<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(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
/ / 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 000-21141
PHARMAPRINT INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0640125
(State or jurisdiction of incorporation (I.R.S. employer
or organization) identification No.)
4 PARK PLAZA, SUITE 1900, IRVINE, CALIFORNIA 92614
(Address of principal executive offices) (Zip code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 655-7778
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares outstanding as of November 12, 1997: Common Stock:
11,053,684
Total number of pages:
<PAGE>
PHARMAPRINT INC.
INDEX
Page
FACING SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION
Item 1. Balance Sheet as of September 30, 1997 (unaudited) . . . . . . . 3
Statements of Operations for the three months ended
September 30, 1996 and 1997, for the six months ended
September 30, 1996 and 1997, and for the period from inception
(September 15, 1994) through September 30, 1997 (unaudited). . . 4
Statements of Cash Flows for the three months ended
September 30, 1996 and 1997, for the six months ended
September 30, 1996 and 1997 and for the period from inception
(September 15, 1994) through September 30, 1997 (unaudited)... . 5
Notes to Financial Statements (unaudited). . . . . . . . . . . . 6
Item 2. Plan of Operation. . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking" statements. The Company is
including this statement for the express purpose of availing itself of
protections of the safe harbor provided by the Private Securities Litigation
Reform Act of 1995 with respect to all such forward-looking statements.
Examples of forward-looking statements include, but are not limited to: (a)
projections of revenues, capital expenditures, growth, prospects, dividends,
capital structure and other financial matters; (b) statements of plans and
objectives of the Company or its management or Board of Directors; (c)
statements of future economic performance; (d) statements of assumptions
underlying other statements and statements about the Company and its business
relating to the future; and (e) any statements using the words "believes",
"anticipate," "expect," "may," "project," "intend" or similar expressions.
The Company's ability to predict projected results or the effect of certain
events on the Company's operating results is inherently uncertain. Therefore,
the Company wishes to caution each reader of this report to carefully consider
the following factors and certain other factors discussed herein and in the
Company's March 31, 1997, Annual Report on Form 10-KSB, any or all of which have
in the past and could in the future affect the ability of the Company to achieve
its anticipated results and could cause actual results to differ materially than
those discussed herein: ability to attract partners and third parties to
transact business with the Company, government regulation and uncertainty of
product approvals, ability to commercialize and market products, results of
research and development and clinical studies, technological advances by third
parties and competition, ability to obtain and enforce patents, future capital
needs of the Company, history of operating losses, dependence upon key
personnel, uncertainty regarding health care reimbursement and reform, limited
manufacturing and marketing experience, control by existing shareholders and
general economic and business conditions.
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<PAGE>
PHARMAPRINT INC.
(A development stage company)
BALANCE SHEET - SEPTEMBER 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 3,281,188
Other current assets. . . . . . . . . . . . . . . . . . . 329,859
------------
Total current assets. . . . . . . . . . . . . . . . . . 3,611,047
EQUIPMENT, NET. . . . . . . . . . . . . . . . . . . . . . . 216,752
OTHER ASSETS, net of accumulated depreciation
and Amortization of $47,269 . . . . . . . . . . . . . . . . 225,165
------------
Total assets. . . . . . . . . . . . . . . . . . . . . . $ 4,052,964
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . . . $ 674,570
Accrued expenses. . . . . . . . . . . . . . . . . . . . . 217,184
------------
Total current liabilities . . . . . . . . . . . . . . . 891,754
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value - 1,000,000 shares
authorized, no shares issued or outstanding. . . . . . . -
Common stock, without par value - 19,000,000 shares
authorized, 11,005,202 shares issued and outstanding . . 23,410,972
Additional paid in capital. . . . . . . . . . . . . . . . 1,130,370
Deferred compensation . . . . . . . . . . . . . . . . . . (114,433)
Deficit accumulated during the development stage. . . . . (21,265,699)
-----------
Total stockholders' equity. . . . . . . . . . . . . . . 3,161,210
-----------
Total liabilities and stockholders' equity. . . . . . . $ 4,052,964
-----------
-----------
The accompanying notes are an integral part of this balance sheet
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<PAGE>
PHARMAPRINT INC.
(A development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period From
Inception
(September 15,
Three Months Three Months Six Months Six Months 1994)
Ended Ended Ended Ended through
September 30, September 30, September 30, September 30, September 30,
1996 1997 1996 1997 1997
------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
REVENUES. . . . . . . . . . $ -- $ -- $ -- $ -- $ --
EXPENSES:
Research and
development. . . . . . . 401,365 1,687,584 786,495 2,717,402 6,462,800
General and
administrative . . . . . 1,120,107 1,089,726 1,640,497 1,863,712 5,542,172
Stock compensation. . . . 3,000,000 3,593,540 4,585,000 3,623,540 9,260,727
----------- ------------ ------------ ------------- -------------
4,521,472 6,370,850 7,011,992 8,204,654 21,265,699
----------- ------------ ------------ ------------- -------------
LOSS FROM OPERATIONS. . . . (4,521,472) (6,370,850) (7,011,992) (8,204,654) (21,265,699)
----------- ------------ ------------ ------------- -------------
NET LOSS. . . . . . . . . $(4,521,472) $(6,370,850) $ (7,011,992) $(8,204,654) $ (21,265,699)
----------- ------------ ------------ ------------- -------------
----------- ------------ ------------ ------------- -------------
LOSS PER SHARE. . . . . . $ (.46) $ (.57) $ (.79) $ (.73) $ (2.30)
----------- ------------ ------------ ------------- -------------
----------- ------------ ------------ ------------- -------------
WEIGHTED AVERAGE
SHARES AND EQUIVALENT SHARES
OUTSTANDING . . . . . . . . 9,925,694 11,223,072 8,893,702 11,223,072 9,228,395
----------- ------------ ------------ ------------- -------------
----------- ------------ ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
PHARMAPRINT INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Period from inception
Six Months Ended Six Months Ended (September 15, 1994)
September 30, September 30, through September 30,
1996 1997 1997
----------------- ----------------- ----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . $ (7,011,992) $(8,204,654) $ (21,265,699)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation. . . . . . . . . . . . . . . . . - 38,914 48,102
Amortization of discount on notes payable . . 31,250 - 31,250
Stock issued for licensing rights . . . . . . - - 315,789
Stock and options issued for services . . . . 4,585,000 3,623,540 9,260,727
(Increase) decrease in other current
assets. . . . . . . . . . . . . . . . . . . . 94,203 7,734 (329,859)
(Increase) decrease in other non-current
assets. . . . . . . . . . . . . . . . . . . . 17,848 (92,287) (230,971)
Increase (decrease) in accounts payable
and accrued expenses. . . . . . . . . . . . . 445,306 (202,842) 891,754
------------- ----------- -------------
Net cash used in operating activities . . . . (1,838,385) (4,829,595) (11,278,907)
------------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment . . . . . . . . . . . . (56,910) (64,289) (259,048)
------------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock. . . . 12,724,101 5,000 14,512,543
Increase in deferred offering costs . . . . . - - -
Proceeds from stock subscription receivable . 100,000 - 306,600
Proceeds from note payable. . . . . . . . . . 270,000 - 270,000
Repayment of notes payable. . . . . . . . . . (250,000) - (270,000)
------------- ------------ -------------
Net cash provided by financing activities . . 12,844,101 5,000 14,819,143
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . 10,948,806 (4,888,884) 3,281,188
CASH AND CASH EQUIVALENTS, beginning of
period. . . . . . . . . . . . . . . . . . . . 889,740 8,170,072 -
------------- ------------ -------------
CASH AND CASH EQUIVALENTS, end of period. . . $ 11,838,546 $ 3,281,188 $ 3,281,188
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited financial statements and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have not been presented. The
accompanying unaudited financial statements and related notes should be read
in conjunction with the financial statements and related notes included in
the PharmaPrint Inc. March 31, 1997, Annual Report on Form 10-KSB.
In the opinion of the Company, all material adjustments (consisting of
normal recurring items) considered necessary to present fairly the Company's
financial condition, results of operations, and changes in financial position
have been made. The results of operations for the three and six month
periods ended September 30, 1997, are not necessarily indicative of the
results that may be expected for the year ending March 31, 1998.
2. FORMATION, NARRATIVE DISCUSSION OF THE BUSINESS AND RISK FACTORS
FORMATION
PharmaPrint Inc. (the "Company" or "PharmaPrint"), a development stage
company, was originally formed under the laws of the State of California in
September 1994 in order to complete the development and commercialization of
the research initiated by Dr. Tasneem A. Khwaja, founder and major
shareholder of the Company, over a 20 year period at the University of
Southern California ("USC") School of Medicine. Effective October 30, 1996,
the Company changed its name from ABT Global Pharmaceutical Corp. to
PharmaPrint Inc. In October 1997, the Company reincorporated in Delaware
without any change in its business, assets or liabilities or the relocation
of management or other employees.
NARRATIVE DESCRIPTION OF THE BUSINESS
The Company develops and manufactures pharmaceutical and dietary
supplement versions of herbal medicines to be used in the treatment of
various maladies. The Company's technology for standardizing the manufacture
of herbal medicines into pharmaceuticals and dietary supplements is marketed
as the PharmaPrint-TM-Process. The PharmaPrint-TM- Process provides the
tools necessary: (1) to identify, quantify and control the bioactive
components of an herbal composition; (2) to determine the activity of each
component in a specific bio-assay; and (3) to ensure these components are
present in pre-determined quantities for a given manufactured herbal batch.
The Company believes that the PharmaPrint-TM- Process, together with the
results of toxicology testing and clinical trials, provides the information
necessary to seek United States Food and Drug Administration ("FDA") approval
for each pharmaceutical version of the herbal medicine. The
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<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
Company also believes that the PharmaPrint-TM- Process is the only method
currently available for developing acceptable and approvable pharmaceutical
versions of herbal medicines. However, there can be no assurance that other
acceptable methods will not be developed or that the PharmaPrint-TM- Process
will be successful in developing acceptable or approvable pharmaceutical
versions of herbal medicines.
On October 7, 1997, the Company entered into agreements with American
Home Products Corporation ("AHP") whereby AHP will market and distribute a
line of herbal products under their Centrum-Registered Trademark- brand name
in the dietary supplement market produced using the PharmaPrint-TM- Process.
Seven of the following products will be distributed under the Agreements:
agnus castus, bilberry, black cohosh, echinacea, garlic, ginger, ginkgo
biloba, ginseng, milk thistle, saw palmetto, St. John's wort, and valerian.
AHP and the Company will examine from time to time market opportunities to
increase or modify this product line.
In addition to opportunities in the dietary supplement market, the
Company believes there is a significant market for the use of the
PharmaPrint-TM- Process is developing pharmaceuticals from herbal medicines.
The market opportunities include developing pharmaceuticals for the Company's
own account, in joint venture arrangements with other companies and on a
contract basis for other companies for a fee and a royalty on sales. The
Company has granted AHP an option to develop certain potential pharmaceutical
products with the Company.
DEVELOPMENT STAGE COMPANY AND RISK FACTORS
PharmaPrint is considered to be a development stage company. Since
inception (September 15, 1994), the Company has been primarily engaged in
research, filing for and securing patent protection, product development,
marketing and raising capital.
The Company, as a development stage enterprise, has yet to generate
significant revenues and has no assurance of future significant revenues.
There can be no assurance that the Company will obtain FDA approval, be able
to further market its PharmaPrint-TM- Process or that it will receive any
royalty or manufacturing revenues from the AHP agreements. Even if future
marketing efforts with third parties are successful or if the Company
receives royalty or manufacturing revenues from AHP, the Company may to
continue to incur operating losses over the next several years and would
therefore require additional financing to fund its operations. The Company's
future capital requirements will depend on many factors, including but not
limited to the Company's ability to further market its PharmaPrint-TM-
Process to third parties, overall product development costs including the
cost of toxicology testing and clinical trials, the length of time required
to obtain FDA approval, if any, competing technological and market
developments, changes in existing collaborative relationships, sales and
marketing arrangements, raw materials costs and the costs of establishing
subcontracts for research, development and
-7-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
manufacturing. Additionally, no assurance can be given that additional
capital, if needed, will be available when required or upon terms acceptable
to the Company.
To achieve profitable operations, the Company alone or with others, must
successfully develop, introduce and market products. No assurance can be given
that the Company's development efforts will be successfully completed, that
required regulatory approvals will be obtained, or that any product, if
introduced, will be successfully marketed or obtain customer acceptance.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
LOSS PER SHARE
Loss per share is computed based on the weighted average number of shares
outstanding for the period. Common equivalent shares are excluded from the
computation as their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares (stock options, warrants and preferred stock) issued
during the period commencing 12 months prior to the initial filing of the
Company's initial public offering (the "Offering") at prices below the public
offering price have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method).
RECLASSIFICATIONS
Certain reclassifications were made to prior period amounts, enabling
them to conform to current period presentation.
4. OTHER ASSETS
In December 1996, the Company amended a Personal Services Agreement with
Dimension Memory, Inc. ("Dimension") and Robert J. Burgess. The amended
agreement provided for the immediate payment by the Company of all amounts
due under the Personal Services Agreement in exchange for Dimension agreeing
to provide additional services to the Company. As a result of this
Agreement, in December 1996 the Company paid and deferred an amount to
Dimension of $312,000. This amount will amortize ratably over the term of the
original service agreement
-8-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
(through December 1998). The unamortized amount, $190,000 at September 30,
1997, has been recorded in other current assets in the accompanying balance
sheet.
5. EQUIPMENT
Equipment is stated at cost and consisted of the following at September 30,
1997:
Equipmen. . . . . . . . . . . . . . . . . . . . $ 157,528
Furniture . . . . . . . . . . . . . . . . . . . 101,520
Less accumulated depreciation . . . . . . . . . (42,296)
------------
Equipment, net. . . . . . . . . . . . . . . . . $ 216,752
------------
------------
Depreciation is provided using the straight-line method over the estimated
useful life for equipment of three years and furniture for five years.
6. STOCKHOLDER'S EQUITY
WARRANTS
At March 31, 1997, the underwriter of the Company's Offering had a warrant
outstanding for the purchase of 300,000 shares of common stock at a purchase
price of $8.25 per share. The warrant is exercisable through August 2001. In
May 1997, the underwriter agreed that any shares of common stock purchased
pursuant to the warrant would not be sold for an additional year (until August
20, 1998) and the Company agreed to reduce the purchase price of the warrant to
$5.50 per share.
-9-
<PAGE>
PHARMAPRINT INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
7. COMMITMENTS AND CONTINGENCIES
The Company leases its corporate headquarters under an operating lease that
expires in December 1998. Future minimum lease payments under this lease, as of
September 30, 1997, are approximately $114,000 payable through March 31, 1998,
and $178,000 payable for fiscal year 1999. Rent expense for the three and six
months ended September 30, 1997 totaled approximately $44,000 and $83,000,
respectively.
8. STOCK COMPENSATION EXPENSE
Pursuant to an agreement with the underwriter of the Offering, in September
1997, the underwriter agreed to release an officer of the Company from a
lock-up agreement and thereby accelerated the vesting of 712,708 shares of
common stock. Accordingly, the Company recorded $3,564,000 of compensation
expense during the three months ended September 30, 1997.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
DEVELOPMENT OF DSHEA PRODUCTS
In October 1997, the Company entered into agreements with AHP whereby
the Company will develop and manufacture a line of herbal products using its
PharmaPrint-TM- Process and AHP will market and distribute such herbal
products under their Centrum-Registered Trademark- brand name in the dietary
supplement market. Seven of the following products will be distributed under
the agreements: agnus castus, bilberry, black cohosh, echinacea, garlic,
ginger, ginkgo biloba, ginseng, milk thistle, saw palmetto, St. John's wort,
and valerian. AHP and the Company will examine from time to time market
opportunities to increase or modify this product line.
In addition to its obligation to develop such herbal products using its
PharmaPrint-TM- Process, the Company will exclusively manufacture such
products for AHP. Prior to product launch the Company will procure the
extract necessary to manufacture such products, perform stability studies on
the products and contract with third party manufacturers to produce the
finished product for delivery to AHP. The Company expects to order
approximately $2.5 million of extract to produce its first batch of products
for AHP.
DEVELOPMENT OF PHARMACEUTICAL PRODUCTS
The Company believes there is a significant market for the use of the
PharmaPrint-TM- Process in developing pharmaceuticals from herbal medicines.
The market opportunities include developing pharmaceuticals for the Company's
own account, in joint venture arrangements with other companies and on the
contract basis for other companies for a fee and a royalty on sales. The
Company has granted AHP an option to develop certain potential pharmaceutical
products with the Company. Additionally, the Company will continue to pursue
development arrangements with other partners to assist in the development of
pharmaceutical versions of herbal medicines.
In September 1997, the Company began Phase II clinical trials in four
medical centers in the United States for PPRT-321, its saw palmetto based
drug, intended to treat the symptoms associated with benign prostatic
hyperplasia ("BPH"). Additionally, in September 1997, the Company began
toxicology testing for PPRT-321 and anticipates continuing with such studies
for at least the next 12 months. The Company anticipates results of the
Phase II trial will be available in mid-1998. Pending the review of such
results and approval by the FDA, the Company anticipates commencing a Phase
III pivotal trial in 1998. The Company has also begun the development
PPRT-152, its St. John's wort based drug intended to treat symptoms
associated with mild to moderate depression. The Company intends to file an
IND application for PPRT-152 in the first quarter of 1998. Although no
assurance can be given that such IND application will be allowed by the FDA,
if the application is allowed in the form that the Company anticipates, the
Company expects to begin Phase II clinical trials and toxicology studies
shortly thereafter. The Phase II study is expected to be completed within
the next 12 months and the toxicology study is expected to last longer than
12 months.
-11-
<PAGE>
The Company also intends to begin development of other pharmaceutical
versions of herbal medicines namely, valerian (to be used as a sleep aid),
black cohosh (used to reduce post menopausal symptoms) and agnus castus (used
to reduce premenstrual symptoms). The Company intends to file at least one
IND application for these or other pharmaceutical versions of herbal
medicines with the FDA within the next 12 months.
To achieve profitable operations, the Company alone or with others, must
successfully develop, introduce and market pharmaceutical and dietary
supplement products. No assurance can be given that the Company's
development efforts will be successfully completed, that required regulatory
approvals will be obtained, or that any product, if introduced, will be
successfully marketed or obtain customer acceptance.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through the sale of
equity securities. From inception (September 15, 1994) through May 1996, the
Company had raised an aggregate net amount of approximately $2,100,000
through private sales of equity securities. In August 1996, the Company
completed an initial public offering of 3,000,000 shares of its common stock
at $5.00 per share, raising net proceeds of approximately $12,705,000.
During the three months ended September 30, 1997, the Company purchased
approximately $32,000 of equipment and furniture. Computer equipment and
office furniture comprised the majority of such capital expenditures. The
Company anticipates that it will purchase an additional $125,000 of equipment
and furniture in the next 12 months.
During the three months ended September 30, 1997, the Company increased
its staff of full-time employees and consultants from 15 to 17. During
fiscal 1998, the Company expects to increase its staff by adding an
additional 15 employees.
-12-
<PAGE>
The Company has incurred net operating losses since its inception and
expects substantial net operating losses in the near term as it continues its
research and development efforts. The Company will incur additional net
operating losses until such time as product or service sales can generate
sufficient revenue to fund continuing operations and research and development
efforts. The Company's ability to generate revenues are dependent upon many
factors including its ability to develop, introduce and market products and
obtain regulatory approvals.
The proceeds of the initial public offering and cash flows from
operations, if any, are expected to be sufficient to meet the Company's
working capital requirements for the next six months. This estimate excludes
the Company's anticipated purchase of approximately $2,500,000 of raw
materials required to produce the first batch of products for distribution by
AHP. The Company intends to seek financing for such purchase, however no
assurance can be given that such financing will be available when needed or
upon terms acceptable to the Company. Additionally, no assurance can be given
that there will be no change in the Company's operations that would consume
available resources more rapidly than anticipated. The Company will need
substantial funds to support its long term product development programs. The
Company has no established bank financing arrangement and it is unlikely that
the Company will establish a bank financing arrangement in the foreseeable
future. The Company's future capital requirements will depend on many
factors, including continued scientific progress in its research and
development programs, progress with toxicology testing and clinical trials,
the time and cost involved in obtaining regulatory approvals, patent costs,
competing technological and market developments, changes in existing
collaborative relationships, the Company's ability to establish development,
sales and marketing arrangements and the cost of establishing manufacturing
capabilities. To the extent that the Company's capital resources are
insufficient to meet its operating requirements, the Company will seek
additional funds through equity or debt financings, collaborative or other
arrangements with corporate partners, licensees and others. The Company has
no current arrangements with respect to, or sources of, such additional
financing, and the Company does not anticipate that existing stockholders
will provide any portion of the Company's future financing requirements, if
any. Additionally, no assurance can be given that additional financing will
be available when needed or upon terms acceptable to the Company.
-13-
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
2.1 Certificate of Ownership and Merger
3.1 Certificate of Incorporation
3.2 By Laws
10.1 American Home Products License Agreement (U.S.)
10.2 American Home Products License Agreement (Foreign)
10.3 American Home Products Supply Agreement
10.4 Second Amendment to USC License Agreement
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMAPRINT INC.
Registrant
Date: November 14, 1997 /s/ James R. Wodach
---------------------------
James R. Wodach
Senior Vice President and
Chief Financial Officer
-15-
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
PHARMAPRINT INC.
