<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ISTA PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 3845 33-0511729
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ISTA PHARMACEUTICALS, INC.
15279 ALTON PARKWAY
BUILDING 100
IRVINE, CA 92618
(949) 788-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
EDWARD H. DANSE
CHIEF EXECUTIVE OFFICER
ISTA PHARMACEUTICALS, INC.
15279 ALTON PARKWAY
BUILDING 100
IRVINE, CA 92618
(949) 788-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ISSAC J. VAUGHN, ESQ. JEROME L. COBEN, ESQ.
WILSON SONSINI GOODRICH & ROSATI SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
PROFESSIONAL CORPORATION 525 UNIVERSITY AVENUE, SUITE 220
650 PAGE MILL ROAD PALO ALTO, CA 94301
PALO ALTO, CA 94304 (650) 470-4500
(650) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, $0.001 par value.............................. $86,250,000 $22,770
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED APRIL 5, 2000
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SHARES
[ISTA PHARMACEUTICALS LOGO]
COMMON STOCK
$ PER SHARE
- --------------------------------------------------------------------------------
This is an initial public offering of common stock of Ista Pharmaceuticals, Inc.
We expect that the price to the public in the offering will be between
$ and $ per share. The market price of the shares after the
offering may be higher or lower than the offering price.
We have applied to include the common stock on the Nasdaq National Market under
the symbol "ISTA."
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -------
<S> <C> <C>
Price to the public.................................... $ $
Underwriting discount..................................
Proceeds to Ista.......................................
</TABLE>
We have granted an over-allotment option to the underwriters. Under this option,
the underwriters may elect to purchase a maximum of additional
shares from us within 30 days following the date of this prospectus to cover
over-allotments.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CIBC WORLD MARKETS
ING BARINGS
PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES
The date of this prospectus is , 2000.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 8
Forward-Looking Statements.................................. 15
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 24
Management.................................................. 38
Principal Stockholders...................................... 46
Related Party Transactions.................................. 48
Description of Capital Stock................................ 49
Shares Eligible for Future Sale............................. 52
Underwriting................................................ 54
Legal Matters............................................... 56
Experts..................................................... 56
Where You Can Find More Information......................... 56
Index to Financial Statements............................... F-1
</TABLE>
3
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this prospectus.
Because it is a summary, it does not contain all of the information that you
should consider before investing in the shares. You should read the entire
prospectus carefully.
THE COMPANY
OVERVIEW
We discover and develop novel therapeutics for diseases and conditions of the
eye. Our product development efforts to date have involved highly purified
formulations of a naturally occurring enzyme called hyaluronidase. We are
targeting serious ophthalmic conditions such as vitreous hemorrhage, diabetic
retinopathy, corneal opacification and keratoconus. Each of these conditions
affects a significant number of patients and has limited treatment options.
STRATEGY
Our objective is to build a leading biopharmaceutical company that discovers,
develops and commercializes novel and superior drug products for treatment of
serious diseases and conditions of the eye. We intend to accomplish this through
the following strategic initiatives:
- targeting diseases and conditions representing large underserved markets for
which there are no approved pharmacological therapies
- focusing on bringing our lead product candidate, Vitrase, to market as
quickly as possible and establishing its broad acceptance for ophthalmic
indications
- continuing to discover and develop novel, safe and effective ophthalmic
applications for hyaluronidase
- forming strategic collaborations with pharmaceutical companies or others to
accelerate commercialization of our products, as appropriate
- seeking to acquire or in-license complementary products and technologies for
ophthalmic applications
OUR PRODUCTS IN DEVELOPMENT
Vitrase
We are developing Vitrase, a proprietary formulation of hyaluronidase, for
treatment of severe vitreous hemorrhage, a sight threatening condition, and
diabetic retinopathy, the leading cause of adult blindness in the United States.
Vitrase is currently in two Phase III clinical trials for treatment of severe
vitreous hemorrhage. We also recently initiated a pilot Phase IIa clinical trial
of Vitrase in Mexico for treatment of diabetic retinopathy.
Vitreous hemorrhage. A vitreous hemorrhage occurs when retinal blood vessels
rupture and bleed into the vitreous humor, the clear, gel-like substance that
fills the back of the eye between the lens and the retina. The blood from the
hemorrhage can obscure vision and prevent ophthalmologists from seeing into the
eye to diagnose or treat the cause of the hemorrhage. The only current treatment
options are a "watchful waiting" period, during which no medical treatment is
provided in the hope that the hemorrhage will clear on its own, and an invasive
surgical procedure to remove the blood filled vitreous humor from the eye.
Vitrase, when injected into the vitreous humor, causes the vitreous humor to
liquefy and promotes clearance of vitreous hemorrhage. Based on market research
we commissioned in February 1999, we believe that approximately one million
cases of vitreous hemorrhage occur each year in the United States, Europe and
Japan and that approximately half of these cases are candidates for treatment
using Vitrase.
Diabetic retinopathy. Diabetes can result in abnormal changes to blood vessels
in the eye, a condition known as diabetic retinopathy. Diabetic retinopathy is a
progressive disease consisting of two stages. We are developing Vitrase for
treatment for nonproliferative diabetic retinopathy,
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<PAGE> 5
the first stage of the disease, for which there is currently no effective
treatment. Vitrase, when injected into the vitreous humor, causes the vitreous
humor to liquefy and separate from the retina, thereby limiting growth of
abnormal blood vessels in the back of the eye.
We believe that Vitrase may be effective for treating diabetic retinopathy at
the nonproliferative stage. Approximately four to six million people in the
United States with diabetes have some form of diabetic retinopathy, the majority
of whom are in the nonproliferative stage of the disease.
Keratase
We plan to initiate a Phase IIb trial of Keratase, a proprietary formulation of
hyaluronidase, for the treatment of corneal opacification during the second half
of 2000. Corneal opacification occurs when the cornea, which is normally
transparent, becomes scarred, cloudy or opaque, diminishing the amount of light
entering the eye. The only current treatment for corneal opacification is a
corneal transplant. Risks associated with a corneal transplant include loss of
vision, rejection and creation of astigmatism. We believe that there are
approximately three million people in the United States, Western Europe and
Japan that have a form of vision impairment due to corneal opacification. We
believe Keratase can be used to treat corneal opacification with benefits
equivalent to those of corneal transplants but without the associated risks of
rejection and astigmatism.
Keraform
We are developing Keraform, our proprietary system for the treatment of
keratoconus. Keratoconus is a degenerative corneal disease that impairs vision
and is characterized by progressive thinning of the cornea and the development
of an irregular, cone-like protrusion of the cornea, typically in both eyes. We
believe that there are approximately 400,000 people in the United States,
Western Europe and Japan who currently have keratoconus.
COLLABORATION WITH ALLERGAN
In March 2000, we entered into agreements with subsidiaries of Allergan, Inc.
for the marketing, sale and distribution of Vitrase in the United States and all
international markets, except Mexico until April 2004 and Japan. Allergan is a
leading provider of eye care and specialty pharmaceutical products throughout
the world. Allergan has agreed to pay us a royalty on any sales of Vitrase
outside the United States and will split any profits on sales of Vitrase in the
United States on a 50/50 basis. Pursuant to our agreements, Allergan made an
equity investment of $10.0 million in us and may pay us aggregate future
milestone payments of up to $35.0 million.
GENERAL INFORMATION
We were incorporated in California in February 1992 as Advanced Corneal Systems,
Inc. and will reincorporate in Delaware prior to the completion of this
offering. In March 2000, we changed our name to Ista Pharmaceuticals, Inc. Our
corporate headquarters and principal research laboratories are located at 15279
Alton Parkway, Building 100, Irvine, California 92618, and our telephone number
is (949) 788-6000. Vitrase, Keratase, Keraform, Ista, Ista Pharmaceuticals and
the Ista logo are our trademarks. We also use trademarks of other companies in
this prospectus.
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<PAGE> 6
THE OFFERING
Common stock offered...................... shares
Common stock to be outstanding after the
offering.................................. shares
Use of proceeds........................... To fund clinical trials and
preclinical research, with a
particular focus on Vitrase, to
finance the possible acquisition
of complementary technologies,
products or businesses, and for
general corporate purposes.
Proposed Nasdaq National Market symbol.... ISTA
The number of shares of common stock to be outstanding after the offering in the
table above is based on the number of shares outstanding as of March 31, 2000
and excludes 3,063,867 shares of common stock issuable upon the exercise of
options outstanding as of March 31, 2000, at a weighted average exercise price
of $0.57 per share.
Unless otherwise stated, all information contained in this prospectus assumes:
- no exercise of the over-allotment option granted to the underwriters
- a 1 for 1.25 reverse split of our common stock
- the conversion of all outstanding shares of our preferred stock into shares
of common stock
- the cashless exercise, prior to the offering, of 923,102 warrants to
purchase shares of our common stock
- our reincorporation in Delaware
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<PAGE> 7
SUMMARY FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
------- --------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Costs and expenses:
Research and development......................... $ 4,969 $ 7,523 $ 11,062
General and administrative....................... 1,949 2,147 3,240
------- ------- --------
Total costs and expenses........................... 6,918 9,670 14,302
------- ------- --------
Loss from operations............................... (6,918) (9,670) (14,302)
Interest income, net............................... 166 46 18
------- ------- --------
Net loss........................................... $(6,752) $(9,624) $(14,284)
======= ======= ========
Net loss per common share,
basic and diluted................................ $ (4.89) $ (6.64) $ (8.80)
======= ======= ========
Shares used in computing net loss per common share,
basic and diluted................................ 1,381 1,449 1,623
Pro forma net loss per common share, basic and
diluted.......................................... $
Shares used in computing pro forma net loss per
common share, basic and diluted..................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 709 $15,079
Working capital (deficit).......................... (4,993) 9,422
Total assets....................................... 3,020 17,498
License fee received from Visionex................. 5,000 -- --
Other long term obligations........................ 38 38 38
Total stockholders' equity (deficit)............... (8,656) 5,789
</TABLE>
See Note 1 of Notes to Financial Statements for a description of the number
of shares used in the computation of basic and diluted net loss per common
share and pro forma basic and diluted net loss per common share.
The pro forma balance sheet data above reflect our acquisition of Visionex
Pte. Ltd. and the sale of Series D preferred stock to Allergan in March
2000 for net proceeds of $10.0 million.
The pro forma as adjusted balance sheet data above also give effect to the
sale of shares to be sold in the offering at an assumed initial
public offering price of per share, less the underwriting discount and
other offering expenses.
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<PAGE> 8
RISK FACTORS
You should carefully consider the following factors and other information in
this prospectus before deciding to invest in the shares.
WE HAVE A HISTORY OF NET LOSSES; WE EXPECT TO CONTINUE TO INCUR NET LOSSES AND
WE MAY NEVER ACHIEVE OR MAINTAIN PROFITABILITY.
We have only a limited operating history upon which you can evaluate our
business. We have incurred losses every year since we began operations. As of
December 31, 1999, our accumulated deficit was approximately $35.8 million,
including a net loss of approximately $14.3 million for the year ended December
31, 1999. We have not generated any revenue from product sales to date, and it
is possible that we will never generate revenues from product sales in the
future. Even if we do achieve significant revenues from product sales, we expect
to incur significant operating losses over the next several years. It is
possible that we will never achieve profitable operations.
OUR PHASE III CLINICAL TRIAL RESULTS FOR VITRASE ARE UNCERTAIN. IF TRIAL RESULTS
ARE NOT SATISFACTORY, WE MAY BE FORCED TO TERMINATE DEVELOPMENT OF VITRASE.
We are currently conducting two multinational Phase III clinical trials for
Vitrase in patients that we classify as having a severe vitreous hemorrhage.
These trials are designed to support fast-track regulatory approval. If the
results of these trials are not satisfactory, we would need to conduct
additional clinical trials or cease the development of Vitrase. Furthermore,
clearance of severe vitreous hemorrhage is considered a surrogate endpoint of
our Phase III clinical trials and, we believe, a predictor of improvement in
visual acuity. If we obtain fast-track approval, we will be required to continue
following patients who participate in the trial or initiate additional clinical
trials to document improvement in visual acuity or other related objective
clinical benefit. This may require several years of follow-up. If there is
significant patient drop-out from the study after treatment or if patients fail
to participate in follow-up procedures, we will be unable to document
improvement in visual acuity or other related objective clinical benefit.
We are still enrolling patients in our Phase III clinical trials, and a
considerable amount of time will elapse before we complete patient enrollment
and know the initial results of these trials. We cannot predict when we will
know the initial results of these trials or how long it will take to adequately
follow these patients in order to document improvement, if any, in visual acuity
or other related objective clinical benefit.
THE FDA FAST-TRACK DESIGNATION MAY NOT ACTUALLY LEAD TO A FASTER REVIEW PROCESS
OR APPROVAL.
Although we have obtained a fast-track designation for Vitrase, we cannot
guarantee a faster review process by the FDA or faster approval compared to
normal FDA procedures. If Vitrase is approved under the fast-track procedure, we
will be required to confirm, post approval, that the primary surrogate endpoint
of clearance of severe vitreous hemorrhage is a valid predictor of improved
visual acuity for treated patients. If, post approval, we fail to document an
improvement in visual acuity or other related objective clinical benefit in
patients treated with Vitrase, FDA approval may be withdrawn on an expedited
basis. Furthermore, if unexpected adverse effects are identified after or during
marketing, FDA approval may be withdrawn on an expedited basis.
NONE OF OUR PRODUCT CANDIDATES HAS RECEIVED REGULATORY APPROVAL FROM THE FDA. IF
WE DO NOT RECEIVE AND MAINTAIN REGULATORY APPROVALS, WE WILL NOT BE ABLE TO
MARKET OUR PRODUCTS.
Approval from the FDA is required to manufacture and market pharmaceutical
products in the United States. Other countries have similar requirements. Except
for an approval of Vitrase by the Mexican Ministry of Health, none of our
product candidates has been approved by the FDA or any other regulatory
authority. We cannot assure you that the data collected from completed or future
clinical trials will be sufficient to support any approvals by the FDA or other
regulatory authorities.
The process that pharmaceuticals must undergo to receive necessary approval is
extensive, time-
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consuming and costly, and there is no guarantee it will be successful. FDA
approval can be delayed, limited or not granted for many reasons, including:
- a product candidate may not be safe or effective
- even if we believe data from preclinical testing and clinical trials should
justify approval, FDA officials may disagree
- the FDA might not approve our manufacturing processes or facilities or the
processes or facilities of our contract manufacturers or raw material
suppliers
- the FDA may change its approval policies or adopt new regulations
- a product candidate may be approved for indications that are narrow, which
may limit our sales and marketing activities
The process of obtaining approvals in foreign countries is subject to delay and
failure for the same reasons.
Final approval of a product candidate could also be contingent on the success
and completion of post-marketing studies. In addition, any marketed product and
its manufacturer continue to be subject to strict regulation after approval. Any
unforeseen problems with an approved product or any violation of regulations
could result in restrictions on the product, including its withdrawal from the
market. Delays in receipt of or failure to receive regulatory approvals, or the
loss of previously received approvals, could delay or prevent product
commercialization, which could materially harm our business and financial
condition.
OUR DEPENDENCE ON ALLERGAN FOR THE MARKETING, SALE AND DISTRIBUTION OF VITRASE
MAY DELAY OR SIGNIFICANTLY IMPAIR OUR ABILITY TO GENERATE REVENUES OR OTHERWISE
ADVERSELY AFFECT OUR PROFITABILITY.
We have entered into a collaboration with Allergan for Vitrase. As a result of
our agreements, we are dependent on Allergan for the commercialization of
Vitrase. The amount and timing of resources Allergan dedicates to our
collaboration is not within our control. Accordingly, the commercialization of
Vitrase could be delayed or stopped if Allergan breaches or terminates our
agreements. We cannot assure you that Allergan will not change its strategic
focus, pursue alternative technologies or develop competing products.
Unfavorable developments in our relationship with Allergan could have a
significant adverse effect on us and our stock price.
IF SUFFICIENT QUANTITIES OF THE RAW MATERIALS NEEDED TO MAKE OUR PRODUCTS ARE
NOT AVAILABLE, PRODUCT DEVELOPMENT AND COMMERCIALIZATION COULD BE DELAYED OR
STOPPED.
We have entered into a supply agreement with Biozyme Laboratories, Ltd. pursuant
to which Biozyme has agreed to supply us with all of our ovine hyaluronidase
requirements for use in our products. Biozyme provides us with highly purified
hyaluronidase extracted from sheep in New Zealand. We cannot assure you that
Biozyme will be able to supply sufficient quantities of ovine hyaluronidase for
our products or that the supply will not be subject to delay or disruption. Any
delay or disruption in the availability of raw materials could slow or stop
development and commercialization of our products.
IF WE ARE NOT ABLE TO COMPLETE OUR CLINICAL TRIALS SUCCESSFULLY OR OUR CLINICAL
TRIALS ARE DELAYED, WE MAY NOT BE ABLE TO OBTAIN REGULATORY APPROVALS TO MARKET
OUR PRODUCTS.
Many of our research and development programs are at an early stage and clinical
testing is a long, expensive and uncertain process. We cannot assure you that
our clinical trials will be completed on schedule. Delays in patient enrollment
in the trials may result in increased costs, program delays or both, which could
slow down our product development and approval process and materially harm our
business and financial condition. Even if initial results of preclinical studies
or clinical trial results are positive, we may obtain different results in later
stages of drug development, including failure to show desired safety and
efficacy.
The clinical trials of any of our product candidates could be unsuccessful,
which would prevent us from commercializing the relevant product. Our failure to
develop safe and effective products would substantially impair our ability to
generate revenues and materially harm our business and financial condition.
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OUR RELIANCE ON CONTRACT MANUFACTURERS COULD ADVERSELY AFFECT OUR ABILITY TO
SUPPLY SUFFICIENT QUANTITIES OF OUR PRODUCTS FOR CLINICAL TRIALS AND COMMERCIAL
SALES.
We have relied in the past, and will continue to rely for the next several
years, on contract manufacturers. The manufacturing facilities of our contract
manufacturers must comply with current Good Manufacturing Practices, or cGMP,
regulations which are strictly enforced by the FDA. Furthermore, the facilities
of our contract manufacturers must undergo a preapproval inspection before any
of our products can be approved for manufacture. To date, our contract
manufacturers have produced only small quantities of our product for use in
clinical trials. We cannot assure you that our contract manufacturers will be
able to scale up production when necessary or accurately and reliably
manufacture commercial quantities of our products at reasonable costs. If we
encounter prolonged delays or difficulties in establishing and maintaining
relationships with third-party manufacturers, our ability to provide sufficient
quantities of our products for clinical trials and commercial sales could be
adversely affected.
WE ARE DEPENDENT ON OUR PATENTS AND PROPRIETARY RIGHTS, THE VALIDITY,
ENFORCEABILITY AND COMMERCIAL VALUE OF WHICH ARE HIGHLY UNCERTAIN. WE MAY BE
REQUIRED TO BRING LITIGATION TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, WHICH
MAY RESULT IN SUBSTANTIAL EXPENSE.
We rely on patents to protect our intellectual property rights. The strength of
this protection, however, is uncertain. In particular, we cannot ensure you
that:
- we were the first to invent the technologies covered by our patents and
pending patent applications
- we were the first to file patent applications for these inventions
- others will not independently develop similar or alternative technologies or
duplicate our technologies
- any of our pending patent applications will result in issued patents
- any patents issued to us will provide a basis for commercially viable
products, will provide us with any competitive advantages or will not be
challenged by third parties or subjected to further proceedings limiting
their scope
In addition, statutory differences in patentable subject matter may limit the
protection we can obtain for some of our inventions outside the United States.
For example, methods of treating humans are not patentable in many foreign
countries.
We may become involved in interference proceedings in the U.S. Patent and
Trademark Office to determine the priority of our inventions. We could also
become involved in opposition proceedings in foreign countries challenging the
validity of our patents. In addition, costly litigation could be necessary to
protect our patent position. Patent law relating to the scope of claims in the
technology fields in which we operate is still evolving, and, consequently,
patent positions in our industry are generally uncertain. We cannot assure you
that we would prevail in any lawsuit or that, if successful, we would be awarded
commercially valuable remedies. In addition, it is possible that we will not
have the resources required to pursue necessary litigation or to otherwise
protect our patent rights. Failure to protect our patent rights could materially
harm our business and financial condition.
We also rely on trade secrets, unpatented proprietary know-how and continuing
technological innovation that we seek to protect in part by confidentiality
agreements with employees, consultants and others with whom we discuss our
business. We cannot assure you that these confidentiality agreements will not be
breached. We also cannot be certain that we will have adequate remedies for any
breach of any of these agreements. Disputes may arise concerning the ownership
of intellectual property or the applicability or enforceability of these
agreements, and we cannot assure you that any such disputes would be resolved in
our favor. Furthermore, we cannot be sure that our trade secrets and proprietary
technology will not otherwise become known or be independently developed by our
competitors or, if patents are not issued with respect to products arising from
research, that we
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will be able to maintain the confidentiality of information relating to such
products.
OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR PRODUCTS.
Third parties may assert infringement or other intellectual property claims
against us based on their patents or other intellectual property claims. We may
be required to pay substantial damages, including treble damages, for past
infringement if it is ultimately determined that our products infringe a third
party's patents. Even if infringement claims against us are without merit,
defending a lawsuit takes significant time, may be expensive and may divert
management attention from other business concerns. Further, we may be prohibited
from selling our products before we obtain a license from the owner of the
relevant technology, which, if available at all, may require us to pay
substantial royalties.
WE MAY NOT BE ABLE TO NEGOTIATE ADDITIONAL AGREEMENTS WITH STRATEGIC PARTNERS,
WHICH COULD LIMIT OUT ABILITY TO COMMERCIALIZE OUR PRODUCT CANDIDATES
We intend to enter into additional agreements with pharmaceutical companies or
others for marketing and other commercialization activities relating to some of
our product candidates. However, we cannot assure you that we will be able to
enter into additional relationships or that any of these relationships, if
established, will be commercially successful.
WE LACK SALES AND MARKETING EXPERIENCE, WHICH MAKES US DEPENDENT ON THIRD
PARTIES FOR THEIR EXPERTISE IN THESE AREAS.
We currently have no sales, marketing or distribution capabilities. If any of
our product candidates are approved, any revenues we receive from sales of our
products will depend primarily on the efforts of our strategic partners. If we
elect to market any of our products directly, we would require significant
additional financial and management resources to develop an internal sales
force. We cannot assure you that we will be able to establish a successful sales
force if we choose to do so.
THE LACK OF REIMBURSEMENT FROM THIRD-PARTY PAYORS COULD LIMIT MARKET ACCEPTANCE
OF OUR PRODUCTS.
As a result of the trend towards managed healthcare in the United States, as
well as legislative proposals to reduce governmental insurance programs,
third-party payors are increasingly attempting to contain healthcare costs by
limiting both coverage and the level of reimbursement of new drug products.
Consequently, significant uncertainty exists as to the reimbursement status of
newly-approved healthcare products. To support our applications for
reimbursement coverage with Medicare and other major third-party payors, we
intend to use data from clinical trials, including Phase III and Phase IV
clinical trials, to demonstrate the healthcare and economic benefits of using
Vitrase for severe vitreous hemorrhage. If we succeed in bringing one or more of
our product candidates to market, we cannot assure you that third-party payors
will establish adequate levels of reimbursement for our products, which could
limit their market acceptance.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE THAT COULD RESULT IN
PRODUCTS THAT ARE SUPERIOR TO THE PRODUCTS WE ARE DEVELOPING.
The biotechnology and pharmaceutical industries are subject to rapid and
significant technological change. We have numerous competitors in the United
States and abroad, including, among others, major pharmaceutical and specialized
biotechnology firms, universities and other research institutions. These
competitors may develop technologies and products that are more effective or
less costly than any of our current or future product candidates or that could
render our technologies and product candidates obsolete or noncompetitive. Many
of these competitors have substantially more resources and product development,
manufacturing and marketing experience and capabilities than we do. In addition,
many of our competitors have significantly greater experience than we do in
undertaking preclinical testing and clinical trials of pharmaceutical product
candidates and obtaining
11
<PAGE> 12
FDA and other regulatory approvals of products and therapies for use in
healthcare.
Products and procedures currently exist in the market that will compete directly
with the products that we are developing. Any product candidate that we develop
and for which we receive regulatory approval will compete for market acceptance
and market share.
WE MAY NEED ADDITIONAL FINANCING, WHICH COULD BE DIFFICULT TO OBTAIN, TO SUPPORT
OUR DEVELOPMENT EFFORTS.
Our current and anticipated development projects require substantial additional
capital, and we may need additional funding sooner than anticipated. An
inability to raise capital when necessary would materially harm our business and
product development efforts.
If our operating and capital resources are insufficient to meet our future
requirements, we will need to raise additional funds to continue the development
and commercialization of our products. These funds may not be available on
favorable terms, or at all. If adequate funds are not available on attractive
terms, we may be required to curtail operations significantly or to obtain funds
by entering into financing, supply or collaboration agreements on unattractive
terms.
IF WE LOSE KEY MANAGEMENT AND SCIENTIFIC PERSONNEL, OR FAIL TO HIRE KEY
PERSONNEL, OUR BUSINESS COULD SUFFER.
Our success depends on our ability to continue to attract and retain highly
qualified management and scientific personnel. Competition for personnel is
intense, and we can not assure you that we can retain our current personnel or
that we can attract or retain other highly qualified management and scientific
personnel in the future. If we are unable to hire and retain the necessary
qualified personnel, we may be required to scale back our growth and delay some
aspects of our product development efforts, which could materially harm our
business and financial condition.
WE ARE EXPOSED TO PRODUCT LIABILITY CLAIMS, AND INSURANCE AGAINST THESE CLAIMS
MAY NOT BE AVAILABLE TO US AT A REASONABLE RATE.
The manufacture, development and commercialization of our product candidates
involve the risk of product liability claims. Although we maintain product
liability insurance, we cannot assure you that the coverage limits of our
insurance policies will be adequate to protect us from any liabilities we might
incur in connection with clinical trials or the sale of our products. Product
liability insurance is expensive and in the future may not be available on
acceptable terms or at all. A successful claim or claims brought against us in
excess of our insurance coverage could materially harm our business and
financial condition.
WE DEAL WITH HAZARDOUS MATERIALS AND GENERATE HAZARDOUS WASTES AND MUST COMPLY
WITH ENVIRONMENTAL LAWS AND REGULATIONS, WHICH CAN BE EXPENSIVE AND RESTRICT HOW
WE DO BUSINESS. WE COULD ALSO BE LIABLE FOR DAMAGES OR PENALTIES IF WE ARE
INVOLVED IN A HAZARDOUS MATERIAL OR WASTE SPILL OR OTHER ACCIDENT.
Our research and development work and manufacturing processes involve the use of
hazardous materials and waste, including chemical, radioactive and biological
materials. Our operations also produce hazardous wastes. We are subject to
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of these materials and waste. Despite
precautionary procedures that we implement for handling and disposing of these
materials and waste, we cannot eliminate the risk of accidental contamination or
discharge or any resultant injury from these materials and waste. In the event
of a hazardous material or waste spill or other accident, we could also be
liable for damages or penalties. In addition, we may be liable or potentially
liable for injury or contamination that results from our use or the use by third
parties of these materials, and our liability could exceed our total assets.
Although we believe that we are in material compliance with applicable
environmental laws and regulations, we cannot assure you that we will not be
required to incur significant costs to comply with environmental laws and
regulations in the future. In addition, changes in current or enactment of new
environmental laws and regulations may impair or create additional liability
relating to our research, development or production efforts.
12
<PAGE> 13
WE HAVE BROAD DISCRETION OVER THE USE OF THE NET PROCEEDS FROM THIS OFFERING.
We have broad discretion to allocate the net proceeds of this offering. The
timing and amount of our actual expenditures are subject to change and will be
based on many factors, including:
- the rate of progress of our research and development programs
- the results of our clinical trials
- the time and expense necessary to obtain regulatory approvals
- our ability to establish and maintain collaborative relationships
- competitive, technological, market and other developments
Our management will determine, in its sole discretion without the need for
stockholder approval, how to allocate these proceeds. If we do not wisely
allocate the proceeds, our ability to carry out our business plan will be
harmed.
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR OUR COMMON STOCK,
AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE INITIAL PUBLIC
OFFERING PRICE.
Prior to this offering, there has been no public market for our common stock. An
active public market for our common stock may not develop or be sustained after
the offering. The initial public offering price will be determined by
negotiation between the representatives of the underwriters and us and may not
be indicative of future market prices. In addition to prevailing market
conditions, the following factors will be among those considered in determining
the initial public offering price of our common stock:
- estimates of our business potential and earnings prospects
- an assessment of our management
- the consideration of the above factors in relation to market valuations of
companies in related businesses
OUR STOCK PRICE MAY BE VOLATILE, AND YOUR INVESTMENT IN OUR COMMON STOCK COULD
DECLINE IN VALUE.
The market prices for securities of healthcare companies in general have been
highly volatile and may continue to be highly volatile in the future. The
following factors, in addition to other risk factors described in this section,
may cause the market price of our common stock to fall:
- announcements of technological innovations or new commercial products by our
competitors
- developments concerning proprietary rights, including patents
- publicity regarding actual or potential products under development by our
competitors
- regulatory developments in the United States and foreign countries
- period-to-period fluctuations in our financial results
- litigation
- economic and other external factors, including disasters and other crises
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Following this offering, our directors, entities affiliated with our directors
and our executive officers will beneficially own, in the aggregate,
approximately % of our outstanding common stock. These stockholders as a
group will be able to substantially influence our management and affairs. If
they act together, they would be able to influence most matters requiring the
approval by our stockholders, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets and any other
significant corporate transaction. The concentration of ownership may also delay
or prevent a change in our control at a premium price if these stockholders
oppose it.
13
<PAGE> 14
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the effect of
delaying or preventing an acquisition or merger in which we are not the
surviving company or changes in our management. In addition, because we will
reincorporate in Delaware prior to the completion of the offering, we will be
governed by the provisions of Section 203 of the Delaware General Corporation
Law. These provisions could discourage acquisitions or other changes in our
control, including those in which our stockholders might otherwise receive a
premium for their shares over then-current market prices, and otherwise limit
the price that investors might be willing to pay for our common stock in the
future.
AS A NEW INVESTOR, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE
NET TANGIBLE BOOK VALUE OF YOUR SHARES.
The initial public offering price will be substantially higher than the net
tangible book value per share of our common stock. Investors purchasing shares
of our common stock in this offering will therefore incur immediate and
substantial net tangible book value dilution of $ per share.
In addition, we may choose to raise additional capital due to market conditions
or strategic considerations. To the extent that additional capital is raised
through the sale of equity or convertible debt securities, the issuance of these
securities could result in dilution to our stockholders.
IF OUR STOCKHOLDERS SELL SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK AFTER THE
OFFERING, THE MARKET PRICE OF OUR COMMON STOCK MAY FALL.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, the market price of our
common stock may fall. These sales also may make it more difficult for us to
sell equity or equity-related securities in the future at a time and price that
we deem appropriate.
At March 31, 2000, approximately shares of common stock,
representing % of our common stock outstanding, were unregistered and
eligible for sale, subject to compliance with Rule 144 under the Securities Act.
Of the 3,063,867 shares that may be issued upon the exercise of options
outstanding as of March 31, 2000, approximately 2,153,355 shares will be vested
and eligible for sale 180 days after the date of this prospectus.
While the holders of shares are subject to lock-up agreements
with the underwriters in this offering for 180 days after the date of this
prospectus, CIBC World Markets Corp., in its sole discretion, may release any
portion or all of these shares from the lock-up restrictions. In addition, sales
of a substantial number of shares could occur at any time after the expiration
of the 180-day period. These sales could have an adverse effect on the price of
our common stock and could impair our ability to raise capital in the future.
14
<PAGE> 15
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking statements.
You can find these statements under "Prospectus Summary," "Risk Factors," "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus.
We typically identify forward-looking statements by using terms such as "may,"
"will," "should," "could," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential" or "continue" or similar words, although we
express some forward-looking statements differently. You should be aware that
actual events could differ materially from those suggested in the
forward-looking statements due to a number of factors, including:
- our failure to develop safe and efficacious drugs
- our failure to achieve positive results in clinical trials
- our failure to successfully commercialize our products
- changes in relationships with our collaborators
- the variability of royalty, license and other revenues
- our inability to enter into future collaborations
- competition and technological change
- regulations affecting our business
You should also consider carefully the statements under "Risk Factors" and other
sections of this prospectus, which address additional factors that could cause
actual events to differ from those suggested in the forward-looking statements.
15
<PAGE> 16
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of common stock we
are offering will be approximately $ million. If the underwriters fully
exercise their over-allotment option, the net proceeds from the offering will be
approximately $ million. "Net proceeds" are what we expect to receive after
paying the underwriting discount and other expenses of the offering. For the
purpose of estimating net proceeds, we are assuming that the initial public
offering price will be $ per share.
We intend to use the net proceeds of this offering primarily to fund our
clinical trials and preclinical research, with a particular focus on Vitrase for
treatment of severe vitreous hemorrhage, and for general corporate purposes,
including working capital. We may use a portion of the net proceeds to acquire
or invest in technologies, products or businesses complementary to our business.
We currently are negotiating the acquisition of technologies similar to
technologies related to one of our product candidates under development. We do
not anticipate that the costs of acquiring these technologies will be material.
Our management has broad discretion over the use of the net proceeds of this
offering. The timing and amount of our actual expenditures are subject to change
and will be based on many factors, including:
- the rate of progress of our research and development programs
- the results of our clinical trials
- the time and expense necessary to obtain regulatory approvals
- our ability to establish and maintain collaborative relationships
- competitive, technological, market and other developments
Until we use the net proceeds of the offering, we will invest the funds in
short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We anticipate that
we will retain earnings to support operations and to finance the growth and
development of our business. Therefore, we do not expect to pay cash dividends
in the foreseeable future.
16
<PAGE> 17
CAPITALIZATION
The following table shows as of December 31, 1999:
- our actual capitalization
- our pro forma capitalization reflecting:
- the cashless exercise, prior to the offering, of 923,102 warrants to
purchase shares of our common stock
- the issuance of 3,319,363 shares of our Series C preferred stock in
connection with our acquisition of all of the capital stock of Visionex
in March 2000, and the conversion of these shares into 2,655,490 shares
of our common stock
- the issuance of 1,776,199 shares of our Series D preferred stock that
were sold to Allergan as part of our collaboration entered into in March
2000, and the conversion of these shares into shares of our
common stock
- the conversion of 7,156,214 shares of our preferred stock outstanding as
of December 31, 1999 into 5,724,971 shares of our common stock
- our pro forma as adjusted capitalization, assuming the pro forma adjustments
described above and the completion of the offering at an assumed initial
public offering price of $ per share
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long term obligations, less current portion...... $ 5,038 $ 38 $ 38
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock: no par value; 24,820,688
shares authorized, 7,156,214 shares issued
and outstanding, actual; $0.001 par value;
5,000,000 shares authorized, no shares
issued and outstanding, pro forma and pro
forma as adjusted........................... 25,496 -- --
Common stock: no par value; 26,200,000 shares
authorized, 1,855,178 shares issued and
outstanding, actual; $0.001 par value;
100,000,000 shares authorized,
shares issued and
outstanding, pro forma, and
shares issued and outstanding, pro forma as
adjusted.................................... 3,891
Additional paid-in capital..................... --
Deferred compensation.......................... (2,216) (2,216) (2,216)
Deficit accumulated during the development
stage....................................... (35,827) (35,827) (35,827)
-------- -------- --------
Total stockholders' equity (deficit)........ (8,656) 5,789
-------- -------- --------
Total capitalization...................... $ (3,617) $ 5,827 $
======== ======== ========
</TABLE>
The number of shares of our common stock outstanding excludes 2,684,667 shares
of common stock issuable upon the exercise of outstanding options as of December
31, 1999, at a weighted average exercise price of $0.55 per share.
17
<PAGE> 18
DILUTION
The pro forma net tangible book value of our common stock as of December 31,
1999 was $ million, or approximately $ per share. Pro forma net
tangible book value per share represents the amount of our stockholders' equity
divided by shares of common stock outstanding assuming:
- the cashless exercise, prior to the offering, of 923,102 warrants to
purchase shares of our common stock
- the issuance of 3,319,363 shares of our Series C preferred stock in
connection with our acquisition of all of the capital stock of Visionex
in March 2000, and the conversion of these shares into 2,655,490 shares
of our common stock
- the issuance of 1,776,199 shares of our Series D preferred stock that
were sold to Allergan as part of our collaboration entered into in March
2000, and the conversion of these shares into shares of our
common stock
- the conversion of 7,156,214 shares of our preferred stock outstanding as
of December 31, 1999 into 5,724,971 shares of our common stock
Net tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the pro forma net tangible book value per share of
common stock immediately after completion of this offering. After giving effect
to the sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share and after deducting the
underwriting discount and other offering expenses and the application of the
estimated net proceeds, our pro forma net tangible book value as of December 31,
1999 would have been $ per share to existing stockholders and an immediate
and substantial dilution in net tangible book value of $ per share to
purchasers of common stock in this offering, as illustrated in the following
table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
--------
Pro forma net tangible book value per share as of December
31, 1999.................................................. $
Increase in net tangible book value per share attributable
to the offering...........................................
--------
Pro forma net tangible book value per share as of December
31, 1999 after giving effect to the offering..............
--------
Dilution per share to new investors in the offering......... $
========
</TABLE>
The following table shows the total consideration paid and the average price
paid per share by the existing stockholders and by new investors, after
deducting the underwriting discount and other offering expenses payable by us,
at an assumed initial public offering price of $ per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 7,580,149 % $25,848,522 % $3.41
New investors...............
--------- ----- ----------- -----
Total.................. 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
In the discussion and tables above, we assume no exercise of outstanding options
to purchase shares of our common stock. As of December 31, 1999, there were
outstanding options to purchase a total of 2,684,667 shares of our common stock,
at a weighted average exercise price of $0.55 per share. To the extent
outstanding options are exercised, there will be further dilution to new
investors.
18
<PAGE> 19
SELECTED FINANCIAL DATA
This section presents our historical financial data. You should read carefully
the financial statements included in this prospectus, including the notes to the
financial statements. We do not intend the selected financial data in this
section to replace the financial statements.
We derived the statement of operations data for the years ended December 31,
1997, 1998 and 1999, and the balance sheet data as of December 31, 1998 and
1999, from the audited financial statements included in this prospectus. Ernst &
Young LLP, independent auditors, audited those financial statements. We derived
the statement of operations data for the years ended December 31, 1995 and 1996
and the balance sheet data as of December 31, 1995, 1996 and 1997 from our
audited financial statements that are not included in this prospectus.
Historical results are not necessarily indicative of results that may be
expected in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Costs and expenses:
Research and development............... $ 493 $ 1,828 $ 4,969 $ 7,523 $ 11,062
General and administrative............. 389 1,405 1,949 2,147 3,240
------ ------- ------- ------- --------
Total costs and expenses............ 882 3,233 6,918 9,670 14,302
------ ------- ------- ------- --------
Loss from operations..................... (882) (3,233) (6,918) (9,670) (14,302)
Interest income.......................... 59 208 251 133 69
Interest expense......................... (64) -- (85) (87) (51)
------ ------- ------- ------- --------
Net loss................................. $ (887) $(3,025) $(6,752) $(9,624) $(14,284)
====== ======= ======= ======= ========
Net loss per common share, basic and
diluted................................ $(0.67) $ (2.23) $ (4.89) $ (6.64) $ (8.80)
====== ======= ======= ======= ========
Shares used in computing net loss per
common share, basic and diluted........ 1,320 1,355 1,381 1,449 1,623
Pro forma net loss per common share,
basic and diluted...................... $
Shares used in computing pro forma net
loss per common share, basic and
diluted................................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
----- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 37 $ 1,963 $ 5,896 $ 2,393 $ 709
Working capital (deficit)................. (396) 1,639 4,820 (260) (4,993)
Total assets.............................. 150 3,083 7,400 4,115 3,020
License fee received from Visionex........ -- -- 5,000 5,000 5,000
Other long term obligations............... -- 310 508 294 38
Total stockholders' equity (deficit)...... (283) 2,304 774 (4,053) (8,656)
</TABLE>
19
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with the financial statements and other
financial information included in this prospectus.
OVERVIEW
Ista was founded to discover, develop and market novel therapeutics for diseases
and conditions of the eye. Our product development efforts are focused on using
highly purified formulations of the enzyme hyaluronidase to treat diseases and
conditions such as vitreous hemorrhage, diabetic retinopathy, corneal
opacification and keratoconus. Our lead product candidate, Vitrase, currently in
Phase III clinical trials, is a proprietary drug for the treatment of severe
vitreous hemorrhage.
We currently have no products available for sale. We have incurred losses since
inception and had an accumulated deficit through December 31, 1999 of $35.8
million. Our losses have resulted primarily from research and development
activities, including clinical trials, and related general and administrative
expenses. We expect to continue to incur operating losses for the foreseeable
future as we increase our research and development, preclinical and clinical
testing activities, and seek regulatory approval for our product candidates.
In March 2000, we completed the acquisition of Visionex, a Singapore
corporation, which has been conducting our Phase II clinical trial of Vitrase in
Singapore. Visionex was a related party through common ownership by some of our
stockholders. We currently plan for Visionex to continue to conduct our ongoing
Phase II clinical trial of Vitrase.
In March 2000, we entered into a collaboration with Allergan, under which
Allergan will be responsible for the marketing, sale and distribution of Vitrase
in the United States and all international markets, except Mexico and Japan. We
will be dependent on the success of Allergan in commercializing Vitrase in these
markets. Our principal sources of revenue from this collaboration and the
commercialization of Vitrase will be milestone, royalty and profit-sharing
payments received from Allergan.
RESULTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997
Research and development expenses. Research and development expenses were $11.1
million in 1999, $7.5 million in 1998, and $5.0 million in 1997. The $3.6
million increase in 1999 was primarily attributable to expansion of our
preclinical and clinical development activities, including employee and
consultant expenses. These expenses related primarily to our development of
Vitrase for treatment of severe vitreous hemorrhage, which entered Phase III
clinical trials in late 1998. The $2.5 million increase in 1998 was attributable
to the expenses associated with the Phase IIb clinical trials of Vitrase.
Employee costs and preclinical development expenses also contributed to the
increase in research and development expenses in 1998 as compared to 1997.
General and administrative expenses. General and administrative expenses were
$3.2 million in 1999, $2.1 million in 1998, and $1.9 million in 1997. The $1.1
million increase in 1999 was primarily attributable to non-cash compensation
expense of $1.3 million in 1999 related to stock option grants, as compared to a
nominal amount in 1998. The increase in general and administrative expenses in
1998 was primarily attributable to increasing our staff in support of our
expanding operations.
Stock-based compensation. Deferred compensation for stock options granted to
employees and directors is the difference between the exercise price and the
deemed fair value of the underlying common stock for financial reporting
purposes on the date the options were granted. In connection with the grant of
stock
20
<PAGE> 21
options to employees and directors, we recorded deferred compensation of
approximately $3.5 million during the year ended December 31, 1999, of which
$1.3 million was amortized during the year.
Compensation for stock options granted to non-employees has been determined in
accordance with Statement of Financial Accounting Standards No. 123 and the
Emerging Issues Task Force Consensus No. 96-18, as the fair value of the equity
instrument issued. Stock option compensation for non-employees is recorded as
the related services are rendered and the value of compensation is periodically
remeasured as the underlying options vest. We recorded approximately $112,000 in
non-employee deferred compensation during the year ended December 31, 1999, of
which $37,000 was amortized in 1999.
In the first quarter of 2000, we granted stock options to employees to purchase
512,800 shares of our common stock at an exercise price of $0.70 per share. We
also granted non-employees stock options to purchase 20,000 shares of common
stock at an exercise price of $0.70 per share.
Interest income. Interest income was $69,000 in 1999, $133,000 in 1998, and
$251,000 in 1997. Decreases in interest income in 1999 and 1998 were primarily
attributable to lower cash balances.
Interest expense. Interest expense was approximately $52,000 in 1999, $86,000 in
1998, and $86,000 in 1997. These interest expenses were incurred in connection
with our capital leases.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, we had approximately $709,000 in cash. On a pro forma
basis, reflecting our acquisition of Visionex and the sale of $10.0 million of
our Series D preferred stock to Allergan in March 2000, we had cash and cash
equivalents of $15.1 million as of December 31, 1999.
We have financed our operations since inception primarily through private sales
of our preferred stock. Prior to this offering, we received total net proceeds
of approximately $35.5 million from the sale of:
- an aggregate 1,951,753 shares of our Series A preferred stock in November,
1992, February 1993 and October 1995, raising total net proceeds of
approximately $2.0 million
- an aggregate 1,955,555 shares of our Series B preferred stock in October
1995, raising total net proceeds of approximately $5.4 million
- an aggregate 3,248,906 shares of our Series C preferred stock in June 1997,
November and December 1998, and April and June 1999, raising total net
proceeds of approximately $18.1 million
- an aggregate 1,776,199 shares of our Series D preferred stock in March 2000,
raising total net proceeds of approximately $10.0 million
All 7,156,214 shares of our Series A, B and C preferred stock will convert into
5,724,971 shares of our common stock upon completion of this offering. Our
Series D preferred stock will convert into our common stock upon completion of
this offering at the initial public offering price, less the underwriting
discount.
During December 1999 and January and February 2000, we borrowed an aggregate of
$1.8 million from some of our stockholders. We repaid this amount, together with
accrued interest, in March 2000 following the Visionex acquisition.
In 1999, we used $10.2 million of cash for operations principally as a result of
the net loss of $14.2 million offset by a non-cash compensation expense of
approximately $1.3 million and an increase in accrued expenses of $2.9 million
related to clinical trials. We used approximately $7.8 million of cash for
operations in 1998.
Our investing activities used cash of approximately $100,000 in 1999 compared to
approximately $232,000 in 1998. These expenditures were for the purchase of
equipment to support our operations. Additionally, in March 2000 we obtained
approximately $4.4 million from the acquisition of Visionex.
21
<PAGE> 22
Our financing activities in 1999 and 1998 generated approximately $8.7 million
and $4.6 million, respectively, of cash primarily from sales of our preferred
stock. Additionally, in March 2000 we raised approximately $10.0 million from
the sale of our Series D preferred stock.
We believe that the proceeds from this offering together with our existing cash
resources will be sufficient to support our operations for at least the next two
years. Our actual future capital requirements will depend on many factors,
including the following:
- the rate of progress of our research and development programs
- the results of our clinical trials
- the time and expense necessary to obtain regulatory approvals
- our ability to establish and maintain collaborative relationships
- competitive, technological, market and other developments
Future capital requirements will also depend on the extent to which we acquire
or invest in businesses, products and technologies. If we require additional
financing due to unanticipated developments, additional financing may not be
available when needed or, if available, may not be on terms favorable to us or
to our stockholders. Insufficient funds may require us to delay, scale back or
eliminate some or all of our research and development programs, or may adversely
affect our ability to operate as a going concern. If additional funds are raised
by issuing equity securities, substantial dilution to existing stockholders may
result.
Income taxes. We incurred net operating losses in 1999, 1998 and 1997 and
consequently did not pay any federal, state or foreign income taxes. At December
31, 1999, we had federal and state net operating loss carryforwards of
approximately $17.3 million and $14.8 million which we have fully reserved at
December 31, 1999 due to the uncertainty of realization. Our federal net
operating loss and credit carryforwards will begin to expire in 2007. Our state
of California net operating losses will begin to expire in 2000.
VISIONEX ACQUISITION
In March 2000, we issued 3,319,363 shares of our Series C preferred stock in
exchange for all the outstanding capital stock of Visionex. In 1997, Visionex
obtained from us the exclusive rights to register, import, market, sell and
distribute Vitrase and Keraform in East Asian markets, excluding Japan and
Korea, for which Visionex paid us $5.0 million. In 1997, we also entered into an
agreement with the Visionex shareholders, which allowed these shareholders to
exchange their Visionex shares for shares of our capital stock. Both of these
agreements with Visionex terminated upon our acquisition of all of the
outstanding capital stock of Visionex.
We accounted for the acquisition of Visionex under the purchase method of
accounting. At the time of the acquisition, we recorded $4.4 million of tangible
assets acquired and expect to record a beneficial conversion charge in the first
quarter of 2000 for the excess value of the shares issued over the net tangible
assets acquired.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which we will
adopt on January 1, 2001. SFAS No. 133 sets forth a comprehensive and consistent
standard for the recognition of derivatives and hedging activities. SFAS No. 133
is not anticipated to have an impact on our results of operations or financial
condition when adopted as we currently hold no derivative financial instruments
and do not currently engage in hedging activities.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities. The average duration of
all of our investments in 1999 was less than one year. Due to the short-term
nature of these investments, we believe we have no material exposure to interest
rate risk arising from our investments. Therefore, no quantitative tabular
disclosure is included in this prospectus.
We have operated primarily in the United States and have had no sales to date.
Accordingly, we have not had any significant exposure to foreign currency rate
fluctuations.
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BUSINESS
OVERVIEW
Ista was founded to discover, develop and market novel therapeutics for diseases
and conditions of the eye. Our product development efforts are focused on using
highly purified formulations of the enzyme hyaluronidase to treat diseases and
conditions such as vitreous hemorrhage, diabetic retinopathy, corneal
opacification and keratoconus. Each of these conditions affects a significant
number of patients worldwide and can impair vision and potentially cause
blindness.
Our lead product candidate, Vitrase, is in Phase III clinical trials for the
treatment of severe vitreous hemorrhage. Vitrase has received "fast-track"
designation by the FDA. We also recently initiated a pilot Phase IIa clinical
trial of Vitrase in Mexico for the treatment of diabetic retinopathy, the
leading cause of adult blindness in the United States. In March 2000, we entered
into a collaboration with Allergan, under which Allergan will be responsible for
the marketing, sale and distribution of Vitrase in the United States and all
international markets, except Mexico and Japan. We are also developing Keratase
and Keraform for the treatment of corneal opacification and keratoconus,
abnormalities of the cornea.
STRATEGY
Our objective is to build a leading biopharmaceutical company that discovers,
develops and commercializes novel and superior drug products for treatment of
diseases and conditions of the eye. The key elements of our strategy are to:
- Focus on diseases and conditions representing large underserved markets in
ophthalmology. We are targeting diseases and conditions, including vitreous
hemorrhage, diabetic retinopathy, corneal opacification and keratoconus, for
which there are currently no approved pharmacological therapies. Surgical
procedures, when available for these conditions, carry significant risks.
These conditions represent a substantial market opportunity in the United
States, Europe and Japan. We are developing Vitrase to address diseases and
conditions in the back of the eye, an area where few therapies are currently
available.
- Maximize the market opportunity for Vitrase. We are focused on bringing
Vitrase to market as quickly as possible and ensuring that it gains broad
acceptance for ophthalmic indications. We recently entered into a
collaboration with Allergan, under which Allergan has agreed to use its
extensive ophthalmic marketing capabilities to commercialize Vitrase. We are
currently in Phase III clinical trials of Vitrase for treatment of severe
vitreous hemorrhage and recently commenced a pilot Phase IIa clinical trial
for treatment of diabetic retinopathy.
- Leverage our expertise and proprietary position with the enzyme
hyaluronidase. We believe that the unique properties of hyaluronidase make
it suitable to be used safely and effectively for numerous applications in
the eye. We have a successful track record of discovering and patenting
novel therapeutic applications for hyaluronidase. All three of our clinical
stage product candidates include hyaluronidase. We plan to continue our
research and development efforts with hyaluronidase to identify additional
ophthalmic applications for this enzyme.
- Form strategic collaborations to accelerate commercialization of our
products. To enable us to capitalize more quickly on commercialization
opportunities for our products, we will continue to explore additional
collaborative opportunities with pharmaceutical companies or others that
have domestic and international sales and marketing expertise. As we pursue
future collaborations, we may choose to retain some strategic sales and
marketing rights.
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- Identify, in-license and acquire complementary products and technologies. In
addition to our internal development efforts, we will seek to acquire or
in-license products and technologies for ophthalmic applications. We believe
that our substantial expertise in the development of ophthalmic products
positions us well to attract, evaluate and secure future opportunities.
ANATOMY OF THE EYE
The human eye is approximately one inch in diameter and functions much like a
camera. The eye incorporates a lens system (the cornea and the lens) that
focuses light, a variable aperture system (the iris) that controls the amount of
light passing through the eye and a film (the retina) that records the image.
The cornea, lens and iris operate to focus light rays on the retina, which
contains the receptors that transmit images through the optic nerve to the
brain.
The cavity between the lens and the retina is filled with the vitreous humor, a
clear, gel-like substance. The vitreous humor is nearly solid in children and
undergoes a natural transition to liquid as one ages.
[ILLUSTRATION OF EYE]
<TABLE>
<S> <C>
Cornea: The clear, transparent outer portion of the front of the eye
that provides most of the eye's focusing power.
Iris: The colored part of the eye that helps control the amount of
light that enters the eye.
Pupil: The dark hole in the middle of the iris through which light
enters the eye.
Lens: The transparent structure inside the eye (behind the cornea
and iris) that also focuses light rays onto the retina.
Vitreous humor: The clear, gel-like substance that fills the back of the eye
between the lens and the retina.
Retina: The nerve layer that lines the back of the eye. The retina
senses light and transmits impulses that are sent through
the optic nerve to the brain.
Optic nerve: The nerve that connects the eye to the brain and carries the
impulses formed by the retina.
</TABLE>
HYALURONIDASE
The term hyaluronidase is used to describe a group of naturally occurring
enzymes that can digest certain forms of carbohydrate molecules called
proteoglycans. The primary role of hyaluronidase is to digest proteoglycans such
as hyaluronan, hyaluronic acid and chondroitin sulphate, substances that are
part of various connective tissues in the body, including connective tissues in
the eye. Physicians have used hyaluronidase safely and extensively for over 50
years to enhance the spreading of local anesthetics.
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<PAGE> 26
In the eye, pharmacological applications of hyaluronidase exploit the properties
of this enzyme to modify the structure of the eye for therapeutic purposes. Our
development work has been focused on applications of hyaluronidase to take
advantage of its ability to digest proteoglycans to treat a variety of eye
diseases and conditions, including vitreous hemorrhage, diabetic retinopathy,
corneal opacification and keratoconus. For ophthalmic indications, only highly
purified and specially formulated hyaluronidase can be used. Hyaluronidase that
is less pure or formulated with preservatives has been shown to be dangerous to
the eye and may cause blindness.
PRODUCT DEVELOPMENT PROGRAMS
We have three product candidates in clinical development as well as other
product candidates that we are evaluating in preclinical studies. The following
is a summary of our clinical stage product candidates:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRODUCT INDICATION DEVELOPMENT STATUS MARKETING RIGHTS
------- ---------- ------------------ ----------------
<S> <C> <C> <C>
Vitrase Severe vitreous hemorrhage Phase III Allergan
Diabetic retinopathy Phase IIa Allergan
Keratase Corneal opacifications Phase IIb planned --
Keraform Keratoconus Phase IIa planned --
Allergan has licensed worldwide rights for Vitrase, except for Mexico and Japan.
- -----------------------------------------------------------------------------------------------------
</TABLE>
VITRASE
We are developing Vitrase, a proprietary formulation of hyaluronidase, for
treatment of severe vitreous hemorrhage and diabetic retinopathy. When injected
into the vitreous humor, Vitrase breaks down the proteoglycan matrix, causing
the vitreous humor to liquefy. We believe that this also results in the
separation of the vitreous humor from the retina and that, together, these
effects are beneficial for treatment of severe vitreous hemorrhage and diabetic
retinopathy. Vitrase is administered directly into the vitreous humor through a
single-dose injection. The procedure is performed in several minutes in an
ophthalmologist's office and is virtually painless due to application of a
topical anesthetic. In March 2000, we entered into a collaboration with Allergan
for the marketing, sale and distribution of Vitrase in the United States and all
international markets, except Mexico and Japan.
Vitreous Hemorrhage
A vitreous hemorrhage occurs when retinal blood vessels rupture and bleed into
the vitreous humor. These hemorrhages result from leakage from abnormal, weak
blood vessels and are associated with diabetic retinopathy, trauma and other
factors. The immediate consequence of a vitreous hemorrhage is a reduction in
the amount of light that can pass through the normally clear vitreous humor to
the retina. The effects of a hemorrhage can be limited to a few dark spots in
vision or, in the case of a severe vitreous hemorrhage, can result in completely
obscured vision. Depending on the severity of the vitreous hemorrhage, it may
take several months or significantly longer for the body to reabsorb the blood
and for the patient to regain vision. In addition to obstructing the patient's
vision, a vitreous hemorrhage often prevents physicians from seeing into the
back of the eye to diagnose or treat the cause of the hemorrhage. If extensive
or repeated bleeding occurs, fibrous tissue or scarring can form on the retina,
which can lead to a detachment of the retina and permanent vision loss or
blindness.
Patients who seek medical care for a vitreous hemorrhage often visit a
physician, who then refers them to a retinal specialist. Treatment options for
patients with a vitreous hemorrhage are limited. Currently, there is no drug
treatment for vitreous hemorrhage and most retinal specialists initially
recommend a "watchful waiting" period, during which no medical treatment is
provided in the hope that the hemorrhage will clear on its own. The risks
related to watchful waiting may include continued bleeding and, if caused by
diabetic
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retinopathy, disease progression during the time it takes for the blood to clear
on its own, if at all. An alternative to watchful waiting is a surgical
procedure called a vitrectomy, in which the vitreous humor and hemorrhage are
surgically removed and replaced with a balanced salt solution. There are serious
risks associated with a vitrectomy, including both cataract formation and
possible loss of vision associated with retinal detachment. These risks
contribute to the limited use of vitrectomy as an initial treatment option for
vitreous hemorrhage patients.
We believe that a substantial opportunity exists to establish Vitrase as the
initial therapy for a severe vitreous hemorrhage. Vitrase, when injected into a
blood-filled vitreous humor, promotes clearance by causing the vitreous humor to
liquefy and the blood to settle to the bottom of the eye. Vitrase also
stimulates the cells responsible for engulfing and breaking down the blood,
accelerating the reabsorption of the blood. This clears the path for light to
reach the retina enabling the patient to regain vision. In addition, clearing
the hemorrhage permits the retinal specialist to visualize, diagnose and treat
the underlying cause of the vitreous hemorrhage.
Hemorrhage density can vary significantly between patients who experience
vitreous hemorrhage, but even a mild hemorrhage indicates the existence of a
serious problem. However, because of the absence of a validated and generally
accepted medical definition of the various densities of vitreous hemorrhage, we
classify a vitreous hemorrhage as either mild, moderate or severe depending on
the density of the vitreous hemorrhage as observed by the physician:
- Mild vitreous hemorrhage is characterized by trace blurring of retinal blood
vessels
- Moderate vitreous hemorrhage is characterized by partial obscuration of
retinal blood vessels and/or the optic nerve
- Severe vitreous hemorrhage is characterized by complete obscuration of
retinal blood vessels and/or the optic nerve
Market Opportunity. Based on market research that we commissioned in February
1999, we believe that approximately 450,000 cases of vitreous hemorrhage occur
each year in the United States, a total of 400,000 cases occur each year in the
five largest European markets and 190,000 cases occur each year in Japan.
Approximately 60% of these cases are due to diabetic retinopathy, 15% are due to
trauma and 25% are due to other factors. We believe that approximately half of
all cases are candidates for treatment using Vitrase.
Clinical/Regulatory Status. In October 1998, the FDA granted fast-track
designation for Vitrase for the treatment of severe vitreous hemorrhage.
Products with fast-track designation may be approved by the FDA based on
clinical studies using surrogate endpoints that are reasonable predictors of a
clinical benefit.
We are currently conducting two Phase III trials for the treatment of severe
vitreous hemorrhage. These trials are prospective, randomized, parallel,
placebo-controlled and double-masked studies. We are conducting one trial, our
North American trial, in the United States, Mexico and Canada and will include
up to 680 patients. We are conducting the other trial in Europe, Brazil,
Australia and South Africa and will include up to 510 patients. To date, we have
enrolled over 400 patients in these trials.
In both studies, we are enrolling patients who have both a severe vitreous
hemorrhage that has been present for at least one month and a best corrected
visual acuity of less than 20/200 at initial screening. After enrollment,
patients are randomly assigned to either a test group or a control group.
Patients in the test group receive either a 7.5 (North America only), 55 or 75
international unit, or IU, injection of Vitrase. Patients in the control group
receive a saline injection. Treatment success in both studies is defined by the
occurrence of any one of the following surrogate endpoints, which must occur
within three months following treatment with Vitrase:
- panretinal laser photocoagulation surgery to slow or stop the cause of the
vitreous hemorrhage
- other surgical treatment not specifically indicated for the clearance of the
vitreous hemorrhage (for example, vitrectomy to enable treatment of retinal
detachment)
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- documented medical evidence that the clinical cause of the vitreous
hemorrhage has been resolved without the need for further therapy
If a surrogate endpoint is achieved, we will be able to file a New Drug
Application, or NDA, with the FDA. We also will have a requirement to validate
the surrogate endpoint by demonstrating that patients treated with Vitrase had a
clinically relevant improvement in visual acuity or other related clinical
benefit. This can be done post NDA-approval. Substantiating a clinical benefit,
if any, could be a long process and may be significantly affected by patient
drop-out or patients' unwillingness to undergo potentially long term
post-treatment evaluation.
Prior to the initiation of our Phase III trials, we completed a Phase I, Phase
IIa and two Phase IIb trials of Vitrase. The Phase I trial was conducted in
Mexico and involved 14 patients. Our Phase IIa trial was a pilot safety/efficacy
study involving 18 patients with vitreous hemorrhage, four of whom were
administered a saline injection, 13 of whom were administered a 75 IU dose
injection of Vitrase and one of whom was administered Vitrase in one eye and
saline in the other eye. The primary efficacy variable was time to clearance of
the vitreous, defined as the investigator's ability to view the retina with
sufficient clarity to treat all areas from which the hemorrhage might have
originated. Following the administration of either Vitrase or saline, patients
were observed for a period ranging from 19 to 124 days, with the average being
56 days. Nine of the 14 patients treated with Vitrase experienced clearance of
their vitreous hemorrhage during the period in which these patients were
observed while none of the patients that received saline experienced clearance
of their vitreous hemorrhage.
Two Phase IIb clinical trials of Vitrase have been completed in the United
States and Mexico. The two prospective, randomized, double-masked, non-placebo
controlled clinical trials involved a total of 378 patients who had a vitreous
hemorrhage for at least one month due to diabetic retinopathy or spontaneous
bleeding that was sufficiently severe to prevent adequate diagnosis or
treatment. The patients were randomly administered either a 7.5, 37.5 or 75 IU
dose injection of Vitrase. The primary efficacy variable for both clinical
trials was clearance of the vitreous hemorrhage, which was defined as the
ability of the investigator to see the back of the eye with sufficient clarity
to identify the cause and/or begin appropriate treatment.
In our Phase IIb Mexico clinical trial, we evaluated 225 patients for up to
eight weeks following treatment. Hemorrhage clearance was achieved in 48.5% of
patients in the 7.5 IU group, 47.1% of patients in the 37.5 IU group, and 63.2%
of patients in the 75 IU group. There was no statistically significant
difference among any of the dosage groups for the total patient population
analysis. However, in a retrospective analysis we divided the total patient
population into two discrete subsets, mild/moderate and severe, and found that
for patients with a severe vitreous hemorrhage, there was a statistically
significant difference in vitreous hemorrhage clearance in the 75 IU dosage
group (62.7%) when compared to either the 7.5 IU (40.4%) or the 37.5 IU (40.4%)
dosage groups. Although this study was not designed to evaluate visual acuity as
a primary endpoint, visual acuity data was collected. Visual acuity improved an
average of three lines on the eye chart for patients in each of the three
treatment groups who experienced clearance of their vitreous hemorrhage. Visual
acuity in patients with non-cleared eyes was essentially unchanged from baseline
with no improvement shown. A valid statistical analysis comparing the change in
visual acuity between patients with cleared eyes and patients with non-cleared
eyes could not be made since patients had not been prospectively randomized into
these two groups.
In our Phase IIb U.S. clinical trial, we evaluated 153 patients for up to 56
days following treatment. Hemorrhage clearance was achieved in 54.0% of patients
in the 7.5 IU group, 41.5% of patients in the 37.5 IU group, and 56.5% of
patients in the 75 IU group. There was no statistically significant difference
among dosage groups. A retrospective analysis of patients that we classified as
having either a mild/moderate or severe vitreous hemorrhage was not
statistically significant between dosage groups. In this retrospective analysis,
the vitreous hemorrhage clearance rates for severe hemorrhage patients was 56.3%
in the 75 IU group as compared to 36.1% in the 37.5 IU group and 40.0% in the
7.5 IU group. Visual acuity was not evaluated in this trial.
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Despite the absence of a control group in our two Phase IIb clinical trials, we
believe that all three doses used in our Phase IIb clinical trials were active
and showed varying levels of clearance. We believe this is the first time that
any pharmacological agent has been shown to promote the clearance of vitreous
hemorrhage in patients. Based on the results of our Phase IIb clinical trials,
we commenced our two Phase III clinical trials of Vitrase, including a placebo
control group involving a saline injection, for the treatment of severe vitreous
hemorrhage.
To date, there have been no significant safety issues associated with the use of
Vitrase in our clinical trials. Depending on the Vitrase dose, 0% to 45% of
patients typically within a day of injection, experience an inflammatory
response near the front of the eye between the iris and cornea, which is
undetectable to the patient. This condition generally requires no treatment by
the retinal specialist and typically resolves itself within seven to 10 days. In
our clinical trials, some physicians chose to prescribe topical
anti-inflammatory medicine to treat the inflammation.
Diabetic Retinopathy
Abnormal changes and/or damage to the blood vessels in the eye due to diabetes
is known as diabetic retinopathy. Diabetic retinopathy is a progressive disease
consisting of two stages, nonproliferative and proliferative. Nonproliferative
diabetic retinopathy is the first stage of diabetic retinopathy and occurs when
the retinal blood vessels swell and leak fluid and small amounts of blood into
the eye. Proliferative diabetic retinopathy occurs when normal retinal blood
vessels become obstructed and new, abnormal blood vessels begin to grow, or
proliferate, on the surface of the retina or into the vitreous humor. The growth
of these new, abnormal blood vessels creates a dangerous condition because they
are weak and grow beyond the supporting structure of the retina. These blood
vessels are prone to bleeding and hemorrhage, and can lead to serious problems,
including retinal tears and retinal detachment, both of which can severely
impair vision and cause blindness. There is no cure for diabetic retinopathy.
Under current practice, physicians do not generally treat patients at the
nonproliferative stage of the disease because there is no effective treatment
available. The most common treatment for patients with proliferative diabetic
retinopathy is panretinal laser photocoagulation. In this treatment, hundreds of
tiny burns are made to the retina by a laser to reduce the growth of the
abnormal blood vessels into the vitreous humor. Panretinal laser
photocoagulation surgery has been shown to be effective in slowing the
progression of proliferative diabetic retinopathy. Panretinal laser
photocoagulation surgery frequently leads to increased loss of night vision and
can make night driving more difficult. Also, after panretinal laser
photocoagulation surgery, peripheral, or side vision, is often not as good as
before the surgery.
We believe that Vitrase can treat diabetic retinopathy at the nonproliferative
stage. Following injection into the vitreous humor, Vitrase acts to separate the
vitreous humor from the retina, thereby limiting growth of retinal blood vessels
into the vitreous humor. We believe that Vitrase achieves this by breaking down
the proteoglycan component of the substance that binds the vitreous humor to the
retina and by liquefying the vitreous humor. This process allows the vitreous
humor to detach from the retina. Retinal specialists consider this detachment to
be beneficial to diabetic retinopathy patients because it delays the progression
of the disease and preserves vision.
Market Opportunity. Diabetes continues to be a major healthcare problem in the
United States and is growing rapidly in many regions outside the United States.
Eye disease is commonly associated with diabetes, and the risk of blindness to
individuals with diabetes is 25 times greater than in the general population. Of
the nearly eight million individuals in the United States diagnosed with
diabetes, four to six million have some form of diabetic retinopathy. The
majority of individuals with diabetic retinopathy are in the nonproliferative
stage of the disease. We believe that these people are potential candidates for
treatment using Vitrase.
Clinical/Regulatory Status. We have conducted a preclinical study using an
animal model to simulate the effects of diabetic retinopathy. In this model, the
growth of abnormal blood vessels in the eye was accelerated by administration of
growth factors. In the treated animals, Vitrase was injected into the
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vitreous humor two weeks prior to the administration of the growth factors.
Vitrase significantly reduced the growth of abnormal blood vessels in the
Vitrase-treated group versus the control group.
In October 1999, we commenced a pilot Phase IIa clinical trial in Mexico City to
evaluate the safety and efficacy of a single dose injection of Vitrase to cause
a detachment of the vitreous humor from the retina and the impact on slowing the
progression of diabetic retinopathy over a one-year period. In two arms of this
four arm trial, Vitrase is being evaluated versus a saline control in patients
with nonproliferative diabetic retinopathy. In addition to these two arms, we
are studying the ability of a gas called sulfur-hexafluoride, or SF6, when used
as an adjunct to Vitrase, to enhance the efficacy of Vitrase in detaching the
vitreous humor from the retina. A published, preclinical study has shown that
SF6 in combination with Vitrase may be effective in separating the vitreous
humor from the retina in an animal model. This study also includes an
SF6-gas-only, control study arm. We have completed enrollment of 60 patients in
this trial. We plan to conduct additional trials in the United States to
evaluate the safety and efficacy of Vitrase for treatment of diabetic
retinopathy.
KERATASE
We are developing Keratase, a proprietary formulation of hyaluronidase, for the
nonsurgical treatment of corneal opacification. Keratase is a more concentrated
formulation of hyaluronidase than Vitrase and is delivered in lower volume.
Corneal opacification occurs when the cornea, which is normally transparent,
becomes scarred, cloudy or opaque, diminishing the amount of light entering the
eye. The severity of opacification can range from scars outside the line of
vision to uniformly opaque corneas where light transmission is reduced to the
point of blindness.
A normal, clear cornea contains collagen fibrils that are uniformly spaced and
connected together by proteoglycans. We believe that corneal opacification is
caused by abnormal deposits of proteoglycans following bacterial, fungal or
viral infection or trauma to the eye. We believe this results in an irregular
rearrangement of the collagen fibrils, which leads to scattering of light and
hazy or blurry vision.
There are currently no drug treatment options for corneal opacification. The
only treatment option is a corneal transplant, whereby a donor cornea is used to
replace a damaged cornea. The number of corneal transplants is limited by cost
and availability of donor corneas. The risks associated with corneal transplants
include loss of vision, rejection and creation of severe astigmatism.
We believe Keratase can be used to treat corneal opacifications with benefits
equivalent to those of corneal transplants but without the associated risks of
rejection and astigmatism. We believe that Keratase digests the abnormal
deposits of proteoglycans that connect the collagen, allowing the collagen to
reorganize, thereby enabling improved vision. Over time, the proteoglycans
reform to connect the corneal collagen in the proper reorganized structure.
Market Opportunity. Based on market research that we commissioned in October
1999, we believe that there are approximately three million people in the United
States, Western Europe and Japan that have a form of vision impairment due to
corneal opacification, with nearly 200,000 new cases of corneal opacification
occurring each year. We believe that the majority of these people are candidates
for treatment using Keratase.
Clinical/Regulatory Status. We have conducted preclinical studies using human
donor corneas with opacification due to scarring. Keratase, when injected into
these corneas, cleared a majority of the corneas with opacification in less than
one week, while a saline control injection was not effective.
The FDA has approved the initiation of a Phase IIb trial of Keratase for the
treatment of corneal opacification. The study will enroll a minimum of 30
patients with corneal opacification due to infection or trauma and will include
five Keratase dose groups and a saline control group. The trial will evaluate
the improvement in aided and unaided visual acuity in patients who have best
corrected vision of no better than 20/100 at entry. We plan to conduct the trial
in Mexico City under U.S. and Mexico Investigational New Drug, or IND,
applications. We plan to commence this trial in the second half of 2000.
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KERAFORM
We are developing Keraform, a proprietary system for the treatment of
keratoconus. Keratoconus is a degenerative corneal disease that impairs vision
and is characterized by progressive thinning of the cornea and the development
of an irregular, cone-like protrusion of the cornea, typically in both eyes. As
the disease progresses, vision becomes increasingly distorted. Keratoconus
typically has its onset during puberty or early adulthood, and usually
progresses over a 10 to 20 year period. The rate of progression and severity can
vary among patients, ranging from mild astigmatism to severe loss of vision.
Eyeglasses do not help the vision of these patients. Most patients choose to
wear hard contacts lenses with limited long term effectiveness. Currently, the
only permanent treatment for keratoconus is a corneal transplant.
Due to the lack of permanent, nonsurgical methods to treat keratoconus, we
believe that Keraform, if successfully developed, will be an attractive option
to treat keratoconus. We believe Keraform, a nonsurgical system, can reshape a
patient's cornea to stabilize, improve or correct keratoconus. Treatment with
Keraform involves three steps:
- Step One. In order to make the cornea more malleable, a proprietary
formulation of hyaluronidase is injected into the stroma, the middle layer
of the cornea. The hyaluronidase digests the proteoglycans that bind the
collagen together in the stroma, making the cornea soft and malleable.
- Step Two. A custom fitted, hard contact lens is temporarily worn by the
patient to reshape the cornea.
- Step Three. Topical stabilizing drops containing glycerose are used to set
the cornea to maintain the proper shape once optimal vision correction is
achieved. Glycerose, a naturally occurring chemical found in the body, when
used in the eye crosslinks the collagen to make the cornea more rigid.
Market Opportunity. Based on market research that we commissioned in October
1999, we believe that there are approximately 400,000 people in the United
States, Western Europe and Japan who currently have keratoconus. We believe that
a majority of these people are candidates for treatment using Keraform.
Clinical/Regulatory Status. We plan to conduct a pilot Phase IIa clinical trial
of Keraform for the treatment of keratoconus. The trial is planned to consist of
four study arms with a total of 24 patients. The primary study objective is to
safely and effectively reshape and stabilize the corneas of keratoconus
patients. Patients enrolled in the trial will receive either a hyaluronidase or
a saline injection, and topical glycerose or saline stabilizing drops.
COLLABORATION WITH ALLERGAN
In March 2000, we entered into a collaboration with wholly-owned subsidiaries of
Allergan, including a license agreement for the marketing, sale and distribution
of Vitrase, a supply agreement for Vitrase and a stock purchase agreement for
$10.0 million of our Series D preferred stock. The license agreement provides
for the creation of a joint operating committee, which will consist of an equal
number of members from each company and will oversee development, regulatory and
marketing activities with respect to Vitrase. Allergan is a leading provider of
eye care and specialty pharmaceutical products throughout the world.
Under the terms of our agreements with Allergan:
- Development. We are responsible for all product development, preclinical
studies and clinical trials in support of marketing approvals of Vitrase for
treatment of vitreous hemorrhage in the United States and Europe. We are
also responsible for all preclinical studies and clinical trials to
demonstrate the safety and efficacy of Vitrase for treatment of diabetic
retinopathy.
- Regulatory Approvals. We are responsible for applying for and obtaining
regulatory approval of Vitrase in the United States from the FDA and in the
European Union through a centralized
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<PAGE> 32
application process. Allergan will be responsible for applying for and
obtaining regulatory approvals of Vitrase in markets outside the United
States and the European Union where it deems appropriate.
- Manufacturing. We will be responsible for the manufacture of Vitrase and for
supplying all of Allergan's requirements for Vitrase during the term of the
license agreement.
- Marketing. In the United States, Allergan will be responsible for the
overall management of marketing, sale and distribution activities for
Vitrase through its established sales and marketing organization. Under the
terms of the license agreement, we will employ medical specialists in the
United States to assist in physician training and usage development. In all
markets outside the United States, except Mexico until 2004 and Japan,
Allergan will be solely responsible for the marketing, sale and distribution
of Vitrase.
- Milestone Payments. Allergan has agreed to pay us up to $35.0 million in
milestone payments based on our achievement of specified regulatory and
development objectives with respect to Vitrase for treatment of vitreous
hemorrhage and diabetic retinopathy. To date, we have not received any
milestone payments from Allergan.
- Profit Sharing and Royalties. In the United States, profits on the sale of
Vitrase will be split on a 50/50 basis between Allergan and us during the
term of the license agreement. Allergan's license to market, sell and
distribute Vitrase in the United States will expire ten full calendar years
following the date of its first commercial sale, at which time all
commercial rights for Vitrase in the United States will revert to us. In all
markets outside the United States, except Mexico until 2004 and Japan, we
will receive a royalty on all sales of Vitrase by Allergan. Allergan's
obligation to pay royalties will terminate on a country-by-country basis
upon the later of ten full calendar years following the date of the first
commercial sale in each particular country and the expiration date of the
last-to-expire licensed patent in that country.
RESEARCH AND DEVELOPMENT
Since our inception, we have made substantial investments in research and
development. During the years ended December 31, 1999, 1998 and 1997, we spent
$11.1 million, $7.5 million and $5.0 million on research and development
activities. We plan to continue to focus our internal research and development
efforts on the development of novel ophthalmic therapies.
In addition to our product candidates in clinical trials, we have a number of
early stage research programs. We have identified an existing chemical compound
that may help to reduce the risks associated with macular translocation surgery.
Macular translocation surgery is a complex procedure that involves several
steps, including a vitrectomy and the detachment and reattachment of the retina
to treat the wet form of age-related macular degeneration. We have observed that
this existing chemical compound, when injected into the vitreous humor of
animals shortly after liquefying the vitreous humor with hyaluronidase, promotes
spontaneous retinal detachment followed by spontaneous reattachment without
marked retinal damage. We intend to conduct further preclinical trials before
proceeding to human trials of the existing chemical compound as an adjunct to
macular translocation surgery.
PATENTS AND PROPRIETARY RIGHTS
Our success will depend in part on our ability to obtain patent protection for
our inventions, to preserve our trade secrets and to operate without infringing
the proprietary rights of third parties. Our strategy is to actively pursue
patent protection in the United States and foreign jurisdictions for technology
that we believe to be proprietary and that offers a potential competitive
advantage for our inventions. To date, we have filed six U.S. patent
applications for Vitrase technologies, two of which have issued for the use of
hyaluronidase to clear vitreous hemorrhage, and two of which are pending for the
use of hyaluronidase to treat other vitreoretinal disorders. In addition, we
have licensed one U.S. patent and the corresponding European patents for the
treatment of certain ophthalmic conditions using enzymes, such as hyaluronidase
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derived from other sources. We hold three issued U.S. patents for the Keraform
technologies and have two additional U.S. patent applications pending. In
addition, we are currently negotiating the acquisition of technologies and
related patent applications similar to our Keraform technology. We have also
filed two other U.S. patent applications, one covering the use of our Keratase
product for clearing corneal opacification and the other covering the use of our
technology for retinal translocation.
In addition to patents, we rely on trade secrets and proprietary know-how. We
seek protection of these trade secrets and proprietary know-how, in part,
through confidentiality and proprietary information agreements. We require our
employees, directors, consultants, and advisors, outside scientific
collaborators and sponsored researchers, other advisors and other individuals
and entities to execute confidentiality agreements upon the start of employment,
consulting or other contractual relationships with us. These agreements provide
that all confidential information developed or made known to the individual or
entity during the course of the relationship is to be kept confidential and not
disclosed to third parties except in specific circumstances. In the case of
employees and some other parties, the agreements provide that all inventions
conceived by the individual will be our exclusive property. These agreements may
not provide meaningful protection for or adequate remedies to protect our
technology in the event of unauthorized use or disclosure of information.
Furthermore, our trade secrets may otherwise become known to, or be
independently developed by, our competitors.
COMPETITION
The markets for therapies that treat diseases and conditions of the eye are
subject to intense competition and technological change. Many companies,
including major pharmaceutical companies and specialized biotechnology
companies, are engaged in activities similar to ours. Some of these companies
have substantially greater financial and other resources, larger research and
development staffs and more extensive marketing and manufacturing organizations
than ours. Many of these companies have significant experience in preclinical
testing, clinical trials and other parts of the regulatory approval process.
We are not aware of any other drug candidates in clinical trials for the
treatment of vitreous hemorrhage or corneal opacification. Eli Lilly and Company
is currently conducting clinical trials for the use of a systemic drug to treat
diabetic retinopathy, and several companies are working on drugs and systems to
help control diabetes and the consequences of diabetes, including diabetic
retinopathy. In the case of keratoconus, we are aware of a surgically implanted
device being tested in clinical trials by KeraVision, Inc.
Our success will depend, in part, on our ability to:
- demonstrate the safety and efficacy of our products
- obtain regulatory approval in a timely manner
- demonstrate potential advantages over alternative treatment methods
- obtain marketing and distribution support from our collaborators
- obtain reimbursement coverage from insurance companies and other third-party
payors
- demonstrate cost-effectiveness
- obtain patent protection
MARKETING AND SALES
We plan to market and distribute our Vitrase product in the United States and
all international markets, except Mexico and Japan, through our collaboration
with Allergan. We have a distribution agreement with Laboratories Sophia S.A. de
C.V. providing for the marketing, sales and distribution of Vitrase in Mexico
until April 2004. In the United States, the primary target market for Vitrase
will initially be retinal specialists to whom most patients with vitreous
hemorrhage are referred. We plan to pursue a collaboration similar to our
collaboration with Allergan for the marketing, sales and distribution of Vitrase
in Japan.
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For our Keratase and Keraform products under development, we plan to develop our
own sales, marketing and distribution infrastructure to establish these
therapeutic products as the standard of care. To achieve this objective, we will
focus on:
- publishing our research in peer review journals
- developing and increasing awareness of these products by recruiting
opinion-leading ophthalmologists as spokespersons for our products
- using physician and patient education to build awareness of these products
THIRD-PARTY REIMBURSEMENT
In the United States, physicians, hospitals and other healthcare providers that
purchase pharmaceutical products generally rely on third-party payors,
principally private health insurance plans and Medicare and to a lesser extent
Medicaid, to reimburse all or part of the cost of the product and procedure for
which the product is being used. We expect that patients with severe vitreous
hemorrhage who are candidates for Vitrase treatment will include, primarily due
to demographic factors, patients with health insurance coverage provided by
Medicare and private insurers, including Medicare health maintenance
organizations. Currently, a Medicare reimbursement code has been established for
the intravitreal injection of a pharmaceutical agent, which, we believe, will be
appropriate for physician billing for a Vitrase injection. Hospitals and
physicians are reimbursed separately for drugs. Typically, the Health Care
Financing Administration, or HCFA, the governmental agency responsible for
Medicare reimbursement policy, does not issue national coverage guidelines for
individual drugs. Drug specific coverage policies are primarily developed by
individual health insurance companies following Medicare's criteria for drug
coverage, which include, among other requirements, that the drug be FDA
approved, be used in connection with a physician service and be medically
reasonable for the treatment of an illness or injury. While reimbursement may be
available under existing payment codes for miscellaneous injectable drugs, such
reimbursement requests are reviewed separately by each Medicare health insurance
provider. Widespread and uniform reimbursement for our injectable drug products
will require the establishment of a specific reimbursement code for the
injectable drug, which is issued by HCFA following review of an application by
the manufacturer. To support our applications for reimbursement coverage with
Medicare and other major third-party payors, we intend to use data from clinical
trials, including Phase III and Phase IV clinical trials, to demonstrate the
healthcare and economic benefits of using Vitrase for severe vitreous
hemorrhage. The lack of satisfactory reimbursement for our drug products will
limit their widespread use and lower potential product revenues.
Reimbursement systems in international markets vary significantly by country
and, within some countries, by region. Reimbursement approvals must be obtained
on a country-by-country basis. In many foreign markets, including markets in
which we anticipate selling our products, the pricing of prescription
pharmaceuticals is subject to government pricing control. In these markets, once
marketing approval is received, pricing negotiations could take another six to
twelve months or longer. As in the United States, the lack of satisfactory
reimbursement or inadequate government pricing of our products will limit their
widespread use and lower potential product revenues.
GOVERNMENT REGULATION
Our pharmaceutical products are subject to extensive government regulation in
the United States. If we distribute our products abroad, these products will
also be subject to extensive foreign government regulation. In the United
States, pharmaceutical products are regulated by the FDA. FDA regulations govern
the testing, manufacturing, advertising, promotion, labeling, sale and
distribution of our products.
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The FDA approval process for drugs includes:
- preclinical studies
- submission of an IND for clinical trials
- adequate and well-controlled human clinical trials to establish the safety
and efficacy of the product
- submission of an NDA
- review of the NDA
- inspection of the facilities used in the manufacturing of the drug to assess
compliance with the cGMP regulations
The NDA includes comprehensive, complete descriptions of the preclinical
testing, clinical trials, and the chemical, manufacturing and control
requirements of a drug that enables the FDA to determine the drug's safety and
efficacy. An NDA must be filed and then approved by the FDA before a drug can be
marketed commercially.
The FDA testing and approval process requires substantial time, effort and
money. We cannot assure you that any approval will ever be granted.
Preclinical studies include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and effectiveness of the product.
These studies must be performed according to good laboratory practices. The
results of the preclinical studies, together with manufacturing information and
analytical data, are submitted to the FDA as part of the IND. Clinical trials
may begin 30 days after the IND is received, unless the FDA raises concerns or
questions about the conduct of the clinical trials. If concerns or questions are
raised, the IND sponsor and the FDA must resolve any outstanding concerns before
clinical trials can proceed. We cannot assure you that submission of an IND will
result in authorization to commence clinical trials. Nor can we assure you that
if clinical trials are approved, that data will result in marketing approval.
Clinical trials involve the administration of the product that is the subject of
the trial to volunteers or patients under the supervision of a qualified
principal investigator. Furthermore, each clinical trial must be reviewed and
approved by an independent institutional review board at each institution at
which the study will be conducted. The institutional review board will consider,
among other things, ethical factors, the safety of human subjects and the
possible liability of the institution. Also, clinical trials must be performed
according to good clinical practices. Good clinical practices are enumerated in
FDA regulations and guidance documents.
Clinical trials typically are conducted in three sequential phases, Phases I, II
and III, with Phase IV studies conducted after approval and generally required
for fast-track designated drugs. These phases may overlap. In Phase I clinical
trials, the drug is usually tested on healthy volunteers to determine:
- safety
- any adverse effects
- dosage tolerance
- absorption
- metabolism
- distribution
- excretion
- other drug effects
In Phase II clinical trials, the drug is usually tested on a limited number of
afflicted patients to evaluate the efficacy of the drug for specific, targeted
indications, determine dosage tolerance and optimal dosage,
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<PAGE> 36
identify possible adverse effects and safety risks. In Phase III clinical
trials, the drug is usually tested on a larger number of patients, in an
expanded patient population and at multiple clinical sites. The FDA may require
that we suspend clinical trials at any time on various grounds, including a
finding that the subjects are being exposed to an unacceptable health risk. In
addition, FDA approval may be conditioned and limit the indicated uses for our
products.
In Phase IV clinical trials or other post-approval commitments, additional
studies and patient follow-up are conducted to gain experience from the
treatment of patients in the intended therapeutic indication. Additional studies
and follow-up are also conducted to document a clinical benefit where drugs are
approved under fast-track designation and based on surrogate endpoints. In
clinical trials, surrogate endpoints are alternative measurements of the
symptoms of a disease or condition, that are substituted for measurements of
observable clinical symptoms. Failure to promptly conduct Phase IV clinical
trials and follow-up could result in expedited withdrawal of products approved
under fast-track designation.
We expect that we will be required to conduct extended Phase IV clinical
follow-up in patients treated with Vitrase for severe vitreous hemorrhage to
monitor the long term effects of the therapy and assure the FDA that the primary
surrogate endpoints were reasonable predictors of the drug product's clinical
benefits. If we gain fast-track approval for Vitrase for severe vitreous
hemorrhage, we cannot assure you that any post-approval follow-up will validate
an objective clinical benefit or that patients will be willing to participate in
any long term follow-up.
Food and Drug Administration Modernization Act of 1997
The Food and Drug Administration Modernization Act of 1997 was enacted, in part,
to ensure the availability of safe and effective drugs, biologics and medical
devices by expediting the FDA review process for new products. The Modernization
Act establishes a statutory program for the approval of fast-track products. The
fast-track provisions essentially codify the FDA's accelerated approval
regulations for drugs and biologics. A fast-track product is defined as a new
drug or biologic intended for the treatment of a serious or life-threatening
condition that demonstrates the potential to address unmet medical needs for
this condition. Under the new fast-track program, the sponsor of a new drug or
biologic may request the FDA to designate the drug or biologic as a fast-track
product at any time during the clinical development of the product. The
Modernization Act specifies that the FDA must determine if the product qualifies
for fast-track designation within 60 days of receipt of the sponsor's request.
Approval of an application for fast-track designation for a product can be based
on an effect on a clinical endpoint or on a surrogate endpoint that is
reasonably likely to predict clinical benefit. Approval of an application for
fast-track designation will be subject to:
- post-approval studies and follow-up to validate the surrogate endpoint or
confirm the effect on the clinical endpoint
- prior review of all promotional materials
If a preliminary review of the clinical data suggests that the product is
effective, the FDA may initiate review of sections of an application for
fast-track designation for a product before the application is complete. This
rolling review is available if the applicant provides a schedule for submission
of remaining information and pays applicable user fees. However, the time period
specified in the Prescription Drug User Fees Act, which governs the time period
goals the FDA has committed for reviewing an application, does not begin until
the complete application is submitted.
In October 1998, the FDA granted our application for fast-track designation for
Vitrase for the treatment of severe vitreous hemorrhage. We cannot predict the
ultimate impact, if any, of the fast-track process on the timing or likelihood
of FDA approval of Vitrase or, if fast-track status is granted, any of our other
potential products.
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International
For marketing outside the United States, we also are subject to foreign
regulatory requirements governing human clinical trials and marketing approval
for pharmaceutical products. The requirements governing the conduct of clinical
trials, product approval, pricing and reimbursement vary widely from country to
country. Whether or not FDA approval has been obtained, approval of a product by
the comparable regulatory authorities of foreign countries must be obtained
before manufacturing or marketing the product in those countries. The approval
process varies from country to country and the time required for such approvals
may differ substantially from that required for FDA approval. We cannot assure
you that clinical trials conducted in one country will be accepted by other
countries or that approval in one country will result in approval in any other
country. For clinical trials conducted outside the United States, the clinical
stages are generally comparable to the phases of clinical development
established by the FDA.
MANUFACTURING
Hyaluronidase, the active pharmaceutical ingredient used in Vitrase, Keratase
and Keraform, is sourced from ovine testes and processed in several stages to
produce a highly purified raw material for formulation. We have a supply
agreement with Biozyme for cGMP-grade hyaluronidase for use in ophthalmic
applications. The hyaluronidase is lyophilized, or freeze dried, by Biozyme and
delivered to our contract manufacturer, Prima Pharm, for formulation and filling
of dose specific vials. Vitrase is currently required to be stored under
refrigerated conditions prior to its use.
We intend to continue using Biozyme and Prima Pharm as our sole source suppliers
of raw materials and manufacturing services. To date, they have manufactured
only limited quantities of our products for clinical trial use. For commercial
scale production we may need to qualify and validate additional suppliers and
contract manufacturers and hire and train additional employees to supervise
these operations.
FACILITIES
We currently lease approximately 13,000 square feet of laboratory and office
space in Irvine, California. This lease expires on September 30, 2001, subject
to a five-year renewal option. We believe that this facility is adequate for our
immediate needs. Additional space will be required, however, as we expand our
research and clinical development activities. We do not foresee any significant
difficulties in obtaining any required additional facilities close to our
current facility.
HUMAN RESOURCES
Including the employees of our Visionex subsidiary, as of March 31, 2000 we had
37 full-time employees, 33 of whom were based in the United States, two of whom
were based in Singapore and two of whom were based in Mexico. Approximately 29
of our employees are involved in research and clinical development activities.
Eleven of our employees hold Ph.D. or M.D. degrees and five other employees hold
other advanced degrees. Our employees do not have a collective bargaining
agreement. We consider our relations with our employees to be good.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers, and their ages and positions as of March 31,
2000 are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edward H. Danse.............................. 47 President, Chief Executive Officer and
Director
J. C. MacRae................................. 48 Executive Vice President, Chief Operating
Officer and Chief Financial Officer
Hampar L. Karageozian........................ 61 Senior Vice President, Discovery
Marilyn R. Carlson, D.M.D., M.D. ............ 52 Vice President, Clinical and Medical
Affairs, and Chief Medical Officer
Marvin J. Garrett............................ 49 Vice President, Development
William S. Craig, Ph.D. ..................... 49 Vice President, Preclinical Research and
Development
Robert G. McNeil, Ph.D. ..................... 56 Chairman of the Board
David E. Collins(1).......................... 65 Director
Brian H. Dovey(1)............................ 58 Director
Benjamin F. McGraw III(2).................... 50 Director
Charles H. May, O.D. ........................ 78 Director
John H. Parrish(2)........................... 57 Director
Wayne I. Roe(1).............................. 49 Director
</TABLE>
- ---------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
EDWARD H. DANSE has served as our President and Chief Executive Officer since
June 1997. From 1988 to 1997, Mr. Danse held various senior management positions
at Allergan including President of the Asia Pacific Region from 1996 to 1997.
Prior to 1988, he served in various management positions at Bausch & Lomb
Incorporated and the Cooper Companies, Inc., both ophthalmic companies. Mr.
Danse received a Masters in International Management from the American Graduate
School of International Management, Thunderbird.
J. C. MACRAE has served as our Chief Financial Officer since July 1998 and was
named Executive Vice President and Chief Operating Officer in January 2000. From
1992 until its acquisition by Urohealth Systems in September 1997, Mr. MacRae
was Vice President and Chief Financial Officer for Imagyn Medical, Inc., a
manufacturer of proprietary surgical products for the obstetrics and gynecology
market. On May 3, 1999, the creditors of the successor to Urohealth Systems
filed a petition for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. Mr.
MacRae received an M.B.A. from the California State University at Fullerton.
HAMPAR L. KARAGEOZIAN has served as our Senior Vice President, Discovery since
1996 and served as our Vice President of Research and Development from 1992 to
1996. From 1970 to 1992, Mr. Karageozian served in various research and
development positions at Allergan, last serving as Senior Vice President of
Research & Development for Allergan Optical. Mr. Karageozian received a M.Sc. in
Nutritional Biochemistry and Metabolism from the Massachusetts Institute of
Technology.
MARILYN R. CARLSON, D.M.D., M.D. has served as our Vice President, Clinical and
Medical Affairs, and Chief Medical Officer since January 2000. From 1997 to
December 1999, Dr. Carlson served in various research and development positions
at Xoma Corporation, a biotechnology company, last serving as Vice President
Clinical and Medical Affairs, since June 1999. From 1991 to 1997, Dr. Carlson
was employed by The Proctor & Gamble Company, a consumer products company, last
serving as Medical Director, Clinical and Medical Affairs. Dr. Carlson received
a D.M.D. from Harvard University and an M.D. from Case Western Reserve
University.
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MARVIN J. GARRETT has served as our Vice President, Development since June 1999.
From May 1994 to May 1999, Mr. Garrett was Vice President, Regulatory Affairs
and Clinical Research for Xoma. From 1990 to 1994, he was President and General
Manager of Coopervision Pharmaceutical, a division of the Cooper Companies, Inc.
Mr. Garrett received a B.S. in Microbiology from California State University
Long Beach.
WILLIAM S. CRAIG, PH.D. has served as our Vice President, Preclinical Research
and Development since March 2000. From 1996 to December 1999, Dr. Craig was Vice
President of Research and Development for Alpha Therapeutics Corporation, a
biotechnology company. From 1991 to 1996 he was Senior Director Research and
Development for Telios Pharmaceuticals, Inc., a biotechnology company. Dr. Craig
received a Ph.D. in chemistry from the University of California, San Diego.
ROBERT G. MCNEIL, PH.D. has served on our board of directors since 1993 and as
our Chairman of the Board since 1995. Dr. McNeil has been a general partner with
Sanderling Venture Partners, an investment firm specializing in the development
of biomedical companies, since 1979. Dr. McNeil received a Ph.D. in Molecular
Biology, Biochemistry and Genetics from the University of California, Irvine.
DAVID E. COLLINS has served on our board of directors since 1998. He has been
Chief Executive Officer and a member of the board of directors of Calypte
Biomedical, a diagnostics company, since October 1999. From 1989 to 1994, Mr.
Collins was President of Schering-Plough Healthcare Products, Inc., a subsidiary
of Schering-Plough Corporation, a pharmaceutical company. Mr. Collins received a
J.D. from Harvard Law School.
BRIAN H. DOVEY has served on our board of directors since 1995. He has been a
managing member of Domain Associates, L.L.C., a venture capital firm, since
1988. Mr. Dovey is also currently a director of Connetics Corporation, a
specialty pharmaceutical company, Creative Biomolecules, Inc., a biotechnology
company, and Trimeris, Inc. a biotechnology company. Mr. Dovey received an
M.B.A. from Harvard Business School.
BENJAMIN F. MCGRAW, III, PHARM.D. has served on our board of directors since
April 2000. He has been President and Chief Executive Officer and Chairman of
the Board of Valentis, Inc., a biotechnology company, since 1994. Mr. McGraw
received a Doctorate of Pharmacy from the University of Tennessee.
CHARLES H. MAY, O.D. has served on our board of directors since 1992 and is one
of our co-founders. Dr. May has managed a private medical practice since 1997.
Dr. May received an O.D. from Northern Illinois College of Optometry.
JOHN H. PARRISH has served on our board of directors since 1992 and is one of
our co-founders. Mr. Parrish was our President and Chief Executive Officer from
our formation in 1992 until June 1997. From June 1997 to present, he has been
Chief Executive Officer of Valley Forge Pharmaceuticals, Inc., an ophthalmic
company. Mr. Parrish received a B.S. in Biology/Chemistry from Wake Forest
University.
WAYNE I. ROE has served on our board of directors since 1998. He has been Senior
Vice President for United Therapeutics, Inc., a biotechnology company, since
November 1999. From 1985 to March 2000, Mr. Roe founded and served in various
management positions at Covance Health Economics and Outcomes Services, Inc., a
clinical research organization, last serving as its Chairman. Mr. Roe is also
currently a director of Aradigm Corporation, a drug delivery company. Mr. Roe
received an M.A. in Political Economy from the State University of New York and
an M.A. in Economics from the University of Maryland.
BOARD COMPOSITION
We currently have eight directors. Our certificate of incorporation and bylaws
provide that the board of directors be divided into three classes: Classes I, II
and III. At our last annual meeting of stockholders, our stockholders elected
directors comprising Class I to a term of office to expire at the next
annual meeting of stockholders after that election; directors comprising
Class II to a term of office to expire at the second annual meeting of
stockholders after that election; and directors comprising Class III
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to a term of office to expire at the third annual meeting of stockholders after
that election. At each annual meeting of stockholders thereafter, the successors
to directors whose terms will then expire will be elected to serve from the time
of election and qualification until the third annual meeting of stockholders
following election and until a successor will have been duly elected and will
have qualified.
Subject to the re-election of the current board of directors at the 2000 annual
meeting of stockholders, and are designated as
Class I directors, whose terms expire at the 2001 annual meeting of
stockholders; , and are designated
as Class II directors, whose terms expire at the 2002 annual meeting of
stockholders; and , and are
designated as Class III directors, whose terms expire at the 2003 annual meeting
of stockholders. Each officer serves at the discretion of the board of
directors.
There are no family relationships among any of our directors or executive
officers.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors currently has two committees: an audit committee and a
compensation committee.
The audit committee makes recommendations to our board of directors regarding
the selection of independent auditors, reviews the results and scope of audit
and other services provided by our independent auditors and reviews the
accounting principles and auditing practices and procedures to be used for our
financial statements.
The compensation committee reviews and makes recommendations to our board of
directors regarding the compensation of officers and other managerial employees.
The compensation committee also considers and recommends grants of stock options
under our stock option plans and administers such plans.
DIRECTOR COMPENSATION
Our directors do not currently receive any cash compensation from us for their
service as members of the board of directors, except Mr. Collins and Mr. Roe who
received $1,500 for each board meeting attended during 1999. Mr. Collins, Mr.
Roe and Mr. McGraw will receive $1,500 for each board meeting attended in the
future. All non-employee directors are reimbursed for certain expenses in
connection with attendance at board and committee meetings. During 1999, we
granted each non-employee director an option to purchase 57,600 shares of common
stock at an exercise price of $0.70 per share. The options vest over a four-year
period and are all currently exercisable.
Our 2000 Stock Plan provides for annual grants of options to purchase common
stock to our directors commencing with our 2001 annual meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee makes decisions concerning salaries, stock options,
incentives and other forms of compensation for directors, officers and other
employees of ours. No interlocking relationship exists between any member of our
board of directors or our compensation committee and any member of the board of
directors or compensation committee of any other company.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation we paid during 1999 to
the chief executive officer and our four highest paid executive officers whose
total annual salary and bonus exceeded $100,000. These individuals are referred
to as the "named executive officers" here and elsewhere in this prospectus.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
--------------------------- -------- ----- ------------
<S> <C> <C> <C>
Edward H. Danse..................................... $258,175 $-- $--
President and Chief Executive Officer
J. C. MacRae........................................ 178,879 -- --
Executive Vice President, Chief Operating Officer
and Chief Financial Officer
Hampar L. Karageozian............................... 224,991 -- --
Senior Vice President, Discovery
Marvin J. Garrett................................... 112,179 -- --
Vice President, Development
</TABLE>
1999 OPTION GRANTS
The following table sets forth information regarding options granted to each of
our named executive officers during the year 1999. The exercise prices of the
options we granted were the fair market value of our common stock on the date of
grant, as determined by the compensation committee of our board of directors.
The potential realizable value is calculated based on the ten-year term of the
option at the time of grant. Stock price appreciation of 5% and 10% is assumed
pursuant to rules promulgated by the Securities and Exchange Commission and does
not represent our prediction of our stock price performance. The potential
realizable values at 5% and 10% appreciation are calculated by:
- multiplying the number of shares of common stock under the option by
$ per share
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options
- subtracting from that result the aggregate option exercise price
The options in this table were granted under our 1993 Stock Plan, have ten-year
terms, will terminate before their expiration dates if the optionee leaves his
or her employment with us, and, unless otherwise noted, vest over a period of
four years. We have not granted any stock appreciation rights.
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<PAGE> 42
The percentages of options granted shown below is based on an aggregate of
1,080,000 options we granted to employees and directors during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM ($)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED (#) 1999 SHARE ($/SH) DATE 5% 10%
---- ----------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Danse.......... 120,000 11.1% $0.70 08/08/09
J. C. MacRae............. 60,000 5.6 0.70 08/08/09
Hampar L. Karageozian.... 40,000 3.7 0.70 08/08/09
Marvin J. Garrett........ 160,000 14.8 0.70 08/08/09
</TABLE>
The options granted to Mr. Danse, Mr. MacRae and Mr. Karageozian vest in a
series of monthly installments over the four years of service following July 28,
1999.
The options granted to Mr. Garrett vest as to 25% of the options twelve months
following June 7, 1999 and in a series of monthly installments over the three
years following June 7, 2000.
AGGREGATE OPTION EXERCISES DURING 1999 AND 1999 OPTION VALUES
The following table describes for the named executive officers the number of
shares acquired and the value realized upon exercise of stock options during
1999, and the exercisable and unexercisable options held by them as of December
31, 1999. The "Value of Unexercised In-the-Money Options at December 31, 1999"
shown in the table represents an amount equal to the difference between the
assumed initial public offering price of $ per share, and the option
exercise price multiplied by the number of unexercised in-the-money options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Danse............... -- -- 154,666 269,334
J. C. MacRae.................. -- -- 60,000 160,000
Hampar L. Karageozian......... 1,000 -- 262,866 68,334
Marvin J. Garrett............. -- -- 0 160,000
</TABLE>
EMPLOYEE BENEFIT PLANS
2000 Stock Plan
The board of directors adopted the 2000 Stock Plan in 2000, and we
will submit it to our stockholders for their approval prior to the date of this
offering to become effective on the date of this offering. The 2000 Stock Plan
provides for the grant of incentive stock options to employees and for the grant
of nonstatutory stock options and stock purchase rights to employees, directors
and consultants. The stock plan administrator, which is the board of directors
or a committee of the board of directors administers the 2000 Stock Plan. If an
option is intended to qualify as performance-based compensation within the
meaning of the Internal Revenue Code, the committee will consist of two or more
outside directors. The stock plan administrator has the power to determine the
terms of the options or stock purchase rights granted, including the exercise
price, the number of shares subject to each option or stock purchase right, the
exercisability of the options and the form of consideration payable upon
exercise.
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<PAGE> 43
As of , 2000, a total of shares of common stock were
reserved for issuance under the 2000 Stock Plan. The number of shares available
for issuance increases annually on the first day of each new year beginning with
the year 2001. An optionee generally may not transfer options and stock purchase
rights granted under the 2000 Stock Plan and only an optionee may exercise an
option and stock purchase right during his or her lifetime. Unless terminated
sooner, the 2000 Stock Plan will terminate automatically in 2010.
Generally, the administrator determines the exercise price of nonstatutory stock
options granted under the 2000 Stock Plan. With respect to nonstatutory stock
options intended to qualify as performance-based compensation within the meaning
of the Internal Revenue Code, the exercise price must at least be equal to the
fair market value of the common stock on the date of grant. The exercise price
of all incentive stock options granted under the 2000 Stock Plan must be at
least equal to the fair market value of the common stock on the date of grant.
With respect to any participant who owns stock possessing more than 10% of the
voting power of all classes of our outstanding capital stock, the exercise price
of any incentive stock option granted must equal at least 110% of the fair
market value on the grant date and the term of such incentive stock option must
not exceed five years. The term of all other options granted under the 2000
Stock Plan may not exceed ten years.
The administrator determines the exercise price of stock purchase rights granted
under the 2000 Stock Plan. Unless the administrator determines otherwise, the
restricted stock purchase agreement entered into in connection with the exercise
of the stock purchase right shall grant us a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's service with us for
any reason, including death or disability. The purchase price for shares we
repurchase is the original price paid by the purchaser. The 2000 Stock Plan
provides for an automatic grant of an option to purchase common stock to a
director who first becomes an outside director after our initial public
offering. The 2000 Stock Plan defines an outside director as a director who is
not an employee. Twenty-five percent of the shares subject to this option vest
12 months after the date of grant and 1/16 of the shares subject to the option
vest each quarter thereafter.
Each outside director is automatically granted an option to purchase common
stock following each of our annual meetings of the stockholders beginning after
2000, if immediately after such meeting, he or she shall continue to serve on
the board of directors and has served on the board of directors for at least the
preceding six months. These options vest and become exercisable in full on the
fourth anniversary after the date of grant, provided that in each case the
outside director continues to serve on the board of directors. The exercise
price of options granted to outside directors is 100% of the fair market value
of our common stock on the date of grant.
In the event we merge or sell substantially all of our assets, the successor
corporation shall assume or substitute each option or stock purchase right. If
the outstanding options or stock purchase rights are not assumed or substituted,
the administrator shall provide notice to the optionee that he or she has the
right to exercise the option or stock purchase right as to all of the shares
subject to the option or stock purchase right, including shares that would not
otherwise be exercisable, for a period of 15 days from the date of notice. The
option or stock purchase right will terminate upon the expiration of the 15-day
period. In the event of change of control each outstanding option held by an
outside director that was granted pursuant to the automatic grant mechanism,
vests and becomes fully exercisable.
2000 Employee Stock Purchase Plan
The board of directors adopted our 2000 Employee Stock Purchase Plan, or Stock
Purchase Plan, in 2000, and we will submit it to our stockholders
for their approval prior to the date of this offering to become effective on the
date of this offering. The board of directors or a committee appointed by the
board of directors administers the Stock Purchase Plan. The board of directors
or its committee has full and exclusive authority to interpret the terms of the
Stock Purchase Plan and determine eligibility.
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<PAGE> 44
A total of shares of common stock has been reserved for issuance under
the Stock Purchase Plan. In addition, the Stock Purchase Plan provides for
annual increases in the number of shares available for issuance under the plan
on the first day of each year, beginning in 2001, equal to the lesser of %
of the outstanding shares of common stock on the first day of the year,
shares or an amount as the board of directors may determine.
Our employees are eligible to participate if they are customarily employed by us
or any of our participating subsidiaries for at least 20 hours per week and more
than five months in any calendar year. However, an employee may not be granted
an option to purchase stock under the Stock Purchase Plan if such an employee:
- immediately after the grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock
- whose rights to purchase stock under all of our employee stock purchase
plans accrues at a rate that exceeds $25,000 worth of stock for each
calendar year
The Stock Purchase Plan contains six-month offering periods. The offering
periods generally start on the first trading day on or after and
, except for the first offering period that will start on the first
trading day on or after the effective date of this offering and will end on the
last trading day on or before , 2000. The Stock Purchase Plan
permits participants to purchase common stock through payroll deductions of up
to 15% of the participant's compensation.
Amounts deducted and accumulated by the participant are used to purchase shares
of common stock at the end of each offering period. The price of stock purchased
under the Stock Purchase Plan is 85% of the lower of the fair market value of
the common stock at the beginning of the offering period or end of the offering
period. Participants may end their participation at any time during an offering
period, and they will be paid their payroll deductions to date. Participation
ends automatically upon termination of employment with us. The maximum number of
shares a participant may purchase during a single offering period is
shares. A participant may not transfer rights granted under the
Stock Purchase Plan other than by will, the laws of descent and distribution or
as otherwise provided under the Stock Purchase Plan. The Stock Purchase Plan
will terminate in 2010.
1993 Stock Plan
Our 1993 Stock Plan was adopted by our board of directors on January 27, 1993
and subsequently approved by our stockholders. Our 1993 Stock Plan provides for
the grant of incentive stock options and nonstatutory stock options, or stock
purchase rights to employees, directors and consultants. A total of 3,400,000
shares of common stock has been reserved for issuance under the 1993 Stock Plan.
In the event we sell all or substantially all of our assets or merge with or
into another corporation, outstanding options will be assumed or substituted for
by the successor corporation. In the event the successor corporation does not
agree to assume or substitute for outstanding options, the options will be
exercisable for a period of 15 days, after which the options will terminate.
As of December 31, 1999, options to purchase 2,684,667 shares of common stock
were outstanding and 715,333 shares were available for future grant. After
December 31, 1999 and through March 31, 2000 we issued options to purchase
532,800 shares of our common stock and options to purchase 153,600 were
exercised. Upon completion of this offering, the 1993 Stock Plan will terminate,
no further option grants will be made under the 1993 Stock Plan, and any shares
reserved but not yet issued under the 1993 Stock Plan will be available for
grant under the 2000 Stock Plan.
401(k) Savings Plan
We sponsor a 401(k) Savings Plan covering our employees who are at least 21
years of age. Contributions to the 401(k) Savings Plan and income earned on such
contributions, are not taxable to employees until withdrawn from the 401(k)
Savings Plan. Subject to restrictions imposed by the Internal Revenue Code
44
<PAGE> 45
on highly compensated employees, employees may generally defer up to 20% of
their pre-tax earnings up to the statutorily prescribed annual limit, which is
$10,500, for the 2000 calendar year, and to have the amount of such reduction
contributed to the 401(k) Savings Plan. The 401(k) Savings Plan permits, but
does not require, additional matching contributions to the 401(k) Savings Plan.
To date, we have not made any matching contributions to the 401(k) Savings Plan.
The 401(k) Savings Plan may be amended or terminated by us at anytime, in our
sole discretion.
EMPLOYMENT AGREEMENTS
We do not have employment agreements with our executive officers, other than
agreements that we maintain with all of our employees and option agreements
under which we issue incentive and non-qualified stock options to employees.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for the following:
- any breach of their duty of loyalty to the corporation or its stockholders
- acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law
- unlawful payments of dividends or unlawful stock repurchases or redemptions
- any transaction from which the director derived an improper personal benefit
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we shall indemnify our
directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.
We will enter into agreements to indemnify our directors and executive officers,
in addition to the indemnification provided for in our bylaws. These agreements,
among other things, provide for indemnification of our directors and executive
officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in our right, arising out of that person's services
as a director or executive officer to us, any of our subsidiaries or any other
company or enterprise to which the person provides services at our request. We
believe that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
45
<PAGE> 46
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of our
common stock as of March 31, 2000:
- each stockholder known by us to be the beneficial owner of more than 5% of
the outstanding shares of common stock
- each of our directors
- each of our named executives officers
- all of our directors and executive officers as a group
Beneficial ownership is determined according to the rules of the Securities and
Exchange Commission, and generally means that person has beneficial ownership of
a security if he or she possesses sole or shared voting or investment power of
that security, and includes options that are currently exercisable or
exercisable within 60 days. Each director, officer or 5% or more stockholder, as
the case may be, has furnished us information with respect to beneficial
ownership. Except as otherwise indicated, we believe that the beneficial owners
of the common stock listed below, based on the information each of them has
given to us, have sole investment and voting power with respect to their shares,
except where community property laws may apply.
