<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___ to ___.
Commission file number 0-26862
DEPOTECH CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0387911
---------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
10450 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
---------------------------
(Address of principal executive offices, zip code)
(619) 625-2424
--------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: No par value, 14,175,303 shares as of October 31, 1997
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DEPOTECH CORPORATION
TABLE OF CONTENTS
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Balance Sheets as of
September 30, 1997 (Unaudited) and December 31, 1996...... 1
Condensed Statements of Operations
for the Three and Nine Months ended
September 30, 1997 and 1996 (Unaudited)................... 2
Condensed Statements of Cash Flows
for the Nine Months ended
September 30, 1997 and 1996 (Unaudited)................... 3
Notes to Condensed Financial Statements (Unaudited)....... 4
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of Operations.......... 6
PART II OTHER INFORMATION
Item 2 Changes in Securities .................................... 13
Item 6 Exhibits and Reports on Form 8-K ......................... 14
Signatures....................................................... 15
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEPOTECH CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,730,596 $ 1,966,626
Short-term investments 26,022,818 16,231,471
Accounts receivable from collaborations 1,825,338 614,580
Other current assets 3,130,900 1,160,394
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Total current assets 39,709,652 19,973,071
Property and equipment, net 24,862,674 16,851,574
Other assets 912,711 783,760
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Total assets $ 65,485,037 $ 37,608,405
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 5,206,230 $ 2,573,087
Current portion of obligations under capital leases 2,116,306 2,040,578
Current portion of notes payable 1,624,273 493,481
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Total current liabilities 8,946,809 5,107,146
Deferred revenue 100,850 54,839
Obligations under capital leases, less current portion 2,536,054 4,129,750
Deferred rent 2,095,282 1,377,623
Notes payable, less current portion 6,794,605 1,709,813
Shareholders' equity:
Common stock, no par value; 30,000,000 shares authorized,
14,172,593 and 11,543,816 shares issued and outstanding at
September 30, 1997 and December 31, 1996, respectively 101,805,608 67,797,617
Deferred compensation related to stock options (122,594) (161,960)
Unrealized gain (loss) on investments 37,265 (10,886)
Accumulated deficit (56,708,842) (42,395,537)
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Total shareholders' equity 45,011,437 25,229,234
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Total liabilities and shareholders' equity $ 65,485,037 $ 37,608,405
============= ============
</TABLE>
See accompanying notes to condensed financial statements.
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date, but does not include all of the
disclosures required by generally accepted accounting principles.
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEPOTECH CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Contract revenue $ 1,045,539 $ 698,725 $ 2,977,498 $ 3,363,680
Licensing/milestone payments 2,000,000 -- 3,000,000 --
------------ ------------ ------------ ------------
Total revenue 3,045,539 698,725 5,977,498 3,363,680
Costs and expenses:
Research and development 3,947,542 5,000,516 14,028,748 12,721,014
General and administrative 2,712,347 1,060,232 4,667,951 2,665,260
Repurchase of marketing rights -- -- 2,000,000 --
------------ ------------ ------------ ------------
Total costs and expenses 6,659,889 6,060,748 20,696,699 15,386,274
------------ ------------ ------------ ------------
Loss from operations (3,614,350) (5,362,023) (14,719,201) (12,022,594)
Interest income 383,919 392,284 1,228,430 1,328,055
Interest expense (356,269) (225,756) (822,534) (548,082)
------------ ------------ ------------ ------------
Net loss $ (3,586,700) $ (5,195,495) $(14,313,305) $(11,242,621)
============ ============ ============ ============
Net loss per share $ (0.27) $ (0.45) $ (1.09) $ (0.98)
============ ============ ============ ============
Shares used in computing
net loss per share 13,382,717 11,509,142 13,178,318 11,429,098
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEPOTECH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net cash used by operating activities $(12,757,725) $(10,597,204)
INVESTING ACTIVITIES
Purchases of short-term investments (29,845,642) (9,215,055)
Proceeds from sale of short-term investments 20,102,446 23,598,780
Purchases of property and equipment (9,403,598) (4,123,967)
Restricted cash (37,119) 55,895
------------ ------------
Net cash (used) provided by investing activities (19,183,913) 10,315,653
FINANCING ACTIVITIES
Repayments on capital lease obligations (1,517,967) (1,320,304)
Reimbursement for assets refinanced as capital leases -- 3,254
Repayments on notes payable (413,118) --
Proceeds from notes payable 6,628,702 1,418,461
Proceeds from issuance of common stock, net 34,007,991 372,786
------------ ------------
Net cash provided by financing activities 38,705,608 474,197
------------ ------------
Net increase in cash and cash equivalents 6,763,970 192,646
Cash and cash equivalents at beginning of period 1,966,626 5,883,911
------------ ------------
Cash and cash equivalents at end of period 8,730,596 6,076,557
Short-term investments at end of period 26,022,818 18,169,195
------------ ------------
Cash, cash equivalents and short-term investments
at end of period $ 34,753,414 $ 24,245,752
============ ============
SUPPLEMENTAL INFORMATION
Property and equipment acquired through capital leases $ -- $ 3,337,461
============ ============
Interest paid $ 822,534 $ 548,082
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
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DEPOTECH CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
The interim unaudited condensed financial statements contained herein have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These interim unaudited condensed financial
statements should be read in conjunction with the Company's December 31, 1996
audited financial statements included in the Company's Annual Report on Form
10-K. In management's opinion, the unaudited information includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position, results of operations and cash
flows for the periods presented. Interim results are not necessarily indicative
of results to be expected for the full year. Certain prior year amounts have
been reclassified to conform with the current year presentation.
2. Net Loss Per Share
Net loss per share is computed using the weighted average number of common
shares outstanding during the period. Common share equivalents have not been
included in the computation, since their effect would have been anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share", regarding the calculation of primary earnings per
share, which will be adopted in January 1998. The Company does not anticipate
that the adoption of this standard will have a material impact to the Company.
3. Chiron Collaboration
In March 1994, the Company entered into a collaborative agreement with
Chiron Corporation ("Chiron") to develop and commercialize sustained-release
formulations of DepoCyt(TM) and certain Chiron proprietary products using the
Company's drug delivery technology. Cumulative reimbursable costs for clinical
trials and process development incurred by the Company under this agreement
totaled $10.2 million through September 30, 1997 and $8.4 million through
September 30, 1996.
In June 1997, DepoTech reacquired rights to DepoCyt in Canada and Europe
from Chiron for aggregate cash payments of up to $13.7 million. Chiron will
retain exclusive marketing rights to DepoCyt in the U.S. A $2.0 million cash
payment is payable by DepoTech to Chiron by December 31, 1997 and has been
expensed at June 30, 1997. If, prior to December 31, 1998, the U.S. Food and
Drug Administration ("FDA") issues a letter or other notification to DepoTech
indicating that DepoCyt is approvable or approved, the remaining balance of
$11.7 million shall be payable no later than
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DEPOTECH CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 1998. If no FDA notification is received prior to December 31,
1998, the remaining amount shall be payable no later than six months from the
earlier of U.S. or European Union regulatory notification that the application
to market or sell DepoCyt is approvable or approved. If all applications for
regulatory approval to sell DepoCyt in the U.S. and European Union are
permanently withdrawn, DepoTech shall be relieved of any obligation to pay the
remaining $11.7 million. Therefore, such amount will be recorded upon the
receipt of the required notification.
4. Pharmacia & Upjohn Agreement
In July 1997, DepoTech entered into a Marketing and Distribution Agreement
with Pharmacia & Upjohn S.p.A ("P&U"), an affiliate of Pharmacia & Upjohn Inc.,
for rights to market and sell DepoCyt in countries outside the United States.
The Company received a cash payment of $2.0 million upon execution of the
agreement. Cumulative reimbursable costs for clinical trials and regulatory
approval incurred by the Company under this agreement totaled $0.6 million
through September 30, 1997.
5. Private Placement
In September 1997, the Company raised net proceeds of $14.6 million
through the sale of 1.0 million shares of DepoTech common stock to a private
investment company.
6. Subsequent Event
In October 1997, DepoTech completed a $4.5 million bank credit facility to
finance future capital equipment purchases.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception in October 1989, DepoTech Corporation ("DepoTech" or
the "Company") has devoted substantially all of its resources to the development
of its potential products. To date, the Company has not received any revenues
from the sale of products. The Company has funded its development programs
primarily from equity-derived working capital, equipment lease financing and
strategic alliances with other companies. The Company has been unprofitable
since its inception and does not expect to achieve sustainable profitability for
at least 24 months. As of September 30, 1997, the Company's accumulated deficit
was approximately $56.7 million.
The following discussion is qualified in its entirety by the more detailed
information and the Condensed Financial Statements and Notes thereto appearing
elsewhere in this Quarterly Report, including the information under "Risks and
Uncertainties." This Quarterly Report may contain, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially from the results discussed
in such forward-looking statements. Factors that could cause or contribute to
such differences include those discussed under "Risks and Uncertainties."
RESULTS OF OPERATIONS
The Company had total revenue of $3.0 million for the three months ended
September 30, 1997 compared to $0.7 million for the same period in 1996. Total
revenue for the nine months ended September 30, 1997 increased to $6.0 million
from $3.4 million in 1996. In July 1997, the Company entered into a Marketing
and Distribution Agreement with Pharmacia & Upjohn S.p.A. ("P&U"), an affiliate
of Pharmacia & Upjohn Inc., for rights to market and sell DepoCyt(TM), an
anticancer drug, outside the U.S. Included in total revenue for the three and
nine months ended September 30, 1997 is an up front payment of $2.0 million from
P&U. Also, included in total revenue for the nine months ended September 30,
1997 is a milestone payment from Chiron Corporation ("Chiron") of $1 million
paid to DepoTech upon the filing of a New Drug Application for DepoCyt in the
U.S. Contract revenue in 1997 and 1996 was derived primarily from reimbursement
of 50% of the U.S. clinical trial and manufacturing scale-up expenses for the
Company's lead product, DepoCyt, under a collaborative agreement with Chiron. In
addition, Chiron reimbursed DepoTech for 100% of pre-clinical development costs
and feasibility studies performed on Chiron proprietary products. Revenue may
fluctuate from period to period depending on the level of development activity
for projects under collaborative agreements and the achievement of future
milestones.
Research and development expenses for the third quarter ended September
30, 1997 decreased to $3.9 million compared to $5.0 million for the same period
in 1996. The decrease in research and development expenses in the third quarter
of 1997 is due to the completion of manufacturing scale-up for DepoCyt and
certain costs that were reclassified to general and administrative expense.
Research and development expenses for the nine
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months ended September 30, 1997 increased to $14.0 million from $12.7 million in
1996. Factors contributing to the year to date increase includes expanded
efforts in clinical trials, manufacturing scale-up, and preclinical development
of potential DepoFoam(TM) products. The Company is continuing Phase III clinical
studies of DepoCyt in neoplastic meningitis arising from leukemia and lymphoma,
as well as a Phase IV nonrandomized trial in solid tumor patients. Earlier this
year, DepoTech began a Phase I clinical trial of DepoCyt in pediatric patients
and a Phase I study of DepoMorphine(TM) sustained-release encapsulated morphine
sulfate to treat acute post-surgical pain. Manufacturing scale-up of
DepoMorphine is underway. The Company has completed a Phase I study of
DepoAmikacin(TM) and is engaged in work necessary to move into follow-on
clinical studies. Additionally, the Company completed certain preclinical and
feasibility studies on various formulations of DepoIGF-1 with partner, Chiron.
Further, the Company is evaluating the feasibility of developing several early
stage compounds internally and for corporate partners. Research and development
expenses are expected to increase during the remainder of 1997.
General and administrative expenses for the third quarter of 1997
increased to $2.7 million from $1.1 million for the same period in 1996. General
and administrative expenses for the nine months ended September 30, 1997
increased to $4.7 million from $2.7 million for the comparable period in the
prior year. These increases were due primarily to expansion in administrative
staffing and higher facility and business development expenses. In addition,
certain costs were reclassified from research and development expenses. Further,
under the collaborative agreement with Chiron, the Company is obligated to share
equally in the funding of sales, marketing and distribution expenses for
DepoCyt. Included in general and administrative expenses are costs of $1.0
million incurred through September 1997, for DepoCyt prior to the onset of any
product revenue. General and administrative expenses are expected to continue to
increase during 1997.
Chiron and DepoTech had been jointly developing DepoCyt in the U.S.,
Canada and Europe since March 1994. In June 1997, DepoTech reacquired rights to
DepoCyt in Canada and Europe from Chiron. Chiron will retain exclusive marketing
rights to DepoCyt in the U.S. Included in operating expenses for the nine months
ended September 30, 1997 were expenses of $2 million associated with the
repurchase which is payable by DepoTech to Chiron by December 31, 1997.
Interest income was $0.4 million and $1.2 million, respectively, for the
three and nine months ended September 30, 1997 compared to $0.4 million and $1.3
million for the same periods in 1996. Interest expense was $0.4 million and $0.8
million for the three and nine months ended September 30, 1997 compared to $0.2
million and $0.5 million for the comparable periods in 1996. The increase in
interest expense was due to higher balances outstanding for obligations under
notes payable.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through September 30, 1997, DepoTech has financed its
operations primarily through public and private placements of equity securities,
which provided aggregate net proceeds of approximately $101.6 million, and
through capital
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equipment leases and notes payable. In October 1995, the Company completed its
initial public offering of common stock with net proceeds of $38.1 million. In
January 1997, the Company completed the private placement of 1.5 million newly
issued shares of common stock raising net proceeds of $18.9 million. In
September 1997, the Company raised net proceeds of $14.6 million through the
sale of 1.0 million shares of DepoTech common stock to a private investment
company.
Chiron and DepoTech had been jointly developing DepoCyt in the U.S.,
Canada and Europe since March 1994. In June 1997, DepoTech reacquired rights to
DepoCyt in Canada and Europe from Chiron for aggregate cash payments of up to
$13.7 million. Chiron will retain exclusive marketing rights to DepoCyt in the
U.S. A $2 million cash payment is payable by DepoTech to Chiron by December 31,
1997. If, prior to December 31, 1998, the U.S. Food and Drug Administration
("FDA") issues a letter or other notification to DepoTech indicating that
DepoCyt is approvable or approved, the remaining balance of $11.7 million shall
be payable no later than December 31, 1998. If no FDA notification is received
prior to December 31, 1998, the remaining amount shall be payable no later than
six months from the earlier of U.S. or European Union regulatory notification
that the application to market or sell DepoCyt is approvable or approved. If all
applications for regulatory approval to sell DepoCyt in the U.S. and European
Union are permanently withdrawn, DepoTech shall be relieved of any obligation to
pay the remaining $11.7 million.
In July 1997, DepoTech entered into a Marketing and Distribution Agreement
with P&U for rights to market and sell DepoCyt in countries outside the U.S. P&U
will generally be responsible for submitting regulatory filings, labeling,
packaging, distribution, marketing and sales of DepoCyt in this territory. The
Company will manufacture DepoCyt and receive a share of the net sales of DepoCyt
sold by P&U. The Company received a cash payment of $2.0 million upon execution
of the agreement and may receive additional payments of up to $17.0 million upon
achievement of certain regulatory milestones. The agreement also provides for
reimbursement of certain clinical trial expenses and regulatory fees incurred by
the Company. The initial cash payment of $2.0 million and future milestone
payments, if any, totaling up to the obligation to Chiron of $13.7 million will
be set aside in a restricted cash account for payment to Chiron for the
repurchase of DepoCyt rights.
As of September 30, 1997, the Company had cash, cash equivalents and
short-term investments of $34.8 million as compared to $18.2 million at December
31, 1996. The increase of $16.6 million in cash, cash equivalents and short-term
investments was due primarily to $33.5 million of net proceeds received from two
private placements, which was partially offset by net cash used to fund
operations of $12.8 million and payments totaling $4.7 million for new capital
expenditures and repayment of capital lease obligations and notes payable. In
May 1996, the Company signed a bank credit facility for $9.0 million to finance
future capital equipment purchases, of which $8.8 million had been utilized
through September 30, 1997. In October 1997, DepoTech signed a $4.5 bank credit
facility to finance future capital equipment purchases. Working capital
increased to $30.8 million as of September 30, 1997 compared to $14.9 million as
of December 31, 1996.
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For the nine months ended September 30, 1997, the Company financed an
aggregate of $6.6 million for property and equipment through bank credit
facilities. The Company intends to continue to fund capital expenditures through
external financing supplemented by internal cash resources where appropriate.
The Company leases a built-to-suit facility housing most of its administrative,
research, clinical and manufacturing activities. The minimum rental commitment
for this facility ranges from $2.4 million to $4.3 million per year over the
next 19 years, based upon pre-established annual rent increases. The Company is
installing a manufacturing line in this facility to support clinical and
commercial production of products under development. The cost of equipment and
tenant improvement expenses are estimated to total approximately $6.1 million in
1997 of which $4.9 million had been incurred through September 30, 1997.
DepoTech intends to finance such expenditures through new and existing bank
credit facilities. The Company's right of first refusal and right of first offer
to purchase land located adjacent to its headquarters expired in October 1997.
The Company's operations to date have consumed substantial amounts of
cash, which is expected to continue over the foreseeable future. The amount of
net losses and the time required for the Company to achieve profitability are
highly uncertain. There can be no assurance that the Company will be able to
achieve profitability at all or on a sustained basis. It is the Company's
intention to fund product research, development, manufacturing, and sales and
marketing costs through additional collaborative relationships with suitable
corporate partners. There can be no assurance that the Company will enter into
collaborative arrangements with corporate partners or that any agreements
resulting from these discussions will successfully reduce the Company's funding
requirements. Additional equity or debt financing will be required, and there
can be no assurance that these funds will be available on terms favorable to the
Company, if at all. If adequate funds are not available, the Company may be
required to delay, scale back or eliminate one or more of its product
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates or products that the Company would not
otherwise relinquish.
DepoTech anticipates that its existing available cash, cash equivalents
and short-term investments, committed future contract revenue, projected funding
from equipment financing and interest income will be adequate to satisfy its
capital requirements and fund operating losses through 1998. The Company's
future capital requirements will depend on many factors, including continued
scientific progress on its products and process development programs, progress
with preclinical testing and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing and maintaining
patents, competing technological and market developments, changes in existing
collaborative relationships, the ability of the Company to establish development
or additional collaborative arrangements, the cost of manufacturing scale-up,
and the establishment of effective sales and marketing arrangements.
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RISKS AND UNCERTAINTIES
This Quarterly Report may contain, in addition to historical information,
forward-looking statements that involve risk and uncertainties. The Company's
actual results could differ materially from the results discussed in such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed elsewhere
in this Quarterly Report.
EARLY STAGE COMPANY. DepoTech's products are at an early stage of
development, and, to date, only three of the Company's DepoFoam formulations
have been subject to human clinical testing. The Company's potential products
will require extensive research, formulation, development, preclinical and
clinical testing, and may involve a lengthy regulatory approval process prior to
commercialization. There can be no assurance that DepoCyt, DepoMorphine,
DepoAmikacin, or any of the Company's other products or potential products will
prove safe and effective in clinical trials, meet applicable regulatory
standards, be capable of being produced in commercial quantities at acceptable
cost or be successfully commercialized. In addition, there can be no assurance
that preclinical or clinical testing will accurately predict safety or efficacy
in broader human use, or that delays in the regulatory approval process will not
arise, delaying approval longer than currently anticipated. Even if all of the
Company's products prove to be safe and effective and are approved for marketing
by the FDA and other regulatory authorities, there can be no assurance that
health care providers, payors and patients will accept the Company's products.
Any failure of the Company to achieve technical feasibility, demonstrate safety,
achieve clinical efficacy, obtain regulatory approval or, together with its
partners, successfully market products would have a material adverse effect on
the Company.
In April 1997, the Company completed a New Drug Application ("NDA") for
DepoCyt for the treatment of neoplastic meningitis arising from solid tumors.
The FDA has advised the Company that it is currently scheduling its NDA for
review by the FDA's Oncologic Drug Advisory Committee on December 18, 1997. As
with all drugs subject to the accelerated approval, the FDA requested that the
Company conduct a Phase IV clinical trial on DepoCyt which is in process. There
can be no assurance that the data from the DepoCyt Phase III clinical trials
will be sufficient to gain FDA approval for marketing for any indication, that
additional results from ongoing pivotal Phase III trials will be consistent with
earlier results or that the Phase IV and other clinical trials of DepoCyt will
generate positive results. Any of these occurrences would have a material
adverse effect on the Company.
GOVERNMENT REGULATION; UNCERTAINTY OF OBTAINING REGULATORY APPROVAL.
DepoTech's research and development activities are, and its future business will
be, subject to significant regulation by governmental authorities in the United
States, primarily by the FDA, and internationally. The clinical testing and the
regulatory review process for new drugs or biologics requires substantial time,
effort and expense. There can be no assurance that any approval will be granted
to the Company's development products on a timely basis, if at all. The FDA or
its international equivalent may refuse to
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approve a drug or biological product for commercial sale or shipment if
applicable statutory and/or regulatory criteria are not satisfied, or may
require additional testing or information. There can be no assurance that such
additional testing or the provision of such additional information, if required,
will not have a material adverse effect on the Company. Also, the regulatory
process can be modified by legislatures, the FDA or international regulators, in
a manner that could have a material adverse effect on the Company.
LIMITED MANUFACTURING EXPERIENCE; RISK OF SCALE-UP; RELIANCE ON
MANUFACTURING PROCESS. The Company has no experience manufacturing products for
commercial purposes. The Company has scaled-up its manufacturing operations to
meet initial commercial requirements for DepoCyt but these operations will
require continuing satisfactory compliance with current Good Manufacturing
Practices ("cGMPs"). For all other products, the Company will need to scale-up
its current manufacturing operations. The Company will also need to comply with
cGMPs and other regulations prescribed by various regulatory agencies in the
United States and other countries to achieve the required levels of production
of each of its products and to obtain and retain marketing approval, if any.