(A CALIFORNIA CORPORATION)
INTO
PHARMAPRINT INC.
(A DELAWARE CORPORATION)
PHARMAPRINT INC., a corporation organized and existing under the laws of
the State of California ("Parent"),
DOES HEREBY CERTIFY:
FIRST: That Parent was incorporated on the 15th day of September, 1994,
pursuant to the General Corporation Law of the State of California, the
provisions of which permit the merger of a corporation of another state and a
corporation organized and existing under the laws of said state.
SECOND: That Parent owns all of the outstanding shares of the stock of
PharmaPrint Inc., a corporation incorporated on the 27th day of August, 1997
pursuant to the Delaware General Corporation Law of the State of Delaware
("Delaware Sub").
THIRD: That the directors of Parent, by the following resolutions of its
Board of Directors, duly adopted at a meeting held on the 20th day of August,
1997, determined to merge Parent into Delaware Sub:
RESOLVED, that Parent merge, and it hereby does merge itself into
Delaware Sub which assumes all of the obligations of Parent;
FURTHER RESOLVED, that the merger shall be effective upon filing
with the Secretary of State of the State of Delaware; and
FURTHER RESOLVED, that the proper officers of Parent be and each
of them is hereby directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of the resolutions to merge
Parent into Merger Sub and the date of adoption thereof, and to cause
the same to be filed with the Secretary of State of the State of
Delaware and to do all acts and things whatsoever, whether within or
without the State of Delaware, which may be necessary or proper to
effect said merger.
<PAGE>
FOURTH: That the proposed merger has been adopted, approved, certified,
executed and acknowledged by Parent in accordance with the laws of the State of
California, under which Parent was organized.
IN WITNESS WHEREOF, Parent has caused this Certificate to be signed by
James R. Wodach, its Senior Vice President, this __th day of September, 1997.
PHARMAPRINT INC.
By:----------------------------------------
James R. Wodach, Senior Vice President
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PHARMAPRINT INC.
1. The name of the corporation is:
PHARMAPRINT INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801,
located in the County of New Castle, Delaware. The name of its registered
agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware, as amended (the
"DGCL").
4. The authorized capital stock of the Corporation shall consist of 25,000,000
shares of which 1,000,000 shall be Preferred Stock, par value $.001 per
share, and 24,000,000 shall be Common Stock, par value $.001 per share, and
the voting powers, designations, preferences and relative, participating,
optional or other special qualifications, limitations or restrictions
thereof are set forth hereinafter:
(a) The Preferred Stock may be issued in one or more series, each of which
shall be distinctively designated, shall rank equally and shall be
identical in all respects except as otherwise provided in subsection
(b) of this Section 4.
(b) Authority is hereby vested in the Board of Directors to issue from
time to time the Preferred Stock of any series and to state in the
resolution or resolutions providing for the issuance of shares of any
series the voting powers, if any, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions of such series to the full
extent now or hereafter permitted by the law of the State of Delaware
in respect of the matters set forth in the following clauses (i) to
(viii) inclusive:
(i) the number of shares to constitute such series, and the
distinctive designations thereof;
<PAGE>
(ii) the voting powers, full or limited, if any, of such series;
(iii) the rate of dividends payable on shares of such series, the
conditions on which and the times when such dividends are
payable, the preference to, or the relation to, the payment
of the dividends payable on any other class, classes or
series of stock, whether cumulative or non-cumulative and,
if cumulative, the date from which dividends on shares of
such series shall be cumulative;
(iv) the redemption price or prices, if any, and the terms and
conditions on which shares of such series shall be redeemable;
(v) the requirement of any sinking fund or funds to be applied to
the purchase or redemption of shares of such series and, if
so, the amount of such fund or funds and the manner of
application;
(vi) the rights of shares of such series upon the liquidation,
dissolution or winding up of, or upon any distribution of the
assets of, the Corporation;
(vii) the rights, if any, of the holders of shares of such series
to convert such shares into, or to exchange such shares for,
shares of any other class, classes or series of stock and
the price or prices or the rates of exchange and the
adjustments at which such shares shall be convertible or
exchangeable, and any other terms and conditions of such
conversion or exchange; and
(viii)any other preferences and relative, participating, optional
or other special rights of shares of such series, and
qualifications, limitations or restrictions including,
without limitation, any restriction on an increase in the
number of shares of any series theretofore authorized and
any qualifications, limitations or restrictions of rights or
powers to which shares of any future series shall be subject.
(c) The number of authorized shares of Preferred Stock may be increased or
decreased by the affirmative vote of the holders of a majority of the
votes of all classes of voting securities of the Corporation without a
class vote of the Preferred Stock, or any series thereof, except as
otherwise provided in the resolution or resolutions fixing the voting
rights of any series of the Preferred Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter or repeal the
Bylaws of the Corporation. Elections of Directors need not be written
ballot unless the Bylaws of the Corporation shall so provide.
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<PAGE>
7. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
8. A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv)
for any transaction from which the Director derived any improper personal
benefit. If the DGCL is hereafter amended to further reduce or to
authorize, with the approval of the Corporation's stockholders, further
reductions in the liability of the Director of the Corporation for breach
of fiduciary duty, then a Director of the Corporation shall not be liable
for any such breach to the fullest extent permitted by the DGCL as so
amended.
To the extent permitted by applicable law, this Corporation is also
authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the
Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested Directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the DGCL, subject only to
limits created by applicable Delaware law (statutory or non-statutory),
with respect to actions for breach of duty to the Corporation, its
stockholders and others.
Any repeal or modification of any of the provisions of this Section 8
shall be prospective and shall not adversely affect any right or protection
of a Director, officer, agent or other person existing at the time of, or
increase the liability of any Director of the Corporation with respect to
any acts or omissions of such Director occurring prior to, such repeal or
modification.
9. No holder of shares of stock of the Corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract,
to purchase or subscribe for or receive any shares of any class, or series
thereof, of stock of the Corporation, whether now or hereafter authorized,
or any warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any share of any
class, or series thereof, of stock; but such additional shares of stock and
such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the
Board of Directors to such persons, and on such terms and for such lawful
consideration as in its discretion it shall deem advisable or as the
Corporation shall have by contract agreed.
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<PAGE>
10. Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of
this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title
8 of the Delaware Code, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three fourths in value
of the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
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<PAGE>
I, THE UNDERSIGNED, being the sole incorporator, for the purpose of forming
a corporation pursuant to the DGCL, do make this certificate, hereby declaring
and certifying that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set my hand this 28th day of August, 1997.
-------------------------------------------
Barry J. Siegel, Sole Incorporator
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<PAGE>
BYLAWS OF
PHARMAPRINT INC.
ARTICLE I - OFFICES
SECTION 1-1. REGISTERED OFFICE AND REGISTERED AGENT. PharmaPrint Inc.
(the "Corporation") shall maintain a registered office and registered agent
within the State of Delaware, which may be changed by the Board of Directors
from time to time.
SECTION 1-2. OTHER OFFICES. The Corporation may also have offices at
such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.
ARTICLE II - STOCKHOLDERS' MEETINGS
SECTION 2-1. PLACE OF STOCKHOLDERS' MEETINGS. Meetings of stockholders
may be held at such place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. If no such place
is designated by the Board of Directors, meetings of the stockholders shall be
held at the registered office of the corporation in the State of Delaware.
SECTION 2-2. ANNUAL MEETING.
(a) DATE AND TIME. A Meeting of the stockholders of the Corporation
shall be held in each calendar year, on such date and time as is designated by
the Board of Directors.
(b) BUSINESS OF MEETING. At an annual meeting of the stockholders,
only such business shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting, business must be
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or (iii)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation no later than the date
specified in the Corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders, which date
shall be not less than one hundred twenty (120) calendar days in advance of the
date of such proxy statement; provided, however, that in the event that no
annual meeting was held in the previous year or the date of the annual meeting
has been changed by more than thirty (30) days from the date contemplated at the
time of the previous year's proxy statement, notice by the stockholder to be
timely must be so received a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to
<PAGE>
bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in his
capacity as a proponent to a stockholder proposal. In addition to the
foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's
meeting, stockholders must provide notice as required by the regulations
promulgated under the Exchange Act to the extent such regulations require
notice that is different from the notice required above. Notwithstanding
anything in these bylaws to the contrary, no business shall be conducted at
any annual meeting except in accordance with the procedures set forth in this
paragraph (b) of this Section 2-2. The chairman of the annual meeting shall,
if the facts warrant, determine and declare at the meeting that business was
not properly brought before the meeting and in accordance with the provisions
of this paragraph (b), and, if he should so determine, he shall so declare at
the meeting that any such business not properly brought before the meeting
shall not be transacted.
(c) BOARD OF DIRECTOR NOMINATIONS. Only persons who are nominated in
accordance with the procedures set forth in this paragraph (c) shall be eligible
for election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the Corporation
entitled to vote in the election of directors at the meeting who complies with
the notice procedures set forth in this paragraph (c). Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation in
accordance with the provisions of paragraph (b) of this Section 2-2. Such
stockholder's notice shall set forth (i) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a director (A)
the name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the corporation that are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Exchange Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serve as a director if elected) and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
subitems (ii), (iii) and (v) of the fifth (5th) sentence of paragraph (b) of
this Section 2-2. At the request of the Board of Directors, any person
nominated by a stockholder for election as a director shall furnish to the
Secretary that information required to be
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<PAGE>
set forth in the stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in
this paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures described by these bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
SECTION 2-3. SPECIAL MEETINGS. Except as otherwise specifically
provided by law, special meetings of the stockholders, for any purpose or
purposes prescribed in the notice of the meeting, may be called at any time
by the Board of Directors, the Chairman of the Board of Directors, the Chief
Executive Officer or the President and shall be held at such place, on such
date and at such time as the Board of Directors, the Chairman, the Chief
Executive Officer or the President shall fix pursuant to the notice.
Business transacted at any special meeting shall be limited to the purposes
stated in the notice.
If a special meeting is called by an person or persons other than
the Board of Directors, the request shall be in writing, specifying the time
of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or
by telegraphic or other facsimile transmission to the Chairman, the Chief
Executive Officer, the President or the Secretary. The officer receiving the
request shall promptly cause notice to be given to the stockholders entitled
to vote, in accordance with the provisions of Section 2-4 of this Article II,
that a meeting will be held at the time requested by the person or persons
calling the meeting, not fewer than thirty-five (35) days or more than one
hundred twenty (120) days after the receipt of the request. If such notice
is not given within twenty (20) days after the receipt of the request, the
person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph shall be construed as limiting, fixing or
affecting the time when a meeting of stockholders called by action of the
Board of Directors may be held.
SECTION 2-4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written
notice stating the place, date and hour of any meeting shall be given not
less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of
the Corporation. Such notice may be given by or at the direction of the
person or persons authorized to call the meeting.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
give to each stockholder of record entitled to vote at the meeting.
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<PAGE>
SECTION 2-5. QUORUM. At all meetings of stockholders, the presence in
person or by proxy, of the holders of a majority of the outstanding shares
entitled to vote shall constitute a quorum. The stockholders present at a
duly organized meeting can continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. If a meeting cannot be organized because of the absence of a quorum,
those present may, except as otherwise provided by law, adjourn the meeting
to such time and place as they may determine. At any adjourned meeting at
which a quorum is present any action may be taken which might have been taken
at the meeting as originally called.
SECTION 2-6. VOTING LIST; PROXIES. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy. All proxies
shall be executed in writing and shall be filed with the Secretary of the
Corporation not later than the day on which exercised. No proxy shall be
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period.
Except as otherwise specifically provided by law, all matters coming
before the meeting shall be determined by a vote by shares. Except as
otherwise specifically provided by law, all other votes may be taken by voice
unless a stockholder demands that it be taken by ballot, in which latter
event the vote shall be taken by written ballot.
SECTION 2-7. INFORMAL ACTION BY STOCKHOLDERS. Unless otherwise provided
by the Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which
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<PAGE>
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or be certified or
registered mail, return receipt requested.
Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing, as required by law.
SECTION 2-8. INSPECTORS OF ELECTION. Before any meeting of
stockholders, the Board of Directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any stockholder or a stockholder's
proxy shall, appoint inspectors of election at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting on the request of one or more stockholders or proxies, the
holders of a majority of shares of their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any stockholder or a
stockholder's proxy shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
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<PAGE>
ARTICLE III - BOARD OF DIRECTORS
SECTION 3-1. NUMBER. The business and affairs of the Corporation shall
be managed by a Board of Directors that shall consist of a minimum of five
members and a maximum of nine members, as may be fixed from time to time by the
vote of a majority of the Board of Directors. The initial number of directors
shall be seven.
Whenever the authorized number of directors is increased between
the annual meetings of the stockholders, a majority of the directors then in
office shall have the power to elect such new directors for the balance of
the term and until their successors are elected. Any decrease in the
authorized number of directors shall not become effective until the
expiration of the term of the directors then in office unless, at the time of
such decrease, there shall be vacancies on the Board of Directors which are
being eliminated by the decrease.
SECTION 3-2. PLACE OF MEETING. Meetings of the Board of Directors may
be held at such place either within or without the State of Delaware, as a
majority of the Directors may from time to time designate or as may be
designated in the notice calling the meeting.
SECTION 3-3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or
at such other place, date and hour as a majority of the Directors may from
time to time designate or as may be designated in the notice calling the
meeting.
SECTION 3-4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the Chairman, the Chief Executive
Officer, the President, the Secretary or any two Directors.
SECTION 3-5. NOTICES OF MEETINGS OF BOARD OF DIRECTORS.
(a) REGULAR MEETINGS. No notice shall be required to be
given of any regular meeting, unless the same be held at other than the time
or place for holding such meetings as fixed in accordance with Section 3-3 of
these bylaws, in which event two (2) days notice shall be given of the time
and place of such meeting.
(b) SPECIAL MEETINGS. At least one (1) business day's notice
shall be given of the time, place and purpose for which any special meeting
of the Board of Directors is to be held.
SECTION 3-6. QUORUM. A majority of the total number of Directors
shall constitute a quorum for the transaction of business, and the vote of a
majority of the Directors present at a
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<PAGE>
meeting at which a quorum is present shall be the act of the Board of
Directors. If there be less than a quorum present, a majority of those
present may adjourn the meeting from time to time and place to place and
shall cause notice of each such adjourned meeting to be given to all absent
Directors.
SECTION 3-7. INFORMAL ACTION BY THE BOARD OF DIRECTORS. Any action
required or permitted to be taken at any meeting of the Board of Directors,
or of any committee thereof, may be taken without a meeting if all members of
the Board or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the
Board or committee.
SECTION 3-8. POWERS.
(a) GENERAL POWERS. The Board of Directors shall have all
powers necessary or appropriate to the management of the business and affairs
of the Corporation, and, in addition to the power and authority conferred by
these bylaws, may exercise all powers of the Corporation and do all such
lawful acts and things as are not by statute, these bylaws or the Certificate
of Incorporation directed or required to be exercised or done by the
stockholders.
(b) SPECIFIC POWERS. Without limiting the general powers
conferred by the last preceding clause and the powers conferred by the
Certificate of Incorporation and bylaws of the Corporation, it is hereby
expressly declared that the Board of Directors shall have the following
powers:
(i) To declare dividends from time to time in accordance
with law.
(ii) To confer upon any officer or officers of the
Corporation the power to choose, remove or suspend assistant officers, agents
or servants.
(iii) To appoint any person, firm or corporation to
accept and hold in trust for the Corporation any property belonging to the
Corporation or in which it is interested, and to authorize any such person,
firm or corporation to execute any documents and perform any duties that may
be requisite in relation to any such trust.
(iv) To appoint a person or persons to vote shares of
another corporation held and owned by the Corporation.
(v) To adopt, from time to time, such stock option,
stock purchase, bonus or other compensation plans for Directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine.
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<PAGE>
(vi) To adopt, from time to time, such insurance,
retirement, and other benefit plans for Directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine.
(vii) By resolution passed by a majority of the whole
Board of Directors, to designate one (1) or more additional committees, each
to consist of one (1) or more Directors, to have such duties, owners and
authority as the Board of Directors shall determine. All committees of the
Board of Directors shall have the authority to adopt their own rules of
procedure. Absent the adoption of specific procedures, the procedures
applicable to the Board of Directors shall also apply to committees thereof.
(viii)To fix the place, time and purpose of meetings of
stockholders.
(ix) To purchase or otherwise acquire for the Corporation
any property, rights or privileges which the Corporation is authorized to
acquire, at such prices, on such terms and conditions and for such
consideration as it shall from time to time see fit, and, at its discretion,
to pay any property or rights acquired by the Corporation, either wholly or
partly in money or in stocks, bonds, debentures or other securities of the
Corporation.
(x) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.
(xi) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time
to time think fit, and to determine their duties, and fix, and from time to
time change, their salaries or emoluments, and to require security in such
instances and in such amounts as it think fit.
(xii) To determine who shall be authorized on the
Corporation's behalf to sign bills, notes, receipts, acceptances,
endorsements, checks, releases, contracts and documents.
SECTION 3-9. COMPENSATION OF DIRECTORS. Compensation of Directors and
reimbursement of their expenses incurred in connection with the business of
the Corporation, if any, shall be as determined from time to time by
resolution of the Board of Directors. This Section 3-9 shall not be
construed to preclude any Director from serving the Corporation in any other
capacity as an officer, agent, employee or otherwise, and receiving
compensation for such service.
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<PAGE>
SECTION 3-10. REMOVAL OF DIRECTORS BY STOCKHOLDERS. The entire Board
of Directors or any individual Director may be removed from office with or
without cause by a majority vote of the holders of the outstanding shares
then entitled to vote at an election of directors. In case the Board of
Directors or any one (1) or more Directors be so removed, new Directors may
be elected at the same time for the unexpired portion of the full term of the
Director or Directors so removed.
SECTION 3-11. RESIGNATIONS. Any Director may resign at any time by
submitting his written resignation to the Corporation. Such resignation
shall take effect at the time of its receipt by the Corporation unless
another time be fixed in the resignation, in which case it shall become
effective at the time so fixed. The acceptance of a resignation shall not be
required to make it effective.
SECTION 3-12. VACANCIES. Vacancies and new created directorships
resulting from any increase in the authorized number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director, and each person so elected shall
hold office for a term expiring at the annual meeting of stockholders at
which the term of the class to which he or she has been elected expires, and
until such directors successor shall have been duly elected and qualified.
SECTION 3-13. PARTICIPATION BY CONFERENCE TELEPHONE. Directors may
participate in regular or special meetings of the Board by telephone or
similar communications equipment by means of which all other persons
participating in the meeting can hear each other, and such participation
shall constitute presence at the meeting.
ARTICLE IV - OFFICERS
SECTION 4-1. ELECTION AND OFFICE. The Corporation shall have a
President, Secretary, Treasurer and Chief Financial Officer, all of whom
shall be elected by the Board of Directors. The Board of Directors may elect
such additional officers as it may deem proper, including a Chairman and a
Vice Chairman of the Board of Directors, one (1) or more Vice Presidents, and
one (1) or more assistant or honorary officers. Any number of offices may be
held by the same person.
SECTION 4-2. TERM. The term of office of any officer shall be as
specified by the Board of Directors.
SECTION 4-3. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD OF
DIRECTORS. Unless otherwise determined by the Board of Directors, the
Chairman of the Board of Directors, if any, shall preside at all meetings of
Directors. He shall have such other powers and perform such further duties
as may be assigned to him by the Board of Directors.
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SECTION 4-4. POWERS AND DUTIES OF THE PRESIDENT. Unless otherwise
determined by the Board of Directors, the President shall be the Chief
Executive Officer of the Corporation and shall have the usual duties of a
Chief Executive Officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to
the limitations of the laws of the State of Delaware, these bylaws, and the
actions of the Board of Directors, he may appoint, suspend and discharge
employees and agents, shall preside at all meetings of the stockholders at
which he shall be present, and, unless there is a Chairman of the Board of
Directors, shall provide at all meetings of the Board of Directors at which
he is present and, unless otherwise specified by the Board of Directors,
shall be a member of all Board of Director committees. He shall also do and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
Unless otherwise determined by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend and to act and to vote at any meeting of the stockholders of any
corporation in which the Corporation may hold stock and, at any such meeting,
shall possess and may exercise any and all of the rights and powers incident
to the ownership of such stock and which, as the owner thereof, the
Corporation might have possessed and exercised.
SECTION 4-5. POWERS AND DUTIES OF THE SECRETARY. Unless otherwise
determined by the Board of Directors, the Secretary shall record all
proceedings of the meetings of the Corporation, the Board of Directors and
all committees, in books to be kept for that purpose, and shall attend to the
giving and serving of all notices for the Corporation. He shall have charge
of the corporate seal, the certificate books, transfer books and stock
ledgers, and such other books and papers as the Board of Directors may
direct. He shall perform all other duties ordinarily incident to the office
of Secretary and shall have such other powers and perform such other duties
as may be assigned to him by the Board of Directors.
SECTION 4-6. POWERS AND DUTIES OF THE TREASURER. Unless otherwise
determined by the Board of Directors, the Treasurer shall have charge of all
the funds and securities or the Corporation which may come into his hands.
