)
minus [ * ] (through the end of such quarter);
and
B = the [ * ] paid to Somerset by CoCensys, if any,
for any prior quarters of the Term.
CoCensys shall pay to Somerset such Quarterly Detail Payment
Reduction with delivery of the statement indicating the
Actual
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Quarterly Details. If payment is not received, Somerset may
deduct any Quarterly Detail Payment Reduction from any
future Quarterly Detail Payment or any other payment due to
CoCensys by Somerset.
(ii) In the event that any Monthly Detail Payment is due pursuant
To Section 7.1 (a) (ii) hereof, CoCensys shall be required,
within 30 days after the end of the month, to provide
Somerset with a statement indicating the number of ELDEPRYL
Details made by the CoCensys ELDEPRYL Sales Force during
each such month or portion thereof ("Actual Monthly
Details"). CoCensys shall include on the statement the
number of Total Actual Details completed as of the end of
such month as set forth in Section 1.36. In the event that
Total Actual Details are not equal to or greater than the
Minimum Aggregate Monthly Details for the period upon which
Total Actual Details are based, as defined in Section 1.22,
Somerset shall be entitled to a "Monthly Detail Payment
Reduction." The Monthly Detail Payment Reduction for a
given month shall be equal to [ * ], where
C = [ * ] (applicable to the end of such month)
minus [ * ] (through the end of such
month); and
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D = the [ * ] if any, for any prior
months of the Term.
CoCensys shall pay to Somerset such Monthly Detail
Payment Reduction with delivery of the statement
indicating the Actual Monthly Details. If payment is
not received, Somerset may deduct any Monthly Detail
Payment Reduction from any future Monthly Detail
Payment or any other payment due to CoCensys by
Somerset.
(c) DETAIL-BASED COMPENSATION RECONCILIATION.
(i) At the conclusion of the full Term, Somerset shall calculate
the Total Actual Details for the entire Term and Total
Detail Payment Reduction for the entire Term, if any, in the
manner provided in Sections 1.36 AND 1.37 respectively. In
the event that Total Actual Details are equal to or greater
than [ * ], then Somerset shall reimburse to
CoCensys the amount of the Total Detail Payment Reduction,
if any, previously paid by CoCensys. In the event that the
Total Actual Details are less than [ * ], Somerset
shall calculate the "Annualized Detail Payment
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Reduction" by multiplying [ * ]. If the
Annualized Detail Payment Reduction is less than the Total
Detail Payment Reduction for the entire Term,
[ * ]. If the Annualized Detail Payment
Reduction is equal to the Total Detail Payment Reduction,
then Somerset shall [ * ]. If the
Annualized Detail Payment Reduction is greater than the
Total Detail Payment Reduction, then CoCensys shall pay to
Somerset an amount equal to [ * ] The
Detail-Based Compensation Reconciliation Payment, if any,
shall be made no later than February 10, 1998.
(ii) In the event that this Agreement is terminated prior to the
conclusion of the Term, Somerset shall calculate Total
Actual Details as of the termination date and Total Detail
Payment Reduction as of the termination date in the manner
provided in Sections 1.36 AND 1.37 respectively. In
addition, "Adjusted Target Details" shall be calculated in
the following manner: Adjusted Target Details =
[ * ]. In the event that the Total Actual Details
are equal to or greater than the Adjusted Target Details,
[ * ]. In the event that the Total Actual
Details are less than the Adjusted Target Details,
[ * ]. If the
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Adjusted Annualized Detail Reduction is less than the Total
Detail Payment Reduction, [ * ]. If the
Adjusted Annualized Detail Payment Reduction is equal to the
Total Detail Payment Reductions, [ * ]. If
the Adjusted Annualized Detail Payment Reduction is greater
than the Total Detail Payment Reduction, then
[ * ]. The Adjusted Detail-Based
Compensation Reconciliation Payment shall be made no later
than February 10, 1998.
(d) Examples of Detail-Based Compensation, under different
hypothetical sales scenarios, are set forth on Exhibit 7.1 (d).
7.2 GROSS SALES-BASED COMPENSATION.
(a) No later than February 10, 1998, Somerset shall send CoCensys a
statement setting forth Actual Gross Sales of ELDEPRYL Brand and
shall pay to CoCensys, with delivery of the statement indicating
the Actual Gross Sales, the amount of compensation listed on
Exhibit 7.2 (the "Gross Sales-Based Compensation"), so long as
CoCensys' ELDEPRYL Sales Force provided services to Somerset
through December 31, 1997.
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(b) In the event that this Agreement is terminated by either party
prior to the end of the Term, then all amounts listed on Exhibit
7.2 shall be adjusted [ * ]. No later than
February 10, 1998, Somerset shall send CoCensys a statement
setting forth Actual Gross Sales through the effective date of
termination of the Agreement and shall pay to CoCensys, with
delivery of the statement indicating such Actual Gross Sales, the
amount of Gross Sales-Based Compensation listed on Exhibit 7.2 as
hereby adjusted.
(c) In the event that Somerset terminates this Agreement under
Section 8.4 below (Termination for Breach), Somerset may
[ * ]. No later than February 10, 1998
following such early termination, Somerset shall send CoCensys a
statement setting forth Actual Gross Sales, a revised Exhibit 7.2
(as adjusted under Section 7.2 (b)) and any offset permitted
under this Section 7.2 (c) and shall pay to CoCensys, with
delivery of the statement indicating such amounts, the amount of
Gross Sales-Based Compensation listed on the revised Exhibit 7.2,
as adjusted pursuant to this Section 7.2 (c).
(d) The parties acknowledge and understand that the outcome of
certain litigation, currently pending in the United States
District Court, District of Delaware entitled SOMERSET
PHARMACEUTICALS, INC. V. SHALALA, ET AL.,
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Docket No. 96-403-SLR, may materially affect the sales of ELDEPRYL
Brand without regard to the efforts of CoCensys' ELDEPRYL Sales
Force. In the event such litigation results in rescission or
suspension of FDA approval for any of the generic ELDEPRYL Brand
products or otherwise results in a significant reduction of the
competitive forces in the marketplace for ELDEPRYL Brand, then the
parties shall immediately commence good faith negotiations to amend
Exhibit 7.2 in order [ * ] so that Gross
Sales-Based Compensation continues to reflect the marketing efforts
of CoCensys and not increased sales arising from the results of
such litigation. The parties will use reasonable efforts to
complete such good faith negotiations promptly; PROVIDED, HOWEVER,
in the event the good faith negotiations described in the preceding
sentence are not completed as of February 1, 1998, Somerset shall
not be obligated to make the payment to CoCensys required by this
Section 7.2 (as adjusted pursuant to this Section 7.2 (d)) until
the parties are able to mutually agree upon revised dollar
thresholds.
7.3 ADJUSTMENTS IN THE EVENT OF CHANGES IN GOVERNMENT MANDATED DISCOUNTS
AND REBATES. Somerset represents that Total Government Discounts and Rebates
during 1996 total approximately [ * ]. In the event that
governmental actions result in a mandated increase in Total Government
Discounts and Rebates so that the Total Government Discounts and Rebates are
higher than [ * ] and Somerset makes a good faith
determination
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that such increased [ * ] is a material increase, Somerset may call
an emergency meeting of the Managing Committee, upon five (5) days written
notice, and the Managing Committee will meet to discuss the circumstances
surrounding such government mandated increase and recommend to the parties
amendments to this Agreement so that the parties will share the risks
associated with such government mandated increase. The parties will then
meet to consider the recommendations put forth by the Managing Committee and
to negotiate in good faith an amendment to this Agreement so that the parties
will share the risks associated with such government mandated increase. Such
amendment may include amendments to the [ * ].
7.4 AUDIT RIGHTS. In accordance with its standard accounting practices,
Somerset shall keep full and accurate books, records and invoices with
respect to Actual Gross Sales, and the amounts payable hereunder, for no less
than three (3) years after the end of the Term. Somerset shall permit
CoCensys to have such books and records examined by independent certified
public accountants retained by CoCensys and acceptable to Somerset, during
regular business hours and upon reasonable advance notice, but not later than
three (3) years following the rendering of any such reports, accounting and
payments and no more often than one (1) time per year. Such independent
accountants shall, pursuant to separate written contract, keep confidential
any information obtained during such examination and shall report to CoCensys
only Actual Gross Sales and the amounts which the independent accountant
believes to be due and payable hereunder. Any such information so reviewed
and any such information reported shall be considered the Proprietary
Information of Somerset. In the absence of material discrepancies (in excess
of [ * ] of the total amount due to CoCensys in respect of the
audited period)
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in any request for payment resulting from such audit, the accounting expense
shall be paid by CoCensys. If material discrepancies do result, Somerset
shall bear the accounting expense.
ARTICLE 8.
TERM; TERMINATION
8.1 RENEWAL TERMS. On or before November 1, 1997, the parties shall
meet to discuss whether the term of this Agreement shall be renewed following
the Term hereof.
8.2 TERMINATION RIGHTS. Either party may terminate this Agreement for
any reason, upon ninety (90) days advance written notice, subject to Sections
8.3 and 8.4.
8.3 TERMINATION UPON CESSATION OF SALE OF ELDEPRYL BRAND. This
Agreement may be terminated at any time without advance notice by either
party, if, pursuant to Section 6.5 hereof, ELDEPRYL Brand is withdrawn from
the market in the Territory.
8.4 TERMINATION FOR BREACH. Either party may terminate this Agreement
for material breach or failure to perform any material duties or obligations
under this Agreement by the other party, where such breach shall remain
uncured, or such failure to perform shall continue, for at least thirty (30)
days after the aggrieved party shall have given written notice of the breach
or failure to perform to the other party. If after the thirty (30) day
period for cure and/or performance such breach remains uncured or such
failure to perform continues, then the aggrieved party may, in accordance
with Section 14.1, provide written notice to the other party
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of termination of this Agreement ("Notice of Termination"). Such termination
shall be effective fifteen (15) days from receipt of said Notice of
Termination.
8.5 EFFECT OF TERMINATION. In the event this Agreement is terminated
early, Gross Sales Based Compensation shall be calculated in the manner
provided in Section 7.2(b) and Detail-Based Compensation shall be calculated
in the manner provided in Section 7.1. In the event that the effective date
of termination occurs prior to June 30, 1997, [ * ] payment
due for the first six months of the Term, based on the portion of the first
six months of 1997 during which the Agreement was in effect. In the event
that the effective date of termination occurs during the second six months of
the Term, [ * ]. Any sums which may be due to either party
by reason of its performance through the effective date of termination will
be paid by the other party within thirty (30) days of such termination.
Neither party shall have any further rights to compensation from the other
party in connection with ELDEPRYL Brand after the effective date of
termination.
8.6 TERMINATION OF THE 1996 AGREEMENT. As of the Effective Date, the
Promotion Agreement between Somerset and CoCensys effective January 4, 1996
is terminated.
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ARTICLE 9.
WARRANTIES, REPRESENTATIONS AND COVENANTS
9.1 WARRANTIES AND REPRESENTATIONS OF EACH PARTY. Each party warrants
and represents that (i) such party possesses all right, title, interest and
authority necessary to enter into this Agreement, perform its obligations
hereunder and to make the appointments set forth herein, (ii) all necessary
corporate action has been taken to enable such party to execute and deliver
this Agreement and perform its obligations hereunder, (iii) no governmental
or third party consent is required in connection with such party's execution,
delivery or performance of this Agreement, except such regulatory approvals
as may be required to manufacture, sell and distribute ELDEPRYL Brand, (iv)
this Agreement is such party's valid and binding obligation, enforceable in
accordance with its terms, (v) such party is not and will not become party to
any agreement in conflict herewith and (vi) such party will comply with all
applicable local, state and federal laws and regulations, including, but not
limited to, the Federal Food, Drug and Cosmetic Act, the Prescription Drug
Marketing Act and the Federal Anti-Kickback Statute in carrying out its
obligations pursuant to this Agreement.
9.2 WARRANTIES AND REPRESENTATIONS OF SOMERSET. Somerset warrants and
represents that it is a corporation duly organized and validly existing under
the laws of Delaware, with full power to conduct its affairs as contemplated
herein.
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9.3 WARRANTIES AND REPRESENTATIONS OF COCENSYS. CoCensys warrants and
represents that it is a corporation duly organized and validly existing under
the laws of Delaware, with full power to conduct its affairs as contemplated
herein.
ARTICLE 10.
INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
10.1 NOTICE. If either party shall learn of a claim or assertion that
the manufacture, use or sale of ELDEPRYL Brand infringes or otherwise
violates the intellectual property rights of any third party in the
Territory, or that any third party violates the intellectual property rights
of Somerset in ELDEPRYL Brand in the Territory, then the party becoming so
informed shall promptly, but in all events within ten (10) business days
thereof, notify the other party to this Agreement of the claim or assertion.
10.2 CONDUCT OF INFRINGEMENT ACTIONS. At its sole discretion, subject
to this Article 10, Somerset shall conduct all infringement actions relating
to ELDEPRYL Brand at its own expense. Should any third party violation of
the intellectual property rights of ELDEPRYL Brand have a material effect on
Actual Gross Sales, the Managing Committee may address such material effect,
as provided for in Section 3.1(b)(iii).
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ARTICLE 11.
INDEMNIFICATION
11.1 INDEMNIFICATION BY SOMERSET. Somerset shall defend, indemnify and
hold harmless CoCensys from all liability, loss, costs, judgments, amounts
paid in settlement, fines or penalties, including, but not limited to,
reasonable attorneys' fees incurred by CoCensys which (i) relate to the
manufacture, promotion, use or sale of ELDEPRYL Brand and (ii) CoCensys may
suffer or sustain as a direct result of any third party claim, charge, suit
or other action (a "Claim"), including, but not limited to Claims related to
product liability, intellectual property infringement and advertising and
promotion of ELDEPRYL Brand, except to the extent CoCensys's negligence or
intentional malfeasance in connection with its promotion, use or sale of
ELDEPRYL Brand shall have given rise to such Claim.
11.2 INDEMNIFICATION BY COCENSYS. CoCensys shall defend, indemnify and
hold Somerset harmless from all liability, loss, costs, judgments, amounts
paid in settlement, fines or penalties, including, but not limited to,
reasonable attorneys' fees incurred by Somerset which Somerset may suffer or
sustain as a direct result of any third party claim, charge, suit or other
action as a direct result of any CoCensys negligence or intentional
malfeasance in connection with its promotion, use or sale of ELDEPRYL Brand.
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11.3 INDEMNIFICATION PROCEDURE. The obligations of Somerset and CoCensys
under this Article 11 shall be subject to the following terms and conditions:
(i) The party claiming a right to indemnification shall, within
ten (10) business days after receipt of any claim, charge,
suit or other action (or within ten (10) business days after
learning of a situation that is reasonably likely to lead to
a claim, charge, suit or other action), give, in accordance
with Section 14.1, written notice to the indemnifying party,
of any such claim, charge, suit or other action received
from a third party (or a description of the situation that
is reasonably likely to lead to the same) which is governed
by the indemnity obligations of this agreement;
(ii) The indemnifying party shall conduct, at its own expense,
the defense of any and all such claims, charges, suits or
other actions by a third party;
(iii) Neither party shall settle or admit liability with respect
to any such claims, charges, suits or other actions which
could result in liability to the other party without the
prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed;
(iv) If the indemnifying party does not promptly take the steps
necessary against any such claims, charges, suits or other
actions by a third party, the party claiming indemnification
may defend against or settle such claims, charges, suits or
other actions
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provided that party may not settle such claims, charges,
suits or other actions without prior written consent of
the indemnifying party which consent shall not be
unreasonably withheld or delayed; however, the defense
and/or settlement under this Article 11 shall not act as a
waiver of rights to indemnification under this Agreement,
or any other rights or remedies of a party claiming
indemnification and shall not excuse the indemnifying party
from its obligations hereunder and all reasonable costs and
expenses incurred by the party claiming indemnification
shall be subject to indemnity by the indemnifying party;
and,
(v) Each party will offer reasonable assistance to the other
party in defending or settling the claim, charge, suit or
other action.
ARTICLE 12.
CONFIDENTIALITY
12.1 NONDISCLOSURE AND NONUSE OBLIGATIONS. During the Term, and for a
period of [ * ] after expiration or termination hereof, each party
will maintain all Proprietary Information in trust and confidence and will
not disclose any Proprietary Information to any third party or use any
Proprietary Information for any unauthorized purpose. Each party may use
such Proprietary Information only to the extent required to accomplish the
purposes of this Agreement. No Proprietary Information shall be disclosed to
any employee, agent, Affiliate or
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consultant who does not have a need for such information. To the extent that
disclosure to any third party is authorized by this Agreement, such third
party shall be bound by written obligations to hold in confidence and not
make use of such Proprietary Information for any purpose other than those
permitted by this Agreement. Each party will promptly notify the other upon
discovery of any unauthorized use or disclosure of the Proprietary
Information.
12.2 EXCEPTIONS. Proprietary Information shall not include any
information which:
(i) is now, or hereafter becomes, through no act or failure to act
on the part of the receiving party, generally known or
available to the public;
(ii) is known by the receiving party at the time of receiving such
information, as evidenced by its written records;
(iii) is hereafter furnished to the receiving party by a third party,
as a matter of right and without restriction on disclosure;
(iv) is independently developed by the receiving party without any
breach of this Article 12; or
(v) is the subject of a written permission to disclose provided by
the disclosing party.
12.3 AUTHORIZED DISCLOSURE. Notwithstanding any other provision of this
Agreement, each party may disclose Proprietary Information if such disclosure
is required (i) by an order of a court or other governmental body of the
United States or any political subdivision thereof; (ii) by law or
regulation; or (iii) to prosecute or defend litigation or otherwise establish
rights or enforce obligations under this Agreement, but only to the extent
that any such disclosure is
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necessary; provided that the disclosing party shall first have given notice to
the other party hereto, so that the other party may raise any objections to such
disclosure, shall cooperate with the other party to minimize the scope and
content of such disclosure, and, with respect to clauses (i) and (iii) of this
sentence, shall have made a reasonable effort to obtain a protective order
requiring that the Proprietary Information so disclosed be used only for the
purposes set forth in clause (i) or (iii) and, with respect to clause (ii) of
this sentence, shall have made a reasonable effort to obtain confidential
treatment for such Proprietary Information. Notwithstanding any other provision
of this Agreement, each party may disclose the terms of this Agreement, on a
confidential basis, to lenders, investment bankers and other financial
institutions of its choice solely for due diligence purposes relating to
financing the business operations of such party.
12.4 OBLIGATIONS AT END OF TERM. Each party agrees, at the request of
the other party, at the end of the Term to either (i) return to the other party
all originals and copies of the other party's Proprietary Information; or, (ii)
at the other party's option, destroy all originals and copies of the other
party's Proprietary Information and to certify in writing such destruction to
the other party.
12.5 RETENTION OF PROPRIETARY INFORMATION. Each party may maintain 1
copy of any document containing Proprietary Information in its legal department,
or with its counsel, solely for archival purposes.
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ARTICLE 13.
PUBLICITY
13.1 Subject to Section 13.2, all publicity, press releases and other
announcements relating to this Agreement or the transaction contemplated hereby
shall be reviewed in advance by, and be subject to the approval of, both
parties; PROVIDED, HOWEVER, that either party may, without the consent of the
other, (i) disclose the existence and general subject matter of this Agreement
without the other party's approval and (ii) subject to Section 12.3, disclose
the terms of this Agreement as required to comply with applicable securities
laws. Any party that determines applicable securities laws require it to file
this Agreement shall first provide the other party a copy of the redacted
version it intends to file and shall provide the other party the opportunity to
comment thereon. Notwithstanding the foregoing, the filing party will make the
final decisions regarding the version hereof to file.
13.2 Subject to Section 12.3, any party that determines applicable
securities laws require it to disclose publicly (i) non-financial information
with respect to its relationship to the other party or (ii) any aspect of the
other party's business, shall first provide the other party a copy of the
disclosure it intends to disclose and shall provide the other party the
opportunity to comment thereon. Notwithstanding the foregoing, the disclosing
party will have final decision-making authority with respect to its disclosures.
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ARTICLE 14.
MISCELLANEOUS
14.1 NOTICES. All notices required or permitted hereunder shall be given
in writing and sent by facsimile transmission, or mailed postage prepaid,
certified or registered mail, return receipt requested, or sent by a nationally
recognized express courier service, or hand-delivered at the following address:
Somerset Pharmaceuticals, Inc.
5215 West Laurel Street
Tampa, Florida 33607
Attn: Dr. Melvin Sharoky, President
Fax: (813) 282-3804
CoCensys, Inc.
213 Technology Drive
Irvine, California 92718
Attn: Office of the President
Fax: (714) 753-6161
All notices shall be deemed made upon receipt by the addressee as evidenced by
the applicable written receipt or, in the case of a facsimile, as evidenced by
the confirmation of transmission.
14.2 CAPTIONS AND SECTION REFERENCES. The titles, headings or captions
in this Agreement do not define, limit, extend, explain or describe the scope or
extent of this Agreement or any of its terms or conditions and therefore shall
not be considered in the interpretations, construction or application of this
Agreement.
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14.3 SEVERABILITY. Whenever possible, each clause, subclause, provision
or condition of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any clause, subclause,
provision or condition of this Agreement should be prohibited or invalid under
applicable law, such clause, subclause, provision or condition shall be
considered separate and severable from this Agreement to the extent of such
prohibition or invalidity without invalidating the remaining clauses,
subclauses, provisions and conditions of this Agreement, so long as the
remaining Agreement reflects the economic intentions of the parties as evidenced
by this Agreement as a whole.
14.4 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all negotiations, preliminary agreements, memoranda or letters of
proposal or intent, discussions and understandings of the parties hereto in
connection with the subject matter hereof. All discussions between the parties
have been merged into this Agreement and neither party shall be bound by any
definition, condition, understanding, representation, warranty, covenant or
provision other than as expressly stated in or contemplated by this Agreement or
as subsequently shall be set forth in writing and executed by a duly authorized
representative of the party to be bound thereby.
14.5 AMENDMENT. No amendment, change or modification of any of the
terms, provisions or conditions of this Agreement shall be effective unless made
in writing and signed on behalf of the parties hereto by their duly authorized
representatives.
48.
<PAGE>
14.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original document, but all
such separate counterparts shall constitute only one and the same Agreement.
14.7 WAIVER. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such or
other term, provision or condition of this Agreement.
14.8 FORCE MAJEURE. Neither party shall be liable hereunder to the other
party nor shall be in breach for failure to perform its obligations caused by
circumstances beyond the control of either party, including, but not limited to,
acts of God; fires; earthquakes; floods; riots; wars; civil disturbances;
sabotage; accidents; labor disputes; shortages or government actions. In the
case of any such event, the affected party shall promptly notify the other
party, and shall keep the other party informed of the efforts to resume
performance. After thirty (30) days of such inability to perform, the parties
agree to meet and in good faith discuss to proceed. In the event that the
affected party is prevented from performing its obligations pursuant to this
Section 14.8 for a period of thirty (30) additional days, the other party shall
have the right to terminate this Agreement on thirty (30) days prior written
notice, i.e. ninety (90) days from the date of such force majeure event, subject
to the provisions of Section 8.5.
14.9 ASSIGNMENT; BENEFITS AND BINDING NATURE OF AGREEMENT. This
Agreement may not be assigned by either party without the consent of the other
party, which consent shall not
49.
<PAGE>
be unreasonably withheld, except to any Affiliate or successor by merger or sale
of substantially all of its business units to which this Agreement relates.
Upon a permitted assignment, the assigning party shall promptly notify the other
party of such assignment. If CoCensys assigns this Agreement, either party may,
within thirty (30) days of the date on which notice is given pursuant to the
preceding sentence, terminate this Agreement upon ninety (90) days written
notice. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns permitted under
this Agreement.
14.10 SURVIVAL. The provisions of Sections 4.9, 6.2(c), 7.4 and 8.5 and
Articles 11, 12, and 13 shall survive, and remain in effect, after termination
or expiration of this Agreement.
14.11 NOT STRICTLY CONSTRUED AGAINST EITHER PARTY. This Agreement has
been prepared jointly and shall not be strictly construed against either party.
14.12 GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware other than those provisions
governing conflicts of law. In the event the parties are unable to resolve
disputes which go beyond the scope of the responsibilities of the Managing
Committee, or any disputes arising from matters set forth in Sections
3.1(b)(iii) and 3.1(b)(iv), each party shall be free to pursue any action at law
or equity.
50.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the day and year first above written.
SOMERSET PHARMACEUTICALS, INC. COCENSYS, INC.
By: /s/ By: /s/ Richard A. Henson
------------------------------- ----------------------------
Title: President Title: President
Somerset Pharmaceuticals CoCensys Pharma
Sales & Marketing
---------------------------- ---------------------
51.
<PAGE>
EXHIBIT 5.7
SOMERSET STANDARD SALES REPORT FORMAT
[SOMERSET LETTERHEAD]
ELDEPRYL SHIPMENTS
DATE OF SHIPMENTS
------------
BOTTLES DOLLARS
------- -------
TODAYS SHIPMENT
------------- --------------
MONTH-TO-MONTH
------------- --------------
QUARTER-TO-DATE
------------- --------------
YEAR-TO-DATE
------------- --------------
<PAGE>
EXHIBIT 7.1(d)
EXAMPLES OF CALCULATION OF
DETAIL-BASED COMPENSATION UNDER
DIFFERENT HYPOTHETICAL SCENARIOS
(1) HYPOTHETICAL #1: QUARTERLY DETAIL PAYMENT REDUCTION
[ * ]
53.