Failure by the Company to successfully scale-up its manufacturing processes or
to comply with cGMPs and other regulations would have a material adverse effect
on the Company, including the loss of manufacturing rights to DepoCyt under the
Chiron and P&U agreements. To date, the Company has relied on a particular
proprietary method of manufacture. There can be no assurance that this method
will be applicable to all pharmaceuticals or biologics the Company desires to
commercialize. Further, the yield of product incorporated into the delivery
system is likely to be highly variable for different therapeutic agents.
Finally, the Company will need to successfully meet any manufacturing challenges
associated with the specific characteristics of the drug to be encapsulated.
DEPENDENCE UPON PARTNERS FOR DEVELOPMENT AND COMMERCIALIZATION. The
Company does not currently possess all of the resources necessary to develop,
complete the FDA approval process and commercialize all of its potential
therapeutic products. The Company hopes to enter into collaborative arrangements
with other companies to fund research, development and clinical trials, to
assist in obtaining regulatory approvals and to commercialize its products in
the United States and internationally. In addition, the Company's ability to
apply its drug delivery technology to a broad range of pharmaceuticals will
depend upon its ability to establish and maintain collaborative arrangements
because the rights to many of the pharmaceuticals most suited to the Company's
drug delivery technology are currently owned or controlled by third parties.
While the Company has entered into preliminary arrangements to test the
feasibility of its delivery technology with certain pharmaceuticals and has
entered into more extensive collaborations with Chiron and P&U, there can be no
assurance that the Company will be able to enter into additional collaborations
to develop commercial applications of its drug delivery technology. In addition,
there can be no assurance that the Company will be able to enter into or
maintain existing or future collaborations or that such collaborations will be
successful. The failure of the Company to enter into a collaboration with the
owner of rights to a particular formulation or pharmaceutical would preclude the
Company from developing its drug delivery technology with respect to such
formulation
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or pharmaceutical. The failure to enter into or maintain existing or future
collaborations would have a material adverse effect on the Company.
LIMITED SALES AND MARKETING CAPABILITY. Commercialization of the Company's
products is expected to be expensive and time-consuming. To the extent the
Company relies on its collaborators for sales and marketing capability, the
Company will be dependent on the efforts of third parties and there can be no
assurance that any of these collaborators will successfully market or distribute
the Company's products.
PATENTS AND PROPRIETARY TECHNOLOGY. DepoTech relies on a combination of
technical leadership, patents, trade secrets, copyright and trademark protection
and nondisclosure agreements to protect its proprietary rights. There can be no
assurance that any patents issued to the Company will provide significant
protection or will not be challenged or that, the Company will be issued any
additional patents. Even if such patents are enforceable, the Company
anticipates that any attempts to enforce its patents would be time consuming and
costly. Additionally, the coverage claimed in a patent application can be
significantly reduced before the patent is issued. Defense of any lawsuit or
failure to obtain a license to intellectual property rights of third parties
could have a material adverse affect on the Company.
POSSIBLE VOLATILITY OF STOCK PRICE. Factors such as the announcements of
technological innovations or new products by the Company, its competitors and
other third parties, the status of submissions to the FDA, as well as variations
in the Company's results of operations, market conditions, analysts' estimates
and the stock market in general may cause the market price of the Company's
common stock to fluctuate significantly. Also, future sales of shares by
existing shareholders pursuant to Rule 144 of the Securities Act of 1933, as
amended, or through the exercise of outstanding registration rights, could have
an adverse effect on the price of the Company's common stock.
12
<PAGE> 15
PART II - OTHER INFORMATION
Item 1 Legal Proceedings. None.
Item 2 Change in Securities.
On September 10, 1997, the Company issued 1.0 million shares of
its Common Stock to a single private investor under Section 4(2)
of the Securities Act of 1933, raising net proceeds of $14.6
million.
Item 3 Defaults Upon Senior Securities. None.
Item 4 Submission of Matters to a Vote of Security Holders. None.
Item 5 Other Information. None.
13
<PAGE> 16
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number
10.1+ Marketing and Distribution Agreement between DepoTech
Corporation and Pharmacia & Upjohn S.p.A. dated July 2, 1997
(with certain confidential portions omitted).
10.2 Stock Purchase Agreement between DepoTech Corporation and
Ross Financial Corporation dated September 10, 1997.
+ Certain confidential portions of this exhibit were omitted by means of
blacking out the text (the "Mark"). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
(b) Reports on Form 8-K. None.
14
<PAGE> 17
DEPOTECH CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEPOTECH CORPORATION
/s/ Edward L. Erickson
---------------------------------
Date: November 13, 1997 Edward L. Erickson
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Dana S. McGowan
----------------------------------
Date: November 13, 1997 Dana S. McGowan
Vice President, Finance
Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<PAGE> 1
EXHIBIT 10.1
MARKETING AND DISTRIBUTION AGREEMENT
BETWEEN
DEPOTECH CORPORATION
AND
PHARMACIA & UPJOHN S.P.A.
JULY 2, 1997
***Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the "Mark"). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.
<PAGE> 2
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS................................................................. 1
ARTICLE 2 GRANTS...................................................................... 6
2.1 Rights Granted to P&U....................................................... 6
2.2 Transfer of Rights.......................................................... 6
2.3 Reservation of Rights....................................................... 7
2.4 Disclosure of Know How...................................................... 7
2.5 Chiron Rights............................................................... 7
2.6 RDF Nondisturbance.......................................................... 7
ARTICLE 3 DEVELOPMENT AND COMMERCIALIZATION OF DEPOCYT................................ 8
3.1 Conduct of Clinical Trials of DepoCyt....................................... 8
3.2 Development and Regulatory Approvals of DepoCyt............................. 8
3.3 Sales, Marketing and Distribution of DepoCyt................................ 10
3.4 Establishment of Minimum Annual Sales Requirements.......................... 10
3.5 Additional Indications and Alternative Formulations......................... 12
3.6 Performance of Services..................................................... 13
3.7 Coordination with Chiron.................................................... 13
3.8 Right to Reference Drug Master Files........................................ 14
ARTICLE 4 MANAGEMENT OF DEPOCYT PROGRAM............................................... 14
4.1 Project Representative...................................................... 14
4.2 Collaboration Steering Committee............................................ 14
4.3 General Rules Applicable To the CSC......................................... 15
ARTICLE 5 PAYMENTS.................................................................... 16
5.1 Initial Payment............................................................. 16
5.2 Milestone Payments.......................................................... 16
5.3 Clinical Development Funding................................................ 18
5.4 Rebate of Milestone Payments................................................ 18
ARTICLE 6 SALE AND PURCHASE OF DEPOCYT................................................ 18
6.1 Sale and Purchase........................................................... 18
6.2 Supply Limit................................................................ 19
6.3 Production Location......................................................... 19
6.4 TERMS AND CONDITIONS........................................................ 19
ARTICLE 7 PRICE AND PAYMENTS.......................................................... 20
7.1 DepoTech Share of Net Sales................................................. 20
7.2 Price Adjustments........................................................... 20
7.3 Payment of the Supply Price................................................. 21
ARTICLE 8 CONTINGENT MANUFACTURING LICENSES........................................... 21
8.1 Expanded Production Capacity................................................ 21
8.2 Supply Assurances........................................................... 22
ARTICLE 9 REPORTING, RECORDS AND ACCOUNTING........................................... 23
9.1 Records and Data............................................................ 23
9.2 Availability of Employees................................................... 24
9.3 Visit of Facilities......................................................... 24
9.4 Audits...................................................................... 24
ARTICLE 10 REPRESENTATIONS AND WARRANTIES.............................................. 25
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
10.1 Mutual Representations...................................................... 25
10.2 DepoTech Representations.................................................... 25
ARTICLE 11 PATENTS..................................................................... 27
11.1 Patent Rights............................................................... 27
11.2 No Other Technology Rights.................................................. 28
11.3 Enforcement of Patent Rights................................................ 28
11.4 Third Party Claim of Infringement........................................... 29
11.5 Patent Marking.............................................................. 30
ARTICLE 12 CONFIDENTIALITY AND PUBLICATION............................................. 30
12.1 General..................................................................... 30
12.2 Confidentiality Agreements.................................................. 31
12.3 Injunctive Relief........................................................... 31
12.4 Publication................................................................. 31
12.5 Termination................................................................. 32
ARTICLE 13 INDEMNIFICATION............................................................. 32
13.1 DepoTech Indemnification.................................................... 32
13.2 P&U Indemnification......................................................... 32
13.3 Mutual Indemnification...................................................... 32
13.4 Procedure................................................................... 33
13.5 Product Liability Insurance................................................. 33
ARTICLE 14 TERM AND TERMINATION........................................................ 34
14.1 Term........................................................................ 34
14.2 Manufacturing Term.......................................................... 34
14.3 Other Causes for Termination................................................ 35
14.4 Patent Challenge............................................................ 36
14.5 Termination by P&U.......................................................... 36
14.6 Survival of Obligations..................................................... 36
14.7 Manufacturing Licenses to P&U............................................... 37
14.8 Change of Control of DepoTech............................................... 38
14.9 Acquisitions by P&U......................................................... 38
14.10 RDF and Chiron Rights....................................................... 38
ARTICLE 15 ALTERNATIVE DISPUTE RESOLUTION.............................................. 39
15.1 Executive Mediation......................................................... 39
15.2 Initiation of ADR........................................................... 39
ARTICLE 16 MISCELLANEOUS............................................................... 40
16.1 Force Majeure............................................................... 40
16.2 Limitation of Liability..................................................... 40
16.3 Relationship of the Parties................................................. 41
16.4 Notices..................................................................... 41
16.5 Successors and Assigns...................................................... 42
16.6 Amendments and Waivers...................................................... 42
16.7 Governing Law............................................................... 43
16.8 Attorneys' Fees............................................................. 43
16.9 Severability................................................................ 43
16.10 Use of Names................................................................ 43
16.11 Execution in Counterparts................................................... 43
16.12 Entire Agreement............................................................ 43
16.13 Export Control.............................................................. 44
</TABLE>
-ii-
<PAGE> 4
MARKETING AND DISTRIBUTION AGREEMENT
This MARKETING AND DISTRIBUTION AGREEMENT (the "Agreement") dated as of
July 2, 1997 (the "Effective Date"), is entered into by and between DEPOTECH
CORPORATION, a California corporation with its principal office at San Diego,
California, USA ("DepoTech") and PHARMACIA & UPJOHN S.P.A., an Italian
corporation with its principal office at Milano, Italy ("P&U").
A. DepoTech has developed novel and proprietary methods of delivering
pharmacologically active compounds to the human body. DepoTech has employed the
DepoTech Technology (as defined below) to the development of DepoCyto
sustained-release encapsulated cytarabine.
B. P&U seeks to collaborate with DepoTech in the clinical development
of, in seeking regulatory and/or marketing approval for, and in commercializing
DepoCyt in the Territory (as defined below), and in connection therewith to
obtain the exclusive right to market and sell DepoCyt in the Territory, and
DepoTech desires to grant such rights and to enter into such arrangements, all
upon the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the mutual agreements provided herein,
DepoTech and P&U agree as follows:
ARTICLE 1
DEFINITIONS
The following capitalized terms used herein shall have the respective
meanings set forth below. Certain other capitalized terms are defined elsewhere
in this Agreement.
1.1 "Act" means the United States Food, Drug, and Cosmetic Act, as
amended, or other equivalent laws, regulations or statutes applicable in each
country of the Territory, including EU Directives 65/65/EEC, 75/318/EEC,
75/319/EEC, and 91/356/EEC, as amended, and all national laws implementing such
directives, EU Regulation 2309/93, as amended, and the Pharmaceutical Law of
Japan (Yakuji Ho, Law No. 1450 of 1960, as amended).
1.2 "Additional Indications" means clinical indications for the use of
DepoCyt other than the Initial Indication.
<PAGE> 5
1.3 "Affiliate" means a person or entity that directly or indirectly
controls, is controlled by or is under common control with a party to this
Agreement. "Control" (and, with correlative meanings, the terms "controlled by"
and "under common control with") means, in the case of a corporation, the
ownership of fifty percent (50%) or more of the outstanding voting securities
thereof or, in the case of any other type of entity, an interest that results in
the ability to direct or cause the direction of the management and policies of
such entity or the power to appoint fifty percent (50%) or more of the members
of the governing body of the entity, or if not meeting the preceding
requirement, any company owned or controlled by or owning or controlling
DepoTech or P&U at the maximum control or ownership right permitted in the
country where such company exists.
1.4 "Alternative Formulations" means any formulations of the generic
chemotherapeutic compound cytarabine prepared using DepoTech Technology other
than DepoCyt.
1.5 "CSC" means the Collaboration Steering Committee described in
Section 4.2 hereof.
1.6 "Certificate of Analysis" means a summary of all DepoCyt testing
results specific to a lot of DepoCyt performed in accordance with the analytical
methods which are required to meet all applicable regulatory (including
pharmacopeia) requirements in the Territory.
1.7 "Clinical Plan" means the written plan for the further clinical
development of DepoCyt for seeking approval to sell DepoCyt in the Territory,
including a budget for Clinical Trial Expenses. The initial Clinical Plan is
attached hereto as EXHIBIT A, and shall be modified only by the CSC as provided
in Article 4 below.
1.8 "Clinical Trial(s)" means human clinical testing meeting the various
regulatory requirements and ethical guidelines as may be specified in the
individual countries in the Territory where clinical trials of DepoCyt will be
conducted or where such trials will be used to seek approval to market DepoCyt
in such country; provided, "Clinical Trials" shall not include Phase IV human
clinical testing or post-marketing surveillance.
1.9 "Clinical Trial Expenses" means, to the extent incurred for Clinical
Trials
2
<PAGE> 6
conducted for the Initial Indication in accordance with the Clinical Plan: (i)
expenses related to trial planning, materials, clinical site recruiting,
training and participation, monitoring of clinical sites, data analysis and data
quality assurance, preparing documents for initial fillings for Regulatory
Authority submission (including, but not limited to, all fees paid to clinical
investigators, consultants and CROs); (ii) expenses related to planning,
managing, carrying out, analyzing and preparing reports of pre-clinical studies
necessary to submit as part of initial regulatory marketing applications; (iii)
travel expenses related to planning meetings, clinical development or regulatory
submissions; and (iv) a reasonable allocation of overhead associated with the
conduct of such activities (not to exceed *** of DepoTech's direct labor costs)
and of general and administrative expenses in support of Clinical Trials (not to
exceed *** of the sum of (i), (ii) and (iii)). "Clinical Trial Expenses" shall
not include any costs incurred to conduct the Phase V testing referred to in
Exhibit A.
1.10 "DepoTech Technology" means the Patent Rights and the Know-How owned
or controlled by DepoTech on the date of this Agreement or which DepoTech
develops or acquires during the term of this Agreement useful in the
development, regulatory submission, manufacture, use or sale of DepoCyt.
1.11 "DepoCyt" means the DepoCyt sustained-release encapsulated
cytarabine product as specified in the NDAs filed in the United States by
DepoTech and to be filed by P&U in the Territory and the product labeling and
packaging as specified in various NDAs filed in the various countries in the
Territory, and all improvements thereof developed or acquired by DepoTech during
the term of this Agreement.
1.12 "EU" means all countries which are the members of the European Union
at any time during the term of this Agreement.
1.13 "First Commercial Sale" means the first arm's length sale of DepoCyt
pursuant to this Agreement to one or more Third Parties following receipt of
approval to commence selling DepoCyt from the applicable Regulatory Authority in
the applicable country.
1.14 "Initial Indication" means the ***.
1.15 "Know-How" means any knowledge and proprietary information which is
not
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
3
<PAGE> 7
generally publicly known, including, without limitation, all preclinical,
clinical, chemical, biochemical, toxicological, manufacturing, process,
formulation and scientific research information, whether or not capable of
precise separate description but which alone or when accumulated give to the one
acquiring it an ability to study, test, produce, formulate or market something
which one otherwise would not have known to study, test, produce, formulate or
market in the same way.
1.16 "Major European Country" means any of the ***.
1.17 "NDA" means a New Drug Application and associated documents required
to be filed with the United States Food and Drug Administration in order to
obtain approval to market DepoCyt in the United States, or its equivalent in
other countries in the Territory, including, without limitation, a Marketing
Authorization Application to be filed in the EU and New Drug Submission in
Canada.
1.18 "Net Sales" means the amount invoiced for sales or other
dispositions of DepoCyt hereunder (other than sales or other dispositions to
Affiliates, unless such Affiliate is the end user), less the following
deductions (to the extent they are not already reflected in the amount billed):
(a) discounts, returns, rebates, retroactive price adjustments, allowances, and
wholesaler chargebacks allowed and taken in amounts customary in the trade; and
(b) import, export, excise, sales or use taxes, tariffs or duties directly
imposed and with reference to particular sales. No other allowance or deduction
shall be made from the amount invoiced in determining Net Sales.
1.19 "Patent Rights" means all patents, inventors' certificates and
patent applications throughout the world, including any renewal, division,
continuation or continuation-in-part of any of such certificates and
applications, and any and all patents issuing thereon, and any and all reissues,
extensions, supplementary protection certificates, substitutions, confirmations,
registrations, revalidations, revisions and additions of or to any of said
patents, now or hereafter owned by or licensed to DepoTech or to any of its
Affiliates, which Patent Rights cover any aspect of the development, use,
manufacture or sale of DepoCyt, including without limitation, the patents and
patent applications listed on EXHIBIT B hereto.
1.20 "Regulatory Authority" means all governmental agencies regulating
the development, manufacture or sale of pharmaceutical products in any country
or groups of
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
4
<PAGE> 8
countries within the Territory, for example, the European Medicines Evaluation
Agency (EMEA).
1.21 "Regulatory Fees" means any fees payable to a Regulatory Authority
to obtain approval of the NDA for the Initial Indication in a country in the
Territory.
1.22 "Specifications" means the mutually agreed upon product
specifications for DepoCyt which shall comply with the requirements of all
Regulatory Authorities in the Territory. Set forth in EXHIBIT C is a preliminary
version of the Specifications, which the parties shall amend from time to time
to comply with such regulatory requirements, and ***.
1.23 "Supply Price" means the price at which DepoTech will supply Vialed
Material to P&U as set forth in Section 7.1.
1.24 "Territory" means all of the nations of the world, other than the
United States (consisting of the 50 states of the United States of America,
Puerto Rico and all territories, possessions and protectorates thereof).
1.25 "Third Party" means any person or entity other than P&U, DepoTech or
their Affiliates.
1.26 "Vialed Material" means the finished but unlabeled vial form of
DepoCyt.
ARTICLE 2
GRANTS
2.1 RIGHTS GRANTED TO P&U. Subject to the terms and conditions of this
Agreement, DepoTech hereby grants to P&U:
(a) the exclusive right (against DepoTech and all others, except
to the extent that DepoTech acquires rights hereunder) to import, offer to sell,
sell and have sold DepoCyt in the Territory;
(b) the exclusive right (against DepoTech and all others, except
to the extent that DepoTech has reserved rights or acquires rights hereunder) to
use DepoTech Technology
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
5
<PAGE> 9
anywhere in the world to develop and finish DepoCyt (from Vialed Material
supplied by DepoTech) for sale in the Territory and to exercise the rights
granted under paragraph (a) above; and
(c) subject to the conditions set forth in Article 8 and Section
14.7 below, the exclusive right (against DepoTech and all others, except to the
extent that DepoTech has reserved rights or acquires rights hereunder) to use
DepoTech Technology anywhere in the world to make and have made DepoCyt
(including Vialed Material) for sale in the Territory.
2.2 TRANSFER OF RIGHTS. P&U shall have the right to grant the rights
granted in this Article 2 to: (a) its Affiliates; (b) Third Parties which
distribute other pharmaceutical products of P&U or its Affiliates; (c) in
respect to its right to finish and, if applicable, manufacture DepoCyt, Third
Parties performing such activities as contract manufacturers for P&U; and (d)
other Third Parties only with the prior written consent of DepoTech, which
consent shall not be unreasonably withheld or delayed.
2.3 RESERVATION OF RIGHTS. Subject to the contingent rights granted P&U
under Section 2.1(c) and the terms of this Agreement, DepoTech hereby retains
and reserves the exclusive right to manufacture Vialed Material using DepoTech
Technology. In respect to Vialed Material to be supplied to P&U, DepoTech shall
have the right to sublicense the manufacture of Vialed Material, or to have
Vialed Material made by Third Parties, only with P&U's prior written consent,
which consent shall not be unreasonably withheld or delayed.
2.4 DISCLOSURE OF KNOW HOW. DepoTech shall from time to time at the
request of P&U disclose and provide reasonable access to all of its Know How
relating to DepoCyt which may be useful in obtaining regulatory approvals,
conducting clinical trials, obtaining pricing approvals and marketing for
Additional Indications, finishing of DepoCyt and otherwise to further develop
and commercialize DepoCyt, including, subject to the terms of Article 8 and
Section 14.7, manufacture of Vialed Material.
2.5 CHIRON RIGHTS. P&U acknowledges that DepoTech has previously entered
into a Collaboration Agreement with Chiron Corporation ("Chiron"), pursuant to
which DepoTech and Chiron are developing, and intend to manufacture, market and
sell, DepoCyt in the United States. DepoTech represents that it has now acquired
from Chiron all rights Chiron had in respect to DepoCyt in the Territory, and
that, except as otherwise previously disclosed in writing to P&U's
6
<PAGE> 10
counsel, it has the right to grant P&U the rights herein free of any claim of
Chiron.
2.6 RDF NONDISTURBANCE. A significant portion of DepoTech Technology was
acquired by DepoTech from the Research Development Foundation, a nonprofit
Nevada corporation ("RDF"), under an agreement under which such Technology may
revert to RDF under certain circumstances. Accordingly, RDF has entered into the
separate agreement with P&U referred to in Section 10.2(g) below.