When necessary or proper, unless otherwise ordered by the Board of Directors,
he shall endorse for collection on behalf of the Corporation checks, notes
and other obligations, and shall deposit the same to the credit of the
Corporation In such banks or depositories as the Board of Directors may
designate and shall sign all receipts and vouchers for payments made to the
Corporation. He shall sign all checks made by the Corporation, except when
the Board of Directors shall otherwise direct. He shall enter regularly, in
books of the Corporation to be kept by him for that purpose, a full and
accurate account of all moneys received and paid by him on account of the
Corporation. Whenever required by the Board of Directors, he shall render a
statement of the financial condition of the Corporation. He shall at all
reasonable times exhibit his books and accounts to any Director of the
Corporation, upon application at the office of the Corporation during
business hours. He shall have such other powers and shall perform such other
duties as may be
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assigned to him from time to time by the Board of Directors. He shall give
such bond, if any, for the faithful performance of his duties as shall be
required by the Board of Directors and any such bond shall remain in the
custody of the President.
SECTION 4-7. POWERS AND DUTIES OF VICE PRESIDENTS AND ASSISTANT
OFFICERS. Unless otherwise determined by the Board of Directors, each Vice
President and each assistant officer shall have the powers and perform the
duties of his respective superior officer. Vice Presidents and assistant
officers shall have such rank as shall be designated by the Board of
Directors and each, in the order of rank, shall act for such superior officer
in his absence, or upon his disability or when so directed by such superior
officer or by the Board of Directors. Vice Presidents may be designated as
having responsibility for a specific aspect of the Corporation's affairs, in
which event each such Vice President shall be superior to the other Vice
Presidents in relation to matters within his aspect. Except as otherwise set
forth herein, the President shall be the superior officer of the Vice
Presidents. The Treasurer and the Secretary shall be the superior officers
of the Assistant Treasurers and Assistant Secretaries, respectively.
SECTION 4-8. DELEGATION OF OFFICE. The Board of Directors may
delegate the powers or duties of any officer of the Corporation to any other
officer or to any Director from time to time.
SECTION 4-9. VACANCIES. The Board of Directors shall have the power
to fill any vacancies in any office occurring from whatever reason.
SECTION 4-10. RESIGNATIONS. Any officer may resign at any time by
submitting his written resignation to the Corporation. Such resignation
shall take effect at the time of its receipt by the Corporation, unless
another time be fixed in the resignation, in which case it shall become
effective at the time so fixed. The acceptance of a resignation shall lot be
required to make it effective.
SECTION 4-11. REMOVAL. Subject to the provisions of any employment
agreement approved by the Board of Directors, any officer of the Corporation
may be removed at any time, with or without cause, by the Board of Directors.
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ARTICLE V - CAPITAL STOCK
SECTION 5-1. STOCK CERTIFICATES. Shares of the Corporation shall be
represented by certificates signed by or in the name of the Corporation by
(a) the Chairman or Vice Chairman of the Board of Directors, or the President
or a Vice President, and (b) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. If such certificate is countersigned (i) by
a transfer agent other than the Corporation or its employee, or (ii) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at
the date of issue.
SECTION 5-2. DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) The Board of Directors may fix a record date to determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
board of Directors, and which record date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) The Board of Directors may fix a record date to determine
the stockholders entitled to consent to corporate action in writing without a
meeting, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If
no record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to the Corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required, the record date for determining stockholders
entitled to consent to corporate
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action in writing without a meeting shall be at the close of business on the
day on which the Board of Directors adopts the resolution taking such prior
action.
(c) The Board of Directors may fix a record date to determine
the stockholders entitled to receive payment of any dividend or other
dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights with respect of any exchange,
conversion or exchange of stock, or for the purpose of any other lawful
action, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
SECTION 5-3. TRANSFER OF SHARES. Transfer of shares shall be made
only upon the transfer books of the Corporation kept at an office of the
Corporation, or by transfer agents designated to transfer shares of stock of
the Corporation. Except where a certificate is issued in accordance with
Section 5-4 of these bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation duly endorsed and
otherwise in proper form for transfer before a new certificate is issued
therefor. No transfer of shares shall be made on the books of this
Corporation if such transfer is in violation of a lawful restriction noted
conspicuously on the certificate.
SECTION 5-4. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES. The
Corporation may issue a new certificate of stock or uncertified shares in
place of any certificate therefor issued by it, alleged to heave been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen, or destroyed certificate, or his legal representative to give the
Corporation a bond sufficient to indemnify it against claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
ARTICLE VI - NOTICES
SECTION 6-1. CONTENTS OF NOTICE. Whenever any notice of a meeting is
required to be given pursuant to these bylaws or the Certificate of
Incorporation or otherwise, the notice shall specify the place, day and hour
of the meeting and, in the case of a special meeting or where otherwise
required by law, the general nature of the business to be transacted at such
meeting.
SECTION 6-2. METHOD OF NOTICE. All notices shall be given to each
person entitled thereto, either personally or by sending a copy thereof
through the mail or by telegraph, charges prepaid, to his address as it
appears on the records of the Corporation, or supplied by him to the
Corporation for the purpose of notice. Notices of special meetings of
stockholders shall conform to Section 2-4 and notices of special meetings or
the Board of Directors shall conform to Section 3-5. If notice is sent
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by mail or telegraph, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with the
telegraph office for transmission. If no address for a stockholder appears
on the books of the Corporation and such stockholder has not supplied the
Corporation with an address for the purpose of notice, notice deposited in
the United States mail addressed to such stockholder care of General Delivery
in the city in which the principal office of the Corporation is located shall
be sufficient.
SECTION 6-3. WAIVER OF NOTICE. Whenever notice is required to be
given under any provision of law or of the Certificate of Incorporation or
bylaws of the Corporation, written waiver, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, Directors, or members of a
committee of Directors need be specified in any written waiver of notice
unless so required by the Certificate of Incorporation.
ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
AND OTHER PERSONS
SECTION 7-1. PERSONS WHO QUALIFY AS AN INDEMNITEE.
(a) Any individual who is a duly elected or appointed member
of the Board of Directors, a corporate officer, or such employee or agent as
approved by the Board of Directors, shall be deemed a person who qualifies
for indemnification under this Article VII so long as said individual was
acting within the course and scope of his capacity as a director, officer,
approved employee and/or agent in accordance with the Certificate of
Incorporation and these bylaws. Any such qualified person, an "Indemnitee."
(b) Any previous member of the Board of Directors, corporate
officer or employee or agent as approved by the Board of Directors, who are
no longer serving in said capacities on behalf of the Corporation at the time
any qualified condition as hereinafter stated in this Article VII arises,
shall be entitled to indemnification under this resolution as though said
individual was still acting in his former capacity on behalf of the
Corporation.
(c) Previous members of the Board of Directors, corporate
officers and employees or agents approved by the Board of Directors, shall
qualify as Indemnitees under this Article VII upon approval by a resolution
of the Board of Directors and upon verification that said individual
terminated or resigned his position with the Corporation in good standing.
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SECTION 7-2. INITIAL INDEMNITY.
(a) The Corporation shall indemnify an Indemnitee when he is
a party or is threatened to be made a party to any pending, threatened or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was or had agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or had
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against any and all costs, charges and expenses,
including without limitation attorneys' and other fees and expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such Indemnitee in connection therewith and any appeal therefrom
if such Indemnitee acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent, shall not, of itself, creative a
presumption that such Indemnitee did not satisfy the foregoing standard of
conduct to the extent applicable thereto.
(b) The Corporation shall indemnify an Indemnitee when he is
a party or is threatened to be made party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was or
had agreed to become a director, officer, employee or agent of the
Corporation, or is or was serving or had agreed to serve at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
costs, charges and expenses (including attorneys' and others' fees and
expenses) actually and reasonably incurred by him in connection with the
defense or settlement thereof or any appeal therefrom if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such Indemnitee
shall have been adjudged to be liable to the Corporation unless and only to
the extent that the court in which such action, suit or proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such
other court shall deem proper.
(c) Any indemnification under paragraphs (a) or (b) of this
Section 7-2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination, in accordance with Section
7-4 of this Article VII or any applicable provision of any other agreement, any
resolution or otherwise, that an Indemnitee is entitled to
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indemnification. Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or, (ii) if such a quorum or
disinterested directors is not available or so directs, by independent legal
counsel (designated in the manner provided below in this subsection (c)), in
a written opinion, or (iii) by a majority vote of the stockholders.
Independent legal counsel shall not be any person or firm who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Corporation or an Indemnitee
in an action to determine such Indemnitee's rights under this Article VII.
The Corporation shall pay the reasonable fees and expenses of such
independent legal counsel and indemnify fully such counsel against any and
all expenses (including reasonable attorneys' fees), claims, liabilities and
damages arising out of or relating to the engagement of such counsel pursuant
to this paragraph (c).
(d) To the extent that an Indemnitee has been successful on
the merits or otherwise, including without limitation the dismissal of an
action without prejudice, in defense of any action, suit or proceeding or in
defense of any claim, issue or matter therein, he shall be indemnified
against costs, charges and expenses (including attorneys' and others' fees
and expenses) actually and reasonably incurred by him in connection
therewith.
(e) For purposes of this Article VII, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on the Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by, an
Indemnitee with respect to any employee benefit plan, its participants or
beneficiaries; and if an Indemnitee acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan he shall be deemed to have acted in
a manner "not opposed to the best interests of the Corporation" as referred
to herein.
SECTION 7-3. ADDITIONAL INDEMNIFICATION.
(a) Without limiting any right which an Indemnitee may have
pursuant to the Certificate of Incorporation, these bylaws, Delaware law, any
other agreement, any resolution, any policy of insurance or otherwise, but
subject to the limitations on the maximum permissible indemnity which may
exist under applicable law at the time of any request for indemnity under
this Article VII determined as contemplated by Section 7-4 of this Article
VII, the Corporation shall pay on behalf of such Indemnitee, and his
executors, administrators or assigns, any amount which he is or becomes
legally obligated to pay relating to or arising out of any claim made against
him because of any act, failure to act or neglect or breach of duty,
including any actual or alleged error, misstatement or misleading statement,
which he commits, suffers, permits or acquiesces in while acting in his
capacity as a director, officer, employee or agent of the Corporation. The
payments
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which the Corporation is obligated to make pursuant to this Section 7-3 shall
include without limitation damages, judgments, fines, settlements and
reasonable charges, costs, expenses, expenses of investigation and reasonable
expenses of defense of legal actions, suits proceedings or claims and appeals
therefrom, and reasonable expenses of appeal, attachment or similar bonds;
provided, however, that the Corporation shall not be obligated under this
Section 7-3 to make any payment in connection with any claim against such
Indemnitee:
(i) for which and to the extent that payment is actually
made to such Indemnitee under a valid and collectible insurance policy;
(ii) for which and to the extent that such Indemnitee is
indemnified by the Corporation otherwise than pursuant to this Section 7-3;
(iii)which results in a final, nonappealable order
for such Indemnitee to pay a fine or similar governmental imposition which
the Corporation is prohibited by applicable law from paying; or
(iv) based upon or attributable to such Indemnitee
gaining in fact a personal profit to which he was not legally entitled,
including without limitation profits made from the purchase and sale by such
Indemnitee of equity securities or the Corporation which are recoverable by
the Corporation pursuant to Section 16(b) of the Securities Exchange Act of
1934, as amended, and profits arising from transactions in publicly traded
securities of the Corporation which were effected by such Indemnitee in
violation of Section 10(b) of the Securities Exchange Act of 1934, as
amended, including Rule 10b-5 promulgated thereunder.
The determination of whether an Indemnitee shall be entitled to
indemnification under this Section 7-3 may, but shall not be required to, be
made in accordance with paragraph (a) of Section 7-4 of this Article VII. If
that determination is so made, it shall be binding upon the Corporation and
such Indemnitee for all purposes.
(b) Expenses (including without limitation reasonable
attorneys' and others' fees and expenses) incurred by an Indemnitee in
defending any actual or threatened civil or criminal action, suit, proceeding
or claim shall be paid by the Corporation in advance of the final disposition
thereof as authorized in accordance with paragraph (b) of Section 7-4 of this
Article VII.
SECTION 7-4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION.
(a) For purposes of pursing his rights to indemnification
under this Article VII, an Indemnitee shall submit to the Board of Directors
a sworn statement of request for indemnification (an "Indemnification
Statement") averring that he is entitled to indemnification
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under this Article VII. Submission of any Indemnification Statement to the
Board of Directors shall create a presumption that such Indemnitee is
entitled to Indemnification under this Article VII and the Board of Directors
shall be deemed to have determined that such Indemnitee is entitled to such
indemnification unless, within thirty (30) calendar days after submission of
the Indemnification Statement, the Board shall determine, based upon clear
and convincing evidence (sufficient to rebut the foregoing presumption) and
such Indemnitee shall have received notice within such period in writing of
such determination, that such Indemnitee is not entitled to indemnification
under this Article VII, which evidence shall be disclosed to such Indemnitee
with particularity in such notice. The foregoing notice shall be sworn to by
all persons who participated in the determination and voted to deny
indemnification.
(b) For purposes of determining whether to authorize
advancement of expenses pursuant to paragraph (b) of Section 7-3 of this
Article VII, an Indemnitee shall be required to submit to the Board of
Directors a sworn statement of request for advancement of expenses
substantially (the "Undertaking"), averring that (i) he has incurred or will
incur actual expenses in defending a civil or criminal action, suit
proceeding or claim and (ii) he undertakes to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation pursuant to this Article VII. Upon receipt of the Undertaking,
the Board shall within ten (10) calendar days authorize immediate payment of
the expenses stated in the Undertaking, whereupon such payments shall
immediately be made by the Corporation. No security shall be required in
connection with any Undertaking and any Undertaking shall be accepted without
reference to such Indemnitee's ability to make repayment.
SECTION 7-5. INSURANCE. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this Article VII.
ARTICLE VIII - RELIANCE UPON BOOKS, REPORTS AND RECORDS
Each Director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation, shall, in the performance of
his duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation, including reports made to the
Corporation by any of its officers, by an independent certified public
accountant, or by an appraiser selected with reasonable care.
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ARTICLE IX - LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with
or without interest and may be unsecured, or secured in such manner as the
Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation. Nothing in this bylaw shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.
ARTICLE X - SEAL
The form of the seal of the Corporation, called the corporate seal
[Form of Seal] of the Corporation, shall be as impressed adjacent hereto.
ARTICLE XI - FISCAL YEAR
The Board of Directors shall have the power by resolution to fix
the fiscal year of the Corporation. If the Board of Directors shall fail to
do so, the President shall fix the fiscal year.
ARTICLE XII - AMENDMENTS
The original or other bylaws may be adopted, amended or repealed by
the stockholders entitled to vote thereon at any regular or special meeting
or, if the Certificate of Incorporation so provides, by the Board of
Directors. The fact that such power has been so conferred upon the Board of
Directors shall not divest the stockholders of the power nor limit their
power to adopt, amend or repeal bylaws.
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ARTICLE XIII - INTERPRETATION OF BYLAWS
All words, terms and provisions of these bylaws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of
Delaware, as amended, and as amended from time to time hereafter.
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* The confidential material marked by brackets contained herein has been
omitted and has been separately filed with the Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
LICENSE AGREEMENT (U.S.)
THIS Agreement is made this 6th day of October, 1997 by and between
PharmaPrint Inc., a corporation organized and existing under the laws of the
State of Delaware having its principal place of business at 4 Park Plaza,
Suite 1900, Irvine, California 92614 and its subsidiaries, including
PharmaPrint B.V. ("PharmaPrint"), and American Home Products Corporation,
acting through its Whitehall-Robins Healthcare division, a corporation
organized and existing under the laws of the State of Delaware, having its
principal place of business at 5 Giralda Farms, Madison, New Jersey 07940
("AHP").
A. PharmaPrint has developed a method for the identification,
characterization of and regulation of the amounts of bioactive components in
herbal products and is seeking to commercialize certain of the herbal
products identified, characterized and regulated thereby.
B. PharmaPrint has developed technological know-how, obtained patents
and filed patent applications relating to and/or covering the subjects of
Paragraph A above.
C. AHP desires to obtain an exclusive license and right under the
above technology, patent and patent applications to market and sell such
herbal products.
<PAGE>
2
D. AHP desires to obtain the aforementioned rights so that it can
purchase, pursuant to a separate, contemporaneous agreement, its supply of
licensed herbal products from PharmaPrint so that AHP can market, distribute
and sell same (as hereinafter provided) throughout the Territory free of
charges of or suits for infringement of PharmaPrint's present or future
Patent Rights and Technology.
ARTICLE I
DEFINITIONS
Terms defined in this Article I shall for all purposes of this Agreement,
as the same may be amended or supplemented from time to time, have the meaning
herein specified.
1.1 The term "Act" shall mean the Federal Food, Drug and Cosmetic Act, as
amended from time to time.
1.2 The term "Additional Product(s)" shall have the meaning set forth in
Paragraph 5.1.
1.3 (a) The term "AHP Affiliate" shall mean any company which directly or
indirectly through stock ownership or through other contractual arrangement
either controls, or is controlled by, or is under common control with AHP.
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(b) The term "PharmaPrint Affiliate" shall mean any company which
directly or indirectly through stock ownership or through other contractual
arrangement either controls, or is controlled by, or is under common control
with PharmaPrint.
1.4 The term "Branded Product(s)" shall mean a product manufactured,
marketed or sold under a regional or national brand label, whether or not a
registered trademark.
1.5 The term "Combination Product(s)" shall mean a composition containing
at least one (1) Herbal Product in admixture with at least one (1) mineral,
vitamin and/or other nutrient other than an Herbal Product. For the avoidance
of doubt, Combination Products do not include Dual Products.
1.6 The term "Commercially Reasonable Efforts" shall mean efforts and
resources normally used by a party for a non-prescription pharmaceutical product
of its own discovery of similar market potential at a similar stage in its
product life, taking into account the competitiveness of the marketplace, the
proprietary position of the product and its dosage form, the regulatory
structure involved, the profitability of the product, and other relevant
factors. It is anticipated by the parties that the level of effort will change
over time reflecting changes in the status of the relevant product and the
marketplace.
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1.7 The term "Dual Product(s)" shall mean a composition wherein its
components (excluding inactive ingredients, excipients and coating compositions)
consist solely of Licensed Products.
1.8 The term "Effective Date" shall mean the date first written
hereinabove.
1.9 The term "FDA" shall mean the Federal Food and Drug Administration of
the United States Department of Health and Human Services, or any successor
agency thereto.
1.10 The term "Foreign Agreement" means the counterpart of this Agreement
granting certain rights to AHP in countries outside the Territory, as executed
by the parties concurrently with this Agreement.
1.11 The term "Government Approvals" shall mean any approvals, licenses,
registrations or authorizations, howsoever called, of any United States
federal, state or local regulatory agency, department, bureau or other
government entity, including the FDA, necessary for the manufacture, use,
storage, transport or sale, both interstate and intrastate, in the Territory
of Product. The term "Government Approvals" further means compliance with
the requirements of the United States Dietary Supplement Health and Education
Act of 1994.
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1.12 The term "Improvements" shall mean any and all new and useful
processes, manufactures, devices, compositions of matter (except as limited
below) or methods of use first conceived, reduced to practice or developed
after the Effective Date and during the term of this Agreement by
PharmaPrint, or a PharmaPrint Affiliate or any employees, consultants or
other persons under their direction or control which increase the
performance, efficacy or safety of a Licensed Product, reduce the cost of
manufacture, harmful side-effects or adverse reactions to Licensed Product,
or otherwise relate to the manufacture or use of Licensed Product or the
practice of the method claimed in any of the patents and/or patent
applications within the Patent Rights. For the avoidance of doubt, the
defined term "Improvement" does not include Licensed Products per se.
1.13 The term "Initial Product(s)" shall mean those herbal products set
forth in Schedule A.
1.14 The term "National Launch Date" as applied to a Licensed Product
shall mean the date when commercial quantities of such Licensed Product are
first shipped to the trade by AHP for sale in the OTC Market.
1.15 The term "NDA" shall mean New Drug Application as defined in
regulations promulgated by the FDA under the Act filed with or
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6
intended to be filed with the FDA for approval for marketing the Licensed
Product in the Territory.
1.16 The term "NDA Product" shall mean a herbal Licensed Product which
(i) it or its method of manufacture or use is claimed in one or more claims
of a patent or patent application within the Patent Rights in the country of
its manufacture, use or sale, (ii) is the subject of an NDA program proposed
by PharmaPrint or an approved NDA based on an application filed by
PharmaPrint in the Territory.
1.17 The term "Net Sales" as applied to a Licensed Product shall mean
gross sales of such Licensed Product as packaged for sale to an end-user,
less transportation charges, returns and allowances (actually paid or allowed
by AHP) , customary discounts (actually paid or allowed, whether in cash or
trade), and sales and other taxes based on sales when included in gross
sales, but not including taxes assessed on income derived from such sales.
Net Sales shall not include Free Goods as defined in the Supply Agreement.
1.18 The term "OTC Market" shall mean sales to the general public other
than those requiring a physician's prescription.
1.19 The term "Patent Rights" shall mean any and all issued patents in
the Territory and any and all patent applications for
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7
letters patent pending in the Territory (until such time as such applications
or any of them are denied, abandoned, or issue into patents) listed in
Schedule B attached hereto, any patents issuing from such applications, all
divisions, continuations, continuations-in-part and all patents granted
thereon, as well as all other patents in the Territory, including any
re-issues, renewals, or extensions thereof, which are owned by PharmaPrint, a
PharmaPrint Affiliate or under which PharmaPrint or a PharmaPrint Affiliate
shall have the right to grant rights, and which claim a Product or
Improvement, or the manufacture or use of a Product or Improvement, which
claim has not lapsed, become abandoned or been declared invalid or
unenforceable by a final non-appealed or unappealable decision or judgment of
a court or tribunal of competent jurisdiction.