* Confidential treatment requested
<PAGE>
HYPOTHETICAL #2: MONTHLY DETAIL PAYMENT REDUCTION (E.G., AGREEMENT TERMINATES
ON 9/1/97)
[ * ]
54.
* Confidential treatment requested
<PAGE>
EXHIBIT 7.2
[ * ]
55.
* Confidential treatment requested
<PAGE>
DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (NO. 1)
BETWEEN
COCENSYS, INC.,
AND
WYETH-AYERST LABORATORIES
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate(s)" . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Agreement (No. 2)" . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "All Other Markets". . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Back-Up Compound Candidate" . . . . . . . . . . . . . . . . . . 2
1.5 "Back-Up Program". . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Back-Up Program Term" . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Beginning of [ * ]. . . . . . . . . . . . . . . . . . . 2
1.8 "Beginning of [ * ]. . . . . . . . . . . . . . . . . . . 2
1.9 "CO 2-6749". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 "CoCensys Patent Rights" . . . . . . . . . . . . . . . . . . . . 2
1.11 "Commercially Reasonable Efforts". . . . . . . . . . . . . . . . 2
1.12 "Control". . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "Co-Promotion" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Development". . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Epalon" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "FDA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Field". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 "First Commercial Sale". . . . . . . . . . . . . . . . . . . . . 3
1.19 "Fully Burdened Cost". . . . . . . . . . . . . . . . . . . . . . 3
1.20 "Good Clinical Practice" . . . . . . . . . . . . . . . . . . . . 3
1.21 "Good Laboratory Practice" . . . . . . . . . . . . . . . . . . . 3
1.22 "Good Manufacturing Practice". . . . . . . . . . . . . . . . . . 4
1.23 "Gross Margin" . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 [ * ]. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 "IND". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 "Intellectual Property Rights" . . . . . . . . . . . . . . . . . 4
1.27 "Invention". . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 "Joint Marketing Committee" or "JMC" . . . . . . . . . . . . . . 4
1.29 "Know-How" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 "Licensed Compound". . . . . . . . . . . . . . . . . . . . . . . 5
1.31 "Marketing Plan" . . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 "NDA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.33 "Net Sales". . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 "Neurologist Market" . . . . . . . . . . . . . . . . . . . . . . 6
1.35 [ * ]. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.36 "Non-Scheduled Product". . . . . . . . . . . . . . . . . . . . . 6
1.37 "Patent Rights". . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 "Phase I," . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
i.
* Confidential treatment requested
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
1.39 "Prescription Audit" . . . . . . . . . . . . . . . . . . . . . . 6
1.40 "Product". . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.41 "Promotion". . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.42 "Psychiatrist Market". . . . . . . . . . . . . . . . . . . . . . 7
1.43 "Regulatory Approval". . . . . . . . . . . . . . . . . . . . . . 7
1.44 "Scheduled Product". . . . . . . . . . . . . . . . . . . . . . . 7
1.45 "Term of Co-Promotion" . . . . . . . . . . . . . . . . . . . . . 7
1.46 "Third Party(ies)" . . . . . . . . . . . . . . . . . . . . . . . 7
1.47 "Trademark". . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.48 "USA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.49 "Wyeth-Ayerst Patent Rights" . . . . . . . . . . . . . . . . . . 7
2. DEVELOPMENT OF LICENSED COMPOUND . . . . . . . . . . . . . . . . . . . 7
2.1 General Obligations. . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Records, Reports and Information Exchange. . . . . . . . . . . . 8
2.3 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Funding of the Development . . . . . . . . . . . . . . . . . . . 8
2.5 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 8
3. BACK-UP PROGRAM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Back-Up Program Term . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Reporting and Submission of Back-Up Compound Candidates. . . . . 9
3.4 Back-Up Compound Development.. . . . . . . . . . . . . . . . . . 9
3.5 Back-Up Program Funding. . . . . . . . . . . . . . . . . . . . . 9
3.6 Partial Reimbursement of Back-Up Program Fees. . . . . . . . . . 9
3.7 Applicability of this Agreement. . . . . . . . . . . . . . . . . 10
4. INDICATIONS; EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Indications. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 No [ * ] by CoCensys [ * ] . . . . . . . . . . . 11
4.3 No [ * ] . . . . . . . . . . . . . . . . . . . . . . . . 11
5. LICENSE GRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Licenses to Wyeth-Ayerst . . . . . . . . . . . . . . . . . . . . 11
5.2 Licenses to CoCensys . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Licenses upon Expiration . . . . . . . . . . . . . . . . . . . . 12
ii.
* Confidential treatment requested
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
6. CONSIDERATION TO COCENSYS. . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Upfront Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Equity Investment. . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Method of Payment of Payments. . . . . . . . . . . . . . . . . . 13
6.5 Payments for Back-Up Compound Candidates . . . . . . . . . . . . 13
6.6 Royalties and Profit Sharing . . . . . . . . . . . . . . . . . . 13
7. CO-PROMOTION OF THE PRODUCT IN THE USA . . . . . . . . . . . . . . . . 13
7.1 Promotion and Co-Promotion Rights. . . . . . . . . . . . . . . . 13
7.2 Joint Marketing Committee. . . . . . . . . . . . . . . . . . . . 16
7.3 Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 Sales Force Expenses . . . . . . . . . . . . . . . . . . . . . . 18
7.5 Determination and Allocation of Gross Margin and Royalties . . . 18
7.6 Adjustment to Royalties. . . . . . . . . . . . . . . . . . . . . 19
7.7 Prescription Audit.. . . . . . . . . . . . . . . . . . . . . . . 20
7.8 Payment and Reporting. . . . . . . . . . . . . . . . . . . . . . 20
7.9 Promotional and Advertising Materials. . . . . . . . . . . . . . 21
7.10 Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.11 No Delegation. . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.12 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.13 Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.14 Samples. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.15 Completion of Sales. . . . . . . . . . . . . . . . . . . . . . . 22
7.16 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.17 Exchange of Marketing Information. . . . . . . . . . . . . . . . 22
8. ACCOUNTS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Audits.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Sales by Sublicensees. . . . . . . . . . . . . . . . . . . . . . 23
8.4 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9. TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10. MANUFACTURING AND DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 23
10.1 Primary Manufacture. . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Second Source. . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.3 Exchange of Information. . . . . . . . . . . . . . . . . . . . . 24
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.4 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. PROSECUTION, MAINTENANCE AND INFRINGEMENT OF INTELLECTUAL PROPERTY
RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Patentable Inventions. . . . . . . . . . . . . . . . . . . . . . 24
11.2 Prosecution and Maintenance of Patent Rights . . . . . . . . . . 25
11.3 Patent Extensions. . . . . . . . . . . . . . . . . . . . . . . . 25
11.4 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.5 Infringement of Intellectual Property Rights . . . . . . . . . . 25
11.6 Infringement of Third Party Patent Rights. . . . . . . . . . . . 27
12. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.1 General Conditions of Expiration and Termination . . . . . . . . 28
13.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.3 Termination for Breach . . . . . . . . . . . . . . . . . . . . . 29
13.4 Breach by CoCensys . . . . . . . . . . . . . . . . . . . . . . . 29
13.5 No Limit on Remedies . . . . . . . . . . . . . . . . . . . . . . 29
13.6 Unilateral Termination by Wyeth-Ayerst . . . . . . . . . . . . . 29
13.7 Determination of Co-Promotion Rights upon Change in Control. . . 30
14. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.1 Assignment to Affiliates . . . . . . . . . . . . . . . . . . . . 30
14.2 Other Permitted Assignment . . . . . . . . . . . . . . . . . . . 30
14.3 Binding Nature of Assignment . . . . . . . . . . . . . . . . . . 31
15. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.1 Cross Indemnification. . . . . . . . . . . . . . . . . . . . . . 31
15.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
16. WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 32
16.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
16.2 USC/Rockefeller License. . . . . . . . . . . . . . . . . . . . . 32
17. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 32
17.1 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
17.2 Exceptions.. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
17.3 Permitted Disclosures. . . . . . . . . . . . . . . . . . . . . . 33
iv.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
17.4 Disclosure of Agreement. . . . . . . . . . . . . . . . . . . . . 33
17.5 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
17.6 Publication. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
18. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
18.1 No Waiver of Contractual Rights. . . . . . . . . . . . . . . . . 34
18.2 Execution and Amendments . . . . . . . . . . . . . . . . . . . . 34
18.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 34
18.4 Relationship between the Parties . . . . . . . . . . . . . . . . 34
18.5 Correspondence and Notices . . . . . . . . . . . . . . . . . . . 35
18.6 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . 35
18.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 36
v.
<PAGE>
DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (NO. 1)
THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (NO. 1) (the "Agreement")
is entered into as of the 12th day of May, 1997 (the "Effective Date"), by and
between COCENSYS, INC., a company incorporated under the laws of the State of
Delaware, with its principal place of business at 213 Technology Drive, Irvine,
California 92618, USA ("CoCensys"), and AMERICAN HOME PRODUCTS CORPORATION,
acting through its WYETH-AYERST LABORATORIES DIVISION, a company incorporated
under the laws of the State of Delaware, with its principal place of business at
555 Lancaster Avenue, St. Davids, Pennsylvania 19087, USA ("Wyeth-Ayerst").
Both CoCensys and Wyeth-Ayerst are referred to individually as a "Party" and
collectively as the "Parties."
WHEREAS, CoCensys has discovered, has rights to and is developing that
certain compound CO 2-6749 (as defined in Article 1.9 below); and
WHEREAS, Wyeth-Ayerst would like to obtain the United States rights to
develop and commercialize CO 2-6749 or a back-up compound therefor; and
WHEREAS, CoCensys and Wyeth-Ayerst wish to co-promote CO 2-6749 or a
back-up compound in the United States;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
premises, covenants and conditions contained in this Agreement, the Parties
agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the terms hereunder shall have the
meanings as defined below:
1.1 "AFFILIATE(S)" shall mean, in the case of either CoCensys or
Wyeth-Ayerst, any corporation, joint venture, or other business
entity which directly or indirectly controls, is controlled by, or
is under common control with that Party. "Control," as used in this
Article 1.1, shall mean having the power to direct, or cause the
direction of, the management and policies of an entity, whether
through ownership of voting securities, by contract or otherwise.
1.2 "AGREEMENT (NO. 2)" shall mean that certain Development and
Commercialization Agreement (No.2) between the Parties relating to
development and commercialization of CO 2-6749 or a back-up compound
therefore in all countries and territories in the world except the
USA, entered into on even date with the Effective Date.
1.
<PAGE>
1.3 "ALL OTHER MARKETS" shall mean all physicians, other than
neurologists and psychiatrists, prescribing pharmaceutical products
in the USA during the Term of Co-Promotion, including without
limitation, all general practitioners.
1.4 "BACK-UP COMPOUND CANDIDATE" shall mean any Epalon meeting the
criteria set forth in Exhibit A as determined by CoCensys and
submitted by CoCensys to Wyeth-Ayerst as a potential substitute for
CO 2-6749. "Back-Up Compound Candidate" shall include any prodrugs,
salt forms and other biologically active isomers or enantiomers of
such CoCensys Epalon.
1.5 "BACK-UP PROGRAM" shall mean the program for identification of
Back-Up Compound Candidates as conducted by CoCensys pursuant to
Article 3.
1.6 "BACK-UP PROGRAM TERM" shall mean the period commencing on the
Effective Date and terminating on the [ * ] anniversary
thereof, unless extended pursuant to Article 3.2.
1.7 "BEGINNING OF [ * ] shall mean the date upon which the
[ * ] for a Product.
1.8 "BEGINNING OF [ * ] shall mean the date upon which the
[ * ] for a Product.
1.9 "CO 2-6749" shall mean the Epalon [ * ] and any prodrugs,
including specifically CO 6-0549, salt forms and other biologically
active isomers or enantiomers palon. A diagram of the chemical
structure of each of CO 2-6749 and CO 6-0549 is set forth on Exhibit
B.
1.10 "COCENSYS PATENT RIGHTS" shall mean all Patent Rights owned or
Controlled by CoCensys. A list of the CoCensys Patent Rights
existing as of the Effective Date is set out in Exhibit C hereto.
1.11 "COMMERCIALLY REASONABLE EFFORTS" shall mean efforts and resources
normally used by a party for a compound owned by it or to which it
has rights, which is of similar market potential at a similar stage
in its product life, taking into account the competitiveness of the
marketplace, the proprietary position of the compound, the
regulatory structure involved, the profitability of the applicable
products, and other relevant factors.
1.12 "CONTROL" shall mean licensed with the right to grant sublicenses
without violating the terms of any Third Party agreement.
2.
* Confidential treatment requested
<PAGE>
1.13 "CO-PROMOTION" shall mean the promotion, marketing and selling of
the Product, including, in particular, the detailing of the Product
to physicians, jointly through the sales forces of CoCensys and
Wyeth-Ayerst in the USA under the Trademark and Regulatory Approval
held by Wyeth-Ayerst and Wyeth-Ayerst's distribution system.
1.14 "DEVELOPMENT" shall mean the pre-clinical development of a Licensed
Compound and clinical development for use in the Field of a Product
through and including Regulatory Approval.
1.15 "EPALON" shall mean the class of neuroactive steroid compounds that
interact with GABA(A) receptor complexes.
1.16 "FDA" shall mean the Food and Drug Administration of the USA.
1.17 "FIELD" shall mean the treatment in humans of
[ * ] in the Diagnostic and Statistical Manual of
Mental Disorders, Fourth Edition ("DSM-IV"). Also, specifically to
be included under [ * ] defined by research
criteria in DSM-IV. It is understood by the Parties that the above-
named disorders may d differently in future editions of the
Diagnostic and Statistical Manual of Mental Disorders, but that,
for purposes of this Agreement, the definition of Field shall
always be with reference to those diseases which fall within the
definition of the above-named disorders in the edition of DSM-IV
which is current as of the Effective Date. Expressly excluded from
the Field are [ * ].
1.18 "FIRST COMMERCIAL SALE" shall mean the first sale of a Product in
the USA after the Product has been granted Regulatory Approval by
the competent authorities in the USA.
1.19 "FULLY BURDENED COST" shall mean the sum of the costs set forth in
Exhibit D, to the extent allocable to Product.
1.20 "GOOD CLINICAL PRACTICE" or "GCP" shall mean the then current
standards for clinical trials for pharmaceuticals, as set forth in
the United States Federal Food, Drug and Cosmetics Act and
applicable regulations promulgated thereunder, as amended from time
to time.
1.21 "GOOD LABORATORY PRACTICE" or "GLP" shall mean the then current
standards for laboratory activities for pharmaceuticals, as set
forth in the United States Federal Food, Drug and Cosmetics Act and
applicable regulations promulgated thereunder, as amended from time
to time.
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1.22 "GOOD MANUFACTURING PRACTICE" or "GMP" shall mean the current
standards for the manufacture of pharmaceuticals, as set forth in
the United States Federal Food, Drug and Cosmetics Act and
applicable regulations promulgated hereunder, as amended from time
to time.
1.23 "GROSS MARGIN" shall mean Net Sales in either the Neurologist
Market, the Psychiatrist Market and/or All Other Markets, as the
case may be, minus the Fully Burdened Cost for such Net Sales.
1.24 [ * ] shall mean the development milestone
[ * ].
1.25 "IND" shall mean an Investigational New Drug Application as defined
in the United States Federal Food, Drug and Cosmetics Act and
applicable regulations promulgated thereunder, as amended from time
to time.
1.26 "INTELLECTUAL PROPERTY RIGHTS" shall mean all Patent Rights,
trademarks, copyrights, know-how and/or trade secrets which are
owned or Controlled by one Party hereto (with the right to license)
or jointly by the Parties, with regard to the development,
manufacture, importing, use, marketing and/or sale of the Product.
1.27 "INVENTION" shall mean an invention conceived in the course of the
performance of and within the scope of this Agreement.
1.28 "JOINT MARKETING COMMITTEE" or "JMC" shall mean the committee
appointed by the Parties as set forth in Article 7.2.
1.29 "KNOW-HOW" shall mean all know-how, processes, information and data
including any copyright relating thereto owned or controlled by
either Party (with the right to have or disclose) as of the
Effective Date or acquired during the term of this Agreement
relating to:
(a) the Licensed Compound;
(b) any Back-Up Compound;
(c) any Product containing (a) or (b);
(d) methods of making any of (a), (b) or (c);
(e) any component of (c);
(f) any intermediate in the making of any of (a), (b), (c), or
(e);
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(G) any method of using any of (a), (b), (c), (e), or (f); and/or
(H) any use of (a), (b) or (c).
The term "Know-How," however, shall not include any know-how,
processes, information and data which is, as of the Effective Date or
becomes later on, generally available to the public.
1.30 "LICENSED COMPOUND" shall mean CO 2-6749 and any Back-Up Compound
Candidate.
1.31 "MARKETING PLAN" shall have the meaning set forth in Article 7.3.
1.32 "NDA" shall mean a New Drug Application, as defined in the United
States Federal Food Drug and Cosmetic Act and applicable regulations
promulgated thereunder as amended from time to time.
1.33 "NET SALES" shall mean proceeds from sales of the Product by either
Party, its Affiliates or sublicensees, as appropriate, to Third
Parties, less the sum of (a) and (b) where (a) is a provision,
determined under generally accepted accounting principles in the
United States, for [ * ] and (b) is [ *
]
Sales of Product by and between a Party and its Affiliates are not
sales to Third Parties and shall be excluded from Net Sales
calculations for all purposes.
1.34 "NEUROLOGIST MARKET" shall mean all neurologists prescribing
pharmaceutical products in the USA during the Term of Co-Promotion.
1.35 [ * ] shall have the meaning set forth in Article 4.1.
1.36 "NON-SCHEDULED PRODUCT" shall mean a Product that has achieved
Regulatory Approval in the USA as either a "Schedule V" designation,
as defined in 21 CFR Part 1308, or no scheduling designation under 21
CFR Part 1308.
1.37 "PATENT RIGHTS" shall mean all patents or patent applications, in the
USA, and all divisionals, continuations, continuations-in-part,
reissues, extensions, supplementary protection certificates thereof,
existing as of the Effective Date or filed or issuing during the term
of this Agreement, at least one claim of which covers:
(A) the Licensed Compound;
(B) any Back-Up Compound;
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(C) any Product containing (a) or (b);
(D) methods of making any of (a), (b) or (c);
(E) any component of (c);
(F) any intermediate in the making of any of (a), (b), (c) or (e);
(G) any method of using any of (a), (b), (c), (e), or (f); and/or
(H) any use of (a), (b) or (c).
1.38 "PHASE I," "PHASE II," AND "PHASE III" shall mean the phases of the
clinical development of pharmaceuticals as defined in the United
States Federal Food, Drug and Cosmetics Act and/or applicable
regulations promulgated thereunder, as amended from time to time, or
any comparable foreign regulations.
1.39 "PRESCRIPTION AUDIT" shall mean an audit conducted pursuant to
Article 7.7.
1.40 "PRODUCT" shall mean any pharmaceutical product containing a Licensed
Compound in any formulation or mode of administration.
1.41 "PROMOTION" shall mean, as applied to a Party, the promotion,
marketing and selling of the Product, including in particular, the
detailing of the Product to physicians, solely by that Party through
its sales force in the USA under the Trademark and the Regulatory
Approval held by Wyeth-Ayerst, and Wyeth-Ayerst's distribution system.
1.42 "PSYCHIATRIST MARKET" shall mean all psychiatrists prescribing
pharmaceutical products in the USA during the Term of Co-Promotion.
1.43 "REGULATORY APPROVAL" shall mean all authorizations by the competent
authorities which are required for the regular marketing, promotion,
pricing and sale of the Product in a given country or regulatory
jurisdiction.
1.44 "SCHEDULED PRODUCT" shall mean a Product that has received Regulatory
Approval in the USA as a Schedule I, II, III or IV product, as defined
in 21 CFR Part 1308.
1.45 "TERM OF CO-PROMOTION" shall mean the period extending from First
Commercial Sale in the USA until the later of (i) expiration of the
last to expire patent within the Patent Rights necessary to make, use,
import, offer for sale or sell the Product in the USA, or (ii) fifteen
(15) years from First Commercial Sale in the USA.
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1.46 "THIRD PARTY(IES)" shall mean any person(s) or entity(ies) other than
CoCensys, Wyeth-Ayerst or their Affiliates.
1.47 "TRADEMARK" shall mean the trademark under which the Product shall be
marketed as set out in Article 9.
1.48 "USA" shall mean the United States of America, its territories and
possessions and the Commonwealth of Puerto Rico.
1.49 "WYETH-AYERST PATENT RIGHTS" shall mean all Patent Rights owned or
Controlled by Wyeth-Ayerst. A list of the Wyeth-Ayerst Patent Rights
existing as of the Effective Date is set out in Exhibit E hereto.
2. DEVELOPMENT OF LICENSED COMPOUND.
2.1 GENERAL OBLIGATIONS. Wyeth-Ayerst shall be responsible for the
design, implementation and funding of all Development. Wyeth-Ayerst
agrees to use Commercially Reasonable Efforts to conduct the
Development with the intent of obtaining Regulatory Approval in the
USA and bringing a Product in the Field to the market as soon as
reasonably practicable. Wyeth-Ayerst shall ensure that the Development
is carried out adhering to Wyeth-Ayerst's ethical and safety
standards. Wyeth-Ayerst shall have the right to subcontract with
third parties any of its Development obligations hereunder, without
the consent or approval of CoCensys. In the event Wyeth-Ayerst
intends to exercise its right to subcontract one or more of its
Development obligations, it shall notify CoCensys of such intent and
CoCensys shall have the right to submit one or more proposals to
Wyeth-Ayerst to perform such one or more parts of such Development
activities. Wyeth-Ayerst shall consider all such proposals submitted
by CoCensys on an equal basis with proposals submitted by Third Party
subcontractors for the same Development tasks.
2.2 RECORDS, REPORTS AND INFORMATION EXCHANGE.
2.2.1 TECHNOLOGY AND INFORMATION TRANSFER. CoCensys will provide to
Wyeth-Ayerst all Know-How as Wyeth-Ayerst deems necessary to
carry out the Development and [ * ] of the Product and
to obtain Regulatory Approval. All information transferred,
provided or exchanged under this Article 2.2.1 will be subject
to the confidentiality requirements set forth in Article 17.
2.2.2 RECORD KEEPING. Wyeth-Ayerst will maintain records in
sufficient detail and in good scientific manner appropriate
for Regulatory Approval and patent purposes.
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2.2.3 COMMUNICATION REGARDING THE DEVELOPMENT PROGRESS. A project
team shall be appointed by Wyeth-Ayerst and representatives
thereof shall meet with representatives of CoCensys on a
regular basis (but no less often than every six (6) months) to
keep CoCensys apprised of the Development progress and to
bring to its attention any problems or issues which may have
an impact on the timing of the Development (e.g., regulatory
submissions).
2.3 COMPLIANCE. Wyeth-Ayerst shall comply with all GLP, GCP and GMP in
the conduct of the Development.
2.4 FUNDING OF THE DEVELOPMENT. Wyeth-Ayerst shall be responsible for one
hundred percent (100%) of all costs, fees and expenses associated with
the Development and the obtaining of all Regulatory Approvals.
2.5 REGULATORY APPROVALS. [ * ] shall file all regulatory
dossiers under its name. [ * ] shall own all Regulatory
Approvals. [ * ] shall have the right of reference to the
extent necessary to exercise its rights or to meet its obligations
hereunder. [ * ] shall be responsible for all communications
with regulatory agencies, subject to its obligation to keep the Joint
Marketing Committee informed.
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3. BACK-UP PROGRAM.
3.1 PURPOSE. During the Back-Up Program Term, CoCensys shall use
Commercially Reasonable Efforts to conduct research, and identify,
characterize and submit to Wyeth-Ayerst Back-Up Compound Candidates.
3.2 BACK-UP PROGRAM TERM. The term of the Back-Up Program shall commence
on the Effective Date and terminate on the [ * ] anniversary
thereof. Such term may be extended for [ * ] upon
120 days prior written notice to [ * ]. Any Epalons in the
process of being evaluated for meeting the criteria set forth in
Exhibit A under the Back-Up Program as of the termination of the
Back-Up Program shall be submitted to Wyeth-Ayerst promptly thereafter
to the extent they meet the criteria set forth on Exhibit A. At the
end of the Back-Up Program Term, Wyeth-Ayerst shall have rights only
to those Back-Up Compound Candidates [ * ] or
thereafter pursuant to the third sentence of this Article 3.2.
3.3 REPORTING AND SUBMISSION OF BACK-UP COMPOUND CANDIDATES. Within
thirty (30) days of the Effective Date, and at least every six (6)
months during the Back-Up Program Term, CoCensys shall provide
Wyeth-Ayerst with a report on the status of the Back-Up Program and
shall submit on an on-going basis all Back-Up Compound Candidates.
3.4 BACK-UP COMPOUND DEVELOPMENT. Wyeth-Ayerst may, at any time and upon
written notice to CoCensys, (i) elect to [ * ].
3.5 BACK-UP PROGRAM FUNDING. Wyeth-Ayerst shall fund the Back-Up Program
at the level of Three Million Dollars ($3,000,000) annually, in
quarterly installments, until the end of the Back-Up Program Term,
with the first payment of Seven Hundred Fifty Thousand Dollars
($750,000) due upon the execution of this Agreement, and the next
quarter's payment due on the first quarter anniversary thereof.