ARTICLE 3
DEVELOPMENT AND COMMERCIALIZATION OF DEPOCYT
3.1 CONDUCT OF CLINICAL TRIALS OF DEPOCYT. Set forth in Exhibit A, as a
"Clinical Plan," is a statement of the general objectives of the Clinical
Trials. Through the CSC, the parties shall amend and expand such statement from
time to time so that it reflects the then current plan and budget for conducting
the Clinical Trials. DepoTech shall use its commercially reasonable and diligent
efforts to conduct and to complete the Clinical Trials for the Initial
Indication in accordance with the Clinical Plan and any relevant clinical
protocol. All Clinical Trials shall be conducted in accordance with all
applicable GCPs and other legal and regulatory requirements. DepoTech shall not
depart in any material manner from the Clinical Plan and any relevant clinical
protocol, without the prior approval of the CSC. DepoTech shall bear all costs
for such Clinical Trials, but P&U shall reimburse DepoTech for all Clinical
Trial Expenses and Regulatory Fees incurred for the Initial Indication, subject
to the provisions of Section 5.3 below. DepoTech's obligations to conduct
Clinical Trials required by Regulatory Authorities in any country in the
Territory, other than the EU, Japan and Canada shall be subject to the
determination of the CSC. All costs associated with such Clinical Trials for
such countries (other than EU, Japan and Canada) shall be borne solely by P&U.
3.2 DEVELOPMENT AND REGULATORY APPROVALS OF DEPOCYT.
(a) Preparation and Submission of NDAs. (1) DepoTech shall obtain,
at its expense, all clearances, registrations, permits and other governmental
approvals which may be required to manufacture DepoCyt and import it into the
EU, Japan, Canada and such countries in the Territory as determined by the CSC.
DepoTech shall also compile and prepare all NDAs required to obtain approval to
sell DepoCyt for the Initial Indication in Canada, the EU and Japan. DepoTech
shall use commercially reasonable and diligent efforts to so compile and
7
<PAGE> 11
prepare NDAs for the Initial Indication for all other countries in the
Territory. DepoTech shall consult with P&U concerning all regulatory and other
governmental submissions related to the use of DepoCyt for the Initial
Indication and provide P&U with access to and the right to approve such
submissions prior to filing the same. P&U shall reimburse DepoTech for all
Regulatory Fees incurred for the Initial Indication, subject to the provisions
of Section 5.3. DepoTech shall provide P&U a complete copy of the New Drug
Application submitted to obtain approval to sell DepoCyt in the United States.
(2) All NDAs filed in the Territory shall be submitted in the name of
P&U or one of its Affiliates. The parties now contemplate that DepoCyt will
qualify for the centralized registration procedure in obtaining the approval to
sell DepoCyt in the EU. As soon as reasonably practical, the parties shall meet
or initiate contact with the EMEA and confirm that such procedure may be
followed. If such procedure cannot be followed for any reason, the
decentralized/mutual recognition registration procedure shall be followed. The
initial filing under such decentralized procedure shall be made in the United
Kingdom or such other country reasonably determined by the CSC.
(b) P&U's Responsibilities. Following the submission of each NDA,
each of P&U and DepoTech shall exercise commercially reasonable and diligent
efforts toward obtaining the approval of each NDA filed in the Territory. After
obtaining approval of each NDA, P&U shall exercise commercially reasonable and
diligent efforts toward maintaining all regulatory and other governmental
approvals, clearances, registrations or permits which may be required to sell
DepoCyt for the Initial Indications in countries within the Territory. P&U shall
consult with DepoTech concerning all supplemental or additional regulatory and
other governmental submissions related to DepoCyt and provide DepoTech with
access to such submissions prior to filing the same. Unless incurred in
connection with any submission to obtain approval for the Initial Indication,
the costs and expenses of making such supplemental regulatory or other
governmental submissions shall be borne entirely by P&U; provided, that DepoTech
shall provide all data and information related to the manufacture of DepoCyt
without additional cost. DepoTech shall also provide P&U with all other
information and Know How possessed or controlled by DepoTech which may
reasonably be required in connection with the conduct of Clinical Trials,
obtaining, renewing and maintaining any NDAs and marketing and selling DepoCyt
in the Territory. P&U shall be solely responsible for obtaining all pricing and
reimbursement approvals for DepoCyt in the Territory.
(c) Orphan Drug Designations. To the extent available and assuming
DepoCyt qualifies, the parties intend to seek orphan drug designations for
DepoCyt in Japan and, when such designation is available under applicable law,
in the EU. P&U shall apply for such
8
<PAGE> 12
designations in its name, and DepoTech shall provide all information and other
assistance reasonably required to support P&U's efforts to obtain such
designations.
3.3 SALES, MARKETING AND DISTRIBUTION OF DEPOCYT.
(a) Sales, Marketing and Distribution. P&U shall be solely
responsible for the sale, marketing and distribution of DepoCyt pursuant to this
Agreement including, without limitation, commissioning and paying for any and
all Phase IV and other post-marketing human clinical studies, post-marketing
surveillance and other marketing studies in the Territory. P&U shall use
reasonable diligence in proceeding with the sale, marketing and distribution of
DepoCyt. Reasonable diligence as used herein shall be the same standard of
effort used by P&U in the sale, marketing and distribution of P&U
pharmaceuticals having a potential market size and profitability similar to
those of DepoCyt. No later than *** prior to the estimated date of First
Commercial Sale in a country within the Territory (other than Canada), P&U shall
submit its annual strategic marketing plan for DepoCyt in the Territory for
review by DepoTech to assure consistency in the product profile and promotional
claims (such plan shall be submitted within *** from the date hereof for
Canada). Thereafter, P&U shall submit such marketing plans annually to DepoTech
prior to November 1 of each year for such review. P&U shall be responsible for
final packaging, labeling, marketing, sales and distribution of DepoCyt in the
Territory, at its sole cost. P&U shall be responsible for invoicing the
customers of DepoCyt and collecting payment therefor. P&U may carry out its
obligations to market DepoCyt in the Territory through Third Parties, as
provided in Sections 2.1 and 2.2 above.
(b) Trademarks. DepoCyt shall be sold under such trademarks and
trade names as P&U may select and own. P&U shall have the right to so use
"DepoCyt" or any other mark owned or controlled by DepoTech, and DepoTech hereby
grants P&U the exclusive license to use any trademarks or trade names owned or
controlled by DepoTech for use in connection with the marketing and sale of
DepoCyt in the Territory. Such marks owned by DepoTech shall include all
trademarks and trade names registered in the Territory by Chiron for the sale of
DepoCyt.
(c) Labels. To the extent permitted under applicable law, each
DepoCyt package shall identify DepoTech as the manufacturer of DepoCyt.
3.4 ESTABLISHMENT OF MINIMUM ANNUAL SALES REQUIREMENTS.
(a) Minimum Annual Sales. Commencing with the *** following the
First Commercial Sale in any ***, the parties shall establish minimum annual
sales requirements (the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
9
<PAGE> 13
"Minimum Annual Sales Requirements"). Prior to November 1 of each such year, P&U
shall submit to DepoTech annual strategic marketing plans for DepoCyt for the
Territory. The plan shall contain projected sales targets for each ***, the ***,
*** and the ***. The Minimum Annual Sales Requirements shall then be *** of such
projected sales targets. Minimum Annual Sales Requirements may be amended at any
time on mutual agreement of the parties. Set forth in EXHIBIT D is P&U's
non-binding estimate of its annual sales for the first *** following such First
Commercial Sale, which estimate is based on the assumptions described in such
Exhibit.
(b) Failure to Attain Minimum Annual Sales Requirements. If (i)
P&U shall fail to meet the Minimum Annual Sales Requirements in the entire
Territory, and (ii) P&U shall fail to meet the Minimum Annual Sales Requirements
in any of the *** during any year (the "Deficit Year")(such of those countries
in which P&U failed to meet the Minimum Annual Sales Requirements shall be
referred to as the "Deficit Countries"), and (iii) such failure is not due to
circumstances beyond the reasonable control of P&U, and (iv) P&U shall not make
up the shortfall between the actual Net Sales and the Minimum Annual Sales
Requirement during the Deficit Year by exceeding such Minimal Annual Sales
Requirement in the *** of the following *** by an amount which, when added to
the actual Net Sales in the Deficit Year, equals or exceeds the Minimum Annual
Sales Requirement for the Deficit Year in which the shortfall occurred, and (v)
P&U shall not, within *** following the giving of notice by DepoTech that the
conditions set forth in (i), (ii) and (iv) have occurred, pay to DepoTech an
amount equal to *** of the difference between (A) the Minimum Annual Sales
Requirement for DepoCyt for the Deficit Countries for the Deficit Year, and (B)
the sum of (x) the actual Net Sales for DepoCyt in the Deficit Countries for the
Deficit Year plus (y) the amount by which Net Sales in the Deficit Countries
during the *** of the *** following the Deficit Year exceed the Minimum Annual
Sales Requirement in the Deficit Countries for such ***, then DepoTech shall
have the right, exercisable by delivering notice to P&U and, as its sole remedy,
to ***. DepoTech shall have the right to ***. P&U shall grant DepoTech the right
to reference ***.
3.5 ADDITIONAL INDICATIONS AND ALTERNATIVE FORMULATIONS.
(a) Scope of P&U's Rights. Subject to Section 3.4(b) above,
DepoTech and P&U agree that P&U's rights hereunder include the exclusive right
to commercialize, market and sell DepoCyt in the Territory. P&U and its
Affiliates shall not research, develop, manufacture or market DepoCyt in the
Territory for any Additional Indications, and shall not enter into any
arrangement or contract with a Third Party that would permit such Third Party to
engage in such conduct, except, in either case, pursuant to this Agreement. In
addition, P&U shall not develop
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Alternative Formulations that are commercially suitable for use in the treatment
of human cancer during the term of this Agreement without the prior written
consent of DepoTech. In the Territory, DepoTech and its Affiliates shall not, by
itself or through a Third Party, research, develop, manufacture or market any
other formulation of cytabarine for oncological indications or any other
pharmaceutical product suitable for the Initial Indication, other than as
provided in paragraph (c) below.
(b) Additional Indications. After consultation with DepoTech and
consideration of its views, P&U may determine to obtain approval from Regulatory
Authorities to sell DepoCyt in the Territory for any Additional Indications. Any
costs and expenses associated with obtaining such approval, including clinical
trials and regulatory fees, shall be borne solely by P&U. DepoTech and its
Affiliates will not, in the Territory, directly or indirectly, develop,
manufacture, sell or license DepoCyt for any Additional Indications without the
prior written consent of P&U.
(c) Restrictions on Development of Alternative Formulations.
Subject to the terms set forth in paragraph (d) below, DepoTech and its
Affiliates shall have the right to research, develop, manufacture or market
Alternative Formulations or enter into any arrangements or contract with a Third
Party that would permit such Third Party to engage in such conduct; provided,
that such Alternative Formulations are unsuitable for and unable to be used for
oncology indications, and are unlikely to adversely affect the sales or market
price of DepoCyt in the Territory.
(d) Right of First Negotiation on Alternative Formulations.
DepoTech hereby grants to P&U and its Affiliates a right of first negotiation to
obtain, in the Territory, a license to, or collaborative or marketing rights
with respect to, any Alternative Formulations that DepoTech has developed or may
in the future develop.
(1) Notification to P&U. Immediately prior to the earlier of
(A) submitting any NDA in the Territory for an Alternative Formulation, or
(B) entering into any agreement with a Third Party with respect to an
Alternative Formulation in the Territory, DepoTech shall promptly give P&U
written notice containing reasonable details concerning such Alternative
Formulation and the material terms, if applicable, on which DepoTech would
propose to enter into an agreement with such Third Party. DepoTech may
elect to give such written notice to P&U earlier than the date required
under the preceding sentence. P&U shall respond to DepoTech within *** of
the giving of such notice of its interest in obtaining rights to the
Alternative Formulation.
(2) Negotiation of Terms. For a period of up to *** after
the giving of notice of P&U's intention to seek rights relating to such
Alternative Formulation, the parties shall negotiate in good faith a
reasonable agreement based upon the value of the Alternative Formulation
and the contributions or anticipated contributions of both parties to the
commercialization of the Alternative Formulation.
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(3) Commercialization by DepoTech. In the event that P&U
fails to respond within ***, indicates that it is not interested in
seeking a license regarding such Alternative Formulation or the parties
fail to reach a final agreement within the time period set forth in
paragraph (2) above, DepoTech and its Affiliates shall be free to
commercialize such Alternative Formulation either independently or with
one or more Third Parties; provided, that DepoTech shall not offer rights
to a Third Party on terms more favorable in the aggregate than those
previously offered to P&U.
3.6 PERFORMANCE OF SERVICES. Each party shall use commercially
reasonable and diligent efforts to perform its responsibilities hereunder in a
prudent and skillful manner, and in accordance, in all material respects, with
applicable laws then in effect. Each party shall furnish all labor, supervision,
facilities, supplies and materials necessary to perform the activities assigned
to it hereunder.
3.7 COORDINATION WITH CHIRON. Together with Chiron, the parties shall
establish procedures in respect to DepoCyt to (a) coordinate the conduct of
clinical trials for Additional Indications, including data and cost sharing
arrangements, (b) allow the free exchange and use of data from clinical trials
conducted by either party (including Phase IV trials after the publication of
their results), and (c) exchange of reports and other information required to
permit DepoTech, Chiron and P&U to comply with their respective obligations to
all Regulatory Authorities in the United States and the Territory, including
information about adverse drug events.
3.8 RIGHT TO REFERENCE DRUG MASTER FILES. DepoTech (or any Third Party
permitted under Section 2.3 above) shall have the right to reference *** and
regulatory documents for use in all regulatory filings for DepoCyt worldwide in
qualifying *** for use in producing Vialed Material. P&U and its Affiliates
shall have the right to reference DepoTech's DepoCyt and Vialed Material Drug
Master File and regulatory documents in the United States for use in all
regulatory filings for DepoCyt in the Territory. DepoTech shall cause Chiron to
grant the same rights to any DMF or NDA for DepoCyt filed in Chiron's name
solely for obtaining regulatory approval to sell DepoCyt in the Territory.
ARTICLE 4
MANAGEMENT OF DEPOCYT PROGRAM
4.1 PROJECT REPRESENTATIVE. P&U and DepoTech each shall appoint a person
(a
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"Project Representative") to coordinate its part of (a) the development and (b)
the commercialization activities contemplated by this Agreement. The Project
Representatives shall be the primary contacts between the parties for day-to-day
collaboration pursuant to this Agreement. Each party shall notify the other
within thirty (30) days of the Effective Date of the appointment of its Project
Representatives and shall notify the other party as soon as practicable upon
changing this appointment.
4.2 COLLABORATION STEERING COMMITTEE.
(a) Composition of the CSC. The clinical testing and regulatory
approval process of DepoCyt in the Territory shall be conducted under the
direction of the CSC which shall be composed of three (3) named representatives
of P&U and three (3) named representatives of DepoTech. Each party may
substitute one or more of its representatives, from time to time in its sole
discretion, effective upon notice to the other party of such change.
(b) Responsibilities of the CSC. The purposes of the CSC shall be
to supervise and coordinate the Clinical Trials and the process of obtaining
regulatory approvals of DepoCyt in the various countries in the Territory, and
shall determine in what countries in the Territory regulatory filings should be
made. As part of its responsibilities, the CSC shall (a) review data developed
from the Clinical Trials, (b) monitor the progress of the Clinical Trials and
evaluate the work performed and the results obtained therefrom, (c) approve
modifications to the Clinical Plan, and establish and modify all Clinical Trial
protocols, (d) determine when an NDA for DepoCyt should be filed with the
Regulatory Authority and (e) carry out such other activities as the parties may
from time to time agree.
4.3 GENERAL RULES APPLICABLE TO THE CSC.
(a) Meetings. Unless otherwise agreed, the CSC shall meet no less
than semiannually. Each party shall be responsible for its own costs incurred in
connection with such meetings. The site of the meetings shall alternate between
a site chosen by DepoTech and a site chosen by P&U, with the party hosting the
meeting choosing the chairperson for the meeting.
(b) Actions. Each member of the CSC shall have one vote. Any
approval, determination, decision or other action by the CSC shall require the
unanimous vote of the members of the CSC.
(c) Records of Action. The chairperson of the CSC shall promptly
prepare and deliver to the other party within fifteen (15) days after the date
of such meeting minutes of such meeting summarizing the matters reviewed and any
actions taken and decisions made at
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such meetings in form and content reasonably acceptable to the other party.
(d) Disagreements. All disagreements within the CSC shall be
resolved in the following manner: The representatives of the CSC promptly shall
present the disagreement to the Managing Director on behalf of P&U, and the
President on behalf of DepoTech. Such executives shall confer to discuss and to
resolve between themselves such disagreement. In the event that the parties are
unable to reach agreement, the parties may, by mutual agreement, submit the
dispute for resolution pursuant to Article 15. Notwithstanding the foregoing,
P&U alone shall resolve all disagreements concerning which countries in the
Territory either party shall conduct clinical trials, seek governmental approval
or sell DepoCyt, so long as P&U pays for all costs incurred in carrying out such
activities.
ARTICLE 5
PAYMENTS
5.1 INITIAL PAYMENT. Within ten (10) days after execution of this
Agreement, P&U shall pay to DepoTech the nonrefundable, noncreditable amount of
2 MUSD.
5.2 MILESTONE PAYMENTS. P&U shall pay DepoTech milestone payments within
thirty (30) days of the times set forth below:
(a) Upon the granting of the approval of the Notice of Compliance
required to sell DepoCyt in Canada, P&U shall pay the nonrefundable,
noncreditable amount of ***.
(b) Upon the granting of FDA approval for marketing DepoCyt in the
United States, P&U shall pay the nonrefundable, noncreditable amount of ***.
(c) ***, (1) upon the submission to the EMEA of an NDA under the
centralized registration procedure, P&U shall pay ***, or (2) if the
decentralized/mutual recognition registration procedure is followed, upon the
submission of an NDA in any of the Major European Countries, P&U shall pay ***
for each such country (up to an aggregate of ***). "Submission" under this
paragraph (c) shall mean the filing or, in respect to the EMEA and where
otherwise applicable, receipt from the applicable Regulatory Authority of a
notice of receipt of a valid application.
(d) Upon the receipt of regulatory approval from the EU Commission
necessary to commence marketing DepoCyt in the EU under the centralized
registration
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procedure, P&U shall pay ***, or if the decentralized/mutual recognition
registration procedure is followed, upon the receipt of regulatory approvals
(inclusive of necessary price and reimbursement approvals) necessary to commence
marketing DepoCyt in any of the Major European Countries, P&U shall pay *** for
each such country (up to an aggregate of ***).
(e) Upon the submission of an NDA to the Japanese Ministry of
Health and Welfare to market DepoCyt in Japan, P&U shall pay ***.
(f) Upon the earlier of (1) receipt of regulatory approvals
necessary to commence marketing DepoCyt in Japan (inclusive of necessary price
and reimbursement approvals) or (2) First Commercial Sale in Japan, P&U shall
pay ***. Certain milestone payments set forth above shall be reduced, on an
event-by-event basis, in the event that they are not completed by the target
dates set forth below. For example, if DepoTech misses the target date for
filing in Europe but achieves the target date for filing in Japan, only the
European filing milestone would be reduced. The following table sets forth the
target date for each milestone and the two delay periods. The first delay period
("First Delay Period") will refer to a delay of between one day and three months
from the target date. The second delay period ("Second Delay Period") will refer
to a delay of between three months and one day and six months from the target
date. If a delay greater than one day and six months occurs, the parties will
assess the situation and renegotiate the product development and affected
milestone payments in good faith.
<TABLE>
<CAPTION>
Milestone
Payment(1)
(set forth First Adjusted Second Adjusted
Milestone Payment (as set Target in Section Delay Milestone Delay Milestone
forth above) Date 5.2) Period Payment(1) Period Payment(1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canadian approval *** *** *** *** *** ***
(Section 5.2(a)
European submission *** *** *** *** *** ***
(Section 5.2(c))
European approval *** *** *** *** *** ***
(Section 5.2(d))
Japanese submission *** *** *** *** *** ***
(Section 5.2(e))2
Japanese approval *** *** *** *** *** ***
(Section 5.2(f))2
</TABLE>
(1) All milestone payments are in millions and are to be paid in U.S. dollars.
If the decentralized/mutual recognition
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procedure is used for the EU, the Adjusted Milestone Payments shall be *** of
the amounts set forth above for each Major European Country, and the Target
Dates and Delay Periods for European submission and approval shall be extended
by ***.
(2) ***.
5.3 CLINICAL DEVELOPMENT FUNDING. P&U shall reimburse DepoTech for ***
of all Clinical Trial Expenses and Regulatory Fees for the Initial Indication
incurred by DepoTech since ***, by the payment to DepoTech, monthly in arrears
and not later than the 15th day after DepoTech's invoice, the lesser of: (a) the
cumulative amount of Clinical Trial Expenses and Regulatory Fees actually
incurred since ***, or (b) *** times the number of months lapsed since ***;
less, in each case, (c) the cumulative amount previously paid by P&U under this
Section 5.3. Notwithstanding the foregoing, P&U shall not be obligated to
reimburse DepoTech for any Clinical Trial Expenses or Regulatory Fees incurred
in connection with obtaining all regulatory approvals in the EU, Canada and
Japan for the Initial Indication which, in the aggregate, exceed ***.
5.4 REBATE OF MILESTONE PAYMENTS. If approval to sell DepoCyt in a Major
European Country for the Initial Indication is not obtained prior to ***,
DepoTech shall refund *** of the pro-rata payments previously made under Section
5.2(c) for such Major European Country. If approval to sell DepoCyt in Japan for
the Initial Indication is not obtained prior to ***, DepoTech shall refund ***
of the payment previously made under Section 5.2(e).
ARTICLE 6
SALE AND PURCHASE OF DEPOCYT
6.1 SALE AND PURCHASE. Subject to the terms and conditions of this
Agreement (including Article 8 and Exhibit E): (a) DepoTech shall use its
commercially reasonable and diligent efforts to manufacture and sell to P&U such
quantities of Vialed Material as P&U may require; and (b) P&U agrees, for
itself, its Affiliates and sublicensees, to satisfy, solely through P&U's
purchase of Vialed Material under this Agreement, *** of P&U's, its Affiliates'
and sublicensees' requirements of DepoCyt in the Territory. P&U shall be solely
responsible for finishing Vialed Material into DepoCyt, including all labelling
and packaging.