1.20 The term "Patent(s)" shall mean any and all issued patents within
the Patent Rights, including the Process Patent.
1.21 The term "Process Patent" shall mean U.S. Patent Application No.
08/838,199, filed April 15, 1997, a continuation-in-part application of U.S.
Patent Application No. 08/632,273, filed April 15, 1996 or a patent issued on
a divisional, continuation or continuation-in-part application on one or more
of the patent applications for the Process Patent.
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1.22 The term "Licensed Product(s)" shall mean any Initial Product as
well as any Additional Product and/or NDA Product which have been added
through the operation of Article V.
1.23 The term "Supply Agreement" means the agreement for the sale and
supply of Licensed Products by PharmaPrint to AHP, as executed by the parties
concurrently with this Agreement.
1.24 The term "Territory" shall mean the United States, its territories
and possessions as well as the Commonwealth of Puerto Rico.
1.25 The term "Trademark" shall mean the trademark "PHARMAPRINT" which
is applied for, owned by and/or registered in the name of PharmaPrint.
1.26 The term "Herbal Product" shall mean a dietary supplement derived
from botanical herbal extracts.
ARTICLE II
GRANT OF LICENSE
2.1 (a) PharmaPrint hereby grants to AHP, and AHP accepts, the sole
and exclusive right, without the right to grant sublicenses except to AHP
Affiliate(s), under the Patent Rights to market and sell Herbal Products,
including the Licensed Products, in the OTC Market in the Territory.
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9
(b) PharmaPrint hereby grants to AHP, and AHP accepts, a
non-exclusive right, without the right to grant sublicenses except to AHP
Affiliate(s), under the Patent Rights to use the Herbal Products, including
the Licensed Products, in the OTC Market in the Territory.
2.2 AHP may unilaterally decide not to commercialize, or to cease
commercialization, of any Licensed Product and shall do so in accordance with
the termination provisions set forth herein in Article XII. The termination
of this Agreement with respect to any Licensed Product shall result in its
deletion from the defined term Licensed Product.
2.3 During the term of this Agreement, PharmaPrint further grants to AHP a
royalty-free non-exclusive license, without the right to grant sublicenses
except to AHP Affiliate(s), under the Trademark for use in conjunction with the
marketing and/or sale of the Licensed Products in the OTC Market in the
Territory, provided any such use of the Trademark shall be consistent with and
recognize PharmaPrint's ownership thereof and reasonably comply with the
standards of quality used and/or established by PharmaPrint.
2.4 PharmaPrint further grants AHP the rights to Additional Products as
set forth in Article V hereof.
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ARTICLE III
CLINICAL DEVELOPMENT
AND REGULATORY REGISTRATION
3.1 PharmaPrint shall expend Commercially Reasonable Efforts to conduct
all research and development necessary to produce the Licensed Product and
fulfill its obligations hereunder. PharmaPrint shall further conduct all
stability testing and clinical trials necessary for the marketing of Licensed
Product in the OTC Market in the Territory.
3.2 (a) All regulatory filings to obtain Government Approvals and all
Government Approvals in the Territory shall be filed in the name of and owned
by PharmaPrint. PharmaPrint agrees, to the extent practical, to provide AHP
with a sufficient opportunity to review and comment on all regulatory filings
and material correspondence to regulatory agencies prior to submission, and
with material correspondence from regulatory agencies prior to submission of
a response.
(b) PharmaPrint agrees to expend Commercially Reasonable Efforts
in the filing, securing and maintenance of all Government Approvals,
including those necessary due to changes in the applicable statutes, rules
and related regulations. All such costs shall be borne by PharmaPrint.
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11
(c) In the event of extraordinary requirements related to the
obtaining or maintenance of such Government Approvals, the parties shall discuss
the apportionment of expenses related thereto. In the event that an agreement
cannot be reached at AHP's sole discretion, AHP may terminate its rights to the
affected Licensed Product in accordance with the provisions of Paragraph 12.3 or
12.4.
ARTICLE IV
PAYMENTS
4.1 In consideration of and support of the research and development
efforts undertaken and to be undertaken by PharmaPrint, AHP shall pay
PharmaPrint a fee of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00)
within thirty (30) days following the Effective Date.
4.2 In recognition of the continuing research and development efforts
necessary by PharmaPrint, AHP shall further pay to PharmaPrint the following
payments:
(a) FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) upon the issuance of
the Process Patent having a claim at least as broad as the model claim shown on
Schedule D attached hereto; and
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12
(b) FIVE HUNDRED THOUSAND DOLLARS ($500, 000. 00) upon (i) the
issuance to PharmaPrint of all Government Approvals directed to the Initial
Products, (ii) acceptance of the Initial Products by AHP for commercial release
and (iii) the receipt by AHP of supplies of such Initial Products from
PharmaPrint under the Supply Agreement in sufficient time and quantities such
that the National Launch Dates of each of such Initial Products may occur on or
before [*].
4.3 With the exception of the running royalty set forth in Paragraph 4.4
and possible additional financial commitments incurred pursuant to Paragraph
3.2(c), after making the payments set forth in Paragraph 4.1 and 4.2, no further
fees shall be owed to PharmaPrint by AHP regardless of whether PharmaPrint
receives any additional or other Government Approvals for any Initial Products
anywhere within the Territory.
4.4 During the term of this Agreement, as royalty for the licenses granted
under Paragraph 2.1, AHP shall pay to PharmaPrint a running royalty as set forth
below on the total Net Sales of Licensed Products sold by AHP and AHP Affiliates
in the Territory ("Earned Royalties").
Royalty Year Cumulative Net Sales
of Product under this Agreement ROYALTY RATE
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I. For the period commencing on the National
Launch Date and ending one year thereafter.
a. For Licensed Products covered by a 4%
Patent which contains a process or
product claim at least as broad as
one of those recited in Schedule D.
II. Subsequent to one year after the National
Launch Date through expiration or termination
of this Agreement.
a. For Licensed Products covered by a 6%
Patent which contains a process or product
claim at least as broad one of those recited
in Schedule D.
For the avoidance of doubt, no running royalty shall be due PharmaPrint
from AHP for Licensed Products not meeting the patent coverage requirements set
forth in this Paragraph 4.4.
4.5 Earned Royalties as provided in Paragraph 4.4 accrued shall be paid by
AHP to PharmaPrint within thirty (30) days after the end of each quarter of each
Royalty Year. Each payment shall be accompanied by a report in writing showing
the period for which such payment is made, the Net Sales of Licensed Product
during such period, and the amount of Earned Royalty thereon and any credit
pursuant to Paragraph 4.10. The first Royalty Year shall consist of the period
commencing on the day of the first National Launch Date, and ending on the last
day of the fourth calendar quarter thereafter. Each subsequent Royalty Year
shall consist of the
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14
twelve (12) month period commencing the first day after the
last day of the previous Royalty Year.
4.6 In the event that the parties disagree whether Earned Royalties should
accrue with respect to patent issues on a specific product and are unable to
successfully resolve the issue after good faith negotiation, the matter shall be
referred to an independent patent attorney agreed to by both parties. The
ultimate determination of such independent patent attorney shall be final and
binding upon the parties. All fees incurred in connection with resolution of
this dispute shall be borne by the party which determined incorrectly that
Earned Royalties were or were not due.
4.7 During the period commencing on the first National Launch Date and
ending two (2) years thereafter, AHP shall annually expend as a minimum for
Marketing Support (defined immediately below) for the Licensed Products [*].
As used herein, Marketing Support shall mean detailing; expenditures on media
(including the cost of purchasing mass advertising media to include TV and
radio time, press space, cinema and outdoor display, and the costs of
production of advertising material and advertising agency remuneration);
market research; promotions (including promotional trade discounts, point
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15
of sale display, couponing and associated costs, mailings, consumer and
professional sampling, and professional conventions and conferences); and
other roll-out activities for the Licensed Products.
4.8 In the event that AHP fails to meet the requirements of Paragraph 4.7,
then PharmaPrint shall have the right to convert AHP's rights under Paragraphs
2.1 and 2.3 of this Agreement and under the Foreign Agreement from exclusive to
semi-exclusive such that PharmaPrint may offer such rights to one third party
other than AHP for the sale of Branded Products only. In such event, AHP shall
not have any further obligation to expend minimum Marketing Support levels for
such Licensed Products. PharmaPrint's right to convert AHP's rights from
exclusive to semi-exclusive shall be the sole remedy of PharmaPrint for failure
of AHP to meet the requirements of Paragraph 4.7.
4.9 During the term of this Agreement, AHP shall expend Commercially
Reasonable Efforts in the marketing of the Licensed Products.
4.10 No royalties as set forth in this Article IV shall be payable on
intercompany sales transactions as between or among AHP and AHP Affiliates, the
final sale by AHP or AHP Affiliate to a third party, alone, being used for the
purposes of determining the
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royalty payments due hereunder. A Licensed Product subject to royalty
payment shall be deemed sold when invoiced or, if not invoiced, when the same
shall be delivered to the third party.
4.11 Whenever, because of price adjustment, including allowances or
returned goods sold during any period, or for any other reason, AHP shall have
overpaid or underpaid the royalty amount due for such period, AHP shall, upon
determining the amount of overpayment or underpayment, deduct or add the same
from or to the payment payable for the period during which the amount of the
overpayment or the underpayment is determined; and if after such deduction and
addition there remains an overpayment, such overpayment shall be deducted from
the payment payable for the immediately following period or, if there is no
following payment period, such overpayment shall be refunded to AHP.
4.12 AHP shall keep, and shall cause its AHP Affiliates to keep, complete
and accurate records of all sales of Licensed Product for a minimum of three (3)
years after the sales period to which they pertain. Said records shall be open
during reasonable business hours to a certified public accountant selected by
PharmaPrint and acceptable to AHP, who shall, at PharmaPrint's expense, have
access to all records deemed by such accountant as reasonably necessary in
verifying for PharmaPrint, not more often
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than once each calendar year, the royalties accrued, payments made or to be
made, and the accuracy of the reports to be made, as herein provided.
However, said accountant shall agree in writing to treat as confidential and
not to disclose to PharmaPrint any information other than information
relating solely to the royalties accrued and the accuracy of the reports and
payments required to be made under this Agreement, and that in no event will
the quantities or prices to individual customers be disclosed to PharmaPrint
by said accountant.
4.13 In the event that AHP is prevented from selling or using any Licensed
Product, as a result of any regulatory action by a governmental agency or
authority of competent jurisdiction in the Territory, then for the period AHP is
prevented from selling or using such Licensed Product the Marketing Support
requirement of Paragraph 4.7 shall be suspended.
ARTICLE V
RIGHTS TO ADDITIONAL PRODUCTS
5.1 Promptly after the Effective Date, and from time to time thereafter,
the parties shall meet to discuss the development of herbal products other than
the Initial Products ("Additional Product") and their possible inclusion as
Licensed Products.
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5.2 (a) AHP may annually propose to PharmaPrint the development of up to
[*] Additional Products other than NDA Products. PharmaPrint shall exercise
Commercially Reasonable Efforts to develop such Additional Products.
(b) PharmaPrint shall conduct all development work, including
stability, necessary for the marketing of such Additional Product other than NDA
Products. Upon the successful completion of the development of each such
Additional Product and its acceptance by AHP, as reasonably determined by AHP,
AHP shall reimburse PharmaPrint in the amount of THREE HUNDRED AND EIGHTY FIVE
THOUSAND DOLLARS ($385,000.00) for the research and development associated with
each such Additional Product other than NDA Products. Such Additional Product
shall be included within the Licensed Products and subject to the accrual of
royalties pursuant to Paragraph 4.4 thereon.
(c) Should AHP not accept such Additional Product other than an NDA
Product, PharmaPrint shall not license to a third party or market, distribute or
sell such Additional Product other than an NDA Product to any third party under
the Trademark.
5.3 (a) Beginning one (1) year following the initial National Launch
Date, PharmaPrint may annually propose to AHP the
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development of one (1) Additional Product other than NDA Products. If such
development is approved by AHP in writing, PharmaPrint shall exercise
Commercially Reasonable Efforts to develop such Additional Product.
(b) PharmaPrint shall conduct all development work, including
stability testing, necessary for the marketing of such Additional Product other
than an NDA Product. Upon the successful completion of the development of each
such Additional Product and its acceptance by AHP, as reasonably determined
solely by AHP, AHP shall reimburse PharmaPrint in the amount of THREE HUNDRED
AND EIGHTY FIVE THOUSAND DOLLARS ($385,000.00) for the research and development
associated with each such Additional Product other than an NDA Product. Such
Additional Product other than an NDA Product shall be included within the
Licensed Products and subject to the accrual of royalties pursuant to Paragraph
4.4 thereon.
(c) Should AHP not accept such Additional Product other than an
NDA Product, PharmaPrint shall not license to a third party or market,
distribute or sell such Additional Product other than an NDA Product under the
Trademark.
5.4 (a) During the term hereof, PharmaPrint shall have the right and
obligation to annually propose up to [*] Additional
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20
Products and/or Initial Products which are NDA Products to AHP. PharmaPrint
grants AHP an exclusive option to acquire such Additional and Initial
Products as Licensed Products during an Option Period (as defined below) AHP,
at its sole option, may accept or reject such Initial and/or Additional
Product as a Licensed Product to be developed, marketed and sold under this
Agreement. During the Option Period, all Initial and Additional Products
which are NDA Products proposed by PharmaPrint shall be submitted to AHP for
its consideration hereunder.
(b) PharmaPrint shall give written notice to AHP of each
proposed Initial and Additional Product which are NDA Products. Included in
said notice shall be a statement of anticipated development work and Government
Approvals necessary for marketing of such Initial and Additional Product within
the Territory.
(c) AHP shall either accept or reject each proposal submitted
under subparagraph (b) hereof from PharmaPrint within ninety (90) days of
receipt of such proposal (hereinafter the "Option Period"). If rejected by AHP,
PharmaPrint shall be free to license such product to a third party and AHP shall
relinquish all rights to such Product as an NDA Product under this Agreement.
(d) If such Additional Product is accepted pursuant to
subparagraph (c) above, the Option Period shall be extended by a
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21
period of three (3) months during which AHP may conduct market, scientific or
other studies directed to such Additional Product. At the conclusion of such
three (3) month period, AHP shall notify PharmaPrint in writing of its
decision to finally accept or reject such Additional Product. If rejected by
AHP, PharmaPrint shall be free to license such product to a third party and
AHP shall relinquish all rights to such Product as an NDA Product under this
Agreement.
(e) If such Additional Product is accepted pursuant to
subparagraph (d) above, the Option Period shall be extended by a further one (1)
month during which time the parties shall engage in good faith negotiations
regarding such Additional Product. Such negotiations shall include discussions
concerning Marketing Support, necessary development and clinical trials and
AHP's contribution thereon and any royalty due on such Additional Product.
(f) If the parties fail to successfully conclude negotiations
pursuant to subparagraph (e) , then PharmaPrint shall be free to offer third
parties terms to develop, manufacture purchase, license, distribute, co-market,
or co-promote such Additional Product which, when taken as a whole, are no less
favorable to PharmaPrint than the principal terms of the proposal
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22
offered by PharmaPrint to AHP. Prior to entering into such an agreement with
a third party, PharmaPrint shall promptly notify AHP, in writing and in
confidence, of the principal terms of such agreement. If AHP notifies
PharmaPrint within ten (10) business days of such notice, that such terms
offered to a third party, when taken as a whole, are less favorable to
PharmaPrint than those offered by AHP, then PharmaPrint and AHP shall have an
additional ten (10) business days to discuss why such terms are or are not
less favorable. If the parties do not agree within such ten (10) business
day period that such terms are not less favorable, then such issue shall be
immediately referred to an independent certified public accounting firm
acceptable to both parties which shall resolve such disagreement within
forty-five (45) days of the referral to said firm. If the parties agree, or
it is determined by the independent certified public accounting firm that the
terms, when taken as a whole, are less favorable to PharmaPrint than AHP's
proposal to PharmaPrint, then PharmaPrint, at its option, shall either
re-negotiate with such third party such that the terms are not less favorable
to PharmaPrint, or accept the initial AHP proposal to PharmaPrint which AHP
shall have five (5) days to finally accept or reject. If accepted by AHP,
the parties shall negotiate a final agreement pursuant to Paragraph 5.3(e)
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ARTICLE VI
PATENTS AND TRADEMARKS
6.1 PharmaPrint shall be responsible, at its cost and expense, for
prosecuting to issuance all patent applications, for filing and prosecuting all
patent reissues and re-examinations, for applying for and obtaining any patent
term extensions, and for paying all maintenance fees, on a large-entity basis,
on all patents, as PharmaPrint determines to be commercially reasonable, which
applications and patents constitute the Patent Rights under this Agreement.
6.2 Within thirty (30) days of execution and delivery of this
Agreement by both parties and to the extent not already provided, PharmaPrint
shall provide AHP with a copy of the prosecution file wrapper histories of each
patent and application constituting Patent Rights under this Agreement.
PharmaPrint agrees to transmit promptly to AHP each action and correspondence as
soon as reasonably possible after it is received from the United States Patent
and Trademark Office, to submit to AHP for consideration and advice all
responses to and correspondence with the United States Patent and Trademark
Office before filing same, and to give due consideration to the advice of AHP in
this regard. PharmaPrint, however, shall have ultimate authority and
responsibility for all
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24
responses to and correspondence with the United States Patent and Trademark
Office.
6.3 In the event PharmaPrint should elect not to continue the
prosecution of any patent application, patent reissue or patent re-examination,
to apply for a patent extension, or to pay a patent maintenance fee, PharmaPrint
shall notify AHP of such decision at least thirty (30) days in advance of the
due date for such action or payment, and AHP shall have the right, but not the
obligation, to assume PharmaPrint's responsibility therefor.
6.4 (a) AHP shall have the right to use and market the Licensed
Product under any AHP-owned trademarks, tradenames and/or tradedress it may
choose. Except as provided in subparagraph (b), AHP agrees to promote the
Licensed Products in association with AHP's CENTRUM-Registered Trademark-
trademark. AHP further agrees that the packaging of the License Products shall
bear a reference to PharmaPrint's ownership of the Trademark.
(b) AHP is not obligated to promote any Herbal Products under
the Centrum-Registered Trademark- trademark if those Herbal Products are covered
under Paragraph 13.1(c).
6.5 Other than the Trademark, PharmaPrint shall have no right, title
or interest in or to any trademarks, tradenames or tradedress which AHP may use
on or in connection with Product, or
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25
the packaging, advertising, promotion, labeling, marketing or selling
thereof. So long as AHP or any AHP Affiliate shall have any interest in or
to any such trademarks, tradenames or tradedress, whether as proprietor,
owner, licensee or licensor, in any state or country of the world,
PharmaPrint shall not adopt, use, apply for registration, register, own or
acquire such trademarks, tradenames or tradedress, or any mark, name or
tradedress confusingly similar thereto, in any state or country of the world.
6.6 Except as provided herein, AHP shall have no right, title or
interest in or to the Trademark so long as PharmaPrint shall have any
interest in or to the Trademark, whether as proprietor, owner, licensee or
licensor, in any state or country of the world, AHP shall not adopt, use,
apply for registration, register, own or acquire such Trademark, or any mark
confusingly similar thereto, in any state or country of the world.
ARTICLE VII
IMPROVEMENTS
7.1 PharmaPrint hereby agrees to disclose to AHP any Improvement,
whether believed to be patentable or unpatentable,
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26
made or discovered during the term of this Agreement within sixty (60) days
after the Improvement is first reduced in writing.
7.2 PharmaPrint shall have sole right, title and interest in and to
any patentable Improvement invented solely by its employees or consultants or
those of a PharmaPrint Affiliate, and shall be solely responsible, at its cost
and expense, for obtaining and maintaining patent protection therefor. Both
parties shall have joint rights, title and interests in and to any patentable
Improvement invented jointly by employees or consultants of each party, and both
parties shall share equally in the costs and expenses of obtaining and
maintaining patent protection therefor, with independent patent counsel,
acceptable to both parties, being appointed to obtain such patent protection.
In the event that either party should elect not to share in such costs and
expenses, the other party may elect to pay all such costs and expenses and shall
be the sole owner of all right, title and interest in all patent applications
and patents obtained.
7.3 (a) PharmaPrint hereby grants to AHP, and AHP accepts, the sole
and exclusive right, without the right to grant sublicensees except to AHP
Affiliates, in and to the Improvements which relate to the sale and distribution
of the Licensed Products for the life of this Agreement.
<PAGE>
27
(b) PharmaPrint further grants to AHP, and AHP accepts, a non-
exclusive right, without the right to sublicenses except to AHP Affiliates,
under the Improvements to use the Licensed Products in the OTC Market in the
Territory.
(c) PharmaPrint hereby agrees that such Improvements shall be
added to the escrowed Manufacturing Know-how as defined in Paragraph 3.2 of the
Supply Agreement.