3.6 PARTIAL REIMBURSEMENT OF BACK-UP PROGRAM FEES. If CO 2-6749 fails to
meet Wyeth-Ayerst's criteria for [ * ], and if at such time,
no Back-Up Compound Candidate has been submitted to Wyeth-Ayerst which
Wyeth-Ayerst agrees meets the criteria set forth in Exhibit A, then
Wyeth-Ayerst shall have the right to so notify CoCensys and CoCensys
will reimburse Wyeth-Ayerst fifty percent (50%) of the funds paid for
the Back-Up Program to CoCensys as of the date of such notification
and the Back-Up Program shall immediately terminate. Such
reimbursement shall be due within thirty (30) days of receipt of such
notice, and, at CoCensys' option, shall be in the form either of cash
or of CoCensys Common Stock. If reimbursement is to be in CoCensys
Common Stock,
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CoCensys will issue to Wyeth-Ayerst that number of shares of CoCensys
Common Stock which, when multiplied by the Market Price equals the
amount of such reimbursement. For purposes of this Article 3.6,
"Market Price" shall mean the average closing price per share of
CoCensys Common Stock for twenty (20) trading days prior to the date
of notification of such reimbursement.
3.7 APPLICABILITY OF THIS AGREEMENT. Unless otherwise provided, all of
the Parties' rights and obligations under this Agreement, including
those regarding the development, manufacture, distribution, marketing,
sale, promotion, profit-sharing and royalties of CO 2-6749 and the
Product are applicable to any Back-Up Compound Candidate either
replacing CO 2-6749 or otherwise developed in the Field. The
provisions herein regarding CO 2-6749 and the Product shall apply to
such Back-Up Compound Candidate MUTATIS MUTANDIS.
4. INDICATIONS; EXCLUSIVITY.
4.1 INDICATIONS. Wyeth-Ayerst shall have the right to conduct Development
with respect to any Licensed Compound. Wyeth-Ayerst [ *
] covenants that it shall not conduct clinical trials of any
Licensed Compound for [ * ] in the USA except as provided
under this Article 4.1. If Wyeth-Ayerst discovers or determines that
any Licensed Compound may have efficacy in the treatment of [ *
] and if Wyeth-Ayerst desires to pursue clinical trials of such
Licensed Compound for [ * ] it will promptly notify CoCensys
in writing and disclose to CoCensys its rationale therefor.
Wyeth-Ayerst shall have the right to pursue such clinical trials for [
* ] and market and sell such Licensed Compound as though it
were a Product developed and sold for [ * ] under this
Agreement, subject to the Parties negotiation of terms and conditions,
including royalty rates, whether and on what terms such Licensed
Compound will be Co-Promoted by the Parties, and other appropriate
payment and other terms. Following such negotiation of such terms and
conditions the Parties shall either enter into a separate agreement or
amend this Agreement to so provide for such terms and conditions. In
the event the Parties are unable to come to agreement as to the
appropriate terms and conditions for the development and
commercialization of such Licensed Compound for [ * ] by
Wyeth-Ayerst, the matter shall be referred to the Chief Executive
Officer of CoCensys and the President of Wyeth-Ayerst Laboratories, an
Affiliate of Wyeth-Ayerst, for good faith resolution, for a period of
[ * ]. If such matter is not resolved by the end of such [
* ] period, the Parties shall be [ * ].
Notwithstanding the
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foregoing, it is expressly understood and agreed that [ * ] as
used in this Agreement shall not include [ * ].
4.2 NO [ * ] BY COCENSYS [ * ]. During the term of this
Agreement, CoCensys shall not [ * ].
4.3 NO [ * ]. During the term of this Agreement,
CoCensys will not [ * ] except under the terms of
this Agreement, or as otherwise agreed to by Wyeth-Ayerst.
5. LICENSE GRANTS.
5.1 LICENSES TO WYETH-AYERST. Subject to the other provisions of this
Agreement, CoCensys hereby grants to Wyeth-Ayerst:
5.1.1 A license in the USA, under its Intellectual Property Rights,
to develop, manufacture and have manufactured, import, use,
market, offer for sale and sell Products, in the Field, and,
subject to Article 4.1, for any New Indication. Such license
shall be exclusive except as to CoCensys, who shall have the
right to Promote and Co-Promote the Product in the Field, or
outside the Field (where agreed by the Parties pursuant to
Article 4.1), in the USA as and to the extent set forth in
this Agreement.
5.1.2 The licenses granted in Article 5.1.1 shall not be
sublicensable by Wyeth-Ayerst in the USA without the consent
of CoCensys, such consent not to be unreasonably withheld,
except to Affiliates of Wyeth-Ayerst, and only for so long as
such Affiliates remain Affiliates.
5.1.3 Unless otherwise provided in this Agreement, Wyeth-Ayerst
covenants that it shall not, nor shall it cause any Affiliate
to, use or practice directly or indirectly any CoCensys
Know-How, and, until expiration thereof, any CoCensys Patent
Rights for any purposes other than the development,
manufacture, importation, use, marketing, offer for sale or
sale of the Product.
5.2 LICENSES TO COCENSYS. Subject to the other provisions of this
Agreement, Wyeth-Ayerst hereby grants to CoCensys:
5.2.1 A non-exclusive license to practice and use Wyeth-Ayerst's
Intellectual Property Rights to the extent needed to Promote
and Co-Promote the Product in the Field in the USA under this
Agreement and otherwise comply with its obligations under this
Agreement;
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5.2.2 The license granted in Article 5.2.1 shall not be
sublicensable by CoCensys without the consent of Wyeth-Ayerst,
such consent not to be unreasonably withheld, except to
Affiliates of CoCensys, and only for so long as such
Affiliates remain Affiliates.
5.2.3 Unless otherwise provided in this Agreement, CoCensys
covenants that it shall not, nor shall it cause any Affiliate
to, use or practice directly or indirectly any Wyeth-Ayerst
Know-How, and until the expiration thereof, any Wyeth-Ayerst
Patent Rights for any purposes other than the marketing,
promotion and offering for sale of the Product as provided in
this Agreement.
5.3 LICENSES UPON EXPIRATION. Upon expiration of the Term of
Co-Promotion, and provided all sums owing to CoCensys have been paid,
Wyeth-Ayerst shall have a [ * ] where agreed under
Article 4.1, under any remaining CoCensys Intellectual Property
Rights.
6. CONSIDERATION TO COCENSYS.
6.1 UPFRONT FEE. In consideration for the efforts expended by CoCensys
prior to the Effective Date and its ongoing assistance with respect to
the identification and development of CO 2-6749, Wyeth-Ayerst shall
pay to CoCensys, simultaneous with the execution of this Agreement,
Five Million Dollars US (US $5,000,000).
6.2 EQUITY INVESTMENT. Simultaneous with the execution of this Agreement,
Wyeth-Ayerst shall enter into a Preferred Stock Purchase Agreement
with CoCensys, in substantially the form attached hereto as Exhibit F,
pursuant to which Wyeth-Ayerst shall invest a total amount of Five
Million Dollars US (US $5,000,000) in convertible preferred capital
stock of CoCensys.
6.3 PAYMENTS. In further consideration of CoCensys' continuing assistance
in research and development of the Product, Wyeth-Ayerst shall pay to
CoCensys the following amounts at the time of the following
achievements with respect to the Product:
6.3.1 [ * ] Upon [ * ] under
this Agreement or Agreement (No. 2), Wyeth-Ayerst shall make
to CoCensys a non-refundable payment of [ * ].
6.3.2 [ * ] Upon [ * ] Wyeth-Ayerst shall
promptly notify CoCensys in writing of such determination and
shall make to CoCensys a non-refundable payment of [ * ].
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6.3.3 [ * ]. Upon the [ * ] Wyeth-Ayerst
shall make to CoCensys a non-refundable payment of [
* ].
6.3.4 [ * ]. Upon [ * ] for the Product,
Wyeth-Ayerst shall make to CoCensys a non-refundable payment
of [ * ].
6.3.5 [ * ]. Upon [ * ] Wyeth-Ayerst
shall make to CoCensys a non-refundable payment of [ *
] if the Product is a [ * ] Product or [ * ]
if the Product is a [ * ] Product.
6.4 METHOD OF PAYMENT OF PAYMENTS. All payments shall be made by
Wyeth-Ayerst to CoCensys by way of wire transfer to CoCensys within
thirty (30) days from the date corresponding to the event triggering
the milestone payment.
6.5 PAYMENTS FOR BACK-UP COMPOUND CANDIDATES. Each payment payable
pursuant to this Article 6 shall [ * ] be payable [ *
] for the Product [ * ].
6.6 ROYALTIES AND PROFIT SHARING. Wyeth-Ayerst shall, in addition to the
payments set forth above, also pay to CoCensys royalties and such
other amounts as set forth in Article 7.
7. CO-PROMOTION OF THE PRODUCT IN THE USA.
7.1 PROMOTION AND CO-PROMOTION RIGHTS.
7.1.1 COCENSYS' RIGHTS TO PROMOTE AND CO-PROMOTE. With respect to
the commercialization of the Product in the USA,
notwithstanding the exclusive rights granted to Wyeth-Ayerst,
CoCensys shall have: (i) the right to Promote the Product in
the Neurologist Market, and (ii) the right to Co-Promote the
Product in the Psychiatrist Market during the Term of
Co-Promotion. The Parties agree and understand that all other
rights to Promote, market and otherwise commercialize the
Product shall reside with Wyeth-Ayerst, including in
particular, the right to Promote the Product in All Other
Markets.
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7.1.2 CONDUCT OF PROMOTION AND CO-PROMOTION. CoCensys and Wyeth-Ayerst
shall each use Commercially Reasonable Efforts to Promote and
Co-Promote the Product pursuant to the terms and conditions
hereof. The Joint Marketing Committee shall oversee and
implement all such Promotion and Co-Promotion activities, based
on the principle of maximizing profits from sales of the Product
in the USA during the Term of Co-Promotion. Each Party shall
cause its sales force, and all other employees and approved
agents and representatives, to comply with all applicable laws,
regulations and guidelines in connection with the Co-Promotion of
the Product, including the Prescription Drug Marketing Act and
the Federal Anti-Kickback Statute.
7.1.3 ELECTION OF CO-PROMOTION RIGHT. CoCensys shall provide
Wyeth-Ayerst written notice prior to [ * ] for the
Product as to whether CoCensys elects to exercise its right to
Promote and Co-Promote the Product in the USA. If CoCensys
elects not to so participate, Wyeth-Ayerst shall have the
exclusive right to commercialize, market, Promote and sell the
Product in the USA, subject to the payment to CoCensys of a
running royalty on Net Sales in the USA at the rates set forth in
Article 7.1.5.
7.1.4 TERMINATION OF RIGHTS BY COCENSYS. Notwithstanding an election
by CoCensys to Promote and Co-Promote the Product, CoCensys may
elect to forego its right to Promote and Co-Promote the Product
if [ * ] upon [ * ] months prior
written notice to Wyeth-Ayerst.
7.1.5 ROYALTIES IN THE EVENT COCENSYS DOES NOT PROMOTE AND CO-PROMOTE.
In the event (i) CoCensys elects not to Promote and Co-Promote
the Product pursuant to Article 7.1.3, (ii) CoCensys elects to
cease to Promote and Co-Promote the Product pursuant to Article
7.1.4, or (iii) CoCensys's rights to Promote and Co-Promote the
Product are terminated pursuant to Article 13.4 or Article
13.7.1, Wyeth-Ayerst shall have the exclusive right to market,
sell and Promote the Product in the USA and CoCensys shall
receive a running royalty on Net Sales in the USA until the end
of the Term of Co-Promotion as follows:
(a) [ * ] PRODUCT ROYALTY. If the Product is a
[ * ] Product, Wyeth-Ayerst shall pay to
CoCensys the following running marginal royalty:
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(i) For annual Net Sales of all [ * ] Products
which are less than or equal to [ * ]
million, [ * ] of such Net Sales per year;
and
(ii) For annual Net Sales of all [ * ] Products
which are more than [ * ] million but less
than or equal to [ * ] million,
[ * ] of such Net Sales per year; and
(iii) For annual Net Sales of all [ * ] Products
which are more than [ * ] million,
[ * ] of such Net Sales per year.
(b) [ * ] PRODUCT ROYALTY. If the Product is a
[ * ] Product, Wyeth-Ayerst shall pay to CoCensys
the following running marginal royalty:
(i) For annual Net Sales of all [ * ] Products
which are less than or equal to [ * ]
million, [ * ] of such Net Sales per year;
and
(ii) For annual Net Sales of all [ * ] Products
which are more than [ * ] million but less
than or equal to [ * ] million, [ *
] of such Net Sales per year; and
(iii) For annual Net Sales of all [ * ] Products
which are more than [ * ] million, [ *
] of such Net Sales per year.
7.1.6 TERMINATION OF RIGHTS BY WYETH-AYERST. Wyeth-Ayerst may elect to
forego its right to Promote and Co-Promote the Product at any
time following [ * ] months prior written notice to
CoCensys, in
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which case CoCensys shall obtain the exclusive, subject to
Wyeth-Ayerst's retained right to manufacture Product in the USA
for sale outside the USA right (with the right to sublicense) to
manufacture, have manufactured, use, market and sell the Product
in the USA, and Wyeth-Ayerst shall receive a running royalty on
Net Sales in the USA until the end of the Term of Co-Promotion as
follows:
(a) [ * ] PRODUCT ROYALTY. If the Product is a
[ * ] Product, CoCensys shall pay to Wyeth-
Ayerst the following running marginal royalty:
(i) For annual Net Sales of all [ * ]
Products which are less than or equal to
[ * ] million, [ * ] of such
Net Sales per year; and
(ii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million but less than or equal to
[ * ] million, [ * ] of such
Net Sales per year; and
(iii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million, [ * ] of such Net Sales per
year.
(b) [ * ] PRODUCT ROYALTY. If the Product is a
[ * ] Product, CoCensys shall pay to Wyeth-
Ayerst the following running marginal royalty:
(i) For annual Net Sales of all [ * ]
Products which are less than or equal to
[ * ] million, [ * ] of such
Net Sales per year; and
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(ii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million but less than or equal to [ * ]
million, [ * ] of such Net Sales per
year; and
(iii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million, [ * ] of such Net Sales per
year.
In the event Wyeth-Ayerst makes the election set forth in this
Article 7.1.6, Wyeth-Ayerst shall [ * ].
7.1.7 NO REINSTATEMENT. A Party's rights to Promote or Co-Promote the
Product may not be reinstated after delivery of a notice of early
termination thereof.
7.2 JOINT MARKETING COMMITTEE. The Parties agree that the Promotion and
Co-Promotion will be managed by a Joint Marketing Committee (the "JMC").
7.2.1 COMPOSITION. No later than the Beginning of Phase III for the
Product, each of the Parties will appoint [ * ]
representatives to the JMC. The chairperson of the JMC will be
[ * ]. A Party may change any of its representatives at
any time by giving written notice to the other Party.
7.2.2 RESPONSIBILITIES. The JMC will:
(a) monitor compliance with the Marketing Plan and approve any
immaterial change in the Marketing Plan; and
(b) oversee the Promotion and Co-Promotion as discussed in this
Article 7, including determining the appropriate level of
effort of each Party in the markets in which they Co-Promote
in a manner commensurate with each Party's economic interest
in such market.
7.2.3 MEETINGS OF THE JMC. The chairperson of the JMC shall call
meetings when deemed appropriate, currently anticipated to be no
less frequently than once every three (3) months. If possible,
the meetings shall be held in person, or where appropriate, by
video or telephone conference. The chairperson shall determine
the form of the meeting. Additional participants may be invited
by any member to attend meetings where
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appropriate (e.g., representatives of regulatory affairs or
outside consultants). Such additional participants shall have no
vote. Minutes of each meeting of the JMC shall be exchanged for
review and comment by the members. Thereafter, they shall be
signed by the chairperson.
7.2.4 VOTING OF THE JMC. The JMC shall make decisions by majority vote,
with at least one consenting vote of each Party's JMC members.
If the required majority for a decision cannot be found and all
the members of each Party take the same opposing positions in a
matter which either Party deems to be of major importance, the
matter shall be handled pursuant to Article 7.2.6. Voting by
proxy is permissible. Urgent matters (including regulatory and
adverse event matters) may be decided by unanimous vote of the
chairperson and a representative designated by CoCensys.
7.2.5 ROLE OF CHAIRPERSON. Except as explicitly set forth herein, in
no event shall the chairperson of the JMC have any additional
powers or responsibilities beyond those delegated to such person
by virtue of such person's membership on the JMC. Without
limiting the foregoing, it is understood that, except as a voting
member of the JMC, the chairperson shall not have the power to
control or dictate decisions or to veto any decisions reached by
the committee under the decision-making processes set forth in
Article 7.2.4.
7.2.6 DISPUTE RESOLUTION. If the JMC is unable to resolve, after
thirty (30) days, a dispute regarding any issue presented to it
or arising in it, such dispute will be referred to the Chief
Executive Officer of CoCensys and the President of Wyeth-Ayerst
Laboratories, an Affiliate of Wyeth-Ayerst for good faith
resolution, for a period of ninety (90) days. If such dispute is
not resolved by the end of such ninety (90) day period, the
Parties shall be free to pursue any legal or equitable remedy
available to them.
7.3 MARKETING PLAN. The Promotion and Co-Promotion of the Product will be
governed by a marketing plan (the "Marketing Plan"). The Marketing Plan
will describe fully, to the extent practicable, the proposed plan for
commercialization of the Product in the USA, including overall marketing
strategy, anticipated marketing, sales and promotion efforts by each Party
in each of the Neurologist Market, the Psychiatrist Market and All Other
Markets, market and sales forecasts, pricing analysis and estimated launch
date, guidelines for discounting the Product, as well as advertising and
other promotional materials to be used in the Promotion and Co-Promotion.
The Marketing Plan will be prepared by Wyeth-Ayerst, after consultation
with representatives of CoCensys, and will take into consideration factors
such as market conditions, regulatory factors and competition. The initial
Marketing Plan shall be prepared under the direction of and adopted by the
JMC no later than six (6) months after the first filing of the NDA for the
Product (unless otherwise agreed by the Parties). Such Marketing
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Plan shall thereafter be reviewed and, where necessary, updated, at least
every three (3) months (or more frequently if so determined by the JMC).
7.4 SALES FORCE EXPENSES. [ * ].
7.5 DETERMINATION AND ALLOCATION OF GROSS MARGIN AND ROYALTIES.
7.5.1 PSYCHIATRY MARKET. In consideration for each Party's
Co-Promotion efforts in the Psychiatry Market, Wyeth-Ayerst shall
be entitled to [ * ] and CoCensys shall be
entitled to [ * ] of the Gross Margin from sales of the
Product in the Psychiatry Market, as determined by a Prescription
Audit.
7.5.2 NEUROLOGIST MARKET. In consideration for CoCensys' Promotion
efforts in the Neurologist Market, CoCensys shall be entitled to
[ * ] and Wyeth-Ayerst shall be entitled to [ * ]
of the Gross Margin from sales of the Product in the Neurologist
Market, as determined by a Prescription Audit.
7.5.3 ALL OTHER MARKETS. In consideration for Wyeth-Ayerst's Promotion
efforts in All Other Markets, Wyeth-Ayerst shall be entitled to
[ * ] of the Gross Margin from sales of the Product in
All Other Markets, as determined by a Prescription Audit, and
shall pay to CoCensys a running royalty on Net Sales in the USA
until the end of the Term of Co-Promotion as follows:
(a) [ * ] PRODUCT ROYALTY. If the Product is a
[ * ] Product, Wyeth-Ayerst shall pay to
CoCensys the following running marginal royalty:
(i) For annual Net Sales of all [ * ]
Products which are less than or equal to
[ * ] million, [ * ] of such
Net Sales per year; and
(ii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million but less than or equal to [ * ]
million, [ * ] of such Net Sales per
year; and
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(iii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million, [ * ] of such Net Sales per
year.
(b) [ * ] PRODUCT ROYALTY. If the Product is a
[ * ] Product, Wyeth-Ayerst shall pay to
CoCensys the following running marginal royalty:
(i) For annual Net Sales of all [ * ]
Products which are less than or equal to
[ * ] million, [ * ] of such
Net Sales per year; and
(ii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million but less than or equal to [ * ]
million, [ * ] of such Net Sales per
year; and
(iii) For annual Net Sales of all [ * ]
Products which are more than [ * ]
million, [ * ] of such Net Sales per
year.
7.6 ADJUSTMENT TO ROYALTIES.
7.6.1 GENERIC PRODUCTS. In the event that, during the Term of
Co-Promotion, a generic version (i.e., same chemical entity) of
the Product is introduced in the USA by a Third Party, and if
unit sales for all such generic product(s) constitute more than
[ * ] of the combined unit sales in the USA of both the
Product and any such generic product(s), then the annual royalty
amount owed by one Party under Article 7.1.5, 7.1.6 or 7.5.3
shall be reduced by [ * ] such reduction to be done in
the fourth quarter payment as described in Article 7.8.
7.6.2 [ * ] In the event one Party (the "Royalty Paying
Party") owes royalties to the other Party (the "USA Royalty
Receiving Party") pursuant to Article 7.1.5, 7.1.6 or 7.5.3
hereunder with respect to Net Sales in the USA and, at the end of
a given calendar year [ * ] (where [
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* ] = [ * ]= [ * ];
and [ * ]= [ * ] then the Royalty Paying Party
will provide written notice to the USA Royalty Receiving Party of
such fact and the Parties shall meet promptly thereafter to
discuss and develop in good faith a commercially reasonable plan
to [ * ]. In the event that, at any time after
the eight (8) month anniversary of the date of the first meeting
to discuss the [ * ] (where [ * ] =
[ * ] then, for so long as [ * ], an
amount equal to [ * ] may be deducted from the royalty
due the USA Royalty Receiving Party for such year; PROVIDED,
HOWEVER, in no event shall the royalty due the USA Royalty
Receiving Party be less than that paid at the lowest applicable
rate (i.e., [ * ] for [ * ] Products and
[ * ] for [ * ] Products, or [ * ]
respectively, where Article 7.6.1 applies) set forth in Article
7.1.5, 7.1.6 or 7.5.3.
7.7 PRESCRIPTION AUDIT. Wyeth-Ayerst shall retain, at its own cost, a
Third Party such as IMS America, Ltd. to conduct an audit of the
prescribing activity in all markets and to provide the prescription
data necessary to calculate Net Sales in each of the Neurologist
Market, the Psychiatry Market and All Other Markets (the
"Prescription Audit"). Wyeth-Ayerst will provide to CoCensys such
data consistent with its obligations to IMS and such data will be
the property of Wyeth-Ayerst.
7.8 PAYMENT AND REPORTING. Within three (3) months after the close of
each calendar quarter, or earlier if possible, during the Term of
Co-Promotion (i.e., on or before the last day of each of the months
of June, September, December and March), Wyeth-Ayerst shall furnish
to CoCensys a statement (the "P&L Statement") setting forth Net
Sales in the USA and all data on which the determination of Gross
Margin was calculated. Wyeth-Ayerst will submit any amount due to
CoCensys pursuant to Articles 7.1, 7.5 and 7.6 with the P&L
Statement. For any given royalty period during the first three
quarters of the year, Wyeth-Ayerst shall pay to CoCensys the royalty
at the lowest rate specified in Articles 7.1.5 or 7.5.3 applicable
to the then current year-to-date Net Sales level in the USA. Each
statement provided at the end of the fourth quarter shall contain a
reconciliation of actual royalty payments made during that year and
the amount actually owed for such year, and any amounts owing to
CoCensys shall be paid to CoCensys at the time of such fourth
quarter statement, in accordance with the terms of this Article 7.8.
If the Term of Co-Promotion ends during an accounting quarter, the
amounts due hereunder shall be calculated for such shortened
calendar quarter. Any adjustments to royalties owed in the USA
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pursuant to Articles 7.6.1 and 7.6.2 shall be done at the end of the
calendar year in which such event giving rise to such adjustment
occurred; PROVIDED, HOWEVER, that following the entry of one or more
generic products in any year, and where royalties were reduced for
that year pursuant to Article 7.6.1, the following year's royalty
rate for quarterly royalty payments shall be at [ * ] with a
reconciliation upward at year end in the event sales of such generic
product(s) do not rise to the level specified in Article 7.6.1.
7.9 PROMOTIONAL AND ADVERTISING MATERIALS. The Parties shall
disseminate in the USA only those promotional and advertising
materials which have been provided or approved for use by the Joint
Marketing Committee, the cost of which shall be the responsibility
of Wyeth-Ayerst. All such materials shall be consistent with the
relevant Marketing Plan approved by the Joint Marketing Committee
and neither Party shall make any claims or representations in
respect of the Product that have not been approved by the Joint
Marketing Committee. All such written and visual materials and all
documentary information, promotional material, and oral
presentations (where practical) regarding the promotion of the
Product will state this arrangement and will display the
Wyeth-Ayerst and CoCensys names and logos with equal prominence, as
permitted by applicable law.
7.10 PRICING. The Parties will discuss, and the Marketing Plan will
include, the general operating guidelines and strategies for the
pricing and discounting of the Product in the USA; PROVIDED,
HOWEVER, that [ * ] as to pricing and discounting
in the USA.