6.2 SUPPLY LIMIT. Notwithstanding the foregoing, DepoTech shall be under
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no obligation to fill orders in excess of *** vials per year (*** vials through
calendar year ***), unless mutually agreed by the parties in writing. DepoTech
represents that its production facility at 11011 N. Torrey Pines Road, La Jolla,
California 92037 is or will be validated for the production of Vialed Material
and that, except for non-commercial quantities of other products manufactured on
a small scale line using its DepoFoam technology, such facility will be used
solely to produce Vialed Material for sale to P&U and Chiron. DepoTech shall use
a dedicated production line at such facility to produce such Vialed Material. If
DepoTech is unable to supply all of requirements of DepoCyt (and, if applicable,
other products using its DepoFoam delivery system), it shall allocate its
available supplies equitably among all requirements in proportion to their
actual purchases in the prior ***.
6.3 PRODUCTION LOCATION. Except as otherwise provided in Article 8
below, all Vialed Material shall be produced at DepoTech's facilities in San
Diego County, or such other locations as agreed by the parties, which facilities
shall be approved by the FDA for the manufacture of the Vialed Material.
6.4 TERMS AND CONDITIONS. THE SUPPLY OF VIALED MATERIAL HEREUNDER IS
EXPRESSLY LIMITED TO AND CONDITIONED UPON THE PARTIES' ACCEPTANCE OF THE
ADDITIONAL TERMS AND CONDITIONS OF SALE ATTACHED HERETO AS EXHIBIT E AND NO
TERMS ADDITIONAL TO OR DIFFERENT FROM THOSE IN OR INCORPORATED BY REFERENCE IN
THIS AGREEMENT ARE BINDING ON DEPOTECH UNLESS AGREED TO IN WRITING BY DEPOTECH.
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ARTICLE 7
PRICE AND PAYMENTS
7.1 DEPOTECH SHARE OF NET SALES. As compensation for the manufacture and
supply of Vialed Material, P&U shall pay to DepoTech an amount equal to *** of
Net Sales, but not less than *** (the "Supply Price"). Such minimum Supply Price
is based on the assumption that DepoCyt is approved only for the Initial
Indication and its approved labeling shall contain ***.
7.2 PRICE ADJUSTMENTS. The Supply Price payable in accordance with
Section 7.1 above shall be subject to adjustment as follows:
(a) Additional Indications and Changes in the Market Price. If
(1)***, or (2)***, the parties shall negotiate in good faith such equitable
modifications to the Supply Price as may be required as a result of such changed
circumstances.
(b) Loss of Patent Coverage. In the event (i) DepoCyt is no longer
claimed under any of DepoTech's valid and enforceable Patent Rights in any
country and (ii)***, the Supply Price for Vialed Material for use in making
DepoCyt for sale in such country shall be reduced to *** of Net Sales in such
country (and the minimum price shall be reduced to ***).
(c) Non-Commercial Sales. The parties shall discuss and agree upon
commercially reasonable reductions in the Supply Price on dispositions of
DepoCyt for use by or for indigent patients, treatment INDs and named patient
uses, and clinical trials (which dispositions shall not exceed *** of the total
vials distributed by P&U).
7.3 PAYMENT OF THE SUPPLY PRICE.
(a) Prior to January 1 of each year, the parties shall establish a
reasonable estimate of the Supply Price. Such estimated Supply Price shall be
used to make tentative payments during that year, and shall be subject to
retroactive adjustment as provided below. Within sixty (60) days after the end
of each calendar quarter, P&U shall pay to DepoTech an amount equal to the
aggregate estimated Supply Price for all DepoCyt sold in that quarter. Within 60
days after the end of year, P&U shall submit its report of its actual Net Sales
for such year, and within 20 days thereafter the parties shall make the
appropriate adjustment of the Supply Price for DepoCyt sold in such year. P&U
shall deliver to DepoTech within thirty (30)
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days after the end of each calendar quarter a sales report, including quantities
and monetary amounts, of P&U's and its Affiliates and sublicensees Net Sales.
Such quarterly reports shall indicate the Net Sales on a country-by-country
basis, as well as all calculations used to determine the Supply Price.
(b) All payments to DepoTech under this Agreement shall be in U.S.
dollars and shall be made by wire transfer of immediately available funds to the
bank account designated in writing by DepoTech from time to time. With respect
to any payment based on Net Sales made in a currency other than U.S. dollars,
P&U shall convert Net Sales to U.S. dollars in accordance with generally
accepted accounting principles, consistently applied, in accordance with P&U's
customary foreign translation methods for its financial reporting.
ARTICLE 8
CONTINGENT MANUFACTURING LICENSES
8.1 EXPANDED PRODUCTION CAPACITY. As soon as reasonably practicable, P&U
shall notify DepoTech in writing when it expects, if at all, its aggregate
annual requirements of Vialed Material in the Territory to exceed *** vials.
DepoTech shall then have the right to produce all such excess requirements of
Vialed Material upon the terms set forth herein. If DepoTech fails to commit in
writing to produce such excess quantities within *** after such notice from P&U,
or at anytime thereafter fails to provide reasonable assurances that it will be
able to produce such quantities, P&U shall have the right to manufacture or to
have manufactured such excess requirements (or, if such excess requirements are
less than *** vials, its requirements exceeding *** vials) for use and sale in
the Territory, whereupon DepoTech shall then grant P&U such licenses and provide
such other materials and services as are described in Section 14.7 below.
DepoTech shall continue to produce, and P&U shall continue to purchase, such
quantities of Vialed Material not so permitted to be manufactured by or for P&U
for so long as this Agreement shall continue pursuant to Article 14.
8.2 SUPPLY ASSURANCES. The parties recognize that the availability of
adequate quantities of Vialed Material consistent with P&U's requirements is
essential for the commercial success of DepoCyt. The parties therefore agree as
follows:
(a) Each party shall maintain an inventory of Vialed Material or
DepoCyt sufficient to satisfy P&U's requirements for at least *** based on P&U's
requirements for the prior *** (or,
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during the first *** after the First Commercial Sale, the first *** set forth in
the forecast provided under Paragraph 1.2 of Exhibit E).
(b) DepoTech shall use commercially reasonable and diligent
efforts to validate its other production facility at 10450 Science Center Drive
in San Diego (or such other facility as the parties may mutually agree) for the
production of Vialed Material. Upon completion of such validation (including the
approval of all Regulatory Authorities in the EU, Canada and Japan), DepoTech
shall confirm in writing that such other facility may be used as a second source
and will be available for use to permit DepoTech to comply with its supply
obligations hereunder.
(c) If such written confirmation is not provided prior to *** or
thereafter P&U asserts reasonable grounds for insecurity with respect to
DepoTech's ability to supply Vialed Material (and DepoTech is unable to promptly
furnish adequate assurance of due performance):
(1) DepoTech shall make available to P&U sufficient
technology and know-how to enable P&U (or a qualified Third Party
designated by P&U and reasonably acceptable to DepoTech) to manufacture
Vialed Material. DepoTech shall update such information from time to time
thereafter so that P&U possesses all such technology and know-how then
used by DepoTech to manufacture the Vialed Material, including all
manufacturing and controls information contained in any DMF or otherwise
contained or referred to in any NDA and reasonable technical assistance to
transfer effectively to P&U such technology and know how.
(2) Subject to the occurrence of the conditions or events
referred to above in this paragraph (c), DepoTech hereby grants P&U and
its Affiliates a non-exclusive, limited license under the DepoTech
Technology and other relevant know how and patents to manufacture and have
manufactured Vialed Material. Subject to the royalty payable under Section
14.7 below, such license may be used only as follows:
(A) To manufacture or have manufactured such portion
of its requirements of Vialed Material in the Territory reasonably
necessary for P&U to maintain a validated facility as a backup
source of Vialed Material (up to *** of its annual requirements);
and
(B) If DepoTech is unable to supply Vialed Material
within *** after receipt of a purchase order from P&U (even if
caused by any of the reasons referred to in Section 16.1 below), P&U
or such Third Party may make or have made Vialed Material until ***
after DepoTech provides written notice that it can again provide
Vialed Material.
(d) Such licenses shall be subject to the amounts and other terms
set forth below in Section 14.7(a) and such additional terms as may be required
to carry out the intent of the foregoing standby license, including rights to
reference DMF's, conduct of bioequivalence studies, and technical assistance.
ARTICLE 9
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REPORTING, RECORDS AND ACCOUNTING
9.1 RECORDS AND DATA. Each party shall maintain records in sufficient
detail and in good scientific manner appropriate for regulatory and other
governmental purposes and so as to properly reflect all work done and results
achieved in the performance of clinical development activities hereunder. Such
records shall include books, records, reports, research notes, charts, graphs,
comments, computations, analyses, recordings, photographs, computer programs and
documentation thereof, computer information storage means, samples of materials
and other graphic or written data generated in connection with such activities,
including any data required to be maintained pursuant to applicable governmental
regulations. Each party shall provide the other the right to inspect such
records, and shall provide copies of all requested records, to the extent
reasonably required for the performance of the other's obligations under this
Agreement.
9.2 AVAILABILITY OF EMPLOYEES. Each party shall make its employees
engaged in activities relating to this Agreement and relevant reports of
nonemployee consultants available, upon reasonable notice during normal business
hours, at their respective places of employment to consult with the other party
on issues arising during the term hereof and in connection with any request from
any regulatory agency, including regulatory, scientific, technical,
commercialization and clinical testing issues.
9.3 VISIT OF FACILITIES. Representatives of each party may, upon
reasonable notice and at times reasonably acceptable to the other party, (a)
visit the facilities where the other party's activities under this Agreement are
being conducted, (b) consult informally, during such visits and by telephone,
with personnel of the other party performing work under this Agreement and (c)
with the other party's prior approval, which approval shall not be unreasonably
withheld, visit the sites of any clinical trials or other experiments being
conducted by such other party in connection with such other party's activities
under this Agreement, but only to the extent in each case as such trials or
other experiments relate to such activities.
9.4 AUDITS. Upon DepoTech's request, P&U shall permit an independent,
certified public accountant selected by DepoTech, except one to whom P&U has
reasonable objection, to have access during ordinary business hours to P&U's
records necessary to determine the accuracy of any report or payment made in
respect to any calendar quarter and obtain information as to the amount payable
to DepoTech for any such period. Such examination shall be at DepoTech's
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expense and shall not take place more than once each year. However, if such
examination reveals an underpayment of monies owed to DepoTech in excess of ***,
then said examination shall be at P&U's expense. The right of examination with
respect to any year shall terminate *** after the end of any such year.
Information supplied to DepoTech by such independent, certified public
accountants shall not include any proprietary information not required to be
disclosed under other sections of this Agreement.
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ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 MUTUAL REPRESENTATIONS. Each party hereby represents and warrants to
the other as follows:
(a) Due Organization. It is a corporation duly organized and
validly existing and in good standing under the laws of its jurisdiction in
which it is chartered.
(b) Due Authority. It has the power and authority to execute and
deliver this Agreement, and to perform its obligations hereunder.
(c) No Conflict. The execution, delivery and performance by it of
this Agreement and its compliance with the terms and provisions hereof does not
and will not conflict with or result in a breach of any of the terms and
provisions of or constitute a default under (i) any loan agreement, guaranty,
financing agreement, agreement affecting any of the Patent Rights or Know How or
other agreement or instrument binding or affecting it or its property; (ii) the
provisions of its charter document or bylaws; or (iii) any material law, rule,
regulation or any order, writ, injunction or decree of any court or governmental
authority entered against it or by which any of its property is bound.
(d) Binding Obligation. This Agreement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to the availability
of particular remedies under general equity principles.
(e) No Actions. There are no actions, suits or proceedings pending
or, to its knowledge, threatened against it or its Affiliates which affect its
ability to carry out its obligations under this Agreement.
10.2 DEPOTECH REPRESENTATIONS. In addition to the foregoing, DepoTech
represents, warrants and covenants to P&U as follows:
(a) No Proceedings. There are no actions, suits or proceedings
pending or, to DepoTech's knowledge, threatened against DepoTech or any of its
Affiliates, at law or in equity before any court or administrative office or
agency which affect the Patent Rights.
(b) No Infringement. To DepoTech's knowledge, practice of the
DepoTech Technology as contemplated by this Agreement will not involve any
infringement or constitute
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an unauthorized use of any patent, copyright, trade secret, proprietary
information, license or right therein belonging to any Third Party.
(c) Patents. Each of the patent applications included in the
Patent Rights is currently pending and in good standing, and has not been
abandoned. DepoTech has no knowledge of any facts or circumstances that could
adversely affect DepoTech's ability to obtain patents based on such applications
or the validity of such patents if any are issued.
(d) Conflicting Rights. DepoTech has not granted, and during the
term of this Agreement will not grant, any right to any Third Party relating to
the Patent Rights or the Know How in the Territory which would conflict with the
rights granted to P&U hereunder.
(e) Right to Practice. DepoTech's right to practice those aspects
of the DepoTech Technology embodied in those Patent Rights of DepoTech
identified on Exhibit B hereto as "RDF Patents" is held pursuant to an
exclusive, worldwide assignment of all right, title and interest in such Patent
Rights to DepoTech by RDF (such technologies, the "RDF Technologies").
(f) Status of RDF Agreements. DepoTech has provided to P&U a true,
correct and complete copy of that certain Assignment Agreement, dated as
February 9, 1994, between DepoTech and RDF (the "Assignment Agreement"). The
Assignment Agreement constitutes the only agreement between DepoTech and RDF
with respect to the RDF Technologies. DepoTech has complied with all obligations
imposed on it by the Assignment Agreement. The Assignment Agreement is in full
force and effect. To DepoTech's knowledge, no right, title or interest in any
aspect of the RDF Technologies is owned by any Third Party other than RDF. Under
the terms of the Assignment Agreement, DepoTech has the exclusive, worldwide
right to practice the RDF Technologies and to license the RDF Technologies to
P&U pursuant to this Agreement. DepoTech has no knowledge of any fact or
circumstance that could adversely affect DepoTech's rights to practice the RDF
Technologies in the Territory under the Assignment Agreement.
(g) RDF Agreement with P&U. DepoTech has delivered to P&U the
agreement of RDF, in form satisfactory to P&U, to grant rights to the RDF
Technologies to P&U on an exclusive basis throughout the Territory for the
purposes of conducting the development and commercialization program
contemplated by the parties under this Agreement in the event that DepoTech
shall, for any reason, no longer have the full and unencumbered right to grant
rights to the RDF Technologies to P&U (the "RDF Agreement").
(h) Compliance with RDF Agreements. DepoTech shall, for the
benefit of P&U, its Affiliates and sublicensees, faithfully and timely perform
and discharge its obligations
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to RDF under the Assignment Agreement.
(i) Disclosure of NDA. DepoTech has disclosed to P&U a correct and
complete copy of its NDA submitted to the United States Food and Drug
Administration.
ARTICLE 11
PATENTS
11.1 PATENT RIGHTS.DepoTech shall file, prosecute and maintain patent and
other regulatory applications with respect to Patent Rights in the Territory.
All costs incurred with respect to the filing, prosecution and maintenance of
the Patent Rights shall be borne by DepoTech. DepoTech shall give P&U an
opportunity to review the text of the patent applications included in the Patent
Rights before filing, and in good faith shall consider and incorporate the
reasonable requests of P&U. DepoTech shall supply P&U with a copy of such
applications as filed by DepoTech, together with notice of its filing date and
serial number. DepoTech shall keep P&U fully informed with copies of all
substantive communications to and from United States and foreign patent offices
regarding such application within a reasonable time prior to filing such
communication or promptly following receipt thereof, as the case may be.
DepoTech shall reasonably consider any comments P&U may have relating to such
applications or communications. In the event that DepoTech elects not to file a
patent application in the Patent Rights in any country in the Territory, or
decides to abandon any pending application or not to maintain any patent with
claims covering a Patent Right in any country in the Territory, it shall provide
adequate notice to P&U and give P&U the opportunity to file or maintain such
application or patent at its own expense. In the event P&U shall thereupon file
or maintain such application, DepoTech shall assign ownership of such Patent
Right and all costs of prosecution and maintenance of such Patent Rights shall
thereafter be borne by P&U. DepoTech and P&U shall also cooperate to obtain
supplementary protection certificates in respect to Patent Rights issued by each
national patent office in the European Union, and the equivalent patent term
extensions in Japan and other countries. Each application for such extensions
shall be prepared by P&U and timely submitted by DepoTech.
11.2 NO OTHER TECHNOLOGY RIGHTS. Except as otherwise provided in this
Agreement, under no circumstances shall a party hereto, as a result of this
Agreement, obtain any ownership interest or other right in any technology, trade
secrets, patents, pending patent applications, products of the other party,
including items owned, controlled or developed by the other, or
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transferred by the other to such party at any time pursuant to this Agreement.
11.3 ENFORCEMENT OF PATENT RIGHTS. *** shall use good faith efforts to
enforce the Patent Rights. Upon learning of a significant and continuing
infringement of any Patent Rights by a Third Party, DepoTech promptly shall
provide notice to P&U in writing of the fact and shall supply P&U with all
evidence possessed by DepoTech pertaining to and establishing said infringement.
*** shall have *** from the giving of notice under this Section, or such lesser
period of time if a further delay would result in ***, to abate the
infringement, to file suit against at least one of the infringers in a country
of the Territory, at its sole expense, following consultation with ***. ***
shall not be obligated to bring or maintain *** with respect to claims directed
to any one method or composition.
If *** does not, within *** days of the giving of such notice or such
lesser period of time if a further delay would result ***, abate the
infringement or file suit to enforce such Patent Rights against *** in a country
of the Territory, *** shall have the right to take whatever action it deems
appropriate in its own name or, if required by law, in the name of ***, to
enforce such Patent Rights. Regardless of which party takes an enforcement
action, all monies recovered upon the final judgment or settlement of any such
enforcement action (after reimbursement of all litigation costs and expenses
incurred by each party) shall be allocated in an equitable manner based on the
financial losses incurred by each party as a consequence of such third party's
acts in the Territory.
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11.4 THIRD PARTY CLAIM OF INFRINGEMENT.
(a) DepoTech Patent Rights; Defense by ***. If a claim of
infringement is brought against *** in any country in the Territory alleging
infringement of any patent in such country owned by a Third Party by reason of
the manufacture, use or sale of DepoCyt, or if *** becomes aware of any
potentially-infringing patent owned by a Third Party in any country in the
Territory, *** shall promptly give notice thereof to *** and provide *** with
all information in *** possession regarding such claim or potential
infringement. *** shall indemnify, defend and hold *** harmless against any
damages, costs, expenses and liabilities (including attorneys' fees and
expenses) arising out of such claim. *** shall conduct the defense of any suit
for infringement at its expense and *** may participate in such defense, at its
option and expense. *** shall furnish to *** such assistance as *** may
reasonably need and request from time to time for the conduct of the defense of
such suit. *** shall not dispose of or settle any such claim in any manner which
may *** prior written consent, which shall not be unreasonably withheld. If ***
defends against such claim or suit, there shall be *** hereunder; provided, that
*** by reason of any infringement, including any ***. Without limiting any
obligation of *** hereunder or any remedies available to ***, if *** fails to
defend such claim or suit, *** shall have the right to do so, and *** hereby
agrees to *** in connection with such defense.
(b) Damages. Without limiting *** obligations under Section
11.4(a), if as a result of any suit or claim falling within the provisions of
Section 11.4(a), *** for which *** is obligated to *** under Section 11.4(a),
*** which would otherwise be payable to ***. If *** becomes obligated to pay
damages, royalties or other costs to any Third Party (including royalties to
allow P&U to make, have made, use or sell DepoCyt), such amounts shall be ***.
***.
11.5 PATENT MARKING. P&U shall mark DepoCyt with appropriate patent
numbers or indicia at DepoTech's instruction and election, as, when and where
P&U may reasonably accommodate same, given packaging, printing schedules and
other factors, in those countries where such markings have notice value as
against infringers.
ARTICLE 12
CONFIDENTIALITY AND PUBLICATION
12.1 GENERAL. All Know-How or other confidential information or materials
disclosed by one party to the other prior to the date hereof or during the term
of this Agreement, including
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chemical and biological materials ("Confidential Information"), shall not be
used by the receiving party except in connection with the activities
contemplated by this Agreement, shall be maintained in confidence by the
receiving party, and shall not be disclosed by the receiving party to any other
person, firm or agency, governmental or private, without the prior written
consent of the disclosing party, except to the extent Confidential Information
is:
(1) known by or in possession of the receiving party at the time
of its receipt as documented in written records;
(2) independently developed outside the scope of this Agreement by
employees of the receiving party having no access to or knowledge of the
Confidential Information disclosed hereunder;
(3) in the public domain at the time of its receipt or thereafter
becomes part of the public domain through no fault of the receiving party;
(4) received without an obligation of confidentiality from a Third
Party having the right to disclose such information;
(5) required to be disclosed to governmental agencies in order to
gain approval to sell DepoCyt, or disclosure is otherwise required by law,
regulation or governmental or court order (so long as the receiving party
provides notice of such disclosure, seeks to obtain protective orders or
other available confidentiality treatment and, in the case of disclosures
to the SEC, seeks confidential treatment to the extent reasonably
requested by the disclosing party);
(6) released from the restrictions of this Section 12.1 by the
express written consent of the disclosing party; or
(7) disclosed to agents, consultants, assignees, sublicensees or
subcontractors of P&U or DepoTech or their Affiliates which have a need to
know such information in connection with the performance of this
Agreement, provided that such persons are or agree to be subject to the
provisions of this Section 12.1 or substantially similar provisions.
12.2 CONFIDENTIALITY AGREEMENTS. P&U and DepoTech shall use all
commercially reasonable efforts to obtain, if not already in place,
confidentiality agreements from its relevant employees and agents, to protect
the confidential information as herein provided.
12.3 INJUNCTIVE RELIEF. Both parties acknowledge that either party would
not have an adequate remedy at law for breach of any of the covenants contained
in this Article 12 and hereby consent to the enforcement of same by the
non-breaching party by means of temporary or permanent injunction issued by any
court having jurisdiction thereof and further agrees that it be entitled to
assert any claim it may have for damages resulting from the breach of such
covenants in addition to seeking injunctive or other relief.
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12.4 PUBLICATION. During the term of this Agreement, P&U and DepoTech
each acknowledge the other party's interest in publishing certain of its results
to obtain recognition within the scientific community and to advance the state
of scientific knowledge. Each party also recognizes the mutual interest in
obtaining valid patent protection and protecting business interests.