ARTICLE VIII
INFRINGEMENTS
8.1 If during the term of this Agreement, any third party should
sell, or make known its intent to sell, in the Territory a herbal product and
PharmaPrint should have a patent within the Patent Rights to lawfully preclude
such third-party sales, then PharmaPrint shall, take action expeditiously and
effectively to preclude the third-party sales, at its own cost and expense. AHP
shall have the right, at its sole option, to appear as a party in the action and
participate, at its cost and expense, in the prosecution of any suit. Any
amount of damages or settlement received shall be apportioned between the
parties equitably to compensate the parties for their direct costs and expenses
(including reasonable attorneys' fees) and thereafter to compensate
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28
AHP for lost sales and profits and PharmaPrint for lost royalties and profits.
8.2 In the event PharmaPrint does not act as provided hereabove in
Paragraph 8.1 within ninety (90) days of its first having knowledge of third-
party sales, or intent to sell, to preclude such sales, AHP shall have the
right, but not the obligation, to act to preclude the third-party sales,
including the right to file a patent infringement claim or counterclaim in any
court of competent jurisdiction naming PharmaPrint as party plaintiff if
necessary or desirable.
If AHP shall initiate such an action, all costs and expenses
(including reasonable attorneys' fees) incurred by AHP in attempting to
eliminate such unlicensed competition shall be deducted in full from the Earned
Royalties and Marketing Support owed to PharmaPrint. Any amount of damages or
settlement received shall belong to AHP. PharmaPrint shall cooperate fully with
AHP regarding any action undertaken by AHP based upon the infringement by a
third party of a PharmaPrint patent.
Should AHP elect not to initiate such an action as set forth above,
the Earned Royalties due PharmaPrint and the Marketing Support from AHP shall be
halved.
<PAGE>
29
ARTICLE IX
MOST FAVORED LICENSEE
In the event that AHP's exclusive rights under this Agreement become
semi-exclusive and should PharmaPrint grant any third party a license to use or
sell a specific Licensed Product on terms more favorable than those herein,
including the royalty rate, PharmaPrint will within thirty (30) days thereafter
provide AHP with a summary of the terms of said third-party license and offer
AHP the benefit of such more favorable terms provided AHP also accepts the less
favorable terms, if any, of such third-party license.
ARTICLE X
WARRANTIES AND COVENANTS
10.1 PharmaPrint represents and warrants that it has the sole,
exclusive and unencumbered right to grant the licenses and rights herein granted
to AHP, and that it has not granted any option, license, right or interest in or
to the Patent Rights, Licensed Product, or any method of manufacture or use of a
Licensed Product to any third party which would conflict with the rights granted
by this Agreement. PharmaPrint agrees to hold AHP harmless from any and all
costs, expenses and damages (including reasonable
<PAGE>
30
attorneys' fees) incurred or sustained by AHP as the result of any third
party's challenge to PharmaPrint's right to grant the rights and licenses
herein granted to AHP.
10.2 (a) PharmaPrint represents and warrants that to the best of its
present knowledge, all, and only, the true inventors of the subject matter
claimed are named in the Patents Rights and all such inventors have irrevocably
assigned all their rights and interests therein (i) to PharmaPrint and/or (ii)
to the University of Southern California and PharmaPrint has acquired an
exclusive license thereto, with rights to sublicense AHP thereunder
(b) PharmaPrint covenants that subsequent to the Effective Date
all, and only, the true inventors of the subject matter claimed shall be named
in the Patents Rights and all such inventors shall have irrevocably assigned all
their rights and interests therein to (i) PharmaPrint and/or (ii) to the
University of Southern California and PharmaPrint has an exclusive license
thereto, with rights to sublicense AHP thereunder.
10.3 PharmaPrint represents and warrants that as of the Effective Date
it is not aware of any information material to the examination of the Patent
Rights listed in Schedule B, within the meaning of 37 C.F.R. 1.56, that was not
disclosed in writing to the United States Patent Office.
<PAGE>
31
10.4 PharmaPrint represents and warrants that it is not presently
aware of any asserted or unasserted claim or demand of any right in or to any of
the Patent Rights, including but not limited to claim or demand of a shopright,
joint ownership, inventorship, or misappropriation, or which would or could in
any way impede or interfere with the licenses and rights herein granted to AHP.
10.5 PharmaPrint represents and warrants that the execution of this
Agreement and the full performance and enjoyment of the rights of PharmaPrint
and AHP under this Agreement will not breach or in any way be inconsistent with
the terms and conditions of any license, contract, understanding or agreement,
whether express, implied, written or oral between PharmaPrint and any third
party.
10.6 PharmaPrint represents and warrants that to the best of its
knowledge no patents or patent applications if issued would be infringed by the
manufacture, use or sale of a Licensed Product.
10.7 (a) PharmaPrint represents and warrants that with respect to all
regulatory filings to obtain Government Approvals, the data and information in
PharmaPrint's submissions to date have been free from fraud or material falsity,
that the Government Approvals have not been obtained either through bribery or
the payment of illegal gratuities, that the data and information in
<PAGE>
32
PharmaPrint's submissions are accurate and reliable for purposes of supporting
approval of the submissions, and that the Government Approvals were obtained
without illegal or unethical behavior of any kind.
(b) PharmaPrint covenants that with respect to all regulatory
filings to obtain Government Approvals, the data and information in
PharmaPrint's submissions shall be free from fraud or material falsity, that the
Government Approvals shall not be obtained either through bribery or the payment
of illegal gratuities, that the data and information in PharmaPrint's
submissions shall be accurate and reliable for purposes of supporting approval
of the submissions, and that the Government Approvals shall be obtained without
illegal or unethical behavior of any kind.
10.8 PharmaPrint shall indemnify, defend and hold harmless AHP from
all actions, losses, claims, demands, damages, costs and liabilities (including
reasonable attorneys' fees) except as arise solely from events listed herebelow
in paragraph 10.9, to which AHP is or may become subject insofar as they arise
out of or are alleged or claimed to arise out of (i) any breach by PharmaPrint
of any of the warranties of PharmaPrint, or (ii) any grossly negligent or
willful act or omission by PharmaPrint or its employees.
<PAGE>
33
10.9 AHP shall indemnify, defend and hold harmless PharmaPrint from
all actions, losses, claims, demands, costs and liabilities (including
reasonable attorneys' fees) to which PharmaPrint is or may become subject
insofar as they arise out of or are alleged or claimed to arise out of (i) any
breach by AHP of any of its warranties under this Agreement, or (ii) any grossly
negligent or willful act or omission by AHP or its Affiliates, or their
employees.
10.10 A party entitled to indemnification hereunder agrees to
give prompt written notice (in no event later than five (5) business days) to
the indemnifying party after the receipt by such party of any written notice
of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such party will claim
indemnification pursuant to this Agreement. Unless, in the reasonable
judgment of the indemnified party, a conflict of interest may exist between
the indemnified party and the indemnifying party with respect to a claim, the
indemnifying party may assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If the indemnifying party
is not entitled to, or elects not to, assume the defense of a claim, it will
not be obligated to pay the fees and expenses of more than one counsel with
respect to such claim. The
<PAGE>
34
indemnifying party will not be subject to any liability for any settlement
made without its consent, which shall not be unreasonably withheld.
10.11 The provisions and obligations of this Article X shall
survive any termination of this Agreement.
ARTICLE XI
THIRD-PARTY LICENSES
11.1 In the event AHP reasonably concludes, at any time prior to
the first commercial sale of a Licensed Product, that a license(s) under any
third-party patent is necessary in order to make, use or sell Licensed
Product in the Territory, and neither PharmaPrint nor AHP are able to obtain
such license(s) on terms reasonably acceptable to both, then PharmaPrint and
AHP shall negotiate in good faith to reach an agreement on the return to AHP
of all or a portion of the payments made pursuant to Article IV, in the case
where AHP reasonably concludes after good faith discussions and negotiations
between the parties that AHP is precluded from selling Licensed Products in
the Territory.
11.2 In the event AHP and PharmaPrint agree, at any time during the
term of this Agreement, that a license(s) under any third-party patent is
necessary or advisable in order to make, use
<PAGE>
35
or sell Licensed Product sold by PharmaPrint as of the Effective Date in the
Territory, any and all payments and royalties paid by AHP for such license(s)
shall be deducted in full from payments and royalties (including Minimum
Royalty payments) due to PharmaPrint under this Agreement.
11.3 In the event that PharmaPrint and AHP cannot agree on any
matters requiring agreement under Paragraph 11.2 above, and a license(s)
under the third-party patent is otherwise available to AHP, PharmaPrint shall
indemnify, defend and hold harmless AHP from all actions, losses, claims,
demands, damages, costs and liability (including reasonable attorney's fees)
to which AHP is or may become insofar as they arise out of or are alleged or
claimed to arise out of any infringement of the third-party patent.
ARTICLE XII
DURATION AND TERMINATION
12.1 This Agreement shall continue in full force and effect, unless
earlier terminated by either party pursuant to the provisions set forth in this
Article XII, or until expiration of the last to expire patent within the Patent
Rights in the Territory. Following expiration of the Agreement, the licenses
<PAGE>
36
granted hereunder to AHP with respect to the Patent Rights shall be fully
paid-up and irrevocable.
12.2 Prior to the initial National Launch Date, AHP may terminate
this Agreement in its sole discretion, at any time upon thirty (30) days
written notice to PharmaPrint.
12.3 After the initial National Launch Date, AHP may terminate this
Agreement on a per Licensed Product basis in its sole discretion, upon ninety
(90) days written notice to PharmaPrint.
12.4 After the initial National Launch Date, AHP may terminate this
Agreement in its entirety in its sole discretion, upon one (1) year's written
notice to PharmaPrint.
12.5 Either party hereto shall be entitled to terminate this
Agreement upon thirty (30) days written notice to the other party (i) if the
other party shall commit a breach of any material provision hereof and shall
not within sixty (60) days from receipt of notice of such breach by the
complaining party remedy the same (if capable of remedy), or offer full
compensation therefor, or (ii) upon termination of the Supply Agreement.
12.6 Insofar as is lawful and legally permissible, this Agreement
may be terminated with immediate effect by a party upon giving written notice
to the other if the other is insolvent or has
<PAGE>
37
committed any act of bankruptcy or an order is made or resolution passed for
the winding up of the other party.
12.7 Failure on the part of either party to exercise or enforce any
right conferred upon it hereunder shall neither be deemed to be a waiver of
any such right nor operate to bar the exercise or enforcement thereof at any
time thereafter.
12.8 Upon termination of this Agreement for any reason, other than
under the provisions of Paragraph 12.1 of Article XII, (a) AHP and AHP
Affiliates shall have the right to advertise, promote, market and sell all
Licensed Product then in inventory, provided AHP makes the appropriate
royalty payments to PharmaPrint upon the sale of such Licensed Product; (b)
the Marketing Support requirements of Paragraph 4.7 shall apply pro-rata for
the portion of the Royalty Year ending as of the date all Product in
inventory are sold; and no payments under Article V are due to PharmaPrint
from AHP except those which had accrued prior to the effective date of such
termination.
ARTICLE XIII
NON-COMPETITION
13.1 During the term of this Agreement, neither AHP nor an AHP
Affiliate shall market or sell any Herbal Product in the Territory
<PAGE>
38
in association with the Centrum-Registered Trademark- trademark except as
permitted by this Agreement; provided, however, nothing in this provision
shall prevent AHP or an AHP Affiliate from (a) performing its obligations
under this Agreement, the Foreign Agreement or the Supply Agreement, (b)
developing, manufacturing, promoting and/or selling Combination Products; (c)
manufacturing, developing, promoting and/or selling any branded Herbal
Product acquired after the Effective Date provided that AHP continues to
promote and sell such product under the acquired brand name or store/private
label brand, or (d) PharmaPrint cannot or fails to deliver any Licensed
Product(s) within nine (9) months.
13.2 Except as provided immediately below, in the event of an
acquisition or merger pursuant to Paragraphs 13.1(c) or failure to deliver
Licensed Product pursuant to Paragraph 13. 1 (d) , AHP agrees not to utilize the
Trademark in association with any herbal products acquired thereby. However,
AHP may utilize the Trademark in any association with an Herbal Product acquired
pursuant to Paragraph 13.1(c) so long as it contains Licensed Product.
Should AHP utilize the Trademark in association with a product acquired under
Paragraph 13.1(c), the Trademark shall be conspicuously displayed and clearly
refer to PharmaPrint's ownership of the Trademark.
<PAGE>
39
ARTICLE XIV
MISCELLANEOUS
14.1 Any notice required or permitted under this Agreement shall be in
writing and deemed to have been sufficiently provided and effectively made as of
the delivery date if hand-delivered with written acknowledgment, or as of the
date received if mailed by registered or certified mail, postage-prepaid, and
addressed to the receiving party at its respective address as follows:
AMERICAN HOME PRODUCTS CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
PHARMAPRINT INCORPORATED
4 Park Plaza
Suite 1900
Irvine, California 92614
Attn: President
or such other address which the receiving party has given notice pursuant to
the provisions of this Paragraph 14.1.
14.2 The relationship of the parties under this Agreement is that
of independent contractors and not as agents of each other or partners or
joint venturers, and neither party shall have the power to bind the other in
any way with respect to any obligation to any third party unless a specific
power of attorney is provided for
<PAGE>
40
such purpose. Each party shall be solely and exclusively responsible for its
own employees and operations.
14.3 In the event that the performance of this Agreement or of any
obligation hereunder, other than payment of money as herein provided by
either party hereto is prevented, restricted or interfered with by reason of
any cause not within the control of the respective party, and which could not
by reasonable diligence have been avoided by such party, the party so
affected, upon giving prompt notice to the other party, as to the nature and
probable duration of such event shall be excused from such performance to the
extent and for the duration of such prevention, restriction or interference,
provided that the party so affected shall use its reasonable efforts to avoid
or remove such cause of non-performance and shall fulfill and continue
performance hereunder with the utmost dispatch whenever and to the extent
such cause or causes are removed.
For the purpose of the preceding paragraph but without limiting the
generality thereof, the following shall be considered as not within the
control of the respective party: acts of God, acts or omissions of a
governmental agency, compliance with requests, recommendations, rules,
regulations or orders of any governmental authority or any officer,
department, agency or
<PAGE>
41
instrument thereof, flood, storm, earthquake, fire, war, riots, insurrection,
accidents, acts of the public enemy, invasion, quarantine restrictions,
strike, lockout, differences with workmen, embargoes, delays or failure in
transportation and acts of a similar nature.
14.4 Should one of the provisions of this Agreement become or prove
to be null and void, such will be without effect on the validity of this
Agreement as a whole. Both parties will, however, endeavor to replace the
void provision by a valid one which in its economic effect is most consistent
with the void provision.
14.5 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to
principles of conflicts of laws.
14.6 This Agreement and the rights and obligations hereunder shall
not be assignable by either of the parties without the previous written
consent of the other party, such consent not to be unreasonably withheld,
except that AHP may assign this Agreement (i) in connection with the transfer
of all or substantially all of the business to which it relates without any
such consent, and (ii) in whole or in part to a AHP Affiliate without any
such consent.
14.7 This Agreement, the Foreign Agreement and the Supply Agreement
constitute the entire understanding between the parties
<PAGE>
41
regarding the subject matter hereof in the Territory and no party has relied
on any representation not expressly set forth or referred to in this
Agreement. No amendment, variation, waiver or modification of any of the
terms or provisions of this Agreement shall be effected unless set forth in
writing, specifically referencing this Agreement, and duly signed on behalf
of the parties hereto.
14.8 No press release or other public announcement concerning this
Agreement shall be made by either party without the prior written approval of
the other party hereto, such approval not to be unreasonably withheld, except
as otherwise required by law. Press releases or other public announcements
reasonably required by law shall be reviewed with the other party and their
comments given due consideration. Approval will be deemed granted if no
response is received by the proposing party within fifteen (15) days of its
written request for approval to the other party.
14.9 PharmaPrint represents and warrants that PharmaPrint and any
ultimate parent entity of PharmaPrint are not persons with total assets or
annual net sales of $10 million or more within the meaning of Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a,
and the rules and regulations promulgated thereunder, 16 C.F.R. 801.1 ET
SEQ., and that a pre-
<PAGE>
43
merger notification is not required pursuant to such statute and rules.
IN WITNESS WHEREOF, the duly authorized representatives of the
parties hereto have caused this Agreement to be executed.
AMERICAN HOME PRODUCTS
CORPORATION PHARMAPRINT INC.
By: By:
-------------------------- --------------------------
Title: Title:
----------------------- -----------------------
Date: Date:
------------------------ ------------------------
PHARMAPRINT B.V.
By:
--------------------------
Title:
-----------------------
Date:
------------------------
<PAGE>
44
SCHEDULE A
SPECIFICATIONS FOR INITIAL PRODUCTS
- ------------------------------------------------------------------------------
DOS\AGE/MG.
PRODUCT CONTENT ENCAPSULATION DOSING FREQUENCY
- ------- ----------- ------------- ----------------
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------
All products to conform with the Supply Agreement, providing for but not
limited to, GMP Manufacturing requirements, 24-month dating, and
PharmaPrint's manufacturing specifications.
<PAGE>
45
SCHEDULE B
PATENT RIGHTS
<PAGE>
46
SCHEDULE C
SPECIFICATIONS
<PAGE>
47
SCHEDULE D
MODEL CLAIMS
A method for making a pharmaceutical grade botanical drug, selected from
the group consisting of [*], [*], [*], [*],
[*], [*] and [*], the method comprising the steps of:
providing the botanical material which has a given biological activity
indicative of use for treating or ameliorating a disorder selected from the
group consisting of [name of disorders e.g. benign prostatic hypertrophy,
etc.), said botanical material comprising a plurality of components;
separating a representative aliquot of the botanical material into a
plurality of marker fractions comprising at least one active component;
determining the degree of the given biological activity for each marker
fractions to provide a bioactivity fingerprint of at least one active
component of the representative aliquot;
determining the amount of the active components in at least one of the
marker fractions to provide a quantitative compositional fingerprint of the
representative aliquot;
determining a total bioactivity of the representative aliquot of the
botanical material; and
(1) comparing the bioactivity fingerprint of the representative aliquot
to a bioactivity fingerprint standard which has been established for at least
one active component of a pharmaceutical grade botanical drug, (2) comparing
the quantitative compositional fingerprint of the representative aliquot to a
quantitative compositional fingerprint standard which has been established
for a given pharmaceutical grade biological drug, and (3) comparing the total
bioactivity of the representative aliquot with that of a total bioactivity of
the standard to determine whether the botanical material containing at least
one active component constitutes a pharmaceutical grade botanical drug.
<PAGE>
EXHIBIT 10.2
LICENSE AGREEMENT (FOREIGN)
THIS Agreement is made this 6th day of October, 1997 by and between
PharmaPrint Inc., a corporation organized and existing under the laws of the
State of Delaware having its principal place of business at 4 Park Plaza,
Suite 1900, Irvine, California 92614 and its subsidiaries, including
PharmaPrint B.V. ("PharmaPrint"), and American Home Products Corporation,
acting through its Whitehall-Robins Healthcare division, a corporation
organized and existing under the laws of the State of Delaware, having its
principal place of business at 5 Giralda Farms, Madison, New Jersey 07940
("AHP").
A. PharmaPrint has developed a method for the identification,
characterization of and regulation of the amounts of bioactive
components in herbal products and is seeking to commercialize
certain of the herbal products identified, characterized and
regulated thereby.
B. PharmaPrint has developed technological know-how, obtained
patents and filed patent applications relating to and/or covering
the subjects of Paragraph A above.
C. AHP desires to obtain an exclusive license and right under the
above technology, patent and patent applications to market and
sell such herbal products.
<PAGE>
2
D. AHP desires to obtain the aforementioned rights so that it can
purchase, pursuant to a separate, contemporaneous agreement, its
supply of licensed herbal products from PharmaPrint so that AHP
can market, distribute and sell same (as hereinafter provided)
throughout the Territory free of charges of or suits for
infringement of PharmaPrint's present or future Patent Rights and
Technology.
ARTICLE I
DEFINITIONS
Terms defined in this Article I shall for all purposes of this
Agreement, as the same may be amended or supplemented from time to time, have
the meaning herein specified.
1.1 The term "Act" shall mean the Federal Food, Drug and Cosmetic
Act, as amended from time to time.
1.2 (a) The term "AHP Affiliate" shall mean any company which
directly or indirectly through stock ownership or through other contractual
arrangement either controls, or is controlled by, or is under common control
with AHP.
<PAGE>
3
(b) The term "PharmaPrint Affiliate" shall mean any company which
directly or indirectly through stock ownership or through other contractual
arrangement either controls, or is controlled by, or is under common control
with PharmaPrint.
1.3 The term "Branded Product(s)" shall mean a product manufactured,
marketed or sold under a regional or national brand label, whether or not a
registered trademark.
1.4 The term "Combination Product(s)" shall mean a composition
containing at least one (1) Herbal Product in admixture with at least one (1)
mineral, vitamin and/or other nutrient other than an Herbal Product. For the
avoidance of doubt, Combination Products do not include Dual Products.
1.5 The term "Commercially Reasonable Efforts" shall mean efforts and
resources normally used by a party for a non-prescription pharmaceutical product
of its own discovery of similar market potential at a similar stage in its
product life, taking into account the competitiveness of the marketplace, the
proprietary position of the product and its dosage form, the regulatory
structure involved, the profitability of the product, and other relevant
factors. It is anticipated by the parties that the level of effort will change
over time reflecting changes in the status of the relevant product and the
marketplace.
<PAGE>
4
1.6 The term "Dual Product(s)" shall mean a composition wherein its
components (excluding inactive ingredients, excipients and coating compositions)
consist solely of Licensed Products.
1.7 The term "Effective Date" shall mean the date first written
hereinabove.