This table lists applicable percentage ownership based on shares
of common stock outstanding as of March 31, 2000, and also lists applicable
percentage ownership based on shares of common stock outstanding
after completion of this offering. Options to purchase shares of our common
stock that are exercisable within 60 days of March 31, 2000, are deemed to be
beneficially owned by the persons holding these options for the purpose of
computing percentage ownership of that person, but are not treated as
outstanding for the purpose of computing any other person's ownership
percentage. Shares underlying options that are deemed beneficially owned are
listed in this table separately in the column labeled "Shares Subject to
Options." These shares are included in the number of shares listed in the column
labeled "Total Number."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------------------------------------
TOTAL SHARES SUBJECT PERCENT PERCENT
NAME OF BENEFICIAL OWNER NUMBER TO OPTIONS BEFORE OFFERING AFTER OFFERING
------------------------ --------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Robert G. McNeil, Ph.D.(1)........... 3,287,380 273,600
Sanderling Venture Partners
Brian H. Dovey(2).................... 1,765,068 --
Domain Associates, L.L.C.
John H. Parrish(3)................... 364,266 209,600
Hampar L. Karageozian................ 337,034 277,034
Charles H. May, O.D.(4).............. 198,400 59,600
Edward H. Danse...................... 161,334 161,334
David E. Collins..................... 87,643 47,334
J. C. MacRae......................... 78,333 78,333
Wayne I. Roe......................... 76,266 76,266
Marvin J. Garrett.................... -- --
All directors and executive officers
as a group (13 persons)(5)........ 6,355,724 1,183,101
</TABLE>
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<PAGE> 47
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------------------------------------
TOTAL SHARES SUBJECT PERCENT PERCENT
NAME OF BENEFICIAL OWNER NUMBER TO OPTIONS BEFORE OFFERING AFTER OFFERING
------------------------ --------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
Biotechnology Investments Ltd.(5).... 909,353 --
Llura Gund(6)........................ 714,244 --
Allergan Pharmaceuticals
(Ireland) Ltd., Inc.(7)........... --
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Dr. McNeil's business address is c/o Sanderling Venture Partners, 2730 Sand
Hill Road, Suite 200, Menlo Park, California 94024.
(2) Mr. Dovey's business address is c/o Domain Associates, L.L.C., One Palmer
Square, Princeton, New Jersey 08542.
(3) Includes 25,000 shares of common stock owned by Christine Parrish, Mr.
Parrish's daughter. Includes 25,000 shares of common stock owned by Phyllis
Parrish, Mr. Parrish's spouse. Includes 86,000 shares of common stock owned
by the Parrish Family Trust of which Mr. Parrish serves as a trustee. Mr.
Parrish's address is 1246 Virginia Way, La Jolla, California 92037.
(4) Includes 136,000 shares of common stock owned by The Charles H. May and
Athena M. May Family Trust of which Dr. May is one of the beneficiaries. Dr.
May's address is 857 Armada Terrace, San Diego, California 92106.
(5) The address of Biotechnology Investments Ltd. is St. Julian Court Street,
Peters Port, Guernsey, Channel Islands.
(6) Includes 714,244 shares of common stock owned by trusts of which Llura Gund
serves as trustee. Ms. Gund's address is Gund Investment Corporation, 14
Nassau Street, Princeton, New Jersey 08542.
(7) The address of Allergan Pharmaceuticals (Ireland) Ltd., Inc. is 2525 Dupont
Drive, Irvine, California 92612.
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<PAGE> 48
RELATED PARTY TRANSACTIONS
The following is a description of transactions during the last three years to
which we have been a party, in which the amount involved exceeded $60,000 and in
which any director, executive officer or holder of more than 5% of our capital
stock had or will have a direct or indirect material interest, other than
compensation arrangements that are described under "Management."
The following 5% stockholders and affiliated investors purchased securities in
the amounts set forth, on an as-converted to common stock basis, in the chart
below. We sold shares of our Series C preferred stock between June 1997 and
March 2000. Between April 1997 and September 1998, we entered into note
agreements with some of the purchasers that were converted, including accrued
interest, into shares of Series C preferred stock at the election of the
noteholders. In connection with the Series C preferred stock financing we sold
the purchasers warrants to purchase common stock.
<TABLE>
<CAPTION>
SERIES C SERIES D
PURCHASER FINANCING FINANCING WARRANTS
--------- ---------- ---------- --------
<S> <C> <C> <C>
DIRECTORS AND PRINCIPAL STOCKHOLDERS
Robert G. McNeil, Ph.D.
Sanderling Venture Partners........................... 1,769,031 -- 353,055
Brian H. Dovey
Domain Associates, L.L.C. ............................ 925,573 -- 196,635
Llura Gund.............................................. 557,507 -- 279,497
Biotechnology Investments Ltd........................... 726,522 -- 96,851
Allergan Pharmaceuticals (Ireland) Ltd., Inc. .......... -- 1,776,199 --
OTHER TRANSACTION INFORMATION
Price................................................... $ 5.63 $ 5.63 $ 0.001
</TABLE>
In connection with the Series C preferred stock financing, we entered into a
call option agreement with some of the purchasers and entered into a license
agreement with Visionex. For a more detailed description see Note 8 to the notes
to the financial statements.
COLLABORATION WITH ALLERGAN
In March 2000, we entered into a collaboration with Allergan for the marketing,
sale and distribution of Vitrase. For a more detailed description of our
collaboration with Allergan, see "Business -- Collaboration with Allergan."
REGISTRATION RIGHTS
We have entered into an Amended and Restated Investor Rights Agreement with each
of the purchasers of our preferred stock pursuant to which these and other
stockholders will have registration rights following this offering with respect
to their shares of common stock issued upon conversion of their preferred stock.
LOAN TO MANAGEMENT
In May 1997, we loaned Edward H. Danse, our chief executive officer, $126,000 at
an interest rate of 8%. The principal and interest is due and payable on May 30,
2002 but may be prepaid without penalty. As of March 31, 2000, Mr. Danse owed us
$155,400.
LOANS FROM STOCKHOLDERS
From December 1999 to January 2000, we borrowed an aggregate principal amount of
$1,750,000 from some of our stockholders at an interest rate of 9%. We borrowed
$1,000,000 from entities associated with Sanderling Venture Partners, $500,000
from entities associated with Domain Associates, L.L.C. and $250,000 from
entities associated with Llura Gund. The principal and interest was due and
payable on January 31, 2000 but was not repaid until March 2000.
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<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our certificate of incorporation that will be effective prior to the closing of
this offering authorizes the issuance of 100,000,000 shares of common stock,
$0.001 par value, and the issuance of 5,000,000 shares of undesignated preferred
stock, $0.001 par value. From time to time, our board of directors may establish
the rights and preferences of the preferred stock. As of March 31, 2000,
shares of common stock were issued and outstanding and held by approximately 159
stockholders, options to purchase 3,063,867 shares of common stock were issued
and outstanding and held by 78 optionholders and warrants to purchase 923,102
shares of common stock were issued and outstanding and held by 32
warrantholders. The warrants will expire on the consummation of this offering if
not exercised prior to that time.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on all
matters to be voted upon by the stockholders; there are no cumulative voting
rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably the
dividends, if any, that are declared from time to time by the board of directors
out of funds legally available for that purpose. See "Dividend Policy." In the
event that we liquidate, dissolve or wind up Ista, the holders of common stock
are entitled to share in our assets remaining after the payment of liabilities
and the satisfaction of any liquidation preference granted to the holders of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive or conversion rights or other subscription rights, and there are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate in the future.
PREFERRED STOCK
The board of directors has the authority, without action by the stockholders, to
designate and issue preferred stock in one or more series and to designate the
rights, preferences and privileges of each series, which may be greater than the
rights of the common stock. It is not possible to state the actual effect of the
issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of this preferred stock. However, the effects might include, among other
things:
- restricting dividends on the common stock
- diluting the voting power of the common stock
- impairing the liquidation rights of the common stock
- delaying or preventing a change in control of Ista without further action by
the stockholders
Upon the closing of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.
REGISTRATION RIGHTS
Pursuant to an investors rights agreement entered into between us and holders of
shares of common stock issuable upon conversion of our preferred
stock, we are obligated, under limited circumstances and subject to specified
conditions and limitations, to use our best efforts to register the registrable
shares.
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<PAGE> 50
We must use our best efforts to register the registrable shares:
- if we receive written notice from holders of 50% or more of the registrable
shares requesting that we effect a registration with respect to not less
than 50% of the registrable shares (or a lesser percentage if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $10.0 million)
- if we decide to register our own securities (except in connection with this
offering)
- if (1) we receive written notice from any holder of registrable shares
requesting that we effect a registration on Form S-3 (a shortened form of
registration statement) with respect to the registrable shares, the
reasonably anticipated price to the public of which is not less than $1.0
million (net of underwriting discounts or commissions) and (2) we are then
eligible to use Form S-3
However, in addition to certain other conditions and limitations, if requested
to register registrable shares, we can delay registration not more than once in
any 12-month period and for not more than 180 days. In any case where we decide
to register our own securities pursuant to an underwritten offering, other than
the initial public offering, the managing underwriter may limit the registrable
shares to be included in the registration to not less than 30% of the total
number of securities to be registered.
These registration rights terminate with respect to each registrable share upon
the earlier of the holder owning less than 1% of our outstanding capital stock
and being able to transfer his or her registrable shares pursuant to Rule 144(k)
and five years after the closing of this offering. In addition, the holders of
these registration rights have entered into lock-up agreements and waived their
registration rights until 180 days following the date of this prospectus.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BYLAWS
Provisions of Delaware law and our certificate of incorporation and bylaws could
make the following more difficult:
- the acquisition of Ista by means of a tender offer
- the acquisition of Ista by means of a proxy contest or otherwise
- the removal of our incumbent officers and directors
These provisions, summarized below, are expected to discourage some types of
coercive takeover practices and inadequate takeover bids. These provisions are
also designed to encourage persons seeking to acquire control of us to negotiate
first with our board of directors. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging these proposals because negotiation of any
proposals of this type could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into three
classes. The directors in each class will serve for a three-year term, with our
stockholders electing one class each year. See "Management -- Board of
Directors." This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us, because it generally makes it more difficult for
stockholders to replace a majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board, the chief executive officer or the president may call
special meetings of stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures for stockholder
proposals and for the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board.
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<PAGE> 51
Delaware Anti-takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an antitakeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date
the person became an interested stockholder, unless the business combination or
the transaction in which the person became an interested stockholder is approved
in the manner specified in Section 203. Generally, a business combination
includes a merger, asset or stock sale, or other transaction resulting in a
financial benefit to the interested stockholder. Generally, an interested
stockholder is a person who, together with affiliates and associates, owns or
within three years prior to the determination of interested stockholder status
did own 15% or more of a corporation's outstanding voting stock. The existence
of this provision may have an antitakeover effect by discouraging takeover
attempts not approved in advance by the board of directors, that might result in
a premium over the market price for the shares of common stock held by
stockholders.
Elimination of Stockholder Action by Written Consent. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.
No Cumulative Voting. Our certificate of incorporation and bylaws do not provide
for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred stock
makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of Ista. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of us.
Amendment of Charter Provisions. The amendment of any of the above provisions
would require approval by holders of at least % of the outstanding common
stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
telephone number for stockholder inquiries is .
LISTING
We have applied to list our common stock on the Nasdaq National Market under the
symbol "ISTA."
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<PAGE> 52
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and we
cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through sale of our equity securities. As described below, no
shares currently outstanding will be available for sale immediately after this
offering because of contractual resale restrictions contained in agreements
between us and our stockholders.
Upon completion of this offering, we will have outstanding shares of
common stock based upon shares outstanding as of March 31, 2000, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options prior to completion of this offering. Of these shares, the
shares sold in this offering will be freely tradable without
restriction under the Securities Act, except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. Of the remaining
shares of common stock, shares held by existing stockholders
are subject to lock-up agreements with the underwriters and/or us providing that
the stockholder will not offer to sell, contract to sell or otherwise sell,
dispose of, loan, pledge or grant any rights to, any shares of common stock or
any securities that are convertible into common stock, owned as of the date of
this prospectus or subsequently acquired, for a period of 180 days after the
date of this prospectus without the prior written consent of CIBC World Markets
Corp. and/or us. As a result of these lock-up agreements, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701 under the Securities Act, none of these shares will be resellable until
181 days after the date of this prospectus. CIBC World Markets Corp., in some
instances together with us, may, in its sole discretion and at any time without
notice, release all or any portion of the shares subject to lock-up agreements.
Beginning 181 days after the date of this prospectus, approximately
shares will be eligible for sale in the public market. All of these shares will
be subject to volume limitations under Rule 144, except shares
eligible for sale under Rule 144(k) and shares eligible for sale under
Rule 701. In some cases, these shares are subject to repurchase rights that we
hold.
In general, under Rule 144, as currently in effect, beginning 90 days after the
date of this prospectus, a person who has beneficially owned restricted shares
for at least one year, including the holding period of any prior owner except an
affiliate, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
- 1.0% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering and
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been an affiliate of
ours at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner except an affiliate, is entitled
to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the holding
period requirement, of Rule 144. Any employee, officer, director or consultant
of ours who purchased shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell their Rule 701 shares in reliance on Rule 144 without
having to comply with the holding period, public information, volume limitation
or notice
52
<PAGE> 53
provisions of Rule 144. All holders of Rule 701 shares are required to wait
until 90 days after the date of this prospectus before selling their Rule 701
shares. However, all Rule 701 shares are subject to lock-up agreements and will
only become eligible for sale at the earlier of the expiration of the 180-day
lock-up agreements or the receipt of the written consent of CIBC World Markets
Corp. more than 90 days after the date of this prospectus.
After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our employee benefit plans. As of March 31, 2000,
options to purchase a total of 3,063,867 shares were outstanding, 336,133 shares
were reserved for future issuance under our stock plans, and were
reserved for issuance under our employee stock purchase plan. Common stock
issued upon exercise of outstanding vested options or issued pursuant to our
employee stock purchase plan, other than common stock issued to our affiliates,
will be available for immediate resale in the open market following expiration
of the 180-day lock-up agreements.
Also, beginning six months after the date of this offering, holders of
restricted shares will be entitled to registration rights on these
shares for sale in the public market. See "Description of Capital
Stock -- Registration Rights." Registration of these shares under the Securities
Act would result in their becoming freely tradable without restriction under the
Securities Act immediately upon the effectiveness of the registration.
53
<PAGE> 54
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. CIBC World Markets Corp., ING Barings LLC and Prudential Securities
Incorporated are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
CIBC World Markets Corp.....................................
ING Barings LLC.............................................
Prudential Securities Incorporated..........................
----------------
Total.....................................................
================
</TABLE>
The underwriters have agreed to purchase all of the shares offered by this
prospectus (other than those covered by the over-allotment option described
below) if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase shares, the commitments of non-
defaulting underwriters may be increased or the underwriting agreement may be
terminated, depending on the circumstances.
The shares should be ready for delivery on or about , 2000 against
payment in immediately available funds. The representatives have advised us that
the underwriters propose to offer the shares directly to the public at the
public offering price that appears on the cover page of this prospectus. In
addition, the representatives may offer some of the shares to other securities
dealers at such price less a concession of $ per share. The underwriters may
also allow, and such dealers may reallow, a concession not in excess of
$ per share to other dealers. After the shares are released for sale to the
public, the representatives may change the offering price and other selling
terms at various times.
We have granted the underwriters an over-allotment option. This option, which is
exercisable for up to 30 days after the date of this prospectus, permits the
underwriters to purchase a maximum of additional shares from us to
cover over-allotments. If the underwriters exercise all or part of this option,
they will purchase shares covered by the option at the public offering price
that appears on the cover page of this prospectus, less the underwriting
discount. If this option is exercised in full, the total price to the public
will be $ , and the total proceeds to us will be $ . The
underwriters have severally agreed that, to the extent the over-allotment option
is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the foregoing
table.
The following table provides information regarding the amount of the discount to
be paid by us to the underwriters.
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE OF TOTAL WITH FULL EXERCISE OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------- ------------------------- ---------------------------
<S> <C> <C> <C>
Ista Pharmaceuticals, Inc............. $ $ $
</TABLE>
We estimate that our total expenses of the offering, excluding the underwriting
discount, will be approximately $ .
54
<PAGE> 55
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
We and our officers and directors and all other stockholders have agreed to a
180-day "lock up" with respect to shares of common stock that
beneficially owned, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable for shares of
common stock. This means that for a period of 180 days following the date of
this prospectus, we and such persons may not offer, sell, pledge or otherwise
dispose of these securities without the prior written consent of CIBC World
Markets Corp.
The representatives have informed us that they do not expect discretionary sales
by the underwriters to exceed 5% percent of the shares offered by this
prospectus.
There is no established trading market for the shares. The offering price for
the shares will be determined by us and the representatives based on the
following factors:
- prevailing market and general economic conditions
- our financial information
- our history and prospects
- Ista and the industry in which we compete
- an assessment of our management, its past and present operations, and the
prospects for, and timing of, our future revenues
- the present stage of our development and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to ours
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the shares,
so long as stabilizing bids do not exceed a specified maximum.
- Over-allotment and syndicate covering transactions -- The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with the offering, the representatives may engage in syndicate
covering transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option.
- Penalty bids -- If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group members
who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither we nor the underwriters make any representation or prediction as to the
effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If such transactions are commenced, they may be discontinued without notice at
any time.
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor(SM), a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.
55
<PAGE> 56
LEGAL MATTERS
The validity of the common stock offered will be passed upon for us by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
Skadden, Arps, Slate, Meager & Flom LLP, Palo Alto, California, is acting as
counsel for the underwriters in connection with various legal matters relating
to this offering. As of December 31, 1999, investment partnerships and a member
of Wilson Sonsini Goodrich & Rosati beneficially owned an aggregate of 30,895
shares of our Series A preferred stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial statements
at December 31, 1998 and 1999, and for each of the three years in the period
ended December 31, 1999 and for the period from February 13, 1992 (inception)
through December 31, 1999, and the financial statements of Visionex at December
31, 1998 and 1999, and for the period from May 24, 1997 (inception) through
December 31, 1997, the years ended December 31, 1998 and 1999, and for the
period from May 24, 1997 (inception) through December 31, 1999, as set forth in
their reports. We have included our financial statements (including those of
Visionex) in this prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's reports, given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1. This prospectus, which forms a part of the registration
statement, does not contain all the information included in the registration
statement. Certain information is omitted and you should refer to the
registration statement and its exhibits. With respect to references made in this
prospectus to any contract or other document of ours, such references are not
necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
review a copy of the registration statement, including exhibits and schedule
filed therewith, at the Securities and Exchange Commission's public reference
facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Securities and Exchange
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may also obtain copies of these materials from the Public
References Section of the Securities and Exchange Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as Ista Pharmaceuticals, Inc.,
that file electronically with the Securities and Exchange Commission.
56
<PAGE> 57
ISTA PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ISTA PHARMACEUTICALS, INC.
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999 and the period from February 13, 1992
(inception) through December 31, 1999..................... F-4
Statement of Stockholders' Equity (Net Capital Deficiency)
for the period from February 13, 1992 (inception) through
December 31, 1999......................................... F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999 and the period from February 13, 1992
(inception) through December 31, 1999..................... F-8
Notes to Financial Statements............................... F-9
VISIONEX PTE. LTD.
Report of Ernst & Young LLP, Independent Auditors........... F-20
Balance Sheets as of December 31, 1998 and 1999............. F-21
Statements of Operations for the period from May 24, 1997
(inception) through December 31, 1997, the years ended
December 31, 1998 and 1999 and the period from May 24,
1997 (inception) through December 31, 1999................ F-22
Statement of Stockholders' Equity for the period from May
24, 1997 (inception) through December 31, 1999............ F-23
Statements of Cash Flows for the period from May 24, 1997
(inception) through December 31, 1997, the years ended
December 31, 1998 and 1999, and the period from May 24,
1997 (inception) through December 31, 1999................ F-24
Notes to Financial Statements............................... F-25
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Introduction................................................ F-29
Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 1999......................................... F-30
Unaudited Pro Forma Combined Condensed Statement of
Operations for the Year Ended December 31, 1999........... F-32
</TABLE>
F-1
<PAGE> 58
REPORT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
The Board of Directors
Ista Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Ista Pharmaceuticals, Inc. (a
development stage company) as of December 31, 1998 and 1999 and the related
statements of operations, stockholders' equity (net capital deficiency), and
cash flows for each of the three years in the period ended December 31, 1999,
and for the period from February 13, 1992 (inception) through December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ista Pharmaceuticals, Inc. (a
development stage company) at December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, and for the period from February 13, 1992 (inception) through
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
San Diego, California
March 29, 2000
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
the restatement of the capital accounts described in Note 1 to the financial
statements.
/s/ ERNST & YOUNG LLP
San Diego, California
April 4, 2000
F-2
<PAGE> 59
ISTA PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AS OF
--------------------------- DECEMBER 31,
1998 1999 1999
------------ ------------ -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 2,392,790 $ 709,350
Advanced payments -- clinical trials............... 162,637 876,793
Other current assets............................... 58,515 58,742
------------ ------------
Total current assets............................ 2,613,942 1,644,885
Property and equipment, net.......................... 966,981 983,600
Note receivable from officer......................... 141,960 152,040
Deposits and other assets............................ 392,259 238,977
------------ ------------
$ 4,115,142 $ 3,019,502
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable................................... $ 418,579 $ 822,833
Accrued compensation and related expenses.......... 187,177 73,501
Accrued expenses -- clinical trials................ 1,698,537 4,782,552
Other accrued expenses............................. 377,275 208,319
Current portion of obligation under capital
lease........................................... 192,538 250,306
Notes payable to stockholders...................... -- 500,000
------------ ------------
Total current liabilities....................... 2,874,106 6,637,511
Obligation under capital lease....................... 265,713 15,406
Deferred rent........................................ 27,855 22,441
License fee received from Visionex................... 5,000,000 5,000,000
Commitments
Stockholders' equity (net capital deficiency):
Convertible preferred stock, no par value;
19,545,085 and 24,820,688 shares authorized in
1998 and 1999, respectively; 5,698,769 and
7,156,214 issued and outstanding in 1998 and
1999, respectively; liquidation preference
$25,620,873 at December 31, 1999; no shares
issued and outstanding pro forma................ 17,289,922 25,496,068 $ --
Common stock, no par value; 20,000,000 and
26,200,000 shares authorized in 1998 and 1999,
respectively; 1,548,894 and 1,855,178 shares
issued and outstanding in 1998 and 1999,
respectively; 7,580,149 shares issued and
outstanding pro forma........................... 201,665 3,890,939 29,387,007
Preferred and common stock subscribed.............. 1,265,958 -- --
Subscriptions receivable........................... (1,265,958) -- --
Deferred compensation.............................. (420) (2,215,421) (2,215,421)
Deficit accumulated during the development stage... (21,543,699) (35,827,442) (35,827,442)
------------ ------------ ------------
Total stockholders' equity (net capital
deficiency)................................... (4,052,532) (8,655,856) $ (8,655,856)
------------ ------------ ============
Total liabilities and stockholders' equity
(net capital deficiency)...................... $ 4,115,142 $ 3,019,502
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 60
ISTA PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 13,
1992
(INCEPTION)
THROUGH
YEARS ENDED DECEMBER 31, DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Costs and expenses:
Research and development.......... $ 4,968,390 $ 7,523,632 $ 11,061,278 $ 26,742,037
General and administrative........ 1,949,112 2,146,701 3,240,286 9,535,776
----------- ----------- ------------ ------------
Total costs and expenses....... 6,917,502 9,670,333 14,301,564 36,277,813
----------- ----------- ------------ ------------
Loss from operations................ (6,917,502) (9,670,333) (14,301,564) (36,277,813)
Interest income..................... 251,444 133,140 69,399 739,806
Interest expense.................... (86,242) (86,310) (51,578) (244,823)
----------- ----------- ------------ ------------
Net loss............................ $(6,752,300) $(9,623,503) $(14,283,743) $(35,782,830)
=========== =========== ============ ============
Net loss per common share, basic and
diluted........................... $ (4.89) $ (6.64) $ (8.80)
=========== =========== ============
Shares used in computing net loss
per common share, basic and
diluted........................... 1,380,748 1,449,409 1,623,032
=========== =========== ============
Pro forma net loss per common share,
basic and diluted................. $ (2.04)
============
Shares used in computing pro forma
net loss per common share, basic
and diluted....................... 6,986,405
============
</TABLE>
See accompanying notes.
F-4
<PAGE> 61
ISTA PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
PERIOD FROM FEBRUARY 13, 1992 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
PREFERRED AND
CONVERTIBLE COMMON STOCK
PREFERRED STOCK COMMON STOCK SUBSCRIBED
----------------------- ---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred stock
at $1.00 per share for cash......... 295,000 $ 295,000 -- $ -- -- $ --
Issuance of common stock at $.0293 to
$.1667 per share for cash........... -- -- 1,026,000 60,000 -- --
Issuance of common stock at $.0348 per
share for intellectual property..... -- -- 144,000 5,000 -- --
Net loss.............................. -- -- -- -- -- --
--------- ----------- --------- ---------- --------- -----------
Balance at December 31, 1992............ 295,000 295,000 1,170,000 65,000 -- --
Issuance of Series A preferred stock
at $1.00 per share for cash......... 539,375 539,375 -- -- -- --
Net loss.............................. -- -- -- -- -- --
--------- ----------- --------- ---------- --------- -----------
Balance at December 31, 1993............ 834,375 834,375 1,170,000 65,000 -- --
Issuance of common stock at $.19 per
share for cash...................... -- -- 144,000 27,000 -- --
Issuance of common stock at $.19 per
share for services.................. -- -- 5,836 1,088 -- --
Net loss.............................. -- -- -- -- -- --
--------- ----------- --------- ---------- --------- -----------
Balance at December 31, 1994............ 834,375 834,375 1,319,836 93,088 -- --
Issuance of Series A preferred stock
at $1.00 per share for cash......... 1,128,531 1,128,531 -- -- -- --
Issuance of Series B preferred stock
at $2.75 per share for cash and in
exchange for outstanding notes
payable, net of issuance costs of
$15,548............................. 1,955,555 5,362,231 -- -- -- --
Net loss.............................. -- -- -- -- -- --
--------- ----------- --------- ---------- --------- -----------
Balance at December 31, 1995............ 3,918,461 7,325,137 1,319,836 93,088 -- --
Issuance of common stock at $.19 per
share for cash...................... -- -- 48,000 9,000 -- --
Net loss.............................. -- -- -- -- -- --
--------- ----------- --------- ---------- --------- -----------
<CAPTION>
DEFICIT TOTAL
ACCUMULATED STOCKHOLDERS'
DURING THE EQUITY (NET
SUBSCRIPTIONS DEFERRED DEVELOPMENT CAPITAL
RECEIVABLE COMPENSATION STAGE DEFICIENCY)
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Issuance of Series A preferred stock
at $1.00 per share for cash......... $ -- $ -- $ -- $ 295,000
Issuance of common stock at $.0293 to
$.1667 per share for cash........... -- -- -- 60,000
Issuance of common stock at $.0348 per
share for intellectual property..... -- -- -- 5,000
Net loss.............................. -- -- (120,913) (120,913)
------------ ----------- ------------ ------------
Balance at December 31, 1992............ -- -- (120,913) 239,087
Issuance of Series A preferred stock
at $1.00 per share for cash......... -- -- -- 539,375
Net loss.............................. -- -- (470,998) (470,998)
------------ ----------- ------------ ------------
Balance at December 31, 1993............ -- -- (591,911) 307,464
Issuance of common stock at $.19 per
share for cash...................... -- -- -- 27,000
Issuance of common stock at $.19 per
share for services.................. -- -- -- 1,088
Net loss.............................. -- -- (618,939) (618,939)
------------ ----------- ------------ ------------
Balance at December 31, 1994............ -- -- (1,210,850) (283,387)
Issuance of Series A preferred stock
at $1.00 per share for cash......... -- -- -- 1,128,531
Issuance of Series B preferred stock
at $2.75 per share for cash and in
exchange for outstanding notes
payable, net of issuance costs of
$15,548............................. -- -- -- 5,362,231
Net loss.............................. -- -- (887,198) (887,198)
------------ ----------- ------------ ------------
Balance at December 31, 1995............ -- -- (2,098,048) 5,320,177
Issuance of common stock at $.19 per
share for cash...................... -- -- -- 9,000
Net loss.............................. -- -- (3,025,236) (3,025,236)
------------ ----------- ------------ ------------
</TABLE>
See accompanying notes.
F-5
<PAGE> 62
ISTA PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (CONTINUED)
PERIOD FROM FEBRUARY 13, 1992 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
PREFERRED AND
CONVERTIBLE COMMON STOCK
PREFERRED STOCK COMMON STOCK SUBSCRIBED
----------------------- ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........... 3,918,461 $ 7,325,137 1,367,836 $ 102,088 -- $ --
Issuance of Series C preferred stock
at $5.63 per share for cash, net of
issuance costs of $66,735.......... 947,295 5,266,536 -- -- -- --
Issuance of common stock upon
exercise of options................ -- -- 56,000 11,400 -- --
Repurchase and retirement of Series A
preferred stock.................... (11,153) (11,153) -- -- -- --
Net loss............................. -- -- -- -- -- --
--------- ----------- ---------- ---------- --------- -----------
Balance at December 31, 1997........... 4,854,603 $12,580,520 1,423,836 $ 113,488 -- $ --
Issuance of Series C preferred stock
and warrants at $5.63 per share in
exchange for conversion of bridge
loans of $1,000,000 and cash, net
of issuance costs of $43,676....... 844,166 4,709,402 -- -- -- --
Preferred and common stock
subscribed......................... -- -- -- -- 1,265,958
Issuance of common stock for
exercisable options................ -- -- 23,666 5,683 -- --
Issuance of common stock at $0.56 per
share for cash..................... -- -- 101,392 70,974 -- --
Deferred compensation related to
stock options...................... -- -- -- 11,520 -- --
Amortization of deferred
compensation....................... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- --
--------- ----------- ---------- ---------- --------- -----------
<CAPTION>
DEFICIT TOTAL
ACCUMULATED STOCKHOLDERS'
DURING THE EQUITY (NET
SUBSCRIPTIONS DEFERRED DEVELOPMENT CAPITAL
RECEIVABLE COMPENSATION STAGE DEFICIENCY)
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996........... $ -- $ -- $(5,123,284) $ 2,303,941
Issuance of Series C preferred stock
at $5.63 per share for cash, net of
issuance costs of $66,735.......... -- -- -- 5,266,536
Issuance of common stock upon
exercise of options................ -- -- -- 11,400
Repurchase and retirement of Series A
preferred stock.................... -- -- (44,612) (55,765)
Net loss............................. -- -- (6,752,300) (6,752,300)
------------ ----------- ------------ ------------
Balance at December 31, 1997........... $ -- $ -- $(11,920,196) $ 773,812
Issuance of Series C preferred stock
and warrants at $5.63 per share in
exchange for conversion of bridge
loans of $1,000,000 and cash, net
of issuance costs of $43,676....... -- -- -- 4,709,402
Preferred and common stock
subscribed......................... (1,265,958) -- -- --
Issuance of common stock for
exercisable options................ -- -- -- 5,683
Issuance of common stock at $0.56 per
share for cash..................... -- -- -- 70,974
Deferred compensation related to
stock options...................... -- (11,520) -- --
Amortization of deferred
compensation....................... -- 11,100 -- 11,100
Net loss............................. -- -- (9,623,503) (9,623,503)
------------ ----------- ------------ ------------
</TABLE>
See accompanying notes.
F-6
<PAGE> 63
ISTA PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (CONTINUED)
PERIOD FROM FEBRUARY 13, 1992 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
PREFERRED AND
CONVERTIBLE COMMON STOCK
PREFERRED STOCK COMMON STOCK SUBSCRIBED
----------------------- ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998........... 5,698,769 $17,289,922 1,548,894 $ 201,665 -- $ 1,265,958
Issuance of Series C preferred stock
and warrants at $5.63 per share in
exchange for conversion of bridge
loans and cash, net of issuance
costs of $41,929................... 1,235,894 6,958,814 -- -- -- --
Issuance of preferred and common
stock subscribed................... 221,551 1,247,332 26,609 18,626 (1,265,958)
Issuance of common stock for
exercisable options................ -- -- 223,382 92,758 -- --
Issuance of common stock at $0.56 per
share for cash..................... -- -- 56,293 39,405 -- --
Deferred compensation related to
stock options...................... 3,538,485 -- --
Amortization of deferred
compensation....................... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- --
--------- ----------- ---------- ---------- --------- -----------
Balance at December 31, 1999........... 7,156,214 $25,496,068 1,855,178 $3,890,939 -- $ --
========= =========== ========== ========== ========= ===========
<CAPTION>
DEFICIT TOTAL
ACCUMULATED STOCKHOLDERS'
DURING THE EQUITY (NET
SUBSCRIPTIONS DEFERRED DEVELOPMENT CAPITAL
RECEIVABLE COMPENSATION STAGE DEFICIENCY)
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998........... $ (1,265,958) $ (420) $(21,543,699) $ (4,052,532)
Issuance of Series C preferred stock
and warrants at $5.63 per share in
exchange for conversion of bridge
loans and cash, net of issuance
costs of $41,929................... -- -- -- 6,958,814
Issuance of preferred and common
stock subscribed................... 1,265,958 -- -- 1,265,958
Issuance of common stock for
exercisable options................ -- -- -- 92,758
Issuance of common stock at $0.56 per
share for cash..................... -- -- -- 39,405
Deferred compensation related to
stock options...................... -- (3,538,485) -- --
Amortization of deferred
compensation....................... -- 1,323,484 -- 1,323,484
Net loss............................. -- -- (14,283,743) (14,283,743)
------------ ----------- ------------ ------------
Balance at December 31, 1999........... $ -- $(2,215,421) $(35,827,442) $ (8,655,856)
============ =========== ============ ============
</TABLE>
See accompanying notes.
F-7
<PAGE> 64
ISTA PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 13,
1992 (INCEPTION)
THROUGH
YEARS ENDED DECEMBER 31, DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss....................................... $(6,752,300) $(9,623,503) $(14,283,743) $(35,782,830)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of deferred compensation........ -- 11,100 1,323,484 1,334,584
Depreciation and amortization................ 174,584 209,060 237,182 669,724
Changes in operating assets and liabilities:
Advanced payments -- clinical trials and
other current assets..................... 103,546 (184,963) (714,383) (935,535)
Note receivable from officer............... (126,000) (10,080) (10,080) (152,040)
Accounts payable........................... 346,205 (57,218) 404,254 822,833
Accrued compensation and related
expenses................................. 56,579 34,020 (113,676) 73,501
Accrued expenses -- clinical trials and
other accrued expenses................... 134,871 1,775,414 2,915,059 4,990,871
Deferred rent.............................. 5,091 (60) (5,415) 22,441
License fee received from Visionex......... 5,000,000 -- -- 5,000,000
----------- ----------- ------------ ------------
Net cash used in operating activities.... (1,057,424) (7,846,230) (10,247,318) (23,956,451)
INVESTING ACTIVITIES
Purchase of equipment.......................... (562,803) (109,175) (253,800) (1,646,323)
Proceeds from refinancing under capital
leases....................................... 454,380 -- -- 828,786
Deposits and other assets...................... 26,578 (122,858) 153,282 (238,977)
----------- ----------- ------------ ------------
Net cash used in investing activities.... (81,845) (232,033) (100,518) (1,058,514)
FINANCING ACTIVITIES
Payments on obligation under capital leases.... (149,605) (211,053) (192,539) (561,986)
Proceeds from exercise of stock options........ 11,400 5,683 92,758 118,841
Proceeds from bridge loans with related
parties...................................... 1,000,000 1,000,000 500,000 3,797,222
Payments on bridge loans with related
parties...................................... (1,000,000) (1,000,000) -- (2,005,000)
Proceeds from issuance of preferred stock...... 5,266,536 4,709,402 8,206,146 24,214,999
Repurchase of preferred stock.................. (55,765) -- -- (55,765)
Proceeds from issuance of common stock......... -- 70,974 58,031 216,004
----------- ----------- ------------ ------------
Net cash provided by financing activities...... 5,072,566 4,575,006 8,664,396 25,724,315
----------- ----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. 3,933,297 (3,503,257) (1,683,440) 709,350
Cash and cash equivalents at beginning of
period....................................... 1,962,750 5,896,047 2,392,790 --
----------- ----------- ------------ ------------
Cash and cash equivalents at end of period..... $ 5,896,047 $ 2,392,790 $ 709,350 $ 709,350
=========== =========== ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest......... $ 86,242 $ 86,310 $ 51,578 $ 246,707
=========== =========== ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Preferred stock issued in exchange for bridge
loans with stockholders and accrued
interest..................................... $ -- $ 1,000,000 $ -- $ 2,356,811
=========== =========== ============ ============
</TABLE>
See accompanying notes.
F-8
<PAGE> 65
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Ista Pharmaceuticals, Inc. ("Ista" or the "Company") was incorporated in the
state of California on February 13, 1992 to discover, develop and market novel
therapeutics for diseases and conditions of the eye. Ista's initial product
development efforts are focused on using highly purified formulations of the
enzyme hyaluronidase to treat diseases and conditions such as vitreous
hemorrhage, diabetic retinopathy, corneal opacification and keratoconus. The
Company's lead product candidate, Vitrase, currently in Phase III clinical
trials, is a proprietary drug for the treatment of vitreous hemorrhage. The
Company has not commenced commercial operations and is considered to be in the
development stage.
The Company will reincorporate in Delaware effective upon the completion of the
initial public offering contemplated by this Prospectus.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of business. Since inception, the Company has been primarily
engaged in research and development, and through December 31, 1999, the Company
has incurred accumulated losses of $35,782,830. Successful completion of the
Company's clinical trials and continuation of operations is dependent upon the
Company's ability to obtain adequate financing. In March 2000, the Company
received approximately $4.4 million from the acquisition of Visionex Pte., Ltd.
(Note 8) and $10.0 million from the sale of Series D preferred stock to Allergan
(Note 10). The Company also obtained a line of credit from Allergan under which
it may borrow up to $10.0 million in the event that the initial public offering
contemplated by this Prospectus has not been completed (Note 10). Management
believes the funds on hand at December 31, 1999, combined with the funds
received from these transactions are adequate to sustain operations through
December 31, 2000.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in banks, certificates of deposit and
short-term investments with original maturities of three months or less when
purchased. Cash and cash equivalents are carried at cost, which management
believes approximates fair value because of the short-term maturity of these
instruments.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Equipment and furniture are
depreciated using the straight-line method over their estimated useful lives
(generally 5 to 7 years) and leasehold improvements are amortized using the
straight-line method over the estimated useful life of the asset or the lease
term, whichever is shorter. Equipment acquired under capital leases is amortized
over the estimated useful life of the assets.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, if indicators of impairment
F-9
<PAGE> 66
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
exist, the Company assesses the recoverability of the affected long-lived assets
by determining whether the carrying value of such assets can be recovered
through undiscounted future operating cash flows. If impairment is indicated,
the Company measures the amount of such impairment by comparing the flows
associated with the use of the asset. While the Company's current and historical
operating and cash flow losses are indicators of impairment, the Company
believes the future cash flows to be received from the long-lived assets will
exceed the assets' carrying value, and accordingly, the Company has not
recognized any impairment losses through December 31, 1999.
RESEARCH AND DEVELOPMENT COSTS
Expenditures relating to research and development are expensed in the period
incurred. The Company also expenses costs incurred to obtain and prosecute
patents as recoverability of such expenditures is not assured. Approximately
$360,000 and $136,000 of patent-related costs were included in research and
development expense in 1998 and 1999, respectively. From February 13, 1992
through December 31, 1999 the Company expensed approximately $496,000 related to
these costs.
STOCK-BASED COMPENSATION
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the
Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related interpretations
in accounting for stock-based employee compensation. Under APB 25, if the
exercise price of the Company's employee and director stock options equals or
exceeds the estimated fair value of the underlying stock on the date of grant,
no compensation expense is recognized.
When the exercise price of the employee or director stock options is less than
the estimated fair value of the underlying stock on the grant date, the Company
records deferred compensation for the difference and amortizes this amount to
expense in accordance with FASB Interpretation No. 28 over the vesting period of
the options.
Options or stock awards issued to non-employees are recorded at their fair value
as determined in accordance with SFAS No. 123 and EITF 96-18 and recognized over
the related service period. Deferred charges for options granted to
non-employees are periodically remeasured as the options vest.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
EFFECT OF NEW ACCOUNTING STANDARDS
Effective January 1, 2001, the Company will adopt SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. The adoption of SFAS No. 133 is
not anticipated to have an impact on the Company's results of operations or
financial condition as the Company holds no derivative financial instruments and
does not currently invest in derivative instruments or engage in hedging
activities.
F-10
<PAGE> 67
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting
Bulletin (SAB) No. 98, basic net income (loss) per common share is computed by
dividing the net income (loss) for the period by the weighted average number of
common shares outstanding during the period. Diluted net income (loss) per share
is computed by dividing the net income (loss) for the period by the weighted
average number of common and common equivalent shares outstanding during the
period. Potentially dilutive securities composed of incremental common shares
issuable upon the exercise of stock options and warrants, and common shares
issuable on conversion of preferred stock, were excluded from historical diluted
loss per share because of their anti-dilutive effect.
Under the provisions of SAB No. 98, common shares issued for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No common shares have been
issued for nominal consideration.
Pro forma net loss per common share in the Statement of Operations has been
computed as described above and also gives effect to common equivalent shares
arising from preferred stock that will automatically convert upon the closing of
the initial public offering contemplated by this prospectus (using the as-if
converted method from the original date of issuance).
The pro forma net loss per common share information included elsewhere in this
Prospectus includes the adjustment described above and the following:
-- the cashless exercise prior to the offering of 923,102 warrants to
purchase shares of our common stock,
-- the issuance of 3,319,363 shares of our Series C preferred stock in
connection with our acquisition of all of the capital stock of Visionex
in March 2000, and the conversion of these shares into 2,655,490 shares
of our common stock, as though the acquisition had occurred January 1,
1999.
-- the issuance of 1,776,199 shares of our Series D preferred stock that
were sold to Allergen as part of our collaboration entered into in March
2000, and the conversion of these shares into shares of our
common stock, as though the shares had been sold January 1, 1999.
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
The unaudited pro forma stockholders' equity at December 31, 1999 reflects the
conversion of 7,156,214 shares of the convertible preferred stock outstanding as
of December 31, 1999 into 5,724,971 shares of common stock.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified to
conform with the current year presentation.
F-11
<PAGE> 68
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. BALANCE SHEET DETAILS
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements and related accumulated depreciation and
amortization are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Property and equipment:
Equipment................................................. $ 648,509 $1,115,641
Furniture and fixtures.................................... 538,025 324,693
Leasehold improvements.................................... 206,359 206,359
---------- ----------
1,392,893 1,646,693
Less accumulated depreciation and amortization.............. (425,912) (663,093)
---------- ----------
$ 966,981 $ 983,600
========== ==========
</TABLE>
Total depreciation and amortization expense amounted to $174,584, $209,060,
$237,182 and $669,724 for the years ended December 31, 1997, 1998 and 1999 and
for the period from February 13, 1992 (inception) through December 31, 1999,
respectively.
3. RELATED PARTY TRANSACTIONS
A stockholder of the Company is also a stockholder of a supplier with which the
Company entered into an agreement in 1996. The supplier provides certain
manufacturing services to the Company. For the years ended December 31, 1997,
1998 and 1999 and the period from February 13, 1992 (inception) through December
31, 1999, the Company purchased $171,502, $148,138, $108,162 and $427,802,
respectively, in services from the supplier.
In 1997, the Company provided an unsecured loan to an officer in the amount of
$126,000. The principal amount of the loan, plus accrued interest of 8% per
annum, is due and payable in full on May 30, 2002.
During the years ended December 31, 1997, 1998 and 1999 and the period from
February 13, 1992 (inception) through December 31, 1999, the Company made total
payments of approximately $28,500, $31,300, $36,200 and $140,435, respectively,
to a management company owned by a stockholder of the Company for reimbursement
of services performed on behalf of the Company and for reimbursement of
out-of-pocket expenses.
In November 1998, notes payable to certain stockholders totaling $1,000,000 were
converted into shares of Series C preferred stock at $5.63 per share.
In December 1999, certain stockholders of the Company provided an unsecured loan
to the Company in the amount of $500,000. In January 2000, the Company borrowed
an additional $1,250,000 from certain stockholders. The principal amount of the
loans, plus accrued interest at 9% per annum, was repaid in full in March 2000.
F-12
<PAGE> 69
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
PREFERRED STOCK
At December 31, 1999, convertible preferred stock authorized and outstanding is
as follows:
<TABLE>
<CAPTION>
SHARES SHARES LIQUIDATION
AUTHORIZED OUTSTANDING VALUE
---------- ----------- -----------------
<S> <C> <C> <C>
Series A.................................... 1,951,753 1,951,753 $ 1,951,753
Series A1................................... 1,951,753 -- --
Series B.................................... 1,955,555 1,955,555 5,377,779
Series B1................................... 1,955,555 -- --
Series C.................................... 8,503,036 3,248,906 18,291,341
Series C1................................... 8,503,036 -- --
---------- --------- -----------
24,820,688 7,156,214 $25,620,873
========== ========= ===========
</TABLE>
In the event the Company completes a dilutive issuance of common stock, each
share of Series A, Series B and Series C preferred stock held by stockholders
that do not participate in the issuance shall be converted into one share of
Series A1, Series B1 and Series C1 preferred stock, respectively, plus such
number of fully paid, non-assessable shares of common stock based on a
conversion rate, subject to certain anti-dilution provisions.
The holders of Series A, Series A1, Series B, Series B1, Series C and Series C1
preferred stock (collectively "Preferred Stock") are entitled to receive annual
dividends of $0.08, $0.08, $0.22, $0.22, $0.45 and $0.45 per share,
respectively, when and if declared by the board of directors, prior to and in
preference to holders of common stock. The right to such dividends, if declared
by the board of directors, shall be cumulative. As of December 31, 1999, no
dividends have been declared. In the event of a liquidation of the Company,
preferred stockholders are entitled to a liquidation preference of $1.00 per
share for Series A and Series A1, $2.75 per share for Series B and Series B1,
and $5.63 per share for Series C and Series C1, plus any declared and unpaid
dividends on such shares.
The Preferred Stock is convertible into common stock at any time at the option
of the holder on a one to .80 basis, subject to anti-dilution adjustments, and
will automatically convert upon the closing of the initial public offering
contemplated by this prospectus, or by the written consent or affirmative vote
of a majority of the preferred stockholders. Each share of outstanding Preferred
Stock is entitled to one vote for each share of common stock into which it could
be converted.
PREFERRED AND COMMON STOCK SUBSCRIBED
Preferred and common stock subscribed reflects 221,551 and 26,609 shares of the
Company's Series C preferred and common stock, respectively, subscribed by
certain stockholders in December 1998 at a per share price of $5.63 and $0.70,
respectively. A corresponding subscription receivable was included in
stockholders' equity as of December 31, 1998. In January 1999, the Company
completed the subscribed transaction, and all preferred and common stock
subscription amounts were received and all preferred and common stock and stock
purchase warrants subject to the subscriptions were issued.
F-13
<PAGE> 70
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (CONTINUED)
COMMON STOCK WARRANTS
In connection with the Series C preferred stock financing completed during 1998
and 1999, the Company also sold to the investors warrants to purchase 923,102
shares of common stock at $0.70 per share. The warrants expire upon the earlier
of five years from the date of issuance or the closing of an initial public
offering. The warrants also provide the holder with the option to receive common
shares equal to the intrinsic value of the warrant at the time of warrant
exercise (a "cashless exercise").
STOCK COMPENSATION PLAN
The Company has reserved 3,400,000 shares of common stock under the 1993 Stock
Option Plan (the "Plan") for issuance to eligible employees, officers, directors
and consultants. The Plan provides for the grant of incentive and nonstatutory
stock options. Terms of the stock option agreements, including vesting
requirements, are determined by the board of directors, subject to the
provisions of the Plan. Options granted by the Company vest ratably over four
years and are exercisable from the date of grant for a period of ten years. The
option price equals the estimated fair value of the common stock as determined
by the board of directors on the date of the grant.
A summary of the Company's stock option activity and related information for the
years ended December 31 follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES PRICE PER SHARE EXERCISE PRICE
--------- --------------- --------------
<S> <C> <C> <C>
Outstanding at December 31, 1996............. 1,192,000 $0.19 - $0.35 $0.24
Granted.................................... 744,600 $0.70 $0.70
Exercised.................................. (56,000) $0.19 - $0.35 $0.21
Canceled................................... (60,000) $0.35 $0.35
---------
Outstanding at December 31, 1997............. 1,820,600 $0.19 - $0.70 $0.43
Granted.................................... 326,800 $0.70 $0.70
Exercised.................................. (23,666) $0.19 - $0.35 $0.24
Canceled................................... (21,134) $0.35 - $0.70 $0.56
---------
Outstanding at December 31, 1998............. 2,102,600 $0.19 - $0.70 $0.46
Granted.................................... 1,080,080 $0.70 $0.70
Exercised.................................. (223,382) $0.19 - $0.70 $0.41
Canceled................................... (274,631) $0.35 - $0.70 $0.66
---------
Outstanding at December 31, 1999............. 2,684,667 $0.19 - $0.70 $0.55
=========
</TABLE>
The following table summarizes information about options outstanding at December
31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED-
REMAINING WEIGHTED NUMBER AVERAGE
NUMBER CONTRACTUAL AVERAGE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICE OUTSTANDING LIFE EXERCISE PRICE AND VESTED PRICE
----------------------- ----------- ----------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.19 - $0.70................... 2,684,667 7.10 $0.55 1,582,466 $0.40
</TABLE>
F-14
<PAGE> 71
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (CONTINUED)
Pro forma net loss information has been determined as if the Company had
accounted for its employee stock options under the fair value method prescribed
in SFAS No. 123. The fair value of these options was estimated at the date of
grant using the minimum value pricing model with the following weighted average
assumptions for 1997, 1998 and 1999: risk-free interest rate of 4.83%, 6.18% and
5.5%, respectively, zero dividend yield; and a weighted-average life of the
option of five years. The estimated weighted average fair value of stock options
granted during 1997, 1998 and 1999 was $0.18, $0.15 and $0.16, respectively.
The minimum value pricing model is similar to the Black-Scholes option valuation
model which was developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable, except that it
excludes the factor for volatility. In addition, option valuation models require
the input of highly subjective assumptions. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of the related options. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Pro forma net loss......................... $(6,800,745) $(9,686,181) $(14,359,850)
=========== =========== ============
Net loss, as reported...................... $(6,752,300) $(9,623,503) $(14,283,743)
=========== =========== ============
Pro forma net loss per share, basic and
diluted.................................. $ (4.93) $ (6.68) $ (8.85)
=========== =========== ============
Net loss per share, basic and diluted, as
reported................................. $ (4.89) $ (6.64) $ (8.80)
=========== =========== ============
</TABLE>
In March 2000 the Board of Directors of the Company approved the 2000 Stock
Option Plan and 2000 Employee Stock Purchase Plan subject to approval of the
stockholders. Upon approval of the plan by the stockholders and upon completion
of an initial public offering, the 1993 Stock Option Plan will terminate, no
further grants will be made under the 1993 Stock Option Plan, and any shares
reserved but not issued under the 1993 Stock Option Plan will be available for
grant under the 2000 Stock Plan.
SHARES RESERVED FOR FUTURE ISSUANCE
The following shares of common stock are reserved for future issuance at
December 31, 1999:
<TABLE>
<S> <C>
Conversion Series A, B and C preferred stock................ 14,131,579
Exercise of Visionex Call Option Agreement.................. 2,655,490
Stock options:
Granted and outstanding................................... 2,684,667
Reserved for future grants................................ 715,333
Exercise of warrants........................................ 923,102
----------
21,110,171
==========
</TABLE>
F-15
<PAGE> 72
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (CONTINUED)
DEFERRED COMPENSATION
The Company has recorded deferred compensation totaling $3,538,485 in 1999 in
connection with the grants of stock options primarily to employees and
directors. Amortization of deferred compensation totaled $1,323,484 during the
year ended December 31, 1999.
In the first quarter of 2000, the Company granted options to purchase 532,800
shares of stock at $0.70 per share. The Company expects to record additional
deferred compensation in the first quarter of 2000 related to these option
grants.
5. COMMITMENTS AND CONTINGENCIES
CLINICAL TRIAL AGREEMENTS
During 1998, the Company entered into several agreements with contract research
organizations to perform Phase II and III clinical trials in various countries.
Upon early termination, the Company is subject to a termination fee as defined
in the agreements. The Company presently has no intention of terminating the
agreements. As of December 31, 1999, the Company had approximately $3.7 million
of future obligations relating to these projects.
LEASE COMMITMENTS
The Company leases its corporate and laboratory facilities and certain equipment
under various operating leases. As of December 31, 1999, the Company has made
approximately $236,000 in cash deposits related to both capital and operating
leases. Provisions of the facilities lease provide for abatement of rent during
certain periods and escalating rent payments during the term. For financial
reporting purposes, rent expense is recognized on a straight-line basis over the
term of the lease. Accordingly, rent expense recognized in excess of rent paid
is reflected as deferred rent. Additionally, the Company is required to pay
taxes, insurance and maintenance expenses related to the building. Rent expense
on the facilities and equipment during 1997, 1998, 1999 and the period February
13, 1992 (inception) through December 31, 1999 was approximately $232,446,
$288,462, $237,159 and $993,253, respectively.
Future annual minimum payments under operating and capital leases as of December
31, 1999 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEARS ENDING DECEMBER 31: LEASES LEASES
------------------------- --------- ---------
<S> <C> <C>
2000........................................................ $190,982 $ 267,791
2001........................................................ 156,748 15,567
2002........................................................ 38,420 --
2003........................................................ 12,009 --
-------- ---------
$398,159 283,358
========
Less amounts representing interest.......................... (17,646)
---------
Present value of future minimum lease payments.............. 265,712
Less current portion........................................ (250,306)
---------
Long-term obligation under capital lease.................... $ 15,406
=========
</TABLE>
F-16
<PAGE> 73
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
PURCHASE COMMITMENTS
The Company entered into a long term supply agreement with a producer of
hyaluronidase in the United Kingdom. The supply agreement provides for the
United Kingdom manufacturer to supply, and the Company to purchase, certain
minimum levels of hyaluronidase. At December 31, 1999, the approximate future
purchase commitments under the supply agreement are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 143,000
2001........................................................ 205,000
2002........................................................ 492,000
2003........................................................ 615,000
----------
$1,455,000
==========
</TABLE>
6. INCOME TAXES
At December 31, 1999, the Company had federal and California income tax net
operating loss carryforwards of approximately $17,308,000 and $14,778,000,
respectively.
The federal tax loss carryforwards will begin to expire in 2007, unless
previously utilized. The California net operating loss will continue to expire
in 2000, unless previously utilized. The Company also has federal and California
research tax credit carryforwards of $1,468,000 and $860,000, respectively,
which will begin to expire in 2010 unless previously utilized.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of the
Company's net operating loss and credit carryforwards may be limited because of
cumulative changes in ownership of more than 50.0% which have occurred. However,
the Company does not believe such limitation will have a material impact upon
the utilization of these carryforwards.
Significant components of the Company's deferred tax assets are shown below. A
valuation allowance of $15,745,000 has been recognized to offset the deferred
tax assets, as realization of such assets is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards....................... $ 1,624,000 $ 6,907,000
Research and development credits....................... 1,063,000 2,027,000
Capitalized research and development................... 2,712,000 4,505,000
Deferred revenue....................................... 2,037,000 2,037,000
Other, net............................................. -- 269,000
----------- ------------
Total deferred tax asset................................. 7,436,000 15,745,000
Deferred tax liability:
Other, net............................................. (137,000) --
----------- ------------
Net deferred tax assets.................................. 7,299,000 15,745,000
Valuation allowance for deferred tax assets.............. (7,299,000) (15,745,000)
----------- ------------
$ -- $ --
=========== ============
</TABLE>
F-17
<PAGE> 74
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Savings Plan (the "Plan") covering substantially all
employees that have been employed for at least three months and meet certain age
requirements. Employees may contribute up to 15% of their compensation per year
(subject to a maximum limit by federal tax law). The Company does not provide
matching contributions to the Plan.
8. VISIONEX AGREEMENTS
In June 1997, the Company entered into a seven-year agreement with Visionex Pte.
Ltd. ("Visionex"), a Singapore corporation. The Company granted Visionex the
exclusive right to register, import, market, sell and distribute the Company's
products in East Asia (excluding Japan and Korea) in exchange for a license fee
paid by Visionex to the Company of $5,000,000. The Company had no ownership
interest in Visionex, but a minority of the Visionex shares are held by
investors who own a majority interest in the Company. In addition, three of the
five board members of Visionex at December 31, 1999 are also board members of
the Company.
The Company also entered into a Call Option Agreement (the "Agreement") with
Visionex and its shareholders (the "Shareholders"), whereby the Company may
require the Shareholders to exchange their outstanding shares of Visionex stock
(the "Preference Shares") for the Company's stock (the "Call Option"). The
Visionex Preference Shares would have been exchanged for a range dependent upon
the annual revenues of Visionex, as defined in the Agreement, of 1,802,155 up to
2,655,489 shares of the Company's common stock, or, if the Company has not yet
successfully completed an initial public offering, Series C preferred stock. The
Call Option could have been exercised by the Company anytime during the two-year
period beginning June 27, 2000, but could have been deferred for a period of up
to two years by a majority of the holders of the Preference Shares.
The Agreement also provided for a put option whereby each of the Visionex
Shareholders may require the Company to purchase the outstanding Preference
Shares held by such shareholder. The per share purchase price to be paid by the
Company under the put option is 0.1689 shares of the Company's common stock, or,
if the Company has not yet successfully completed an initial public offering,
Series C preferred stock (up to a maximum of 2,252,694 shares). The put option
was exercisable anytime in the three-year period beginning June 27, 1999.
The Company's financial statements through December 31, 1999 do not include the
assets, liabilities, or results of operations of Visionex due to the Company's
lack of ownership interest in Visionex and lack of control of the operations of
Visionex during such period. Due to the existence of the put option, the $5
million license fee received from Visionex was recorded as a liability.
On March 8, 2000, the Company issued 3,319,363 shares of Series C preferred
stock to acquire all of the outstanding capital stock of Visionex, which is
convertible into 2,655,490 shares of common stock. The assets of Visionex
consisted primarily of cash of approximately $4.4 million and the product rights
originally acquired from the Company by Visionex. The Company recorded no value
for such intangible assets since (i) Visionex had not made any substantial
progress in commercializing the products since it had originally acquired them,
and (ii) the intangible assets had originally been acquired from the Company,
and (iii) the Company had no historical cost basis in the assets prior to the
transfer of them to Visionex. Accordingly, the Company will record a beneficial
conversion charge in the first quarter of 2000 for the excess of the value of
the shares issued over the net tangible assets acquired.
F-18
<PAGE> 75
ISTA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
9. GEOGRAPHIC INFORMATION
During 1999, the Company purchased certain laboratory and production equipment
for use in Mexico and the United Kingdom. Laboratory and production equipment
located in these areas totaled $278,722 and $385,475 at December 31, 1998 and
1999, respectively.
The Company also has certain obligations denoted in foreign currency relating to
clinical trials in Mexico, the United Kingdom, Poland, Germany, and the
Netherlands. At December 31, 1998 and 1999 these obligations totaled $58,201 and
$74,544, respectively.
10. SUBSEQUENT EVENTS
In March 2000, the Company entered into a license agreement with Allergan, under
which Allergan will be responsible for the marketing, sale and distribution of
Vitrase in the United States and all international markets, except Mexico and
Japan. Under a related supply agreement, Ista will supply all of Allergan's
requirements of Vitrase at a fixed price per unit subject to certain future
adjustments. The term of the license is ten full calendar years after the date
of the first commercial sale. Profits on the sale of Vitrase in the United
States will be split on a 50/50 basis between Allergan and the Company. The
Company is responsible for all costs of product development, preclinical studies
and clinical trials of Vitrase and may receive up to $35.0 million in payments
from Allergan upon the achievement of specified regulatory and development
objectives.
The Company issued 1,776,199 shares of Series D preferred stock to Allergan at
$5.63 per share for proceeds of approximately $10.0 million. These shares are
convertible into common stock upon an initial public offering based on a
conversion ratio determined by the initial public offering price or at any time
after September 30, 2000 based on a specified rate. The shares shall be entitled
to a dividend of $0.45 per share when and if declared by the board of directors.
In connection with the Company's license agreement with Allergan, the Company
expects to enter into a credit agreement with Allergan which will provide for up
to $10.0 million to be used for Vitrase specific development expenses. The
aggregate amount of this credit line may increase by $2.5 million upon the
filing of a new drug application by the Company. The credit agreement will be
terminated if the registration statement covering the Company's initial public
offering is declared effective by the Securities and Exchange Commission prior
to September 30, 2000.
F-19
<PAGE> 76
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Visionex Pte. Ltd.
We have audited the accompanying balance sheets of Visionex Pte. Ltd. (a
development stage company) as of December 31, 1998 and 1999 and the related
statements of operations, stockholders' equity and cash flows for the period May
24, 1997 (inception) through December 31, 1997, the years ended December 31,
1998 and 1999, and the period May 24, 1997 (inception) through December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Visionex Pte. Ltd. (a
development stage company) at December 31, 1998 and 1999, and the results of its
operations and its cash flows for the period May 24, 1997 (inception) through
December 31, 1997, the years ended December 31, 1998 and 1999, and the period
May 24, 1997 (inception) through December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
San Diego, California
March 8, 2000
F-20
<PAGE> 77
VISIONEX PTE. LTD.
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,416,932 $ 4,369,960
Receivable from related party............................. -- 78,750
----------- -----------
Total current assets................................... 4,416,932 4,448,710
Property and equipment, net................................. 22,600 12,755
Licensed technology, net.................................. 3,928,571 3,214,286
Other assets.............................................. 13,703 16,747
----------- -----------
$ 8,381,806 $ 7,692,498
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 23,790 $ 33,731
----------- -----------
Total current liabilities.............................. 23,790 33,731
Commitments
Stockholders' equity:
Convertible preference shares, $.07 par value; 12,000,000
shares authorized in 1998 and 1999; 10,666,717 shares
issued and outstanding in 1998 and 1999................ 745,920 745,920
Ordinary shares, no par value, 8,000,000 shares authorized
and 20 shares issued and outstanding in 1998 and
1999................................................... 2 2
Additional paid-in capital................................ 9,920,746 9,920,746
Accumulated other comprehensive loss...................... (1,025,447) (1,033,787)
Deficit accumulated during the development stage.......... (1,283,205) (1,974,114)
----------- -----------
Total stockholders' equity............................. 8,358,016 7,658,767
----------- -----------
Total liabilities and stockholders' equity............. $ 8,381,806 $ 7,692,498
=========== ===========
</TABLE>
See accompanying notes.
F-21
<PAGE> 78
VISIONEX PTE. LTD.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM MAY 24, FROM MAY 24,
1997 (INCEPTION) YEARS ENDED 1997 (INCEPTION)
THROUGH DECEMBER 31, THROUGH
DECEMBER 31, ------------------------ DECEMBER 31,
1997 1998 1999 1999
---------------- ----------- --------- ----------------
<S> <C> <C> <C> <C>
Costs and expenses:
Amortization of licensed
technology..................... $ 357,143 $ 714,286 $ 714,285 $ 1,785,714
Research and development.......... 4,475 57,308 32,404 94,187
General and administrative........ 102,785 256,406 153,681 512,872
--------- ----------- --------- -----------
Total costs and expenses....... 464,403 1,028,000 900,370 2,392,773
--------- ----------- --------- -----------
Loss from operations................ (464,403) (1,028,000) (900,370) (2,392,773)
Interest income..................... 179 209,019 209,461 418,659
--------- ----------- --------- -----------
Net loss............................ $(464,224) $ (818,981) $(690,909) $(1,974,114)
========= =========== ========= ===========
</TABLE>
See accompanying notes.
F-22
<PAGE> 79
VISIONEX PTE. LTD.
(a development stage company)
STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM MAY 24, 1997 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
CONVERTIBLE ACCUMULATED ACCUMULATED
PREFERENCE SHARES ORDINARY SHARES ADDITIONAL OTHER DURING THE TOTAL
--------------------- --------------- PAID-IN COMPREHENSIVE DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL LOSS STAGE EQUITY
---------- -------- ------ ------ ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Convertible
Preference shares for
cash................... 10,666,717 $745,920 -- $-- $9,920,746 $ -- $ -- $10,666,666
Issuance of ordinary
shares for cash........ -- -- 20 2 -- -- -- 2
Net loss................. -- -- -- -- -- -- (464,224) (464,224)
Foreign currency
translation
adjustment............. -- -- -- -- -- (838,807) -- (838,807)
-----------
Comprehensive loss....... -- -- -- -- -- -- -- (1,303,031)
---------- -------- -- -- ---------- ----------- ----------- -----------
Balance at December 31,
1997..................... 10,666,717 745,920 20 2 9,920,746 (838,807) (464,224) 9,363,637
Net loss................. -- -- -- -- -- -- (818,981) (818,981)
Foreign currency
translation
adjustment............. -- -- -- -- -- (186,640) -- (186,640)
-----------
Comprehensive loss....... -- -- -- -- -- -- -- (1,005,621)
---------- -------- -- -- ---------- ----------- ----------- -----------
Balance at December 31,
1998..................... 10,666,717 745,920 20 2 9,920,746 (1,025,447) (1,283,205) 8,358,016
Net loss................. -- -- -- -- -- -- (690,909) (690,909)
Foreign currency
translation
adjustment............. -- -- -- -- -- (8,340) -- (8,340)
-----------
Comprehensive loss....... -- -- -- -- -- -- -- (699,249)
---------- -------- -- -- ---------- ----------- ----------- -----------
Balance at December 31,
1999..................... 10,666,717 $745,920 20 $2 $9,920,746 $(1,033,787) $(1,974,114) $ 7,658,767
========== ======== == == ========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE> 80
VISIONEX PTE. LTD.
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM MAY 24, FROM MAY 24,
1997 1997
(INCEPTION) YEARS ENDED (INCEPTION)
THROUGH DECEMBER 31, THROUGH
DECEMBER 31, ----------------------- DECEMBER 31,
1997 1998 1999 1999
---------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................ $ (464,224) $ (818,981) $ (690,909) $(1,974,114)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of licensed technology... 357,143 714,286 714,285 1,785,714
Depreciation and amortization......... -- 4,892 9,845 14,737
Changes in operating assets and
liabilities:
Receivable from related party...... -- -- (78,750) (78,750)
Other assets....................... (17,534) 3,831 (3,044) (16,747)
Accounts payable................... 26,812 (3,022) 9,941 33,731
----------- ---------- ---------- -----------
Net cash used in operating
activities.................... (97,803) (98,994) (38,632) (235,429)
INVESTING ACTIVITIES
Purchases of property and equipment..... -- (27,492) -- (27,492)
License fee paid to Ista
Pharmaceuticals....................... (5,000,000) -- -- (5,000,000)
----------- ---------- ---------- -----------
Net cash used in investing
activities.................... (5,000,000) (27,492) -- (5,027,492)
FINANCING ACTIVITIES
Proceeds from issuance of preference
shares................................ 10,666,666 -- -- 10,666,666
Proceeds from issuance of ordinary
shares................................ 2 -- -- 2
----------- ---------- ---------- -----------
Net cash provided by financing
activities.................... 10,666,668 -- -- 10,666,668
EFFECT OF EXCHANGE RATE CHANGES ON
CASH.................................. (838,807) (186,640) (8,340) (1,033,787)
Increase (decrease) in cash and cash
equivalents........................... 4,730,058 (313,126) (46,972) 4,369,960
Cash and cash equivalents at beginning
of period............................. -- 4,730,058 4,416,932 --
----------- ---------- ---------- -----------
Cash and cash equivalents at end of
period................................ $ 4,730,058 $4,416,932 $4,369,960 $ 4,369,960
=========== ========== ========== ===========
</TABLE>
See accompanying notes.
F-24
<PAGE> 81
VISIONEX PTE. LTD.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Visionex Pte. Ltd. ("Visionex"), was incorporated in Singapore on May 24, 1997
to develop and commercialize therapeutic ophthalmic drugs and non-surgical
vision correction systems and to manufacture and distribute such systems and
products.
Certain Singapore-based investors control a majority of the outstanding voting
shares, and certain minority investors in Visionex control a majority of the
outstanding voting shares in Ista Pharmaceuticals, Inc.
On March 8, 2000, all of the outstanding preference and ordinary shares of
Visionex were acquired by Ista Pharmaceuticals, Inc. through the exchange of
3,319,363 shares of its Series C preferred stock.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in banks, certificates of deposit and
short-term investments with original maturities of three months or less when
purchased. Cash and cash equivalents are carried at cost, which management
believes approximates fair value because of the short-term maturity of these
instruments.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Equipment and furniture are
depreciated using the straight-line method over their estimated useful lives
(generally 3 to 5 years) and leasehold improvements are amortized using the
straight-line method over the useful life of the asset or the lease term,
whichever is shorter.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, if indicators of impairment
exist, Visionex assesses the recoverability of the affected long-lived assets by
determining whether the carrying value of such assets can be recovered through
undiscounted future operating cash flows. If impairment is indicated, Visionex
measures the amount of such impairment by comparing the cash flows associated
with the use of the asset. While Visionex's current and historical operating and
cash flow losses are indicators of impairment, Visionex believes the future cash
flows to be received from the long-lived assets will exceed the assets' carrying
value, and accordingly Visionex has not recognized any impairment losses through
December 31, 1999.
RESEARCH AND DEVELOPMENT
Expenditures relating to research and development are expensed in the period
incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-25
<PAGE> 82
VISIONEX PTE. LTD.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 requires unrealized gains or losses on the Company's cash,
and cash equivalents and available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income (loss).
The financial statements of the Company are measured using the Singapore Dollar
(SGD) as the functional currency. Assets and liabilities of the Company have
been translated into U.S. dollars at the rates of exchange at the balance sheet
date. Income and expense items have been translated into U.S. dollars at the
average daily rate of exchange during the reporting period. The resulting
translation adjustments are included as a separate component of other
comprehensive income (loss).
Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in exchange rates result in transaction gains and losses that are
reflected in income as unrealized (based on period-end transactions) or realized
upon settlement of the transactions.
INCOME TAXES
Total tax expense to the Singapore government amounted to $10,000 for the year
ended December 31, 1999 and for the period from May 24, 1997 (inception) through
December 31, 1999. The Company is not subject to and is not required to pay U.S.
federal income taxes.
2. BALANCE SHEET DETAILS
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements and related accumulated depreciation and
amortization are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
------- --------
<S> <C> <C>
Property and equipment:
Computer equipment........................................ $ 7,308 $ 7,308
Leasehold improvements.................................... 20,184 20,184
------- --------
27,492 27,492
Less accumulated depreciation and amortization.............. (4,892) (14,737)
------- --------
$22,600 $ 12,755
======= ========
</TABLE>
Total depreciation and amortization expense amounted to $9,845, $4,892 and
$14,737 for the years ended December 31, 1998 and 1999 and for the period from
May 24, 1997 (inception) through December 31, 1999, respectively. There was no
depreciation or amortization expense for the period from May 24, 1997
(inception) through December 31, 1997. All property and equipment is located at
the Company's Singapore operating location.
F-26
<PAGE> 83
VISIONEX PTE. LTD.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
3. RELATED PARTY TRANSACTIONS
In 1998, Visionex became the Asian research and development and marketing arm
for a pharmaceutical company in the United States. The pharmaceutical company
has certain patent rights for Pirenzepine. The agreement is structured so that
the pharmaceutical company will reimburse Visionex for costs incurred by
Visionex related to the development of Pirenzepine. If a viable product is
discovered, Visionex will have the option to license the technology for a
mutually agreed upon amount. An officer of the pharmaceutical company is also on
the Board of Directors of Visionex.
4. STOCKHOLDERS' EQUITY
PREFERENCE SHARES
Each preference share shall be entitled to one vote. The preference shares are
not redeemable by Visionex. In the event of the liquidation of Visionex, the
holders of preference shares shall have priority in the repayment of capital
(based on the issue price) over holders of ordinary shares with respect to any
net proceeds from liquidation of Visionex after payments to all the creditors of
Visionex, whether secured or unsecured.
The preference shares are convertible into one ordinary share at the option of
the holders. The preference shares shall be automatically converted into
ordinary shares at the conversion ratio in the event not less than 75% of the
holders of the issued and outstanding preference shares consent in writing to
such conversion or resolve by way of a special resolution at a duly convened
meeting of the preference shareholders, approving such a conversion.
5. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases primarily consist of a facility lease. Rent expense on the
facility lease during 1998, 1999 and the period from inception (May 24, 1997)
through December 31, 1999 was $33,268, $43,750 and $77,018, respectively. There
was no rent expense for the period May 24, 1997 (inception) through December 31,
1997.
Future annual minimum payments under the operating leases as of December 31,
1999 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31: OPERATING LEASES
------------------------- ----------------
<S> <C>
2000........................................................ $51,636
2001........................................................ 6,071
2002........................................................ 1,804
2003........................................................ 1,022
-------
$60,533
=======
</TABLE>
RESEARCH AND CAPITAL EXPENDITURE COMMITMENTS
In 1998, Visionex entered into an agreement with the Economic Development Board
of Singapore. Under the agreement, the company committed to implement a research
project requiring aggregate expenditures
F-27
<PAGE> 84
VISIONEX PTE. LTD.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
of $3.0 million in capital equipment and $2.3 million in operating costs,
preliminarily budgeted to be incurred as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
<S> <C>
1999........................................................ $1,040,000
2000........................................................ $2,460,000
2001........................................................ $ 680,000
2002........................................................ $1,100,000
</TABLE>
This commitment was made as consideration for the abatement of a transfer tax of
up to $1.0 million which would otherwise have been payable to the Singapore
government on the license of technology from Ista in 1997. Through December 31,
1999, Visionex has not met the operating expenditure plans as set forth in the
agreement, and Ista management is not currently planning to meet the expenditure
plans for 2000 through 2002. The Economic Development Board has accepted a
suspension of the original project, but has not formally approved a termination
of the Company's remaining research and capital expenditure commitment.
F-28
<PAGE> 85
ISTA PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
INTRODUCTION
Ista Pharmaceuticals ("Ista") entered into a stock purchase agreement with
Visionex Pte. Ltd. ("Visionex"), which was consummated on March 8, 2000.
The unaudited pro forma combined condensed balance sheet and statement of
operations which follow have been prepared by Ista based upon the historical
financial statements of Ista and Visionex, and may not be indicative of the
results that may have actually occurred if the combination had been in effect on
the date indicated or for the periods presented or that may be obtained in the
future. The pro forma combined condensed financial statements should be read in
conjunction with the audited financial statements and notes of Ista and Visionex
included elsewhere in the Prospectus.
The unaudited pro forma combined condensed balance sheet as of December 31, 1999
assumes the purchase of Visionex had occurred on such date. The unaudited pro
forma combined condensed statement of operations for the year ended December 31,
1999 assumes the purchase of Visionex had been consummated on January 1, 1999.
The pro forma information is based on the historical financial statements of
Ista and Visionex giving effect to the transaction under the purchase method of
accounting and the assumption and adjustments in the accompanying footnotes.
F-29
<PAGE> 86
ISTA PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
TOTAL
PRO FORMA COMBINED
ISTA VISIONEX ADJUSTMENTS RESULTS
------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 709,350 $ 4,369,960 $ -- $ 5,079,310
Receivable from related party.............. -- 78,750 -- 78,750
Advanced payments -- clinical trials....... 876,793 -- -- 876,793
Other current assets....................... 58,742 -- -- 58,742
------------ ----------- ----------- ------------
Total current assets..................... 1,644,885 4,448,710 -- 6,093,595
Property and equipment, net.................. 983,600 12,755 996,355
Licensed technology, net..................... -- 3,214,286 (5,000,000)(a) --
1,785,714(a)
Note receivable from officer................. 152,040 -- -- 152,040
Deposits and other assets.................... 238,977 16,747 -- 255,724
------------ ----------- ----------- ------------
$ 3,019,502 $ 7,692,498 $(3,214,286) $ 7,497,714
============ =========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable........................... $ 822,833 $ 33,731 $ -- $ 856,564
Accrued compensation and related
expenses................................. 73,501 -- -- 73,501
Accrued expenses -- clinical trials........ 4,782,552 -- -- 4,782,552
Other accrued expenses..................... 208,319 -- -- 208,319
Current portion of obligation under capital
lease.................................... 250,306 -- -- 250,306
Notes payable to shareholders.............. 500,000 -- -- 500,000
------------ ----------- ----------- ------------
Total current liabilities................ 6,637,511 33,731 -- 6,671,242
Obligation under capital lease............... 15,406 -- -- 15,406
Deferred rent................................ 22,441 -- -- 22,441
License fee received from Visionex........... 5,000,000 -- (5,000,000)(b) --
Commitments
Stockholders' equity
(net capital deficiency):
Convertible preferred stock................ 25,496,068 745,920 4,444,481(c) 34,940,549
5,000,000(b)
(745,920)(c)
Common stock............................... 3,890,939 2 (2)(c) 3,890,939
Additional paid-in capital................. -- 9,920,746 (4,920,746)(c) --
(5,000,000)(a)
Cumulative foreign currency translation
adjustment............................... -- (1,033,787) 1,033,787(c) --
Deferred compensation...................... (2,215,421) -- -- (2,215,421)
Deficit accumulated during the development
stage.................................... (35,827,442) (1,974,114) 1,785,714(a) (35,827,442)
188,400(c)
------------ ----------- ----------- ------------
Total stockholders' equity
(net capital deficiency)................... (8,655,856) 7,658,767 1,785,714 788,625
------------ ----------- ----------- ------------
Total liabilities and stockholders' equity
(net capital deficiency)................... $ 3,019,502 $ 7,692,498 $(3,214,286) $ 7,497,714
============ =========== =========== ============
</TABLE>
- ---------------
(a) Eliminates the $5,000,000 license fee obtained in 1997 by Visionex from
Ista, which was originally capitalized by Visionex, and the related
accumulated amortization of $1,785,714 which had been recorded through
December 31, 1999, and recharacterizes such payment as a capital
contribution to Ista.
F-30
<PAGE> 87
(b) Eliminates the $5,000,000 liability to the Visionex shareholders related to
their "Put Option" under which they could require Ista to acquire their
Visionex shares, and recharacterizes such payment as a capital contribution
to Ista.
(c) Eliminates the capital accounts of Visionex and records the 3,319,363 shares
of Ista Series C preferred stock at $4,444,481, the net tangible value of
the Visionex assets acquired. Ista will also record a charge related to the
beneficial conversion feature of such shares which is not reflected herein.
See accompanying notes to unaudited pro forma combined condensed financial
statements.
F-31
<PAGE> 88
ISTA PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
TOTAL
PRO FORMA COMBINED
ISTA VISIONEX ADJUSTMENTS RESULTS
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Costs and expenses:
Research and development........... $ 11,061,278 $ 746,689 $(714,285)(d) $ 11,093,682
General and administrative......... 3,240,286 153,681 -- 3,393,967
------------ --------- --------- ------------
Total costs and expenses........ 14,301,564 900,370 (714,285) 14,487,649
------------ --------- --------- ------------
Loss from operations................. (14,301,564) (900,370) 714,285 (14,487,649)
Interest income...................... 69,399 209,461 -- 278,860
Interest expense..................... (51,578) -- -- (51,578)
------------ --------- --------- ------------
Net loss............................. $(14,283,743) $(690,909) $ 714,285 $(14,260,367)(e)
============ ========= ========= ============
Pro forma net loss per common share
(basic and diluted)................ $ (1.48)
============
Shares used in the computation of pro
forma net loss per common share
(basic and diluted)................ 9,641,895(f)
============
</TABLE>
(d) Eliminates the 1999 amortization of the $5,000,000 license fee originally
acquired by Visionex from Ista in 1997.
(e) Does not include the charge related to the beneficial conversion feature of
the Ista Series C preferred stock issued to effect the acquisition in March
2000.
(f) Includes (i) the weighted average common shares of Ista during 1999, (ii)
Ista's convertible preferred stock outstanding as of December 31, 1999,
using the as-if converted method from the original date of issuance, and
(iii) the 3,319,363 shares of Series C preferred stock issued by Ista in
March 2000 to acquire Visionex, as if such shares had been issued on January
1, 1999 and converted into 2,655,490 shares of common stock at that date.
See accompanying notes to unaudited pro forma combined condensed financial
statements.
F-32
<PAGE> 89
[INSIDE BACK COVER]
<PAGE> 90
- --------------------------------------------------------------------------------
[ISTA PHARMACEUTICALS]
ISTA PHARMACEUTICALS, INC.
SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 2000
CIBC WORLD MARKETS
ING BARINGS
PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by Ista in
connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC Registration Fee........................................ $ 22,770
NASD Filing Fee............................................. 9,125
Nasdaq National Market Listing Fee.......................... 90,000
Printing and Engraving Expenses............................. 200,000
Legal Fees and Expenses..................................... 350,000
Accounting Fees and Expenses................................ 250,000
Transfer Agent and Registrar Fees and Expenses.............. 25,000
Blue Sky fees and expenses.................................. 10,000
Miscellaneous Expenses...................................... 43,105
----------
Total.................................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our certificate of incorporation and our bylaws provide for
indemnification of our directors, officers, employees and other agents to the
extent and under the circumstances permitted by the Delaware General Corporation
Law. We will also enter into agreements with our directors and executive
officers that require Ista, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors and executive officers to the fullest extent permitted by Delaware
law. We have also purchased directors and officers liability insurance, which
provides coverage against certain liabilities, including liabilities under the
Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Within the last three years, and through December 31, 1999, we have issued
and sold the following unregistered securities:
(1) Since inception, the registrant has granted options to purchase
4,406,600 shares of common stock to employees, directors and consultants
under its 1993 stock plan at exercise prices ranging from $0.15 to $0.56
per share. Of the 4,406,600 options granted, 3,400,834 remain outstanding,
558,811 shares of common stock have been purchased pursuant to exercises of
options and 446,955 options have been canceled and returned to the 1993
stock plan.
(2) From June 1997 to March 2000, the registrant sold 6,528,269 shares
of Series C preferred stock and 1,153,877 warrants to purchase common stock
to 42 investors at a purchase price of $5.63 for each share of Series C
preferred stock and $0.001 for each warrant.
(3) In March 2000, the registrant sold 1,776,199 shares of Series D
preferred stock to one investor at a purchase price of $5.63 per share.
II-1
<PAGE> 92
The sales and issuances of securities in the transactions described above were
deemed to be exempt from registration under the Securities Act in reliance upon
Rule 506 of Regulation D of the Securities Act or Rule 701 promulgated under
Section 3(b) of the Securities Act, as transactions by an issuer not involving
any public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under Rule 701. The recipients of
securities in each transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
securities issued in such transactions. All recipients had adequate access,
through their relationship with Ista, to information about us.
(b) There were no underwritten offerings employed in connection with any of the
transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation, as in effect
upon filing of the registration statement
3.2 Certificate of Incorporation to be effective prior to
completion of the offering
4.1 Bylaws of the registrant, as in effect upon filing of the
registration statement
4.2 Bylaws of the registrant, to be effective prior to
completion of the offering
4.3* Specimen common stock certificate
5.1* Form of opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation
10.1 Amended and Restated Investors Rights Agreement dated as of
March 29, 2000
10.2 1993 Stock Plan and forms of agreements thereunder
10.3 2000 Stock Plan and forms of agreements thereunder
10.4 2000 Employee Stock Purchase Plan
10.5 Form of Indemnification Agreement with executive officers
and directors
10.6 Clinical Development Agreement between Covance, Inc. and the
registrant dated as of October 20, 1998, as amended
10.7 Agreement between CroMedica Global Inc. and the registrant
as of September 8, 1998
10.8 Agreement between CroMedica Global Inc. and the registrant
as of May 19, 1999
10.9 Lease between the registrant and Aetna Life Insurance
Company dated September 13, 1996 for leased premises located
at Suite 100, 15279 Alton Parkway, Irvine, California
10.10 Lease between the registrant and Aseguradora Mexicana, S.A.
dated December 30, 1993 for leased premises located at Paseo
de los Heroes No. 10, 105 in the development known as
"Desarrollo Urbano del Rio Tijuana" in Tijuana, B.C., Mexico
10.11 Equipment Financing Agreement between Lease Management
Services, Inc. and the registrant as of October 7, 1996, as
amended
10.12 Agreement between Visionex Pte. Ltd. and the registrant as
of June 1997
10.13 Distributor agreement between Laboratories Sophia S.A. de
C.V. and the registrant as of April 23, 1998
10.14 Manufacture and Supply Agreement between Prima Pharm, Inc.
and the registrant as of December 19, 1996
</TABLE>
II-2
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.15 Supply Agreement between Biozyme Laboratories, Ltd. and the
registrant as of September 23, 1999
10.16* License Agreement between Allergan Sales, Inc., Allergan
Sales, Ltd. and the registrant as of March 29, 2000
10.17* Supply Agreement between Allergan Sales, Inc., Allergan
Sales, Ltd. and the registrant as of March 29, 2000
10.18 Series D Preferred Stock Purchase Agreement between Allergan
Pharmaceuticals (Ireland) Ltd., Inc. and registrant, dated
as of March 29, 2000
21.1 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by Ista for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Ista, we
have been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Ista of
expenses incurred or paid by a director, officer or controlling person of Ista
in the successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by Ista is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake that:
(a) We will provide to the underwriters at the closing as specified in
the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(b) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by Ista pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(c) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, Ista
Pharmaceuticals, Inc. has duly caused this Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Irvine, State of California, on the 5th day of April, 2000.
ISTA PHARMACEUTICALS, INC.
By: /s/ EDWARD H. DANSE
------------------------------------
Edward H. Danse
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Edward H. Danse and J. C. MacRae, and each of
them, his attorneys-in-fact, each with the power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities indicated on the 5th day of April, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ EDWARD H. DANSE Chief Executive Officer,
- ----------------------------------------------------- Director (Principal Executive
Edward H. Danse Officer)
/s/ J. C. MACRAE Executive Vice President,
- ----------------------------------------------------- Chief Operating Officer,
J. C. MacRae Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ ROBERT G. MCNEIL Chairman of the Board
- -----------------------------------------------------
Robert G. McNeil
/s/ BRIAN H. DOVEY Director
- -----------------------------------------------------
Brian H. Dovey
/s/ CHARLES H. MAY Director
- -----------------------------------------------------
Charles H. May
</TABLE>
II-4
<PAGE> 95
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ BENJAMIN F. MCGRAW III Director
- -----------------------------------------------------
Benjamin F. McGraw III
/s/ JOHN H. PARRISH Director
- -----------------------------------------------------
John H. Parrish
/s/ WAYNE I. ROE Director
- -----------------------------------------------------
Wayne I. Roe
</TABLE>
II-5
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation, as in effect
upon filing of the registration statement
3.2 Amended and Restated Certificate of Incorporation to be
filed upon completion of the offering
4.1 Bylaws of the registrant, as in effect upon filing of the
registration statement
4.2 Bylaws of the registrant, as in effect upon completion of
the offering
4.3* Specimen common stock certificate
5.1* Form of Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation
10.1 Amended and Restated Investors Rights Agreement dated as of
March 29, 2000
10.2 1993 Stock Plan and forms of agreements thereunder
10.3 2000 Stock Plan and forms of agreements thereunder
10.4 2000 Employee Stock Purchase Plan
10.5 Form of Indemnification Agreement with executive officers
and directors
10.6 Clinical Development Agreement between Covance, Inc. and the
registrant dated as of October 28, 1998, as amended
10.7 Agreement between CroMedica Global Inc. and the registrant
as of September 8, 1998
10.8 Agreement between CroMedica Global Inc. and the registrant
as of May 19, 1999
10.9 Lease between the registrant and Aetna Life Insurance
Company dated September 13, 1996 for leased premises located
at Suite 100, 15279 Alton Parkway, Irvine, California
10.10 Lease between the registrant and Aseguradora Mexicana, S.A.
dated December 30, 1993 for leased premises located at Paseo
de los Heroes No. 10, 105 in the development known as
"Desarrollo Urbano del Rio Tijuana" in Tijuana, B.C., Mexico
10.11 Equipment Financing Agreement between Lease Management
Services, Inc. and the registrant as of October 7, 1996, as
amended
10.12 Agreement between Visionex Pte. Ltd. and the registrant as
of June 1997
10.13 Distributor Agreement between Laboratories Sophia S.A. de
C.V. and the registrant as of April 23, 1998
10.14 Manufacture and Supply Agreement between Prima Pharm, Inc.
and the registrant as of December 19, 1996
10.15 Supply Agreement between Biozyme Laboratories, Ltd. and the
registrant as of September 23, 1999
10.16* License Agreement between Allergan Sales, Inc., Allergan
Sales, Ltd. and the registrant as of March 29, 2000
10.17* Supply Agreement between Allergan Sales, Inc., Allergan
Sales, Ltd. and the registrant as of March 29, 2000
10.18 Series D Preferred Stock Purchase Agreement between Allergan
Pharmaceuticals (Ireland) Ltd., Inc. and registrant, dated
as of March 29, 2000
21.1 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ADVANCED CORNEAL SYSTEMS, INC.
The undersigned, Edward H. Danse and J. C. MacRae, hereby certify that:
ONE: They are the duly elected President and Assistant Secretary of the
corporation.
TWO: The Articles of Incorporation of the corporation shall be amended
and restated to read in full as follows:
I.
The name of this corporation is Ista Pharmaceuticals, Inc.
II.
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 California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
1. Capital Stock. This corporation is authorized to issue two classes of
shares designated "Common Stock" and "Preferred Stock." The number of shares of
Common Stock authorized to be issued is 40,000,000; the number of shares of
Preferred Stock authorized to be issued is 26,933,878. 1,951,753 shares of
Preferred Stock are designated as Series A Preferred Stock, 1,951,753 shares of
Preferred Stock are designated as Series A-1 Preferred Stock, 1,955,555 shares
of Preferred Stock are designated as Series B Preferred Stock, 1,955,555 shares
of Preferred Stock are designated as Series B-1 Preferred Stock, 6,600,000
shares of Preferred Stock are designated as Series C Preferred Stock, 6,600,000
shares of Preferred Stock are designated as Series C-1 Preferred Stock,
2,959,631 shares of Preferred Stock are designated as Series D Preferred Stock
and 2,959,631 shares of Preferred Stock are designated as Series D-1 Preferred
Stock.. The Series A Preferred Stock and the Series A-1 Preferred Stock are
hereafter collectively referred to as the "Preferred A Shares." The Series B
Preferred Stock and the Series B-1 Preferred Stock are hereafter collectively
referred to as the "Preferred B Shares." The Series C Preferred Stock and the
Series C-1 Preferred Stock are hereafter collectively referred to as the
"Preferred C Shares." The Series D Preferred Stock and the Series D-1 Preferred
Stock are hereafter collectively referred to as
<PAGE> 2
the "Preferred D Shares." The Preferred A Shares, Preferred B Shares, Preferred
C Shares and Preferred D Shares are hereafter collectively referred to as the
"Preferred Stock."
2. Designation of Series. The Preferred Stock may be issued from time to
time in one or more series. The board of directors is authorized to fix the
number of shares of any Series of Preferred Stock and to determine the
designation of any such series. The board of directors is also authorized to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued Series of Preferred Stock. Within the
limits and restrictions stated in any resolution or resolutions of the board of
directors originally fixing or specifying the number of shares constituting any
Series of Preferred Stock, the board of directors is authorized to increase or
decrease (but not below the number of shares of any such Series outstanding) the
number of shares of any such Series subsequent to the issue of shares of that
series. In case the number of shares of any Series shall be so decreased, the
shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of shares of such
series.
IV.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The holders of the Preferred A Shares, Preferred
B Shares, Preferred C Shares and Preferred D Shares shall be entitled, when and
if declared by the board of directors of the corporation and prior to any
payment or declaration of any dividend to the holders of Common Stock, to annual
dividends at the rate of $0.08, $0.22, $0.45 and $0.45 per share, respectively
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares). The right to such dividends, if
declared by the board of directors, shall be cumulative. No right shall accrue
to the holders of such shares by reason of the failure of the board of directors
to declare and set apart dividends thereupon for any period. No dividends or
other distributions shall be made with respect to the Common Stock nor shall any
shares of Common Stock of the Company be purchased, redeemed or otherwise
acquired for value by the Company (except for acquisitions of Common Stock by
the Company pursuant to agreements which permit the Company to repurchase such
shares upon termination of services to the Company) until cumulative dividends
on the Preferred Stock shall have been declared and paid or set apart.
2. Liquidation Preference.
(a) Preferred Preference. In the event of any liquidation,
dissolution or winding up of this corporation, either voluntary or involuntary,
the holders of the Preferred A Shares, Preferred B Shares, Preferred C Shares
and Preferred D Shares shall be entitled to receive, prior and in preference to
any distribution of any of the assets of this corporation to the holders of
Common Stock by reason of their ownership thereof, an amount per share equal to
$1.00 for each outstanding Preferred A Share, $2.75 for each outstanding
Preferred B Share, $5.63 for each outstanding Preferred C Share and $5.63 for
each outstanding Preferred D Share (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), plus an
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amount equal to any declared but unpaid dividends on such share. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Preferred A Shares, Preferred B Shares, Preferred C Shares and
Preferred D Shares shall be insufficient to permit the payment to such holders
of the full aforesaid amounts, then, the entire assets and funds of this
corporation legally available for distribution shall be distributed ratably
among the holders of the Preferred Stock in proportion to the preferential
amount each such holder is otherwise entitled to receive.
After payment has been made to the holders of the Preferred Stock of the
full amounts to which they shall be entitled as aforesaid, the holders of Common
Stock shall receive pro rata any remaining assets of the corporation that are
legally available for distribution.
(b) Mergers. A merger, reorganization, or sale of all or
substantially all of the assets of this corporation in which the shareholders of
this corporation immediately prior to the transaction possess less than 50% of
the voting power of the surviving entity (or its parent) immediately after the
transaction (together referred to herein as a "Merger") shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 2. Any
securities to be delivered to the holders of Preferred Stock and Common Stock
upon a Merger shall be valued as follows:
(i) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall
be the fair market value thereof as approved by the affirmative vote or written
consent of the corporation and the holders of not less than (i) 70% of the
outstanding shares of Preferred A Shares and Preferred B Shares, each voting
separately, and (ii) 50% of the outstanding shares of Preferred C Shares and
Preferred D Shares, voting as one class; provided that if no such affirmative
vote is reached, then by independent appraisal by an investment banker hired and
paid by the corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(c) Consent for Certain Repurchase. Each holder of an outstanding
share of Preferred Stock shall be deemed to have consented, for purposes of
Sections 502, 503 and 506 of the General Corporation Law, to distributions made
by the corporation in connection with the repurchase of shares of Common Stock
issued to or held by employees or consultants upon termination of their
employment or services pursuant to agreements providing for the right of said
repurchase between the corporation and such persons.
3. Voting Rights.
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(a) The holder of each share of Preferred Stock shall be entitled
to notice of any shareholders' meeting in accordance with the bylaws of the
corporation and shall vote with holders of the Common Stock upon the election of
directors and upon any other matter submitted to a vote of shareholders, except
those matters required by law to be submitted to a class vote and except as
otherwise set forth herein. The holder of each share of Preferred Stock shall be
entitled to that number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or consent of shareholders. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of Preferred Stock held by each holder) shall be
disregarded.
(b) Board of Directors. Notwithstanding the foregoing, the
holders of Preferred A Shares, voting separately, shall be entitled to elect one
(1) director of the corporation. The holders of Preferred B Shares, voting
separately, shall be entitled to elect one (1) director of the corporation. The
holders of Preferred C Shares, voting separately, shall be entitled to elect one
(1) director of the corporation. The holders of Preferred D Shares, voting
separately, shall be entitled to elect one (1) director of the corporation. The
holders of Preferred Stock and Common Stock, voting together as a class, shall
be entitled to elect all remaining directors of the corporation. Notwithstanding
any Bylaw provision to the contrary, the shareholders entitled to elect a
particular director shall be entitled to remove such director or to fill a
vacancy in the seat formerly held by such director, all in accordance with the
applicable provisions of the California Corporations Code.
4. Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Except for Series D Shares, each share of
Preferred Stock shall be convertible into shares of Common Stock without the
payment of any additional consideration by the holder thereof and, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of the corporation or any transfer agent for the Preferred Stock. The
Series D Shares shall be convertible into shares of Common Stock without the
payment of any additional consideration by the holder thereof and, at the option
of the holder thereof, at any time after September 30, 2000, at the office of
the corporation or any transfer agent for the Preferred Stock; provided,
however, that each Series D Share may be convertible into shares of Common Stock
without the payment of any additional consideration by the holder thereof if a
liquidation, dissolution or winding up of this corporation occurs, as set forth
in Section 2 of Article IV, prior to October 1, 2000. Each share of Preferred
Stock shall be convertible into the number of fully paid and nonassessable
shares of Common Stock which results from dividing the Conversion Price (as
hereinafter defined) per share in effect for each series of Preferred Stock at
the time of conversion into the per share Conversion Value (as hereinafter
defined) of such series. The initial Conversion Price per share of Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series
B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock
shall be $1.00, $1.00, $2.75, $2.75, $5.63 and $5.63, respectively. The initial
Conversion Price per share of Series D Preferred Stock and Series D-1 Preferred
Stock shall be $5.63 per share; provided, however, if a Qualified Initial Public
Offering (as defined below) occurs prior to October 1, 2000, the Conversion
Price per share of Series D Preferred Stock and Series D-1 Preferred Stock shall
equal to the offering
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price, net of underwriting discounts and commissions, of Common Stock sold in
such Qualified Initial Public Offering. The per share Conversion Value of Series
A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series
B-1 Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock,
Series D Preferred Stock and Series D-1 Preferred Stock shall be $1.00, $1.00,
$2.75, $2.75, $5.63, $5.63, $5.63 and $5.63, respectively. The initial
Conversion Price of each Series of Preferred Stock shall be subject to
adjustment from time to time as provided below. The number of shares of Common
Stock into which a share of Preferred Stock is convertible is hereinafter
referred to as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate (i) immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (a) the public offering price equals or exceeds $7.00 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (b) the aggregate proceeds raised, equal or exceed
$15,000,000 (the "Qualified Initial Public Offering"), or (ii) the date
specified by written consent or the affirmative vote of the holders of (i) not
less than 70% of the outstanding shares of Preferred A Shares and Preferred B
Shares, each voting separately, and (ii) more than 50% of the outstanding shares
of Preferred C Shares and Preferred D Shares, voting as one class. Upon such
automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4(c).
(c) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate(s) therefor, duly endorsed, at the office of the
corporation or of any transfer agent for the Preferred Stock and shall give
written notice to the corporation at such office that he elects to convert the
same (except that no such written notice of election to convert shall be
necessary in the event of an automatic conversion pursuant to Section 4(b)
hereof). The corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock certificate(s) for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid and the corporation shall promptly pay in cash, or to the extent
sufficient funds are not legally available therefor, in Common Stock (at the
Common Stock's fair market value determined by the board of directors as of the
date of such conversion), any declared and unpaid dividends on the shares of
Preferred Stock being converted. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted (except that in the case of an
automatic conversion pursuant to Section 4(b)(i) hereof such conversion shall be
deemed to have been made immediately prior to the closing of the offering
referred to in Section 4(b)(i)) 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) Fractional Shares. In lieu of any fractional shares to which
the holder of Preferred Stock would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the fair market value of one share
of such Series of Preferred Stock as determined by
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<PAGE> 6
the board of directors of the corporation. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock of each holder at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(e) Adjustment of Conversion Price.
(i) For purposes of this Section 4(e), the following
definitions shall apply:
(1) "Excluded Stock" shall mean:
(A) all shares of Common Stock issued and
outstanding on the date this document is filed with the California Secretary of
State;
(B) all shares of Preferred Stock and the Common
Stock into which the shares of Preferred Stock are convertible;
(C) up to 4,750,000 shares of Common Stock,
warrants or options to purchase Common Stock or other securities previously
issued or issuable to officers, directors, consultants or employees of the
corporation pursuant to any plan or arrangement approved by the board of
directors of the corporation;
(D) up to 1,153,877 shares of Common Stock or
warrants to purchase Common Stock issued pursuant to the exercise of warrants to
purchase Common Stock on such terms as are approved by the board of directors of
the corporation; and
(E) up to 3,319,363 shares of Common Stock issued
pursuant to the Call Option Agreement dated June 27,1997.
(F) up to 1,183,432 shares of Common Stock or
Series D Preferred Stock (or any combination thereof) issued or issuable
pursuant to the Credit Agreement between the corporation and an affiliate of the
initial purchaser of Series D Preferred Stock.
All outstanding shares of Excluded Stock
(including any shares issuable upon conversion of the Preferred Stock) shall be
deemed to be outstanding for all purposes of the computations of Section
4(e)(iii) below.
(2) "Financing" shall mean any issuance of Common Stock
(including securities exercisable for or convertible into Common Stock) in a
transaction where the holders of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock are offered an
opportunity to purchase their Preferred Stock Pro Rata Share of the additional
shares of Common Stock (including securities exercisable for or convertible into
Common Stock) issued in such transaction.
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<PAGE> 7
(3) "Preferred Stock Pro Rata Share" shall mean the
amount determined by multiplying the total number of shares of Common Stock
(including securities exercisable for or convertible into Common Stock) offered
for sale by the corporation in a Financing to the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock by a fraction, (x) the numerator of which is the total number of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock (on an as-converted basis) held by such holder and (y)
the denominator of which is the total number of shares of Common Stock
(including securities convertible into Common Stock) then outstanding.
(4) "Series A Dilutive Issuance" shall mean an issuance
of Common Stock (including securities exercisable for or convertible into Common
Stock) in a Financing for a consideration per share less than the Conversion
Price of the Series A Preferred Stock in effect on the date of and immediately
prior to such issue.
(5) "Series B Dilutive Issuance" shall mean an issuance
of Common Stock (including securities exercisable for or convertible into Common
Stock) in a Financing for a consideration per share less than the Conversion
Price of the Series B Preferred Stock in effect on the date of and immediately
prior to such issue.
(6) "Series C Dilutive Issuance" shall mean an issuance
of Common Stock (including securities exercisable for or convertible into Common
Stock) in a Financing for a consideration per share less than the Conversion
Price of the Series C Preferred Stock in effect on the date of and immediately
prior to such issue.
(7) "Series D Dilutive Issuance" shall mean an issuance
of Common Stock (including securities exercisable for or convertible into Common
Stock) in a Financing for a consideration per share less than the Conversion
Price of the Series D Preferred Stock in effect on the date of and immediately
prior to such issue.
(7) "Participating Holder" shall mean any holder or an
affiliate holder of Series A Preferred Stock that purchases at least its
Preferred Stock Pro Rata Share of a Series A Dilutive Issuance, any holder of
Series B Preferred Stock that purchases at least its Preferred Stock Pro Rata
Share of a Series B Dilutive Issuance, any holder of Series C Preferred Stock
that purchases at least its Preferred Stock Pro Rata share of a Series C
Dilutive Issuance and any holder of Series D Preferred Stock that purchases at
least its Preferred Stock Pro Rata share of a Series D Dilutive Issuance.
(8) "Non-Participating Holder" shall mean any holder of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock that is not a Participating Holder.
(ii) Shadow Preferred. In the event the corporation issues
additional shares of Common Stock (including securities exercisable for or
convertible into Common Stock) other than Excluded Stock in a Series A Dilutive
Issuance, each share of Series A Preferred Stock
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<PAGE> 8
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series A Dilutive Issuance, be automatically converted
into one fully paid and nonassessable share of Series A-1 Preferred Stock plus
such number of fully paid and nonassessable shares of Common Stock based on the
Series A Forced Conversion Rate (as defined below). The "Series A Forced
Conversion Rate" shall be equal to the difference between the Conversion Rates
in effect for the Series A Preferred Stock and the Series A-1 Preferred Stock
immediately prior to the closing of the applicable Series A Dilutive Issuance.
In the event the corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) other than Excluded
Stock in a Series B Dilutive Issuance, each share of Series B Preferred Stock
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series B Dilutive Issuance, be automatically converted
into one fully paid and nonassessable share of Series B-1 Preferred Stock plus
such number of fully paid and nonassessable shares of Common Stock based on the
Series B Forced Conversion Rate (as defined below). The "Series B Forced
Conversion Rate" shall be equal to the difference between the Conversion Rates
in effect for the Series B Preferred Stock and the Series B-1 Preferred Stock
immediately prior to the closing of the applicable Series B Dilutive Issuance.
In the event the corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) other than Excluded
Stock in a Series C Dilutive Issuance, each share of Series C Preferred Stock
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series C Dilutive Issuance, be automatically converted
into one fully paid and nonassessable share of Series C-1 Preferred Stock plus
such number of fully paid and nonassessable shares of Common Stock based on the
Series C Forced Conversion Rate (as defined below). The "Series C Forced
Conversion Rate" shall be equal to the difference between the Conversion Rates
in effect for the Series C Preferred Stock and the Series C-1 Preferred Stock
immediately prior to the closing of the applicable Series C Dilutive Issuance.
In the event the corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) other than Excluded
Stock in a Series D Dilutive Issuance, each share of Series D Preferred Stock
held by each and every Nonparticipating Holder shall, immediately prior to the
closing of the applicable Series D Dilutive Issuance, be automatically converted
into one fully paid and nonassessable share of Series D-1 Preferred Stock plus
such number of fully paid and nonassessable shares of Common Stock based on the
Series D Forced Conversion Rate (as defined below). The "Series D Forced
Conversion Rate" shall be equal to the difference between the Conversion Rates
in effect for the Series D Preferred Stock and the Series D-1 Preferred Stock
immediately prior to the closing of the applicable Series D Dilutive Issuance.
Upon the conversion of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock held by a Nonparticipating
Holder as set forth herein, such shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall no
longer be outstanding on the books of the corporation and the Nonparticipating
Holder shall be treated for all purposes as the record holder of such shares of
Series A-1 Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred
Stock and Series D-1 Preferred Stock, and, if applicable Common Stock on the
date of the closing of the applicable Series A Dilutive Issuance, Series B
Dilutive Issuance, Series C Dilutive Issuance or Series D Dilutive Issuance, as
the case may be. The corporation shall, as soon as practicable following the
delivery of certificates representing such converted shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred
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Stock, issue and deliver to such holder of such converted shares of Preferred
Stock a certificate or certificates for the number of shares of Series A-1
Preferred Stock, Series B-1 Preferred Stock, Series C-1 Preferred Stock and
Series D-1 Preferred Stock, and, if applicable, Common Stock to which such
holder shall be entitled as aforesaid.
(iii) Adjustment of Conversion Price for Issuance of Common
Stock. No adjustment in the Conversion Price of Series A-1 Preferred Stock,
Series B-1 Preferred Stock, Series C-1 Preferred Stock or Series D-1 Preferred
Stock shall be made in respect of the issuance of additional shares of Common
Stock (other than in the event of stock dividends, subdivisions, split-ups,
combinations or recapitalizations which are covered by Sections 4(e) (iv), (v),
(vi) and (vii)). The Conversion Price of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
subject to adjustment from time to time as follows:
If the corporation shall issue, or is deemed by express provisions
herein to issue, any Common Stock other than Excluded Stock, for a consideration
per share less than the Conversion Price for a Series of Preferred Stock in
effect immediately prior to the issuance of such Common Stock (excluding stock
dividends, subdivisions, split-ups, combinations, dividends or recapitalizations
which are covered by Sections 4(e) (iv), (v), (vi) and (vii)), the Conversion
Price in effect immediately after each such issuance shall forthwith (except as
provided in this Section 4(e)) be adjusted to a price equal to the quotient
obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon conversion
of the Preferred Stock or exercise or conversion of all other rights, options or
convertible or exchangeable securities) immediately prior to such issuance
multiplied by the Conversion Price in effect immediately prior to such issuance,
plus
(y) the consideration received by the
corporation upon such issuance, by
(B) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock or exercise or conversion of all other rights, options or
convertible or exchangeable securities) immediately prior to such issuance plus
the additional shares of Common Stock issued in such issuance (but not including
any additional shares of Common Stock deemed to be issued as a result of any
adjustment in the Conversion Price resulting from such issuance).
For purposes of any adjustment of the Conversion
Price pursuant to this clause (iii), the following provisions shall be
applicable:
(1) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any
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discounts or commissions paid or incurred by the corporation in connection with
the issuance and sale thereof.
(2) In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the board of directors of the corporation, in accordance with
generally accepted accounting treatment; provided, however, that if, at the time
of such determination, the corporation's Common Stock is traded in the
over-the-counter market or on a national or regional securities exchange, such
fair market value as determined by the board of directors of the corporation
shall not exceed the aggregate "Current Market Price" (as defined below) of the
shares of Common Stock being issued.
(3) In the case of the issuance of (i)
options to purchase or rights to subscribe for Common Stock (other than Excluded
Stock), (ii) securities by their terms convertible into or exchangeable for
Common Stock (other than Excluded Stock), or (iii) options to purchase or rights
to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subdivisions (1) and (2)
above), if any, received by the corporation upon the issuance of such options or
rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above);
(C) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or exchange for such convertible or exchangeable securities, or
on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change or (y) the options or rights related to such
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securities not converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change; and
(D) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iv) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective, the
Conversion Price of each Series of Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
any shares of such Series of Preferred Stock shall be increased in proportion to
such increase of outstanding shares.
(v) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
Conversion Price of each Series of Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
any shares of such Series of Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(vi) In case the corporation shall declare a cash dividend
upon its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of this capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Preferred Stock shall, concurrent with the distribution to holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which each Series of Preferred Stock is convertible.
(vii) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the corporation
(other than as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the corporation with
or into another person (other than a consolidation or merger in which the
corporation is the continuing entity and which does not result in any change in
the Common Stock), or of the sale or other disposition of all or substantially
all the properties and assets of the corporation, the shares of
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Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the corporation
or otherwise to which such holder would have been entitled if immediately prior
to such reorganization, reclassification, consolidation, merger, sale or other
disposition he had converted his shares of Preferred Stock into Common Stock.
The provisions of this clause (vi) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales or other
dispositions.
(viii) All calculations under this Section 4 shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(f) Minimal Adjustments. No adjustment in the Conversion Price
need be made if such adjustment would result in a change in the Conversion Price
of less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
(g) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 4,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate of such Series at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversions of such holder's shares of
Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
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(k) 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 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 Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holder of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the corporation.
(l) Reissuance of Converted Shares. No shares of Preferred Stock
which have been converted into Common Stock after the original issuance thereof
shall ever again be reissued and all such shares so converted shall upon such
conversion cease to be a part of the authorized shares of the corporation.
5. Protective Provisions. In addition to any other rights provided by
law, so long as at least 500,000 shares of Preferred Stock shall be outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least (i) 70% of the
outstanding shares of Preferred A Shares and Preferred B Shares, each voting
separately, and (ii) a majority of the outstanding shares of Preferred C Shares
and Preferred D Shares, voting as one class; provided, however, that if
Preferred C Shares are treated differently than Preferred D Shares, a majority
of the outstanding shares of Preferred C Shares and Preferred D Shares, each
voting separately:
(a) Increase or decrease the aggregate number of authorized
shares of Preferred Stock and Common Stock;
(b) Create a new class or Series of shares having rights,
preferences or privileges or increase the number of authorized shares of any
class or shares having rights, preferences or privileges on parity or with or
senior to the shares of any class or Series of Preferred Stock;
(c) Apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, of any shares of any class or
Series of Common Stock except pursuant to agreements with directors, employees
and consultants of this corporation which permit the corporation to repurchase
such shares upon termination of services to the corporation;
(d) Change the rights, preferences, privileges or restrictions of
the Preferred Stock;
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<PAGE> 14
(e) Amend, alter or repeal any provision of the Amended and
Restated Articles of Incorporation or Bylaws of this corporation (including any
filing of a Certificate of Determination) that affects adversely the voting
powers, preferences, or other special rights or privileges, qualifications, or
restrictions of the Preferred Stock;
(f) Approve any agreement by the Company or its shareholders
regarding a Merger (as defined in Section 2(b)).