Consequently, either party, its employees or consultants wishing to make a
publication (including any oral disclosure made without obligation of
confidentiality) relating to work performed by such party as part of the
activities being conducted under this Agreement (the "Publishing Party") shall
transmit to the other party (the "Reviewing Party") a copy of the proposed
written publication or an outline of such oral disclosure at least fifteen (15)
days prior to submission for publication or oral disclosure. To the extent such
publications or disclosures contain clinical or other data generated by P&U or
information about clinical or sales results in the Territory, such publication
or disclosure shall not be made without the prior written consent of P&U, which
consent shall not be unreasonably withheld. The parties will jointly issue press
releases following the execution of this Agreement, the form and substance of
which shall be approved by both parties.
12.5 TERMINATION. All obligations of confidentiality imposed under this
Article 12 shall expire ten (10) years following termination of this Agreement.
ARTICLE 13
INDEMNIFICATION
13.1 DEPOTECH INDEMNIFICATION. DepoTech shall indemnify and hold P&U, its
directors, officers, employees, agents, Affiliates and sublicensees harmless
against all claims, damages, liabilities, losses, costs and expenses
(collectively, "Claims") arising from ***.
13.2 P&U INDEMNIFICATION. P&U shall indemnify and hold DepoTech, its
directors, officers, employees, agents, Affiliates and sublicensees harmless
against all Claims arising from any ***.
13.3 MUTUAL INDEMNIFICATION. Each party agrees to indemnify and hold the
other party and its Affiliates, officers, directors, employees, agents and
shareholders harmless against any and all Claims arising out of or in connection
with (a) the breach by the indemnifying party
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of any of its representations or warranties contained in this Agreement or (b)
the nonperformance, partial or total, of any covenants of the indemnifying party
contained in this Agreement (including its Exhibits).
13.4 PROCEDURE.
(a) Notice to Indemnifying Party. As a condition to the
indemnified party's right to indemnification under this Section, the indemnified
party shall give prompt written notice to the indemnifying party of any suits,
claims or demands by third parties or the indemnified party which may give rise
to any loss for which indemnification may be required under this Section. The
indemnifying party shall be entitled to assume the defense and control of any
suit, claim or demand of any third party at its own cost and expense; provided,
that the other party shall have the right to be represented by its own counsel
at its own cost in such matters. In the event that the indemnifying party shall
decline to assume control of any such suit, claim or demand, the party entitled
to indemnification shall be entitled to assume such control, conduct the defense
of, and settle such suit, claim or action, all at the sole cost and expense of
the indemnifying party. The indemnifying party shall not settle or dispose of
any such matter in any manner which would adversely impact the rights or
interests of the indemnified party without the prior written consent of the
indemnified party, which shall not be unreasonably withheld.
(b) Joint Defense.***.
13.5 PRODUCT LIABILITY INSURANCE.***.
ARTICLE 14
TERM AND TERMINATION
14.1 TERM. (a) The exclusive rights granted under Section 2.1 shall
remain in effect, on a country-by-country basis until the later of (a) *** from
the date of First Commercial Sale in such country or (b) the last-to-expire of
the Patent Rights in such country claiming DepoCyt or its method of manufacture
or use which, but for the rights granted hereunder, would be infringed by P&U.
Thereafter, P&U shall have a fully-paid up, non-exclusive right under Section
2.1 in such country, including the right to manufacture anywhere in the world
Vialed Material and DepoCyt for sale in such country. Notwithstanding such
conversion of such exclusive rights, the exclusive trademark license granted to
P&U under Section 3.3(b) shall continue for all trademarks of DepoTech then used
by P&U in connection with the sale of DepoCyt. Upon
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expiration of such exclusive rights in a country (and expiration of any market
exclusivity, orphan drug designations or other exclusivity rights), P&U shall
grant DepoTech the right to reference its NDAs in connection with DepoTech's
regulatory filings to obtain approval to sell DepoCyt in such country.
(b) All references in this Agreement to the "term of this
Agreement" or words of similar meaning shall mean the period ending upon the
expiration pursuant to paragraph (a) above of all exclusivity rights granted
under Section 2.1 in all countries of the Territory. All references in this
Agreement to the "termination of this Agreement" or words of similar meaning
shall mean the period ending upon the earlier of (i) the expiration pursuant to
paragraph (a) above of all exclusivity rights granted under Section 2.1 in all
countries of the Territory, or (ii) the termination of this Agreement under
Sections 14.3, 14.4 or 14.5.
14.2 MANUFACTURING TERM. The term of DepoTech's manufacturing and supply
obligations shall be co-extensive with the term set forth above, except that it
shall continue indefinitely thereafter until either party elects to terminate
upon *** prior notice. Following such termination of P&U's exclusive rights as
provided in Section 14.1, if P&U does not elect to manufacture Vialed Material
itself under the paid up rights granted under Section 14.1, DepoTech shall
continue to supply Vialed Material on such commercially reasonable terms as the
parties shall negotiate in good faith, which terms shall include a reduced
Supply Price to reflect P&U's paid up rights, the then current patent position
of DepoCyt in the Territory and the expiration of DepoTech's payment obligations
to RDF.
14.3 OTHER CAUSES FOR TERMINATION. Either party may terminate this
Agreement by written notice to the other in the event that (i) the other party
fails to perform any material obligation hereunder and such failure is not cured
within ninety (90) days following notice thereof from the nondefaulting party,
except obligations under Section 3.4 or Article 8, as to which the sole remedies
are set forth therein, or (ii) any bankruptcy, receivership, insolvency or
reorganization proceedings are instituted by the other party or any such
proceedings are instituted against the other party and not dismissed within
ninety (90) days. The failure to obtain the approvals to sell DepoCyt referred
to in Section 5.4 above prior to the dates set forth therein shall be deemed a
breach by DepoTech of a material obligation.
(a) Breach. If either party terminates this Agreement pursuant to
clause (i) hereof, then the terminating party shall be entitled to pursue all of
its legal and contractual remedies (but in no event shall it be entitled to
recover lost profits or other consequential
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damages). In the event of such a termination, the non-breaching party shall have
the ***. Additionally, if P&U is the breaching party and to the extent allowed
under applicable law, all registrations held by P&U to sell DepoCyt shall be
transferred, at DepoTech's expense, to DepoTech. P&U shall also then grant
DepoTech the right to use any of P&U's trademarks then used by P&U exclusively
for DepoCyt.
(b) Bankruptcy. If either party terminates this Agreement pursuant
to clause (ii) hereof, the terminating party shall have an exclusive right in
the Territory (including the right to grant rights under the rights granted
hereunder) to make, have made, use and sell DepoCyt, subject to all royalty
obligations to Third Parties. If P&U terminates this Agreement pursuant to
clause (ii) hereof, it shall in addition have the exclusive right (including the
right to grant rights thereunder) to make, have made, use and sell DepoCyt in
the Territory, subject to an obligation to pay to DepoTech an amount equal to
10% of Net Sales. The rights granted to P&U by DepoTech pursuant to this
Agreement constitute "intellectual property" within the meaning of Sections 101
and 365(n) of the United States Bankruptcy Code (the "Code") and the rights of
P&U to obtain DepoTech Technology in the event of a DepoTech bankruptcy pursuant
to any escrow or similar arrangement are "supplementary to" such rights within
the meaning of Section 365(n) of the Code.
14.4 PATENT CHALLENGE. DepoTech shall have the right to terminate this
Agreement if P&U commences legal proceedings to challenge the validity of the
Patent Rights within any country in the Territory and does not withdraw such
challenge within 60 days after written request from DepoTech, which shall have
been given within 30 days after commencement of such proceedings.
14.5 TERMINATION BY P&U. P&U shall have the right at any time to
terminate this Agreement upon *** prior notice to DepoTech. In the event of such
a termination, all of P&U's rights to DepoCyt shall revert to DepoTech, and P&U
shall grant DepoTech the perpetual, royalty-free, exclusive right to make, have
made, use and sell Vialed Material and DepoCyt in the Territory. Additionally,
to the extent allowed under applicable law, all registrations held by P&U to
sell DepoCyt shall be transferred to DepoTech at P&U's expense for its internal
costs and DepoTech's expense for fees and expenses payable to Regulatory
Authorities and other Third Parties.
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14.6 SURVIVAL OF OBLIGATIONS. No termination of this Agreement shall
eliminate any rights and obligations accrued prior to such termination. Promptly
following any termination of this Agreement under Sections 14.3, 14.4 or 14.5,
each party shall return all written materials containing Confidential
Information, except one copy that may be retained for record keeping purposes
only. The provisions of Articles 12, 13, 15 and 16 and Sections 9.4, 11.4, 14.6,
14.7(b), 14.7(c) (under the terms set forth therein) and 14.10 of this Agreement
and Paragraphs 5.1(e), (f), and (g), 5.2(e), (f) (i) and (l), 8, 9, and 10.3 of
Exhibit E shall survive any termination of this Agreement; provided, that
neither party shall be liable to the other under Article 13 with respect to
Claims arising out of the other party's activities with respect to DepoCyt
occurring following termination of this Agreement.
14.7 MANUFACTURING LICENSES TO P&U. Upon the occurrence of the following
conditions or events P&U shall have the right to manufacture Vialed Material:
(a) Upon the occurrence of the conditions referred to in Section
8.1 or 8.2 above, DepoTech shall grant P&U a non-exclusive, perpetual (so long
as P&U complies with the terms of this license), sublicensable right and license
to use the DepoTech Technology anywhere in the world solely to manufacture and
have manufactured the quantities of Vialed Material DepoTech does not supply as
provided in such Sections for use and sale in the Territory. P&U shall pay an
amount on its sales of DepoCyt so manufactured by or for it equal to *** of Net
Sales of such DepoCyt.
(b) Upon the expiration, on a country-by-country basis, under
Section 14.1 of the exclusive rights granted hereunder, DepoTech shall grant P&U
non-exclusive, royalty-free, perpetual (so long as P&U complies with the terms
of this license), sublicensable rights under the DepoTech Technology solely to
manufacture and have manufactured DepoCyt and Vialed Material anywhere in the
world for use and sale in the Territory, except to the extent P&U then obtains
Vialed Material or DepoCyt from DepoTech.
(c) Upon the termination of this Agreement by P&U under Section
14.3, DepoTech shall grant P&U an exclusive, royalty-free, perpetual (so long as
P&U complies with the terms of this license), sublicensable right and license
under the DepoTech Technology solely to manufacture and have manufactured
DepoCyt and Vialed Material anywhere in the world for use and sale in the
Territory. In each such case, at the request of P&U, DepoTech shall provide P&U
or its designee with all available information and data comprising any such
technology and shall render reasonable technical assistance to enable P&U or its
designee to manufacture Vialed Material and DepoCyt in a commercial manner, to
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validate its production facility in accordance with all regulatory requirements,
to obtain all process equipment and raw materials not commercially available and
to obtain regulatory approval to sell DepoCyt so manufactured by or for P&U.
Unless arising under paragraph (c) above, P&U shall compensate DepoTech for all
reasonable costs and expenses incurred by DepoTech in providing such information
and data and rendering such technical assistance.
14.8 CHANGE OF CONTROL OF DEPOTECH. In the event that a Third Party
active in the pharmaceutical industry (the "Acquiring Party") shall acquire by
stock purchase, merger or otherwise, directly or indirectly, *** or more of the
outstanding shares entitled to vote for the election of directors of DepoTech,
or substantially all of its assets to which this Agreement relates, P&U shall
have the right, within *** of such acquisition, to *** upon 30 days notice to
the Acquiring Party and to DepoTech, except for the sales reports referred to in
Section 7.3(a) above and as otherwise required by law.
14.9 ACQUISITIONS BY P&U. In the event that P&U shall acquire control of
any Third Party which is a competitor of DepoTech in the development of
alternative drug delivery technologies suitable for use for the indications for
which DepoCyt is approved, P&U agrees ***.
14.10 RDF AND CHIRON RIGHTS.
(a) In the event that the RDF shall, by notice to P&U given
pursuant to the RDF Agreement or otherwise, indicate that DepoTech has breached
an obligation to RDF under the Assignment Agreement or any other agreement with
RDF which relates to the DepoTech Technology licensed to P&U hereunder, P&U may
in its discretion proceed to cure any such breach and shall be entitled to
immediately offset the cost of any such cure against amounts due to DepoTech
hereunder, or to otherwise recover such amounts from DepoTech by process of law.
(b) In the event the (i) DepoTech's rights to the Assigned
Proprietary Technologies (as that term is defined in the Assignment Agreement)
are reconveyed to the RDF or its assigns pursuant to the terms of the Assignment
Agreement, or (ii) DepoTech's rights under the Assignment Agreement are
converted into a non-exclusive license to the Assigned Proprietary Technologies,
then P&U shall have the right, in its sole discretion, to enter into such
agreement or agreements with RDF as P&U deems necessary or desirable to secure
an exclusive license to the Assigned Proprietary Technologies within the
territories and for the purposes contemplated by this Agreement, and to
immediately offset any amounts that may be payable to RDF under
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such agreement or agreements against amounts due to DepoTech hereunder, or to
otherwise recover such amounts from DepoTech by process of law.
(c) In respect to DepoTech's agreement with Chiron concerning the
termination of Chiron's rights to sell DepoCyt in the Territory, P&U shall have
the right, similar to that provided in paragraph (a) above, to cure any breach
by DepoTech of its obligation to Chiron and offset the cost of such cure; and
P&U shall have the right, similar to that provided in paragraph (b) above, to
enter into an agreement directly with Chiron in the event such rights to DepoCyt
revert to Chiron.
ARTICLE 15
ALTERNATIVE DISPUTE RESOLUTION
15.1 EXECUTIVE MEDIATION. The parties recognize that a bona fide dispute
as to certain matters may from time to time arise during the term of this
Agreement which relate to either party's rights or obligations hereunder. In the
event of the occurrence of such a dispute, either party may, by written notice
to the other, have such dispute referred to their respective officer designated
below or their successors, for attempted resolution by good faith negotiations
within sixty (60) days after such notice is received. Said designated officers
are as follows:
For DepoTech - Chief Executive Officer
For P&U - Managing Director
In the event the designated officers are not able to resolve such dispute
within such thirty (30) day period, any party may invoke the provisions below.
15.2 INITIATION OF ADR.
(a) Any dispute arising out of or relating to this Agreement,
including any question regarding its existence, validity or termination, which
is not resolved under the procedure set forth in Section 15.1 above shall be
referred to and finally resolved by arbitration in London, England under the
Rules of the London Court of International Arbitration ("LCIA") by three (3)
arbitrators appointed in accordance with said Rules (i.e., two party-appointed
arbitrators shall select the third arbitrator). The decision reached by such
arbitrators in any such proceeding shall be final and binding upon the parties
thereto. The parties shall, however, in addition to the rights provided in
Section 12.3, remain free to apply to any competent judicial authority for
interim or conservatory measures, even after the transmittal of the file to the
aforesaid arbitrators and even if there are no exceptional circumstances. The
arbitration proceedings shall be conducted in the English language.
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(b) Whenever a party shall decide to institute arbitration
proceedings, it shall give sixty (60) days' prior written notice to that effect
to the other party.
(c) The arbitration tribunal shall determine the proportion in
which the parties shall pay the costs and fees of the arbitration. Each party
shall pay its own costs (including, without limitation, attorneys' fees) and
expenses in connection with such arbitration.
(d) The arbitration proceedings shall be confidential and the
tribunal shall issue appropriate protective orders to safeguard each party's
Confidential Information. Except as required by law, no party shall make (or
instruct the tribunal to make) any public announcement with respect to the
proceedings or decision of the neutral without the prior written consent of each
other party. The existence of any dispute submitted to arbitration, and the
award of the tribunal, shall be kept in confidence by the parties and the
neutral, except as required in connection with the enforcement of such award or
as otherwise required by applicable law.
(e) Any judgment upon the award rendered by the tribunal may be
entered in any court having jurisdiction thereof.
ARTICLE 16
MISCELLANEOUS
16.1 FORCE MAJEURE. Each party shall be excused for any failure or delay
in performing any of its obligations under this Agreement (except payment
obligations), if such failure or delay is caused by Force Majeure. For purposes
of this Agreement, "Force Majeure" shall mean any act of God, accident,
explosion, fire, storm, earthquake, flood, drought, riot, embargo, civil
commotion, war, act of war, strike or other labor difficulty or any other
similar or dissimilar circumstances or event beyond the reasonable control of
the party relying upon such circumstance or event.
16.2 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR ITS
AFFILIATES BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE,
FAILURE TO WARN OR FAILURE TO TEST), STRICT LIABILITY OR OTHERWISE, including,
but not limited to, loss of profits or revenue, except to the extent such
damages are claimed by third parties and for which either party is required to
indemnify the other party under Section 11.4 or Article 13.
36
<PAGE> 40
16.3 RELATIONSHIP OF THE PARTIES. The parties agree that each is acting
as an independent contractor with respect to the other and nothing contained in
this Agreement is intended, or is to be construed, to constitute P&U and
DepoTech as partners or joint venturers or DepoTech or P&U as an agent of the
other. Neither party hereto shall have any express or implied right or authority
to assume or create any obligations on behalf of or in the name of the other
party or to bind the other party to any contract, agreement or undertaking.
16.4 NOTICES. Any notice or other communication hereunder shall be in
writing and shall be deemed given when so delivered in person, by overnight
courier (with receipt confirmed) or by facsimile transmission (with receipt
confirmed by telephone or by automatic transmission report) as follows (or to
such other address as may be specified in writing to the other party hereto):
DepoTech Corporation
10450 Science Center Drive
San Diego, CA 92121
Attention: President
Facsimile: (619) 623-0376
Copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: Faye H. Russell, Esq.
Facsimile: (619) 234-3848
Pharmacia & Upjohn S.p.A.
Via Robert Koch, 1.2
20152 Milano, Italy
Attention: Managing Director
Facsimile: +39 2 4838 2033
Copy to:
Wiggin & Dana
301 Tresser Blvd.
Stamford, CT 06901
Attention: James F. Farrington, Jr.
Facsimile: (203) 363-7676
16.5 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, P&U, DepoTech, and their
respective successors and
37
<PAGE> 41
assigns; provided, that neither P&U nor DepoTech may transfer or assign any of
its rights and obligations hereunder without the prior written consent of the
other, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, either party may transfer or assign any of its rights and obligations
hereunder to an Affiliate or a person that acquires all or substantially all of
the assets of such party to which this Agreement relates or pursuant to a merger
or consolidation. Each party shall notify the other within thirty (30) days
prior to any such transfer, assignment, merger or consolidation. Any purported
assignment in contravention of this Section 16.5 shall, at the option of the
nonassigning party, be null and void and of no effect.
16.6 AMENDMENTS AND WAIVERS. No amendment, modification, waiver,
termination or discharge of any provision of this Agreement, nor consent to any
departure by P&U or DepoTech therefrom, shall in any event be effective, unless
the same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and
signed by the party against whom enforcement of such amendment is sought, and
each amendment, modification, waiver, termination or discharge shall be
effective only in the specific instance and for the specific purpose for which
given. No provision of this Agreement shall be varied, contradicted or explained
by any oral agreement, course of dealing or performance or any other matter not
set forth in an agreement in writing and signed by the party against whom
enforcement of such variance, contradiction or explanation is sought.
16.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (USA), without regard to its
conflict of laws rules (and without limiting the foregoing, the United Nations
Convention On Contracts for International Sale of Goods [1980] shall not govern
this Agreement).
16.8 ATTORNEYS' FEES. Each party shall bear its own legal fees incurred
in connection with the transactions contemplated hereby.
16.9 SEVERABILITY. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the
fullest extent permitted by law, all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intentions of the parties hereto as nearly as may be
possible; provided, that nothing herein shall be construed so as to defeat the
overall intention
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<PAGE> 42
of the parties.
16.10 USE OF NAMES. Neither party shall use the name, trade name or
trademark of the other party in connection with this Agreement without the
express prior written consent of the other party, and nothing herein shall be
deemed to require any party to use any name or mark of the other party in
connection with commercialization of DepoCyt hereunder, except as set forth in
this Agreement.
16.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, and all of which counterparts,
taken together, shall constitute one and the same instrument.
16.12 ENTIRE AGREEMENT. This Agreement, together with all exhibits and
schedules attached hereto and all documents referred to herein, contains the
entire agreement and understanding of the parties hereto, and supersedes any
prior agreements or understandings between the parties with respect to the
subject matter hereof including without limitation the letter of intent between
the parties dated February 19, 1997.
16.13 EXPORT CONTROL. P&U agrees not to export, or allow the export or
reexport of any DepoCyt outside the Territory. In addition, P&U agrees to comply
with all export laws and regulations governing the import or export of DepoCyt
within the Territory.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
39
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as an instrument under seal and delivered as of the date first
above written.
DEPOTECH CORPORATION
/s/ Edward L. Erickson
-----------------------------------------
By: Edward L. Erickson
President and Chief Executive Officer
PHARMACIA & UPJOHN S.P.A.
/s/ Lamberto Andreotti
---------------------------------
By: Lamberto Andreotti
Managing Director
40
<PAGE> 44
EXHIBIT A
CLINICAL PLAN
SEE ATTACHED 2 PAGES
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
41
<PAGE> 45
EXHIBIT A
CLINICAL PLAN
EUROPE
***
JAPAN
***
PHASE V
***
<PAGE> 46
DEPOTECH CORPORATION
PU COST PROJECTION
DEPOCYT
(IN 000'S)
<TABLE>
<CAPTION>
JAPAN TOTAL EUROPE TOTAL
------------------------------ ------------------------------
1997 1998 1999 JAPAN 1997 1998 1999 EUROPE
------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLINICAL COSTS
CRO Payments *** *** *** *** *** *** *** ***
Toxicology Study *** *** *** *** *** *** *** ***
Other *** *** *** *** *** *** *** ***
------------------------------ ---------- ------------------------------ ----------
Total
------------------------------ ---------- ------------------------------ ----------
REGULATORY SUPPORT
Labor & Travel *** *** *** *** *** *** *** ***
Regulatory Consulting *** *** *** *** *** *** *** ***
------------------------------ ---------- ------------------------------ ----------
Total
------------------------------ ---------- ------------------------------ ----------
MANUFACTURING *** *** *** *** *** *** *** ***
REGULATORY FEES *** *** *** *** *** *** *** ***
OVERHEAD *** *** *** *** *** *** *** ***
------------------------------ ---------- ------------------------------ ----------
TOTAL DEPOCYT
============================== ========== ============================== ==========
</TABLE>
<TABLE>
<CAPTION>
CANADA TOTAL TOTAL
-------------------------------
1997 1998 1999 CANADA EX-U.S.