1.8 The term "FDA" shall mean the national agency in a country of the
Territory from which approval is necessary to market pharmaceutical products
within such jurisdiction for administration to humans.
1.9 The term "U.S. Agreement" means the counterpart of this Agreement
granting certain rights to AHP in the United States of America, as executed by
the parties concurrently with this Agreement.
1.10 The term "Government Approvals" shall mean any approvals,
licenses, registrations or authorizations, howsoever called, of any national,
state or local regulatory agency, department, bureau or other government entity,
including the FDA, necessary for the manufacture, use, storage, transport or
sale in the Territory of Product. The term "'Government Approvals" further
means compliance with the requirements of any legislation directed to the same
or similar subject matter contained in the United States Dietary Supplement
Health and Education Act of 1994.
1.11 The term "Improvements" shall mean any and all new and useful
processes, manufactures, devices, compositions of matter (except as limited
below) or methods of use first conceived, reduced to practice or developed
after the Effective Date and during the term of this Agreement
<PAGE>
5
by PharmaPrint, or a Pharmaprint Affiliate or any employees, consultants or
other persons under their direction or control which increase the
performance, efficacy or safety of a Licensed Product, reduce the cost of
manufacture, harmful side-effects or adverse reactions to Licensed Product,
or otherwise relate to the manufacture or use of Licensed Product or the
practice of the method claimed in any of the patents and/or patent
applications within the Patent Rights. For the avoidance of doubt, the
defined term "Improvement" does not include Licensed Products per se.
1.12 The term "National Launch Date" as applied to a Licensed Product
shall mean the date when commercial quantities of such Licensed Product are
first shipped to the trade by AHP for sale in the OTC Market.
1.13 The term "NDA" shall mean New Drug Application as defined in
regulations promulgated by the FDA under the Act filed with or intended to be
filed with the FDA for approval for marketing the Licensed Product in the
Territory.
1.14 The term "NDA Product" shall mean a herbal Licensed Product which
(i) it or its method of manufacture or use is claimed in one or more claims of a
patent or patent application within the Patent Rights in the country of its
manufacture, use or sale, (ii) is the subject of an NDA program proposed by
PharmaPrint or an approved NDA based on an application filed by PharmaPrint in
the Territory.
1.15 The term "Net Sales" as applied to a Licensed Product shall
mean gross sales of such Licensed Product as packaged for sale to
<PAGE>
6
an end-user, less transportation charges, returns and allowances (actually
paid or allowed by AHP), customary discounts (actually paid or allowed,
whether in cash or trade), and sales and other taxes based on sales when
included in gross sales, but not including taxes assessed on income derived
from such sales. Net Sales shall not include Free Goods as defined in the
Supply Agreement.
1.16 The term "OTC Market" shall mean sales to the general public
other than those requiring a physician's prescription.
1.17 The term "Patent Rights" shall mean any and all issued patents in
the Territory and any and all patent applications for letters patent pending in
the Territory (until such time as such applications or any of them are denied,
abandoned, or issued into patents) listed in Schedule B of the U.S. Agreement
and any patents issuing from such applications, all divisions, continuations,
continuations-in-part and all patents granted thereon, as well as all other
patents in the Territory, including any re-issues, renewals, or extensions
thereof, which are owned by PharmaPrint, a PharmaPrint Affiliate or under which
PharmaPrint or a PharmaPrint Affiliate shall have the right to grant rights, and
which claim a Product or Improvement, or the manufacture or use of a Product or
Improvement, which claim, has not lapsed, become abandoned or been declared
invalid or unenforceable by a final non-appealed or unappealable decision or
judgment of a court or tribunal of competent jurisdiction.
1.18 The term "Patent (s)" shall mean any and all issued patents
within the Patent Rights, including the Process Patent.
<PAGE>
7
1.19 The term "Process Patent" shall mean the foreign counterparts
within the Territory to U.S. Patent Application No. 08/838,199, filed April
15, 1997, a continuation-in-part application of U.S. Patent Application No.
08/632,273, filed April 15, 1996 or a patent issued on a divisional,
continuation or continuation-in-part application on one or more of the patent
applications for the Process Patent.
1.20 The term "Licensed Product(s)" shall have a meaning identical
to that of the definition of Licensed Products contained within the U.S.
Agreement at any given time, unless otherwise agreed to by the parties.
1.21 The term "Supply Agreement" means the agreement for the sale
and supply of Licensed Products by PharmaPrint to AHP, as executed by the
parties concurrently with this Agreement.
1.22 The term "Territory" shall mean Canada and Mexico.
1.23 The term "Trademark" shall mean the trademark "PHARMAPRINT",
which is applied for, owned by and/or registered in the name of PharmaPrint .
1.24 The term "Herbal Product" shall mean a dietary supplement
derived from botanical herbal extracts.
ARTICLE II
GRANT OF LICENSE
2.1 (a) PharmaPrint hereby grants to AHP, and AHP accepts, the sole
and exclusive right, without the right to grant sublicenses
<PAGE>
8
except to AHP Affiliate(s), under the Patent Rights to market and sell Herbal
Products, including Licensed Products, in the OTC Market in the Territory.
(b) PharmaPrint hereby grants to AHP, and AHP accepts, a
non-exclusive right, without the right to grant sublicenses except to AHP
Affiliate(s), under the Patent Rights to use Herbal Products, including the
Licensed Products, in the OTC Market in the Territory.
2.2 During the term of this Agreement, PharmaPrint further grants to
AHP a royalty-free non-exclusive license, without the right to grant
sublicenses except to AHP Affiliate(s), under the Trademark for use in
conjunction with the marketing and/or sale of the Licensed Products in the
OTC Market in the Territory, provided any such use of the Trademark shall be
consistent with and recognize PharmaPrint's ownership thereof and reasonably
comply with the standards of quality used and/or established by PharmaPrint.
ARTICLE III
CLINICAL DEVELOPMENT
AND REGULATORY REGISTRATION
3.1 PharmaPrint shall expend Commercially Reasonable Efforts to conduct
all research and development necessary to produce the Licensed Product and
fulfill its obligations hereunder. PharmaPrint shall further conduct all
stability testing and clinical trials necessary for the marketing of Licensed
Product in the OTC Market in the Territory.
<PAGE>
9
3.2 (a) All regulatory filings to obtain Government Approvals and all
Government Approvals in the Territory shall be filed in the name of and owned
by PharmaPrint. PharmaPrint agrees, to the extent practical, to provide AHP
with a sufficient opportunity to review and comment on all regulatory filings
and material correspondence to regulatory agencies prior to submission, and
with material correspondence from regulatory agencies prior to submission of
a response.
(b) PharmaPrint agrees to expend Commercially Reasonable Efforts in
the filing, securing and maintenance of all Government Approvals, including
those necessary due to changes in the applicable statutes, rules and related
regulations. All such costs shall be borne by PharmaPrint.
(c) In the event of the requirement for financial commitments
related to the obtaining or maintenance of such Government Approva1s are
significantly greater than those for such Product in the United States, the
parties shall discuss the apportionment of expenses related thereto. In the
event that an agreement cannot be reached at AHP's sole discretion, AHP may
terminate its rights to the affected Licensed Product in accordance with the
provisions of Paragraph 12.3 or 12.4.
ARTICLE IV
ROYALTY PAYMENTS
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10
4.1 During the term of this Agreement, as royalty for the licenses
granted under Paragraph 2.1, AHP shall pay to PharmaPrint a running royalty
as set forth below on the total Net Sales of Licensed Products sold by AHP
and AHP Affiliates in the Territory ("Earned Royalties").
Royalty Year Cumulative Net Sales
of Product under this Agreement
ROYALTY RATE
I. For the period commencing on the National
Launch Date and ending one year thereafter.
a. For Licensed Products covered by a 4%
Patent which contains a process or product claim at
least as broad as that recited in Schedule B.
II. Subsequent to one year after the National
Launch Date through expiration or termination
of this Agreement.
a. For Licensed Products covered by a 6%
Patent which contains a process or product claim at
least as broad as that recited in Schedule D.
For the avoidance of doubt, no running royalty shall be due PharmaPrint
from AHP for Licensed Products not meeting the patent coverage requirements
set forth in this Paragraph 4.1.
4.2 Earned Royalties as provided in Paragraph 4. 1 accrued shall be
paid by AHP to PharmaPrint within thirty (30) days after the end of each
quarter of each Royalty Year. Each payment shall be accompanied by a report
in writing showing the period for which such payment is made, the Net Sales
of Licensed Product during such period, and the amount of Earned Royalty
thereon and any credit pursuant to Paragraph 4.7. The
<PAGE>
11
first Royalty Year shall consist of the period commencing on the day of the
first National Launch Date within the Territory, and ending on the last day
of the fourth calendar quarter thereafter. Each subsequent Royalty Year shall
consist of the twelve (12) month period commencing the first day after the
'Last day of the previous Royalty Year.
4.3 In the event that the parties disagree whether Earned Royalties
should accrue wi th respect to patent issues on a specific product are unable
to successfully resolve the issue after good faith negotiation, the matter
shall be referred to an independent patent attorney agreed to by both
parties. The ultimate determination of such independent patent attorney
shall be final and binding upon the parties. All fees incurred in connection
with resolution of this dispute shall be borne by the party which determined
incorrectly that Earned Royalties were or were not due.
4.4 In the event that AHP fails to meet the requirements of Paragraph
4.7 of the U.S. Agreement, then PharmaPrint shall have the right to convert
AHP's rights under Paragraphs 2.1 and 2.2 of this Agreement from exclusive to
semi-exclusive such that PharmaPrint may offer such rights to one third party
other than AHP for the sale of Branded Products only. PharmaPrint's right to
convert AHP's rights from exclusive to semi-exclusive shall be the sole
remedy of PharmaPrint for failure of AHP to meet the requirements of such
Paragraph 4.7 of the U.S. Agreement.
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12
4.5 During the term of this Agreement, AHP shall expend
Commercially Reasonable Efforts in the marketing of the Licensed Products.
4.6 No royalties as set forth in this Article IV shall be
payable on intercompany sales transactions as between or among AHP and AHP
Affiliates, the final sale by AHP or AHP Affiliate to a third party, alone,
being used for the purposes of determining the royalty payments due
hereunder. A Licensed Product subject to royalty payment shall be deemed
sold when invoiced or, if not invoiced, when the same shall be delivered to
the third party.
4.7 Whenever, because of price adjustment, including allowances
or returned goods sold during any period, or for any other reason, AHP shall
have overpaid or underpaid the royalty amount due for such period, AHP shall,
upon determining the amount of overpayment or underpayment, deduct or add the
same from or to the payment payable for the period during which the amount of
the overpayment or the underpayment is determined; and if after such
deduction and addition there remains an overpayment, such overpayment shall
be deducted from the payment payable for the immediately following period or,
if there is no following payment period, such overpayment shall be refunded
to AHP.
4.8 AHP shall keep, and shall cause its AHP Affiliates to keep,
complete and accurate records of all sales of Licensed Product for a minimum
of three (3) years after the sales period to which they pertain. Said
records shall be open during reasonable business hours to
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13
a certified public accountant selected by PharmaPrint and acceptable to AHP,
who shall, at PharmaPrint's expense, have access to all records deemed by
such accountant as reasonably necessary in verifying for PharmaPrint, not
more often than once each calendar year, the royalties accrued, payments made
or to be made, and the accuracy of the reports to be made, as herein
provided. However, said accountant shall agree in writing to treat as
confidential and not to disclose to PharmaPrint any information other than
information relating solely to the royalties accrued and the accuracy of the
reports and payments required to be made under this Agreement, and that in no
event will the quantities or prices to individual customers be disclosed to
PharmaPrint by said accountant.
ARTICLE V
EXPANSION OF THE TERRITORY
5.1 PharmaPrint hereby grants AHP, and AHP accepts, an option to
expand the Territory to further include any countries other than the United
States of America.
5.2 Such option may be exercised by AHP in its sole discretion
at any time during a period of three (3) years commencing upon the initial
National Launch Date within the Territory ("Option Period") through the
provision by AHP to PharmaPrint of notice of such exercise in conformance
with the notice provisions of this Agreement.
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14
5.3 AHP's rights to expand the Territory pursuant to Paragraph
5.1 shall irrevocably expire upon the expiration of the Option Period.
ARTICLE VI
PATENTS AND TRADEMARKS
6.1 PharmaPrint sha1l be responsible, at its cost and expense,
for prosecuting to issuance all patent applications, for filing and
prosecuting all patent reissues and re-examinations, for applying for and
obtaining any patent term extensions, and for paying all maintenance fees, on
a large-entity basis (if applicable), on all patents, as PharmaPrint
determines to be commercially reasonable, which applications and patents
constitute the Patent Rights under this Agreement.
6.2 (a) AHP shall have the right to use and market the
Licensed Products under any AHP-owned trademarks, tradenames and/or
tradedress it may choose. Except as provided in subparagraph (b), AHP agrees
to promote the Licensed Products in association with AHP's CENTRUM-Registered
Trademark-trademark. AHP further agrees that the packaging of the License
Products shall bear a reference to PharmaPrint's ownership of the Trademark.
(b) AHP is not obligated to promote any Herbal Products under
the Centrum-Registered Trademark- trademark is such Herbal Products are
covered under Paragraph 13.1(c).
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15
6.3 Other than the Trademark, PharmaPrint shall have no right,
title or interest in or to any trademarks, tradenames or tradedress which AHP
may use on or in connection with Product, or the packaging, advertising,
promotion, labeling, marketing or selling thereof. So long as AHP or any AHP
Affiliate shall have any interest in or to any such trademarks, tradenames or
tradedress, whether as proprietor, owner, licensee or licensor, in any state
or country of the world, PharmaPrint shall not adopt, use, apply for
registration, register, own or acquire such trademarks, tradenames or
tradedress, or any mark, name or tradedress confusingly similar thereto, in
any state or country of the world.
6.4 Except as provided herein, AHP shall have no right, title or
interest in or to the Trademark so long as PharmaPrint shall have any
interest in or to the Trademark, whether as proprietor, owner, licensee or
licensor, in any state or country of the world, AHP shall not adopt, use,
apply for registration, register, own or acquire such Trademark, or any mark
confusingly similar thereto, in any state or country of the world.
ARTICLE VII
IMPROVEMENTS
7.1 PharmaPrint hereby agrees to disclose to AHP any
improvement, whether believed to be patentable or unpatentable, made or
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16
discovered during the term of this Agreement within sixty (60) days after the
Improvement is first reduced in writing.
7.2 PharmaPrint shall have sole right, title and interest in and
to any patentable Improvement invented solely by its employees or consultants
or those of a PharmaPrint Affiliate, and shall be solely responsible, at its
cost and expense, for obtaining and maintaining patent protection therefor.
Both parties shall have joint rights, title and interests in and to any
patentable Improvement invented jointly by employees or consultants of each
party, and both parties shall share equally in the costs and expenses of
obtaining and maintaining patent protection therefor, with independent patent
counsel, acceptable to both parties, being appointed to obtain such patent
protection. In the event that either party should elect not to share in such
costs and expenses, the other party may elect to pay all such costs and
expenses and shall be the sole owner of all right, title and interest in all
patent applications and patents obtained.
7.3 (a) PharmaPrint hereby grants to AHP, and AHP accepts, sole
and exclusive right, without the right to grant sublicensees except to AHP
Affiliates, in and to the Improvements which relate to the sale and
distribution of the Licensed Products for the life of this Agreement.
(b) PharmaPrint further grants to AHP, and AHP accepts, a
non-exclusive right, without the right to sublicenses except to AHP
Affiliates, under the Improvements to use the Licensed Products in the OTC
Market in the Territory.
<PAGE>
17
(c) PharmaPrint hereby agrees that such Improvements shall be
added to the escrowed Manufacturing Know-how as defined in Paragraph 3.2 of
the Supply Agreement.
ARTICLE VIII
INFRINGEMENTS
8.1 If during the term of this Agreement, any third party should
sell, or make known its intent to sell, in the Territory a herbal product and
PharmaPrint should have a patent within the Patent Rights to lawfully
preclude such third-party sales, then PharmaPrint shall, take action
expeditiously and effectively to preclude the third-party sales, at its own
cost and expense. AHP shall have the right, at its sole option, to appear as
a party in the action and participate, at its cost and expense, in the
prosecution of any suit. Any amount of damages or settlement received shall
be apportioned between the parties equitably to compensate the parties for
their direct costs and expenses (including reasonable attorneys' fees) and
thereafter to compensate AHP for lost sales and profits and PharmaPrint for
lost royalties and profits.
8.2 In the event PharmaPrint does not act as provided hereabove
in Paragraph 8.1 within ninety (90) days of its first having knowledge of
third-party sales, or intent to sell, to preclude such sales, AHP shall have
the right, but not the obligation, to act to preclude the third-party sales,
including the right to file a patent
<PAGE>
18
infringement claim or counterclaim in any court of competent jurisdiction
naming PharmaPrint as party plaintiff if necessary or desirable.
If AHP shall initiate such an action, all costs and expenses
(including reasonable attorneys' fees) incurred by AHP in attempting to
eliminate such unlicensed competition shall be deducted in full from the
Earned Royalties and Marketing Support owed to PharmaPrint. Any amount of
damages or settlement received shall belong to AHP. PharmaPrint shall
cooperate fully with AHP regarding any action undertaken by AHP based upon
the infringement by a third party of a PharmaPrint patent.
Should AHP elect not to initiate such an action as set forth above,
the Earned Royalties due PharmaPrint and the Marketing Support from AHP shall
be halved.
ARTICLE IX
MOST FAVORED LICENSEE
In the event that AHP's exclusive rights under this Agreement
become semi-exclusive and should PharmaPrint grant any third party a license
to use or sell a specific Licensed Product on terms more favorable than those
herein, including the royalty rate, PharmaPrint will within thirty (30) days
thereafter provide AHP with a summary of the terms of said third-party
license and offer AHP the benefit of such more favorable terms provided AHP
also accepts the less favorable terms, if any, of such third-party license.
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19
ARTICLE X
WARRANTIES AND COVENANTS
10.1 PharmaPrint represents and warrants that it has the sole,
exclusive and unencumbered right to grant the licenses and rights herein
granted to AHP and that it has not granted any option, license, right or
interest in or to the Patent Rights, Licensed Product, or any method of
manufacture or use of a Licensed Product to any third party which would
conflict with the rights granted by this Agreement. PharmaPrint agrees to
hold AHP harmless from any and all costs, expenses and damages (including
reasonable attorneys' fees) incurred or sustained by AHP as the result of any
third party's challenge to PharmaPrint's right to grant the rights and
licenses herein granted to AHP.
10.2 (a) PharmaPrint represents and warrants that to the best
of its present knowledge, all, and only, the true inventors of the subject
matter claimed are named in the Patents Rights and all such inventors have
irrevocably assigned all their rights and interests therein (i) to
PharmaPrint and/or (ii) to the University of Southern California and
PharmaPrint has acquired an exclusive license thereto, with rights to
sublicense AHP thereunder
(b) PharmaPrint covenants that subsequent to the
Effective Date all, and only, the true inventors of the subject matter
claimed shall be named in the Patents Rights and all such inventors shall
have irrevocably assigned all their rights and interests therein to (i)
PharmaPrint and/or (ii) to the University of Southern California and
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20
PharmaPrint has an exclusive license thereto, with rights to sublicense AHP
thereunder.
10.3 PharmaPrint represents and warrants that as of the Effective
Date it is not aware of any information material to the examination of the
Patent Rights listed in Schedule B, within the meaning of 37 C.F.R. 1.56,
that was not disclosed in writing to the United States Patent Office.
10.4 PharmaPrint represents and warrants that it is not presently
aware of any asserted or unasserted claim or demand of any right in or to any
of the Patent Rights, including but not limited to claim or demand of a
shopright, joint ownership, inventorship, or misappropriation, or which would
or could in any way impede or interfere with the licenses and rights herein
granted to AHP.
10.5 PharmaPrint represents and warrants that the execution of
this Agreement and the full performance and enjoyment of the rights of
PharmaPrint and AHP under this Agreement will not breach or in any way be
inconsistent with the terms and conditions of any license, contract,
understanding or agreement, whether express, implied, written or oral between
PharmaPrint and any third party.
10.6 PharmaPrint represents and warrants that to the best of its
knowledge no patents or patent applications if issued would be infringed by
the manufacture, use or sale of a Licensed Product.
10.7 (a) PharmaPrint represents and warrants that with respect to
all regulatory filings to obtain Government Approvals, the data and
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21
information in PharmaPrint's submissions to date have been free from fraud or
material falsity, that the Government Approvals have not been obtained either
through bribery or the payment of illegal gratuities, that the data and
information in PharmaPrint's submissions are accurate and reliable for
purposes of supporting approval of the submissions, and that the Government
Approvals were obtained without illegal or unethical behavior of any kind.
(b) PharmaPrint covenants that with respect to all regulatory
filings to obtain Government Approvals, the data and information in
PharmaPrint's submissions shall be free from fraud or material falsity, that
the Government Approvals shall not be obtained either through bribery or the
payment of illegal gratuities, that the data and information in PharmaPrint's
submissions shall be accurate and reliable for purposes of supporting
approval of the submissions, and that the Government Approvals shall be
obtained without illegal or unethical behavior of any kind.