(g) Grant more favorable antidilution provisions than those
granted to the Preferred Stock; or
(h) Alter or amend this Section 5.
V.
1. Limitation of Directors' Liability. The liability of the directors of
this corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. Indemnification of Corporate Agents. This corporation is authorized
to indemnify its agents to the fullest extent permissible under California law.
For purposes of this provision the term "agent" has the meaning set forth in
Section 317 of the California Corporations Code.
3. Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification.
THREE: The foregoing Amendment and Restatement of the Amended and
Restated Articles of Incorporation has been approved by the Board of Directors.
FOUR: The foregoing Amendment and Restatement of the Amended and
Restated Articles of Incorporation has been duly approved by the required vote
of the shareholders in accordance with Sections 902 and 903 of the California
General Corporation Law. The total number of outstanding shares entitled to vote
with respect to the amendment is 2,438,927 shares of Common Stock, 1,951,753
shares of Series A Preferred Stock, 1,955,555 shares of Series B Preferred Stock
and 6,568,269 shares of Series C Preferred Stock. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The percentage
vote required was (i) a majority
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<PAGE> 15
of the outstanding shares of Common Stock, (ii) 70% of the outstanding Series A
Shares, (iii) 70% of the outstanding Series B Shares, and (iv) a majority of the
outstanding Series C Shares, each voting separately.
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<PAGE> 16
We declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge. Executed at Palo Alto, California on March 21, 2000.
/s/ EDWARD H. DANSE
________________________________________
Edward H. Danse, President
/s/ J. C. MACRAE
________________________________________
J. C. MacRae, Assistant Secretary
<PAGE> 1
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
ISTA PHARMACEUTICALS, INC.
Ista Pharmaceuticals, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Ista Pharmaceuticals, Inc. The
corporation was originally incorporated under the name Ista Pharmaceuticals,
Inc., and the original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on ______________, 2000.
B. Pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware, this Restated Certificate of Incorporation restates
and amends the provisions of the Certificate of Incorporation of the
corporation.
C. The text of the Restated Certificate of Incorporation is hereby
amended and restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is Ista Pharmaceuticals, Inc.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock to
be designated, respectively, Common Stock, $0.001 par value, and Preferred
Stock, $0.001 par value. The total number of shares that the corporation is
authorized to issue is 105,000,000 shares. The number of
<PAGE> 2
shares of Common Stock authorized is 100,000,000. The number of shares of
Preferred Stock authorized is 5,000,000.
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the board of directors (authority to do so being hereby expressly
vested in the board). The board of directors is further authorized to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares of any series of Preferred Stock and the designation of any such
series of Preferred Stock. The board of directors, within the limits and
restrictions stated in any resolution or resolutions of the board of directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The authority of the board of directors with respect to each such class
or series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the
number of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or
series shall be declared and paid, or set aside for payment, whether dividends
at the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or other
dividends in addition to dividends at the rate so determined, and if so, on what
terms;
(c) the right or obligation, if any, of the corporation to redeem
shares of the particular class or series of Preferred Stock and, if redeemable,
the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and
the amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such
class or series shall be convertible into, or exchangeable for, shares of
capital stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem
or purchase shares of such class or series pursuant to a sinking fund or fund of
a similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares
of such class or series or any shares of any other class or series of Preferred
Stock;
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<PAGE> 3
(h) limitations, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of Preferred
Stock; and
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation.
ARTICLE V
The corporation reserves the right to amend, alter, change, or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, 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.
2. Indemnification. The corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VII, nor
the adoption of any provision of the corporation's Restated Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
ARTICLE VIII
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<PAGE> 4
In the event any shares of Preferred Stock shall be redeemed or
converted pursuant to the terms hereof, the shares so converted or redeemed
shall not revert to the status of authorized but unissued shares, but instead
shall be canceled and shall not be re-issuable by the corporation.
ARTICLE IX
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 2115 or 301.5 of the California General
Corporation Law, in which event each such holder shall be entitled to as many
votes as shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.
1. Number of Directors. The number of directors which constitutes the
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. The directors shall be divided into
three classes with the term of office of the first class (Class I) to expire at
the annual meeting of stockholders held in 2001; the term of office of the
second class (Class II) to expire at the annual meeting of stockholders held in
2002; the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2003; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election.
2. Election of Directors. Elections of directors need not be by written
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
ARTICLE X
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Amended and Restated Bylaws of the corporation.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at an
annual or special meeting of the stockholders called in accordance with the
Amended and Restated Bylaws and no action shall be taken by the stockholders by
written consent. The affirmative vote of sixty-six and
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<PAGE> 5
two-thirds percent (66 2/3%) of the then outstanding voting securities of the
corporation, voting together as a single class, shall be required for the
amendment, repeal or modification of the provisions of Article IX, Article X, XI
or Article XII of this Restated Certificate of Incorporation or Sections 2.3
(Special Meeting), 2.4 (Notice of Stockholders' Meetings), 2.5 (Advance Notice
of Stockholder Nominees and Stockholder Business), 2.10 (Voting), 2.12
(Stockholder Action by Written Consent Without a Meeting), or 3.2 (Number of
Directors) of the corporation's Amended and Restated Bylaws.
ARTICLE XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
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<PAGE> 6
IN WITNESS WHEREOF, Ista Pharmaceuticals, Inc. has caused this
certificate to be signed by Edward H. Danse, its President and Chief Executive
Officer, this _____________ day of ___________________, 2000.
________________________________________
Edward H. Danse,
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 4.1
BYLAWS
OF
ADVANCED CORNEAL SYSTEMS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE SECTION Page
<S> <C> <C>
I OFFICES ............................................... 1
1. Principal Executive Office ......................... 1
2. Principal Business Office .......................... 1
II MEETINGS OF SHAREHOLDERS .............................. 1
1. Place of Meetings .................................. 1
2. Annual Meetings .................................... 1
3. Notice of Annual Meetings .......................... 1
4. Special Meetings ................................... 2
5. Special Notice Required ............................ 3
6. Adjourned Meetings and Notice Thereof .............. 3
7. Voting ............................................. 3
8. Quorum ............................................. 4
9. Waiver of Notice ................................... 4
10. Shareholders' Written Consent to Action ........... 5
11. Proxies ........................................... 5
12. Inspectors of Election ............................ 6
III DIRECTORS ............................................. 7
1. Powers ............................................. 7
2. Number and Qualifications of Directors ............. 9
3. Election and Term of Office ........................ 9
4. Vacancies .......................................... 9
5. Place of Meetings .................................. 10
6. Telephonic Meetings ................................ 10
7. Organization Meeting ............................... 10
8. Other Regular Meetings ............................. 11
9. Special Meetings ................................... 11
10. Notice of Directors Meetings ...................... 11
11. Quorum ............................................ 11
12. Voting ............................................ 12
13. Validation of Meetings Held Without Proper
Call or Notice .................................... 12
14. Adjournment ....................................... 12
15. Unanimous Written Consent to Actions Taken ........ 12
16. Fees and Compensation ............................. 12
17. Executive Committee ............................... 13
IV OFFICERS .............................................. 13
1. Officers ........................................... 13
2. Election ........................................... 13
3. Subordinate Officers ............................... 14
4. Removal and Resignation ............................ 14
</TABLE>
i
<PAGE> 3
5. Vacancies.................................................. 14
6. Chairman of the Board...................................... 14
7. President.................................................. 14
8. Vice-President............................................. 15
9. Secretary.................................................. 15
10. Chief Financial Officer.................................... 15
V INDEMNIFICATION................................................. 16
1. Extent..................................................... 16
2. Insurance.................................................. 16
3. Fiduciaries of Employee Benefit Plans...................... 16
4. Construction of Bylaws..................................... 17
VI MISCELLANEOUS................................................... 17
1. Record Date................................................ 17
2. Shareholder Inspection of Corporate Records................ 18
3. Director Inspection of Corporate Records................... 18
4. Inspection of Bylaws....................................... 18
5. Checks, Drafts............................................. 19
6. Annual Report.............................................. 19
7. Financial Statements....................................... 19
8. Fiscal Year................................................ 20
9. Contracts, How Executed.................................... 20
10. Share Certificates......................................... 20
11. Registrars and Transfer Agents............................. 21
12. Representation of Shares of Other Corporations............. 22
13. Amendments................................................. 22
CERTIFICATE OF SECRETARY........................................ 23
ii
<PAGE> 4
BYLAWS
OF
ADVANCED CORNEAL SYSTEMS, INC.
ARTICLE I
OFFICES
1. Principal Executive Office. The Board of Directors by resolution
shall designate a principal executive office for the corporation at any place
where the corporation is qualified to do business.
2. Principal Business Office. If the principal executive office is
located outside California, and the corporation has one or more business offices
in California, the Board of Directors shall designate a principal business
office in the State of California.
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. Place of Meetings. All meetings of shareholders shall be held either
at the principal executive office or at any other place within or without the
State of California which may be designated by the Board of Directors or by the
written consent of all shareholders entitled to vote at such meeting given
either before or after the meeting and filed with the Secretary of the
corporation.
2. Annual Meetings. The annual meetings of shareholders shall be held
on the second Tuesday of May at 10:00 A.M.; provided, however, that should such
day fall upon a legal holiday, then any such annual meeting of shareholders
shall be held at the same time and place on the first day thereafter which is
not a legal holiday. At such meetings directors shall be elected, reports of the
affairs of the corporation shall be considered and any other business may be
transacted which is within the powers of the shareholders.
3. Notice of Annual Meetings. Written notice of each annual meeting
shall be given to each shareholder entitled to vote, either personally or by
mail or other means of written communication, charges prepaid, addressed to such
shareholder at
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<PAGE> 5
the address of the shareholder appearing on the books of the corporation or
given by the shareholder to the corporation for the purpose of notice. If no
address appears on the records of the corporation or is so given, notice shall
be deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal executive office of
the corporation is situated or if published at least once in a newspaper of
general circulation in the county in which such office is located. All such
notices shall be sent to each shareholder entitled thereto not less than 10 nor
more than 60 days before each annual meeting, and shall specify the place, the
day and the hour of such meeting, and shall state those matters which the
Board, at the time of mailing of the notice, intends to present for action by
the shareholders. If any notice or report addressed to the shareholder at the
shareholder's address appearing on the books of the corporation is returned to
the corporation by the United States Postal Service marked to indicate that it
is unable to deliver the notice or report to the shareholder, all future
notices or reports shall be deemed to have been duly given if they are made
available to the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
or report to all other shareholders.
An affidavit of the mailing or other means of giving notice of any
shareholders' meeting shall be executed by the Secretary, Assistant Secretary,
or any transfer agent of the corporation giving the notice, and shall be filed
and maintained in the minute book of the corporation or with the corporate
records.
4. Special Meetings. Special meetings of the shareholders, for any
proper purpose, may be called at any time by the President, or by the Board of
Directors, or by the Chairman of the Board, if there is such an officer, or by
one or more shareholders holding in the aggregate not less than one-tenth of
the voting power of the corporation. Notice of such special meeting shall be
given in the same manner as for annual meetings of shareholders. Notices of any
special meeting shall specify the place, day and hour of such meeting and the
nature of the business to be transacted, and no other business may be
transacted.
If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by mail or by telegraphic or other
facsimile transmission to the Chairman of the Board, if there is such an
officer, the President, any Vice President or the
2
<PAGE> 6
Secretary of the corporation. The time specified for such meeting shall be not
less than 35 nor more than 60 days after the date of receipt of such request by
one of the officers specified in the preceding sentence. The officer receiving
the request shall cause notice to be promptly given to all shareholders entitled
to vote at such meeting that a meeting will be held at the time requested by the
person or persons calling the meeting.
5. Special Notice Required. The notice of any meeting at which directors
are to be elected shall include the names of nominees intended at the time of
notice to be presented by management for election. If action is proposed to be
taken at any meeting to obtain the approval of the shareholders pursuant to
Section 310 (transactions between the corporation and one or more of the
directors), Section 902 (amendment of the Articles of Incorporation), Section
1201 (reorganization), Section 1900 (voluntary dissolution), or Section 2007
(plan of distribution upon dissolution) of the California General Corporation
Law, the notice of meeting shall state the general nature of that proposal.
6. Adjourned Meetings and Notice Thereof. Any shareholders' meeting,
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares represented thereat either
in person or by proxy.
It shall not be necessary to give any notice of an adjournment or of the
business to be transacted at an adjourned meeting, other than by announcement
at the meeting at which such adjournment is taken; provided, however, that if
after the adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting. If any meeting is adjourned for more than 45 days from the date set
for the original meeting, a new record date shall be fixed or established in
accordance with Section 1 of Article VI of these Bylaws.
7. Voting. Subject to the provisions of Sections 702 through 704 of the
California General Corporation Law, the only persons entitled to vote at any
meeting of the shareholders are those persons in whose names shares entitled to
vote stand on the share records of the corporation at the close of business on
the record date for voting purposes as fixed or established in accordance with
Section 1 of Article VI of these Bylaws. Such vote may be by voice or by ballot;
provided, however, that all elections for directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins.
Subject to the following two sentences, every shareholder entitled to vote at
any election for directors shall have the
3
<PAGE> 7
right to cumulate votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shares held by such shareholder are normally entitled, or to distribute
votes on the same principle among as many candidates as the shareholder shall
think fit. No shareholders shall be entitled to cumulate votes unless such
candidate's or candidates' names have been placed in nomination prior to the
voting and the shareholder has given notice at the meeting, prior to the
voting, of the shareholder's intention to cumulate votes. If any shareholder
has given such notice, all shareholders may cumulate their votes for candidates
in nomination. The candidates receiving the highest number of votes, up to the
number of directors to be elected, shall be elected.
8. Quorum. A majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum for the transaction of business.
The shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum. If a quorum is present, the affirmative vote
of a majority of the shares represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively also constitute at
least a majority of the required quorum) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required by law or
the Articles of Incorporation.
9. Waiver of Notice. The transactions of any meeting of shareholders,
either annual or special, however called and noticed and wherever held, shall
be as valid as though had at a meeting duly held after regular call and notice,
if a quorum is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote, not present in person
or by proxy, signs a written waiver of notice, or a consent to the holding of
such meeting, or an approval of the minutes thereof. Attendance of a person at
a meeting shall constitute a waiver of notice of and presence at such meeting,
except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters required by law to be included in the
notice but not so included, if such objection is expressly made at the meeting.
The Secretary shall cause all such waivers, consents or approvals to be filed
with the corporate records or made a part of the minutes of the meeting. Neither
the business to be transacted at nor the purpose of any regular or special
4
<PAGE> 8
meeting of shareholders need be specified in any written waiver of notice,
consent to the holding of the meeting or approval of the minutes thereof;
provided, however, that any shareholder approval at a meeting, other than by
unanimous approval of those entitled to vote, pursuant to those sections of the
California General Corporation Law specified in Section 5 of Article II of the
Bylaws shall be valid only if the general nature of the proposal so approved is
stated in any written waiver of notice.
10. Shareholders' Written Consent to Action. Any action which, under any
provision of the California General Corporation Law, may be taken at a meeting
of the shareholders may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Directors may not be elected by
written consent except by unanimous written consent of all shares entitled to
vote for the election of directors; provided, however, that a director may be
elected to fill a vacancy on the Board of Directors, other than a vacancy
created by the removal of a director, by the written consent of the holders of a
majority of the outstanding shares entitled to vote for the election of
directors. The Secretary shall cause all such consents to be filed with the
corporate records. Any shareholder giving a written consent, a transferee of
such shareholder, a personal representative of such shareholder or their
respective proxyholders may revoke the written consent of such shareholder by a
writing received by the Secretary of the corporation before written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
In the case of shareholder approval pursuant to Section 310 (transactions
between the corporation and one or more of the directors), Section 317
(indemnification of an officer, director or employee), Section 1201
(reorganization), or Section 2007 (plan of distribution upon dissolution) of the
California General Corporation Law, the notice shall be given at least 10 days
before the consummation of any action authorized by that approval.
11. Proxies. Every person entitled to vote shares may authorize another
person or persons to act by proxy with respect
5
<PAGE> 9
to such shares. No proxy shall be valid after the expiration of 11 months from
the date of its execution unless otherwise provided in the proxy.
12. Inspectors of Election. Before any meeting of shareholders, the Board
of Directors may appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If the Board of
Directors does so appoint inspectors of election, it shall determine whether
the number of such inspectors shall be one or three. If no inspectors of
election are so appointed, the chairman of the meeting may, and on the request
of any person entitled to vote at the meeting shall, appoint inspectors of
election at the meeting. If inspectors are appointed by the chairman of the
meeting without a request from a person entitled to vote at the meeting, the
chairman shall determine if the number of inspectors shall be one or three. If
inspectors are appointed at a meeting at the request of one or more persons
entitled to vote thereat, the majority of shares represented in person or by
proxy shall determine whether one or three inspectors are to be appointed. If
any person appointed as inspector fails to appear of fails or refuses to act,
the chairman of the meeting may, and upon the request of any person entitled to
vote at the meeting shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum and
the authenticity, validity and effect of proxies.
(b) Receive votes, ballots or consents.
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote.
(d) Count and tabulate all votes or consents.
(e) Determine when the polls shall close.
(f) Determine the result.
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
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ARTICLE III
DIRECTORS
1. Powers. Subject to the limitations of the Articles of Incorporation
and of the California General Corporations law as to action to be authorized or
approved by the shareholders, the business and affairs of the Corporation shall
be managed and all the corporate powers shall be exercised by or under the
direction of the Board of Directors. The Board of Directors may delegate the
management of the day-to-day operation of the business of the Corporation to a
management company or other person or persons provided that the business and
affairs of the Corporation shall be managed and all corporate powers shall be
exercised under the ultimate direction of the Board of Directors. Without
prejudice to such general powers, but subject to the same limitations, the
Directors shall have the following powers:
First: To select and remove all the officers, agents and employees of
the Corporation; prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or these Bylaws;
fix their compensation; and require from them security for faithful service.
Second: To conduct, manage and control the affairs and business of
the Corporation, and to make such rules and regulations therefor not
inconsistent with law, or the Articles of Incorporation or these Bylaws, as
they may deem best.
Third: To change the principal executive office and the principal
office for the transaction of business of the Corporation from one location to
another as provided in Article I, Section 1 hereof; to fix and locate from time
to time one (1) or more subsidiary offices of the Corporation within or without
the State of California; to designate any place within or without the state for
the holding of any meeting or meetings of shareholders; to adopt, make and use
the corporate seal and to prescribe the forms of certificates of shares; and to
alter the form of such seal and certificates from time to time as in their
judgment they deem best, provided such seal and such certificates shall at all
times comply with the provisions of law.
Fourth: To authorize issuance of shares of the Corporation from time
to time upon such terms as may be lawful in consideration of money paid, labor
done, services actually rendered to the Corporation or for its benefit or in
its formation or reorganization, debts or securities cancelled, and
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tangible or intangible property actually received either by the Corporation or
any one of its wholly owned subsidiaries, if any, or as a share dividend or
upon a stock split, reverse stock split, reclassification, conversion or
exchange of shares for shares of another class or series of shares, but not in
consideration of promissory notes of the purchaser (unless adequately secured
by collateral other than the shares acquired or pursuant to a stock purchase
plan or agreement or stock option plan or agreement authorized by section 408
of the California General Corporations Law) or future services.
Fifth: To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor in the
corporate name promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor.
Sixth: By resolution adopted by a majority of the authorized number
of Directors, to designate an executive committee and other committees, each
consisting of two (2) or more Directors, to serve at the pleasure of the Board.
Unless the Board of Directors shall otherwise prescribe the manner of
proceedings of any such committee, meetings of such committee (other than the
executive committee whose proceedings shall be governed by Section 17 of this
Article III of these Bylaws) may be regularly scheduled in advance and may be
called at any time by any two (2) members thereof; otherwise, the provisions of
these Bylaws with respect to notice and conduct of the meetings of the Board
shall govern. Any such committee, to the extent provided in a resolution of the
Board, shall have all the authority of the Board, except with respect to:
i. The approval of any action for which the California General
Corporations Law or the Articles of Incorporation also require shareholder
approval;
ii. The filling of vacancies on the Board of Directors or on
any committee;
iii. The fixing of compensation of the Directors serving on the
Board or on any committee;
iv. The adoption, amendment or repeal of Bylaws;
v. The amendment or repeal of any resolution of the Board
which by its express terms is not so amendable or repealable;
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vi. The declaration of a dividend, or the authorization or
ratification of the repurchase or redemption of shares, except at a rate or in a
periodic amount or within a price range determined by the Board of Directors;
and
vii. The appointment of other committees of the Board or the
members thereof.
2. Number and Qualifications of Directors.
a. The number of Directors of the Corporation shall not be less than
seven (7) nor more than eleven (11) until changed by amendment of the Articles
of Incorporation or by a Bylaw amending this section, duly adopted by the vote
or written consent of holders of a majority of the outstanding shares entitled
to vote; provided that a proposal to reduce the authorized minimum number of
Directors below seven (7) cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in the case of action by
written consent, are equal to more than sixteen and two-thirds percent (16-2/3%)
of the outstanding shares entitled to vote. The exact number of Directors shall
be fixed from time to time, within the limits specified in the Articles of
Incorporation or in this section, by a Bylaw or amendment thereof, duly adopted
by shareholders or by the Board of Directors; and
b. Subject to the foregoing provisions for changing the number of
Directors, the exact number of Directors of this Corporation shall be nine (9).
3. Election and Term of Office. The Directors shall be elected at each
annual meeting, but if any such annual meeting is not held or the Directors are
not elected thereat, the Directors may be elected at any special meeting of
shareholders held for that purpose. All Directors shall hold office until the
next annual meeting of shareholders and until their respective successors have
been elected and qualified, subject to the California General corporations Law
and the Provisions of these Bylaws with respect to vacancies on the Board of
Directors.
4. Vacancies. A vacancy in the Board of Directors shall be deemed to
exist in the event of the death, resignation or removal of any Director, an
increase of the authorized number of Directors, or the failure of the
shareholders at any annual or special meeting of shareholders at which any
Director or Directors are to be elected to elect the full authorized number
of Directors to be voted for at that meeting. The Board of Directors may
declare vacant the office of a Director who has been declared of unsound mind
by an order of court or convicted of a felony.
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A vacancy or vacancies in the Board of Directors, except for a vacancy
created by the removal of a Director, may be filled by a majority of the
remaining Directors, though less than a quorum, or by a sole remaining Director,
and each Director so elected shall hold office until his successor is elected in
an annual or special meeting of shareholders called for that purpose. A vacancy
in the Board of Directors created by the removal of a Director may be filled
only by the vote of the majority of the shares entitled to vote represented at a
duly held meeting at which a quorum is present, or by the written consent of the
holders of the majority of the outstanding shares. The shareholders may elect a
Director or Directors at any time to fill any vacancy or vacancies not filled by
the Directors. Any such election by written consent shall require the consent of
holders of a majority of the outstanding shares entitled to vote.
Any Director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of Directors of
the Corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the resignation is effective at a future time, a
successor may be elected to take office when the resignation becomes effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
5. Place of Meetings. All meetings of the Board of Directors shall be
held at any place within or without California which has been designated in the
notice of the meeting, or if not stated in the notice or if there is no notice,
at any place designated from time to time by resolution of the Board or by
written consent of all members of the Board. In the absence of such designation,
meetings shall be held at the Principal executive office of the Corporation.
6. Telephonic Meetings. The members of the Board may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in the meeting can hear one another.
Participation in a meeting as permitted in the preceding sentence constitutes
presence in person at such meeting.
7. Organization Meeting. Immediately following each annual meeting of
shareholders, the Board of Directors shall hold a regular meeting at the place
of the annual meeting of shareholders or at such other place as shall be fixed
by the Board of Directors, for the purpose of organization, election of
officers, and the transaction of other business.
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8. Other Regular Meetings. The other regular meeting of the Board of
Directors shall be held without call at 10:30 a.m. on the second Tuesday in
February, August and November. Provided however, should said day fall on a legal
holiday, then the meeting shall be held at the same time on the next day
thereafter ensuing which is a full business day.
9. Special Meetings. Special meetings of the Board of Directors for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President, any vice-president, the Secretary or any two (2) Directors.
10. Notice of Directors Meetings. Call and notice of the annual
organization meeting and other regular meetings of the Board of Directors are
hereby dispensed with. Notice of the time and place of special meetings shall
be personally delivered to each Director or communicated to each Director by
telephone, telegraph or mail, charges prepaid, addressed to him at his address
as is shown upon the records of the Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place at which the
meetings of Directors are regularly held. In the case notice is mailed, it
shall be deposited in the United States mail at least ninety-six (96) hours
prior to the time of the holding of the meeting. In the event notice is
communicated by telegraph, it shall be delivered to the telegraph company at
least forty-eight (48) hours prior to the time of the holding of the meeting.
In the event notice is delivered personally or communicated by telephone, it
shall be so delivered or communicated at least forty-eight (48) hours prior to
the time of the holding of a meeting.
A notice need not specify the purpose of any regular or special
meeting of the Board of Directors. Whenever any Director has been absent from
any meeting of the Board of Directors for which notice has not been dispensed
with, an entry in the minutes to the effect that notice has been duly given
shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to such Director.
11. Quorum. The presence at a meeting of the Board of Directors of a
majority of the members of the Board of Directors shall constitute a quorum for
the transaction of business; provided that such quorum shall at no time be less
than one-third (1/3) of the authorized number of Directors. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of enough Directors to leave less than a quorum, provided that
any action taken is approved by at least a majority of the required quorum for
such meeting.
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12. Voting. Every act or decision done or made by a majority of the
Directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors, unless a greater number, or the
same number after disqualifying one (1) or more Directors from voting, is
required by law, by the Articles of Incorporation or by these Bylaws.
13. Validation of Meetings Held Without Proper Call or Notice. The
transactions of any meeting of the Board of Directors, however called and
noticed or wherever held, shall be valid as though had at a meeting duly held
after regular call and notice, if a quorum is initially present, and if, either
before or after the meeting, each of the Directors not present or who though
present has prior to the meeting or at its commencement protested the lack of
proper notice to him signs a written waiver of notice, a consent to holding of
such meeting or an approval of the minutes thereof. All such waivers, consents
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
14. Adjournment. A majority of the Directors present, whether or not a
quorum is present, may adjourn any Directors' meeting to meet again at another
time or place. In the event a meeting of the Board of Directors is adjourned
for more than twenty-four (24) hours, notice of any adjournment to another time
or place shall be given prior to the time of the adjourned meeting to the
Directors who were not present at the time of the adjournment. Otherwise,
notice of the time and place of holding an adjourned meeting need not be given
to absent Directors if the time and place is fixed and announced at the meeting
so adjourned.
15. Unanimous Written Consent to Actions Taken. Any action required or
permitted to be taken by the Board of Directors may be taken without a meeting
if all the members of the Board of Directors shall individually or collectively
consent in writing to such action. Such consent or consents shall be filed with
the minutes of the proceedings of the Board of Directors and shall have the
same force and effect as a unanimous vote of the Directors.
16. Fees and Compensation. Directors and members of committees may
receive such compensation, if any, for their services and such reimbursement
for expenses as may be fixed or determined by resolution of the Board of
Directors. Nothing herein shall be considered to preclude any Director from
serving the Corporation in any other capacity, including as an officer, agent,
employee or otherwise, and receiving compensation therefor.
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17. Executive Committee. In the event the Board of Directors shall
appoint an executive committee and shall not provide otherwise, regular meetings
of the executive committee shall be held at such times as are determined by the
Board or by such committee as appointed, and notice of such regular meetings is
hereby dispensed with. Meetings of the executive committee shall be held at the
place designated in the notice of the meeting, or if not stated in the notice or
if there is no notice, at any place which has been designated from time to time
by resolution of the executive committee or by written consent of all the
members thereof, or in the absence of such designation, at the principal
executive office of the Corporation. Special meetings of the executive committee
may be called by the Chairman of the Board, the President, any vice-president
who is a member of the executive committee, or any two (2) members thereof, upon
written notice to the members of the executive committee of the time and place
of such special meeting given in the manner and within the time provided for
giving of notice to members of the Board of Directors of the time and place of
special meetings thereof. Minutes shall be recorded of each meeting of the
executive committee and kept in the book of minutes of the Corporation.
Vacancies in the membership of the executive committee may be filled only by the
Board of Directors. Only members of the Board of Directors shall serve as
members of the executive committee. A majority of the authorized number of
members of the executive committee shall constitute a quorum for the transaction
of business. The provisions of this Article III of these Bylaws also apply to
the executive committee and action by the executive committee, mutatis mutandis.
The Board of Directors may designate one (1) or more Directors as alternate
members of the executive committee, who may replace and act in the stead of any
absent members at any meeting of such committee.
ARTICLE IV
OFFICERS
1. Officers. The officers of the corporation shall be a President, a
Secretary and Chief Financial Officer (who may also be called the "Treasurer").
The corporation may also have, at the discretion of the Board of Directors, a
Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers and such other officers as may be
elected in accordance with the provisions of Section 3 of this Article IV. One
person may hold any two or more offices.
2. Election. The officers of the corporation, except such officers
as may be elected in accordance with the provisions
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of Section 3 or Section 5 of this Article IV, shall be elected annually by the
Board, and each shall hold office at the pleasure of the Board until
resignation, removal, disqualification or until a successor is elected and
qualified.
3. Subordinate Officers. The Board of Directors may elect such
other officers as the business of the corporation may require, each of whom
shall hold office at the pleasure of the Board for such period, have such
authority and perform such duties as are provided in the Bylaws or as the Board
may from time to time determine.
4. Removal and Resignation. Any officer may be removed, with or
without cause, by a majority of the directors at the time in office at any
regular or special meeting of the Board of Directors, or, except in case of an
officer elected by the Board, by any officer upon whom such power of removal
may be conferred by the Board.
Any officer may resign at any time by giving written notice to the
Board, the President or the Secretary of the corporation. Any such resignation
shall take effect at the date of the receipt of such notice or at any later
time specified therein, and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in the Bylaws for regular election to such office.
6. Chairman of the Board. The Chairman of the Board, if there is
such an officer, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as from time to
time may be assigned by the Board or prescribed by the Bylaws.
7. President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there is
such an officer, the President shall be the general manager and chief executive
officer of the corporation and shall, subject to the control of the Board, have
general supervision, direction and control of the business and officers of the
corporation. The President shall preside at all meetings of the shareholders
and, in the absence of the Chairman of the Board, or if there is not such an
officer, at all meetings of the Board. The President shall be an ex officio
member of all of the standing committees of the Board, including the executive
committee, if any. The President shall also have the general powers and duties
of management usually vested in the office of
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the president of a corporation and shall have such other powers and duties as
from time to time may be prescribed by the Board or the Bylaws.
8. Vice-President. In the absence or disability of the President, the
Vice-Presidents in order of their rank as fixed by the Board of Directors, or if
not ranked, the Vice-President designated by the Board, shall perform all the
duties of the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the President. The Vice-Presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board or the Bylaws.
9. Secretary. The Secretary shall keep or cause to be kept a book of
minutes at the principal executive office or such other place as the Board may
order of all meetings of the Board, committees of the Board and shareholders,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at
directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof. Such minutes shall be kept
in written form.
The Secretary shall keep or cause to be kept at the principal executive
office or at the office of the corporation's transfer agent, as determined by
resolution of the Board, a share register or a duplicate share register showing
the names of all shareholders and their addresses, the number and classes of
shares held by each, the number and date of certificates issued for the same,
and the number and date of cancellation of every certificate surrendered for
cancellation. Such record shall be kept either in written form or in any other
form capable of being converted into written form.
The Secretary shall give or cause to be given notice of all of the meetings
of the shareholders and of the Board required by the Bylaws or by law to be
given, shall keep the seal of the corporation, if there is one, in safe custody
and shall have such other powers and perform such other duties as from time to
time may be prescribed by the Board or the Bylaws.
The Secretary shall keep at the Corporation's principal executive office
the original or a copy of these Bylaws as amended to date.
10. Chief Financial Officer. The Chief Financial Officer (who may also be
called the "Treasurer") shall keep and maintain or cause to be kept and
maintained adequate and correct books and records of account of the properties
and business
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transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall be open to inspection by any director at all
reasonable times.
The Chief Financial Officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the Board. The Chief Financial Officer shall disburse the funds of
the corporation as may be ordered by the Board, shall render to the President
and directors, whenever they request it, an account of all of the transactions
of the Chief Financial Officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
from time to time may be prescribed by the Board or the Bylaws.
ARTICLE V
INDEMNIFICATION
1. Extent. The corporation shall, to the fullest extent permitted by the
California General Corporation Law, indemnify each director, officer, employee
and agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
2. Insurance. The corporation shall have the power to purchase and
maintain insurance in such amounts as the Board of Directors deems appropriate
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
3. Fiduciaries of Employee Benefit Plans. The corporation shall have the
power to indemnify any trustee, investment manager or other fiduciary of any
employee benefit plan established by the corporation to the fullest extent
permitted by law.
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4. Construction of Bylaws. No provision of these Bylaws shall be
construed as prohibiting, denying or abrogating any of the general or specific
powers or rights conferred by the California General Corporation Law upon the
corporation or any court to furnish or award indemnification as otherwise
authorized by the California General Corporation Law or any other law now or
hereafter in effect.
ARTICLE VI
MISCELLANEOUS
1. Record Date. The Board may fix, in advance, a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting of shareholders or entitled to receive any dividend or distribution, or
any allotment of rights, or to exercise any rights in respect to any other
lawful action. The record date so fixed shall be not more than 60 nor less than
10 days prior to the date of such meeting nor more than 60 days prior to any
other action.
If no record date is fixed by the Board, the record date shall be
determined as provided in this paragraph. The record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the business day immediately preceding the day on
which notice os given or, if notice is waived, at the close of business on the
business day immediately preceding the day on which the meeting is held. The
record date for determining shareholders entitled to give consent to corporate
action in writing without a meeting, when no prior action by the Board has been
taken, shall be the day on which the first written consent is given. The record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto,
or the sixtieth day prior to the date of such other action, whichever is later.
Except as otherwise provided in the California General Corporation Law,
only shareholders of record as of the record date are entitled to notice of and
to vote at the meeting or to receive the divided, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board fixes a new
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record date for the adjourned meeting. The Board shall fix a new record date if
the meeting is adjourned for more than 45 days from the date set for the
original meeting.
2. Shareholder Inspection of Corporate Records. A shareholder or
shareholders of the corporation holding at least five percent in the aggregate
of the outstanding voting shares of the corporation may (i) inspect and copy the
records of shareholders' names and addresses and shareholdings during usual
business hours on five days' prior written demand on the corporation and (ii)
obtain from the transfer agent of the corporation, on written demand and on the
tender of such transfer agent's usual charges for such list, a list of the names
and addresses of shareholders who are entitled to vote for the election of
directors, and the shareholdings of such shareholders, as of the most recent
record date for which that list has been compiled or as of a date specified by
the shareholder after the date of demand. This list shall be made available to
any such shareholder by the transfer agent on or before the later of five
business days after the demand is received or the date specified in the demand
as the date as of which the list is to be compiled.
The share register or duplicate share register, the books of account and
minutes of proceedings of the shareholders and the Board of Directors and of
committees of directors shall be open to inspection upon the written demand of
any shareholder or the holder of a voting trust certificate, at any reasonable
time, if for a purpose reasonably related to such holder's interests as a
shareholder or as the holder of such voting trust certificate. Such inspection
may be made in person or by agent or attorney, and shall include the right to
make copies or extracts.
3. Director Inspection of Corporate Records. Every director shall have
the absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. Such inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the
right to copy and make extracts of documents.
4. Inspection of Bylaws. The corporation shall keep at its principal
executive office, or if its principal executive office is not in the State of
California, at its principal business office in the State of California, the
original or a copy of the Bylaws as amended to date, which shall be open to
inspection by any shareholder at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
California and the
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corporation has no principal business office in the State of California, the
Secretary shall, upon the written request of any shareholder, furnish to that
shareholder a copy of the Bylaws as amended to date.
5. Checks, Drafts. All checks, drafts or other orders for payment of
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as from time to time shall be determined by
resolution of the Board of Directors.
6. Annual Report. The annual report to shareholders referred to in
Section 1501 of the California General Corporation Law is hereby dispensed
with, but the Board of Directors may cause to be sent to the shareholders
annual or other periodic reports in such form as they may deem appropriate.
7. Financial Statements. A copy of any annual financial statement and
any income statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the corporation as of the
end of each such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for 12
months, and each such statement shall be exhibited at all reasonable times to
any shareholder demanding an examination of any such statement or a copy shall
be mailed to any such shareholder.
A shareholder or shareholders holding at least five percent in the
aggregate of the outstanding shares of any class of the corporation may make a
written request for an income statement of the corporation for the three-month,
six-month or nine-month period (of the then current fiscal year) ended more
than 30 days prior to the date of the request and a balance sheet of the
corporation as of the end of such period and, in addition, if no annual report
for the last fiscal year has been sent to shareholders, an annual report for
the last fiscal year containing the statements required by Section 1501(a) of
the California General Corporation Law. If such a request is made, the Chief
Financial Officer shall cause the requested statement or statements to be
prepared, if not already prepared, and shall deliver personally or mail the
statement or statements to the person making the request within 30 days after
the receipt of the request.
The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual, or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.
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The quarterly income statements and balance sheets referred to in this
Section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
8. Fiscal Year. The fiscal year of the Corporation shall be determined
by the Board of Directors, and having been so determined, is subject to change
from time to time as the Board of Directors shall determine.
9. Contracts, How Executed. The Board of Directors, except as otherwise
provided in the Bylaws, may authorize any officer, officers, agent or agents to
enter into any contract or execute any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances. Unless so authorized by the Board, no officer, agent or employee
shall have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or render it liable for any purpose or for
any amount. If any person, acting without such authority, causes the
corporation to be liable to any third person by virtue of California General
Corporation Law Section 313, the corporation may seek to hold such person
liable to the corporation.
10. Share Certificates. A share certificate or certificates of the
corporation shall be issued to each shareholder when any such shares are fully
paid. All such certificates shall be signed by the Chairman of the Board, if
there is such an officer, or the President or any Vice-President and by the
Chief Financial Officer or any Assistant Treasurer or the Secretary or any
Assistant Secretary. Any or all of the signatures on the certificate may be
facsimile.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or the Bylaws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state the total amount of consideration to be paid therefor and
the amount paid thereon.
There shall appear on certificates for shares of the Corporation the
following facts if, and to the extent, applicable:
a. The shares are subject to restrictions upon transfer, including
those imposed by the California Corporate Securities Law of 1968, the federal
securities laws, any
20
<PAGE> 24
agreement between the Corporation and the issuee thereof, the Articles of
Incorporation, these Bylaws or otherwise;
b. The shares are assessable;
c. The shares are not fully paid and the total amount of the
consideration to be paid therefor and the amount theretofore paid thereon;
d. The shares are subject to restrictions upon voting rights
contractually imposed by the Corporation;
e. The shares are redeemable;
f. The shares are convertible and the period for conversion; and
g. The shares are classified or a class of the shares has two (2) or
more series, and a statement setting forth the office or agency of the
Corporation from which shareholders may obtain, upon request and without charge,
a copy of a statement of the rights, preferences, privileges and restrictions
granted to or imposed upon each class or series of shares authorized to be
issued and upon the holders thereof.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and cancelled at the same time;
provided, however, that the Board of Directors may authorize the issuance of a
new share certificate in the place of any certificate theretofore issued by the
Corporation and alleged to be lost, stolen or destroyed in the event that: (i)
the request for the issuance of the new certificate is made within a reasonable
time after the holder of the old certificate has notice of its loss, destruction
or theft and prior to the receipt of notice by the Corporation that the old
certificate has been acquired by a bona fide purchaser or holder in due course;
and (ii) the holder of the old certificate files a sufficient indemnity bond
with or provides other adequate security to the Corporation and satisfies any
other reasonable requirements imposed by the Board. In the event of the issuance
of a new certificate, the rights and liabilities of the Corporation and the
holders of the old and new certificates shall be governed by the provisions of
Sections 8104 and 8405 of the California Commercial Code.
11. Registrars and Transfer Agents. The Board of Directors may appoint one
(1) or more registrars of transfer, which shall be incorporated banks or trust
companies, either domestic or foreign, and one (1) or more transfer agents or
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<PAGE> 25
transfer clerks, who shall be appointed at such times and places as the Board
of Directors shall determine.
12. Representation of Shares of Other Corporations. The Chairman of the
Board, if there is such an officer, the President, any Vice-President or any
other person authorized by resolution of the Board of Directors or by any of
the foregoing designated officers is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The authority
granted to such officers to vote or represent on behalf of the corporation any
and all shares held by the corporation of any other corporation or corporations
may be exercised by any of these officers in person or by any person authorized
to do so by a proxy duly executed by these officers.
13. Amendments. These Bylaws may be amended or repealed either by
approval of the outstanding shares or by the approval of the Board of
Directors; provided, however, that a bylaw specifying or changing a fixed
number or the maximum or minimum number of directors or changing from a fixed to
a variable number of directors or vice versa may be adopted only by approval of
the outstanding shares complying, if applicable, with Section 212 of the
California General Corporation Law.
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<PAGE> 26
CERTIFICATE OF SECRETARY
The undersigned, Donald H. Harris hereby certifies that:
(1) The undersigned is the duly elected and acting Secretary of Advanced
Corneal Systems, Inc., a California corporation.
(2) Attached hereto is a complete and correct copy of the Bylaws of such
corporation as adopted February 13, 1992, and which have not been amended or
modified since such date.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Secretary on March 1, 1992.
/s/ DONALD H. HARRIS
----------------------------------------
Donald H. Harris, Secretary
23
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED BYLAWS
OF
ISTA PHARMACEUTICALS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I CORPORATE OFFICES......................................................................1
1.1 REGISTERED OFFICE.................................................................1
1.2 OTHER OFFICES.....................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..............................................................1
2.1 PLACE OF MEETINGS.................................................................1
2.2 ANNUAL MEETING....................................................................1
2.3 SPECIAL MEETING...................................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS...................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................................3
2.7 QUORUM............................................................................4
2.8 ADJOURNED MEETING; NOTICE.........................................................4
2.9 CONDUCT OF BUSINESS...............................................................4
2.10 VOTING............................................................................4
2.11 WAIVER OF NOTICE..................................................................5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...........................5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.......................5
2.14 PROXIES...........................................................................6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................................6
ARTICLE III DIRECTORS............................................................................7
3.1 POWERS............................................................................7
3.2 NUMBER OF DIRECTORS...............................................................7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...........................7
3.4 RESIGNATION AND VACANCIES.........................................................8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..........................................8
3.6 REGULAR MEETINGS..................................................................9
3.7 SPECIAL MEETINGS; NOTICE..........................................................9
3.8 QUORUM............................................................................9
3.9 WAIVER OF NOTICE..................................................................9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................................10
3.11 FEES AND COMPENSATION OF DIRECTORS...............................................10
3.12 APPROVAL OF LOANS TO OFFICERS....................................................10
3.13 REMOVAL OF DIRECTORS.............................................................10
ARTICLE IV COMMITTEES...........................................................................11
4.1 COMMITTEES OF DIRECTORS..........................................................11
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
4.2 COMMITTEE MINUTES................................................................11
4.3 MEETINGS AND ACTION OF COMMITTEES................................................11
ARTICLE V OFFICERS..............................................................................12
5.1 OFFICERS.........................................................................12
5.2 APPOINTMENT OF OFFICERS..........................................................12
5.3 SUBORDINATE OFFICERS.............................................................12
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES...........................12
5.5 CHAIRMAN OF THE BOARD............................................................13
5.6 CHIEF EXECUTIVE OFFICER..........................................................13
5.7 PRESIDENT........................................................................13
5.8 VICE PRESIDENTS..................................................................13
5.9 SECRETARY........................................................................13
5.10 CHIEF FINANCIAL OFFICER..........................................................14
5.11 ASSISTANT SECRETARY..............................................................14
5.12 ASSISTANT TREASURER..............................................................15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................................15
5.14 AUTHORITY AND DUTIES OF OFFICERS.................................................15
ARTICLE VI INDEMNITY............................................................................15
6.1 THIRD PARTY ACTIONS..............................................................15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION....................................16
6.3 SUCCESSFUL DEFENSE...............................................................16
6.4 DETERMINATION OF CONDUCT.........................................................16
6.5 PAYMENT OF EXPENSES IN ADVANCE...................................................17
6.6 INDEMNITY NOT EXCLUSIVE..........................................................17
6.7 INSURANCE INDEMNIFICATION........................................................17
6.8 THE CORPORATION..................................................................17
6.9 EMPLOYEE BENEFIT PLANS...........................................................18
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES......................18
ARTICLE VII RECORDS AND REPORTS.................................................................18
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................18
7.2 INSPECTION BY DIRECTORS..........................................................19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................................19
ARTICLE VIII GENERAL MATTERS....................................................................19
8.1 CHECKS...........................................................................19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.................................20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES...........................................20
8.4 SPECIAL DESIGNATION ON CERTIFICATES..............................................20
8.5 LOST CERTIFICATES................................................................21
8.6 CONSTRUCTION; DEFINITIONS........................................................21
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
8.7 DIVIDENDS........................................................................21
8.8 FISCAL YEAR......................................................................21
8.9 SEAL.............................................................................21
8.10 TRANSFER OF STOCK................................................................22
8.11 STOCK TRANSFER AGREEMENTS........................................................22
8.12 REGISTERED STOCKHOLDERS..........................................................22
ARTICLE IX AMENDMENTS...........................................................................22
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
ISTA PHARMACEUTICALS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, either within or
without the State of Delaware, as may be designated by the board of directors or
in the manner provided in these amended and restated bylaws. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation in the State of Delaware.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the 15th day of
April of each year at 10:00 a.m. However, if such day falls on a weekend or a
legal holiday, then the meeting shall be held at the same time and place on the
next
<PAGE> 6
succeeding business day. At the meeting, directors shall be elected and any
other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer, or by the president.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.6 of these amended and
restated bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting. The
notice shall specify the place, date, and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
(i) nominations for the election of directors, and
(ii) business proposed to be brought before any stockholder
meeting
may be made by the board of directors or proxy committee appointed by the board
of directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such stockholder has given timely notice in
proper written form of its intent to make such nomination or nominations or to
propose such business. To be timely, such stockholder's notice must be delivered
to or mailed and received at the principal
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<PAGE> 7
executive offices of the corporation not less than one hundred twenty (120)
calendar days in advance of the first anniversary date of mailing of the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(a) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be proposed;
(b) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and,
if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(c) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, or the matter been proposed, or
intended to be proposed by the board of directors; and
(e) if applicable, the consent of each nominee to serve
as director of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
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<PAGE> 8
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the Chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
amended and restated bylaws otherwise require, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.9 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.13 of these amended
and restated bylaws, subject to the provisions of Sections 217 and 218 of the
Delaware General Corporation Law (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
Notwithstanding the foregoing, if the stockholders of the corporation
are entitled, pursuant to Sections 2115 and 301.5 of the California Corporations
Code, to cumulate their votes in the election of directors, each such
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes that such stockholder normally
is entitled to cast) only if the candidates' names have been properly placed in
nomination (in accordance with these Amended and Restated Bylaws) prior to
commencement of the voting, and the stockholder
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<PAGE> 9
requesting cumulative voting has given notice prior to commencement of the
voting of the stockholder's intention to cumulate votes. If cumulative voting is
properly requested, each holder of stock, or of any class or classes or of a
series or series thereof, who elects to cumulate votes shall be entitled to as
many votes as equals the number of votes that (absent this provision as to
cumulative voting) he or she would be entitled to cast for the election of
directors with respect to his or her shares of stock multiplied by the number of
directors to be elected by him, and he or she may cast all of such votes for a
single director or may distribute them among the number to be voted for, or for
any two or more of them, as he or she may see fit.
2.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law or of the certificate of incorporation or these
amended and restated bylaws, a written waiver, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these amended and restated
bylaws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
a corporation, or any action that may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the Delaware General Corporation Law.
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other
-5-
<PAGE> 10
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the first date on which
a signed written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.14 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by such stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if such stockholder's name is placed on the proxy by any
reasonable means including, but not limited to, by facsimile signature, manual
signature, typewriting, telegraphic transmission or otherwise, by such
stockholder or such stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the Delaware General Corporation Law.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
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<PAGE> 11
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Delaware General Corporation Law and
any limitations in the certificate of incorporation or these amended and
restated bylaws relating to action required to be approved by the stockholders
or by the outstanding shares, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of the board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of eight (8) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. Upon the closing of the first sale of the
corporation's common stock pursuant to a firmly underwritten registered public
offering (the "IPO"), the directors shall be divided into three classes, with
the term of office of the first class, which class shall initially consist of
three (3) directors, to expire at the first annual meeting of stockholders held
after the IPO; the term of office of the second class, which shall initially
consist of three (3) directors, to expire at the second annual meeting of
stockholders held after the IPO; the term of office of the third class, which
class shall initially consist of two (2) directors, to expire at the third
annual meeting of stockholders held after the IPO; and thereafter for each such
term to expire at each third succeeding annual meeting of stockholders held
after such election.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these amended and restated bylaws,
directors shall be elected at each annual meeting of stockholders to hold office
until the next annual meeting. Directors need not be stockholders unless so
required by the certificate of incorporation or these amended and restated
bylaws, wherein other qualifications for directors may be prescribed. Each
director, including a director elected to fill a vacancy, shall hold office
until his successor is elected and qualified or until his earlier resignation or
removal.
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<PAGE> 12
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention
of the Secretary of the corporation. When one or more directors shall resign
from the board of directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
amended and restated bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these amended and restated
bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the Delaware General Corporation Law.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the
Delaware General Corporation Law as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
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Unless otherwise restricted by the certificate of incorporation or these
amended and restated bylaws, members of the board of directors, or any committee
designated by the board of directors, may participate in a meeting of such board
of directors, or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting pursuant to
this section shall constitute presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, the certificate of incorporation, or
these amended and restated bylaws. If a quorum is not present at any meeting of
the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
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Whenever notice is required to be given under any provision of the
Delaware General Corporation Law, the certificate of incorporation, or these
amended and restated bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when such person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these amended and restated bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
amended and restated bylaws, any action required or permitted to be taken at any
meeting of the board of directors, or of any committee thereof may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
amended and restated bylaws, the board of directors shall have the authority to
fix the compensation of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these amended and restated bylaws, any director or the
entire board of directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors;
provided, however, that, so long as stockholders of the corporation are entitled
to cumulative voting, if less than the entire board is to be removed, no
director may be removed without cause if the votes cast against his removal
would be sufficient to elect such director if then cumulatively voted at an
election of the entire board of directors or, if there be classes of directors,
at an election of the class of directors of which such director is a part.
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No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, or in the amended and restated bylaws of
the corporation, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority (i) approving or adopting or recommending to the stockholders, any
action or matter expressly required by the Delaware General Corporation Law to
be submitted to stockholders for approval or (ii) adopting, amending, or
repealing any amended and restated bylaws of the corporation; and, unless the
board resolution establishing the committee, the amended and restated bylaws or
the certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the Delaware General Corporation Law.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these amended and
restated bylaws, Section 3.5 (place of meetings and meetings by telephone),
Section 3.6 (regular meetings), Section 3.7 (special meetings and notice),
Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action
without a meeting), with such changes in the context of those amended and
restated bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may
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also be called by resolution of the board of directors and that notice of
special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not inconsistent
with the provisions of these amended and restated bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant vice presidents, one or more
assistant secretaries, one or more assistant treasurers, and any such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these amended and restated bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
amended and restated bylaws, shall be appointed by the board of directors,
subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these amended and restated bylaws or as the board
of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.5 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board by the board of directors or as may be prescribed by these
amended and restated bylaws. If there is no president and no one has been
appointed chief executive officer, then the chairman of the board shall also be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.6 of these amended and restated bylaws.
5.6 CHIEF EXECUTIVE OFFICER
The board of directors shall select a chief executive officer of the
corporation who shall be subject to the control of the board of directors and
have general supervision, direction and control of the business and the officers
of the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors.
5.7 PRESIDENT
The president shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
amended and restated bylaws. In addition and subject to such supervisory powers,
if any, as may be given by the board of directors to the chairman of the board,
if no one has been appointed chief executive officer, the president shall be the
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have the powers and duties described in Section 5.6.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these amended
and restated bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all
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meetings and actions of directors, committees of directors, and stockholders.
The minutes shall show the time and place of each meeting, whether regular or
special (and, if special, how authorized and the notice given), the names of
those present at directors' meetings or committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these amended and restated bylaws. The secretary shall keep the seal of the
corporation, if one be adopted, in safe custody and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
by these amended and restated bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. The chief financial officer shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all his transactions as chief financial officer and of the
financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the board of directors or these
amended and restated bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these amended and restated bylaws.
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5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these amended and
restated bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe
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such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Sections 6.1 and 6.2. Such
determination shall be made (1) by the Board of Directors or the Executive
Committee by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or (2) if such quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by independent
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legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding
the foregoing, a director, officer, employee or agent of the Corporation shall
be entitled to contest any determination that the director, officer, employee or
agent has not met the applicable standard of conduct set forth in Sections 6.1
and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
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6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these amended and restated bylaws as
amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
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8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these amended
and restated bylaws, may authorize any officer or officers, or agent or agents,
to enter into any contract or execute any instrument in the name of and on
behalf of the corporation; such authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock
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a statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these amended and restated bylaws. Without limiting
the generality of this provision, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both a
corporation and a natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in (i) the Delaware General Corporation Law or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
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The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the Delaware General Corporation Law.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The amended and restated bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal amended and restated bylaws upon the directors. The
fact that such power has been so conferred upon the directors shall not divest
the stockholders of the power, nor limit their power to adopt, amend or repeal
amended and restated bylaws.
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CERTIFICATE OF ADOPTION OF
AMENDED AND RESTATED BYLAWS
OF
ISTA PHARMACEUTICALS, INC.
Certificate by Secretary
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Ista Pharmaceuticals, Inc. and that the foregoing
Amended and Restated Bylaws, comprising twenty-two (22) pages, were adopted as
the Amended and Restated Bylaws of the corporation on __________, 2000 by the
board of directors of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this ____ day of ______________________ 2000.
------------------------------------
J. Casey McGlynn, Secretary
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EXHIBIT 10.1
AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
This Amended and Restated Investors Rights Agreement (the "Agreement")
is entered into as of March 29, 2000 by and among Ista Pharmaceuticals, Inc., a
California corporation (the "Company") and the individuals and entities set
forth on the signature pages attached hereto (the "Investors"). This Agreement
amends and restates the Amended and Restated Investors Rights Agreement dated
June 4, 1999 (the "Prior Rights Agreement").
1. Right of First Offer.
(a) Major Investor. Each Investor who holds at least 100,000
shares of Preferred Stock (as defined in Section 2 below) (or Common Stock of
the Company issued or issuable upon conversion thereof) is hereby defined as a
Major Investor. When applying the term "Major Investor" to any Investor, such
Investor shall be considered to hold all shares held in a trust for the benefit
of such investors and all shares of such stock that such Investor has
distributed to and are held by any general or limited partner or other holder of
the Investor's equity securities and shares of such stock owned by any other
Investor that controls, is controlled by or under common control with such
Investor or that is managed by the same investment manager as such Investor
(collectively, "Affiliates"). Each Major Investor shall be entitled to apportion
the right of first offer hereby granted it among itself and its partners and
Affiliates in such proportions as it deems appropriate.
(b) Procedure. Subject to Section 1(d) below, the Company
hereby grants to each Major Investor a right of first offer with respect to
future sales by the Company of its New Securities (as hereinafter defined). Each
time the Company proposes to offer any shares of, or securities convertible into
or exercisable for any shares of, any class of its capital stock ("New
Securities"), the Company shall first make an offering of such New Securities to
the Major Investors in accordance with the following provisions:
(i) The Company shall deliver a notice ("Notice")
to each of the Major Investors stating (A) its bona fide intention to offer New
Securities, (B) the number of such New Securities to be offered, and (C) the
price, if any, for which it proposes to offer such New Securities.
(ii) Within 20 calendar days after receipt of the
Notice, each Major Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to that portion of such New Securities
which equals the proportion that the number of shares of Common Stock issued and
held, or issuable upon conversion of the Preferred Stock then held, by such
Major Investor bears to the total number of shares of Common Stock issued and
held, or issuable upon conversion of the Preferred Stock then held, by all Major
Investors.
(iii) If not all of the Major Investors elect to
purchase their pro rata share of the New Securities, then the Company shall
promptly notify in writing the Major Investors who do
<PAGE> 2
so elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares.
(iv) If all such New Securities referred to in
the Notice are not elected to be obtained as provided in Section 1(b) hereof,
the Company may, during the 90-day period following the expiration of the period
provided in Section 1(b) hereof, offer the remaining unsubscribed New Securities
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the New Securities within such
period, or if such agreement is not consummated within 90 days of the execution
thereof, the Major Investors right of first offer with respect to such New
Securities provided hereunder shall be deemed to be revived and such New
Securities shall not be offered unless first reoffered to each Major Investor in
accordance herewith.
(c) Exclusions. The right of first offer in this Section 1
shall not be applicable (i) to the issuance or sale of up to 4,750,000 shares of
Common Stock (or options therefor) to employees, directors and officers and
consultants of the Company, for the primary purpose of soliciting or retaining
their employment or as part of an incentive program, and such additional shares
as are approved by the board of directors, (ii) on or after consummation of a
bona fide, firmly underwritten public offering of shares of Common Stock,
registered under the Act (defined in Section 2(a)(i) below) pursuant to a
registration statement on Form S-1 (iii) to securities issued in connection with
the acquisition of another corporation by the Company by merger of,
reorganization or purchase of all or substantially all of the assets or, (iv) to
securities issued to persons or entities in connection with bank or equipment
lease financing, technology licensing or corporate partnering transactions.
(d) Forfeiture of Right of First Offer. Each Major Investor,
who was a Major Investor on November 20, 1998, that elected not to purchase its
pro rata share of New Securities issued pursuant to the Series C Preferred Stock
and Warrant Purchase Agreement and the Common Stock Purchase Agreement, each
dated November 20, 1998, has forfeited all rights to purchase New Securities
under this Section 1.
(e) Limitation. Such right of first offer shall terminate upon
the earlier to occur of (i) an underwritten public offering of shares of Common
Stock of the Company, and (ii) a merger, acquisition or other transactions
resulting in a change in control of the Company.
(f) Amendment. With the written consent of not less than (i)
70% of the outstanding shares of Preferred A Shares and Preferred B Shares, each
voting separately, and (ii) 50% of the outstanding shares of Preferred C Shares
and Series D Shares, voting as one class, (or Common Stock issued or issuable
upon conversion thereof) held by the Major Investors, the obligations of the
Company and the rights of the Major Investors under this Section 1 may be waived
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its board of
directors, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Section 1.
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(g) Waiver of Right of First Offer. Each Major Investor,
hereby waives its right of first refusal under the Prior Rights Agreement,
including any notice rights pertaining thereto, to purchase the shares of Series
D Preferred Stock being issued and sold pursuant to the Series D Preferred Stock
Purchase Agreement dated as of the date hereof. Such waiver shall be effective
upon the execution of this Agreement by (i) the Company, (ii) 70% of the
outstanding shares of Preferred A Shares and Preferred B Shares, each voting
separately, and (iii) 50% of the outstanding shares of Preferred C Shares (or
Common Stock issued or issuable upon conversion thereof) held by the Major
Investors. By entering into this Agreement each Major Investor hereby waives any
current or future right of first offer to purchase the Company's securities
other than the rights set forth in this Agreement.
2. Registration Rights.
(a) Definitions. For purposes of this Section 2:
(i) The term "Act" shall mean the Securities Act
of 1933, as amended.
(ii) The term "Form S-3" shall mean such form
under the Act as in effect on the date hereof or any registration form under the
Act subsequently adopted by the Securities and Exchange Commission (the "SEC")
which permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.
(iii) The term "Holder" shall mean any person
owning or having the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 2(l) hereof; and
(iv) The term "Preferred Stock" shall mean the
shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock, Series D Preferred Stock and Series D-1 Preferred Stock.
(v) The term "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(vi) The term "Registrable Securities" shall mean
(1) the Common Stock issuable or issued upon conversion of the Preferred Stock,
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Preferred Stock or Common Stock, excluding in all cases,
however, (i) any Registrable Securities sold by a person in a transaction in
which his rights under this Section 2 are not assigned, or (ii) any Registrable
Securities sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.
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<PAGE> 4
(vii) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
(viii) The term "Series A Shares" shall mean the
shares of Series A Preferred Stock and Series A-1 Preferred Stock.
(ix) The term "Series B Shares" shall mean the
shares of Series B Preferred Stock and Series B-1 Preferred Stock.
(x) The term "Series C Shares" shall mean the
shares of Series C Preferred Stock and Series C-1 Preferred Stock.
(xi) The term "Series D Shares" shall mean the
shares of Series D Preferred Stock and Series D-1 Preferred Stock.
(b) Request for Registration.
(i) If at any time after the earlier of (i) four
(4) years from the date hereof or (ii) the first anniversary of the closing of
the Company's initial public offering, the Company shall receive a written
request from the Holders of at least fifty percent (50%) of the outstanding
Registrable Securities (including securities convertible into Registrable
Securities) that the Company file a registration statement under the Act
covering the registration of at least fifty (50%) of the Registrable Securities
(or any lesser number of shares if the anticipated aggregate offering price, net
of underwriting discounts and commissions, would exceed $10,000,000), then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of Section
2(b)(ii), effect as soon as practicable, and in any event within 90 days of the
receipt of such request, the registration under the Act of all Registrable
Securities which the Holders request to be registered within twenty (20) days of
the mailing of such written notice by the Company; provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 2(b)(i):
(A) During the period starting with the date
ninety (90) days prior to the Company's estimated date of filing of, and ending
on the date one hundred eighty (180) days immediately following the effective
date of, any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(B) After the Company has effected one such
registration pursuant to this Section 2(b), and such registration has been
declared or ordered effective;
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<PAGE> 5
(C) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 2(b) shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Holders; provided, however, that the Company may not utilize this right more
than twice in any 12-month period.
(ii) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2(b) and the Company shall include such information in the written
notice referred to in Section 2(b)(i). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 2(e)(v)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company, who
shall be reasonably acceptable to the Initiating Holders. Notwithstanding any
other provision of this Section 2(b), if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within ten (10) days after mailing of
written notice by the Company, the Company shall, subject to the provisions of
Section 2(h), cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
(d) Form S-3 Registration. In case the Company shall receive
from any Holder or Holders a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
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<PAGE> 6
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 2(d): (1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than hundred
eighty (180) days after receipt of the request of the Holder or Holders under
this Section 2(d); provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; (4) if the Company has
already effected two (2) registrations on Form S-3 for the Holders pursuant to
this Section 2(d); (5) if the Company has already effected a registrations on
Form S-3 for the Holders pursuant to this Section 2(d) in the past twelve-month
period; or (6) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(iii) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request made pursuant to this
Section 2(d) and the Company shall include such information in the written
notice referred to in Section 2(d)(i). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 2(e)(v)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2(d), if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders
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thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder.
(iv) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2(d) shall not be counted as demands for registration or registrations
effected pursuant to Sections 2(b) or 2(c), respectively.
(e) Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(i) 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 for up to ninety (90)
days.
(ii) 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 Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(iv) 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.
(v) 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. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the holders greater than the obligations set forth in
Section 2(j)(ii).
(vi) 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 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
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<PAGE> 8
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.
(vii) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 2, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 2, if such
securities are being sold through underwriters, or, if such securities are not
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 certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
(f) Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that such
holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
(g) Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections 2(b), 2(c) and
2(d), including (without limitation) all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements (not to exceed $25,000) of
one counsel for the selling Holders shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 2(b) if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all Participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their demand registration right pursuant
to Section 2(b); provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 2(b).
(h) Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2(c) to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the Holders greater than the obligations set
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forth in Section 2(j)(ii). If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders) but in no event shall (i) any shares being sold by
a shareholder exercising a demand registration right similar to that granted in
Section 2(b) be excluded from such offering, or (ii) the number of Registrable
Securities to be included in such offering be less than 30% of the total number
of securities to be included in such offering, unless such offering is the
initial public offering of the Company's Common Stock and such registration does
not include shares of any other selling shareholders, in which event any or all
of the Registrable Securities of the Holders may be excluded from such offering.
For purposes of apportionment, any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders 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
shareholder", and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
(i) 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 2.
(j) Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 2:
(i) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, amended (the "1934 Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the 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 (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating
-9-
<PAGE> 10
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 2(j)(i) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(ii) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Section 2(j)(ii), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 2(j)(ii) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this Section
2(j)(ii) exceed the net proceeds from the offering received by such Holder.
(iii) Promptly after receipt by an indemnified
party under this Section 2(j) of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
2(j), deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying 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. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2(j), but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2(j).
-10-
<PAGE> 11
(iv) If the indemnification provided for in this
Section 2(j) is unavailable to or insufficient to hold harmless an indemnified
party under subsection (i) or (ii) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Investors
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or an Investor on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and equitable if
contribution pursuant to this subsection (iv) were determined by pro rata
allocation (even if the Investors were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (iv). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred to above in
this subsection (iv) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (iv), no Investor shall be required to contribute any amount in
excess of the amount by which the net amount received by the Investor from the
sale of the Securities to which such loss relates exceeds the amount of any
damages which such Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Investors' obligations in this subsection
(iv) to contribute are several in proportion to their respective sales of
Securities to which such loss relates and not joint.
(v) The obligations of the Company and Holders
under this Section 2(j) shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 2, and
otherwise.
(k) Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(i) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;
-11-
<PAGE> 12
(ii) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(iii) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(iv) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company) or the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
(l) Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee who acquires at least 150,000
shares of Registrable Securities, provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be assigned
by a Holder to a limited partner, general partner or other affiliate of an
Investor (the "Transferee") regardless of the number of shares acquired by such
Transferee.
(m) Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder to include such securities in any registration filed under
Section 2(b) hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included.
(n) "Market Stand-Off" Agreement. Each holder of securities
which are or at one time were Registrable Securities (or which are or were
convertible into Registrable Securities) hereby agrees that, during a period not
to exceed hundred eighty (180) days (or the shortest period of time agreed to by
any officer, director or 5% shareholder), following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the
-12-
<PAGE> 13
Company and such underwriter, sell or otherwise transfer or dispose of (other
than to donee who agree to be similarly bound) any Common Stock of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that all officers and directors of the Company,
all shareholders holding more than 1% of the outstanding Capital Stock of the
Company, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of each Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
(o) Amendment of Registration Rights. Any provision of this
Section 2 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this section shall be binding
upon each holder of any securities which are or at one time were Registrable
Securities (or which are or were convertible into Registrable Securities), each
future holder of all such securities, and the Company.
(p) Termination of Registration Rights. No shareholder shall
be entitled to exercise any right provided for in this Section 2 and all such
rights shall terminate on the earlier of (i) the date on which such shareholder
holds less than 1% of the outstanding capital stock and all shares held by such
shareholder can be resold pursuant to Rule 144(k), or (ii) five (5) years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.
3. Termination of Prior Rights Agreement. Effective upon the execution
of this Agreement by the Company and the holders of not less than (i) 70% of the
outstanding shares of Preferred A Shares and Preferred B Shares, each voting
separately, and (ii) 50% of the outstanding shares of Preferred C Shares (or
Common Stock issued or issuable upon conversion thereof) held by the Major
Investors, the Prior Rights Agreement is null and void and superseded in its
entirety by this Agreement.
4. Delivery of Financial Statements. The Company shall deliver to each
Major Investor and each Investor holding 10% of the aggregate outstanding Common
Stock and Preferred Stock, together with its Affiliates:
(a) Annual Financials. As soon as practicable, but in any
event within ninety (90) days after the end of each fiscal year, a balance
sheet, and statements of operations and cash flow for such fiscal year. Such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting principles ("GAAP"), and audited and
certified by independent public accountants of nationally recognized standing
selected by the Company;
-13-
<PAGE> 14
(b) Monthly Financials. Within thirty (30) days of the end of
each month, an unaudited statement of operations and balance sheet for and as of
the end of such month, in reasonable detail and prepared in accordance with
GAAP, subject to year end audit adjustments and the absence of footnotes;
(c) Operating Plan. Within thirty (30) days prior to the end
of each fiscal year, a budget and business plan for the next fiscal year,
prepared on a monthly basis, including a balance sheet and statement of
operations for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company;
(d) Termination of Information and Inspection Covenants. The
covenants set forth in Section 4 shall terminate as to the Investor and be of no
further force or effect when the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the firm
commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Securities Exchange Act of 1934,
whichever event shall first occur.
5. Visitation Rights. The Company shall allow one representative
designated by each Investor who, together with its Affiliates, holds 150,000
shares of Preferred Stock or Common Stock issued or issuable upon conversion
thereof to attend all meetings of the Company's board of directors in a
nonvoting capacity, and in connection therewith, the Company shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise, which the company provides to its board of directors.
6. Miscellaneous.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) upon personal delivery; (ii)
upon transmission by facsimile (receipt
-14-
<PAGE> 15
verified); (iii) upon the fifth day following deposit by registered or certified
mail (return receipt requested), postage prepaid, and , if delivered to a party
overseas, by air mail; or (iv) upon the second day following dispatch by express
courier service (receipt verified), to the party to be notified at the address
indicated for such party in Exhibit A or in the case of the Company on the first
page of this Agreement, or at such other address for a party as shell be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof.
(f) Amendments and Waivers. Any provision of Section 4 or
Section 5 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
not less than (i) 70% of the outstanding shares of Preferred A Shares and
Preferred B Shares, each voting separately, and (ii) 50% of the outstanding
shares of Preferred C Shares (or Common Stock issued or issuable upon conversion
thereof) and shares of Preferred D Shares (or Common Stock issued or issuable
upon conversion thereof), voting together as one class, held by the Major
Investors; provided, however, that if Preferred C Shares are treated differently
than Preferred D Shares, a majority of the outstanding shares of Preferred C
Shares and Preferred D Shares held by the Major Investors, each voting
separately. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon all present and future Investors.
(g) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
(h) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
(i) Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above respectively.
ISTA PHARMACEUTICALS, INC.
By: /s/ EDWARD H. DANSE
--------------------------------------
Address: 15279 Alton Parkway, Suite 100
Irvine, CA 92618
<PAGE> 17
-----------------------------------------
Walter K. Brown
<PAGE> 18
-----------------------------------------
David E. Collins
<PAGE> 19
CHANCELLOR VENTURE CAPITAL II, L.P.
By:
--------------------------------------
Title:
-----------------------------------
KME VENTURE III, LP
By:
--------------------------------------
Title:
-----------------------------------
DRAKE & CO., FOR THE ACCOUNT OF
CITIVENTURE III
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 20
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
its General Partner
By:
----------------------------------------
General Partner
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
its General Partner
By:
----------------------------------------
General Partner
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By:
----------------------------------------
Attorney-in-Fact
<PAGE> 21
-----------------------------------------
Gregory A. Hartzler
<PAGE> 22
-----------------------------------------
Geoffrey O. Hartzler
<PAGE> 23
-----------------------------------------
William M. Helvey
<PAGE> 24
-----------------------------------------
Arthur Rock
<PAGE> 25
SANDERLING VENTURE PARTNERS III, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING III LIMITED PARTNERSHIP, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING III BIOMEDICAL, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING VENTURE PARTNERS IV, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING VENTURE PARTNERS IV
CO-INVESTMENT FUND, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING IV LIMITED PARTNERSHIP, L.P.
By:
--------------------------------------
Its:
-------------------------------------
<PAGE> 26
SANDERLING [FERI TRUST] VENTURE
PARTNERS IV, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING IV BIOMEDICAL, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING IV BIOMEDICAL
CO-INVESTMENT FUND, L.P.
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING VENTURES MANAGEMENT
By:
--------------------------------------
Its:
-------------------------------------
SANDERLING MANAGEMENT COMPANY, LLC
RETIREMENT TRUST FBO ROBERT G. MCNEIL
By:
--------------------------------------
Its:
-------------------------------------
<PAGE> 27
WILLIAM N. STARLING & DANA GREGORY
STARLING, TRUSTEES OF THE STARLING FAMILY
TRUST U/D/T DATED AUGUST 15, 1990
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 28
JAMES D. WOODWARD & ELAINE K. WASKI,
TRUSTEES OF THE WOODWARD FAMILY TRUST
U/D/T DATED AUGUST 23, 1990
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 29
WS INVESTMENT 92B
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 30
WTI VENTURES
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 31
ECICS VENTURES PTE. LTD.
By: ECICS Management Pte. Ltd.
By:
--------------------------------------
Title:
-----------------------------------
ECICS VENTURE 2 LIMITED
By: ECICS Management Pte. Ltd.
By:
--------------------------------------
Title:
-----------------------------------
IFS MANAGEMENT SERVICES PTE LTD
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 32
OCBC, WEARNES & WALDEN INVESTMENTS
(SINGAPORE) LIMITED
By: OCBC, Wearnes & Walden Management
(Singapore) Pte. Ltd.
By:
--------------------------------------
Title:
-----------------------------------
O,W&W INVESTMENTS LIMITED
By:
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 33
UOB VENTURE INVESTMENTS LIMITED
UOB VENTURE INVESTMENTS II LIMITED
By: UOB Venture Management Pte. Ltd.
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 34
SINGAPORE BIO-INNOVATIONS PTE. LTD.
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 35
DIONIS TRUST
By:
--------------------------------------
Its:
-------------------------------------
GRANT GUND 1978 TRUST
By:
--------------------------------------
Its:
-------------------------------------
G. ZACHARY GUND 1978 TRUST
By:
--------------------------------------
Its:
-------------------------------------
-----------------------------------------
Grant Gund
-----------------------------------------
G. Zachary Gund
-----------------------------------------
Warren Thaler
<PAGE> 36
VERTEX ASIA LIMITED
VERTEX INVESTMENT (II) LIMITED
HWH INVESTMENT PRIVATE LIMITED
By: Vertex Management, Inc.
By:
--------------------------------------
ALLERGAN PHARMACEUTICALS
(IRELAND) LTD., INC.
By:
--------------------------------------
Its:
-------------------------------------
<PAGE> 1
EXHIBIT 10.2
ISTA PHARMACEUTICALS, INC.
1993 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder.
2. Certain Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with of Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Ista Pharmaceuticals, Inc., a California
corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not; provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Board, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company
<PAGE> 2
policy adopted from time to time; or (iv) transfers between locations of the
Company or between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange for the last market trading day
prior to the time of determination) as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
-2-
<PAGE> 3
(r) "Plan" means this 1993 Stock Plan.
(s) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(t) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 4,750,000 shares of Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3 promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the Plan
("Rule 16b-3"), and by the legal requirements relating to the administration of
stock plans, if any, of California corporate and securities laws and the Code
(collectively, "Applicable Laws"), the Plan may (but need not) be administered
by different bodies with respect to directors, non-director officers and
Employees who are neither directors nor officers.
(ii) Administration With Respect to Directors and
Officers. With respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 with respect to
a plan intended to qualify thereunder as a discretionary plan, or (B) a
Committee designated by the Board to administer the Plan, which Committee shall
be constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
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<PAGE> 4
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options to Employees or Consultants
who are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted to satisfy Applicable Laws. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees
to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(f) instead of Common Stock;
and
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
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<PAGE> 5
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
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<PAGE> 6
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (4) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (5) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, (6) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for
the
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<PAGE> 7
Shares not more than twelve months after the date of delivery of the
subscription agreement, (7) any combination of the foregoing methods of payment,
or (8) such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. In making its determination as to
the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company (Section 315(b) of the California Corporation law).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only within ninety (90)
days (or such other period of time as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option and not exceeding ninety (90) days) after the date
of such termination (but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise his Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise
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<PAGE> 8
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Consulting
relationship or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option , which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the
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<PAGE> 9
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
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<PAGE> 10
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Administrator shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the
Administrator shall notify the Optionee that the Option shall be exercisable for
a period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without
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<PAGE> 11
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, a balance sheet and an income statement at least annually. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 12
ISTA PHARMACEUTICALS, INC.
STOCK OPTION AGREEMENT
UNDER THE
1993 STOCK PLAN
- --------------------------------------------------------------------------------
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
- --------------------------------------------------------------------------------
Unless otherwise defined herein, the terms defined in the Ista
Pharmaceuticals, Inc. 1993 Stock Plan (the "Plan") shall have the same meanings
in this Stock Option Agreement.
Optionee's Name:
---------------------------
Address:
---------------------------
---------------------------
<PAGE> 13
I. NOTICE OF STOCK OPTION GRANT
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Stock Option Agreement,
as follows:
Optionee's Name:
---------------------------
Date of Grant:
---------------------------
Total Number of Shares Granted:
---------------------------
Exercise Price per Share: $
---------------------------
Total Exercise Price: $
---------------------------
Term/Expiration Date:
---------------------------
Vesting Start Date:
---------------------------
Type of Option: Incentive Stock Option
----
Nonstatutory Stock Option
----
Vesting Schedule: This Option may be exercised, in whole or in part, in
accordance with the following "Vesting Schedule":
[With respect to the above-referenced options, one forty-eighth (1/48)
of the total number of shares subject to each option shall become
execrable at the end of each calendar month following the Vesting Start
Date, based upon such individuals' continued relationship with the
corporation.]
Termination Period: The "Termination Period" during which this Option
may be exercised is 30 days (3 months maximum for Incentive Stock Options) after
termination of Optionee's employment or consulting relationship, or such longer
period as may be applicable upon death or Disability of Optionee as provided in
the Plan, but in no event later than the Term/Expiration Date as provided above.
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<PAGE> 14
II. AGREEMENT
1. Grant of Option. The Company hereby grants to the Optionee named in
the Notice of Grant set forth as Part I above (the "Optionee"), an option (the
"Option") to purchase a total number of shares of Common Stock (the "Shares")
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price") subject to the terms, definitions and
provisions of the Plan, which is incorporated herein by reference.
If designated an Incentive Stock Option ("ISO"), this Option is intended
to qualify as an incentive stock option as defined in Section 422 of the Code.
If designated a Nonstatutory Stock Option ("NSO"), this Option is not intended
to qualify as an incentive stock option.
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Stock Option Agreement. In the
event of Optionee's death, Disability or other termination of Optionee's
employment or consulting relationship, the exercisability of the Option is
governed by the applicable provisions of the Plan and this Stock Option
Agreement. Notwithstanding the foregoing, this Option shall only be exercisable
if stockholder approval of the Plan is obtained within twelve months of the
adoption of the Plan by the Board.
(b) Method of Exercise. This Option is exercisable by delivery
of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares as
to which the Option is being exercised (the "Exercised Shares") and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise Notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be deemed to be
exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by such aggregate Exercise Price and any required withholding tax.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares are then listed.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
3. Investment Representations; Restrictions on Transfer.
(a) By receipt of this Option, by its execution and by its
exercise in whole or in part, Optionee represents to the Company the following:
(i) Optionee understands that this Option and any Shares
purchased upon its exercise are securities, the issuance of which requires
compliance with federal and state securities laws.
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<PAGE> 15
(ii) Optionee is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
securities. Optionee is acquiring these securities for investment for Optionee's
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(iii) Optionee acknowledges and understands that the
securities constitute "restricted securities" under the Securities Act and must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Optionee
further acknowledges and understands that the Company is under no obligation to
register the securities. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of Corporations of the
State of California and any other legend required under applicable state
securities laws.
(iv) Optionee is familiar with the provisions of Rule
701 and Rule 144, each promulgated under the Securities Act, which, in
substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of exercise of the Option by the
Optionee, such exercise will be exempt from registration under the Securities
Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph 3(a)(iv), the Optionee acknowledges
and agrees to the restrictions set forth in paragraph 3(b).
In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company: (2) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and (3) in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(v) Optionee understands that transfer of the Shares may
be restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner.
(b) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for
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<PAGE> 16
the purchase of, or otherwise dispose of any shares of Common Stock of the
Company held by Optionee (other than those shares included in the registration)
without the prior written consent of the Company or the underwriters managing
such initial underwritten public offering of the Company's securities for ninety
(90) days from the effective date of such registration, and (2) further agrees
to execute any agreement reflecting (1) above as may be requested by the
underwriters at the time of the public offering.
4. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
5. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) if there is a public market for the Shares and they are
registered under the Securities Act, delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price.
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<PAGE> 17
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
7. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified herein, the Option shall terminate.
8. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
9. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
10. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies
as an ISO, there will be no regular federal income tax liability or California
income tax liability upon the exercise of the Option, although the excess, if
any, of the fair market value of the Shares on the date of exercise over the
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to the alternative minimum
tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
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<PAGE> 18
(c) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price.
(d) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
ISTA PHARMACEUTICALS, INC.,
a California corporation
By:
---------------------------------
Title:
------------------------------
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<PAGE> 19
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan.
Dated:
----------------------------- ------------------------------------
Optionholder
------------------------------------
Address
------------------------------------
------------------------------------
Social Security No.
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<PAGE> 20
EXHIBIT A
ISTA PHARMACEUTICALS, INC.
1993 STOCK PLAN
EXERCISE NOTICE
Ista Pharmaceuticals, Inc.
15279 Alton Parkway
Building 100
Irvine, California 92618
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, _______, the
undersigned ("Purchaser") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Ista Pharmaceuticals, Inc. (the "Company")
under and pursuant to the Company's 1993 Stock Plan (the "Plan") and the Stock
Option Agreement dated (the "Option Agreement"). The aggregate purchase price
for the Shares shall be $________, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions. Purchaser acknowledges
the representations made in the Option Agreement.
4. Rights as Stockholder. Subject to the terms and conditions of this
Agreement, Purchaser shall have all of the rights of a stockholder of the
Company with respect to the Shares from and after the date the stock certificate
evidencing such Shares is issued, as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and such agreement is governed by
California law except for that body of law pertaining to conflict of laws.
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<PAGE> 21
Submitted by: Accepted by:
PURCHASER: ISTA PHARMACEUTICALS, INC.
By:
- ----------------------------------- ---------------------------------
Signature
Its:
- ----------------------------------- --------------------------------
Print Name
Address: Address:
15279 Alton Parkway
- ----------------------------------- Building 100
Irvine, CA 92618
- -----------------------------------
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<PAGE> 22
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: ISTA PHARMACEUTICALS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted
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<PAGE> 23
securities" acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the grant of
the Option to the Optionee, the exercise will be exempt from registration under
the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
(e) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
------------------------------------
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<PAGE> 24
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
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<PAGE> 25
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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<PAGE> 1
EXHIBIT 10.3
ISTA PHARMACEUTICALS, INC.
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) any act of personal dishonesty taken by the
Optionee in connection with his responsibilities as an Employee which is
intended to result in personal enrichment of the Optionee, (ii) the Optionee's
conviction of a felony, (iii) any act by the Optionee that constitutes
misconduct, and (iv) continued violations by the Optionee of the Optionee's
obligations to the Company.
(e) "Change of Control" means the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or
(ii) The consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets; or
<PAGE> 2
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or its parent) at
least seventy percent (70%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(h) "Common Stock" means the common stock of the Company.
(i) "Company" means Ista Pharmaceuticals, Inc., a California
corporation.
(j) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.
(k) "Director" means a member of the Board.
(l) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(m) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
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<PAGE> 3
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(p) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(q) "Inside Director" means a Director who is an Employee.
(r) "IPO Effective Date" means the date upon which the Securities
and Exchange Commission declares the initial public offering of the Company's
Common Stock as effective.
(s) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(t) "Notice of Grant" means a written or electronic notice
evidencing certain times and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(u) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(v) "Option" means a stock option granted pursuant to the Plan.
(w) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(x) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(y) "Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.
(z) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(aa) "Outside Director" means a Director who is not an Employee.
(bb) "Plan" means this 2000 Stock Option Plan, as amended and
restated.
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<PAGE> 4
(cc) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(dd) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(ee) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(ff) "Section 16(b) " means Section 16(b) of the Exchange Act.
(gg) "Service Provider" means an Employee, Director or Consultant.
(hh) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(ii) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(jj) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is [__________________] Shares, which includes the Shares
available for future issuance under the Advanced Corneal Systems, Inc. 1993
Stock Plan (the "1993 Stock Plan") on the date the Securities and Exchange
Commission declares the company's registration statement effective and any
Shares returned to the 1993 Stock Plan. The number of Shares reserved for
issuance under the Plan shall increase annually on the first day of the
Company's fiscal year beginning in 2001 by an amount of Shares equal to the
lesser of (i) [___________(same as in plan)] Shares, (ii) 5% of the outstanding
Shares on such date or (iii) an amount determined by the Board. The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
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<PAGE> 5
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
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(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 16(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without Cause.
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(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 2,000,000
Shares, which shall not count against the limit, set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 14.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
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(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the
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Administrator provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. Subject to
Section 14, if an Optionee ceases to be a Service Provider (but not in the event
of an Optionee's change of status from Employee to Consultant (in which case an
Employee's Incentive Stock Option shall automatically convert to a Nonstatutory
Stock Option on the ninety-first (91st) day following such change of status) or
from Consultant to Employee), such Optionee may, but only within such period of
time as is specified in the Option Agreement (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination. In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for three (3)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may, but only
within twelve (12) months from the date of such termination (and in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Option is
vested on the date of termination. If, on the date of termination, the Optionee
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event
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<PAGE> 10
later than the expiration of the term of such Option as set forth in the Notice
of Grant), by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death. If, at the time of death, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if none,
by the person(s) entitled to exercise the Option under the Optionee's will or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the
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Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
13. Formula Option Grants to Outside Directors. Outside Directors shall
be granted Options in accordance with the following provisions:
(a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.
(b) Except as provided in subsection (d) below, each person who
first becomes an Outside Director on or after the IPO Effective Date, whether
through election by the stockholders of the Company or appointment by the Board
to fill a vacancy shall be automatically granted an Option to purchase up to
[20,000] Shares (the "First Option") on the date he or she first becomes an
Outside Director; provided, however, that an Inside Director who ceases to be an
Inside Director but who remains a Director shall not receive a First Option.
(c) Except as provided in subsection (d) below, each Outside
Director shall be automatically granted an Option to purchase up to [5,000]
Shares (a "Subsequent Option") following each annual meeting of the stockholders
of the Company occurring after the end of the Company's fiscal year 2000, if
immediately after such meeting, he or she shall continue to serve on the Board
and shall have served on the Board for at least the preceding six (6) months.
(d) Notwithstanding the provisions of subsections (b) and (c)
hereof, any exercise of an Option granted before the Company has obtained
stockholder approval of the Plan in accordance with Section 20 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 20 hereof.
(e) The terms of each First Option granted pursuant to this
Section shall be as follows:
(i) the term of the Option shall be ten (10) years.
(ii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
(iii) 25% of the Shares subject to the Option shall vest
twelve months after the date of grant and 1/16 of the Shares subject to the
Option shall vest each quarter thereafter. provided that the Outside Director
shall continue to serve on the Board on such dates.
(f) The terms of each Subsequent Option granted pursuant to this
Section shall be as follows:
(i) the term of the Option shall be ten (10) years.
(ii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
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(iii) the Option shall vest and become exercisable in full on
the fourth anniversary after the date of grant provided that in each case the
Outside Director shall continue to serve on the Board on such date.
14. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. Subject to Section 15 below, in the
event of a merger of the Company with or into another corporation, or the sale
of substantially all of the assets of the Company (a "Merger"), each outstanding
Option and Stock Purchase Right shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation (the "Successor Corporation"). In the event that the
Successor Corporation refuses to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and have the right to exercise
the Option or Stock Purchase Right as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
or Stock Purchase Right becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a Merger, the Administrator shall
notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days
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from the date of such notice, and the Option or Stock Purchase Right shall
terminate upon the expiration of such period. For the purposes of this Section
14(c), the Option or Stock Purchase Right shall be considered assumed if,
following the Merger, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the Merger, the consideration (whether
stock, cash, or other securities or property) received in the Merger by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Merger is not
solely common stock of the Successor Corporation or its Parent, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the Successor Corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the Merger.
15. Change of Control. In the event of a Change of Control, each
outstanding Option held by an Outside Director shall vest and become exercisable
in full as to all of the Optioned Stock, including Shares as to which the
Outside Director would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable as provided in this paragraph, the
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the Option shall terminate upon the expiration
of such period.
16. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
17. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
18. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the
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issuance and delivery of such Shares shall comply with Applicable Laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
19. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
20. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
21. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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EXHIBIT 10.4
ISTA PHARMACEUTICALS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of Ista Pharmaceuticals, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or
any committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Ista Pharmaceuticals, Inc. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
Purchase Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after [_____________]
and [______________] of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the last Trading Day on
or before [______________]. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
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(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after [_______________] and [_______________] each year, or on
such other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the last Trading
Day on or before [________________]. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced [AT LEAST FIVE (5) DAYS] prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
[___________] shares of the Company's Common Stock (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board
may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of
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<PAGE> 5
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
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<PAGE> 6
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be [_____________ (__________)] shares plus an annual increase to be
added on the first day of the company's fiscal year beginning in 2001, equal
to the lesser of (i) [______] shares, (ii) [___%] of the outstanding shares on
such date or (iii) a lesser amount determined by the Board.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the participant
and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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<PAGE> 7
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of
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<PAGE> 8
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount
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<PAGE> 9
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable, modify
or amend the Plan to reduce or eliminate such accounting consequence including,
but not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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<PAGE> 10
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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<PAGE> 11
EXHIBIT A
ISTA PHARMACEUTICALS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Ista
Pharmaceuticals, Inc. Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee
Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to _____%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the
<PAGE> 12
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
------------------------------------------------------
(First) (Middle) (Last)
----------------------------- --------------------------------------
Relationship
--------------------------------------
(Address)
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<PAGE> 13
Employee's Social
Security Number:
--------------------------------------
Employee's Address:
--------------------------------------
--------------------------------------
--------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
------------------------------- --------------------------------------
Signature of Employee
--------------------------------------
Spouse's Signature (If beneficiary
other than spouse)
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<PAGE> 14
EXHIBIT B
ISTA PHARMACEUTICALS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Ista
Pharmaceuticals, Inc. Employee Stock Purchase Plan which began on ____________,
______ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
--------------------------------------
--------------------------------------
--------------------------------------
Signature:
--------------------------------------
Date:
---------------------------------
<PAGE> 1
EXHIBIT 10.5
ISTA PHARMACEUTICALS, INC.
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of________,
2000 by and between Ista Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and _________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
a. "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a
<PAGE> 2
vote of at least two thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
b. "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
c. References to the "Company" shall include, in addition to Ista
Pharmaceuticals, Inc., any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger to which Ista
Pharmaceuticals, Inc. (or any of its wholly owned subsidiaries) is a party
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
d. "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
e. "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
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<PAGE> 3
f. "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
h. References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
i. "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
j. "Section" refers to a section of this Agreement unless otherwise
indicated.
k. "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
a. Indemnification of Expenses. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part out of
a Covered Event), including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses.
b. Review of Indemnification Obligations. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party,
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<PAGE> 4
and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all Expenses theretofore paid to
Indemnitee to which Indemnitee is not entitled hereunder under applicable law;
provided, however, that if Indemnitee has commenced or thereafter commences
legal proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee is entitled to be indemnified hereunder under applicable law,
any determination made by any Reviewing Party that Indemnitee is not entitled to
be indemnified hereunder under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expenses
theretofore paid in indemnifying Indemnitee until a final judicial determination
is made with respect thereto (as to which all rights of appeal therefrom have
been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for
any Expenses shall be unsecured and no interest shall be charged thereon.
c. Indemnitee Rights on Unfavorable Determination; Binding Effect.
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
d. Selection of Reviewing Party; Change in Control. If there has not
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the employment of separate counsel by one or more
Indemnitees has been previously authorized by the Company in writing, or (ii) an
Indemnitee shall have provided to the Company a written statement that such
Indemnitee has reasonably concluded that there may be a conflict of interest
between such Indemnitee and the other Indemnitees with respect to the matters
arising under this Agreement.
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<PAGE> 5
e. Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
a. Obligation to Make Expense Advances. Upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.
b. Form of Undertaking. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured
and no interest shall be charged thereon.
c. Determination of Reasonable Expense Advances. The parties agree
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
a. Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such written
demand by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than ten (10) business days after such
written demand by Indemnitee is presented to the Company.
b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
c. No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that
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<PAGE> 6
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by this Agreement or applicable law. In addition, neither the failure
of any Reviewing Party to have made a determination as to whether Indemnitee has
met any particular standard of conduct or had any particular belief, nor an
actual determination by any Reviewing Party that Indemnitee has not met such
standard of conduct or did not have such belief, prior to the commencement of
legal proceedings by Indemnitee to secure a judicial determination that
Indemnitee should be indemnified under this Agreement under applicable law,
shall be a defense to Indemnitee's claim or create a presumption that Indemnitee
has not met any particular standard of conduct or did not have any particular
belief. In connection with any determination by any Reviewing Party or otherwise
as to whether the Indemnitee is entitled to be indemnified hereunder under
applicable law, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
d. Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
e. Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
a. Scope. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that
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<PAGE> 7
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 10(a) hereof.
b. Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:
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<PAGE> 8
a. Excluded Actions or Omissions. To indemnify or make Expense
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
b. Claims Initiated by Indemnitee. To indemnify or make Expense
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances, or insurance recovery, as
the case may be.
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
d. Claims Under Section 16(b). To indemnify Indemnitee for Expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation.
In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance
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<PAGE> 9
policies maintained by the Company to enforce or interpret any of the terms
hereof or thereof, Indemnitee shall be entitled to be indemnified for all
Expenses incurred by Indemnitee with respect to such action (including without
limitation attorneys' fees), regardless of whether Indemnitee is ultimately
successful in such action, unless as a part of such action a court having
jurisdiction over such action makes a final judicial determination (as to which
all rights of appeal therefrom have been exhausted or lapsed) that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous; provided, however, that until such final
judicial determination is made, Indemnitee shall be entitled under Section 3 to
receive payment of Expense Advances hereunder with respect to such action. In
the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee in
defense of such action (including without limitation costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action a court having jurisdiction over such
action makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
15. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
17. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to
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<PAGE> 10
the fullest extent possible, the provisions of this Agreement (including without
limitation each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
21. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
ISTA PHARMACEUTICALS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address:
------------------------------
AGREED TO AND ACCEPTED
INDEMNITEE:
----------------------------------------
(Signature)
----------------------------------------
Name
----------------------------------------
Address
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<PAGE> 1
EXHIBIT 10.6
CLINICAL DEVELOPMENT AGREEMENT
PROTOCOL #VIT-02-08961X AND PROTOCOL #VIT-03-08961X: Two Phase III Safety and
Efficacy Studies of Vitrase(TM) (Hyaluronidase for Ophthalmic Intravitreal
Injection) for Clearance of Severe Vitreous Hemorrhage.
PREPARED FOR: Advanced Corneal Systems, Inc.
15279 Alton Parkway
Suite 100
Irvine, California 92618
BY: Covance Clinical and Periapproval Services Inc.
2121 North California Boulevard
Suite 500
Walnut Creek, California 94596
20 October 1998
[COVANCE LOGO]
<PAGE> 2
CLINICAL DEVELOPMENT AGREEMENT
THIS AGREEMENT, made as of the date last signed below is by
and between ADVANCED CORNEAL SYSTEMS, INC., a corporation of the State of
California having its principal place of business at 15279 Alton Parkway, Suite
100, Irvine, California, 92618 ("ACS"), and COVANCE, INC., doing business as
COVANCE CLINICAL AND PERIAPPROVAL SERVICES, INC., a corporation of the State of
Delaware having its principal place of business at 210 Carnegie Center,
Princeton, New Jersey 08540-6233 ("COVANCE").
WITNESSETH:
WHEREAS, ACS is an ethical pharmaceutical manufacturer which is
currently considering the evaluation of the safety and effectiveness of a drug
known as Hyaluronidase Solution (the "DRUG") for the clearance of severe
vitreous hemorrhage; and
WHEREAS, COVANCE is in the business of providing services for the
development of experimental new drugs in North and South America, Asia,
Australia, and Europe; and
WHEREAS, ACS has entered into a contract substantially similar to this
Agreement with CroMedica Global, Inc. ("CROMEDICA"), for the purpose of having
CroMedica assist ACS with the execution of substantially the same clinical
investigation of the DRUG in South Africa ("CROMEDICA STUDY") and ACS intends to
enter into a contract substantially similar to this Agreement with Verum
Staticon ("VERUM"), for the purpose of having Verum assist ACS with the
execution of substantially the same clinical investigation of the DRUG in
Germany ("VERUM STUDY"); and
WHEREAS, ACS desires to contract with COVANCE, and COVANCE desires to
be contracted by ACS, for the purposes of providing such services to assist ACS
in the execution of a clinical investigation of the DRUG and the preparation of
the data (incorporating the result's from both COVANCE's clinical investigation,
the CROMEDICA STUDY, and the VERUM STUDY) into a report or reports for ACS to
submit to the United States Food and Drug Administration ("FDA") and other
international regulatory authorities for marketing approval (collectively the
"SUBMISSIONS") and completion of other tasks as outlined in Exhibit A,
<PAGE> 3
20 October 1998
Page 2
NOW, THEREFORE, the parties hereby agree as follows:
1. Obligations of Covance: COVANCE hereby agrees to conduct a clinical
investigation (the "STUDY") of the DRUG in accordance with ACS's
instructions and the accepted standards of medical and clinical
research standards. The services to be provided by COVANCE to ACS will
include, but will not be limited to, the following:
(a) COVANCE will conduct the STUDY in accordance to agreed upon
protocols and as outlined in Exhibit A. The STUDY will be
conducted in full compliance with this Agreement and in
accordance with the protocol, any protocol amendments mutually
agreed to by the parties, any conditions set forth by the
reviewing Institutional Review Board ("IRB") and all
applicable Federal, state, and local laws, statutes,
ordinances, and regulations including all applicable
regulations enforced by the FDA for the conduct of clinical
trials used to support marketing approval of the DRUG. COVANCE
also agrees that Investigators will agree to conduct the study
in accordance with generally accepted standards of Good
Clinical Practice.
(b) COVANCE will include the data received from CroMedica and
Verum in connection with the CROMEDICA STUDY and VERUM STUDY
in the SUBMISSIONS or parts thereof, prepared by COVANCE.
COVANCE will be responsible for the timely and proper
preparation of the SUBMISSIONS or parts thereof COVANCE will
not be responsible for any delays, and/or deficiencies that
are caused by CROMEDICA's or VERUM's failure to implement the
agreed to PROTOCOLS or deliver the data from the CROMEDICA
STUDY or VERUM STUDY to COVANCE in accordance with mutually
agreeable timelines or in a mutually acceptable format;
provided, however, that COVANCE has provided ACS with timely
notice of potential delays and/or deficiencies once it has a
reasonable basis to believe either or both are likely.
(c) COVANCE will recruit qualified investigators identified by ACS
("INVESTIGATOR") with the necessary and appropriate experience
and standing to perform the STUDY; and said INVESTIGATOR must
be licensed to practice medicine in the location where the
STUDY is to be conducted and must be in compliance with
21 CFR 312.53.
<PAGE> 4
20 October 1998
Page 3
(d) COVANCE will prepare necessary and appropriate documentation
for submission to the appropriate regulatory authority and ACS
for the conduct of the STUDY including but not limited to the
following:
1) A completed and signed Form FDA-1572
2) Current curriculum vitae of the INVESTIGATOR and all
secondary INVESTIGATORS identified on Form FDA-1572.
3) PROTOCOL (defined below) signature page signed by the
principal INVESTIGATOR.
4) A copy of the informed consent form to be used by the
INVESTIGATOR.
5) IRB's (defined below) approval of the PROTOCOL and
informed consent form.
For purposes of this Agreement: (i) "IRB" means an
institution review board that complies with the
requirements of Title 21, Part 56 of the code of
Federal Regulations, as amended, supplemented or
modified from time to time; and (ii) "PROTOCOL" means
the document which specifies the testing procedures
and conditions mutually agreed upon by ACS and
COVANCE for the performance of a STUDY.
6) As appropriate, IRB approval of PROTOCOL amendments
and annual re-approvals.
(e) COVANCE will undertake to assure that INVESTIGATORS hereby
certify that they have not been debarred under the provisions
of the Generic Drug Enforcement Act of 1992, 21 U.S.C. 306 (a)
or (b). In the event that INVESTIGATOR:
(i) becomes debarred; or
(ii) receives notice of action or threat of
action with respect to their debarment,
during the term of this Agreement, COVANCE
and INVESTIGATOR agree to notify ACS
immediately. In the event that
<PAGE> 5
20 October 1998
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any INVESTIGATOR becomes debarred as set
forth in clause (i) INVESTIGATOR understands
that this Agreement shall automatically
terminate without any further action or
notice by either party. In the event that an
INVESTIGATOR receives notice of action or
threat of action as set forth in clause
(ii) above, COVANCE and INVESTIGATOR
understands that ACS shall have the right
to terminate this Agreement immediately.
(f) COVANCE hereby certifies that they have not and will not
knowingly use in any capacity the services of any individual,
corporation, partnership or association which has been
debarred under 21 U.S.C. 306 (a) or (b). In the event that
COVANCE or any INVESTIGATOR becomes aware of the debarment or
threatened debarment of any individual, corporation,
partnership or association providing services to COVANCE or an
INVESTIGATOR which directly or indirectly relate to
Investigator's activities under this Agreement, COVANCE and
INVESTIGATOR shall notify ACS immediately. COVANCE and
INVESTIGATOR understand that ACS shall have the right to
terminate this Agreement immediately upon receipt of such
notice.
(g) COVANCE will provide all INVESTIGATORS with the current
INVESTIGATORS' brochure and any amendments thereto and, as the
investigation proceeds, will keep each INVESTIGATOR informed
of new information received from ACS regarding the DRUG.
(h) COVANCE will monitor the STUDY in accordance with all now or
hereafter applicable Federal, state, and local laws, statutes,
ordinances, and regulations, including without limitation:
Food and Drug Administration (or any other government body or
agency that succeeds it) ("FDA") guidelines on the
responsibilities of sponsors, monitors and clinical
INVESTIGATORS and informed consents in compliance with Good
Clinical Practices.
ACS shall have the right, but not the obligation, to
co-monitor, in conjunction with COVANCE, the INVESTIGATORS
retained by COVANCE and their STUDY with respect to the
services provided hereunder. In the event ACS determines there
is cause for independent monitoring by ACS, it may do so
<PAGE> 6
20 October 1998
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following prior written notification to COVANCE, and COVANCE
will assist and cooperate with ACS therein.
(i) COVANCE agrees that throughout the duration of this Agreement,
and at any subsequent time when COVANCE shall receive
information regarding the safety of the DRUG used in the STUDY
as it pertains to serious or unexpected adverse experiences,
it shall notify ACS in writing, in English. Such notification
shall be in such a timely fashion so as to permit full
compliance with all regulatory requirements (e.g. 21 CRF
312.32) for the handling and disclosure of any information
concerning any serious or unexpected event, injury, toxicity
or sensitivity reaction or any unexpected incidence, or the
severity thereof, associated with the clinical use, studies,
investigations, tests, whether or not determined to be
attributable to the DRUG. "Serious," as used in this section,
refers to an experience at any dose which results in death or
which places the patient at immediate risk of death,
in-patient hospitalization or prolongation of existing
hospitalization, a persistent or significant disability or
incapacity, a congenital anomaly, cancer or birth defect, or
an important medical event that may jeopardize the patient and
may require medical or surgical intervention to prevent any of
the foregoing outcomes, or as such definition may otherwise be
amended, supplemented or modified from time to time by the
FDA. "Unexpected," as used in this section, refers to
conditions or developments to the frequency, specificity or
severity of which are not consistent with the current
investigator brochure or, if an investigator brochure is not
required or available, with the risk information described in
the general investigational plan or elsewhere in the current
application or conditions or developments that have not been
previously observed during clinical studies of the DRUG, or as
such definition may otherwise be amended, supplemented or
modified from time to time by the FDA.
ACS and COVANCE shall be responsible for collecting,
reporting, and processing all relevant serious and unexpected
adverse experience ("SAE") information and follow-up SAE
information as defined in the SAE Reporting Plan developed by
ACS and Covance.
<PAGE> 7
20 October 1998
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(j) COVANCE will collect the evidence related to the safety of the
drug as it is obtained from the INVESTIGATORS being monitored
by COVANCE and forward such evidence to ACS.
(k) COVANCE will store copies of all data and records in
accordance with local and FDA regulations. The originals of
all such information will be forwarded to ACS at the
termination of the program.
(1) COVANCE will report to ACS any INVESTIGATOR that is not
complying with his/her signed agreement (Form FDA-1572) and
attempt to obtain compliance. If compliance is not promptly
obtained and after approval is received from ACS, Covance will
end the INVESTIGATORS participation in the STUDY, and recover
any DRUG and STUDY records.
(m) COVANCE will be responsible for the selection of monitors
qualified by training and experience to monitor the progress
of the investigation.
(n) ACS will undertake the shipment of the DRUG to participating
INVESTIGATORS, During the STUDY, COVANCE will monitor to
ensure that the clinical INVESTIGATOR maintains a record of
the dates and amounts of drug supplies received at the STUDY
location; the dates, amount and patients to whom the test DRUG
has been administered; the dates (when known) and amount of
the drug broken, spilled, or lost; and the dates and amount of
the DRUG supply which is being returned. At the completion or
early termination of each STUDY, COVANCE will make an
accounting of all clinical supplies. COVANCE will assure that
the INVESTIGATOR shall return to ACS (or to another location
specified by ACS), after the completion or earlier termination
of any such STUDIES all unused DRUG supplies and account for
all DRUG supplies which have been lost or missing.
(o) Should appropriate regulatory authorities or any other
Federal, state, or local government authority conduct, or give
notice of intent to conduct, an inspection at any
investigational site or take any other regulatory action with
respect to services provided for in this Agreement, then
COVANCE will promptly give ACS notice
<PAGE> 8
20 October 1998
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thereof, supply all information pertinent thereto, and ACS
shall have the right, but not the obligation, to be present at
any such inspection or regulatory action.
2. Transfer of Obligations: Pursuant to 21 CFR 312.52, ACS has
transferred to COVANCE all of the obligations identified in Attachment
1 and agrees that the same description and extent of obligations
transferred should be included in Form FDA 1571, Section #13. COVANCE
accepts the transferred responsibilities and agrees to carry out
diligently all transferred obligations. All obligations not
specifically transferred hereunder are retained by ACS.
3. Status Reporting: All of the hereinabove described services shall be
performed in close cooperation with ACS, and designated ACS personnel
will be kept continuously informed of the progress of the
INVESTIGATIONS.
COVANCE will provide status reports on the STUDY. The status reports
will include, but not be limited to: the number of patients entered,
dropped, and completed in the STUDY. Reports of monitoring visits will
also be provided on a timely basis as specified in Exhibit A.
4. Clinical Supplies: ACS will, at its expense, supply the INVESTIGATORS
with the DRUG and other DRUG supplies as are agreed upon by COVANCE and
ACS for the timely completion of the STUDY hereinabove described, and
will direct the shipment of any such supplies to the location indicated
by COVANCE, within a reasonable time after receipt of notification from
COVANCE of the need for any such clinical supplies.
5. Confidential Information: COVANCE agrees that all materials, documents
and information provided to it by ACS and, except as provided in
Section 14, all information developed by COVANCE exclusively in
connection with the STUDY, whether prior or subsequent to the execution
of this Agreement, for ACS pursuant to this Agreement is and shall be
considered as confidential information to ACS (collectively, the
"CONFIDENTIAL INFORMATION") and the sole property of ACS. COVANCE
agrees to hold such CONFIDENTIAL INFORMATION in strict confidence for
ten (10) years after the date of this Agreement and shall disclose the
CONFIDENTIAL INFORMATION to hospital authorities, IRB, INVESTIGATORS
and their respective agents, employees, officers and directors, and
representatives only on a need-to-know
<PAGE> 9
20 October 1998
Page 8
basis (including fulfilling corporate reporting obligations) and only
if the foregoing parties (other than hospital authorities and IRBs) are
bound and obligated by the same provisions of confidentiality as used
by any member of COVANCE; provided that (a) COVANCE will have no
obligations with respect to any CONFIDENTIAL INFORMATION that is now or
later becomes publicly available through no fault of COVANCE, (b)
COVANCE obtains such CONFIDENTIAL INFORMATION from a third party
entitled to disclose it, (c) COVANCE can demonstrate through written
records it already has in their possession such CONFIDENTIAL
INFORMATION as indicated in their written records, or (d) such
CONFIDENTIAL INFORMATION is required by any law, rule, regulation,
order, decision, decree or subpoena or other judicial, administrative
or legal process to be disclosed.
All obligations of confidentiality and non-disclosure set forth in this
Agreement will survive, without limitation, the expiration or earlier
termination, for any reason, of this Agreement.
Nothing contained in this Section 5 shall be interpreted to limit the
rights of COVANCE and ACS's obligations under Section 14 hereof and to
the extent that any conflict arises in applying the provisions of
Sections 5 and 14, the provisions of Section 14 shall control.
Upon the completion or earlier termination of this Agreement, COVANCE
will promptly return to ACS all of the CONFIDENTIAL INFORMATION, as
well as all written material which incorporates any CONFIDENTIAL
INFORMATION.
COVANCE acknowledges that the disclosure of CONFIDENTIAL INFORMATION
without ACS's express written permission will cause ACS irreparable
harm and that the breach or threatened breach of the nondisclosure
provisions of this Agreement will entitle ACS to injunctive relief, in
addition to any other legal remedies that may be available to it.
6. Compensation:
(a) Attached hereto as Exhibit A are the COVANCE Time and Cost
Estimates, which contains the budgets for out-of-pocket costs
and for COVANCE costs, which can only be modified by the
procedure described in this Section.
<PAGE> 10
20 October 1998
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(b) ACS hereby agrees to pay COVANCE for all services performed by
COVANCE and its agents and clinical investigators pursuant to
this Agreement, as set forth in Exhibit A, provided that the
total amount paid by ACS shall not exceed the cost estimates
provided for in Exhibit A, unless agreed to in writing by the
parties or allowed for in this Section.
(c) All direct COVANCE out-of-pocket expenses incurred on behalf
of ACS, such as, but not limited to travel and shipping
expenses, do not have profit factors applied to them. COVANCE
expects that the specified out-of-pocket costs estimated in
Exhibit A will be correct to within 10%. ACS agrees to this
margin of the estimate as long as expenses are based on actual
costs and documented. If changes in the program occur that
affect out-of-pocket costs, or COVANCE otherwise projects that
costs may exceed the estimates plus 10%, COVANCE will provide
revised estimates for ACS's review and written approval as
specified in Section 8.
Out-of-pocket costs will be invoiced to ACS on a monthly
basis. These invoices will contain summary reports of
expenses. Receipts of all expenses will remain on file at
COVANCE and will be open to ACS inspection, if requested.
(d) COVANCE fees for this project will not exceed those specified
in Exhibit A unless there is a change in the program agreed to
in writing by the parties and documented as described in
Section 8.
COVANCE fees will be invoiced in accordance with the payment
schedule outlined in Attachment 2.
(e) ACS will, within thirty (30) days subsequent to the date of
this Agreement, pre-pay COVANCE an amount corresponding to 25%
of the out-of-pocket costs of the project over the first 12
months as contained in Exhibit A. This amount will be adjusted
to correspond to the next 12 month period each successive year
of the program.
<PAGE> 11
20 October 1998
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This prepaid amount will be returned to ACS at the early
termination or completion of the project or credited against
final invoices as agreed to between COVANCE and ACS.
(f) COVANCE will submit to ACS a monthly invoice approximately
twenty (20) days after the end of each calendar month during
the term of this Agreement that will contain out-of-pocket
costs as specified in Section 6(b) and (c). Invoices for
COVANCE fees will be provided as specified in Section 6(d).
All invoices are payable within thirty (30) days of receipt.
(g) All payments or prepayments by ACS under Section 6 shall be
made free of interest.