7.11 NO DELEGATION. Each of the Parties may use only its own employees
or the employees of one or more of its Affiliates in the course of
exercising its Promotion and Co-Promotion rights under this
Agreement, unless an alternative arrangement is approved in advance
by the JMC. Notwithstanding the foregoing, in the event CoCensys is
exclusively marketing, selling, or promoting the Product in the USA,
it shall be free to delegate or sublicense such rights to any Third
Party.
7.12 RETURNS. Wyeth-Ayerst shall be responsible for handling all returns
relating to Product. Any Product returned to CoCensys shall be
shipped by CoCensys to the address designated by Wyeth-Ayerst.
7.13 ORDERS. All customer orders for the Product shall be received and
executed by Wyeth-Ayerst.
7.14 SAMPLES. Each of the Parties will keep accurate records as to the
distribution of samples of Products and comply with all applicable
laws, rules and regulations dealing with the distribution of
samples.
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7.15 COMPLETION OF SALES. All sales of the Product will be completed,
distributed, accounted for, billed and booked by Wyeth-Ayerst.
7.16 TRAINING. Consistent with the Marketing Plan, but not less than
ninety (90) days prior to the commencement of the Term of
Co-Promotion for the Product, Wyeth-Ayerst and CoCensys shall
conduct joint initial training of each Party's sales force at a site
to be determined by the JMC. [ * ]
7.17 EXCHANGE OF MARKETING INFORMATION. From time-to-time the Joint
Marketing Committee will develop call lists, schedules, and other
appropriate information for the purpose of determining the
physicians and other persons involved in the drug purchase
decision-making process to whom CoCensys and Wyeth-Ayerst,
respectively, may detail and otherwise promote each Product. The
Parties agree to cooperate in finding an inexpensive and expeditious
way to provide a call list and other information indicating the
identity of those physicians and other persons involved in the
decision-making process regarding the purchase of pharmaceuticals.
8. ACCOUNTS AND RECORDS; WITHHOLDING TAX.
8.1 RECORDS. Wyeth-Ayerst shall keep accurate books and accounts of
record in connection with the manufacture, use and/or sale by or for
it of the Products in sufficient detail to permit accurate
determination of all figures necessary for verification of
royalties, profits, milestone payments and other compensation
required to be paid hereunder. Wyeth-Ayerst shall maintain such
records for a period of three (3) years after the end of the year in
which they were generated.
8.2 AUDITS. CoCensys, through an independent certified public
accountant reasonably acceptable to Wyeth-Ayerst, shall have the
right, at its own expense, to access the books and records of
Wyeth-Ayerst for the sole purpose of verifying statements furnished
by Wyeth-Ayerst pursuant to Article 7.8. Such access shall be
conducted after reasonable prior written notice to Wyeth-Ayerst and
during ordinary business hours and shall not be more frequent than
once during each calendar year. CoCensys agrees to keep in strict
confidence all information learned in the course of such audit,
except when it is necessary to reveal such information in order to
enforce its rights under this Agreement. CoCensys' right to have
such records examined shall survive termination or expiration of
this Agreement. In the event such audit reveals an underpayment of
[ * ] or more of the amount actually due, Wyeth-Ayerst shall
reimburse CoCensys for the costs of such audit in addition to
promptly remitting to CoCensys the amount of any underpayment.
8.3 SALES BY SUBLICENSEES. In the event Wyeth-Ayerst grants licenses or
sublicenses to others to make or sell the Product, such licenses or
sublicenses shall include
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an obligation for the licensee or sublicensee to account for and
report its Net Sales of such Products on the same basis as if such
sales were Net Sales by Wyeth-Ayerst, and CoCensys shall receive
royalties in the same amounts as if the Net Sales of the licensee or
sublicensee were Net Sales of Wyeth-Ayerst.
8.4 WITHHOLDING. All taxes, assessments and fees of any nature levied or
incurred on account of any payments accruing under this Agreement, by
national, state or local governments, will be assumed and paid by
Wyeth-Ayerst, except taxes levied thereon as income to CoCensys and if
such taxes are required to be withheld by Wyeth-Ayerst they will be
deducted from payments due to CoCensys and will be timely paid by
Wyeth-Ayerst to the proper taxing authority for the account of
CoCensys, a receipt or other proof of payment therefor secured and
sent to CoCensys as soon as practicable.
9. TRADEMARKS.
[ * ] shall select and own the Trademarks for marketing the Product
in the USA. [ * ] for (i) registration of such Trademarks and
(ii) bringing, maintaining and prosecuting any action to protect or defend
such Trademarks shall be borne [ * ] At the termination
of this Agreement, [ * ] shall continue to have unrestricted
ownership of such Trademark(s) in the USA. [ * ] rights in this
Article are subject to Article 7.1.6.
10. MANUFACTURING AND DISTRIBUTION.
10.1 PRIMARY MANUFACTURE. [ * ] shall manufacture or have
manufactured its requirements for clinical and commercial supplies of
the Product. In fulfilling its manufacturing obligations hereunder,
[ * ] will use at least the same level of effort as it employs
for its other products of similar scientific and commercial promise.
If [ * ] elects to have the Product manufactured,
[ * ] shall favorably consider using, but shall not be
obligated to use, [ * ] as its manufacturing
sublicensee.
10.2 SECOND SOURCE. In order to ensure an uninterrupted supply of the
Product, the Parties intend to identify a Third Party manufacturer
(the "Second Source") to manufacture the Product in the event that
[ * ] is unable to supply all of the reasonably anticipated
requirements of the Product. If the Second Source manufactures the
Product pursuant to this Article 10.2, Wyeth-Ayerst and CoCensys shall
cooperate and assist each other to obtain, transfer or use any
licenses, registrations or information reasonably required to permit
such Second Source to manufacture the Product.
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10.3 EXCHANGE OF INFORMATION. Subject to Article 17, the Parties undertake
to exchange and to use diligent efforts to cause Third Party
manufacturers to exchange, on a regular basis, all data and know-how
relating to the manufacture of the Product.
10.4 COMPLIANCE. Any manufacture of the Product for sale in the USA shall
be performed in full compliance with United States GMP and all
applicable laws and regulations. The JMC shall be entitled to audit
such compliance and in particular the quality assurance program for
the manufacture of the Product.
11. PROSECUTION, MAINTENANCE AND INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.
11.1 PATENTABLE INVENTIONS.
11.1.1 Wyeth-Ayerst shall own all Inventions made solely by
itsemployees and agents, and all patent applications and
patents claiming such Inventions. CoCensys shall own all
Inventions made solely by its employees and agents, and all
patent applications and patents claiming such Inventions.
All Inventions made jointly by employees or agents of
CoCensys and employees or agents of Wyeth-Ayerst and all
patent applications and patents claiming such Inventions
shall be owned jointly by CoCensys and Wyeth-Ayerst. All
determinations of inventorship under this Article 11.1.1
shall be in accordance with U.S. law.
11.1.2 Wyeth-Ayerst and CoCensys shall each disclose to the other
and discuss any Inventions and the desirability of filing a
United States patent application covering the Invention, as
well as any foreign counterparts. The Party owning the
Invention shall make the final decision with respect to any
such filings. With respect to jointly owned Inventions, the
Parties shall determine which Party shall file and prosecute
any patent applications thereon. [ * ] shall be
responsible for expenses for preparing and prosecuting joint
patent applications in the USA.
11.1.3 Each Party shall have the right to select patent counsel and
to take such other actions as are reasonably appropriate to
prepare, file, prosecute and maintain patent protection with
respect to its Inventions arising under this Article 11.1.
11.2 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS. In the USA, each Party
shall be responsible for prosecuting and maintaining its own Patent
Rights, subject to Article 11.1.2. To facilitate such
decision-making, each Party will appoint a "patent coordinator", who
will have the authority to make such decision on behalf
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of such Party. All expenses for filing, prosecuting and maintaining
the CoCensys Patent Rights in the USA shall be borne [ * ]
11.3 PATENT EXTENSIONS. The Party holding a Patent Right, if requested by
and with the assistance of the other Party, shall apply in a timely
manner for such patent term extensions or patent restoration
certificates for such Patent Right as are available under the Federal
Drug Price Competition and Patent Term Restoration Act of 1984 (Pub.
L. No. 98-417), and any amendments thereof or any successor acts
thereto in the USA. [ * ] expenses incurred in connection
with such patent term extensions or patent restoration certificates
shall be borne [ * ].
11.4 COOPERATION. Each of the Parties shall execute or have executed by
its appropriate employees, representatives, agents, and contractors
such documents as may be necessary to obtain, perfect or maintain any
Patent Rights filed or to be filed pursuant to this Agreement, and to
cooperate with the other Party so far as reasonably necessary with
respect to furnishing all information and data in its possession
reasonably necessary to obtain or maintain such Patent Rights.
11.5 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.
11.5.1
(a) If either Party should become aware of any infringement or
threatened infringement or misappropriation, as the case may
be, in the USA of any Intellectual Property Rights of the
other Party, it shall promptly notify such other Party in
writing. As soon as practicable the Parties shall confer on
the particulars of such infringement or misappropriation and
the possible courses of action to be taken. The Party
holding the affected Intellectual Property Rights shall have
the right, but not the obligation, to institute, prosecute
and control any legal proceedings in its own name and by its
own counsel and at its own expense, subject to
Article 11.5.1(d), to prevent or restrain such infringement,
and the other Party shall have the right, [ * ] to
be represented in such action by its own counsel. If one
Party brings any such action or proceeding, the other Party
hereby consents to being joined as a party plaintiff where
necessary and, in case of joining, such other Party agrees
to give the first Party reasonable assistance and authority
to file and to prosecute such suit, at the exercise of the
Party bringing such suit.
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(b) Notwithstanding the foregoing, the Parties shall jointly
determine which Party shall have the primary right and
responsibility (but not the obligation) to institute,
prosecute, and control any action or proceeding with respect
to infringement or misappropriation of jointly owned
Intellectual Property Rights in the USA and the other Party
shall have the right, [ * ] to be represented by its
counsel. Each Party hereby consents to the filing of any
such action by the other Party with respect to any jointly
owned Patent Rights in accordance with this Article
11.5.1(b).
(c) If one Party alone prosecutes an infringement or
misappropriation of Intellectual Property Rights,
[ * ] any damages and costs recovered in
any proceedings or by way of settlement under Articles
11.5.1(a) and 11.5.1(b) above or Article 11.5.2 shall
[ * ] as applicable.
(d) If both Parties participate in prosecuting an infringement
or misappropriation of Intellectual Property Rights, the
actual costs and expenses of all suits brought by either
Party under this Article 11.5.1 shall be [ * ]
Any remaining damages shall then be split [ * ] to
CoCensys and [ * ] to Wyeth-Ayerst.
11.5.2 If the Party having the primary right to institute,
prosecute, and control such infringement or misappropriation
action under Article 11.5.1 fails to do so within a period
of one hundred twenty (120) days after receiving notice of
the infringement, or if that Party, after initiating an
action, determines to discontinue such action, the other
Party shall have the right to bring and control or take over
any such action by counsel of its own choice, and at its own
expense, subject to Article 11.5.1(c) unless prevented from
doing so by the laws of the country where the infringement
or misappropriation occurred or is threatened.
11.5.3 In connection with any proposed settlement in respect of any
infringement or threatened infringement of any Intellectual
Property Rights, the Party intending to settle shall notify
and consult with the other Party as to the terms of
settlement, whose written consent shall be required prior to
any such settlement, such consent shall not be unreasonably
withheld.
11.5.4 In connection with any action taken by either Party against
a Third Party to protect or enforce any Intellectual
Property Rights, the
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other Party shall, if requested, consult with the Party
taking such action, and make available as witnesses its
employees or as evidence any materials, and/or data as are
reasonably necessary for the furtherance of such action.
The expenses in connection with the providing of witnesses
and/or the making available of any materials and/or data
shall be [ * ]
11.6 INFRINGEMENT OF THIRD PARTY PATENT RIGHTS.
11.6.1 If Wyeth-Ayerst should be of the opinion that it cannot
make, import, use, market and/or sell the Product in the USA
under its own Intellectual Property Rights or those licensed
to it by CoCensys under this Agreement without infringing a
Third Party's patent, it shall notify CoCensys. Both
Parties then shall seek an opinion of patent counsel
acceptable to both Parties. If such patent counsel concurs
with Wyeth-Ayerst's opinion, they shall jointly or
independently endeavor to secure a license from the Third
Party on terms that are acceptable to both Parties.
11.6.2 If, in the opinion of patent counsel selected under
Article 11.6.1, the Third Party patent, if litigated, would
be found invalid or not be infringed by the manufacture or
sale of the Product or if the Parties otherwise mutually
agree to obtain a license to such Third Party patent, the
Parties shall proceed in accordance with the terms of this
Agreement, unless an action for infringement is brought
against one or both Parties.
11.6.3 If either Party is sued for patent infringement of any Third
Party patents arising out of the manufacture, use, sale or
importation of the Product in the USA, the Parties shall
promptly meet to discuss the course of action to be taken to
resolve or defend any such infringement litigation. Each
Party shall provide the other with such assistance as is
reasonably necessary and shall cooperate in the defense of
any such action. [ * ] of any cost/expense of
defending such action incurred by Wyeth-Ayerst in the USA
and any damages and/or other compensation imposed on
Wyeth/Ayerst in such country may be deducted by Wyeth-Ayerst
from any amounts otherwise due CoCensys under this Agreement
in the form of royalties and/or profit-sharing for the USA,
PROVIDED, HOWEVER, in no event shall royalty and/or profit
sharing amounts due CoCensys for such country be reduced by
more than [ * ] in any given calendar year as a
result of this sentence.
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12. FORCE MAJEURE.
Neither Party shall be liable to the other for delay or failure in the
performance of the obligations on its part contained in this Agreement if
and to the extent that such failure or delay is due to circumstances beyond
its control which it could not have avoided by the exercise of reasonable
diligence. It shall notify the other Party promptly should such
circumstances arise, giving an indication of the likely extent and duration
thereof, and shall use all commercially reasonable efforts to resume
performance of its obligations as soon as practicable.
13. TERM AND TERMINATION.
13.1 GENERAL CONDITIONS OF EXPIRATION AND TERMINATION.
13.1.1 Any permitted sublicenses granted hereunder shall
automatically terminate or expire at the same time as this
Agreement expires (insofar as they haven't already
terminated), except where, and to the extent, any license
granted hereunder survives expiration of this Agreement, as
expressly provided in this Agreement. Upon early
termination of this Agreement for any reason, if any
permitted sublicensee is not then in default under its
sublicense agreement with Wyeth-Ayerst, then such
sublicensee shall automatically have a license under this
Agreement as a direct licensee of CoCensys, on economic
terms as are set forth herein with respect to Wyeth-Ayerst
and otherwise with the same rights and obligations as
Wyeth-Ayerst under this Agreement.
13.1.2 The provisions of Articles 8, 9, 11, 14, 15, and 17 shall
survive termination or expiration of this Agreement.
13.1.3 Termination or expiration of this Agreement shall not
operate to deprive either Party of any rights or remedies
either at law or in equity or to relieve either Party of any
of its obligations incurred prior to the effective date of
such termination or expiration.
13.2 TERM. Unless earlier terminated as set out in this Agreement, the
term of this Agreement shall end when all the respective royalty and
profit payment obligations of the Parties under this Agreement have
expired.
13.3 TERMINATION FOR BREACH.
13.3.1 TERMINATION FOR BREACH. Except as otherwise provided in
this Section 13.3.1, either Party may terminate this
Agreement for material breach by the other Party, which
breach remains uncured for [ * ] in the case of
nonpayment of any amount due
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and [ * ] for all other breaches, each measured from
the date written notice of such breach is given to the
breaching party, or, if such breach is not susceptible of
cure within such [ * ] period and the breaching
party uses diligent good faith efforts to cure such breach,
for [ * ] after written notice to the breaching
party.
13.3.2 BREACH BY WYETH-AYERST. If termination is due to a material
breach by Wyeth-Ayerst, all rights granted to Wyeth-Ayerst
under this Agreement shall revert to CoCensys, provided that
[ * ] as of the date of such termination.
13.4 BREACH BY COCENSYS. In the event of an uncured material breach by
CoCensys, [ * ] subject to the payment of royalties
as provided in Article 7.1.5.
13.5 NO LIMIT ON REMEDIES. Nothing herein shall exclude or limit any
remedies or entitlements whatsoever which the law confers to either
Party in the event of a breach of contractual obligations by the other
Party.
13.6 UNILATERAL TERMINATION BY WYETH-AYERST. Wyeth-Ayerst shall have the
right to unilaterally terminate this Agreement upon [ * ]
written notice. In the event of such termination by Wyeth-Ayerst, all
Wyeth-Ayerst's worldwide rights to the Licensed Compound and the
Product shall revert to CoCensys. Wyeth-Ayerst shall not be obligated
to further fund the Development or the Back-Up Program or to make any
other payments under this Agreement for events which occur after the
effective date of such termination. After the termination date,
Wyeth-Ayerst will make its relevant personnel, relevant data and other
resources available as are reasonably necessary to effect an orderly
transition of Development and commercialization of the Product for a
period of [ * ] after termination. In the event of such
termination, Wyeth-Ayerst shall (i) [ * ] (ii)
transfer to CoCensys [ * ] and (iii)
[ * ]
13.7 DETERMINATION OF CO-PROMOTION RIGHTS UPON CHANGE IN CONTROL.
13.7.1 In the event of a Change of Control (as defined below) of
[ * ] promptly shall notify [ * ] of such
Change in Control and [ * ] shall have the right,
for a period of [
30.
* Confidential treatment requested
<PAGE>
* ] from receipt of such notice, and upon
[ * ] written notice to [ * ] (the "Notice
of Intent"), to [ * ]
13.7.2 For purposes of this Article 13.7, "Change in Control" shall
mean (1) a merger or consolidation in which a Party hereto
is not the surviving corporation; (2) a reverse merger in
which a Party hereto is the surviving corporation but the
shares of such Party's voting stock outstanding immediately
preceding the merger are converted by virtue of the merger
into other property, whether in the form of securities, cash
or otherwise; or (3) if, after giving effect to any
agreements among stockholders of a Party hereto, any person
holds and may vote in excess of 50% of such Party's voting
stock.
13.7.3 A Change of Control of [ * ] shall have no effect on
this Agreement.
14. ASSIGNMENT.
14.1 ASSIGNMENT TO AFFILIATES. Either Party may assign any of its rights
or obligations under this Agreement in any country to any Affiliates,
for so long as they remain Affiliates; provided, however, that such
assignment shall not relieve the assigning Party of its
responsibilities for performance of its obligations under this
Agreement.
14.2 OTHER PERMITTED ASSIGNMENT. Either Party may assign its rights or
obligations under this Agreement in connection with a merger or
similar reorganization or the sale of all or substantially all of its
assets, subject to provisions of Article 13.7, [ * ]
provided, that in the event of such merger, reorganization or sale,
[ * ] All other assignments by any Party shall
[ * ]
14.3 BINDING NATURE OF ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the successors and permitted assigns of
the Parties. Any assignment not in accordance with this Article 14
shall be void.
31.
* Confidential treatment requested
<PAGE>
15. INDEMNIFICATION.
15.1 CROSS INDEMNIFICATION.
15.1. Each Party hereby agrees to save, defend and hold the other
Party and its agents and employees harmless from and against
any and all suits, claims, actions, demands, liabilities,
expenses and/or losses, including reasonable legal expense
and attorneys' fees, brought by a Third Party or that arise
in connection with any claim brought by a Third Party
("Losses") resulting directly from the manufacture, use,
handling, storage, sale or other disposition of Products in
the USA to the extent such Losses result solely from (i) the
negligence of the indemnifying party or breach by the
indemnifying party of any provision of this Agreement, (ii)
failure of the indemnifying party to manufacture or have
manufactured Products (bulk or finished form) according to
cGMP or Product specifications, or (iii) marketing
activities of the indemnifying party contrary to applicable
governmental regulations or outside the approved labeling of
the Product.
15.1.2 In the event CoCensys is seeking indemnification under
Article 15.1.1, it shall inform Wyeth-Ayerst of a claim as
soon as is reasonably practicable after it receives notice
of the claim, shall permit Wyeth-Ayerst to assume direction
and control of the defense of the claim (including the right
to settle the claim solely for monetary consideration), and
shall cooperate as requested (at the expense of
Wyeth-Ayerst) in the defense of the claim.
15.1.3 In the event Wyeth-Ayerst is seeking indemnification under
Article 15.1.1, it shall inform CoCensys of a claim as soon
as is reasonably practicable after it receives notice of the
claim, shall permit CoCensys to assume direction and control
of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and shall
cooperate as requested (at the expense of CoCensys) in the
defense of the claim.
15.2 INSURANCE. Each Party further agrees to use reasonable commercial
efforts to obtain and maintain, during the term of this Agreement,
Comprehensive General Liability Insurance, including Products
Liability, with reputable and financially secure insurance carriers to
cover its indemnification obligations under Articles 15.1 and 15.2 or
self-insurance, with limits of not less than $5,000,000 per occurrence
and in the aggregate.
32.
<PAGE>
16. WARRANTIES AND REPRESENTATIONS.
16.1 GENERAL. Each Party hereby warrants to the other:
16.1.1 that it has full power and authority to execute and deliver
this Agreement and to perform the obligations on its part
hereunder; and
16.1.2 that the execution and delivery by it of this Agreement and
the performance of its obligations hereunder have been duly
approved by all necessary corporate action and do not
require any shareholder action or approval.
16.1.3 that to the best of its knowledge, the manufacture, use,
importation, offer for sale or sale of CO 2-6749 will not
infringe any Third Party patent in the USA.
16.2 USC/ROCKEFELLER LICENSE. Wyeth-Ayerst acknowledges and understands
that certain technologies sublicensed to Wyeth-Ayerst hereunder were
licensed to CoCensys under terms of that certain Exclusive License
Agreement among CoCensys, The University of Southern California and
the Rockefeller University dated August 28, 1990 (the "USC/Rockefeller
License"), a copy of which has been provided to Wyeth-Ayerst.
CoCensys has received a letter from the University of Southern
California, dated April 11, 1997, permitting CoCensys to grant to
Wyeth-Ayerst a sublicense under such license.
17. CONFIDENTIAL INFORMATION.
17.1 INFORMATION. Each Party shall keep all information received from the
other Party (the "Information") confidential and shall not disclose
nor use the Information without the other Party's written consent
except to the extent contemplated by this Agreement. This restriction
shall not, however, prevent disclosure of the Information if and to
the extent that disclosure is required by law, PROVIDED THAT the
disclosing Party informs the other Party without delay of any such
requirement, in order to allow such other Party to object to such
disclosure and to seek an appropriate protective order or similar
protection prior to disclosure.
17.2 EXCEPTIONS. The above obligations shall not apply or shall cease to
apply to Information which:
17.2.1 is now, or hereafter becomes, through no act or failure to
act on the part of the receiving Party, generally known or
available;
17.2.2 is known by the receiving Party at the time of receiving
such information, as evidenced by its written records;
33.
<PAGE>
17.2.3 is hereafter furnished to the receiving Party by a Third
Party, as a matter of right and without restriction on
disclosure;
17.2.4 is independently developed by or for the receiving Party
without any breach of this Article 17; or
17.2.5 is the subject of a written permission to disclose provided
by the disclosing Party.
17.3 PERMITTED DISCLOSURES. Information may be disclosed to employees,
agents, consultants, sublicensees or suppliers of the recipient Party
or its Affiliates, but only to the extent required to accomplish the
purposes of this Agreement and only if the recipient Party obtains
prior agreement from its employees, agents, consultants, sublicensees
or suppliers 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 proprietary or confidential
information of its own to ensure that such employees, agents,
consultants, sublicensees or suppliers do not disclose or make any
unauthorized use of the Information.
17.4 DISCLOSURE OF AGREEMENT. Neither CoCensys nor Wyeth-Ayerst shall
release to any Third Party or publish in any way any non-public
information with respect to the terms of this Agreement or concerning
their cooperation without the prior written consent of the other,
which consent will not be unreasonably withheld or delayed; provided;
however that either Party may disclose the terms of this Agreement to
the extent required to comply with applicable laws, including without
limitation the rules and regulations promulgated by the Securities and
Exchange Commission and the Party intending to disclose the terms of
this Agreement shall provide the nondisclosing party an opportunity to
review and comment on the intended disclosure which is reasonable
under the circumstances. Notwithstanding any other provision of this
Agreement, each Party may disclose the terms of this Agreement to
lenders, investment bankers and other financial institutions of its
choice solely for purposes of financing the business operations of
such Party either (i) upon the written consent of the other Party or
(ii) if the disclosing Party uses reasonable efforts to obtain a
signed confidentiality agreement with such financial institution with
respect to such information, upon terms substantially similar to those
contained in this Article 17.
17.5 PUBLICITY. Subject to Article 17.4, all publicity, press releases and
other announcements relating to this Agreement or the transaction
contemplated hereby shall be reviewed in advance by, and shall be
subject to the approval of, both Parties.
17.6 PUBLICATION. The Parties shall cooperate in appropriate publication
of the results of research and development work performed pursuant to
this Agreement, but
34.
<PAGE>
subject to their predominating interest in obtaining patent protection
for any patentable subject matter. The determination of authorship
for any paper shall be in accordance with accepted scientific
practice. Notwithstanding anything in this Article 17.6 to the
contrary, all publication and presentations of the results of research
and development work performed pursuant to this Agreement must be
approved in advance by both Parties.