10.8 PharmaPrint shall indemnify, defend and hold harmless AHP
from all actions, losses, claims, demands, damages, costs and liabilities
(including reasonable attorneys' fees) except as arise solely from events
listed herebelow in paragraph 10.9, to which AHP is or may become subject
insofar as they arise out of or are alleged or claimed to arise out of (i)
any breach by PharmaPrint of any of the warranties of PharmaPrint, or (ii)
any grossly negligent or willful act or omission by PharmaPrint or its
employees.
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22
10.9 AHP shall indemnify, defend and hold harmless PharmaPrint
from all actions, losses, claims, demands, costs and liabilities (including
reasonable attorneys' fees) to which PharmaPrint is or may become subject to
insofar as they arise out of or are alleged or claimed to arise out of (i)
any breach by AHP of any of its warranties under this Agreement, or (ii) any
grossly negligent or willful act or omission by AHP or its Affiliates, or
their employees.
10.10 A party entitled to indemnification hereunder agrees to give
prompt written notice (in no event later than five (5) business days) to the
indemnifying Party after the receipt by such party of any written notice of
the commencement of any action, suit, proceeding or investigation or threat
thereof made in writing for which such party will claim indemnification
pursuant to this Agreement. Unless, in the reasonable judgment of the
indemnified party, a conflict of interest may exist between the indemnified
party and the indemnifying party with respect to a claim, the indemnifying
party may assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel with respect
to such claim. The indemnifying party will not be subject to any liability
for any settlement made without its consent, which shall not be unreasonably
withheld.
10.11 The provisions and obligations of this Article X shall
survive any termination of this Agreement.
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23
ARTICLE XI
THIRD-PARTY LICENSES
11.1 In the event AHP reasonably concludes, at any time prior to the
first commercial sale of a Licensed Product, that a license(s) under any third-
party patent is necessary in order to make, use or sell Licensed Product in the
Territory, and neither PharmaPrint nor AHP are able to obtain such license (s)
on terms reasonably acceptable to both, then PharmaPrint and AHP shall negotiate
in good faith to reach an agreement on the return to AHP of all or a portion of
the payments made pursuant to Article IV, in the case where AHP reasonably
concludes after good faith discussions and negotiations between the parties that
AHP is precluded from selling Licensed Products in the Territory.
11.2 In the event AHP and PharmaPrint agree, at any time during the
term of this Agreement, that a license(s) under any third-party patent is
necessary or advisable in order to make, use or sell Licensed Product sold by
PharmaPrint as of the Effective Date in the Territory, any and all payments and
royalties paid by AHP for such License(s) shall be deducted in full from
payments and royalties (including Minimum Royalty payments) due to PharmaPrint
under this Agreement.
11.3 In the event that PharmaPrint and AHP cannot agree on any
matters requiring agreement under Paragraph 11.2 above, and a license(s) under
the third-party patent is otherwise available to AHP, PharmaPrint shall
indemnify, defend and hold harmless AHP from all actions, losses,
<PAGE>
24
claims, demands, damages, costs and liability (including reasonable
attorney's fees) to which AHP is or may become insofar as they arise out of
or are alleged or claimed to arise out of any infringement of the third-party
patent.
ARTICLE XII
DURATION AND TERMINATION
12.1 This Agreement shall continue in full force and effect, unless
earlier terminated by either party pursuant to the provisions set forth in this
Article XII, or until expiration of the last to expire patent within the Patent
Rights in the Territory. Following expiration of the Agreement, the licenses
granted hereunder to AHP with respect to the Patent Rights shall be fully paid-
up and irrevocable.
12.2 Prior to the initial National Launch Date within the Territory,
AHP may terminate this Agreement in its sole discretion, at any time upon thirty
(30) days written notice to PharmaPrint.
12.3 After the initial National Launch Date within the Territory,
AHP may terminate this Agreement on a per Licensed Product basis in its sole
discretion, upon ninety (90) days written notice to PharmaPrint.
12.4 After the initial National Launch Date in the Territory, AHP
may terminate this Agreement in its entirety in its sole discretion, upon one
(1) year's written notice to PharmaPrint.
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25
12.5 Either party hereto shall be entitled to terminate this
Agreement upon thirty (30) days written notice to the other party (i) if the
other party shall commit a breach of any material provision hereof and shall not
within sixty (60) days from receipt of notice of such breach by the complaining
party remedy the same (if capable of remedy), or offer full compensation
therefor, or (ii) upon termination of the Supply Agreement.
12.6 Insofar as is lawful and legally permissible, this Agreement
may be terminated with immediate effect by a party upon giving written notice to
the other if the other is insolvent or has committed any act of bankruptcy or an
order is made or resolution passed for the winding up of the other party.
12.7 Failure on the part of either party to exercise or enforce any
right conferred upon it hereunder shall neither be deemed to be a waiver of any
such right nor operate to bar the exercise or enforcement thereof at any time
thereafter.
12.8 Upon termination of this Agreement for any reason, other than
under the provisions of Paragraph 12.1 of Article XII, (a) AHP and AHP
Affiliates shall have the right to advertise, promote, market and sell all
Licensed Product then in inventory, provided AHP makes the appropriate royalty
payments to PharmaPrint upon the sale of such Licensed Product.
12.9 This Agreement shall immediately terminate upon termination of
the U. S. Agreement.
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26
ARTICLE XIII
NON-COMPETITION
13.1 During the term of this Agreement, neither AHP nor an AHP
Affiliate shall market or sell any Herbal Product in the Territory in
association with the Centrum-Registered Trademark- trademark within the
Territory except as permitted by this Agreement; provided, however, nothing in
this provision shall prevent AHP or an AHP Affiliate from (a) performing its
obligations under this Agreement, the Foreign Agreement or the Supply Agreement,
(b) developing manufacturing, promoting and/or selling Combination Products, (c)
developing, manufacturing, promoting and/or selling any branded Herbal Product
acquired after the Effective Date provided that AHP continues to promote and
sell such product under the acquired brand name or store/private label brand, or
(e) PharmaPrint cannot or fails to deliver any Licensed Product (s) within nine
(9) months.
13.2 Except as provided immediately below, in the event of an
acquisition or merger pursuant to Paragraphs 13.1(c) or failure to deliver
Licensed Product pursuant to Paragraph 13.1(d), AHP agrees not to utilize the
Trademark in association with any herbal products acquired thereby. However,
AHP may utilize the Trademark in any association with an Herbal product acquired
pursuant to Paragraph 13.1(c) so long as it contains Licensed Product. Should
AHP utilize the Trademark in association with a product acquired under Paragraph
13.1(c), the Trademark shall be conspicuously displayed and clearly refer to
PharmaPrint's ownership of the Trademark.
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27
ARTICLE XIV
MISCELLANEOUS
14.1 Any notice required or permitted under this Agreement shall be
in writing and deemed to have been sufficiently provided and effectively made as
of the delivery date if hand-delivered with written acknowledgment, or as of the
date received if mailed by registered or certified mail, postage-prepaid, and
addressed to the receiving party at its respective address as follows:
AMERICAN HOME PRODUCTS CORPORATION
Five Giraida Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
PHARMAPRINT INCORPORATED
4 Park Plaza
Suite 1900
Irvine, California 92614
Attn: President
or such other address which the receiving party has given notice pursuant to the
provisions of this Paragraph 14.1.
14.2 The relationship of the parties under this Agreement is that of
independent contractors and not as agents of each other or partners or joint
venturers, and neither party shall have the power to bind the other in any way
with respect to any obligation to any third party unless a specific power of
attorney is provided for such purpose. Each party shall be solely and
exclusively responsible for its own employees and operations.
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28
14.3 In the event that the performance of this Agreement or of any
obligation hereunder, other than payment of money as herein provided by either
party hereto is prevented, restricted or interfered with by reason of any cause
not within the control of the respective party, and, which could not by
reasonable diligence have been avoided by such party, the party so affected,
upon giving prompt notice to the other party, as to the nature and probable
duration of such event shall be excused from such performance to the extent and
for the duration of such prevention, restriction or interference, provided that
the party so affected shall use its reasonable efforts to avoid or remove such
cause of non-performance and shall fulfill and continue performance hereunder
with the utmost dispatch whenever and to the extent such cause or causes are
removed.
For the purpose of the preceding paragraph but without limiting the
generality thereof, the following shall be considered as not within the control
of the respective party: acts of God, acts or omissions of a governmental
agency, compliance with requests, recommendations, rules, regulations or orders
of any governmental authority or any officer, department, agency or instrument
thereof, flood, storm, earthquake, fire, war, riots, insurrection, accidents,
acts of the public enemy, invasion, Quarantine restrictions, strike, lockout,
differences with workmen, embargoes, delays or failure in transportation and
acts of a similar nature.
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29
14.4 Should one of the provisions of this Agreement become or prove
to be null and void, such will be without effect on the validity of this
Agreement as a whole. Both parties will, however, endeavor to replace the void
provision by a valid one which in its economic effect is most consistent with
the void provision.
14.5 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of laws.
14.6 This Agreement and the rights and obligations hereunder shall
not be assignable by either of the parties without the previous written consent
of the other party, such consent not to be unreasonably withheld, except that
AHP may assign this Agreement (i) in connection with the transfer of all or
substantially all of the business to which it relates without any such consent,
and (ii) in whole or in part to an AHP Affiliate without any such consent.
14.7 This Agreement, the U.S. Agreement and the Supply Agreement
constitute the entire understanding between the parties regarding the subject
matter hereof in the Territory and no party has relied on any representation not
expressly set forth or referred to in this Agreement. No amendment, variation,
waiver or modification of any of the terms or provisions of this Agreement shall
be effected unless set forth in writing, specifically referencing this
Agreement, and duly signed on behalf of the parties hereto.
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30
14.8 No press release or other public announcement concerning this
Agreement shall be made by either party without the prior written approval of
the other party hereto, such approval not to be unreasonably withheld, except as
otherwise required by law. Press releases or other public announcements
reasonably required by law shall be reviewed with the other party and their
comments given due consideration. Approval will be deemed granted if no
response is received by the proposing party within fifteen (15) days of its
written request for approval to the other party.
IN WITNESS WHEREOF, the duly authorized representatives of the parties
hereto have caused this Agreement to be executed.
AMERICAN HOME PRODUCTS CORPORATION PHARMAPRINT INC.
By: By:
----------------------------- -------------------------------
Title: Title:
-------------------------- ----------------------------
Date: Date:
--------------------------- -----------------------------
PHARMAPRINT B.V.
By:
-----------------------------
Title:
--------------------------
Date:
---------------------------
<PAGE>
* The confidential material marked by brackets contained herein has been
omitted and has been separately filed with the Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
SUPPLY AGREEMENT
THIS Agreement is made this 6th day of October, 1997 by and between
PharmaPrint Inc., a corporation organized and existing under the laws of the
State of Delaware having its principal place of business at 4 Park Plaza,
Suite 1900, Irvine, California 92614 and its subsidiaries, including
PharmaPrint B.V., and Whitehall-Robins Healthcare, a division of American
Home Licensed Products Corporation, a corporation organized and existing
under the laws of the State of Delaware, having its principal place of
business at Five Giralda Farms, Madison, New Jersey 07940 ("AHP").
A. PharmaPrint has developed a method for the identification,
characterization of and regulation of the amounts of bioactive components in
herbal products and is seeking to commercialize certain of the herbal
products identified, characterized and regulated thereby.
B. PharmaPrint has developed technological know-how, obtained patents
and filed patent applications relating to and/or covering the subjects of
Paragraph A above.
C. Concurrently herewith, AHP and PharmaPrint have entered into
license agreements under which AHP has acquired certain exclusive rights to
market such herbal products within specified territories.
D. AHP desires to secure a coordinated and continuous manufacture and
supply of said herbal products.
<PAGE>
2
ARTICLE I
DEFINITIONS
Terms defined in this Article I shall for all purposes of this
Agreement, as the same may be amended or supplemented from time to time, have
the meaning herein specified.
1.1 The term "Effective Date" shall mean the date first written
hereinabove.
1.2 The term "OTC Market" shall have the same meaning as set forth in
Paragraph 1.18 of the License Agreement (U.S.).
1.3 The term "FDA" shall mean the Federal Food and Drug Administration
of the United States Department of Health and Human Services or any successor
agency thereto as well as governmental agencies of comparable jurisdiction in
countries within the Territory other than the United States.
1.4 The term "GMP" means the good manufacturing practice regulations of
the FDA as described in the United States Code of Federal Regulations or any
successor regulations in the United States and as may be described in comparable
regulations in force in countries within the Territory other than the United
States, as applicable. For DSHEA Licensed Products, "GMP" shall mean compliance
with the regulations of the United States Dietary Supplement Health and
Education Act of 1994 and comparable regulations in force in countries within
the Territory other than the United States, as applicable.
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3
1.5 The term "Government Approvals" shall mean any approvals, licenses,
registrations or authorizations, howsoever called, of any United States
federal, state or local regulatory agency, department, bureau or other
government entity, including the FDA, necessary for the manufacture, use,
storage, transport or sale, both interstate and intrastate, in the Territory
of Licensed Products. In the case of DSHEA Licensed Products, the term
"Government Approvals" shall mean compliance with the applicable sections of
the United States Dietary Supplement Health and Education Act of 1994. In
countries of the Territory other than the United States, "Governmental
Approvals" shall mean comparable regulations to those noted above.
1.6 The term "License Agreements" shall mean the License Agreement
(U.S.) and License Agreement (Foreign) granting certain rights to AHP, as
executed by the parties concurrently with this Agreement.
1.7 The term "Affiliate" shall mean any company which directly or
indirectly through stock ownership or through other arrangement is controlled
by either of the parties.
1.8 The term "Licensed Product" shall have the meaning set forth in the
License Agreements and shall include DSHEA Licensed Products. Licensed
Products shall comply with the Specifications defined below.
1.9 The term "Contract Year" shall mean, for the initial Contract Year,
the period commencing on the Effective Date and ending 365 days
<PAGE>
4
thereafter. Subsequent Contract Years will commence upon the anniversary of
the Effective Date and end 365 days thereafter.
1.10 The term "Specifications" shall mean the specifications for the
Licensed Products set out in Schedule A of the License Agreements.
1.11 The term "Territory" shall mean those countries, and their
respective territories, possessions and affiliated Commonwealths as are then
in effect in the License Agreements.
1.12 The term "Contractor" shall mean a third party manufacturer of
Licensed Product(s) who agrees to manufacture such Licensed Product(s) for
PharmaPrint during the term of this Agreement.
1.13 The term "DSHEA Licensed Products" shall mean those products the
sale of which is governed by the United States Dietary Supplement Health and
Education Act of 1994.
1.14 The term "Global Shortage" relates to the botanical raw material
from which a Licensed Product is produced and shall mean either (i) the
unavailability of such raw material, or (ii) the limited availability of such
raw material to the extent that its price on the open market increases at
least twenty percent (20%) over a period of one Contract Year.
<PAGE>
5
ARTICLE II
SUPPLY
2.1 PharmaPrint and its Affiliates shall have the right and obligation
to supply to AHP and AHP Affiliates one-hundred percent (100%) of their
requirements of Licensed Products in the Territory. During the period in
which AHP's rights under Paragraph 2.1(a) of the License Agreement (U.S.) are
exclusive, PharmaPrint and its Affiliates agree not to supply to any third
party or market for sale in the Territory a Licensed Product to any party for
use or sale in the OTC Market other than AHP.
2.2 By the first day of the first Contract Year, AHP shall provide
PharmaPrint with a forecast prepared in good faith of its quarterly
requirements of Licensed Products for the following twenty four (24) month
period, the initial twelve (12) month thereof being known as the "Initial
Forecast". Purchase orders will be placed by AHP corresponding to the first
three (3) months of the Initial Forecast. Throughout the term of the
Agreement, AHP shall further provide PharmaPrint with a rolling monthly
forecast of AHP's anticipated requirements of Licensed Products for the
subsequent twelve (12) month period ("Updated Forecast"). The forecasted
requirements of Licensed Products in the initial three (3) month Period of
the Initial Forecast and each subsequent Updated Forecast shall be binding
upon AHP. The remaining period of the Initial Forecast and each subsequent
Updated Forecast shall not bind AHP to order or accept such forecasted
requirements or any part
<PAGE>
6
thereof and shall be only for the purpose of assisting PharmaPrint and its
Contractor(s) to plan their manufacturing of Licensed Products for the
applicable period.
2.3 AHP shall place purchase orders for each of the Licensed Products
with PharmaPrint from time to time specifying the quantities of the Licensed
Products desired, and the places to which and the manner and dates by which
delivery is to be made; said delivery dates to be no earlier than ninety (90)
days from the date of the purchase order unless requested by AHP and agreed
to by PharmaPrint.
2.4 PharmaPrint shall acknowledge all purchase orders within ten (10)
business days of their receipt. PharmaPrint shall execute all accepted
purchase orders by delivery of all ordered quantities of the Licensed
Products no later than the delivery dates provided in the purchase orders of
AHP to the destination recited therein, unless requested by AHP and agreed to
by PharmaPrint.
2.5 To the extent that the terms of any purchase order or
acknowledgment thereof are inconsistent with the terms of this Agreement, the
terms of this Agreement shall control.
2.6 Title and risk of loss will pass to AHP upon delivery of Licensed
Products to the designated carrier of AHP at Contractor's manufacturing
facility or PharmaPrint's storage facility as set forth in Schedule A or may
be agreed to by the parties. The parties agree that Contractors' facilities
shall be domestically located unless otherwise agreed.
<PAGE>
7
2.7 All Licensed Products supplied by PharmaPrint to AHP in response to
purchase orders placed by AHP will conform to the Specifications and shall be
accompanied by the applicable certificate of analysis. PharmaPrint shall
further have the sole responsibility for obtaining all Government Approvals.
2.8 PharmaPrint and/or its Contractor(s) shall procure all active
ingredients, inactive ingredients and excipients necessary for the production
of the Licensed Products. Title in all such materials shall reside in
PharmaPrint.
2.9 The initial prices for the Licensed Products are set forth on
Schedule A. All prices for Licensed Products are F.O.B. Contractor's
manufacturing or PharmaPrint's storage facility as noted in Schedule A or as
may be agreed to by the parties.
2.10 Except as set forth in Paragraph 2.16, such prices of each such
Licensed Product shall remain fixed for a period of two (2) years from the
date of receipt by PharmaPrint of AHP's first purchase order for each of such
Licensed Products. After such two (2) year period, PharmaPrint may adjust
the price of each of the Licensed Products not more than once per Contract
Year upon not less than ninety (90) days written notice to AHP, to adjust for
increases or decreases in raw material costs ("Raw Materials Costs"), and not
more often than once in any Contract Year to adjust for increases or
decreases in Contractor's manufacturing costs ("Manufacturing Costs")
incurred in the manufacture of the Licensed Product. Any price adjustment
hereunder shall apply only
<PAGE>
8
to Licensed Products sold in response to orders placed after the date on
which such adjustment becomes effective. Increases or decreases in the price
of the Licensed Product for Manufacturing Costs in any Contract Year shall
not exceed in the aggregate sixty percent (60%) of the increase or decrease
in the Consumer Price Index for the related product area published by the
U.S. Department of Commerce for the preceding calendar year. PharmaPrint
shall cause its Contractors to keep complete and accurate records of all Raw
Materials Costs and Manufacturing Costs incurred in the manufacture and
delivery of Licensed Products to AHP. PharmaPrint shall provide access to
said records during reasonable business hours to a certified public
accountant selected by AHP, and reasonably acceptable to PharmaPrint, who
shall, at AHP's expense, have access to such records deemed by such
accountant as reasonably necessary in verifying for AHP, not more often than
once each calendar year, such costs incurred by PharmaPrint and/or its
Contractors.
2.11 AHP agrees to randomly inspect all shipments of Licensed Products
to determine whether or not the Licensed Products are in conformity with the
Specifications. In the event that any portion of the shipment of Licensed
Products received by AHP fails to conform to the Specifications, AHP may
reject the non-conforming Licensed Products shipment by giving written notice
to PharmaPrint within sixty (60) days of AHP's receipt of the Licensed
Products, which notice shall specify the manner in which the Licensed
Products fail to meet the Specifications. Failing such notification, AHP
will be deemed to have accepted the
<PAGE>
9
Licensed Products, and PharmaPrint shall not thereafter be required to
indemnify AHP for breach of its warranties under Paragraph 6.3 as to such
Licensed Products, except for defects not reasonably discoverable by AHP in
such inspection.
2.12 In the event PharmaPrint does not agree that any such Licensed
Product failed to meet the Specifications and PharmaPrint and AHP cannot
reach agreement with respect to such Licensed Product, PharmaPrint will
submit the question of whether the Licensed Product failed to meet the
Specifications to an independent laboratory selected by PharmaPrint and
approved by AHP for determination. The findings of such laboratory shall be
binding upon PharmaPrint and AHP and the cost of such determination shall be
paid by the party in error.
2.13 PharmaPrint shall replace any Licensed Product not conforming to
the Specifications forthwith, at its expense, or if it is unable to make
prompt replacement, PharmaPrint shall either credit AHP's account or refund
any payment made on the nonaccepted Licensed Products, depending on AHP's
account balance, within forty-five (45) days of AHP's receipt of notice of
AHP's nonacceptance. AHP shall return, at PharmaPrint's expense, the
nonaccepted Licensed Products to PharmaPrint or its Contractor, as may be
agreed by the parties.
2.14 AHP's right to inspect and right to replacement of Licensed
Products not conforming to the Specifications shall not preclude AHP from
exercising or enforcing any other rights or remedies it may have to
<PAGE>
10
redress any loss or damage resulting from PharmaPrint's failure to supply
Licensed Products conforming to the Specifications.