7. Assumptions:
(a) The time, cost, fee and budget estimates specified in Exhibit
A with respect to a STUDY are subject to a number of general
and STUDY specific assumptions. The general assumptions
(collectively, the "GENERAL ASSUMPTIONS") are as follows:
(i) The scope of the STUDY remains constant;
(ii) ACS and COVANCE execute all of their obligations
under this Agreement in a timely manner;
(iii) ACS and Covance fully cooperate with each other in
the performance of their obligations under this
Agreement and refrain from any actions or inactions
which prevent a party from timely or properly
performing its obligations hereunder and thereunder,
respectively; and
(iv) No other event outside of COVANCE's or ACS's control,
including, without limitation, the events described
in Section 10 occur.
The STUDY specific assumptions (the "STUDY SPECIFIC
ASSUMPTIONS") are set forth in Exhibit A.
<PAGE> 12
20 October 1998
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(b) In the event that any of the ASSUMPTIONS (defined below) are
not complied with by the parties or the parties desire to
modify or deviate (a "DEVIATION") from them, or the parties
determine that the STUDY objectives cannot be fulfilled based
on the ASSUMPTIONS, then the budget, fees, costs and time
estimates for such STUDY as specified in Exhibit A shall be
modified in accordance with the terms of Section 8 hereof. For
purposes of this Agreement, "ASSUMPTIONS" means any of the
GENERAL ASSUMPTIONS and the STUDY SPECIFIC ASSUMPTIONS.
8. Change Orders:
(a) In the event a DEVIATION is identified by ACS or COVANCE, the
identifying party shall notify in writing the other party of
such DEVIATION. Within 20 business days from the receipt by
COVANCE or sending of such DEVIATION notice, COVANCE shall
provide ACS with an estimate of the modification to the
timeline, costs and fees and overall budget (whether an
increase or decrease) arising from such DEVIATION. ACS shall
have seven business days to approve such modification
estimates. If ACS does not approve such modification estimates
and has not terminated the STUDY but wants the STUDY to be
modified to take in account the DEVIATION, then ACS and
COVANCE shall use their best efforts to agree on modification
estimates that are mutually acceptable.
(b) During the DEVIATION ASSESSMENT PERIOD (defined below),
COVANCE shall continue work on the STUDY if practicable but
shall not implement the modification representing the
DEVIATION unless approved in writing by ACS.
For purposes of this Agreement, "DEVIATION ASSESSMENT PERIOD"
means the time from the date COVANCE sends or receives a
notice of DEVIATION pursuant to this Section 8 and the date
ACS either accepts or rejects COVANCE's modification estimates
as specified in this Section 8.
9. Early Termination: ACS may terminate this Agreement prior to the
STUDY's completion at any time for any reason upon 30 days written
notice to COVANCE. In the event of such termination, COVANCE shall be
promptly paid in full for all work and services performed in connection
with such STUDY, including all out-of-pocket expenses and all
<PAGE> 13
20 October 1998
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COVANCE fees, as of the date work on such STUDY is actually concluded.
COVANCE shall use all reasonable efforts to conclude or transfer the
STUDY as expeditiously as practicable and in accordance with all
applicable laws, rules and regulations, including those of the FDA.
Further, COVANCE and ACS shall cooperate with each other during such
STUDY termination to safeguard patient safety, continuity of patient
treatment and to comply with applicable laws, rules and regulations.
In addition to the costs, expenses and fees specified in this
Section 9, ACS shall pay to COVANCE an amount equal 1.5 (months) times
the average of the monthly fee paid to COVANCE during the STUDY (x
dollars), as liquidated damages and not as a penalty; provided that
such fee shall not be paid if ACS has terminated the STUDY because of
COVANCE's breach of a material obligation under this Agreement.
10. Force Majeure. The parties shall be excused from performing their
obligations under this Agreement if its performance is delayed or
prevented by any event beyond such party's is reasonable control,
including, but not limited to, acts of God, fire, explosion, weather,
disease, war, insurrection, civil strife, riots, government action or
power failure, provided that such performance shall be excused only to
the extent of and during such disability. Any time specified for
completion of performance in this Agreement falling due during or
subsequent to the occurrence of any such events shall be automatically
extended for a period of time equal to the period of such disability.
COVANCE will promptly notify ACS if, by reason of any of the events
referred to herein, COVANCE is unable to meet any such time for
performance specified in this Agreement.
11. Indemnity - Clinical Investigators: ACS hereby agrees to indemnify and
hold harmless the INVESTIGATORS, subject to limitations (a), (b), (c),
(d) and (e) below, from and against any and all costs (including costs
and reasonable attorneys' fees), expenses, damages and judgments
resulting from a claim which occurs to a participant in the STUDY which
was directly or indirectly caused by the DRUG provided:
(a) The conduct of the INVESTIGATOR is not negligent or otherwise
tortisus;
(b) ACS is properly notified in writing of the claim, but no
indemnitee shall lose indemnification rights hereunder by
failing to give the indemnifying party such
<PAGE> 14
20 October 1998
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notice unless such failure materially and adversely affects
the indemnifying party's ability to defend;
(c) ACS is given sole and absolute control of, and discretion in,
the handling of such claim, action or suit, including, without
limitation, the selection of defense counsel, provided ACS
reasonably and promptly acknowledges its intent to assume
control of the defense of such claim, action or suit;
(d) ACS receives the full cooperation of the INVESTIGATOR during
pendency of the claim or lawsuit; and
(e) The STUDY is conducted in full accordance with the PROTOCOL,
any PROTOCOL amendment, and in accordance with generally
accepted medical standards; slight deviations arising out of
necessity and not contributing to the injury or affecting the
STUDY validity shall not be considered a failure to adhere to
the PROTOCOL.
12. Indemnification - COVANCE:
(a) COVANCE shall indemnify and hold harmless ACS and its
officers, directors, employees and agents from any loss,
damage, cost or expense (including reasonable attorney's
fees) (a "LOSS") arising from any claim, demand, assessment,
action, suit or proceeding (a "CLAIM") for personal injury to
STUDY participants or personal injury to any employee of ACS
or property damage arising or occurring during the conduct of
the STUDY as a result of COVANCE's negligence, gross
negligence or intentional misconduct or inaction or
performance that violates the law; provided that if such LOSS
or CLAIM arises in whole or in part from ACS's negligence,
gross negligence or intentional misconduct or inaction, then
the amount of the LOSS that COVANCE shall indemnify ACS for
pursuant to this Section 12 shall be reduced by an amount in
proportion to the percentage of ACS's responsibilities for
such LOSS as determined by a court of competent jurisdiction
in a final and non-appealable decision or in a binding
settlement between the parties.
<PAGE> 15
20 October 1998
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(b) ACS shall indemnify and hold harmless COVANCE, and their
respective affiliates and their respective officers,
directors, employees and agents (the "COVANCE GROUP") from any
CLAIM or LOSS arising from or related to (i) personal injury
to a participant in the STUDY or personal injury to any
employee of the COVANCE GROUP directly or indirectly caused by
the DRUG, (ii) this AGREEMENT, the STUDY or any aspect thereof
set forth in the PROTOCOL that violates any applicable law,
rule, regulation or ordinance, (iii) the DRUG's harmful or
otherwise unsafe effect, including, without limitation, a
CLAIM based upon ACS's or any other person's use, consumption,
sale, distribution or marketing of any substance, including
the DRUG, or (iv) the negligence, gross negligence or
intentional misconduct or inaction of ACS in the performance
of its obligations under this AGREEMENT or the PROTOCOL
related to such STUDY (v) the performance of CROMEDICA or
VERUM in its obligations; provided that if such LOSS or CLAIM
(other than a LOSS or CLAIM described in clause [iii] hereof
arises in whole or in part from COVANCE's negligence, gross
negligence or intentional misconduct or inaction or COVANCE's
violation of the law, then the amount of such LOSS that ACS
shall indemnify the COVANCE GROUP for pursuant to this Section
12 shall be reduced by an amount in proportion to the
percentage of COVANCE's responsibilities for such LOSS as
determined by a court of competent jurisdiction in a final and
non-appealable decision or in a binding settlement between the
parties. ACS shall not indemnify the COVANCE GROUP from any
LOSS or from any CLAIM described in clause (iii) hereof
arising solely from the willful misconduct or inaction or
gross negligence of COVANCE or COVANCE's violation of the law.
(c) Upon receipt of notice of any CLAIM which may give rise to a
right of indemnity from the other party hereto, the party
seeking indemnification (the "INDEMNIFIED PARTY") shall give
written notice thereof to the other party, (the "INDEMNIFYING
PARTY") with a CLAIM for indemnity. Such CLAIM for indemnity
shall indicate the nature of the CLAIM and the basis
therefore. Promptly after a CLAIM is made for which the
INDEMNIFIED PARTY seeks indemnity, the INDEMNIFIED PARTY shall
permit the INDEMNIFYING PARTY, at its own option and expense,
to assume the complete defense and settlement of such CLAIM,
provided that (i) the INDEMNIFIED PARTY will have the right to
participate in the defense of any such CLAIM at its own cost
and
<PAGE> 16
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expense, (ii) the INDEMNIFYING PARTY will conduct the defense
of any CLAIM with due regard for the business interests and
potential related liabilities of the INDEMNIFIED PARTY. The
INDEMNIFYING PARTY will not, in defense of any such CLAIM,
except with the consent of the INDEMNIFIED PARTY, consent to
the entry of any judgment or enter into any settlement which
does not include, as an unconditional term thereof, the giving
by the claimant or plaintiff to the INDEMNIFIED PARTY of a
release from all liability in respect thereof. As to those
CLAIMS with respect to which the INDEMNIFYING PARTY does not
elect to assume control of the defense, the INDEMNIFIED PARTY
will afford the INDEMNIFYING PARTY an opportunity to
participate in such defense, at the INDEMNIFYING PARTY's own
cost and expense, and will not settle or otherwise dispose of
any of the same without the consent of the INDEMNIFYING PARTY.
(d) The obligations of the parties under this Section 12 shall
survive the termination of this AGREEMENT.
13. Default: If COVANCE is in default of its material obligations under
this Agreement, then ACS shall promptly notify COVANCE in writing of
any such default. COVANCE shall have a period of thirty (30) days from
the date of receipt of such notice within which to cause the cure of
such default. If COVANCE shall fail to so cause such cure, or if such
failure cannot be cured within the specified cure period, then this
Agreement shall, at ACS's option, immediately terminate. In the event
of such termination, ACS's sole remedy shall be, a reduction in the
total contract price for the Services in an amount equal to the
difference between (i) the total contract price for the Services and
(ii) the value of the work properly performed; provided, however, that
under no circumstances shall COVANCE be liable to ACS in an amount
that, in aggregate, exceeds, the contract price paid for the Services,
as specified in this Agreement. UNDER NO CIRCUMSTANCES SHALL ACS BE
ENTITLED TO INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES
ARISING IN CONNECTION WITH SUCH DEFAULT OR BREACH OF COVANCE'S
OBLIGATIONS UNDER THIS AGREEMENT.
14. Property Ownership. All materials, documents, data, information and
suggestions of every kind and description supplied to COVANCE by ACS
or prepared or developed by COVANCE pursuant to this Agreement (except
for COVANCE procedural manuals,
<PAGE> 17
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personnel data, and COVANCE-developed computer software, technology or
Covance's Interactive Voice Response System used for patient drug
randomization) shall be the sole and exclusive property of ACS and ACS
shall have the right to make whatever use it deems desirable of any
such materials, documents and information; provided that COVANCE may
retain copies of such materials as required by applicable laws, rules
and regulations. Unless otherwise required by law or by the terms of
this Agreement, all such ACS property which COVANCE shall have in its
possessions shall be maintained by COVANCE for a period of not less
than three (3) years from the date of receipt thereof and shall be
organized in such manner that it will be ready for immediate reference.
After three (3) years or such longer period as may be required by
applicable laws or regulations, COVANCE may dispose of such property in
accordance with ACS's instructions. If ACS fails to give said
instructions, COVANCE shall so notify ACS; and if said instructions are
still not forthcoming within thirty (30) days of said notification,
then COVANCE may destroy such property as it determines.
15. Recruitment
(a) ACS agrees that it will not solicit or otherwise encourage
COVANCE employees to seek employment with ACS throughout the
term of this Agreement.
(b) COVANCE agrees that it will not solicit or otherwise encourage
ACS employees to seek employment with COVANCE throughout the
term of this Agreement.
16. Patent Rights: COVANCE shall not acquire any rights of any kind
whatsoever with respect to ACS's product as a result of performance
under this agreement or otherwise. All inventions, discoveries, and
technology relating to the ACS product, whether patentable or not,
conceived by COVANCE or its employees or agents, including the
INVESTIGATORS or their employees or agents, solely or jointly with
others as a result of work done under this Agreement, shall be, and
remain at all times the sole and exclusive property of ACS. COVANCE
will disclose promptly to ACS or its nominee any and all patentable
inventions, discoveries and improvements conceived or made by COVANCE
as a result of providing such services to ACS pursuant to this
Agreement and relating to such services, and agrees to assign all its
interest therein to ACS or its nominee; provided, ACS requests such
assignment within one year of notification of such invention; provided,
further, that COVANCE shall retain all rights to any data, processes,
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software (including codes) technology, means, know-how developed by
COVANCE which relate to data collection, data management or to
Covance's Interactive Voice Response System used for patient drug
randomization (IVRS data and programming). Whenever requested to do so
by ACS, COVANCE will execute any and all applications, assignments, or
other instruments and give testimony which ACS shall deem necessary to
apply for and obtain Letters of Patent of the United States or of any
foreign country or to protect otherwise ACS's interests therein, and
ACS shall compensate COVANCE for the time devoted to said activities
and reimburse it for expenses incurred. COVANCE agrees to include in
agreements with INVESTIGATORS participating in the STUDY, a provision
requiring such INVESTIGATORS to assign to ACS on terms substantially
similar to this Section 16 patentable inventions, discoveries and
improvements made by such INVESTIGATORS during the STUDY. These
obligations shall continue beyond the termination of this Agreement and
shall be binding upon COVANCE's assignees, administrators and other
legal representatives.
17. Modifications: No changes may be made in this Agreement except by
written agreement of both parties.
18. Entire Agreement: This Agreement, together with any attached
Exhibit(s), is the entire and complete understanding of the parties in
regard to the covered subject matter. It replaces, supersedes and
renders void any and all predecessor agreements between the parties
whether written or oral.
19. Independent Contractor: COVANCE's relationship with ACS under this
Agreement shall be that of an independent contractor, and nothing in
this Agreement or the arrangements for which it is made shall
constitute COVANCE, or anyone furnished or used by COVANCE in the
performance of the services contemplated by this Agreement, as an
employee, joint venture, partner, or servant of ACS.
20. Contact with ACS: Until further notice, COVANCE's contacts within ACS
will be Ron Yamamoto and Sheri Guille or such persons as said Mr.
Yamamoto or Ms. Guille shall designate.
21. Notices: Any notices which either party may be required or shall desire
to give hereunder shall be deemed to be duly given when delivered
personally or mailed by certified or
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registered mail, postage prepaid, to the party to whom notice is to be
given at the address first given above or such other address or
addresses of which such party shall have given written notice.
22. Severability: If any provisions hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other
provisions of this Agreement shall not be affected thereby.
23. Governing Law: This Agreement is a New Jersey contract. It shall be
governed and construed and interpreted in accordance with the laws of
New Jersey without giving effect to its choice of law principles.
24. Waiver: The waiver by either party or the failure by either party to
claim a breach of any provision of this Agreement shall not be deemed
to constitute a waiver or estoppel with respect to any subsequent
breach or with respect to any provision thereof.
25. Term of Agreement: This Agreement shall become effective on the date
last signed below and shall continue until midnight on the 30th day of
September, 2004, unless modified as provided for herein.
26. Captions. Any caption used in this Agreement is inserted for
convenience and reference only and is to be ignored in the construction
and interpretation of the provisions hereof.
COVANCE INC.
(d/b/a COVANCE CLINICAL AND
ADVANCED CORNEAL SYSTEMS, INC. PERIAPPROVAL SERVICES, INC.)
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
----------------------------- --------------------------------
Title: President & CEO Title: Corporate VP & GM
-------------------------- -----------------------------
Date: October 24, 1998 Date: 3 November, 1998
--------------------------- ------------------------------
<PAGE> 20
EXHIBIT A.1
ACS: HYALURONIDASE SOLUTION
PROTOCOL #VIT-02-08961X AND PROTOCOL #VIT-03-08961X
TIME AND COST ESTIMATE
<PAGE> 21
ADVANCED CORNEAL SYSTEMS
A Revised Time and Cost Estimate for Assistance with
the Conduct of Two Global Phase III Studies of
Vitrase(TM) (Hyaluronidase for Ophthalmic
Intravitreal Injection) for Clearance of Severe
Vitreous Hemorrhage
PREPARED FOR-
Advanced Corneal Systems, Inc.
15279 Alton Parkway, Suite 100
Irvine, California 92618
PREPARED BY-
Covance Clinical and Periapproval Services Inc.
2121 North California Boulevard, Suite 500
Walnut Creek, California 94596
10 July 1998
10 September 1998 (revision)
20 October 1998 (revision)
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. Introduction 1
II. Project Scope and Timelines
Project Scope 3
Project Timelines 4
III. Responsibilities and Services
ACS and Covance Responsibilities 5
Pre-Study Preparation 7
Site Identification and Qualification 10
Study Drug Management 13
Site Initiation, Monitoring, and Management 14
Serious Adverse Event Reporting 17
Project Management 18
Data Management 20
Statistical Analysis 23
Clinical Trial Report Preparation 23
NDA Preparation 24
IV. Cost Estimates 25
Appendices
Appendix 1: Covance's Interactive Voice Response System
Appendix 2: Covance's Trial Tracker System
Appendix 3: Covance Pharmaceutical Packaging Services Estimate
</TABLE>
MATERIAL CONTAINED IN THIS PROPOSAL IS CONFIDENTIAL
AND IS THE PROPERTY OF COVANCE, INC.
<PAGE> 23
I. INTRODUCTION
Advanced Corneal Systems (ACS) has requested that Covance Clinical and
Periapproval Services, Inc. (Covance) revise and update the 10 September
1998 Time and Cost Estimate for assistance in conducting two global Phase
III Studies of Vitrase(TM) (Hyaluronidase for Ophthalmic Intravitreal
Injection) for Clearance of Severe Vitreous Hemorrhage.
This revised proposal contains a detailed summary of the scope of work to
be performed by Covance, task assumptions, and cost estimates. We have
made adjustments to reflect the following changes:
- Covance will not be responsible for preparing and submitting the NDA
- An increase in the monitoring hours during the enrollment period from 10
to 16 hours per visit
- Inclusion of Brazilian IND costs
The changes above are in addition to the previous changes in scope from
Covance's July 1998 Time and Cost Estimate, which include:
- Covance will not be responsible for preparing the Canadian IND and the
European MAA
- A decrease in the number of Quality Assurance site audits from 30 to 15
audits
- An increase in the number of pre-study site evaluation visits from 114
to 123 visits
- A net increase in the number of initiated investigative sites from 120
to 145 sites
- 36 more sites in the United States
- 7 more sites in France
- 1 more site in the Netherlands
- 2 more sites in the United Kingdom
- 6 less sites in Canada
- 5 less sites in Brazil
- 10 less sites in South Africa
- A net increase in the number of productive sites from 80 to 105 sites
- An increase in the number of monitoring days from 1,284 to 2,365 days
- An increase in the number of case report form pages per patient from 32
to 36 pages. However, Covance has assumed a higher level of efficiency in
data management, which results in lower overall data entry costs.
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 1
<PAGE> 24
- South African sites may participate in this study after completing the
Phase II study. If required, costs for conducting this Phase III study
and for drug supply management in South Africa will be provided at a
later time.
COSTS HAVE NOT BEEN INCLUDED WITHIN THIS TIME AND COST ESTIMATE FOR THE
GERMAN CRA MONITORING SERVICES AND RELATED OUT-OF-POCKET EXPENSES, AS ACS
WILL BE RESPONSIBLE FOR CONTRACTING AND MAINTAINING THE CONTRACT AND
PAYMENTS WITH THE CRA.
This Time and Cost Estimate, based on discussions with ACS, describes
Covance's plan for supporting the Vitrase(TM) Phase III program. The
Project Scope and Timeline section outlines the program scope and
timelines. The Responsibilities and Services section provides a detailed
summary of organizational responsibilities and task assumptions. Cost
estimates appear in Section IV. Changes to timelines, organizational
responsibilities, or program assumptions listed in this Time and Cost
Estimate may have an impact on the costs indicated. Details regarding
Covance's Interactive Voice Response System, Trial Tracker System, and
Covance Pharmaceutical Packaging Services are provided as appendices.
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 2
<PAGE> 25
II. PROJECT SCOPE AND TIMELINES
PROJECT SCOPE
Two Phase III, randomized, masked safety and efficacy studies
of Vitrase(TM) for the treatment of severe vitreous hemorrhage
will be conducted under separate protocols. Protocol #
VIT-02-08961X will be conducted at 80 investigative sites in
North America (United States and Canada). Protocol #
VIT-03-08961X will be conducted at 60 investigative sites in
Europe and 5 sites in Brazil. All investigative sites are
stand-alone sites and are expected to enroll a minimum of 1.0
to 1.5 patients per month during a 15 month enrollment period.
In the North American study, a total of 800 eligible patients
will be randomized into one of four treatment arms in a
1:1:1:1 ratio
(1) Vitrase(TM) 7.5 IU
(2) Vitrase(TM) 55 IU
(3) Vitrase(TM) 75 IU
(4) Watchful waiting
In Europe and Brazil, 800 eligible patients will be randomized
into the same four treatment arms used in the North American
study.
While in the study, patients will be clinically evaluated at
Baseline (Day 0); Days 1, 2, and 7; and Months 1, 2, 3, 6, and
12. In addition, the FDA has requested bi-annual follow-up
visits over a three year period (Months 18, 24, 30, 36, 42,
and 48). Costs for activities for the follow-up period will be
provided in a separate proposal. Table 1 provides a summary of
the project specifications.
TABLE 1
<TABLE>
<CAPTION>
VITRASE(TM) PHASE III STUDY SPECIFICATIONS
-----------------------------------------------------------------------------------------
<S> <C>
Number of Patients Enrolled 800 (North America) and 800 (Europe and Brazil)
Number of Initiated Sites 80 (North America) and 65 (Europe and Brazil)
Number of Productive Sites 60 (North America) and 45 (Europe and Brazil)
Case Report Form Size(a) 36 pages per patient
Enrollment Rate(b) Approximately 1.0 to 1.5 patients per site per month
Enrollment Period(b) 15 months
Final Deliverable 4 Integrated Clinical/Statistical Reports
- 3 Months (2 studies)
- 12 Months (2 studies)
-----------------------------------------------------------------------------------------
</TABLE>
(a) CRF size specified by ACS
(b) Enrollment rate and period projected by ACS
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 3
<PAGE> 26
PROJECT TIMELINES
Table 2 presents the assumed timelines for the Vitrase(TM)
Phase III program.
TABLE 2
<TABLE>
<CAPTION>
ESTIMATED TIMELINES
-----------------------------------------------------------------------
MILESTONE DATE
-----------------------------------------------------------------------
<S> <C>
Planning Activities Start July 1998
Investigator Screening July - September 1998
Regional Investigators' Meetings October 1998 and January 1999
First Patient Enrolled October - November 1998
Last Patient Enrolled January 2000
Last Patient Out (3 months) April 2000
Delivery of 3 Month Clinical Study July 2000
Reports
Last Patient Out (1 Year Follow-Up) January 2001
Delivery of 1 Year Follow-Up May 2001
Clinical Study Reports
-----------------------------------------------------------------------
</TABLE>
o Timeline provided by ACS and apply to each study
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 4
<PAGE> 27
III. RESPONSIBILITIES AND SERVICES
ACS AND COVANCE RESPONSIBILITIES
Table 3 presents the responsibilities shared between ACS or its
designee (e.g., German contract CRA) and Covance to meet the objectives
of the Vitrase(TM) Phase III program. A detailed discussion of these
activities is provided after Table 3.
<TABLE>
<CAPTION>
Table 3
Summary of Responsibilities for Vitrase(TM) Phase III Program
- ----------------------------------------------------------------------------
ACS COVANCE
- ----------------------------------------------------------------------------
<S> <C> <C>
Pre-Study Preparation
Protocol Preparation P S
Investigator's Brochure P
Template informed consent form development P R
Case-report form development R P
Print and ship case report forms P
CRF Completion Instructions and Site Manual R P
Study File Notebook P
Regulatory submissions (FDA, HPB and South P
African regulatory authorities)
Regulatory submissions (European and Brazilian P
regulatory authorities)
Randomization scheme P
Kick-off meeting S P
Project team training meeting S P
Site Identification and Qualification
Investigative site identification and screening (a) S P
Pre-study site evaluation visits S P
Approve final site selection P S
Regulatory document acquisition and review S P
Translations P
Negotiation and administration of investigator P
contracts
Study Drug Management
Clinical drug supply labeling and distribution
United States and Canada P
Europe, Brazil, and South Africa (b) S P
On-site clinical drug supply inventory control P
Patient randomization (IVRS) P
</TABLE>
- -------------------------------------------------------------------------------
(a) ACS has identified and screened a number of investigative sites in Europe
and North America
(b) Study drug management costs for South Africa have not been included. Costs
for these activities will be provided when the scope of work for South
Africa is fully defined
P = Primary Responsibility
S = Shared Responsibility
R = Review
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 5
<PAGE> 28
Table 3 (continued)
Summary of Responsibilities for Vitrase(TM) Phase III Study
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Responsibility ACS Covance
- -------------------------------------------------------------------------------------
<S> <C> <C>
Site Initiation, Monitoring and Management
Organization and conduct of Investigators' meetings P
Initiation visits S P
Develop clinical monitoring plan and study forms S P
Routine monitoring visits S P
Close-out visits S P
In-house site management P
Quality assurance site visits P
Serious Adverse Event Reporting
SAE Reporting Plan R P
Collect study-specific adverse event information P
Provide medical evaluation of adverse events P
Report SAEs to FDA and HPB P
Report SAEs to all European and Brazilian reg. authorities P
Report SAEs to investigative sites P
Maintain safety database P
Reconcile Safety and Clinical Databases P
Project Management
Overall project management S P
Conduct team meetings P
Conduct weekly teleconferences with ACS S P
Conduct quarterly face-to-face meetings with ACS S P
Project status reporting S P
Maintenance of study master files P
Data Management Services
Data Management Plan R P
Develop database and data entry screens P
Data processing and entry P
Data review and clean-up P
AE and concomitant medication coding P
Quality assurance of databases P
Transfer of clinical data P
CRF disposition and archival P
Statistical Analysis
Statistical Analysis Plans R P
Statistical programming and analyses P
Review tables, listings, and figures R P
Clinical Study Report Preparation
Clinical study reports (3 and 12 Month Data) R P
NDA Preparation P
- -------------------------------------------------------------------------------------
</TABLE>
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 6
<PAGE> 29
PRE-STUDY PREPARATION
PROTOCOL PREPARATION
ACS will be responsible for the development of the study protocols. Covance
will review the draft protocols and provide comments to ACS, who will be
responsible for preparing the final protocols. Covance has assumed two
review cycles for each protocol.
ACS will submit the final study protocol to the US Food and Drug
Administration (FDA) and the Canadian Health Protection Branch (HPB).
Covance will provide the final protocol to all other regulatory agencies
and all investigative sites.
INVESTIGATOR'S BROCHURE
ACS will provide the Investigator's Brochure to Covance. ACS will be
responsible for updating the Investigator's Brochure, as necessary, and
providing updates to the FDA, the HPB, and Covance. Covance will distribute
the Investigator's Brochure and subsequent updates to all other regulatory
authorities and all investigative sites.
TEMPLATE INFORMED CONSENT FORM DEVELOPMENT
ACS will prepare a template patient informed consent form (ICF) for each
study based on the ICF used in the Phase II study. Covance will review the
template and provide comments to ACS. ACS will be responsible for final
approval of the template ICF. Covance has assumed two review cycles for ICF
finalization.
In Europe and Brazil, Covance will translate the ICFs into the local
language, taking into account all country specific requirements.
Covance will interact with investigative sites in obtaining site specific
changes to the ICF in accordance with instructions provided by ACS.
CASE REPORT FORM DEVELOPMENT AND PRINTING
Covance will be responsible for designing the Phase III case report form
(CRF) for each study. To allow for rapid retrieval, review, and data entry,
Covance will design the CRFs to make use of:
- A segmented design format
- International date coding
- Completion in English
- Precoding, where applicable
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 7
<PAGE> 30
Per ACS's instructions, Covance has assumed each CRF will be 36 pages in
length, with approximately 10 to 15 unique pages. Covance will provide
draft CRFs to ACS for review and comment. Covance has assumed two review
cycles for each CRF.
Covance will print the CRFs on three-part NCR paper and ship the CRFs to
all investigative sites.
CRF COMPLETION INSTRUCTIONS AND SITE MANUAL DEVELOPMENT
To facilitate accurate completion of the CRF by the investigative sites,
Covance will prepare CRF Completion Instructions for each study. These
instructions will provide detailed procedures for completing each section
of the CRF. It will also highlight important protocol adherence items and
interrelated sections within the CRF.
Covance will also prepare a Site Manual that will include the CRF
completion instructions, monitoring frequency, query resolution
procedures, patient screening procedures, and all other forms and
procedures that are applicable for this study.
Covance has assumed the CRF Completion Instructions and the Site Manual
will be written in English and require one review cycle by ACS prior to
finalization. Covance will be responsible for printing and shipping copies
of the CRF Completion Instructions and Site Manual to monitors, study
coordinators, investigators, and ACS.
STUDY FILE NOTEBOOK
Covance will develop and forward to each investigative site a Study File
Notebook. The binder is provided to file the following documents:
- Protocol and amendments
- Protocol summary and study schema
- Investigator's Brochure
- Informed Consent Form
- Institutional Review Board or Independent Ethic Committee approvals
- Adverse event reporting procedure
- Safety updates
- FDA 1572
- Regulatory binder maintenance instructions (with signature verification
sheet and site visit log)
- Correspondence
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 8
<PAGE> 31
Covance will be responsible for ensuring that each investigator maintains
and updates their Study File Notebook at each site.
PREPARATION OF REGULATORY SUBMISSIONS
ACS will be responsible for all initial and subsequent IND and INDs
regulatory submissions and filings to the FDA and the HPB during this
program, including all amendments and maintenance. Covance will be
responsible for all initial and subsequent regulatory submissions and
filings in Brazil, France, Germany, Italy, Poland, the Netherlands,
and the United Kingdom, including all amendments and maintenance in
support of these two Phase III clinical trials. Covance will be the
primary contact for regulatory authorities within each of these European
countries and Brazil.
RANDOMIZATION SCHEME
Covance will prepare the randomization schedule for each study and
administer central patient randomization using an Interactive Voice
Randomization System (IVRS). Covance's IVRS is described in detail in
Appendix 1.
KICK-OFF MEETING
An ACS-Covance Phase II/III kick-off meeting was held on 25 June 1998.
Discussion items at the meeting included task responsibilities, timelines,
and communication plans.
PROJECT TEAM TRAINING MEETING
To ensure consistency in understanding and implementing program objectives,
ACS's Project Physician and Covance's International Project Director will
conduct two formal training sessions for Covance's clinical project team
members. The first training session was conducted in North America on 20
July and the second training session will be conducted at the European
Investigators' Meeting. Covance has assumed members of the ACS Vitrase(TM)
Project Team will attend and contribute to each meeting.
The training session will include a review of the details of the
Vitrase(TM) program, the Investigator Brochure, disease state, and
regulatory requirements. It will also include a review the protocol, CRF
completion requirements, monitoring requirements, pharmacy instructions,
and present an overview of the pre-study requirements, adverse event
reporting requirements, and expectations for study completion and
follow-up.
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 9
<PAGE> 32
Each training session is expected to last one day and will be
videotaped for future reference. Covance and ACS will share
the responsibility for the preparation of all training
materials. All proposed training materials and plans will be
circulated between ACS and Covance for review and comment
prior to the training session.
SITE IDENTIFICATION AND QUALIFICATION
INVESTIGATIVE SITE IDENTIFICATION AND SCREENING
Table 4 summarizes the total number of site contacts,
pre-study visits, and initiation visits to be conducted by
Covance for these studies in the US, Canada, Europe and
Brazil.
TABLE 4
<TABLE>
<CAPTION>
INVESTIGATIVE SITE IDENTIFICATION AND SCREENING
--------------------------------------------------------------
REGION SITE CONTACTS PRE-STUDY INITIATION
VISITS VISITS
--------------------------------------------------------------
<S> <C> <C> <C>
United States 120 90 76
Canada 10 8 4
Europe* 0 20 43
Brazil 5 5 5
--------------------------------------------------------------
</TABLE>
* Excludes sites located in Germany.
ACS has identified a contract CRA for the German sites who
will perform the following tasks according to Covance
standards:
- Evaluation and selection of sites including pre-study visits
and reports
- Budget and SOA negotiations
- Attendance and follow-up of Investigators' Meeting in
Brussels
- Attendance to one training meeting in Covance Brussels
- Translations
- Provide assistance to Investigators for EC submissions
- Initiation, routine monitoring, and close-out visits,
reports, and follow-up
- Provide input for status reports
- Attendance to project team meetings
- Maintenance of project files
- SAE-reporting according to the SAE plan
- Site management
- Shipping of non-drug supplies
- Tracking of investigator payments
- Assistance to the follow-up of issues raised during audits
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 10
<PAGE> 33
- - In-House review of retrieved CRFs
- - Clinical query resolution with sites
- - Drug/randomization code accountability on sites
Covance has assumed it will be responsible for the following activities for the
German sites:
- - Regulatory submissions
- - SAE Plan
- - SAE reporting to authorities
- - SAE reporting to Investigators and Ethics Committees (ECs)
- - Notifying reportable SAEs to Central ECs
- - Review and approval of Investigator regulatory document package
- - Site Audits
- - Drug distribution and tracking (including IVRS)
- - Drug label translation and review
Table 5 provides the assumed investigative site location by country, by study,
and the assumed patient enrollment by country. The patient enrollment potential
within each country has not been confirmed by a formal feasibility study.
TABLE 5
<TABLE>
<CAPTION>
INVESTIGATIVE SITE LOCATION AND ESTIMATED PATIENT ENROLLMENT
- --------------------------------------------------------------------------------
ESTIMATED NUMBER
LOCATION SITES OF PATIENTS
- --------------------------------------------------------------------------------
<S> <C> <C>
Study #VIT-02-08961X 80 800
Canada 4 80
United States 76 720
Study #VIT-03-08961X* 65 800
France 10 75
Germany 17 200
Italy 5 75
The Netherlands 8 50
Poland 8 175
United Kingdom 12 100
Brazil 5 125
- --------------------------------------------------------------------------------
</TABLE>
* Covance and ACS anticipates changes in the site numbers and patient enrollment
numbers.
Advanced Corneal Systems 20 October, 1998
Vitrase(TM) 11
<PAGE> 34
PRE-STUDY SITE EVALUATION VISITS
ACS has identified 10 sites in the US and 40 sites in Europe that do not require
pre-study visits. Therefore, Covance will conduct 98 pre-study site evaluation
visits in North America, 20 pre-study visits in Europe (excluding Germany), and
5 pre-study visits in Brazil. Each pre-study visit will last ten hours including
time for preparation, travel, and report generation. At each pre-study site
visit, the Covance monitor will conduct an in-depth interview to evaluate the
investigator with respect to:
- - His or her professional experience and training
- - Past experience in conducting clinical trials
- - Current participation in or future scheduling of studies that will compete
for patients with severe vitreous hemorrhage.
- - Access to appropriate study patients
- - Evidence of the number of potential patients entering the investigator's
facility on a monthly basis
- - Ability to meet ACS's and Covance's enrollment goals
- - Proper level of staffing, including availability of study coordinator
- - Adequacy of facilities, including required study medical equipment
- - Secure drug refrigeration (between 2 degrees and 8 degrees Celsius) and
storage capabilities
- - Understanding of regulatory requirements
ACS may elect to co-monitor some of the pre-study site visits with the Covance
monitor.
Covance will provide a monitor's report to ACS electronically (via Covance's
Trial Tracker System) within ten working days of completing a pre-study site
visit. Covance will define the format of the pre-study visit reports.
REGULATORY DOCUMENTS ACQUISITION AND REVIEW
Covance will collect and review the required pre-study regulatory documents for
each investigative site, including Institutional Review Board (IRB) and
Independent Ethics Committee (IEC) approvals. Covance also will be responsible
for obtaining annual IRB and IEC renewals for the duration of this study.
Covance will review all documents for completeness and accuracy prior to
submission to regulatory authorities. ACS will submit regulatory documents to
the FDA, HPB, and South African regulatory authorities. Covenance will submit
regulatory documents to all other regulatory authorities in Europe and Brazil,
as appropriate.
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 12
<PAGE> 35
TRANSLATIONS
Covance will ensure accurate translations of ICFs, protocol synopsis, and
clinical drug labels into appropriate languages using
translators/regulatory affairs staff located in Covance's Canadian,
Brazilian, and European offices.
NEGOTIATION AND ADMINISTRATION OF INVESTIGATOR BUDGETS AND CONTRACTS
ACS will provide Covance with guidelines for negotiation of investigator
budgets. Covance will be responsible for negotiating the lowest reasonable
investigator budget within the guidelines provided by ACS. Covance will
discuss with ACS investigative sites that do not fall within these
guidelines. ACS will develop a standard investigator contract and payment
schedule.
ACS will be responsible for maintenance of investigator contracts and all
administrative details and payments to investigators. ACS will reimburse
investigators on a pro-rated basis for work performed according to a
written agreement. Covance will visually verify that investigators have
performed the work before payment.
STUDY DRUG MANAGEMENT
CLINICAL DRUG SUPPLY
ACS will be responsible for packaging, labeling, and shipment of study
medications in Canada, Brazil, and the United States. ACS will send
packaged drug to Covance for distribution to sites in Europe. Covance
Pharmaceutical Packaging Services (CPPS) in Horsham, UK will be responsible
for drug distribution in Europe, Brazil and South Africa. Covance will set
up and maintain import licenses where required by local regulations.
Covance also will be responsible for supplying, tracking, and shipping of
all ancillary materials.
Covance will be responsible for developing country-specific secondary
labels from the original English label text provided by ACS. The secondary
labels will also include investigator name and address, telephone number,
site number, and any local regulatory requirements. To ensure the accuracy
of the secondary labels, Covance will conduct back-translation
certification of the final labels. Covance will affix the secondary labels
before shipment of study medications to investigative sites within Europe.
Covance has assumed ACS will be responsible for all country-specific
secondary labeling activities for Canadian.
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 13
<PAGE> 36
ON-SITE CLINICAL DRUG SUPPLY INVENTORY CONTROL
During monitoring visits and at study closure, Covance will be responsible
for verifying site documentation regarding receipt of study drug and for
ensuring the investigative sites maintain proper drug dispensing records.
At the end of the study, Covance will either manage the return of study
drug to ACS and reconcile any remaining drug supplies or instruct sites to
destroy drug upon authorization from ACS.
PATIENT RANDOMIZATION
Covance proposes the use of an Interactive Voice Response System (IVRS)
for this program. The IVRS provides computerized patient randomization
using touch-tone telephone equipment and computerized voice output.
The following features will be available in this program:
- Secure site access to the IVRS through a touch-tone telephone, using a
toll-free number and individual site access code
- Patient randomization following the site's entering of specific project
and patient information, which is repeated by the system for
verification prior to randomizing a patient
- Confirmation faxes to ACS and the investigative site
- Management of warehouse and site drug inventory in "just-in-time" fashion
- Drug expiration tracking
- A secure and tested backup and disaster recovery plan
- A system validated by standards that meet the FDA requirements based on
"Guidelines on General Principles of Process Validation" and the Device
Manufacturing Practices Parts 211.68 and 820.61
- Support in at least 21 languages that is available 7 days a week, 24
hours a day
Appendix 1 contains detailed summaries and specifications for each of the
above items.
SITE INITIATION, MONITORING, AND MANAGEMENT
ORGANIZATION AND CONDUCT OF THREE INVESTIGATORS' MEETINGS
Covance will organize and conduct three Investigators' Meeting tentatively
scheduled for October 1998 and January 1999. The North American meeting
will be held in Irvine, California. The European meeting will be conducted
in Brussels, Belgium. The Brazilian meeting location is yet to be
determined.
Advanced Corneal Systems 20 October, 1998
Vitrase(TM) 14
<PAGE> 37
ACS and Covance will work together to develop the agenda and presentation
responsibilities for each meeting and will conduct a rehearsal meeting
prior to the first Investigators' Meeting. Each meeting is expected to be
one day in length. To ensure consistency in meeting presentations the
Covance International Project Director will attend each meeting. The
following attendees are anticipated to attend the meetings:
- Principal investigator from each site
- Study coordinator from each site (North America only)
- Five ACS project team members per meeting (only 2 assumed for Brazil
Meeting)
- Twelve Covance project team members for the North American meeting
- Nine Covance project team members for the European meeting
- Three Covance project team members for the Brazil meeting
INITIATION VISITS
Covance will be responsible for study initiation visits pending ACS's
approval of the investigator's regulatory documents and after shipment of
study drug has been approved. Covance has assumed Covance will conduct 128
site initiation visits for this program. In addition, the German contract
CRA will conduct 17 visits. Each initiation/monitoring visit will require
approximately 14 hours spent on site. An additional six hours are allotted
for preparation, travel, and report generation. At each initial visit, the
Covance monitor will be responsible for reviewing with the investigator
and site staff the protocol, the CRF and procedures for its completion,
regulatory documentation and requirements, the details of drug dispensing,
storage, and accountability, serious adverse events reporting and
requirements, and other administrative aspects of the program.
Covance will provide a monitor's report to ACS electronically (via
Covance's Trial Tracker System) within ten working days of completing an
initiation visit. Covance will define the format of the initiation visit
reports.
ROUTINE MONITORING VISITS
Following the initial initiation/monitoring visit, Covance will conduct
monitoring visits approximately every six to eight weeks during the
enrollment period and every 12 weeks thereafter for the duration of the
program. Each routine monitoring visit will last 16 hours including time
for preparation, travel, and report generation. ACS may elect to
co-monitor some of the visits with the Covance monitor. Covance also has
assumed that ACS has identified and contracted with a contract CRA in
Germany who will monitor all active sites in Germany. Table 6 displays the
number of monitoring days by study Covance has
Advanced Corneal Systems 20 October, 1998
Vitrase(TM) 15
<PAGE> 38
assumed in this proposal. Covance has assumed 20 of the North
American sites will be non-productive and not require
monitoring visits. Prior to determining a site is
non-productive, Covance suggests conducting a follow-up
training site visit for inactive sites. Costs for this visit
are not included.
<TABLE>
<CAPTION>
TABLE 6
MONITORING DAYS BY LOCATION
-------------------------------------------------------------
LOCATION MONITORING DAYS
-------------------------------------------------------------
<S> <C>
North America Study 1,393
European Study (includes Brazil)* 972
-------------------------------------------------------------
</TABLE>
* Assumes ACS contract CRA will monitor all German sites
Covance proposes to decouple retrieval of CRFs from monitoring
visits for this program. This strategy will allow
investigative sites to submit patient CRFs as soon as possible
following a patient visit. This will allow Covance to enter
data into the clinical database as early as possible. The
monitor will review the patient's source documentation against
the site's copy of the CRF. Any corrections or additions to
the CRF will be noted on a Data Clarification Form, which will
be signed-off by the investigator and forwarded to Covance's
data management group for processing.
Covance monitors will ensure that information collected in the
CRF is complete and accurately reflects the information
recorded on the patient's medical chart. During monitoring
visits, Covance monitors will review the following:
- Appropriate patient enrollment and randomization
- Protocol and patient compliance
- 100% of the CRF data fields for accuracy, completeness, and
consistency with source documentation
- Investigator's Study File Notebook (e.g., study logs, signed
patient informed consents forms, etc.)
- Drug supplies, pharmacy records, and appropriate drug
storage
- Data received regarding the safety of the drug
- Regulatory compliance (IRB/IEC correspondence, etc.)
- Appropriate review of other data instruments for
completeness, accuracy, and consistency with source
documents
Covance will provide a monitor's report to ACS electronically
(via Covance's Trial Tracker System) within ten working days
of completing a monitoring visit that will define any issues
found or discussed at the site. Covance will define the format
of the monitoring reports.
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<PAGE> 39
CLOSE-OUT VISITS
Where possible, Covance will close sites at the time of the final
monitoring visit. Covance has assumed that non-accruing/non-productive
sites will require a separate site visit for close-out. Each close-out
visit will last ten hours including time for preparation, travel, and
report generation.
Covance will ensure that all site documentation is complete and accessible
for potential future FDA or other regulatory authority audits, that the
investigator is aware of his or her continuing responsibilities, and that
all remaining clinical trial materials to be returned to ACS are removed
from the investigative site.
Covance will provide a monitor's report to ACS electronically (via
Covance's Trial Tracker System) within ten working days of completing a
close-out visit.
IN-HOUSE SITE MANAGEMENT
Between monitoring visits, Covance will maintain weekly telephone contact
with investigative sites to discuss patient accrual, adverse experiences,
query resolution, and any other study related issues. Covance will provide
written documentation to ACS of all critical issues discussed.
QUALITY ASSURANCE SITE AUDITS
Quality Assurance Good Clinical Practices site audits will be conducted by
Covance's Quality Assurance personnel. ACS has requested that 10% of sites
will undergo a Quality Assurance Audit. Therefore, Covance will conduct
eight site audits in North America, one site audit in Brazil, and six site
audits in Europe for this program. Covance will provide audit reports to
ACS within four weeks of conducting an audit. Covance has assumed that each
audit will require three days on site to complete.
SERIOUS ADVERSE EVENT REPORTING
SERIOUS ADVERSE EVENT REPORTING PLAN
Covance and ACS will work together to develop a serious adverse events
(SAE) reporting plan. The plan will define procedures and responsibilities
for collecting, reporting and tracking SAEs. ACS will provide final
approval and sign-off of the plan.
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<PAGE> 40
SAE REPORTING
ACS has asked Covance to assume 80 SAEs per study (160 total)
with one follow-up report per event on average. Covance will
use its standard SAE report forms. Covance will collect and
forward all SAE information from the investigators to ACS
within 24 hours of receipt. Covance also will collect SAE
follow-up information and forward the information to ACS.
Information on events occurring in North America will be
collected by Covance's Walnut Creek office. Information on
events occurring in Europe will be collected by Covance's
Maidenhead, UK office. Information on events occurring in
Brazil will be collected in Covance's Buenos Aires, Argentina
office. In processing SAEs, Covance will be responsible for:
- Providing medical evaluation
- Writing all SAE narratives
- Submission to ACS for filing with the FDA and HPB
- Reporting and submission of all reportable events in
compliance with applicable local regulations in Europe and
Brazil
- Notifying investigators of any events per local regulations
ACS will determine whether each SAE requires submission to the
FDA and submitting reportable SAEs to the FDA and HPB. Covance
has assumed 20% of SAEs (total of 32) will be reported to the
Regulatory Agencies.
SAE DATABASE
Covance will establish and maintain an SAE database and will
be responsible for reconciling the SAE and clinical databases.
PROJECT MANAGEMENT
OVERALL PROJECT MANAGEMENT
Covance has assigned Cecile Lardinois as the International
Project Director and Toniann Derion, Christiane Booremans, and
Maria Fernanda Castro Duran as regional Project Managers in
the United States, Europe, and Brazil, respectively.
The International Project Director will be responsible for:
- Leading the Covance Vitrase(TM) project team and providing
expertise as needed
- Serving as ACS's key point of contact within Covance
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<PAGE> 41
- Maintaining effective communication with ACS and all groups performing
project work
- Preparing of project plans, timelines, and milestones
- Directing all activities required to meet Covance's obligations to ACS
- Ensuring Covance's budgetary, on-time, and quality performance
The regional Project Managers will serve under the International Project
Director and be responsible for coordinating the daily activities of the core
and extended Covance project team. The Project Managers will report directly to
the International Project Director on project status and issues.
COMMUNICATION WITH ACS
The Covance International Project Director will maintain contact with the ACS
Clinical Operations representative throughout the program. Covance has assumed
core project team telephone conferences will be conducted weekly and that
face-to-face meetings between ACS and Covance will occur quarterly with
Covance's North American team throughout the program. Covance's European Project
Manager will attend project team teleconferences on an as needed basis and
face-to-face meetings annually. Covance and ACS will conduct a contract and
budget status review in coordination with the quarterly face-to-face team
meetings. Covance has assumed these meetings will alternate between ACS's and
Covance's offices. A minimum of four Covance project team members will attend
each meeting.
PROJECT STATUS REPORTING
It is Covance's intention to provide ACS with project status reporting through
Covance's Trial Tracker system, which will allow ACS 24-hour access to key
project status information. ACS's project team members will be able to access
Trial Tracker from their desktops via Covance's network. A technical support
individual based in Covance's Walnut Creek office will be available on an
"on-call" basis to address any Trial Tracker issues. For each study, Trial
Tracker will contain modules that will provide the following information to ACS:
- - Investigator data
- Names and addresses
- Budget/Payment Status
- - Regulatory document status
- - Monitor's trip reports
- Pre-study investigative site visits
- Initiation investigative site visits
- Monitoring investigative site visits
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<PAGE> 42
o Close-out investigative site visits
o Patient enrollment data
o Site contacts
o Telephone contacts
o Protocol exceptions
o Common study site issues
o CRF retrieval and correction tracking data
o SAE summaries
Appendix 2 provides details on each of the Trial Tracker modules.
Covance will update Trial Tracker information on a daily basis. The
timeliness of the information contained within the individual modules will
depend on the nature of the data collected for the specific module. For
example, monitoring visit trip reports are scheduled for delivery to ACS
within ten days of completion of the site visit. Therefore, information
entered into the Site Visit Report Module will pertain to visits that
occurred up to ten days before the daily system update.
MAINTENANCE OF STUDY MASTER FILES
In accordance with the International Conference on Harmonization (ICH) Good
Clinical Practices and local applicable regulations, Covance will maintain
study files that consist of the original CRFs, investigator regulatory
documentation, and correspondence between ACS and the investigative sites.
Covance will maintain the study files until completion of the program
unless ACS requests provision of the files prior to completion of the
program, at which time they will be forwarded to ACS. ACS will have access
to the study files at all times.
DATA MANAGEMENT
DATA MANAGEMENT PLAN
Data Management activities for both studies will be conducted out of
Covance's Walnut Creek office.
Covance will be responsible for developing a Data Management Plan for this
program. Covance will provide a draft of the Data Management Plan to ACS
for review and comment.
The Data Management Plan will include, but not be limited to:
o Definition of a data segment
o CRF log-in, pre-data entry clarification, and data entry procedures
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<PAGE> 43
- Coding specifications
- Data coordination procedures (i.e., review systems, validation of data,
query generation and resolution, and database correction procedures)
- Database audit procedures
DATABASE DESIGN
Covance will develop separate but identical CRF database structures for
the European study (including Brazil) and for the North American Study.
CRF PROCESSING AND DATA ENTRY
CRFs will be directly submitted by the study sites to Covance's Document
Control Center in Walnut Creek as quickly as possible after the patient
visit. Once in house, data personnel will inventory and forward the CRFs
for data entry. Covance's CRF tracking system will track the CRFs
throughout the data entry and data management process. Working copies of
the CRF will be stored in Covance's Document Control Center and the
original white copies will be kept in a separate off-site storage facility.
Entry of the data from each CRF will occur promptly to ensure a current
database. Data entry will be performed on an on-going basis by two
independent operators: the first operator performs the initial entry and
the second operator performs second key verification of all numeric and
date fields, adverse experiences, and concomitant medications. Lengthy
text fields (in excess of 80 characters) will be entered by the first data
processor, then sight verified by the second operator. Any questionable
discrepancies will be addressed by a Data Manager. Covance will data enter
up to 57,600 CRF pages (1,600 patients x 36 CRF pages).
DATA REVIEW AND CLEAN-UP
The data review process will begin with the preparation of Data Review
Guidelines, which will specify the computerized validation checks and query
conventions. The Data Review Guidelines will be developed when the CRF
Monitoring Conventions and Site Manual are developed, thus ensuring
consistency and appropriateness in approach to data collection and
handling. ACS will review and sign-off on the Data Review Guidelines.
Data review will occur on an ongoing basis. Covance will immediately
correct and document data problems that can be resolved through intra-CRF
verification and without discussion with an investigator's staff. Data
queries that require resolution with an Investigator's staff will be
addressed by mail, facsimile or, if necessary, with investigative site
staff during the next monitoring visit. Covance's standard procedures
ensure that all corrections to a CRF are
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<PAGE> 44
appropriately documented, reviewed, and approved by the investigator. Covance
will review and clean up to 57,600 CRF pages (1600 patients x 36 CRF pages).
ADVERSE EVENT AND CONCOMITANT MEDICATION CODING
Covance will be responsible for applying coding conventions to adverse events
and concomitant medications. Covance has assumed that it will use Covance's
standard COSTART dictionary to code intercurrent illnesses and adverse events
and Covance's standard WHODRUG dictionary to code concomitant medications.
Costs for additional coding for specific ophthalmologic events that cannot be
coded by COSTART have not been included in this proposal.
QUALITY CONTROL AND QUALITY ASSURANCE OF THE DATABASE
To ensure data quality, Covance will conduct a database audit (a random
sampling of the database verified with the hard copy CRF, item by item) of each
database. Covance will use its Standard Database Audit error rate of 0.05% or
less as the threshold for accepting a file. If the error rate is above 0.05%,
Covance will reject the file and conduct a systematic review of the database
for errors.
In addition, per Covance SOPs, Covance Regulatory Compliance personnel will
conduct a database audit on 10% of patients.
TRANSFER OF CLINICAL DATA
Covance will conduct one test data transfer to ACS of a populated database
using data structures compatible with ACS standards prior to CRF data entry.
Dummy data included in the test transfer will be prepared by Covance. Table 7
defines the data transfers per study.
<TABLE>
<CAPTION>
TABLE 7
DATA TRANSFERS BY STUDY
- -------------------------------------------------------------------------------
NORTH EUROPE AND
TRANSFER AMERICA BRAZIL TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Dummy Data 1 1 2
IND Updates 3 3 6
Final Transfer 1 1 2
Total 5 5 10
- -------------------------------------------------------------------------------
</TABLE>
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<PAGE> 45
CRF DISPOSITION AND ARCHIVAL
Covance will be responsible for coordinating the disposition of the
CRF's after the trial is completed.
STATISTICAL ANALYSIS
STATISTICAL ANALYSIS PLAN
Covance will prepare a Report and Analysis Plan (RAP) for the final
analyses for each study. Covance has assumed each RAP will be finalized
early in the program prior to data analysis and will be identical for each
study.
The RAP will define all statistical analyses and will include an outline
of the statistical report with table, listing, and figure mock-ups. ACS
will review the draft RAPs and provide comments to Covance, who will be
responsible for incorporating ACS's comments and preparing final drafts
for ACS to sign-off. Covance has assumed two review cycles for each RAP.
STATISTICAL PROGRAMMING AND ANALYSIS
Covance programmers will be responsible for creating programs for the
development of safety and efficacy tables and listings. The programs will
be based on the programs used to create the tables, listings, and figures
from the Phase II analyses. Covance has assumed a total of 100 tables,
listings, and figures for each of the 3 and 12 month final analyses.
Analyses, tables, and listings will be substantially the same for the 3
and 12 month analyses, with the exception of changes necessary to
accommodate additional timepoints at 12 months. Covance has assumed two
review cycles by ACS will be required prior to sign-off on final tables,
listings, and figures by ACS.
CLINICAL STUDY REPORT PREPARATION
CLINICAL STUDY REPORT
Covance will be responsible for preparation of the Clinical Study Reports
(CSR) for each study. Covance has assumed two CSRs per study: one after
completion of three months in the study by all patients and one after
completion of 12 months in the study by all patients. Covance will prepare
the reports using Covance's standard report format, which follows ICH
Guidelines. Covance will use the individual patient narratives from the
SAE reports in the CSRs. Covance has
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<PAGE> 46
assumed that ACS will conduct two review cycles prior to sign-off on the
final CSRs.
NDA PREPARATION
NEW DRUG APPLICATION
Early in the program, ACS and Covance will meet to define organizational
responsibilities as related to the Vitrase(TM) New Drug Application (NDA).
Following that meeting Covance will provide ACS with an estimate for its
services as related to the NDA. No costs are provided within this Time and
Cost Estimate for Covance's assistance with the Vitrase(TM) NDA.
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<PAGE> 47
IV. COST ESTIMATES
Table 8 presents estimated Out-of-Pocket (OOP) Costs, Table 9 presents
estimated Covance Fees, and Table 10 presents estimated OOP costs and Covance
Fees for Covance Pharmaceutical Packaging Services (CPPS). Estimated Covance
fees are based upon the resources needed to complete tasks described in the
Responsibilities and Services Section of this Time and Cost Estimate.
Subsequent changes to the timelines, organizational responsibilities, and
program assumptions listed throughout this Time and Cost Estimate may have an
impact on the costs provided.
TABLE 8
ESTIMATED OUT-OF-POCKET (OOP) COSTS
- --------------------------------------------------------------------------------
TASK AMERICAS EUROPE
- --------------------------------------------------------------------------------
Travel (Pre-study Site Visits) $ 84,000 $ 10,000
Travel (Initiation Visits) 85,000 22,000
Travel (Monitoring Visits) 871,000 329,000
Travel (GCP Audits) 17,000 19,000
Travel (ACS-Covance Meetings) 81,000 9,500
Travel (Project Team Meetings) 5,000 15,000
Investigators' Meetings 258,000 62,000
Case Report Form Printing 20,000 17,000
Miscellaneous (e.g., Binders) 10,000 10,000
Shipping 31,000 31,000
Brazil Regulatory 23,000
IVRS Charges 17,000 --
- --------------------------------------------------------------------------------
TOTAL OUT-OF-POCKET COSTS $1,502,000 $524,500
- --------------------------------------------------------------------------------
OOP costs for a secure e-mail connection have not been included
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<PAGE> 48
TABLE 9
ESTIMATED COVANCE FEES PER TASK
<TABLE>
<CAPTION>
TASK AMERICAS(a) EUROPE
- ---- ------------ ----------
<S> <C> <C>
Regulatory Submission (Brazil) $ 19,000 $ 68,000
Protocol/Case Report Form Preparation(b) 47,000 3,000
Pre-Study Preparation 390,000 135,000
Initiation Visits 170,000 99,000
Monitoring Visits 1,491,000 1,155,000
Project Management 1,416,000 329,000
Site Management 1,176,000 381,000
Data Entry 207,000 --
Data Clean-up 976,000 118,000
Biostatistical Programming and Analysis(b) 280,000 0
Clinical Study Report Preparation 219,000 0
Site Audits 54,000 33,000
Drug Supply Management (includes IVRS) 338,000 28,000
Project Support 1,154,000 276,000
----------- ----------
TOTAL COVANCE FEES $ 7,937,000 $2,625,000
----------- ----------
</TABLE>
(a) Costs include international project management, data management,
analysis, report preparation and IVRS for both studies.
TABLE 10
ESTIMATED COVANCE PHARMACEUTICAL PACKAGING (CPPS) OOPS AND FEES
<TABLE>
<CAPTION>
TASK BRAZIL EUROPE
- ---- ------ ----------
<S> <C> <C>
Drug Supply Management OOPs(a) 34,000
Drug Supply Management Fees 5,000 122,000
------ ----------
TOTAL CPPS OOPS AND FEES $ 156,000
==========
</TABLE>
(a) OOPs for Brazil will be provided once the process for transporting
study drug within Brazil to the sites has been finalized. Original
estimates for a drug depot in Brazil were estimated to be
$10,000-$20,000. Covance and ACS will continue to define logistics for
drug distribution in Brazil.
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<PAGE> 49
APPENDIX 1
COVANCE'S INTERACTIVE VOICE RESPONSE SYSTEM
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<PAGE> 50
COVANCE'S INTERACTIVE VOICE RESPONSE SYSTEM
Covance will be responsible for randomization for ACS's Vitrase(TM) Phase
III studies. We propose the use of Interactive Voice Response System
(IVRS).
GENERAL IVRS OVERVIEW
The IVRS patient randomization system provides computerized patient
randomization using touch-tone telephone equipment and computerized voice
output. Covance's IVRSs have been in use since 1989 in over 130 protocols.
More than 52,000 patients have been randomized and over 525,000 drug
assignments have been performed in more than 32 countries using toll-free
telephone numbers. Covance's IVRS is capable of supporting at least 21
languages and is available 7 days a week, 24 hours a day.
IVRS FUNCTIONAL REQUIREMENTS
The following functions will be available:
Site access to the IVRS
With a touch-tone telephone, study staff will call the IVRS using a
toll-free number. The IVRS will prompt the caller for his or her
identification number and preassigned access code. The identification
number is a unique number that identifies the caller. The access code has
been implemented as a security measure.
Patient Randomization
Callers can randomize patients by entering specific project and patient
information. All information entered by the caller is repeated by the
system for verification prior to randomizing a patient; this allows the
caller the chance to correct mis-entries during the call. Upon
verification from the caller, the IVRS assigns the patient an
identification number and a treatment arm from the randomization scheme
generated by a Covance statistician. This will provide real-time patient
enrollment.
Drug numbers can be dynamically matched to the patients at the moment of
the randomization and drug assignment. No pre-association between patient
and drug numbers is required. This disassociation allows the ACS to start
up the trial with minimal study drug supplies.
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<PAGE> 51
An additional advantage of the IVRS is that it allows ACS to have the
ability to control patient stratification, for example by age.
Randomization can be done at site level and allow for balancing of the
patient population at site or treatment level as patients are enrolled in
the study.
Confirmation Faxes
The system will automatically fax confirmation statements after each
randomization to both the study sites and ACS. These documents will serve
as written verification of the randomization for auditing purposes.
Drug Ordering and Inventory Management
The IVRS will manage the warehouse and site drug inventory in a
"just-in-time" fashion. This allows for limited initial drug supplies and
minimal drug inventory at the sites, which is achieved by using actual
patient enrollment data along with predetermined resupply algorithms. The
drug inventory algorithms account for drug at warehouse, drug in route,
drug at sites, and drug dispensed.
Drug Expiration Tracking
The Covance IVRS maintains drug lot numbers, kit numbers, expiration
dates, and batch numbers. This allows the IVRS to categorize expired drug
as unassignable within the system. In addition, if there is a drug recall
this information allows the tracking of how much drug remains and where it
is. Thus, measures can be implemented to ensure the appropriate drug
inventory.
Script Translations and Recordings
If applicable, Covance will provide translations and recordings through
our preferred vendor, which has certified language translators. Scripts in
all languages are recorded by a voice professional at a recording studio
to provide a high sound quality IVRS.
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<PAGE> 52
System Architecture
The IVRS architecture consists of an industry standard client/server and
computer telephony components. The database server is Sybase System 11, running
in a UNIX environment. The voice server component is designed with Dialogic
voice cards, the leading computer telephony boards, and Artisoft's Visual
Voice, an industry-leading computer telephony software development kit. The
IVRS voice servers run on Windows NT, the operating system standard for
computer telephony applications.
The system architecture has been designed with redundancy to handle component
or complete system failure in the event of a disaster; voice servers have dual
power supplies, disk-mirroring, and redundant disk arrays. Each voice server
acts as a backup to the other in the event of voice server failure. The Sybase
database server also has error correcting memory, disk-mirroring, redundant
disk arrays, and a backup processing unit. The backup processing unit is linked
to the primary unit via Hewlett Packard's Servicegard software. If the primary
processing unit fails, the backup processor will replace its functionality
within minutes.
Backup and Disaster Recovery
A disaster recovery plan has been developed and tested to support the IVRS
architecture. Its purpose is to minimize interruptions to the IVRS in the event
of hardware failures and natural disasters. An alternate site is maintained in
Covance's Nashville, Tennessee office to recover IVRSs operations during these
types of events.
Switching operations to the alternate site is estimated to take less than one
hour. This involves Covance's long distance telephone carrier to redirect the
toll-free service to the alternate site, as well as Covance staff to activate
the backup database server and voice server in Nashville. In the event that
Covance temporarily recovers to its alternate site, Covance will transfer data
to ACS by diskette or other designated media until operations resume at the
Covance Princeton site.
Complete backups of all systems and data are performed on a daily basis (seven
days/week) and are maintained off-site.
System Validation
The IVRS software produced and administered by Covance is validated by
standards that meet the FDA requirements based on "Guidelines on General
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<PAGE> 53
Principles of Process Validation" and the Device Manufacturing Practices
Parts 211.68 and 820.61.
All Covance IVRSs are validated following the Covance Computer System
Validation SOP. This SOP covers types of validation testing, the test
plan, the results, and change control. The contents of the SOP are as
follows:
- The Types of Validation Testing section describes unit testing,
subsystem testing, system testing and acceptance testing.
- The Test Plan section describes the minimum test plan inclusion
requirements. These are system description, subsystem list, glossary of
terms, validation environment, test procedures, and test sheets.
- The Test Results section describes the approval signature sheet, test
sheets, source code, test data, system output, error logs, error
resolution, and other documents.
- The Change Control section describes the documentation and testing
requirements for modification of the source code to add features and fix
problems, changing any part of the operating environment software, or
any hardware used.
DATA REVIEWS
A series of data reviews are performed throughout the life of an IVRS to
ensure that a project's significant operating requirements are being met.
Typical "business rules" may include: safety issues (such as assignment of
treatment type or dose regimen); correct randomization; stratification or
balancing; uniqueness of patient and drug numbers; windows of time between
visits issues; and adherence to inclusion/exclusion criteria. These data
reviews are appropriately documented, then reviewed and approved by
validation and project management, and then become part of the permanent
validation documentation for the project's IVRS.
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STUDY ASSUMPTIONS
The following assumptions were made in preparing these estimates:
- - This is a Randomization and One Time Drug Assignment IVRS.
- - Options included are:
-Randomization
-Drug Assignment
-Patient Query
- - A manual system will be utilized until 16 November 1998:
-Each call will take approximately 1/2 hour to process.
-Assume 2.25 patient/site will be randomized from 1 October 1998 -
16 November 1998.
-Site will call into the IVRS helpdesk and provide the required
information to the helpdesk associate (ID, password, patient
date-of-birth, gender). The helpdesk associate will provide the
patient number, treatment assignment and the color of the
instructions to prepare the medication. This information will be
obtained from paper randomization lists. A manual confirmation fax
will be sent out to the site.
- - Total IVRS duration is 16 months.
- - Covance will be ordering drug on a site by site basis; Covance will not be
performing drug forecasting for manufacturing purposes or projected
country level needs.
- - There is only 1 drug assignment per patient.
- - A touch-tone phone is required for investigators to interface with the
IVRS; if an Investigator does not have a touch-tone phone, an adapter will
be provided for a fee of $20 per adapter.
- - In order to access the IVRS, toll free phone numbers will be provided;
toll-free phone service is for IVRS only.
- - IVRS staff will participate in 1 in-person Client meeting (8 hours).
- - 1 in-house audit visit will occur with at least two Covance partners.
- - All IVRS functions will be tested and validated prior to system activation;
the validation process will be conducted in accordance with IVRS
Validation SOPs.
- - Study drug expires every 12 months.
- - One data transfer has been assumed.
- - Express mail costs are not included.
- - Covance, Inc. will provide the patient randomization codes. All
randomization schemes imported into the IVRS will be 100% verified by
Covance.
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<PAGE> 55
COST EFFICIENCIES
Cost savings and efficiencies can be recognized by utilizing the drug management
services provided via the Covance IVRS. These savings include:
- - Reduction in drug manufacturing
- - Reduction in drug packaging
- - Reduction in drug labeling
- - Reduction in drug storage (warehouse)
- - Reduction in the quantity of drug to be destroyed
- - Reduction in the time to perform drug reconciliation
- - Total drug inventory management real time
Clinical support will not be required to track the following study parameters
as the data can be provided from the IVRS database via Trial Tracker:
- - Patient enrollment and status
- - Discontinuations
- - Drug expiration dates
- - Clinical supplies at the site and warehouse level
- - The system also allows for total control over patient enrollment (i.e.
"turning off" a site or closing enrollment once enrollment numbers are
met) and for interim analysis/trend analysis to be completed.
Your study centers benefit from these services as well;
- - Eliminates the time required to manually track enrollment and the time to
communicate this information to ACS.
- - Reduces the amount of storage space required for drug at the site.
PROJECT MANAGEMENT BENEFITS OF USING AN IVRS
An IVRS will allow ACS to conduct project, site and study drug activities more
efficiently by providing reports on patient enrollment and demographics,
patient visits, and drug inventories. For example, an IVRS would give ACS the
ability to know real time patient enrollment and patient status; to turn on/off
patient enrollment when target numbers are reached at site, region, country or
study level; or to add or delete treatment arms at any time during the trial.
In terms of site management activities, an IVRS will also allow ACS to
efficiently forecast when CRFs are to be completed and submitted by the site
based on patient enrollment and site visits. Therefore, ACS will be able to
quickly determine which sites should be closed due to delinquent CRF completion
or lack
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<PAGE> 56
of adequate enrollment. The IVRS can also assist in the
planning of site audits. Finally, an IVRS would give ACS to
ability to close enrollment within minutes when decisions on
safety and/or endpoints are made.
With respect to drug management, an IVRS would allow ACS to
start with minimal supplies to allow for early trial start up.
For example, ACS could only package enough drug to allow 3%
wastage versus the traditional 40% wastage. In addition, ACS
will have the ability to track expiration dates and batch
numbers; to recall and stop dispensing any particular drug
batch immediately; and to track drug inventories at all the
various depots and countries.
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<PAGE> 57
APPENDIX 2
COVANCE'S TRIAL TRACKER SYSTEM
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Vitrase(TM) 35
<PAGE> 58
COVANCE'S TRIAL TRACKER SYSTEM
Trial Tracker is an integrated project management tool used by Covance
teams to collect, monitor and report key study activities. The approach to
this system is modular, allowing the Covance and ACS teams to select
desired modules, as well as modify the contents of each selected module for
optimal customization for each unique project. Covance has assumed that ACS
will have access to the following modules:
TRIAL TRACKER MODULES
<TABLE>
<CAPTION>
MODULE OBJECTIVE
<S> <C>
Trial Tracker a central menu system, which acts as the main interface to Trial Tracker.
Menu
Investigator acts as central list of study investigator names and addresses. The
Database Investigator Database assures consistency across Trial Tracker systems by
sharing key information about study sites.
Investigator tracks the collection of study regulatory documents and identifies sites which
Recruitment are ready for initiation. Investigator Recruitment allows the team to select good
clinical sites and move them quickly through the approval process.
Grant Payments facilitates the study payment process from Project Director, through Finance,
and to the Investigator. This process allows for effective financial tracking and
timely payments.
Trip Reporting collects site pre-study, initiation, routine, and final monitoring reports created by
the Covance project team. Trip Reporting expedites the creation, review, and
approval of site monitoring reports.
Patient Tracking records each patient's current status and builds a history of each patient's visits
(projected and actual). Patient Tracking allows the Covance team to monitor
patient activity at each site and creates summary reports for the entire project.
Contact Log allows the team to record issues raised during phone contacts, track protocol
exceptions, and organize the project team list. The Contact Log identifies
issues frequently raised by sites enabling the team to take corrective action.
Sherlock Tracking displays the current status of CRFs as they are received, entered, reviewed
and cleaned by Covance. Sherlock Tracking allows the team to monitor data management
activities and identify trends in the processing of CRFs.
</TABLE>
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 36
<PAGE> 59
APPENDIX 3
COVANCE PHARMACEUTICAL PACKAGING SERVICES ESTIMATES
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 37
<PAGE> 60
- --------------------------------------------------------------------------------
CPPS STUDY COST ESTIMATION
- --------------------------------------------------------------------------------
PROTOCOL NO.: VITRASE PROGRAMME
(ACS)
INTERNAL NO.: 400260
CONTENTS:
SECTION I - JOB SPECIFICATION/DESCRIPTION
SECTION II - QUOTE
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 38
<PAGE> 61
SECTION I
- --------------------------------------------------------------------------------
JOB SPECIFICATION
- --------------------------------------------------------------------------------
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 39
<PAGE> 62
STUDY DESCRIPTION
PREPARATION AND APPLICATION, INCLUDING LANGUAGE TRANSLATION, OF A LABEL
COMPLYING WITH LOCAL LANGUAGE REGULATIONS TO READY PACKAGED MEDICATION AND THE
DISTRIBUTION OF THE MEDICATION AND ANY ADDITIONAL MATERIAL IS WHAT IS REQUIRED
FOR THIS STUDY. IF ADDITIONAL SERVICES ARE REQUIRED OR THE DETAILS WITHIN THIS
QUOTATION ALTER THEN COST WILL BE REVISED ACCORDINGLY.
THE PROGRAMME IS DUE TO RUN IN THE UNITED STATES AND EUROPE. THIS DOCUMENT ONLY
COVERS THE EUROPEAN COUNTRIES.
Assumptions of participating countries
<TABLE>
<CAPTION>
COUNTRY NUMBER OF SITES NUMBER OF PATIENTS
- -------------- --------------- ------------------
<S> <C> <C>
FRANCE 13 130
GERMANY 17 204
ITALY 10 100
NETHERLANDS 6 72
POLAND 8 88
UK 10 120
</TABLE>
ASSUMED STUDY REQUIREMENTS
First patient enrolled in study November 1998. (Could be US).
Last patient enrolled January 2000.
Assume 1 Vitrase vial and 1 Vitrase clinical kit per patient.
Despatch requests to be provided via IVRS directly to CPPS-Horsham.
CPPS-Horsham will be provided with drug supplies that are both primary and
secondary packaged. This will be delivered from ACS. CPPS-Horsham will need to
overlabel the Vitrase vials and apply an additional label on the Vitrase
clinical kit.
CPPS-Horsham will design a label based on English text for each participating
country, ensuring that all local cGMP requirements are adhered to.
Covance will be responsible for the label language translations. This will be
co-ordinated through the Covance regulatory group, by CPPS-Horsham.
Advance Corneal Systems 20 October 1998
Vitrase(TM) 40
<PAGE> 63
The country specific labels will be applied in advance and an amount of drug
will be pre-allocated to the different countries.
Drug will be stored at 2-8 Degrees C.
Drug will be shipped at 2-8 Degrees C. in insulated boxes, accompanied by
frozen ice packs to the nominated sites.
Any miscellaneous materials, such as CRF's, Vitrase clinical kits will be
shipped at ambient temperatures.
Advanced Corneal Systems 20 October 1998
Vitrase (TM) 41
<PAGE> 64
SECTION II
- --------------------------------------------------------------------------------
QUOTE
- --------------------------------------------------------------------------------
Advanced Corneal Systems 25 October 1998
Vitrase(TM) 42
<PAGE> 65
QUOTE FOR ACS -- VITRASE(TM) PROGRAMME.
<TABLE>
<S> <C>
STUDY SET UP L.3,000.00
LABEL DESIGN AND PRINTING OF LABELS
(ASSUMES 6 LABEL TYPES/2 LABELS PER PATIENT) L.4,750.00
including:
Design of label texts
Printing of secondary labels
QA review/approval
Regulatory review/approval
PACKAGING AND LABELLING L.6,250.00
including:
Preparation of packaging instructions
Labelling of vials and clinical kit boxes
QA review/approval
SHIPMENT COST FOR AMBIENT TEMPERATURE L. 80.00
PER SHIPMENT
including:
Design and printing of centre labels
Design and printing of shipping labels
Packaging material for (centre boxes)
Labels (centre labels)
Preparation of packaging and shipping instructions
Co-ordination of shipments with the medical centres,
and the forwarder
Preparation of shipping documents
Co-ordination of drug ordering with IVRS and the centres
Actual shipping costs excluded
</TABLE>
Advance Corneal Systems 20 October 1998
Vitrase(TM) 43
<PAGE> 66
SHIPMENT COST (MULTIPLE OR SINGLE PATIENT SHIPMENT) L. 250.00
FOR COLD STORAGE PER SHIPMENT
including:
Placement of vial into plastic bag prior to despatch
Design and printing of centre labels
Design and printing of shipping labels
Insulated packaging material (centre boxes)
Labels (centre labels)
Preparation of packaging and shipping instructions
Co-ordination of shipments with the medical centres,
and the forwarder
Preparation of shipping documents
Co-ordination of drug ordering with IVRS and the centres
Actual shipping costs excluded
ESTIMATED ACTUAL SHIPMENT FREIGHT COSTS L.20,000.00
(This is possible for change and should only be treated as a guide)
DESIGN AND VALIDATION OF INSULATED SHIPPING CASES L. 1,500.00
including:
Dimensional sizing
Validation of temperature shelf life
INVENTORY MANAGEMENT PER MONTH L. 450.00
including:
Inventory management and follow up of medication
Packed medication (quality control: exp.date, batch no)
Follow up after stock levels as well as follow up of requests
for additional supplies
Inventory reports (monthly basis)
PROJECT MANAGEMENT PER MONTH L. 450.00
STORAGE PER BAY PER MONTH BETWEEN 2-8oC L. 90.00
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 44
<PAGE> 67
<TABLE>
<S> <C>
STORAGE PER BAY PER MONTH BETWEEN 15-30oC L.40.00
RETURNED MEDICATION TO BE AGREED
DESTRUCTION OF RETURNED STUDY MEDICATION TO BE AGREED
EUROPEAN RELEASE OF IMPORTED DRUG/PER BATCH L.500.00
(assumes paperwork exercise only)
</TABLE>
Stephen Savage Heinz Stamm
Customer Services Director General Manager
Date: 10/9/98
Advanced Corneal Systems 20 October 1998
Vitrase(TM) 45
<PAGE> 68
[COVANCE LETTERHEAD]
16 October 1998
Advanced Corneal Systems Reference#: 3375ctm
15279 Alton Parkway, #100
Irvine, CA 92618
RE: QUOTATION FOR ADVANCED CORNEAL SYSTEMS - PHASE III STUDIES FOR VITRASE -
STORAGE AND DISTRIBUTION - BRAZIL
This letter serves to confirm pricing and specifications for the above
referenced study. Pricing has been based on the information provided to date.
This quotation may be revised as more specific information becomes available.
ASSUMPTIONS
o Supplies will be provided for 125 patients.
o There will be 5 sites in Brazil.
o The vials of Vitrase will be packaged separate from the auxiliary supplies
and will be packaged as one lot for all treatment groups (open labeled).
o The vials of Vitrase will require refrigerated storage and shipment at 2 -
8 degrees Celcius.
o The auxiliary supplies will be stored and shipped in ambient temperature
conditions.
o This compound is not cytotoxic, a penicillin or cephalosporin, DEA
scheduled product or considered hazardous material.
o There will be one pallet of refrigerated product in storage and one pallet
of ambient supplies in storage.
o Each patient will receive one Vitrase vial and one kit of auxiliary
supplies.
o Initial site shipments will include supplies for 5 patients per site.
o There will be 2 shipments to each site (ambient and refrigerated).
o Covance Horsham will provide the validated insulated shippers.
o One shipment will be made from CPPS Allentown to a distribution company in
Brazil. Site shipments will be made from that distribution company.
o There will be 12 months of inventory and project management.
<PAGE> 69
20 October 1998
Page 2
CPPS SUPPLIED COMPONENTS
Vitrase Vial Labels
Open labels to be printed at CPPS, Allentown
Quantity: 125
Vitrase Auxiliary Supply Labels
Open labels to be printed at CPPS, Allentown
Quantity: 125
Validated Insulated Shippers and Dividers
Provided by CPPS Horsham
Quantity: 25
Kool-it Bricks
Provided by CPPS Allentown
Quantity: 75
Plastic Ziplock Bags
To protect the vials from moisture during shipment
Provided by CPPS Allentown
Quantity: 50
CUSTOMER SUPPLIED COMPONENTS
Vitrase Vials
Auxiliary Supply Kits
ASSEMBLY: Secondary Labeling Operations (2 put-ups)
1. Vitrase Vials
2. Auxiliary Supply Kits
The vials of Vitrase will be overlabeled and placed into the
original storage containers.
The auxiliary supply kits will receive an additional label.
PRICE: Labeling of 125 patients' supplies @ $2,626.00.
Additional supplies will be billed @ $21.01/patient supply
(vial or auxiliary kit).
TOOLING: N/A
<PAGE> 70
20 October 1998
Page 3
DISTRIBUTION: One shipment will be made from CPPS Allentown to the SAR
warehouse in Brazil @ $145.00.
Note: CPPS requires 48-hour lead time to process and ship
distribution requests. Emergency shipments requiring less
than 48-hours lead time will receive an upcharge of $50.00
per shipment.
Note: The costs for site distribution within Brazil are not
included in this quotation.
ESTIMATED BUDGET: Initial shipment to Brazil @ $145.00.
FREIGHT: Freight charges are not included in the above prices. Freight
will be billed at the carrier's cost. This includes freight for
paperwork and samples.
STORAGE AT CPPS ALLENTOWN: Ambient storage of patient supplies @ $50.00 per
pallet per month.
Refrigerated storage of Vitrase vials @ $100.00
per pallet per month.
ESTIMATED BUDGET: 1 pallet of ambient supplies
stored for 1 month = $50.00
1 pallet of refrigerated vials
stored for 1 month = $100.00
Note: The costs for storage in Brazil are not included in
this quotation.
RETURNED DRUG: Not necessary at this time.
STORAGE OF RETURNS: Not necessary at this time.
DESTRUCTION: CPPS does not handle the destruction of drug product. CPPS is able
to prepare returned or rejected drug product for shipment to an
approved Medical Waste Facility. However, the contract for
destruction and manifest for pick up of the product must be
arranged between the client and the chosen Medical Waste Facility.
If this service is necessary, it will be quoted at that time.
ADMINISTRATIVE CHARGES: Preparation of special reports required more than one
time per month will be billed @ $85.00 per technician
hour.
ESTIMATED BUDGET: 2 hours per month x 12 months
@ $2,040.00
SPECIAL NOTES/INSTRUCTIONS: N/A
<PAGE> 71
20 October 1998
Page 4
TERMS: Net 60 Days
DELIVERY: F.O.B. Allentown, PA
ESTIMATED PRICING SUMMARY: CLINICAL PACKAGING $2,626.00
TOOLING N/A
DISTRIBUTION $ 145.00
FREIGHT TBD
STORAGE OF STUDY SUPPLIES $ 100.00
RETURNED DRUG ACCOUNTABILITY N/A
STORAGE OF RETURNED DRUG N/A
ADMINISTRATIVE CHARGES $2,040.00
TOTAL ESTIMATED COSTS $4,911.00
Thank you for the opportunity to quote.
Sincerely,
Covance Pharmaceutical Packaging Services Inc.
Jennifer Gaidjunas
Senior Clinical Coordinator
Copy Mike Ivers
I agree to the terms and conditions of this price estimate and understand that
if there are changes to the specifications listed above, a revised quotation may
be required.
X
--------------------------- -------------------------------
Customer Approval Signature Date
<PAGE> 72
ATTACHMENT 1
ACS: HYALURONIDASE SOLUTION
PROTOCOL #VIT-02-08961X AND PROTOCOL #VIT-03-08961X
TRANSFER OF OBLIGATIONS TO COVANCE
20 OCTOBER 1998
<PAGE> 73
Attachment 1
20 October 1998
Page 1
TRANSFER OF OBLIGATIONS TO COVANCE*
20 OCTOBER 1998
The following obligations of the Study sponsor will be transferred from ACS to
COVANCE.
1. The conduct of pre-study visits to assist ACS in the selection of
investigators qualified by training and experience.
2. Procurement of the following documents from each INVESTIGATOR to be
monitored by COVANCE:
a. A completed and signed Form FDA-1572.
b. Current curriculum vitae of the principal INVESTIGATOR and all
secondary INVESTIGATORS identified on Form FDA-1572.
c. PROTOCOL signature page signed by the principal INVESTIGATOR.
d. A copy of informed consent form to be used by the INVESTIGATOR.
e. IRB approval of the PROTOCOL and informed consent form.
f. As appropriate, IRB approval of PROTOCOL amendments and annual
reapprovals.
3. Provide all participating INVESTIGATORS with current investigators'
brochure and, as the investigation proceeds, keep each participating
INVESTIGATOR informed of new information received from ACS regarding the
DRUG.
4. In accordance with 21 CRF 312.32, COVANCE will promptly inform
INVESTIGATORS and ACS of any important safety information, including
serious adverse experiences received by COVANCE.
* Terms not defined herein are used herein as defined in the Clinical
Development Agreement; dated 20 October 1998, by and between ADVANCED
CORNEAL SYSTEMS, INC. and COVANCE, INC.
<PAGE> 74
ATTACHMENT 2
ACS: HYALURONIDASE SOLUTION
PROTOCOL #VIT-02-08961X AND PROTOCOL #VIT-03-08961X
PAYMENT SCHEDULE
<PAGE> 75
Final AO Payment Schedule
<TABLE>
<CAPTION>
MILESTONE* EXPECTED DATE PAYMENT
---------- ------------- --------
<S> <C> <C> <C>
1 Initial Payment Oct-98 $900,000
2 10% of Patients Enrolled (160 patients) Jan-99 800,000
3 20% of Patients Enrolled (320 patients) Feb-99 600,000
4 30% of Patients Enrolled (480 patients) Mar-99 600,000
5 40% of Patients Enrolled (640 patients) May-99 600,000
6 50% of Patients Enrolled (800 patients) Jun-99 600,000
7 60% of Patients Enrolled (960 patients) Aug-99 600,000
8 70% of Patients Enrolled (1,120 patients) Sep-99 500,000
9 80% of Patients Enrolled (1,280 patients) Nov-99 500,000
10 90% of Patients Enrolled (1,440 patients) Dec-99 500,000
11 100% of Patients Enrolled (1,600 patients) Jan-00 500,000
12 100% of Patients Complete Three months Apr-00 450,000
13 Last Three-Month CRF In-House May-00 340,000
14 Three Month Statistical Analysis Completed Jun-00 340,000
15 Three Month CSR Completed Jul-00 340,000
16 60% of Patients Complete 1 year Aug-00 340,000
17 80% of Patients Complete 1 year Nov-00 546,000
18 100% of Patients Complete 1 year Jan-01 504,000
19 Last 12-Month CRF In-House Feb-01 340,000
20 12 Month Statistical Analysis Completed Apr-01 350,000
21 12-Month CSR Completed May-01 250,000
22 Final Payment Jun-01 252,000
-----------
TOTAL $10,562,000
===========
</TABLE>
*Covance will invoice ACS upon completion of milestones. All payments are due
within 30 days of receipt of invoice.
Page 1
<PAGE> 76
ADVANCED CORNEAL
SYSTEMS
CHANGE ORDER #4 TO THE TIME AND COST ESTIMATE FOR
ASSISTANCE WITH THE CONDUCT OF ONE GLOBAL PHASE III
STUDY (PROTOCOL VIT-03-08961X) OF VITRASE(TM)
(HYALURONIDASE FOR OPHTHALMIC INTRAVITREAL INJECTION)
FOR CLEARANCE OF SEVERE VITREOUS HEMORRHAGE
Prepared for -
ADVANCE CORNEAL SYSTEMS, INC.
15279 ALTON PARKWAY, SUITE 100
IRVINE, CALIFORNIA 92618
Prepared by -
Convance Clinical and Periapproval Services SA
Avenue de Tervueren 273
1150 Brussels - Belgium
14 July 1999
Revised 10 September 1999
<PAGE> 77
Time & Cost Estimate - Change Order #4
ACS - Vitrase
TABLE OF CONTENTS
I. INTRODUCTION 3
II. PROJECT SCOPE AND TIMELINES 4
PROJECT SCOPE 4
PROJECT TIMELINES 6
III. RESPONSIBILITIES AND SERVICES 7
EUROPE & BRAZIL 7
A. GENERAL ASSUMPTIONS 7
B. TASK SPECIFIC ASSUMPTIONS 9
C. COST ESTIMATES 16
D. CHANGE ORDER FORMS 18
E. VALIDITY 18
ATTACHMENTS
COVANCE PHARMACEUTICAL PACKAGING SERVICES 19
<PAGE> 78
Time & Cost Estimate - Change Order #4
ACS - Vitrase
I. INTRODUCTION
On 20 October 1998, Covance Inc. (Covance) provided Advanced Corneal
Systems, Inc. (ACS) with a Time and Cost Estimate (TCE) for assistance in
conducting two Phase III safety and efficacy studies of Vitrase(TM)
involving 1,600 patients with severe vitreous hemorrhage.
This TCE includes the task descriptions and the cost estimates for one study
(protocol VIT-03-08961X) as from 1 June 1999, in response to the changes
required in the revised protocol, dated 5 March 1999. In agreement with ACS,
all expenses incurred from the start of the study until 31 May 1999 will be
invoiced to ACS on a cost incurred basis. The following list indicates the
changes affecting the scope of this program.
o VIT-02-08961X
This is a North American study. All work (with the exception of IVRS) has
been withdrawn from Covance Inc. as of 8 May 1999. IVRS work on this study
will be the subject of a separate Time & Cost Estimate (TCE).
o VIT-03-08961X
Covance will continue to work on this global study in the participating
European and Brazilian countries. Changes include:
o Deletion of watchful waiting arm
o Replacement of 7.5 IU treatment arm with saline injection arm
o Decrease in number of patients from 660 to 306
- 278 complete evaluable patients
- 28 non-completers who will be replaced
3
<PAGE> 79
Time & Cost Estimate--Change Order #4
ACS - Vitrase
o Decrease in number of Covance responsible investigative sites from 48
to 32 in Europe and Brazil
- CroMedia will monitor sites in South Africa and
Australia/New-Zealand
- Staticon International will monitor sites in Germany and
Hungary
o Selection, pre-study and initiation of additional British and Polish
sites needed to replace French sites
o Increase in number of CRF pages per patient from 36 to 50
o Addition of an interim analysis (additional monitoring/query
resolution)
o Shift in start-up timelines because of delays in finalizing the study
protocol and delays in receiving required regulatory filing documents
required for submission to regulatory health authorities
o Brazilian Investigators' Meeting
o CroMedica will be responsible for data entry, data management and
query generation
o Covance Pharmaceutical Packaging Services (CPPS Horsham) will be
responsible for labeling of all drug supplies (including Brazil)
o CPPS Horsham will be responsible for generating randomizing envelopes
for all participating countries
o CPPS Horsham will be responsible for storage and shipment of all drug
supplies to participating countries
II. PROJECT SCOPE AND TIMELINES
A. PROJECT SCOPE
Protocol #VIT-03-08961X is a phase III, randomized, masked safety and efficacy
study of Vitrase(TM) for the treatment of severe vitreous hemorrhage, which
will be conducted at 51 investigative sites in Europe, 10 sites in South
Africa, 5 sites in Brazil, and 10-12 sites Australia/New-Zealand.
Covance is responsible for sits in The Netherlands, the United Kingdom, Poland
and Brazil.
Other countries are handled by other CROs and are not subject for this TCE.
Covance will however provide assistance for regulatory submissions in Italy and
minimal support activities for regulatory submissions in Hungary. In addition,
Covance is responsible for Investigator Package review and Serious Adverse
Events reporting to authorities for all participating countries.
4
<PAGE> 80
Time & Cost Estimate-Change Order #4
ACS - Vitrase
All investigative sites are stand-alone sites which ACS expects to enroll a
minimum of 1.0 to 1.5 patients per month.
In Europe, South Africa, Australia/New-Zealand and Brazil, up to 561 eligible
patients will be randomized into the following three treatment arms in a 1:1:1
ratio for Protocol VIT-03-08961X.
(1) Saline Injection
(2) Vitrase(TM) 55 IU
(3) Vitrase(TM) 75 IU
While in the study, patients will be clinically evaluated at Screening and
Randomization; Days 1 and 7; and Months 1, 2, 3, 6, and 12. Patients will be
followed every six months thereafter, up to three additional years. Costs are
provided for patient monitoring and management through Month 12. Costs for
activities during the three-year follow-up period will be provided upon request
from ACS. Table 1 provides a summary of the project specifications.
TABLE 1
VITRASE(TM) PHASE III STUDY SPECIFICATIONS--PROTOCOL VIT-03-08961X
<TABLE>
<S> <C>
Number of Patients Enrolled 561(a)
completers 510
patients replaced (10%) 51
original --
Number of Initiated Sites 78(b)
Case Report Form Size 50 pages per patient
Enrollment Rate(c) Approximately 1.0 to 1.5 patients per
site per month
Enrollment Period(c) 7 months
Final Deliverable(d) Clean CRF
</TABLE>
(a) ACS assumes European sites will enroll 231 patients and Brazilian
sites 75 patients
(b) Covance will initiate 27 sites in Europe and 5 sites in Brazil
(c) Enrollment rate and period projected by ACS
(d) An interim analysis will be conducted after 150 patients complete
three months.
5
<PAGE> 81
Time & Cost Estimate - Change Order #4
ACS - Vitrase
B. PROJECT TIMELINES
Table 2 presents the assumed timelines for the Vitrase(TM) Phase III program.
TABLE 2
ESTIMATED TIMELINES(a) - PROTOCOL VIT-03-08961X
<TABLE>
<CAPTION>
MILESTONE DATES
- --------- -----
<S> <C>
Final Protocol (Amendment 3) 5 March 1999
Study Drug Available 1 May 1999/July 1999(b)
Site Initiations (start-end) 26 May 1999 - 30 September 1999
First Patient Enrolled 1 June 1999
Interim Analysis(c) October 1999
Last Patient Enrolled(d) 15 January 2000
Last Patient Out (3 months) 15 April 2000
Delivery of Draft 3 Month Clinical Study Reports July 2000
Last Patient Out (1 Year Follow-up) 15 January 2001
Delivery of Draft 12 month Clinical Study Reports April 2001
</TABLE>
(a) Timeline provided by ACS
(b) Second batch to be supplied by ACS
(c) Time of interim analyses based on enrollment rate of 1.5 per patients per
month
(d) Timeline based on by ACS assumed recruitment of 1.5 patients/site/month
6
<PAGE> 82
Time & Cost Estimate--Change Order #4
ACS - Vitrase
III. RESPONSIBILITIES AND SERVICES
PROTOCOL VIT-03-08961X (EUROPE & BRAZIL)
Below is an outline of Covance responsibilities from 1 June 1999 through
completion of activities per the timelines stated in Section II (page 6) of this
Change Order.
A. GENERAL ASSUMPTIONS
1. THE ESTIMATES HAVE BEEN BASED ON THE PROTOCOL STATED BELOW:
<TABLE>
<CAPTION>
STATUS
ACS PROTOCOL # NAME PHASE INDICATION (DRAFT/FINAL) DATE
- -------------- ---- ----- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
VIT-03-08961X VVHS III Vitreous FINAL 05 March 1999
hemorrhage
</TABLE>
2. THE TOTAL NUMBER OF PATIENTS AND SITES:
<TABLE>
<CAPTION>
TOTAL NUMBER OF PATIENTS TOTAL NUMBER OF SITES
- ------------------------ ---------------------
<S> <C>
306 32
</TABLE>
3. END POINT OF COVANCE INVOLVEMENT IN THE STUDY IS: CLEAN CRF
7
<PAGE> 83
Time & Cost Estimate-Change Order #4
ACS - Vitrase
4. THE STUDY IS TO BE CONDUCTED IN THE FOLLOWING COUNTRIES:
<TABLE>
<CAPTION>
COUNTRY # SITES # PATIENTS
------- ------- ----------
<S> <C> <C>
THE Netherlands 4 35
Poland 10 140
United Kingdom 13 56
Brazil 5 75
TOTAL 32 306
</TABLE>
5. THE PROJECT WILL BE CONDUCTED ACCORDING TO THE FOLLOWING TIMELINES:
<TABLE>
<CAPTION>
EVENT TIMELINE
----- --------
<S> <C>
Agreement reached 1 March 1999
Final Protocol 5 March 1999
Study Drug Available 1 May 1999/ July 1999*
Site Initiations (start-end) 26 May 1999 - 30 September 1999
First Patient In 1 June 1999
First Patient Out 1 June 2000
First CRF to Data Management CroMedica September 1999
Last Patient In 15 January 2000
Last Patient Out 15 January 2001
Start Audits September 1999
Last CRF to Data Management CroMedica February 2001
Last Query Resolved End February 2001 **
Statistical Analysis Provided N/A
Clinical Trial Report Provided N/A
Transfer of all archive materials to ACS March 2001
</TABLE>
* Availability of second batch to be used for supplies in Hungary, Australia
and Brazil.
** Assumes one week turnaround time of queries by outside data management group.
8
<PAGE> 84
Time & Cost Estimate--Change Order #4
ACS - Vitrase
B. TASK-SPECIFIC ASSUMPTIONS
All tasks required as of 1 June 1999 for the successful completion of the
Covance portion of the study are listed below with the agreed assignment of
responsibilities for each of the tasks. The cost estimates are based on the
assumptions detailed for each of the tasks.
<TABLE>
<CAPTION>
ACS COVANCE
--- -------
<S> <C> <C> <C>
A. REGULATORY SUBMISSIONS
1. PREPARATION OF CLINICAL TRIAL APPLICATION
o the Netherlands Completed
o Poland Completed
o United Kingdom Completed
o Brazil X
o Italy (support for ACS consultant) X
o Hungary (minimal support) X
o Australia/New Zealand (minimal support) Completed
* Assumes no updates to the authorities.
2. REPORTING OF SAES TO REGULATORY AUTHORITIES
* Covance will report SAEs from all sites, including
non-Covance countries, i.e. Germany, Hungary,
Australia/New Zealand and South Africa. X
* Standard Covance SAE reporting forms will be used.
* Assumes a total of 17 reportable SAEs.
3. NOTIFYING INVESTIGATORS OF SAEs
* Includes notification to investigators and ethic
committees for Covance countries and to other CROs
for Germany, Hungary, Rep. of South Africa,
Australia/New Zealand. X
* Assumes a total of 17 reportable SAEs.
</TABLE>
9
<PAGE> 85
Time & Cost Estimate - Change Order #4
ACS - Vitrase
<TABLE>
<CAPTION>
B. PROTOCOL AND CRF PREPARATION ACS COVANCE
--- -------
<S> <C> <C>
1. PROTOCOL DESIGN Completed
* Assumes no further protocol amendments
2. CRF DESIGN Completed
3. CRF PRINTING (3-part NCR paper) Completed
4. SHIPPING OF CRFs TO INVESTIGATORS X
C. PRE-STUDY PREPARATION
1. IDENTIFY POTENTIAL INVESTIGATORS (X) (X)
* Includes 20 calls to potential new investigators.
2. MAILING PROTOCOL PACKAGES to potential investigators X
3. PRE-STUDY SITE VISITS
* Includes a total of 5 Pre-Study Site Visits. X
4. INVESTIGATOR GRANT NEGOTIATION (X) (X)
5. NEGOTIATIONS WITH SUBCONTRACTORS N/A
6. INVESTIGATORS' MEETINGS
* Includes 1 Investigators' Meeting in Brazil with 2 Covance X
attendees.
* Includes organization and attendance of the meeting.
7. FORMS DEVELOPMENT
(trip reports, investigator files, study file notebook, enrollment Minimal
tracking,....) review
8. PROJECT-SPECIFIC TRAINING
* Assumes training for 3 Covance staff members (Project X
Manager and 2 monitors).
9. TRANSLATIONS
* informed consent forms Completed
* drug reconstitution sheets Completed
* source data work sheets, to be translated into X
Portuguese (Brazil).
* Assumes no site specific changes.
</TABLE>
10
<PAGE> 86
Time & Cost Estimate - Change Order #4
ACS - Vitrase
<TABLE>
<CAPTION>
C. PRE-STUDY PREPARATION ACS COVANCE
--- ---------
<S> <C> <C>
10. BACK-TRANSLATIONS INTO ENGLISH Completed
* informed consent form
11. DESIGN OF MONITORING CONVENTIONS MANUAL X Revision
* Assumes no update during course of study.
12. ASSISTING INVESTIGATORS WITH ETHICS COMMITTEES X
13. DESIGN OF SAE REPORTING PLAN X
14. REVIEW OF INVESTIGATOR DOCUMENTS X
15. DESIGN OF SOURCE DATA VERIFICATION PLAN X Revision
16. UPDATE TRIAL TRACKER DATABASE to cover amendment X
17. SET-UP OF 24-HOUR MEDICAL COVER PLAN X
D. STUDY INITIATION VISITS
1. STUDY INITIATION VISITS X
* Includes a total of 31 study initiation visits.
E. ROUTINE MONITORING VISITS
1. ROUTINE MONITORING VISITS (INCL. CLOSE-OUT VISITS)
* During enrollment, visits will be performed every 4 weeks
in Poland and Brazil, and every 6 weeks in The Netherlands
and United Kingdom, plus 1 extra visit after inclusion of the
first patient and 1 visit for interim analysis. X
After the enrollment period, visits will be performed every
12 weeks for all sites.
* Includes 2 extra visits per site for unmasked monitor.
-> Total # of Routine Monitoring Visits: 489
</TABLE>
11
<PAGE> 87
TIME & COST ESTIMATE-CHANGE ORDER #4
ACS - VITRASE
<TABLE>
<CAPTION>
<S> <C> <C>
F. PROJECT MANAGEMENT ACS CONVANCE
1. PROJECT PLAN Revision
2. KICK-OFF MEETING Completed
3. REVIEW AND APPROVAL OF INVOICES X
4. DEVELOPMENT/MAINTENANCE OF PROJECT DATABASES Revision
5. PREPARATION OF MONTHLY STATUS REPORTS X
6. MEETINGS WITH ACS
* Includes a total of 1 face-to-face meeting per year of 1 day
duration between ACS and Covance. X
* Includes 2 Convance participants at each meeting.
7. TELEPHONE CONTACTS WITH ACS X
8. OVERALL PROJECT SUPERVISION X
9. PROJECT TEAM MEETINGS
* Includes a total of 2 meetings of 1 day duration per full
year (i.e. 1 meeting in 1999, 2 meetings in 2000 and X
1 meeting in 2001).
* Includes 7 Covance participants per meeting.
10. PROJECT FILES X
11. INTERACTION WITH OTHER CROS X
12. ARCHIVING OF CRFS and all other study documentation after
study completion X
14. SHIPPING OF CRFS and all other study documentation to ACS
after study completion X
15. PERIODIC BUDGET AND CONTRACT REVIEW, telephone calls and
meetings with ACS regarding contract issues X
</TABLE>
12
<PAGE> 88
Time & Cost Estimate - Change Order #4
ACS - Vitrase
<TABLE>
<CAPTION>
G. SITE MANAGEMENT ACS COVANCE
--- -------
<S> <C> <C>
1. SERIOUS ADVERSE EVENT REPORTING
- to ACS
- to data management (CroMedica)
- to authorities \
- to investigators Reportable SAEs only X
- to other monitoring CROs /
* Assumes a total of 56 SAEs.
2. MAINTENANCE OF SAE DATABASE X
3. TELEPHONE MONITORING OF SITES X
4. IN-HOUSE FOLLOW-UP OF MONITORING VISITS X
5. IN-HOUSE FOLLOW-UP OF ISSUES FOUND DURING AUDITS X
6. INVESTIGATOR FILES X
7. ADMINISTRATION OF PAYMENTS for
- Investigators (assumes a max. of 4 payments per site) X
- Patient travel, Ethic Committees, Authorities (MoH),
pharmacy fees, etc. X
8. SHIPPING OF NON-DRUG SUPPLIES TO INVESTIGATIONAL SITES
- Case Report Forms
- Pharmacy binders X
- Other
9. ORGANIZATION OF ETDRS MATERIALS TO SITES X X
10. NEWSLETTERS X
</TABLE>
13
<PAGE> 89
Time & Cost Estimate-Change Order #4
ACS - Vitrase
<TABLE>
<CAPTION>
H. DATA CLEAN-UP ACS COVANCE
- -- ------------- --- -------
<S> <C> <C>
1. IN-HOUSE CRF REVIEW
- Includes CRF tracking, translations of investigator
comments. X
- Assumes no copying of CRFs
2. CLINICAL QUERY RESOLUTION X
3. SUPPORT TO DATA MANAGEMENT AT CROMEDICA for
reconciliation of safety data and clinical databases X
</TABLE>
<TABLE>
<CAPTION>
I. STATISTICAL/CLINICAL REPORTS ACS COVANCE
- -- ----------------------------- --- -------
<S> <C> <C>
1. STATISTICAL ANALYSIS/REPORT
- Design Statistical Analysis Plan
- Statistical Analysis X
- Statistical Report
2. CLINICAL TRIAL REPORT (CTR)
- Design CTR Plan
- Production CTR X
- Review CTR
</TABLE>
<TABLE>
<CAPTION>
J. SITE AUDITS ACS COVANCE
- -- ----------- --- -------
<S> <C> <C>
1. SITE AUDITS BY THE CLIENT (represented by CroMedica) with
Covance assistance
- Includes scheduling, travel, in-house file review, pre-
and post-audit discussions, assistance of the monitor X (X)
during the audit
- Assumes 9 site audits.
</TABLE>
14
<PAGE> 90
Time & Cost Estimate - Change Order #4
ACS - Vitrase
<TABLE>
<CAPTION>
ACS COVANCE
--------- -----------
<S> <C> <C>
K. DRUG SUPPLIES MANAGEMENT
1. SET-UP
- includes design of Drug Supply Plan, obtaining
investigator consignees, set-up tracking system X
2. DRUG IMPORTATION X
3. DESIGN OF CORE LABEL Completed
4. REVIEW OF LABELS X
5. TRANSLATIONS OF LABELS Completed
6. TRACKING OF DRUG SUPPLIES BY MONITORS for Covance
sites only X
- Under refrigerated storage conditions
- Includes re-supply requests for sites
7. WAREHOUSE STORAGE AND TRACKING OF DRUG SUPPLIES FOR ALL
STUDY SITES
- will be performed by CPPS
8. PREPARATION OF DRUG RANDOMIZATION PLAN AND BLINDING
ENVELOPES Completed
9. DISTRIBUTION OF BLINDING ENVELOPES TO INVESTIGATIONAL
SITES X
- will be performed by CPPS
10. DRUG LABELING X
- will be performed by CPPS
11. DRUG PACKAGING X
- will be performed by CPPS
12. SHIPPING OF DRUG SUPPLIES TO INVESTIGATIONAL SITES X
- will be performed by CPPS
13. REMAINING DRUG DISPOSAL X
- assumes return of drug to CPPS/destruction by CPPS
following approval by ACS
</TABLE>
15
<PAGE> 91
Time & Cost Estimate--Change Order #4
ACS - Vitrase
C. COST ESTIMATES
COVANCE PROFESSIONAL FEES
Covance costs have been calculated based on staff time needed to complete all
the tasks as outlined in Section B of this proposal. Individuals from various
departments throughout Covance will participate. These individuals will be
integrated into a dedicated project team. Estimated Covance professional fees
are presented in the table below. The cost table includes the estimates as of 1
June 1999 until completion of the study. In agreement with ACS, all expenses
incurred from the start of the study until 31 May 1999 will be invoiced to ACS
on a cost incurred basis. From 1 June 1999, this contract will become a fixed
price contract.
COVANCE FEES
<TABLE>
<CAPTION>
TASK FEES (US$)
- ---- ----------
<S> <C>
Regulatory Submissions 26,900
Protocol and CRF Preparation Completed
Pre-Study Preparation 116,500
Study Initiation Visits 39,900
Routine Monitoring Visits 718,000
Project Management 525,500
Site Management 380,000
Data Entry and/or Import N/A
Data Clean-Up 75,000
Generation and Review of Tables/Listings/Figures N/A
Statistical Analysis/Statistical Report N/A
Clinical Trial Report (CTR) N/A
Site Audits 9,500
Drug Supplies Management 32,500
exclusive CPPS Horsham fees (see Attachment 1)
Project Specific Support 122,100
TOTAL 2,045,900
</TABLE>
16
<PAGE> 92
Time & Cost Estimate-Change Order #4
ACS - Vitrase
OUT-OF-POCKET COSTS
Presented below are out-of-pocket costs for travel and accomodation, and
shipping of study materials to the investigational sites. These are all
pass-through costs.
OUT-OF-POCKET COSTS
<TABLE>
<CAPTION>
ITEM COST (US$)
- ---- ----------
<S> <C>
Travel and Accomodation 423,200
Client Meeting 12,300
Project Specific Training 0
Project Team Meetings 23,500
Kick-Off Meeting 0
Shipping of non-drug supplies 32,000
Printing 4,000
Patient travel t.b.d.
Investigators' Meeting, including investigators' t.b.d.
travel & accommodation
Ethic Committees' fees
Authorities' fees t.b.d.
Pharmacy fees
Custom clearance fees t.b.d.
TOTAL (EXCL. T.B.D.) 491,000
</TABLE>
In addition to the above, the estimated fees for regulatory submissions in
Brazil are approximately $35,000. This has not been included in this TCE.
17
<PAGE> 93
Time & Cost Estimate-Change Order #4
ACS - Vitrase
D. CHANGE ORDER FORMS
Covance professional fees are fixed, and are based on assumptions and
specifications described in this proposal. Deviations from the assumptions and
specifications will be jointly reviewed and assessed by ACS and Covance with
regard to impact on cost and timelines. Deviations outside Covance's control or
changes in the assumptions, specifications or scope of the project resulting in
a change in time or costs will need to be re-negotiated with ACS. Once a
deviation is identified, a "Change Order Form" will be prepared by Covance, with
an estimate of the new timelines, fees and expenses associated with this
deviation. Upon ACS's approval of Covance's estimate, said change notice will be
effective. Any events or changes of assumptions which affect the time or costs
and which are within Covance's control will be the responsibility of Covance and
will not affect the program budget.
E. VALIDITY
This Time and Cost Estimate is valid for 90 days.
18
<PAGE> 94
Time & Cost Estimate--Change Order #4
ACS - Vitrase
ATTACHMENT
COVANCE PHARMACEUTICAL PACKAGING SERVICES
(CPPS HORSHAM)
JOB SPECIFICATION
o STUDY DESCRIPTION
Additional countries are now set to participate in this study. Therefore
packaged supplies are required for Hungary and Australia, neither of these
countries were listed among the original participating sites.
Additionally, packaging has had to be split over two runs, which was not
originally intended, as drug material was not available to pack under one
packaging campaign. Therefore packaging for original countries has to be
repeated.
Preparation and application of a label complying with local language regulations
to ready packaged medication and the distribution of the medication and any
additional material is what is required for this study. If additional services
are required or the details within this quotation alter then cost will be
revised accordingly.
19
<PAGE> 95
Time & Cost Estimate--Change Order #4
ACS - Vitrase
o MODIFICATION REQUIREMENTS
Items covered within this change order are as follows:
Labeling of Vitrase vials and Clinical kit cartons (including provision in each
carton of a lose two-part Saline vial label), for the following countries:
<TABLE>
<CAPTION>
COUNTRY # VITRASE VIALS TO LABEL # CLINICAL KITS TO LABEL
- ------- ------------------------ ------------------------
<S> <C> <C>
Netherlands 8 15
Poland 36 54
UK 28 42
Germany 32 48
South Africa 32 48
Hungary 72 108
Australia 96 144
Brazil 17 63
</TABLE>
QUOTE
<TABLE>
<CAPTION>
TASK DESCRIPTION COST (US$)
---------------- ----------
<S> <C>
LABEL DESIGN AND PRINTING OF LABELS (3 labels per
patient and setting of new texts), including design of 4,780
label texts, printing of secondary labels for
medication vials, clinical kits and saline vials,
QA review/approval, regulatory review/approval
PACKAGING AND LABELING (of material listed above),
including preparation of packaging instructions, 6,070
labeling of vials and clinical kit boxes, QA
review/approval
</TABLE>
20
<PAGE> 96
Time & Cost Estimate-Change Order #4
ACS - Vitrase
<TABLE>
<CAPTION>
TASK DESCRIPTION COST (US$)
<S> <C>
SHIPMENT COST FOR AMBIENT TEMPERATURE - per shipment,
including design and printing of center labels, design and 130
printing of shipping labels, packaging material (center
boxes), labels (center labels), preparation of packaging and
shipping instructions, co-ordination of shipments with the
medical centers, and the forwarder, preparation of shipping
documents, co-ordination of drug ordering with IVRS and
the centers
Actual shipping costs excluded
SHIPMENT COST (MULTIPLE OR SINGLE PATIENT SHIPMENT) FOR
COLD STORAGE - per shipment, including placement of vial 410
into plastic bag prior to dispatch, design and printing of
center labels, design and printing of shipping labels,
insulated packaging material (center boxes), labels (center
labels), preparation of packaging and shipping instructions,
co-ordination of shipments with the medical centers, and the
forwarder, preparation of shipping documents, co-ordination
of drug ordering with IVRS and the centers
Actual shipping costs excluded
INVENTORY MANAGEMENT PER MONTH, including inventory
management and follow up of medication, packed 730
medication (quality control: expiry date, batch number),
follow up after stock levels as well as follow up of requests
for additional supplies, inventory reports (monthly basis)
PROJECT MANAGEMENT PER MONTH 730
STORAGE PER BAY PER MONTH BETWEEN 2-8 degrees C 150
STORAGE PER BAY PER MONTH BETWEEN 15-30 degrees C 65
RETURNED MEDICATION To be agreed
DESTRUCTION OF RETURNED STUDY MEDICATION To be agreed
EUROPEAN RELEASE OF IMPORTED DRUG/PER BATCH (assumes 810
paperwork exercise only)
</TABLE>
21
<PAGE> 1
EXHIBIT 10.7
AGREEMENT
This Agreement, is by and between Advanced Corneal Systems, Inc., (hereinafter
"ACS"), with offices at 15279 Alton Parkway, Suite 100, Irvine, CA 92618 and
CoMedica Global Inc., (hereafter "CoMedica") located at 730 View Street,
Suite 620, Victoria, British Columbia V8W 3Y7.