------- ----- ------ ------- --------
<S> <C> <C> <C> <C> <C>
CLINICAL COSTS
CRO Payments *** *** *** *** ***
Toxicology Study *** *** *** *** ***
Other *** *** *** *** ***
------------------------------- -------------------------
Total
------------------------------- -------------------------
REGULATORY SUPPORT
Labor & Travel *** *** *** *** ***
Regulatory Consulting *** *** *** *** ***
------------------------------- -------------------------
Total
------------------------------- -------------------------
MANUFACTURING *** *** *** *** ***
REGULATORY FEES *** *** *** *** ***
OVERHEAD *** *** *** *** ***
------------------------------- -------------------------
TOTAL DEPOCYT
=============================== =========================
</TABLE>
<PAGE> 47
EXHIBIT B
DEPOTECH PATENT RIGHTS
SEE THE ATTACHED FOUR PAGES
All Patents marked with an asterisk are subject to the terms of the
Assignment Agreement with RDF.
42
<PAGE> 48
EXHIBIT B
DEPOTECH PATENT RIGHTS
All Patent marked with an asterisk (*) are subject to the terms of the
Assignment Agreement with RDF.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
DEPOTECH PATENTS AND APPLICATIONS COVERING DepoCyt(TM)
- -----------------------------------------------------------------------------------------------------------------------------
Patent Application Title/Claims Patent Number Date of Country Status Expiration Date
Issuance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*"Multivesicular Liposomes Having A Biologically Expected USA Notice of Expected
Active Substance Encapsulated therein in the Sept. 1997 Allowance Sept. 2011
presence of A Hydrochloride" - 43 Process Claims June 1997
- -----------------------------------------------------------------------------------------------------------------------------
*"Multivesicular Liposomes Having a Biologically Expected USA Notice of Expected
Active Substance Encapsulated Therein in the Sept. 1997 Allowance Sept. 2011
presence of A Hydrochloride" -7 Composition June 1997
claims and 1 Method of Treatment Claim
- -----------------------------------------------------------------------------------------------------------------------------
*"Multivesicular Liposomes Having A Biologically EPO Published
Active Substance Encapsulated Therein in the 8/31/88
presence of A Hydrochloride" - 22 Process Claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 04/07/93 Austria Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 602190 02/23/88 Australia Issued 2/23/2008
23 process claims, 5 method claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 04/07/93 Belgium Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 1323568 10/26/93 Canada Issued 10/26/2010
23 process claims, 5 method claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 04/07/93 Switzerland Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
DEPOTECH PATENTS AND APPLICATIONS COVERING DepoCyt(TM)
- -----------------------------------------------------------------------------------------------------------------------------
Patent Application Title/Claims Patent Number Date of Country Status Expiration Date
Issuance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
* " 0280503 04/07/93 Germany Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 172057 10/16/97 Denmark Granted 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 04/07/93 EPC Granted 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 04/07/93 Spain Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
*"Multivesicular Liposomes Having A Biologically 95439 02/12/96 Finland Issued 2/23/2008
Active Substance Encapsulated Therein in the
presence of A Hydrochloride" - 22 Process Claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 France Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 Great Britain Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 Greece Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 62221 1/11/95 Ireland Issued 2/23/2008
23 process claims, 1 method
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
DEPOTECH PATENTS AND APPLICATIONS COVERING DepoCyt(TM)
- -----------------------------------------------------------------------------------------------------------------------------
Patent Application Title/Claims Patent Number Date of Country Status Expiration Date
Issuance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*"Multivesicular Liposomes Having a Biologically 85509 6/30/92 Israel Issued 2/23/2008
Active Substance Encapsulated Therein in the
presence of A Hydrochloride" - 22 Process and 3
Compositions Claims, 2 method claims"
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 Italy Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " Japan Pending
22 process claims, 5 method claims
- -----------------------------------------------------------------------------------------------------------------------------
* " South Korea Allowed
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 Luxembourg Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 Netherlands Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 174087 3/16/94 Norway Issued 2/22/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 223599 1/25/91 New Zealand Issued 2/22/2008
28 process claims, 6 method claims (from spec)
- -----------------------------------------------------------------------------------------------------------------------------
* " 86805 5/29/92 Portugal Issued 2/22/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 0280503 4/07/93 Sweden Issued 2/23/2008
22 process claims
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
DEPOTECH PATENTS AND APPLICATIONS COVERING DepoCyt(TM)
- -----------------------------------------------------------------------------------------------------------------------------
Patent Application Title/Claims Patent Number Date of Country Status Expiration Date
Issuance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*"Multivesicular Liposomes Having a Biologically 39083 05/01/90 Taiwan Issued 2/23/2008
Active Substance Encapsulated Therein in the
presence of A Hydrochloride" - 22 Process Claims
- -----------------------------------------------------------------------------------------------------------------------------
* " 88/1241 10/26/88 South Africa Issued 2/23/2008
22 process claims, 5 method claims
- -----------------------------------------------------------------------------------------------------------------------------
"Method for treating Neurologic Disorders" - 4 US 5,455,044 10/03/95 USA Issued 10/03/2012
Method Claims
- -----------------------------------------------------------------------------------------------------------------------------
"Method for treating Neurologic Disorders" - 5 US 5,576,018 11/19/96 USA Issued 11/19/2013
Method Claims
- -----------------------------------------------------------------------------------------------------------------------------
"Method for treating Neurologic Disorders" - 47 Canada Pending
Method Claims
- -----------------------------------------------------------------------------------------------------------------------------
" Japan Pending
- -----------------------------------------------------------------------------------------------------------------------------
DepoCyt "Species" patent - narrow species To be filed 2Q97 in the US,
patent to cover DepoCyt formulation and PCT, and other countries
oncology uses for this formulation
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 52
EXHIBIT C
SPECIFICATIONS FOR VIALED MATERIAL AND DEPOCYT
SEE THE ATTACHED 2 PAGES
43
<PAGE> 53
EXHIBIT C
SPECIFICATIONS FOR VIALED MATERIAL AND DEPOCYT
(AS OF 11/22/97 PRE-NDA SUBMISSION)
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
44
<PAGE> 54
EXHIBIT C
TENTATIVE MODIFICATIONS TO DEPOCYT SPECIFICATIONS TO COMPLY WITH EU
REQUIREMENTS
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
45
<PAGE> 55
EXHIBIT D
ANNUAL SALES FORECAST
Set forth below is P&U's non-binding forecast of its estimated sales of DepoCyt
for the *** following the First Commercial Sale in the ***. Such estimated
requirements are based on the following assumptions:
1. ***
2. The Initial Indication is ***.
3. Sales price is *** per vial, and ***.
4. Approved labeling contains ***.
SALES IN ***
Country Year 1 Year 2 Year 3
------- ------ ------ ------
*** *** *** ***
TOTAL *** *** ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
46
<PAGE> 56
EXHIBIT E
ADDITIONAL TERMS AND CONDITIONS OF SALE
1. QUANTITY; FORECASTS; ORDER PROCEDURE.
1.1 P&U agrees to purchase the Vialed Material in production batch
quantities (approximately *** vials) or multiples thereof.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
47
<PAGE> 57
1.2 Within 30 days after submission of the first NDA in the EU, P&U
shall deliver to DepoTech a non-binding, good-faith *** forecast of purchases of
Vialed Material (such forecast shall be provided within 60 days from the date
hereof in respect to Canada). Beginning on the first day of the *** which is ***
immediately prior to the *** in which the First Commercial Sale of DepoCyt in
the Territory is projected to occur, P&U shall provide to DepoTech a rolling
forecast of purchases of Vialed Material for the following ***, including
desired delivery dates. Thereafter, P&U shall provide such rolling forecast to
DepoTech every *** during the term of this Agreement. The first *** of each
rolling forecast shall be a firm order by P&U, against which DepoTech is
authorized to institute production and P&U is authorized to give shipping
orders. The total amount of Vialed Material ordered by P&U for delivery in the
first *** of such forecast shall be not less than *** (the "Minimum Order
Amount") or more than *** (the "Maximum Order Amount") of the most recent
forecast for Vialed Material for such ***. If P&U's requirement hereunder for
any quarter exceeds the Maximum Order Amount, DepoTech and P&U will discuss in
good faith the additional amount which DepoTech will be able to supply
consistent with its other obligations and P&U will adjust its order accordingly.
P&U shall indemnify DepoTech and reimburse it promptly upon request for all
reasonable out-of-pocket costs and expenses, including the cost of carrying
increased inventory, to the extent caused by any P&U failure to order at least
the Minimum Order Amount, and DepoTech shall act reasonably to mitigate any such
costs and expenses. To the extent DepoTech fails to deliver Vialed Material in
the quantities required under this Paragraph 1.2 or within the time period
required under Paragraph 2.1 below, the Supply Price for such Vialed Material
shall be *** of the amount otherwise due. P&U shall exercise reasonable efforts
to level load its production requirements in recognition of DepoTech's finite
capacity and the lead times necessary for production.
1.3 Vialed Material shall be ordered on P&U or its designees' standard
purchase order forms. The only function of the purchase order is to set forth
the quantities of Vialed Material desired by the desired delivery dates for the
quantity of Vialed Material ordered and shipping destination of Vialed Material.
Within five (5) business days, DepoTech shall either acknowledge receipt of the
purchase order on DepoTech's standard acknowledgment form, or contact P&U about
DepoTech's ability to supply quantities of Vialed Material in excess of the
forecast, and/or alternative ship dates which shall be agreed to in writing
using the purchase order form and acknowledgment form. Except as otherwise set
forth above, the only function of DepoTech's acknowledgment form is to
acknowledge receipt of the purchase order. All other terms and conditions of
either the purchase orders or the acknowledgment forms are void and of no
effect, and the terms and conditions of this Agreement shall control.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
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<PAGE> 58
1.4 P&U's forecasts and purchase orders shall reflect its good faith
expectations of customer demand and P&U shall act in a commercially reasonable
manner to schedule orders to avoid creating production capacity problems for
DepoTech.
2. DELIVERY.
2.1 Vialed Material shall be delivered to P&U DDP (INCOTERMS 1990) P&U's
warehouses in the Territory within five (5) business days of the applicable
delivery dates set forth in the purchase orders. All customs, duties, costs,
taxes, insurance premiums and other expenses relating to such transportation and
delivery shall be at DepoTech's expense. All Vialed Material shall be delivered
with a remaining shelf life of at least ***. If technically feasible and
approved by the appropriate Regulatory Authority, the shelf life shall be
increased to *** (including *** of inventory held by DepoTech under the
Agreement) after completion of required stability tests.
2.2 DepoTech shall package Vialed Material for delivery to P&U according
to the Specifications. DepoTech shall include with each shipment copies of all
applicable quality and testing records, which shall be in a form acceptable for
the appropriate Regulatory Authorities.
3. SPECIFICATIONS. Either of the parties shall have the right to request
changes to the Specifications. Such request shall be made in writing. No change
shall be implemented by either party, whether requested by a party or by a
Regulatory Authority, until the parties have mutually agreed in writing to such
change and the implementation date of such change, subject to the receipt of any
necessary approvals by a Regulatory Authority. The reasonable costs incurred to
implement such changes to the Specifications shall be borne as follows: (a) in
the event the change to the Specifications is requested by *** and requires a
change in the NDA, *** shall bear all such costs; (b) in the event the change to
the Specifications is required by *** shall bear all such costs; and (c) in the
event the change to the Specifications is otherwise required by ***.
Notwithstanding the foregoing, DepoTech shall be solely responsible for any
changes to the Specifications required to obtain approvals of NDAs to sell
DepoCyt in the EU, Canada and Japan.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.
49
<PAGE> 59
4. NONCONFORMING VIALED MATERIAL.
4.1 P&U may reject any shipment of Vialed Material which is not
conforming with the Specifications. In order to reject a shipment, P&U must (i)
give notice to DepoTech of P&U's intent to reject the shipment within sixty (60)
days of receipt together with a detailed written indication of the reasons for
such possible rejection, and (ii) as promptly as reasonably possible thereafter
but in any event within an additional thirty (30) days, provide DepoTech with
notice of final rejection and the full basis therefor. After notice of intention
to reject is given, P&U shall cooperate with DepoTech in determining whether
rejection is necessary or justified. If no such notice of intent to reject is
timely received, P&U shall be deemed to have accepted such delivery of Vialed
Material. DepoTech shall notify P&U as promptly as reasonably possible whether
it accepts P&U's basis for any rejection. DepoTech shall promptly replace all
Vialed Material properly rejected, at its expense.
4.2 Unless DepoTech requests the return to it of a rejected batch within
sixty (60) days of receipt of P&U's notice of rejection, P&U shall destroy such
batch promptly, at DepoTech's expense, and provide DepoTech with certification
of such destruction. P&U shall, upon receipt of DepoTech's request for return,
promptly dispatch said batch to DepoTech, at DepoTech's cost.
5. DEPOTECH AND P&U DUTIES.
5.1 P&U shall:
(a) order and receive labeling and other packaging supplies from
vendors;
(b) package and label Vialed Material for sale to Third Parties in
accordance with the Specifications;
(c) perform identity testing of Vialed Material and final release
testing of DepoCyt in accordance with all applicable regulatory requirements and
agreed testing procedures, including the use of a "qualified person" (as
required by EU Directive 75/319/EEC; Article 21 or any successor regulation);
(d) ascertain and comply with all applicable laws and regulations
and standards of industry or professional conduct in connection with the use,
distribution or promotion of DepoCyt, including without limitation, those
applicable to product claims, labeling, approvals, registrations and
notifications; and
(e) keep for five (5) years after termination of this Agreement
(or such other period of time required by the Regulatory Authority in each
country in the Territory) records of all DepoCyt sales and customers sufficient
to adequately administer a recall of DepoCyt and to fully cooperate (at P&U's
expense) in any decision by the parties to recall, retrieve and/or replace
DepoCyt;
(f) immediately notify DepoTech of any ADEs or any other
unexpected results or any actual or potential government action relevant to
DepoCyt and, if and to the extent requested by DepoTech in writing, to suspend
distribution of DepoCyt;
(g) retain under proper storage conditions such samples of DepoCyt
as are required to comply with the general retention requirements as specified
in cGMPs; and
(h) participate and cooperate with DepoTech representatives who
may, upon reasonable prior notice and in a reasonable manner, audit P&U
facilities and records, and promptly
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<PAGE> 60
take reasonable corrective action as may be required by DepoTech to comply with
cGMP requirements, and when requested by DepoTech, describe in writing
appropriate corrective action planned or taken.
5.2 DepoTech shall:
(a) be responsible for supplying Vialed Material;
(b) promptly notify P&U of any problems or unusual production
situations which have the potential to adversely affect production of Vialed
Material, or its timely delivery to P&U or its designee;
(c) perform quality assurance final product release of the Vialed
Material in accordance with all applicable regulatory requirements and agreed
testing procedures;
(d) provide a Certificate of Analysis to P&U;
(e) immediately notify P&U of any ADEs or any other unexpected
results or any actual or potential government action relevant to Vialed Material
or DepoCyt and, if and to the extent requested by P&U in writing, to suspend its
manufacture of Vialed Material;
(f) keep for five (5) years after termination of this Agreement
(or such other period of time required by the Regulatory Authority in each
country in the Territory) records of all DepoCyt sales and customers sufficient
to adequately administer a recall of DepoCyt and to fully cooperate (at
DepoTech's expense) in any decision by the parties to recall, retrieve and/or
replace DepoCyt;
(g) ascertain and comply with all applicable laws and regulations
and standards of industry or professional conduct in connection with the
manufacture of Vialed Material and the conduct of the Clinical Trials, including
without limitation, those applicable to approvals, registrations and
notifications;
(h) assist P&U in complying with all applicable laws and
regulations by providing all relevant Know How in its possession, including
material safety data sheets and other information about chemical and physical
characteristics of DepoCyt and the Vialed Material;
(i) retain under proper storage conditions such samples of Vialed
Material as are required to comply with the general retention requirements as
specified in GMPs;
(j) perform stability testing as described in an approved
stability protocol and report any out of specification test results to P&U
within three (3) business days and report annually to P&U all stability test
results;
(k) participate and cooperate with P&U representatives who may,
upon reasonable prior notice and in a reasonable manner audit DepoTech
facilities and records and promptly take reasonable corrective action as may be
required by P&U to comply with cGMP requirements and when requested by P&U
describe in writing appropriate corrective action planned or taken;
(l) immediately notify P&U of any incident or data of which it
becomes aware that could result in a recall; and
(m) Assure that penicillin or penicillin containing products will
not be received, stored, handled, dispensed, manufactured or packaged in the
same facility(ies) or in facilities that share a common Heating, Ventilation and
Air Conditioning systems or utilize the same equipment in the manufacture or
handling of the components, raw materials or
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packaging as Vialed Material.
6. TAXES. DepoTech shall pay any and all taxes levied on account of the
Supply Price or other payments it receives under this Agreement. If laws or
regulations require that taxes be withheld, P&U shall (a) deduct these taxes
from the remittable amount, (b) pay the taxes to the proper taxing authority,
and (c) send proof of payment to DepoTech within forty-five (45) days following
that payment. P&U shall cooperate with DepoTech to claim exemption from such
withholdings under any double taxation treaty or similar agreement in force from
time to time and shall endeavor to secure any such exemptions before payments
are made hereunder.
7. BLOCKED CURRENCY. If at any time legal restrictions in any country in the
Territory prevent the prompt remittance of part or all of any amounts owing to
DepoTech hereunder, then P&U shall, at DepoTech's election, either (a) have no
obligation to pay such amounts to DepoTech for the period such restrictions
remain in place, and shall thereafter pay such amounts to DepoTech, or (b) pay
such amounts in such country in local currency by deposit in a local bank
designated by DepoTech. P&U shall, during the period that its obligation to make
payments directly to DepoTech is suspended pursuant to this Section, exert
commercially reasonable efforts to cause such amounts to be remitted to
DepoTech.
8. COMPLAINTS. Each party shall maintain a record of all complaints it
receives with respect to DepoCyt. Each party shall notify the other of any
complaint received by it in sufficient detail and within five (5) business days
after the event, and in any event in sufficient time to allow the responsible
party to comply with any and all regulatory requirements imposed upon it in any
country in the Territory.
9. DATA SHARING AND ADVERSE DRUG EVENTS. The parties recognize that the
holder of an NDA may be required to submit information and file reports to
various governmental agencies on DepoCyt. Information must be submitted at the
time of initial filing for investigational use in humans and at the time of a
request for market approval of a new drug. In addition, supplemental information
must be provided on compounds at periodic intervals and adverse drug experiences
("ADE") must be reported at more frequent intervals depending on the severity of
the experience. Consequently, each party agrees to follow P&U's standard
operating procedures for the reporting of ADEs and to:
(a) provide to the other for initial and/or periodic submission to
a Regulatory Authority significant information on DepoCyt from preclinical
laboratory, animal toxicology and pharmacology studies, as well as adverse drug
experience reports from clinical trials and commercial experiences with DepoCyt;
52
<PAGE> 62
(b) report to the other within three (3) calendar days of the
initial receipt of a report of any fatal or life-threatening adverse reaction
with DepoCyt, or sooner if required for either party to comply with regulatory
requirements; and
(c) report to the other within five (5) business days of the
initial receipt of a report of any adverse reaction with DepoCyt that is serious
and unexpected or sooner if required for either party to comply with regulatory
requirements; and
(d) send to the other a list with any other serious (expected)
adverse reaction with DepoCyt monthly or sooner if required for either party to
comply with regulatory requirements. "Serious adverse reaction" means any
drug-related event that: results in death; is life-threatening (i.e. results in
an immediate risk of death); requires inpatient hospitalization or prolongation
of existing hospitalization (for treating the event); results in persistent or
significant disability/incapacity; is a congenital anomaly/birth defect or a new
cancer; is an inadvertent medication overdose (irrespective of whether it gives
signs/symptoms or not). In addition, any other drug-related event the
Investigator judges to be serious can also be considered a serious adverse
reaction.
An unexpected adverse reaction is one not identified in nature, specificity,
severity or frequency in the current investigator brochure or the U.S. labeling
for DepoCyt. Each party also agrees that if it contracts with a Third Party for
research, development or marketing to be performed by such Third Party on
DepoCyt, that party agrees to require such Third Party to report to the
contracting party the information set forth in subparagraphs (a), (b), (c) or
(d) above. Furthermore, DepoTech will facilitate the coordination the reporting
of such information directly between P&U and Chiron.
10. WARRANTIES.
10.1 DEPOTECH'S WARRANTIES. DepoTech warrants to P&U that DepoCyt, upon
receipt of the Certificate of Analysis, (i) will conform in all respects to the
Specifications, as then in effect, and the Act, (ii) will not be adulterated,
misbranded or mislabeled within the meaning of the Act; and (iii) was
manufactured in accordance with all applicable GMP. Should any failure to
conform with such warranties appear prior to the expiration date of any Vialed
Material (whether discovered by P&U, its Affiliates, or their distributors or
customers), and if given prompt written notice by P&U, DepoTech shall correct
such nonconformity, at its option, by (a) replacement of the nonconforming
Vialed Material, or (b) refund of the Supply Price.
10.2 P&U'S WARRANTIES. P&U warrants to DepoTech that it will not
adulterate, misbrand or mislabel DepoCyt within the meaning of the Act.