2.15 PharmaPrint shall secure access for AHP to the operations and
facilities of PharmaPrint and/or its Contractors wherein Licensed Products
are manufactured, packaged, tested, labeled, stored and/or shipped. AHP
shall have the right to inspect such operations or facilities during normal
business hours, and on reasonable prior notice.
2.16 In the event of a Global Shortage affecting at least one Licensed
Product, the parties agree to discuss the institution of a temporary
adjustment to the price then if effect for such Licensed Product. However,
this provision in no way modifies PharmaPrint's obligations with respect to
the supply of such Licensed Product during the time of such discussions or
such Global Shortage.
ARTICLE III
RIGHT TO MANUFACTURE
3.1 In the event that PharmaPrint is unable at any time to supply
commercial quantities of Licensed Products for a period of sixty (60)
consecutive days for any reason, including acts of force majeure, AHP shall
have the right to manufacture Licensed Products itself, or have a third party
manufacture Licensed Products for AHP. The time of such manufacture by
either AHP or such third party shall be for a finite duration of reasonable
length in view of the complexity and costs of arranging such change in
Licensed Product(s) manufacturing. As used
<PAGE>
11
herein, commercial quantities of Licensed Products shall mean total units of
Licensed Products equal to seventy five percent (75%) of AHP's quarterly
orders for the preceding two (2) quarters.
3.2 PharmaPrint agrees that information and manufacturing directions,
drawings, processing information, shop practice, standards and specifications
as to the materials to be used, identification of vendors, control methods
and test data, in sufficient detail to enable AHP, or a third party, to
manufacture the Licensed Products (the "Manufacturing Know-How"), will be
deposited with a bank designated by AHP as an independent Escrow Agent
pursuant to an Escrow Agreement containing terms and conditions consistent
with the provisions of this Article III. Any fees of the Escrow Agent will
be paid by AHP. The aforementioned deposit of Manufacturing Know-How shall
be accomplished not later than one (1) year after the Effective Date.
PharmaPrint shall bear the costs and expenses incurred in the establishment
of the escrow materials. PharmaPrint shall notify AHP in writing of the date
of deposit of the Manufacturing Know-How. PharmaPrint warrants that such
Manufacturing Know-How will contain all information referred to in the first
sentence of this paragraph 3.2 necessary to make Licensed Products conforming
to the Specifications.
3.3 AHP shall have the right to access and use the Manufacturing
Know-How by five (5) days' written notice to the Escrow Agent and to
PharmaPrint that PharmaPrint has failed to supply commercial quantities of
Licensed Products to AHP for a period of sixty (60) days.
<PAGE>
12
3.4 PharmaPrint agrees that in the event the provisions of this Article
III are utilized, PharmaPrint will to the best of its ability assist AHP or a
third party designated by AHP to manufacture the Licensed Products.
3.5 If the procedure of Paragraph 3.1 is implemented, manufacture of
Licensed Products and their supply to AHP shall revert to PharmaPrint on a
Licensed Product-by-Licensed Product basis upon (a) notification to AHP from
PharmaPrint that PharmaPrint is again able to manufacture and supply such
Licensed Products, and (b) termination of any third party obligations incurred
by AHP in obtaining supply of Licensed Products pursuant to Paragraph 3.1
hereof. Upon such reversion, AHP right to use the Manufacturing Know-how shall
terminate.
3.6 In the event that Licensed Product(s) are to be produced by a third
party manufacturer for the benefit of AHP hereunder, such third party
manufacturer shall be placed under obligations of confidentiality with respect
to the Manufacturing Know-how at least as strict as those imposed upon AHP
hereunder. Such third party manufacturer shall further be obligated to use such
Manufacturing Know-how only for the purposes of producing Licensed Product for
AHP.
<PAGE>
13
ARTICLE IV
RECALLS AND RETURNS
4.1 In the event of a recall of any of the Licensed Products required by a
governmental agency or authority of competent jurisdiction or if recall of any
Licensed Products is reasonably deemed advisable by AHP, such recall shall be
promptly implemented and administered by AHP in a manner which is appropriate
and reasonable under the circumstances and in conformity with accepted trade
practices. In the event that a recall is required as a result of AHP's breach
of its obligations hereunder, all costs and expenses incurred in connection
therewith shall be borne by AHP. PharmaPrint shall bear all costs associated
with such recalls not borne by AHP.
4.2 The provisions and obligations of this Article IV shall survive any
termination of this Agreement.
ARTICLE V
WARRANTIES AND COVENANTS
5.1 PharmaPrint represents and warrants that the execution of this
Agreement and the full performance and enjoyment of the rights of PharmaPrint
and AHP under this Agreement will not breach or in any way be inconsistent with
the terms and conditions of any license, contract, understanding or agreement,
whether express, implied, written or oral between PharmaPrint and any third
party.
<PAGE>
14
5.2 PharmaPrint represents and warrants that to the best of its knowledge
no patents or patent applications if issued would be infringed by the
manufacture, use or sale of the Licensed Products.
5.3 PharmaPrint warrants that all Licensed Products supplied by
PharmaPrint pursuant to Paragraph 2.1 shall conform to the Specifications, be
manufactured in accordance with GMP and shall comply with all applicable laws in
the Territory.
5.4 PharmaPrint shall indemnify, defend and hold harmless AHP from all
actions, losses, claims, demands, damages, costs and liabilities (including
reasonable attorneys' fees) except as arise solely from events listed herebelow
in paragraph 5.5, to which AHP is or may become subject insofar as they arise
out of or are alleged or claimed to arise out of (i) personal injury, death or
property damage sustained by any person(s) resulting from the use of any
Licensed Product manufactured by or for PharmaPrint, (ii) any material breach by
PharmaPrint of any the warranties of PharmaPrint, or (iii) any grossly negligent
or willful act or omission by PharmaPrint or its employees, agents or
subcontractors.
5.5 AHP shall indemnify, defend and hold harmless PharmaPrint from all
actions, losses, claims, demands, costs and liabilities including reasonable
attorneys' fees) to which PharmaPrint is or may become subject insofar as they
arise out of or are alleged or claimed to arise out of (i) any grossly negligent
or willful act or omission by AHP or its employees, agent or subcontractors,
(ii) personal injury, death or property damage sustained by any person(s)
resulting from the use of any
<PAGE>
15
Licensed Product manufactured by AHP or by a third party at the direction of
AHP, or (iii) any labeling, advertising or promotional materials used by AHP.
5.6 PharmaPrint shall maintain, during the term of this Agreement,
comprehensive general liability insurance with an insurance carrier reasonably
acceptable to AHP, which insurance policy or policies shall maintain the full
products hazards provisions with Licensed Products hazards limits subject to
deductibles not in excess of $10,000 per occurrence, and with at least
$2,500,000 per occurrence and at least $2,500,000 overall coverage for claims of
bodily injury and property damage arising out of any loss. Such policy or
policies shall extend coverage with respect to occurrences during a policy
period, regardless of the dates on which claims arising from such occurrences
are made, and shall include AHP as named insured in such policy or policies.
Both parties shall provide notice to the other of any loss, whether actual or
threatened, promptly upon receipt of notice thereof.
5.7 A party entitled to indemnification hereunder agrees to give prompt
written notice (in no event later than five (5) business days following its
receipt) to the indemnifying party after the receipt by such party of any
written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such party will claim
indemnification pursuant to this Agreement. Unless, in the reasonable judgment
of the indemnified party, a conflict of interest may exist between the
indemnified party and the indemnifying
<PAGE>
16
party with respect to a claim, the indemnifying party may assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party.
If the indemnifying party is not entitled to, or elects not to, assume the
defense of a claim, it will not be obligated to pay the fees and expenses of
more than one counsel with respect to such claim. The indemnifying party
will not be subject to any liability for any settlement made without its
consent, which shall not be unreasonably withheld.
5.8 The provisions and obligations of this Article V shall survive any
termination or expiration of this Agreement.
ARTICLE VI
CONFIDENTIALITY
6.1 (a) Except as provided in subparagraph (b) hereto, both AHP and
PharmaPrint agree to keep secret and confidential all Manufacturing Know-How,
regardless of its source, and except as hereinafter specifically provided, shall
not disclose Manufacturing Know-How to any third person or party except such
third parties who agree to maintain such Manufacturing Know-How in confidence
under terms at least as restrictive as those in this Article VI.
(b) The above provision shall not bar the disclosure of Manufacturing
Know-how to a third party manufacturer as provided by Article 3 so long as the
terms of Paragraph 3.6 are adhered to.
<PAGE>
17
6.2 Each of AHP and PharmaPrint shall take all such steps as are
reasonably necessary to ensure that its directors, officers and employees and
those of its affiliates, consultants manufacturing agents and third parties to
whom it shall disclose any Manufacturing Know-How shall not disclose the same to
any unauthorized person.
6.3 Either party, however, may disclose Manufacturing Know-How:
a) to the extent necessary by PharmaPrint, AHP and AHP Affiliates to
obtain Government Approvals for Licensed Products;
b) to the extent necessary to file, prosecute and obtain patents;
and/or
c) to the extent the Manufacturing Know-How is in the public domain
or enters the public domain hereafter through no fault of either party.
6.4 The provisions of this Article VI shall remain in force during the
period of this Agreement and for five (5) years thereafter, except that after
termination of this Agreement, a party may disclose Manufacturing Know-How
which:
a) according to the records of the party was known to it before
receipt (if any) from or on behalf of the other party;
b) is disclosed to the party by a third party who is under no
obligation of confidentiality to the other party.
6.5 The confidentiality provisions set forth herein shall supersede those
contained within the Confidentiality Agreement between the parties dated April
4, 1997.
<PAGE>
18
ARTICLE VII
DURATION AND TERMINATION
7.1 This Agreement shall continue in full force and effect until
terminated by either party pursuant to the provisions set forth in this Article
VII, or until termination of the License Agreement (U.S.), whichever first
occurs.
7.2 AHP may terminate this Agreement in its entirety or on a Licensed
Product-by-Licensed Product basis, in its sole discretion, at any time upon
thirty (30) days written notice to PharmaPrint, provided that AHP's rights to
the applicable Licensed Product(s) has also been terminated pursuant to the
terms of the License Agreement(s). In such event, AHP shall remain obligated to
purchase under the terms herein such quantities of Licensed Products ordered
prior to the date termination becomes effective.
7.3 PharmaPrint may terminate this Agreement in its sole discretion, upon
thirty (30) days written notice to AHP, if the License Agreements, are
terminated in their entirety for any reason other than expiration pursuant to
paragraphs 12.1 of the License Agreements.
7.4 Either party hereto shall be entitled to terminate this Agreement upon
thirty (30) days written notice to the other party if the other party shall
commit a breach of any material provision hereof and shall not within sixty (60)
days from receipt of notice of such breach by the complaining party remedy the
same (if capable of remedy), or offer
<PAGE>
19
full compensation therefor pursuant to the terms of the License Agreement(s).
7.5 Insofar as is lawful and legally permissible, This Agreement may be
terminated with immediate effect by a party upon giving written notice to the
other if the other is insolvent or has committed any act of bankruptcy or an
order is made or resolution passed for the winding up of the other party.
7.6 Failure on the part of either party to exercise or enforce any right
conferred upon it hereunder shall neither be deemed to be a waiver of any such
right nor operate to bar the exercise or enforcement thereof at any time
thereafter.
ARTICLE VIII
SUPPLY OF SAMPLES
8.1 During a three (3) years period commencing on the initial National
Launch Date, PharmaPrint shall supply AHP with additional quantities of Product
for use as marketing programs, such as their use in physician detailing or as
consumer samples. Such Products shall be supplied by PharmaPrint to AHP
annually at no cost to AHP, in quantities equal in value to three percent (3%)
of AHP's annual purchases of Product(s).
<PAGE>
20
8.2 The additional Product supplied by PharmaPrint to AHP pursuant to
the terms of Paragraph 8.1 shall be ordered by AHP periodically through
submission of purchase orders as set forth in Paragraph 2.3.
ARTICLE IX
MISCELLANEOUS
9.1 Any notice required or permitted under this Agreement shall be in
writing and deemed to have been sufficiently provided and effectively made as
of the delivery date if hand-delivered with written acknowledgment thereof,
or as of the date received if mailed by registered or certified mail,
postage-prepaid, and addressed to the receiving party at its respective
address as follows:
AMERICAN HOME Licensed Products CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
PHARMAPRINT INC. (and/or PHARMAPRINT B.V.)
4 Park Plaza
Suite 1900
Irvine, California 92614
Attn: President
or such other address which the receiving party has given notice pursuant to
the provisions of this Paragraph 9.1.
9.2 The relationship of the parties under this Agreement is that of
independent contractors and not as agents of each other or partners or joint
venturers, and neither party shall have the power to bind the other in any
way with respect to any obligation to any third party unless a specific power
of attorney is provided for such purpose. Each party
<PAGE>
21
shall be solely and exclusively responsible for its own employees and
operations.
9.3 In the event that the performance of this Agreement or of any
obligation hereunder, other than payment of money as herein provided by
either party hereto is prevented, restricted or interfered with by reason of
any cause not within the control of the respective party, and which could not
by reasonable diligence have been avoided by such party, the party so
affected, upon giving prompt notice to the other party, as to the nature and
probable duration of such event shall be excused from such performance to the
extent and for the duration of such prevention, restriction or interference,
provided that the party so affected shall use its reasonable efforts to avoid
or remove such cause of non-performance and shall fulfill and continue
performance hereunder with the utmost dispatch whenever and to the extent
such cause or causes are removed.
For the purpose of the preceding paragraph but without limiting the
Generality thereof, the following shall be considered as not within the
control of the respective party: acts of God, acts or omissions of a
governmental agency, compliance with requests, recommendations, rules,
regulations or orders of any governmental authority or any officer,
department, agency or instrument thereof, flood, storm, earthquake, fire,
war, riots, insurrection, accidents, acts of the public enemy, invasion,
quarantine restrictions, strike, lockout, differences with workmen,
<PAGE>
22
embargoes, delays or failure in transportation and acts of a similar nature.
9.4 Should one of the provisions of this Agreement become or prove to
be null and void, such will be without effect on the validity of this
Agreement as a whole. Both parties will, however, endeavor to replace the
void provision by a valid one which in its economic effect is most consistent
with the void provision.
9.5 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of
conflicts of laws.
9.6 This Agreement and the rights and obligations hereunder shall not
be assignable by either of the parties without the previous written consent
of the other party, such consent not to be unreasonably withheld, except that
AHP may assign this Agreement (i) in connection with the transfer of all or
substantially all of
<PAGE>
23
IN WITNESS WHEREOF, the duly authorized representatives of the parties
hereto have caused this Agreement to be executed.
AMERICAN HOME PRODUCTS CORPORATION PHARMAPRINT INCORPORATED
By: By:
------------------------------- -------------------------------------
Title: Title:
---------------------------- ----------------------------------
Date: Date:
----------------------------- -----------------------------------
PHARMAPRINT B.V.
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
<PAGE>
SCHEDULE A
PRICES FOR INITIAL PRODUCTS
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DOSAGE/MG
PRODUCT CONTENT ENCAPSULATION PRICE
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<PAGE>
SECOND AMENDMENT TO LICENSE AGREEMENT
USC FILES 2520, 2521, 2522, AND 2523
This Second Amendment [the "Amendment"], to the License Agreement dated as
of March 1, 1995, [the "License Agreement"] between the University of Southern
California, ["USC"], and PharmaPrint Inc., a California corporation,
["Licensee"] is made by and between USC and Licensee, with respect to the
following facts:
RECITALS
i. USC and Licensee wish to amend the License Agreement as provided
below:
II. Licensee is currently in compliance with all of the terms of the
license agreement and the First Amendment to License Agreement dated August 6,
1996.
AGREEMENT
1. USC and Licensee hereby agree as follows:
A. Section 2, Subsection G of the License Agreement is amended to
read in its entirety as follows:
g. "NET SALES PRICE" shall mean the gross billing price of any
PRODUCT (which includes PRODUCTS which are Pharmaceuticals (Rx),
Over-The-Counter (OTC), and Dietary Supplement Health and Education Act
(DSHEA) extracts or compounds) received by Licensee for the sale or
distribution of any PRODUCT, less the following amounts actually paid by
Licensee in reference to the following PRODUCTS:
(1) PHARMACEUTICALS (RX) AND/OR OVER THE COUNTER (OTC)
PRODUCTS ALLOWED DEDUCTIONS:
i. Discounts allowed.
ii. Returns;
iii. Transportation charges or allowances.
iv. Packing and transportation packing material costs [not
including product
--1--
<PAGE>
containers or product packing containers as manufactured by the Company]:
v. Customs and duties charges; and
vi. Sales, transfer and other excise taxes or other governmental
charges levied on or measured by the sales, but no franchise or income tax of
any kind whatsoever.
(2) DIETARY SUPPLEMENT HEALTH AND EDUCATION ACT (DSHEA) PRODUCTS
ALLOWED DEDUCTIONS:
i. Discounts allowed.
ii. Returns;
iii. Transportation charges or allowances.
iv. Packing and transportation packing material costs [not
including product containers or product packing containers as manufactured by
the Company]:
v. Customs and duties charges; and
vi. Sales, transfer and other excise taxes or other governmental
charges levied on or measured by the sales, but no franchise or income tax of
any kind whatsoever.
vii. Direct business expenditures for actual development,
manufacturing and production costs relating to a contract for sale of products
or products, direct manufacturing costs, including but not limited to, raw
materials, manufacturing, encapsulation, and, capital expenditures related to
manufacturing and production equipment or components.
Every commercial use or disposition of any PRODUCT, in addition to a
bonafide sale to a customer, shall be considered a sale of such PRODUCT. The
NET SALES PRICE, in the case of a use or disposition other than a bona fide
sale, shall be equivalent to the then payable NET SALES PRICE of such PRODUCT in
an arms length transaction.
B. Section 4, subSections [a] and [b] are amended to read in their
entirety as follows:
[a]. On all sales of PATENT PRODUCTS anywhere in the world by
Licensee or a SUBLICENSEE, licensee shall pay USC a royalty of one percent [1%]
of the NET SALES PRICE.
[b]. On all sales of TECHNOLOGY PRODUCTS anywhere in the world by
Licensee or a SUBLICENSEE, Licensee shall pay to USC a royalty of one percent
[1%] of the NET SALES PRICE.
--2--
<PAGE>
C. Section 8, subsections [a] and [b] are amended to read in their
entirety as follows:
[a]. Defensive Controversy:
Except for the placing in escrow of a portion of royalties, referred
to hereinafter, USC shall have no obligation or liability in the event that
legal action is brought against Licensee for patent infringement. Licensee may
choose legal counsel and defend the patent infringement lawsuit. During such
lawsuit, Licensee may place all of the royalties derived from sales of the
PRODUCT in the country where such lawsuit is pending in an interest bearing
escrow account. The escrow account shall be established in a bank mutually
acceptable to both parties under escrow instructions insulating the funds from
claims of any creditor. Upon termination of the action, any judgment amount,
reasonable attorneys' fees and costs, may be paid from this escrow account.
Should the settlement of any such patent infringement lawsuit involve payment of
royalties by Licensee to a third-party for the continued right to manufacture,
use and sell the PRODUCT, then funds in the escrow account, and royalties
payable to USC may be applied against said payments up to one-half [1/2] of such
royalties to a third-party. Any royalty funds thereafter remaining in the
escrow shall be paid to USC. The above shall constitute USC's sole liability in
the event of such action. Royalties paid to third-parties as provided for above
shall be included when determining whether the minimum royalty provided for in
this Agreement has been paid in a given year. During the patent infringement
litigation, both parties shall keep each other informed in writing of
significant developments in the lawsuit.
[b]. OFFENSIVE CONTROVERSY:
[1]. In the event that a third party infringes on a PATENT,
Licensee shall have the right, but not an obligation, to bring legal action to
enforce any such patent. If Licensee exercises such right, Licensee shall
select legal counsel and pay all legal fees and costs of prosecution of such
action. In the event that Licensee shall choose not to take such action, USC
shall have the right, at its option and at its own expense, to prosecute any
action to enjoin such infringement or to prosecute any claim for damages. The
party prosecuting any such action shall be entitled to retain any funds received
as a result of settlement or judgment of such action.
[2]. The parties may also agree to jointly pursue infringers.
The parties shall deduct and pay to the parties their respective costs and fees
incurred in prosecuting any such actions, the net funds obtained as a result of
settlement or of judgment of any such jointly prosecuted action shall be divided
in the following manner:
[a]. Twenty-five percent [25%] of all net funds shall be
divided equally by the parties, and seventy-five percent [75%] of all net funds
shall be divided between the parties in the proportion to the amount of legal
fees and costs incurred by the parties in the prosecution of such actions.
[b]. If funds are insufficient to pay all costs and fees,
then all of the
--3--
<PAGE>
funds shall be paid to the parties in said proportion.
2. Except as amended by this Amendment, the License Agreement and First
Amendment shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment is executed as of
, 1997.
"USC"
THE UNIVERSITY OF SOUTHERN CALIFORNIA
By:
------------------------------------------------
DENNIS F. DOUGHERTY,
Senior Vice President, Administration.
"LICENSEE"
PHARMAPRINT INC., a California corporation,
By:
------------------------------------------------
PHILLLIP G. TRAD
EXECUTIVE VICE-PRESIDENT
GENERAL COUNSEL
--4--
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