WHEREAS, ACS intends to submit the results of the Investigation to the Food and
Drug Administration ("FDA") and other international regulatory agencies in
support of marketing approval;
WHEREAS, ACS desires to have certain research conducted (as described herein)
with respect to the compound known as Vitrase(TM) a hyaluronidase solution (the
"Investigation") in accordance with the protocol attached hereto as Exhibit A,
which is incorporated herein together with all amendments thereto,
(hereinafter, the "Protocol"); and
WHEREAS, CoMedica is experienced in such research and has the qualified
personnel available to perform these services for ACS;
WHEREAS, ACS has entered into a contract substantially similar to this
Agreement with Covance Clinical and Periapproval Services, Inc., having its
principal place of business at 210 Carnegie Center, Princeton, New Jersey
("COVANCE"), for the purpose of having COVANCE assist ACS with the execution of
substantially the same investigation in North America and Europe; and
NOW THEREFORE, in consideration of the premises and of the mutual promises and
undertakings herein contained, the parties intending to be legally bound do
hereby agree as follows:
I. SCOPE OF SERVICES
The Investigation shall consist of the services set forth in
Attachment 1 (Scope of Services) which is incorporated herein.
COMEDICA shall not undertake any additional work without a written
modification of this Agreement pursuant to Section XVIII
(Modifications). To the extent that any conflict exists between the
terms of this Agreement and Attachment 1 (Scope of Services), the
terms of this Agreement shall take precedence.
<PAGE> 2
CroMedica agrees to conduct, and to cause its employees, officers, directors and
representatives to conduct, the Investigation in accordance with the terms of
this Agreement (as applicable to the particular Investigation), the Protocol,
and in full compliance with all applicable Federal, State, and local laws and
regulations, including without limitation FDA guidelines pertaining to clinical
investigations and the use of investigational drugs in humans.
CroMedica hereby certifies that it has not and will not use in any capacity the
services of any individual, corporation, partnership or association which has
been debarred under 21 U.S.C. 306(a) or (b). In the event that CroMedica
becomes aware of the debarment or threatened debarment of any individual,
corporation, partnership or association providing services to CroMedica or to
an Investigator retained by CroMedica which directly or indirectly relate to
Investigator's activities under this Agreement, CroMedica shall notify ACS
immediately. Any Investigator retained by CroMedica will understand that ACS
shall have the right to terminate this Agreement immediately upon receipt of
such notice.
CroMedica will undertake to assure that Investigators retained by CroMedica in
the INVESTIGATION certify that they have not been debarred under the provisions
of the Generic Drug Enforcement Act of 1992, 21 U.S.C. 306(a) or (b). In the
event that an Investigator:
(i) becomes debarred; or
(ii) receives notice of action or threat of action with respect to debarment,
during the term of this Agreement, CroMedica agrees to notify ACS
immediately. In the event that Investigator becomes debarred as set forth
in clause (I) Investigators retained by CroMedica understands that this
Agreement shall automatically terminate without any further action or
notice by either party. In the event that an Investigator receives notice
of action or threat of action as set forth in clause (ii) above, CroMedica
and Investigators retained by CroMedica understands that ACS shall have
the right to terminate this Agreement immediately.
2
<PAGE> 3
CroMedica understands that the results from its Investigation will be
incorporated with the results from the COVANCE investigation into
regulatory submissions, or parts thereof, as contemplated herein.
CroMedica understands that COVANCE is responsible for the timely and
proper preparation of portions of the regulatory submissions.
Therefore, CroMedica will cooperate to the full extent necessary to
insure that the Protocol is properly implemented, and that the data
from the Investigation is delivered to COVANCE in a timely manner as
required under the Protocol. Such cooperation shall include, but not
be limited to, providing COVANCE and ACS with timely notice of any
issues with the Protocol or Investigation, delays in delivering the
data and/or deficiencies in the data itself.
II. PERFORMANCE SCHEDULE
The Performance Schedule by which CROMEDICA shall perform the services
specified in this Agreement is set forth in Attachment 2 (Payment and
Performance Schedule), which is incorporated herein.
III. COMPENSATION
A. CROMEDICA Compensation
This is a fixed unit price contract. ACS shall pay to
CROMEDICA in the manner specified in Attachment 2 (Payment and
Performance Schedule), as compensation for all services
performed under this Agreement, the sum of US $409,790. This
amount represents all of CroMedica's professional fees, and
all expenses other than Reimbursable Expenses as described
below.
B. Payment Schedule
CroMedica shall invoice ACS on a milestone-completion basis,
according to the Payment Schedule set forth in Attachment 2
(Payment and Performance Schedule), which is incorporated
herein.
C. Reimbursement of Expenses
3
<PAGE> 4
1. ACS will reimburse CroMedica for the "actual cost" (defined
below) of expenses incurred by CroMedica for:
(a) travel; provided that such expenses are (i) reasonable
and necessary; and (ii) incurred consistent with
CroMedica's travel policy.
As used herein, "actual cost" means the dollar cost paid by
CroMedica, without any management fee, commission or mark-up
by CroMedica, and less any discount, rebate or other
allowance paid to CroMedica by a supplier, whether reflected
on the original billing or thereafter.
2. Expenses reimbursable under (a) above are referred to
herein as "Reimbursable Expenses". Except for Reimbursable
Expenses, all costs incurred by CroMedica in performing this
Agreement shall be the responsibility of CroMedica.
3. CroMedica shall submit monthly invoices for travel expenses
paid in the preceding month, together with back-up
documentation as requested by ACS, to the person identified
on Attachment 3 (Contact Persons).
IV. PROTOCOL
The Investigation shall be conducted in full accordance with the
Protocol and any Protocol amendments. CroMedica shall make no change
in the Protocol during the course of the Investigation without the
prior written approval of ACS, except where necessary to eliminate
apparent immediate hazards to human subjects. ACS shall have the right
at any time to initiate such changes in the Protocol, as ACS deems
necessary or appropriate, including suspending the Investigation
temporarily or permanently.
V. CROMEDICA MANAGEMENT OF CLINICAL INVESTIGATIONS
A. Investigator Brochure/Product Monograph
4
<PAGE> 5
Before the Investigation begins, and from time to time throughout the
course of the Investigation, as determined by ACS, ACS shall provide
CroMedica and all Investigators with a current Investigator Brochure
and Product Monograph for the study compound.
B. Field Monitoring Guidelines
Unless supplied by ACS, in consultation with ACS, CroMedica shall
develop, Protocol-specific Field Monitoring Guidelines to facilitate
study monitoring.
c. On-Site Monitoring
1. Before the commencement of the Investigation at each site,
CroMedica shall conduct an on-site study initiation visit to
each Investigator site. During the study initiation visit,
CroMedica shall inspect and inventory clinical supplies and
review the Protocol and CRF form with site staff to ensure
understanding and compliance.
2. CroMedica shall conduct periodic on-site monitoring visits to
each Investigator site during the course of the Investigation
at a frequency to be directed by ACS, but in no event less
than one visit every eight weeks. During each such visit,
CroMedica shall ensure, by review of relevant investigator
records, and otherwise, that the investigator and the
investigational site continue to meet all applicable federal,
state, and local laws, statutes and ordinances and
regulations, and FDA Guidelines for the Conduct of Clinical
Investigations. CroMedica will promptly notify ACS of any
investigator that is not complying with their agreement, and
attempt to obtain compliance. If compliance is not promptly
obtained, and after approval is received from ACS, CroMedica
will end the investigators participation in the study.
5
<PAGE> 6
3. CroMedica shall conduct an on-site, close-out visit at
the conclusion of the study. During the close-out
visit, CroMedica shall ensure that the Investigator has
maintained the standards specified in Paragraph 2,
above, and, in addition, shall:
a. Obtain a reconciliation of all drug inventories;
b. Resolve any final inquiries concerning CRF
issues; and
c. Confirm that the Investigator has maintained all
required documentation.
4. CroMedica shall prepare and maintain reports of each
on-site visit performed pursuant to this sub-Section
(On-Site Monitoring). The monitoring visit reports
shall be in a format mutually agreed upon by the
parties.
D. Supply of Drug
1. Supply of Drug to Investigators
ACS shall supply all of the drug to be used in the
Investigation.
2. Return of Unused Drug Supplies
CroMedica shall ensure that each investigator whose
participation in the Investigation has been completed
or discontinued shall either (a) return any unused drug
supplies to CroMedica or ACS, as directed by ACS; or
(b) dispose of the unused drug supplies as directed by
ACS. CroMedica shall require that each Investigator
account for any drug supplies that are missing.
3. Non-Diversion; Labeling
All drug supplied to CroMedica and to Investigators
shall remain the exclusive property of ACS until
administered or dispensed to patients during the course
of the
6
<PAGE> 7
Investigation. In no event shall any drug supplied to CroMedica for
use in the Investigation be used by CroMedica for any purpose other
than as contemplated by the Protocol and this Agreement, or be
delivered to any person other than an Investigator and, CroMedica
shall use all reasonable efforts to ensure that the Investigators
comply with the terms of this Agreement, the Attachments hereto and
the Protocol in all material respects.
4. Study Drug Disposition Records
Unless otherwise specified by ACS, CroMedica shall maintain records
relating to the disposition of the drug, which shall include, without
limitation: (1) the amounts of drug supplies received from ACS (with
respective dates); (2) the Investigator sites to which the drug has
been delivered (with respective dates and amounts); (3) the amount of
the drug spilled or otherwise lost (with respective dates, if known);
(4) the amount of the drug returned to CroMedica (with respective
dates); and (5) the amount of the drug returned by CroMedica to ACS
(with respective dates).
E. Maintenance and Inspection of Records
CroMedica shall prepare and maintain complete, accurate, legible written
records, accounts, notes, reports and data on the Investigation in a timely
fashion. CroMedica shall maintain all records under this Section (CROMEDICA
Management of Clinical Investigation) pertaining to the management of the
Clinical Investigation for a period of 15 years from the date of creation.
ACS authorized representative(s), and regulatory authorities to the extent
permitted by law, may, during regular business hours, arrange in advance
with CroMedica to inspect and copy all data and work products related to
the Investigation. CroMedica shall cooperate with
7
<PAGE> 8
any regulatory authority and allow them access to relevant
records and data to the extent permitted by law.
VIII. CONTACT PERSONS AND STAFFING
CROMEDICA shall assign a sufficient number of personnel to complete
the Scope of Services set forth on Attachment 1 (Scope of Services).
In the event that ACS determines that any CROMEDICA personnel are not
performing to ACS satisfaction, ACS shall have the right to request
that such personnel be replaced by personnel acceptable to ACS. ACS
and CROMEDICA have designated appropriate personnel to be available to
CroMedica to answer questions and resolve problems relating to the
Investigation. The names of these individuals, and the respective
subjects on which they may be consulted, are set forth in Attachment 3
(Contact Persons).
IX. PERIOD OF PERFORMANCE
This Agreement shall take effect as of the last date of execution by
the last of the parties to execute this Agreement, and shall remain in
effect until the completion of the services performed by CroMedica
under the Agreement, or until earlier termination in accordance with
the Section on Termination, below.
X. TERMINATION
A. ACS Right to Terminate
ACS reserves the right to immediately terminate this Agreement in
whole or in part, with or without cause, upon written notice to
CroMedica. In the event this Agreement is terminated by ACS prior
to completion, CroMedica shall use its best efforts to conclude
or transfer the project, as directed by ACS, as expeditiously as
possible. CroMedica shall not undertake further work, incur
additional expenses, or enter into further commitments with
regard to the Investigation after receiving such notice upon of
termination from ACS, except as mutually agreed upon by the
parties. Upon termination of the Agreement, CroMedica shall
return to ACS all of ACS property (as defined in the Section
covering
8
<PAGE> 9
Property Ownership) in CroMedica's possession, unless
otherwise agreed to in writing.
B. CROMEDICA's Right to Terminate
CroMedica may terminate this Agreement upon default of any
material provision of this Agreement; provided, however, that
prior to terminating, CroMedica shall notify ACS in writing of
such default, and shall allow ACS thirty (30) days to remedy
such default. In the event that ACS fails to remedy the
default within the 30-day period, CroMedica may terminate the
Agreement effective immediately.
C. Compensation to CroMedica upon Termination
In the event of a termination under this Section, CroMedica
shall be entitled to compensation as follows:
1. All payments due and owing under this Agreement at
the time of CroMedica's receipt of the notice of
termination for work completed and in progress;
2. Reimbursement for any noncancelable services and
commitments entered into by CroMedica in order to
carry out this Agreement, provided CroMedica provides
ACS with documentation of completion of work or
expenses incurred.
3. CroMedica shall credit or return to ACS any funds not
expended or obligated by CroMedica in connection with
the Investigation prior to the effective termination
date indicated in the notice of termination.
Termination of this Agreement by either party shall
not affect the rights and obligations of the parties
accrued prior to the effective date of termination.
The rights and duties under Articles III, V, VI, X,
XI, XII, XIII, XIV, XVI, XVIII, XX, XXI, XXII, XXIII,
and XXIV shall survive the termination or expiration
of this Agreement.
XI. CONFIDENTIAL INFORMATION
9
<PAGE> 10
A. Definition
For purposes of this Agreement, "Confidential Information" means any
knowledge or information that is (1) acquired by CroMedica from ACS prior
to or during the course of the Investigation whether written, graphic or
oral, or (2) prepared, developed or generated by CroMedica during the
course of the Investigation; provided, however, that "Confidential
Information" does not, whether written, graphic or oral, include knowledge
or information that CroMedica can demonstrate by written records was known
by it prior to the receipt of such knowledge or information from ACS, or
that is publicly disclosed by ACS either prior to or subsequent to receipt
of the knowledge or information by CroMedica.
B. Non-Disclosure
CroMedica (1) shall not publish, disseminate, or otherwise disclose to any
third party (except as may be required by this Agreement or by law) any
Confidential Information without the prior written consent of ACS; (2)
shall use the same care and discretion in maintaining the confidentiality
of the Confidential Information that CroMedica uses with similar
information that it considers confidential; provided that such care and
discretion shall not be less than the standard of care and discretion that
would be employed by a prudent person under similar circumstances; (3)
shall restrict the dissemination of the Confidential Information within its
own organization to persons who have a need to know; and (4) shall not,
without the prior written consent of ACS, make any use whatever of the
Confidential Information except for the purpose of conducting the
Investigation. In the event CroMedica is required by applicable law to
disclose Confidential Information to a proper authority, CroMedica shall
first notify ACS, and CroMedica and ACS shall then attempt in good faith to
agree upon a mutually satisfactory way to disclose such Confidential
Information as necessary for this limited purpose. CroMedica shall ensure
that its employees, officers,
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<PAGE> 11
directors, affiliates, agents and representatives
comply with the terms of this Article XI and
otherwise with there terms of this Agreement.
C. Return of Confidential Information
At the expiration or earlier termination of this
Agreement, CroMedica shall return to ACS all
written Confidential-Information, and all written
material that incorporates any Confidential
Information.
D. Survival of Obligation of Confidentiality
The obligation of confidentiality set forth in
this Section shall continue for ten years
following the date of expiration or earlier
termination, for any reason, of this Agreement,
and shall be binding upon permitted assignees,
administrators and other legal representatives of
CroMedica.
E. CroMedica shall obtain ACS prior written
permission before using ACS name, symbols and/or
marks in any form of publicity in connection with
the Investigation. The foregoing sentence shall
not exclude legally required disclosure by
CroMedica or reports generated in the normal
course of business by CroMedica.
XII. PROPERTY OWNERSHIP
A. Rights in Property
All materials, documents, data, software and
information of every kind and description supplied
to CroMedica by ACS or prepared, developed, or
generated by CroMedica pursuant to this
Agreement, (except for CroMedica procedural
manuals, personnel data, methods, procedures, and
policies) shall be the sole and exclusive property
of ACS and ACS shall have the right to make
whatever use it deems desirable of any such
property. CroMedica shall not, without the prior
written consent of ACS, publish, disseminate, or
otherwise disclose to any third party any such
property (except such disclosure as may be
required by law), or use any such property for any
purpose other than the
11
<PAGE> 12
performance of this Agreement. CroMedica warrants by the
execution of this agreement that they have not entered, and
will not enter into any contractual agreement or relationship
which would in any way conflict with or compromise ACS's
proprietary interest in, or rights to any inventions,
discoveries or technology existing at the time of the
execution of this Agreement or arising out of or related to
the performance thereunder.
B. Retention of Property
Unless otherwise required by law or the terms of this
Agreement, any property specified in Subsection A, above, that
CroMedica shall have in its possession shall be maintained by
CroMedica for a period of not less than five (5) years from
the date of receipt thereof and shall be organized in such
manner that it will be ready for immediate reference. ACS
shall have the right at any time to examine or obtain from
CroMedica copies of any or all such property. After five (5)
years, CroMedica may dispose of such property in accordance
with instructions provided by ACS. If ACS fails to provide
such instructions, CroMedica shall so notify ACS, and if
instructions are still not forthcoming within thirty (30) days
of such notification, CroMedica may destroy such property.
C. Survival of Obligation
The rights and obligations set forth in this Section shall
survive the expiration or earlier termination, for any reason,
of this Agreement, and shall be binding upon permitted
assignees, administrators and other legal representations of
CroMedica.
XIII. RIGHTS IN INTELLECTUAL PROPERTY AND PATENTS
A. Inventions, Discoveries, and Know-How
With respect to any and all inventions, discoveries, and
know-how (including, without limitation, all ideas,
improvements, and creations) that are conceived, gained, or
reduced to practice by
12
<PAGE> 13
CroMedica in the course of performing its obligations under
this Agreement, CroMedica agrees:
1. To disclose promptly to ACS or its nominee any such
inventions, discoveries and know-how;
2. To assign and transfer to ACS all rights, title, and
interest in and to any and all such inventions,
discoveries, and know-how upon the request of ACS;
and
3. To perform any and all lawful acts that in the
judgment of ACS are necessary or desirable to secure
or maintain for the benefit of ACS adequate patent
and other property rights in the United States and
all foreign countries with respect to any such
inventions, discoveries and know-how, including,
without limitation, making or delivering to ACS
United States and foreign patent applications, powers
of attorney, assignments, oaths and affirmations, and
applications for securing, protecting or registering
any property rights relating to such inventions,
discoveries and know-how, and cooperating with ACS in
the defense of patents related to such inventions,
discoveries and know-how in infringement actions.
ACS shall compensate CroMedica at standard hourly rates for
the time devoted to said activities and reimburse it for all
reasonable expenses incurred.
B. Copyrights
CroMedica agrees to assign to ACS all right, title, and
interest in and to any Work, as defined below, including
without limitation all right, title, and interest in and to
copyright of the Work, in the United States or anywhere
throughout the world, in the name of ACS (or otherwise, as
directed by ACS), for the sole benefit of ACS, and to secure
renewals or extensions of such copyrights in ACS name (or
otherwise, as directed by ACS). CroMedica shall execute any
assignments or other documents that ACS deems necessary to
effectuate the purposes of this
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<PAGE> 14
Subsection B. For purposes of this Section, "Work" means all reports,
documents, research, drafts, materials, computer software, and data
that are recorded in any form (including, without limitation, written,
electronic, or photographic form) and that are prepared, developed, or
generated by CroMedica in the course of performing its obligations
under this Agreement.
C. Survival of Obligations
The obligations imposed by this Section shall survive the expiration
or earlier termination, for any reason, of this Agreement with respect
to inventions, discoveries and know-how conceived, gained or reduced
to practice by CroMedica, and Work prepared, developed, or generated
by CroMedica, in the course of performing this Agreement. Such
obligations shall be binding upon permitted assignees, administrators
and other legal representatives of CroMedica. It is agreed that
neither CroMedica nor ACS transfers to the other by operation of this
Agreement any patent right, copyright, or other proprietary right of
either party, except as specifically set forth in this Agreement.
XIV. INDEMNIFICATION
A. Indemnification of ACS
CroMedica shall hold harmless and indemnify ACS, its employees, agents
and assigns, from and against all claims, complaints, or lawsuits for
damages that arise or are alleged to arise as a result of the
intentional misconduct, negligence, malfeasance or violation of law,
statute or regulation of CroMedica, or any of its employees, agents,
or representatives, in conducting the Investigation, or from
CroMedica's failure to adhere to the terms of the Protocol or this
Agreement or fails to comply with all applicable Provincial, Federal,
state and local laws, and guidelines and regulations. For purposes of
this Article XIV only, Investigators are not agents or representatives
of CroMedica.
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<PAGE> 15
B. Indemnification of CroMedica
ACS shall indemnify and hold harmless CroMedica, its
representatives and employees, from and against all claims,
complaints, or lawsuits for damages that arise as a result of
personal injury or death that is alleged to have been caused by
or attributed to any substance provided by ACS and dispensed or
administered in accordance with the provisions of the Protocol;
provided that:
1. ACS shall be promptly notified of any such claim,
complaint, or lawsuit;
2. ACS shall have the right, in its sole discretion, to
undertake the defense, compromise, or settlement, at its own
expense and by its own counsel, of any such claim,
complaint, or lawsuit; and
3. CroMedica shall cooperate fully in the investigation and
defense of any such claim, complaint, or lawsuit.
The indemnification provided for in this Subsection B shall not
apply to any loss, damage, cost or expense that is caused by or
attributable to the intentional misconduct, negligence,
malfeasance or violation of law, statute or regulation of
CroMedica, or any of its employees, agents, or representatives.
XV. INSURANCE
A. CROMEDICA shall maintain in force at all times during the term of this
Agreement, with an insurance company acceptable to ACS, the following
insurance, including any special terms indicated and shall, prior to
signing this Agreement, provide to ACS certificates of insurance for
each type of insurance specifying that ACS will receive no less than
thirty (30) days' notice of cancellation, non-renewable or material
change.
1. Comprehensive General Liability insurance including products and
completed operations, personal injury,
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<PAGE> 16
broad form property damage including completed operations, independent
contractors, and blanket contractual liability with the
product/completed operations exclusion removed. ACS will be named as
additional insured. Combined Single Limit for bodily injury and
property damage - $1,000,000.
2. Workers' Compensation Insurance Coverage - statutory.
3. Employers' Liability Coverage - $500,000.
4. Professional Liability Insurance - Covering all claims for damages
arising out of errors and omissions in the performance of professional
duties of CROMEDICA under this Agreement. The Limits of Liability shall
be $1 million per claim subject to a $2 million annual aggregate.
XVI. NOTICES AND PAYMENTS
Except as otherwise provided herein, any notice or other communications
or any payment required under this Agreement shall be delivered by
hand, first class mail, a nationally recognized overnight courier
service, or facsimile transmission, to the party at the address listed
below:
If to Advanced Corneal Systems: Jane Ellen Giamporcaro
------------------------------
ADVANCED CORNEAL SYSTEMS, INC.
15279 Alton Parkway, Suite 100
Irvine, CA 92618
If to CROMEDICA: Ken Newport
------------------------------
CroMedica Global Inc.
620-730 View Street
Victoria, British Columbia
V8W 3Y7
Any such notice shall be effective (1) in the case of a hand delivery,
when received; (2) in the case of an overnight delivery service, on the
next business day after being placed in the possession of such delivery
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<PAGE> 17
service, with delivery charges prepaid; (3) in the case of the mail,
three days after deposit in the postal system, first class postage
prepaid; and (4) in the case of facsimile transmission, when electronic
indication of receipt is received.
XVII. MODIFICATIONS
No changes shall be made in this Agreement except by written agreement
of the parties, signed by authorized representatives. ACS authorized
representative shall be designated in Attachment 3 (Contact Persons).
XVIII. ENTIRE AGREEMENT
This Agreement, together with its Attachments, including the Protocol,
shall be the entire and complete understanding between the parties in
regard to the covered subject matter. This Agreement merges all prior
discussions between the parties and neither party shall be bound by
conditions, definitions, warranties, understandings, or representations
concerning such subject matter except as provided in this Agreement or
as specified on or subsequent to the effective date of this Agreement
in a writing signed by properly authorized representatives of both the
parties.
XIX. ASSIGNMENT
Neither party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written
consent of the other party. Notwithstanding the previous sentence, ACS
may assign its obligations under this Agreement to any affiliate of ACS
or in connection with the transfer or sale of all or substantially all
of its assets or business relating to the drug(s) being studied
hereunder or its merger or consolidation with another organization,
provided that the rights of CroMedica under this Agreement are not
materially prejudiced.
XX. INDEPENDENT CONTRACTOR
CroMedica shall function as an independent contractor and shall not
hold itself out as an agent of ACS in any way.
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<PAGE> 18
XXI. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced under the
laws (excluding the laws governing conflicts of laws) of the State of
California.
XXII. WAIVER
The failure of a party in any instance to insist on the strict
performance of the terms of this Agreement shall not be construed to
be a waiver or relinquishment of any of the terms of this Agreement,
either at the time of the party's failure to insist upon strict
performance or at any subsequent time.
XXIII. SEVERANCE
Each clause of this Agreement is a distinct and severable clause and
if any clause is deemed illegal, void, or unenforceable, the validity,
legality, or enforceability of any other clause or portion of this
Agreement shall not be affected thereby.
XXIV. HEADINGS
All headings contained in this Agreement appear only for convenience
and reference. They do not define, limit, extend, or describe the
scope of this Agreement or the intent of any of its provisions.
ACCEPTED AND AGREED:
ADVANCED CORNEAL SYSTEMS, INC. CROMEDICA GLOBAL INC.
BY: /s/ [ILLEGIBLE] BY: /s/ [ILLEGIBLE]
--------------------------- ----------------------
TITLE: VICE PRESIDENT TITLE: PRESIDENT & C.F.O.
DATED: SEPTEMBER 8, 1998 DATED: AUGUST 24, 1998
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<PAGE> 19
CROMEDICA PROPOSAL FOR ADVANCED CORNEAL SYSTEMS, PHASE III VITRASE(TM) STUDY
- --------------------------------------------------------------------------------
STUDY SPECIFICATIONS AND TIME ESTIMATES
(based on protocol synopsis and other information received)
- --------------------------------------------------------------------------------
Product Vitrase(TM) a hyaluronidase solution
Indication Intravitreal hemorrhage
Study Design Phase III, prospective, randomized, parallel,
double-masked, dose-response study with 4
arms
Study Objectives To investigate the safety and efficacy of
hyaluronidase (intravitreal injection) for
clearance of severe vitreous hemorrhage
Estimated # and Location of Sites 10, South Africa
# of Patients Global enrolment 800 patients, competitive
enrolment
# of Visits/Patient 9 (baseline, randomization, day 1, day 7,
months 1, 2, 3, 6, 12)
Estimated # of CRF Pages/Patient Not known
Estimated Enrolment Period 20 months as indicated: October 1998-May 2000
Follow-up Period 12 months
Estimated Time Study Conduct Total 32 months Oct. 1998-May 2001
Enrolment and 6 month follow-up complete: 26 months Oct. 1998-Nov. 2000
12 month follow-up complete: an additional 6 months Dec. 2000-May 2001
Total CroMedica Involvement 3 years
July-Sept 1998: regulatory and site selection
Oct. 1998-May 2001: study conduct
June 2001: study close-out
Estimated # Monitoring Visits/Site Initiation, 24 regular visits, close-out
(Visits every 4-6 weeks for 26 months;
visits every 3 months for another 6 months)
<PAGE> 20
ASSUMPTIONS
Fee Schedules
o Fee schedules are based on the study specifications noted above and the
assumptions noted below.
o Fees are in U.S. funds.
o All travel-associated costs including transportation, accommodation and
meals connected with meetings, monitoring and other site visits will be
passed directly through to ACS.
o All shipping and printing costs of study-related materials will be the
responsibility of ACS.
Investigator Meeting
o For this proposal we have assumed that CroMedica will organize and
conduct an investigator meeting in S. Africa, including logistics,
correspondence with participants and agenda in consultation with ACS,
with presenters from CroMedica and ACS. Medica expertise for the
meeting will be provided by ACS as discussed.
o Pass-through costs include transportation, accommodation and meals for
CroMedica staff, including the project manager, a clinical operations
assistant and CRAs.
ACS Responsibilities
o Investigator budget negotiations, fees and fee administration are not
included in the budget, and will be the responsibility of ACS.
o It is assumed that ACS will provide the protocol, CRFs, laboratory
services and biometry services.
o It is assumed that ACS has in place a Medical Monitor to whom CroMedica
will report all serious adverse events and refer questions about
inclusion/exclusion criteria and protocol interpretation.
IRBs
o CroMedica has assumed the use of individual institutional IRBs.
Site Responsibilities
o It is assumed that sites will provide all necessary regulatory
documentation, transcribe data on to CRFs, provide adequate resources
for the conduct of the study, provide source documentation, remain in
compliance with the protocol and report all adverse events.
<PAGE> 21
Project Management and Monitoring
o CroMedica will provide comprehensive management of the study to include:
-leadership, direction and problem-solving
-ensuring all regulatory requirements are met
-site selection and initiation
-provision and supervision of CRAs
-scheduling of visits
-review of trip reports
-supply tracking
-timeline preparation and updates
-progress reports to ACS
-meetings and communications with ACS and monitors
-weekly teleconferences with CRAs for status up-dates
o All trial related activities undertaken by the CroMedica project team
are conducted in accordance with CroMedica SOPs and ICH/GCP guidelines.
Where requested, ACS SOPs can be used.
o CroMedica policy dictates that an indication- and protocol-specific CRA
training seminar occur as an adjunct to the investigator meeting.
Otherwise, a training seminar will be planned before commencement of the
study.
o CroMedica will prepare a monitoring plan, define the scope of work for
the monitors, and distribute all relevant study materials to monitors.
o Time allotted for monitoring visits includes preparation, time on-site,
travel time and trip report.
o Monitoring visits include all monitoring activities, specifically:
-review of patient eligibility and consent
-data review for accuracy and completeness, including 100% source
verification of CRF data
-protocol and GCP adherence
-recruitment assessment
-study file maintenance, including regulatory documentation as needed
-adverse event and serious adverse event reporting
-supply tracking and accountability
-data query resolution and transfer of data
-trip report
-all communications with site staff and project manager
<PAGE> 22
ATTACHMENT 2
PAYMENT AND PERFORMANCE SCHEDULE
PAYMENT SCHEDULE
Sponsor shall reimburse reasonable costs and expenses at net thirty (30) days
terms upon receipt of invoice and any associated original receipts, and/or at
the occurrence of the below incidents enacted at Sponsor's request, pending
review for acceptableness and/or completeness. All figures are in US dollars:
<TABLE>
<CAPTION>
FIXED-UNIT PRICE PAYMENT STRUCTURE
- --------------------------------------------------------------------------------
UNIT COST STUDY MAXIMUM
--------- -------------
<S> <C> <C>
Up-front (20%) $81,958. $ 81,958.
-------------- --------
Site recruitment including IRB
submission and collection of
pre-Study documentation $ 731. X 10 $ 7,310.
-------------- --------
Regulatory Submission $ 1,360. $ 1,360.
-------------- --------
Investigator Meeting $ 5,240. $ 5,240.
-------------- --------
Site Initiation Visit $ 1,428. X 10 $ 14,280.
-------------- --------
Interim Monitoring Visit $ 1,190. X 240 $285,600.
-------------- --------
Site Close Out Visit $ 1,020. X 10 $ 10,200.
-------------- --------
Management fee paid at study $ 3,842. $ 3,842.
completion
-------------- --------
Total Contract $409,790.
========
</TABLE>
Pass-through Costs: SPONSOR shall reimburse CONTRACTOR for reasonable
pass-through costs (e.g., travel, lodging, meals) at net thirty (30) days term
upon receipt of original receipt(s)/invoice. Interest at 15% shall apply in net
thirty (30) days terms are not satisfied.
<PAGE> 23
ATTACHMENT 3
CONTACT PERSONS
Advanced Corneal Systems, Inc. Contractual/Financial Matters:
J.C. MacRae
Vice President
15279 Alton Parkway, Suite 100
Irvine, CA 92618
Clinical/Investigation Matters:
Jane Ellen Giamporcaro
15279 Alton Parkway, Suite 100
Irvine, CA 92618
CroMedica Ken Newport
CroMedica Global Inc.
730 View Street, Suite 620
Victoria, British Columbia
V8W 3Y7
20
<PAGE> 1
EXHIBIT 10.8
AGREEMENT
This Agreement, is by and between Advanced Corneal Systems, Inc., (hereinafter
"ACS"), with offices at 15279 Alton Parkway, Suite 100, Irvine, CA 92618 and
CroMedica Global Inc., (hereafter "CroMedica") located at 730 View Street, Suite
620, Victoria, British Columbia V8W 3Y7.
WHEREAS ACS intends to submit the results of the Investigation to the Food and
Drug Administration ("FDA") and other international regulatory agencies in
support of marketing approval;
WHEREAS, ACS desires to have certain research conducted (as described herein)
with respect to the compound known as Vitrase(TM) a hyaluronidase solution (the
"Investigation") in accordance with the protocols attached hereto as Exhibit A,
which is incorporated herein together with all amendments thereto, (hereinafter,
the "Protocols"); and
WHEREAS, CroMedica is experienced in such research and has the qualified
personnel available to perform these services for ACS; and
WHEREAS, ACS intends to enter into a contract substantially similar to this
Agreement with Covance Clinical and Periapproval Services, Inc. ("COVANCE"), for
the purpose of having Covance assist ACS with the execution of substantially the
same clinical investigation of the Drug in the United Kingdom, the Netherlands,
Poland and Brazil ("COVANCE STUDY"); and ACS intends to enter into a contract
substantially similar to this Agreement with Verum Staticon ("VERUM"), for the
purpose of having Verum assist ACS with the execution of substantially the same
clinical investigation of the Drug in Germany and Hungary ("VERUM STUDY"); and
has entered into a contract substantially similar to this Agreement with
CroMedica for the purpose of having CroMedica assist ACS with the execution of
substantially the same clinical investigation of the Drug in South Africa
("CROMEDICA SOUTH AFRICA STUDY"); and
NOW THEREFORE, in consideration of the premises and of the mutual promises and
undertakings herein contained, the parties intending to be legally bound do
hereby agree as follows:
I. SCOPE OF SERVICES
The Investigation shall consist of the services set forth in Attachment
1 (Scope of Services) which is incorporated herein. CroMedica shall not
undertake any additional work without a written modification of this
Agreement pursuant to Section XVII (Modifications). To the extent that
any conflict exists between the terms of
1
<PAGE> 2
this Agreement and Attachment 1 (Scope of Services), the terms of this
Agreement shall take precedence.
CroMedica agrees to conduct, and to cause its employees, officers,
directors and representatives to conduct, the Investigation in
accordance with the terms of this Agreement (as applicable to the
particular Investigation), the Protocols, and in full compliance with
all applicable Federal, State, and local laws and regulations,
including without limitation FDA guidelines pertaining to clinical
investigations and the use of investigational drugs in humans.
CroMedica hereby certifies that it has not and will not use in any
capacity the services of any individual, corporation, partnership or
association which has been debarred under 21 U.S.C. 306(a) or (b). In
the event that CroMedica becomes aware of the debarment or threatened
debarment of any individual, corporation, partnership or association
providing services to CroMedica or to an Investigator retained by
CroMedica which directly or indirectly relate to Investigator's
activities under this Agreement, CroMedica shall notify ACS
immediately. Any Investigator retained by CroMedica will understand
that ACS shall have the right to terminate this Agreement immediately
upon receipt of such notice.
CroMedica will undertake to assure that Investigators retained by
CroMedica in the INVESTIGATION certify that they have not been debarred
under the provisions of the Generic Drug Enforcement Act of 1992, 21
U.S.C. 306(a) or (b). In the event that an Investigator:
(i) becomes debarred; or
(ii) receives notice of action or threat of action with respect to
debarment, during the term of this Agreement, CroMedica agrees
to notify ACS immediately. In the event that Investigator
becomes debarred as set forth in clause (i) Investigators
retained by CroMedica understands that this Agreement shall
automatically terminate without any further action or notice
by either party. In the event that an Investigator receives
notice of action or threat of action as set forth in clause
(ii) above, CroMedica and Investigators retained by CroMedica
understands that ACS shall have the right to terminate this
Agreement immediately.
CroMedica will be responsible for coordinating the collection of data
from the COVANCE STUDY, VERUM STUDY, and CROMEDICA SOUTH AFRICA STUDY
for inclusion in the
2
<PAGE> 3
regulatory submissions, or parts thereof. CroMedica will not be
responsible for any delays, and/or deficiencies that are caused by
COVANCE's or VERUM's failure to implement the agreed to Protocols or
deliver the data from the COVANCE STUDY and VERUM STUDY to CroMedica on
an agreed to schedule; provided, however, that CroMedica has provided
ACS with timely notice of potential delays and/or deficiencies once it
has a reasonable basis to believe either or both are likely.
II. PERFORMANCE SCHEDULE
The Performance Schedule by which CroMedica shall perform the services
specified in this Agreement is set forth in Attachment 2. (Payment and
Performance Schedule), which is incorporated herein.
III. COMPENSATION
A. CroMedica Compensation
This is a fixed unit price contract. ACS shall pay to
CroMedica in the manner specified in Attachment 2 (Payment and
Performance Schedule), as compensation for all services
performed under this Agreement, the sum of US $2,817,625. This
amount represents all of CroMedica's professional fees, and
all expenses other than Reimbursable Expenses as described
below.
B. Payment Schedule
CroMedica shall invoice ACS on a milestone-completion basis,
according to the Payment Schedule set forth in Attachment 2
(Payment and Performance Schedule), which is incorporated
herein. Invoices shall include, for recurring activities, the
number of such activities included in the invoiced amount.
C. Reimbursement of Expenses
1. ACS will reimburse CroMedica for the "actual cost"
(defined below) of expenses incurred by CroMedica
for:
(a) travel; provided that such expenses are (i)
reasonable and necessary; and (ii) incurred
consistent with CroMedica's travel policy;
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<PAGE> 4
(b) Other costs incurred in the performance the Scope
of Services as outlined in Attachment 1 of this
Agreement, such as printing, photographing,
telephone and facsimile charges.
As used herein, "actual cost" means the dollar cost
paid by CroMedica, without any management fee,
commission or mark-up by CroMedica, and less any
discount, rebate or other allowance paid to CroMedica
by a supplier, whether reflected on the original
billing or thereafter.
2. Expenses reimbursable under (a) and (b) above are
referred to herein as "Reimbursable Expenses". Except
for Reimbursable Expenses, all costs incurred by
CroMedica in performing this Agreement shall be the
responsibility of CroMedica.
3. CroMedica shall submit monthly invoices for travel
expenses paid in the preceding month, together with
back-up documentation as requested by ACS, to the
person identified on Attachment 3 (Contact Persons).
IV. PROTOCOLS
The Investigation shall be conducted in full accordance with the
Protocols and any amendments to the Protocols. CroMedica shall make no
change in the Protocols during the course of the Investigation without
the prior written approval of ACS, except where necessary to eliminate
apparent immediate hazards to human subjects. ACS shall have the right
at any time to initiate such changes in the Protocols, as ACS deems
necessary or appropriate, including suspending the Investigation
temporarily or permanently.
V. CROMEDICA MANAGEMENT OF CLINICAL INVESTIGATIONS
A. Investigator Brochure/Product Monograph
Before the Investigation begins, and from time to time
throughout the course of the Investigation, as determined by
ACS, ACS shall provide CroMedica and all Investigators with a
current Investigator Brochure and Product Monograph for the
study compound.
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<PAGE> 5
B. Field Monitoring Guidelines
Unless supplied by ACS, in consultation with ACS, CroMedica
shall develop, Protocol-specific Field Monitoring Guidelines
to facilitate study monitoring.
C. On-Site Monitoring
1. Before the commencement of the Investigation at a new
study site, CroMedica shall conduct an on-site study
initiation visit to each Investigator site. During
the study initiation visit, CroMedica shall inspect
and inventory clinical supplies and review the
Protocols and CRF form with site staff to ensure
understanding and compliance.
2. CroMedica shall conduct periodic on-site monitoring
visits to each Investigator site during the course of
the Investigation at a frequency to be directed by
ACS, but in no event less that one visit every eight
weeks. During each such visit, CroMedica shall
ensure, by review of relevant investigator records,
and otherwise, that the investigator and the
investigational site continue to meet all applicable
federal, state, and local laws, statutes and
ordinances and regulations, and FDA Guidelines for
the Conduct of Clinical Investigations. CroMedica
will promptly notify ACS of any investigator that is
not complying with their agreement, and attempt to
obtain compliance. If compliance is not promptly
obtained, and after written approval is received from
ACS, CroMedica will end the investigators
participation in the study.
3. CroMedica shall conduct an on-site, close-out visit
at each investigational site at the conclusion of the
study. During the close-out visit, CroMedica shall
ensure that the Investigator has maintained the
standards specified in Paragraph 2, above, and, in
addition, shall:
a. Obtain a reconciliation of all drug
inventories;
b. Resolve any final inquiries concerning CRF
issues; and
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<PAGE> 6
c. Confirm that the Investigator has maintained
all required documentation.
4. CroMedica shall prepare and maintain reports of each
on-site visit performed pursuant to this sub-Section
(On-Site Monitoring). The monitoring visit reports
shall be in a format mutually agreed upon by the
parties.
D. Supply of Drug
1. Supply of Drug to Investigators
ACS shall supply all of the drug to be used in the
Investigation.
2. Return of Unused Drug Supplies
CroMedica shall ensure that each investigator whose
participation in the Investigation has been completed
or discontinued shall either (a) return any unused
drug supplies to CroMedica or ACS, as directed by
ACS; or (b) dispose of the unused drug supplies as
directed by ACS. CroMedica shall require that each
Investigator account for any drug supplies that are
missing.
3. Non-Diversion; Labeling
All drug supplied to CroMedica and to Investigators
shall remain the exclusive property of ACS until
administered or dispensed to patients during the
course of the Investigation. In no event shall any
drug supplied to CroMedica for any purpose other than
as contemplated by the Protocols and this Agreement,
or be delivered to any person other than an
Investigator and, CroMedica shall use all reasonable
efforts to ensure that the Investigators comply with
the terms of this Agreement, the Attachments hereto
and the Protocols in all material respects.
4. Study Drug Disposition Records
Unless otherwise specified by ACS, CroMedica shall
maintain records relating to the disposition of the
drug, which shall include, without limitation: (1)
the amounts of drug
6
<PAGE> 7
supplies received from ACS (with respective dates); (2) the
Investigator sites to which the drug has been delivered
(with respective dates and amounts); (3) the amount of the
drug spilled or otherwise lost (with respective dates, if
known); (4) the amount of the drug returned to CroMedica
(with respective dates); and (5) the amount of the drug
returned by CroMedica to ACS (with respective dates).
E. Maintenance and Inspection of Records
CroMedica shall prepare and maintain complete, accurate, legible
written records, accounts, notes, reports and data on the
Investigation in a timely fashion. CroMedica shall maintain all
records under this Section (CROMEDICA Management of Clinical
Investigation) pertaining to the management of the clinical
Investigation for a period of 15 years from the date of creation.
ACS authorized representative(s), and regulatory authorities to
the extent permitted by law, may, during regular business hours,
arrange in advance with CroMedica to inspect and copy all data
and work products related to the Investigation. CroMedica shall
cooperate with any regulatory authority and allow them access to
relevant records and data to the extent permitted by law.
VIII. CONTACT PERSONS AND STAFFING
CroMedica shall assign a sufficient number of personnel to complete
the Scope of Services set forth on Attachment 1 (Scope of Services).
In the event that ACS determines that any CroMedica personnel are not
performing to ACS satisfaction, ACS shall have the right to request
that such personnel be replaced by personnel acceptable to ACS. ACS
and CroMedica have designated appropriate personnel to be available to
CroMedica to answer questions and resolve problems relating to the
Investigation. The names of these individuals, and the respective
subjects on which they may be consulted, are set forth in Attachment 3
(Contact Persons).
IX. PERIOD OF PERFORMANCE
This Agreement shall take effect as of the last date of execution by
the last of the parties to execute this Agreement, and shall remain in
effect until the completion of the services performed by CroMedica
under
7
<PAGE> 8
the Agreement, or until earlier termination in accordance with the
Section on Termination, below.
X. TERMINATION
A. ACS Right to Terminate
ACS reserves the right to immediately terminate this Agreement
in whole or in part, with or without cause, upon written
notice to CroMedica. In the event this Agreement is terminated
by ACS prior to completion, CroMedica shall use its best
efforts to conclude or transfer the project, as directed by
ACS, as expeditiously as possible. CroMedica shall not
undertake further work, incur additional expenses, or enter
into further commitments with regard to the Investigation
after receiving such notice of termination from ACS, except as
mutually agreed upon by the parties. Upon termination of the
Agreement, CroMedica shall return to ACS all of ACS property
(as defined in the Section covering Property Ownership) in
CroMedica's possession, unless otherwise agreed to in writing.
B. CroMedica's Right to Terminate
CroMedica may terminate this Agreement upon default of any
material provision of this Agreement; provided, however, that
prior to terminating, CroMedica shall notify ACS in writing of
such default, and shall allow ACS thirty (30) days to remedy
such default. In the event that ACS fails to remedy the
default within the 30-day period, CroMedica may terminate the
Agreement effective immediately.
C. Compensation to CroMedica upon Termination
In the event of a termination under this Section, CroMedica
shall be entitled to compensation as follows:
1. All payments due and owing under this Agreement at
the time of CroMedica's receipt of the notice of
termination for work completed and in progress;
2. Reimbursement for any noncancelable services and
commitments entered into by CroMedica in order to
carry out this Agreement, provided CroMedica provides
ACS with documentation of completion of work or
expenses incurred.
8
<PAGE> 9
3. CroMedica shall credit or return to ACS any funds not
expended or obligated by CroMedica in connection with
the Investigation prior to the effective termination
date indicated in the notice of termination.
Termination of this Agreement by either party shall
not affect the rights and obligations of the parties
accrued prior to the effective date of termination.
The rights and duties under Articles III, V, VI, X,
XI, XII, XIII, XIV, XVI, XVII, XX, XXI, XXII, XXIII
and XXIV shall survive the termination or expiration
of this Agreement.
XI. CONFIDENTIAL INFORMATION
A. Definition
For purposes of this Agreement, "Confidential Information"
means any knowledge or information that is (1) acquired by
CroMedica from ACS prior to or during the course of the
Investigation whether written, graphic or oral, or (2)
prepared, developed or generated by CroMedica during the
course of the Investigation; provided, however, that
"Confidential Information" does not, whether written, graphic
or oral, include knowledge or information that CroMedica can
demonstrate by written records was known by it prior to the
receipt of such knowledge or information from ACS, or that is
publicly disclosed by ACS either prior to or subsequent to
receipt of the knowledge or information by CroMedica.
B. Non-Disclosure
CroMedica (1) shall not publish, disseminate, or otherwise
disclose to any third party (except as may be required by this
Agreement or by law) any Confidential Information without the
prior written consent of ACS; (2) shall use the same care and
discretion in maintaining the confidentiality of the
Confidential Information that CroMedica uses with similar
information that it considers confidential; provided that such
care and discretion shall not be less than the standard of
care and discretion that would be employed by a prudent person
under similar circumstances; (3) shall restrict the
dissemination of the Confidential Information within its own
organization to persons who have a need to know;
9
<PAGE> 10
and (4) shall not, without the prior written consent of ACS,
make any use whatever of the Confidential Information except
for the purpose of conducting the Investigation. In the event
CroMedica is required by applicable law to disclosure
Confidential Information to a proper authority, CroMedica
shall first notify ACS, and CroMedica and ACS shall then
attempt in good faith to agree upon a mutually satisfactory
way to disclose such Confidential Information as necessary for
this limited purpose. CroMedica shall ensure that its
employees, officers, directors, affiliates, agents and
representatives comply with the terms of this Article XI and
otherwise with the terms of this Agreement.
C. Return of Confidential Information
At the expiration or earlier termination of this Agreement,
CroMedica shall return to ACS all written Confidential
Information, and all written material that incorporates any
Confidential Information.
D. Survival of Obligation of Confidentiality
The obligation of confidentiality set forth in this Section
shall continue for ten years following the date of expiration
or earlier termination, for any reason, of this Agreement, and
shall be binding upon permitted assignees, administrators and
other legal representatives of CroMedica.
E. CroMedica shall obtain ACS prior written permission before
using ACS name, symbols and/or marks in any form of publicity
in connection with the Investigation. The foregoing sentence
shall not exclude legally required disclosure by CroMedica or
reports generated in the normal course of business by
CroMedica.
XII. PROPERTY OWNERSHIP
A. Rights in Property
All materials, documents, data, software and information of
every kind and description supplied to CroMedica by ACS or
prepared, developed, or generated by CroMedica pursuant to
this Agreement, (except for CroMedica procedural manuals,
personnel data, methods, procedures, and policies) shall be
the sole and exclusive property of ACS and ACS
10
<PAGE> 11
shall have the right to make whatever use it deems desirable
of any such property. CroMedica shall not, without the prior
written consent of ACS, publish, disseminate, or otherwise
disclose to any third party any such property (except such
disclosure as may be required by law), or use any such
property for any purpose other than the performance of this
Agreement. CroMedica warrants by the execution of this
agreement that they have not entered, and will not enter into
any contractual agreement or relationship which would in any
way conflict with or compromise ACS's proprietary interest in,
or rights to any inventions, discoveries or technology
existing at the time of the execution of this Agreement or
arising out of or related to the performance thereunder.
B. Retention of Property
Unless otherwise required by law or the terms of this
Agreement, any property specified in Subsection A, above, that
CroMedica shall have in its possession shall be maintained by
CroMedica for a period of not less than five (5) years from
the date of receipt thereof and shall be organized in such
manner that it will be ready for immediate reference. ACS
shall have the right at any time to examine or obtain from
CroMedica copies of any or all such property. After five (5)
years, CroMedica may dispose of such property in accordance
with instructions provided by ACS. If ACS fails to provide
such instructions, CroMedica shall so notify ACS, and if
instructions are still not forthcoming within thirty (30) days
of such notification, CroMedica may destroy such property.
C. Survival of obligation
The rights and obligations set forth in this Section shall
survive the expiration or earlier termination, for any reason,
of this Agreement, and shall be binding upon permitted
assignees, administrators and other legal representatives of
CroMedica.
XIII. RIGHTS IN INTELLECTUAL PROPERTY AND PATENTS
A. Inventions, Discoveries, and Know-How
With respect to any and all inventions, discoveries, and
know-how (including, without
11
<PAGE> 12
limitation, all ideas, improvements, and creations) that are
conceived, gained, or reduced to practice by CroMedica in the
course of performing its obligations under this Agreement,
CroMedica agrees:
1. To disclose promptly to ACS or its nominee any such
inventions, discoveries and know-how;
2. To assign and transfer to ACS all rights, title, and
interest in and to any and all such inventions,
discoveries, and know-how upon the request of ACS;
and
3. To perform any and all lawful acts that in the
judgment of ACS are necessary or desirable to secure
or maintain for the benefit of ACS adequate patent
and other property rights in the United States and
all foreign countries with respect to any such
inventions, discoveries and know-how, including,
without limitation, making or delivering to ACS
United States and foreign patent applications, powers
of attorney, assignments, oaths and affirmations, and
applications for securing, protecting or registering
any property rights relating to such inventions,
discoveries and know-how, and cooperating with ACS in
the defense of patents related to such inventions,
discoveries and know-how in infringement actions.
ACS shall compensate CroMedica at standard hourly rates for
the time devoted to said activities and reimburse it for all
reasonable expenses incurred.
B. Copyrights
CroMedica agrees to assign to ACS all right, title, and
interest in and to any Work, as defined below, including
without limitation all right, title, and interest in and to
copyright of the Work, in the United States or anywhere
throughout the world, in the name of ACS (or otherwise, as
directed by ACS), for the sole benefit of ACS, and to secure
renewals or extensions of such copyrights in ACS name (or
otherwise, as directed by ACS). CroMedica shall execute any
assignments or other documents that ACS deems necessary to
effectuate the purposes of this Subsection B. For purposes of
this Section, "Work" means all reports, documents, research,
drafts, materials, computer software, and data that are
recorded in any form (including, without
12
<PAGE> 13
limitation, written, electronic, or photographic form) and
that are prepared, developed, or generated by CroMedica in the
course of performing its obligations under this Agreement.
C. Survival of Obligations
The obligations imposed by this Section shall survive the
expiration or earlier termination, for any reason, of this
Agreement with respect to inventions, discoveries and know-how
conceived, gained, or reduced to practice by CroMedica, and
Work prepared, developed, or generated by CroMedica, in the
course of performing this Agreement. Such obligations shall be
binding upon permitted assignees, administrators and other
legal representatives of CroMedica. It is agreed that neither
CroMedica nor ACS transfers to the other by operation of this
Agreement any patent right, copyright, or other proprietary
right of either party, except as specifically set forth in
this Agreement.
XIV. INDEMNIFICATION
A. Indemnification of ACS
CroMedica shall hold harmless and indemnify ACS, its
employees, agents and assigns, from and against all claims,
complaints, or lawsuits for damages that arise or are alleged
to arise as a result of the intentional misconduct,
negligence, malfeasance or violation of law, statute or
regulation of CroMedica, or any of its employees, agents, or
representatives, in conducting the Investigation, or from
CroMedica's failure to adhere to the terms of the Protocols or
this Agreement or fails to comply with all applicable
Provincial, Federal, state and local laws, and guidelines and
regulations. For purposes of this Article XIV only,
Investigators are not agents or representatives of CroMedica.
B. Indemnification of CroMedica
ACS shall indemnify and hold harmless CroMedica, its
representatives and employees, from and against all claims,
complaints, or lawsuits for damages that arise as a result of
personal injury or death that is alleged to have been caused
by or attributed to any substance provided by ACS and
13
<PAGE> 14
dispensed or administered in accordance with the provisions of
the Protocols; provided that:
1. ACS shall be promptly notified of any such claim,
complaint, or lawsuit;
2. ACS shall have the right, in its sole discretion, to
undertake the defense, compromise, or settlement, at its
own expense and by its own counsel, of any such claim,
complaint, or lawsuit; and
3. CroMedica shall cooperate fully in the investigation and
defense of any such claim, complaint, or lawsuit.
The indemnification provided for in this Subsection B shall not
apply to any loss, damage, cost or expense that is caused by or
attributable to the intentional misconduct, negligence,
malfeasance or violation of law, statute or regulation of
CroMedica, or any of its employees, agents, or representatives.
XV. INSURANCE
A. CroMedica shall maintain in force at all times during the term of
this Agreement, with an insurance company acceptable to ACS, the
following insurance, including any special terms indicated and shall,
prior to signing this Agreement, provide to ACS certificates of
insurance for each type of insurance specifying that ACS will receive
no less than thirty (30) days' notice of cancellation, non-renewable or
material change.
1. Comprehensive General Liability insurance including products and
completed operations, personal injury, broad form property damage
including completed operations, independent contractors, and blanket
contractual liability with the product/completed operations exclusion
removed. ACS will be named as additional insured. Combined Single Limit
for bodily injury and property damage - $2,000,000.
2. Workers' Compensation Insurance Coverage - statutory.
3. Employers' Liability Coverage - $500,000.
4. Professional Liability Insurance - Covering all claims for
damages arising out of errors and omissions in the performance of
professional duties of CroMedica
14
<PAGE> 15
under this Agreement. The Limits of Liability shall be $2 million per
claim subject to a $2 million annual aggregate.
XVI. NOTICES AND PAYMENTS
Except as otherwise provided herein, any notice or other communications
or any payment required under this Agreement shall be delivered by
hand, first class mail, a nationally recognized overnight courier
service, or facsimile transmission, to the party at the address listed
below:
If to Advanced Corneal Systems: J.C. MacRae
ADVANCED CORNEAL SYSTEMS, INC.
15279 Alton Parkway, Suite 100
Irvine, CA 92618
If to CroMedica Global Inc.:
Ken Newport
CroMedica Global Inc.
620-730 View Street
Victoria, British Columbia
V8W 3Y7
Any such notice shall be effective (1) in the case of a hand delivery,
when received; (2) in the case of an overnight delivery service, on the
next business day after being placed in the possession of such delivery
service, with delivery charges prepaid; (3) in the case of the mail,
three days after deposit in the postal system, first class postage
prepaid; and (4) in the case of facsimile transmission, when electronic
indication of receipt is received.
XVII. MODIFICATIONS
No changes shall be made in this Agreement except by written agreement
of the parties, signed by authorized representatives. ACS authorized
representative shall be designated in Attachment 3 (Contact Persons).
15
<PAGE> 16
XVIII. ENTIRE AGREEMENT
This Agreement, together with its Attachments, including the Protocols,
shall be the entire and complete understanding between the parties in
regard to the covered subject matter. This Agreement merges all prior
discussions between the parties and neither party shall be bound by
conditions, definitions, warranties, understandings, or representations
concerning such subject matter except as provided in this Agreement or
as specified on or subsequent to the effective date of this Agreement
in a writing signed by properly authorized representatives of both the
parties.
XIX. ASSIGNMENT
Neither party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written
consent of the other party. Notwithstanding the previous sentence, ACS
may assign its obligations under this Agreement to any affiliate of ACS
or in connection with the transfer or sale of all or substantially all
of its assets or business relating to the drug(s) being studied
hereunder or its merger or consolidation with another organization,
provided that the rights of CroMedica under this Agreement are not
materially prejudiced.
XX. INDEPENDENT CONTRACTOR
CroMedica shall function as an independent contractor and shall not
hold itself out as an agent of ACS in any way.
XXI. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced under the
laws (excluding the laws governing conflicts of laws) of the State of
California.
XXII. WAIVER
The failure of a party in any instance to insist on the strict
performance of the terms of this Agreement shall not be construed to be
a waiver or relinquishment of any of the terms of this Agreement,
either at the time of the party's failure to insist upon strict
performance or at any subsequent time.
16
<PAGE> 17
XXIII. SEVERANCE
Each clause of this Agreement is a distinct and severable clause and if
any clause is deemed illegal, void, or unenforceable, the validity,
legality, or enforceability of any other clause or portion of this
Agreement shall not be affected thereby.
XXIV. HEADINGS
All headings contained in this Agreement appear only for convenience
and reference. They do not define, limit, extend, or describe the scope
of this Agreement or the intent of any of its provisions.
ACCEPTED AND AGREED:
ADVANCED CORNEAL SYSTEMS, INC. CROMEDICA GLOBAL INC.
BY: /s/ [ILLEGIBLE] BY: /s/ [ILLEGIBLE]
------------------------------- -------------------------------
TITLE: Vice President TITLE: President
DATED: May 18, 1999 DATED: May 19, 1999
17
<PAGE> 18
ATTACHMENT 1
Scope of Services
18
<PAGE> 19
<TABLE>
<CAPTION>
FEE SCHEDULE - NORTH AMERICAN TRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
HOURLY RATE($US)
HOURS ------------------------ TOTAL
ACTIVITY PERSONNEL OF EFFORT CDN-BASED US-BASED ($US) CALCULATIONS/COMMENTS
SERVICES SERVICES
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
STUDY PREPARATION
- ------------------------------------------------------------------------------------------------------------------------------------
Medical Writer 32 90 2,880 Based on estimated 70 CRF
pages (data and information
Case Report Clinical Data Manager 16 75 1,200 pages). Includes correction,
Form Update reviews, print coordination
and Printing Data Manager 12 75 900 and distribution of all CRFs
and Distribu- in the US and Non-US trials.
tion Storage, Distribution & All printing and shipping
Printing Management not applicable 3,600 costs will be passed through
to ACS
- ------------------------------------------------------------------------------------------------------------------------------------
Canada-based CRAs 32 75 2,400 32 sites will be evaluated
to identify 24 sites (12 in
US-based CRAs 32 90 2,880 Canada, 12 in the U.S.)
Includes: 2 hrs/site x 32 sites
Site Recruit- Canada-On site Visit 120 75 9,000 12 new sites will have on site
ment & Evalua- validation
tion
US-On site Visit 120 90 10,800 12 new sites will have on site
validation
- ------------------------------------------------------------------------------------------------------------------------------------
Canada-based CRA(s) 56 75 4,200 IRB submission, and pre-study
documentation will be compiled
IRB Submission US-based CRA(s) 56 90 5,040 for new sites (12 Canadian and
& Pre-Study 12 US sites).
Documentation Includes: 8 hours prep +
for New Sites 4 hrs/site
- ------------------------------------------------------------------------------------------------------------------------------------
Review/compilation of all in-
house documentation from curr-
In-house Study ent CRO for completeness. A
Documentation Canada Based CRAs 189 75 14,175 list of contents and document
Review for requirements will be created to
Current Sites ensure matching documentation
at sites.
3 hrs/site x 63 sites
- ------------------------------------------------------------------------------------------------------------------------------------
All documentation at all sites
Study Documenta- will be compiled/reviewed by
tion Review US-based CRAs 126 90 11,340 CroMedica CRAs. This includes
for Current a full review of regulatory
Sites documentation.
Includes: 2 hrs/site x 63 sites
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL CroMedica Global Inc. May 18, 1999
<PAGE> 20
<TABLE>
<CAPTION>
HOURLY RATE ($US)
------------------------
HOURS CDN-BASED US-BASED TOTAL
ACTIVITY PERSONNEL OF EFFORT SERVICES SERVICES ($US) CALCULATIONS/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Project Manager 30 110 3,300 PM & Clin. Ops. Dir: 30 hours each
Clinical Operations Canada-based CRAs: 20 hrs X 2 CRAs
Director 30 125 3,750 US-based CRAs: 20 hrs/CRA X 6 CRAs
STUDY-SPECIFIC TRAINING Canada-based CRAs 40 75 3,000 Data Manager & Dir., Biometry: 20
SESSION US-based CRAs 120 90 10,600 hrs each. Includes travel time,
Data Manager 20 75 1,500 participation and preparation.
Director of Biometry 20 110 2,200
- ------------------------------------------------------------------------------------------------------------------------------------
Director of Biometry 60 110 6,600 Dir. Biometry: 60 hrs.
TRANSITION ASSISTANCE Director, Clinical Ops. 60 125 7,500 Dir. Clinical Ops.: 60 hrs
President 40 200 NC -- President: 40 hrs @ no charge
- ------------------------------------------------------------------------------------------------------------------------------------
STUDY CONDUCT
- ------------------------------------------------------------------------------------------------------------------------------------
Project Manager 2697 110 296,670 172 hrs/month x 6 months (full
time initially)
120 hrs/month x 4.5 months
75 hrs/month x 15 months
PROJECT MANAGEMENT -----------------------------------------------------------------------------------------------------------
In-House CRA 990 75 74,250 60 hrs/month x 6 months
40 hrs/month x 4.5 months
30 hrs/month x 15 months
- ------------------------------------------------------------------------------------------------------------------------------------
Clinical Operations 172 hrs/month x 6 months (full-
Assistant 2697 40 107,680 time initially)
120 hrs/month x 4.5 months
75 hrs/month x 15 months
- ------------------------------------------------------------------------------------------------------------------------------------
Medical Monitor/ 272 SAEs
SAE MANAGEMENT Physician 300/SAE 81,600 (680 patients x 40% expected
SAE rate)
- ------------------------------------------------------------------------------------------------------------------------------------
Canada-based CRAs 96 75 7,200 Canada: 8 hrs/site x 12 sites
SITE INITIATION US-based CRAs 208 90 18,720 US: 6 hrs/site x 26 sites
Includes preparation, all on-site
activities; report and travel
time.
- ------------------------------------------------------------------------------------------------------------------------------------
CONFIDENTIAL CroMedica Global Inc. May 18, 1999
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
HOURLY RATE ($US)
------------------
HOURS CDN-BASED US-BASED TOTAL
ACTIVITY PERSONNEL OF EFFORT SERVICES SERVICES ($US) CALCULATIONS/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTERIM MONITORING Canada-based CRAs 2448 75 183,600 Canada: [(8.25 visits x 12 sites)+ (4.5
(INCLUDES ADDITIONAL SITE visits x 12 sites)] x 16 hrs/site
TRAINING WHERE REQUIRED) US:[(8.25 visits x 63 sites)+(4.5 visits
x 63 sites)] x 16 hrs/site
- -----------------------------------------------------------------------------------------
US-based CRAs 12852 90 1,156,680 Based on monitoring visits every 4 to 6
weeks during enrollment and every 3
months during follow up. Includes
preparation, all on- and off-site
activities, report and travel time. We
have assumed that all new sites (12 Can,
12 US) complete the trial.
- ------------------------------------------------------------------------------------------------------------------------------------
UNMASKED MONITORING Canada-based CRAs 144 75 10,800 1 visits x 12 sites x 12 hours
- ------------------------------------------------------------------------------------------------------------------------------------
US-based CRAs 756 90 68,040 1 visits x 63 sites x 12 hours
- ------------------------------------------------------------------------------------------------------------------------------------
SITE CLOSEOUT Canada-based CRAs 144 75 10,800 87 sites x 12 hrs/site
- -----------------------------------------------------------------------------------------
US-based CRAs 900 90 81,000
- ------------------------------------------------------------------------------------------------------------------------------------
SITE AUDITS North American Trial 62,500 25 sites audits @ $2,500 each
- ------------------------------------------------------------------------------------------------------------------------------------
Non North American Trial 62,500 25 sites audits @ $2,500 each
- ------------------------------------------------------------------------------------------------------------------------------------
2,329,305
----------------------------------------------------
</TABLE>
<PAGE> 22
FEE SCHEDULE AUSTRALIA TRIAL
<TABLE>
<CAPTION>
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
HOURS TOTAL
ACTIVITY OF EFFORT HOURLY RATE ($US) ($US) CALCULATIONS/COMMENTS
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
<S> <C> <C> <C> <C>
REGULATORY CONSULTING 80 125 10,000 80 hrs x $125/hr (est.)
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
IRS SUBMISSION 38 80 3,040 8 hrs + (3 hrs x 10 sites) x $80/hr
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
PRE STUDY DOCUMENTATION 24 80 1,920 4 hrs + (2 hrs x 10 sites) x $80/hr
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
IDENTIFY SITES 30 80 2,400 15 sites evaluated to find 10
15 x 2 hrs x $80
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
INVESTIGATOR MEETING COORDINATION -- -- 12,000 Includes: organization, logistics, attendance,
clinical assistance, presentations by specialists
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
80 80 6,400 10 sites x 8 hrs x $80/hr
INITIATIONS VISITS
--------- -------------------- --------- --------------------------------------------------
40 110 4,400 5 sites x 8 hrs x $110/hr
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
CLOSE OUT VISITS 120 80 9,600 10 sites x 12 hrs x $80/hr
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
840 80 67,200 August '99-Feb. '00; every 4-6 weeks
10 sites x 16 hrs x 5.25 visits x $80
MONITORING --------- -------------------- --------- --------------------------------------------------
720 80 57,600 Mar. '00-April '01; every 12 weeks
10 sites x 16 hrs x 4.5 visits x $60
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
640 110 70,400 40 hrs/mth x 16 mths x $110
PROJECT MANAGEMENT
--------- -------------------- --------- --------------------------------------------------
95 110 10,560 16 hrs/mth x 6 mths x $110
- ---------------------------------- --------- -------------------- --------- --------------------------------------------------
255,520
--------- --------------------------------------------------
</TABLE>
CONFIDENTIAL CroMedica Global Inc. May 18, 1999
<PAGE> 23
FEE SCHEDULE DATA MANAGEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
VIT-02-08961X &
VIT-03-08961X
ACTIVITY PERSONNEL HOURLY RATE (GLOBAL SITES)
---------------
EFFORT TOTAL
HOURS
- --------------------------- ---------------- ----------- ------ -------
<S> <C> <C> <C> <C>
DATABASE DESIGN & DATA Data Manager 75 180 13,500
MANAGEMENT GUIDELINES
- --------------------------- ---------------- ----------- ------ -------
CRF QA & DOCUMENT CONTROL Data Assistant 50 640 32,000
- --------------------------- ---------------- ----------- ------ -------
DATA ENTRY Data Entry Tech. 40 1,060 42,400
- --------------------------- ---------------- ----------- ------ -------
DATA CODING, EDIT CHECKS, Data Manager 75 1,932 144,900
QUERY RESOLUTION & LISTINGS
- --------------------------- ---------------- ----------- ------ -------
232,800
==========================================================================================
</TABLE>
BY COMBINING DATA MANAGEMENT SERVICES FOR BOTH PROTOCOLS, CROMEDICA IS ABLE TO
PASS ON A DIRECT SAVINGS OF 10 PER CENT OVER THE INDIVIDUAL COSTS FOR EACH
PROTOCOL.
<TABLE>
<CAPTION>
-------------------------------------
SUMMARY
-------------------------------------
<S> <C>
NORTH AMERICA TRIAL $ 3,040
AUSTRALIA TRIAL 0
DATA MANAGEMENT 232,800
--------
GRAND TOTAL $235,840
========
</TABLE>
CONFIDENTIAL Cromedica Global Inc. May 18, 1999
<PAGE> 24
ATTACHMENT 2
PAYMENT AND PERFORMANCE SCHEDULE
PAYMENT SCHEDULE
- ----------------
Sponsor shall reimburse reasonable costs and expenses at net thirty (30) days
terms upon receipt of invoice and any associated original receipts, and/or at
the occurrence of the below incidents enacted at Sponsor's request, pending
review for acceptableness and/or completeness. All figures are in US dollars:
FIXED-UNIT PRICE PAYMENT STRUCTURE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Unit Cost Study Maximum
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Up front (20%) $563,525
- -----------------------------------------------------------------------------------------------------------------------------------
Australia Regulatory Submission $10,000 10,000
- -----------------------------------------------------------------------------------------------------------------------------------
CRF Finalization 6,180 8,580
- -----------------------------------------------------------------------------------------------------------------------------------
Site Recruitment:
Canadian 200 2,400
U.S. 240 2,880
Australia 240 2,400
- -----------------------------------------------------------------------------------------------------------------------------------
Initiation Visits:
Canadian 600 7,200
U.S. 720 18,720
Australia 1,080 10,800
- -----------------------------------------------------------------------------------------------------------------------------------
Interim Visits:
Canadian 1,200 183,600
U.S. 1,440 1,156,680
Australia 1,280 124,800
- -----------------------------------------------------------------------------------------------------------------------------------
Unmasked Visits:
Canadian 900 10,800
U.S. 1,080 68,040
- -----------------------------------------------------------------------------------------------------------------------------------
Close Out Visits:
Canadian 900 10,800
U.S. 1,080 81,000
Australia 960 9,600
- -----------------------------------------------------------------------------------------------------------------------------------
Site Audits 2,500 125,000
- -----------------------------------------------------------------------------------------------------------------------------------
Australia Investigator Meeting 12,000 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
Study Training 24,550 24,550
- -----------------------------------------------------------------------------------------------------------------------------------
SAE Management $300 per SAE 81,600
- -----------------------------------------------------------------------------------------------------------------------------------
Database Design 13,500 13,500
- -----------------------------------------------------------------------------------------------------------------------------------
Data Entry:
1/3 Data Entered 50,000 50,000
2/3 Data Entered 50,000 50,000
3/3 Data Entered 50,000 50,000
- -----------------------------------------------------------------------------------------------------------------------------------
Project Management Fee 5,556 139,150
(per month for 25 months)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Contract $2,817,625
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PASS-THROUGH COSTS: SPONSOR shall reimburse CONTRACTOR for reasonable pass-
through costs (e.g., travel, lodging, meals) at net thirty (30) days term upon
receipt of original receipt(s)/invoice. Interest at 15% shall apply in net
thirty (30) days terms are not satisfied.
24
<PAGE> 25
ATTACHMENT 3
CONTACT PERSONS
Advanced Corneal Systems, Inc. Contractual/Financial Matters:
J.C. MacRae
Vice President
15279 Alton Parkway, Suite 100
Irvine, CA 92618
Clinical/Investigation Matters:
Jane Ellen Giamporcaro
15279 Alton Parkway, Suite 100
Irvine, CA 92618
CroMedica Global Inc. Ken Newport
CroMedica Global Inc.
730 View Street, Suite 620
Victoria, British Columbia
V8W 3Y7
25
<PAGE> 26
Exhibit A
Protocols
26
<PAGE> 27
ATTACHMENT 1
Scope of Services
Agreed to and approved by:
/s/ JANE ELLEN GIAMPORCARO
-------------------------------
JANE ELLEN GIAMPORCARO 5/18/99
<PAGE> 28
page 19
FEE SCHEDULE -- NORTH AMERICAN TRIAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
HOURLY RATE ($US)
HOURS ----------------------- TOTAL
ACTIVITY PERSONNEL OF EFFORT CDN-BASED US-BASED ($US) CALCULATIONS/COMMENTS
SERVICES SERVICES
- ----------------------------------------------------------------------------------------------------------------------------------
STUDY PREPARATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Medical Writer 32 90 2,860 Based on estimated 70 CRF (data and
------------------------------------------------------------------------ information pages). Includes
CASE REPORT FORM Clinical Data Manager 16 75 1,200 correction, reviews, print
UPDATE AND PRINTING ------------------------------------------------------------------------ coordination and distribution of
AND DISTRIBUTION Data Manager 12 75 900 all CRFs in the US and Non-US
------------------------------------------------------------------------ trials. All printing and shipping
Storage, Distribution not applicable 3,600 costs will be passed through to ACS.
& Printing Management
- ----------------------------------------------------------------------------------------------------------------------------------
Canada-based CRAs 32 75 2,400 32 sites will be evaluated to
------------------------------------------------------------------------ identify 24 sites (12 in Canada,
US-based CRAs 32 90 2,880 12 in the U.S.)
Includes: 2hrs/site x 32 sites
SITE RECRUITMENT -------------------------------------------------------------------------------------------------------------
& EVALUATION Canada - On site Visit 120 75 9,000 12 new sites will have on site
validation
-------------------------------------------------------------------------------------------------------------
US - On site Visit 120 90 10,600 12 new sites will have on site
validation
- ----------------------------------------------------------------------------------------------------------------------------------
IRB SUBMISSION & IRB submissions and pre-study
PRE-STUDY Canada-based CRA(s) 56 75 4,200 documentation will be compiled for
DOCUMENTATION FOR ------------------------------------------------------------------------ new sites (12 Canadian and 12 US
NEW SITES US-based CRA(s) 56 90 5,040 sites).
Includes: 8 hours prep + 4 hrs/site
- ----------------------------------------------------------------------------------------------------------------------------------
Review/compilation of all in-house
documentation from current CRO for
IN-HOUSE STUDY completeness. A list of contents
DOCUMENTATION Canada based CRAs 189 75 14,175 and document requirements will
REVIEW FOR be created to ensure matching
CURRENT SITES documentation at sites.
3hrs/site x 63 sites
- ----------------------------------------------------------------------------------------------------------------------------------
STUDY All documentation at all sites will
DOCUMENTATION be compiled/reviewed by CroMedica
REVIEW FOR US-based CRAs 126 90 11,340 CRAs. This includes a full review
CURRENT SITES of regulatory documentation.
Includes: 2hrs/site x 63 sites
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
page 20
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
HOURLY RATE ($US)
HOURS ----------------------- TOTAL
ACTIVITY PERSONNEL OF EFFORT CDN-BASED US-BASED ($US) CALCULATIONS/COMMENTS
SERVICES SERVICES
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Project Manager 30 110 3,300
------------------------------------------------------------------------
Clinical Operations 30 125 3,750
Director PM & Clin. Ops. Dir. 30 hours each
STUDY-SPECIFIC ------------------------------------------------------------------------ Canada-based CRAs: 20 hrs x 2 CRAs
TRAINING SESSION Canada-based CRAs 40 75 3,000 US-based CRAs: 20 hrs/CRA x 6 CRAs
------------------------------------------------------------------------ Data Manager & Dir., Biometry: 20
US-based CRAs 120 90 10,800 hrs each Includes travel time,
------------------------------------------------------------------------ participation and preparation
Data Manager 20 75 1,500
------------------------------------------------------------------------
Director of 20 110 2,200
Biometry
- ----------------------------------------------------------------------------------------------------------------------------------
Director of 60 110 6,600
Biometry
------------------------------------------------------------------------ Dir. Biometry: 60 hrs
TRANSITION Director, Clinical 60 125 7,500 Dir. Clinical Ops.: 60 hrs
ASSISTANCE Ops. President: 40 hrs @ no charge
------------------------------------------------------------------------
President 40 200 N/C --
- ----------------------------------------------------------------------------------------------------------------------------------
STUDY CONDUCT
- ----------------------------------------------------------------------------------------------------------------------------------
172 hrs/month x 6 months (full-time
Project Manager 2697 110 296,670 initially)
120 hrs/month x 4.5 months
75 hrs/month x 15 months
PROJECT MANAGEMENT -------------------------------------------------------------------------------------------------------------
60 hrs/month x 6 months
In-House CRA 990 75 74,250 40 hrs/month x 4.5 months
30 hrs/month x 15 months
- ----------------------------------------------------------------------------------------------------------------------------------
172 hrs/month x 6 months (full-time
Clinical Operations 2697 40 107,880 initially)
Assistant 120 hrs/month x 4.5 months
75 hrs/month x 15 months
- ----------------------------------------------------------------------------------------------------------------------------------
SAE Management Medical Monitor/ 300/SAE 81,600 272 SAEs
Physician (680 patients x 40% expected
SAE rate)
- ----------------------------------------------------------------------------------------------------------------------------------
Canada-based CRAs 96 75 7,200 Canada: 8 hrs/site x 12 sites
SITE INITIATION ------------------------------------------------------------------------ US: 8 hrs/site x 26 sites
US-based CRAs 208 90 18,720 Includes preparation, all on-site
activities, report and travel time.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
page 21
<TABLE>
<CAPTION>
Hourly Rate ($US)
-------------------
Hours Cdn-based US-based Total
Activity Personnel of Effort services services ($US) Calculations/Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canada: [(8.25 visits x 12 sites) +
Canada-based CRAs 2448 75 183,600 (4.5 visits x 12 sites)] x 16 hrs/site
US: [(6.25 visits x 63 sites) + (4.5
Interim Monitoring visits x 63 sites) x 16 hrs/site
(includes additional -------------------------------------------------------------------- Based on monitoring visits every 4 to 6
site training where weeks during enrolment and every 3
required) months during follow up. Includes
preparation, all on- and off-site
US-based CRAs 12652 90 1,156,680 activities, report and travel time. We
have assumed that all new sites (12 Can,
12 US) complete the trial.
- ------------------------------------------------------------------------------------------------------------------------------------
Canada-based CRAs 144 75 10,800 1 visits x 12 sites x 12 hours
Unmasked Monitoring --------------------------------------------------------------------------------------------------------------
US-based CRAs 756 90 88,040 1 visits x 63 sites x 12 hours
- ------------------------------------------------------------------------------------------------------------------------------------
Canada-based CRAs 144 75 10,800
Site Closeout -------------------------------------------------------------------- 67 sites x 12 hrs/site
US-based CRAs 900 90 61,000
- ------------------------------------------------------------------------------------------------------------------------------------
North American Trial 62,500 25 sites audits @ $2,500 each
Site Audits --------------------------------------------------------------------------------------------------------------
Non North American Trial 62,500 25 sites audits @ $2,500 each
- ------------------------------------------------------------------------------------------------------------------------------------
2,329,305
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
Page 22
FEE SCHEDULE AUSTRALIA TRIAL
<TABLE>
<CAPTION>
Hours Total
Activity of Effort Hourly Rate ($US) ($US) Calculations/Comments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Regulatory Consulting 80 125 10,000 80 hrs x $125/hr (est.)
IRS Submission 36 80 3,040 8 hrs + (3 hrs x 10 sites) x $80/hr
Pre Study Documentation 24 80 1,920 4 hrs + (2 hrs x 10 sites) x $80/hr
Identify Sites 30 80 2,400 15 sites evaluated to find 10
15 x 2 hrs x $80
Investigator Meeting Coordination -- -- 12,000 Includes: organization, logistics, attendance,
clinical assistance, presentations by specialists.
Initiations Visits 80 80 6,400 10 sites x 8 hrs x $80/hr
40 110 4,400 5 sites x 6 hrs x $110/hr
Close Out Visits 120 80 9,600 10 sites x 12 hrs x $60/hr
Monitoring 840 80 67,200 August '99-Feb. '00; every 4-6 weeks
10 sites x 16 hrs x 5.25 visits x $80
720 80 57,600 Mar. '00-April '01; every 12 weeks
10 sites x 16 hrs x 4.5 visits x $80
Project Management 640 110 70,400 40 hrs/mth x 16 mths x $110
96 110 10,560 16 hrs/mth x 6 mths x $110
255,520
</TABLE>
<PAGE> 32
Page 23
FEE SCHEDULE DATA MANAGEMENT
<TABLE>
<CAPTION>
VIT-02-08961X &
VIT-03-08961X
ACTIVITY PERSONNEL HOURLY RATE (GLOBAL SITES)
----------------
EFFORT
HOURS TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
Database Design & Data
Management Guidelines Data Manager 75 180 13,500
- -----------------------------------------------------------------------------------
CRF QA & Document Control Data Assistant 50 640 32,000
- -----------------------------------------------------------------------------------
Data Entry Data Entry Tech. 40 1,060 42,400
- -----------------------------------------------------------------------------------
Data Coding, Edit Checks,
Query Resolution & Listings Data Manager 75 1,932 144,900
- -----------------------------------------------------------------------------------
232,800
-------
</TABLE>
By combining data management services for both protocols, CroMedica is able to
pass on a direct savings of 10 per cent over the individual costs for each
protocol.
<TABLE>
<CAPTION>
SUMMARY
<S> <C>
North America Trial $ 3,040
Australia Trial 0
Data Management 232,800
--------
Grand Total $235,840
========
</TABLE>
<PAGE> 33
ATTACHMENT 2
PAYMENT AND PERFORMANCE SCHEDULE
PAYMENT SCHEDULE
Sponsor shall reimburse reasonable costs and expenses at net thirty (30) days
terms upon receipt of invoice and any associated original receipts, and/or at
the occurrence of the below incidents enacted at Sponsor's request, pending
review for acceptableness and/or completeness. All figures are in US dollars:
FIXED-UNIT PRICE PAYMENT STRUCTURE
<TABLE>
<CAPTION>
Unit Cost Study Maximum
--------- -------------
<S> <C> <C>
Up Front (20%) $563,525
Australia Regulatory Submission $10,000 10,000
CRF Finalization 6,180 8,580
Site Recruitment:
Canadian 200 2,400
U.S. 240 2,880
Australia 240 2,400
Initiation Visits:
Canadian 600 7,200
U.S. 720 18,720
Australia 1,080 10,800
Interim Visits:
Canadian 1,200 183,600
U.S. 1,440 1,156,680
Australia 1,280 124,800
Unmasked Visits:
Canadian 900 10,800
U.S. 1,080 68,040
Close Out Visits:
Canadian 900 10,800
U.S. 1,080 81,000
Australia 960 9,600
Site Audits 2,500 125,000
Australia Investigator Meeting 12,000 12,000
Study Training 24,550 24,550
SAE Management $300 per SAE 81,600
Database Design 13,500 13,500
Data Entry:
1/3 Data Entered 50,000 50,000
2/3 Data Entered 50,000 50,000
3/3 Data Entered 50,000 50,000
Project Management Fee
(per month for 25 months) 5,566 139,150
Total Contract $2,817,625
</TABLE>
Pass-through Costs: SPONSOR shall reimburse CONTRACTOR for reasonable
pass-through costs (e.g., travel, lodging, meals) at net thirty (30) days term
upon receipt of original receipt(s)/invoice. Interest at 15% shall apply in net
thirty (30) days terms are not satisfied.
24
<PAGE> 1
Exhibit 10.9
LEASE AGREEMENT
(Net)
BASIC LEASE INFORMATION
Lease Date: September 13, 1996
Lessor: Aetna Life Insurance Company,
a Connecticut Corporation
Lessor's Address: P.O. Box 19693, 30 Executive Park, Suite 100
Irvine, California 92713-9693
Lessee: Advanced Corneal Systems, Inc.,
a California Corporation
Lessee's Address: 23046 Avenida de la Carlota, Suite 600
Laguna Hills, CA 92653
Premises: Approximately 12,946 square feet as shown on Exhibit A
Premises Address: 15279 Alton Parkway, Suite 100
Irvine, CA 92618
Park: 213,585 square feet
Term: October 1, 1996 ("Commencement Date"), through
September 30, 2001 ("Expiration Date")
Base Rent Ten Thousand Six Hundred Sixteen Dollars and No Cents
(Paragraph 3): ($10,616.00) per month
Adjustments to November 1, 1996 - December 31, 1996 $ -0- per month
Base Rent: January 1, 1997 - September 30, 1997 $10,616.00 per month
October 1, 1997 - September 30, 1998 $11,041.00 per month
October 1, 1998 - September 30, 1999 $11,483.00 per month
October 1, 1999 - September 30, 2000 $11,942.00 per month
October 1, 2000 - September 30, 2001 $12,420.00 per month
Security Deposit Fifty Thousand Dollars and No Cents ($50,000.00). See
(Paragraph 4.A): Paragraph 39
Cleaning Deposit N/A
(Paragraph 4.B):
*Lessee's Share of
Operating Expenses 6.06% of the Park
(Paragraph 6.A):
*Lessee's Share of
Tax Expenses 6.06% of the Park
(Paragraph 6.B):
*Lessee's Share of
Common Area Utility
Costs 6.06% of the Park
(Paragraph 7):
*The amount of Lessee's Share of the expenses as referenced above shall be
subject to modification as set forth in this Lease.
Permitted Uses: General offices and research and development laboratory for
an ophthalmology company.
General Liability
Insurance Amount Bodily injury limit of not less than $1,000,000.00 per
(Paragraph 12): occurrence;
Property damage limit of not less than $1,000,000.00
per occurrence;
Combined single limit of not less than $2,000,000.00.
Unreserved Parking
Spaces: Forty-four (44) nonexclusive and undesignated spaces
Broker Lee & Associates, 15615 Alton Parkway, Suite 150,
(Paragraph 38): Irvine, CA 92718
Exhibits: Exhibit A - Premises, Building, Lot and/or Park
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - Sign Criteria
Exhibit E - Hazardous Materials Disclosure Certificate
Exhibit F - Change of Commencement Date
Addenda: Addendum I:
1
<PAGE> 2
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date defined on
Page 1. The Basic Lease information set forth on Page 1 and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Lessor hereby leases the Premises to Lessee upon the terms and
conditions contained herein. Lessor hereby grants to Lessee a revocable license
for the right to use, on a non-exclusive basis, parking areas and ancillary
facilities located within the Common Area of the Park, subject to the terms of
this Lease.
2. ADJUSTMENT OF COMMENCEMENT DATE: CONDITION OF THE PREMISES:
A. If Lessor cannot deliver possession of the Premises on the
Commencement Date, Lessor shall not be subject to any liability nor shall the
validity of the Lease be affected; provided the Lease term and the obligation
to pay Rent shall commence on the date possession is tendered and the
termination date shall be extended by a period of time equal to the period
computed from the Commencement Date to the date possession is tendered by
Lessor to Lessee. In the event the commencement date of this Lease is other
than the Commencement Date provided on Page 1, Lessor and Lessee shall execute
a written amendment to this Lease, substantially in the form of Exhibit F
hereto, wherein the parties shall specify the actual commencement date,
termination date and the date on which Lessee is to commence paying Rent. In
the event that Lessor permits Lessee to occupy the Premises prior to the
Commencement Date, such occupancy shall be at Lessee's sole risk and subject to
all the provisions of this Lease, including, but not limited to, the
requirement to pay Rent and the Security Deposit, and to obtain the insurance
required pursuant to this Lease and to deliver insurance certificates as
required herein. In addition to the foregoing, Lessor shall have the right to
impose such additional conditions on Lessee's early entry as Lessor shall deem
appropriate. By taking possession of the Premises, Lessee shall be deemed to
have accepted the Premises in a good, clean and completed condition and state
of repair, in compliance with applicable laws, codes, regulations,
administrative orders and ordinances, and subject to all matters of record.
Lessee hereby acknowledges and agrees that neither Lessor nor Lessor's agents
or representatives has made any representations or warranties as to the
suitability, safety or fitness of the Premises for the conduct of Lessee's
business, Lessee's intended use of the Premises or for any other purpose, and
that neither Lessor nor Lessor's agents or representatives has agreed to
undertake any alterations or construct any Tenant Improvements to the Premises
except as expressly provided in this Lease.
B. Notwithstanding anything to the contrary in Paragraph 2.A above, in
the event Lessor fails to deliver possession of the Premises to Lessee on or
before April 1, 1997, then Lessee shall have the right as its sole remedy for
such failure to terminate this Lease upon ten (10) days' notice to Lessor,
which notice shall be given, if at all, on or before April 10, 1997.
3. RENT. On the date that Lessee executes this Lease, Lessee shall deliver to
Lessor the original executed Lease, the Base Rent (which shall be applied
against the Rent payable for the first month Lessee is required to pay Base
Rent), the Security Deposit, the Cleaning Deposit, and all insurance
certificates evidencing the insurance required to be obtained by Lessee under
Paragraph 12 of this Lease. Lessee agrees to pay Lessor, without prior notice or
demand, or abatement, offset, deduction or claim, the Base Rent described on
Page 1, payable in advance at Lessor's address shown on Page 1 on the first day
of each month throughout the term of the Lease. In addition to the Base Rent set
forth on Page 1, Lessee shall pay Lessor in advance and on the first (1st) day
of each month throughout the term of this Lease, (including any extensions of
such term), as additional rent Lessee's share, as set forth on Page 1, of
Operating Expenses, Tax Expenses, Common Area Utility Costs, administrative
expenses and Utility Expenses, as specified in Paragraphs 6.A., 6.B., 6.C. and 7
of this Lease, respectively. Additionally, Lessee shall pay to Lessor as
additional rent hereunder, immediately on Lessor's demand therefor, any and all
costs and expenses incurred by Lessor to enforce the provisions of this Lease,
including, but not limited to, costs associated with any proposed assignment or
subletting of all or any portion of the Premises by Lessee, costs associated
with the delivery of notices, delivery and recordation of notice(s) of default,
attorneys' fees, expert fees, court costs and filing fees (collectively, the
"Enforcement Expenses"). The term "Rent" whenever used herein refers to the
aggregate of all these amounts. If Lessor permits Lessee to occupy the Premises
without requiring Lessee to pay rental payments for a period of time, the waiver
of the requirement to pay rental payments shall only apply to waiver of the Base
Rent and Lessee shall otherwise perform all other obligations of Lessee
hereunder, including, but not limited to paying to Lessor any and all amounts
considered additional rent, such as Lessee's share of Operating Expenses, Tax
Expenses, Common Area Utility Costs, Utility Expenses, and administrative
expenses. If, at any time, Lessee is in default of or otherwise breaches any
term, condition or provision of this Lease, any such waiver by Lessor of
Lessee's requirement to pay rental payments shall be null and void and Lessee
shall immediately pay to Lessor all rental payments waived by Lessor. The Rent
for any fractional part of a calender month at the
2
<PAGE> 3
commencement or termination of the Lease term shall be a prorated amount of the
Rent for a full calendar month based upon a thirty (30) day month. The prorated
Rent shall be paid on the Commencement Date and the first day of the calendar
month in which the date of termination occurs, as the case may be.
4. SECURITY DEPOSIT AND CLEANING DEPOSIT:
A. Security Deposit: Upon Lessee's execution of this Lease, Lessee shall
deliver to Lessor, as a Security Deposit for the performance by Lessee of its
obligations under this Lease, the amount described on Page 1. If Lessee is in
default, Lessor may, but without obligation to do so, use the Security Deposit,
or any portion thereof, to cure the default or to compensate Lessor for all
damages sustained by Lessor resulting from Lessee's default, including, but not
limited to the Enforcement Expenses. Lessee shall, immediately on demand, pay
to Lessor a sum equal to the portion of the Security Deposit so applied or used
so as to replenish the amount of the Security Deposit held up to the
amount initially deposited with Lessor. At anytime after Lessee has defaulted
hereunder, Lessor may require an increase in the amount of the Security Deposit
required hereunder for the then balance of the Lease term and Lessee shall,
immediately on demand, pay to Lessor additional sums in the amount of such
increase. As soon as practicable after the termination of this Lease, Lessor
shall return the Security Deposit to Lessee, less such amounts as are
reasonably necessary, as determined by Lessor, to remedy Lessee's default(s)
hereunder or to otherwise restore the Premises to a clean and safe condition,
reasonable wear and tear excepted. If the cost to restore the Premises exceeds
the amount of the Security Deposit, Lessee shall promptly deliver to Lessor any
and all of such excess sums as determined solely by Lessor. Lessor shall not be
required to keep the Security Deposit separate from other funds, and, unless
otherwise required by law, Lessee shall not be entitled to interest on the
Security Deposit. In no event or circumstance shall Lessee have the right to
any use of the Security Deposit and, specifically, Lessee may not use the
Security Deposit as a credit or to otherwise offset any payments required
hereunder, including, but not limited to, Rent or any portion thereof.
B. CLEANING DEPOSIT: Intentionally Omitted.
5. CONDITION OF PREMISES:
A. Lessee hereby accepts the Premises in its current "as is" condition
unless otherwise specified in Exhibit B, attached hereto and incorporated
herein by this reference. If so specified in Exhibit B hereto, Lessor or
Lessee, as the case may be, shall install the improvements ("Tenant
Improvements") on the Premises as described and in accordance with the terms,
conditions, criteria and provisions set forth in Exhibit B, attached and
incorporated herein by this reference. Lessee acknowledges that neither Lessor
nor any of Lessor's agents, representatives or employees has made any
representations as to the suitability or fitness of the Premises for the
conduct of Lessee's business or for any other purpose, and that neither Lessor
nor any of Lessor's agents, representatives or employees has agreed to undertake
any alterations or construct any Tenant Improvements to the Premises except as
expressly provided in Exhibit B to this Lease.
B. Notwithstanding anything to the contrary contained in Section 5.A
above, Lessor shall cause the HVAC, electrical and plumbing systems serving the
Premises to be in good working order and the roof on the Premises to be in good
condition on the Commencement Date. Lessee shall have a period of thirty (30)
days after the Commencement Date to provide Lessor with written notice of any
defects in the HVAC, electrical or plumbing systems or the roof. In the event
Lessee fails to notify Lessor of any such defects within the aforesaid period,
then Lessor shall be conclusively deemed to have satisfied its obligations
under this Paragraph 5.B.
6. EXPENSES:
A. OPERATING EXPENSES: In addition to the Base Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on Page 1, of all
Operating Expenses as additional rent. The term "Operating Expenses" as used
herein shall mean the total amounts paid or payable by Lessor in connection
with the ownership, maintenance, repair and operation of the Premises, the
Building and the Lot, and where applicable, of the Park referred to on Page 1.
The amount of Lessee's share of Operating Expenses shall be reviewed from time
to time by Lessor and shall be subject to modification by Lessor as reasonably
determined by Lessor. These Operating Expenses may include, but are not limited
to:
(i) Lessor's cost of non-structural repairs to and maintenance of
the roof and exterior walls of the Building;
(ii) Lessor's cost of maintaining the outside paved area, landscaping
and other common areas for the Park. The term "Common Area" shall mean all
areas and facilities within the Park exclusive of the Premises and the
other portions of the Park leased exclusively to other tenants. The Common
Area includes, but is not limited to, interior lobbies, mezzanines, parking
areas, access and perimeter roads, sidewalks, landscaped areas and similar
areas and facilities;
3
<PAGE> 4
(iii) Lessor's annual cost of insurance insuring against fire and
extended coverage (including, if Lessor elects, "all risk" coverage) and all
other insurance, including, but not limited to, earthquake, flood and/or
surface water endorsements for the Building, the Lot and the Park (including
the Common Area), and rental value insurance against loss of Rent in an amount
equal to the amount of Rent for a period of at least six (6) months commencing
on the date of loss;
(iv) Lessor's cost of modifications to the Building, the Common Area
and/or the Park occasioned by any rules, laws or regulations effective
subsequent to the commencement of the Lease;
(v) Lessor's cost of modifications to the Building, the Common Area
and/or the Park occasioned by any rules, laws or regulations arising from
Lessee's use of the Premises regardless of when such rules, laws or regulations
became effective;
(vi) If Lessor elects to so procure, Lessor's cost of preventative
maintenance, repair and replacement contracts including, but not limited to,
contracts for elevator systems and heating, ventilation and air conditioning
systems, and trash or refuse collection;
(vii) Lessor's cost of security and fire protection services for the
Park, if in Lessor's sole discretion such services are provided;
(viii) Lessor's establishment of reasonable reserves for replacements
and/or repairs of Common Area improvements, equipment and supplies;
(ix) Lessor's cost for the creation and negotiation of, and pursuant to,
any rail spur or track agreements, licenses, easements or other similar
undertakings; and
(x) Lessor's cost of supplies, equipment, rental equipment and other
similar items used in the operation and/or maintenance of the Park.
Notwithstanding anything to the contrary contained in this Section 6.A,
the following items shall be specifically excluded from the definition of
"Operating Expenses":
(1) Costs occasioned by fire, acts of God or other casualties or by the
exercise of the power of eminent domain;
(2) Costs incurred by Lessor in remediating Hazardous Materials (as
hereinafter defined) from the Premises or the Property;
(3) Any excess costs, fines or penalties incurred because Lessor violated
any governmental rule or authority, provided, however, that for purposes of
this subparagraph (3), "excess costs" shall mean the excess costs resulting
from such violation and shall exclude the ordinary costs which would have been
incurred in complying with such governmental rule or authority absent such
violation; and
(4) Costs, including, without limitation, attorneys' fees, incurred by
Lessor in connection with negotiations or disputes with other tenants of the
Park.
Nothing contained herein shall be deemed to restrict or limit the
obligations and liabilities of Lessee under Sections 13, 27, 28 or 29 below or
any other applicable provisions of this Lease.
B. TAX EXPENSES: In addition to the Base Rent set forth in Paragraph 3,
Lessee shall pay its share, which is defined on Page 1, of all real property
taxes applicable to the land and improvements included within the Lot on which
the Premises are situated and one hundred percent (100%) of all personal
property taxes now or hereafter assessed or levied against the Premises or
Lessee's personal property. The amount of Lessee's share of Tax Expenses shall
be reviewed from time to time by Lessor and shall be subject to modification by
Lessor as reasonably determined by Lessor. Lessee shall also pay any increase
in real property taxes attributable, in Lessor's reasonable discretion, to any
and all alterations, Tenant Improvements or other improvements of any kind
whatsoever placed in, on or about the Premises for the benefit of, at the
request of, or by Lessee. The term "Tax Expenses" includes, but is not limited
to, any form of tax and assessment (general, special, ordinary or
extraordinary), commercial rental tax, payments under any improvement bond or
bonds, license, rental tax, transaction tax, levy, or penalty imposed by
authority having the direct or indirect power of tax (including any city,
county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement district thereof) as against any legal or
equitable interest of Lessor in the Premises, Lot or Park, as against Lessor's
right to rent or other income therefrom, or as against Lessor's business of
leasing the Premises or the occupancy of Lessee or any other
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tax, fee, or excise, however described (excluding inheritance or estate taxes),
including any value added tax, or any tax imposed in substitution, partially or
totally, of any tax previously included within the definition of real property
taxes, or any additional tax the nature of which was previously included within
the definition of real property tax.
C. PAYMENT OF EXPENSES AND ADMINISTRATIVE EXPENSES: Lessor shall
estimate the Operating Expenses and Tax Expenses which shall be paid by Lessee
for the calendar year in which the Lease commences. Commencing on the
Commencement Date, one-twelfth (1/12th) of this estimated amount shall be paid
by Lessee to Lessor, as additional rent, on the first (1st) day of each month
and throughout the remaining months of such calendar year. Thereafter, Lessor
may estimate such expenses as of the beginning of each calendar year and Lessee
shall pay one-twelfth (1/12th) of such estimated amount as additional rent
hereunder on the first day of each month during such calendar year and for each
ensuing calendar year throughout the term of this Lease (including any
extensions of the term). Not later than March 31 of each of the following
calendar years, or as soon thereafter as reasonably possible, including the
calendar year after the calendar year in which this Lease terminates or the
term expires, Lessor shall endeavor to furnish Lessee with a true and correct
accounting of actual Operating Expenses and Tax Expenses. Within thirty (30)
days of Lessor's delivery of such accounting, Lessee shall pay to Lessor the
amount of any underpayment. Notwithstanding the foregoing, failure by Lessor to
give such accounting by such date shall not constitute a waiver by Lessor of
its right to collect any of Lessee's underpayment at anytime. Lessor shall
credit the amount of any overpayment by Lessee toward the next estimated
monthly installment(s) falling due, or where the term of the Lease has expired,
refund the amount of overpayment to Lessee. Lessee, at its sole cost and
expense through any certified public accountant designated by it, shall have
the right to examine and/or audit the books and records evidencing such costs
and expenses for the previous one (1) calendar year, during Lessor's reasonable
business hours and not more frequently than once during any calendar year.
Lessee's obligations to pay its share of Operating Expenses and Tax Expenses
shall survive the expiration or earlier termination of this Lease.
If the term of the Lease expires prior to the annual reconciliation of
expenses, if any, Lessor shall have the right to reasonably estimate Lessee's
share of such expenses, and if Lessor determines that an underpayment is due,
Lessee hereby agrees that Lessor shall be entitled to deduct such underpayment
from Lessee's Security Deposit. If Lessor reasonably determines that an
overpayment has been made by Lessee, Lessor shall refund said overpayment
together with the return of Lessee's Security Deposit. Notwithstanding the
foregoing, failure of Lessor to accurately estimate Lessee's share of such
expenses shall not constitute a waiver of Lessor's right to collect any of
Lessee's underpayment at anytime.
In addition to the Base Rent set forth in Paragraph 3 hereof, Lessee shall
pay Lessor, without prior notice or demand, on the first (1st) day of each month
throughout the term of this Lease (including any extensions of such term), as
compensation to Lessor for accounting and management services rendered on behalf
of the Park, an amount equal to ten percent (10%) of the aggregate of Lessee's
share of (i) the total Operating Expenses and Tax Expenses as described in
Paragraphs 6.A. and 6.B. above, respectively, and (ii) all Common Area Utility
Costs for the Park as described in Paragraph 7. Lessee's obligations to pay its
share of such administrative expenses shall survive the expiration or earlier
termination of this Lease.
7. UTILITIES: Lessee shall pay the cost of all water, sewer use and
connection fees, gas, heat, electricity, refuse pickup, janitorial service,
telephone and other utilities billed or metered separately to the Premises
and/or Lessee. Lessee shall also pay its share of any assessments or charges
for utility or similar purposes included within any tax bill for the Lot on
which the Premises are situated. For any such utility fees or use charges that
are not billed or metered separately to Lessee, Lessee shall pay to Lessor, as
additional rent, without prior notice or demand, on the first (1st) day of each
month throughout the term of this Lease the amount which is attributable to
Lessee's use of the Premises as reasonably estimated and determined by Lessor
based upon factors such as size of the Premises and intensity of use of such
utilities by Lessee such that Lessee shall pay the portion of such charges
reasonably consistent with Lessee's use of such utilities ("Utility Expenses").
If Lessee disputes any such estimate or determination, then Lessee shall either
pay the estimated amount or cause the Premises to be separately metered at
Lessee's sole expense. In addition, Lessee shall pay Lessor its share, which is
described on Page 1, as additional rent, of any Common Area utility costs,
fees, charges or expenses ("Common Area Utility Costs") within fifteen (15)
days after receiving a bill from Lessor. The amount of Lessee's share of Common
Area Utility Costs shall be reviewed from time to time by Lessor and shall be
subject to modification by Lessor as reasonably determined by Lessor. Lessee
acknowledges that the Premises may become subject to the rationing of utility
services or restrictions on utility use as required by a public utility
company, governmental agency or other similar entity having jurisdiction
thereof. Notwithstanding any such rationing or restrictions on use of any such
utility services, Lessee acknowledges and agrees that its tenancy and occupancy
hereunder shall be subject to such rationing restrictions as may be imposed
upon Lessor, Lessee, the Premises, the Building or the Park, and Lessee shall
in no event be excused or relieved from any covenant or obligation to be kept
or performed by Lessee by reason of any such rationing or restrictions. Lessee
further agrees to pay and discharge, prior to delinquency, any amount, tax,
charge, surcharge, assessment or imposition levied,
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assessed or imposed upon the Premises, or Lessee's use and occupancy thereof, or
as a result directly or indirectly of any such rationing or restrictions.
8. LATE CHARGES: Lessee acknowledges that late payment by Lessee to Lessor of
Base Rent, Lessee's share of Operating Expenses, Tax Expenses, Common Area
Utility Costs, Utility Expenses or other sums due hereunder, will cause Lessor
to incur costs not contemplated by this Lease, the exact amount of such costs
being extremely difficult and impracticable to fix. Such costs include, without
limitation, processing and accounting charges, and late charges that may be
imposed on Lessor by the terms of any note secured by any encumbrance against
the Premises, and late charges and penalties due to the late payment of real
property taxes on the Premises. Therefore, if any installment of Rent or any
other sum due from Lessee is not received by Lessor within five (5) days after
notice (the "Late Rent Notice") from Lessor of such delinquency, Lessee shall
promptly pay to Lessor all of the following, as applicable: (a) an additional
sum equal to five percent (5%) of such delinquent amount plus interest on such
delinquent amount at the rate equal to the prime rate plus three percent (3%)
for the time period such payments are delinquent as a late charge for every
month or portion thereof that such sums remain unpaid, (b) the amount of
seventy-five dollars ($75) for each three-day notice prepared for, or served on,
Lessee, and (c) the amount of fifty dollars ($50) relating to checks for which
there are not sufficient funds; provided, however, that Lessor shall only be
required to provide Lessee with one (1) Late Rent Notice during any twelve (12)
month period and, after the giving of such Late Rent Notice, the aforesaid
charges shall be due and payable by Lessee if any subsequent installment of Rent
or other sum during such twelve (12) month period is not received by Lessor
within five (5) days after the date such Rent or other sum is due. The parties
agree that this late charge and the other charges referenced above represent a
fair and reasonable estimate of the costs that Lessor will incur by reason of
late payment by Lessee. Acceptance of any late charge or other charges shall not
constitute a waiver by Lessor of Lessee's default with respect to the delinquent
amount, nor prevent Lessor from exercising any of the other rights and remedies
available to Lessor for any other breach of Lessee under this Lease. If a late
charge or other charge becomes payable for any three (3) installments of Rent
within any twelve (12) month period, then Lessor, at Lessor's sole option, can
either require the Rent be paid quarterly in advance, or be paid monthly in
advance by cashier's check or by electronic funds transfer.
9. USE OF PREMISES: The Premises are to be used solely for the uses stated on
Page 1 and for no other uses or purposes without Lessor's prior written consent.
The use of the Premises by Lessee and its agents, invitees and employees shall
be subject to, and at all times in compliance with, (a) any and all applicable
laws, ordinances, statutes, orders and regulations as same exist from time to
time (collectively, the "Laws"), and (b) any and all declarations of covenants,
conditions and restrictions ("CC&Rs") and any supplement thereto which has been
or hereafter is recorded in any official or public records with respect to the
Premises, the Building, the Lot and/or the Park, or any portion thereof.
Lessee shall not use the Premises or permit anything to be done in or about
the Premises nor keep or bring anything therein which will in any way conflict
with any of the requirements of the Board of Fire Underwriters or similar body
now or hereafter constituted or in any way increase the existing rate of or
affect any policy of fire or other insurance upon the Building or any of its
contents, or cause a cancellation of any insurance policy. Lessee shall not do
or permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of Lessor, other tenants or occupants of
the Building, other buildings in the Park, or other persons or businesses in the
Park, or injure or annoy other tenants or use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose, as determined by
Lessor, in its sole discretion, for the benefit, quiet enjoyment and use by
Lessor and all other tenants or occupants of the Building or other buildings in
the Park; nor shall Lessee cause, maintain or permit any private or public
nuisance in, on or about the Premises, Building, Park and/or the Common Area,
including, but not limited to, any offensive odors, fumes or vibrations. Lessee
shall not damage or deface or otherwise commit or suffer to be committed any
waste in, upon or about the Premises. Lessee shall not store, nor permit any
other person or entity to store, any property, equipment, materials, supplies,
personal property or any other items or goods outside of the Premises. Lessee
shall not permit any animals, including, but not limited to, any household pets,
to be brought or kept in or about the Premises. Lessee shall place no loads upon
the floors, walls, or ceilings in excess of the maximum designed load permitted
by the applicable Uniform Building Code or which may damage the Building or
outside Park; nor place any harmful liquids in the drainage systems; nor dump or
store waste materials, refuse or other such materials, or allow such to remain
outside the Building area, except in refuse dumpsters or in any enclosed trash
areas provided. Lessee shall honor the terms of all recorded CC&Rs relating to
the Premises, the Building, the Lot and/or the Park. Lessee shall honor the
rules and regulations set forth in Exhibit C, attached to and made a part of
this Lease, and any other reasonable rules and regulations of Lessor now or
hereafter enacted relating to parking and the operation of the Building and the
Park. If Lessee fails to comply with such Laws, CC&Rs, rules and regulations or
the provisions of this Lease, Lessor shall have the right to collect from Lessee
a reasonable sum as a penalty, in addition to all rights and remedies of Lessor
hereunder including, but not limited to, the payment by Lessee to Lessor of all
Enforcement Expenses and Lessor's
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costs and expenses, if any, to cure any of such failures of Lessee, if Lessor,
at its sole option, elects to undertake such cure.
10. ALTERATIONS AND ADDITIONS:
A. Lessee shall not install any signs, fixtures, improvements, nor make
or permit any other alterations or additions to the Premises without the prior
written consent of Lessor, which consent shall not be unreasonably withheld;
provided, however, that Lessee shall have the right to make non-structural and
non-mechanical alterations costing not more than $1,500.00 on an individual
basis or for a series of related alterations (collectively, "Permitted
Alterations"). If any alteration or addition is expressly consented to by
Lessor, or if Lessee desires to make any Permitted Alterations, Lessee shall
deliver at least twenty (20) days prior notice to Lessor, from the date Lessee
intends to commence construction, sufficient to enable Lessor to post a Notice
of Non-Responsibility. In all events, Lessee shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a copy
of same to Lessor. All alterations and additions shall be installed by a
licensed contractor approved by Lessor, at Lessee's sole expense in compliance
with all applicable Laws, CC&Rs, and Lessor's rules and regulations. Lessee
shall keep the Premises and the property on which the Premises are situated free
from any liens arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Lessee. As a condition to Lessor's
consent to the installation of any fixtures or improvements, Lessor may require
Lessee to post and obtain a completion and indemnity bond for up to one hundred
twenty-five percent (125%) of the cost of the work. In the event Lessee requests
Lessor's consent to an alteration, Lessee shall have the right to request
Lessor's advice whether or not such proposed alteration shall be required to be
removed at the expiration or termination of this Lease. If Lessee fails to
obtain such advice in writing, then Lessor shall have the right, at the
expiration or termination of this Lease, to require Lessee to remove such
alteration (and to repair any damage caused by such removal) or to surrender
such alteration to Lessor with the Premises. Upon termination of this Lease,
Lessee shall remove all signs, fixtures, furniture and furnishings and, subject
to the immediately preceding sentence, if requested by Lessor, remove any
improvements made by Lessee and repair any damage caused by the installation or
removal of such signs, fixtures, furniture, furnishings and improvements and
leave the Premises in as good condition as they were in at the time of the
commencement of this Lease, excepting for reasonable wear and tear. Reasonable
wear and tear shall not include any damage or deterioration that would have been
prevented by proper maintenance by Lessee or Lessee otherwise performing all of
its obligations under this Lease. All additions, alterations or improvements,
including, but not limited to, heating, lighting, electrical, air conditioning,
fixed partitioning, drapery, wall covering and paneling, built-in cabinet work
and carpeting installations made by Lessee and not otherwise removed by Lessee
upon the expiration or sooner termination of this Lease in accordance with the
terms hereof, together with all property that has become an integral part of the
Premises, shall become the property of Lessor upon such expiration or
termination and shall not be deemed trade fixtures.