18. MISCELLANEOUS.
18.1 NO WAIVER OF CONTRACTUAL RIGHTS. The failure of either Party to
require performance by the other Party of any of that other Party's
obligations hereunder shall in no manner affect the right of such
Party to enforce the same at a later time. No waiver by any Party
hereto of any condition, or of the breach of any provision, term,
representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to
be or construed as a further or continuing waiver of any such
condition or breach, or of any other condition or of the breach of any
other provision, term representation or warranty hereof.
18.2 EXECUTION AND AMENDMENTS.
18.2.1 Each Party shall execute and deliver all such instruments
and perform all such other acts as the other Party may
reasonably request in order to carry out the transactions
contemplated by this Agreement.
18.2.2 This Agreement may not be amended or modified except by
written instrument signed by or on behalf of both Parties.
18.3 SEVERABILITY. If a court or other tribunal of competent jurisdiction
should hold any term or provision of this agreement to be excessive,
or invalid, void or unenforceable, the offending term or provision
shall be deleted, and, if possible, replaced by a term or provision
which, so far as practicable achieves the legitimate aims of the
Parties.
18.4 RELATIONSHIP BETWEEN THE PARTIES. Both Parties are independent
contractors under this Agreement. Nothing contained in this Agreement
is intended nor shall be construed so as to constitute CoCensys or
Wyeth-Ayerst as partners or joint venturers with respect to this
Agreement. Neither Party shall have the express or the implied right
nor authority to assume or create any obligations on behalf of or in
the name of the other Party, nor to bind the other Party to any other
contract, agreement or undertaking with any Third Party.
18.5 CORRESPONDENCE AND NOTICES.
35.
<PAGE>
18.5.1 Correspondence, reports, documentation, and any other
communication in writing between the Parties in the course
of ordinary implementation of this Agreement shall be
delivered by hand, sent by facsimile, or by airmail to any
one member of the JMC appointed by the Party which is to
receive such written communication, or any other way as the
JMC deems appropriate.
18.5.2 Extraordinary notices and communications (including but not
limited to notices of termination, force majeure, material
breach, change of address) shall be in writing and sent by
prepaid registered or certified air mail, or by facsimile
confirmed by prepaid registered or certified air mail
letter, and shall be deemed to have been properly served to
the addressee upon receipt of such written communication.
18.5.3 In the case of CoCensys, the proper address for
communications and for all payments shall be:
CoCensys, Inc.
213 Technology Drive
Irvine, California 92618, USA
Attn: Chief Executive Officer
and in the case of Wyeth-Ayerst, the proper address for
communications and for all payments shall be:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, PA 19087
Attn: Senior Vice President, Global Business Development
With a copy to:
American Home Products Corporation
5 Giralda Farms
Madison, NJ 07940
Attn: Senior Vice President and General Counsel
18.6 CHOICE OF LAW. This Agreement is subject to and governed by the laws
of the State of Delaware, excluding its conflict of laws provisions.
18.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which
shall constitute together the same document.
36.
<PAGE>
This Agreement together with its Exhibits and further agreements mentioned
herein and Agreement (No. 2) constitutes the entire agreement of the Parties
with respect to the subject matter hereof as of its date, and supersedes all
prior agreements, understandings, representations and proposals, written or
oral, relating thereto.
AMERICAN HOME PRODUCTS CORPORATION COCENSYS, INC.
- ------------------------------- -------------------------------
Name Name
Title Title
37.
<PAGE>
EXHIBIT A
BACK-UP COMPOUND CANDIDATE CRITERIA
-----------------------------------------------------------
-----------------------------------------------------------
CRITERION FOR IND-TRACKING ACTIVITIES REQUIRED
-----------------------------------------------------------
-----------------------------------------------------------
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT B
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT C
COCENSYS PATENT RIGHTS
US ISSUE DATE EXPIRATION DATE CORRESPONDING FOREIGN APPLICATION
- -------------------------------------------------------------------------
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT D
DEFINITION OF FULLY BURDENED COST
The following expenses are manufacturing expenses which are prepared in
accordance with generally accepted accounting principles consistently applied.
THE FOLLOWING EXPENSES ARE INCLUDED IN MANUFACTURING COSTS:
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT E
WYETH-AYERST PATENT RIGHTS
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT F
STOCK PURCHASE AGREEMENT
<PAGE>
COCENSYS, INC.
-----------
PREFERRED STOCK PURCHASE AGREEMENT
-----------
MAY , 1997
<PAGE>
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Shares.. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 1
2.1 Organization and Standing; Articles and Bylaws . . . . . . 1
2.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Validity of Shares and Conversion Shares . . . . . . . . . 2
2.4 Offering . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . 2
2.6 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Authorized Capital; Outstanding Shares . . . . . . . . . . 3
2.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Voting Arrangements. . . . . . . . . . . . . . . . . . . . 3
2.10 No Conflict; No Violation. . . . . . . . . . . . . . . . . 3
2.11 Consents and Approvals.. . . . . . . . . . . . . . . . . . 3
2.12 Absence of Certain Developments. . . . . . . . . . . . . . 4
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . 4
3.1 Legal Power. . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Due Execution. . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Investment Representations . . . . . . . . . . . . . . . . 4
4. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Registration . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Expenses of Registration . . . . . . . . . . . . . . . . . 7
4.4 Obligations of the Company . . . . . . . . . . . . . . . . 8
4.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . 9
4.6 Information by Holder. . . . . . . . . . . . . . . . . . . 11
4.7 Transfer of Registration Rights. . . . . . . . . . . . . . 11
4.8 Delay of Registration. . . . . . . . . . . . . . . . . . . 11
4.9 Rule 144 Reporting.. . . . . . . . . . . . . . . . . . . . 11
4.10 "Market Stand-Off" Agreement.. . . . . . . . . . . . . . . 12
5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . 12
5.1 Conditions to Obligations of Purchaser . . . . . . . . . . 12
5.2 Conditions to Obligations of the Company . . . . . . . . . 13
6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Successors and Assigns . . . . . . . . . . . . . . . . . . 14
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6.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 14
6.5 Separability . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 Amendment and Waiver . . . . . . . . . . . . . . . . . . . 14
6.7 Delays or Omissions. . . . . . . . . . . . . . . . . . . . 15
6.8 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . 15
6.9 Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . 16
6.10 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . 16
6.11 Information Confidential . . . . . . . . . . . . . . . . . 16
6.12 Titles and Subtitles . . . . . . . . . . . . . . . . . . . 17
6.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 17
ii
<PAGE>
COCENSYS, INC.
PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 12, 1997, by and among COCENSYS, INC., a
Delaware corporation (the "Company"), and AMERICAN HOME PRODUCTS CORPORATION, a
Delaware corporation ("Purchaser").
1. PURCHASE AND SALE
1.1 SHARES. Subject to the terms and conditions hereof, and in
reliance upon the representations, warranties and agreements contained herein,
the Company hereby agrees to issue and sell to Purchaser, and Purchaser hereby
agrees to purchase from the Company, for $5,000,000 (the "Purchase Price"),
100,000 shares (the "Shares") of the Company's Series C Convertible Preferred
Stock (the "Preferred Stock"). The terms of the Preferred Stock are set forth
in the Certificate of Designation annexed hereto as Exhibit A (the "Certificate
of Designation").
1.2 CLOSING DATE. The closing of the sale and purchase of the Shares
(the "Closing") shall take place on May 12, 1997 (the "Closing Date").
1.3 DELIVERY. At the Closing, the Company will deliver to Purchaser
a certificate or certificates, in such denominations and registered in such
names as Purchaser may designate by notice to the Company, representing the
Shares to be purchased by Purchaser from the Company, dated the Closing Date,
against payment of the Purchase Price by wire transfer, a check made payable to
the order of the Company, or any combination thereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as otherwise specifically disclosed to Purchaser in writing on
the date hereof, the Company hereby represents and warrants to Purchaser as
follows:
2.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has full and requisite power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and as proposed to be conducted. The Company is duly qualified as a
foreign corporation to do business in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except where the failure to so qualify would not materially or adversely affect
the Company, its business, assets, prospects, condition (financial or otherwise)
or operations.
2.2 AUTHORIZATION. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to issue the Shares as contemplated herein. All corporate action
on the part of the Company, its
1
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officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all the Company's obligations
hereunder, for the authorization, issuance, sale and delivery of the Shares and
for the reservation for issuance of the shares of Common Stock issuable upon
conversion of the Shares (the "Conversion Shares") has been taken or will be
taken prior to the Closing. This Agreement, when executed and delivered, shall
constitute a valid and legally binding obligation of the Company in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors.
2.3 VALIDITY OF SHARES AND CONVERSION SHARES. The sale of the Shares
is not and will not be subject to any preemptive rights or rights of first
refusal that have not been waived and, when issued, sold and delivered in
compliance with the provisions of this Agreement and, as applicable, the
Certificate of Designation, the Shares and the Conversion Shares will be validly
issued, fully paid and nonassessable and will be free of any liens, claims or
encumbrances; PROVIDED, HOWEVER, that the Shares and the Conversion Shares will
be subject to restrictions on transfer under state and/or federal securities
laws, and the Shares will be subject to additional restrictions on transfer, in
each case as set forth herein, or as otherwise required by such laws at the time
a transfer is proposed.
2.4 OFFERING. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 3.3 hereof on the date hereof and
on the Closing Date, the offer, issue, and sale of the Shares, and the issuance
of the Conversion Shares (assuming no change in applicable law on each
Conversion Date), are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "1933 Act")
and have been or will be registered or qualified (or are or will be exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.
2.5 FULL DISCLOSURE.
(a) The Company has furnished to Purchaser the Company's annual
report on Form 10-K for the fiscal year ended December 31, 1996, as amended (the
"1996 10-K") and the Company's Current Report on Form 8-K dated April 29, 1997
(the "8-K") (the "SEC Documents"). The Company warrants that, as of their
respective dates (or if amended, as of the date of such amendment), the SEC
documents complied as to form with the requirements of the Securities Exchange
Act of 1934 (the "1934 Act"), and the information contained in such documents
did not contain any untrue statement of a material fact, and did not omit to
state any material fact necessary to make any statement, in light of the
circumstances under which such statement was made, not misleading. The Company
further warrants that the 1996 10-K, as modified by the 8-K, does not contain
any untrue statement of a material fact and does not omit to state any material
fact necessary to make the statements therein not misleading as of the date
hereof.
(b) The Company has not filed with the Securities and Exchange
Commission (the "SEC") any reports under the 1934 Act since the date of the 8-K.
2
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2.6 SEC FILINGS. The Company has timely filed with the SEC all
reports and other documents required to be so filed. The Company agrees that,
as long as the Development and Commercialization Agreement between the Company
and Wyeth-Ayerst Laboratories, dated as of May 12, 1997, is in effect, it will,
upon the Purchaser's written request, promptly furnish to Purchaser all SEC
filings and any annual and quarterly reports furnished to the Company's
stockholders.
2.7 AUTHORIZED CAPITAL; OUTSTANDING SHARES. The Company is
authorized to issue 75,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. As of March 31, 1997, there were 22,516,863 shares of Common
Stock and 100,000 shares of Preferred Stock outstanding. No shares of capital
stock, or securities convertible into or exercisable for capital stock or other
rights affecting the capital stock, have been issued since such date except for
issuances pursuant to the Company's equity compensation plans or pursuant to
outstanding options, warrants or rights, in each case as described in the 1996
10-K. All outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; and none of the
outstanding shares of Common Stock were issued in violation of the preemptive
rights, if any, of any stockholders of the Company.
2.8 LITIGATION. There is no action, suit or proceeding pending, or,
to the Company's knowledge, threatened, against the Company (a) which questions
the validity of this Agreement or the ability of the Company to consummate the
transactions contemplated hereby or (b) which, singly or in the aggregate, if
the subject of unfavorable decision, ruling or finding, would materially
adversely affect the business, properties, prospects, operations, or financial
condition of the Company, in each case as described in the 1996 10-K.
2.9 VOTING ARRANGEMENTS. To the best of the Company's knowledge,
there are no outstanding stockholder agreements, voting trusts, proxies or other
arrangements or understandings among the stockholders of the Company relating to
the voting of their respective shares.
2.10 NO CONFLICT; NO VIOLATION. The execution, delivery and
performance of this Agreement and consummation of the transactions contemplated
hereby will not (a) violate or conflict with any provisions of the Amended and
Restated Certificate of Incorporation, as amended, or Bylaws of the Company; (b)
result in any breach, conflict with, violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under (in each case,
upon the giving of notice, the passage of time, or both) any mortgage,
indenture, lease, loan agreement or other agreement or instrument, permit,
franchise, license, judgment, order, decree, law, ordinance, rule or regulation
applicable to the Company or its properties.
2.11 CONSENTS AND APPROVALS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any federal, state or local governmental authority, required on
the part of the Company in connection with the valid execution, delivery and
performance of this Agreement, the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby have been obtained, or
will be effective at the Closing, except for notices required or permitted to be
filed
3
<PAGE>
with certain state and federal securities commissions after the Closing, which
notices will be filed on a timely basis.
2.12 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in or
contemplated by the SEC Documents, since December 31, 1996, the Company has not
(a) incurred or become subject to any material liabilities (absolute or
contingent) except current liabilities incurred, and liabilities under contracts
entered into, in the ordinary course of business, consistent with past
practices; (b) mortgaged, pledged or subjected to lien, charge or any other
encumbrance any of its assets, tangible or intangible; (c) sold, assigned or
transferred any of its assets or canceled any debts or obligations except in the
ordinary course of business, consistent with past practices; (d) suffered any
extraordinary losses, or waived any rights of substantial value; (e) sold,
assigned or transferred to a third party that is not an affiliate (within the
meaning set forth in Rule 405 under the Securities Act of 1933, as amended) any
material patents, trademarks, copyrights, trade secrets or other intangible
assets for compensation less than the fair value of such assets; (f) declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock; (g) entered into any material transaction other than in the ordinary
course of business, consistent with past practices; or (h) otherwise had any
material change in its condition, financial or otherwise, except for changes in
the ordinary course of business, consistent with past practices, none of which
individually or in the aggregate has been materially adverse.
2.13 NASDAQ NATIONAL MARKET DESIGNATION. The Common Stock of the
Company is listed on the Nasdaq National Market and the Company knows of no
reason or set of facts which is likely to result in the delisting of the Common
Stock by the Nasdaq National Market or the inability of such stock to continue
to be included in the Nasdaq National Market.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
3.1 LEGAL POWER. It has the requisite legal power to enter into this
Agreement, to purchase the Shares hereunder, and to carry out and perform its
obligations under the terms of this Agreement.
3.2 DUE EXECUTION. This Agreement has been duly authorized, executed
and delivered by it, and, upon due execution and delivery by the Company, this
Agreement will be a valid and binding agreement of it in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors.
3.3 INVESTMENT REPRESENTATIONS.
(a) It is acquiring the Shares, and intends to acquire the
Conversion 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 1933 Act.
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(b) It understands and agrees that the Shares have not been
and, when issued, the Conversion Shares will not be, registered under the 1933
Act by reason of a specific exemption therefrom, that they must be held by it
indefinitely, and that it must, therefore, bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the 1933 Act or is exempt from such registration; each certificate
representing the Shares and the Conversion Shares will be endorsed with the
following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE 1933 ACT, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS (A) PURSUANT TO RULE 144 UNDER THE 1933 ACT OR (B)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING
SUCH SECURITIES OR (C) THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT;
(iii) each certificate representing the Shares also will be endorsed with the
following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) THE TRANSFEREE IS AN
AFFILIATE OF THE HOLDER WITHIN THE MEANING OF RULE 144 UNDER THE 1933 ACT
OR (B) ALL SUCH SECURITIES ARE TRANSFERRED TO A SINGLE INDIVIDUAL OR
ENTITY;
and the Company will instruct any transfer agent not to register the transfer
of any of the Shares unless the conditions specified in the foregoing legends
are satisfied, PROVIDED HOWEVER, that to the extent the legend set forth in
clause (b)(ii) above is no longer required, the Company shall cause its transfer
agent to issue a new certificate or certificates free of such legend.
(c) It has been furnished with such materials and has been given
access to such information relating to the Company as it or its qualified
representative has requested and it has been afforded the opportunity to ask
questions regarding the Company and the Shares, all as it has found necessary to
make an informed investment decision.
(d) It is an "accredited investor" within the meaning of
Regulation D under the 1933 Act.
(e) It was not formed for the specific purpose of acquiring the
Shares or the Conversion Shares.
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4. REGISTRATION RIGHTS.
The Company hereby grants to Purchaser the registration rights set
forth in this Section 4, with respect to the Registrable Securities (as
hereinafter defined) owned by Purchaser.
4.1 DEFINITIONS. As used in this Section 4:
(a) The term "Holder" or "Holders" shall mean (i) Purchaser and
(ii) any other person holding or having the right to acquire Registrable
Securities to whom these registration rights have been transferred pursuant to
Subsection 4.7 hereof.
(b) The terms "register," "registered," and "registration" refer
to a registration effected by filing with the SEC a registration statement (the
"Registration Statement") in compliance with the 1933 Act and the declaration or
ordering by the SEC of the effectiveness of such Registration Statement.
(c) The term "Registrable Securities" means (i) the shares of
Common Stock of the Company issued upon conversion of the Shares (the
"Conversion Shares") in accordance with the Certificate of Designation and such
other shares of Common Stock of the Company held by Purchaser from time to time
and (ii) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right, or other security that is issued
as) a dividend or other distribution with respect to, or in exchange or in
replacement of, the shares referred to in clause (i) of this subsection (c);
PROVIDED, HOWEVER, that Registrable Securities shall cease to be Registrable
Securities upon the expiration of the Market Stand-Off Agreement set forth in
Section 4.10 hereof. In the event of any recapitalization by the Company,
whether by stock split, reverse stock split, stock dividend or the like, the
number of shares of Registrable Securities shall be proportionately increased or
decreased.
4.2 REGISTRATION.
(a) REGISTRATION. If at any time or from time to time the
Company shall determine to register any of its securities for its own account
(other than a registration relating solely to employee benefit plans or a
registration on Form S-4 relating solely to an SEC Rule 145 transaction) or for
the account of security holders pursuant to demand registration rights, the
Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 calendar days
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after receipt of such written notice from the Company, by any Holder or Holders,
except as set forth in Subsection 4.2(b) below.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Subsection 4.2(a)(i). In such event the right of any Holder to
registration pursuant to this Section 4 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 securities through such underwriting
shall, together with the Company and any other parties distributing their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Subsection 4.2, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting, or may exclude Registrable Securities entirely from such
registration and underwriting subject to the terms of this paragraph. The
Company shall so advise all holders of the Company's securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
shares of such securities, including Registrable Securities, that may be
included in the registration and underwriting shall be allocated in the
following manner: shares, other than Registrable Securities and other
securities carrying registration rights, requested to be included in such
registration by stockholders shall be excluded and if a limitation on the number
of shares is still required, the number of securities that may be included shall
be allocated among the Holders and holders of securities having PARI PASSU
registration rights, if any, in proportion, as nearly as possible, to the
respective amounts of such securities held by each such holder, in each case at
the time of filing the Registration Statement. In the event of any underwriter
cutback, if any selling stockholder which is a Holder of Registrable Securities
is a partnership or corporation, the partners, retired partners and stockholders
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "selling Holder", and any pro rata reduction with
respect to such "selling Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "selling Holder", as defined in this sentence. No securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder disapproves of
the terms of the underwriting, it may elect to withdraw therefrom by written
notice to the Company and the underwriter. The Registrable Securities so
withdrawn shall also be withdrawn from registration.
4.3 EXPENSES OF REGISTRATION. All expenses incurred in connection
with a registration effected pursuant to Subsection 4.2, including without
limitation all registration, filing, and qualification fees (including blue sky
fees and expenses), printing expenses, escrow fees, fees and disbursements of
counsel for the Company and, if there are more than two (2) participating
Holders, of one special counsel for the participating Holders, and expenses of
any special audits incidental to or required by such registration (collectively,
"Registration Expenses"), shall be borne by the Company; provided, however, that
the term Registration
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Expenses shall not include, and in no event will the Company be obligated to
pay, stock transfer taxes or underwriters' discounts or commissions relating to
Registrable Securities.
4.4 OBLIGATIONS OF THE COMPANY. Whenever required under Section 4.2
to effect the registration of any Registrable Securities, 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 its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective until the earlier of (i) one hundred eighty
(180) days or (ii) until the Holder or Holders have completed the distribution
relating thereto; PROVIDED HOWEVER, that the Company may delay the filing of
such registration statement for up to 60 days following such request by giving
notice to Purchaser if the Company shall have determined that the Company may be
required to disclose any material corporate development which disclosure may
have a material effect on the Company. Following the effectiveness of a
registration statement filed pursuant to Rule 415 under the 1933 Act, the
Company may, at any time, but not more than once in any six-month period,
suspend the effectiveness of such registration statement for up to 60 days, as
appropriate (a "Suspension Period"), by giving notice to Purchaser, if the
Company shall have determined that the Company may be required to disclose any
material corporate development which disclosure may have a material effect on
the Company. The duration of any Suspension Period shall be added to the period
of time the Company agrees to keep the registration statement effective.
Purchaser agrees that, upon receipt of any notice from the Company of a
Suspension Period, Purchaser shall forthwith discontinue disposition of shares
covered by such registration statement or prospectus until Purchaser (i) is
advised in writing by the Company that the use of the applicable prospectus may
be resumed, (ii) has received copies of a supplemental or amended prospectus, if
applicable, and (iii) has received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference in such
prospectus.
(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 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best 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 of such offering and, if requested
by such underwriter, cause appropriate officers to participate in a "road show"
to market 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 1933 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 any Holder requesting
registration of Registrable Securities pursuant to this Section 4, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 4, if such securities
are being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated 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, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent accountants of the Company, in form and
substance as is customarily given by independent accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
4.5 INDEMNIFICATION.
(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Holder of Registrable Securities, each of such Holder's
officers, directors, partners and agents, and each person controlling such
Holder, with respect to any registration, qualification, or compliance effected
pursuant to this Section 4, and each underwriter, if any, and each person who
controls any underwriter, of the Registrable Securities held by or issuable to
such Holder, against all claims, losses, damages, and liabilities (or actions in
respect thereto) to which they may become subject under the 1933 Act, the 1934
Act, or other applicable law arising out of or based on (i) any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular, or other similar document (including any related Registration
Statement, notification, or the like) incident to any such registration,
qualification, or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) any violation or alleged
violation by the Company of any law, rule or regulation applicable to the
Company in connection with any such registration, qualification, or compliance,
and will reimburse, as incurred, each such Holder, each such underwriter, and
each such director, officer, partner, agent and controlling person, for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss,
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damage, liability, or action; provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense, arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification, or
compliance, indemnify the Company, each of its directors, and each officer who
signs a Registration Statement in connection therewith, and each person
controlling the Company, each underwriter, if any, and each person who controls
any underwriter, of the Company's securities covered by such a Registration
Statement, and each other Holder, each of such other Holder's officers,
partners, directors and agents and each person controlling such other Holder,
against all claims, losses, damages, and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such Registration Statement,
prospectus, offering circular, or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse, as
incurred, the Company, each such underwriter, each such other Holder, and each
such director, officer, partner, and controlling person, for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) was made in such Registration Statement,
prospectus, offering circular, or other document, in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein. In
no event will any Holder be required to enter into any agreement or undertaking
in connection with any registration under this Section 4 providing for any
indemnification or contribution obligations on the part of such Holder greater
than such Holder's obligations under this Subsection 4.5. The liability of each
Holder for indemnification under this Section 4.5 shall not exceed the proceeds
to such Holder from the sale of Registrable Securities.
(c) Each party entitled to indemnification under this
Subsection 4.5 (the "Indemnified Party") shall give notice to the party required
to provide such indemnification (the "Indemnifying Party") of any claim as to
which indemnification may be sought promptly after such Indemnified Party has
actual knowledge thereof, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be reasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 4, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No
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Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
4.6 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification, or
compliance referred to in this Section 4.
4.7 TRANSFER OF REGISTRATION RIGHTS. The rights contained in this
Section 4 to cause the Company to register the Registrable Securities, may be
assigned or otherwise conveyed to any affiliate (as such term is defined in Rule
405 under the 1933 Act) of Purchaser who is a transferee or assignee of Shares
or Registrable Securities, or to a third party acquiring all of the Registrable
Securities, each of whom shall be considered a "Holder" for purposes of this
Section 4, provided that the Company is given written notice by Purchaser, at
the time of or within a reasonable time after said transfer, stating the name
and address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned, and provided that
any such transferee agrees in writing to be bound by the provisions of this
Section 4.
4.8 DELAY OF REGISTRATION. 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 4.
4.9 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, in accordance
with subsection (c) of Rule 144 under the 1933 Act ("Rule 144") or any similar
or analogous rule promulgated under the 1933 Act, as long as Registrable
Securities are outstanding;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the 1933 Act and 1934 Act;
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the 1934 Act;
a copy of the most recent annual or quarterly report of the Company; and such
other reports and documents as a Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing it to sell any such
securities without registration.