10.3 LIMITATION OF LIABILITY. A PARTY'S SOLE AND EXCLUSIVE REMEDY FOR ANY
BREACH OF THE FOREGOING WARRANTIES BY THE OTHER PARTY SHALL BE ITS RIGHTS SET
FORTH ABOVE AND ITS RIGHTS UNDER ARTICLE 13 OF THE AGREEMENT. EXCEPT FOR THE
FOREGOING WARRANTIES, NEITHER PARTY WARRANTS THE MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OF DEPOCYT OR THE PERFORMANCE OR NONINFRINGEMENT THEREOF,
MAKES ANY WARRANTY, EXPRESS OR IMPLIED, WITH
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RESPECT TO DEPOCYT, SPECIFICATIONS, SUPPORT, SERVICE OR ANYTHING ELSE AND MAKES
ANY WARRANTY TO P&U'S CUSTOMERS OR AGENTS. DEPOTECH HAS NOT AUTHORIZED ANYONE TO
MAKE ANY REPRESENTATION OR WARRANTY OTHER THAN AS PROVIDED ABOVE. THE FOREGOING
LIMITATIONS OF WARRANTIES SHALL NOT IN ANY WAY LIMIT A PARTY'S RIGHTS UNDER
ARTICLE 13 OF THE AGREEMENT.
11. INSPECTION.
11.1 Prior to commencement of manufacture and/or packaging of DepoCyt,
and at least once during each year, each party shall permit the other party or
its designated representative to review such party's licenses and permits
relating to the facilities and operations utilized by such party in the
manufacture and/or packaging of DepoCyt. Such review shall be conducted during
regular business hours, on mutually agreeable dates.
11.2 In the event that either party's facilities used for the production
of Vialed Material or DepoCyt are the subject of an inspection by any duly
authorized agency of the federal, state, local or any foreign government, such
party shall thereafter notify the other party immediately (by telephone and, if
possible, in writing) upon learning of such inspection, and shall supply the
other party with copies of any correspondence or portions of correspondence
which relate to Vialed Material or DepoCyt. Such other party may send
representatives to the manufacturing facility and may participate fully in any
portion of such inspection relating to Vialed Material or DepoCyt. In the event
either party receives (or has received in the past 12 months) any regulatory
letter or written comments from any Regulatory Agency in connection with its
manufacture of Vialed Material, including but not limited to receipt of a Form
483 (Inspectional Observations) or a Warning Letter, it shall provide the other
party with a copy of each such communication and the proposed response.
11.3 To the extent applicable to it, each party shall maintain all
manufacturing and analytical records, all records of shipments of Vialed
Material and DepoCyt, and all validation data relating to Vialed Material for
the time periods required by applicable laws and regulations and shall make such
data available to the EMEA (or other Regulatory Authority) upon the other
party's request or if required by law.
12. REGULATORY COMPLIANCE. Each party shall comply in all respects with the
requirements of the Act, all other applicable laws and the Specifications, then
in effect.
13. ENVIRONMENTAL. Each party shall identify to the other party all haulers
and disposal sites utilized for disposal of Vialed Material or DepoCyt and such
party shall permit, or cause those with whom such party contracts for the
disposal of waste to permit the other party or its designated representative to
visit all disposal sites for Vialed Material or DepoCyt.
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<PAGE> 1
EXHIBIT 10.2
[CONFORMED COPY]
STOCK PURCHASE AGREEMENT
by and between
DEPOTECH CORPORATION,
and
ROSS FINANCIAL CORPORATION
Dated as of September 10, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. PURCHASE AND SALE.......................................................................1
1.1. Purchase and Sale......................................................1
1.2. Purchase Price.........................................................1
1.3. Closing................................................................2
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................3
2.1. Due Organization, etc..................................................3
2.2. Compliance with Law....................................................3
2.3. Authorization; Execution and Delivery of Agreement.....................4
2.4. No Conflict; No Consent................................................4
2.5. Capital Stock..........................................................5
2.6. SEC Reports............................................................6
2.7. Financial Statements...................................................6
2.8. No Brokers.............................................................7
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................................7
3.1. Due Organization, etc..................................................7
3.2. Authorization; Execution and Delivery of Agreement.....................7
3.3. No Conflict; No Consent................................................8
3.4. No Brokers.............................................................8
3.5. Investment Purposes....................................................8
IV. COVENANTS OF THE COMPANY..............................................................10
4.1. Preemptive Rights.....................................................10
4.2. Exchange of Stock Certificates........................................11
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates...............11
V. COVENANTS OF THE PURCHASER AND THE COMPANY.............................................12
5.1. Public Disclosure and Confidentiality.................................12
5.2. Restrictions on Transfer..............................................12
5.3. Efforts to Consummate; Further Actions................................13
VI. REGISTRATION RIGHTS...................................................................13
6.1. "Piggyback" Registration..............................................13
6.2. Demand Registration...................................................15
6.3. General Provisions....................................................15
6.4. Information, Documents, Etc...........................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.5. Expenses..............................................................17
6.6. Cooperation...........................................................18
6.7. Action to Suspend Effectiveness; Supplement to Registration
Statement...........................................................19
6.8. Indemnification.......................................................21
VII. INDEMNIFICATION......................................................................27
7.1. Indemnification by the Company........................................27
7.2. Indemnification by the Purchaser......................................27
VIII. TERMINATION........................................................................27
8.1 Termination............................................................27
IX. GENERAL PROVISIONS....................................................................29
9.1. Survival of Representations, Warranties and Agreements................29
9.2. Notices...............................................................29
9.3. General...............................................................30
9.4. Governing Law.........................................................31
9.5. Severability of Provisions............................................31
9.6. Captions..............................................................31
9.7. Expenses..............................................................31
9.8. Equitable Relief......................................................32
9.9. Definitions...........................................................32
</TABLE>
ii
<PAGE> 4
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of September 10,
1997 by and between DEPOTECH CORPORATION, a California corporation (the
"Company"), and ROSS FINANCIAL CORPORATION a Cayman Islands corporation (the
"Purchaser").
WHEREAS, the Purchaser wishes to purchase from the Company, and the
Company wishes to sell to the Purchaser, one million (1,000,000) shares (the
"Shares") of the Company's authorized but unissued common stock, no par value
(the "Common Stock"), at a price of fourteen and 0.625 dollars ($14.625) per
share of Common Stock;
WHEREAS, the Purchaser and the Company are entering into this Agreement
to provide for such purchase and sale and to establish various rights and
obligations in connection therewith;
NOW THEREFORE, in consideration of these premises and for other good and
valuable consideration, the parties hereto hereby agree as follows:
I. PURCHASE AND SALE
1.1. Purchase and Sale. Upon the terms and subject to the conditions
set forth in this Agreement, the Company agrees to issue, sell and deliver to
the Purchaser, and the Purchaser agrees to purchase from the Company, 1,000,000
Shares. The Shares purchased and sold hereunder shall be free and clear of any
liens, security interests, pledges, voting agreements, claims, options and
encumbrances of every kind, character and description whatsoever
("Encumbrances"), except as contemplated by this Agreement.
1.2. Purchase Price. As consideration for the sale of the Shares, at
the Closing (as hereinafter defined) the Purchaser shall pay to the Company in
immediately available funds
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<PAGE> 5
by wire transfer, a purchase price of $14,625,000 to an account designated by
the Company in writing prior to the date hereof.
1.3. Closing. (a) On the terms and subject to the conditions of this
Agreement, the purchase and sale of the Shares pursuant to this Agreement shall
take place at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty
Plaza, New York, New York, 10006 at 10:00 a.m. (New York time) on September 11,
1997 or as soon thereafter as practicable. The consummation of the purchase and
sale transactions described in this Section 1.3 are hereinafter referred to
collectively as the "Closing." The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
(b) Company Closing Deliveries. At the Closing, the Company will
deliver to the Purchaser the following:
(i) a stock certificate or certificates representing the
Shares; and
(ii) a certificate of the Secretary of the Company certifying
as to the adoption and effect of resolutions of the Board
of Directors of the Company (the "Board") authorizing the
execution, delivery and performance of this Agreement.
(c) Purchaser Closing Deliveries. At the Closing, the Purchaser will
deliver to the Company the following:
(i) a certificate of an authorized officer of the Purchaser
certifying as to the adoption and effect of resolutions of
the Purchaser authorizing the execution, delivery and
performance of this Agreement; and
(ii) payment of the purchase price provided by Section 1.2.
2
<PAGE> 6
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Due Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of California,
and it has all requisite corporate or other necessary power and authority to
own, operate and lease its respective properties and assets and to conduct its
respective businesses as now conducted and is qualified to do business in each
state or other jurisdiction where the nature of its properties, assets or
businesses requires such qualification other than where the failure to be so
qualified would not have a material adverse effect on the condition (financial
or otherwise), business, operations, properties, assets or liabilities of the
Company (a "Material Adverse Effect"). The Company has no subsidiaries.
2.2. Compliance with Law. The Company has obtained and maintains in
full force and effect all permits, licenses, consents, approvals, registrations,
memberships, authorizations and qualifications under all federal, state, local
and foreign laws and regulations, and with all Authorities, required for the
conduct by it of its business and the ownership or possession by it of its
properties and assets other than where the failure to obtain or maintain such
permits, licenses, consents, approvals, registrations, memberships,
authorizations or qualifications would not, individually or in the aggregate,
have a Material Adverse Effect. The Company is in compliance with all laws,
regulations, ordinances, orders and decrees (including, without limitation, all
environmental and occupational, health and safety laws) of any federal, state,
local or foreign governmental or regulatory authority (an "Authority")
applicable to the conduct by the Company of its business and to its ownership
and possession of its properties and assets, other than where the failure so to
comply would not, individually or in the aggregate, have a Material Adverse
Effect.
3
<PAGE> 7
2.3. Authorization; Execution and Delivery of Agreement. (a) The
execution and delivery of this Agreement, the issuance and sale of the Shares to
the Purchaser and the consummation of the transactions contemplated hereby (i)
do not require the approval or consent of any stockholders of the Company and
(ii) have been duly authorized by all necessary corporate action on the part of
the Company for all purposes. This Agreement has been duly executed and
delivered by the Company and this Agreement constitutes the legal, valid,
binding and enforceable obligation of the Company, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. The Company has full corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder.
(b) The Shares have been duly authorized by all necessary corporate
action on the part of the Company, and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration therefor set
forth herein, the Shares will be validly issued, fully paid and non-assessable.
The Purchaser will acquire valid and marketable title to the Shares, free and
clear of any Encumbrances except as contemplated by this Agreement.
2.4. No Conflict; No Consent. The execution and delivery of this
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions contemplated hereby do not, and will not,
conflict with, or result in any violation of or default under, or permit the
acceleration of any obligation under, or the creation or imposition of any
Encumbrance on any of the properties or assets of the Company under, (i) any
provision of the articles of incorporation or by-laws or similar constituent
documents of the Company, (ii) any indenture, lease, mortgage, deed of trust,
loan agreement or other agreement or instrument, or
4
<PAGE> 8
any permit, license, registration, membership, authorization or qualification
from any Authority, of the Company or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation of any Authority to which the
Company is a party or by which it is bound, other than, in the case of clause
(ii) above, where such conflict, violation, default, acceleration or Encumbrance
would not, individually or in the aggregate, have a Material Adverse Effect. No
consent, approval, order or authorization of, or registration, declaration,
filing with or notice to, any Authority or third party is required to be made or
obtained by the Company (including, without limitation, under any environmental
or occupational, health and safety laws) in order to execute or deliver this
Agreement, issue and sell the Shares or to consummate the transactions
contemplated hereby, other than as a result of the periodic reporting
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or except where the failure to make or obtain any such consent,
approval, order, authorization, registration, declaration, filing or notice
would not have a Material Adverse Effect.
2.5. Capital Stock. (a) The authorized capital stock of the Company
consists of thirty million (30,000,000) shares of Common Stock, no par value, of
which, as of June 30, 1997, thirteen million one hundred and fifty five
thousand, two hundred and seventy nine (13,155,279) shares were outstanding and
no shares were held in treasury and two million seven hundred and twenty six
thousand, seven hundred and ninety three (2,726,793) shares are reserved for
future issuance pursuant to any option, warrant or other rights agreement,
arrangement or other commitment. All of the issued and outstanding shares of
Common Stock have been validly issued and are fully paid and non-assessable.
(b) (i) Other than this Agreement or as set forth in SEC Reports (as
defined hereinafter), there are not authorized or outstanding any subscriptions,
options, conversion rights,
5
<PAGE> 9
warrants or other agreements, securities or commitments of any nature whatsoever
(whether oral or written and whether firm or conditional) obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, to any
Person any shares of Common Stock or any other shares of the capital stock of
the Company or any securities convertible into or exchangeable for any such
shares, or obligating any such Person to grant, extend or enter into any such
agreement or commitment; and (ii) except as set forth in SEC Reports, there is
no obligation, contingent or otherwise, of the Company to repurchase, redeem or
otherwise acquire any share of capital stock or other equity interests of the
Company.
2.6. SEC Reports. The Company has filed with the Securities and
Exchange Commission (the "Commission") all proxy statements, reports, forms and
other documents required to be filed by it after January 1, 1995 under the
Exchange Act (collectively, the "SEC Reports"). As of their respective dates,
the SEC Reports (i) complied as to form in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
2.7. Financial Statements. (a) The financial statements (including any
related notes) included in the SEC Reports (the "Financial Statements") have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as may be noted
therein) and fairly present the consolidated financial condition, results of
operations and cash flows of the Company as of the dates thereof and for the
periods ended on such dates (in each case subject, as to interim statements, to
changes resulting from year-end adjustments (none of which were or, except as
otherwise disclosed to the
6
<PAGE> 10
Purchaser in writing, will be material in amount or effect) and except as
permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act).
(b) On the date hereof, except as disclosed in the SEC Reports, the
Company has no liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due and whether
or not required to be disclosed in the SEC Reports, other than liabilities that
have been disclosed to the Purchaser in writing, have been incurred in the
ordinary course of business or are not in the aggregate material to the Company.
2.8. No Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
III. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser represents and warrants to the Company that:
3.1. Due Organization, etc. The Purchaser is a corporation duly
organized and validly existing under the laws of the Cayman Islands. The
Purchaser has no direct or indirect subsidiaries.
3.2. Authorization; Execution and Delivery of Agreement. The Purchaser
has all requisite power and authority to execute this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser and this Agreement constitutes the legal, valid,
binding
7
<PAGE> 11
and enforceable obligation of the Purchaser, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
3.3. No Conflict; No Consent. The execution and delivery of this
Agreement, the issuance and sale of the Shares to the Purchaser and the
consummation of the transactions contemplated hereby do not, and will not,
conflict with, or result in any violation of or default under, or permit the
acceleration of any obligation under, or the creation or imposition of any
Encumbrance on any of the properties or assets of the Purchaser under, (i) any
provision of the charter and by-laws or similar constituent documents of the
Purchaser, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or
other agreement or instrument, or any permit, license, registration, membership,
authorization or qualification from any Authority, of the Purchaser or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation of any
Authority to which the Purchaser is a party or by which it is bound, other than,
in the case of clause (ii) above, where such conflict, violation, default,
acceleration or Encumbrance would not, individually or in the aggregate, have a
Purchaser Material Adverse Effect. Other than as a result of the reporting
requirements of the Exchange Act, no consent, approval, order or authorization
of, or registration, declaration, filing with or notice to, any Authority is
required to be made or obtained by the Purchaser in order to execute or deliver
this Agreement or to consummate the transactions contemplated hereby.
3.4. No Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Purchaser.
3.5. Investment Purposes. (a) The Purchaser, by reason of its business
and financial experience, has such knowledge, sophistication and experience in
business and financial
8
<PAGE> 12
matters as to be capable of evaluating the merits and risks of its investment in
the Shares, and is purchasing the Shares hereunder for its own account, for
investment only and not with a view to, or any present intention of, effecting a
distribution of such securities or any part thereof. The Purchaser acknowledges
that the Shares to be purchased hereunder have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or the securities
laws of any state or other jurisdiction and cannot be disposed of unless they
are subsequently registered under the Securities Act and any applicable state
laws or exemption from such registration is available. Furthermore, the
Purchaser acknowledges that the Company shall place upon each certificate
representing the Shares, a legend substantially in the following form:
"The securities represented by this certificate have been issued without
registration or qualification under the Securities Act of 1933, as
amended (the "Securities Act"), or any applicable state securities laws
(the "State Acts"). Such securities may not be sold, assigned,
transferred or otherwise disposed of, beneficially or on the records of
the company, unless the securities represented by this certificate have
been registered or qualified under the Securities Act and the applicable
State Acts or there has been delivered to the company an opinion of
counsel, reasonably satisfactory to the company, to the effect that such
registration and qualification are not required."
(b) The Purchaser is an "accredited investor" as that term is defined
in Rule 501 promulgated under the Securities Act.
(c) The Purchaser or its representative has had the opportunity to
ask questions and to receive answers concerning the financial condition,
operations and prospects of the Company and the terms and conditions of the
Purchaser's investment, as well as the opportunity to obtain any additional
information necessary to verify the accuracy of information furnished in
connection therewith that the Company possesses or can acquire without
unreasonable effort or expense.
9
<PAGE> 13
IV. COVENANTS OF THE COMPANY
The Company covenants and agrees that:
4.1. Preemptive Rights. The Company shall not issue, reissue or
otherwise dispose of any shares of Common Stock or any securities convertible
into, or any rights, warrants or options to acquire, shares of Common Stock,
without affording the Purchaser the preemptive right to acquire such shares of
Common Stock or other securities in proportion to its then-existing holdings of
outstanding shares of Common Stock, on the same terms and conditions and for the
same consideration as the Company proposes to issue such shares of Common Stock
or other securities to Persons other than the Purchaser; provided, however, that
the provisions of this Section 4.1 shall not apply to any of the following:
(a) shares of Common Stock issued on a pro rata basis pursuant to a
stock split, subdivision or dividend;
(b) shares of Common Stock issued in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise;
(c) shares of Common Stock issued to a corporation, partnership,
educational institution or other entity in connection with a research and
development partnership or licensing or other collaborative arrangement between
the Company and such institution or entity; or
(d) shares of Common Stock (or options, warrants or other rights to
purchase such shares of Common Stock) issuable or issued to employees,
consultants or directors of this corporation, upon the express approval of the
Board of Directors, whether issued or issuable after the Closing Date;
10
<PAGE> 14
and provided, further, however, that the aggregate number of shares of Common
Stock issued pursuant to Sections 4.1(a), 4.1(b) and 4.1(c) shall not exceed, on
a cumulative basis, ten percent (10%) of the outstanding shares of Common Stock
as of the date hereof. As used herein, "Person" means any individual,
partnership, joint venture, firm, corporation, association, trust or other
entity or any government or political subdivision or agency, department or
instrumentality thereof.
4.2. Exchange of Stock Certificates. Promptly upon surrender of any
certificates representing Shares at the office of the Company, the Company will,
at its expense, execute and deliver to the Purchaser a new certificate or
certificates in denominations specified by the Purchaser for an aggregate number
of Shares equal to the number of Shares represented by the certificates
surrendered.
4.3. Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate for Shares and, in the case of loss, theft or
destruction, upon delivery of an indemnity satisfactory to the Company (which,
in the case of the Purchaser may be an undertaking by the Purchaser to so
indemnify the Company), or, in the case of mutilation, upon surrender and
cancellation thereof, the Company will issue a new certificate of like tenor for
a number of Shares equal to the number of Shares represented by the certificate
lost, stolen, destroyed or mutilated.
4.4. Poison Pill. The Company shall not adopt a shareholder rights
plan, poison pill or similar device, nor shall it adopt any provision in its
articles of incorporation, by-laws or other constituent document which (a)
prohibits the acquisition of shares beyond a specific threshold by a shareholder
or (b) provides benefits to other shareholders upon the
11
<PAGE> 15
acquisition by a shareholder of shares in excess of a specific threshold, unless
such rights plan, poison pill or similar device includes, as an express term
thereof, an exemption for the Purchaser from (i) the prohibition of the
acquisition of shares or (ii) the effect triggered by an acquisition of shares
in excess of a specific threshold and the Company shall not amend any such
rights plan, poison pill or similar device or its articles of incorporation,
by-laws or other constituent document to remove the exemption granted the
Purchaser herein.
V. COVENANTS OF THE PURCHASER AND THE COMPANY
5.1. Public Disclosure and Confidentiality. Each party hereby agrees
that, prior to the Closing, except as required by applicable law (or under the
rules and regulations of the Nasdaq Stock Market (or any national securities
exchange on which the Common Stock is listed)), no press release or public
announcement or communication will be made or caused to be made concerning the
execution or performance of this Agreement, the terms hereof or the transactions
contemplated hereby unless specifically approved in advance by both parties. In
the event that a party views disclosure as required by applicable law (or the
rules and regulations of the Nasdaq Stock Market or any such national stock
exchange) as contemplated by the previous sentence, such disclosing party shall
provide a copy of such disclosure to the other party within a reasonable period
of time prior to such disclosure.
5.2. Restrictions on Transfer. (a) The rights contained in this
Agreement, including the registration rights, may be transferred by the
Purchaser only to one of its "Affiliates", as determined under Rule 12b-2 of the
General Rules and Regulations under the Exchange Act. Prior to such transfer,
the Company shall be furnished with prior written notice of the name and address
of such transferee, the Company shall give its prior written consent to
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<PAGE> 16
such transfer, which consent shall not be unreasonably withheld, and such
transferee shall agree to be bound by the terms and provisions of this
Agreement.
(b) Except pursuant to the requirements of Rule 144, the Shares may
not be sold or otherwise disposed of except as follows:
(i) to a person or persons who, in the opinion of counsel
reasonably satisfactory to the Company, is a person to whom the Shares
may legally be transferred without registration and without the delivery
of a current prospectus with respect thereto; or
(ii) to any person upon delivery of a prospectus then meeting
the requirements of the Securities Act relating to such securities (as
to which a registration statement under the Securities Act shall then be
in effect) and the offering thereof for such sale or disposition.