B. Notwithstanding anything to the contrary contained in Paragraph 10.A
above or any other provision of this Lease, Lessor may, by notice to Lessee
given not later than sixty (60) days prior to the Expiration Date (except in
the event of a termination of this Lease prior to the scheduled Expiration
Date, in which event no advance notice shall be required), require Lessee to
either surrender to Lessor with the Premises the laboratory space to be
constructed by Lessee in the Premises, as shown on Exhibit A-1 hereto (the
"Labs"), without compensation to Lessee, or to remove the Labs and to repair
any damage caused by such removal at Lessee's sole cost and expense. In the
event Lessor requires Lessee to surrender the Labs to Lessor with the Premises,
Lessee shall have the right to remove its laboratory equipment, benches and
cabinets, provided, however, that Lessee shall repair any damage to the
Premises caused by such removal; and, provided further, that in no event shall
Lessee have the right to remove any sinks (unless specifically required to do
so by Lessor).
11. REPAIRS AND MAINTENANCE:
A. MAINTENANCE BY LESSEE. Throughout the Term, Lessee shall, at its
sole expense, (1) keep and maintain in good order and condition the Premises,
and repair and replace every part thereof, including glass, windows, interior
doors, interior door frames and interior door closers, interior lighting
(including, without limitation, light bulbs and ballasts), Lessee's signage,
interior demising walls and partitions, equipment, interior painting and
interior walls and floors (excepting only those portions of the Building or the
Park to be maintained by Lessor, as provided in Paragraph 11.B below), (2)
furnish all expendables, including light bulbs, paper goods and soaps, used in
the Premises, and (3) keep and maintain in good order and condition, repair and
replace all of Lessee's security systems in or about or serving the Premises.
Lessee shall not do nor shall Lessee allow Lessee's Agents (as hereinafter
defined) to do anything to cause any damage, deterioration or unsightliness to
the Premises, the Building or the Project.
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B. MAINTENANCE BY LESSOR. Subject to the provisions of Paragraphs 11.A, 27
and 28, and further subject to Lessee's obligation under Paragraph 6 to
reimburse Lessor for Lessee's share of the cost and expense of the following
items, Lessor agrees to repair and maintain the following items: the roof
coverings (provided that Lessee installs no additional air conditioning or
other equipment on the roof that damages the roof coverings, in which event
Lessee shall pay all costs resulting from the presence of such additional
equipment); window frames, window casements, skylights, exterior doors,
exterior door frames and exterior door closers; the heating, ventilating, air
conditioning, plumbing, sewer, drainage, electrical, fire protection, life
safety and security systems and other mechanical, electrical and communications
systems and equipment serving the Premises, the Building and/or the Park or any
part thereof; the parking areas, pavement, landscaping, sprinkler systems,
sidewalks, driveways, curbs, and lighting systems in the Common Areas; and the
roll-up doors, ramps and dock equipment including without limitation, dock
bumpers, dock plates, dock seals, dock levelers and dock lights located in or
on the Premises. Subject to the provisions of Paragraphs 11.A, 27 and 28,
Lessor, at its own cost and expense, agrees to repair and maintain the
following items: the structural portions of the roof (specifically excluding
the roof coverings), the foundation, the footings, the floor slab, the load
bearing walls, and the exterior walls (excluding any glass therein) of the
Building. Notwithstanding anything in this Paragraph 11.B to the contrary,
Lessor shall have the right to either repair or to require Lessee to repair any
damage to any portion of the Premises, the Building and/or the Park caused by
or created due to any act, omission, negligence or willful misconduct of Lessee
or Lessee's Agents and to restore the Premises, the Building and/or the Park,
as applicable, to the condition existing prior to the occurrence of such
damage; provided, however, that in the event Lessor elects to perform such
repair and restoration work, Lessee shall reimburse Lessor upon demand for all
costs and expenses incurred by Lessor in connection therewith. Lessor's
obligation hereunder to repair and maintain is subject to the condition
precedent that Lessor shall have received written notice of the need for such
repairs and maintenance and a reasonable time to perform such repair and
maintenance. Lessee shall promptly report in writing to Lessor any defective
condition known to it which Lessor is required to repair, and failure to so
report such defects shall make Lessee responsible to Lessor for any liability
incurred by Lessor by reason of such condition.
C. LESSEE'S WAIVER OF RIGHTS. Lessee hereby expressly waives all rights to
make repairs at the expense of Lessor or to terminate this Lease, as provided
for in California Civil Code Sections 1941 and 1942, and 1932(1), respectively,
and any similar or successor statute or law in effect or any amendment thereof
during the Term.
12. INSURANCE:
A. COMMERCIAL GENERAL LIABILITY INSURANCE. Lessee shall, at Lessee's
expense, secure and keep in force a "broad form" commercial general liability
insurance and property damage policy covering the Premises, insuring Lessee,
and naming Lessor and its lenders as additional insureds, against any liability
arising out of the ownership, use, occupancy or maintenance of the Premises.
The minimum limit of coverage of such policy shall be in the amount of not less
than One Million Dollars ($1,000,000.00) for injury or death of one person in
any one accident or occurrence and in the amount of not less than Two Million
Dollars ($2,000,000.00) for injury or death of more than one person in any one
accident or occurrence, shall include an extended liability endorsement
providing contractual liability coverage (which shall include coverage for
Lessee's indemnification obligations in this Lease), and shall contain a
severability of interest clause or a cross liability endorsement. Such
insurance shall further insure Lessor and Lessee against liability for property
damage of at least One Million Dollars ($1,000,000.00). Lessor may from time to
time require reasonable increases in any such limits if Lessor believes that
additional coverage is necessary or prudent. The limit of any insurance shall
not limit the liability of Lessee hereunder. No policy maintained by Lessee
under this Paragraph 12.A shall contain a deductible greater than two thousand
five hundred dollars($2,500.00). No policy shall be cancelable or subject to
reduction of coverage without thirty (30) days prior written notice to Lessor,
and loss payable clauses shall be subject to Lessor's approval. Such policies
of insurance shall be issued as primary policies and not contributing with or
in excess of coverage that Lessor may carry, by an insurance company authorized
to do business in the State of California for the issuance of such type of
insurance coverage and rated A.XIII or better in Best's Key Rating Guide.
B. PERSONAL PROPERTY INSURANCE. Lessee shall maintain in full force and
effect on all of its personal property, furniture, furnishings, trade or
business fixtures and equipment (collectively, "Lessee's Property") on the
Premises, a policy or policies of fire and extended coverage insurance with
standard coverage endorsement to the extent of the full replacement cost
thereof. No such policy shall contain a deductible greater than two thousand
five hundred dollars ($2,500.00). During the term of this Lease the proceeds
from any such policy or policies of insurance shall be used for the repair or
replacement of the fixtures and equipment so insured. Lessor shall have no
interest in the insurance upon Lessee's equipment and fixtures and will sign all
documents reasonably necessary in connection with the settlement of any claim or
loss by Lessee. Lessor will not carry insurance on Lessee's Property.
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C. WORKER'S COMPENSATION INSURANCE; EMPLOYER'S LIABILITY INSURANCE.
Lessee shall, at Lessee's expense, maintain in full force and effect worker's
compensation insurance with not less than the minimum limits required by law,
and employer's liability insurance with a minimum limit of coverage of One
Million Dollars ($1,000,000).
D. EVIDENCE OF COVERAGE. Lessee shall deliver to Lessor certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Lessee hereunder at the
time of execution of this Lease by Lessee. Lessee shall, at least ten (10) days
prior to expiration of each policy, furnish Lessor with certificates of renewal
or "binders" thereof. Each certificate shall expressly provide that such
policies shall not be cancelable or otherwise subject to modification except
after thirty (30) days prior written notice to Lessor and the other parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days notice has been given to Lessor).
13. LIMITATION OF LIABILITY AND INDEMNITY: Except for damage resulting from the
gross negligence or willful misconduct of Lessor or its authorized
representatives, Lessee agrees to protect, defend (with counsel acceptable to
Lessor) and hold Lessor and Lessor's lender(s), partners, employees,
representatives, legal representatives, successors and assigns (collectively,
the "Indemnitees") harmless and indemnify the Indemnitees from and against all
liabilities, damages, claims, losses, judgments, charges and expenses (including
reasonable attorney's fees, costs of court and expenses necessary in the
prosecution or defense of any litigation including the enforcement of this
provision) arising from or in any way related to, directly or indirectly,
Lessee's use of the Premises and/or the Park, or the conduct of Lessee's
business, or from any activity, work or thing done, permitted or suffered by
Lessee in or about the Premises, or in any way connected with the Premises or
with the improvements or personal property therein, including, but not limited
to, any liability for injury to person or property of Lessee, its agents or
employees or third party persons. Lessee agrees that the obligations of Lessee
herein shall survive the expiration or earlier termination of this Lease.
Except for damage resulting from the gross negligence or willful
misconduct of Lessor or its authorized representatives, or by the failure of
Lessor to observe any of the terms and conditions of this Lease, if such
failure has persisted for an unreasonable period of time after written notice
of such failure, Lessor shall not be liable to Lessee or any person(s)
whomsoever who may at any time be using or occupying or visiting the Premises,
the Building or the Park (collectively, "Lessee Parties") for any loss,
liability, injury, death or damage to Lessee or the Lessee Parties or the
property of Lessee or the Lessee Parties, for any injury to or loss of Lessee
or the Lessee Parties' business or for any damage or injury to any person from
any cause whatsoever, including, but not limited to, any acts, errors or
omissions by or on behalf of any other tenants or occupants of the Building
and/or the Park. Lessee shall not, in any event or circumstance, be permitted
to offset or otherwise credit against any payments of Rent required herein for
matters for which Lessor may be liable hereunder. Lessor and its authorized
representatives shall not be liable for any interference with light or air, or
for any latent defect in the Premises or the Building.
14. ASSIGNMENT AND SUBLEASING:
A. PROHIBITION: Lessee shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer this
Lease (collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Lessee of all or any portion of the Premises without first
obtaining the prior written consent of Lessor, which shall not be unreasonably
withheld. If Lessee seeks to sublet or assign all or any portion of the
Premises, Lessee shall deliver to Lessor at least thirty (30) days prior to the
proposed commencement of the sublease or assignment (the "Proposed Effective
Date") the following: (i) the name of the proposed assignee or sublessee; (ii)
such information as to such assignee's or sublessee's financial responsibility
and standing as Lessor may reasonably require; and (iii) a copy of the proposed
sublease or assignment agreement and all agreement collateral thereto, which
instrument shall include a provision whereby the assignee or sublessee assumes
all of Lessee's obligations hereunder and agrees to be bound by the terms
hereof. As additional rent hereunder, Lessee shall pay to Lessor a fee in the
amount of five hundred dollars ($500) plus Lessee shall reimburse Lessor for
actual legal or other expenses incurred by Lessor in connection with any
request by Lessee for Lessor's consent to assignment or subletting. In the
event the sublease (1) by itself or taken together with prior sublease(s)
covers or totals, as the case may be, more than fifty percent (50%) of the
rentable square feet of the Premises or (2) is for a term which by itself or
taken together with prior or other subleases is greater than fifty percent
(50%) of the period remaining in the term of this Lease as of the time of the
Proposed Effective Date, then Lessor shall have the right, to be exercised by
giving written notice to Lessee, to recapture the space described in the
sublease. If such recapture notice is given, it shall serve to terminate this
Lease with respect to the proposed sublease space, or, if the proposed sublease
space covers all the Premises, it shall serve to terminate the entire term of
this
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Lease, in either case as of the Proposed Effective Date. However, no termination
of this Lease with respect to part or all of the Premises shall become effective
without the prior written consent, where necessary, of the holder of each deed
of trust encumbering the Premises or any part thereof. If this Lease is
terminated pursuant to the foregoing with respect to less than the entire
Premises, the Rent shall be adjusted on the basis of the proportion of square
feet retained by Lessee to the square feet originally demised and this Lease as
so amended shall continue thereafter in full force and effect. Each permitted
assignee or sublessee shall assume and be deemed to assume this Lease and shall
be and remain liable jointly and severally with Lessee for payment of Rent and
for the due performance of, and compliance with all the terms, covenants,
conditions and agreements herein contained on Lessee's part to be performed or
complied with, for the term of this Lease. No assignment or subletting shall
affect the continuing primary liability of Lessee (which following assignment,
shall be joint and several with the assignee), and Lessee shall not be released
from performing any of the terms, covenants and conditions of this Lease. For
purposes hereof, in the event Lessee is a corporation, partnership, joint
venture, trust or other entity other than a natural person, any change in the
direct or indirect ownership of Lessee (whether pursuant to one or more
transfers) which results in a change of more than fifty percent (50%) in the
direct or indirect ownership of Lessee shall be deemed to be an assignment
within the meaning of this Paragraph 14 and shall be subject to all the
provisions hereof. Any and all options, first rights of refusal, tenant
improvement allowances and other similar rights granted to Lessee in this Lease,
if any, shall not be assignable by Lessee unless expressly authorized in writing
by Lessor.
B. EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the event of
any sublease or assignment of all or any portion of the Premises where the rent
or other consideration actually paid under the sublease or assignment, after
deducting reasonable, market-based leasing commissions actually paid by Lessee
in connection with such sublease or assignment, either initially or over the
term of the sublease or assignment exceeds the Rent or pro rata portion of the
Rent, as the case may be, for such space reserved in the Lease, Lessee shall pay
the Lessor monthly, as additional rent, at the same time as the monthly
installments of Rent are payable hereunder, fifty percent (50%) of the excess of
each such payment of rent or other consideration (after deducting the aforesaid
leasing commissions) in excess of the Rent called for hereunder.
C. WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Lessor to any assignee or
sublessee, or failure by Lessor to take action against any assignee or
sublessee, Lessee waives notice of any default of any assignee or sublessee and
agrees that Lessor may, at its option, proceed against Lessee without having
taken action against or joined such assignee or sublessee, except that Lessee
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.
15. WAIVER OF SUBROGATION: Lessor and Lessee hereby mutually waive any claim
against the other during the Term for any injury to person or loss or damage to
any of their property located on or about the Premises or the Park that is
caused by or results from perils covered by insurance carried by the respective
parties or required to be carried by the respective parties under the terms of
this Lease, to the extent of the proceeds of such insurance actually received
with respect to such injury, loss or damage (or, with respect to insurance
required to be carried under this Lease but not actually carried, the proceeds
of such insurance which would have been received had the party required to carry
such insurance actually maintained such coverage), whether or not due to the
negligence of the other party or its agents. Because the foregoing waivers will
preclude the assignment of any claim by way of subrogation to an insurance
company or any other person, each party now agrees to immediately give to its
insurer written notice of the terms of these mutual waivers and shall have their
insurance policies endorsed to prevent the invalidation of the insurance
coverage because of these waivers. Nothing in this Paragraph shall relieve a
party of liability to the other for failure to carry insurance required by this
Lease.
16. AD VALOREM TAXES: Prior to delinquency, Lessee shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the Premises
by, or on behalf of, Lessee; and if requested by Lessor, Lessee shall promptly
deliver to Lessor copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or billed
to Lessee, Lessee shall pay the amount thereof as invoiced by Lessor.
17. SUBORDINATION: Without the necessity of any additional document being
executed by Lessee for the purpose of effecting a subordination, and at the
election of Lessor or any bona fide mortgagee or deed of trust beneficiary with
a lien on all or any portion of the Premises or any ground lessor with respect
to the land of which the Premises are a part, this Lease shall be subject and
subordinate at all times to: (i) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building or the land upon
which the Building is situated or both, and (ii) the lien of any mortgage or
deed of trust which
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may now exist or hereafter be executed in any amount for which the Building, the
Lot, ground leases or underlying leases, or Lessor's interest or estate in any
of said items is specified as security. Notwithstanding the foregoing, Lessor or
any such ground lessor, mortgagee, or any beneficiary shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or any such liens to this Lease. If any ground lease or underlying lease
terminates for any reason or any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Lessee shall,
notwithstanding any subordination and upon the request of such successor to
Lessor, attorn to and become the Lessee of the successor in interest to Lessor,
provided such successor in interest will not disturb Lessee's use, occupancy or
quiet enjoyment of the Premises so long as Lessee is not in default of the terms
and provisions of this Lease. The successor in interest to Lessor following
foreclosure, sale or deed in lieu thereof shall not be (a) liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership, except that such successor in interest shall be
responsible for the performance of any unperformed repair or maintenance
obligations under this Lease; (b) subject to any offsets or defenses which
Lessee might have against any prior lessor; (c) bound by prepayment of more than
one (1) month's Rent; or (d) liable to Lessee for any Security Deposit not
actually received by such successor in interest. Lessee covenants and agrees to
execute (and acknowledge if required by Lessor, any lender or ground lessor) and
deliver, within five (5) days of a demand or request by Lessor and in the form
requested by Lessor, ground lessor, mortgagee or beneficiary, any additional
documents evidencing the priority or subordination of this Lease with respect to
any such ground leases or underlying leases or the lien of any such mortgage or
deed of trust. Lessee's failure to timely execute and deliver such additional
documents shall, at Lessor's option, constitute a material default hereunder. It
is further agreed that Lessee shall be liable to Lessor, and shall indemnify
Lessor from and against any loss, cost, damage or expense, incidental,
consequential, or otherwise, arising or accruing directly or indirectly, from
any failure of Lessee to execute or deliver to Lessor any such additional
documents. Lessee hereby irrevocably appoints Lessor as attorney-in-fact of
Lessee, which appointment is coupled with an interest, to execute, deliver and
record any such documents in the name and on behalf of Lessee.
18. RIGHT OF ENTRY: Lessee grants Lessor or its agents the right to enter the
Premises upon twenty-four (24) hours prior notice (except in the event of an
emergency, in which case no notice shall be required) for purposes of
inspection, exhibition, posting of notices, repair or alteration. Lessee's
representatives shall have the right to accompany Lessor on such inspections. At
Lessor's option, Lessor shall at all times have and retain a key with which to
unlock all the doors in, upon and about the Premises, excluding Lessee's vaults
and safes. It is further agreed that Lessor shall have the right to use any and
all means Lessor deems necessary to enter the Premises in an emergency. Lessor
shall also have the right to place "for rent" and/or "for sale" signs on the
outside of the Premises. Lessee hereby waives any claim from damages or for any
injury or inconvenience to or interference with Lessee's business, or any other
loss occasioned thereby except for any claim for any of the foregoing arising
out of the gross active negligent acts or willful misconduct of Lessor or its
authorized representatives.
19. ESTOPPEL CERTIFICATE: Lessee shall execute (and acknowledge if required by
any lender or ground lessor) and deliver to Lessor, within ten (10) days after
Lessor provides such to Lessee, a statement in writing certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification), the date to which the Rent and other charges are
paid in advance, if any, acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder or specifying
such defaults as are claimed, and such other matters as Lessor may reasonably
require. Any such statement may be conclusively relied upon by Lessor and any
prospective purchaser or encumbrancer of the Premises. Lessee's failure to
deliver such statement within such time shall be conclusive upon the Lessee that
(a) this Lease is in full force and effect, without modification except as may
be represented by Lessor; (b) there are no uncured defaults in Lessor's
performance; and (c) not more than one month's Rent has been paid in advance,
except in those instances when Lessee pays Rent quarterly in advance pursuant to
Paragraph 8 hereof, then not more than three month's Rent has been paid in
advance. Failure by Lessee to so deliver such certified estoppel certificate
shall be a default of the provisions of this Lease. Lessee shall be liable to
Lessor, and shall indemnify Lessor from and against any loss, cost, damage or
expense, incidental, consequential, or otherwise, arising or accruing directly
or indirectly, from any failure of Lessee to execute or deliver to Lessor any
such certified estoppel certificate.
Lessee hereby irrevocably appoints Lessor as attorney-in-fact of Lessee,
which appointment is coupled with an interest, to act in Lessee's name, place
and stead to execute and deliver such estoppel certificate on behalf of Lessee.
20. LESSEE'S DEFAULT: The occurrence of any one or more of the following events
shall, at Lessor's option, constitute a default and breach of this Lease by
Lessee:
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(i) The abandonment of the Premises by Lessee for a period of
ten (10) consecutive days;
(ii) The failure by Lessee to make any payment of Rent or any
other payment required hereunder on the date said payment is due;
(iii) The failure in the performance of any of Lessee's
covenants, agreements or obligations hereunder (except those failures
specified as events of default in other Paragraphs of this Paragraph 20,
which shall be governed by such other Paragraphs), which failure continues
for fifteen (15) days after written notice thereof from Lessor to Lessee
provided that, if Lessee has exercised reasonable diligence to cure such
failure and such failure cannot be cured within such fifteen (15) day
period despite reasonable diligence, Lessee shall not be in default under
this subparagraph unless Lessee fails thereafter diligently and
continuously to prosecute the cure to completion;
(iv) The making of a general assignment by Lessee for the
benefit of creditors, the filing of a voluntary petition by Lessee or the
filing of an involuntary petition by any of Lessee's creditors seeking the
rehabilitation, liquidation, or reorganization of Lessee under any law
relating to bankruptcy, insolvency or other relief of debtors and, in the
case of an involuntary action, the failure to remove or discharge the same
within sixty (60) days of such filing, the appointment of a receiver or
other custodian to take possession of substantially all of Lessee's assets
or this leasehold, Lessee's insolvency or inability to pay Lessee's debts
or failure generally to pay Lessee's debts when due, any court entering a
decree or order directing the winding up or liquidation of Lessee or of
substantially all of Lessee's assets, Lessee taking any action toward the
dissolution or winding up of Lessee's affairs, the cessation or suspension
of Lessee's use of the Premises, or the attachment, execution or other
judicial seizure of substantially all of Lessee's assets or this leasehold;
(v) Lessee's use or storage of Hazardous Materials on the
Premises other than as permitted by the provisions of Paragraph 29 below;
(vi) The making of any material misrepresentation or omission by
Lessee in any materials delivered by or on behalf of Lessee to Lessor
pursuant to this Lease; or
(vii) Lessee's default or other breach of any covenant, condition
or provision of any lease agreement between Lessee or an affiliated
entity of Lessee, as the tenant, and Lessor or an affiliated entity of
Lessor, as landlord, with regard to any and all leased premises other than
the Premises as described herein.
21. REMEDIES FOR LESSEE'S DEFAULT: In the event of Lessee's default or breach
of the Lease, Lessor may terminate Lessee's right to possession of the Premises
by any lawful means in which case upon delivery of written notice by Lessor this
Lease shall terminate on the date specified by Lessor in such notice and Lessee
shall immediately surrender possession of the Premises to Lessor. In addition,
the Lessor shall have the immediate right of re-entry whether or not this Lease
is terminated, and if this right of re-entry is exercised following abandonment
of the Premises by Lessee, Lessor may consider any personal property belonging
to Lessee and left on the Premises to also have been abandoned. No re-entry or
taking possession of the Premises by Lessor pursuant to this Paragraph 21 shall
be construed as an election to terminate this Lease unless a written notice of
such intention is given to Lessee. If Lessor relets the Premises or any portion
thereof, (i) Lessee shall be liable immediately to Lessor for all costs Lessor
incurs in reletting the Premises or any part thereof, including, without
limitation, broker's commissions, expenses of cleaning, redecorating, and
further improving the Premises and other similar costs, and (ii) the rent
received by Lessor from such reletting shall be applied to the payment of,
first, any indebtedness from Lessee to Lessor other than Base Rent, Operating
Expenses, Tax Expenses, Common Area Utility Costs, and Utility Expenses; second,
all costs including maintenance, incurred by Lessor in reletting; and, third,
Base Rent, Operating Expenses, Tax Expenses, Common Area Utility Costs, and
Utility Expenses due under this Lease. After deducting the payments referred to
above, any sum remaining from the rental Lessor receives from reletting shall be
held by Lessor and applied in payment of future Rent as Rent becomes due under
this Lease. In no event shall Lessee be entitled to any excess rent received by
Lessor. Reletting may be for a period shorter or longer than the remaining term
of this Lease. No act by Lessor other than giving written notice to Lessee shall
terminate this Lease. Acts of maintenance, efforts to relet the Premises or the
appointment of a receiver on Lessor's initiative to protect Lessor's interest
under this Lease shall not constitute a termination of Lessee's right to
possession. So long as this Lease is not terminated, Lessor shall have the right
to remedy any default of Lessee, to maintain or improve the Premises, to cause a
receiver to be appointed to administer the Premises and new or existing
subleases and to add to the Rent payable hereunder all of Lessor's reasonable
costs in so doing, with interest at the maximum rate permitted by law from the
date of such expenditure.
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If Lessee breaches this Lease and abandons the property before the end of
the term, or if Lessee's right to possession is terminated by Lessor because of
a breach or default of the Lease, then in either such case, Lessor may recover
from Lessee all damages suffered by Lessor as a result of Lessee's failure to
perform its obligations hereunder, including, but not limited to, the cost of
any tenant improvements, and all costs Lessor incurs in reletting the Premises
or any part thereof, including without limitation, brokerage or leasing
commissions, expenses of cleaning, redecorating, and further improving the
Premises and like costs, and the worth at the time of the award (computed in
accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the
California Civil Code) of the amount by which the Rent then unpaid hereunder for
the balance of the Lease term exceeds the amount of such loss of Rent for the
same period which Lessee proves could be reasonably avoided by Lessor and in
such case, Lessor prior to the award, may relet the Premises for the purpose of
mitigating damages suffered by Lessor because of Lessee's failure to perform its
obligations hereunder; provided, however, that even though Lessee has abandoned
the Premises following such breach, this Lease shall nevertheless continue in
full force and effect for as long as Lessor does not terminate Lessee's right of
possession, and until such termination, Lessor shall have the remedy described
in Section 1951.4 of the California Civil Code (Lessor may continue this Lease
in effect after Lessee's breach and abandonment and recover Rent as it becomes
due, if Lessee has the right to sublet or assign, subject only to reasonable
limitations) and may enforce all its rights and remedies under this Lease,
including the right to recover the Rent from Lessee as it becomes due hereunder.
The "worth at the time of the award" within the meaning of Subparagraphs (a)(1)
and (a)(2) of Section 1951.2 of the California Civil Code shall be computed by
allowing interest at the rate of ten percent (10%) per annum. Lessee waives
redemption or relief from forfeiture under California Code of Civil Procedure
Sections 1174 and 1179, or under any other present or future law, in the event
Lessee is evicted or Lessor takes possession of the Premises by reason of any
default of Lessee hereunder.
The foregoing rights and remedies of Lessor are not exclusive; they are
cumulative in addition to any rights and remedies now or hereafter existing at
law, in equity by statute or otherwise, or to any equitable remedies Lessor may
have, and to any remedies Lessor may have under bankruptcy laws or laws
affecting creditor's rights generally. In addition to all remedies set forth
above, if Lessee defaults or otherwise breaches this Lease, any and all Base
Rent waived by Lessor under Paragraph 3 above shall be immediately due and
payable to Lessor and all options granted to Lessee hereunder shall
automatically terminate, unless otherwise expressly agreed to in writing by
Lessor.
The waiver by Lessor of any default or breach of any provision of this
Lease shall not be deemed or construed a waiver of any other breach or default
by Lessee hereunder or of any subsequent breach or default of this Lease,
except for the default specified in the waiver.
22. HOLDING OVER: If Lessee holds possession of the Premises after the
expiration of the term of this Lease with Lessor's consent, Lessee shall become
a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during such hold over period shall be 150% of
the Base Rent due on the last month of the Lease term, payable in advance on or
before the first day of each month. Such month-to-month tenancy shall not
constitute a renewal or extension for any further term. All options, if any,
granted under the terms of this Lease shall be deemed automatically terminated
and be of no force or effect during said month-to-month tenancy. Lessee shall
continue in possession until such tenancy shall be terminated by either Lessor
or Lessee giving written notice of termination to the other party at least
thirty (30) days prior to the effective date of termination. This paragraph
shall not be construed as Lessor's permission for Lessee to hold over.
Acceptance of Base Rent by Lessor following expiration or termination of this
Lease shall not constitute a renewal of this Lease.
23. LESSOR'S DEFAULT: Lessor shall not be deemed in breach or default of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor hereunder. For purposes of this provision, a
reasonable time shall in no event be more than thirty (30) days after receipt
by Lessor of written notice specifying the nature of the obligation Lessor has
not performed; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days, after receipt of written notice, is
reasonably necessary for its performance, then Lessor shall not be in breach or
default of this Lease if performance of such obligation is commenced within
such thirty (30) day period and thereafter diligently pursued to completion.
24. PARKING: Lessee shall have a license to use the number of undersignated
and nonexclusive parking spaces set forth on Page 1. Lessor shall exercise
reasonable efforts to insure that such spaces are available to Lessee for its
use, but Lessor shall not be required to enforce Lessee's right to use the same.
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25. SALE OF PREMISES: In the event of any sale of the Premises by Lessor,
Lessor shall be and is hereby entirely released from any and all of its
obligations to perform or further perform under this Lease and from all
liability hereunder as of the date of such sale, provided that the purchaser
at such sale has assumed and agreed in writing to carry out any and all
covenants and obligations of Lessor hereunder. Lessee agrees to attorn to such
new owner provided such new owner does not disturb Lessee's use, occupancy or
quiet enjoyment of the Premises so long as Lessee is not in default of any of
the provisions of this Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right or remedy or be
construed as a waiver.
The subsequent acceptance of Rent by Lessor after breach by Lessee of any
covenant or term of this Lease shall not be deemed a waiver of such breach,
other than a waiver of timely payment for the particular Rent payment involved,
and shall not prevent Lessor from maintaining an unlawful detainer or other
action based on such breach.
No payment by Lessee or receipt by Lessor of a lesser amount than the
monthly Rent and other sums due hereunder shall be deemed to be other than on
account of the earliest Rent or other sums due, nor shall any endorsement or
statement on any check or accompanying check or payment be deemed an accord and
satisfaction; and Lessor may accept such check or payment without prejudice to
Lessor's right to recover the balance of such Rent or other sum or pursue any
other remedy provided in this Lease.
27. CASUALTY DAMAGE:
A. If the Premises or any part thereof shall be damaged by fire or other
casualty, Lessee shall give prompt written notice thereof to Lessor. In case the
Building shall be so damaged by fire or other casualty that substantial
alteration or reconstruction of the Building shall, in Lessor's sole opinion, be
required (whether or not the Premises shall have been damaged by such fire or
other casualty), Lessor may, at its option, terminate this Lease by notifying
Lessee in writing of such termination within sixty (60) days after the date of
such damage, in which event the Rent shall be abated as of the date of such
damage. If Lessor does not elect to terminate this Lease and provided insurance
proceeds and any contributions from Lessee, if necessary, are available to fully
repair the damage, Lessor shall within ninety (90) days after the date of such
damage commence to repair and restore the Building and shall proceed with
reasonable diligence to restore the Building (except that Lessor shall not be
responsible for delays outside its control) to substantially the same condition
in which it was immediately prior to the happening of the casualty; provided,
Lessor shall not be required to rebuild, repair, or replace any part of Lessee's
furniture, furnishings or fixtures and equipment removable by Lessee or any
improvements, alterations or additions installed by or for the benefit of Lessee
under the provisions of this Lease. Lessor shall not in any event be required to
spend for such work an amount in excess of the insurance proceeds and any
contributions from Lessee if necessary, actually received by Lessor as a result
of the fire or other casualty. Lessor shall not be liable for any inconvenience
or annoyance to Lessee, injury to the business of Lessee, loss of use of any
part of the Premises by the Lessee or loss of Lessee's personal property
resulting in any way from such damage or the repair thereof, except that,
subject to the provisions of the next sentence, Lessor shall allow Lessee a fair
diminution of Rent during the time and to the extent the Premises are unfit for
occupancy. If the Premises or any other portion of the Building be damaged by
fire or other casualty resulting from the fault or active or passive negligence
or omissions of Lessee or any of Lessee's agents, employees, or invitees, the
Rent shall not be diminished during the repair of such damage and Lessee shall
be liable to Lessor for the cost and expense of the repair and restoration of
the Building caused thereby to the extent such cost and expense is not covered
by insurance proceeds. In the event the holder of any indebtedness secured by
the Premises requires that the insurance proceeds be applied to such
indebtedness, then Lessor shall have the right to terminate this Lease by
delivering written notice of termination to Lessee within thirty (30) days after
the date of notice to Lessee of any such event, whereupon all rights and
obligations shall cease and terminate hereunder.
B. Notwithstanding anything to the contrary contained in this Paragraph
27, if the premises are damaged by fire or other casualty and if the damage
thereto is such that the Premises may not be substantially repaired or restored
to its condition existing immediately prior to such damage or destruction
within one hundred eighty (180) days from the date of such destruction, Lessee
shall have the right to terminate this Lease by written notice to Lessor, which
notice shall be given, if at all, within fifteen (15) days after Lessor informs
Lessee of the expected duration of the period of repair or restoration. In the
event Lessee elects to terminate this Lease under this Paragraph 27.B, this
Lease shall be deemed to have terminated as of the date on which Lessee
surrenders possession of the Premises to Lessor, except that if the damage to
the Premises materially impairs Lessee's ability to continue is business
operations in the Premises and if Lessee ceases its operations in the Premises
as of the date of such damage, then this Lease shall be deemed to have
terminated as of the date such damage occurred.
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C. Except as otherwise provided in this Paragraph 27, Lessee hereby waives
the provisions of Sections 1932(2.), 1933(4.), 1941 and 1942 of the California
Civil Code.
28. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose ("Condemned"), then Lessee or
Lessor may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent shall
be adjusted to the date of termination. Lessee shall not because of such
condemnation assert any claim against Lessor or the condemning authority for any
compensation because of such condemnation, and Lessor shall be entitled to
receive the entire amount of any award without deduction for any estate of
interest or interest of Lessee. If a substantial portion of the Premises,
Building or the Lot is so Condemned, Lessor at its option may terminate this
Lease. If Lessor does not elect to terminate this Lease, Lessor shall, if
necessary, promptly proceed to restore the Premises or the Building to
substantially its same condition prior to such partial condemnation, allowing
for the reasonable effects of such partial condemnation, and a proportionate
allowance shall be made to Lessee, as reasonably determined by Lessor, for the
Rent corresponding to the time during which, and to the part of the Premises of
which, Lessee is deprived on account of such partial condemnation and
restoration. Lessor shall not be required to spend funds for restoration in
excess of the amount received by Lessor as compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS: As used in this Lease, the term
"Hazardous Materials" shall mean and include any substance that is or contains
petroleum, asbestos, polychlorinated byphenyls, lead, or any other substance,
material or waste which is now or is hereafter classified or considered to be
hazardous or toxic under any federal, state or local law, rule, regulation or
ordinance relating to pollution or the protection or regulation of human health,
natural resources or the environment (collectively "Environmental Laws") or
poses or threatens to pose a hazard to the health or safety of persons on the
Leased Premises or any adjacent property.
Lessee agrees that during its use and occupancy of the Leased Premises it
will not permit Hazardous Materials to be present on or about the Leased
Premises except in a manner and quantity necessary for the ordinary performance
of Lessee's business and that it will comply with all Environmental Laws
relating to the use, storage or disposal of any such Hazardous Materials.
If Lessee's use of Hazardous Materials on or about the Leased Premises
results in a release, discharge or disposal of Hazardous Materials on, in, at,
under, or emanating from, the Leased Premises or the property in which the
Leased Premises are located, Lessee agrees to investigate, clean up, remove or
remediate such Hazardous Materials in full compliance with (a) the requirements
of (i) all Environmental Laws and (ii) any governmental agency or authority
responsible for the enforcement of any Environmental Laws; and (b) any
additional requirements of Lessor that are reasonably necessary to protect the
value of the Leased Premises or the property in which the Leased Premises are
located. Lessor shall also have the right, but not the obligation, to take
whatever action with respect to any such Hazardous Materials that it deems
reasonably necessary to protect the value of the Leased Premises or the property
in which the Leased Premises are located. All costs and expenses paid or
incurred by Lessor in the exercise of such right shall be payable by Lessee upon
demand.
Upon reasonable notice to Lessee, Lessor may inspect the Leased Premises
for the purpose of determining whether there exists on the Leased Premises any
Hazardous Materials or other condition or activity that is in violation of the
requirements of this Lease or of any Environmental Laws. The right granted to
Lessor herein to perform inspections shall not create a duty on Lessor's part to
inspect the Leased Premises, or liability on the part of Lessor for Lessee's
use, storage or disposal of Hazardous Materials, it being understood that Lessee
shall be solely responsible for all liability in connection therewith.
Lessee shall surrender the Leased Premises to Lessor upon the expiration or
earlier termination of this Lease free of debris, waste or Hazardous Materials
placed on or about the Leased Premises by Lessee or its agents, employees,
contractors or invitees, and in a condition which complies with all
Environmental Laws.
Lessee agrees to indemnify and hold harmless Lessor from and against any
and all claims, losses (including, without limitation, loss in value of the
Leased Premises or the property in which the Leased Premises are located),
liabilities and expenses (including reasonable attorney's fees) sustained by
Lessor attributable to (i) any Hazardous Materials placed on or about the Leased
Premises by Lessee or its agents, employees, contractors or invitees or (ii)
Lessee's breach of any provision of this Section 29.
Notwithstanding anything in this Paragraph 29 to the contrary, Lessee shall
not be responsible for the clean up or remediation of, and shall not required to
indemnify Lessor against, any costs or liabilities attributable to, Hazardous
Materials placed on or about the Premises (i) prior to the Commencement Date by
third parties not related to Lessee or its agents, employees, partners,
shareholders, directors, invitees or independent contractors (collectively
("Agents"), or (ii) by Lessor at any time, except in either case to
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the extent that Lessee or its Agents have contributed to or exacerbated the
presence of such Hazardous Materials.
The provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease.
30. FINANCIAL STATEMENTS: Lessee, for the reliance of Lessor, any lender
holding or anticipated to acquire a lien upon the Premises, the Building or the
Park or any portion thereof, or any prospective purchaser of the Building or the
Park or any portion thereof, within ten (10) days after Lessor's request
therefor, but not more often than once annually so long as Lessee is not in
default of this Lease, shall deliver to Lessor the then current financial
statements of Lessee (including interim periods following the end of the last
fiscal year for which annual statements are available) which statements shall be
prepared or compiled by a certified public accountant and shall present fairly
the financial condition of Lessee at such dates and the result of its operations
and changes in its financial positions for the periods ended on such dates. If
an audited financial statement has not been prepared, Lessee shall provide
Lessor with an unaudited financial statement and/or such other information,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), which reflects the financial condition of Lessee.
If an audited financial statement has been prepared, and if Lessor so requests,
Lessee shall deliver to Lessor an opinion of a certified public accountant,
including a balance sheet and profit and loss statement for the most recent
prior year, all prepared in accordance with GAAP. Lessor shall keep Lessee's
financial statements confidential, except that Lessor shall have the right to
disclose such statements to Lessor's partners, actual and prospective lenders,
actual and prospective purchasers, consultants and advisors, including
accountants and attorneys, and otherwise as required by law or legal process.
Any and all options granted to Lessee hereunder shall be subject to and
conditioned upon Lessor's reasonable approval of Lessee's financial condition at
the time of Lessee's exercise of any such option. Lessor shall not withhold such
approval provided that (a) Lessee shall have had positive cash flow from
operations for the twelve (12) month period prior to the exercise of such
option, as shown on audited financial statements delivered to and approved by
Lessor, or (b) Lessee provides Lessor with other evidence satisfactory to Lessor
in Lessor's good faith discretion of Lessee's continuing financial viability and
ability to perform its obligations under this Lease throughout the term or
period covered by such option.
31. GENERAL PROVISIONS:
(i) TIME. Time is of the essence in this Lease and with respect to each
and all of its provisions in which performance is a factor.
(ii) SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
(iii) RECORDATION. Lessee shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Lessor.
(iv) LESSOR'S PERSONAL LIABILITY. The liability of Lessor (which, for
purposes of this Lease, shall include Lessor and the owner of the Building if
other than Lessor) to Lessee for any default by Lessor under the terms of this
Lease shall be limited to the actual interest of Lessor and its present or
future partners in the Premises or the Building and Lessee agrees to look solely
to the Premises for satisfaction of any liability and shall not look to other
assets of Lessor nor seek any recourse against the assets of the individual
partners, directors, officers, shareholders, agents or employees of Lessor; it
being intended that Lessor and the individual partners, directors, officers,
shareholders, agents or employees of Lessor shall not be personally liable in
any manner whatsoever for any judgment or deficiency. The liability of Lessor
under this Lease is limited to its actual period of ownership of title to the
Building, and Lessor shall be automatically released from further performance
under this Lease and from all further liabilities and expenses hereunder upon
transfer of Lessor's interest in the Premises or the Building. Lessee agrees to
attorn to any entity purchasing or otherwise acquiring the Premises.
(v) SEPARABILITY. Any provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provision shall remain in full force and
effect.
(vi) CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
(vii) ATTORNEYS' FEES. If either party hereto fails to perform any of its
obligations under this Lease or if any dispute arises between the parties hereto
concerning the meaning or interpretation of any provision of this Lease, then
the defaulting party or the party not prevailing in such dispute, as the case
may be, shall pay any and all costs and expenses incurred by the other party on
account of such default and/or in enforcing or establishing its rights
hereunder, including, without limitation, court costs and
16
<PAGE> 17
reasonable attorneys' fees and disbursements. Any such attorneys' fees and other
expenses incurred by either party in enforcing a judgment in its favor under
this Lease shall be recoverable separately from and in addition to any other
amount included in such judgment, and such attorneys' fees obligation is
intended to be severable from the other provisions of this Lease and to survive
and not be merged into any such judgment.
(viii) ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party that is not in writing and
signed by all parties to this Lease shall be binding.
(ix) WARRANTY OF AUTHORITY. Each person executing this agreement on
behalf of a party represents and warrants that (1) such person is duly and
validly authorized to do so on behalf of the entity it purports to so bind, and
(2) if such party is a partnership, corporation or trustee, that such
partnership, corporation or trustee has full right and authority to enter into
this Lease and perform all of its obligations hereunder.
(x) NOTICES. All notices and demands required or permitted to be sent
to Lessor or Lessee shall be in writing and shall be sent by United States mail,
certified and postage prepaid, or by personal delivery or by overnight courier,
addressed to Lessor at 30 Executive Park, Suite 100, Irvine, California 92714,
or to Lessee at the Premises, or to such other place as such party may designate
in a notice to the other party given as provided herein. Notice shall be deemed
given upon the earlier of actual receipt or the third day following deposit in
the United States mail.
(xi) JOINT AND SEVERAL. If Lessee consists of more than one person or
entity, the obligations of all such persons or entities shall be joint and
several.
(xii) WAIVER OF JURY TRIAL. The parties hereto shall and they hereby do
waive trial by jury in any action, proceeding or counterclaim brought by either
of the parties hereto against the other on any matters whatsoever arising out
of or in any way related to this Lease, the relationship of Lessor and Lessee,
Lessee's use or occupancy of the Premises, the Building or the Park, and/or any
claim of injury, loss or damage.
32. SIGNS: All signs and graphics of every kind visible in or from public view
or corridors or the exterior of the Premises shall be subject to Lessor's prior
written approval and shall be subject to any applicable governmental laws,
ordinances, and regulations and in compliance with Lessor's Sign Criteria as set
forth in Exhibit D hereto and made a part hereof. Lessee shall remove all such
signs and graphics prior to the termination of this Lease. Such installations
and removals shall be made in a manner as to avoid damage or defacement of the
Premises; and Lessee shall repair any damage or defacement, including without
limitation, discoloration caused by such installation or removal. Lessor shall
have the right, at its option, to deduct from the Security Deposit such sums as
are reasonably necessary to remove such signs, including, but not limited to,
the costs and expenses associated with any repairs necessitated by such removal.
Notwithstanding the foregoing, in no event shall any: (a) neon, flashing or
moving sign(s) or (b) sign(s) which shall interfere with the visibility of any
sign, awning, canopy, advertising matter, or decoration of any kind of any other
business or occupant of the Building or the Park be permitted hereunder. Lessee
further agrees to maintain any such sign, awning, canopy, advertising matter,
lettering, decoration or other thing as may be approved in good condition and
repair at all times.
33. MORTGAGEE PROTECTION: Upon any breach or default on the part of Lessor,
Lessee will give written notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage covering the Premises
who has provided Lessee with notice of their interest together with an address
for receiving notice, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default (which, in no event shall be more than ninety
(90) days), including time to obtain possession of the Premises by power of sale
or a judicial foreclosure, if such should prove necessary to effect a cure. If
such breach or default cannot be cured within such time period, then such
additional time as may be necessary will be given to such beneficiary or
mortgagee to effect such cure so long as such beneficiary or mortgagee has
commenced the cure within the original time period and thereafter diligently
pursues such cure to completion, in which event this Lease shall not be
terminated while such cure is being diligently pursued. Lessee agrees that each
lender to whom this Lease has been assigned by Lessor is an express third party
beneficiary hereof. Lessee shall not make any prepayment of Rent more than one
(1) month in advance without the prior written consent of each such lender,
except if Lessee is required to make quarterly payments of Rent in advance
pursuant to the provisions of Paragraph 8 above. Lessee waives the collection of
any deposit from such lender(s) or any purchaser at a foreclosure sale of such
lender(s)' deed of trust unless the lender(s) or such purchaser shall have
actually received and not refunded the deposit. Lessee agrees to make all
payments under this Lease to the lender with the most senior encumbrance upon
17
<PAGE> 18
receiving a direction, in writing, to pay said amounts to such lender. Lessee
shall comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Lessor.
34. QUITCLAIM: Upon any termination of this Lease, Lessee shall, at Lessor's
request, execute, have acknowledged and deliver to Lessor a quitclaim deed of
Lessee's interest in and to the Premises.
35. MODIFICATIONS FOR LENDER: If, in connection with obtaining financing for
the Premises or any portion thereof, Lessor's lender shall request reasonable
modification(s) to this Lease as a condition to such financing. Lessee shall not
unreasonably withhold, delay or defer its consent thereto, provided such
modifications do not materially adversely affect Lessee's rights hereunder or
the use, occupancy or quiet enjoyment of Lessee hereunder.
36. WARRANTIES OF LESSEE: Lessee hereby warrants and represents to Lessor, for
the express benefit of Lessor, that Lessee has undertaken a complete and
independent evaluation of the risks inherent in the execution of this Lease and
the operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Lessee has elected to enter into this Lease and
hereby assumes all risks with respect thereto. Lessee hereby further warrants
and represents to Lessor, for the express benefit of Lessor, that in entering
into this Lease, Lessee has not relied upon any statement, fact, promise or
representation (whether express or implied, written or oral) not specifically
set forth herein in writing and that any statement, fact, promise or
representation (whether express or implied, written or oral) made at any time to
Lessee, which is not expressly incorporated herein in writing, is hereby waived
by Lessee.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Lessor and Lessee hereby
agree and acknowledge that the Premises, the Building and/or the Park may be
subject to the requirements of the Americans with Disabilities Act (the "ADA"),
a federal law codified at 42 U.S.C. 12101 et seq, including, but not limited to
Title III thereof, all regulations and guidelines related thereto, and any
amendments thereof. Any Tenant Improvements to be constructed hereunder shall be
in compliance with the requirements of the ADA, and all costs incurred for
purposes of compliance therewith shall be a part of and included in the costs of
the Tenant Improvements. Lessee is responsible for conducting its own
independent investigation of this matter. Except for the construction of any
Tenant Improvements, for which Lessee shall be solely responsible for compliance
with the ADA, if any barrier removal work or other work is required to the
Building, the Common Area or the Park under Title III of the ADA, then such work
shall be performed by Lessor; provided, if such work is required under the ADA
as a result of Lessee's use of the Premises or any work or alteration made to
the Premises by or on behalf of Lessee, then such work shall be performed by
Lessor at the sole cost and expense of Lessee. Except as otherwise provided in
this provision, Lessee shall be responsible at its sole cost and expense for
fully and faithfully complying with all applicable requirements of the ADA.
38. BROKERAGE COMMISSION: Lessee hereby represents and warrants to Lessor that
Lessee's sole contact with Lessor or with the Premises in connection with this
Lease has been directly with Lessor and the Broker (as set forth on Page 1), and
that no other broker or finder can properly claim a right to a commission or a
finder's fee based upon contacts between the claimant and Lessee. Lessee shall
indemnify, defend by counsel acceptable to Lessor, protect and hold Lessor
harmless from and against any loss, liability, suit, judgment, cost or expense,
including, but not limited to, experts' and attorneys' fees and costs, arising
from or relating to any claim for a fee or commission by any broker or finder in
connection with the Premises and this Lease other than Broker, if any.
IN WITNESS WHEREOF, this Lease is executed on the date and year first
written above.
LESSOR:
AETNA LIFE INSURANCE COMPANY
A CONNECTICUT CORPORATION
By: ALLEGIS REALTY INVESTORS, LLC
ITS INVESTMENT ADVISOR
By: /s/ Cynthia Stevenin
---------------------------------
Cynthia Stevenin, Vice President
Date: 9/19/96
---------------------------------
18
<PAGE> 19
LESSEE:
ADVANCED CORNEAL SYSTEMS, INC.,
A CALIFORNIA CORPORATION
By: /s/ Robert K. Bruning
--------------------------
Title: Chief Financial Officer
--------------------------
Date: 9-13-96
--------------------------
By:
--------------------------
Title:
--------------------------
Date:
--------------------------
19
<PAGE> 20
ADVANCED CORNEAL PLAN
[FLOOR PLAN DRAWING]
SECOND FLOOR
9-11-96
<PAGE> 21
ADVANCED CORNEAL PLAN
[FLOOR PLAN DRAWING]
SECOND FLOOR
9-11-96
<PAGE> 22
EXHIBIT A
PREMISES DESCRIPTION
15279 Alton Parkway, Suite 100
Irvine, CA 92618
Approximately 12,946 Sq. Ft.
SITE PLAN
[SITE PLAN DRAWING]
<PAGE> 23
EXHIBIT B
TENANT IMPROVEMENT AGREEMENT
Lease Date for Reference Purposes: September 13, 1996
Lessor: Aetna Life Insurance Company,
a Connecticut Corporation
Lessee: Advanced Corneal Systems, Inc.,
a California Corporation
The terms, provisions and conditions of this Exhibit "B" are hereby
incorporated into the Lease between the parties named above. Any capitalized
terms used herein and not otherwise defined herein shall have the meaning
ascribed to such terms as set forth in the Lease.
Lessor hereby agrees that Lessee shall have the right to use its own contractor
to perform certain improvements ("Lessee Improvements") in the Premises. Lessee
herein agrees to assume all responsibility for supervising the Lessee
Improvements and will indemnify and hold Lessor harmless with respect to any
errors or omissions and negligent acts of the general contractor and its
subcontractors. The Lessee Improvements shall be constructed in accordance with
the space plan attached hereto as SCHEDULE 1 (the "Space Plan"), and working
drawings approved by Landlord and the City of Irvine in writing. All Lessee
Improvements shall be permitted, if required by the City of Irvine, and shall be
constructed in accordance with the rules and regulations of all governing
authorities having jurisdiction. Prior to the commencement of Lessee
Improvements, Lessee shall provide Lessor a true and complete copy of the
written construction contract, evidence of Contractor's Insurance in amounts and
limits satisfactory to Lessor, a complete list of contractor's subcontractors
including address, telephone and facsimile numbers and contact name, and a copy
of any required building permit(s). Upon completion of the Lessee Improvements,
Lessee shall deliver to Lessor complete as-built plans, unconditional lien
waivers from all contractors, subcontractors and material suppliers, the
original signed permit card from the City of Irvine, an original executed
certificate of occupancy from the City of Irvine and any equipment warranties
obtained by Lessee in connection with the construction and installation of the
Lessee Improvements.
LESSOR'S INITIALS /s/CPS
LESSEE'S INITIALS /s/RKB
<PAGE> 24
EXHIBIT C
RULES AND REGULATIONS
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation, or property of the
Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or interfere
with other lessees or persons having business within the Project.
4. Lessee shall not keep animals or birds within the Project, and shall not
bring bicycles, motorcycles or other vehicles into areas not designated as
authorized for the same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts, without Lessor's written prior consent.
7. Lessee shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
premises of the Project.
9. Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of
the Project.
10. Lessee shall return all keys at the termination of its tenancy and shall be
responsible for the cost of replacing any keys that are lost.
11. No window coverings, shades or awnings shall be installed or used by
Lessee, without Lessor's written prior consent.
12. No Lessee, employee or Invitee shall go upon the roof of the Building or
make any penetrations of the roof without Lessor's written prior consent.
13. Lessee shall not suffer or permit smoking or carrying of lighted cigars or
cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
14. Lessee shall not use any method of heating or air conditioning other than
as provided by Lessor.
15. Lessee shall not install, maintain or operate any vending machines upon the
Premises without Lessor's written consent.
16. The Premises shall not be used for lodging, cooking or food preparation,
except Lessee shall have the right to use a microwave oven.
17. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
18. Lessor reserves the right to waive any one of these rules or regulations,
and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
19. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
20. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Project and its occupants. Lessee agrees to
abide by these and such rules and regulations.
PARKING RULES
1. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
or invitees to be loaded, unloaded, or parked in areas other than those
designated by Lessor for such activities.
2. Users of the parking area will obey all posted signs and park only in the
areas designated for vehicle parking.
3. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible
for any damage to vehicles, injury to persons or loss of property, all of
which risks are assumed by the party using the parking area.
4. The maintenance, washing, waxing or cleaning of vehicles in the Common Area
is prohibited.
5. Lessee shall be responsible for seeing that all of its employees, agents
and invitees comply with the applicable parking rules, regulations, laws
and agreements.
6. Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
LESSOR'S INITIALS: CPS
LESSEE'S INITIALS: RKB
1
<PAGE> 1
EXHIBIT 10.10
[ASEMEX LOGO]
LEASE AGREEMENT ENTERED INTO BY AND BETWEEN ASEGURADORA MEXICANA, S.A.,
HEREINAFTER REFERRED TO AS "LESSOR", REPRESENTED IN THIS ACT BY MR. JORGE
IZQUIERDO RODRIGUEZ, IN HIS CAPACITY OF GENERAL SUBDIRECTOR, AND BY ADVANCED
CORNEAL SYSTEMS, A.C. HEREINAFTER REFERRED TO AS "LESSEE", REPRESENTED IN THIS
ACT BY MR. JOHN H. PARRISH, IN HIS CAPACITY OF ATTORNEY-IN-LAW, PURSUANT TO THE
FOLLOWING RECITALS AND CLAUSES:
R E C I T A L S
I. LESSOR STATES:
A) That is an Insurance Institution duly organized in accordance with the
General Law of Insurance and Mutualist Entities and the General Law of
Mercantile Entities, as evidenced by Public Instrument Number 11,945, granted on
November 27, 1937, before Mr. Manuel Borja Sorianco, Notary Public Number 47 for
the Federal District, and recorded with the Public Registry of Property and
Commerce for this city, under record number 66, pages 18, volume 108, book 3,
dated December 10 of that same year.
B) That it has its corporate domicile in the Federal District and its main
offices at Ave. Paseo de la Reforma No. 175, Col. Cuauhtemoc, C.P. 06500,
Federal District, Mexico, notwithstanding the foregoing, for purposes of this
agreement designates as its domicile the one located at 10105 Avenida Paseo de
los Heroes, 10o. (Tenth) floor, of the development known as "Desarrollo Urbano
del Rio Tijuana" in the City of Tijuana, B.C.
C) That its legal representative, Mr. Jorge Izquierdo Rodriguez, evidences his
authority with Public Instrument Number 2,131, granted on October 19, 1994,
before Mr. Jorge Reed Chavarria, Notary Public Number 43 for Naucalpan, State of
Mexico, which authority has not been revoked, modified nor limited in any manner
whatsoever.
D) That it acquired lots numbers 3 and 5 of Block 68 of the Development known as
"Desarrollo Urbano del Rio Tijuana" in the City of Tijuana, B.C., as evidenced
by public deeds numbers 95,481 and 34,789, granted on December 4, 1987 and April
24, 1990 before Notary Public Number 68 for the Federal District, Mr. Alejandro
Soberon Alonso and Notary Public Number 6, Mr. J. Eduardo Illades Moreno for
Tijuana, Baja California, under record number 68,759, pages 57, volume 421,
Civil Section, and record number 85,016, pages 455, volume 534 of the same Civil
Section dated June 27, 1988 and July 24, 1990 respectively, which lots were
united forming one plot of land, where it carried out the construction of a
building with its own funds.
E) That the building referred to on the preceding paragraph, was constituted
under the Condominium Property Regime, as evidenced with Public Instrument
Number 38,784, granted on September 18, 1992, before Mr. J. Eduardo Illades
Moreno, Notary Public Number 6 for the City of Tijuana, Baja California, which
instrument was recorded on February 2, 1993 with the Public Registry of Property
and Commerce for the State of Baja California, under record number 424, page
429, volume V, Condominium Section.
F) That it entered into a Purchase Agreement with Arrendadora Plus, S.A. de
C.V., an Auxiliary Credit Organization now Arrendadora Banpais, S.A. de C.V. an
Auxiliary Credit Organization, Grupo Financiero ASEMEX-BANPAIS, S.A., with
respect to the whole of the real estate described in the preceding paragraph
with all what corresponded to it by fact or by law, through a Purchase
agreement, formalized in Public Instrument Number 47,059, dated December 30,
1993, granted before Mr. Cecilio Gonzalez Marquez, Notary Public Number 151 for
the Federal District.
<PAGE> 2
[ASEMEX LETTERHEAD]
G) That on December 30, 1993, it entered into Lease Agreement Number 53/93
with Arrendadora Plus, S.A. de C.V. an Auxiliary Credit Organization now
Arrendadora Banpais, S.A. de C.V. an Auxiliary Credit Organization of Grupo
Financiero ASEMEX-BANPAIS, S.A., with respect to the real estate described
herein above.
That it early terminated the Lease Agreement mentioned in the preceding
paragraph and is now in the process of formalization of the public deed
corresponding to the purchase of said real estate now in favor of Aseguradora
Mexicana, S.A.
H) That is its will to partially lease the building to the "THE SUBLESSEE" on
the terms of this Agreement.
II. "LESSEE" STATES
I) That is Mercantile Entity duly organized and existing in accordance with
the General Law of Mercantile Entities, as evidenced with Public Instrument
Number ___, granted on ________, 19__, before Mr. ________, Notary Public Number
___ for _______, Baja California, which recording is in process before the
Public Registry of Property and Commerce of that municipality.
J) That its legal representative Mr. _______, evidences his personality with
Public Instrument Number ___, which data is considered as stated in the
preceding paragraph, stating that his faculties have no been revoked, modified
nor limited in any manner whatsoever.
K) That is interested to lease a part of the real estate referred to in
Recital I.D. above, for the establishment of its offices.
III. THE "PARTIES" STATE
Both parties state that is their will to enter into this lease Agreement
and for such purposes they grant the following:
C L A U S E S
FIRST.- "LESSOR" leases to "LESSEE" the office area known as suites 202 and 203
with a total area of 191.42 square meters located in the second level of the
building located at Paseo de los Heroes No. 10,105, in the development known as
"Desarrollo Urbano del Rio Tijuana" in Tijuana, B.C., as well as the parking
spaces numbers 55 and 56, located in level 1B of the same building, shown in the
drawing attached here to as Exhibit 1.
SECOND.- The parties agree that this agreement is for a term of 2 (TWO) years
mandatory for both parties, commencing on January 1st., 1996. "LESSEE" shall be
able to renew this lease with 60 (SIXTY) days of anticipation to the expiration
of the same, for an additional term of 5 (FIVE) years, on the same terms of the
original foregoing two years.
THIRD.- "LESSEE" binds itself to pay the rent to "LESSOR" for the first year
of the lease of the office area known as suites numbers 202 and 203, as well as
for the parking spaces described in CLAUSE FIRST of this Agreement, the Amount
in Dollars of $25,267.44 (TWENTY FIVE THOUSAND TWO HUNDRED AND SIXTY SEVEN
DOLLARS 44/100 CURRENCY OF THE UNITED STATES OF AMERICA), plus the
corresponding Value Added Tax for the amount of $2,526.75 Dollars (TWO THOUSAND
FIVE HUNDRED AND TWENTY SIX DOLLARS 75/100 CURRENCY OF THE UNITED STATES OF
AMERICA), making the total sum in Dollars of $27,794.19 (TWENTY SEVEN THOUSAND
SEVEN HUNDRED AND NINETY FOUR DOLLARS 19/100 CURRENCY OF THE UNITED STATES OF
AMERICA), which amount will be paid by "LESSEE" in 12 (TWELVE) monthly
installments of $2,316.19 Dollars (TWO THOUSAND THREE HUNDRED AND SIXTEEN
DOLLARS 19/100 CURRENCY OF THE UNITED STATES OF AMERICA), each one, Value Added
Tax included, payable in advance on the first 5 (FIVE) days of each month at
the offices of "LESSOR", located at the tenth floor (10th) of the same building
located at Paseo de los Heroes No. 10,105, in the City of Tijuana, B.C.
<PAGE> 3
[ASEMEX LOGO]
Additionally, "LESSEE" shall pay for the first year to "LESSOR" for maintenance
expenses the amount in dollars of $4,594.08 (FOUR THOUSAND FIVE HUNDRED AND
NINETY FOUR DOLLARS 08/100 CURRENCY OF THE UNITED STATES OF AMERICA), plus the
corresponding Value Added Tax, this is $459.41 Dollars (FOUR HUNDRED AND FIFTY
NINE DOLLARS 41/100 CURRENCY OF THE UNITED STATES OF AMERICA), making a total of
$5,053.49 Dollars (FIVE THOUSAND FIFTY THREE DOLLARS 49/100 CURRENCY OF THE
UNITED STATES OF AMERICA), which will be also paid in 12 (TWELVE) monthly
installments of $421.13 Dollars (FOUR HUNDRED AND TWENTY ONE DOLLARS 13/100
CURRENCY OF THE UNITED STATES OF AMERICA) each one, Value Added Tax included, in
the same date in which the rent is paid, in the understanding that "LESSOR" will
deliver the corresponding fiscal receipts.
It is hereby understood that the maintenance supplied by "LESSOR" will be
exclusively applied to the general systems, equipment and installations of the
building as well as to the closed circuit television. The particular maintenance
of the installations and equipment derived from the improvements carried out by
"LESSEE" in the leased area will be its exclusive responsibility and at its own
expense.
Likewise, "LESSEE", shall pay to "LESSOR" the proportional part corresponding to
the area being leased, the expenses for supply and use of running water in the
building for the corresponding consumption period.
The payment of rents and the maintenance expenses may be effected by "LESSEE"
either in Dollars currency of the United States of America on in Mexican
Currency at the free exchange rate in force at the exchange offices in the date
on which the payment is effected.
FOURTH.- The rent and the maintenance expenses agreed in the preceding Clause
for the first year of lease, will be annually increased in the subsequent years
based in the Consumer Price Index for the United States of America (C.P.I.) for
the 12 (TWELVE) months prior to the date in which the rent is modified, which
increase will be applied to the second year of sublease and so forth until the
expiration of this Lease or its renewal in its case.
FIFTH.- In the event "LESSEE" does not pay totally and in a timely manner the
agreed rent, it shall pay to "LESSOR" moratory interests to the rate resulting
from adding 10 (TEN) percentage points at the average percentage cost (costo
porcentual promedio de captacion "C.P.P.") published each month by the Banco de
Mexico, in the understanding that this penalty will be applied each month or
fraction of month while said default continues.
SIXTH.- "LESSOR" will be responsible for the hidden defects of the leased
premises that may prevent it from the use of the same, even if it was not aware
of such hidden defects or these take place during the term of the lease.
SEVENTH.- If for acts of god or force majeure "LESSEE" is totally prevented to
use the leased premises, the rent payments will be ceased during the prevention
and if it continues for more than two months, "LESSEE" may request the recision
of the agreement, or if it is only partially prevented to use the lease
premises, "LESSEE" may request the partial reduction of the rent, to the judge
of experts, or the parties may elect the recision of the Agreement, if this
prevention subsists for more than two months.
EIGHTH.- In the event "LESSOR" has prospects to lease the office number 201
located in the same level that the offices subject matter of this Agreement,
"LESSEE" will have a Right of Preference to lease said office, having "LESSOR"
to notify "LESSEE" for such purpose with 30 days of anticipation, who will have
to answer to this Right of Preference within ten (10) working days, if this is
not the case, "LESSOR" may lease this office to whom it considers convenient for
its interests.
NINTH.- "LESSEE" will destine the leased premises for the establishment of its
own offices, being prohibited to sub-lease the same to third parties, whether
individuals or entities, all or part of the area being leased, as well as the
parking spaces, with the only exception that the lease is granted to companies
of the same Group and with the prior written authorization by "LESSOR".
<PAGE> 4
[ASEMEX LETTERHEAD]
TENTH.--"LESSEE" will contract directly with the Federal Electricity Commission
of Tijuana, Baja California, the electric power required to carry out its
activities in the leased premises.
Likewise, in the event it is required, "LESSEE" will apply for securing the
number of telephone lines previously requested in written to "LESSOR", being its
exclusive responsibility the payment for the activation, rent and use cost
generated by the telephone lines to be leased.
ELEVENTH.--"LESSEE" shall pay in the timely manner the expenses for the electric
power consumption and the rents of the telephone lines used by "LESSEE", being
"LESSOR" entitled to request "LESSEE" at any time the corresponding proofs of
payment and in the event this utilities are suspended for lack of payment,
"LESSEE" will be obligated to pay at its own cost the expenses for
reinstallation and to pay the damages being caused to "LESSOR" for the
non-compliance of this liability.
TWELFTH.--"LESSEE" will secure on its account with an authorized company a CIVIL
LIABILITY POLICY, to cover the possible events that may arise from the operation
carried out in the leased premises. The Policy shall contain the preference
Clause in the payment of indemnification in favour of Aseguradora Mexicana,
S.A., and a copy of said Policy will have to be delivered by "LESSEE", within 15
(FIFTEEN) days following to the execution of this Agreement, any deductible,
coinsurance will always be paid by "LESSEE" as well as any other participation
that the insurance Policy may indicate. "Lessee", obligates itself to pay in
time the insurance premiums and to keep the insurance policy in force at all
times during the time the leased premises are occupied.
THIRTEENTH.--"LESSEE", to guarantee the payment of the rents agreed on in this
Agreement during the term of the same, shall pay in advance eight months of rent
and maintenance plus added value tax (IVA) on both. "LESSEE" will repeat this
procedure every seven months in order to secure the payments for the next eight
months during the first two years, process that will continue in case that
according to the second clause, "LESSEE" renew the lease for and additional term
of five years. The mentioned payments in advance will be effected at present
value with and interest rate of 9% on balance for the first year. For the
subsequent years of the agreements, said rate will be negotiated according to
market conditions.
FOURTEENTH.--"LESSEE" is hereby authorized to establish by itself the services
for surveillance and security systems it deems convenient, for the protection of
persons and goods in the sub-leased area, being its exclusive responsibility the
personnel hired for such services, keeping "LESSEE" free from any liability in
this regard.
FIFTEENTH.--"LESSEE" will hire at its own risk and account the supplier or
contractor who will supply in the subleased area the floor and wall finish,
which works and materials will be to the benefit of "LESSOR" when the leased
premises are desoccupied at the term of this Agreement or its renewals, in its
case.
"LESSEE" is hereby authorized to carry out with the contractor it deems
convenient the improvements to its offices and to install the electronic,
electric, hydraulic and sanitary equipments required for its operation, being
the performance of these works subject to the technical approval of the
executive project by "LESSOR" which works shall not affect the structural
stability or facade of the building, nor cause inconvenience to the other
occupants of the building.
SIXTEENTH.--Both parties agree that the total cost for the works and
installations referred to in the preceding Clause, will be on the exclusive
account and responsibility of "LESSEE", and therefore, it is hereby authorized
by "LESSOR" to remove at any time and specially when it desoccupies the leased
area, each and every special installations and equipment which were installed
within the leased area, including the fixed furnitures, doors, security systems
and other chattels which, even when incorporated to the premises, will be
removed by "LESSEE", since said investments constitute an integral part of its
fixed assets.
<PAGE> 5
[ASEMEX LOGO]
It is hereby understood that when "LESSEE" carries out the removal or detachment
of the works and installations, it will be obliged at the time it desoccupies
the leased area subject matter of this Agreement, to deliver it to "LESSOR" in
the conditions in which it was received and, in its case, to repair any
dysfunction that may be its responsibility, except the normal tear and wear of
the leased area and it obligates itself at the execution of this Agreement to
pay the damages, if this obligation is not comply with.
SEVENTEENTH.- "LESSEE" is hereby authorized to place signs in the exterior,
exclusively in the access door of its office and in the billboard located at
the lobby of the building, being at its charge the procedures and expenses that
may originate the securing of the permit or license that, in its case, grant
the competent authorities.
EIGHTEENTH.- At the execution hereof, "LESSOR" delivers to "LESSEE" the leased
premises and the parking spaces referred to hereinabove, by a delivery-receipt
notice that signed by the parties is attached hereto as EXHIBIT 2.
NINETEENTH.- "LESSOR" may terminate this agreement for the following causes:
A) The lack of payment of the rent and the maintenance expenses agreed for
two consecutive months.
B) If "LESSEE" destines the leased area to purposes different than those
specified in this agreement.
C) That transfers in the event of sub-lease to third parties, part or all the
leased area, as well as if "LESSEE" assigns in any manner the total or partial
use of the leased premises gratuitously or through a consideration except when
assigned to companies of the same Group and with the prior written
authorization by "LESSOR".
D) For not delivering within the term established in Clauses TWELFTH and
THIRTEENTH hereof, the Civil Liability Policy and the Lease Bond, as well as if
the Insurance policies are not paid in time or if the respective Bond and
Policy are not kept in force.
On its part, "LESSEE", may terminate this agreement in the following cases:
A) If for causes attributable to "LESSOR", it is prevented from the use and
enjoyment of the leased area except for urgent repairs.
B) For not complying with the obligations assumed by "LESSEE" under this
agreement.
C) For the causes established by Law.
TWENTIETH.- For purposes derived from this lease agreement, the parties
designate as their domiciles the following:
"LESSOR" 10th (TENTH) FLOOR
PASEO DE LOS HEROES No. 10105
FRACC. DES. URB. RIO TIJUANA
ZONA RIO
TORRE-ASEMEX
TIJUANA, B.C.
<PAGE> 6
[ASEMEX LETTERHEAD]
"LESSEE" SUITES 202 AND 203
PASEO DE LOS HEROES NO. 10105
FRACC. DES. URB. RIO TIJUANA
ZONA RIO
TORRE-ASEMEX
TIJUANA, B.C.
Any notice or requirement that has to be done between the parties with regard to
this lease agreement, will be done or made in the above mentioned domiciles.
TWENTY FIRST.- The parties hereto agree that this agreement may only be added or
modified by written duly executed by the parties by common agreement through
its attorneys-in-law.
TWENTY SECOND.- Both parties agree, for purposes of what is not agreed or
foreseen in this agreement, to submit themselves to the provisions of the Civil
Code for the State of Baja California, with respect to leases.
TWENTY THIRD.- For purposes interpretation, execution or non-compliance of this
agreement, the parties expressly agree to submit themselves to the jurisdiction
of the Competent Courts for the State of Baja California, waiving any other
jurisdiction that for reason of their present or future domiciles may
correspond to them.
THIS AGREEMENT IS EXECUTED IN THE CITY OF TIJUANA, BAJA CALIFORNIA, ON NOVEMBER
TWENTY TWO, ONE THOUSAND NINE HUNDRED AND NINETY FIVE.
ASEGURADORA MEXICANA, S.A. "LESSEE"
"LESSOR"
- ----------------------------------- ----------------------------------------
MR. JORGE J. IZQUIERDO RODRIGUEZ MR. JOHN H. PARRISH
GENERAL SUB-DIRECTOR ATTORNEY-IN-LAW
WITNESS
----------------------------------------
MR. FRANCISCO FLORES HERNANDEZ
SUBDIRECTOR OF REAL ESTATE ADMINISTRATION
<PAGE> 7
[ASEMEX LOGO]
ACTA DE ENTREGA-RECEPCION
ANEXO AL CONTRATO DE ARRENDAMIENTO
En la Ciudad de Tijuana Baja California, siendo las 12:00 horas del dia 1o. de
Enero de 1996, se reunieron en el edificio de nominado "TORRE-ASEMEX", ubicado
en Avenida Paseo de los Heroes, Fraccionamiento Desarrollo Urbano del Rio
Tijuana, el Arq. Francisco Flores Hernandez, Subdirector de Administracion de
inmuebles de ASEGURADORA MEXICANA S.A., por "LA ARRENDADORA", y el Sr. John H.
Parrish de la empresa ADVANCED CORNEAL SYSTEMS A.C., por "EL ARRENDATARIO",
para hacer constar la entrega-recepcion fisica de las oficinas marcadas con los
numeros 202 y 203, ubicados en el Segundo Piso de la torre, asi como de los
cajones de estacionamiento numeros 54-55 del referido edificio de los cuales se
hace descripcion de superficies y colindancias en el Contrato de Arrendamiento
celebrado entre ASEGURADORA MEXICANA S.A. y ADVANCED CORNEAL SYSTEMS A.C., de
fecha 1o. de Enero de 1996, segun se detalla a continuacion:
AREA DE OFICINA.-
Con los siguientes acabados:
- - Pisos en cemento acabado escobillado para recibir acabado final con una
superficie de 191.42 metros cuadrados, falso plafon de acustome linea de sombra
en modulos de 61x61 cms. cubriendo una superficie de 164.48 metros cuadrados,
luminarias tipo parabolica de 61x61 cms. con difusor y retorno de aire integrado
46 piezas, muros perimetrales de tabla roca con acabado Texturi Tersa en
combinacion con 60.47 metros cuadrados de canceleria de aluminio anodizado
negro con cristal templado reflecta sobre sustrato gris, la cual forma parte de
la fachada de la torre, puerta de tambor de pino de 250 x 98 cms. en el acceso
principal a la oficina incluye cerradura marca KWIKSET y juego de llaves.
Con las siguientes instalaciones en la oficina:
a) Ducteria de lamina galvanizada con forro en losa correspondiente al Sistema
de Aire Acondicionado, que incluye: 36 salidas de inyeccion y extraccion de
aire integradas a las luminarias tipo parabolicas de 61x61 cms., 1 unidad
manejadora de aire tipo unizona, 1 termostato-control de temperatura, redes de
tuberia y cableado correspondiente a 1 resistencia electrica para la
calefaccion del area.
b) Ducteria y registros para la instalacion telefonica.
c) Preparaciones para instalar a futuro sanitarios privados, las cuales
consisten en 1 bajada de fo.fo. 4" de diametro para aguas negras y 1
alimentacion de agua fria en tuberia de Cobre tipo M de 1/2" de diametro.
d) Redes de tuberia y cableado respecto a la instalacion electrica de alumbrado
y fuerza del area, con 7 salidas electricas de contactos de piso, 1 tablero de
distribucion localizado en los ductos de instalaciones del edificio.
<PAGE> 8
[ASEMEX LOGO]
CAJONES DE ESTACIONAMIENTO
"LA ARRENDATARIA", adquiere conjuntamente con las Oficinas Numeros 202 y 203, 2
cajones de estacionamiento los cuales se localizan en el sotano 1B del edificio,
marcados con los numeros 54 y 55.
No habiendo otro asunto que tratar y conformes las partes con el contenido de la
presente Acta de Entrega-Recepcion, la firman el dia de su fecha:
"LA ARRENDADORA" "EL ARRENDATARIO"
/s/ ARQ. FRANCISCO FLORES HERNANDEZ /s/ SR. JOHN H. PARRISH
- ----------------------------------- ------------------------------------
ASEGURADORA MEXICANA S.A. ADVANCED CORNEAL SYSTEMS A.C.
ARQ. FRANCISCO FLORES HERNANDEZ SR. JOHN H. PARRISH
SUBDIRECTOR DE ADMINISTRACION DE APODERADO LEGAL
IMMUEBLES
<PAGE> 9
[ASEMEX LOGO]
CROQUIS DE INSTALACIONES EXISTENTES EN OFICINAS 202 Y 203
<PAGE> 10
FLOOR PLAN
SOTANO 1-B "B"
<PAGE> 1
EXHIBIT 10.11
[LEASE MANAGEMENT SERVICES, INC. LOGO]
EQUIPMENT FINANCING AGREEMENT
(Number 10802)
THIS EQUIPMENT FINANCING AGREEMENT NUMBER 10802 ("Agreement") is dated as of
the date set forth at the foot hereof and is between LEASE MANAGEMENT SERVICES,
INC., ("Secured Party") and ADVANCED CORNEAL SYSTEMS, INC., ("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this Agreement
cover each item of machinery, equipment and other property (individually an
"Item" or "Item of Equipment" and collectively the "Equipment") described in a
schedule now or hereafter executed by the parties hereto and made a part hereof
(individually a "Schedule" and collectively the "Schedules"). Debtor hereby
grants Secured Party a security interest in and to all Debtor's right, title
and interest in and to the Equipment under the Uniform Commercial Code, such
grant with respect to an Item of Equipment to be as of Debtor's execution of a
related Equipment Financing Commitment referencing this Agreement or, if Debtor
then has no interest in such Item, as of such subsequent time as Debtor
acquires an interest in the Item. Such security interest is granted by Debtor
to secure performance by Debtor of Debtor's obligations to Secured Party
hereunder and under any other agreements under which Debtor has or may
hereafter have obligations to Secured Party. Debtor will ensure that such
security interest will be and remain a sole and valid first lien security
interest subject only to the lien of current taxes and assessment not in
default but only if such taxes are entitled to priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this Agreement
respecting an Item of Equipment, except the obligation to pay installment
payments with respect thereto which will commence as set forth in Paragraph 3
below, commence upon the grant to Secured Party of a security interest in the
Item. Debtor's obligations hereunder with respect to an Item of Equipment and
Secured Party's security interest therein will continue until payment of all
amounts due, and performance of all terms and conditions required hereunder
provided, however, that if this Agreement is in default said obligations and
security interest will continue during the continuance of said default. Upon
termination of Secured Party's security interest in an Item of Equipment,
Secured Party will execute such release of interest with respect thereto as
Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances
Secured Party makes on account of the Equipment in installment payments in the
amounts and at the times set forth in the Schedules, whether or not Secured
Party has rendered an invoice therefor, at the office of Secured Party set
forth at the foot hereof, or to such person and/or at such other place as
Secured Party may from time to time designate by notice to Debtor. Any other
amounts required to be paid Secured Party by Debtor hereunder are due upon
Debtor's receipt of Secured Party's invoice therefor and will be payable as
directed in the invoice. Payments under this Agreement may be applied to
Debtor's then accrued obligations to Secured Party in such order as Secured
Party may choose.
4. NET AGREEMENT; NO OFFSET, SURVIVAL. This Agreement is a net agreement, and
Debtor will not be entitled to any abatement of installment payments or other
payments due hereunder or any reduction thereof under any circumstance or for
any reason whatsoever. Debtor hereby waives any and all existing and future
claims, as offsets, against any installment payments or other payments due
hereunder and agrees to pay the installment payments and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Debtor or on its behalf. The obligations and liabilities of Debtor
hereunder will survive the termination of the Agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND
ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND
WILL NOT BE THE VENDOR OF ANY
<PAGE> 2
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT, FINANCING AGREEMENT NUMBER 10802
PAGE 2 OF 8
EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT,
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION,
QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT OR
ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR OTHER
SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN CONNECTION
WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY IS NOT BOUND BY
A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN PARAGRAPH 27 BELOW,
THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR CONCERNING THE FINANCING OF THE
EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS IT MAY BE AMENDED ONLY AS PROVIDED
IN THAT PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering
the Equipment or any Items thereof will conclusively establish that such
Equipment has been included under and will be subject to all the terms and
conditions of this Agreement. If Debtor has not furnished Secured Party with an
executed Schedule by the earlier of fourteen (14) days after receipt thereof or
expiration of the commitment period set forth in the applicable Equipment
Financing Agreement, Secured Party may terminate its obligation to advance
funds as to the applicable Equipment.
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control at the
Equipment Location designated in the applicable Schedule, or at such other
location to which such Item may have been moved with the prior written consent
of Secured Party. Whenever requested by Secured Party, Debtor will advise
Secured Party as to the exact location of an Item of Equipment. Secured Party
will have the right to inspect the Equipment and observe its use during normal
business hours, subject to Debtor's security procedures and to enter into and
upon the premises where the Equipment may be located for such purpose. The
Equipment will at all times be used solely for commercial or business purposes
and operated in a careful and proper manner and in compliance with all
applicable laws, ordinances, rules and regulations, all conditions and
requirements of the policy or policies of insurance required to be carried by
Debtor under the terms of this Agreement and all manufacturer's instructions
and warranty requirements. Any modifications or additions to the Equipment
required by any such governmental edict or insurance policy will be promptly
made by Debtor.
9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written
consent of Secured Party, Debtor will not make any alterations, additions or
improvements to any Item of Equipment which detract from its economic value or
functional utility, except as may be required pursuant to Paragraph 8 above.
Secured Party's security interest in the Equipment will include all
modifications and additions thereto and replacements and substitutions
therefor, in whole or in part. Such reference to replacements and substitutions
will not grant Debtor greater rights to replace or substitute than are provided
in Paragraph 11 below or as may be allowed upon the prior written consent of
Secured Party.
10. MAINTENANCE. Debtor will maintain the Equipment in good repair, condition
and working order. Debtor will also cause each Item of Equipment for which a
service contract is generally available to be covered by such a contract which
provides coverages typical to property of the type involved and is issued by a
competent servicing entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment ("Casualty
Occurrence"), Debtor will give Secured Party prompt notice thereof and will
thereafter place such Item in good repair,
<PAGE> 3
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
PAGE 3 OF 8
condition and working order, provided, however, that if such Item is determined
by Secured Party to be lost, stolen, destroyed or damaged beyond repair, is
requisitioned or suffers a constructive total loss as defined in any applicable
insurance policy carried by Debtor in accordance with Paragraph 14 below,
Debtor, at Secured Party's option, will (a) replace such Item with like
Equipment in good repair, condition and working order whereupon such replacement
equipment will be deemed such Item for all purposes hereof or (b) pay Secured
Party the "Casualty Value" of such Item which will equal the total of (i) all
installment payments and other amounts due from Debtor to Secured Party at the
time of such payment and (ii) future installment payments due with respect to
such Item with each such payment including any final uneven payment discounted
at a rate equal to the discount rate of the Federal Reserve Bank of San
Francisco from the date due to the date of such payment.
Upon such replacement or payment, as appropriate, this Agreement and Secured
Party's security interest will terminate with, and only with, respect to the
Item of Equipment so replaced or as to which such payment is made in accordance
with Paragraph 2 above.
12. TITLING; REGISTRATION. Each item of Equipment subject to title
registration laws will at all times be titled and/or registered by Debtor as
Secured Party's agent and attorney-in-fact with full power and authority to
register (but without power to affect title to) the Equipment in such manner and
in such jurisdiction or jurisdictions as Secured Party directs. Debtor will
promptly notify Secured Party of any necessary or advisable retitling and/or
reregistration of an Item of Equipment in a jurisdiction other than the one in
which such Item is then titled and/or registered. Any and all documents of title
will be furnished or caused to be furnished Secured Party by Debtor within sixty
(60) days of the date any titling or registering or restating or reregistering,
as appropriate, is directed by Secured Party.
13. TAXES. Debtor will make all filings as to any pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges and
assessments based on the ownership or use of the Equipment and will pay as
directed by Secured Party or reimburse Secured Party for all other taxes,
including, but not limited to, gross receipt taxes (exclusive of federal and
state taxes based on Secured Party's net income, unless such net income taxes
are in substitution for or relieve Debtor from any taxes which Debtor would
otherwise be obligated to pay under the terms of this Paragraph 13), fees,
charges and assessments whatsoever, however designated, whether based on the
installment payments or other amounts due hereunder, levied, assessed or imposed
upon the Equipment or otherwise related hereto or to the Equipment, now or
hereafter levied, assessed or imposed under the authority of a federal, state,
or local taxing jurisdiction, regardless of when and by whom payable. Filings
with respect to such other amounts will, at Secured Party's option, be made by
Secured Party or by Debtor as directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk insurance
against loss or damage to the Equipment from any cause whatsoever for not less
than the full replacement value thereof naming Secured Party as Loss Payee. Such
insurance must be in a form and with companies approved by Secured Party, must
provide at least thirty (30) days advance written notice to Secured Party of
cancellation, change or modification in any term, condition, or amount of
protection provided therein, must provide full breach of warranty protection
and must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide Secured
Party with an original policy or certificate evidencing such insurance. In the
event of an assignment of this Agreement of which Debtor has notice, Debtor
will cause such insurance to provide the same protection to the assignee as its
interests may appear. The proceeds of such insurance, at the option of the
Secured Party or such assignee, as appropriate, will be applied toward (a)
repair or replacement of the appropriate Item or Items of Equipment, (b)
payment of the Casualty Value thereof and/or (c) payment of, or as provision
for, satisfaction of any other accrued obligations of Debtor hereunder. Debtor
hereby appoints Secured Party as Debtor's attorney-in-fact with full power and
authority to do all things, including, but not limited to, making claims,
receiving payments and endorsing documents, checks or drafts, necessary to
secure payments due under any policy contemplated hereby on account of a
Casualty
<PAGE> 4
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
PAGE 4 OF 8
Occurrence. Debtor and Secured Party contemplate that the jurisdictions where
the Equipment will be located will not impose any liability upon Secured Party
for personal injury and/or property damage resulting out of the possession, use,
operation or condition of the Equipment. In the event Secured Party determines
that such is not or may not be the case with respect to a given jurisdiction,
Debtor will provide Secured Party with public liability and property damage
coverage applicable to the Equipment in such amounts and in such form as Secured
Party requires.
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due hereunder
or to perform any of its other obligations under this Agreement, Secured Party
may, at its option, but without any obligation to do so, pay such amounts or
perform such obligations, and Debtor will reimburse Secured Party the amount of
such payment or cost of such performance, plus interest at 1.5% per month.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from and
against any and all liabilities, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including court costs and legal
expenses, of whatever kind and nature, imposed on, incurred by or asserted
against Secured Party (whether or not also indemnified against by any other
person) in any way relating to or arising out of this Agreement or the
manufacture, financing, ownership, delivery, possession, use, operation,
condition or disposition of the Equipment by Secured Party or Debtor,
including, without limitation, any claim alleging latent and other defects,
whether or not discoverable by Secured Party or Debtor, and any other claim
arising out of strict liability in tort, whether or not in either instance
relating to an event occurring while Debtor remains obligated under this
Agreement, and any claim for patent, trademark or copyright infringement. Debtor
agrees to give Secured Party and Secured Party agrees to give Debtor notice of
any claim or liability hereby indemnified against promptly following learning
thereof.
17. DEFAULT. Any of the following will constitute an event of default
hereunder: (a) Debtor's failure to pay when due any installment payment or other
amount due hereunder, which failure continues for ten (10) days after the due
date thereof; (b) Debtor's default in performing any other obligation, term or
condition of this Agreement or any other agreement between Debtor and Secured
Party or default under any further agreement providing security for the
performance by Debtor of its obligations hereunder provided such default has
continued for more than twenty (20) days, except as provided in (c) and (d)
hereinbelow, or, without limiting the generality of subparagraph (1)
hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the real
property where an Item of Equipment is located; (c) any writ or order of
attachment or execution or other legal process being levied on or charged
against any Item of Equipment and not being released or satisfied within ten
(10) days; (d) Debtor's failure to comply with its obligations under Paragraph
14 above or any transfer by Debtor in violation of Paragraph 21 below; (e) a
non-appealable judgment for the payment of money in excess of $100,000 being
rendered by a court of record against Debtor which Debtor does not discharge or
make provision for discharge in accordance with the terms thereof within ninety
(90) days from the date of entry thereof; (f) death or judicial declaration of
incompetency of Debtor, if an individual; (g) the filing by Debtor of a petition
under the Bankruptcy Code or any amendment thereto or under any other insolvency
law or law providing for the relief of debtors, including, without limitation, a
petition for reorganization, arrangement or extension, or the commission by
Debtor of an act of bankruptcy; (h) the filing against Debtor of any such
petition not dismissed or permanently stayed within thirty (30) days of the
filing thereof; (i) the voluntary or involuntary making of an assignment of
substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's assets,
institution by or against Debtor or any other type of insolvency proceeding
(under the Bankruptcy Code or otherwise) or of any formal or informal proceeding
for dissolution, liquidation, settlement of claims against or winding up of the
affairs or Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets or
inventory not in the ordinary course of business; (j) the occurrence of any
event described in parts (e), (f), (g), (h) or (i) hereinabove with respect to
any guarantor or
<PAGE> 5
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
PAGE 5 OF 8
other party liable for payment or performance of this Agreement; (k) any
certificate, statement, representation, warranty or audit heretofore or
hereafter furnished with respect hereto by or on behalf of Debtor or any
guarantor or other party liable for payment or performance of this Agreement
proving to have been false in any material respect at the time as of which the
facts therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor or any
such guarantor or other party; (l) breach by Debtor of any lease or other
agreement providing financial accommodation under which Debtor or its property
is bound; or (m) a transfer of effective control of Debtor, if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a Secured Party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial Code
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and, without limiting
the foregoing, Secured Party may exercise any one or more of the following
remedies: (a) declare the Casualty Value or such lesser amount as may be set by
law immediately due and payable with respect to any or all Items of Equipment
without notice or demand to Debtor; (b) sue from time to time for and recover
all installment payments and other payments then accrued and which accrue during
the pendency of such action with respect to any or all Items of Equipment; (c)
take possession of and, if deemed appropriate, render unusable any or all Items
of Equipment, without demand or notice, wherever same may be located, without
any court order or other process of law and without liability for any damages
occasioned by such taking of possession and remove, keep and store the same or
use and operate or lease the same until sold; (d) require Debtor to assemble any
or all Items of Equipment at the Equipment Location therefor, or at such
location to which such Equipment may have been moved with the written consent of
Secured Party or such other location in reasonable proximity to either of the
foregoing as Secured Party designates; (e) upon ten (10) days notice to Debtor
or such other notice as may be required by law, sell or otherwise dispose of any
Item of Equipment, whether or not in Secured Party's possession, in a
commercially reasonable manner at public or private sale at any place deemed
appropriate and apply the new proceeds of such sale, after deducting all costs
of such sale, including, but not limited to, costs of transportation,
repossession, storage, refurbishing, advertising and brokers' fees, to the
obligations of Debtor to Secured Party hereunder or otherwise, with Debtor
remaining liable for any deficiency and with any excess being returned to
Debtor; (f) upon thirty (30) days notice to Debtor, retain any repossessed or
assembled Items of Equipment as Secured Party's own property in full
satisfaction of Debtor's liability for the installment payments due hereunder
with respect thereto, provided that Debtor will have the right to redeem such
Items by payment in full of its obligations to Secured Party hereunder or
otherwise or to require Secured Party to sell or otherwise dispose of such Items
in the manner set forth in subparagraph (e) hereinabove upon notice to Secured
Party within such thirty (30) day period; or (g) utilize any other remedy
available to Secured Party under the Uniform Commercial Code or similar
provision of law or otherwise at law or in equity.
No right or remedy conferred herein is exclusive of any other right or remedy
conferred herein or by law; but all such remedies are cumulative of every other
right or remedy conferred hereunder or at law or in equity, by statute or
otherwise, and may be exercised concurrently or separately from time to time.
Any sale contemplated by subparagraph (e) of this Paragraph 18 may be adjourned
from time to time by announcement at the time and place appointed for such sale,
or for any such adjourned sale, without further published notice, Secured Party
may bid and become the purchaser at any such sale. Any sale of an Item of
Equipment, whether under said subparagraph or by virtue of judicial proceedings,
will operate to divest all right, title, interest, claim and demand whatsoever;
either at law or in equity, of Debtor in and to said item and will be a
perpetual bar to any claim against such Item, both at law and in equity, against
Debtor and all persons claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this Agreement and such proceedings are discontinued or abandoned for any
reason or are
<PAGE> 6
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
PAGE 6 OF 8
determined adversely, then and in every such case Debtor and Secured Party will
be restored to their former positions and rights hereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorney's fees and court costs and sales costs not offset
against sales proceeds under Paragraph 18 above, incurred by Secured Party in
exercising any of its rights or remedies hereunder or enforcing any of the
terms, conditions or provisions hereof. This obligation includes the payment or
reimbursement of all such amounts whether an action is ultimately filed and
whether an action is ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor
will not sell, lease, pledge or hypothecate, except as provided in this
Agreement, any Item of Equipment or any interest therein or assign, transfer,
pledge, or hypothecate this Agreement or any interest in this Agreement or
permit the Equipment to be subject to any lien, charge or encumbrance of any
nature except the security interest of Secured Party contemplated hereby.
Debtor's interest herein is not assignable and will not be assigned or
transferred by operation of law. Consent to any of the foregoing prohibited acts
applies only in the given instance and is not a consent to any subsequent like
act by Debtor or any other person.
All rights of Secured Party hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without notice
to Debtor but always, however, subject to the rights of Debtor under this
Agreement. If Debtor is given notice of any such assignment, Debtor will
acknowledge receipt thereof in writing. In the event Secured Party assigns this
Agreement or the installment payments due or to become due hereunder or any
other interest herein, whether as security for any of its indebtedness or
otherwise, no breach or default by Secured Party hereunder or pursuant to any
other agreement between Secured Party and Debtor, should there be one, will
excuse performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor will pursue
any rights on account thereof solely against Secured Party. No such assignee,
unless such assignee agrees in writing, will be obligated to perform any duty,
covenant or condition required to be performed by Secured Party in connection
with this Agreement.
Subject always to the foregoing, this Agreement inures to the benefit of, and is
binding upon, the heirs, legatees, personal representative, successors and
assigns of the parties hereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with labels,
plates, decals or other markings stating that Secured Party has an interest in
the Equipment, Debtor will affix and keep the same prominently displayed on the
Equipment or will otherwise mark the Equipment or its then location or
locations, as appropriate, at Secured Party's request to indicate Secured
Party's security interest in the Equipment. The Equipment is, and at all times
will remain, personal property notwithstanding that the Equipment or any Item
thereof may now be, or hereafter become, in any manner affixed or attached to,
or embedded in, or permanently resting upon real property or any improvement
thereof or attached in any manner to what is permanent as by means of cement,
plaster, nails, bolts, screws or otherwise. If requested by Secured Party,
Debtor will obtain and deliver to Secured Party waivers of interest or liens in
recordable form satisfactory to Secured Party from all persons claiming any
interest in the real property on which an Item of Equipment is or is to be
installed or located.
23. LATE CHARGES. Time is of the essence in this Agreement and if any
Installment Payment is not paid within ten (10) days after the due date thereof,
Secured Party shall have the right to add and collect, and Debtor agrees to pay:
(a) a late charge on and in addition to, such Installment Payment equal to five
percent (5%) of such Installment Payment or a lesser amount if established by
any state or federal statute applicable thereto, and (b) interest on such
Installment Payment from thirty (30) days after the due date until paid at the
highest contract rate enforceable against Debtor under applicable law but never
to exceed eighteen percent (18%) per annum.
<PAGE> 7
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
PAGE 7 OF 8
24. NON-WAIVER. No covenant or condition of this Agreement can be waived
except by the written consent of Secured Party. Forbearance or indulgence by
Secured Party in regard to any breach hereunder will not constitute a waiver of
the related covenant or condition to be performed by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party hereunder
Debtor will execute and deliver to Secured Party such financing statements and
similar documents as Secured Party requests. Debtor authorizes Secured Party
where permitted by law to make filings of such financing statements without
Debtor's signature. Debtor further will furnish Secured Party (a) on a timely
basis, Debtor's future financial statements, including Debtor's most recent
annual report, balance sheet and income statement, prepared in accordance with
generally accepted accounting principles, which reports, Debtor warrants, shall
fully and fairly represent the true financial condition of Debtor (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this Agreement and the Equipment,
including, without limitation, copies of vendor proposals and purchase orders
and agreements, listings of serial numbers or other identification data and
confirmations of such information, as Secured Party may from time to time
reasonably request. Debtor will procure and/or execute, have executed,
acknowledge, have acknowledged, deliver to Secured Party, record and file such
other documents and showings as Secured Party deems necessary or desirable to
protect its interest in and rights under this Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all filing, search, title report, legal and other fees incurred by
Secured Party in connection with any documents to be provided by Debtor pursuant
to this Paragraph or Paragraph 22 and any further similar documents Secured
Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial
data and other information which Debtor has submitted, or will submit, to
Secured Party in connection with this Agreement is, or will be at time of
delivery, as appropriate, a true and complete statement of the matters therein
contained. Debtor further certifies and warrants; (a) this Agreement has been
duly authorized by Debtor and when executed and delivered by the person signing
on behalf of Debtor below will constitute the legal, valid and binding
obligation, contract and agreement of Debtor enforceable against Debtor in
accordance with its respective terms; (b) this Agreement and each and every
showing provided by or on behalf of Debtor in connection herewith may be relied
upon by Secured Party in accordance with the terms thereof notwithstanding the
failure of Debtor or other applicable party to ensure proper attestation
thereto, whether by absence of a seal or acknowledgement or otherwise; (c)
Debtor has the right, power and authority to grant a security interest in the
Equipment to Secured Party for the uses and purposes herein set forth and (d)
each Item of Equipment will, at the time such Item becomes subject hereto, be
in good repair, condition and working order.
27. ENTIRE AGREEMENT. This instrument with exhibits and related documentation
constitutes the entire agreement between Secured Party and Debtor and will not
be amended, altered or changed except by a written agreement signed by the
parties.
28. NOTICES. Notices under this Agreement must be in writing and must be
mailed by United States mail, certified mail with return receipt requested,
duly addressed, with postage prepaid, to the party involved at its respective
address set forth at the foot hereof or at such other address as each party may
provide on notice to the other from time to time. Notices will be effective
when deposited. Each party will promptly notify the other of any change in that
party's address.
29. GENDER, NUMBER: JOINT AND SEVERAL LIABILITY. Whenever the context of this
Agreement requires, the neuter gender includes the feminine or masculine and
the singular number includes the plural; and whenever the words "Secured Party"
are used herein, they include all assignees of Secured Party, it being
understood that specific reference to "assignee" in
<PAGE> 8
ADVANCED CORNEAL SYSTEMS, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10802
PAGE 8 OF 8
Paragraph 14 above is for further emphasis. If there is more than one Debtor
named in this Agreement, the liability of each will be joint and several.
30. TITLES. The titles to the Paragraphs of this Agreement are solely for the
convenience of the parties and are not an aid in the interpretation of the
instrument.
31. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in
accordance with the laws of the State of California. Venue for any action
related to the Agreement will be in an appropriate court in San Mateo County,
California, to which Debtor consents, or in another court selected by Secured
Party which has jurisdiction over the parties. In any event any provision hereof
is declared invalid, such provision will be deemed severable from the remaining
provisions of this Agreement, which will remain in full force and effect.
32. TIME. Time is of the essence of this Agreement and for each and all of
its provisions.
In WITNESS WHEREOF, the undersigned have executed this Agreement as of October
7, 1996.
DEBTOR:
ADVANCED CORNEAL SYSTEMS, INC.
15279 Alton Parkway, Suite 100
Irvine, CA 92618
By: /s/ Robert K. Bruning
-----------------------------
Title: V.P., Chief Financial Officer
SECURED PARTY:
LEASE MANAGEMENT SERVICES, INC.
2500 Sand Hill Road, Suite 101
Menlo Park, CA 94025
By: /s/ [illegible]
-----------------------------
Title: EVP/ General Manager
<PAGE> 9
[LEASE MANAGEMENT SERVICES, INC. LOGO]
CERTIFIED COPY OF RESOLUTIONS OF
BOARD OF DIRECTORS
I, Donald H. Harris, hereby certify that I am the Corporate Secretary and
official custodian of certain records including the Charter, By-Laws, and the
Minutes of the Meetings of the Board of Directors of ADVANCED CORNEAL SYSTEMS,
INC., a Corporation duly organized and existing under the laws of the State of
California, that the following is a true, accurate and compared transcript of
the Resolutions contained in the Minute Book of the Corporation, duly adopted
by the Board of Directors of said Corporation at a Meeting of the Board of
Directors of said Corporation duly held on the 10th day of September, 1996, at
which time a quorum was present and acted throughout and authorized its
officers to transact the business hereinafter described, and that the
proceedings of said meeting were in accordance with the Charter and By-Laws of
said Corporation and that said Resolutions have not been rescinded or amended
and are in full force and effect:
RESOLVED, that this Corporation enter into a Lease Agreement and/or an
Equipment Financing Agreement with LEASE MANAGEMENT SERVICES, INC. for the
funding of that certain property as is set forth in the Master Equipment Lease
Agreement and/or Equipment Financing Agreement, and it is further
RESOLVED, that any officers of this Corporation be and they are hereby
authorized and empowered in the name of and on behalf of this Corporation to
execute any and all documents as may be required by LEASE MANAGEMENT SERVICES,
INC. to effectuate the provisions hereof.
I CERTIFY, that I have examined the Articles of Incorporation, the By-Laws
of the Corporation, and all amendments therewith and I am fully familiar with
all of said documents and that there are no restrictions imposed on the power
and authority of the Board of Directors of said Corporation to adopt the
foregoing resolutions whereupon the Corporation and its officers are authorized
to act in accordance therewith.
IN WITNESS WHEREOF, I have hereupon subscribed my name on the 7th day of
October, 1996.
By: /s/ Donald H. Harris
--------------------------------
Corporate Secretary
ATTEST:
/s/ Robert K. Bruning
--------------------------------
Title: V.P. CFO
-----------------------------
<PAGE> 10
[LEASE MANAGEMENT SERVICES, INC. LOGO]
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, Donald H. Harris, do hereby certify that I am duly elected, qualified and
acting Secretary of ADVANCED CORNEAL SYSTEMS, INC., (Debtor), a California
corporation; that the persons whose names, titles and signatures appear below
are duly elected (or appointed) qualified and acting officers of said
corporation and hold on the date of this Certificate, and on the date of
execution of the Master Lease documents and/or Equipment Certificate, and on the
date of execution of the Master Lease documents and/or Equipment Financing
documents, the offices set opposite their respective names; that the signatures
appearing opposite their respective names are the genuine signatures of such
officers; that each such officer is duly authorized for and on behalf of said
corporation to execute and deliver any Equipment Financing Agreement between
said corporation and said Secured Party, LEASE MANAGEMENT SERVICES, INC., and
all agreements, documents, and instruments in connection therewith, including
without limitation, Rental Schedules and Certificates of Equipment Acceptance,
and that the execution and delivery of any such equipment financing agreement,
and all agreements, documents, and instruments in connection therewith for and
on behalf of said corporation is not prohibited by or in any manner restricted
by the terms of said corporation's Certificate of Incorporation, its by-laws, or
of any loan agreement, indenture or contract to which said corporation is a
party or under which it is bound. I do further certify that the foregoing
authority shall remain in full force and effect, and LEASE MANAGEMENT SERVICES,
INC. shall be entitled to rely upon the same, until written notice of the
modification, rescission or revocation of same, in whole or in part, has been
delivered to LEASE MANAGEMENT SERVICES, INC., but no such modification,
rescission or revocation shall, in any event, be effective with respect to any
documents executed or actions taken in reliance upon the foregoing authority
prior to the delivery to LEASE MANAGEMENT SERVICES, INC. of said written notice
of said modification, rescission or revocation.
NAME OF OFFICER TITLE OF OFFICER SIGNATURE OF OFFICER
John H. Parrish President and CEO /s/ John H. Parrish
--------------------------
Robert K. Bruning Vice President, CFO /s/ Robert K. Bruning
--------------------------
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of October, 1996.
Debtor:
ADVANCED CORNEAL
SYSTEMS, INC.
By: /s/ Donald H. Harris
---------------------------
Title: Secretary
------------------------
<PAGE> 11
[LEASE MANAGEMENT SERVICES, INC. LOGO]
ADDENDUM TO
EQUIPMENT FINANCING AGREEMENT
NUMBER 10802
BY AND BETWEEN
ADVANCED CORNEAL SYSTEMS, INC., AS DEBTOR,
AND
LEASE MANAGEMENT SERVICES, INC., AS SECURED PARTY
ADVANCED CORNEAL SYSTEMS, INC., as Debtor, hereby acknowledges its
responsibility to pay, and agrees to pay any taxes which may be due to the
State of California or where applicable, for the collateral covered under the
above referenced agreement.
DEBTOR:
ADVANCED CORNEAL
SYSTEMS, INC.
BY: /s/ Robert K. Bruning
--------------------------------
Title: V.P. Chief Financial Officer
-----------------------------
Date: October 7, 1996
------------------------------
<PAGE> 12
[LMS LOGO] LEASE MANAGEMENT SERVICES, INC.
REQUEST FOR CERTIFICATE OF INSURANCE
To: Johnson & Higgins
Name: Dennis Moore Phone: (619) 587-1700
Address: 4275 Executive Square, Suite 600 Fax: (619) 546-1100
San Diego, CA 92037-1499
We, as Lessee/Debtor, have entered into a Master Equipment Lease Agreement
and/or an Equipment Financing Agreement with LEASE MANAGEMENT SERVICES, INC., as
Lessor/Secured Party, to finance the purchase of equipment.
Accordingly, you are hereby authorized to:
1. Insure said equipment in the name of LEASE MANAGEMENT SERVICES, INC.
2. Issue a written endorsement naming LEASE MANAGEMENT SERVICES, INC., as
Additional Insured and First Loss Payee, and provide LMSI with thirty (30)
day written notice of material change of coverage, cancellation or
non-renewal. LMSI shall have the right to name additional parties as
Additional Insured and First Loss Payee and notices will also be provided
to those parties upon LMSI's request.
3. INSURANCE MUST INCLUDE COVERAGE AS INDICATED BELOW:
(x) Bodily Injury and Property Damage Insurance with limits of $6,500,000
(x) Physical Damage (all risk) from any cause whatsoever, except
earthquake and flood.
4. Loss, if any, under this endorsement shall be payable SOLELY to LEASE
MANAGEMENT SERVICES, INC. or its assigns and shall not be invalidated due
to any violation of any conditional warranty contained in any policy or
application therefor by Lessee/Debtor, or by reason of any act of the
Lessee/Debtor.
5. THIS POLICY MUST CONTAIN THE FOLLOWING ENDORSEMENT:
The insurance under this policy shall be primary insurance, and the company
insurer shall be liable under this policy for the full amount of the loss
up to and including the total limits of liability herein without right of
contribution from any other insurance effected by LEASE MANAGEMENT
SERVICES, INC., under any policy with any insurance company covering a loss
covered under this policy.
Forward evidence of coverage to: LEASE MANAGEMENT SERVICES, INC.
2500 Sand Hill Road, Suite 101
Menlo Park, California 94025
Attn: Insurance Administrator
DEBTOR:
ADVANCED CORNEAL SYSTEMS, INC.
By: /s/ Robert K. Bruning
--------------------------
Title: Chief Financial Officer
-----------------------
Date: October 7, 1996
------------------------
<PAGE> 13
[LMS LOGO] LEASE MANAGEMENT SERVICES, INC.
SECURITY DEPOSIT PLEDGE AGREEMENT
PLEDGEE: LEASE MANAGEMENT SERVICES, INC.
2500 Sand Hill Road, Suite 101
Menlo Park, California 94025
PLEDGOR: ADVANCED CORNEAL SYSTEMS, INC.
15279 Alton Parkway, Suite 100
Irvine, CA 92618
In consideration of, and as an inducement for Pledgee to enter into an Equipment
Financing Agreement Number 10802 and all Schedules thereunder (hereinafter
collectively referred to as the "Agreements") with Pledgor, and to secure the
payment and performance of all Pledgor's obligations under the Agreements,
Pledgor hereby grants and assigns to Pledgee, its successors and assigns, a
security interest in, and hereby deposits and pledges with Pledgee a Security
Deposit in an amount equivalent to twenty-two percent (22%) of aggregate
Equipment cost (including any soft costs) leased or financed for each Schedule.
As used herein, "Security Deposit" shall refer to the aggregate of all
component deposits made under the applicable Schedules. Such pledge is to be
upon the terms and conditions set forth below:
1. Pledgor delivers the Security Deposit to Pledgee to secure the due and
punctual payment and performance of the obligations of Pledgor under the
Agreements. Pledgee will pay 4.5% simple interest per annum on the Security
Deposit, which interest will be accrued for each respective component of
the Security Deposit from the commencement date of the applicable Schedule
and paid when the Security Deposit is returned to Pledgor.
2. Upon any default by Pledgor under the Agreements, interest accrual on the
Security Deposit shall cease and Pledgee may, at its option, apply the
Security Deposit and any interest accrued to that date toward the
satisfaction of Pledgor's obligations under the Agreements, and the payment
of all costs and expenses incurred by Pledgee as a result of such default,
including reasonable attorney's fees, Pledgee is liable to Pledgor only for
any surplus remaining from said Security Deposit after the full
satisfaction of the foregoing obligations, costs and expenses.
3. Pledgor waives any rights to require Pledgee to (i) proceed against Pledgor
or any other party; (ii) proceed against or exhaust any security held from
Pledgor; or (iii) pursue any other remedy in Pledgee's power whatsoever
before enforcing the provisions of, and proceeding under the provisions of,
this Security Deposit Pledge Agreement. The obligations of Pledgor under
this Security Deposit Pledge Agreement shall be absolute and unconditional,
and shall remain in full force and effect without regard to, and shall not
be released or discharged or in any way affected by (a) any amendment or
modification of or supplement to the Agreements; (b) any exercise or
non-exercise of any right, remedy or privilege under or in respect to this
Security Deposit Pledge Agreement, the Agreements, or any other instrument
provided for in the Agreements, or any waiver, consent, explanation,
indulgence or actions or inaction
<PAGE> 14
SECURITY DEPOSIT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 2 of 3
with respect to any such instrument; or (c) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceedings of Pledgor.
4. Pledgee shall have no obligation to segregate said Security Deposit and
Pledgor hereby irrevocably authorizes Pledgee, at Pledgee's sole election,
to commingle said Security Deposit with other assets and funds held by or
belonging to Pledgee. Pledgor may not assign, pledge or transfer to any
party its interest in the Security Deposit and any attempt to do so shall
be null and void.
5. Without notice to Pledgor, Pledgee may freely assign its rights and
obligations hereunder, in whole or in part, at any time and this Security
Deposit Pledge Agreement shall inure to the successors and assignees of
Pledgee. In the event Pledgee assigns or transfers one or more Schedules
under the Agreements without assigning or transferring the Security
Deposit, Pledgor agrees that it will look solely to Pledgee for the return
of the Security Deposit and will not assert any claim against any assignee
of Pledgee for the return of said Security Deposit and further agrees that
it will not assert against any payments due such assignee of Pledgee any
offset that Pledgor may have against Pledgee for the return of said
Security Deposit. In the event Pledgee assigns or transfers this Security
Deposit Pledge Agreement along with the Security Deposit, Pledgor agrees
that it shall look solely to the assignee of Pledgee for the return of said
Security Deposit and Pledgee shall have no further liability to Pledgor
with respect thereto.
6. Provided that the Pledgor is not then in default of its obligations to the
Pledgee under the Agreements or otherwise, any remaining Security Deposit
and accrued interest will be returned to Pledgor when Pledgor's
unrestricted cash becomes equal to or greater than $7,000,000.
ADDITIONAL COLLATERAL REQUIREMENTS WILL THEN BE AS DEFINED IN THE NEGATIVE
COVENANT PLEDGE AGREEMENT DATED OCTOBER 7, 1996.
All accounting terms used herein shall be interpreted in accordance with
generally accepted accounting principles.
9. Any reduction/return of the Security Deposit and any payment of interest
prior to the Termination of the Agreements (as defined below) is contingent
upon the following additional conditions: (a) verification of all
benchmarks; (b) Pledgor has made all payments on a timely basis according
to the terms of the Agreements; (c) Pledgor is not, nor ever has been, in
default of any financial obligation; (d) Pledgor, if privately held, has
provided monthly financial statements to Pledgee within 30 days of each
month-end, or if Pledgor is publicly held, has provided quarterly
statements as required to be filed by the Securities and Exchange
Commission (the "SEC"); (e) Pledgor, if privately held, has provided an
annual audited financial statements to Pledgee within 90 days of Pledgor's
fiscal year end or if Pledgor is publicly held, has provided Pledgee with
annual statements as required to be filed by the SEC; and (f) Pledgor has
not suffered any material adverse change.