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(d) Take all such action (including without limitation the
furnishing of the information described in Rule 144(d)(4)) as may be necessary
or helpful to facilitate a sale of Registrable Securities by a Holder to a
"qualified institutional buyer," as such term is defined in Rule 144A of the
1933 Act.
4.10 "MARKET STAND-OFF" AGREEMENT. Purchaser hereby agrees that,
except for Registrable Securities being sold pursuant to this Section 4, during
the ninety (90)-day period following the effective date of a registration
statement of the Company filed under the 1933 Act, it shall not, to the extent
requested by the Company or any underwriter, sell or otherwise transfer or
dispose of any Common Stock of the Company held by it at any time during such
period; PROVIDED, HOWEVER, that:
(a) Such agreement shall be applicable only to registration
statements (other than on Form S-8) of the Company which cover Common Stock (or
other securities) to be sold on its behalf to the public;
(b) Such Agreement shall be applicable only if Purchaser holds
at least one percent (1%) of the Common Stock of the Company then outstanding;
and
(c) All executive officers and directors of the Company, and all
other corporate partners of the Company similarly situated, enter into similar
agreements.
The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restriction until the end of such period.
The agreement of the Purchaser set forth in this Section 4.10 shall lapse five
(5) years after the Closing Date provided that Purchaser is not at such time an
affiliate of the Company (as defined in Rule 405 under the 1933 Act), in which
case such restrictions shall lapse at such time as Purchaser ceases to be an
affiliate.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's obligation
to purchase the Shares at the Closing is subject to the fulfillment, at or prior
to the Closing, of all of the following conditions, any of which may be waived
by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 2 hereof, to the extent qualified as to materiality, shall be true and
correct in all respects and, to the extent not so qualified, shall be true and
correct in all material respects on the date of the Closing with the same force
and effect as if they had been made on and as of said date; the business and
assets of the Company shall not have been adversely affected in any material way
prior to the Closing; and the Company shall have performed and complied with all
obligations, agreements and conditions herein required to be performed by it on
or prior to the Closing.
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(b) OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have
received from Cooley Godward LLP, counsel to the Company, an opinion letter
substantially in the form attached hereto as Exhibit B, addressed to it, dated
the date of the Closing.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to Purchaser, and Purchaser shall
have received all such counterpart originals or certified or other copies of
such documents as they 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 pursuant to this Agreement 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 or any commissioner of corporations or similar
officer of any other state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares shall be legally
permitted by all laws and regulations to which Purchaser and the Company are
subject.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Certificate, executed by the President of the Company, dated the
Closing Date, certifying to (i) the fulfillment of the conditions specified in
subparagraphs (a) and (d) of this Subsection 5.1. and (ii) the incumbency of the
officers of the Company executing this Agreement and the other instruments
delivered by the Purchaser upon the Closing.
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, 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 Purchaser in Section 3 hereof shall be true and correct
at the date of the Closing, with the same force and effect as if they had been
made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
and complied with all obligations, agreements and conditions herein required to
be performed or complied with by it on or before the Closing.
(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 pursuant to this Agreement 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
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by the SEC or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the Closing, the sale
and issuance of the Shares shall be legally permitted by all laws and
regulations to which Purchaser and the Company are subject.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware, without regard to the principles
regarding conflicts of laws of such State.
6.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
6.3 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 (including any permitted transferee of the Shares).
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and the
other documents delivered pursuant hereto constitute 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.
6.5 SEPARABILITY. In case 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.
6.6 AMENDMENT AND WAIVER. 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 the holders of not less than a majority-in-interest of the aggregate
of outstanding Shares. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon Purchaser, each future holder of the Shares, and
the Company. Upon the effectuation of each such amendment or waiver, the
14
<PAGE>
Company shall promptly give written notice thereof to the record holders of the
Shares who have not previously consented thereto in writing, if any.
6.7 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to Purchaser or any subsequent holder of any Shares
upon any breach, default or noncompliance of the Company under this Agreement,
shall impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval
of any kind or character on Purchaser's part of any breach, default or
noncompliance under this Agreement or any waiver on Purchaser's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing, and that
all remedies, either under this Agreement, by law, or otherwise afforded to
Purchaser, shall be cumulative and not alternative.
6.8 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(a) upon personal delivery, (b) on the first business day after receipted
delivery to a courier service which guarantees next business-day delivery, under
circumstances in which such guaranty is applicable, or (c) on the earlier of
delivery or five (5) business days after mailing by United States certified by
mail, postage and fees prepaid, to the appropriate party at the address set
forth below or to such other address as the part so notifies the other in
writing:
(a) if to the Company, to:
COCENSYS, INC.
213 Technology Drive
Irvine, CA 92718
Attention: President and Chief Executive Officer
Fax:(714) 753-6141
with a copy to:
COOLEY GODWARD LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Alan C. Mendelson, Esq.
Fax:(415) 857-0663
15
<PAGE>
if to Purchaser, to:
AMERICAN HOME PRODUCTS CORPORATION
5 Giralda Farms
Madison, NJ 07940
Attention: Senior Vice President and General Counsel
Notwithstanding the foregoing, all notices and other communications to
an address outside of the United States shall be sent by telecopy and confirmed
in writing to be sent by first class mail.
6.9 FINDER'S FEES.
(a) The Company represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and hereby agrees to indemnify and to hold harmless of and from any
liability for any commission or compensation in the nature of a finder's fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which the Company or any of
its employees or representatives is responsible.
(b) Purchaser represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement, and hereby agrees to indemnify and to hold the Company harmless of
and from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which Purchaser
or any of its employees or representatives are responsible.
6.10 FEES AND EXPENSES. Each party agrees to pay all its own
fees, costs and expenses, including legal and accounting fees, relating to the
negotiation, execution, delivery and performance this Agreement and the
transactions contemplated hereby. If legal action is brought by, or on behalf
of, Purchaser to enforce or interpret this Agreement, the prevailing party shall
be entitled to recover its attorneys' fees and legal costs in connection
therewith.
6.11 INFORMATION CONFIDENTIAL. Purchaser acknowledges that
certain information received by it pursuant hereto is confidential and for
Purchaser's use only, and it will refrain from using such information or
reproducing, disclosing, or disseminating such information to any other person
(other than its employees, affiliates, agents, or partners having a need to know
the contents of such information and its attorneys, in each case who agree to be
bound by this Section 6.11), except in connection with the exercise of rights
under this Agreement, unless such information (i) is or becomes, through no
fault of Purchaser, available to the public generally; (ii) was already known by
Purchaser, as demonstrated by competent evidence, at the time of its receipt
from the Company; (iii) is obtained by Purchaser from a third party legally free
to disclose such information; or (iv) Purchaser is required by a governmental
body or court of competent jurisdiction to disclose such information.
16
<PAGE>
6.12 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.
6.13 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.
17
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
COCENSYS, INC. AMERICAN HOME PRODUCTS CORPORATION
213 Technology Drive 5 Giralda Farms
Irvine, CA 92718 Madison, NJ 07940
By: By:
--------------------------- ----------------------------
F. Richard Nichol Name:
President and Chief Executive Officer Title:
18
<PAGE>
EXHIBITS
Exhibit A - CERTIFICATE OF DESIGNATION
Exhibit B - OPINION OF COMPANY'S COUNSEL
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION
<PAGE>
CERTIFICATE OF POWERS, DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
COCENSYS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
COCENSYS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on April 29, 1997:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation in accordance with the provisions of
its Amended and 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 rights, preferences and limitations thereof
(in addition to the provisions set forth in the Restated Certificate of
Incorporation of the Corporation, which are applicable to the Preferred
Stock of all classes and series), as follows:
Series C Convertible Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. One Hundred Thousand (100,000)
shares of Preferred Stock, $.001 par value, are designated "Series C
Convertible Preferred Stock" with the rights, preferences, privileges and
restrictions specified herein (the
1.
<PAGE>
"Series C Preferred Stock"). Such number of shares may be not increased or
decreased without the consent of the holder.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of the Series C
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available therefor, dividends
at the rate per share equal to any dividend declared or paid per share to
the Common Stock of the Corporation ("Common Stock"). The right to such
dividends on the Series C Preferred Stock shall be non-cumulative.
SECTION 3. VOTING RIGHTS. Except as set forth herein. or as otherwise
provided by law, holders of Series C Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.
SECTION 4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or
involuntary (a "Liquidation Event"), the holders of the Series C Preferred
Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to
the holders of the Common Stock or Junior Preferred Stock of the
Corporation, an amount per share (as adjusted for any combinations,
consolidations, stock distributions or stock dividends with respect to such
shares) equal to the quotient of (a) $5,000,000 divided by (b) the number
of shares of Series C Preferred Stock issued and outstanding as of the date
of such Liquidation Event. If upon the occurrence of such Liquidation
Event, the assets and funds thus distributed among the holders of the
Series C Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amount, then the entire
assets and funds of the Corporation legally available for distribution shall
be distributed among the holders of the Series C Preferred Stock in
proportion to the shares of Series C Preferred Stock then held by them.
SECTION 5. CONVERSION. Subject to the limitations set forth in
Subsection (B) below, the Series C Preferred Stock shall convert only as
follows:
(A) CONVERSION AT HOLDER'S OPTION. At any time after May _, 1999, the
Series C Preferred Stock shall be convertible, in whole or in part, on a
maximum of three occasions, at the
2.
<PAGE>
option of the holder, into such number of fully paid and nonassessable
shares of Common Stock equal to the quotient of (a) the product of $50 and
the number of shares of Series C Preferred Stock being converted, divided
by (b) the Conversion Price.
The "Conversion Prices" shall be equal to the greater of:
(i) $[5.43] or
(ii) the lesser of:
(x) the Future Market Price x 0.80 or
(y) $[7.76];
PROVIDED, HOWEVER, that if the Future Market Price is less than $[3.88],
the Conversion Price shall be $[4.37].
The "Future Market Price" set forth above shall be the average closing
price of the Common Stock for the period commencing on the 23rd trading day
prior to the date upon which the holder delivers notice to the Corporation
of such conversion (each, a "Conversion Date") and ending on the third
trading day prior to the Conversion Date, as reported in the WALL STREET
JOURNAL, WESTERN EDITION.
(B) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In
the event the Corporation at any time or from time to time shall declare or
pay any dividend on the Common Stock payable in Common Stock or in any
right to acquire Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by stock split, reclassification or otherwise), or in the
event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the maximum and minimum number of shares of
Common Stock into which the Series C Preferred Stock may be converted,
shall be proportionately decreased or increased, as appropriate.
(C) MECHANICS OF CONVERSION. Before any holder of Series C Preferred
Stock shall be entitled to receive shares of Common Stock, he shall
surrender the certificate or certificates thereof, duly endorsed, at the
office of the Corporation or of any transfer agent for such stock, and
shall state therein the name or
3.
<PAGE>
names in which he wishes the certificate or certificates shares of Common
Stock to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series C
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled as aforesaid. Such conversion
shall be deemed to have been made on the Conversion Date, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(D) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock, 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 C Preferred
Stock.
(E) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any share or shares of Series C Preferred Stock. All shares
of Common Stock (including fractions thereof) issuable upon conversion of
Series C Preferred Stock 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 a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the closing
price of the Common Stock on the date of conversion, multiplied by such
fraction.
(F) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any (i) reorganization of the capital stock of the Corporation, (ii)
consolidation or merger of the Corporation in which the Corporation is not
the surviving corporation, or (iii) sale of all or substantially all of the
Corporation's assets to another corporation (each, an "Event") shall be
effected in such a way that holders of Common Stock shall be entitled to
receive securities, cash or other assets or property, the first Conversion
Date shall be accelerated to the date immediately preceding such Event, or
such other date necessary to assure that any holder of Series C Preferred
Stock receives such shares of stock, securities or other assets or property
as may be issued or payable with respect to or in exchange for shares of
Common Stock.
4.
<PAGE>
SECTION 6. NO REDEMPTION. The shares of Series C Preferred Stock shall
not be redeemable.
SECTION 7. AMENDMENT. The Restated Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series C
Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of at least two-thirds of the outstanding shares of Series C
Preferred Stock, voting together as a single class.
5.
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this certificate as of
May ___, 1997.
---------------------------------------
F. Richard Nichol, Ph.D.
President and Chief Executive Officer
---------------------------------------
Alan C. Mendelson
Secretary
6.
<PAGE>
EXHIBIT B
OPINION OF COMPANY'S COUNSEL
<PAGE>
EXHIBIT B
FORM OF OPINION
May ___, 1997
American Home Products Corporation
5 Giralda Farms
Madison, NJ 07940
RE: SALE AND PURCHASE OF COCENSYS, INC. SERIES C PREFERRED STOCK
Gentlemen:
We have acted as counsel for CoCensys, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale of 100,000 shares of the
Company's Series C Preferred Stock to American Home Products Corporation, a
Delaware corporation ("Purchaser"), pursuant to the terms of that certain Stock
Purchase Agreement, dated May ___, 1997, by and between the Company and
Purchaser (the "Agreement"). The shares of Company Series C Preferred Stock
issued to Purchaser at the closing (the "Closing") are referred to herein as the
"Shares". We are rendering this opinion pursuant to Section 5.1(b) of the
Agreement. Except as otherwise defined herein, capitalized terms used but not
defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the parties thereto and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents where authorization, execution and delivery are
prerequisites to the effectiveness of such documents (except the due
authorization, execution and delivery of the Agreement by the Company). We have
also assumed: that all individuals executing and delivering documents had the
legal capacity to so execute and deliver; that you have received all documents
you were to receive under the Agreement; that the Agreement is an obligation
binding upon you; if you are a corporation or other entity, that you have filed
any required California franchise or income tax returns and have paid any
required
<PAGE>
American Home Products Corporation
May ___, 1997
Page 2
California franchise or income taxes; and that there are no extrinsic agreements
or understandings among the parties to the Agreement that would modify or
interpret the terms of the Agreement or the respective rights or obligations of
the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antifraud law, rule or regulation relating to securities, or to the
sale or issuance thereof.
Our opinions in paragraphs 5, 6 and 7 below as they relate to the Conversion
Shares are based upon the hypotheses that the Shares are convertible, and are
being converted, on the date hereof.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
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 or lease its
property and assets and to conduct its business as it is currently being
conducted and, to the best of our knowledge, is qualified as a foreign
corporation to do business in each jurisdiction in the United States in which
the ownership of its property or the conduct of its business requires such
qualification and where any statutory fines or penalties or any corporate
disability imposed for the failure to qualify would materially or adversely
affect the Company, its assets, financial condition or operations.
3. The Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company in accordance with its terms, except as rights to indemnity thereunder
may be limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
4. The Shares have been duly authorized and, upon issuance and delivery
in accordance with the terms of the Agreement, will be validly issued, fully
paid and nonassessable. The
<PAGE>
American Home Products Corporation
May ___, 1997
Page 3
Conversion Shares have been duly authorized and, upon issuance and delivery in
accordance with the Certificate of Designation, will be validly issued, fully
paid and nonassessable.
5. The issuance and sale of the Shares and the issuance of the Conversion
Shares, in each case as contemplated by the Agreement, do not violate any
provision of the Company's Amended and Restated Certificate of Incorporation or
Bylaws and do not violate or contravene (a) any governmental statute, rule or
regulation 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 we are aware, the violation or contravention of which would
materially and adversely affect the Company, its assets, financial condition or
operations.
6. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the issuance and sale of the Shares and
the issuance of the Conversion Shares, in each case as contemplated by the
Agreement, have been made or obtained.
7. The issuance and sale of the Shares and the issuance of the Conversion
Shares, in each case as contemplated by the Agreement is exempt from the
registration requirements of the Securities Act of 1933, as amended.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
By ________________________
<PAGE>
DOC. 3
EXHIBIT 10.3
DEVELOPMENT AND COMMERCIALIZATION
AGREEMENT (NO. 2)
BETWEEN
COCENSYS, INC.,
AND
WYETH-AYERST LABORATORIES
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate(s)". . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Agreement (No. 1)" . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Back-Up Compound Candidate". . . . . . . . . . . . . . . . . . . . 1
1.4 "Back-Up Program" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Beginning of [ * ] . . . . . . . . . . . . . . . . . . . . 2
1.6 "Beginning of [ * ] . . . . . . . . . . . . . . . . . . . . 2
1.7 "CO 2-6749" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "CoCensys Patent Rights". . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Commercially Reasonable Efforts" . . . . . . . . . . . . . . . . . 2
1.10 "Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Development" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 "Epalon". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "FDA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Field" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 "First Commercial Sale" . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Fully Burdened Cost" . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Good Clinical Practice". . . . . . . . . . . . . . . . . . . . . . 3
1.18 "Good Laboratory Practice". . . . . . . . . . . . . . . . . . . . . 3
1.19 "Good Manufacturing Practice" . . . . . . . . . . . . . . . . . . . 3
1.20 [ * ] . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 "IND" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 "Intellectual Property Rights". . . . . . . . . . . . . . . . . . . 4
1.23 "Invention" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 "Know-How". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 "Licensed Compound" . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 "MAA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 "Major Market Countries". . . . . . . . . . . . . . . . . . . . . . 5
1.28 "NDA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 "Net Sales" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 [ * ] . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.31 "Non-Scheduled Product" . . . . . . . . . . . . . . . . . . . . . . 5
1.32 "Patent Rights" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 "Phase I," "Phase II," and "Phase III". . . . . . . . . . . . . . . 6
1.34 "Product" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.35 "Regulatory Approval" . . . . . . . . . . . . . . . . . . . . . . . 6
1.36 "RoW" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.37 "Royalty Term". . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 "Scheduled Product" . . . . . . . . . . . . . . . . . . . . . . . . 6
i.
* Confidential treatment requested
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
1.39 "Third Party(ies)". . . . . . . . . . . . . . . . . . . . . . . . . 7
1.40 "Trademark" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.41 "USA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.42 "Wyeth-Ayerst Patent Rights". . . . . . . . . . . . . . . . . . . . 7
2. DEVELOPMENT OF LICENSED COMPOUND . . . . . . . . . . . . . . . . . . . . 7
2.1 General Obligations . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Records, Reports and Information Exchange . . . . . . . . . . . . . 7
2.3 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Funding of the Development. . . . . . . . . . . . . . . . . . . . . 8
2.5 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . 8
3. BACK-UP COMPOUND CANDIDATES. . . . . . . . . . . . . . . . . . . . . . . 8
4. INDICATIONS; EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Indications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 No [ * ]by CoCensys [ * ] . . . . . . . . . . . . . 9
4.3 No [ * ]. . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. LICENSE GRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Licenses to Wyeth-Ayerst. . . . . . . . . . . . . . . . . . . . . . 9
5.2 Licenses upon Expiration. . . . . . . . . . . . . . . . . . . . . . 10
6. CONSIDERATION TO COCENSYS. . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Method of Payment of Payments . . . . . . . . . . . . . . . . . . . 11
6.3 Payments for Back-Up Compound Candidates. . . . . . . . . . . . . . 11
6.4 Royalties and Profit Sharing. . . . . . . . . . . . . . . . . . . . 11
7. MARKETING AND ROYALTIES IN THE ROW . . . . . . . . . . . . . . . . . . . 11
7.1 Marketing by Wyeth-Ayerst . . . . . . . . . . . . . . . . . . . . . 11
7.2 Commercial and Regulatory Diligence . . . . . . . . . . . . . . . . 11
7.3 Annual Net Sales Calculation. . . . . . . . . . . . . . . . . . . . 12
7.4 Non-Scheduled Product Royalty in the RoW. . . . . . . . . . . . . . 12
7.5 Scheduled Product Royalty.. . . . . . . . . . . . . . . . . . . . . 12
7.6 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7 Adjustment to Royalties in RoW. . . . . . . . . . . . . . . . . . . 13
ii.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
8. ACCOUNTS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Foreign Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Sales by Sublicensees . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 Currency Blockage . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10. MANUFACTURING AND DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 16
10.1 Primary Manufacture . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Second Source . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 Exchange of Information . . . . . . . . . . . . . . . . . . . . . . 16
10.4 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. PROSECUTION, MAINTENANCE AND INFRINGEMENT OF INTELLECTUAL PROPERTY
RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.1 Patentable Inventions . . . . . . . . . . . . . . . . . . . . . . . 16
11.2 Prosecution and Maintenance of Patent Rights. . . . . . . . . . . . 17
11.3 Patent Extensions . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.4 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.5 Infringement of Intellectual Property Rights. . . . . . . . . . . . 18
11.6 Infringement of Third Party Patent Rights . . . . . . . . . . . . . 19
12. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.1 General Conditions of Expiration and Termination. . . . . . . . . . 20
13.2 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.3 Termination for Breach. . . . . . . . . . . . . . . . . . . . . . . 21
13.4 No Limit on Remedies. . . . . . . . . . . . . . . . . . . . . . . . 22
13.5 Unilateral Termination by Wyeth-Ayerst. . . . . . . . . . . . . . . 22
13.6 Automatic Termination of Agreement (No. 1). . . . . . . . . . . . . 22
14. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.1 Assignment to Affiliates. . . . . . . . . . . . . . . . . . . . . . 22
14.2 Other Permitted Assignment. . . . . . . . . . . . . . . . . . . . . 22
14.3 Binding Nature of Assignment. . . . . . . . . . . . . . . . . . . . 22
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
15. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.1 Cross Indemnification . . . . . . . . . . . . . . . . . . . . . . . 23
15.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16. WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 24
16.1 General.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 24
17.1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.2 Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.3 Permitted Disclosures . . . . . . . . . . . . . . . . . . . . . . . 25
17.4 Disclosure of Agreement . . . . . . . . . . . . . . . . . . . . . . 25
17.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.6 Publication . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
18. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.1 No Waiver of Contractual Rights . . . . . . . . . . . . . . . . . . 26
18.2 Execution and Amendments. . . . . . . . . . . . . . . . . . . . . . 26
18.3 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.4 Relationship between the Parties. . . . . . . . . . . . . . . . . . 26
18.5 Correspondence and Notices. . . . . . . . . . . . . . . . . . . . . 26
18.6 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.8 Appointment of Wyeth-Ayerst International, Inc. . . . . . . . . . . 27
iv.
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DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (NO. 2)
THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (NO. 2) (the
"Agreement") is entered into as of the 12th day of May, 1997 (the "Effective
Date"), by and between CoCensys, Inc., a company incorporated under the laws
of the State of Delaware, with its principal place of business at 213
Technology Drive, Irvine, California 92618, USA ("CoCensys"), and American
Home Products Corporation, acting through its Wyeth-Ayerst Laboratories
Division, a company incorporated under the laws of the State of Delaware,
with its principal place of business at 555 Lancaster Avenue, St. Davids,
Pennsylvania 19087, USA ("Wyeth-Ayerst"). Both CoCensys and Wyeth-Ayerst are
referred to individually as a "Party" and collectively as the "Parties."
WHEREAS, CoCensys has discovered, has rights to and is developing that
certain compound CO 2-6749 (as defined in Article 1.8 below); and
WHEREAS, Wyeth-Ayerst would like to obtain the worldwide (except in the
USA) rights to develop and commercialize CO 2-6749 or a back-up compound
therefor;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
premises, covenants and conditions contained in this Agreement, the Parties
agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the terms hereunder shall have the
meanings as defined below:
1.1 "AFFILIATE(S)" shall mean, in the case of either CoCensys or
Wyeth-Ayerst, any corporation, joint venture, or other business
entity which directly or indirectly controls, is controlled by, or is
under common control with that Party. "Control," as used in this
Article 1.1, shall mean having the power to direct, or cause the
direction of, the management and policies of an entity, whether
through ownership of voting securities, by contract or otherwise.
1.2 "AGREEMENT (NO. 1)" shall mean that Development and Commercialization
Agreement (No.1) between the Parties relating to development and
commercialization of CO 2-6749 or a back-up compound therefore in the
USA, entered into on even date with the Effective Date.
1.3 "BACK-UP COMPOUND CANDIDATE" shall mean any Epalon meeting the
criteria set forth in Exhibit A as determined by CoCensys and
submitted by CoCensys to Wyeth-Ayerst as a potential substitute for CO
2-6749. "Back-Up Compound Candidate" shall include any prodrugs, salt
forms and other biologically active isomers or enantiomers of such
CoCensys Epalon.
1.
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1.4 "BACK-UP PROGRAM" shall mean the program for identification of Back-Up
Compound Candidates as conducted by CoCensys pursuant to Agreement
(No. 1)
1.5 "BEGINNING OF [ * ] shall mean the date upon which the
[ * ] for a Product.
1.6 "BEGINNING OF [ * ] shall mean the date upon which the
[ * ] for a Product.
1.7 "CO 2-6749" shall mean the Epalon [ * ] and any
prodrugs, including specifically CO 6-0549, salt forms and other
biologically active isomers or enantiomers of this Epalon. A diagram
of the chemical structure of each of CO 2-6749 and CO 6-0549 is set
forth on Exhibit B.
1.8 "COCENSYS PATENT RIGHTS" shall mean all Patent Rights owned or
Controlled by CoCensys. A list of the CoCensys Patent Rights existing
as of the Effective Date is set out in Exhibit C hereto.
1.9 "COMMERCIALLY REASONABLE EFFORTS" shall mean efforts and resources
normally used by a party for a compound owned by it or to which it has
rights, which is of similar market potential at a similar stage in its
product life, taking into account the competitiveness of the
marketplace, the proprietary position of the compound, the regulatory
structure involved, the profitability of the applicable products, and
other relevant factors.
1.10 "CONTROL" shall mean licensed with the right to grant sublicenses
without violating the terms of any Third Party agreement.