5.3. Efforts to Consummate; Further Actions. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
VI. REGISTRATION RIGHTS
The Company covenants and agrees to provide the following registration
rights:
6.1. "Piggyback" Registration. If, at any time while the Purchaser
shall hold shares of Common Stock, the Company proposes to file a registration
statement relating to the offering of any of its capital stock under the
Securities Act (other than (i) a registration statement required to be filed in
respect of employee benefit plans of the Company on Form S-8 or any similar form
from time to time in effect, (ii) any registration statement on Form S-4 or
similar successor form, or (iii) a registration statement relating to a
transaction pursuant to Rule 145 of
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<PAGE> 17
the Securities Act), whether or not for sale for its own account, the Company
shall, at least twenty-one days (or if such twenty-one day period is not
practicable, then a reasonable shorter period which shall not be less than seven
days) prior to such filing, give written notice of such proposed filing to the
Purchaser. Upon receipt by the Company not more than seven days (unless the
notice given to the Purchaser pursuant to the previous sentence is less than ten
days, in which case such seven-day period shall be shortened to five days) after
such notice of a written request from the Purchaser for registration of
Purchaser's Stock (as hereinafter defined), (i) the Company shall, subject to
Section 6.3, include such Purchaser's Stock in such registration statement, and
shall use all reasonable efforts to cause such registration statement to become
effective with respect to such Purchaser's Stock, unless the managing
underwriter therefor concludes in its reasonable judgment that the number of
securities requested to be included in such registration exceeds the number
which can reasonably be sold in (or during the time of) such offering, in which
case the Company may (i) include all securities initially proposed by the
Company to be sold for its own account and (ii) decrease the number of shares of
Purchaser's Stock and any other securities (other than securities included by
virtue of clause (i) above) proposed to be sold to the extent necessary to
reduce the number of securities to be included in the registration to the level
recommended by the managing underwriter; provided, however, that there shall be
no such decrease in the number of shares of Purchaser's Stock unless the number
of shares of Purchaser's Stock and such other securities (other than the
securities included by virtue of clause (i) above) proposed to be sold has been
decreased on a pro rata basis, calculated according to the number of shares of
Purchaser's Stock and other securities requested to be included by the
respective holders of each. "Purchaser's Stock" means any shares of Common Stock
held by the Purchaser or its affiliates.
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<PAGE> 18
6.2. Demand Registration. In the event that, subsequent to 180 days
following the Closing Date, the Company shall receive at any time or from time
to time a written request from the Purchaser requesting the Company to register
any shares of Purchaser's Stock under the Securities Act on Form S-3 (or if the
Company is not eligible to use Form S-3, then on Form S-1 or S-2), or any other
similar form then in effect, the Company agrees that it will use all reasonable
efforts to cause the prompt registration of all shares of Purchaser's Stock as
to which such request is made (or will amend or supplement an effective
registration statement to include Purchaser's Stock) provided; however; that the
Company shall in no event be required to register shares of Purchaser's Stock
pursuant to this Section 6.2 unless the number of such shares of Purchaser's
Stock exceeds twenty-five thousand (25,000). The Company may postpone for a
limited time, which in no event shall be longer than 45 days, compliance with a
request for registration pursuant to this Section 6.2 if (i) the Company shall
have given notice to the Purchaser of the occurrence of a Suspension Event (as
hereinafter defined) or (ii) the Company is conducting a public offering of
capital stock and the managing underwriter concludes in its reasonable judgment
that such compliance would materially adversely affect such offering.
Notwithstanding anything in this Section 6.2 to the contrary, the Company shall
not be required to prepare or cause to be prepared audited financial statements
of the Company other than those prepared in the normal course of the Company's
business at its fiscal year end.
6.3. General Provisions. (a) As long as the Purchaser owns at least
twenty five thousand (25,000) shares of Common Stock, the Company will use all
reasonable efforts to cause any registration statement referred to in Sections
6.1 and 6.2 to become effective and to remain effective (with a prospectus at
all times meeting the requirement of the 1933 Act), subject, however, to the
Company's suspension rights set forth in Section 6.7(b). The Company
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<PAGE> 19
will use all reasonable efforts to effect such qualifications under applicable
Blue Sky or other state securities laws as may be reasonably requested by the
Purchaser (provided that the Company shall not be obligated to file a general
consent to service of process or qualify to do business as a foreign corporation
or otherwise subject itself to taxation in any jurisdiction solely for the
purpose of any such qualification) to permit or facilitate such sale or other
distribution. The Company will cause the Purchaser's Stock to be listed on the
principal stock exchange on which the shares of Common Stock are listed.
(b) The Purchaser agrees, if requested by the managing underwriter or
underwriters in an underwritten offering (an "Offering"), not to effect any
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Offering), during the 15-day
period prior to, and during the 90-day period beginning on, the date of pricing
of each Offering, to the extent timely notified in writing by the Company or the
managing underwriters. Furthermore, notwithstanding anything to the contrary set
forth in the Agreement, the Company's obligation under this Agreement to cause a
registration statement and any filings with any state securities commission to
be made or to become effective or to amend or supplement such registration
statement shall be suspended in the event and during such period as the Company
is proceeding with an Offering if the Company is advised by the underwriters
that the sale of shares of Purchaser's Stock under such registration statement
would have a material adverse effect on the Offering.
(c) Following the effectiveness of a registration statement and the
filings with any state securities commissions, the Purchaser agrees that it will
not effect any sales of the Purchaser's Stock pursuant to such registration
statement or any such filings at any time after it
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<PAGE> 20
has received notice from the Company to suspend sales (i) as a result of the
occurrence or existence of any Suspension Event, or (ii) so that the Company may
amend or supplement such registration statement or such filing. The Purchaser
may recommence effecting sales of the Purchaser's Stock pursuant to the
registration statement or such filings following further notice to such effect
from the Company, which notice shall be given by the Company not later than
three (3) business days after the conclusion of any such Suspension Event or
amendment or supplement.
6.4. Information, Documents, Etc. Upon making a request for
registration pursuant to Sections 6.1 or 6.2, the Purchaser shall furnish to the
Company such information regarding its holdings and the proposed manner of
distribution thereof as the Company may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Article VI. The Company agrees that it will furnish to the
Purchaser the number of prospectuses, offering circulars or other documents, or
any amendments or supplements thereto, incident to any registration,
qualification or compliance referred to in this Article VI as the Purchaser from
time to time may reasonably request.
6.5. Expenses. The Company will bear all expenses of registrations
(including amendments and supplements related thereto) pursuant to Sections 6.1
and 6.2 (in each case, other than underwriting discounts and commissions and
brokerage commissions and fees, if any, payable with respect to shares of
Purchaser's Stock sold by the Purchaser, and fees and expenses of any
accountants, counsel or other parties retained or employed by holders of
Purchaser's Stock) including, without limitation, registration fees, printing
expenses, expenses of compliance with Blue Sky or other state securities laws,
and legal and audit fees incurred by the Company in connection with such
registration and amendments or supplements in connection therewith.
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<PAGE> 21
6.6. Cooperation. In connection with any registration of Purchaser's
Stock pursuant to this Article VI, the Company agrees to:
(a) enter into such customary agreement (including an underwriting
agreement containing such representations and warranties by the Company and such
other terms and provisions, including indemnification provisions, as are
customarily contained in underwriting agreements for comparable offerings and,
if no underwriting agreement is entered into, an indemnification agreement on
such terms as is customary in transactions of such nature) and take all such
other actions as the Purchaser or the underwriters, if any, participating in
such offering and sale may reasonably request in order to expedite or facilitate
such offering and sale;
(b) furnish, at the request of the Purchaser or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the Purchaser's Stock and/or
the date of the closing for the sale of the Purchaser's Stock from the
independent certified public accountants of the Company and addressed to the
Purchaser and any underwriters participating in such offering and sale, which
letter or letters shall state that such accountants are independent with respect
to the Company within the meaning of Rule 1.01 of the Code of Professional
Ethics of the American Institute of Certified Public Accountants and shall be in
form reasonably satisfactory to the managing underwriter (or, if none, to the
Purchaser) and shall cover matters of the type customarily covered in "cold
comfort" letters in connection with transactions of a similar nature for similar
entities and (ii) an opinion, dated the date of the closing for the sale of the
Purchaser's Stock, of the counsel representing the Company with respect to such
offering and sale (which counsel may be the General Counsel of the Company or
other counsel reasonably satisfactory to the Purchaser), addressed to the
Purchaser and any such underwriters, which opinion shall be in form reasonably
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<PAGE> 22
satisfactory to the managing underwriter (or, if none, to the Purchaser) and
shall address such matters as are customary in transactions of a similar nature
for similar entities;
(c) make available for inspection by the Purchaser, the underwriters,
if any, participating in such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager or managers for such
participating underwriters), the counsel for the Purchaser, one accountant or
accounting firm retained by the Purchaser and any such underwriters, or any
other agent retained by the Purchaser or such underwriters, all financial and
other records, corporate documents and properties of the Company, and supply
such additional information, as they shall reasonably request; provided that any
such party shall keep the contents thereof confidential in the manner prescribed
by Section 5.1.
6.7. Action to Suspend Effectiveness; Supplement to Registration
Statement. (a) The Company will notify the Purchaser and its counsel promptly of
(i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Purchaser's Stock or the institution or
threatening of any proceeding for such purpose (a "stop order") or (ii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Purchaser's Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. Immediately upon
receipt of any such notice, the Purchaser shall cease to offer or sell any
Purchaser's Stock pursuant to the registration statement in the jurisdiction to
which such stop order or suspension relates. The Company will use all reasonable
efforts to prevent the issuance of any such stop order or the suspension of any
such qualification and, if any such stop order is issued or any such
qualification is suspended, to obtain as soon as possible the withdrawal or
revocation thereof, and will notify the Purchaser and its counsel at the
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<PAGE> 23
earliest practicable date of the date on which the Purchaser may offer and sell
Purchaser's Stock pursuant to the registration statement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to cause the
registration of Purchaser's Stock and any filings with any state securities
commission to be made or to become effective or to amend or supplement a
registration statement shall be suspended in the event and during such period
that there are pending negotiations relating to, or consummation of, a
transaction or the occurrence of an event that would require additional
disclosure of material information by the Company in such registration statement
or such filing (such circumstances being hereinafter referred to as a
"Suspension Event") that would make it impractical or inadvisable to cause such
registration statement or such filings to be made or to become effective or to
amend or supplement such registration statement, but such suspension shall
continue only for so long as such event or its effect is continuing but in no
event will that suspension exceed forty-five (45) days. Immediately upon receipt
by the Purchaser of notice of a Suspension Event, the Purchaser shall cease to
offer or sell any Purchaser's Stock pursuant to such registration statement,
cease to deliver or use such registration statement and, if so requested by the
Company, return to the Company, at its expense, all copies (other than permanent
file copies) of such registration statement.
(c) In the event the Company shall determine that it is necessary to
amend or supplement any registration statement relating to Purchaser's Stock,
the Company will furnish copies of such proposed amendment or supplement to the
Purchaser and its counsel and will not file or distribute such amendment or
supplement without the prior consent of the Purchaser, which consent shall not
be unreasonably withheld.
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<PAGE> 24
6.8. Indemnification . In the event any Purchaser's Stock is included
in a registration statement under this Article VI:
(a) To the full extent permitted by law, the Company will indemnify
and hold harmless the Purchaser and each subsequent holder of Purchaser's Stock
as set forth in Section 9.3(d) hereof (each, a "Holder") and the affiliates of
such Holder, and their respective directors, officers, employees, general and
limited partners, members, agents and representatives (and the directors,
officers, affiliates and controlling Persons thereof), and each other Person, if
any, who controls such Holder within the meaning of the Securities Act or the
Exchange Act, from and against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange 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, any final prospectus contained therein or any amendments or
supplements thereto, (ii) any omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company in connection with the registration of Purchaser's Stock under the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, affiliate or
controlling Person, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, that the indemnity agreement contained in this
Section 6.8(a) shall not apply to amounts paid in settlement of any
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<PAGE> 25
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 hereunder 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 the Purchaser or controlling Person; and provided, further, that
the Company shall not be liable hereunder in any such case to the extent it is
determined that any such loss, claim, damage, liability or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made:
(A) in any such preliminary prospectus, if (I) it was the
responsibility of such Holder to provide the Person asserting such loss,
claim, damage, liability or expense with a current copy of the
prospectus and such Holder failed to deliver or cause to be delivered a
copy of the prospectus to such Person after the Company had furnished
such Holder with a sufficient number of copies of the same and (II) the
prospectus corrected such untrue statement or omission; or
(B) in such prospectus, if such untrue statement or omission
is corrected in an amendment or supplement to such prospectus and the
Holder thereafter fails to deliver the prospectus as so amended or
supplemented prior to or concurrently with the sale of Purchaser's Stock
to the Person asserting such loss, claim, damage, liability or expense
after the Company had furnished such Holder with a sufficient number
copies of the same.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director, officer,
employee,
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<PAGE> 26
general or limited partner, member, agent, representative or controlling Person
and shall survive the transfer of such securities by such Holder. Each Holder
shall furnish such information regarding itself or the claim in question as the
Company may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(b) To the full 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 Securities 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 Securities Act, the Exchange 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 (i) 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 or (ii) an untrue
statement or alleged untrue statement or omission or alleged omission made in
the circumstances described in clauses (A) or (B) of Section 6.8(a); 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
6.8(b), in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, that the indemnity agreement contained in
this Section 6.8(b) 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;
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<PAGE> 27
provided, that, in no event shall any indemnity under this Section 6.8(b) exceed
the gross proceeds from the offering received by such Holder; and provided,
further, that the obligation to provide indemnification pursuant to this Section
6.8(b) shall be several, and not joint and several, among such indemnifying
parties. Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer,
representative or controlling Person and shall survive the transfer of such
securities by such prospective Seller.
(c) Promptly after receipt by an indemnified party under this Section
6.8 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 6.8, 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 selected by the
indemnifying party or parties. The failure to deliver written notice to the
indemnifying party within a reasonable time after the indemnifying party first
learns of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 6.8 to the extent of such
prejudice, 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 6.8. The indemnified party shall have
the right, but not the obligation, to participate in the defense of any action
referred to above through counsel of its own choosing and shall have the right,
but not the obligation, to assert any and all separate defenses, cross claims or
counterclaims which it may have, and the fees and
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expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel has been specifically authorized in
advance by the indemnifying party, (ii) there is a conflict of interest that
prevents counsel for the indemnifying party from adequately representing the
interests of the indemnified party or there are defenses available to the
indemnified party that are different from, or additional to, the defenses that
are available to the indemnifying party, or (iii) the indemnifying party fails
to assume the defense or does not reasonably contest such action in good faith,
in which case, if the indemnified party notifies the indemnifying party that it
elects to employ separate counsel, the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party
and the reasonable fees and expenses of such separate counsel shall be borne by
the indemnifying party; provided, however, that, the indemnifying party shall
not, in connection with any proceeding or related proceedings, be liable for the
reasonable fees and expenses of more than one separate firm (in addition to one
firm acting as local counsel) for all indemnified parties.
(d) Contribution. If for any reason (other than the reasons expressly
specified in this Section 6.8) the foregoing indemnity and payment obligation is
unavailable or is insufficient to hold harmless an indemnified party under
paragraphs (a) or (b) of this Section 6.8, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any loss, claim, damage or liability (or actions or proceedings in respect
thereof), including, without limitation, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other. The relative fault shall be
determined by reference to, among other things, whether the action in question,
including any
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untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact has been taken or made by, or relates to
information supplied by, the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, or if the allocation provided in the second preceding sentence
provides a lesser sum to the indemnified party than the amount hereinafter
calculated, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative fault but also the relative benefits to the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The parties agree that it would not be just and
equitable if contributions pursuant to this Section 6.8(d) were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the preceding sentences
of this Section 6.8(d). Notwithstanding anything in this Section 6.8(d) to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 6.8(d) to contribute any amount in excess of the gross
proceeds received by such indemnifying party from the sale of Purchaser's Stock
in the offering to which the losses, claims, damages or liabilities of the
indemnified parties relate. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and the Holders under this Section
6.8 shall survive the completion of any offering of Purchaser's Stock in a
registration statement under this Article VI.
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(f) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement (if
any) entered into in connection with any underwritten public offering of the
Purchaser's Stock are in conflict with the foregoing provisions, the provisions
in such underwriting agreement shall control.
VII. INDEMNIFICATION
7.1. Indemnification by the Company. The Company shall indemnify and
hold the Purchaser and each of its members, employees, officers and agents
harmless from and against any and all losses, claims, damages or liabilities
whatsoever (including legal fees and expenses) incurred by any of them based
upon, resulting from or arising out of any material breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement.
7.2. Indemnification by the Purchaser. The Purchaser shall indemnify
and hold the Company and each of its employees, directors, officers and agents
harmless from and against any and all losses, claims, damages or liabilities
whatsoever (including legal fees and expenses) incurred by any of them resulting
from or arising out of any material breach of any representation, warranty,
covenant or agreement of the Purchaser contained in this Agreement.
VIII. TERMINATION
8.1 Termination. (a) This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(i) by the Company or the Purchaser, if the Closing has not
occurred by September 12, 1997;
(ii) by mutual written consent of the Company and the
Purchaser;
(iii) by the Company, if there has been a material
misrepresentation or breach of warranty on the part of the Purchaser in
the representations and warranties contained herein or
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<PAGE> 31
a material breach of covenants on the part of the Purchaser and the same
has not been cured within 30 days after notice thereof;
(iv) by the Purchaser, if there has been a material
misrepresentation or breach of warranty on the part of the Company in
the representations and warranties contained herein or a material breach
of covenants on the part of the Company and the same has not been cured
within 30 days after notice thereof; or
(v) by either the Purchaser or the Company, if any court,
administrative body or governmental agency shall have issued a final
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable, provided that the party seeking to
terminate shall have used its best efforts to appeal such order, decree,
ruling or other action.
(b) Notwithstanding anything herein to the contrary, the right to
terminate this Agreement under this Section 8.1 shall not be available to any
party to the extent the failure of such party to fulfill any of its obligations
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date (as a result, for example, of an action
or failure to act causing a failure of a condition precedent).
(c) A party terminating this Agreement pursuant to this Section 8.1
shall give written notice thereof to the other party hereto, whereupon this
Agreement shall terminate and be of no further force and effect, the
transactions contemplated hereby shall be abandoned without further action by
any party and there shall be no liability on the part of the Company or the
Purchaser, except as provided in Section 9.7 hereof and except for any liability
for any willful
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breach hereof; provided however that the provisions of Sections 7.1 and 7.2
shall survive any such termination.
IX. GENERAL PROVISIONS
9.1. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation conducted or notice or knowledge obtained by
or on behalf of any party hereto, each representation and warranty in this
Agreement and each agreement or covenant in this Agreement which does not by its
own terms expire on or prior to the Closing shall survive the Closing without
limitation as to time, except as specifically referred to herein.
9.2. Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (i) when received if given in Person, or (ii) on the date of
transmission if sent by nationally recognized overnight courier, certified or
registered mail, return receipt requested or (iii) three days after being
deposited in the U.S. mail, postage prepaid:
(a) if to the Purchaser, addressed as follows:
Ross Financial Corporation
P.O. Box 31363
Seven Mile Beach
Grand Cayman, Cayman Islands
British West Indies
Attention: Kenneth B. Dart
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Lee C. Buchheit, Esq.
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(b) if to the Company, addressed as follows:
DepoTech Corporation
10450 Science Center Drive,
San Diego, California 92121
Attention: Edward L. Erickson
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street
Suite 1300
San Diego, California 92101
Attention: Faye H. Russell, Esq.
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
9.3. General. (a) This Agreement (including the documents and
instruments referred to or incorporated herein) constitutes the entire
agreement, and supersedes all of the prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
(b) This Agreement is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder other than as
contemplated in Article VI, Article VII and Section 9.3(d) and shall not be
assigned by any party by operation of law or otherwise.
(c) This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, heirs and permitted assigns. This
Agreement is not assignable except by consent of each of the parties hereto or
by operation of law. Any purported assignment of this Agreement in violation of
this Section 9.3 shall be null and void.
30
<PAGE> 34
9.4. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(b) Each party agrees that any proceeding relating to this Agreement
shall be brought in a state court of New York. Each party hereby consents to
personal jurisdiction in any such action brought in any such New York court,
consents to service of process by mail made upon such party and such party's
agent and waives any objection to venue in any such New York court or to any
claim that any such New York court is an inconvenient forum.
9.5. Severability of Provisions. If any provision or any portion of
any provision of this Agreement or the application of any such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, to the extent permitted by law, the remaining portion of such
provision and the remaining provisions of this Agreement, or the application of
such provision or portion of such provision as is held invalid or unenforceable
to Persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby.
9.6. Captions. All section titles or captions contained in this
Agreement are for convenience only, shall not be deemed a part of this Agreement
and shall not affect the meaning or interpretation of this Agreement. All
references herein to Sections shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
9.7. Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall pay its own expenses incidental to the
preparation of this Agreement, the
31
<PAGE> 35
carrying out of the provisions hereof and the consummation of the transactions
contemplated hereby.
9.8. Equitable Relief. Each party acknowledges that, in the event of
any breach of this Agreement by a party, the other party would be irreparably
and immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that such other party, in addition to any other remedy to
which it may be entitled, shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to compel specific
performance of this Agreement. Any requirements for the securing or posting of
any bond with respect to such remedy are hereby waived by each of the parties
hereto.
9.9. Definitions. The following terms shall have the respective
meanings specified in the indicated Sections of this Agreement:
Term Agreement Section
- ---- -----------------
Agreement Recitals
Authority 2.2
Board 1.3(b)(ii)
Closing 1.3(a)
Closing Date 1.3(a)
Commission 2.6
Common Stock Recitals
Company Recitals
Encumbrances 1.1
Exchange Act 2.4
Financial Statements 2.7(a)
Holder 6.8(a)
Material Adverse Effect 2.1
Offering 6.3(b)
Person 4.1
Purchaser Recitals
Purchaser Material Adverse Effect 1.3(c)
Purchaser's Stock 6.1
SEC Reports 2.6
Securities Act 3.5
Shares Recitals
32
<PAGE> 36
Stop Order 6.7(a)
Suspension Event 6.7(b)
33
<PAGE> 37
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the date first above written.
DEPOTECH CORPORATION
By: /s/ Edward L. Erickson
------------------------------------
Name: Edward L. Erickson
Title: President/CEO
ROSS FINANCIAL CORPORATION
By: /s/ Kenneth B. Dart
------------------------------------
Name: Kenneth B. Dart
Title: President
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
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