The Termination of the Agreements shall be defined as the satisfaction of
all Pledgor's obligations under the Agreements.
<PAGE> 15
SECURITY DEPOSIT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 3 of 3
10. If the Security Deposit has not previously been returned, upon the
Termination of the Agreements, Pledgee shall deliver the Security Deposit and
accrued interest (less any portion of same cashed, sold, assigned or delivered
pursuant to, and under the circumstances specified in, Paragraph 2 hereof) to
Pledgor, and this Security Deposit Pledge Agreement shall thereupon be without
further effect.
PLEDGOR: PLEDGEE:
ADVANCED CORNEAL LEASE MANAGEMENT SERVICES, INC.
SYSTEMS, INC.
By: /s/ Robert K. Bruning By: /s/ [illegible]
-------------------------------- --------------------------------
Title: V.P. Chief Financial Officer Title: EVP/General Manager
----------------------------- -----------------------------
Date: 10/7/96 Date: 10/7/96
------------------------------ ------------------------------
<PAGE> 16
[LEASE MANAGEMENT SERVICES, INC. LOGO]
LEASE MANAGEMENT SERVICES, INC.
NEGATIVE COVENANT PLEDGE AGREEMENT
Agreement made and entered into as of the 7th day of October, 1996, by and
between ADVANCED CORNEAL SYSTEMS, INC., a California corporation, with its
principal place of business at 15279 Alton Parkway, Suite 100, Irvine, CA 92618
("Pledgor") and LEASE MANAGEMENT SERVICES, INC., a California Corporation, with
its principal place of business at 2500 Sand Hill Road, Suite #101, Menlo Park,
CA 94025 ("Pledgee").
In consideration of, and as an inducement for Pledgee to enter into Equipment
Financing Agreement Number 10802, and all Schedules thereunder, (referred to
hereinafter as the "Agreements") with Pledgor, and to secure the payment and
performance of all Pledgor's obligations under the Agreements, Pledgor and
Pledgee agree as follows:
1) If at any point in time after the full return of the Security Deposit and
accrued interest as specified in the Security Deposit Pledge Agreement
dated October 7, 1996, Pledgor's Unrestricted Cash (as defined below) falls
below the financial requirements listed in A) or B), or Pledgor is in
default of the Agreements, Pledgor agrees to provide to Pledgee within 10
days of such occurrence a cash security deposit in an amount equal to
twenty-two percent (22%) of the total aggregate Equipment cost (including
any soft costs) which are included in the Agreements ("Collateral Pledge"),
but in any event not to exceed the remaining gross receivable.
A) PRE-IPO: In the event unrestricted cash falls below the greater of
$3,000,000 or 6 month's cash needs (defined as the cash burn for the 3
months just completed, multiplied by a factor of 2.3).
B) POST-IPO: In the event unrestricted cash falls below the greater of
$7,000,000 or 11 months' cash needs (defined as the cash burn for the
3 months just completed, multiplied by a factor of 3.8).
Unrestricted Cash shall be defined as cash on hand, including investments
in marketable securities with maturities of less than one (1) year, less
all debt which is not subordinated to Pledgee.
The failure to timely provide the Collateral Pledge to Pledgee shall
constitute an event of default under the Agreements.
2) Pledgor if privately held, agrees to provide financial statements,
including a cash flow statement, balance sheet and statement of operations,
to Pledgee within 30 days of each month-end and audited annual financial
statements within 90 days of Pledgor's fiscal year end or if Pledgor is
publicly held, agrees to provide quarterly and annual audited financial
statements as required by the Securities and Exchange Commission (the
"SEC"). All such statements are to be prepared using generally accepted
accounting principles and are to be in compliance with SEC requirements.
Failure to provide these statements as specified herein will constitute an
event of default under the Agreements.
3) Pledgor agrees to keep all Unrestricted Cash within the following financial
institutions:
<PAGE> 17
NEGATIVE COVENANT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
PAGE 2 OF 3
3) Pledgor agrees to keep all Unrestricted Cash within the following
financial institutions:
Financial Institution: UNION BANK
-----------------------------------------
Account Number: 4500153666
-----------------------------------------
Officer Contact:
-----------------------------------------
Phone Number: (800) 918-6466
-----------------------------------------
Financial Institution: U.S. COMMUNITY SAVINGS BANK
-----------------------------------------
Account Number: 01082262
-----------------------------------------
Officer Contact: GLORIA DOTTY
-----------------------------------------
Phone Number: (619) 753-4663
-----------------------------------------
Financial Institution: DONALDSON LUFKIN & JENRETTE
-----------------------------------------
Account Number: 219-246121
-----------------------------------------
Officer Contact: DON TRABERT
-----------------------------------------
Phone Number: (415) 249-2032
-----------------------------------------
Any changes in the above information shall be provided in writing by the
Pledgor to Pledgee within fifteen (15) days of such change.
Pledgor hereby authorizes these financial institutions to give specific
account balance information to Pledgee and agrees to execute any other
documents or take any other action required to provide verification of
unrestricted cash balances.
4) Pledgee agrees to pay interest on the Collateral Pledge at a simple
interest rate equal to 4.5%, which interest will accrue from the date the
Collateral Pledge is received until the date the Collateral Pledge and
interest are returned to the Pledgor.
5) Pledgor agrees to recognize the Collateral Pledge as a contingent
liability and to establish the appropriate reserves.
6) Upon any default by Pledgor under the Agreements, interest accrual on the
Collateral Pledge shall cease and Pledgee may, at its option, apply the
Collateral Pledge and any interest accrued to that date toward the
satisfaction of Pledgor's obligations under the Agreements, and the payment
of all costs and expenses incurred by Pledgee as a result of such default,
including reasonable attorney's fees. Pledgee is liable to Pledgor only for
any surplus remaining from said Collateral Pledge after the full
satisfaction of the foregoing obligations, costs and expenses.
7) Pledgee shall have no duty to first commence an action against or seek
recourse from Pledgor, in the event of a default under the Agreements,
before enforcing the provisions of, and proceeding under the provisions of,
this Negative Covenant Pledge Agreement. The obligations of Pledgor under
this Negative Covenant Pledge Agreement shall be absolute and unconditional
and shall remain in full force and effect without regard to, and shall not
be released or discharged or in any way affected by:
a) any amendment or modification of or supplement to the Agreements;
b) any exercise or non-exercise of any right, remedy or privilege under
or in respect to this Negative Covenant Pledge Agreement, the
Agreements, or any other Instrument provided for in the Agreement(s),
or any waiver, consent,
<PAGE> 18
NEGATIVE COVENANT PLEDGE AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 3 of 3
explanation, indulgency or actions or inaction with respect to any
such instrument; or
(c) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding of Pledgor.
8) The entire Collateral Pledge and any accrued interest will be returned to
Pledgor when Pledgor's Unrestricted Cash exceeds the benchmark defined
above for a period of at least one fiscal quarter and continues to remain
greater and Pledgor is not in default under the Agreements or any other
financial obligations.
Return of any required Collateral Pledge prior to the Termination of the
Agreements (as defined below) is contingent upon the following additional
conditions: (a) verification of all benchmarks; (b) Pledgor has made all
payments in a timely manner to Pledgee according to the terms of the
Agreements; (c) Pledgor is not then, nor has ever been in default of its
obligation to the Pledgee under the Agreements, and Pledgor has not
defaulted on any other financial obligation; (d) Pledgor, if privately
held, has provided monthly financial statements to Pledgee within 30 days
of each month-end or if Pledgor is publicly held, has provided quarterly
statements as required to be filed by the Securities and Exchange
Commission (the "SEC"); (e) Pledgor, if privately held, has provided an
annual audited financial statements to Pledgee within 90 days of
Pledgor's fiscal year end or if Pledgor is publicly held, has provided
Pledgee with annual statements as required to be filed by the SEC; and (f)
Pledgor has not suffered any material adverse change.
The Termination of the Agreements shall be defined as the satisfaction of
all Pledgor's obligations under the Agreements.
If the Collateral Pledge is returned prior to the Termination of the
Agreements, this Negative Covenant Pledge Agreement shall remain in full
force and effect.
9) If the Collateral Pledge has not been previously returned upon Termination
of the Agreements and the satisfaction of all obligations of Pledgor
thereunder, Pledgee shall deliver the Collateral Pledge (less any portion
of same cashed, sold, assigned or delivered pursuant to, and under the
circumstances specified in, Paragraph 6 hereof) to Pledgor, and this
Negative Covenant Pledge Agreement shall thereupon be without further
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Negative Covenant Pledge
to be executed as of the date first above written.
PLEDGOR: PLEDGEE:
ADVANCED CORNEAL SYSTEMS, INC. LEASE MANAGEMENT SERVICES, INC.
By: /s/ Robert K. Bruning By: /s/ [Illegible]
-------------------------------- --------------------------------
Its: VP, Chief Financial Officer Its: EVP/General Manager
------------------------------- -------------------------------
<PAGE> 19
[LOGO]
LEASE MANAGEMENT SERVICES, INC.
COLLATERAL SECURITY AGREEMENT
Agreement made and entered into as of this 7th day of October, 1996, by and
between ADVANCED CORNEAL SYSTEMS, INC., Debtor and LEASE MANAGEMENT SERVICES,
INC., Secured Party.
As security for the payment and performance by ADVANCED CORNEAL SYSTEMS, INC.
("ACSI") to LEASE MANAGEMENT SERVICES, INC. ("LMSI") under (a) Equipment
Financing Agreement Number 10802, and all schedules thereunder between ACSI and
LMSI (hereinafter collectively referred to as the "Agreements"); (b) any and
all obligations of ACSI to LMSI hereunder and any and all indebtedness and
obligations of ACSI to LMSI, direct, indirect or contingent, joint or several,
whether or not otherwise secured, and whether now existing or hereafter
incurred; and (c) any and all amounts advanced or expended by LMSI for the
maintenance or preservation of the Collateral (as defined below). ACSI hereby
pledges, assigns and grants to LMSI, a first security interest in:
All fixed assets now owned and all fixed assets hereinafter acquired through
the later of a) July 31, 1997 or b) the expiration of the funding period stated
in the Proposal Letter dated August 16, 1996 and any extensions thereunder,
including, but not limited to, laboratory equipment, laboratory furniture, test
equipment, electronic equipment, computer equipment, office equipment, office
furniture, fume hoods, autoclaves, and leasehold improvements together with all
accessories, parts, upgrades, renewals and replacements of, and repairs,
improvements and accessions to the fixed assets and any insurance proceeds or
revenue derived from the sale or other disposition of the fixed assets
(collectively, the "Collateral").
ACSI hereby warrants that it is the sole owner in possession of all Collateral
and that the Collateral is free and clear of all liens, encumbrances and
adverse claims, with the exception of the security interest herein created and
all other security interests previously granted to LMSI. ACSI agrees to execute
and deliver to LMSI at any time and from time to time such other security
agreements or mortgages of chattel as LMSI may reasonably request, covering the
Collateral. ACSI also agrees to appear in and defend any and all actions and
proceedings, at its own expense, affecting title to the Collateral or any part
thereof, or affecting the security interest of LMSI therein.
ACSI also agrees to: do all acts which may necessary to maintain, preserve and
protect the Collateral and to keep the Collateral in good condition and repair;
not to cause or permit any waste or unusual or unreasonable depreciation
thereof or any act for which the Collateral might be confiscated; to pay before
delinquency all taxes, assessments and liens now or hereafter imposed upon the
Collateral; not to sell, lease, encumber or dispose of all or any part of the
Collateral; at any time upon demand of LMSI to exhibit to and allow inspection
by LMSI of the Collateral; not to remove or permit the removal of the
Collateral from the premises where it is now located without the prior written
consent of LMSI, which consent shall not be unreasonably withheld; to provide,
maintain and deliver to LMSI policies insuring the Collateral against loss or
damage by such risks and in such amounts, forms and companies as LMSI
reasonably requires and with loss payable to LMSI. If LMSI takes possession of
the Collateral in the event of a Default, the insurance policy or policies of
any unearned or returned premium shall, at the option of LMSI, be assigned by
ACSI to LMSI, upon LMSI crediting the amount of any unearned premium upon the
obligation secured hereby.
In the event the Collateral or an item thereof is destroyed and payment
upon such policies of insurance is made to ACSI and ACSI chooses not to replace
the Collateral with equipment of like kind or value, LMSI will retain all
insurance proceeds except to the extent that the proceeds exceed the remaining
obligation of ACSI to LMSI. If ACSI chooses to replace the
<PAGE> 20
COLLATERAL SECURITY AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
Page 2 of 3
Collateral or any item thereof with equipment of like kind and value, the
replacement must be completed within 60 days of loss, unless otherwise agreed
by LMSI, ACSI must acquire title to the replacement free and clear of liens and
encumbrances and grant to LMSI a first priority perfected security interest
therein; otherwise LMSI shall be entitled to the insurance proceeds. The
provisions of this paragraph shall not apply to Collateral specifically covered
by any schedules to a Master Lease Agreement or Equipment Financing Agreement
between ACSI and LMSI which shall governed by the provisions of the applicable
Master Lease Agreement and Equipment Financing Agreement.
If ACSI fails to make any payment or do any act as herein required, then LMSI
may, but without obligation to do so, and without notice to or demand upon
ACSI, make such payments and do such acts as LMSI may deem necessary to protect
its security interest in the Collateral. LMSI is hereby authorized (without
limiting the general nature of the authority hereinabove conferred) to take
possession of the Collateral; to pay, purchase, contest, and compromise any
encumbrance, charge or lien which in the judgment of LMSI appears to be prior
or superior to its security interest; and, in exercising any such powers and
authority, to pay necessary expenses, employ counsel and pay reasonable fees
therefor. ACSI hereby agrees to repay immediately, and without demand, all sums
so expended by LMSI, with interest from date of expenditure at the rate of
Eighteen Percent (18%), but never to exceed any legal limit for such interest.
Any officer of LMSI is hereby irrevocably appointed the attorney-in-fact of
ACSI, with full power of substitution, only to sign any certificate of
ownership, registration card, application therefor, affidavits or documents
necessary to transfer title to any of the Collateral, to receive and give
receipt for all licenses, registration cards and certificates of ownership, and
to do all acts necessary or incident to the powers granted to LMSI herein, as
full as ACSI might.
Should ACSI default under the Lease, upon written notice, pursuant to the terms
and conditions of the Agreements, LMSI may (a) immediately take possession of
the Collateral wherever it may be found, using all necessary force to do so or
require ACSI to assemble the Collateral and make it available to LMSI at a
place designated by LMSI which is reasonably convenient to LMSI, and ACSI
waives all claims for damages due to or arising from or connected with any such
taking; (b) proceed in the foreclosure of LMSI's security interest and the sale
of the Collateral in any manner permitted by law, or provided for herein; (c)
sell, lease or otherwise dispose of the Collateral at public or private sale,
with or without having the Collateral at the place of sale, and upon terms and
in such manner as LMSI may determine, and LMSI may purchase the same at any
such sale; (d) retain the Collateral in full satisfaction of the obligations
secured thereby; (e) exercise any remedies of a LMSI under the Uniform
Commercial Code.
Prior to any such disposition, LMSI may, at its option, cause any of the
Collateral to be repaired or reconditioned in such manner and to such extent as
LMSI may deem advisable, and any sums expended therefor by LMSI shall be repaid
by ACSI and secured hereby; LMSI shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
stop or prevent LMSI from pursuing any further remedy which it may have
hereunder or by law. If a sufficient sum is not realized from any such
disposition of Collateral to pay all obligations secured by this agreement,
ACSI hereby promises and agrees to pay LMSI any deficiency.
Time and exactitude of each of the terms, obligations, covenants and conditions
are hereby declared to be the essence hereof. No waiver by LMSI of any breach
or default shall be deemed a waiver of any breach or default thereafter
occurring and the taking of any action by LMSI shall not be deemed to be an
election of that action but rather the rights and privileges and options
granted to LMSI under the terms hereof shall be deemed cumulative, the one with
the other and not alternative.
<PAGE> 21
COLLATERAL SECURITY AGREEMENT
ADVANCED CORNEAL SYSTEMS, INC.
PAGE 3 OF 3
Should the Collateral be sold, with or without the consent of LMSI, then it is
expressly agreed that the proceeds from said sale are hereby assigned to LMSI
who shall immediately receive the entire proceeds.
ACSI agrees to execute any additional documents deemed necessary by LMSI to
assure the perfection of the security interest created hereunder and to pay any
fees or charges paid by LMSI in connection with the perfection of, or continue
the perfection of, the security interest created hereunder.
Upon termination of the Agreements and the satisfaction of all obligations of
ACSI thereunder, LMSI shall release its security interest in the Collateral,
and this Collateral Security Agreement shall thereupon be without further
effect.
IN WITNESS WHEREOF, the parties have caused this Collateral Security Agreement
to be executed as of this 7th day of October, 1996.
LESSEE/DEBTOR: LESSOR/SECURED PARTY
ADVANCED CORNEAL LEASE MANAGEMENT SERVICES, INC.
SYSTEMS, INC.
By: /s/ Robert K. Bruning By: /s/ [Illegible]
Title: V.P. Chief Financial Officer Title: EVP/General Manager
<PAGE> 22
To: Leslie Way
From: Robert Bruning
The following is the information you requested for the lease documents with the
corresponding item number:
1. Advanced Corneal Systems, Inc.
2. 33-0511729
3. 15279 Alton Parkway, Suite 100
Irvine, California 92653
4. Same as # 3.
5. Donald H. Harris
6. John H. Parrish--President and CEO
Hampar L. Karageozian--Vice President, Chief Technical Officer
Robert K. Bruning--Vice President, Chief Financial Officer
Diana L. Schmidt--Vice President, Marketing
7. California
8. Johnson & Higgins
4275 Executive Square, Suite 600
San Diego, California 92037-1499
Attn: Dennis Moore
9. Aetna Life Insurance Company
P.O. Box 19693, 30 Executive Park, Suite 100
Irvine California 92713-9693
Attn: Donna Freeman
10. Same as #3.
<PAGE> 23
[LMSI VENTURE FINANCE LOGO]
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, , do hereby certify that I am the duly elected, qualified and
acting Secretary of ADVANCED CORNEAL SYSTEMS, INC. ("Borrower"), a California
corporation; that the persons whose names, titles and signatures appear below
are duly elected (or appointed) qualified and acting officers of said
corporation and hold on the date of this Certificate, and on the date of
execution of the Master Loan and Security Agreement documents, the office set
opposite their respective names; that the signatures appearing opposite their
respective names are the genuine signatures of such officers; that each such
officer is duly authorized for and on behalf of said corporation to execute and
deliver any Master Loan and Security Agreement between said corporation and said
Lender, LMSI VENTURE FINANCE, and all agreements, documents, and instruments in
connection therewith, including without limitation, Loan Schedules and
Certificates of Equipment Acceptance, and that the execution and delivery of any
such Master Loan and Security Agreement, and all agreements, documents, and
instruments in connection therewith for and on behalf of said corporation is not
prohibited by or in any manner restricted by the terms of said corporation's
Certificate of Incorporation, its by-laws, or of any loan agreement, indenture
or contract to which said corporation is a party or under which it is bound. I
do further certify that the foregoing authority shall remain in full force and
effect, and LMSI VENTURE FINANCE shall be entitled to rely upon the same, until
written notice of the modification, rescission or revocation of same, in whole
or in part, has been delivered to LMSI VENTURE FINANCE, but no such
modification, rescission or revocation shall, in any event, be effective with
respect to any documents executed or actions taken in reliance upon the
foregoing authority prior to the delivery to LMSI VENTURE FINANCE of said
written notice of said modification, rescission or revocation.
NAME OF OFFICER TITLE OF OFFICER SIGNATURE OF OFFICER
J.C. MacRae Vice President & Chief /s/ J.C. MacRae
Financial Officer -------------------------
IN WITNESS WHEREOF, I have hereunto set my hand this 9 day of April, 1999.
/s/ J.C. MacRae
---------------------
(Corporate Secretary)
Name: J.C. MacRae
------------------------------------
Title: Vice President, Assistant Secretary
-----------------------------------
<PAGE> 24
[LMSI VENTURE FINANCE LOGO]
AMENDMENT TO
EQUIPMENT FINANCING AGREEMENT
NO. 10802
BY AND BETWEEN
ADVANCED CORNEAL SYSTEMS, INC., AS DEBTOR
AND
LMSI VENTURE FINANCE, A DIVISION OF PHOENIXCOR, INC., AS
SECURED PARTY
(FORMERLY KNOWN AS LEASE MANAGEMENT SERVICES, INC.)
Debtor and Secured Party hereby agree to amend Equipment Financing Agreement
No. 10802 and all Schedules thereunder and all other related documents (herein
collectively referred to as the "Agreements") to reflect Secured Party's name
change from Lease Management Services, Inc. to LMSI Venture Finance, a division
of Phoenixcor, Inc., a Delaware Corporation ("LMSI Venture Finance").
All other terms and conditions remain the same.
IN WITNESS WHEREOF, Debtor and Secured Party have each caused this Amendment to
be duly executed in their respective names.
DEBTOR: SECURED PARTY:
ADVANCED CORNEAL SYSTEMS, INC. LMSI VENTURE FINANCE, A DIVISION OF
PHOENIXCOR, INC.
By: /s/ Cynthia Gleason By: /s/ Barbara B. Kaiser
---------------------- ----------------------
Title: Administrative Manager Title: EVP/General Manager
---------------------- ----------------------
Date: 4/8/99 Date: 4/8/99
---------------------- ----------------------
<PAGE> 25
[LOGO] LEASE MANAGEMENT SERVICES, INC.
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, John H. Parrish, do hereby certify that I am a duly elected, qualified and
acting Chairman of the Board of Directors of ADVANCED CORNEAL SYSTEMS, INC.,
(Debtor), a California corporation; that the persons whose names, titles and
signatures appear below are duly elected (or appointed) qualified and acting
officers or managers of said corporation and hold on the date of this
Certificate, and on the date of execution of the Master Lease documents and/or
Equipment Financing documents, the offices/positions set opposite their
respective names; that the signatures appearing opposite their respective names
are the genuine signatures of such officers/managers; that each such
officer/manager is duly authorized for and on behalf of said corporation to
execute and deliver any Equipment Financing Agreement between said corporation
and said Secured Party, LEASE MANAGEMENT SERVICES, INC., and all agreements,
documents, and instruments in connection therewith, including without
limitation, Rental Schedules and Certificates of Equipment Acceptance, and that
the execution and delivery of any such equipment financing agreement, and all
agreements, documents, and instruments in connection therewith for and on
behalf of said corporation is not prohibited by or in any manner restricted by
the terms of said corporation's Certificate of Incorporation, its by-laws, or
of any loan agreement, indenture or contract to which said corporation is a
party or under which it is bound. I do further certify that the foregoing
authority shall remain in full force and effect, and LEASE MANAGEMENT SERVICES,
INC. shall be entitled to rely upon the same, until written notice of the
modification, rescission or revocation of same, in whole or in part, has been
delivered to LEASE MANAGEMENT SERVICES, INC., but no such modification,
rescission or revocation shall, in any event, be effective with respect to any
documents executed or actions taken in reliance upon the foregoing authority
prior to the delivery to LEASE MANAGEMENT SERVICES, INC. of said written notice
of said modification, rescission or revocation.
NAME OF MANAGER TITLE OF MANAGER SIGNATURE OF MANAGER
Cynthia L. Gleason Administrative Manager /s/ Cynthia L. Gleason
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of July, 1997.
Debtor:
ADVANCED CORNEAL
SYSTEMS, INC.
By: /s/ John H. Parrish
------------------------------
Title: Co-Chairman
---------------------------
<PAGE> 1
EXHIBIT 10.12
AGREEMENT
THIS AGREEMENT (the "Agreement"), effective as of June, 1997 (the
"Effective Date"), is made by and between Advanced Corneal Systems, Inc., a
California corporation with a principal place of business at 15279 Alton
Parkway, Suite 100, Irvine, California 92618 ("ACS"), and Visionex Pte. Ltd., a
Singapore corporation with a principal place of business at 1 Robinson Road
#18-00 AIA Tower, Singapore 048542 ("Visionex").
WHEREAS, ACS has developed among other things certain proprietary
technology relating to non-surgical therapeutic ophthalmic systems;
WHEREAS, ACS is engaged in the business of manufacturing, and selling
certain products and technologies, including the Products (as defined below);
WHEREAS, ACS desires to sell, and Visionex desires to purchase and
distribute, such Products in the Territory (as defined below); and
WHEREAS, ACS and Visionex have entered into a Stock Purchase Agreement on
even date herewith pursuant to which Visionex has agreed to purchase, and ACS
has agreed to sell, shares of ACS' stock.
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES AGREE
AS FOLLOWS:
1. DEFINITIONS
(a) "ACS' Cost of Goods" shall mean the fully burdened costs incurred by
ACS, including without limitation materials, labor and overhead to manufacture,
test, store, package and ship the Products, calculated in accordance with U.S.
GAAP and ACS' then-prevailing standard procedure for calculating Cost of Goods
as reflected in ACS' audited financial statements.
(b) "Net Sales" shall mean the gross revenues from sales of the Products
in the Territory by Visionex and its affiliates to unaffiliated third parties,
less deductions for the following, to the extent any such item is included in
the invoice price:
i. standard transportation charges, including insurance pre-paid or
allowed, all as separately identified on the invoice or other documentation
maintained in the ordinary course of business;
ii. import, exports, sales, use and excise taxes, tariffs, duties and
other compulsory governmental charges imposed upon the importation, use or
sale of Products, all as actually
<PAGE> 2
paid and separately identified on the invoice or other documentation
maintained in the ordinary course of business;
iii. normal and customary quantity discounts, cash discounts
(including discounts for prompt payment), trade promotional allowances,
rebates and credits actually taken in the ordinary course of business;
iv. discounts or rebates mandated by local laws or regulations in the
Territory and separately identified on the invoice or other documentation
maintained in the ordinary course of business; and
v. allowances or credits to customers due to recalls, rejections or
returns (including for spoiled, damaged and outdated goods) actually taken
in the ordinary course of business.
(c) "Product(s)" shall mean the products listed on Exhibit A, as they may
be changed by ACS from time to time during the Term, and agreed improvements
thereto. Visionex acknowledges that the Products are provided hereunder by ACS
solely for the indications listed on Exhibit A, and the rights granted to
Visionex hereunder pertain only to such indications.
(d) "Proprietary Rights" shall mean all current and future worldwide
patents and other patent rights, copyrights, trademarks trade secrets and other
intellectual property rights, including, without limitation, all applications
and registrations with respect thereto relating to the Products and the use,
formulation and manufacture thereof. Proprietary Rights shall also mean
intellectual property as defined in Section 101(35A) of the United States
Bankruptcy Code, and embodiments of such intellectual property including the
manufacturing know-how necessary for Visionex or its designee to manufacture the
Products under Section 3(e).
(e) "Quality Inspection Criteria" shall mean the quality inspection
criteria for the Products as set forth in Exhibit B as the same may be amended
from time to time upon the mutual agreement of the parties.
(f) "Specifications" shall mean the specifications for the Products as set
forth on Exhibit C, as the same may be amended by ACS from time to time as
provided in this Agreement.
(g) "Territory" shall mean the countries set forth in Exhibit D hereto,
including any territory and province under the direct governmental control of
the government(s) of such countries.
2. RIGHTS
(a) Appointment. Subject to the terms and conditions of this Agreement,
ACS hereby grants to Visionex, and Visionex accepts the exclusive rights to
register, import, market, sell and distribute the Products in the Territory.
-2-
<PAGE> 3
(b) Initial Fee. In consideration of the appointment of Visionex made by
ACS in Section 2(a) above, and other covenants made herein, Visionex shall pay
to ACS a one-time initial fee in the amount of Five Million Dollars
($5,000,000) within five (5) days of the closing of Visionex's next equity
offering in which not less than Ten Million Dollars ($10,000,000) of Visionex
securities are sold. Visionex acknowledges that such initial fee is additional
to and distinct from the purchase payments to be made by Visionex pursuant to
Section 3 herein, and shall in no way affect any amount receivable by ACS in
accordance with Section 3 herein.
(c) Subdistributors. Visionex may exercise its distribution rights to
distribute the Products in the Territory through the use of third party
subdistributors ("Subdistributors") provided that Visionex enters into written
agreements with each Subdistributor containing terms and conditions consistent
with those contained in this Agreement. ACS acknowledges such Subdistributor
agreements will not require Visionex to pay any additional fee in excess of the
payments described in Section 2(b) and Section 3 herein.
(d) Reservation of Rights; No Right Beyond Products. Except as expressly
provided herein, no right, title, or interest is granted, whether express or
implied, by ACS to Visionex. Nothing in this Agreement shall be deemed to
grant to Visionex rights in any products or technology other than the Products,
nor shall any provision of this Agreement be deemed to restrict ACS' rights to
exploit technology, know-how, patents, or any other intellectual property
rights relating to the Products. It is further understood and agreed that ACS
and Visionex may distribute products other than Products in the Territory,
either directly or indirectly, for any and all uses except as set forth in
Section 7(g) and 8(e) herein, and no right, title or interest is granted by ACS
to Visionex with respect to any products other than the Products.
(e) Sale Conveys No Right to Manufacture or Copy. The Products are
offered for sale and are sold by ACS subject, in every case, to the condition
that such sale does not convey any license, expressly or by implication, to
manufacture, modify, reverse engineer, duplicate or otherwise copy or reproduce
any of the Products.
3. TERMS OF PURCHASE OF PRODUCTS BY Visionex
(a) Terms and Conditions. All Product purchases hereunder shall be
subject to the terms and conditions of this Agreement. Nothing contained in
any purchase order or other routine documentation submitted pursuant to this
Agreement shall in any way modify or add any terms or conditions to said
purchases, unless otherwise mutually agreed to in writing by the parties.
(b) Prices. All Product prices shall be F.O.B. Los Angeles Airport or
Seaport. The difference between Visionex's purchase price and Visionex's price
to its Customers shall be Visionex's sole remuneration for the sale of the
Products. The sales price to Visionex for each of the Products shall be as set
forth in Exhibit E.
-3-
<PAGE> 4
(c) TAXES. ACS' Product prices to Visionex shall not include any government
taxes (including without limitation sales, use, excise, withholding and value
added taxes), tariffs or duties imposed by any governmental agency that are
applicable to the export, import, or purchase of the Products and Visionex shall
bear all such taxes and duties (other than taxes on the net income of ACS). When
ACS has the legal obligation to collect and/or pay such taxes, the appropriate
amount shall be added to Visionex's invoice and paid by Visionex, unless
Visionex provides ACS with a valid tax exemption certificate authorized by the
appropriate taxing authority.
(d) FORECASTS. Beginning on the first commercial sale of a Product in the
Territory, and thereafter thirty (30) days prior to the first day of each
calendar quarter, Visionex shall provide to ACS a good faith, quarterly written
forecast of the number of units of each Product, on a Product-by-Product basis,
that Visionex expects to purchase over the following twelve (12) months
("Forecasts"). Visionex shall submit purchase orders for Products in accordance
with the number of units of Products forecasted in the first three (3) calendar
months of each Forecast (the "Binding Forecast"). Visionex may submit purchase
orders for Products in excess of the Binding Forecast for any given month, and
ACS will use reasonable efforts to accept such purchase orders, provided
however, that Visionex shall give ACS reasonable advance notice that Visionex's
needs will exceed the Binding Forecast and in no event shall ACS be obligated to
accept purchase orders exceeding one hundred twenty-five percent (125%) of the
Binding Forecast for any given month. The parties acknowledge that the last nine
(9) calendar months included in each Forecast are for ACS' planning purposes
only and shall not be binding upon the parties.
(e) ORDER AND ACCEPTANCE. All orders shall be by means of signed written
purchase orders by Visionex to ACS, sent to ACS at ACS' address for notice
hereunder and requesting a delivery date not less than ninety (90) days after
ACS' acceptance of such purchase order. Orders may initially be placed by
telephone or telecopy, provided that a signed confirming purchase order is
received in writing (which may include telecopy transmission) by ACS.
Notwithstanding anything herein to the contrary, no order shall be binding upon
ACS until accepted by ACS in writing. ACS shall use its commercially reasonable
efforts to accept each reasonable order for Products placed by Visionex and
shall deliver the ordered Products within four (4) months after ACS' acceptance
of Visionex's purchase order. Each party may cancel or reschedule purchase
orders for Products only with prior written approval of the other party. In the
event that ACS fails to supply Products which have been ordered by Visionex for
a period exceeding three (3) months beyond the due delivery date, or there are
repeated and serious failures, inability or delay in filling orders, excluding
those caused by Visionex or a supplier of raw materials comprising Products, but
otherwise including those caused by a force majeure described in Section 16(e)
("Supply Failure"), Visionex shall have the right to make Products itself or
purchase the Products from a source other than ACS. In order that Visionex may
ensure an alternative source of the Products, ACS hereby grants to Visionex an
exclusive, royalty-bearing license under the Proprietary Rights to make, have
made, register, use, import, offer for sale and sell Products in the Territory
for the indications described on Exhibit A. In no event shall such license
continue for a period longer than the Term defined in Section 9(a) hereof unless
the parties agree to such continuation in writing. Notwithstanding the
foregoing, Visionex agrees that it will not practice the license granted
hereunder except in the event of, and only for the
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duration of, a Supply Failure and ACS shall at all times have the right to
resume supply of the Products to Visionex and terminate the foregoing license
as soon as it is able to do so. In the event that Visionex practices the
license granted hereunder, at Visionex's request, ACS will provide reasonable
assistance to Visionex to establish a manufacturing facility for Products and
to transfer manufacturing of Products to such facilities. Such assistance shall
include training of Visionex personnel in Product manufacture, quality
inspection, and delivery to Visionex of all Specifications which may be
necessary in the quality inspection, manufacture and release of Products.
Visionex shall pay to ACS a royalty in the amount of five (5) percent of Net
Sales by Visionex, its affiliates, and Subdistributors of Products manufactured
by Visionex or its designee pursuant to the license granted herein.
(f) Invoicing. ACS shall submit an invoice, packing list and airway bill
to Visionex upon shipment of each Product ordered by Visionex. All invoices and
other shipping documents shall be sent first by fax, followed by business mail
to Visionex's address for notices hereunder, without regard to the actual
shipping address. Each such invoice shall state Visionex's aggregate and unit
purchase price for Products in a given shipment, plus any freight, taxes or
other costs incident to the purchase or shipment initially paid by ACS but to
be borne by Visionex hereunder.
(g) Payment and Terms. For so long as shipment is made via air carrier,
payment for Products supplied pursuant to this Agreement shall be made net
thirty (30) days after the date of shipment. In the event that ACS at any time
changes its Product delivery method to shipment via surface carrier, payment for
Products so shipped shall be made net forty-five (45) days after the date of
shipment. Visionex shall make all payments under the Agreement to ACS in United
States dollars to ACS' account in a financial institution located in the United
States. Any payment due hereunder which are not paid on the date such payment is
due shall bear interest at the lesser of one and one-half percent (1 1/2%) per
month or the maximum rate permitted by law, calculated on the number of days
such payment is delinquent. This Section 3(g) shall in no way limit any other
remedies available to ACS.
(h) Shipping. All Products delivered pursuant to the terms of this
Agreement shall be suitably packed for surface or air shipment in ACS' standard
shipping cartons, marked for shipment to one of Visionex's carrier agents F.O.B.
Los Angeles Airport or Seaport. ACS shall ship Products using the carrier
specified in Visionex's purchase order, provided however, that if Visionex does
not provide instructions with respect to the carrier to be used, ACS shall
select the carrier. Costs of any special packaging requested by Visionex and all
freight, insurance and other shipping expenses shall be paid by Visionex.
4. RETURN OF DEFECTIVE PRODUCT
(a) Rejection of Non-Conforming Products. In the event that any Product
purchased by Visionex from ACS fails to conform to the warranty set forth in
Article 6 hereof, except for the obligations expressly assumed by ACS under
Sections 13(a) and 14(a) herein regarding third-party claims, ACS' sole and
exclusive liability and Visionex's exclusive remedy shall be, at ACS' sole
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election, to repair or replace the Product or credit Visionex's account for the
net amount actually paid for any such Product, provided that (i) Visionex
notifies ACS in writing within thirty (30) days of receipt that such Product
failed to conform to the Specifications upon inspection pursuant to the Quality
Inspection Criteria, and furnishes a detailed explanation of any alleged
nonconformity and requests a return material authorization number; and (ii)
such Product is returned to ACS by Visionex F.O.B. ACS' shipping location in
Irvine, California, during the warranty period with the return material
authorization number affixed prominently to the outside packaging; and (iii)
ACS is satisfied that claimed nonconformities actually exist and were not caused
by accident, misuse, neglect, alteration, unusual physical or electrical
stress, or improper testing, provided however, that any dispute regarding the
foregoing shall be resolved by submitting the allegedly non-conforming Products
to an independent third party laboratory for testing. If such Product fails to
so conform, ACS will reimburse Visionex for shipment charges for return of the
nonconforming Product.
(b) LATENT DEFECTS. The parties recognize that it is possible for a
shipment of Products to fail to conform to the applicable Specifications in a
manner which would not be discoverable upon reasonable inspection and testing
("Latent Defects"). As soon as either party becomes aware of a Latent Defect in
any Product it shall immediately notify the other party, in which case,
Visionex may reject the applicable Products as provided in Section 4(a) until
sixty (60) days after the discovery of such Latent Defect. Except for the
obligations expressly assumed by ACS under Sections 13(a) and 14(a) hereof
regarding third party claims, in no event shall ACS' liability for any Latent
Defect exceed the invoice price of the applicable Product.
5. PRODUCT PACKAGING AND LABELING
(a) MATERIALS. Visionex, at its expense, shall provide ACS with any and
all promotional, advertising and educational materials and programs relating to
the Products, for purposes of review and comment by ACS (translated in English
by Visionex at its expense), at least two (2) weeks prior to the commercial
release of such materials or commencement of such programs. ACS shall provide
Visionex, within ten (10) business days after receipt of such materials and/or
programs, any and all comments and suggestions relating to such materials
and/or programs, provided however, that Visionex shall not be obligated to
accept any comments or suggestions which will jeopardize Visionex's compliance
with applicable laws, regulations and other regulatory requirements. In the
event that ACS fails to respond to materials submitted by Visionex within 30
days after receipt by ACS, Visionex may make a written request to ACS for
comments due under this Section 5(a). If ACS fails to respond to such request
within 10 business days, Visionex may proceed as though ACS has approved the
submitted materials, provided however, that ACS shall have the right to later
comment and Visionex agrees to use reasonable efforts to implement such later
comments if implementation is not unduly burdensome or contrary to applicable
laws, regulations or other regulatory requirements.
(b) PRODUCT PACKAGING AND LABELING. ACS shall package Products in a manner
suitable for shipment to Visionex and Visionex shall be responsible for final
packaging and labeling. Visionex shall not use any Product packaging or
labeling without the prior written consent of ACS.
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Visionex shall provide ACS with samples of any proposed Product repackaging
materials to be used by Visionex, for purposes of review and comment by ACS
(translated in English by Visionex at its expense); at least three (3) weeks
prior to commercial production of such Product repackaging materials. In
addition, Visionex shall provide ACS with the text of any labels that Visionex
intends to use with the Products, for purposes of review and comment by ACS
(translated in English by Visionex at its expense), at least three (3) weeks
prior to commercial production of such Product labels. ACS shall provide
Visionex any and all comments and suggestions relating to such Product
repackaging and/or labeling materials within ten (10) business days after
receipt of such Product repackaging and/or labeling materials, provided
however, that Visionex shall not be obligated to accept any comments or
suggestions which will jeopardize Visionex's compliance with applicable laws,
regulations and other regulatory requirements. In the event that ACS fails to
respond to materials submitted by Visionex within 30 days after receipt by ACS,
Visionex may make a written request to ACS for comments due under this Section
5(b). If ACS fails to respond to such request within 10 business days, Visionex
may proceed as though ACS has approved the submitted materials, provided
however, that ACS shall have the right to later comment and Visionex agrees to
use reasonable efforts to implement such later comments if implementation is
not unduly burdensome or contrary to applicable laws, regulations or other
regulatory requirements.
6. WARRANTY
(a) Standard Limited Warranty. ACS warrants to Visionex and to Visionex's
Customers that the Products purchased by Visionex, on the date of shipment to
Visionex, shall conform to the Specifications published by ACS for such
Products and shall be free from defects in material and workmanship for the
shelf life of each Product as set forth in the label for such Product. This
warranty is contingent upon proper use of Products in the applications for
which they were intended as indicated herein and in the Product label claims
provided by ACS, and ACS makes no warranty (express, implied, or statutory)
for Products that are modified (except as expressly contemplated herein) or
subjected to unusual physical or electrical stress not recommended in Product
handling instructions provided by ACS. Visionex shall pass on to Visionex's
Customers the foregoing standard limited warranty except as required by law.
Except for the indemnification obligations expressly assumed by ACS under
Sections 13(a) and 14(a) herein regarding third party claims, Visionex's
exclusive remedy and ACS' sole liability for breach of the foregoing warranty
shall be the remedy set forth in Article 4. All Products shall be returned to
ACS in accordance with Article 4. Visionex shall not pass on to its Customers a
warranty or limitation of liability which is more protective of such Customers
than the warranty (including the limited remedy and exclusions) set forth in
this Article 6 and the limitation of liability set forth in Article 10.
Notwithstanding the provisions of this Article 6, the forgoing warranty shall
not apply to any Products manufactured by Visionex pursuant to the license
granted in Section 3(e) hereof.
(b) Exclusion of Other Warranties. EXCEPT FOR THE LIMITED WARRANTY
PROVIDED IN SECTION 6(a) ABOVE, ACS GRANTS NO OTHER WARRANTIES OR CONDITIONS,
EXPRESS OR IMPLIED, BY STATUTE, IN ANY COMMUNICATION WITH VISIONEX OR THE
CUSTOMER, OR OTHERWISE, REGARDING THE PRODUCTS, THEIR
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FITNESS FOR ANY PURPOSE, THEIR QUALITY, OR THEIR MERCHANTABILITY. ANY OTHER
REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON OR ENTITY, INCLUDING EMPLOYEES
OR REPRESENTATIVES OF ACS, THAT ARE INCONSISTENT HEREWITH SHALL BE DISREGARDED
AND SHALL NOT BE BINDING ON ACS. IN NO EVENT SHALL ACS BE LIABLE TO VISIONEX OR
ANY THIRD PARTY FOR LOST PROFITS, OR FOR ANY SPECIAL, CONSEQUENTIAL,
INCIDENTAL, OR INDIRECT DAMAGES FOR BREACH OF WARRANTY. THIS LIMITATION SHALL
APPLY EVEN WHERE ACS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND
NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY
STATE HEREIN.
(c) Indemnification of ACS. Visionex shall indemnify defend and hold ACS
harmless against all claims, liabilities, costs and expenses (including the
reasonable fees of attorneys and other professionals) incurred by, or
threatened against, ACS to the extent caused by any representation by Visionex,
its personnel, agents, affiliates, or Subdistributors which is inconsistent
with the foregoing limited warranty and disclaimer or publications of ACS
concerning the Products. The foregoing indemnification by Visionex shall be
subject to the same conditions contained in the last eight (8) lines of Section
7(b) herein.
7. ADDITIONAL OBLIGATIONS OF Visionex
(a) Performance. Visionex shall use its commercially reasonable efforts
to maximize Product sales in the Territory.
(b) Health and Safety Laws and Regulations. Visionex shall use reasonable
efforts to comply with any and all applicable health and safety laws and
regulations of the Territory.
(c) Governmental Approvals. Visionex agrees at its own expense to use its
reasonable efforts to obtain government approval for the Products in the
Territory. Such efforts shall include the following:
(i) Exercise due diligence to obtain and maintain government
approvals to import, register and market the Products in the Territory.
(ii) If any Product clinical trials are required under the laws of
the Territory at any time during the Term (as defined herein), then Visionex,
at Visionex's expense shall organize, conduct and support any and all
pre-clinical and clinical trials required to obtain registrations, licenses and
permits required to comply with the laws and regulations of the Territory for
or relating to sale and distribution of the Products; provided however, that
Visionex shall obtain ACS' prior written approval for all protocols to be used
in such trials. Visionex agrees that ACS shall own all data and results
generated during any such pre-clinical and/or clinical trials and Visionex
shall promptly deliver to ACS all such data and results and copies of any
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governmental or regulatory filings filed in the name of ACS, unless prohibited
by applicable local law.
iii. Commence marketing of the Products in the Territory promptly
after receipt of all requisite government health registration approvals.
Visionex shall be deemed to have commenced the marketing of the Products only
when it shall have made the first commercial sale of the Products.
iv. Visionex shall not make changes, alterations, modifications or
additions to the Products without prior written approval of ACS.
(d) Solicitation of Orders. Visionex agrees not to solicit orders outside
the Territory without prior written approval of ACS.
(e) Sales and Inventory Reporting. Visionex shall supply to ACS on a
semi-annual basis a report of total Product sales and inventory, in each case
by Product and country.
(f) Product Reporting Requirements.
(1) Visionex shall promptly provide ACS with a report of Product
complaints or problems.
(2) Pursuant to the United States Food and Drug Administration's
("FDA") rules and regulations, ACS is required to report to the FDA any
information that reasonably suggests that one of its Products may have caused
or contributed to a death or serious injury. Visionex agrees to use its best
efforts to supply any such information to ACS within twenty-four (24) hours
after becoming aware of it.
(3) In the event that Visionex or ACS is required by any regulatory
agency to recall the Products or if ACS voluntarily initiates a recall of the
Products, Visionex shall cooperate fully with and assist ACS in locating and
retrieving if necessary, the recalled Products from the Customers and
responding to government inquiries in the Territory. The parties shall share
equally the cost of any Product recall provided that such recall is not due to
the fault of one party. In such event, the costs of the recall will be borne
exclusively by the party at fault. Notwithstanding any other provision
contained in this Agreement, if it is adjudicatively determined or is
determined by a governmental authority within the Territory that any Product,
or part thereof, must be recalled, or if the sale or use of the Products is, as
a result, enjoined, then ACS may discontinue Product sales under the Agreement,
remove any Products in Visionex's inventory, and refund the aggregate payments
paid therefor by Visionex, less a reasonable sum for use and damage.
(4) Visionex shall maintain records of sales of Products to
customers and/or Subdistributors and shall make such records available to ACS,
upon request from ACS, in the event of a Product recall or other quality
related issue, and upon request by ACS, Visionex shall be
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responsible for obtaining from its customers and/or Subdistributors all records
of customers and/or Subdistributors' sales to end users in the event of a
Product recall or other quality related issue.
(g) Conflicts of Interest. Visionex shall not market or distribute in
the Territory, directly or indirectly through third-party distributors,
any product competitive with the Products without the prior express written
consent of ACS. Visionex acknowledges that any efforts by Visionex to sell
products in the Territory that would, in the reasonable opinion of ACS, compete
with the Products would constitute a conflict of interest and material default
with respect to Visionex's obligations to market the Products and, in such
event, ACS may terminate this Agreement for cause pursuant to Section 9(b)
herein. Visionex represents and warrants that as of the Effective Date of the
Agreement, it does not represent any such competing products.
(h) Indemnification of ACS. Except to the extent that ACS has
expressly assumed indemnification obligations under Sections 13(a) and 14(a)
herein, Visionex agrees to indemnify, hold harmless and defend ACS against any
cost, loss, liability or expense (including reasonable fees of attorneys and
other professionals) arising out of any third party claims against ACS
resulting from:
i. any breach by Visionex or its Subdistributors of this Agreement;
ii. any violation by Visionex or its Subdistributors of applicable
laws, rules or regulatory requirements;
iii. any manufacture of Products by Visionex or its designee pursuant
to the license granted in Section 3(e) except to the extent that such claim
results from defective Product design or defective manufacturing instructions
provided to Visionex by ACS;
iv. any negligence or willful misconduct by Visionex or its
Subdistributors in the exercise of Visionex's rights or performance of
Visionex's obligations under this Agreement; or
v. any claim for which Visionex is obligated to provide
indemnification under Section 6(c) herein.
("Claims"), provided that ACS notifies Visionex promptly in writing of such
Claims, gives Visionex sole control over the defense or settlement of Claims
and, at Visionex's expense, gives Visionex proper and full information and
assistance to settle or defend any such Claim. Notwithstanding the foregoing,
Visionex shall not make any statement or admission during such defense or
settlement which could adversely affect ACS without obtaining the prior written
consent of ACS, which shall not be unreasonably withheld. ACS shall have the
right to participate in any such defense or settlement proceedings at its own
expense. Visionex shall not be obligated to indemnify any party for any claim
in connection with any settlement unless Visionex consents in writing to such
settlement.
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8. ADDITIONAL OBLIGATION OF ACS
(a) Technical Support. ACS, at ACS's expense and as deemed reasonable by
ACS, shall provide training and consultation to Visionex concerning technical,
scientific or medical aspects and use of the Products sufficient to enable
Visionex to perform its testing, marketing, product labeling and packaging, and
regulatory obligations hereunder.
(b) Assistance. ACS shall provide Visionex with all technical, scientific
or medical data and other information available to ACS, and shall execute such
certificates and other documents, as reasonably necessary to assist Visionex in
obtaining all necessary Product registration in the Territory for the Product
to import and market (including price reimbursement approvals) the Products in
the Territory. ACS shall provide Visionex with reasonable access to and
assistance of its technical and sales personnel in Irvine, California as ACS
deems appropriate. Such assistance under this Section 8(b) shall be without
charge to Visionex except as may be otherwise mutually agreed.
(c) Demonstration Products. Prior to, and during the period of one (1)
year following the date of the first commercial sale of the Products in the
Territory, ACS shall deliver to Visionex at a price to Visionex equal to ACS's
Cost of Goods such quantity of the Products, not to exceed _____ (___) units,
as Visionex requests solely for demonstration purposes in connection with the
promotion, marketing, distribution and sale of the Products. During the term of
the Agreement, Visionex may request from time to time any additional Products
at a price equal to ACS's Cost of Goods for demonstration purposes and upon
such request the parties shall negotiate in good faith terms and conditions.
(d) Support for Product Registration. ACS shall provide Visionex with any
necessary, sufficient and reasonable backup in support of Visionex's obtaining
necessary product registration. ACS shall deliver free of charge to Visionex
such quantity of the Products, not to exceed _____ (____) units, as Visionex
requests solely for product registration purposes, including for pre-clinical
and clinical trials.
(e) Conflicts of Interest. ACS shall not license, sell, promote, import,
market or distribute, directly or indirectly through third party distributors,
any product competitive with the Products in the Territory without the prior
express written consent of Visionex.
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9. TERM AND TERMINATION
(a) Term. The initial Term shall commence on the Effective Date and
continue in full force and effect for a period of seven (7) years from the
Effective Date (the "Initial Term"), unless earlier terminated pursuant to this
Article 9 below. Thereafter, this Agreement will be renewable for an additional
period (the "Renewal Term") to be agreed upon by ACS and Visionex in writing at
least ninety (90) days prior to the expiration of the Initial Term or any
Renewal Term. The Initial Term and any Renewal Terms are referred to
collectively herein as the "Term."
(b) Termination for Cause. Either ACS or Visionex may terminate this
Agreement by written notice stating each party's intent to terminate in the
event the other shall have breached or defaulted in the performance of any of
its material obligations hereunder, and such default shall have continued
uncured for sixty (60) days after written notice thereof was provided to the
breaching party by the non-breaching party. In addition, ACS may terminate this
Agreement by written notice in the event Visionex does not pay ACS in
accordance with the provisions of Article 3 and such failure shall have
continued for ten (10) days after written notice thereof was provided to
Visionex by ACS unless Visionex has notified ACS in writing of a good faith
dispute regarding such due payment, in which event, payment shall become due as
agreed by the parties, and otherwise shall be subject to the provisions of this
Section 9(b).
(c) Termination for Bankruptcy. Either party may terminate this Agreement
effective upon written notice to the other party in the event the other party
declares bankruptcy or becomes the subject of any voluntary or involuntary
proceeding under the U.S. Bankruptcy Code, state insolvency proceeding, or any
foreign equivalent of the foregoing and such proceeding is not terminated
within sixty (60) days of its commencement. Without limiting any of Visionex's
rights under any other provision of this Agreement, Visionex's rights under
this Agreement shall include those rights afforded by 11 U.S.C. Section 365(n)
of the United States Bankruptcy Code and any successor thereto (the "Code"). If
the bankruptcy trustee of ACS as a debtor or ACS as a debtor-in-possession
rejects this Agreement under 11 U.S.C. Section 365(n) of the Code, Visionex may
elect to retain its rights licensed from ACS hereunder for the duration of this
Agreement and avail itself of all rights and remedies to the full extent
contemplated by this Agreement, 11 U.S.C. Section 365(n) of the Code, any other
relevant sections of the Code or other relevant non-bankruptcy law.
(d) Termination in the Event of a Roll-Up Transaction. In the event of an
acquisition of Visionex by ACS, or other transaction effecting a merger or
consolidation of Visionex and ACS, this Agreement shall terminate as of the
effective date of such transaction unless the parties otherwise agree in
writing in advance of such transaction.
(e) Effect of Termination.
(1) Expiration or termination of this Agreement pursuant to the
terms and conditions set forth in this Agreement shall not relieve the parties
of any rights or obligation accruing prior to or upon such expiration or
termination.
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(2) Upon expiration or any termination of this Agreement, Visionex
shall transfer to ACS ownership of any and all data made, developed or acquired
by or for Visionex relating to Products and of all Product authorizations,
registrations, permits, and approvals of any kind with respect to Products and
applications therefor, including, without limitation, copyrights, marketing
approval applications, reimbursement price approvals, and any other
governmental approvals, registrations and the like. Visionex shall execute such
documents and perform such acts as ACS may request to perfect such transfer. It
is understood that ACS may use the foregoing for any purpose it deems
appropriate.
(f) No Renewal, Extension or Waiver. Acceptance of any order form, or sale
of, any Product to Visionex after the effective date of termination of this
Agreement shall not be construed as a renewal or extension hereof, or as a
waiver of termination of this Agreement.
(g) Limitation of Liability upon Termination. In the event of termination
by either party in accordance with any of the provisions of this Agreement,
neither party shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales or on account of expenditures, inventory,
investments, leases or commitments in connection with the business or goodwill
of ACS or Visionex.
(h) Survival of Certain Terms. The provisions of Articles 4, 6, 10, 11, 13
and 14 and Sections 2(d), 2(e), 7(b), 7(c), 7(f), 7(h), 9(e), 9(g), 9(h), 16(a),
16(b), 16(c), 16(d), 16(h), 16(i), 16(j), and 16(l) shall survive the expiration
or termination of this Agreement for any reason. All other rights and
obligations of the parties shall cease upon expiration or termination of this
Agreement.
10. LIMITED LIABILITY
EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS REGARDING THIRD PARTY CLAIMS
EXPRESSLY ASSUMED BY ACS UNDER SECTIONS 13(a) and 14(a) HEREIN, ACS' LIABILITY
ARISING OUT OF THIS AGREEMENT, THE TERMINATION THEREOF, AND/OR SALE OF THE
PRODUCTS SHALL BE LIMITED TO THE AMOUNT PAID BY VISIONEX FOR THE PRODUCT,
NOTWITHSTANDING THE INDEMNIFICATION OBLIGATIONS ASSUMED BY ACS UNDER SECTIONS
13(a) and 14(a) HEREIN, IN NO EVENT SHALL ACS BE LIABLE TO VISIONEX OR ANY OTHER
ENTITY FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, LOST PROFITS, OR ANY OTHER
SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY
OF LIABILITY ARISING OUT OF THIS AGREEMENT WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), OR OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER OR
NOT ACS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING
ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN OR IN THE
WARRANTY FOUND IN THE PRODUCTS.
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11. PROPERTY RIGHTS AND CONFIDENTIALITY
(a) Property Rights. ACS owns and retains all of its right, title, and
interest in the (i) Products, (ii) any and all modifications, improvements, and
enhancements thereto, and (iii) all of ACS' patents, copyrights, trade secrets,
inventions, know-how, trademarks, and trade names relating to (i) and (ii) above
whether currently held of hereafter obtained, and all data and results generated
during any clinical or pre-clinical trials performed by Visionex. The use by
Visionex of any of the Products is authorized only for the purposes herein set
forth and upon expiration or termination of this Agreement for any reason such
authorization shall cease. Visionex hereby assigns to ACS all right, title, and
interest in and to any and all improvements, modifications, and enhancements to
the Products which may be developed, made, conceived or otherwise generated by
Visionex during the Term and all patents, copyrights, trade secrets and other
intellectual property rights therein. Visionex agrees to perform, at ACS'
expense, all acts that may be necessary or useful, and to sign and execute, and
cause to be signed and executed, any and all documents in order to perfect the
foregoing assignment. Visionex further agrees not to modify, delete or obscure
any and all proprietary notices affixed to the Products. ACS agrees to grant to
Visionex a non-exclusive, royalty-free license in the Territory, during the
term, to use, market, import, register and sell any improvements or enhancements
to the Products developed, made, conceived or otherwise generated by Visionex
during the Term.
(b) Confidential Information. Except as expressly provided herein, the
parties agree that, for the Term and for five (5) years after the termination of
the Agreement, Visionex shall not publish or otherwise disclose and shall not
use for any purpose, except as expressly permitted herein any information
furnished to it by ACS pursuant to this Agreement which if disclosed in tangible
form is marked "Confidential" or with other similar designation to indicate its
confidential or proprietary nature, or if disclosed orally is confirmed as
confidential or proprietary by the party disclosing such information at the time
of such disclosure or within thirty (30) days thereafter ("Confidential
Information"). Notwithstanding the foregoing, it is understood and agreed that
Confidential Information shall not include information that, in each case as
demonstrated by written documentation:
i. was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;
ii. was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving party;
iii. became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
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iv. was subsequently lawfully disclosed to the receiving party by
a person other than a party hereto or developed by the receiving party
without reference to any information or materials disclosed by the
disclosing party.
(c) Permitted Disclosures. Notwithstanding the provisions of Section
11(b) above, each party hereto may disclose the other's Confidential
Information to the extent such disclosures is reasonably necessary in
prosecuting or defending litigation, complying with applicable governmental
regulations, or submitting information to tax or other governmental authorities
provided that if a party is required to make any such disclosure of
Confidential Information of a party hereto, to the extent it may legally do so,
it will give reasonable advance written notice to the latter party of such
disclosure and will use its reasonable efforts to secure confidential treatment
of such Confidential Information prior to its disclosure (whether through
protective orders or otherwise). If the party whose Confidential Information is
to be disclosed has not filed a patent application with respect to such
Confidential Information, it may require the other party to delay the proposed
disclosure (to the extent the disclosing party may legally do so), for up to
ninety (90) days after receipt of written notice from the disclosing party of
its intent to disclose, to allow for the filing of such an application. In
addition, ACS may disclose the existence of this Agreement and the terms and
conditions hereof to its legal representatives and advisors and prospective
investors under the circumstances that reasonably ensure the confidentiality
thereof.
(d) Review of Publication. As soon as is practicable prior to the oral
public disclosure, and prior to the submission to any third party for public
dissemination of information describing the scientific data with respect to
Products generated in any stage of the pre-clinical or clinical trials in each
case to the extent the contents of the oral disclosure or manuscript have not
been previously disclosed pursuant to this Section 11(d) before such proposed
disclosure, Visionex shall disclose to ACS the information to be disclosed, and
shall allow ACS at least thirty (30) days to determine whether such disclosure
contains subject matter for which patent protection should be sought prior to
publication or which ACS reasonably believes should be modified to avoid (i)
disclosure of information of a confidential or proprietary nature, or (ii)
regulatory or other similar problems.
(e) Delay of Publication. Prior to the expiration of the thirty (30) day
period specified in Section 11(d) above, ACS may notify Visionex in writing of
its determination that the proposed disclosure contains confidential or
objectionable material or material that consists of patentable subject matter
for which patent protection should be sought. If so notified, Visionex shall
withhold its proposed public disclosure and the parties shall mutually consult
in good faith to determine the best course of action to take in order to modify
the disclosure or to obtain patent protection.
12. TRADEMARKS
(a) License. ACS hereby grants Visionex the right and license to use
ACS' trademarks and trade names as well as those trademarks and trade names
that ACS may adopt from time to time and that ACS notifies Visionex of in
writing ("Marks") in distributing, marketing, and selling the Products in the
Territory and Visionex hereby agrees to use the Marks together with Visionex's
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<PAGE> 16
trademarks in distributing, marketing, and selling the Products in the
Territory. ACS reserves the right to modify Marks or terminate the foregoing
trademark license at any time upon thirty (30) days' prior written notice to
Visionex. This license shall automatically terminate on termination or
expiration of this Agreement.
(b) Use. Visionex shall not remove, modify, or observe Marks affixed to
Products without the prior written consent of ACS. Except as set forth in this
Article 12, nothing contained in this Agreement shall grant to Visionex any
right, title or interest in or to Marks whether or not specifically recognized
or perfected under applicable laws of the Territory, and Visionex irrevocably
assigns to ACS all such right, title and interest, if any, in any Marks. Nothing
in this Agreement shall grant to ACS any right, title or interest in or to
Visionex's trademarks. At no time during or after the Term shall ACS challenge
or assist others to challenge Marks or the registration thereof or attempt to
register any trademarks, marks or trade names confusingly similar to Marks in
the Territory. If at any time during the Term, Visionex becomes aware of any
infringement by a third party of ACS' Marks, Visionex shall promptly notify ACS
thereof. In the event that ACS decides not to defend such infringement of ACS'
Marks, Visionex may, at its expense, undertake such defense, provided however,
that Visionex obtains ACS' prior written consent to such defense of ACS' Marks
by Visionex.
13. INTELLECTUAL PROPERTY INDEMNIFICATION
(a) ACS Defense. Visionex agrees that ACS has the right to defend, or
at its option to settle, and ACS agrees, at its own expense, to defend or at
its option to settle, any claim, suit or proceeding brought against Visionex by
any third party for infringement of any patent, trademark or other intellectual
property rights by the Products. ACS shall have sole control of any such action
or settlement negotiations, and ACS agrees to pay, subject to the limitations
hereinafter set forth and those contained in the last two (2) sentences of
Article 10 herein, to indemnify and hold harmless Visionex, and to pay
reasonable fees of attorneys and other professionals incurred in defending, and
any final judgment entered against Visionex on such issue in any such claim,
suit or proceeding defended by ACS. Visionex agrees that ACS, at its sole
option, shall be relieved of the foregoing obligations unless Visionex (i)
notifies ACS promptly in writing of such claim, suit or proceeding; (ii) gives
ACS authority to proceed as contemplated herein; and (iii) at ACS' expense,
gives ACS proper and full information and assistance to settle or defend any
such claim, suit or proceeding for infringement of any patent. Notwithstanding
the foregoing, ACS shall not be liable for any costs or expenses incurred
without its prior written authorization. Notwithstanding the provisions of this
Article 13, ACS assumes no infringement liability for (x) combination of
Products with other products not provided by ACS, which infringement would not
arise from such Products standing alone, or (y) the modification of the
Products, where such infringement would not have occurred but for such
modifications.
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<PAGE> 17
(b) ACS Remedy. Notwithstanding the foregoing, if it is adjudicatively
determined that any Product infringes, or in ACS' sole opinion, may be found to
infringe a third party's patent, or if the sale or use of the Products is, as a
result, enjoined, then ACS may, at its option and expense, either: (i) procure
for Visionex the right under such patent to sell or use, as appropriate, the
Products; or (ii) replace the Products with other non-infringing functionally
equivalent products; or (iii) modify the Products to make the Products
functionally equivalent and non-infringing; or (iv) if the use of the Products
is prevented by injunction, discontinue Product sales under the Agreement and
remove any Products in Visionex's inventory and refund the aggregate payments
paid therefor by Visionex.
(c) DISCLAIMER. THE FOREGOING PROVISIONS OF THIS ARTICLE 13 STATE THE
ENTIRE LIABILITY OF ACS AND THE EXCLUSIVE REMEDY OF VISIONEX AND ITS CUSTOMERS,
WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADEMARKS OR
OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR ANY PART THEREOF.
14. PRODUCT LIABILITY INDEMNITY AND INSURANCE
(a) Subject to the limitations contained in Section 6(b) and the last two
(2) sentences of Article 10 herein, and except to the extent that Visionex has
assumed indemnification obligations under Sections 6(c) or 7(h) herein; ACS
shall, to the extent of ACS's insurance coverage, indemnify, hold harmless and
defend Visionex against any cost, loss, liability or expense (including
reasonable fees of attorneys and other professionals) arising out of third
party claims against Visionex resulting from:
i. breach by ACS of this Agreement (including breach of warranty
under Article 6 if such breach results in a claim for personal injury or death);
ii. any violation by ACS of applicable laws provided that Visionex is
not responsible for compliance with such laws, rules or regulatory requirements
under this Agreement;
iii. manufacturing or design defects (including without limitation
latent or inherent defects), or defective testing or labeling of Products if
such defects result in a claim for personal injury or death and except to the
extent that such defects are caused by Visionex or Visionex's failure to adhere
to specifications, training, protocols, instructions, data or other information
provided by ACS; or
iv. negligence or willful misconduct by ACS in the performance of
ACS' obligations under this Agreement.
("Claims"), provided that such Claims do not result from the gross negligence
or willful misconduct of Visionex, and further provided that Visionex notifies
ACS promptly in writing of such Claims,
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<PAGE> 18
gives ACS sole control over the defense or settlement of Claims and, at ACS'
expense, gives ACS proper and full information and assistance to settle or
defend any such Claim. ACS shall not be obligated to indemnify any party for
any Claim in connection with any settlement unless ACS consents in writing to
such settlement. Notwithstanding the foregoing, ACS shall not make any
statement or admission during such defense or settlement which would adversely
affect Visionex without obtaining the prior written consent of Visionex, which
shall not be unreasonably withheld.
(b) Notwithstanding the provisions of Section 14(a) above, ACS assumes no
liability or obligation (i) for use of the Product in an application other than
applications indicated on Exhibit A hereto or in the Product label claims for
the authorized indications under this Agreement, (ii) for the modification of
such Products unless such modification was made by ACS, where such liability
would not have occurred but for such modifications, (iii) to the extent any
Claim arises out of or relates to any misstatement, omission, statement or
representation made by Visionex, its affiliates or Subdistributors regarding
the Products which is inconsistent with ACS' warranties expressly granted under
this Agreement or the label claims on the Products for the authorized
indications under this Agreement, or (iv) any Claim arising out of any
manufacture of Product by Visionex pursuant to the license granted in Section
3(e) hereof except to the extent that such claim results from defective Product
design or defective manufacturing instructions provided to Visionex by ACS.
(c) During the term of this Agreement, ACS and Visionex shall maintain
liability insurance policies, including, without limitation, product liability
insurance coverage, in the minimum amount of $1,000,000 per occurrence, and
each party shall furnish to the other party, upon request, certificates of
insurance evidencing the foregoing coverage. The liability insurance maintained
by each party shall name the other party an additional insured and contain an
endorsement to provide the other party with at least thirty (30) days' prior
written notice of any cancellation or non-renewal.
15. COMPLIANCE WITH LAWS AND FOREIGN LAW WARRANTIES AND OBLIGATIONS
(a) Governmental Consent. Except for registrations, licenses and permits
required to comply with the laws and regulation of the Territory for sale and
distribution of the Products, which Visionex is responsible for obtaining,
Visionex represents and warrants that on the Effective Date of this Agreement,
no consent, approval or authorization of, or designation, declaration or filing
with, any governmental authority in the Territory, which has not been obtained
by Visionex prior to the Effective Date, is required in connection with the
valid execution, performance and delivery of this Agreement by Visionex.
(b) Compliance with Laws. Each party shall at all times conduct its
efforts hereunder with the highest commercial standards and in strict
accordance with all applicable laws, rules, directives and regulations ("Laws").
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<PAGE> 19
(c) Currency Control. Visionex represents and warrants that, on the
Effective Date of this Agreement, no currency control laws applicable in the
Territory prevent the payment to ACS of any sums due under this Agreement.
(d) Foreign Corrupt Practices Act. In conformity with the United States
Foreign Corrupt Practices Act and with ACS' established corporate policies
regarding foreign business practices, Visionex and its employees and agents
shall not directly or indirectly make any offer, payment, promise to pay, or
authorize payment, or offer a gift, promise to give, or authorize the giving of
anything of value for the purpose of influencing an act or decision of an
official of any government within the Territory or the United States Government
(including a decision not to act) or inducing such a person to use his
influence to affect any such governmental act or decision in order to assist
ACS in obtaining, retaining or directing any such business.
(e) Copyright and Trademark Protection. Visionex shall promptly notify
ACS of the requirements for copyright and trademark protection and registration
for the Products in the Territory and at ACS's request shall assist ACS in
fulfilling such requirements at ACS' expense.
16. MISCELLANEOUS PROVISIONS
(a) Independent Contractors. The relationship of ACS and Visionex
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct or control the day-to-day activities of the other, (ii)
constitute the parties as partners, joint venturers, co-owners or otherwise as
participates in a joint or common undertaking or (iii) allow a party to create
or assume any obligation on behalf of the other party for any purpose
whatsoever.
(b) Governing Law. Except as otherwise agreed, the rights and obligations
of the parties under this Agreement shall not be governed by the 1980 U.N.
Convention on contracts for the International Sale of Goods; rather such rights
and obligations shall be governed by and construed under the laws of the State
of California, including its Uniform Commercial Code, without reference to
conflict of laws principles.
(c) Dispute Resolution. Any dispute or claim arising out of, or in
connection with, this Agreement shall be finally settled by binding arbitration
in Orange County, California, United States of America, in accordance with the
then current rules and procedures of the International Chamber of Commerce by a
panel of three (3) arbitrators appointed in accordance with such rules. The
arbitration panel shall apply the substantive law of California in interpreting
this Agreement and resolving such dispute or claims. The arbitration including
any discovery proceeding and any award shall be in the English language.
Judgment on the award rendered by the arbitrator may be entered in any court of
competent jurisdiction. The parties agree that, any provision of applicable law
notwithstanding, they will not request, and the arbitrator shall have no
authority to award, punitive or exemplary damages against any party due to a
breach of any obligation under this Agreement. The
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<PAGE> 20
parties may apply to any court of competent jurisdiction for temporary or
permanent injunctive relief, without breach of this Article 16 and without any
abridgement of the powers of the arbitrator.
(d) Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be sent by prepaid registered or certified mail, return
receipt requested, internationally recognized courier or personal delivery,
addressed to the other party at the address shown at the beginning of this
Agreement or at such other address for which such party gives notice hereunder.
Such notice shall be deemed to have been given when delivered or, if delivery
is not accomplished by some fault of the addressee, when tendered.
(e) Force Majeure. Nonperformance by either party hereto shall be excused
to the extent that performance is rendered impossible by strike, fire, flood,
earthquake, windstorm or other natural disaster, governmental acts or orders or
restrictions, not due to the fault of the non-performing party, failure of
suppliers, or any other reason to the extent that the failure to perform is
beyond the reasonable control and not caused by the gross negligence or willful
misconduct of the non-performing party.
(f) Nonassignability and Binding Effect. Visionex agrees that its rights
and obligations under this Agreement may not be transferred or assigned
directly or indirectly without the prior written consent of ACS. Subject to the
foregoing sentence, this Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and assigns. In the event ACS
is acquired by a third party during the Term, this Agreement shall survive such
acquisition and ACS shall assign its rights and delegate its duties under this
Agreement to such third party acquiror.
(g) Partial Invalidity. If any provision of this Agreement is held to be
invalid by a court of competent jurisdiction, then the remaining provisions
shall remain, nevertheless, in full force and effect. The parties agree to
renegotiate in good faith any term held invalid and to be bound by the mutually
agreed substitute provision in order to give the most approximate effect
intended by the parties.
(h) U.S. Export Control. Visionex understands and acknowledges that ACS
is subject to regulation by agencies of the U.S. Government, including, but not
limited to, the U.S. Department of Commerce, which prohibit export or diversion
of certain products and technology to certain countries. Any and all
obligations of ACS to provide the Products, Documentation, or any media in
which any of the following is contained, as well as any other technical
assistance shall be subject in all respects to such United States laws and
regulations as shall from time to time govern the license and delivery of
technology and products abroad by persons subject to the jurisdiction of the
United States, including the Administration Act of 1979, as amended, any
successor legislation, and the Export Administration Regulations issued by the
Department of Commerce, Bureau of Import Administration. Visionex agrees to
cooperate with ACS, including, without limitation, providing required
documentation, in order to obtain export licenses or exemptions therefrom.
Visionex and ACS warrant that they will at all times comply with the Export
Administration Regulations and other United States laws and regulations
governing exports in effect during the Term.
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<PAGE> 21
(i) No Waiver. No waiver of any term or condition of this Agreement shall
be valid or binding on either party unless agreed in writing by the party to be
charged. The failure of either party to enforce at any time any of the
provisions of the Agreement, or the failure to require at any time performance
by the other party of any of the provisions of this Agreement, shall in no way
be construed to be a present or future waiver of such provisions, nor in any
way affect the validity of either party to enforce each and every such
provision thereafter.
(j) Language. This Agreement is in the English language, which language
shall be controlling in all respects, and all versions hereof in any other
language shall be for accommodation only and shall not be binding upon the
parties hereto. All communications and notices to be made or given pursuant to
this Agreement shall be in the English language.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(l) Entire Agreement. This Agreement, including the Exhibits attached
hereto, constitutes the entire agreement of the parties with respect to the
subject matter hereof, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between ACS and Visionex
with respect to such subject matter. No amendment or modification hereof shall
be valid or binding upon the parties unless made in writing and signed by the
duly authorized representatives of both parties.
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<PAGE> 22
IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of ACS and Visionex respectively, effective as of the
Effective Date.
ADVANCED CORNEAL SYSTEMS, INC. VISIONEX PTE LTD.
("ACS") ("Visionex")
By: /s/ [Signature Illegible] By:
------------------------------- ------------------------------
Name: Name:
----------------------------- ----------------------------
Title: Title:
---------------------------- ---------------------------
Date: Date:
----------------------------- ----------------------------
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<PAGE> 23
IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of ACS and Visionex respectively, effective as of the
Effective Date.
ADVANCED CORNEAL SYSTEMS, INC. VISIONEX PTE LTD.
("ACS") ("Visionex")
By: By: /s/ PATRICK YANG
------------------------------- ------------------------------
Name: Name: Patrick Yang
----------------------------- ----------------------------
Title: Title: Executive Director
---------------------------- ---------------------------
Date: Date: 13/6/97
----------------------------- ----------------------------
[ILLEGIBLE]
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<PAGE> 24
EXHIBIT A
PRODUCTS
1) Vitrase(TM):
1) Vial containing lyophilized hyaluronidase
2) Diluent
3) 5 cc syringe with affixed needle (for dilution)
4) 1/3 or 1/4 cc syringe with affixed needle (for injection)
2) Corneaplasty(TM):
1) Vila containing lyophilized hyaluronidase
2) Diluent
3) 5 cc syringe with affixed needle (for dilution)
4) 1/4 or 1/3 cc syringe with affixed needle (for injection)
5) Reshaping lenses
<PAGE> 25
EXHIBIT B
QUALITY INSPECTION CRITERIA
(To be attached when prepared.)
<PAGE> 26
EXHIBIT C
PRODUCT SPECIFICATIONS
(To be attached when prepared.)
<PAGE> 27
EXHIBIT D
TERRITORY
Burma
Cambodia
China
Hongkong
Indonesia
Laos
Malaysia
Micronesia
Philippines
Singapore
Taiwan
Thailand
Vietnam
<PAGE> 28
EXHIBIT E
PRODUCT PRICE SCHEDULE
Until the third anniversary of the Effective Date hereof, ACS shall sell
Products to Visionex at a price equal to one-half of ACS' then-current U.S.
list price for the applicable Product; thereafter, ACS shall sell Products to
Visionex at a price equal to one-third of ACS' then-current U.S. list price for
the applicable Product.
If at any time during the Term, Visionex reasonably believes that market
conditions and/or competition require a change in Product sale prices in the
Territory such that Visionex's performance of this Agreement is impracticable,
Visionex may make a written request to ACS for renegotiation of the Product
prices to Visionex hereunder. Such request shall describe the facts and
circumstances supporting Visionex's belief that Product prices hereunder must be
altered. If any such request is made by Visionex, ACS shall have the right to
request further information as it deems necessary to evaluate Visionex's
request, and agrees to negotiate with Visionex in good faith, provided however,
that in no event shall such negotiations obligate ACS to agree to change its
Product prices to Visionex hereunder. No change in Product prices hereunder
shall apply to purchase orders made and accepted in accordance with Section 3(e)
hereof prior to the date such price change is agreed upon in writing by the
parties.
ACS may change its U.S. list price for any or all Products with sixty (60)
days prior notice to Visionex.
On the Effective Date, ACS' U.S. list prices for Products are as follows:
Vitrase(TM): $500 per kit
Corneaplasty(TM): $400 per kit (kit contains drug and lenses for one eye)
<PAGE> 1
EXHIBIT 10.13
DISTRIBUTOR AGREEMENT
THIS AGREEMENT is entered into and made effective as of this 23rd day of April
of 1998 by ADVANCED CORNEAL SYSTEMS, INC., represented herein by MR. EDWARD H.
DANSE (Hereinafter referred to as the "Company"), and on the other part by
LABORATORIES SOPHIA S.A. DE C.V. represented herein by MR. FERNANDO SANCHEZ
BECERRA (Hereinafter referred to as the "Distributor").
RECITALS
WHEREAS, the Company is in the business of discovering, developing and
commercializing products and technology useful in the treatment and prevention
of irregularities, malformations and diseases of the eye; and
WHEREAS, the Company has developed proprietary technology to clear a vitreous
hemorrhage and desires to have the Distributor market and sell the Product (as
defined on Exhibit A attached); and
WHEREAS, the Distributor has the necessary organization, personnel and
facilities to distribute the products within the Territory, including all
required licenses, authorizations and permits as may be required to carry out
the distribution of the products; and
WHEREAS, the Company desires to market and sell its Product in the Territory,
and Distributor desires to market and sell the Product on behalf of the
Company, on the terms and conditions set forth below.
NOW, THEREFORE, THE COMPANY AND DISTRIBUTOR AGREE AS FOLLOWS:
1. APPOINTMENTS AND ACCEPTANCE
1.1 Company Hereby appoints Distributor on an exclusive basis to purchase and
resell the Products in the Territory. Distributor accepts this appointment on
the terms and conditions set forth herein.
1.2 The term "Products" shall mean the products, specified by brand name,
manufactured and/or sold by the Company listed on Exhibit A hereto. Company, in
its sole discretion, may from time to time modify or change the design or
specification or any type of Products or discontinue the sale of or instruct
Distributor not to sell any Products in the Territory. In such event, Company
shall use reasonable efforts to provide reasonable advance notice to
Distributor of any such deletion or material change or modification to or
instruction with respect to any Product registered with the Mexican Ministry of
Health so that Distributor may make the appropriate regulatory response to such
action, such as an amendment of the Product's registration or re-registration
of the Product. If any such material change or modification to any Product
causes Distributor to fail to meet its obligations to purchase Minimum Product
Quantities in any Contract Year and this failure is beyond Distributor's
reasonable control, then Company and Distributor agree to negotiate in good
faith an equitable adjustment of such Minimum Product Quantity in consideration
thereof.
<PAGE> 2
1.3 Company here grants to Distributor a right of first negotiation to be the
distributor of any item of New Product (as defined below) in the Territory. In
connection therewith, Company shall not appoint any non-Affiliated third party
as the distributor of any item on New Product until Company has offered such
rights to Distributor in accordance herewith and has given Distributor sixty
(60) days to negotiate with Company a mutually acceptable distribution
agreement with respect to such item of New Product in the Territory. If no such
agreement is consummated within such sixty (60) day period, then Company shall
be free to offer such rights to non-Affiliated third party. Notwithstanding the
above, nothing in this Section 1.3 shall, in any way, be construed as
preventing Company from marketing, selling and distributing any item of New
Product directly, or indirectly through an Affiliate, in the Territory. For the
purposes of this Section 1.3, the term "New Product" shall mean any
pharmaceutical product used in connection therewith which Company intends to
offer for distribution by a non-Affiliated third party in the Territory and
which is not otherwise defined as a "Product" hereunder.
1.4 The term "Affiliate" shall mean any corporation or other entity
controlling, controlled by, or under common control with a party to this
Agreement. For such purpose, "control" shall mean the ownership, directly or
indirectly, or more than 50% of the voting stock of a corporate entity or more
than 50% of the beneficial interest of an entity other than a corporation.
1.5 The term "Territory" shall mean the geographic area defined on Exhibit B
hereto. Distributor shall not re-export the Products from the Territory without
the express written authority of Company.
2. DIRECT SALES
2.1 During the term of this Agreement and provided Distributor complies with
the terms hereof, Company will not sell directly to customers located in the
Territory any Product included in this Agreement, regardless of whether such
Product is offered by the Company under the same or different brand name than
that indicated on Exhibit A.
3. BUSINESS OF DISTRIBUTOR
3.1 Distributor is and shall remain an independent contractor. Distributor
agrees that the Company has granted it no authority to act or make any
representations or warranties on behalf of Company. Distributor is at all times
acting for its own account, and at its own expense. Distributor represents to
Company that Distributor has adequate personnel, facilities and other resources
in the Territory from which to sell and distribute the Products. Distributor
shall comply with all applicable laws, statutes, regulations and treaties
relating to the sale and distribution of the Products and the performance of
its duties and obligations hereunder.
4. TERM
4.1 The term of this Agreement shall be for a period of (three) 3 years,
commencing on the effective date above, and shall thereafter automatically be
renewed for further consecutive periods of (three) 3 years each, unless and
until either party shall give to the other not less than (ninety) 90 days prior
written notice of termination before the end of the first or any subsequent
such period.
5. PRICES AND TERMS
5.1 The prices which Distributor shall pay to Company for the Products shall
be as specified on the Price List included within Exhibit B. The prices quoted
are exclusive of any national, state or local sales, use, value-added or other
taxes, customs duties, or similar tariffs and fees which shall be the
responsibility of Distributor. In the event that Company is required to pay any
such taxes, duties or fees, such items will be added to the invoice to be paid
by Distributor. Company may change the prices of the Products from time to time
with ninety (90) days prior written notice to Distributor.
<PAGE> 3
such items will be added to the invoice to be paid by Distributor. Company
may change the prices of the Products from time to time with ninety (90)
days prior written notice to Distributor.
5.2 All payments shall be made in Dollars currency of the United States of
America. Unless otherwise agreed by Company in writing, terms of payment shall
be by irrevocable letter of credit acceptable to Company.
5.3 In the event Company establishes a line of credit for Distributor or
permits Distributor to purchase products on open account, Distributor grants
Company a continuing security interest in the Collateral in order to secure
payment of its accounts. The term "Collateral" shall mean any Products now or
hereafter acquired by Distributor and all proceeds from the resale of such
Products. Distributor acknowledges that this provision constitutes a security
agreement and authorizes Company to file any financing statement or other
documents necessary to protect Company's security interest in the Collateral.
6. COMPANY OBLIGATIONS
Company shall, during the term of this Agreement:
6.1 Provide, at no cost, Product training, at mutually acceptable times and
places, for a reasonable number of Distributor's personnel, provided that
Distributor shall pay all expenses of its personnel attending such training
sessions (including without limitation salaries, transportation,
accommodations, meals and related expenses);
6.2 Furnish Distributor, without charge, reasonable quantities of Product
literature and promotional materials, in the English and Spanish languages,
which Company will publish or prepare from time to time; and
6.3 Render reasonable periodic assistance to Distributor on Product technical
and sales issues accordingly to the stated in Section 6.1 above.
7. DISTRIBUTOR OBLIGATIONS
Distributor shall, during the terms of this Agreement;
7.1 Actively use its best efforts to promote and penetrate the market for the
Products in the Territory;
7.2 Meet the requirements of the Company for warehousing, logistics,
distribution and maintenance of the product. Maintain adequate personnel,
facilities and other resources within the Territory, at its own expense, from
which to sell and distribute the Products;
7.3 Submit to Company regular quarterly status reports on the months of March,
June, September and December, reflecting sales activities and anticipated
requirements of customers in the Territory;
7.4 Furnish Company copies of Distributor's annual financial statements,
credit references from established institutions Distributor has been engaged
with or such other information as Company may reasonably request, if Company
establishes a line of credit for Distributor or permits Distributor to purchase
Products on open accounts in lieu of irrevocable Letters of Credit.
7.5 Not represent, distribute, or otherwise handle competitive products of the
type, size and capability of the Products for a period of the life of the
patents on the Products in Mexico or any other country in the world.
<PAGE> 4
7.6 Maintain adequate insurance in such amounts and with such insurers as is
customary in accordance with sound business practices. At Company's request,
such policies shall name Company as an additional insured and loss payee
thereof, as Company's interests may appear, and shall provide that the insurer
will give Company at least ten (10) days notice of cancellation. At Company's
request, Distributor shall furnish to Company a certificate of insurance or
other evidence satisfactory to Company with respect to the above.
7.7 The Distributor at all times shall carry out its business in such a manner
that it reflects a favorable image of Company and Company's Products, and shall
not act in a misleading business manner, which may result in an error, be
illegal or contrary to commercial ethics and uses.
7.8 The Distributor shall not offer nor sell the Products outside the
Territory as stated in Exhibit B.
7.9 Distributor will provide a "specialty" sales force fully dedicated to
market and sell the Products of the Company within the Territory. The Company
will have direct input into the training and hiring of this sales force, which
will be formed as follows, unless, by mutual agreement, it shall consider as
inconvenient:
<TABLE>
<CAPTION>
YEAR 1998 1999 2000 2001 2002
<S> <C> <C> <C> <C> <C>
Minimum of fully
dedicated Sales Reps. 4 4 5 5 6
</TABLE>
8. FORECASTS/ PURCHASE ORDERS/MINIMUM PRODUCT QUANTITIES.
8.1 During the first week of each month, Distributor shall forward to Company
a six (6) month rolling forecast of Product requirements designating the
quantities of the Products which Distributor intends to sell in this period.
Product requirements scheduled for delivery in months 1, 2 and 3 of the rolling
forecast will be considered firm orders and may not be rescheduled or canceled
by Distributor. However, Products scheduled for delivery in months 4, 5 and 6
of the rolling forecast may be rescheduled or canceled by Distributor, subject
to Distributor's Minimum Product Quantities set forth in Section 8.2 below.
8.2 During each Contract Year under this Agreement, Distributor shall purchase
from the Company the minimum quantity of each Product ("Minimum Product
Quantities") that Company and Distributor shall agree upon in advance. The
Minimum Product Quantities for the first 3 (three) Contract Years are shown on
Exhibit C hereto. The Minimum Product Quantities for subsequent Contract Years
shall be submitted by Company to Distributor, after consultation with
Distributor at least ninety (90) days prior to each such Contract Year. If
Company and Distributor fail to agree upon the Minimum Product quantities for
any Contract Year, then the Minimum Product Quantities for such Contract Year
shall be deemed to be ten percent (10%) greater than the Minimum Product
Quantities for the preceding Contract Year. "Contract Year" means for the first
Contract Year the period commencing on the effective date hereof and ending one
year thereafter and for subsequent Contract Years, the successive twelve (12)
month period thereafter. Failure of Distributor to purchase the Minimum Product
Quantities in any Contract Year shall be considered a material breach of this
Agreement.
9. DELIVERY
9.1 Delivery of all Products ordered by Distributor shall be made C.I.F.
Price. Title and risk of loss to the Products shall pass to Distributor when
Company makes available the Products to Distributor at Distributor's facilities
located in Guadalajara, Jal. Mexico or the named point of shipment. ICC
Incoterms (1990 edition) shall apply, except insofar as these Incoterms may be
inconsistent with the terms of this Agreement.
<PAGE> 5
9.2 In the event Distributor fails to take delivery and/or shipment of
Products pursuant to the terms of this Agreement: (i) Company shall be entitled
to store the Products in a warehouse at the expense and risk of Distributor;
(ii) the price of the Products shall become immediately due and payable by
Distributor; (iii) if payment is secured by a letter of credit, Company may
receive payment upon presentation of its sales invoice and warehouse receipt;
and (iv) after sixty (60) days from the date upon which the price becomes
payable, Company may dispose of the Products in a commercially reasonable
manner without notice to Distributor and recover any shortfall and related
expenses from Distributors.
9.3 All Products ordered pursuant to accepted purchase order shall be
scheduled for delivery in accordance with Company's then current and normal
delivery times.
10. WARRANTY, QUALITY CONTROL AND INDEMNIFICATION
10.1 Company warrants that the Products, when delivered to Distributor pursuant
to this Agreement, will meet the written Company specifications for such
Products in effect as of the time of such delivery and will be free from
defects in material and workmanship during the warranty period (as defined
below). Subject to Section 1.2, Company reserves the right to amend such
specifications from time to time at its sole discretion. THE FOREGOING WARRANTY
IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED (INCLUDING
BUT NOT LIMITED TO OTHER WARRANTIES OF MERCHANTABILITY OR FITTENESS FOR A
PARTICULAR PURPOSE). The exclusive remedy for breach of warranty shall be, at
Company's option, the rework or replacement, at Company's expense, of the
non-conforming Product, provided that, such Product is returned to the Company
within six (6) months after delivery (the "Warranty Period"). Distributor shall
notify Company of the nonconforming Product within the warranty period.
Products may only be returned by Distributor when accompanied by a return
material authorization number issued by Company. Shipping expenses for Products
returned by Distributor will be prepaid by Distributor. Company shall pay for
shipment back to Distributor for Products replaced or reworked under warranty.
10.2 Distributor shall not make any representation or warranty as to the
Products except for the warranty stated in Section 10.1 above. Distributor
shall not alter and shall not recommend or knowingly sell the Products for any
uses except as described in Company's Product label and labeling and in
accordance with the written instructions and warnings furnished by Company.
Distributor agrees to deliver to its customers and or before sale all
specifications, inserts, instructions, and warnings furnished by Company and to
retain records evidencing such delivery. Distributor further agrees to notify
Company of any events involving bodily injury or property damages resulting
from the use of any of the Products within three (3) Mexican business days
after Distributor receives notice thereof.
10.3 Distributor shall maintain all records regarding sales and traceability of
Products as required by applicable law or the applicable governmental
authority in the Territory. Periodically, but not less than every three (3)
months, Distributor shall supply Company with a summary report of the
information contained in such records. Upon termination of this Agreement,
Distributor shall deliver such records to Company. Distributor shall not
initiate any recall of any Product without the prior written authorization of
Company; provided that, if a governmental authority requires Distributor to
recall any Product, then Distributor shall immediately notify the Company in
writing of such requirement and the reasons therefor and shall give Company a
reasonable opportunity to consult with the governmental authority prior to
initiating such recall. In the event that Company deems it necessary to recall
any Product or any governmental authority requests recall of any Product
distributed or sold by Distributor in the Territory, Distributor Shall bear all
costs and exposes of such recall, including without limitation expenses or
obligations to third parties, the costs of notifying customers and costs
associated with the shipment of such recalled Products from customers. Company
shall reimburse Distributor for Distributor's reasonable costs of such recall,
provided such recall is a consequence of a product defect caused by Company. In
the event of any recall, Distributor and Company shall cooperate fully with
each other in effecting such recall.
<PAGE> 6
10.4 Distributor agrees to indemnify and hold Company harmless against any
liability, demand, cost or expense (including reasonable attorney's fees)
caused by any claim that is attributable to the failure by Distributor to
perform its obligations hereunder or to Distributor's misconduct or negligence
in the shipment, storage, handling, distribution, promotion or sale of the
Products.
10.5 Except for claims arising under Section 10.4, Company agrees to indemnify
Distributor against any liability, demand, cost or expense (including
reasonable attorney's fees) arising from any third party claim to the extent
such claim is attributable to a product defect caused by Company.
11. GOVERNMENTAL APPROVALS AND REGISTRATIONS
11.1 With the exception of the health approvals for the Products provided for
in Section 11.2 below, Distributor shall secure (and provide copies thereof the
Company) all necessary governmental permits, licenses and registrations
required in connection with the incorporation and resale of the Products in the
Territory.
11.2 Following clinical trials fully carried out by the Company at the
Company's own cost, distributor shall obtain all necessary health approvals to
lawfully market the Products in the Territory. If such approvals can not be
legally obtained in the name of the Company, then such approvals shall be
obtained in the name of Distributor to be held by Distributor for the sole
benefit of Company. All costs and expenses of obtaining and maintaining such
approvals shall be borne by Company. In connection with obtaining health
approval of any Product, Company shall provide Distributor sufficient
quantities of Product samples (the "Sample Product") as Distributor as
reasonably required by Distributor to comply with legal requirements in
obtaining such health approval. Upon expiration or termination of this
Agreement, the Distributor shall, at the Company's option, transfer to Company
(or its nominee) without compensation all right and title to any or all of the
Product approvals and/or registrations in the Territory.
12. COMPANY'S PROPRIETARY INFORMATION AND RIGHTS
12.1 Distributor recognizes and understands that all information not generally
known concerning Company and the Products, including but not limited to
Company's organization and business affairs, customer lists, sales information,
operating procedures and practices, technical data, designs, know-how, trade
secrets, and processes (the "Proprietary Information"), whether owned by
Company or licensed by Company from third parties, are subject to a valuable
proprietary interest of Company, and that Distributor is under an obligation to
maintain the confidentiality of such Proprietary Information. Without limiting
the generality of the forgoing obligations, Distributor agrees that for the
term of this Agreement and thereafter until such time as the Proprietary
Information is in the public domain, Distributor will (i) not disclose, publish
or disseminate any Proprietary Information, (ii) not use any Proprietary
Information for its own account, (iii) not authorize any other person to
disclose, publish or disseminate the Proprietary information, and (iv) treat
all Proprietary Information in a confidential manner, including appropriate
marking and secure storage of written Proprietary Information. Company agrees
to maintain the same confidentiality for all of Distributor's Proprietary
Information that might be disclosed to Company and identified by Distributor in
writing when disclosed as its "Proprietary Information".
12.2 Distributor acknowledges that the Company is the owner and/or licenser the
Territory of the trademark(s) appearing on the Product packaging, labeling,
advertisements or promotional material or utilized in the sale of the Products
(the "Trademarks"). During the term of this Agreement, Distributor is
authorized to use the Trademarks solely in connection with Distributor's
advertisement, promotion and distribution of the Products in the Territory.
Whenever the Trademark is used, e.g., on any package, label or advertisement,
the right or most prominent use shall always be accompanied by a legend
acceptable to Company indicating that the Trademark is licensed to the
Distributor by Company.
<PAGE> 7
12.3 Distributor shall neither use nor permit others to use the name "Advanced
Corneal Systems" or any abbreviation or modification thereof, or the Trademarks
or any other trademark or tradename of Company as part of the Distributor's fir
name or corporate titles, in signs or in letterheads without the prior written
consent of Company. Distributor may designate itself as a Director of Products
in the Territory in such form and manner as Company may approve of in advance
in writing. Distributor shall not grant this privilege to any third party or to
any affiliates without Company's prior written consent.
12.4 Distributor acknowledges that Company owns and retains all patents,
trademarks, copyrights and other proprietary rights in the Products, and agrees
that it will not at any time during or after the termination of this Agreement
assert or claim any interest in or take any action which may adversely affect
the validity or enforceability of any trademark, trade name, trade secret,
copyright or other proprietary right owned by or licensed to Company. No
license, either express or implied, is granted to the Distributor by this
Agreement to any patents, trademarks, copyrights, processes, or other
proprietary rights of Company or its affiliates, except the right to sell the
Products sold to the Distributor hereunder in the Territory, and the license to
use the Trademarks in connection therewith.
13. TERMINATION
13.1 Company or Distributor shall have the right, at its option, to terminate
this Agreement, by given written notice to the other party, effective
immediately upon receipt of such notice, upon the occurrence of any of the
following events:
(A) In the event that the other party becomes insolvent; proceedings are
instituted by or against it in bankruptcy, insolvency, re-organization or
dissolution; or it makes a general assignment for the benefit of creditors.
(B) In the event that the other party fails to perform any material
obligation, warranty, duty or responsibility under this Agreement (including
without limitation Distributor's obligation to pay Company amounts owning
Company when due and Distributor's obligations under Section 8.2) and such
failure continues unremedied for a period of thirty (30) days following written
notice thereof.
13.2 Upon termination hereby by either party:
13.2.1 All sums due to either party from the other shall be promptly paid;
13.2.2 Distributor orders received and accepted by Company prior to the
effective date of the termination of this Agreement shall be fulfilled in
accordance with their terms;
13.2.3 All property belonging to one party but in the custody of the other
shall be returned;
13.2.4 Company shall have the option to repurchase any or all current and
resalable Products in Distributor's inventory at Distributor's inventory at
Distributor's original net purchase price;
13.2.5 Distributor shall cease all display, advertising and use of Company
tradenames, trademarks (including the Trademarks), logos and designations,
except uses on the Products which remain in Distributor's possession in
accordance with this Agreement;
13.2.6 Distributor shall, at the Company's option, transfer to the Company (or
its nominee), without compensation, all right and title to any or all of the
product approvals and/or registrations in the Territory, and shall execute at
Company's request all the documents required under the territory laws to
complete such transfer.
13.2.7 Neither party shall be liable to the other for loss or damage arising
from termination of this Agreement and Distributor hereby waives any
compensation that would otherwise be payable to it by
<PAGE> 8
reason of such termination.
14. U.S. LAWS AND REGULATIONS
14.1 Distributor acknowledges that Company has informed it that United States
law and related regulations may under certain circumstances forbid the
re-export of Products (or associated technical data) sold or transferred to
customers in the Territory or elsewhere. Distributor agrees that it will make
every reasonable effort to comply with such regulations, including providing
customer information required by Company to comply with United States and local
country laws and regulations.
14.2 Distributor acknowledges that Company has informed it that United States
law forbids the making of gifts or payments to government employees or
political parties to induce such employee or parties to misuse positions of
influence in order to obtain or retain business. Distributor agrees that it
will not engage in such conduct, nor permit others under its control to make
such gifts or payments.
15. GOVERNING LAW & ARBITRATION
15.1 This Agreement and any amendment or modification hereof and all rights
hereunder shall in all respect be governed by and construed in accordance with
the laws of Mexico City, D.F.
15.2 For any and all controversies arising from or with respect to this
Agreement and the interpretation hereof the parties shall submit to the
International Rules of Arbitration of the Mexican Chapter of the International
Chamber of Commerce (C.I.C.), as amended from time to time, for all matters not
otherwise covered in the following paragraph:
15.2.1 The arbitration shall be conducted in the Mexico City, unless Company
and Distributor mutually agree to another location.
15.2.2 The arbitration demand notice and any notices resulting from the
arbitration shall be made to the domiciles set forth by the parties herein
below by certified mail with return receipt of specialized messenger service
(e.g. DHL, Federal Express), or by any other valid means of notice in
accordance with the applicable legislation of the domicile of the party
receiving notice. The arbitration shall commence on the date when the
arbitration demand notice is delivered to the party receiving the demand
notice. A copy of such notice shall be delivered simultaneously to the C.I.C.
15.2.3 In order to calculate the terms in accordance with the present clause,
the working day following the date on which a notice is delivered shall be
used. If the last day of such term is not a working day in the place of
delivery, the term shall be extended to the following working day. If there are
various non-working days in any term, such days shall be included to compute
such term. All terms relating to the arbitration shall be computed as calendar
days.
15.2.4 The arbitration demand notice shall include the following information as
well as other information required by the C.I.C.:
a.) the demand for which the dispute is submitted to arbitration;
b.) the names and address of the party;
c.) a reference to the present clause or to the guaranty trust agreement
contained in this instrument;
<PAGE> 9
d.) a reference to the contract or document from which the dispute arises; and
e.) a description of the Event of Default and the obligations and damages
claimed.
15.2.5 The party to whom demand notice is served shall have a term of fourteen
(14) days from the date of delivery of the arbitration demand. In the event
that such receiving party does not answer the demand within such term, he shall
be held in default and such default shall constitute an admission by the
receiving party of the allegations set forth in the arbitration demand.
15.2.6 The arbitrator shall be designated by the C.I.C. within seven (7) days
(or such longer period as required by the AAA) following the delivery of the
arbitration demand notice and such arbitrator shall have the required
experience relating to the nature of the Event of Default. The designation of
the arbitrator shall not be object to be either of the parties.
15.2.7 Within three (3) days following the termination for the answer of the
demand, the arbitrator shall notify the Company and the Distributor with at
least thirty (30) days notice prior to the date on which the arbitration
hearing shall be carried out, indicating the place and the time when such
hearing will take place. The hearing shall be carried out in a term no greater
than three (3) days, unless the arbitrator determines that a greater term is
necessary.
15.2.8 At least fifteen (15) days prior to the date of the hearing, the Company
and the Distributor shall deliver to the arbitrator: (1) the names and
addresses of any witnesses that they intend to present and a sworn declaration
(affidavit) duly signed by each witness that shall detail the content of his or
her testimony at the hearing; (ii) the documents that will be presented at the
hearing; and (iii) a brief which details the evidence that will be presented at
the arbitration.
15.2.9 The applicable legislation shall be that which corresponds to Mexico
City. The arbitration shall be conducted in the Spanish language.
15.2.10 The party that prevails in the arbitration shall have the right to
receive payment for its lawyer's fees and costs and expenses incurred in
connection with the arbitration, including, but not limited to, expert fees.
15.2.11 The arbitral award shall be final and non-appealable and shall obligate
Company and Distributor. In the event necessary, the arbitral award shall be
executed by any competent court.
15.2.12 For the purposes of paragraph 15.2 hereof, the parties shall have the
following domiciles:
COMPANY: DISTRIBUTOR:
ADVANCED CORNEAL SYSTEMS, INC. LABORATORIOS SOPHIA, S.A. DE C.V.
15279 ALTON PARKWAY, SUITE 100 AV. HIDALGO #738
IRVINE, CALIFORNIA 92618 GUADALAJARA, JAL.
USA MEXICO
ATTN: MR. EDWARD H. DANSE ATTN: MR. FERNANDO SANCHEZ BECERRA
ccp. Ortega y Videgaray ccp. Cuesta Campos Y Associados, S.C.
Yautepec #12 Lic. Fernando Cuesta L.
Col. Condesa Bismark #192 P.B.
Mexico, D.F. 06140 Guadalajara, Jal., CP. 44690
Tel: 6-30-05-80 6-30-21-29
<PAGE> 10
16. LIMITATION OF LIABILITY
16.1 Neither Company nor Distributor shall be liable to the other, or to
Distributor's customers, for any special, indirect, or consequential damages,
including but not limited to loss of profits, loss of business opportunities,
or loss of business investment.
17. SURVIVAL
17.1 In addition to Distributor's obligation to pay Company all amounts due
hereunder, the provisions under Sections 10, 11, 12, 13, 15 and 16 shall
survive termination of the Agreement, as well as such other provisions which by
their meaning and intent have applicability beyond the terms of this Agreement.
18. ASSIGNMENT
18.1 This Distribution Agreement shall be binding upon and shall innure to the
benefit of the parties and its successors and assigns. The Distributor shall
not be able to assign its rights and/or obligations hereunder or sell or
transfer a majority of its ownership interests without the prior written
consent of Company. Company may at any time without obtaining the consent of
Distributor may sell, assign, negotiate or otherwise transfer to any third
party all or any part of, or any interest in, the rights and benefits contained
hereunder and, to the extent of such assignment, such assignee shall have the
same rights and benefits against the Distributor as it would have had if it was
Company.
19. INTEGRATED AGREEMENT
19.1 This Agreement constitutes the entire understanding and agreement between
Company and Distributor and terminates and supersedes all prior formal or
informal understandings.
20. FORCE MAJEURE
20.1 Performance of the parties hereto of their respective obligations
hereunder shall be subject to force majeure and acts of God, including but not
limited to, insurrections, riots, wars and war-like operations, explosives,
governmental acts, epidemics, failure of contractors to perform, strikes,
fires, accidents, acts of any public enemy, inability to obtain required
materials, supplies, products or qualified labor, delay in transportation and
any applicable law, regulation, or restriction of any foreign, federal, state
or local governmental entity or instrumentality. However, the parties hereto
shall use their best efforts to avoid, remove or cure said circumstances. Any
party temporarily excused for performances hereunder by any such circumstance
shall resume performance with utmost dispatch when such circumstances are
removed or cured. Any party claiming such circumstances as an excuse for delay
in performance shall give prompt notice in writing thereof to the other party.
Nothing herein and no contrary provisions of any law, regulation, or
governmental pronouncement shall, however, relieve the Distributor of its
obligations to make the payments to Company required hereunder at the times and
in the manner specified.
21. NO WAIVER
21.1 No waiver by either party of any breach or default of any of the covenants
or agreements herein contained shall be deemed a waiver as to any subsequent or
similar breach or default. No right or remedy herein conferred upon either party
is exclusive or any other right or remedy herein or by law provided or
permitted.
<PAGE> 11
22. SEVERABILITY
22.1 This Agreement is divisible, and provisions herein held to be violative of
any applicable treaties, statutes or regulations of any governmental agency
having jurisdiction shall effect only that portion held to be invalid or
inoperative, and the remaining portions of this Agreement shall remain in full
force and effect.
23. COUNTERPARTS
23.1 This Agreement may be executed in duplicate counterparts, each of which
shall be deemed to be an original; provided however, such counterparts shall
together constitute only one instrument.
24. NOTICE
24.1 Notices to be given to any party under this Agreement shall not be
effective unless in writing and hand-delivered or mailed by certified or
registered mail to the party to whom notice is to be given at the address dated
on the cover page thereof or sent by telefax to the party to be notified to
such telefax number as such party hereafter designates by written notice to the
other party. Notices sent by mail shall be deemed to have been given ten (10)
days after the postmark thereof. All other notices shall be deemed to have
given on the date of receipt thereof. Any party may change its address by
giving written notice of such change in the manner provided herein.
25. LANGUAGE
25.1 This Agreement has been written in the English language. It may be
translated, for convenience, into other languages. However, in the case of
conflict or disagreement, the executed English language version shall prevail.
IN WITNESS WHEREOF, Company and Distributor have duly executed this Agreement.
/s/ [SIGNATURE ILLEGIBLE] /s/ EDWARD H. DANSE
- --------------------------------- -----------------------------------
Laboratories Sophia, S.A. DE C.V. Advanced Corneal Systems, Inc.
Director General President & CEO
- --------------------------------- ------------------------------------
Title Title
23 April 1998 April 23, 1998
- --------------------------------- ------------------------------------
Date Date
<PAGE> 12
EXHIBIT A
PRODUCTS:
Initially, this Agreement includes only one product named VITRASE(R) (one vial
for one treatment)
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
/s/ [Signature Illegible] /s/ EDWARD H. DANSE
<PAGE> 13
EXHIBIT B
TERRITORY:
This Agreement initially includes the country of Mexico.
PRICE:
Distributor shall pay to the Company 75% from final actual retail price
(selling price to the public). Expected retail price in Mexico and the United
States of America is $500.00 USD per vial.
Any change on retail price for this product in Mexico shall be made by mutual
agreement between Company and Distributor and, one copy from Price Increase
Authorization released by SECOFI (if proceeds) shall be delivered to the
Company's files.
Company reserves the right to review all Distributor's invoices for this
product in a quarterly basis.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
/s/ [Signature Illegible] /s/ EDWARD H. DANSE
<PAGE> 14
EXHIBIT C
MINIMUM PRODUCT QUANTITIES
YEAR MINIMUM PRODUCT QUANTITIES
1998 800 units.
1999 Established by mutual agreement.
To be determined by or before March 31st, 1999
2000 Established by mutual agreement.
To be determined by or before September 30th, 1999
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
/s/ [Signature Illegible] /s/ Edward H. Danse
<PAGE> 1
EXHIBIT 10.14
MANUFACTURE AND SUPPLY AGREEMENT
This MANUFACTURE AND SUPPLY AGREEMENT (the "Agreement"), effective as of
December 19, 1996 (the "Effective Date"), is entered into by and between
ADVANCED CORNEAL SYSTEMS, INC., a California corporation having its principal
place of business at 15279 Alton Parkway, Suite 100, Irvine, California 92618
("ACS"), and PRIMA PHARM, INC., a California corporation having its principal
place of business at 3443 Tripp Court, Suite A, San Diego, California 92121
("Prima Pharm").
RECITALS
WHEREAS, ACS is in the business of discovering, developing, and
commercializing products and technology useful in the treatment and prevention
of irregularities, malformations, and diseases of the eye; and
WHEREAS, ACS has developed proprietary technology using the enzyme
Hyaluronidase (as defined below) to correct vision, and desires to have Prima
Pharm manufacture a Product containing Hyaluronidase suitable for human use; and
WHEREAS, Prima Pharm has the manufacturing facilities and technical
expertise to manufacture the Product in conformance with the specifications
provided in Exhibit B attached hereto; and
WHEREAS, ACS desires to purchase from Prima Pharm, and Prima Pharm desires
to sell to ACS, the Product, on the terms and conditions set forth below.
NOW, THEREFORE, ACS and Prima Pharm agree as follows:
ARTICLE - DEFINITIONS
1.1 Definitions. The following capitalized and underlined terms shall
have the following meanings when used herein;
1.1.1 "Affiliate" shall mean any corporation, association, company,
organization or other entity which directly or indirectly controls, is
controlled by, or is under common control with a party. For the purpose of this
definition, the term "control" shall mean the direct or indirect ownership of
fifty percent (50%) or more of the voting power of the subject entity.
1.1.2 "Bulk Material" shall mean that material containing
Hyaluronidase obtained by Prima Pharm.
1.1.3 "Delivery Point" shall mean Prima Pharm's facility located at
the address written above.
<PAGE> 2
1.1.4 "FDA" shall mean the United States Food and Drug
Administration, any successor agency thereto, and any foreign equivalent
thereof.
1.1.5 "GMP" shall mean the current Good Manufacturing Practices as
prescribed by applicable FDA regulations, as may be amended from time to time
during the term hereof, and any foreign equivalent thereto which relates to
manufacture, distribution, or sale of Products in a foreign country.
1.1.6 "Hyaluronidase" shall mean that enzyme that catalyzes the
breakdown of hyaluronic acid, which enzyme is produced by recombinant means or
extracted from mammalian tissue and conforms to the specification set forth in
Exhibit A.
1.1.7 "Product" shall mean a lyophilized composition containing
Hyaluronidase as the active ingredient, such composition being capable of being
reconstituted into a liquid formulation which may then be administered to the
eye(s) of a patient in order to effect reshaping of the patient's cornea(s) or
reversibly liquefy the patient's vitreous humor, and which conforms to the
specifications set forth on Exhibit B attached hereto, as may be amended from
time to time.
1.1.8 "U.S. Pharmacopoeia" or "U.S.P." shall mean the compendium of
pharmaceutical standards published by the United States Pharmacopeial
Convention, Inc., as may be updated from time to time during the term hereof.
1.1.9 "Unit" means an International Unit of Hyaluronidase activity,
which corresponds to the hydrolysis of muccopolysaccharides such as hyaluronic
acid, as described by U.S.P. Biozyme Laboratories, Ltd., or as stated in
analytical procedures supplied by ACS to Prima Pharm from time to time.
1.2 Rules of Construction. AS used in this Agreement, all defined terms
used in the singular shall include the plural, and vice versa, as the context
may require. The words "hereof," "herein," and "hereunder" and other words of
similar import refer to this Agreement as a whole. The word "including" when
used herein is not intended to be exclusive and instead shall mean "including,
without limitation," unless otherwise indicated. The descriptive Article,
Section, and Paragraph numbers and headings are used for convenience and
reference only and do not constitute a part of and shall not be utilized in
interpreting this Agreement. This Agreement has been negotiated by the parties
and their respective counsel and shall be fairly interpreted in accordance with
its terms and without any rules of construction relating to which party drafted
the Agreement being applied in favor or against either party.
-2-
<PAGE> 3
ARTICLE 2 -- BULK MATERIAL
2.1 Supply.
2.1.1 Obtaining Bulk Material. During the term of this Agreement,
Prima Pharm shall use its best efforts to obtain, and shall obtain either from
a third party manufacturer acceptable to and first approved in writing by ACS
or by itself manufacturing, a supply of Bulk Material sufficient to enable
production of Products in order to meet ACS's purchase requirements, as
provided in Article 4, such Bulk Material to meet the specifications listed in
Exhibit A with respect thereto and any and all applicable U.S.P. requirements
then in effect.