1.11 "DEVELOPMENT" shall mean the pre-clinical development of a Licensed
Compound and clinical development for use in the Field in the RoW of a
Product through and including Regulatory Approval.
1.12 "EPALON" shall mean the class of neuroactive steroid compounds that
interact with GABAA receptor complexes.
1.13 "FDA" shall mean the Food and Drug Administration of the USA.
1.14 "FIELD" shall mean the treatment in humans of [ * ]
in the Diagnostic and Statistical Manual of Mental Disorders, Fourth
Edition ("DSM-IV"). Also, specifically to be included under [
* ] defined by research criteria in DSM-IV. It is understood
by the Parties that the above-named disorders may be defined
differently in future editions of the Diagnostic and
2.
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Statistical Manual of Mental Disorders, but that, for purposes of
this Agreement, the definition of Field shall always be with
reference to those diseases which fall within the definition of the
above-named disorders in the edition of DSM-IV which is current as of
the Effective Date. Expressly excluded from the Field are
[ * ].
1.15 "FIRST COMMERCIAL SALE" shall mean the first sale of a Product in a
given country after the Product has been granted Regulatory Approval
by the competent authorities in that country.
1.16 "FULLY BURDENED COST" shall mean the sum of the costs set forth on
Exhibit D, to the extent allocable to Product.
1.17 "GOOD CLINICAL PRACTICE" or "GCP" shall mean the then current
standards for clinical trials for pharmaceuticals, as set forth in the
United States Federal Food, Drug and Cosmetics Act and applicable
regulations promulgated thereunder, as amended from time to time, and
such standards of good clinical practice as are required by the
European Union and other organizations and governmental agencies in
countries in which the Product is intended to be sold, to the extent
such standards are not in contravention with United States GCP.
1.18 "GOOD LABORATORY PRACTICE" or "GLP" shall mean the then current
standards for laboratory activities for pharmaceuticals, as set forth
in the United States Federal Food, Drug and Cosmetics Act and
applicable regulations promulgated thereunder, as amended from time to
time, and such standards of good laboratory practice as are required
by the European Union and other organizations and governmental
agencies in countries in which the Product is intended to be sold, to
the extent such standards are not in contravention with United States
GLP.
1.19 "GOOD MANUFACTURING PRACTICE" or "GMP" shall mean the current
standards for the manufacture of pharmaceuticals, as set forth in the
United States Federal Food, Drug and Cosmetics Act and applicable
regulations promulgated hereunder, as amended from time to time, and
such standards of good manufacturing practice as are required by the
European Union and other organizations and governmental agencies in
countries in which the Product is intended to be sold, to the extent
such standards are not in contravention with United States GMP.
1.20 [ * ] shall mean the development milestone
[ * ].
1.21 "IND" shall mean an Investigational New Drug Application as defined in
the United States Federal Food, Drug and Cosmetics Act and applicable
regulations promulgated thereunder, as amended from time to time.
3.
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1.22 "INTELLECTUAL PROPERTY RIGHTS" shall mean all Patent Rights,
trademarks, copyrights, know-how and/or trade secrets which are owned
or Controlled by one Party hereto (with the right to license) or
jointly by the Parties, with regard to the development, manufacture,
importing, use, marketing and/or sale of the Product.
1.23 "INVENTION" shall mean an invention conceived in the course of the
performance of and within the scope of this Agreement.
1.24 "KNOW-HOW" shall mean all know-how, processes, information and data
including any copyright relating thereto owned or controlled by either
Party (with the right to have or disclose) as of the Effective Date or
acquired during the term of this Agreement relating to:
(a) the Licensed Compound;
(b) any Back-Up Compound;
(c) any Product containing (a) or (b);
(d) methods of making any of (a), (b) or (c);
(e) any component of (c);
(f) any intermediate in the making of any of (a), (b), (c), or (e);
(g) any method of using any of (a), (b), (c), (e), or (f); and/or
(h) any use of (a), (b) or (c).
The term "Know-How," however, shall not include any know-how,
processes, information and data which is, as of the Effective Date or
becomes later on, generally available to the public.
1.25 "LICENSED COMPOUND" shall mean CO 2-6749 and any Back-Up Compound
Candidate.
1.26 "MAA" shall mean the Marketing Authorization Application filed in the
European Community for approval to market and sell a pharmaceutical
product, whether by centralized procedure with the Committee for
Proprietary Medicinal Products or otherwise.
1.27 "MAJOR MARKET COUNTRIES" shall mean Germany, the United Kingdom, Italy
and France.
4.
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1.28 "NDA" shall mean a New Drug Application, as defined in the United
States Federal Food, Drug and Cosmetic Act and applicable regulations
promulgated thereunder as amended from time to time.
1.29 "NET SALES" shall mean proceeds from sales of the Product by either
Party, its Affiliates or sublicensees, as appropriate, to Third
Parties, less the sum of (a) and (b) where (a) is a provision,
determined under generally accepted accounting principles in the
United States, for [ * ] and (b) is
[ * ].
Sales of Product by and between a Party and its Affiliates are not
sales to Third Parties and shall be excluded from Net Sales
calculations for all purposes.
1.30 [ * ] shall have the meaning set forth in Article 4.1.
1.31 "NON-SCHEDULED PRODUCT" shall mean a Product to be sold in the RoW
that has received a designation similar to a "Schedule V" designation
in the USA, as defined in 21 CFR Part 1308, or no scheduling
designation in the course of Regulatory Approval from a foreign
government.
1.32 "PATENT RIGHTS" shall mean all patents or patent applications, in
whatever country in the RoW, and all divisionals, continuations,
continuations-in-part, reissues, extensions, supplementary protection
certificates and foreign counterparts thereof in the RoW, existing as
of the Effective Date or filed or issuing during the term of this
Agreement, at least one claim of which covers:
(a) the Licensed Compound;
(b) any Back-Up Compound;
(c) any Product containing (a) or (b);
(d) methods of making any of (a), (b) or (c);
(e) any component of (c);
(f) any intermediate in the making of any of (a), (b), (c) or (e);
(g) any method of using any of (a), (b), (c), (e), or (f); and/or
(h) any use of (a), (b) or (c).
5.
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1.33 "PHASE I," "PHASE II," AND "PHASE III" shall mean the phases of the
clinical development of pharmaceuticals as defined in the United
States Federal Food, Drug and Cosmetics Act and/or applicable
regulations promulgated thereunder, as amended from time to time, or
any comparable foreign regulations.
1.34 "PRODUCT" shall mean any pharmaceutical product containing a Licensed
Compound in any formulation or mode of administration.
1.35 "REGULATORY APPROVAL" shall mean all authorizations by the competent
authorities which are required for the regular marketing, promotion,
pricing and sale of the Product in a given country or regulatory
jurisdiction.
1.36 "ROW" shall mean all countries and territories in the world except the
USA.
1.37 "ROYALTY TERM" shall mean the period extending from First Commercial
Sale in any country in the RoW until the later of (i) expiration of
the last to expire patent within the Patent Rights necessary to make,
use, import, offer for sale or sell the Product in one or more Major
Market Countries, or (b) fifteen (15) years from First Commercial Sale
in the first Major Market Country.
1.38 "SCHEDULED PRODUCT" shall mean a Product to be sold in the RoW that
has received a designation similar to a Schedule I, II, III or IV
designation in the USA, as defined in 21 CFR Part 1308, in the course
of Regulatory Approval from a foreign government.
1.39 "THIRD PARTY(IES)" shall mean any person(s) or entity(ies) other than
CoCensys, Wyeth-Ayerst or their Affiliates.
1.40 "TRADEMARK" shall mean the trademark under which the Product shall be
marketed as set out in Article 9.
1.41 "USA" shall mean the United States of America, its territories and
possessions and the Commonwealth of Puerto Rico.
1.42 "WYETH-AYERST PATENT RIGHTS" shall mean all Patent Rights owned or
Controlled by Wyeth-Ayerst. A list of the Wyeth-Ayerst Patent Rights
existing as of the Effective Date is set out in Exhibit E hereto.
2. DEVELOPMENT OF LICENSED COMPOUND.
2.1 GENERAL OBLIGATIONS. Wyeth-Ayerst shall be responsible for the
design, implementation and funding of all Development. Wyeth-Ayerst
agrees to use Commercially Reasonable Efforts to conduct the
Development with the intent of obtaining Regulatory Approval in the
RoW and bringing a Product in the Field
6.
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to the market as soon as reasonably practicable. Wyeth-Ayerst shall
ensure that the Development is carried out adhering to
Wyeth-Ayerst's ethical and safety standards. Wyeth-Ayerst shall
have the right to subcontract with third parties any of its
Development obligations hereunder, without the consent or
approval of CoCensys. In the event Wyeth-Ayerst intends to
exercise its right to subcontract one or more of its Development
obligations, it shall notify CoCensys of such intent and CoCensys
shall have the right to submit one or more proposals to
Wyeth-Ayerst to perform such one or more parts of such Development
activities. Wyeth-Ayerst shall consider all such proposals
submitted by CoCensys on an equal basis with proposals submitted by
Third Party subcontractors for the same Development tasks.
2.2 RECORDS, REPORTS AND INFORMATION EXCHANGE.
2.2.1 TECHNOLOGY AND INFORMATION TRANSFER. CoCensys will provide
to Wyeth-Ayerst all Know-How as Wyeth-Ayerst deems
necessary to carry out the Development and [ * ]
of the Product and to obtain Regulatory Approval. All
information transferred, provided or exchanged under this
Article 2.2.1 will be subject to the confidentiality
requirements set forth in Article 17.
2.2.2 RECORD KEEPING. Wyeth-Ayerst will maintain records in
sufficient detail and in good scientific manner appropriate
for Regulatory Approval and patent purposes.
2.2.3 COMMUNICATION REGARDING THE DEVELOPMENT PROGRESS. A
project team shall be appointed by Wyeth-Ayerst and
representatives thereof shall meet with representatives of
CoCensys on a regular basis (but no less often than every
six (6) months) to keep CoCensys apprised of the
Development progress and to bring to its attention any
problems or issues which may have an impact on the timing
of the Development (e.g., regulatory submissions).
2.3 COMPLIANCE. Wyeth-Ayerst shall comply with all GLP, GCP and GMP in
the conduct of the Development.
2.4 FUNDING OF THE DEVELOPMENT. Wyeth-Ayerst shall be responsible for
one hundred percent (100%) of all costs, fees and expenses
associated with the Development and the obtaining of all Regulatory
Approvals.
2.5 REGULATORY APPROVALS. [ * ] shall file all regulatory
dossiers under its name. [ * ] shall own all Regulatory
Approvals. [ * ] shall have the right of reference to the
extent necessary to exercise its rights or to meet its
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obligations hereunder. [ * ] shall be responsible for all
communications with regulatory agencies.
3. BACK-UP COMPOUND CANDIDATES
Unless otherwise provided, all of the Parties' rights and obligations
under this Agreement, including those regarding the development,
manufacture, distribution, marketing, sale, promotion, profit-sharing
and royalties of CO 2-6749 and the Product are applicable to any Back-Up
Compound Candidate either replacing CO 2-6749 or otherwise developed in
the Field pursuant to Agreement (No. 1). The provisions herein
regarding CO 2-6749 and the Product shall apply to such Back-Up Compound
Candidate MUTATIS MUTANDIS.
4. INDICATIONS; EXCLUSIVITY.
4.1 INDICATIONS. Wyeth-Ayerst shall have the right to conduct
Development with respect to any Licensed Compound. Wyeth-Ayerst
[ * ] covenants that it shall not conduct clinical trials of any
Licensed Compound for [ * ] in the Row except as provided under
this Article 4.1. If Wyeth-Ayerst discovers or determines that any
Licensed Compound may have efficacy in the treatment of [ * ]
and if Wyeth-Ayerst desires to pursue clinical trials of such Licensed
Compound [ * ] it will promptly notify CoCensys in writing and
disclose to CoCensys its rationale therefor. Wyeth-Ayerst shall have
the right to pursue such clinical trials for [ * ] and market
and sell such Licensed Compound as though it were a Product developed
and sold for [ * ]under this Agreement, subject to the Parties
negotiation of terms and conditions, including royalty rates, whether
and on what terms such Licensed Compound will be Co-Promoted by the
Parties, and other appropriate payment and other terms. Following
such negotiation of such terms and conditions the Parties shall either
enter into a separate agreement or amend this Agreement to so provide
for such terms and conditions. In the event the Parties are unable to
come to agreement as to the appropriate terms and conditions for the
development and commercialization of such Licensed Compound for
[ * ] by Wyeth-Ayerst, the matter shall be referred to the
Chief Executive Officer of CoCensys and the President of Wyeth-Ayerst
Laboratories, an Affiliate of Wyeth-Ayerst, for good faith
resolution, for a period of [ * ] days. If such matter is not
resolved by the end of such [ * ] day period, the Parties
shall be [ * ]. Notwithstanding the foregoing, it is
expressly understood and
8.
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agreed that [ * ] as used in this Agreement shall not include
[ * ].
4.2 NO [ * ] BY COCENSYS [ * ]. During the term of this
Agreement, CoCensys shall not [ * ]
4.3 NO [ * ] During the term of this Agreement, CoCensys will
not [ * ] except under the terms of this Agreement, or as
otherwise agreed to by Wyeth-Ayerst.
5. LICENSE GRANTS.
5.1 LICENSES TO WYETH-AYERST. Subject to the other
provisions of this Agreement, CoCensys hereby grants to
Wyeth-Ayerst:
5.1.1 An exclusive license in the RoW, under its Intellectual
Property Rights, to develop, manufacture and have
manufactured, import, use, market, offer for sale and sell
Products, in the Field, and, subject to Article 4.1, for
any New Indication.
5.1.1 The licenses granted in Article 5.1.1 shall be
sublicensable by Wyeth-Ayerst outside the USA without
the consent of CoCensys to Affiliates and Third Parties.
Wyeth-Ayerst agrees to keep CoCensys informed as to such
sublicensing activities.
5.1.2 Unless otherwise provided in this Agreement, Wyeth-Ayerst
covenants that it shall not, nor shall it cause any
Affiliate to, use or practice directly or indirectly any
CoCensys Know-How, and, until expiration thereof, any
CoCensys Patent Rights for any purposes other than the
development, manufacture, importation, use, marketing, offer
for sale or sale of the Product.
5.1.3 Wyeth-Ayerst may at any time request and authorize CoCensys
to grant licenses directly to Affiliates of Wyeth-Ayerst
wheresoever located by giving written notice to CoCensys
designating to whom a direct license is to be granted by
CoCensys. CoCensys shall promptly enter into a separate
direct license agreement with each Affiliate of Wyeth-Ayerst
designated by Wyeth-Ayerst in such notice. All such direct
license agreements shall be consistent with the terms of
this Agreement, to the extent applicable, except for such
modifications as may be required by the laws, regulations
and customs in the country in which the direct license
agreement is to be performed.
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5.2 LICENSES UPON EXPIRATION. Upon expiration of the Royalty Term,
and provided all sums owing to CoCensys have been paid,
Wyeth-Ayerst shall have a [ * ] where agreed under Article
4.1, under any remaining CoCensys Intellectual Property Rights.
6. CONSIDERATION TO COCENSYS.
6.1 PAYMENTS. In further consideration of CoCensys' continuing
assistance in research and development of the Product, Wyeth-Ayerst
shall pay to CoCensys the following amounts at the time of the
following achievements with respect to the Product:
6.1.1 [ * ] Upon [ * ] Wyeth-Ayerst shall make to
CoCensys a non-refundable payment of [ * ].
6.1.2 [ * ] Upon [ * ]
Wyeth-Ayerst shall make to CoCensys a non-refundable payment
of [ * ].
6.1.3 [ * ] Upon [ * ] Wyeth-Ayerst
shall make to CoCensys a non-refundable payment of
[ * ]if the Product is a [ * ] Product in such
[ * ], or [ * ] if the Product is a [ * ]
Product in such [ * ]. If the Product is a [ * ]
Product in all [ * ] Wyeth-Ayerst shall make to
CoCensys an additional non-refundable payment of
[ * ].
6.1.4 [ * ] Upon [ * ]
Wyeth-Ayerst shall make to CoCensys a non-refundable payment
of [ * ] if the Product is a [ * ] Product or
[ * ] if the Product is a [ * ] Product.
6.2 METHOD OF PAYMENT OF PAYMENTS. All payments shall be made by
Wyeth-Ayerst to CoCensys by way of wire transfer to CoCensys
within thirty (30) days from the date corresponding to the event
triggering the milestone payment.
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6.3 PAYMENTS FOR BACK-UP COMPOUND CANDIDATES. Each payment payable
pursuant to this Article 6 shall [ * ] be payable
[ * ] for the Product [ * ].
6.4 ROYALTIES AND PROFIT SHARING. Wyeth-Ayerst shall, in addition to
the payments set forth above, also pay to CoCensys royalties and
such other amounts as set forth in Article 7.
7. MARKETING AND ROYALTIES IN THE ROW.
7.1 MARKETING BY WYETH-AYERST. Wyeth-Ayerst shall have exclusive rights
to the Product in the countries of the RoW, and shall use
Commercially Reasonable Efforts to market, sell and distribute the
Product at its discretion in such countries through its own network
and direct licensee Affiliates, and/or through the network of its
licensees/distributors, subject to Article 5.1.2.
7.2 COMMERCIAL AND REGULATORY DILIGENCE.
7.2.1 Within [ * ] months of [ * ] for the Product
in the USA or the European Union, Wyeth-Ayerst will commence
[ * ] and notify CoCensys in writing of such event.
7.2.2 Within [ * ] months of [ * ] Wyeth-Ayerst
shall notify CoCensys in writing as to [ * ].
7.2.3 After [ * ] Wyeth-Ayerst agrees that it
will undertake commercial launch of the Product in such
country [ * ].
7.3 ANNUAL NET SALES CALCULATIONS. Annual Net Sales in the RoW of
[ * ] and [ * ] Products shall be first calculated on
a country-by-country basis until the end of the Royalty Term. Then
Net Sales of [ * ] Products in all countries in the RoW shall
be added together to calculate annual Net Sales of [ * ]
Products in the RoW; and Net Sales of [ * ] Products in all
countries in the RoW shall be added together to calculate annual
Net Sales of [ * ] Products in the RoW. Finally, Net Sales
of [ * ] Products and Net Sales of [ * ] Products
shall be added together to calculate annual RoW Net Sales.
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7.4 [ * ] PRODUCT ROYALTY IN THE ROW. In consideration of the
licenses granted to Wyeth-Ayerst by CoCensys under Article 5,
Wyeth-Ayerst shall pay to CoCensys a running royalty on annual Net
Sales of all [ * ] Products in the RoW according to the
following marginal rates:
(a) For annual RoW Net Sales which are less than or equal to [ * ]
million, [ * ] of such RoW Net Sales which are allocable
to Net Sales of [ * ] Products; and
(b) For annual RoW Net Sales which are more than [ * ] million
but less than or equal to [ * ] million,
[ * ] of such RoW Net Sales which are allocable to Net
Sales of [ * ] Products; and
(c) For annual RoW Net Sales which are more than [ * ] million,
[ * ] of such RoW Net Sales which are allocable to Net Sales
of [ * ] Products.
7.5 [ * ] PRODUCT ROYALTY. In consideration of the licenses
granted to Wyeth-Ayerst by CoCensys under Article 5, Wyeth-Ayerst
shall pay to CoCensys a running royalty on Net Sales of all [ * ]
Products in the RoW according to the following marginal rates:
(a) For annual RoW Net Sales which are less than or equal to
[ * ] million, [ * ] of such RoW Net Sales which are
allocable to Net Sales of [ * ] Products; and
(b) For annual RoW Net Sales which are more than [ * ] million
but less than or equal to [ * ] million, [ * ] of
such RoW Net Sales which are allocable to Net Sales of
[ * ] Products; and
(c) For annual RoW Net Sales which are more than [ * ] million,
[ * ] of such RoW Net Sales which are allocable to Net
Sales of [ * ] Products.
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7.6 PAYMENTS. All royalties payable to CoCensys under this Article 7
shall be paid in U.S. Dollars within three (3) months after
the close of each calendar quarter, or earlier if possible, during the
Royalty Term. Each payment shall be accompanied by a statement, on a
country by country basis, of the amount of Net Sales in the RoW during
such quarter, the aggregate amount of Net Sales for the year-to-date
in the RoW, and amount of royalties due on such Net Sales. For any
given royalty period during the first three (3) quarters of the year,
Wyeth-Ayerst shall pay to CoCensys the royalty at the lowest rate
specified in Articles 7.4 and 7.5 applicable to the then current
year-to-date worldwide RoW Net Sales level. Each statement provided at
the end of the fourth quarter shall contain a reconciliation of actual
royalty payments made during that year, any adjustments to be made to
such royalty amounts owing for such year, and the amount actually
owed for such year. Any amounts owing to CoCensys shall be paid to
CoCensys at the time of such fourth quarter statement, in accordance
with the terms of this Article 7.6. Any adjustments to royalties owed
in the RoW pursuant to Articles 7.7.1 and 7.7.2 shall be done at the
end of the calendar year in which such event giving rise to such
adjustment occurred; PROVIDED, HOWEVER, that following the entry of
one or more generic products in any year, and where royalties were
reduced for that year pursuant to Article 7.7.1, the following year's
royalty rate for quarterly royalty payments shall be at [ * ]
with a reconciliation upward at year end in the event sales of such
generic product(s) do not rise to the level specified in
Article 7.7.1.
7.7 ADJUSTMENT TO ROYALTIES IN ROW.
7.7.1 GENERIC PRODUCTS. In the event that, during the Royalty
Term, a generic version of the Product is introduced in
any country in the RoW by a Third Party, and if unit sales
of all such generic product(s) constitute more than [ * ]
of the combined unit sales in the RoW of both the Product
and any such generic product(s), then the annual royalty
amount owed under Article 7.4 or 7.5 for such country shall
be reduced by [ * ] such reduction to be done
in the fourth quarter payment as described in Article 7.6.
7.7.2 [ * ] In the event that at the end of a given
calendar year [ * ] (where [ * ] =
[ * ] = the [ * ] and
[ * ] = [ * ] then Wyeth-Ayerst will provide
written notice to CoCensys of such fact and the Parties
shall meet promptly thereafter to discuss and develop in
good faith a commercially reasonable plan to [ * ]
In the event that, at any time after the eight (8) month
anniversary of the date of the first meeting to discuss the
RoW
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Cost Reduction Plan, [ * ] (where [ * ] =
[ * ] then, for so long as [ * ] an amount
equal to [ * ] may be deducted from the royalty
amount due CoCensys for such year; PROVIDED, HOWEVER, in
no event shall the royalty due CoCensys be less than that
paid at the lowest applicable rate (i.e., [ * ]
for [ * ] Products and [ * ] for [ * ]
Products, or [ * ] respectively, where
Article 7.7.1 applies) set forth in Article 7.4 or 7.5.
8. ACCOUNTS AND RECORDS; WITHHOLDING TAX.
8.1 RECORDS. Wyeth-Ayerst shall keep accurate books and accounts
of record in connection with the manufacture, use and/or sale by or
for it of the Products in sufficient detail to permit accurate
determination of all figures necessary for verification of royalties,
profits, milestone payments and other compensation required to be
paid hereunder. Wyeth-Ayerst shall maintain such records for a period
of three (3) years after the end of the year in which they were
generated.
8.2 AUDITS. CoCensys, through an independent certified public accountant
reasonably acceptable to Wyeth-Ayerst, shall have the right, at its
own expense, to access the books and records of Wyeth-Ayerst for the
sole purpose of verifying statements furnished by Wyeth-Ayerst
pursuant to Article 7.6. Such access shall be conducted after
reasonable prior written notice to Wyeth-Ayerst and during ordinary
business hours and shall not be more frequent than once during each
calendar year. CoCensys agrees to keep in strict confidence all
information learned in the course of such audit, except when it is
necessary to reveal such information in order to enforce its rights
under this Agreement. CoCensys' right to have such records examined
shall survive termination or expiration of this Agreement. In the
event such audit reveals an underpayment of [ * ] or more of
the amount actually due, Wyeth-Ayerst shall reimburse CoCensys for
the costs of such audit in addition to promptly remitting to CoCensys
the amount of any underpayment.
8.3 FOREIGN EXCHANGE. For the purpose of computing Net Sales for Products
sold in a currency other than United States Dollars, such currency
shall be converted into United States Dollars in accordance with
Wyeth-Ayerst's customary and usual translation procedures,
consistently applied.
8.4 SALES BY SUBLICENSEES. In the event Wyeth-Ayerst grants
licenses or sublicenses to others to make or sell the Product, such
licenses or sublicenses shall include an obligation for the licensee
or sublicensee to account for and report its Net Sales of such
Products on the same basis as if such sales were Net Sales by
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Wyeth-Ayerst, and CoCensys shall receive royalties in the same amounts
as if the Net Sales of the licensee or sublicensee were Net Sales
of Wyeth-Ayerst.
8.5 CURRENCY BLOCKAGE. In the event Wyeth-Ayerst is prevented from
making any payment under this Agreement by virtue of the Statutes,
Laws, Codes or Governmental Regulations of the country from which
the payment is to be made, then such payments may be paid by
depositing them in the currency in which accrued to CoCensys'
account in a bank acceptable to CoCensys in the country whose currency
is involved. If the Statutes, Laws, Codes or Governmental Regulations
prohibit both transmittal and deposit of such payments, the obligation
to pay, deposit, accrue or otherwise account for such payments in such
country shall be suspended for so long as said prohibition shall be
in effect.