2.1.2 Payment. ACS agrees that it will pay for Bulk Material
ordered by Prima Pharm from a third party manufacturer. Prima Pharm shall
provide ACS with any invoice with regard to Bulk Material ordered by Prima
Pharm within five (5) days of receipt of the invoice, and ACS, at its option,
shall pay those amounts due pursuant to the invoice directly to the third party
manufacturer, or provide such payment to Prima Pharm, which will then
immediately forward such payment to the third party manufacturer. ACS also
reserves the right to at any time enter into a supply agreement with a third
party in respect of Bulk Material, in which event ACS shall become responsible
for the supply of Bulk Material and Prima Pharm shall be relieved of its
obligations under Paragraph 2.1.1, following receipt of notice from ACS to such
effect.
2.2 Specifications. During the term of this Agreement, ACS shall be
responsible for developing, updating, and testing any additions to or
modifications of the specifications and/or formulation of the Product. Prima
Pharm shall have the right to propose any reasonable change(s) to such
specifications or formulation, provided that implementation of any such
change(s) shall be subject to the prior written approval of ACS. As of the
Effective Date, specifications for Bulk Material and the Product are as listed
in attached Exhibit B. Exhibit B will be updated at the time any change to
specification for the Product are implemented in accordance with this Section
2.2.
ARTICLE 3 -- PROCESS DEVELOPMENT
AND MANUFACTURING
3.1 Process Development.
3.1.1 Prima Pharm's Obligations. In conjunction with ACS, Prima
Pharm shall promptly design, develop, and implement a formulation and
lyophilization process acceptable to ACS and which results in the production
of a Product meeting the specifications listed in Exhibit B (the "Process").
Prima Pharm shall be responsible for obtaining supplies of raw materials and
constituents for the Product and any related equipment necessary to manufacture
and supply the Product in accordance with the terms of this Agreement. Prima
Pharm shall perform its obligations hereunder using employees with proper
training and skill in accordance with GMPs and the Product specifications as
provided in Exhibit B or otherwise then in effect.
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3.1.2 Suppliers. During the term of this Agreement, Prima Pharm
will purchase or otherwise acquire raw materials and constituents for the
Product only from vendors listed on a mutually agreed approved vendor list
("AVL"). In the event Prima Pharm wishes to add a vendor to the AVL, ACS must
first consent in writing, and ACS reserves the right from time to time to
review, inspect, or otherwise evaluate a proposed or existing vendor and their
corresponding constituent(s) incorporated into the Product.
3.1.3 Initial Lot. On or before April 1, 1997, Prima Pharm shall
produce and provide to ACS four (4) to six (6) initial lots of Product
consisting of one thousand (1,000) vials of each of the following: (i) eight
thousand (8,000) Units of Hyaluronidase per vial; and (ii) eleven thousand
(11,000) Units of Hyaluronidase per vial, to validate the Process, which
Product shall meet the specifications therefor and all applicable U.S.P.
requirements. In addition, Prima Pharm shall concurrently provide to ACS (i) a
detailed written report acceptable to ACS describing the Process used,
including copies of all GMP documentation relating thereto, (ii) a full
chemical analysis of such Product, and (iii) such other information as ACS may
reasonably request or which is needed to support ACS's submission to the FDA
with respect to the Product. Within thirty (30) days of accepting the foregoing
information and the initial lot and in accordance in Article 5, ACS shall pay
Prima Pharm a mutually agreed upon price in U.S. dollars.
3.4.4 Scale Up. Upon receipt of notice of ACS's acceptance of the
initial lot which yields those vials of Product produced in accordance with
Paragraph 3.1.3, Prima Pharm shall promptly begin scale-up of the Process to
demonstrate that commercially practicable yields of Product can be achieved
with the Process so as to meet ACS's Product requirements. On or before July 1,
1997, Prima Pharm shall provide to ACS (i) a written report confirming the use
of the Process to successfully make at least three (3) consecutive lots of
seven thousand (7,000) vials of Product containing eleven thousand (11,000)
Units of Hyaluronidase for corneaplasty and seven thousand (7,000) vials of
Product containing eight thousand (8,000) Units of Hyaluronidase for use in the
vitreous humor, in each case meeting all U.S.P. requirements, (ii) a full
chemical analysis of each such lot of Product, (iii) a one hundred (100) vial
sample from each such lot of Product, and (iv) such other information as ACS
may reasonably request. Within sixty (60) days following receipt of such
report, analysis, and information, ACS shall notify Prima Pharm whether the
development of the Process is complete. In the event that ACS notifies Prima
Pharm that further development of the Process is required, the parties shall
confer to determine what further development activities are necessary, and the
compensation, if any, that Prima Pharm shall receive for such development.
3.1.5 Progress Reports. From the Effective Date until the
completion of Process development and scale-up in accordance with Paragraphs
3.1.1, 3.1.3, and 3.4.4, Prima Pharm shall provide ACS with monthly written
progress reports, within ten (10) days following the end of each month. Such
reports shall describe Prima Pharm's activities with respect to Process
development in the preceding month.
3.1.6 Process Development Documentation. Prima Pharm shall prepare
and maintain in good scientific manner detailed written records regarding the
activities performed pursuant to Paragraphs 3.1.3 and 3.1.4. Such records shall
include, without limitation, each
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formulation lyophilized relating to Hyaluronidase and the corresponding
results, and a detailed description of each invention or discovery made in
connection with the development and scale-up of the Process. Upon ACS's written
request, Prima Pharm shall promptly provide copies of such records to ACS.
3.2 Manufacturing. During the term of this Agreement and following
completion of process development and scale-up of the Process as provided in
Section 3.1, Prima Pharm shall manufacture quantities of Product sufficient to
meet ACS's requirements for Product Units ordered hereunder in accordance with
GMPs then in effect.
ARTICLE 4 - REGULATORY COMPLIANCE AND QUALITY ASSURANCE
4.1 Drug Master File. Upon ACS's request, Prima Pharm shall provide to
ACS a drug master file for Hyaluronidase, and shall assist ACS, at ACS's
expense, in preparing any addendum thereto in respect of Products made using the
Process and which shall contain all information necessary to comply with FDA,
U.S. Environmental Protection Agency, and all U.S. and European Pharmacopoeia
standards with respect to the Process and Product. Within thirty (30) days of
ACS's receipt of the drug master file, it shall notify Prima Pharm of its
acceptance of such file or that the file is unacceptable in the form presented,
identifying the deficiencies. In the event the drug master file is unacceptable,
Prima Pharm agrees to assist ACS, at ACS's expense, in correcting any
deficiencies identified by ACS.
4.2 Audit Rights. ACS shall have the right to review and audit Prima
Pharm's records and facilities relating to the development of the Process and
production of Products on an ongoing basis to evaluate and monitor: (i) the
feasibility of scaling-up the Process to obtain commercially practicable yields
and thereafter to assure GMP compliance, (ii) Prima Pharm's compliance with
governmental standards in the U.S. and abroad, and (ii) Prima Pharm's
performance of its obligations under this Agreement. At ACS's election, any
such reviews and/or audits may be performed by a third party consultant
designated by ACS, subject to the execution of a reasonable confidentiality
agreement between Prima Pharm and such consultant. Prima Pharm agrees to
promptly provide ACS (or ACS's consultant) with all information and/or access
to Prima Pharm's facilities as they may request.
4.3 Subcontracts. Prima Pharm shall not subcontract any aspect of the
Process or production of the Product from Bulk Material without ACS's prior
written consent. In the event that Prima Pharm wishes to subcontract any
portion of its obligations hereunder, Prima Pharm shall notify ACS of the
proposed subcontractor and the work to be performed by such subcontractor. ACS
shall approve or disapprove such proposed subcontractor within thirty (30)
days. Each approved subcontractor shall execute a confidentiality and
proprietary rights agreement in a form acceptable to ACS before beginning work
relating to this Agreement.
4.4 Facility Approval. Upon ACS's request, Prima Pharm shall assist ACS
in obtaining FDA (and the approval of foreign counterparts to the FDA) approval
for the manufacture of Products in the facility in which the Product subject to
this Agreement will be manufactured pursuant to
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Article 5. ACS shall have no obligation to purchase any Products from Prima
Pharm until ACS receives final FDA approval of Prima Pharm's manufacturing
facility. Prima Pharm shall advise ACS in writing immediately if an agent of
any regulatory body having jurisdiction over the manufacture and/or marketing
of the Product visits Prima Pharm's manufacturing facility, and shall specify
what, if any, inquiry was made in respect of the Process or Product.
4.5 Country of Origin Certification. Upon ACS's request, Prima Pharm will
provide ACS with an appropriate certification stating the county of origin for
the Product sufficient to satisfy the requirements of any applicable export
licensing regulations and the custom authorities of the country to which ACS
intends to ship the Product.
4.6 Quality Assurance.
4.6.1 Program. Prima Pharm agrees to assure the quality level of
the Product through the use of a formal quality assurance program in
conformance with industry standards. Such program shall require Prima Pharm to
prepare and maintain written records sufficient to enable ACS to trace the
history of each Product lot. During the term of the Agreement, ACS shall have
the right to audit such quality assurance program, at its expense, during
regular business hours.
4.6.2 Certificates of Analysis. Prima Pharm shall test, or cause
to be tested for conformance to the specifications then in effect, each lot of
Product manufactured pursuant to this Agreement before delivery to ACS. A
certificate of analysis for each batch delivered shall set forth the items
tested, the specifications therefor, and the test results (the "Q.A. Data
Sheet"). The Q.A. Data Sheet shall include at least the following information:
(i) manufacturing records, including an indication that all lot production and
control records have been reviewed and approved by the appropriate quality
control unit; (ii) Hyaluronidase assay data and results; (iii) tyrosine assay
data and results; (iv) pyrogenicity data; (v) container closure integrity; (vi)
sterility data; and (vii) pyrogen test results as per U.S.P. Prima Pharm shall
send, or cause to be sent, such Q.A. Data Sheets, to ACS prior to each shipment
of Products. As may be required by the FDA, ACS shall assume full
responsibility for final release of each lot of Product and shall be
responsible for all contact with the FDA in connection with the Product, except
as relates to FDA inspection and approval of Prima Pharm's Product
manufacturing facilities, for which Prima Pharm will be responsible.
4.7 Permits. Prima Pharm shall obtain and maintain all licenses, permits
and registrations necessary to manufacture the Products and supply the same to
ACS hereunder.
ARTICLE 5 - SUPPLY
5.1 Obligation to Supply. Subject to the terms and conditions of this
Agreement, Prima Pharm shall sell Products to ACS which shall conform fully
with the Product specifications listed in Exhibit B or otherwise in effect.
Subject to the terms of this Agreement, Prima Pharm shall sell to ACS all
Products ordered by ACS pursuant to this Agreement; provided, however, that ACS
shall have no obligation to purchase any Products from Prima Pharm pursuant to
this Section 5.1 unless
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(i) the Products conform to the specifications therefor set forth in Exhibit B
or otherwise then in effect, (ii) meet the warranties set forth in Section 7.1,
and (iii) Prima Pharm timely fills ACS's purchase orders and delivers Products
to ACS pursuant to this Article 5. During the term of this Agreement following
completion of scale up of the Process, Prima Pharm shall manufacture in
accordance with GMP quantities of Product sufficient to meet ACS's orders.
5.2 Non-Competition. During the term of this Agreement and for a period
of three (3) years thereafter, Prima Pharm agrees that it shall not supply any
third party directly or indirectly Products or Hyaluronidase or any derivative
thereof which Prima Pharm knows such third party is using, selling, or
distributing for ophthalmic applications.
5.3 Price. During the term of this Agreement, the price paid by ACS for
Products produced by Prima Pharm shall be as provided in Exhibit C attached
hereto.
5.4 Capacity. Prima Pharm shall make available to ACS for production of
the Product sufficient capacity to satisfy at least fifty percent (50%) of ACS's
Product requirements, and in no event shall such capacity be less than Three
Hundred Fifty Thousand (350,000) vials of Product per year. In the event ACS
desires Prima Pharm to increase the capacity dedicated to ACS, it must provide
written notice to Prima Pharm specifying the date and desired increased level of
capacity at least seven (7) months prior to the date at which such level of
capacity is to be made available, and Prima Pharm shall make such capacity
available on such date.
5.5 Forecasts.
5.5.1 Rolling Forecasts. During the term of this Agreement, ACS
shall provide to Prima Pharm within ten (10) days of the beginning of each
calendar quarter a rolling, non-binding forecast of ACS's anticipated
requirements for Products for the following twelve (12) month period.
5.5.2 Product Commitment. During the term of this Agreement, ACS agrees
that it will order fifty percent (50%) of its Product requirements from Prima
Pharm, provided that Prima Pharm is in full compliance with the terms of this
Agreement.
5.6 Orders for Products. ACS may initiate Product purchases under this
Agreement by telephone contact, e-mail, fax or by submitting written purchase
orders to Prima Pharm at the address first listed above, or such other address
as may be specified by Prima Pharm. Any purchase order initiated by telephone or
e-mail must be confirmed within ten (10) working days by a written purchase
order. In the event of a conflict between the terms of this Agreement and the
terms of a purchase order submitted by ACS to Prima Pharm in respect of a
Product, the terms of this Agreement shall control.
5.7 Acceptance. Prima Pharm shall acknowledge each purchase order in
writing within ten (10) business days of receipt. Within such ten (10) day
period, Prima Pharm may reject a purchase order which does not conform with the
terms and conditions of this Agreement. Any
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rejection of a purchase order must be in writing. If a purchase order is
neither confirmed nor rejected within ten (10) business days of receipt by
Prima Pharm, it shall be deemed to have been accepted.
5.8 Product Lead Times. To facilitate Prima Pharm's production
scheduling, ACS will submit purchase orders for Products to Prima Pharm with a
lead time of at least ninety (90) days prior to the specified delivery date
with respect to Products ordered therein, and Prima Pharm shall deliver any such
Products in accordance with the terms of the corresponding purchase order. For
those Product purchase orders for which ACS fails to provide a lead time of at
least ninety (90) days, Prima Pharm agrees to use its reasonable efforts to
attempt to fill such orders by the delivery date specified therein by ACS, and
in any such event shall promptly notify ACS of the date on which such Product
shall be delivered. In the event ACS places a purchase order for Products
specifying a delivery date of less than sixty (60) days from the date of such
purchase order, and the same is accepted by Prima Pharm, or if ACS, subject to
Sections 5.9 and 5.10, cancels or reschedules an order in accordance with the
terms of this Article 5 fewer than sixty (60) days from specified delivery date
therefor, ACS agrees to pay for any additional costs incurred by Prima Pharm in
filing such orders, to the extent such costs are invoiced to ACS at the time
the Product invoice therefor is issued, as provided in Section 5.13.
5.9 Rescheduling.
5.9.1 By ACS. ACS may reschedule delivery of shipments of
Products covered by any purchase order as follows:
(a) for Products due to be delivered less than ninety (90)
days from the date Prima Pharm receives ACS's notice of rescheduling, any such
rescheduling must be mutually agreed;
(b) for Products due to be delivered between ninety (90)
and one hundred twenty (120) days from the date Prima Pharm receives ACS's
notice of rescheduling. ACS may reschedule delivery therefor one (1) time,
subject to Paragraph 5.9.2; provided, however, that if after rescheduling
delivery of such Products once, ACS again wishes to reschedule delivery, Prima
Pharm must consent thereto; and
(c) for Products due to be delivered more than one hundred
twenty (120) days after the date Prima Pharm receives ACS's notice of
rescheduling, subject to Paragraph 5.9.2, ACS shall be free to reschedule such
delivery at any time, provided that Prima Pharm must consent to any delivery
rescheduled to occur within ninety (90) days of such notice of rescheduling.
5.9.2 Limitations. In no event shall ACS have the right to
reschedule delivery of any Products ordered hereunder for a delivery date later
than nine (9) months after the date the purchase order corresponding thereto
was accepted by Prima Pharm, and, unless canceled pursuant to Section 5.10, any
Products ordered pursuant to a purchase order shall be delivered to ACS within
nine (9) months from the date such purchase order was accepted by Prima Pharm.
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5.9.3 Changes in Numbers. With respect to a purchase order
specifying more than one Product delivery date, ACS may increase or decrease
the number of Products to be delivered on a specified delivery date, but only
to the extent such change does not change the number of Products to be
delivered on a delivery date specified in the corresponding purchase order by
more than twenty-five percent (25%), unless otherwise mutually agreed. For any
change in delivery dates made pursuant to this Paragraph 5.9.3, ACS shall, in
addition to specifying changed delivery dates and the number of Products to be
delivered, specify the corresponding decrease(s) or increase(s) in the number
of Products to be delivered on the other dates specified in the corresponding
purchase order.
5.10 Cancellation or Reduction. ACS may cancel, in whole or in part,
delivery of Products ordered pursuant to purchase orders submitted hereunder to
Prima Pharm, or reduce the number of Products ordered; provided, however, that
the delivery of any Product cannot be canceled without Prima Pharm's written
consent within sixty (60) days of such Product's scheduled delivery date.
5.11 Delivery. Prima Pharm shall make deliveries of the Products to the
destination designated by ACS in its purchase order on the date requested in
such purchase order, provided such requested delivery date is at least sixty
(6) days after the date of such purchase order, unless (i) ACS indicates a
later delivery date on the purchase order, or (ii) ACS notifies Prima Pharm in
writing requesting delayed delivery of such Products.
5.12 Packaging and Shipping. Products shall be supplied to ACS in lots (a)
allocated as requested by ACS in its purchase order for such Products, and (b)
contained within airtight and moisture proof Type 1 glass containers, and (c)
packaged in low temperature containers of a type approved in writing in advance
by ACS. Each such glass container shall be individually labeled. In accordance
with GMPs, Prima Pharm will label each vial of Product with a permanent,
non-erasable label containing only that information which ACS directs Prima
Pharm to include, it being understood that ACS retains the right to provide
such labels to Prima Pharm, and in the event ACS so provides such labels, Prima
Pharm agrees to apply them to each vial of Product ordered by ACS hereunder.
Each such glass container shall be resealable and protected from light and
breakage. All Products subject to this Agreement shall be suitably packed for
shipment in containers adequate to insure safe arrival of such goods at ACS's
designated Delivery Point, and delivered to a carrier or forwarding agent
chosen by ACS. Prima Pharm shall mark all containers with necessary lifting,
handling and shipping information, purchase order numbers, and date of
shipment. An itemized packing list must accompany each shipment. In the event
that ACS requests special packaging or finishing for any Product ordered
hereunder, ACS shall pay the incremental cost for such special packaging or
finishing; provided, however, that Prima Pharm agrees to include any special
documentation regarding the Products requested by ACS at no additional charge.
Shipment will be F.O.B. the Delivery Point. All shipping papers and/or invoices
shall include the purchase order number and lot numbers of Products shipped. A
copy of the Q.A. Data Sheet for each Product lot in a shipment shall accompany
such shipment. A second copy of such certificate of analysis shall be
separately sent to ACS.
5.13 Payment. Prima Pharm shall issue ACS individual invoices for each lot
of Product produced and shipped. Each such invoice, or billing statement
accompanying the invoice, shall
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separately list the purchase order number, product descriptions, the number
vials of Product shipped, and the number of vials containing different
quantities of Product, the individual and total prices therefore, and any
special packaging or finishing charges. ACS shall pay each invoice within
thirty (30) days of the date of such invoice or the delivery date, whichever is
later. Payment of an invoice shall not constitute implied acceptance of
Products listed thereon.
5.14 Payment Method. ACS shall, at its discretion, make payment for
Products to Prima Pharm by check or by wire transfer to an account specified by
Prima Pharm.
5.15 Taxes. ACS shall not be responsible for the payment of any excise,
sales, use, value added, withholding or other taxes, tariffs or duties that may
be applicable to the transfer of products to ACS hereunder, all of which shall
be Prima Pharm's responsibility.
ARTICLE 6 - RECEIPT OF PRODUCT
6.1 Rejection. ACS shall have sixty (60) days following its receipt of a
shipment of Products to reject such Products on the grounds that all or part of
the shipment fails to conform to the applicable specifications or otherwise
fails to conform to the warranties given by Prima Pharm in Section 7.1, which
rejection shall be accomplished by giving written notice to Prima Pharm
specifying the manner in which all or part of such shipment fails to meet the
foregoing requirements. ACS reserves the right to reject any unauthorized early
or over/shipment of Products received without prior written approval from ACS.
If ACS rejects a shipment before the date on which payment therefor is due, it
may withhold payment for such shipment or the rejected portion thereof. All
shipments or portions thereof not rejected by ACS before payment is due
hereunder shall be paid for in accordance with Section 5.13. The warranties
given by Prima Pharm in Section 7.1 shall survive any failure to reject by ACS
under this Section 6.1.
6.2 Defects and Recalls.
6.2.1 Latent Defects. It is recognized that it is possible for a
shipment of Products to have defects ("defects" meaning that such Products fail
to conform to the applicable specifications or otherwise fail to conform to the
warranties given by Prima Pharm under Section 7.1) which would not be
discoverable upon reasonable physical inspection or testing (the "Latent
Defects"). As soon as either party becomes aware of a Latent Defect in any lot
of Products, it shall immediately notify the other party, and the lot or batch
involved, at ACS's election, shall be deemed rejected as of the date of such
notice. In the event of a rejection by ACS under this Section 6.2 due to a
Latent Defect attributable to Prima Pharm, Prima Pharm shall refund all monies
paid for such Products to the extent such Products have not been sold by ACS.
To the extent such Products have been sold by ACS, Prima Pharm shall reimburse
ACS for its acceptance of returns from its customers. At its election, ACS may
recover amounts to which it may become entitled under this Section 6.2 by
offsetting such amounts from amounts then due or that may subsequently become
due to Prima Pharm.
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6.2.2 Product Recalls. In the event: (a) any government authority
issues a request, directive, or order that the Product, or a lot or lots
thereof, be recalled; (b) a court of competent jurisdiction orders such a
recall; or (c) ACS reasonably determines that the Product, or a lot or lots
thereof, should be recalled because the Product does not conform to
specifications or is found to contain a Latent Defect, the parties shall take
appropriate corrective action. In no event shall Prima Pharm be responsible for
regulatory compliance in connection with any recall, except to the extent
required hereunder or by law. All costs and expenses incurred in connection
with a recall shall be the responsibility of ACS, unless caused solely by the
negligence, willful act or omission, or breach hereof by Prima Pharm.
6.3 Disposal. All Products rejected by ACS under Section 6.1 or 6.2 may be
returned by ACS to Prima Pharm at Prima Pharm's expense. ACS shall give Prima
Pharm reasonable prior notice of such return. Within thirty (30) days of ACS's
request, Prima Pharm shall refund to ACS all amounts paid by ACS to return such
rejected Products to Prima Pharm or, with the agreement of the parties, credit
such amount to ACS against future purchases of Products.
6.4 Samples and Lot Records. Prima Pharm shall prepare and maintain lot
records and an archival sample, properly stored, from each lot of Products
manufactured and shipped hereunder sufficient to perform each quality control
test identified in the specifications at least twice. Prima Pharm shall comply
with all requirements of 21 C.F.R. Section 211.180 in preparing and maintaining
lot records and with the requirements of 21 C.F.R. Section 211.170 in
maintaining and storing samples.
6.5 Presence at Facility. During the term of this Agreement, ACS shall
have the right from time to time to have a reasonable number of representatives
of ACS selected by ACS to be present at the Prima Pharm facilities at which
Products are being manufactured; provided, however, that such representatives
shall (i) not interfere in the other activities being carried out at the
facility, and (ii) observe all rules and regulations applicable to individuals
employed at the facility. The presence of ACS's representative(s) shall in no
way relieve Prima Pharm of any of its obligations under this Agreement.
6.6 Inspections by Government Agencies. Prima Pharm shall promptly notify
ACS of any inspections by federal or national; state, province, or regional; or
local regulatory representatives (including, without limitation, FDA, EPA,
EEOC, OSHA, similar state agencies or building code inspectors) of any facility
at which Products are being or will be manufactured, and shall so cause the
supplier(s) of Bulk Material to do the same, and shall send ACS copies of the
results of any such inspections, including actions taken by Prima Pharm or any
other entity to remedy conditions cited in such inspections. Without limiting
the generality of the foregoing, Prima Pharm shall provide, and cause the
supplier(s) of Bulk Material to provide, ACS with copies of any written
inspection reports issued by such agencies and all correspondence between Prima
Pharm or the Bulk Material to do the same, and the agency involved, including,
but not limited to, FDA Form 483 and all correspondence relating thereto. Prima
Pharm shall permit, and cause Bulk Material Suppliers to permit, the FDA to
conduct whatever inspections of the facilities at which Products or Bulk
Material are to be manufactured as the FDA may reasonably request in connection
with ACS's obtaining and maintaining market approval for the Products, and
shall cooperate fully with the FDA during any such inspections.
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Prima Pharm shall give, and cause the supplier(s) of Bulk Material to give, ACS
prompt written notice of any such inspections and allow representatives of ACS
to be present at such facilities during any such inspections.
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES
7.1 PROCESS AND PRODUCTS WARRANTIES. Prima Pharm warrants and represents
that:
7.1.1 all Products sold by Prima Pharm to ACS hereunder shall (i)
comply with the specifications for such Products, (ii) conform with the
information shown on the Q.A. Data Sheet provided for the particular shipment,
and (iii) not contain any Latent Defect attributable to Prima Pharm;
7.1.2 none of the Products sold hereunder shall be adulterated or
misbranded within the meaning to ACS of the United States Food, Drug, and
Cosmetic Act, as amended and in effect at the time of shipment (the "Act"), or
within the meaning of any state or municipal laws in the United States
applicable to the Products and containing terms with substantially similar
meanings as the meaning of adulteration or misbranding under the Act; provided,
however, that this Paragraph 7.1.2 shall not apply to, and Prima Pharm shall
have no responsibility for, misbranding caused directly by ACS as a result of
labels or package texts specified or provided by ACS for the Products;
7.1.3 all Products delivered to ACS hereunder shall have been
manufactured within eight (8) weeks prior to receipt by ACS;
7.1.4 Prima Pharm, all Products sold by Prima Pharm to ACS
hereunder, and all facilities used by Prima Pharm to manufacture the Products
hereunder shall meet all United States regulatory requirements for
commercialization, including, without limitation, compliance with then current
GMPs, demonstration of commercial production capability, and demonstration of
acceptable stability of such Products; all ISO 9000 regulatory requirements.
7.1.5 Prima Pharm will provide written notice to ACS of any proposed
alterations to the Process; provided, however, that under no circumstances
shall any such alteration be implemented without ACS's express prior written
consent.
7.1.6 title to all Products sold hereunder shall pass to ACS as
provided herein free and clear of any security interest, lien, or other
encumbrance; and
7.1.7 the Products sold by Prima Pharm to ACS hereunder shall have
been manufactured, packaged, and stored in facilities which are approved by the
FDA at the time of such manufacture, packaging, and storage, to the extent such
approval is required by law or regulation.
7.2 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 7, PRIMA
PHARM MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
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THE PRODUCTS, AND PRIMA PHARM HEREBY EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED OR
STATUTORY WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
7.3 Authority. Prima Pharm represents and warrants on a continuing basis
that it: (a) has the right to enter this Agreement, is a corporation duly
organized, validly existing, and in good standing under the laws of the state
in which it is incorporated; (b) has the power and authority to execute and
deliver this Agreement and to perform its obligations hereunder; (c) it has by
all necessary corporate action duly and validly authorized the execution and
delivery of this Agreement and the performance of its obligations hereunder
including approval of the execution of this Agreement by the requisite number
if disinterested directors; (d) any employee or other personnel affiliated with
Prima Pharm who will be involved in development of the Process, its scale-up
and/or the manufacture of Products has executed a proprietary information and
technology agreement in favor of Prima Pharm, pursuant to which such employee
or other personnel is obligated to assign his/her entire right, title, and
interest in and to any invention, discovery, technology, or related
intellectual property conceived of, reduced to practice or otherwise developed
in the course of their employment to Prima Pharm; and (e) has not and will not
during the term of this Agreement enter into any agreement which conflicts with
or which will result in any breach of, or constitute a default under, any note,
security agreement, commitment, contract or other agreement, instrument or
undertaking to which Prima Pharm is a party.
7.4 Effect of Product Warranty.
7.4.1 Options. If any Product purchased hereunder does not meet the
warranties specified herein or otherwise applicable, ACS may, at its option and
subject to Section 7.5 (i) require Prima Pharm to replace or correct at no cost
to ACS any non-conforming Products, (ii) return any non-conforming Products to
Prima Pharm and recover from Prima Pharm the full purchase price paid in
respect thereof, or (iii) replace non-conforming Products itself and charge
Prima Pharm the reasonable cost of such correction. The foregoing remedies are
in addition to all other remedies at law or in equity or under this Agreement
and shall not be deemed to be exclusive thereof.
7.4.2 No Waiver. No inspection or acceptance, approval, acquiescence,
or payment by ACS with respect to non-conforming Products shall relieve Prima
Pharm from any portion of its warranty obligations hereunder, nor shall waiver
by of any specification requirement for one or more Products constitute a
waiver of such requirements for remaining Products unless expressly agreed by
ACS in writing.
7.5 Warranty Procedures. Subject to Section 7.4 above, ACS may send
non-conforming Products (or Products with Latent Defects) covered by the
foregoing warranties to Prima Pharm's facility at the address specified herein.
ACS shall request authorization from Prima Pharm prior to the return of each
non-conforming Product for repair or replacement by Prima Pharm. Upon such
request, Prima Pharm shall provide ACS with a return Authorization (RA) number
to be prominently displayed on the shipping container for the non-conforming
vial(s) of Product. Once ACS receives an
-13-
<PAGE> 14
RA number for any non-conforming Product, ACS may ship such Product to Prima
Pharm's facility, at Prima Pharm's expense, in its original shipping container
of equivalent protective constitution. If an RA number in respect of such a
non-conforming Product is requested by ACS during the applicable warranty
period, Prima Pharm shall, at its sole expense, replace the defective or
non-conforming Products upon receipt form ACS, and shall ship the replaced
Products to ACS in accordance with Section 5.12. Upon receipt of any replaced
Product, ACS shall be entitled under Article 6 to inspect and reject any such
Product failing to conform to the warranties set forth in Section 7.1.
7.6 Indemnification.
7.6.1 By Prima Pharm. Subject to Paragraph 7.6.3, in the event of a
breach of the representatives and warranties under this Article 7 by Prima
Pharm, Prima Pharm shall indemnify, defend, and hold ACS, it directors,
officers, employees, agents, distributors, and customers harmless from and
against all liabilities, damages (including personal injury and property
damage), expenses, and costs (including reasonable attorney's and other
professional fees) arising or resulting therefrom.
7.6.2 By ACS. Subject to Paragraph 7.6.3, ACS shall indemnify,
defend, and hold Prima Pharm, its directors, officers, employees, and agents
harmless from and against all liabilities, damages, (including personal injury
and property damage) expenses, and costs (including reasonable attorney's and
other professional fees) resulting from personal injury, property damage, or
any other loss irrespective of the theory of liability, relating to or arising
from the use or sale of Products by ACS, its Affiliates, sublicenses, or
distributors, unless and to the extent such injury or damage is attributable to
the acts or omissions of Prima Pharm, or results from a breach of the
representations and warranties under this Article 7 by Prima Pharm.
7.6.3 Notification. The parties shall promptly notify each other of
any claim or suit with respect to which indemnification is sought hereunder;
provided, however, that if such notification is provided to the party from whom
indemnification is sought after such time as the rights of the indemnifying
party have been prejudiced by the passage of time, the provisions of this
Section 7.6 shall not apply to any such claim or suit. The party seeking
indemnification shall permit the indemnifying party to assume control of the
defense, including settlement, of such claims or suits, at the expense of the
indemnifying party. During the course of any proceeding for which
indemnification is provided hereunder, the indemnified party shall cooperate
with the indemnifying party, upon request by the indemnifying party. No
settlement or compromise shall be binding on a party hereto without such
party's prior written consent, and such consent shall not be unreasonably
withheld.
7.7 Limitation of Liability. IN NO EVENT WILL EITHER PARTY HERETO BE
LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES SUFFERED BY THE
OTHER PARTY ARISING IN ANY WAY OUT OF THIS AGREEMENT, HOWEVER CAUSED AND
IRRESPECTIVE OF THE THEORY OF LIABILITY.
-14-
<PAGE> 15
ARTICLE 8 - INTELLECTUAL PROPERTY: LICENSE
8.1 Ownership. ACS shall own the Process and any and all methods,
machines, articles of manufacture, compositions of matter, other inventions,
discoveries, works of authorship, computer programs, show-how, know-how, trade
secrets and other intellectual property (whether or not patentable or
copyrightable) conceived, reduced to practice, authored, discovered or
developed by or on behalf of Prima Pharm in connection with the development of
the Process of the manufacture of Products hereunder (the "Intellectual
Property" and Prima Pharm shall promptly notify ACS in writing of any such
Intellectual Property. Prima Pharm hereby assigns its entire worldwide right,
title, and interest in and to any such Intellectual Property to ACS. In the
even that ACS elects to file patent applications with respect to the
Intellectual Property, Prima Pharm shall cooperate fully with ACS in such
filing, and shall execute such documents and take such other actions as ACS
requests, and Prima Pharm shall cooperate with and assist ACS, as requested by
and at the expense of ACS, to evidence, perfect, enforce, and defend such
Intellectual Property and ACS's ownership thereof.
8.2 Prima Pharm Employees. Prima Pharm will require any and all of its
employees involved in the development of the Process, its scale-up, or the
manufacture of Products hereunder to enter into a written agreement acceptable
to ACS, assigning and transferring to Prima Pharm or ACS all of the employee's
right, title, and interest in all Intellectual Property conceived, reduced to
practice, authored, discovered or developed by such employee and which relates
to the subject matter of this Agreement, and to otherwise assist ACS as
contemplated in Section 8.1 above.
8.3 License. ACS hereby grants to Prima Pharm a fully paid,
non-transferable, non-exclusive license under the Intellectual Property to
make, use, and sell products, other than Products, for any purpose other than
opthalmic applications; it being understood that with respect to Products,
Prima Pharm shall manufacture and sell the same only for the account of ACS.
Except as expressly granted herein, ACS retains all rights in respect of the
Intellectual Property.
ARTICLE 9 - CONFIDENTIALITY
9.1 Confidentiality. Except as expressly authorized hereunder, Prima
Pharm shall not use for any purpose, or disclose to any third party, any
Intellectual Property, or any information regarding the Process, the
development of the Process and the use of the Process to manufacture Products,
except as expressly provided in this Agreement. All such information and/or
Products shall be ACS Confidential Information (as defined in Section 9.2
below) subject to this Article 9. Prima Pharm shall require each of its
employees which will be involved in the development of the Process or the
manufacture of Products hereunder to enter a confidentiality agreement with
ACS, in a form acceptable to ACS, and in any event Prima Pharm shall use its
best efforts to maintain the confidentiality of all information described in
this Article 9.
9.2 Confidential Information. The parties may from time to time disclose
to each other Confidential Information. "Confidential Information" shall mean
any proprietary information owned by a party or which a party controls which is
disclosed to the other party hereto which is designated
-15-
<PAGE> 16
as confidential at the time of disclosure or is otherwise identified as
Confidential Information. Nothing contained in this Article 9 shall prevent
either party from disclosing any Confidential Information of the other party to
(i) regulatory agencies for the purpose of obtaining approval to distribute and
market the Products; provided, however, that all reasonable steps are taken to
maintain the confidentiality of such Confidential Information to be disclosed;
(ii) accountants, banks, or another financing source (or their advisors), or in
connection with a merger, acquisition or securities offering, subject in each
case to the recipient entering into an agreement to protect such Confidential
Information from disclosure; or (iii) is required by law or regulation to be
disclosed; provided, however, that the party subject to such disclosure
requirement has provided has provided written notice to the other party promptly
upon receiving notice of such requirement in order to enable the other party to
seek a protective order or otherwise prevent disclosure of the other party's
Confidential Information.
9.3 Process Disclosures. Unless required pursuant to the terms of this
Agreement or otherwise requested by ACS in writing: (i) Prima Pharm shall not
disclose to any third party any Confidential Information relating in any way to
the Process or ACS's business; and (ii) all disclosures by Prima Pharm of ACS
Confidential Information with respect to the Product or Process shall be made to
a third party only after ACS has agreed in writing to such disclosure and the
third party to whom such disclosure is to be made has agreed in writing to be
bound by the terms of a confidentiality agreement reasonably acceptable to ACS,
and which names ACS as an intended third party beneficiary thereof.
ARTICLE 10 - TERM AND TERMINATION
10.1 Term. Unless earlier terminated, this agreement shall continue in
full force and effect until the fifth anniversary of the Effective Date. The
parties may renew or otherwise extend this Agreement for an additional period
upon the agreement of the parties.
10.2 Termination for Cause. This Agreement may be terminated:
10.2.1 by either party, upon a material breach of this Agreement by the
other party, upon sixty (60) days' prior written notice to the breaching party,
which notice shall become effective at the end of the sixty (60) day period;
provided, however, that prior to the effective date of such termination, the
breaching party shall have the right to cure any such breach, and if the
breaching party timely cures such breach, this Agreement shall not terminate.
10.2.2 by either party upon thirty (30) days notice, if the other party
becomes the subject of a voluntary on involuntary petition for bankruptcy or any
proceeding relating to insolvency, receivership, or liquidation, if such
proceeding is not dismissed with prejudice within thirty (30) days after any
such filing.
16
<PAGE> 17
10.3 Effect of Termination or Expiration.
10.3.1 Accrued Rights and Obligations. In the event of termination
or termination or expiration of this Agreement, the provisions hereof shall
continue to apply to all purchase orders accepted by Prima Pharm prior to the
effective date of such termination or expiration, and Prima Pharm shall honor
any such purchase order(s) and deliver to ACS such Products corresponding to
such purchase orders, and ACS shall pay Prima Pharm the purchase price therefor
as provided herein. Termination or expiration of this Agreement shall not
relieve or release either party from making payments for obligations accrued
prior to such termination. In the event Prima Pharm terminates for cause, ACS
shall also be responsible for payment in respect to raw materials,
work-in-progress, and finished Products made by Prima Pharm and for which
purchase orders corresponding thereto have been accepted by Prima Pharm prior
to such termination.
10.3.2 Return of Confidential Information. Upon any termination or
expiration of this Agreement, Prima Pharm shall promptly return to ACS any
Confidential Information received from ACS prior to such termination or
expiration, and Prima Pharm shall no longer be entitled to use any Confidential
Information of ACS for any purpose.
10.4 No Liability For Expiration. ACS will not, by reason of the
expiration of this Agreement, be liable to Prima Pharm for compensation,
reimbursement, or damages on account of any residual inventory of materials
(including Bulk Material) purchased by Prima Pharm for the manufacture of
Product, for which no purchase order was accepted by Prima Pharm prior to such
expiration or termination.
10.5 Survival. The provisions of Articles 7, 8, 9, and 11, Sections 1.2,
5.2, 6.2, 6.4, 10.3, 10.4, and 10.5, and Paragraph 3.1.6 shall survive the
termination or expiration of this Agreement.
ARTICLE 11 - MISCELLANEOUS
11.1 Governing Law. The Agreement shall be governed by the laws of the
state of California, without reference to conflicts of law principles.
11.2 Arbitration. If a dispute arises between the parties relating the
interpretation or performance of this Agreement or the grounds for the
termination thereof, representatives of the parties with decision-making
authority shall meet to attempt in good faith to negotiate a resolution of the
dispute prior to pursuing other available remedies. If within thirty (30) days
after such meeting the parties have not succeeded in negotiating a resolution of
the dispute, such dispute shall be submitted to final and binding arbitration
under the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by one (1) arbitrator in Orange County, California. Such
arbitrator shall be selected by the mutual agreement of the parties, or failing
such agreement, shall be selected according to the aforesaid AAA rules. The
arbitrator will be instructed to prepare and deliver a written, reasoned
opinion stating his decision within thirty (30) days of the completion of the
arbitration. Such arbitration shall be concluded within nine (9) months
following the filing of the
17
<PAGE> 18
initial request for arbitration. The parties shall bear the costs of
arbitration equally and shall bear their own expenses, including professional
fees. The decision of the arbitrator shall be final and non-appealable and may
be enforced in any court of competent jurisdiction.
11.3 Notices. Any notice or report required or permitted to be given or
made under this Agreement by either party shall be in writing and delivered to
the other party at its address indicated above (or to such other address as a
party may specify by notice hereunder) by courier or by registered or certified
airmail, postage prepaid, or by facsimile; provided, however, that all
facsimile notices shall be promptly confirmed, in writing, by registered or
certified airmail, postage prepaid. All notices shall be effective as of the
date received by the addressee.
11.4 Force Majeure. Neither party will be liable for its failure to
perform any of its obligations hereunder during any period in which such
performance is delayed by acts of God, fire, war, embargo, riots, strikes or
other similar cause outside the control of the party whose performance is
affected thereby.
11.5 Non-Waiver. Any waiver of the terms and conditions hereof must be
explicitly in writing. The waiver by either of the parties of any breach of
any provision hereof by the other shall not be construed to be a waiver of any
succeeding breach of such provision or a waiver of the provision itself.
11.6 Severability. Should any Article, Section, or Paragraph of this
Agreement, or any portion of any of the foregoing, be held invalid by reason of
any law, statute or regulation existing now or in the future in any
jurisdiction by any court of competent authority or by a legally enforceable
directive of any governmental body, such Article, Section, Paragraph, or
portion thereof shall be validly reformed so as to approximate the intent of
the parties as nearly as possible and, if practicable, shall be deemed
divisible and the invalid portion deleted with respect to such jurisdiction,
but the Agreement shall not otherwise be affected.
11.7 Independent Contractors. The relationship of the parties under the
Agreement is that of independent contractors. Neither party shall be deemed to
be the agent of the other, and neither is authorized to take any action binding
upon the other.
11.8 Assignment. This Agreement may not be assigned by Prima Pharm without
the prior written consent of ACS. ACS may assign this Agreement, and the rights
granted herein, to a third party who agrees to be bound by the terms hereof.
11.9 Publicity. Should a party be required by law to make a public
disclosure about this Agreement, then the party so required may do so;
provided, however, that it gives at least three (3) business days' prior
written notice to the other party. Otherwise, neither party shall issue any
press release or other public disclosure about this Agreement or its terms
without the prior written consent of the other party.
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<PAGE> 19
11.10 Trademarks. ACS, in its sole discretion, shall select the
trademarks, trade names and trade dresses to be used in connection with the
Products and all such trademarks, trade names and trade dresses shall be and
become the exclusive property of ACS. Prima Pharm shall use said trademarks,
trade names and trade dresses for the sole purpose of manufacturing the Products
for sale to ACS and at no time shall adopt any trademark, trade name or trade
dress that may be confusingly similar therewith. Prima Pharm shall acquire no
rights in and to any trademarks, trade names and trade dresses selected by ACS
under this Section 11.10.
11.11 Financial Statements. Prima Pharm shall provide to ACS on an annual
basis a copy of its annual financial statements.
11.12 Entire Agreement. The terms and provisions contained in the
Agreement, including the Exhibits hereto, constitute the entire agreement
between the parties and shall supersede all previous communications,
representations, agreements or understandings, either oral or written, between
the parties with respect to the subject matter hereof. ACS shall not have any
other obligations to Prima Pharm other than as specifically and expressly
provided herein. No agreement or understanding varying or extending this
Agreement shall be binding upon either party hereto, unless set forth in a
writing which specifically refers to the Agreement signed by duly authorized
officers or representatives of the respective parties, and the provisions hereof
not specifically amended thereby shall remain in full force and effect.
11.13 Counterparts and Headings. The Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both together
shall be deemed to be one and the same agreement. All headings in the Agreement
are inserted for convenience of reference only and shall not affect its meaning
of interpretation.
IN WITNESS WHEREOF, Prima Pharm and ACS have executed the Agreement in
duplicate as of the day and year first above written.
ADVANCED CORNEAL SYSTEMS, INC. PRIMA PHARM INC.
By: /s/ John H. Parish By: /s/ [SIGNATURE ILLEGIBLE]
--------------------------------- ----------------------------------
Title: COO Title: President and CEO
Date: 12/19/96 Date: 1-2-97
------------------------------- --------------------------------
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<PAGE> 20
EXHIBIT A
SPECIFICATIONS FOR HYALURONIDASE
Bulk Supply
1. Microbioload of Hyaluronidase:
a. No E. coli Contamination;
b. No Salmonella Contamination; and
c. Total Microbial contamination less than 10(3) organisms/grams of
Hyaluronidase.
2. Tyrosine Content not to exceed 0.25ug for every U.S.P. Unit of
Hyaluronidase.
3. Level of pyrogen in bulk Hyaluronidase not to exceed an amount to be
determined by ACS and provided to Prima Pharm in writing.
4. Hyaluronidase Activity to Exceed 5000 Units of activity/mg of lyophilized
Product.
5. To be Supplied in Frozen Form.
Specifications for Phosphate Buffer
and Lactose + U.S.P. Water for Injection
1. All materials to be U.S.P. certified and meet or exceed all applicable
U.S.P. specifications.
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<PAGE> 21
EXHIBIT B
SPECIFICATIONS FOR FINAL PRODUCTS
Product 1 - For application to the Vitreous Humor
1. 8,000 Units of Hyaluronidase/vial (specifications to be finalized within
sixty (60) days of the Effective Date).
2. Tyrosine content less than 0.25ug/Unit of Hyaluronidase.
3. Pyrogen Test - meets or exceeds U.S.P. requirement.
4. Sterility test - meets or exceeds U.S.P. Sterility Requirements.
5. Container Closure Integrity test - Passes set requirements.
6. Vacuum Test - Seal Integrity of container to maintain vacuum at or below
conditions to be determined by ACS and provided to Prima Pharm in writing.
7. Level of water content in the lyophilized product not to exceed seven
percent (7%).
Product 2 - For Corneaplasty
1. 11,000 Units of Hyaluronidase/vial (specifications to be finalized within
sixty (60) days of the Effective Date).
2. Tyrosine content less than 0.25ug/Unit of Hyaluronidase.
3. Pyrogen Test - meets or exceeds U.S.P. requirement.
4. Sterility test - meets or exceeds U.S.P. Sterility Requirement.
5. Container Closure Integrity test - Passes set requirements.
6. Vacuum Test - Seal Integrity of container to maintain vacuum at or below
conditions to be determined by ACS and provided to Prima Pharm in writing.
7. Level of water content in the lyophilized product not to exceed seven
percent (7%).
<PAGE> 22
EXHIBIT C
PRODUCT PRICING
The parties agree that the prices listed in this Exhibit C shall be based
on cumulative totals of Products ordered in the twelve (12) month period
immediately preceding that in which the purchase order corresponding to the
particular Products ordered therein was received by Prima Pharm, unless
otherwise agreed by the parties.
<TABLE>
<CAPTION>
12 MONTH CUMULATIVE TOTAL PRICE PER VIAL
OF PRODUCTS ORDERED VITRASE(TM) CORNEAPLASTY
------------------------- ----------------------------
<S> <C>
0 - 100,000 vials $10.50 $10.50
100,001 - 125,000 vials $9.45 $9.45
125,001 - 150,000 vials $9.00 $9.00
150,001 - 175,000 vials $8.00 $8.00
> 175,000 vials
</TABLE>
<PAGE> 1
EXHIBIT 10.15
SUPPLY AGREEMENT
BETWEEN
ADVANCED CORNEAL SYSTEMS, INC.
AND
BIOZYME LABORATORIES, LTD.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 - DEFINITIONS..........................................................................1
1.1 "Act".............................................................................1
1.2 "ACS Vitrase(TM)Product"..........................................................1
1.3 "ACS Corneaplasty(TM)Product".....................................................1
1.4 "Equipment".......................................................................1
1.5 "Facility"........................................................................1
1.6 "FDA".............................................................................2
1.7 "GMP Grade".......................................................................2
1.8 "Good Manufacturing Practices"....................................................2
1.9 "Ophthalmic Applications".........................................................2
1.10 "Product".........................................................................2
1.11 "Specifications"..................................................................2
1.12 "Unit"............................................................................2
ARTICLE 2 - CERTIFICATION AND APPROVAL...........................................................2
2.1 Certification.....................................................................2
2.2 Milestone Payments................................................................3
2.3 ACS Equipment.....................................................................3
ARTICLE 3 - SUPPLY...............................................................................4
3.1 Product Supply....................................................................4
3.2 Forecasts.........................................................................4
3.3 Orders............................................................................5
3.4 Form of Order.....................................................................5
3.5 Annual Purchase Requirements......................................................6
3.6 Pricing...........................................................................6
3.7 Payment...........................................................................7
3.8 Delivery..........................................................................7
3.9 Shipping Requirements.............................................................7
3.10 Title and Risk of Loss............................................................7
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES.......................................................7
4.1 Product Warranties................................................................7
4.2 Testing Warranties................................................................8
ARTICLE 5 - QUALITY ASSURANCE REQUIREMENTS.......................................................9
5.1 Release Testing...................................................................9
5.2 Stability Testing.................................................................9
5.3 Retains...........................................................................9
5.4 Maintenance of Records............................................................9
5.5 Inspection of Manufacturing Facility and Manufacturing Data.......................9
5.6 FDA Inspection of Facility.......................................................10
5.7 Subcontracting...................................................................10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
{CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.8 Reprocessing......................................................................9
ARTICLE 6 - ACCEPTANCE OF PRODUCT...............................................................10
6.1 Review of Results of Release Testing.............................................10
6.2 Rejection of Product.............................................................10
6.3 Results of Regulatory Authority Inspections......................................10
ARTICLE 7 - SHORTAGE OF SUPPLY..................................................................11
7.1 Notification.....................................................................11
7.2 Priority Allocation..............................................................11
7.3 Other Remedies...................................................................11
ARTICLE 8 - INDEMNIFICATION.....................................................................
8.1 Indemnity by ACS.................................................................
8.2 Indemnity by Biozyme.............................................................
8.3 Defense of Indemnification Claims................................................
ARTICLE 9 - CONFIDENTIALITY.....................................................................11
9.1 Confidential Information.........................................................11
ARTICLE 10 - TERM...............................................................................12
10.1 Term.............................................................................12
10.2 Termination for Cause............................................................10
10.3 Termination with Notice..........................................................13
10.4 Effect of Expiration or Termination on Agreement.................................13
10.5 Survival.........................................................................13
ARTICLE 11 - MISCELLANEOUS......................................................................13
11.1 Suppliers........................................................................13
11.2 Force Majeure....................................................................13
11.3 Relationship of the Parties......................................................14
11.4 Assignment.......................................................................14
11.5 Entire Agreement.................................................................14
11.6 Severability.....................................................................14
11.7 Headings.........................................................................14
11.8 Notices..........................................................................15
11.9 Public Disclosure................................................................15
11.10 Amendment; No Waiver.............................................................15
11.11 No Conflict......................................................................16
11.12 Governing Law....................................................................16
11.13 No Strict Construction...........................................................16
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
{CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
11.14 Counterparts.... ................................................................16
</TABLE>
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<PAGE> 5
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is entered into as of the 23rd
day of September 1999 (the "Effective Date") by and between Biozyme
Laboratories, Ltd., a company incorporated in England and Wales under number
1034731 whose registered office is at Unit 6, Gilchrist Thomas Estate,
Blaenavon, Gwent, NP4 9RL, United Kingdom ("Biozyme") and Advanced Corneal
Systems, Inc., a California corporation ("ACS").
RECITALS
A. Biozyme has expertise in the production of particular animal sourced
hyaluronidase.
B. ACS has developed products which utilize such particular animal
sourced hyaluronidase for use in ophthalmic applications.
C. Biozyme wishes to supply to ACS, and ACS wishes to purchase from
Biozyme, quantities of the Product for use in its products and sale worldwide on
the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Act" means the United States Food, Drug and Cosmetics Act, as
amended from time to time and the regulations promulgated thereunder.
1.2 "ACS Vitrase(R) Product" means a product containing hyaluronidase as
an active ingredient used to treat various diseases of the human eye.
1.3 "ACS Corneaplasty(TM) Product" means a product system, containing
hyaluronidase as an active ingredient used to correct refractive vision errors
of the human eye.
1.4 "Equipment" shall have the meaning set forth in Article 2.3.
1.5 "Facility" means the facility at Biozyme Laboratories, Ltd.,
Blaenavon Gwent, South Wales, United Kingdom.
1.6 "FDA" means the United States Food and Drug Administration.
1.7 "GMP Grade" means Product that has been produced in accordance
with applicable Good Manufacturing Practices with respect to active
pharmaceutical ingredients.
1.8 ."Good Manufacturing Practices" means the current good manufacturing
practices for manufacturing active pharmaceutical ingredients as set forth in 21
CFR Parts 210 and
<PAGE> 6
211 and the Rules Governing Medical Products in the European Community as set
forth in Volume IV; Guide to Good Manufacturing Practice for the Manufacturing
of Active Pharmaceutical Ingredients.
1.9 "Ophthalmic Applications" means any application, whether research
or commercial, of the Product for administration to the human or animal eye.
1.10 "Product" means animal sourced hyaluronidase manufactured in
accordance with the Specifications.
1.11 "Specifications" means the manufacturing, quality control,
packaging, labeling, shipping and storage specifications for the Product, as set
forth in Exhibit A hereto or as otherwise mutually agreed in writing by ACS and
Biozyme from time to time.
1.12 "Unit" means that amount of enzyme causing the same turbidity
reduction as the 'International Unit' (I.U.) as compared with the International
Standard meeting the applicable Specifications.
ARTICLE 2 - CERTIFICATION AND APPROVAL
2.1 Certification. Promptly upon execution of this Agreement, but in
no event later than March 31, 2000, Biozyme will use best efforts to obtain
third party certification ("GMP Certification"), by an auditor acceptable to
both Biozyme and ACS, that the manufacture of Product by Biozyme at the Facility
is in compliance with GMP requirements. ACS shall bear the reasonable costs
associated with the third party audit and inspection of the Facility as
requested by ACS. ACS shall also bear the costs of outside laboratory testing
for the new water system and cleaning validations as required to obtain GMP
certification. Biozyme shall bear the costs in connection with the modification
or improvement of the Facility including certain improvements to Unit 15, cold
rooms 1 and 2 and laboratory 3 as required in order to obtain certification of
compliance with GMP requirements.
2.2 Milestone Payments. Upon receipt of GMP certification pursuant to
Article 2.1 above, ACS shall pay to Biozyme Pound Sterling40,000 (British
Pounds). In addition, ACS shall pay to Biozyme, Pound Sterling20,000 (British
Pounds) immediately upon the occurrence of each of: (i) FDA approval of a New
Drug Application ("NDA") for the ACS Vitrase(R) product; and (ii) FDA approval
of an NDA for the ACS Corneaplasty(TM) product system.
2.3 ACS Equipment.
2.3.1 ACS shall acquire, in a timely manner and at its own
expense, and install or have installed at the Facility, the equipment listed in
Exhibit B attached hereto ("Equipment"). Biozyme shall not utilize the Equipment
for any use other than for the manufacture of the Product for ACS. The Equipment
shall, at all times, remain the sole and exclusive property of ACS.
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<PAGE> 7
2.3.2 Biozyme, at its expense, shall make all necessary site
preparations and cause the Equipment to be operated in accordance with any
applicable operating manuals, manufacturer's instructions and GMP requirements.
Biozyme shall effect and bear the reasonable expense of all necessary repair,
maintenance and operation of the Equipment. Replacements required to be made to
maintain the Equipment in good condition, reasonable wear and tear excepted, and
to comply with all applicable laws to which the use and operation of the
Equipment may be or become subject shall be subject to the prior written
approval of ACS, the cost of which shall be the responsibility of ACS. All
replacement Equipment and parts furnished in connection with such maintenance or
repair shall immediately become the property of ACS and part of the Equipment
for all purposes hereof. All such maintenance and repair services shall be
immediately paid for and discharged by Biozyme with the result that no lien
under any applicable laws will attach to the Equipment as a result of the
performance of such services or the provision of any such material.
2.3.3 Biozyme shall obtain and maintain for the term of this
Agreement, at its own expense, (a) "all risk" insurance against loss or damage
to the Equipment, (b) commercial general liability insurance (including
contractual liability, products liability and completed operations coverage)
reasonably satisfactory to ACS.
2.3.4 If any items of Equipment shall become lost, stolen,
destroyed, or damaged beyond repair for any reason, or in the event of
condemnation, confiscation, seizure or requisition of title to or use of such
items (collectively, an "Event of Loss"), Biozyme shall promptly pay to ACS the
fair market value of the Equipment subject to the Event of Loss as determined by
an objective third party evaluator agreeable to both parties. Upon payment of
such amount by Biozyme, ACS will transfer to Biozyme, "AS IS, WHERE IS, WITHOUT
RECOURSE, REPRESENTATION OR WARRANTY," all of ACS's right, title and interest,
if any, in such items of Equipment.
2.3.5 (a) ACS and Biozyme confirm their intent that title to the
Equipment shall remain in ACS (or its successors and assigns) exclusively. If
requested by ACS, Biozyme, at ACS's cost, will affix plates or markings on the
Equipment and on any operating manuals and manufacturer's instructions
indicating the interests of ACS and its assigns therein, and Biozyme will not
allow any other indicia of ownership or other interest in the Equipment to be
placed on the Equipment. Biozyme shall not sell, assign, grant a security
interest in, sublet, pledge, hypothecate or otherwise encumber or suffer a lien
upon or against the Equipment.
(b) Location. Biozyme may move such Equipment from the
Facility only if Biozyme gives at least thirty (30) days prior written notice of
the relocation or such other documentation as ACS reasonably requests to protect
its interest in the Equipment.
(c) Biozyme shall keep copies of all operating manuals and
manufacturer's instructions with respect to the Equipment in good condition at
the Facility.
2.3.6 In the event ACS should decide to sell or otherwise dispose
of any or all of the Equipment, Biozyme shall have the right of first refusal to
purchase such Equipment at ACS' good faith determination of the Equipment's fair
market value. If Biozyme elects not to
-3-
<PAGE> 8
purchase the Equipment under this Article 2.3.6, Biozyme shall, at ACS's
expense, return the Equipment to ACS in the same condition as delivered, normal
wear and tear expected, at such location as ACS shall designate.
ARTICLE 3 - SUPPLY
3.1 Product Supply. Subject to the terms and conditions of this
Agreement, Biozyme shall supply ACS with ACS's requirements for Product, which
shall not be less than the minimum quantities of the Product set forth in
Article 3.5, during the term of this Agreement. Biozyme agrees that it shall not
manufacture Product for any third party for use in Ophthalmic Applications, and
shall not authorize any third party to manufacture or produce the Product for
third parties for use in Ophthalmic Applications.
3.2 Forecasts. During the term of this Agreement, at least sixty (60)
days prior to the start of each calendar quarter ("Q1"), ACS shall provide
Biozyme with a rolling written forecast of the quantities of Product estimated
to be required on a quarterly basis during Q1 and the next three (3) quarters
("Q2" through "Q4").
3.3 Orders. ACS shall place orders with Biozyme at any time for
delivery of the Product specifying the amount of Product ordered and required
delivery date(s). Biozyme shall accept such orders from ACS, subject to the
terms and conditions of this Agreement, provided that Biozyme shall not be
obligated to accept orders for any given quarter to the extent the quantity
ordered exceeds 120% of the quantity forecast in the forecast provided under
Article 3.2 above for the immediately preceding calendar quarter, but shall use
good faith efforts to fill orders for such quantities from available supplies.
Upon acceptance by Biozyme, each ACS order shall be final and not subject to
modification without the consent of Biozyme.
3.4 Form of Order. ACS's orders shall be made pursuant to a written
purchase order, and shall provide for shipment in accordance with reasonable
delivery schedules as may be agreed upon from time to time in writing by Biozyme
and ACS.
3.4.1 All sales of the Product pursuant to this Agreement shall
be subject to the standard terms and conditions of sale of Biozyme from
time to time set out in Biozyme Laboratories Ltd. catalogue, except to
the extent that any provision of those terms and conditions of sale is
inconsistent with any provisions of this Agreement in which event the
latter shall prevail; or
3.4.2 Biozyme and ACS agree in writing to vary those terms and
conditions of sale.
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<PAGE> 9
3.5 Annual Purchase Requirements. ACS shall be required to order the
following minimum quantities of Product during the initial five (5) calendar
years following the Effective Date. ACS orders for non-GMP Product during
calendar year 1999 shall be applied to the Annual Purchase Requirements for 1999
as defined below.
<TABLE>
<S> <C>
1999 250 million Units
2000 350 million Units
2001 500 million Units
2002 1,200 million Units
2003 1,500 million Units
</TABLE>
3.6 Pricing.
3.6.1 Prices for commercial supply of the Product shall be as
follows:
(a) For orders providing for shipments of less than 100
million Units, $451 United States Dollars per million Units:
(b) For orders providing for shipments of 101 to 200
million Units, $428 United States Dollars per million Units: or
(c) For orders providing for shipments of more than 201
million Units, $410 United States Dollars per million Units:
3.6.2 Any increase in the pricing for Product after the initial
two years of the agreement shall be presented to ACS by Biozyme not later than
ninety (90) days prior to the proposed effective date of the pricing change and
shall provide justification for the pricing increase. In no event shall such
pricing increase (i) be applicable to purchase orders accepted by Biozyme prior
to the effective date of the pricing change and (ii) in no event shall exceed
five percent (5%) per annum, unless such increase is due to a documented
increase in Biozyme's cost for the purchase of ovine raw material.
3.6.3 Pricing for Product as defined in Article 3.6.1 above shall
be applicable to GMP Grade Product. Pricing for non-GMP Grade Product shall be
$410 USD per million units.
3.6.4 Notwithstanding Article 3.6.2, Biozyme shall be entitled to
increase the price of the Product to cover extra expenses which are a
direct result of changes to the Specifications requested by ACS.
3.7 Payment. Upon shipment of the Product, Biozyme will generate and
deliver to ACS an invoice for the quantities delivered. ACS shall remit payment
to Biozyme within thirty-five (35) days of such invoice date.
-5-
<PAGE> 10
3.8 Delivery. Biozyme shall provide delivery of the Product, subject to
the provisions in Article 3.3 as follows:
(a) ACS orders for shipments of Product less than 60
million units: within forty-five (45) days of receipt of ACS order.
(b) ACS orders for shipments of Product more than 60
million units: within ninety (90) days of receipt of ACS order.
3.9 Shipping Requirements. Biozyme shall be responsible for arranging
for shipment of Product in accordance with shipping instructions which ACS shall
provide to Biozyme reasonably in advance of any such shipment (including,
without limitation, destination point and courier). Prior to delivering Product
to the courier, Biozyme shall package the material in accordance with good
commercial practice with respect to protection of the Product during
transportation and to comply with any applicable regulations and government
requirements. ACS shall be responsible for (i) obtaining all governmental
permits, consents and approvals which are required in order to export Product
from the United Kingdom and import the Product into the country of destination,
and (ii) making any notifications or other filings (whether before or after
shipment) which are required in connection with the exportation of Product from
the United Kingdom or importation of Product into the country of destination.
All out-of-pocket costs associated with freight insurance and custom duties, as
well as any special packaging expenses shall be paid by ACS.
3.10 Title and Risk of Loss. Title and risk of loss or damage shall
pass to ACS upon delivery of Product to the courier approved by ACS. In all
cases, delivery of Product shall be FOB point of shipment.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1 Product Warranties. Biozyme represents and warrants for the
period of this Agreement and for the twelve months immediately following
termination that (i) each shipment of Product will conform to the
Specifications, and all Product produced under this Agreement shall be GMP Grade
following completion of the GMP certification as specified in Article 2.1, (ii)
its standard manufacturing procedures conform to the applicable requirements of
all applicable Specifications at the time it is shipped hereunder, and (iii) to
the best of Biozyme's knowledge, the Product does not infringe the intellectual
property rights of any third party.
4.2 Testing Warranties. Biozyme represents and warrants for the
period of this Agreement and for the twelve months immediately following
termination that it shall use due care in conducting the testing specified in
Article 5 hereof and shall perform all such testing in accordance with the terms
of this Agreement and generally prevailing industry standards.
-6-
<PAGE> 11
ARTICLE 5 - QUALITY ASSURANCE REQUIREMENTS
5.1 Release Testing. Biozyme shall be responsible for all quality
control testing and analysis of Product outlined in Exhibit C to ensure that it
conforms to the Specifications and the warranties set forth in Article 4.1
hereof (the "Release Testing"). Biozyme shall provide ACS, at the time the
Product is shipped, with the results of all Release Testing, together with a
Certificate of Analysis relating to such testing, in order to enable ACS to
review such data in accordance with the provisions of Article 5 hereof.
5.2 Stability Testing. Biozyme shall be responsible for conducting
stability testing of the Product in accordance with the provisions of Exhibit D
hereto. Product required for Stability Testing pursuant to Exhibit D will be
provided by ACS to Biozyme at no cost from Product purchased under this
Agreement.
5.3 Retains. Biozyme shall retain a sufficient quantity of each
production run of Product to enable the performance of the tests required by
this Article 5 at least twice. Such samples shall be retained during such period
as is required by the Specifications, GMP requirements and all applicable
regulatory requirements.
5.4 Maintenance of Records. Biozyme shall keep, for a period of seven
(7) years following the end of the relevant calendar quarter, or such longer
period as shall be required by the Act or the applicable regulatory authorities
in any jurisdiction in which the Product is sold, exact, true and complete
records of all operations involved in the manufacture, testing, storage and
shipping of Product produced in such calendar quarter.
5.5 Inspection of Manufacturing Facility and Manufacturing Data.
Biozyme will permit ACS representatives or its designates to visit the Facility,
during normal working hours and with reasonable prior written notice, to observe
the performance of the manufacturing, handling, storage and shipping of Product
hereunder, discuss such activities with appropriate officials of Biozyme,
inspect (and if reasonably necessary copy) all records and data required to be
maintained pursuant to this Article 5, and analyze any tangible material
relevant thereto which is then within Biozyme's control and which is reasonably
available for such testing. Biozyme will cooperate with ACS and any governmental
authority in evaluating any complaint or claim by such governmental authority,
or adverse drug reaction report, related to the Product, and shall provide
information and take such other steps as may be necessary or appropriate to
comply with all requirements imposed by any regulatory authority in any
jurisdiction in which the Product is sold with respect to the Product. ACS shall
be entitled to exercise its rights pursuant to this Article 5.5 until the
expiration of the record retention period described in Article 5.4.
5.6 FDA Inspection of Facility. Biozyme shall promptly provide ACS
with any correspondence and other documentation received from or provided to
FDA, United Kingdom or European regulatory authorities in connection with
inspection of the Facility, including without limitation any post-inspection
reports and any Establishment Inspection Reports.
-7-
<PAGE> 12
5.7 Subcontracting. It is understood that in fulfilling its obligations
hereunder, Biozyme may subcontract such obligations for the testing pursuant to
Articles 5.1 - 5.2; provided that Biozyme shall at all times be responsible to
ACS for the performance of such subcontractors.
5.8 Reprocessing. Reprocessing of the Product at any stage of its
manufacture will not be permitted unless so authorized in writing by ACS.
ARTICLE 6 - ACCEPTANCE OF PRODUCT
6.1 Review of Results of Release Testing. ACS shall promptly accept
all Units of Product supplied to it in accordance with this Agreement, but shall
have the right to reject any Product which does not meet the Specifications
according to the manufacturing records and results of the Release Testing
relating to such Product. ACS agrees to review such data and records and
indicate to Biozyme in writing within thirty (30) calendar days after receipt
thereof whether it accepts the applicable Product or rejects such Product for
failure to meet the Specifications or, if both Biozyme and ACS agree in writing
to delay its response for a mutually agreed upon period of time. In the event
that ACS shall not have so rejected Product in writing within the thirty-day
time period described above, ACS shall be deemed to have accepted such Product.
It is understood and agreed that ACS's review of data or its acceptance (or
deemed acceptance) of Product pursuant to the provisions of this Article 6.1
shall in no way modify or diminish Biozyme's obligation hereunder.
6.2 Rejection of Product. If ACS rejects any Product, then it shall
provide Biozyme with a reasonably detailed description of the basis for such
rejection. Within thirty (30) business days of receiving ACS's notice of
rejection, Biozyme shall notify ACS as to whether it agrees with such rejection.
6.3 Results of Regulatory Authority Inspections. In no event shall
ACS be required to accept any Product in the event that the results of any FDA,
United Kingdom or European regulatory authority inspection of the Facility
indicate that the Facility was not being operated at the time the Product was
produced, or the Product is not being manufactured, handled, stored, packaged or
shipped, in accordance with the applicable regulatory standards.
ARTICLE 7 - SHORTAGE OF SUPPLY
7.1 Notification. If at any time Biozyme becomes unable to supply
requirements for the Product, or becomes aware that it will be unable to supply,
Biozyme shall promptly notify ACS in writing. In such event, representatives
from ACS and Biozyme shall, at their own expense and at their earliest
opportunity, convene to address the problem, including locating alternative
suppliers and/or facilities to increase production and any other actions
necessary to resolve the problem.
7.2 Priority Allocation. During the term of the Agreement, and in
accordance with Article 3, Biozyme shall provide ACS with a priority allocation
of ovine raw materials used to
-8-
<PAGE> 13
manufacture the product and shall not allocate ovine raw materials to other
manufacturing operations until ACS requirements pursuant to Article 3.3 are
satisfied.
7.3 Other Remedies. In the event that Biozyme fails to supply to ACS
quantities of Product that Biozyme is otherwise obligated to supply under this
Agreement, and such failure is the result of Biozyme's willful breach of its
obligations hereunder or its gross negligence, the remedies in Articles 7 and 9
shall not be exclusive and ACS shall be entitled to damages and/or other
remedies legally available. In the event that ACS fails to purchase the minimum
quantities of Product set forth in Article 3.5, Biozyme shall be entitled to
terminate the Agreement forthwith and shall be entitled to damages in line with
outstanding minimum purchases; provided however, that ACS may fulfill its
obligations to Biozyme under Article 3.5 by rendering to Biozyme a payment in
the amount equal to that which would be paid to Biozyme for such minimum
purchases.
ARTICLE 8 - CONFIDENTIALITY
8.1 Confidential Information.
8.1.1 Confidentiality. All information submitted by one party to
the other in connection with this Agreement identified as confidential at the
time of disclosure shall be considered as confidential ("Confidential
Information") and shall be utilized only pursuant to the purposes set forth
hereunder. During the term of this Agreement and for a period of five (5) years
thereafter, neither party shall disclose to any third party any Confidential
Information received from the other party without the specific written consent
of such party. The foregoing shall not apply where such information: a) was or
becomes public through no fault of the receiving party, b) was, at the time of
receipt, already in the possession of receiving party as evidenced by its prior
written records, c) was obtained from a third party legally entitled to use and
disclose the same, d) is independently developed by the receiving party without
use of any Confidential Information of the disclosing party, or e) is required
by law to be disclosed to a court or governmental agency.
8.1.2 Permitted Use and Disclosures. Notwithstanding Article
8.1.1 above, each party hereto may use or disclose information disclosed to it
by the other party to the extent such use or disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental regulations or otherwise
submitting information to tax or other governmental authorities, conducting
clinical trials, making a permitted sublicense or otherwise exercising its
rights hereunder, provided that if a party is required to make any such
disclosure of another party's confidential information, other than pursuant to a
confidentiality agreement, it will give reasonable advance notice to the latter
party of such disclosure and, save to the extent inappropriate in the case of
patent applications, will use its best efforts to secure confidential treatment
of such information prior to its disclosure (whether through protective orders
or otherwise).
-9-
<PAGE> 14
8.1.3 Confidential Terms. Except as expressly provided herein,
each party agrees not to disclose any terms of this Agreement to any third party
without the consent of the other party; provided, disclosures may be made as
required by securities or other applicable laws, or London Stock Exchange
requirements, or to actual or prospective investors or corporate partners, or to
a party's accountants, lenders, attorneys and other professional advisors.
ARTICLE 9 - TERM
9.1 Term. This Agreement shall be effective as of the Effective Date
and, unless earlier terminated in accordance with the provisions of this Article
9, shall continue in full force and effect until terminated by mutual agreement
of the parties or as provided under Article 9.2 below.
9.2 Termination for Cause.
9.2.1 At any time prior to expiration pursuant to Article 9.1,
either party may terminate this Agreement for cause upon written notice to the
other party in the event that there has been a material breach by the other
party of any of the terms of this Agreement and the other party has failed to
cure such breach within sixty (60) days after receipt of written notice thereof.
Such termination rights shall be in addition to and not in substitution for any
other remedies that may be available to the party serving such notice against
the party in default. Termination pursuant to this Article 9 shall not relieve
the party in default from liability and damages to the other party for breach.
Waiver by either party of a single default or a succession of defaults shall not
deprive such party of any right to terminate this Agreement arising by reason of
any subsequent default.
9.2.2 ACS may terminate this Agreement if third party GMP
Certification for the manufacture of the ACS Hyaluronidase is not received by
December 31, 2000.
9.2.3 ACS may terminate this Agreement if Biozyme fails to
satisfy its obligations under Article 3.
9.3 Termination with Notice. ACS may terminate the agreement upon
twelve months prior written notice to Biozyme. At the end of this twelve-month
period and following delivery of all outstanding orders, ACS shall purchase
Biozyme's remaining inventory of ovine raw material which was acquired to
fulfill ACS requirements as defined under Article 3.
9.4 Effect of Expiration or Termination on Agreement. Termination of
this Agreement shall not relieve the parties of any obligation occurring or
incurred prior to such termination, including without limitation, any obligation
of ACS to pay for Product which has been manufactured prior to termination. In
addition, and without limiting the foregoing, in the event of any termination of
this Agreement, Biozyme may elect to either terminate all obligations to supply
further Product to ACS hereunder, or to continue to supply to ACS all quantities
of Product that ACS has ordered under then outstanding orders and any quantities
that ACS would be obligated to order under Article 3.3 above.
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<PAGE> 15
9.5 Survival. The rights and obligations of the parties set forth in
Articles 4, 5.3, 5.4, 5.5 and 8 shall survive and remain in full force and
effect after the expiration, cancellation or termination of this Agreement for
any reason pursuant to the period of time specified in each of these Articles.
ARTICLE 10 - MISCELLANEOUS
10.1 Suppliers. Without limiting Biozyme's responsibility under this
Agreement, Biozyme shall have the right at any time to satisfy its supply
obligations to ACS hereunder either in whole or in part through arrangements
with third parties engaged to perform services or supply facilities or goods in
connection with the manufacture, testing, and/or packaging of Product, however,
ACS shall receive prior written notice of any proposed change in the suppliers
of the raw material used to manufacture the Product.
10.2 Force Majeure. Neither party to this Agreement will be liable to
the other party for failure or delay in the performance of any of its
obligations hereunder, if such failure or delay is due to causes beyond its
reasonable control, including, but not limited to, acts of God, earthquakes,
fires, strikes, acts of war, or intervention of any governmental authority, but
any such delay or failure will be remedied by such party as soon as possible
after the removal of the cause of such failure or delay.
10.3 Relationship of the Parties. For all purposes of this Agreement,
Biozyme and ACS will be deemed to be independent entities, and anything in this
Agreement to the contrary notwithstanding, nothing herein will be deemed to
constitute Biozyme and ACS as partners, joint venturers, co-owners, or any
entity separate and apart from each party itself, nor will this Agreement
constitute any party hereto an employee or agent, legal or otherwise, of the
other party for any purposes whatsoever. Neither party hereto is authorized to
make any statements or representations on behalf of the other party or in any
way obligate the other party, except as expressly authorized in writing by the
other party. Anything in this Agreement to the contrary notwithstanding, except
as expressly provided in this Agreement, no party hereto will assume nor will be
liable for any liabilities or obligations of the other party, whether past,
present or future.
10.4 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, except that either party
may assign this Agreement, in whole or in part, to the successor (including the
surviving company in any consolidation, reorganization or merger) or assignee of
all or substantially all of its business. This Agreement will be binding upon
any permitted assignee of either party. No assignment permitted hereunder will
have the effect of relieving any party to this Agreement of any obligations
hereunder.
10.5 Entire Agreement. This Agreement and the exhibits hereto sets
forth the entire understanding between the parties relating to the subject
matter contained herein and may not be modified, amended or discharged except as
expressly stated in this Agreement or by a written agreement signed by the
parties hereto.
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<PAGE> 16
10.6 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, it will be
modified, if possible, to the minimum extent necessary to make it valid and
enforceable or, if such modification is not possible, it will be stricken and
the remaining provisions will remain in full force and effect; provided,
however, that if a provision is stricken so as to significantly alter the
economic arrangements of this Agreement, the party adversely affected may
terminate this Agreement upon sixty (60) days' prior written notice to the other
party.
10.7 Headings. The headings set forth at the beginning of the various
sections of this Agreement are for reference and convenience and will not affect
the meanings of the provisions of this Agreement.
10.8 Notices. Any required notices under this Agreement will be in
writing and be given by either party to the other in or by facsimile
transmission or by letter sent via courier, and sent to the address or place of
business of the other party as shown below and the notice will operate and be
deemed to have been given at the earliest of either the time of delivery or at
expiration of one business day from the date of the facsimile transmission or
three business days from the date the letter is deposited with the courier
service, and proof that the fax or telegram was sent or that the letter was
properly addressed and deposited will be sufficient evidence of service.
Any such notice given to Biozyme will be addressed to:
Biozyme Laboratories, Ltd.
Unit 6, Gilchrist Thomas Estate
Blaenavon, Gwent NP4 941
South Wales
United Kingdom
Attn: John Chesham, Ph.D.
Managing Director
Any notice to be given to ACS will be addressed to:
Advanced Corneal Systems, Inc.
15279 Alton Pkwy
Suite 100
Irvine, California 92618 USA
Attn: J.C. MacRae
Vice President/Chief Financial Officer
10.9 Public Disclosure. Neither party will originate any publicity, news
release or public announcement, written or oral, whether to the public, the
press, public stockholders or otherwise, referring to the subject matter of this
Agreement, the performance under it, or any of its specific terms and
conditions, except such statements or announcements, as in the opinion of the
counsel for the party making such announcement, are required by law, including
United States securities laws, rules or regulations, the U.K. Companies Act
requirements and the listing rules of
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<PAGE> 17
the London Stock Exchange, without the prior written consent of the other party.
If a party decides to make a statement or announcement it believes to be
required by law with respect to this Agreement, it will give the other party
such notice as is reasonably practicable and an opportunity to comment upon the
statement or announcement.
10.10 Amendment; No Waiver. This Agreement may be amended in a written
amendment signed by both parties hereto. Any waiver by any party hereto of a
breach of any provisions of this Agreement will not be implied and will not be
valid unless such waiver is made in a writing signed by such party. Failure of
any party to require, in one or more instances, performance by the other party
in strict accordance with the terms and conditions of this Agreement will not be
deemed a waiver of the future performance of any such terms or conditions or of
any other terms and conditions of this Agreement. A waiver by either party of
any term or condition of this Agreement will not be deemed or construed to be a
waiver of such term or condition or any other term or condition. All rights,
remedies, undertakings, obligations and agreements contained in this Agreement
will be cumulative and none of them will be a limitation of any other remedy,
right, undertaking, obligation or agreement of either party.
10.11 No Conflict. Each party represents that neither this Agreement nor
any of its obligations hereunder will conflict or result in a breach of any
arrangement or agreement between such party and any third party. Each party
represents that it has not been debarred and has not been the subject of
debarment proceedings by the FDA or any other regulatory authority. Each party
will undertake the activities to be undertaken by it pursuant to this Agreement
in compliance with applicable laws.
10.12 Governing Law. This Agreement will be governed by the laws of the
State of California, excluding any choice of law rules which may direct the
application of the laws of another jurisdiction.
10.13 No Strict Construction. This Agreement has been prepared jointly
by the parties and shall not be strictly construed against either party.
10.14 Counterparts. This Agreement may be executed in two counterparts,
both of which, taken together, shall constitute the full agreement of the
parties.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate as of the date and year first above written by their
respective duly authorized representatives.
BIOZYME LABORATORIES, LTD. ADVANCED CORNEAL SYSTEMS, INC.
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------ -----------------------------
Title: Managing Director Title: Vice President
----------------------------- -----------------------------
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<PAGE> 19
Exhibit A - Specifications
Exhibit B - Equipment
Exhibit C - Testing Specifications
Exhibit D - Stability Testing
<PAGE> 20
EXHIBIT A
Specifications
GENERAL:
White fluffy powder with no less than 7,000 I.U./mg hyaluronidase activity
sourced from ovine testes. Other product specifications as per Release Testing
Specifications as contained in EXHIBIT C.
PACKAGING AND STORAGE:
Package in airtight polycarbonate containers and store frozen (<-15(degrees)C).
LABELING:
Primary package must be labeled with ACS name, full product name, product code
#, lot #, weight, contents, storage condition, and retest date.
SHIPPING:
Insure primary package is well insolated. Seal insolated container in a sturdy
corrugated box. Ship by commercial air courier only. Enclose certificate of
analysis with shipment.
D-1
<PAGE> 21
EXHIBIT B
Equipment
<TABLE>
<CAPTION>
Estimated Cost
Description (in British Pounds)
- ----------- -------------------
<S> <C>
15 Liter Ion Exchange Column 2,600 Pound Sterling
Ion Exchange Resin for 15 Liter Column 2,900 Pound Sterling
Freeze Drying Apparatus (Lyophilizer) 11,500 Pound Sterling
Plastic Ware, (buckets, bins, etc.), Beakers 1,400 Pound Sterling
Millipore Purified Water System
Equipment/Installation Not to Exceed 17,300 Pound Sterling
Total Organic Carbon Analyzer Not to Exceed 9,998 Pound Sterling
300L Ion Exchange Column 27,500 Pound Sterling
Ion Exchange Resin for 300 Liter Column 6,000 Pound Sterling
UF Membranes 1,900 Pound Sterling
Lyophilization Flasks 1,200 Pound Sterling
Dry Box with balance 5,000 Pound Sterling
Glassware, bins Not to Exceed 1,000 Pound Sterling
</TABLE>
D-2
<PAGE> 22
EXHIBIT C
Testing Specifications
In Process Testing Specification*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In-Process Test Specification
- --------------------------------------------------------------------------------
<S> <C>
I.U./E280 of Combined "A" Fraction No less than 10,000
- --------------------------------------------------------------------------------
</TABLE>
*Additional in-process specification as applied to HY06 process; all other
in-process specification will apply.
Release Testing Specifications
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Release Test Specification
- ----------------------------------------------------------------------------------------
<S> <C>
Assay (hyaluronidase activity) No less than 7,000 I.U./mg
Physical Appearance White fluffy powder
Solubility and Appearance of Solution Dissolves readily at 5 mg/mL in
0.02M sodium phosphate/0.45%
sodium chloride/0.01% bovine serum
albumin, pH 6.9, to give a clear
colorless solution.
pH (30 mg in 10mL water) 4.5 to 7.5
Loss on Drying, or Water by Karl Fischer To be determined following process
development
Bacterial Endotoxins No more than 0.2 I.U. endotoxin per I.U.
hyaluronidase
Microbial Limit Tests No E. coli, S. aureus, P. aeruginosa, or
Salmonella contamination. Total
microbial contamination less than 1000
organisms per gram hyaluronidase.
SDS-PAGE To be determined following process
development work using newly
received ovine testes.
- ----------------------------------------------------------------------------------------
</TABLE>
D-3
<PAGE> 23
EXHIBIT D
Stability Testing
Stability testing must be conducted on all validation batches, the first three
batches produced post regulatory approval and on a minimum of one batch per year
following regulatory approval.
The containers to be used in stability evaluations should be the same as the
actual packaging used for storage and distribution.
STABILITY TESTING TEMPERATURES AND DURATIONS:
Test all stability batches at freezer (between -25 degrees C and -10 degrees C)
and refrigerated (between 2 degrees C and 8 degrees C) conditions. Freezer and
refrigerated samples should be tested for a minimum of 3 years.
STABILITY TESTING INTERVALS:
Test stability batch samples every 3 months over the first year, every 6 months
over the second year, and then annually.
Stability Testing Specifications
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Release Test Specification
- --------------------------------------------------------------------------------
<S> <C>
Assay (hyaluronidase activity) No less than 7,000 I.U./mg
Physical Appearance White fluffy powder
Solubility and Appearance of Solution Dissolves readily at 5 mg/mL in
0.02M sodium phosphate/0.45%
sodium chloride/0.01% bovine serum
albumin, pH 6.9, to give a clear
colorless solution.
pH (30 mg in 10mL water) 4.5 to 7.5
- --------------------------------------------------------------------------------
</TABLE>
D-4
<PAGE> 1
EXHIBIT 10.18
================================================================================
ISTA PHARMACEUTICALS, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
Dated March 29, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purchase and Sale of Stock..........................................................................1
1.1 Sale and Issuance of Series D Preferred Stock.........................................1
1.2 Closing Date; Delivery................................................................1
2. Representations and Warranties of the Company.......................................................1
2.1 Organization, Good Standing and Qualification.........................................2
2.2 Capitalization........................................................................2
2.3 Subsidiaries..........................................................................2
2.4 Authorization.........................................................................3
2.5 Valid Issuance of Preferred and Common Stock..........................................3
2.6 Governmental Consents.................................................................3
2.7 Litigation............................................................................3
2.8 Confidential Disclosure Agreement.....................................................4
2.9 Patents and Trademarks................................................................4
2.10 Compliance with Other Instruments.....................................................4
2.11 Agreements; Action....................................................................5
2.12 Financial Statements..................................................................6
2.13 Disclosure............................................................................6
2.14 Registration Rights...................................................................6
2.15 Corporate Documents...................................................................6
2.16 Title to Property and Assets..........................................................6
2.17 Employee Benefit Plans................................................................6
2.18 Tax Returns, Payments and Elections...................................................7
2.19 Labor Agreements and Actions..........................................................7
2.20 Environmental and Safety Laws.........................................................7
2.21 Real Property Holding Corporation.....................................................7
2.22 Insurance.............................................................................7
2.23 Year 2000.............................................................................7
3. Representations and Warranties of the Investor......................................................8
3.1 Authorization.........................................................................8
3.2 Purchase Entirely for Own Account.....................................................8
3.3 Disclosure of Information.............................................................8
3.4 Investment Experience.................................................................8
3.5 Restricted Securities.................................................................8
3.6 Further Limitations on Disposition....................................................9
3.7 Legends...............................................................................9
4. California Commissioner of Corporations.............................................................9
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C> <C>
5. Conditions to Investors' Obligations at Closing....................................................10
5.1 Representations and Warranties.......................................................10
5.2 Performance..........................................................................10
5.3 Compliance Certificate...............................................................10
5.4 Qualifications.......................................................................10
5.5 Opinion of Company Counsel...........................................................10
5.6 Investors Rights Agreement...........................................................10
5.7 Election of Director.................................................................10
6. Conditions of the Company's Obligations at Closing.................................................10
6.1 Representations and Warranties.......................................................11
6.2 Payment of Purchase Price............................................................11
6.3 California Qualification.............................................................11
6.4 Articles.............................................................................11
6.5 Investors Rights Agreement...........................................................11
7. Covenants..........................................................................................11
7.1 First Refusal and Co-Sale Agreement..................................................11
7.2 Board of Directors...................................................................11
8. Miscellaneous......................................................................................11
8.1 Survival of Warranties...............................................................11
8.2 Successors and Assigns...............................................................11
8.3 Governing Law........................................................................12
8.4 Counterparts.........................................................................12
8.5 Titles and Subtitles.................................................................12
8.6 Notices..............................................................................12
8.7 Finder's Fee.........................................................................12
8.8 Expenses.............................................................................12
8.9 Amendments and Waivers...............................................................12
8.10 Severability.........................................................................13
</TABLE>
EXHIBITS
A Schedule of Investors
B Amended and Restated Articles of Incorporation
C Schedule of Exceptions
D Amended and Restated Investors Rights Agreement
E Wilson Sonsini Goodrich & Rosati Legal Opinion
F First Refusal and Co-Sale Agreement
-ii-
<PAGE> 4
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT is made as of the 29th
day of March, by and between Ista Pharmaceuticals, Inc., a California
corporation located at 15279 Alton Parkway, Suite 100, Irvine, California 92618
(the "Company"), and the investors listed on Exhibit A hereto, each of which is
herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series D Preferred Stock.
(a) The Company has authorized the sale and issuance of up to
1,776,199 shares of its Series D Preferred Stock (the "Shares") having the
rights, privileges and preferences as set forth in the Company's Amended and
Restated Articles of Incorporation (the "Articles") in the form attached to this
Agreement as Exhibit B.
(b) Subject to the terms and conditions of this Agreement, the
Company will severally issue and sell to each of the Investors, and the
Investors will severally buy from the Company the total number of Shares set
forth opposite such Investor's name on Exhibit A for the purchase price equal to
$5.63 times the number of Shares being purchased. The Company's agreements with
each Investor are separate agreements, and the sale to each Investor is a
separate sale.
1.2 Closing Date; Delivery.
(a) Closing. The closing of the purchase and sale of the Shares
under this Agreement to the Investors shall be held at 10:00 a.m. on March 29,
at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304-1050 or at such other time and place as the Company and
the Investors may agree (the "Closing"). The date of such closing is hereinafter
referred to as the "Closing Date."
(b) At the Closing (as defined below) the Company shall deliver
to each Investor a certificate, registered in such Investor's name, representing
the number of Shares to be purchased by such Investor at the Closing as
specified in Exhibit A, against payment of the purchase price therefor by check
payable to the Company or by wire transfer in accordance with the Company's
wiring instructions.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions attached hereto as
<PAGE> 5
Exhibit C, which exceptions shall be deemed to be representations and warranties
as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to execute and deliver this Agreement, and the agreements set forth as Exhibits
hereto (collectively, the "Agreements"), to issue, transfer, and sell the Shares
hereunder, to issue the Common Stock issuable upon conversion of the Shares, and
to carry out and perform its obligations under the terms of the Agreements. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company consists,
or will consist prior to the Closing, of:
(a) 26,933,878 shares of Preferred Stock (the "Preferred Stock"),
of which 1,951,753 shares have been designated Series A Preferred Stock,
1,951,753 shares have been designated Series A-1 Preferred Stock, 1,955,555
shares have been designated Series B Preferred Stock, 1,955,555 shares have been
designated Series B-1 Preferred Stock, 6,600,000 shares have been designated
Series C Preferred Stock, 6,600,000 shares have been designated Series C-1
Preferred Stock, 2,959,631 shares have been designated Series D Preferred Stock
and 2,959,631 shares have been designated Series D-1 Preferred Stock. Prior to
the Closing, 1,951,753 shares of Series A Preferred Stock are outstanding,
1,955,555 shares of Series B Preferred Stock are outstanding and 6,568,269
shares of Series C Preferred Stock are outstanding, and up to 1,776,199
additional shares of Series D Preferred Stock will be sold pursuant to this
Agreement. The rights, privileges and preferences of the Shares will be as
stated in the Articles attached hereto as Exhibit B.
(b) 40,000,000 shares of Common Stock (the "Common Stock"), of
which 2,438,927 shares are issued and outstanding.
(c) Except as set forth in the Schedule of Exceptions, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock.
(d) Except as hereinabove described, (i) the Company has no
shares reserved for issuance, and (ii) all of the outstanding shares have been
duly authorized and are validly issued, fully-paid and nonassessable.
(e) The Company does not have outstanding any bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity.
-2-
<PAGE> 6
2.4 Authorization. The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
All corporate action on the part of the Company, its officers, directors and
shareholders necessary for the authorization, execution and delivery of the
Agreements, the performance of all obligations of the Company hereunder and the
authorization, issuance and delivery of the Shares being sold and transferred
hereunder and the Common Stock issuable upon conversion of the Shares have been
taken or will be taken prior to the Closing, and the Agreements constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their terms.
2.5 Valid Issuance of Preferred and Common Stock.
(a) The Shares which are being transferred to the Investors
hereunder, when issued, sold and delivered in accordance with the terms hereof
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and, based in part upon the representations of the
Investors in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Common Stock issuable upon conversion of
the Shares have been duly and validly reserved for issuance and, upon issuance
in accordance with the provisions of this Agreement, shall be duly and validly
issued, fully paid and nonassessable, free of any liens or encumbrances, and
issued in compliance with all applicable federal and state securities law. The
transfer of the Shares offered hereby and the subsequent conversion of the
Shares into Common Stock are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
(b) The outstanding shares of Common Stock and Preferred Stock
are all duly and validly authorized and issued, fully paid and nonassessable,
and were issued in compliance with all applicable federal and state securities
laws and all preemptive rights and rights of first refusal.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, which filing will be effected within 15 days of the
transfer of the Shares, and any other filing required by applicable state
securities or blue sky laws, which will be filed in a timely manner.
2.7 Litigation. There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Company, currently threatened against the
Company which questions the validity of this Agreement or the right of the
Company to enter into it, or to consummate the transactions contemplated hereby,
or which might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions pending or threatened (or any
basis therefor known to the Company) involving the prior employment of any of
the Company's employees, their use in connection with the Company's business of
any information or techniques allegedly proprietary to any of their former
employers, or their obligations
-3-
<PAGE> 7
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Confidential Disclosure Agreement. Each employee, consultant and
officer of the Company has executed a Confidential Disclosure Agreement similar
to the form attached hereto as Exhibit D and no exceptions have been taken by
any such employee, consultant or officer to the terms of such agreement. The
Company, after reasonable investigation, is not aware that any of its employees
or consultants are in violation thereof, and the Company will use its best
efforts to prevent any such violation.
2.9 Patents and Trademarks. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, knowhow information, proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted and to the
best of its knowledge without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The Company is not aware
of any reasonable basis for the denial of any pending patent application
(including divisions, continuations, continuations in part and renewal
applications) relating to the Company's intellectual property rights. The
Company is not aware that any of its employees, consultants and officers is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution,
delivery nor performance of this Agreement, nor the carrying on of the Company's
business by the employees, consultants or officers of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees, consultants or officers is now obligated.
2.10 Compliance with Other Instruments.
(a) The Company is not in violation or default of any provisions
of its Articles or Bylaws or of any instrument, judgment, order, writ, decree or
contract to which it is a party or by which it is bound or, to its knowledge, of
any provision of federal or state statute, rule or regulation applicable to the
Company. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default
-4-
<PAGE> 8
under any such provision, instrument, judgment, order, writ, decree or contract
or an event which results in the creation of any lien, charge or encumbrance
upon any assets of the Company. The business of the Company is not being,
conducted in violation of any federal, state, local or foreign law, statute,
ordinance, rule, regulation, judgment, order, injunction, decree, arbitration
awarded, agency requirements, license or permit of any governmental entity
(collectively "Laws"). No investigation or review by any governmental entity
with respect to the Company is pending or, to the knowledge of the Company,
threatened, nor has any governmental entity indicated an intention to conduct
the same. To the knowledge of the Company, no material change is required in the
Company's processes, properties or procedures in connection with any such Laws
and the Company has not received any notice or communication of any material
noncompliance with any such Laws that has not been cured as of the date hereof.
The Company has all permits, licenses, franchises, variances, exemption, orders
and other governmental authorizations, consent and approvals necessary to
conduct its business as presently conducted except those the absence of which
are not, individually or in the aggregate, reasonably likely to have a material
adverse effect or prevent or materially burden or materially impair the ability
of the Company to operate its business.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
2.11 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts or proposed transactions to which the Company is a party or by which
it is bound which involve (i) obligations of, or payments to the Company in
excess of $15,000, or (ii) the license of any patent, copyright, trade secret or
other proprietary right to or from the Company.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or Series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $15,000 or in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than in the ordinary course of
business.
(d) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Articles or Bylaws, which materially adversely affects its business as now
conducted and as proposed to be conducted.
(e) The Company has not engaged in the past twelve (12) months
in any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any
-5-
<PAGE> 9
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company or a transaction or Series of related transactions in
which more than fifty percent (50%) of the voting power of the Company is
disposed of, or (iii) regarding any other form of acquisition, liquidation,
dissolution or winding up of the Company.
2.12 Financial Statements. The Company has furnished to each Investor
its unaudited balance sheet as of December 31, 1999 (the "Balance Sheet") and
income statement for the period ended December 31, 1999 (collectively, the
"Financial Statements"). The Financial Statements, together with the notes
thereto, (i) are complete and correct in all material respects, (ii) are in
accordance with the Company's books and records, (iii) present fairly its
financial position as of that date and the results of its operations for the
period indicated, and (iv) have been prepared in conformity with generally
accepted accounting principles consistently applied throughout the periods
indicated, subject in the case of interim statements to year end adjustments and
the absence of footnotes. Since December 31, 1999 (i) there has been no material
adverse change in the financial condition, results of operations, business,
properties or prospects of the Company, and (ii) the Company has conducted its
business only in, and has not engaged in any material transaction other than
according to, the ordinary and usual course of its business.
2.13 Disclosure. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Shares and all information which the Company believes is reasonably
necessary to enable such Investor to make such decision. Neither the Agreements
nor any other statements or certificates made or delivered in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
2.14 Registration Rights. Except as provided in the Investors Rights
Agreement attached hereto as Exhibit E of this Agreement, the Company has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity.
2.15 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Articles and Bylaws of the
Company are in the form previously provided to the Investors.
2.16 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.17 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
-6-
<PAGE> 10
2.18 Tax Returns, Payments and Elections. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. As of the date hereof, there are not pending or, to
the knowledge of the Company threatened in writing, any audits, examinations,
investigations or other proceedings against the Company in respect to taxes or
tax matters. There are not any unresolved questions or claims concerning the
Company's tax liability that may have a material adverse effect on the Company.
The provision for taxes of the Company as shown in the Balance Sheet is adequate
for taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 341(f) or Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
adverse effect on the financial condition, results of operations, business,
properties or prospects at the Company.
2.19 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the financial condition, results of operations,
business properties or prospects of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. The employment of
each officer and employee of the Company is terminable at the will of the
Company.
2.20 Environmental and Safety Laws. To its knowledge, the Company is
not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
2.21 Real Property Holding Corporation. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.22 Insurance. All material property, clinical trials liability and
general liability insurance policies maintained by the Company are with
reputable insurance carriers, provide adequate coverage for all normal risks
incident to the business of the Company and its properties and assets.
2.23 Year 2000. The Company has reviewed its operations those of any
third party with which the Company has a material relationship to evaluate the
extent to which the business or operations of the Company will be affected by
the Year 2000 Problem, as defined below. The Year
-7-
<PAGE> 11
2000 Problem is not reasonably likely to have a material adverse effect on the
general affairs, management, the current or future consolidated financial
position, business prospects, stockholders' equity or results of operations of
the Company or result in any material loss or interference with the Company's
business or operations. The "Year 2000 Problem" as used herein, means any
significant risk that the computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000
3. Representations and Warranties of the Investor. Each Investor hereby
represents and warrants, severally and not jointly, that:
3.1 Authorization. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Shares and the Common Stock issuable upon conversion of the
Shares (collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent (other than those Investors
set forth on the signature page set forth hereto who are acquiring such shares
as custodian or trustee), and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has full
power and authority to enter into this Agreement.
3.3 Disclosure of Information. It believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Securities. Each Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of the Investors to rely thereon.
3.4 Investment Experience. Each Investor is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, and bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Securities. If other than an
individual, Investor also represents it has not been organized for the purpose
of acquiring the Securities.
3.5 Restricted Securities. It understands that the Securities are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the
-8-
<PAGE> 12
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act of 1933, as amended (the "Act") only in
certain limited circumstances. In this connection, each Investor represents that
it is familiar with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or lineal
descendants or ancestors, if the transferee agrees in writing to be subject to
the terms hereof to the same extent as if he were an original Investor
hereunder.
3.7 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(b) Any legend required by the laws of the State of California or
any other applicable state, including any legend required by the California
Department of Corporations and Sections 417 and 418 of the California
Corporations Code.
4. California Commissioner of Corporations. THE SALE OF THE SECURITIES
THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
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<PAGE> 13
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF THE
SECURITIES IS EXEMPT FROM QUALIFICATION BY 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS
SO EXEMPT.
5. Conditions to Investors' Obligations at Closing. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing
5.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The vice president of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since
October 31, 1999.
5.4 Qualifications. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale of the
Securities to the Investors pursuant to this Agreement, or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended.
5.5 Opinion of Company Counsel. Each Investor shall have received
from Wilson Sonsini Goodrich & Rosati, counsel for the Company, an opinion,
dated as of the Closing Date, in the form attached as Exhibit F.
5.6 Investors Rights Agreement. The Company shall have entered into
the Investors Rights Agreement in the form attached hereto as Exhibit E.
5.7 Election of Director. Effective upon the Closing, a designee of
Allergan Pharmaceuticals (Ireland) Ltd., Inc., or its affiliate ("Allergan"),
shall be elected to the Company's Board of Directors.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of
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<PAGE> 14
the following conditions, the waiver of which shall not be effective unless
consented to in writing by the Company:
6.1 Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
6.2 Payment of Purchase Price. The Investors shall have delivered the
purchase price for the Shares.
6.3 California Qualification. The Commissioner of Corporations of the
State of California shall have issued a permit qualifying the offer and sale to
the Investors of the Securities or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
6.4 Articles. The Articles attached hereto as Exhibit B shall have
been accepted for filing by the California Secretary of State.
6.5 Investors Rights Agreement. Each Investor shall have entered into
the Investors Rights Agreement in the form attached hereto as Exhibit E.
7. Covenants.
7.1 First Refusal and Co-Sale Agreement. The Company will use
commercial best efforts to add each Investor as a party to the First Refusal and
Co-Sale Agreement, in the form attached hereto as Exhibit G.
7.2 Board of Directors. So long as Allergan owns at least 750,000
Shares or Common Stock of the Company (subject to adjustment for stock splits,
dividends or the like), the Company agrees (i) to nominate a representative of
Allergan to the Company's Board of Directors or (ii) if a nominee of Allergan is
not represented on the Company's Board of Directors, the Company shall invite a
representative of Allergan to attend all meeting of its Board of Directors,
including committee meetings, in a nonvoting observer capacity and, in this
respect, shall give such representative timely copies of all notices, minutes,
consents, and other material that the Company provides to its directors.
8. Miscellaneous.
8.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
8.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in
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<PAGE> 15
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (i) upon personal delivery; (ii) upon
transmission by facsimile (receipt verified); (iii) upon the fifth day following
deposit by registered or certified mail (return receipt requested), postage
prepaid, and , if delivered to a party overseas, by air mail; or (iv) upon the
second day following dispatch by express courier service (receipt verified), to
the party to be notified at the address indicated for such party in Exhibit A or
in the case of the Company on the first page of this Agreement, or at such other
address for a party as shall be specified by like notice; provided, that notices
of a change of address shall be effective only upon receipt thereof.
8.7 Finder's Fee. Each Investor, severally and not jointly, agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Investor
or any of its officers, partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
8.8 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or the Articles, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
8.9 Amendments and Waivers. 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 and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Common Stock issued or issuable upon conversion of the Shares, and with the same
consent the Company may enter into a supplemental agreement for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement. Any amendment or waiver effected in accordance
with this Section 8.9 shall be binding
-12-
<PAGE> 16
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company.
8.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ISTA PHARMACEUTICALS, INC.
By: /s/ EDWARD H. DANSE
---------------------------------
Title: Chief Executive Officer
------------------------------
<PAGE> 18
INVESTORS:
Allergan Pharmaceuticals (Ireland) Ltd., Inc.
By: /s/ FRANCIS R. TUNNEY, JR.
------------------------------------------
Its: Secretary
-----------------------------------------
<PAGE> 19
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Series D
Preferred Purchase
Names and Addresses Stock Price
- --------------------------------------------- --------- -----------------
<S> <C> <C>
Allergan Pharmaceuticals (Ireland) Ltd., Inc. 1,776,199 $ 10,000,000.37
2525 Dupont Drive
Irvine, California 92612
</TABLE>
<PAGE> 20
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of March 29, 2000, is made and
given pursuant to paragraph 2 of the Series D Preferred Stock Purchase Agreement
dated March 29, 2000 (the "Agreement") of Ista Pharmaceuticals, Inc. (the
"Company"). The paragraph numbers in this Schedule of Exceptions correspond to
the paragraph numbers in the Agreement; however, any information disclosed
herein under any paragraph number shall be deemed to be disclosed and
incorporated into any other paragraph number under the Agreement where such
disclosure would be appropriate. Any terms defined in the Agreement shall have
the same meaning when used in this Schedule of Exceptions as when used in the
Agreement unless the context otherwise requires.
2.2 Capitalization.
(c) The Company has adopted a stock option plan under which
4,750,000 shares of Common Stock have been reserved for issuance. Prior to the
Closing, options to purchase 3,341,050 shares of the Company's Common Stock are
currently outstanding and 728,367 shares of the Company's Common Stock have been
reserved for future grants.
The Company has entered into an Investors Rights Agreement, dated as
of the date hereto, pursuant to which the holders of at least 100,000 shares of
Preferred Stock have been granted a right of first offer to purchase certain
securities offered by the Company.
The Company has issued Warrants for the purchase of up to 1,153,777
shares of Common Stock. The Warrants entitle the holder to purchase Common Stock
at a purchase price of $0.56 per share. The Warrants expire at the earlier of a
firmly underwritten public offering of the Company's common stock or five years
from date of issuance.
The Company and certain shareholders have entered into a First
Refusal and Co-Sale Agreement, dated as of the date hereof.
2.3 Subsidiaries. The Company owns 100% of the capital stock of Visionex
Pte. Ltd ("Visionex"), a company organized under the laws of Singapore.
2.5 Valid Issuance of Preferred and Common Stock.
See Section 2.2 above.
Investors' subsequent transfers of the Shares may be subject to the
First Refusal and Co-Sale Agreement.
2.8 Confidential Disclosure Agreement.
Each of our scientific advisors has signed a non-disclosure
agreement.
<PAGE> 21
2.9 Patents and Trademarks.
The Company has entered into a field-limited exclusive license
agreement with a certain third-party pursuant to which the Company may develop
and commercialize certain ophthalmic products utilizing the enzyme
hyaluronidase.
The Company has entered into a Trademark License Agreement with
Sophia S.A. granting certain rights to Sophia for the use of the Company's
Vitrase mark in Mexico.
The Company intends to enter into an agreement with Keratoform and
its founders to acquire the rights to certain U.S. and foreign patent
applications.
The Company intends to enter into an agreement with Allergan Sales,
Inc. and Allergan Sales, Ltd. whereby Allergan Sales, Inc. and Allergan Sales,
Ltd. would be granted certain rights for the use of the Company's Vitrase
related patents.
2.11 Agreements; Action.
See 2.9 above.
(a) The Company entered into unsecured loan agreement, dated
May 29, 1997, with Edward Danse, the Company's Chief Executive Officer.
(b) The Company has entered into a lease credit line with Lease
Management Services, Inc. pursuant to which the Company granted a security
interest in its fixed assets. Under this agreement, the Company has an
outstanding balance of approximately $300,000 and lease credit line of
$1,100,000.
The Company has entered into a commercial Lease Agreement, dated
September 13, 1996, for its offices located at 15279 Alton Parkway, Irvine,
California, which provides for monthly lease payments of approximately $12,000
through September 30, 2001.
The Company has entered into a Commercial Lease agreement, dated
January 1, 1996, for medical offices in Tijuana, Mexico which provides for
monthly lease payments of approximately $3,000 through January, 2003.
The Company has entered into consulting agreements with the
following individuals; Charles May, O.D. (variable up to $6,000 per month),
Christina Kenney, M.D. Ph.D. ($5,000 per month), David Harper, M.D. ($7,500 per
month), Frank Killey, Ph.D. (approximately $12,000 per month), Edgar Thomas,
M.D. (approximately $7,500 per month), Baruch Kupperman, M.D. Ph.D.
(approximately $7,500 per month), Anthony Nesburn, M.D. ($3,000 per quarter),
Judy Atkins (approximately $10,000 per month) and Syneract, Inc. (approximately
$10,000 per month).
-2-
<PAGE> 22
The Company intends to enter into an agreement with Staticon, Inc.
which will provide for up to approximately $200,000 in payments for clinical
research services in connection with the Company's Vitrase Phase III Study in
Hungary.
The Company has entered into a development agreement with ChemSyn
Laboratories which provides for payments of up to $34,500 in connection with the
development of GMP production of a certain raw material used for one of the
Company's products.
The Company has entered into a Distribution agreement, dated April
23, 1998, with Sophia S.A. which grants Sophia exclusive distribution rights for
the Company's Vitrase product in Mexico.
The Company has entered into a Distribution Agreement, dated June
27, 1997, with Visionex which grants Visionex exclusive distribution rights for
the Company's Vitrase and Corneaplasty products in certain Asian markets.
The Company has entered into an agreement with CroMedica Global,
Inc. ("CroMedica"), dated September 8, 1998, which provides for up to $450,000
in payments for clinical research services in connection with the Company's
Vitrase Phase III Study in South Africa.
The Company has entered into an agreement with Covance dated
November 3, 1998, modified September 10, 1999, which provides for up to
approximately $6 million in payments for clinical research services in
connection with the Company's Vitrase Phase III Studies in the United States,
Canada, Europe and Brazil.
The Company has entered into an agreement with CroMedica dated May
19, 1999, which provides for payments up to $2.7 million for the performance of
clinical research services in connection with the completion of Company's
Vitrase Phase III Studies in the United States, Canada, South Africa, Australia
and Europe.
The Company has entered or intends to enter into agreements with
all clinical investigators involved in the Company's Vitrase Phase III clinical
trials, which among other provisions, will provide for payments to the clinical
investigator of up to $3,000 per enrolled patient.
The Company has entered into a Supply Agreement dated September 23,
1999 with Biozyme Laboratories, Ltd. which, amongst other provisions, will
require the Company to purchase certain capital equipment totaling $140,000,
provide payment to Biozyme of approximately $130,000 upon achievement of certain
events, and require the Company to purchase minimum annual amounts of material
from Biozyme.
In connection with the terms of the Company's Supply Agreement with
Biozyme Laboratories, Inc., Company is required, beginning in calendar year
1999, to purchase annual minimum amounts of material from Biozyme.
-3-
<PAGE> 23
On March 9, 2000, the Company borrowed $4,000,000 from Visionex,
its wholly owned subsidiary (the "Note"). The Note, which was provided to
Investor's counsel for review, carries a 7% and is due on January 31, 2001.
2.16 Title to Property and Assets. The Company has entered into a lease
credit line with Lease Management Services, Inc. pursuant to which the Company
granted a security interest in its fixed assets. Under this agreement, the
Company has an outstanding balance of approximately $300,000 and lease credit
line of $1,100,000.
2.17 Employee Benefit Plans. The Company has established a
non-contributory 401(k) plan for its employees.
2.23 Year 2000.
The Company has completed an assessment of its internal computer
software and hardware systems, and believes that the "Year 2000 Problem" is not
likely to have a material effect on the Company's business or operations
conducted with these systems.
The Company has reviewed representations of CroMedica and Covance
with regard to its programs regarding the "Year 2000 Problem." CroMedica and
Covance have made representations to the Company that these programs will result
in Year 2000 compliance, however, the Company cannot verify CroMedica's and
Covance's full year 2000 compliance at this time.
The Company has reviewed the operations of other vendors which
are currently providing services to the Company and does not believe that the
"Year 2000 Problem" will have a material effect on the Company's operations as
it pertains to these vendors.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 24
IN WITNESS WHEREOF, the Company has caused this Schedule of Exceptions
to be executed by its proper and duly authorized officer as of the date and year
first written above.
ISTA PHARMACEUTICALS, INC.
By:
---------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
Visionex Pty. Ltd. a Singapore corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our reports dated March 29, 2000, with
respect to the financial statements of Ista Pharmaceuticals, Inc. and March 8,
2000, with respect to the financial statements of Visionex Pte. Ltd., in the
Registration Statement (Form S-1) and related Prospectus of Ista
Pharmaceuticals, Inc. for the registration of shares of its common stock.
/s/ ERNST & YOUNG LLP
San Diego, California
April 4, 2000
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 709,350
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,644,885
<PP&E> 1,646,693
<DEPRECIATION> (663,093)
<TOTAL-ASSETS> 3,019,502
<CURRENT-LIABILITIES> 6,637,511
<BONDS> 0
0
25,496,068
<COMMON> 3,890,939
<OTHER-SE> (2,215,421)
<TOTAL-LIABILITY-AND-EQUITY> 3,019,502
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 14,301,564
<TOTAL-COSTS> 14,301,564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,578
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,283,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,283,743)
<EPS-BASIC> (8.80)
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