8.6 WITHHOLDING. All taxes, assessments and fees of any nature levied
or incurred on account of any payments accruing under this Agreement,
by national, state or local governments, will be assumed and paid by
Wyeth-Ayerst, except taxes levied thereon as income to CoCensys and
if such taxes are required to be withheld by Wyeth-Ayerst they will
be deducted from payments due to CoCensys and will be timely paid by
Wyeth-Ayerst to the proper taxing authority for the account of
CoCensys, a receipt or other proof of payment therefor secured and
sent to CoCensys as soon as practicable.
9. TRADEMARKS.
[ * ] shall select and own the Trademarks for marketing the Product
in the RoW. [ * ] for (i) registration of such Trademarks and
(ii) bringing, maintaining and prosecuting any action to protect or defend
such Trademarks shall be borne [ * ] At the termination of this
Agreement, [ * ] shall [ * ] have unrestricted ownership
of such Trademark(s) in the RoW.
10. MANUFACTURING AND DISTRIBUTION.
10.1 PRIMARY MANUFACTURE. [ * ] shall manufacture or have
manufactured its requirements for clinical and commercial supplies
of the Product. In fulfilling its manufacturing obligations
hereunder, [ * ] will use at least the same level of effort
as it employs for its other products of similar scientific and
commercial promise. If [ * ] elects to have the Product
manufactured, [ * ] shall favorably consider using, but shall
not be obligated to use, [ * ] as its manufacturing
sublicensee.
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10.2 SECOND SOURCE. In order to ensure an uninterrupted supply of
the Product, the Parties intend to identify a Third Party manufacturer
(the "Second Source") to manufacture the Product in the event that
[ * ]is unable to supply all of the reasonably anticipated
requirements of the Product. If the Second Source manufactures the
Product pursuant to this Article 10.2, Wyeth-Ayerst and CoCensys shall
cooperate and assist each other to obtain, transfer or use any
licenses, registrations or information reasonably required to permit
such Second Source to manufacture the Product.
10.3 EXCHANGE OF INFORMATION. Subject to Article 17, the Parties
undertake to exchange and to use diligent efforts to cause Third Party
manufacturers to exchange, on a regular basis, all data and know-how
relating to the manufacture of the Product.
10.4 COMPLIANCE. Any manufacture of the Product for sale in the
RoW shall be performed in full compliance with all applicable foreign
GMP and applicable laws and regulations. CoCensys shall be entitled
to audit such compliance and in particular the quality assurance
program for the manufacture of the Product.
11. PROSECUTION, MAINTENANCE AND INFRINGEMENT OF INTELLECTUAL
PROPERTY RIGHTS.
11.1 PATENTABLE INVENTIONS.
11.1.1 Wyeth-Ayerst shall own all Inventions made solely by its
employees and agents, and all patent applications and
patents claiming such Inventions. CoCensys shall own all
Inventions made solely by its employees and agents, and all
patent applications and patents claiming such Inventions.
All Inventions made jointly by employees or agents of
CoCensys and employees or agents of Wyeth-Ayerst and all
patent applications and patents claiming such Inventions
shall be owned jointly by CoCensys and Wyeth-Ayerst. All
determinations of inventorship under this Article 11.1.1
shall be in accordance with U.S. law.
11.1.2 Wyeth-Ayerst and CoCensys shall each disclose to the other
and discuss any Inventions and the desirability of filing a
United States patent application covering the Invention, as
well as any foreign counterparts. The Party owning the
Invention shall make the final decision with respect to any
such filings. With respect to jointly owned Inventions, the
Parties shall determine which Party shall file and prosecute
any patent applications thereon. [ * ] shall be
responsible for expenses for preparing and prosecuting joint
patent applications in the RoW.
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11.1.3 Each Party shall have the right to select patent counsel and
to take such other actions as are reasonably appropriate to
prepare, file, prosecute and maintain patent protection with
respect to its Inventions arising under this Article 11.1.
11.2 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS. Each Party
shall be responsible for prosecuting and maintaining its own Patent
Rights, subject to Article 11.1.2. With respect to the RoW, the
decision as to whether to prosecute and maintain Patent Rights, and in
which countries to do so, shall be made jointly by Wyeth-Ayerst and
CoCensys. To facilitate such decision-making, each Party will appoint
a "patent coordinator", who will have the authority to make such
decision on behalf of such Party. All expenses for filing,
prosecuting and maintaining the CoCensys Patent Rights in the RoW
shall be paid by [ * ].
11.3 PATENT EXTENSIONS. The Party holding a Patent Right, if requested by
and with the assistance of the other Party, shall apply in a timely
manner for such patent term extensions or patent restoration
certificates for such Patent Right as are available under similar
legislation to the U.S. Federal Drug Price Competition and Patent
Term Restoration Act of 1984 (Pub. L. No. 98-417), and any amendments
thereof or any successor acts thereto. [ * ] expenses incurred
in connection with such patent term extensions or patent restoration
certificates shall be borne [ * ].
11.4 COOPERATION. Each of the Parties shall execute or have
executed by its appropriate employees, representatives, agents, and
contractors such documents as may be necessary to obtain, perfect or
maintain any Patent Rights filed or to be filed pursuant to this
Agreement, and to cooperate with the other Party so far as reasonably
necessary with respect to furnishing all information and data in its
possession reasonably necessary to obtain or maintain such Patent
Rights.
11.5 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.
11.5.1
(a) If either Party should become aware of any infringement or
threatened infringement or misappropriation, as the case
may be, in the RoW of any Intellectual Property Rights of
the other Party, it shall promptly notify such other Party
in writing. As soon as practicable the Parties shall
confer on the particulars of such infringement or
misappropriation and the possible courses of action to be
taken. The Party holding the affected Intellectual Property
Rights shall have the right, but not the obligation, to
institute, prosecute and control any
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legal proceedings in its own name and by its own counsel and at its
own expense, subject to Article 11.5.1(d), to prevent or restrain
such infringement, and the other Party shall have the right,
[ * ] to be represented in such action by its own counsel.
If one Party brings any such action or proceeding, the other Party
hereby consents to being joined as a party plaintiff where
necessary and, in case of joining, such other Party agrees to give
the first Party reasonable assistance and authority to file and to
prosecute such suit, at the exercise of the Party bringing such
suit.
(b) Notwithstanding the foregoing, the Parties shall jointly determine
which Party shall have the primary right and responsibility (but
not the obligation) to institute, prosecute, and control any action
or proceeding with respect to infringement or misappropriation of
jointly owned Intellectual Property Rights in the RoW and the other
Party shall have the right [ * ] to be represented by its
counsel. Each Party hereby consents to the filing of any such
action by the other Party with respect to any jointly owned Patent
Rights in accordance with this Article 11.5.1(b).
(c) If one Party alone prosecutes an infringement or misappropriation of
Intellectual Property Rights, [ * ] any damages
and costs recovered in any proceedings or by way of settlement
under Articles 11.5.1(a) and 11.5.1(b) above or Article 11.5.2
shall [ * ] as applicable.
(d) If both Parties participate in prosecuting an infringement or
misappropriation of Intellectual Property Rights, the actual costs
and expenses of all suits brought by either Party under this
Article 11.5.1 shall be [ * ]. Any remaining
damages shall then be [ * ].
11.5.2 If the Party having the primary right to institute, prosecute, and
control such infringement or misappropriation action under Article
11.5.1 fails to do so within a period of one hundred twenty (120)
days after receiving notice of the infringement, or if that Party,
after initiating an action, determines to discontinue such action,
the other Party shall have the right to bring and control or take
over any such action by counsel of its own choice, and at its own
expense, subject to Article 11.5.1(c) unless prevented from doing
so by the laws of the country where the infringement or
misappropriation occurred or is threatened.
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11.5.3 In connection with any proposed settlement in respect of any
infringement or threatened infringement of any Intellectual
Property Rights, the Party intending to settle shall notify
and consult with the other Party as to the terms of
settlement, whose written consent shall be required prior to
any such settlement, such consent shall not be unreasonably
withheld.
11.5.4 In connection with any action taken by either Party against a
Third Party to protect or enforce any Intellectual Property
Rights, the other Party shall, if requested, consult with the
Party taking such action, and make available as witnesses its
employees or as evidence any materials, and/or data as are
reasonably necessary for the furtherance of such action. The
expenses in connection with the providing of witnesses and/or
the making available of any materials and/or data shall be
[ * ].
11.6 INFRINGEMENT OF THIRD PARTY PATENT RIGHTS.
11.6.1 If Wyeth-Ayerst should be of the opinion that it cannot make,
import, use, market and/or sell the Product in the RoW under
its own Intellectual Property Rights or those licensed to it
by CoCensys under this Agreement without infringing a Third
Party's patent, it shall notify CoCensys. Both Parties then
shall seek an opinion of patent counsel acceptable to both
Parties. If such patent counsel concurs with Wyeth-Ayerst's
opinion, they shall jointly or independently endeavor to
secure a license from the Third Party on terms that are
acceptable to both Parties.
11.6.2 If, in the opinion of patent counsel selected under Article
11.6.1, the Third Party patent, if litigated, would be found
invalid or not be infringed by the manufacture or sale of the
Product or if the Parties otherwise mutually agree to obtain a
license to such Third Party patent, the Parties shall proceed
in accordance with the terms of this Agreement, unless an
action for infringement is brought against one or both Parties.
11.6.3 If either Party is sued for patent infringement of any Third
Party patents arising out of the manufacture, use, sale or
importation of the Product in the RoW, the Parties shall
promptly meet to discuss the course of action to be taken to
resolve or defend any such infringement litigation. Each Party
shall provide the other with such assistance as is reasonably
necessary and shall cooperate in the defense of any such
action. [ * ] of any cost/expense of defending such
action incurred by Wyeth-Ayerst in a given country
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and any damages and/or other compensation imposed on
Wyeth/Ayerst in such country may be deducted by
Wyeth-Ayerst from any amounts otherwise due CoCensys
under this Agreement in the form of royalties for such
country, PROVIDED, HOWEVER, in no event shall royalty
amounts due CoCensys for such country be reduced by more
than [ * ]in any given calendar year as a result
of this sentence.
12. FORCE MAJEURE.
Neither Party shall be liable to the other for delay or failure in the
performance of the obligations on its part contained in this Agreement
if and to the extent that such failure or delay is due to circumstances
beyond its control which it could not have avoided by the exercise of
reasonable diligence. It shall notify the other Party promptly should
such circumstances arise, giving an indication of the likely extent and
duration thereof, and shall use all commercially reasonable efforts to
resume performance of its obligations as soon as practicable.
13. TERM AND TERMINATION.
13.1 GENERAL CONDITIONS OF EXPIRATION AND TERMINATION.
13.1.1 Any permitted sublicenses granted hereunder shall
automatically terminate or expire at the same time as
this Agreement expires (insofar as they haven't already
terminated), except where, and to the extent, any license
granted hereunder survives expiration of this Agreement,
as expressly provided in this Agreement. Upon early
termination of this Agreement for any reason, if any
permitted sublicensee is not then in default under its
sublicense agreement with Wyeth-Ayerst, then such
sublicensee shall automatically have a license under this
Agreement as a direct licensee of CoCensys, on economic
terms as are set forth herein with respect to
Wyeth-Ayerst and otherwise with the same rights and
obligations as Wyeth-Ayerst under this Agreement.
13.1.2 The provisions of Articles 8, 9, 11, 14, 15, and 17 shall
survive termination or expiration of this Agreement.
13.1.3 Termination or expiration of this Agreement
shall not operate to deprive either Party of any rights
or remedies either at law or in equity or to relieve
either Party of any of its obligations incurred prior to
the effective date of such termination or expiration.
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13.2 TERM. Unless earlier terminated as set out in this Agreement, the term
of this Agreement shall end when all the respective royalty payment
obligations of the Parties under this Agreement have expired.
13.3 TERMINATION FOR BREACH.
13.3.1 TERMINATION FOR BREACH. Except as otherwise provided in this
Section 13.3.1, either Party may terminate this Agreement for
material breach by the other Party, which breach remains
uncured for [ * ] in the case of nonpayment of any
amount due and [ * ] for all other breaches, each
measured from the date written notice of such breach is given
to the breaching party, or, if such breach is not susceptible
of cure within such [ * ] period and the breaching
party uses diligent good faith efforts to cure such breach,
for [ * ] after written notice to the breaching party.
13.3.2 BREACH BY WYETH-AYERST. If termination is due to a material
breach by Wyeth-Ayerst, all rights granted to Wyeth-Ayerst
under this Agreement shall revert to CoCensys, provided that
[ * ] as of the date of such termination.
13.4 NO LIMIT ON REMEDIES. Nothing herein shall exclude or limit any remedies
or entitlements whatsoever which the law confers to either Party in the
event of a breach of contractual obligations by the other Party.
13.5 UNILATERAL TERMINATION BY WYETH-AYERST. Wyeth-Ayerst shall have the right
to unilaterally terminate this Agreement upon [ * ] written
notice. In the event of such termination by Wyeth-Ayerst, all
Wyeth-Ayerst's rights to the Licensed Compound and the Product in the
RoW shall revert to CoCensys. Wyeth-Ayerst shall not be obligated to
make any payments under this Agreement for events which occur after the
effective date of such termination. After the termination date,
Wyeth-Ayerst will make its relevant personnel, relevant data and other
resources available as are reasonably necessary to effect an orderly
transition of Development and commercialization of the Product for a
period of [ * ] after termination. In the event of such
termination, Wyeth-Ayerst shall (i) [ * ] (ii)
[ * ] and (iii) [ * ].
13.6 AUTOMATIC TERMINATION OF AGREEMENT (NO. 1). This Agreement shall
terminate automatically if Agreement (No. 1) is terminated for any
reason other than expiration or for material breach by CoCensys.
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14. ASSIGNMENT.
14.1 ASSIGNMENT TO AFFILIATES. Either Party may assign any of its rights
or obligations under this Agreement in any country to any
Affiliates, for so long as they remain Affiliates; provided,
however, that such assignment shall not relieve the assigning Party
of its responsibilities for performance of its obligations under
this Agreement.
14.2 OTHER PERMITTED ASSIGNMENT. Either Party may assign its rights or
obligations under this Agreement in connection with a merger or
similar reorganization or the sale of all or substantially all of
its assets, [ * ] provided, that in the event of
such merger, reorganization or sale, [ * ] All
other assignments by any Party shall [ * ].
14.3 BINDING NATURE OF ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the successors and permitted assigns of
the Parties. Any assignment not in accordance with this Article 14
shall be void.
15. INDEMNIFICATION.
15.1 CROSS INDEMNIFICATION.
15.1.1 Each Party hereby agrees to save, defend and hold the other
Party and its agents and employees harmless from and
against any and all suits, claims, actions, demands,
liabilities, expenses and/or losses, including reasonable
legal expense and attorneys' fees, brought by a Third
Party or that arise in connection with any claim brought
by a Third Party ("Losses") resulting directly from the
manufacture, use, handling, storage, sale or other
disposition of Products in the RoW to the extent such
Losses result solely from (i) the negligence of the
indemnifying party or breach by the indemnifying party of
any provision of this Agreement, (ii) failure of the
indemnifying party to manufacture or have manufactured
Products (bulk or finished form) according to cGMP or
Product specifications, or (iii) marketing activities of
the indemnifying party contrary to applicable
governmental regulations or outside the approved labeling
of the Product.
15.1.2 In the event CoCensys is seeking indemnification under
Article 15.1.1, it shall inform Wyeth-Ayerst of a claim
as soon as is reasonably practicable after it receives
notice of the claim, shall permit Wyeth-Ayerst to assume
direction and control of the defense of the claim
(including the right to settle the claim solely for
monetary
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consideration), and shall cooperate as requested (at the
expense of Wyeth-Ayerst) in the defense of the claim.
15.1.3 In the event Wyeth-Ayerst is seeking indemnification under
Article 15.1.1, it shall inform CoCensys of a claim as
soon as is reasonably practicable after it receives
notice of the claim, shall permit CoCensys to assume
direction and control of the defense of the claim
(including the right to settle the claim solely for
monetary consideration), and shall cooperate as requested
(at the expense of CoCensys) in the defense of the claim.
15.2 INSURANCE. Each Party further agrees to use reasonable commercial
efforts to obtain and maintain, during the term of this Agreement,
Comprehensive General Liability Insurance, including Products
Liability, with reputable and financially secure insurance carriers
or self-insurance, with limits of not less than $5,000,000 per
occurrence and in the aggregate to cover its indemnification
obligations under Articles 15.1 and 15.2.
16. WARRANTIES AND REPRESENTATIONS.
16.1 GENERAL. Each Party hereby warrants to the other:
16.1.1 that it has full power and authority to execute and deliver
this Agreement and to perform the obligations on its part
hereunder; and
16.1.2 that the execution and delivery by it of this Agreement and
the performance of its obligations hereunder have been
duly approved by all necessary corporate action and do
not require any shareholder action or approval.
16.1.3 that, to the best of its knowledge, the manufacture, use,
importation, offer for sale, or sale of CO 2-6749 will
not infringe any Third Party patent in the RoW.
17. CONFIDENTIAL INFORMATION.
17.1 INFORMATION. Each Party shall keep all information received from
the other Party (the "Information") confidential and shall not
disclose nor use the Information without the other Party's written
consent except to the extent contemplated by this Agreement. This
restriction shall not, however, prevent disclosure of the
Information if and to the extent that disclosure is required by
law, PROVIDED THAT the disclosing Party informs the other Party
without delay of any such
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requirement, in order to allow such other Party to object to such
disclosure and to seek an appropriate protective order or similar
protection prior to disclosure.
17.2 EXCEPTIONS. The above obligations shall not apply or shall cease to
apply to Information which:
17.2.1 is now, or hereafter becomes, through no act or failure to
act on the part of the receiving Party, generally known or
available;
17.2.2 is known by the receiving Party at the time of receiving
such information, as evidenced by its written records;
17.2.3 is hereafter furnished to the receiving Party by a Third
Party, as a matter of right and without restriction on
disclosure;
17.2.4 is independently developed by or for the receiving Party
without any breach of this Article 17; or
17.2.5 is the subject of a written permission to disclose provided
by the disclosing Party.
17.3 PERMITTED DISCLOSURES. Information may be disclosed to employees,
agents, consultants, sublicensees or suppliers of the recipient Party
or its Affiliates, but only to the extent required to accomplish the
purposes of this Agreement and only if the recipient Party obtains
prior agreement from its employees, agents, consultants, sublicensees
or suppliers 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 proprietary or confidential
information of its own to ensure that such employees, agents,
consultants, sublicensees or suppliers do not disclose or make any
unauthorized use of the Information.
17.4 DISCLOSURE OF AGREEMENT. Neither CoCensys nor Wyeth-Ayerst shall
release to any Third Party or publish in any way any non-public
information with respect to the terms of this Agreement or concerning
their cooperation without the prior written consent of the other,
which consent will not be unreasonably withheld or delayed; provided;
however that either Party may disclose the terms of this Agreement to
the extent required to comply with applicable laws, including without
limitation the rules and regulations promulgated by the Securities and
Exchange Commission and the Party intending to disclose the terms of
this Agreement shall provide the nondisclosing party an opportunity to
review and comment on the intended disclosure which is reasonable
under the circumstances. Notwithstanding any other provision of this
Agreement, each Party may disclose the terms of this Agreement to
lenders, investment bankers and other financial
24.
<PAGE>
institutions of its choice solely for purposes of financing the
business operations of such Party either (i) upon the written consent
of the other Party or (ii) if the disclosing Party uses reasonable
efforts to obtain a signed confidentiality agreement with such
financial institution with respect to such information, upon terms
substantially similar to those contained in this Article 17.
17.5 PUBLICITY. Subject to Section 17.4, all publicity, press releases and
other announcements relating to this Agreement or the transaction
contemplated hereby shall be reviewed in advance by, and shall be
subject to the approval of, both Parties.
17.6 PUBLICATION. The Parties shall cooperate in appropriate publication
of the results of research and development work performed pursuant to
this Agreement, but subject to their predominating interest in
obtaining patent protection for any patentable subject matter. The
determination of authorship for any paper shall be in accordance with
accepted scientific practice. Notwithstanding anything in this
Article 17.6 to the contrary, all publication and presentations of the
results of research and development work performed pursuant to this
Agreement must be approved in advance by both Parties.
18. MISCELLANEOUS.
18.1 NO WAIVER OF CONTRACTUAL RIGHTS. The failure of either Party to
require performance by the other Party of any of that other Party's
obligations hereunder shall in no manner affect the right of such
Party to enforce the same at a later time. No waiver by any Party
hereto of any condition, or of the breach of any provision, term,
representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such
condition or breach, or of any other condition or of the breach of any
other provision, term representation or warranty hereof.
18.2 EXECUTION AND AMENDMENTS.
18.2.1 Each Party shall execute and deliver all such instruments
and perform all such other acts as the other Party may
reasonably request in order to carry out the transactions
contemplated by this Agreement.
18.2.2 This Agreement may not be amended or modified except by
written instrument signed by or on behalf of both Parties.
18.3 SEVERABILITY. If a court or other tribunal of competent jurisdiction
should hold any term or provision of this agreement to be excessive,
or invalid, void or unenforceable, the offending term or provision
shall be deleted, and, if possible,
25.
<PAGE>
replaced by a term or provision which, so far as practicable achieves
the legitimate aims of the Parties.
18.4 RELATIONSHIP BETWEEN THE PARTIES. Both Parties are independent
contractors under this Agreement. Nothing contained in this Agreement
is intended nor shall be construed so as to constitute CoCensys or
Wyeth-Ayerst as partners or joint venturers with respect to this
Agreement. Neither Party shall have the express or the implied right
nor authority to assume or create any obligations on behalf of or in
the name of the other Party, nor to bind the other Party to any other
contract, agreement or undertaking with any Third Party.
18.5 CORRESPONDENCE AND NOTICES.
18.5.1 Correspondence, reports, documentation, and any other
communication in writing between the Parties in the course
of ordinary implementation of this Agreement shall be
delivered by hand, sent by facsimile, or by airmail to any
one employee appointed by the Party which is to receive such
written communication, or any other way as the Parties deem
appropriate.
18.5.2 Extraordinary notices and communications (including but not
limited to notices of termination, force majeure, material
breach, change of address) shall be in writing and sent by
prepaid registered or certified air mail, or by facsimile
confirmed by prepaid registered or certified air mail
letter, and shall be deemed to have been properly served to
the addressee upon receipt of such written communication.
18.5.3 In the case of CoCensys, the proper address for
communications and for all payments shall be:
CoCensys, Inc.
213 Technology Drive
Irvine, California 92618, USA
Attn: Chief Executive Officer
and in the case of Wyeth-Ayerst, the proper address for
communications and for all payments shall be:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, PA 19087
Attn: Senior Vice President, Global Business Development
With a copy to:
26.
<PAGE>
American Home Products Corporation
5 Giralda Farms
Madison, NJ 07940
Attn: Senior Vice President and General Counsel
18.6 CHOICE OF LAW. This Agreement is subject to and governed by the
laws of the State of Delaware, excluding its conflict of laws
provisions.
18.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which
shall constitute together the same document.
18.8 APPOINTMENT OF WYETH-AYERST INTERNATIONAL, INC. Wyeth-Ayerst hereby
appoints Wyeth-Ayerst International Inc., a subsidiary company of
Wyeth-Ayerst, organized and existing under the laws of the State of
New York, U.S.A., having an office and place of business at 150
Radnor-Chester Road, St. Davids Center, St. Davids, Pennsylvania
19087, U.S.A., to administer as agent for Wyeth-Ayerst all the rights
and obligations of Wyeth-Ayerst in respect of this Agreement,
including, without limitation, the accounting of all royalties and
other sums or payments due CoCensys hereunder, and the transmittal
and receipt of all notices, reports, statements or other records
relating to such royalties and the manufacture and sale of the
Product. By its execution hereinbelow, Wyeth-Ayerst International
Inc. accepts the designation and appointment set forth hereinabove.
This Agreement together with its Exhibits and further agreements mentioned
herein and Agreement No. 1 constitutes the entire agreement of the Parties with
respect to the subject matter hereof as of its date, and supersedes all prior
agreements, understandings, representations and proposals, written or oral,
relating thereto.
AMERICAN HOME PRODUCTS CORPORATION COCENSYS, INC.
- ---------------------------------- ---------------------------------
Name Name
Title Title
WYETH-AYERST INTERNATIONAL, INC.
- ----------------------------------
Name
Title
27.
<PAGE>
EXHIBIT A
BACK-UP COMPOUND CANDIDATE CRITERIA
Criterion for IND-Tracking Activities Required
-------------------------- -------------------
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT B
[ * ]
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT C
COCENSYS PATENT RIGHTS
US ISSUE DATE EXPIRATION DATE CORRESPONDING FOREIGN APPLICATIONS
- ------------------------------------------------------------------------------
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT D
DEFINITION OF FULLY BURDENED COST
The following expenses are manufacturing expenses which are prepared in
accordance with generally accepted accounting principles consistently applied.
THE FOLLOWING EXPENSES ARE INCLUDED IN MANUFACTURING COSTS:
[ * ]
* Confidential treatment requested
<PAGE>
EXHIBIT E
WYETH-AYERST PATENT RIGHTS
[ * ]
* Confidential treatment requested
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<PAGE>
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